<PAGE>
As filed with the Securities and Exchange Commission on _________, 1996
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
ZIONS BANCORPORATION
(Exact name of registrant as specified in its charter)
Utah 6712 87-0227400
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification No.)
organization)
1380 Kennecott Building
Salt Lake City, Utah 84133
(801) 524-4787
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
--------------------
Harris H. Simmons
President and Chief Executive Officer
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
(801) 524-4787
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies to:
Brian D. Alprin, Esq. Robert S. Kant, Esq.
Laurence S. Lese, Esq. Michelle S. Monserez, Esq.
Metzger, Hollis, Gordon & Alprin O'Connor, Cavanagh, Anderson,
Suite 1000 Killingsworth & Beshears, P.A.
1275 K Street, N.W. One East Camelback Road
Washington, D.C. 20005 Suite 1100
(202) 842-1600 Phoenix, Arizona 85012-1656
(602) 263-2400
Approximate date of commencement of the proposed sale of the securities to the
public: The date of mailing the Proxy Statement/Prospectus contained herein.
<PAGE>
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CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=======================================================================================================================
Proposed
Proposed maximum
maximum aggregate Amount of
Title of securities to Amount to be offering price offering registration
be registered registered per share price fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, no par 500,000 NA (1) $3,155.35
value
=========================================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the
registration fee and calculated in accordance with Rule
457(f)(2) on the basis of the book value of the Common Stock,
no par value, of Southern Arizona Bancorp, Inc. on February
29, 1996 of $9,150,515 and the maximum of 1,266,362 shares of
such stock to be converted in the Reorganization described
herein into Common Stock of the registrant.
</FN>
</TABLE>
--------------------
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
ZIONS BANCORPORATION
Cross-Reference Sheet between
Items of Form S-4
and Captions in Proxy Statement/Prospectus
Form S-4 Item Caption(s) or Location in
Number and Caption Proxy Statement/Prospectus
------------------ --------------------------
<S> <C> <C>
A. Information About the Transaction
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................... Outside Front Cover Page of
Proxy Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.......... Available Information; Table
of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information........................ Summary; Introduction
4. Terms of the Transaction........... Plan of Reorganization;
Comparison of Zions Common
Stock and Southern Arizona
Common Stock; Information
Concerning the Pro Forma
Combined Financial Data
5. Pro Forma Financial Information.... Pro Forma Combined Financial
Information; Pro Forma
Combined Financial
Information--Information
Concerning the Pro Forma
Combined Financial
Information; Pro Forma
Combined Financial
Information
6. Material Contracts with the
Company Being Acquired............. Plan of Reorganization; Plan
of Reorganization--
Background of and Reasons
for the Reorganization; Plan
of Reorganization--Voting
Agreements; Plan of
Reorganization--Interests of
Certain Persons in the
Transaction
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters.. NA
<PAGE>
8. Interests of Named Experts and
Counsel............................ NA
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................... NA
B. Information About the Registrant
10. Information with Respect to S-3
Registrants........................ Information Concerning Zions
11. Incorporation of Certain
Information by Reference........... Information Concerning
Zions--Zions Documents
Incorporated by Reference
12. Information with Respect to S-2
or S-3 Registrants................. NA
13. Incorporation of Certain
Information by Reference........... NA
14. Information with Respect to
Registrants Other than S-3 or S-2
Registrants........................ NA
C. Information About the Company Being
Acquired
15. Information with Respect to S-3
Companies.......................... NA
16. Information with Respect to S-2
or S-3 Companies................... NA
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies.......................... Information Concerning
Southern Arizona
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations are to be
Solicited:
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<PAGE>
Item Number and Caption in Schedule
14A under the Securities Exchange Caption(s) or Location in
Act of 1934 or Regulation S-K Proxy Statement/Prospectus
----------------------------------- --------------------------
(1) Date, Time and Place Information... Outside Front Cover Page of
Proxy Statement/Prospectus;
Summary; Introduction
(2) Revocability of Proxy.............. Introduction--Voting and
Revocation of Proxies
(3) Dissenters' Rights of Appraisal.... Plan of Reorganization--
Dissenters' Rights of
Southern Arizona
Shareholders
(4) Persons Making the Solicitation.... Introduction--Solicitation
of Proxies
(5) Interest of Certain Persons in
Matters to be Acted Upon........... Plan of Reorganization--
Boards of Directors
Following the
Reorganization; Interests of
Certain Persons in the
Transaction
(6) Voting Securities and Principal
Holders Thereof.................... Introduction--Record Date;
Voting Rights; Principal
Holders of Zions Common
Stock; Information
Concerning Zions--Zions
Documents Incorporated by
Reference; Information
Concerning Southern Arizona-
-Principal Shareholders
(21) Vote Required for Approval....... Plan of Reorganization--
Required Vote; Management
Recommendation
(401) Directors and Executive
Officers......................... Information Concerning
Zions--Zions Documents
Incorporated by Reference;
Plan of Reorganization--
Boards of Directors
Following the
Reorganization; Information
Concerning Southern Arizona-
-Southern Arizona Management
- 3 -
<PAGE>
(402) Executive Compensation........... Information Concerning
Zions--Zions Documents
Incorporated by Reference
(404) Certain Relationships and
Related Transactions............. Information Concerning
Zions--Zions Documents
Incorporated by Reference;
Information Concerning
Southern Arizona--Certain
Transactions
Caption(s) or Location in
Form S-4 Item Number and Caption Proxy Statement/Prospectus
-------------------------------- --------------------------
19. Information if Proxies, Consents
or Authorizations are Not to be
Solicited, or in Exchange Offer.... NA
</TABLE>
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<PAGE>
SOUTHERN ARIZONA BANCORP, INC.
Proxy Statement
Special Meeting of Shareholders
To be Held on May __, 1996
and
ZIONS BANCORPORATION
Prospectus
Up to 500,000 Shares of
Common Stock
This Proxy Statement/Prospectus is being furnished to the shareholders
of Southern Arizona Bancorp, Inc. ("Southern Arizona"), an Arizona corporation,
in connection with the solicitation of proxies by its Board of Directors for use
at a Special Meeting of Shareholders of Southern Arizona to be held on May __,
1996 (the "Special Meeting") and at any adjournments or postponements thereof.
This Proxy Statement/Prospectus and accompanying form of proxy ("Proxy") are
first being mailed to the shareholders of Southern Arizona as of April [ ], 1996
(the "Record Date") on or about April [ ], 1996.
At the Special Meeting, the shareholders of Southern Arizona will
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Reorganization dated as of January 17, 1996 (the "Plan of Reorganization"),
between Southern Arizona, Zions Bancorporation, a Utah corporation ("Zions"),
Southern Arizona Bank (the "Bank"), a wholly-owned subsidiary of Southern
Arizona, and National Bank of Arizona ("NBA"), a wholly-owned subsidiary of
Zions (except for directors' qualifying shares) pursuant to which Southern
Arizona will be merged into Zions with Zions being the surviving corporation and
the Bank will be merged into NBA with NBA being the surviving institution
(together, the "Reorganization"). Upon consummation of the Reorganization, each
outstanding share of Southern Arizona's common stock (the "Southern Arizona
Common Stock") will be converted into the right to receive that number of shares
of Zions common stock (the "Zions Common Stock") calculated by dividing the
Benchmark Price (as defined herein) representing $25,330,000 plus certain
accretions, by the Average Closing Price (as defined herein) of Zions Common
Stock, and by further dividing that number by the number of issued and
outstanding shares of Southern Arizona Common Stock at the effective date of the
Reorganization. Additionally, in the event that the Unadjusted Average Price (as
defined herein) of Zions Common Stock is less than $59.00, a cash payment will
be made to the holders of Southern Arizona Common Stock. On April __, 1996, the
closing price of Zions Common Stock was $_____ per share and Southern Arizona
had issued and outstanding 1,266,362 shares of its Common Stock. If the
Reorganization had been consummated as of that date and assuming the Average
Closing Price of Zions Common Stock was $_____ and the Benchmark Price equalled
$_______ on that date, shareholders of Southern Arizona would have received __
shares of Zions Common Stock for each share of Southern Arizona Common Stock or
an equivalent consideration to holders of Southern Arizona Common Stock of
$_____ per share. The Zions Common Stock to be distributed to Southern Arizona
shareholders will be registered with the Securities and Exchange Commission and
for all shareholders, other than shareholders who are affiliates of Southern
Arizona or who become affiliates of Zions, will be immediately tradable. See
"Plan of Reorganization--Conversion of Southern Arizona Shares."
<PAGE>
Zions has filed this Proxy Statement/Prospectus with the Securities and
Exchange Commission as part of a Registration Statement under the Securities Act
of 1933, as amended, with respect to the shares of Zions Common Stock which may
be issued in the Reorganization to the shareholders of Southern Arizona. This
Proxy Statement/Prospectus also constitutes the prospectus of Zions filed as
part of the Registration Statement.
--------------------
FOR THE ACTION OF THE SHAREHOLDERS TO BE EFFECTIVE, TWO-THIRDS OF THE
SHAREHOLDERS OF SOUTHERN ARIZONA AND HOLDERS OF TWO-THIRDS OF THE ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK OF SOUTHERN ARIZONA MUST VOTE IN FAVOR OF THE
REORGANIZATION. BEFORE THE REORGANIZATION WILL BE IMPLEMENTED, THE
REORGANIZATION MUST ALSO BE APPROVED BY FEDERAL AND STATE BANKING REGULATORS.
REGULATORY APPROVALS HAVE NOT YET BEEN OBTAINED.
--------------------
THE SHARES OF ZIONS COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF ZIONS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, any such information or representation should not be relied upon as
having been authorized by Zions or Southern Arizona. This Proxy
Statement/Prospectus does not constitute an offer or solicitation by any person
in any state in which such offer or solicitation is not authorized by the laws
thereof or in which the person making such offer or solicitation is not
qualified to make the same. Neither the delivery of this Proxy
Statement/Prospectus at any time nor the distribution of Zions Common Stock
hereunder shall imply that the information contained herein is correct as of any
time subsequent to its date.
The information contained in this Proxy Statement/Prospectus with
respect to Zions and NBA has been supplied by Zions. The information contained
in this Proxy Statement/Prospectus with respect to Southern Arizona and the Bank
has been supplied by Southern Arizona. Neither Zions nor Southern Arizona
warrants the accuracy or completeness of information relating to the other.
The date of this Proxy Statement/Prospectus is April __, 1996.
- 2 -
<PAGE>
AVAILABLE INFORMATION
Zions has filed with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "Securities Act") a Registration Statement
on Form S-4 (the "Registration Statement") covering the shares of Zions Common
Stock issuable in the Reorganization. As permitted by the rules and regulations
of the SEC, this Proxy Statement/Prospectus omits certain information, exhibits
and undertakings contained in the Registration Statement. The statements
contained in this Proxy Statement/Prospectus as to the contents of any contract
or other document filed as an exhibit to the Registration Statement are of
necessity brief descriptions and are not necessarily complete. Each such
statement is qualified in its entirety by reference to the copy of such contract
or document filed as an exhibit to the Registration Statement. The Registration
Statement and the exhibits thereto can be inspected at the public reference
facilities of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.,
and copies of such material can be obtained at prescribed rates by mail
addressed to the SEC, Public Reference Section, Washington, D.C. 20549.
Zions is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C.; Suite 4800, 1801 California Street, Denver, Colorado; and 500
Key Bank Tower, Suite 500, 50 S. Main Street, Salt Lake City, Utah. Copies of
such material can also be obtained at prescribed rates by mail addressed to the
SEC, Public Reference Section, Washington, D.C. 20549. Zions Common Stock is
quoted on the NASDAQ National Market System, and such reports, proxy statements
and other Zions information can also be inspected at the offices of NASDAQ
Operations, 1735 K Street, N.W., Washington, D.C.
This Proxy Statement/Prospectus incorporates by reference certain
documents relating to Zions which are not presented herein or delivered
herewith, including the Plan of Reorganization (as described herein). See
"Information Concerning Zions -- Zions Documents Incorporated by Reference."
Copies of such documents are available upon request and without charge to any
person to whom this Proxy Statement/Prospectus has been delivered. Requests for
the Plan of Reorganization or Zions documents should be directed to Zions
Bancorporation, 1380 Kennecott Building, Salt Lake City, Utah 84133, Attention:
Gary L. Anderson, Corporate Secretary (telephone: 801-524-4787). In order to
ensure timely delivery of the Plan of Reorganization or Zions documents, any
request should be made not later than __________, 1996.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY......................................................................................................... 1
INTRODUCTION.................................................................................................... 12
Record Date; Voting Rights............................................................................. 12
Purpose of the Special Meeting......................................................................... 12
Voting and Revocation of Proxies....................................................................... 13
Solicitation of Proxies................................................................................ 13
PLAN OF REORGANIZATION.......................................................................................... 14
The Reorganization..................................................................................... 14
Background of and Reasons for the Reorganization....................................................... 14
Voting Agreements...................................................................................... 17
Required Vote; Management Recommendation............................................................... 18
Opinion of Financial Advisor........................................................................... 18
Conversion of Southern Arizona Shares.................................................................. 21
Federal Income Tax Consequences of the Reorganization.................................................. 23
Interests of Certain Persons in the Transaction........................................................ 25
Inconsistent Activities................................................................................ 25
Conduct of Business Pending the Reorganization......................................................... 26
Conditions to the Reorganization....................................................................... 27
Representations and Warranties......................................................................... 28
Amendment and Waiver................................................................................... 28
Authorized Termination and Damages for Breach.......................................................... 28
Dissenters' Rights of Southern Arizona Shareholders.................................................... 29
Restrictions on Resales by Southern Arizona Affiliates................................................. 32
Expenses .............................................................................................. 32
Government Approvals................................................................................... 32
Effective Date of the Reorganization................................................................... 33
Accounting Treatment....................................................................................33
Relationship Between Zions and Southern Arizona.........................................................33
Unaudited Pro Forma Combined Financial Information......................................................33
SUPERVISION AND REGULATION...................................................................................... 34
Zions .............................................................................................. 34
Regulatory Capital Requirements........................................................................ 35
Other Regulations...................................................................................... 40
Deposit Insurance Assessments.......................................................................... 42
Interstate Banking..................................................................................... 43
NBA.................................................................................................... 44
MONETARY POLICY................................................................................................. 45
INFORMATION CONCERNING ZIONS BANCORPORATION .....................................................................45
Selected Financial Data................................................................................ 45
Stock Prices and Dividends on Zions Common Stock....................................................... 48
Principal Holders of Zions Common Stock.................................................................49
Zions Documents Incorporated by Reference.............................................................. 51
INFORMATION CONCERNING SOUTHERN ARIZONA......................................................................... 51
- i -
<PAGE>
Selected Financial Data................................................................................ 55
Stock Prices and Dividends on Southern Arizona Common Stock.............................................57
Stockholdings of Directors, Officers and Certain Others................................................ 58
SOUTHERN ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THREE-YEAR PERIOD ENDED
DECEMBER 31, 1995.......................................................................................62
COMPARISON OF ZIONS COMMON STOCK AND SOUTHERN ARIZONA COMMON STOCK...............................................63
LEGAL OPINIONS...................................................................................................69
EXPERTS..........................................................................................................69
OTHER MATTERS....................................................................................................69
SOUTHERN ARIZONA FINANCIAL STATEMENTS.......................................................................... F-1
STATISTICAL INFORMATION AND ANALYSIS...........................................................................ST-1
APPENDICES:
A. Statutory Provisions Concerning Dissenters' Rights of Southern Arizona
Shareholders
B. Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A. as
to Tax Matters
C. Fairness Opinion of M One, Inc.
</TABLE>
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<PAGE>
SUMMARY
The following is a brief summary of certain information which may also
be contained elsewhere in this Proxy Statement/Prospectus. This summary is
provided for convenience and should not be considered complete. It is qualified
in its entirety by the more detailed information contained in this Proxy
Statement/Prospectus and in the Appendices hereto.
The Parties
Zions Bancorporation ("Zions") is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended, and organized under the
laws of Utah, engaged primarily in the commercial banking business through its
banking subsidiaries. Zions' principal executive offices are at 1380 Kennecott
Building, Salt Lake City, Utah 84133 (telephone: 801/524-4787). Zions is the
second largest bank holding company headquartered in Utah. Zions First National
Bank, Salt Lake City, Utah ("Zions Bank"), founded in 1873, is a wholly-owned
subsidiary of Zions (except for directors' qualifying shares) and as of December
31, 1995 had 94 offices located throughout the state of Utah, plus one foreign
office, for a total of 95 banking offices, including its Head Office. Zions Bank
is the second largest commercial banking organization headquartered in the state
of Utah. Zions also owns Nevada State Bank, Las Vegas, Nevada, and National Bank
of Arizona, Tucson, Arizona ("NBA"). Nevada State Bank, with 25 offices in
Nevada, is the fifth largest commercial bank in Nevada. NBA currently has eleven
offices in Arizona and is the fifth largest commercial bank in Arizona. At
December 31, 1995 Zions had total consolidated assets of $5.62 billion, deposits
of $4.09 billion, and shareholders' equity of $428 million. See "Information
Concerning Zions Bancorporation."
National Bank of Arizona ("NBA") is a commercial bank organized under
the laws of the United States of America, with its main office located at 335 N.
Wilmot Road, Tucson, Arizona 85711 (telephone 520/571-1500). In addition to
providing financial services for businesses, including commercial loans,
leasing, cash management, payroll processing, lockbox, and customized draft
processing, NBA also makes mortgage loans within its service area and provides a
wide range of personal banking services for individual customers, including
bankcard, installment loans, home equity credit line loans, checking and savings
accounts, time certificates, and safe deposit facilities. As of December 31,
1995, NBA had total assets of $829 million, deposits of $751 million, loans of
$536 million, and equity of $71 million.
Southern Arizona Bancorp, Inc. ("Southern Arizona") is a bank holding
company organized under the laws of the State of Arizona and registered under
the Bank Holding Company Act of 1956, as amended. Southern Arizona's principal
executive offices are located at 1800 South Fourth Avenue, Yuma, Arizona 85364
and its telephone number is 520/782-7505. Southern Arizona is primarily engaged
in the commercial banking business through its wholly-owned subsidiary, Southern
Arizona Bank. As of December 31, 1995, Southern Arizona had total assets of $127
million, loans of $85 million, deposits of $115 million, and shareholders'
equity of $9 million.
Southern Arizona Bank (the "Bank") is the sole subsidiary of Southern
Arizona and is an Arizona banking corporation licensed to conduct commercial
banking business in the State of Arizona. The Bank currently operates five
offices, all in Yuma County, Arizona. The Bank's main office is located at 1800
<PAGE>
South Fourth Avenue, Yuma, Arizona 85364. Its telephone number is 520/782-7505.
The Bank was founded in 1982. In 1984, pursuant to a plan of reorganization, the
Bank became a wholly-owned subsidiary of Southern Arizona and shares of the Bank
were converted into shares of Southern Arizona. The Bank provides a full range
of commercial banking services, including consumer and commercial loans,
residential real estate loans, and construction and permanent mortgage loans.
The Bank offers a variety of deposit accounts, including non-interest bearing
demand accounts, interest bearing checking and savings accounts, and
certificates of deposit.
The Special Meeting; Purpose
The Special Meeting of Shareholders of Southern Arizona (the "Special
Meeting") will be held at 6:30 p.m. local time, on May __, 1996 at Best Western
Chilton Inn and Conference Center, 300 East 32nd Street, Yuma, Arizona.
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve the Plan of Reorganization. Only holders of record of Common
Stock, no par value, of Southern Arizona ("Southern Arizona Common Stock") at
the close of business on April __, 1996 will be entitled to vote at the Special
Meeting. At that date, 1,266,362 shares of Southern Arizona Common Stock were
outstanding, each share being entitled to one vote except for certain matters
which require approval of a specified percentage of holders of shares of
Southern Arizona Common Stock. See "Introduction."
Vote Required for Approval
Approval of the Plan of Reorganization requires the affirmative vote of
at least two-thirds of the shareholders of Southern Arizona Common Stock (with
each shareholder receiving one vote regardless of the number of shares owned by
each shareholder) and the affirmative vote of the holders of at least two-thirds
of the outstanding shares of Southern Arizona Common Stock voting in person or
by proxy. A failure to vote, an abstention, or a failure by a broker to vote
shares held in street name will have the same legal effect as a vote against the
approval of the Plan of Reorganization. See "Plan of Reorganization--Required
Vote; Management Recommendation."
As of December 31, 1995, the directors and executive officers of
Southern Arizona beneficially owned an aggregate of 24.5% of the outstanding
Southern Arizona Common Stock. As an inducement to Zions to enter into the Plan
of Reorganization, all of the directors of Southern Arizona have entered into
agreements with Zions under which they have agreed, in their capacity as
shareholders, to vote their shares in favor of the Reorganization. These
agreements cover an aggregate of 24.5% of the outstanding Southern Arizona
Common Stock and represent the holdings of twelve persons or approximately 2.4%
of the Southern Arizona shareholders of record. See "Plan of
Reorganization--Voting Agreements."
Proposed Reorganization
At the Special Meeting, the shareholders of Southern Arizona will be
asked to consider and approve an Agreement and Plan of Reorganization among
Zions, NBA, Southern Arizona, and the Bank, an Agreement of Merger between
Southern Arizona and Zions, and an Agreement to Merge between the Bank and NBA
(collectively, the
- 2 -
<PAGE>
"Plan of Reorganization"). The Plan of Reorganization provides for the merger of
Southern Arizona into Zions, whereby Zions will be the surviving corporation and
for the subsequent merger of the Bank into NBA, whereby NBA will be the
surviving bank. See "Plan of Reorganization." Upon consummation of the
Reorganization, shareholders of Southern Arizona Common Stock will be entitled
to receive, in exchange for each share of Southern Arizona Common Stock, that
number of shares of Common Stock, no par value, of Zions ("Zions Common Stock")
calculated by dividing the Benchmark Price (as defined below) by the Average
Closing Price (as defined below) of Zions Common Stock, and by further dividing
the number so reached by the total number of outstanding shares of Southern
Arizona Common Stock. If the Unadjusted Average Price (as defined below) of the
Zions Common Stock is less than $59.00, Zions will also make a cash payment to
the holders of Southern Arizona Common Stock in an amount per share of Southern
Arizona Common Stock equal to (i) the amount by which the Benchmark Price
exceeds the product of the Unadjusted Average Price and the number of shares of
Zions Common Stock issuable assuming the Unadjusted Average Price had been
$59.00 divided by (ii) the number of outstanding shares of Southern Arizona
Common Stock at the Effective Date.
On April __, 1996, the closing price of Zions Common Stock quoted on
the National Market System of NASDAQ ("NASDAQ-NMS") was $_____ per share and
there were issued and outstanding 1,266,362 shares of Southern Arizona Common
Stock. If the Reorganization had been consummated on that date and the Average
Closing Price had been $_____ and the Benchmark Price had been $_____ on that
date, each shareholder of Southern Arizona Common Stock would have received ____
shares of Zions Common Stock for each share of Southern Arizona Common Stock.
This exchange would equate to a value of $_____ for each share of Southern
Arizona Common Stock if the exchange were consummated as of such date. The
actual exchange ratio of Southern Arizona Common Stock for Zions Common Stock
and the amount of any cash payment will depend upon the Benchmark Price and the
Average Closing Price on the Effective Date.
Fractional shares of Zions Common Stock will not be issued in the
Reorganization. Southern Arizona shareholders otherwise entitled to a fractional
share will be paid the value of such fraction in cash as described herein under
"Plan of Reorganization -- Conversion of Southern Arizona Shares -- Payment for
Fractional Shares."
Certain Definitions
In connection with the description of the Reorganization in this Proxy
Statement/Prospectus, shareholders of Southern Arizona should be aware of the
following terms. The following definitions may not be complete. For a complete
definition of each term, please refer to the Plan of Reorganization.
"Average Closing Price" means the average (rounded to the nearest
penny) of each Daily Sales Price of Zions Common Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date. Notwithstanding the foregoing, (A) if the result of the
calculation described in the previous sentence is less than $59.00, then the
Average Closing Price shall be $59.00, and (B) if the result of the calculation
described in the previous sentence is more than $72.00, then the Average Closing
Price shall be $72.00.
- 3 -
<PAGE>
"Benchmark Price" means the sum of (i) $25,330,000.00; and (ii) the
consolidated net undistributed income of Southern Arizona during the period
beginning on October 1, 1995 and ending on the close of business on the last day
of the calendar month preceding the Effective Date, calculated in accordance
with generally accepted accounting principles in a manner consistent with
Southern Arizona Financial Statements (the amount calculated under this
subclause (ii) may be a negative number; the effect of summing such a negative
number would be a reduction in the Benchmark Price as otherwise would be
calculated); and (iii) if the Effective Date does not occur on the first day of
a calendar month, an amount calculated by computing the daily average of the net
undistributed income of Southern Arizona for the period and in the manner
prescribed in subclause (ii) and multiplying the result of such computation by
the number of days elapsing during the period beginning on the first day of the
month in which the Effective Date occurs and ending on the day immediately
preceding the Effective Date.
"Daily Sales Price" means for any trading day, the last reported sale
price or, if no such reported sale takes place, the mean (unrounded) of the
closing bid and asked prices of Zions Common Stock in the over-the-counter
market as such prices are reported by the automated quotation system of the
National Association of Securities Dealers, Inc. or, in the absence thereof, by
such other source upon which Zions and Southern Arizona shall mutually agree.
"Effective Date" means the date which is the latest of (a) the date
following the day upon which the Southern Arizona shareholders approve, ratify,
and confirm the transactions contemplated by the Plan of Reorganization; (b) the
date following the day upon which the shareholder of the Bank approves,
ratifies, and confirms the transaction contemplated by the Plan of
Reorganization; (c) the first to occur of (i) the date thirty days following the
date on which the Board of Governors of the Federal Reserve System or the
Federal Reserve Bank of San Francisco acting pursuant to delegated authority
(collectively, the "Board of Governors") authorizes consummation of the merger
of Southern Arizona into Zions; or (ii) if, pursuant to section 321(a) of the
Riegle Community Development and Regulatory Improvement Act of 1994 (the "Riegle
Act"), 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 (iii) the date ten days
following the date on which the Board of Governors indicates its waiver of
jurisdiction over the merger of Southern Arizona into Zions; (d) (i) the date
thirty days after the date on which the Comptroller of the Currency (the
"Comptroller") approves the merger of the Bank into NBA, or (ii) if, pursuant to
section 321 (b) of the Riegle Act, the Comptroller 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; (e)
if such an order shall be required by law, the date ten days following the date
of the order of the Commissioner of Financial Institutions of the State of Utah
(the "Commissioner") approving the transactions contemplated by this Agreement;
(f) if such an order shall be required by law, the date ten days following the
date upon which the Superintendent of Banks of Arizona (the "Superintendent")
approves the Reorganization; (g) the date upon which any other material order,
approval, or consent of a federal or state regulator of financial institutions
or financial institution holding companies authorizing consummation of the
transactions contemplated by the Plan of Reorganization is obtained, or any
waiting period mandated by such order, approval, or consent has run; (h) ten
days after any stay of the approvals of the Board of Governors, the Comptroller,
the Commissioner, or the Superintendent of
- 4 -
<PAGE>
the transactions contemplated by the Plan of Reorganization, or any injunction
against closing of such transactions is lifted, discharged, or dismissed; or (i)
such other date as shall be mutually agreed upon by Zions and Southern Arizona.
"Unadjusted Average Price" means the average (rounded to the nearest
penny) of each Daily Sales Price of Zions Common Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date.
Reasons for the Reorganization
Management and the directors of Southern Arizona believe that the
merger of Southern Arizona into Zions and the exchange of Southern Arizona
Common Stock for Zions Common Stock (together with any cash payment) is in the
best interests of shareholders, employees, customers and the community served by
the Bank. In reaching such determination, the Southern Arizona Board determined,
among other things, that the Reorganization will provide Southern Arizona
shareholders the best means of realizing a significant premium on their
investment as well as a liquid market and attractive dividend yield for the
stock they receive as a result of the Reorganization. In addition, the
Reorganization is expected to preserve employees' jobs within the Bank and
enhance the services offered to the Bank's customers and the community it
serves. See "Plan of Reorganization-- Background of and Reasons for the
Reorganization" for a description of the factors considered by Southern
Arizona's board of directors in determining to recommend the Reorganization to
shareholders for their approval. Southern Arizona's board of directors believes
that the merger with Zions will realize substantial value for Southern Arizona's
shareholders and will allow them the option of realizing a significant return on
their original investment and continuing to participate in the development of
banking in Arizona and in the West by holding the Zions Common Stock they will
receive in the Reorganization.
For Zions, the Reorganization will provide the opportunity to
continue to develop its franchise in the Arizona market by expanding its
operations to Yuma County, Arizona, a county within which Zions currently has no
presence, by broadening its geographical base in the Arizona market and thereby
diversifying its Arizona operations, and by expanding the banking services it is
able to provide. The combination of the different skills, resources and services
offered by the Bank and NBA, together with the additional skills and resources
available in the broader Zions organization, will make the resulting bank better
able to effectively compete in its markets with other full-service financial
institutions. See "Plan of Reorganization--Background of and Reasons for the
Reorganization--Zions."
Board of Directors Recommendation
The Board of Directors of Southern Arizona unanimously believes that
the Reorganization is in the best interests of the shareholders, employees, and
customers of Southern Arizona and recommends that the shareholders of Southern
Arizona vote "FOR" approval of the Plan of Reorganization.
SHAREHOLDERS OF SOUTHERN ARIZONA ARE REQUESTED TO COMPLETE, DATE, AND
SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- 5 -
<PAGE>
Opinion of Financial Advisor
Southern Arizona retained the financial advisory and consulting firm of
M One, Inc. ("M One") to render an opinion on the fairness of the merger
consideration offered to Southern Arizona shareholders by Zions. M One has
rendered an opinion to Southern Arizona dated February 29, 1996 that the
consideration offered in the Reorganization is fair, from a financial point of
view, to the Southern Arizona shareholders. The opinion is attached as Appendix
C to this Proxy Statement/Prospectus and should be read in its entirety for
information as to the matters considered and assumptions made in rendering such
opinion. See "Plan of Reorganization--Opinion of Financial Advisor."
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that, following the Reorganization,
Mr. John E. Byrd, currently president and chief executive officer of Southern
Arizona and the Bank, will be appointed an executive vice president of NBA,
responsible for the general banking operations of NBA in Yuma County, Arizona.
Mr. Byrd will enter into the three-year employment agreement with NBA effective
as of the Effective Date. See "Plan of Reorganization--Interests of Certain
Persons in the Transaction."
Tax Consequences
Southern Arizona will receive an opinion from O'Connor, Cavanagh,
Anderson, Killingsworth & Beshears, P.A., legal counsel to Southern Arizona (the
"O'Connor Opinion") that, based upon the facts and representations set forth or
referred to in such opinion, the merger of Southern Arizona with and into Zions
(the "Merger") will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, provided that
the cash received by the Southern Arizona shareholders does not exceed the fair
market value of the Zions Common Stock received by the Southern Arizona
shareholders. As a result, the Southern Arizona shareholders will recognize no
gain or loss upon the exchange of their shares of Southern Arizona Common Stock
for Zions Common Stock in the Merger, except with respect to cash received in
lieu of fractional shares, cash received as a portion of the consideration paid
in the Merger, and cash paid to shareholders who elect to exercise and perfect
their dissenters' rights under Arizona law. If the cash received by the Southern
Arizona shareholders does exceed the fair market value of the Zions Common Stock
received by the Southern Arizona shareholders, the Merger may be treated as a
fully taxable exchange (or sale) of Southern Arizona Common Stock and therefore
taxable to the shareholders of Southern Arizona because the Merger will fail to
meet IRS published guidelines, which require that the Southern Arizona
shareholders exchange at least 50 percent by value of their Southern Arizona
Common Stock for Zions Common Stock in the Reorganization. For further
discussion, see "Federal Income Tax Consequences of the Reorganization." A copy
of the O'Connor Opinion is attached to this Proxy Statement/Prospectus in
Appendix B.
Dissenters' Rights
Record holders of Southern Arizona Common Stock who object to the
Reorganization and comply with the prescribed statutory procedures are entitled
to have the fair value of their shares determined in accordance with the Arizona
Business Corporation Act (Arizona Revised Statutes, Title 10, ss.ss. 10-1301 et
seq.) and paid to them in lieu of the shares of Zions Common Stock they would
otherwise be entitled to receive in the Reorganization. A copy of the pertinent
statutory provisions is attached to this Proxy Statement/Prospectus as Appendix
A. Failure
- 6 -
<PAGE>
to follow such provisions precisely may result in a loss of dissenters' rights.
Under the Plan of Reorganization, Zions is not obligated to consummate the Plan
of Reorganization if the holders of more than 6% of Southern Arizona Common
Stock exercise and perfect their dissenters' rights. See "Plan of
Reorganization-- Dissenters' Rights of Southern Arizona Shareholders."
Conditions; Regulatory Approval
Consummation of the Reorganization is subject to satisfaction of a
number of conditions, including (i) obtaining requisite approval from Southern
Arizona shareholders, (ii) obtaining regulatory approvals from the Board of
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, and the Superintendent of Banks of Arizona, (iii) the receipt of an
opinion of counsel with respect to certain tax aspects of the Reorganization,
(iv) the absence of any adverse change with respect to Southern Arizona, (v)
confirmation that not more than 6% of the total shares of Southern Arizona
Common Stock have properly exercised their dissenters' rights as of the
Effective Date; and (vi) the satisfaction of other customary closing conditions.
See "Plan of Reorganization--Conditions to the Reorganization." Applications for
the regulatory approvals have been filed and are expected to be approved,
although no assurances can be given as to whether or when such approvals may be
received.
Amendment; Termination
Notwithstanding prior shareholder approval, the Plan of Reorganization
may be amended at any time prior to the Effective Date of the Reorganization in
any respect that would not prejudice the economic interests of the Southern
Arizona shareholders.
The Plan of Reorganization may be terminated and abandoned at any time
prior to the Effective Date, notwithstanding approval of the shareholders, as
follows: (i) by mutual consent of Zions and Southern Arizona; (ii) unilaterally,
by either party if any of the representations and warranties of the other party
was materially incorrect when made; (iii) by either party in the event of a
material breach or material failure by the other party to the Plan of
Reorganization of any covenant or agreement contained in the Plan of
Reorganization which has not been, or cannot be, cured within thirty days after
written notice has been given; (iv) by the board of directors of Southern
Arizona if they determine in good faith, based upon the advice of outside
counsel, that such termination is required for the board of directors to comply
with their fiduciary duties to the shareholders imposed by law by reason of an
Alternative Proposal (as defined in the Plan of Reorganization); (v) by either
party if the Reorganization has become inadvisable or impracticable by reason of
federal or state litigation to restrain or invalidate the Reorganization; or
(vi) by either party on or after August 31, 1996, if the Effective Date has not
occurred on or before that date. In the event of termination by Southern Arizona
by reason of an Alternative Proposal, Southern Arizona has agreed to pay Zions a
termination fee of $750,000.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of Southern Arizona, the Reorganization will become
effective in the second quarter of 1996. However, there can be no assurance that
all conditions necessary to the consummation of the Reorganization will be
satisfied or, if satisfied, that they will be satisfied in time to permit the
- 7 -
<PAGE>
Reorganization to become effective at the anticipated time. See "Plan of
Reorganization--Effective Date of the Reorganization."
Accounting Treatment
It is intended that the Reorganization will be accounted for as a
purchase under generally accepted accounting principles ("GAAP").
Comparison of Shareholders' Rights
See "Comparison of Zions Common Stock and Southern Arizona Common
Stock" for a summary of the material differences between the rights of holders
of shares of Southern Arizona Common Stock and holders of shares of Zions Common
Stock.
"Anti-Takeover" Provisions
The Articles of Incorporation and Bylaws of Zions contain provisions
which may be considered to be anti-takeover in nature, including staggered terms
of office for directors, absence of cumulative voting and special shareholder
vote requirements for certain types of extraordinary corporate transactions. See
"Comparison of Zions Common Stock and Southern Arizona Common Stock."
Exchange of Certificates
Instructions on how to effect the exchange of Southern Arizona Common
Stock certificates for Zions Common Stock certificates will be sent, as promptly
as practicable after the Reorganization becomes effective, to each shareholder
of record of Southern Arizona. Shareholders should not send in stock
certificates until they receive written instructions to do so.
Trading Markets; Pre-Announcement Prices
The outstanding shares of Zions Common Stock currently are traded on
NASDAQ-NMS under the symbol "ZION". The shares of Zions Common Stock to be
issued in the Reorganization will be listed on NASDAQ-NMS, subject to official
notice of issuance. The closing sale price for Zions Common Stock on the NASDAQ-
NMS on January 16, 1996, the last trading day prior to the first public
announcement of the Reorganization, was $66.75. On April __, 1996, the last date
prior to the printing of this Proxy Statement/Prospectus, the closing sale price
for Zions Common Stock was $_____. If the Average Closing Price equated to this
price and the Benchmark Price equalled $________ on that date, _____ shares of
Zions Common Stock would be issued in exchange for each share of Southern
Arizona Common Stock, and the equivalent per share price (as calculated above)
for Southern Arizona Common Stock, in each case assuming consummation of the
Plan of Reorganization, would have been $_____.
Southern Arizona's Common Stock is not listed with a national
securities exchange or quoted on any automated quotation system. No established
public trading market for Southern Arizona's Common Stock presently exists and
the private market that has existed is thin and not necessarily indicative of
the value of Southern Arizona Common Stock. For the year ended December 31,
1995, the high and low prices for Southern Arizona Common Stock ranged from
$11.00 to $15.00 per share. There have been no trades in Southern Arizona Common
Stock in the fourth quarter of 1995 and the first quarter of 1996 and since the
Plan of Reorganization was publicly announced. See "Stock Prices and Dividends
on Southern Arizona Common Stock," below.
- 8 -
<PAGE>
Selected Financial Information
The following table sets forth certain historical financial information
for Zions and Southern Arizona. With respect to pro forma combined financial
information for Zions giving effect to the Reorganization using the purchase
method of accounting, see "Information Concerning the Pro Forma Combined
Financial Data." This information is based on the historical financial
statements of Zions appearing elsewhere herein and incorporated herein by
reference and the Southern Arizona financial statements appearing elsewhere
herein, and should be read in conjunction with such statements and information
and the related notes.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Zions
Earnings
Net interest income.... $ 227,094 $ 198,606 $ 174,657 $ 157,282 $ 139,871
Provision for loan
losses................ 2,800 2,181 2,993 10,929 25,561
Net income............. 81,328 63,827 58,205 47,209 30,449
Per Share
Net income ............ $ 5.53 $ 4.37 $ 4.08 $ 3.42 $ 2.23
Dividends.............. 1.41 1.16 .98 .75 .72
Statement of Condition at
Period End
Assets................. $ 5,620,646 $ 4,934,095 $ 4,801,054 $ 4,107,924 $ 3,883,938
Deposits............... 4,097,114 3,705,976 3,432,289 3,075,110 2,877,860
Long-term debt......... 56,229 58,182 59,587 99,223 81,134
Shareholders' equity... 428,506 365,770 312,592 260,070 220,753
Southern Arizona
Earnings
Net interest income.... $ 7,042 $ 6,049 $ 5,162 $ 4,474 $ 3,573
Provision for loan
losses................ 401 429 756 753 422
Net income............. 1,999 1,632 1,291 950 725
Per Share
Net income............. $ 1.58 $ 1.29 $ 1.02 $ .75 $ .57
Dividends.............. .36 .30 .24 .17 .13
Statement of Condition at
Period End
Assets................. $ 127,418 $ 101,254 $ 91,225 $ 81,938 $ 71,603
Deposits............... 114,762 91,205 82,316 76,435 66,983
Long-term debt......... 2,980 2,500 2,500 -- --
Shareholders' equity... 8,858 7,284 6,024 5,036 4,302
</TABLE>
- 9 -
<PAGE>
Comparative Per Share Data
The following table sets forth for the periods indicated historical
earnings, book values and dividends per share for Zions and Southern Arizona
Common Stock. The following data are based on the historical financial
statements of Zions appearing elsewhere herein and incorporated herein by
reference and of Southern Arizona appearing elsewhere herein and should be read
in conjunction with such financial statements and such information and the
related notes to each.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income Per Common Share
Zions........................ $ 5.53 $ 4.37 $ 4.08 $ 3.42 $ 2.23
Southern Arizona............. 1.58 1.29 1.02 .75 .57
Book Value Per Common Share
Zions........................ $29.44 $25.12 $22.01 $18.95 $16.23
Southern Arizona............. 7.00 5.75 4.76 3.98 3.40
Cash Dividends Declared Per Common
Share
Zions (1).................... $ 1.41 $ 1.16 $ .98 $ .75 $ .72
Southern Arizona............. .36 .30 .24 .17 .13
<FN>
(1) While Zions is not obligated to pay cash dividends, the Board of
Directors presently intends to continue the policy of paying quarterly
cash dividends. Future dividends will depend, in part, upon the
earnings and financial condition of Zions.
</FN>
</TABLE>
Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information
reflects the application of the purchase method of accounting. The following
table, which shows comparative historical per Common Share data for Zions and
Southern Arizona (separately and pro forma combined), and equivalent pro forma
per share data for Southern Arizona, should be read in conjunction with the
financial information appearing elsewhere in this Proxy Statement/Prospectus or
as incorporated herein by reference to other documents. The pro forma data in
the table, presented as of and for the year ended December 31, 1995, are
presented for comparative and illustrative purposes only and are not necessarily
indicative of the combined financial position or results of operations in the
future or what the combined financial position or results of operations would
have been had the Reorganization been consummated during the periods or as of
the dates for which the information in the table is presented:
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------- ---------------------------
Zions
and Southern Southern
Arizona Arizona
Southern Pro-Forma Equivalent
Per Common Share Zions Arizona Combined(4) Pro-Forma(5)
- ---------------- ----- ------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME (1)
For the year ended
December 31, 1995 $ 5.53 $1.58 $ 5.41 $1.51
CASH DIVIDENDS(2)
For the year ended
December 31, 1995 $ 1.41 $ .36 $ 1.41 $ .39
BOOK VALUE:(3)
As of December 31, 1995 $29.44 $7.00 $30.33 $8.46
- ----------------------
<FN>
(1) Net Income per share is based on weighted average common and common
equivalent shares outstanding.
(2) Pro forma cash dividends represent historical cash dividends of Zions.
(3) Book value per common share is based on total period-end of Zions
shareholders' equity.
(4) Pro forma combined net income per share represents historical net
income of Zions and Southern Arizona adjusted for expenses related to
prepayment of $2,500,000, 8.75% Senior Notes of Southern Arizona
Bancorp Inc. and amortization of goodwill resulting from purchase
accounting computed using historical weighted average common and common
equivalent shares of Zions adjusted by computed common and common
equivalent shares to be issued in the purchase. Pro forma combined book
value per share represents historical total shareholders' equity of
Zions adjusted by the purchase price less expenses related to
prepayment of Senior Notes and amortization of goodwill resulting from
purchase accounting computed using Zions' historical common shares
outstanding adjusted by computed common shares to be issued in the
purchase.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the estimated exchange ratio as of April __, 1996
and assume a Benchmark Price of $_____, an Average Closing Price of
$_____ as of April __, 1996, and a resulting exchange ratio of ___
shares of Zions Common Stock for each share of Southern Arizona Common
Stock.
</FN>
</TABLE>
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<PAGE>
SOUTHERN ARIZONA BANCORP, INC.
Proxy Statement
for
Special Meeting of Shareholders
of Southern Arizona Bancorp, Inc.
to be held on
May __, 1996
and
ZIONS BANCORPORATION
Prospectus
Up to 500,000 Shares of
Common Stock
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Southern Arizona Bancorp, Inc.
("Southern Arizona") of proxies to be voted at the Special Meeting of
Shareholders of Southern Arizona to be held on May __, 1996 and at any
adjournment or adjournments thereof. The Special Meeting will be held at 6:30
p.m., local time, at Best Western Chilton Inn and Conference Center, 300 East
32nd Street, Yuma, Arizona. The approximate date on which this Proxy
Statement/Prospectus will first be mailed to the shareholders of Southern
Arizona is April __, 1996.
Record Date; Voting Rights
The Board of Directors of Southern Arizona has fixed the close of
business on April __, 1996 as the record date for determining the shareholders
of Southern Arizona entitled to notice of and to vote at the Special Meeting or
any postponements or adjournments thereof. At that date, 1,266,362 shares of
Common Stock, no par value, of Southern Arizona ("Southern Arizona Common
Stock") were outstanding, held by approximately 500 shareholders of record. Each
such share of Southern Arizona Common Stock entitles its holder of record at the
close of business on the record date to one vote on each matter properly
submitted to the shareholders for action at the Special Meeting except that the
vote required by Southern Arizona's articles of incorporation to approve the
Plan of Reorganization also entitles each holder of shares of Southern Arizona
Common Stock to one vote, irrespective of the number of shares of Southern
Arizona Common Stock that such shareholder owns. Southern Arizona has no other
outstanding class of capital stock.
Purpose of the Special Meeting
At the Special Meeting, the shareholders of Southern Arizona will be
asked to consider and vote upon a proposal to approve an Agreement and Plan of
Reorganization dated as of January 17, 1996 among Southern Arizona, Southern
- 12 -
<PAGE>
Arizona Bank (the "Bank"), Zions Bancorporation ("Zions"), and National Bank of
Arizona ("NBA"), a related Agreement of Merger between Southern Arizona and
Zions, and an Agreement to Merge between the Bank, Southern Arizona's
wholly-owned subsidiary, and NBA, Zions' wholly-owned subsidiary (except for
directors' qualifying shares) (these agreements are hereinafter referred to
collectively as the "Plan of Reorganization"). As more fully described below
under "Plan of Reorganization," the Plan of Reorganization provides for the
merger of Southern Arizona into Zions and the merger of the Bank into NBA
(hereinafter, the two mergers will be referred to collectively as the
"Reorganization"). Upon the Effective Date, each holder of Southern Arizona
Common Stock will be entitled to receive, in exchange for each share of Southern
Arizona Common Stock held by him, that number of shares of Zions Common Stock
calculated by dividing the Benchmark Price (as defined in "Summary" above) of
$25,330,000 plus accretions by the Average Closing Price (as defined in
"Summary" above) of Zions Common Stock, and by further dividing the number so
reached by the total number of outstanding shares of Southern Arizona Common
Stock. If the Unadjusted Average Price of Zions Common Stock is less than
$59.00, Zions will also make a cash payment to the holders of Southern Arizona
Common Stock in an amount per share of Southern Arizona Common Stock equal to
(i) the amount by which the Benchmark Price exceeds the product of the
Unadjusted Average Price and the number of shares of Zions Common Stock issuable
assuming the Unadjusted Average Price had been $59.00 divided by (ii) the number
of outstanding shares of Southern Arizona Common Stock at the Effective Date.
On April __, 1996, the closing price of Zions Common Stock quoted on
NASDAQ-NMS was $____ per share and 1,266,362 shares of Southern Arizona Common
Stock were outstanding. If the Reorganization had been consummated on that date,
holders of Southern Arizona Common Stock would have received _____ shares of
Zions Common Stock for each share of Southern Arizona Common Stock, assuming
that the Average Closing Price was $___ and assuming the Benchmark Price
equalled $_____ on that date. This exchange would equate to a value of $_____
for each share of Southern Arizona Common Stock if the exchange were consummated
as of such date.
Southern Arizona has received an opinion from the independent financial
advisory and consulting firm M One, Inc. ("M One") that the merger consideration
to be paid pursuant to the Plan of Reorganization is fair to the shareholders of
Southern Arizona from a financial point of view. See "Plan of Reorganization--
Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF SOUTHERN ARIZONA UNANIMOUSLY BELIEVES THAT
THE REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF SOUTHERN
ARIZONA AND RECOMMENDS THAT SOUTHERN ARIZONA SHAREHOLDERS VOTE TO APPROVE THE
PLAN OF REORGANIZATION.
Voting and Revocation of Proxies
All properly executed proxies not theretofore revoked will be voted at
the Special Meeting or any postponements or adjournments thereof in accordance
with the instructions thereon. Southern Arizona proxies containing no voting
instructions will be voted in favor of approval of the Plan of Reorganization.
As to any other matter brought before the Special Meeting and submitted to a
shareholder vote, proxies will be voted in accordance with the judgment of the
proxyholders named thereon.
- 13 -
<PAGE>
A shareholder who has executed and returned a proxy may revoke it at
any time before it is voted by filing with the Secretary of Southern Arizona
written notice of such revocation or a later dated proxy or by attending the
Special Meeting and voting in person. Attendance at the Special Meeting will
not, of itself, constitute a revocation of a proxy.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees
of Southern Arizona may solicit proxies from the shareholders of Southern
Arizona in person or by telephone or otherwise for no additional compensation.
Brokerage houses, nominees, fiduciaries and other custodians will be requested
to forward proxy soliciting materials to beneficial owners of shares held of
record by them and will be reimbursed for their reasonable expenses. Southern
Arizona and Zions will share expenses in connection with the printing and
solicitation of proxies for the Special Meeting. Zions will pay for all costs
attributable to registering the Zions Common Stock under applicable federal and
state law. See "Plan of Reorganization--Expenses."
PLAN OF REORGANIZATION
This section of the Proxy Statement/Prospectus describes certain
important aspects of the Plan of Reorganization. The following description does
not purport to be complete and is qualified in its entirety by reference to the
Plan of Reorganization. The Plan of Reorganization has been filed with the SEC
as an exhibit to the Registration Statement. The Plan of Reorganization is
incorporated into this Proxy Statement/Prospectus by reference to such filing
and is available upon request to Gary L. Anderson, Corporate Secretary, Zions
Bancorporation. See "Available Information."
The Reorganization
The Plan of Reorganization provides for the merger of Southern Arizona
into Zions with Zions being the surviving corporation and immediately thereafter
for the merger of the Bank with NBA with NBA being the surviving corporation.
Upon consummation of the latter merger, NBA will continue as a direct
wholly-owned subsidiary of Zions (except for directors' qualifying shares).
Zions is a bank holding company incorporated in Utah. The principal subsidiaries
of Zions are Zions First National Bank with 94 offices located throughout the
state of Utah and one foreign office, Nevada State Bank with 25 offices in
Nevada, and NBA with eleven offices in Arizona. Southern Arizona's only
subsidiary is the Bank which has five offices in Yuma County, Arizona.
In the Reorganization, the shareholders of Southern Arizona (except
dissenting shareholders) will become shareholders of Zions. The approximately
1,266,362 outstanding shares of Southern Arizona Common Stock (other than shares
subject to dissenters' rights) will be converted into the right to receive that
number of shares of Zions Common Stock calculated by dividing the Benchmark
Price of $25,330,000 plus certain accretions determined on the Effective Date of
the Reorganization by the Average Closing Price of Zions Common Stock. If the
Unadjusted Average Price is less than $59.00, the shareholders of Southern
Arizona will also be entitled to a cash payment. See "Conversion of Southern
Arizona Shares."
- 14 -
<PAGE>
Background of and Reasons for the Reorganization
Southern Arizona. Over the past several years, Southern Arizona has
been approached by several bank holding companies concerning the possibility of
a merger or purchase of Southern Arizona. Until the past year, none of such
possibilities offered sufficient shareholder value to justify deviation from
Southern Arizona's strategy of continued growth as an independent institution.
However, during the past year, the Board of Directors of Southern Arizona
determined to consider two possible mergers as a result of the offerors'
apparent interest in paying a substantial premium over the market price of the
Southern Arizona Common Stock and the opportunity presented by such offerors for
Southern Arizona's shareholders to own stock with increased market liquidity
after the merger in a larger, more diversified institution.
On December 12, 1994, Mr. Harris Simmons, President of Zions, Mr. John
Gisi, President of NBA, and Mr. James Lee, Vice Chairman of NBA, met in Yuma,
Arizona with Mr. Stephen Shadle, Southern Arizona's Chairman of the Board, and
Mr. John Byrd, President and Chief Executive Officer of Southern Arizona. During
the meeting, a discussion took place concerning the possibility of a merger
between Zions and Southern Arizona and preliminary information about Zions and
Southern Arizona was exchanged. It was not until Mr. Byrd contacted Mr. Gisi in
late July 1995, however, that the parties commenced a series of telephonic
discussions, culminating in a telephonic discussion on October 2, 1995 between
Messrs. Simmons and Byrd during which Zions made a preliminary offer to merge
with Southern Arizona for a purchase price of $23,500,000. On that same date,
Messrs. Shadle and Byrd met with an officer of Norwest Bank who proposed a
merger transaction at a purchase price of $15,980,000 which Messrs. Shadle and
Byrd advised such officer was too low. On October 16, 1995, the Norwest officer
contacted Mr. Byrd with a merger proposal of $20,400,000 which Mr. Byrd again
rejected. On October 18, 1995, the Southern Arizona Board met to discuss Zions'
revised proposal and, after extensive discussions, determined that a merger with
Zions presented a meritorious opportunity for the Southern Arizona shareholders
at a higher purchase price of $25,330,000 and directed Mr. Byrd to inform Zions
that Southern Arizona would proceed with further negotiations at the new
purchase price. During an October 23, 1995 telephone call, Messrs. Byrd and
Simmons agreed to such purchase price. As a result of such agreement, throughout
November and December, Mr. Byrd on behalf of Southern Arizona, assisted by the
law firm of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A,
proceeded to negotiate with Mr. Simmons on behalf of Zions, assisted by the law
firm of Metzger, Hollis, Gordon & Mortimer, regarding a definitive agreement
between Zions and Southern Arizona.
The Southern Arizona Board of Directors discussed the progress of the
negotiations and the proposed terms at each of its November 15, 1995 and
December 20, 1995 meetings. Messrs. Simmons and Gisi were present for a portion
of the December 20 meeting to provide the Southern Arizona directors with
information regarding Zions and to respond to their questions.
Prior to the December 20, 1995 meeting, drafts of the Plan of
Reorganization were circulated for review by the directors. On December 29,
1995, the Southern Arizona Board of Directors held a special meeting of the
Board for the purpose of considering the proposed merger. At that meeting, the
directors determined that further negotiation should take place respecting the
impact of the market price of Zions' Common Stock on the purchase price. After
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resolution of such issue, the Southern Arizona Board approved the merger at a
meeting of the Board held on January 17, 1996. The definitive Plan of
Reorganization was thereafter executed by the parties on January 17, 1996.
In approving the Plan of Reorganization, the Board of Directors of
Southern Arizona considered a number of factors. Without assigning any relative
or specific weights to the factors, the Southern Arizona Board of Directors
considered the following:
o The current and anticipated economic and regulatory environment and
competitive constraints facing relatively small, independent financial
institutions. Recent changes in applicable law have placed the smaller community
banks in more direct competition with larger banks and other non-bank financial
intermediaries for originating deposits and loans. The trend towards industry
consolidation, emerging technology changes, and increasing regulatory and other
costs of operation create a difficult environment for independent institutions
of Southern Arizona's size to compete effectively. In addition, future
extensions of Southern Arizona's operations could be difficult to achieve
considering the size of and number of competitors in the Arizona market.
o Business operations and financial condition of Zions. Based in part
on presentations by Zions' management, the Southern Arizona Board considered the
business, operations, earnings and financial condition of Zions on both an
historical and a prospective basis (particularly its capital position and asset
quality), the enhanced opportunities for growth in shareholder values that the
Reorganization would make possible, and the respective customer bases, product
lines, and other contributions the respective institutions would bring to a
combined institution. The Southern Arizona Board believes that Zions' community
bank orientation to the banking business, as evidenced by NBA's operations since
its merger with Zions, with emphasis on quality products and customer service,
would complement and enhance the business of Southern Arizona. The Southern
Arizona Board believes, based upon an analysis of the anticipated financial
effects of the Reorganization, that upon consummation of the Reorganization,
Zions and its bank subsidiaries would be well-capitalized institutions.
o Terms of Merger. The Southern Arizona Board considered the financial
terms of the Reorganization, including the Benchmark Price, an estimate of the
future value of Southern Arizona as an independent entity, and the relationship
of the market value of Zions Common Stock to the market value, tangible book
value, and earnings per share of Southern Arizona Common Stock. The Southern
Arizona Board also considered that the Benchmark Price represents a significant
premium over the consideration that seemed likely to result from consummation of
other transactions proposed to Southern Arizona during the same time period. In
addition, the directors compared such Benchmark Price to the prices and premiums
paid in comparable acquisition transactions involving other financial
institutions of which Southern Arizona's Board was aware.
o Impact on Employees. The Southern Arizona Board considered the
prospects of continued employment by most Southern Arizona employees. Because
NBA currently does not have any presence in the Yuma market, the Southern
Arizona Board believed that the Reorganization provided an opportunity for
Southern Arizona's employees that other merger candidates would not be able to
offer.
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o Impact on Community. The Southern Arizona Board considered Zions'
history of providing its community banks with a substantial amount of operating
autonomy, as evidenced by NBA's operations, generally leaving existing
management in place to manage the institution consistent with past management
culture, so long as such culture is not inconsistent with Zions' policies and
produces results consistent with results achieved while the institution was
independent. The Southern Arizona Board believes that the continuity of Southern
Arizona's management following the Reorganization will enable Southern Arizona's
continued service to its customers and contribute to shareholder values for
Southern Arizona shareholders who will acquire Zions Common Stock in the
Reorganization.
o Service to Customers. The Southern Arizona Board considered the
additional products of Zions that would be available to Southern Arizona
customers. After the Reorganization, in addition to existing services, the Bank
anticipates that it will be able to provide customers with an expanded array of
services, including additional mortgage services, lease financing services,
personal investment services, alternative delivery channels for banking
services, discount brokerage services and other investment services.
o Dividend Yield. The Southern Arizona Board considered that the Zions
Common Stock offers an annual dividend yield that exceeds the historical yield
on the Southern Arizona Common Stock and a broader and more liquid market.
o Tax-Free Nature of Transaction. The Southern Arizona Board reviewed
with its advisors of the provisions of the Plan of Reorganization and the
treatment of the Reorganization as a tax free reorganization within the meaning
of Section 368(a)(1)(A) of the Code for federal income tax purposes.
o Likelihood of Regulatory Approval. The Southern Arizona Board
considered the likelihood of the Reorganization being approved by applicable
regulatory authorities without undue conditions or delay.
o Ability to Consider Other Proposals. The Southern Arizona Board also
considered that, although the Plan of Reorganization provides that Southern
Arizona may not solicit any Acquisition Proposal (as defined in the Plan of
Reorganization), if Southern Arizona receives an unsolicited Acquisition
Proposal, Southern Arizona may, before the Reorganization is consummated,
provide information to, engage in discussions with, and enter into an agreement
with a third party relating to an unsolicited Acquisition Proposal that the
Southern Arizona Board reasonably believes is superior to the shareholders of
Southern Arizona from a financial point of view to the terms of the
Reorganization, if the Southern Arizona Board, upon advice of counsel,
determines that the failure to do so would result in a breach of fiduciary duty
under applicable law. The Southern Arizona Board noted that the Plan of
Reorganization provides for the payment to Zions of a termination fee of
$750,000 in certain circumstances as described under "Plan of Reorganization --
Authorized Termination and Damages for Breach" and was aware that Zions would
probably not have agreed to enter into the Plan of Reorganization without such a
provision. The Southern Arizona Board concluded that, while the existence of the
termination fee provision might reduce the likelihood that a third party would
propose an alternative merger with Southern Arizona pending completion of the
Reorganization, the increased cost to a third party would not be material and
the benefits of the Reorganization to Southern Arizona outweighed the risks.
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Based upon its consideration of the foregoing factors, the Board of
Directors of Southern Arizona concluded that the Reorganization offers Southern
Arizona's shareholders the best means of realizing the value of their
investment, preserving employees' jobs within the Bank, and offering the Bank's
customers and the community enhanced services and a stronger and more
competitive banking institution which will result from the merger of Southern
Arizona into Zions. Accordingly, the Southern Arizona Board unanimously approved
the Reorganization as being in the best interests of Southern Arizona and its
stockholders.
Each member of the Board of Directors of Southern Arizona has agreed to
vote those shares of Southern Arizona Common Stock which such director owns in
favor of the Reorganization and the Plan of Reorganization. The executive
officers and directors of Southern Arizona beneficially own approximately 24.5%
of the outstanding shares of Southern Arizona Common Stock but represent 2.4% of
the total number of Southern Arizona shareholders and will receive the same
price per share under the Plan of Reorganization as all other shareholders. See
"Plan of Reorganization -- Interests of Certain Persons in the Transaction."
Zions. On October 1, 1986, Zions acquired Mesa Bank, a small commercial
bank in the fast-growing East Valley section of the greater Phoenix area. In
1987, Mesa Bank received a new national charter and was renamed Zions First
National Bank of Arizona ("Zions Arizona"). On December 31, 1987, Camel Bank in
Phoenix, Arizona, was acquired in an exchange of stock and merged into Zions
Arizona. In January 1994 Zions Arizona acquired National Bank of Arizona
("NBA"), with offices in Tucson, Phoenix, and Scottsdale, and changed its name
to NBA. Thereafter, also in 1994, NBA acquired Rio Salado Bank, with offices in
Tempe and Mesa. NBA currently has eleven offices. NBA has provided Zions with
the opportunity to enter the Arizona commercial banking market by establishing
its operations in the Phoenix, Mesa, Tucson, and Flagstaff, Arizona areas.
For Zions, the Reorganization will provide the opportunity to continue
its expansion in the Arizona market by initiating its presence and offering its
services in Yuma County. The expansion will be evidenced by Zions' both
broadening its geographical base in this market and expanding the banking
services it is able to provide. Additionally, the Zions' expansion into a new
geographical region of Arizona will allow Zions to diversify its Arizona
operations.
The combination of Zions and Southern Arizona and their respective
Arizona banking subsidiaries will bring together the different skills and
resources of the two organizations and, together with the additional skills and
resources available in the broader Zions organization, will result in the
ability to make a wider spectrum of banking services available to consumers,
businesses and professionals in the geographic areas currently served by both
institutions.
Voting Agreements
In connection with the Plan of Reorganization, all of the shareholder-
directors of Southern Arizona, whose common share holdings aggregate 24.5% of
the outstanding Southern Arizona Common Stock, but who represent 2.4% of the
total number of Southern Arizona shareholders, have entered into agreements with
Zions under which they have agreed, in their capacity as shareholders, to vote
their shares in favor of the Plan of Reorganization and to support the Plan of
Reorganization and to recommend its adoption by the other shareholders of
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Southern Arizona. The shareholder-directors also agreed in their capacity as
directors, until the earlier of consummation of the Reorganization or
termination of the Plan of Reorganization, to refrain from soliciting or,
subject to their fiduciary duties to shareholders or to Section 7.8 of the Plan
of Reorganization, negotiating or accepting any offer of merger, consolidation,
or acquisition of any of the shares or all or substantially all of the assets of
Southern Arizona or the Bank.
The voting agreements are applicable to the directors only in their
capacities as shareholders and do not legally affect the exercise their
responsibilities as a director of Southern Arizona.
The form of the voting agreements has been filed with the SEC as an
exhibit to the Registration Statement and is incorporated herein by reference.
The foregoing summary of the agreements is qualified in its entirety by
reference to such filing.
Required Vote; Management Recommendation
Approval of the Plan of Reorganization requires the affirmative vote of
at least two-thirds of the shareholders of Southern Arizona Common Stock (with
each shareholder receiving one vote regardless of the number of shares owned by
each shareholder) and the affirmative vote of the holders of at least two-thirds
of the outstanding shares of Southern Arizona Common Stock at the Special
Meeting by the holders of Southern Arizona Common Stock voting in person or by
proxy. Because approval requires the affirmative votes of at least two-thirds of
all shareholders and two-thirds of all outstanding shares, a failure to vote, an
abstention, or a broker's failure to vote shares held in street name will have
the same legal effect as a vote against approval of the Plan of Reorganization.
In order to evaluate the merger consideration offered to Southern Arizona
shareholders by Zions, Southern Arizona retained M One to render an opinion on
the fairness of Zions' offer from a financial point of view. See " -- Opinion of
Financial Advisor," below. THE BOARD OF DIRECTORS OF SOUTHERN ARIZONA
UNANIMOUSLY RECOMMENDS THAT SOUTHERN ARIZONA SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE PLAN OF REORGANIZATION.
The Board of Directors of Zions has approved the Plan of
Reorganization, and under the Utah Business Corporation Act no approval of the
Plan of Reorganization by the shareholders of Zions is required.
Opinion of Financial Advisor
In January, 1996, Southern Arizona retained Marilyn Seymann and William
Seidman, president and chairman of the Advisory Board, respectively, of M One,
Inc. ("M One"), an independent financial advisory and consulting firm based in
Phoenix, Arizona, on the basis of its experience, to render a written fairness
opinion (the "Fairness Opinion") to the board of directors and shareholders of
Southern Arizona. Ms. Seymann and Mr. Seidman have extensive experience in the
strategic operations and financial affairs of American depository institutions.
Ms. Seymann has broad experience on a national basis in the public, regulatory
and private sectors of the banking industry and served as vice chair of the
Federal Housing Finance Board (formerly the Federal Home Loan Bank Board) from
1990-1993. Mr. Seidman has extensive experience in the banking industry having
served as the Chairman of the Federal Deposit Insurance Corporation and the
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Chairman of the Resolution Trust Corporation. M One has reviewed the negotiated
terms of the Plan of Reorganization including exchange ratio and corporate
governance matters. Except as described herein, M One is not affiliated in any
way with Southern Arizona or Zions or their respective affiliates.
The full text of M One's Fairness Opinion to Southern Arizona, which
sets forth the assumptions made, matters considered, and limitations of the
review of M One, is attached hereto as Appendix C and is incorporated herein by
reference and should be read carefully and in its entirety in connection with
this Proxy Statement/Prospectus. The following summary of M One's Fairness
Opinion is qualified in its entirety by reference to the full text of the
Fairness Opinion. The Fairness Opinion is addressed to the Southern Arizona
Board of Directors only and does not constitute a recommendation to any
shareholder of Southern Arizona as to how such shareholder should vote at the
Special Meeting or as to any other matter; however, the foregoing is not
intended to limit reliance by shareholders on the Fairness Opinion or any of
their rights with respect to the Fairness Opinion.
In connection with the Fairness Opinion, M One reviewed and analyzed
material bearing upon the financial and operating condition of Southern Arizona
and Zions and material prepared in connection with the Merger, including, among
other things: (i) the Plan of Reorganization; (ii) Zions Form S-4, dated January
31, 1996, as well as Zions' last three Form 10-K Annual Statements; (iii) Zions
Unaudited 1995 Annual Financial Statements; (iv) Zions last three Annual
Reports; (v) Zions last two Proxy Reports; (vi) Zions Quarterly Report, dated
September 30, 1995; (vii) Southern Arizona preliminary 1995 Annual Financial
Statements; (viii) Southern Arizona last two Annual Reports; and (ix) Southern
Arizona-Bank Deposit by County Report - Yuma County, dated December 31, 1995. M
One also held discussions with members of the senior management of Southern
Arizona and Zions regarding their respective past and current business
operations, financial condition and future prospects. In addition, M One
reviewed the reported price and trading history for Southern Arizona Common
Stock and Zions Common Stock, compared certain financial and stock market
information for Southern Arizona and Zions with similar information for certain
other companies, reviewed the financial terms of certain recent business
combinations in the commercial banking industry, and performed such other
studies and analysis as M One deemed appropriate.
In connection with its review, M One did not independently verify any
of the foregoing information, and relied on such information and assumed such
information was complete and accurate in all material respects. With respect to
the financial forecasts for Southern Arizona and Zions provided to M One by
their respective managements, M One assumed for purposes of its opinion that
such forecasts were reasonably prepared on basis reflecting the best available
estimates and judgments of the Southern Arizona and Zions managements at the
time of preparation as to the future financial performance of Southern Arizona
and Zions. M One did not review individual credit files and did not make an
independent evaluation or appraisal of the assets and liabilities of Southern
Arizona and Zions or any of their respective subsidiaries. In addition, M One
did not make an independent evaluation of the allowance for loan losses of Zions
or Southern Arizona in relation to their respective loan portfolios. M One has
assumed that the allowance for loan losses for Southern Arizona and Zions are
adequate to cover future loan portfolio losses as they may occur from time to
time.
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Set forth below is a brief summary of the selected analyses performed
by M One in reaching its February 29, 1996 opinion.
Analysis of Zions' Offer. M One reviewed the terms of the proposed
transaction as reflected in the Plan of Reorganization. The Benchmark Price is
constant, as defined, between the price range of Zions Common Stock from $59.00
per share to $72.00 per share. M One has calculated that each share of Southern
Arizona Common Stock has an economic value of $20.00 at the Benchmark Price of
$25,330,000 (with no accretions). The number of shares of Zions' stock exchanged
for Southern Arizona stock will vary according to the average price of Zions'
stock divided into the Benchmark Price. The economic value of the exchange price
of $20.00 compares to $14.77 per share for the average trading value of Southern
Arizona Common Stock for the 90 days prior to September 30, 1995. The Benchmark
Price represents a purchase price which was 2.86 times Southern Arizona's book
value as of September 30, 1995.
Dividend Analysis. M One evaluated the effect of Zions' offer on the
dividends received by Southern Arizona shareholders. Assuming the current
indicated annual dividends for Zions Common Stock of $1.64 per share, the annual
yield is 2.46% based on the closing price of Zions Common Stock on January 17,
1996 (the date that the Plan of Reorganization was signed). Assuming the current
indicated dividend for Southern Arizona Common Stock of $0.36 per share, the
annual yield is 2.4% based on the closing price of Southern Arizona Common Stock
on the date the Plan of Reorganization was signed. The equivalent Zions'
dividend is $0.49 per share based upon the $20.00 economic value of the exchange
offer compared to the $0.36 dividend per share currently received on Southern
Arizona Common Stock.
Analysis of Selected Merger Transactions. M One reviewed selected
financial data related to announced bank holding company acquisitions throughout
the United States during 1995. In addition, M One reviewed selected bank
acquisitions in certain Southwestern states in which the acquired banks had an
asset size ranging from $70 million to $350 million (the "Selected
Transactions"). For each of the Selected Transactions, M One reviewed the
purchase price as a percentage of the acquiree's book value, tangible book value
and total assets; as a multiple of the acquiree's latest 12 months earnings per
share; and as a premium over the acquiree's market price and recent public share
purchases prior to the acquisition. The Selected Transactions included the
following transactions: Vectra Banking Group/Bank Land Company; CVB Financial
Corp./Citizens Commercial; Pacific Bank, N.A./Burlingame Bankcorp.; Shinhan
Bank/Marine National Bank; First Financial Bankshares/Citizens Equity Corp.; FP
Bancorp./Rancho Sante Fe NB; Cullen/Frost Bankers/Park NB of Houston; Dartmouth
Capital/Liberty National Bank-CA; ValliCorp. Holdings/CoBank Financial Corp.;
Norwest Corporation/Bank of Robstown; California State Bank/Landmark Bancorp.;
Comerica Inc./QuestStar Bank, N.A.; Plains Capital Corp./Friona Bancorp.;
Norwest Corporation/Liberty National Bank; Norwest Corporation/Alice Bancshares;
Coastal Bancorp/Texas Capital Bancshares; Eldorado Bancorp/Mariners Bancorp;
ValliCorp Holdings/El Capitan Bancshares; Texas Bancorp Shares/Camino Real
Bancshares; Norwest Corporation/First N.B.-Big Spring; Victoria
Bankshares/Cattlemen's Financial; California Bancshares/Centennial Bank; Norwest
Corporation/Valley-Hi Inv. Co.; First Interstate/Tomball National Bancshares;
CRB Financial Corp./Camino Real Bancshares; Northern Trust Corp./Tanglewood
Bancshares; Texas Financial Bancorp/First Bank; and Western Bank/Pacific Bank,
N.A.
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<PAGE>
Based on Southern Arizona's full year results for 1995 and the most
recently available figures for the Selected Transactions, M One's analysis
yielded the following statistics: (i) the purchase price offered as a percentage
of book value was 286% for the Reorganization compared to an average of 154% for
the Selected Transactions; (ii) the price offered as a percentage of assets was
19.9% for the Reorganization compared to an average of 14.2% for the Selected
Transactions; (iii) the price offered as a multiple of the latest twelve months
earnings was 12.67x for the Reorganization compared to an average of 17.5x for
the Selected Transactions (M One conducted an additional sampling of 80
commercial banks acquired during 1995 with return on equity levels similar to
Southern Arizona and found that the average price offered as a multiple of the
latest twelve months earnings per share was 12.5x for such transactions). The
core deposit premium (price offered less tangible book value divided by core
deposits) was 14.4% for the Reorganization compared to an average of 6.57% for
the Selected Transactions. The above-mentioned comparisons are limited in that
no company is identical to Southern Arizona or Zions and no transaction is
identical to the Reorganization.
Discounted Cash Flow Analysis. M One completed a discounted cash flow
analysis to compare the offered reorganization price against the intrinsic value
of Southern Arizona as an ongoing concern. Based upon projected earnings and
reasonable assumptions concerning a future terminal value and discount rate on
cash flows, the analysis concluded that the current intrinsic value of Southern
Arizona as an ongoing concern ranges between $13.30 and $17.66, depending on
discount rate applied and the timing of the future sale. This analysis is not
necessarily indicative of actual future results and does not purport to reflect
pricing multiples at which any securities may trade at any time in the future.
Zions' Analyses. M One reviewed the historical performance of Zions and
its publicly traded peers, the historical and current stock market valuations of
Zions and its peers, and management and financial analysts' earnings projections
for Zions. M One compared the financial performance of Zions based on various
financial measures of earnings performance, capital adequacy, asset quality and
operating efficiencies with selected other banking companies that operate in the
western states (the "Selected Banking Companies"). The Selected Banking
Companies include Banc One Corp., Bancorp. Hawaii Inc., BankAmerica Corp.,
Comerica Inc., First Bank System Inc., First Interstate Bancorp., First Security
Corp./Del., Norwest Corp., Union Bank/San Francisco, US Bancorp., Wells Fargo &
Company, and WestAmerica Bancorporation. The calculations yielded the following
statistics as of September 30, 1995: (i) the price to earnings ratio for Zions
was 13.47x compared to an average of 12.56x for the Selected Banking Companies;
(ii) the price to book value ratio for Zions was 2.64x compared to an average of
1.92x for the Selected Banking Companies; (iii) the return on assets ratio for
Zions' was 1.31% compared to an average of 1.22% for the Selected Banking
Companies; (iv) the return on equity ratio for Zions' was 18.82% compared to an
average of 15.87% for the Selected Banking Companies; (v) the reserve for loan
losses as a percentage of total loans for Zions was 2.68% compared to an average
of 2.16% for the Selected Banking Companies; (vi) the dividend payoff ratio for
Zions was 26.30% compared to an average of 34.26% for the Selected Banking
Companies; (vii) non-performing assets as a percentage of total loans for Zions
was .83% compared to an average of .87% for the Selected Banking Companies; and
(viii) the tangible book value to asset ratio for Zions was 6.65% (calculated
with December 31, 1995 figures) compared with an average of 6.80% for the
Selected Banking Companies.
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For services as independent financial analysts for the Reorganization,
including the rendering of its Fairness Opinion referred to above, Southern
Arizona has paid M One aggregate fees and reimbursed expenses totalling $17,500.
The fee is payable irrespective of whether or not the Reorganization is
consummated. Prior to being retained for this assignment, M One provided
Southern Arizona with a one-day strategic planning seminar in 1994 for which M
One was paid $5,000. M One has not previously provided professional services or
products to Zions.
Conversion of Southern Arizona Shares
Exchange Formula. According to the valuation formula set forth in the
Plan of Reorganization, the total number of shares of Zions Common Stock and the
amount of cash, if any, to be received by each Southern Arizona shareholder
(other than a dissenting shareholder) will not be determined until the Effective
Date of the Reorganization. The number of shares of Zions Common Stock to be
received by each Southern Arizona shareholder is based upon the actual average
trading price of Zions Common Stock as reported on NASDAQ-NMS over the twenty
consecutive trading days ending on the fifth trading day preceding the Effective
Date (the "Average Closing Price") and upon the Benchmark Price, comprising the
sum of $25,330,000 and the amount of consolidated net undistributed income of
Southern Arizona during the period beginning on October 1, 1995 and ending on
the close of business on the day immediately preceding the Effective Date except
that the amount of consolidated net undistributed income of Southern Arizona for
the month that includes the Effective Date will be imputed by prorating the
consolidated net undistributed income from October 1, 1995 until the beginning
of that month over the portion of that month that precedes the Effective Date.
On the Effective Date of the Reorganization, each outstanding share of Southern
Arizona Common Stock (other than shares of a dissenting shareholder) as of the
Effective Date will be converted into the right to receive that number of shares
of Zions Common Stock calculated by dividing the Benchmark Price of $25,330,000
plus certain accretions (as more specifically described in the "Summary" section
above) by the Average Closing Price of Zions Common Stock, and by further
dividing the number so reached by the number of shares of Southern Arizona
Common Stock outstanding at the Effective Date. In the event that the Unadjusted
Average Price of Zions Common Stock is less than $59.00, Zions will pay to the
Southern Arizona shareholders an amount of cash equal to the difference between
the Benchmark Price and the product of the Unadjusted Average Price (as defined
in "Summary" above) and the number of shares Zions Common Stock issuable
assuming the Unadjusted Average Price had been $59.00.
On April __, 1994, the closing sale price for Zions Common Stock
reported on the NASDAQ-NMS was $_____. Assuming on that date that a total of
1,266,362 shares of Southern Arizona Common Stock were outstanding and further
assuming that the Average Closing Price was $_____, then each share of Southern
Arizona Common Stock would be exchangeable for _____ shares of Zions Common
Stock, excluding any shares for which dissenters' rights were perfected. In view
of the method of calculating the Average Closing Price and possible accretions
due to the consolidated net undistributed income of Southern Arizona between
October 1, 1995 and the Effective Date, it is not possible at the date of this
Proxy Statement/Prospectus to specify the rate of exchange at the Effective
Date.
Surrender of Certificates. As promptly as practicable after the
Effective Date of the Reorganization, Zions First National Bank, Salt Lake City,
Utah, the
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exchange agent designated by Southern Arizona and Zions in the Plan of
Reorganization, will send to each shareholder of record of Southern Arizona
Common Stock a letter of transmittal containing instructions as to how to effect
the exchange of Southern Arizona Common Stock certificates for certificates
representing the shares of Zions Common Stock into which their shares have been
converted. Southern Arizona shareholders should not send in their certificates
until they receive such written instructions. However, certificates should be
surrendered promptly after instructions to do so are received.
Any dividends declared on Zions Common Stock after the Effective Date
of the Reorganization will apply to all whole shares of Zions Common Stock into
which shares of Southern Arizona Common Stock will have been converted in the
Reorganization. However, no former Southern Arizona shareholder will be entitled
to receive any such dividend until such shareholder's Southern Arizona Common
Stock certificates have been surrendered for exchange as provided in the letter
of transmittal. Upon such surrender, the shareholder will be entitled to receive
all such dividends payable on the whole shares of Zions Common Stock represented
by the surrendered certificate or certificates (without interest thereon and
less the amount of taxes, if any, which may have in fact been imposed or paid
thereon).
Payment for Fractional Shares. No fractional shares of Zions Common
Stock will be issued in connection with the Reorganization. Instead, each
Southern Arizona shareholder who surrenders for exchange Southern Arizona Common
Stock certificates representing a fraction of a share of Zions Common Stock will
be entitled to receive, in addition to a certificate for the whole shares of
Zions Common Stock represented by the surrendered certificates, cash in an
amount equal to such fractional part of a share multiplied by the Average
Closing Price of Zions Common Stock.
Unexchanged Certificates. On the Effective Date of the Reorganization,
the stock transfer books of Southern Arizona will be closed, and no further
transfers of Southern Arizona Common Stock will be made or recognized.
Certificates for Southern Arizona Common Stock not surrendered for exchange will
entitle the holder to receive, upon surrender as provided in the letter of
transmittal, only a certificate for the whole shares of Zions Common Stock
represented by such certificates, plus payment of any amount for a fractional
share or dividends to which such holder is entitled as outlined above, and
without any interest thereon.
Adjustment of Exchange Formula. The Plan of Reorganization contains
provisions for the proportionate adjustment of the exchange ratio in the event
of a stock dividend, stock split, recapitalization or similar event involving
the Zions Common Stock or the Southern Arizona Common Stock which occurs prior
to the Reorganization. Nevertheless, the total purchase price to be paid by
Zions for all of the outstanding shares of Southern Arizona Common Stock will
not be less than the Benchmark Price of $25,330,000 plus certain accretions and
will not be adjusted (except for such accretions and except to the extent of any
cash payment in the event the Unadjusted Average Price of Zions Common Stock
were less than $59.00 per share). Neither Zions nor Southern Arizona anticipates
declaring any stock dividend, stock split, or recapitalization prior to the
Effective Date.
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Federal Income Tax Consequences of the Reorganization
The following discussion is a summary of the material federal income
tax consequences of the merger of Southern Arizona with and into Zions (the
"Merger") to Southern Arizona and to the existing shareholders of Southern
Arizona, but does not purport to be a complete analysis of all the potential tax
effects of the Merger. The discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial, or administrative action. Any
such change may be applied retroactively. No information is provided herein with
respect to foreign, state or local tax laws or estate and gift tax
considerations. Shareholders of Southern Arizona are urged to consult their own
tax advisors as to specific tax consequences to them of the Merger. In addition,
the federal income tax consequences of the merger of the Bank with and into NBA
are not addressed.
Southern Arizona will receive an opinion from O'Connor, Cavanagh,
Anderson, Killingsworth & Beshears, P.A., legal counsel to Southern Arizona (the
"O'Connor Opinion") that, based upon the facts and representations set forth or
referred to in such opinion, the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
provided that the cash received by the Southern Arizona shareholders does not
exceed the fair market value of the Zions Common Stock received by the Southern
Arizona shareholders. If the cash received by the Southern Arizona shareholders
does exceed the fair market value of the Zions Common Stock received by the
Southern Arizona shareholders, the Merger may be treated as a fully taxable
exchange (or sale) of Southern Arizona Common Stock because the Merger will fail
to meet IRS published guidelines, which would require that the Southern Arizona
shareholders exchange at least 50 percent by value of their Southern Arizona
Common Stock for Zions Common Stock in order for the Merger to be treated as a
tax-free reorganization. No ruling will be requested from the IRS with respect
to the federal income tax consequences of the Merger. An opinion of counsel only
represents counsel's best judgment and is not binding on the IRS or the courts.
Accordingly, no assurance can be given that the IRS will agree with counsel's
conclusions, that the IRS will not challenge the tax treatment of the Merger, or
that such a challenge, if made, will not be successful.
Based upon the facts and representations which will be set forth or
referred to in the O'Connor Opinion (including compliance with the continuity of
interest requirement), such opinion will provide, among other things, that
Southern Arizona will not recognize gain or loss for federal income tax purposes
upon the Merger and that the shareholders of Southern Arizona will have the
following federal income tax consequences upon the Merger: (i) no taxable gain
or loss will be recognized upon the receipt of Zions Common Stock; (ii) income
or gain will be recognized (the "Boot Income") to the extent of the lesser of
(a) the income or gain which would have been recognized had the Merger been a
fully taxable transaction or (b) the amount of cash actually received in the
Merger; (iii) the tax basis of the Southern Arizona Common Stock surrendered in
the Merger will be allocated to the Zions Common Stock to be received in the
Merger reduced by cash received and increased by any income or gain recognized;
(iv) the holding period of the Zions Common Stock to be received in the Merger
will include the holding period of the Southern Arizona Common Stock surrendered
in
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exchange therefor; and (v) if any cash is received in lieu of a fractional share
of Zions Common Stock, gain (or loss) will be recognized in an amount equal to
the difference between the cash received and the shareholder's basis in that
fractional share.
The character of any Boot Income realized by a Southern Arizona
shareholder will depend upon a Southern Arizona shareholder's individual
circumstances. If the Southern Arizona Common Stock surrendered by a Southern
Arizona shareholder in the Merger was a capital asset in the hands of that
Southern Arizona shareholder, any Boot Income should be treated as capital gain
for that Southern Arizona shareholder. Each Southern Arizona shareholder should
consult its tax advisor regarding the character of any Boot Income realized by
that shareholder.
If the Merger is not treated as a reorganization within the meaning of
Section 368(a) of the Code because the cash received by the Southern Arizona
shareholders exceeds the fair market value of the Zions Common Stock received by
the Southern Arizona shareholders, it may be treated as a sale in which shares
of Southern Arizona Common Stock are exchanged for shares of Zions Common Stock
and cash. If it were so treated, each Southern Arizona shareholder will
recognize taxable gain or loss in an amount equal to the difference between the
shareholder's amount realized and the shareholder's tax basis in the Southern
Arizona Common Stock sold. The amount realized is the sum of any cash received
plus the fair market value of the Zions Common Stock received. The fair market
value of Zions Common Stock will be the market price on the Effective Date of
the Reorganization multiplied by the number of shares of Zions Common Stock
received by a Southern Arizona shareholder. If the Southern Arizona Common Stock
surrendered by a Southern Arizona shareholder in the Holding Company Merger was
a capital asset in the hands of that Southern Arizona shareholder, any taxable
gain or loss would be treated as capital gain or capital loss for that Southern
Arizona shareholder.
The foregoing is intended only as a summary of certain federal income
tax consequences of the Reorganization under existing law and regulations, as
presently interpreted by judicial decisions and administrative rulings, all of
which are subject to change without notice and any such change might be
retroactively applied to the Reorganization. Among other things, the summary
does not address state income tax consequences, local taxes, or the federal or
state income tax considerations that may affect the treatment of a shareholder
who acquired his Southern Arizona Common Stock pursuant to an employee stock
option or other special circumstances. Accordingly, it is recommended that
Southern Arizona shareholders consult their own tax advisors for specific advice
concerning their own tax situations, potential changes in the applicable tax law
and all federal, state and local tax matters in connection with the
Reorganization.
A copy of the O'Connor Opinion rendered as to the material federal
income tax consequences relating to the Reorganization is attached and set forth
in Appendix B of the Proxy Statement/Prospectus.
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<PAGE>
Interests of Certain Persons in the Transaction
In connection with the Plan of Reorganization, all of Southern
Arizona's shareholder-directors, whose common shareholdings aggregate 24.5% of
the outstanding Southern Arizona Common Stock and who represent approximately
2.4% of the Southern Arizona shareholders of record, have entered into
agreements with Zions under which they have agreed, in their capacity as
shareholders, to vote their shares in favor of the Plan of Reorganization and to
support the Plan of Reorganization and to recommend its adoption by the other
shareholders of Southern Arizona. The shareholder-directors have also agreed in
their capacity as directors, until the earlier of the consummation of the
Reorganization or the termination of the Plan of Reorganization, to refrain from
soliciting or, subject to their fiduciary duties to shareholders and to section
7.8 of the Plan of Reorganization, negotiating or accepting any offer of merger,
consolidation, or acquisition of any of the shares or substantially all of the
assets of Southern Arizona or the Bank.
The Plan of Reorganization provides that after the Reorganization
becomes effective, NBA will employ John E. Byrd, currently president and chief
executive officer of Southern Arizona and the Bank, pursuant to a three-year
agreement as an executive vice president of NBA. The agreement provides that Mr.
Byrd will receive an initial annual salary substantially the same as his current
annual salary with Southern Arizona, will be considered annually for a
discretionary bonus, based upon the financial performance of NBA and upon
individual performance factors (the target level for the bonus being 25%-35% of
his then current salary), and will be entitled to other benefits normally
afforded executive employees, including employee benefit and stock option plans
participation, an automobile allowance, country club membership, retirement and
life insurance policies, and consideration for periodic raises or bonuses, based
upon performance and responsibility. NBA will also continue to maintain a term
life insurance policy on the life of Mr. Byrd and will pay all the premiums
therefor. The policy will be owned by Mr. Byrd and will provide for the payment
of death benefits to his estate.
The employment agreement provides for severance benefits for Mr. Byrd
upon the termination of his employment agreement for reasons other than his
death or disability or "for cause" (as defined in his employment agreement). In
the event of termination for reasons other than set forth in the preceding
sentence, Mr. Byrd shall receive (i) salary payable (as defined in the
employment agreement) for the period commencing on the date immediately
following the termination date and ending upon the third anniversary of the
effective date of the employment agreement and (ii) such benefits as Mr. Byrd
has accrued under NBA's Value Sharing Plan, Incentive Stock Option Plan and
employee benefit plans, reimbursement for expenses accrued as of the date of
termination of his employment, and the right to receive the cash equivalent of
paid annual leave and sick leave accrued as of the date of termination of his
employment.
Under his employment agreement, Mr. Byrd has agreed that he will not
for a period of five years from the effective date of the employment agreement
(i) engage in the banking business within Yuma County, Arizona other than on
behalf of NBA or affiliated companies; (ii) own or operate any entity engaged in
the banking business within Yuma County, Arizona other than NBA or affiliated
companies; and (iii) solicit or intentionally cause an officer, director or
employee of NBA to engage in the banking business or own or operate an entity
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<PAGE>
engaged in the banking business in Yuma County, Arizona. In consideration of
such five-year covenant not to compete, Mr. Byrd will receive a one-time cash
payment of $250,000.
Inconsistent Activities
Southern Arizona and the Bank have agreed in the Plan of Reorganization
that unless and until the Reorganization has been consummated or the Plan of
Reorganization has been terminated in accordance with its terms, Southern
Arizona and the Bank will not (i) solicit or encourage any inquiries or
proposals by any third person to acquire more than 1% of the Southern Arizona
Common Stock, any stock of the Bank or any significant portion of Southern
Arizona's or the Bank's assets (whether by tender offer, merger, purchase of
assets or otherwise), (ii) afford any third party which may be considering any
such transaction access to Southern Arizona's or the Bank's properties, books or
records except as required by law, (iii) enter into any discussions,
negotiations, agreement or understanding with respect to any such transaction or
(iv) authorize or permit any of Southern Arizona's directors, officers,
employees or agents to do any of the foregoing. Notwithstanding the foregoing,
Southern Arizona may take an action referred to in clause (ii) or (iii) of the
previous sentence (or permit its directors, officers, employees or agents to do
so) if Southern Arizona's Board of Directors, after consulting with counsel,
determines that such actions should be taken or permitted in the exercise of its
fiduciary duties. If Southern Arizona or the Bank becomes aware of any offer or
proposed offer to acquire any shares of Southern Arizona or any significant
portion of its assets, Southern Arizona is required to give immediate notice
thereof to Zions and to keep Zions informed of the matter. Notwithstanding the
foregoing, the right of the board of directors to comply with its fiduciary
duties as cited in the previous sentence does not permit Southern Arizona or the
Bank to terminate the Plan of Reorganization (other than as expressly provided
in section 10.1 or 10.2 of the Plan of Reorganization) or to enter into any
agreement with respect to any of the above-referenced transactions.
Conduct of Business Pending the Reorganization
The Plan of Reorganization contains covenants, representations and
warranties by Southern Arizona and the Bank as to matters which are typical in
transactions similar to the Reorganization.
Prior to the Effective Date, Southern Arizona and the Bank have agreed
that neither Southern Arizona nor the Bank will, without Zions' prior written
consent: (i) declare or pay cash dividends or property dividends with the
exception of customary cash dividends in a manner consistent with past practice;
(ii) except for the issuance of Southern Arizona Common Stock upon exercise of
existing stock options, declare or distribute any stock dividend, authorize any
stock split, authorize, issue or make any distribution of its capital stock or
other securities or grant any option to acquire such securities; (iii) except as
contemplated by the Plan of Reorganization, merge into, consolidate with or sell
any of its assets to any other person, or enter into any other transaction or
agree to effect any other transaction not in the ordinary course of its business
or engage in any discussions concerning such a possible transaction; (iv)
convert the charter of the Bank from that of an Arizona banking corporation to
any other charter or form of entity; (v) make any direct or indirect redemption,
purchase or other acquisition of any of its capital stock; (vi) incur any
liability or
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obligation, make any commitment or disbursement, acquire or dispose of any
property or asset, make any agreement or engage in any transaction, except in
the ordinary course of its business; (vii) subject any of its properties or
assets to any lien, claim, charge, option or encumbrance, except in the ordinary
course of its business; (viii) institute or agree to any increase in the
compensation of any employee, except for ordinary increases in accordance with
past practices not to exceed 4% per annum of the aggregate payroll as of October
1, 1995; (ix) 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, or increase or decrease any severance or any other
fringe benefit; or (x) except to directly facilitate the Reorganization, enter
into any employment or personal services contract with any person.
Southern Arizona has also agreed to carry on its business and manage
its assets and property diligently in the same manner as it has previously done
and to use its best efforts to preserve its business organization. Pending
completion of Reorganization or termination of the Plan of Reorganization,
Southern Arizona has agreed to provide Zions with certain information and
reports and access to other information.
Conditions to the Reorganization
The obligations of Southern Arizona and Zions to consummate the
Reorganization are subject to, among other things, the satisfaction of the
following conditions: (i) the shareholders of Southern Arizona shall have
approved the Plan of Reorganization; (ii) Southern Arizona and Zions shall have
received all relevant orders, consents and approvals from all requisite
governmental authorities for the completion of the Reorganization; (iii) there
shall be an absence of certain litigation, as specified in the Plan of
Reorganization; (iv) the registration statement to be filed by Zions pursuant to
the Securities Act in connection with the registration of the shares of Zions
Common Stock to be used as consideration in connection with the Reorganization
shall have become effective under the Securities Act, and Zions shall have
received all required state securities laws ("Blue Sky") permits and other
required authorizations or confirmations of the availability of exemption from
registration requirements necessary to issue Zions Common Stock in the
Reorganization, and neither the registration statement nor any such required
permit, authorization or confirmation shall be subject to a stop-order or
threatened stop-order by the SEC or any state securities authority; (v) Southern
Arizona and Zions shall have determined that the Reorganization shall qualify as
a tax free reorganization under the Code and the regulations and rulings
promulgated thereunder; and (vi) there shall be no adverse legislation or
government regulation which would make the transaction contemplated impossible
or which would materially and adversely affect the economic assumptions of the
transactions contemplated by the Plan of Reorganization or the business of Zions
and Southern Arizona or which would otherwise materially impair the value of
Southern Arizona to Zions.
The obligations of Zions to consummate the Reorganization are subject
to satisfaction or waiver of certain additional conditions, including: (i) the
shareholders of Southern Arizona shall have authorized the Plan of
Reorganization, and dissenters' rights shall have been exercised and perfected
by owners of not more than 6% of the outstanding shares of Southern Arizona
Common Stock; (ii) all representations and warranties made by Southern Arizona
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<PAGE>
and the Bank in the Plan of Reorganization shall be true in all material
respects on the Effective Date and Southern Arizona and the Bank shall have
performed in all material respects all of its respective obligations under the
Plan of Reorganization on or prior to the Effective Date; (iii) O'Connor,
Cavanagh, Anderson, Killingsworth & Beshears, P.A., special counsel to Southern
Arizona, shall have rendered a legal opinion to Zions in form and substance
satisfactory to Zions; (iv) during the period from September 30, 1995 to the
Effective Date, there shall be no material adverse change in the financial
position or results of operations, properties, liabilities or businesses of
Southern Arizona or the Bank nor shall Southern Arizona or the Bank have become
(or have been threatened to be made) a party to any litigation which in the
judgment of Zions would make the Reorganization inadvisable or impracticable to
Zions or NBA; (v) on the Effective Date the consolidated net worth of Southern
Arizona shall not be less than the consolidated net worth of Southern Arizona as
of September 30, 1995; (vi) during the period from September 30, 1995 to the
Effective Date of the Reorganization, Southern Arizona and the Bank shall have
continued to employ the loan loss reserve methodology which it employed on
September 30, 1995; and (vii) Mr. Byrd shall have entered into an employment and
non-competition agreement with Zions and NBA in the form set forth in the Plan
of Reorganization. See " -- Interests of Certain Persons in the Transaction,"
above.
The obligations of Southern Arizona to consummate the Reorganization
are subject to the satisfaction or waiver of certain additional conditions,
including: (i) all representations and warranties made by Zions and NBA in the
Plan of Reorganization shall be true in all material respects on the Effective
Date and Zions and NBA shall have performed all of its respective obligations
under the Plan of Reorganization on or prior to the Effective Date; (ii) receipt
of a legal opinion of Metzger, Hollis, Gordon & Alprin, special counsel to
Zions, satisfactory to Southern Arizona; (iii) during the period from September
30, 1995 to the Effective Date, there shall be no material adverse change in the
financial position or results of operations, properties, liabilities or business
of Zions; (iv) Southern Arizona shall have received from M One a written opinion
to the effect that, as of the date of the opinion, the terms of the
Reorganization are fair to Southern Arizona and its shareholders from a
financial point of view; (v) the directors and shareholders of NBA shall have
authorized and approved the Reorganization; and (vi) the Zions Common Stock to
be issued in the Reorganization shall be quoted on NASDAQ or shall be listed on
a national securities exchange.
Representations and Warranties
The representations and warranties of Zions and Southern Arizona
contained in the Plan of Reorganization relate, among other things, to the
organization and good standing of Zions, Southern Arizona, and their
subsidiaries; the capitalization of Zions and Southern Arizona; the
authorization by Zions and Southern Arizona of the Plan of Reorganization and
the absence of conflict with laws or other agreements; the accuracy and
completeness of the financial statements and other information furnished to the
other party; the absence of material adverse changes since September 30, 1995;
the absence of undisclosed liabilities; and compliance with laws. Southern
Arizona has additionally warranted that there will be no material deterioration
in the quality of its loan portfolio or any major component thereof and no
material increase in the level of its nonperforming assets or non-accrual loans
at the Bank or in the level of its provision for credit losses or its reserve
for possible credit losses.
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<PAGE>
Southern Arizona has also warranted that its consolidated reserve for possible
credit losses as of September 30, 1995, was adequate to absorb reasonably
anticipated losses in the consolidated loan and lease portfolios of Southern
Arizona in view of the size and character of such portfolios, current economic
conditions, and other factors.
Zions and Southern Arizona have additionally warranted that there are
no facts known to them respectively which might materially adversely affect
their respective business, assets, liabilities, financial condition, results of
operations or prospects which have not been disclosed in their respective
financial statements or a certificate delivered to the other party.
Amendment and Waiver
Notwithstanding prior approval by the shareholders of Southern Arizona,
the Plan of Reorganization may be amended in any respect by written agreement
between the parties, except that after such shareholder approval no amendment
may prejudice the economic interests of the shareholders of Southern Arizona.
Zions or Southern Arizona may also, at any time prior to the Effective Date,
waive any condition or term of the Plan of Reorganization provided that any such
waiver must be in writing signed by the party entitled to the benefit thereof
and will be permitted only if it will not have a materially adverse effect on
the benefits intended under the Plan of Reorganization to the shareholders of
its or his corporation.
Authorized Termination and Damages for Breach
The Plan of Reorganization may be terminated and abandoned at any time
prior to the Effective Date, notwithstanding approval of the shareholders of
Southern Arizona or the Bank, as follows: (i) by mutual consent of Zions and
Southern Arizona; (ii) unilaterally, by either party if any of the
representations and warranties of the other party was materially incorrect when
made or in the event of a material breach or material failure by the other party
of any covenant or agreement which has not been, or cannot be, cured within
thirty days after written notice has been given; (iii) by Southern Arizona if
its board of directors, based upon the advice of outside counsel, determines in
good faith that such termination is required for the board to comply with its
fiduciary duties to the shareholders imposed by law by reason of a proposal to
acquire more than 1% of Southern Arizona's Common Stock or any significant
portion of its or the Bank's assets (an "Alternative Proposal"); (iv) by either
party if the Reorganization has become inadvisable by reason of federal or state
litigation to restrain or invalidate the Reorganization; or (v) by either party
on or after August 31, 1996, if the Effective Date has not occurred on or before
that date.
If either party terminates the Plan of Reorganization because any of
the representations and warranties of a party were materially incorrect when
made, or because of a material breach by a party of a covenant made under the
Plan of Reorganization, then such party whose representations and warranties
were materially incorrect or who materially breached its covenant shall be
liable to the other party or parties to the Plan of Reorganization for such
party's actual, reasonable out-of-pocket expenses, not to exceed $250,000,
incurred by the other party in connection with the negotiation and preparation
of the Plan of Reorganization and the carrying out of the transactions
contemplated thereby.
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<PAGE>
If on the other hand termination of the Plan of Reorganization occurs
(1) because of an Alternative Proposal; or (2) because of any representation or
warranty is materially incorrect when made by Southern Arizona or the Bank or
because of a material breach or material failure by Southern Arizona or the Bank
of any covenant or agreement contained in the Plan of Reorganization which has
not been or cannot be cured within thirty days after written notice of such
breach or failure has been given and a definitive agreement with respect to an
Alternative Proposal is executed by Southern Arizona or the Bank within one year
after such termination, then in either case Southern Arizona shall be liable to
Zions in the amount of $750,000.
Dissenters' Rights of Southern Arizona Shareholders
A holder of shares of Southern Arizona 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 Plan of Reorganization and
demand that Zions, as the surviving corporation, pay the fair value of the
shares of Southern Arizona Common Stock held as determined in accordance with
such statutory provisions. The Act became effective on January 1, 1996 and
substantially revises shareholder dissenters' rights provisions under Arizona
law. Several provisions of the Act that address dissenters' rights are
ambiguous, including the requirements for delivery of the dissenters' notice, as
described below, and the provisions regarding delivery of payment, also
described below. The following summary attempts to interpret the statute in a
consistent and logical manner, and does not purport to be a complete statement
of the provisions of Arizona law and is qualified in its entirety by reference
to Chapter 13 of the Act, which is set forth in full as Appendix D to this Proxy
Statement/Prospectus.
Arizona law requires that Southern Arizona shareholders must follow
certain prescribed procedures in their exercise of the statutory right to
dissent in connection with the Reorganization. The failure to follow these
procedures 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
Reorganization, a shareholder must (i) deliver written notice of the
shareholder's intent to demand payment, (ii) not vote in favor of the proposed
Reorganization, and (iii) make a payment demand, in each case as provided below.
Any shareholder electing to exercise the right to dissent must deliver
to Southern Arizona, prior to the taking of the vote at the Special Meeting to
be held on May ____, written notice of the shareholder's intent to demand
payment for such shareholder's shares if the proposed Reorganization is
effectuated. Additionally, a shareholder who wishes to assert dissenters' rights
cannot vote in favor of the proposed Reorganization. If the shareholder does not
comply with these two requirements, the shareholder will not be entitled to
payment for the shareholder's shares of Southern Arizona Common Stock.
If the proposed Reorganization is authorized at the shareholders'
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 Reorganization is effectuated. The dissenters' notice must: (i) state
where the dissenting shareholder must send the shareholder's payment demand and
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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 Reorganization 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 date
required, 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 Reorganization.
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 after-acquired shares, as soon as the
Reorganization 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. Any appreciation or
depreciation in the value of dissenting shareholder's shares attributable to the
Reorganization shall be excluded for determining the fair value of such shares,
unless such exclusion is inequitable. The payment must be accompanied by: (i)
Southern Arizona'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 Reorganization 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
Reorganization 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 unless such dissenting shareholder was the beneficial owner of
shares before the date set forth in the dissenters' notice as the date of the
first
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announcement to news media or to shareholders of the terms of the proposed
Reorganization. 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 Reorganization, 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 Yuma
County, 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. 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
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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
benefitted.
SOUTHERN ARIZONA SHAREHOLDERS WISHING TO EXERCISE DISSENTERS' RIGHTS
ARE ADVISED TO CONSULT THEIR OWN COUNSEL TO ENSURE THAT THEY FULLY AND PROPERLY
COMPLY WITH THE REQUIREMENTS OF ARIZONA LAW.
Restrictions on Resales by Southern Arizona Affiliates
The shares of Zions Common Stock issuable in the Reorganization have
been registered under the Securities Act, and such shares will generally be
freely tradable by the Southern Arizona shareholders who receive Zions shares as
a result of the Reorganization. However, this registration does not cover
resales by Southern Arizona shareholders who may be deemed to control or be
under common control with Southern Arizona or Zions and who therefore may be
deemed "affiliates" of Southern Arizona or Zions as that term is defined in Rule
144 under the Securities Act. Such affiliates are not permitted to sell their
shares of Zions Common Stock acquired in the Reorganization except pursuant to
(i) an effective registration statement under the Securities Act covering the
shares to be sold; (ii) the conditions contemplated by Rules 144 and 145 under
the Securities Act; or (iii) another applicable exemption from the registration
requirements of the Securities Act. The management of Southern Arizona will
notify those persons who it believes may be such affiliates.
Expenses
Each party to the Plan of Reorganization will pay its own expenses,
including those of its own counsel, accountants, and tax advisors, incurred in
connection with the Plan of Reorganization. Southern Arizona and Zions will
share the cost of printing and delivering this Proxy Statement/Prospectus to the
Southern Arizona shareholders. Zions will pay all costs attributable to
registering its stock issuable pursuant to this Proxy Statement/Prospectus under
federal and state securities laws.
Government Approvals
Applications for approval (or requests for waiver of application
requirements) of the Reorganization must be made to, and approvals and consents
must be obtained from, appropriate federal and Arizona regulators, including the
Board of Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Arizona State Banking Department. Submissions have been
made to each of these regulatory authorities. Federal law prohibits consummation
of the Reorganization until 30 days after the approvals of the federal
regulators have been obtained, except that this period may be shortened to 15
days with the concurrence of the Attorney General of the United States. There
can be no
- 35 -
<PAGE>
assurance that the Arizona or federal regulatory approvals or waivers will be
granted, and if they are granted, there can be no assurance as to the dates of
such approvals or waivers. Management of Zions and Southern Arizona are not
presently aware of any reasonable basis for regulatory disapproval of the
Reorganization.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of Southern Arizona, the Reorganization will become
effective during the second quarter of 1996. However, as noted above,
consummation of the Reorganization is subject to the satisfaction of a number of
conditions, some of which cannot be waived. There can be no assurance that all
conditions to the Reorganization will be satisfied or, if satisfied, that they
will be satisfied in time to permit the Reorganization to become effective
during the second quarter of 1996. In addition, as also noted above, Zions and
Southern Arizona retain the power to abandon the Reorganization or to extend the
time for performance of conditions or obligations necessary to its consummation,
notwithstanding prior shareholder approval.
Accounting Treatment
The Reorganization will be accounted for as a "purchase" for financial
reporting purposes. Under this method of accounting, Zions will adjust the
assets and liabilities of Southern Arizona to their fair values as of the
Effective Date. The purchase price will be allocated to assets acquired and
liabilities assumed based upon their estimated fair values at the Effective
Date. Deferred tax assets and liabilities will be adjusted for the difference
between the tax basis of the assets and liabilities and their estimated fair
values. Income of the combined company will not include income (or loss) of
Southern Arizona prior to the Effective Date.
Relationship Between Zions and Southern Arizona
Neither Zions nor Southern Arizona is aware of any material
relationship between Zions, its directors or officers or their affiliates, and
Southern Arizona, its directors or executive officers, except as contemplated by
the Plan of Reorganization or as described herein. Southern Arizona has
determined to redeem and prepay its 8.75% Senior Notes Due July 1, 2000 (the
"Notes") prior to the Effective Date of the Reorganization. All $2,500,000 of
the principal amount of the Notes are currently outstanding. In connection with
the redemption and prepayment of the Notes, Southern Arizona has entered into an
agreement with Zions whereby Zions will loan Southern Arizona an amount
sufficient to permit Southern Arizona to pay the aggregate principal of
$2,500,000, as well as accrued but unpaid interest to the date of prepayment and
a prepayment premium. The terms and conditions of the loan agreement between
Southern Arizona and Zions are substantially similar to the terms and conditions
set forth in the Notes. Both the redemption and prepayment of the Notes by
Southern Arizona and the loan by Zions to Southern Arizona will be conditioned
upon an assessment of the likelihood of the consummation of the Reorganization
as of the date of prepayment. In the ordinary course of business and from time
to time, Zions may enter into banking transactions with certain of Southern
Arizona's directors, executive officers and their affiliates.
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<PAGE>
Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information
reflects the application of the purchase method of accounting. The following
table, which shows comparative historical per Common Share data for Zions and
Southern Arizona (separately and pro forma combined), and equivalent pro forma
per share data for Southern Arizona, should be read in conjunction with the
financial information appearing elsewhere in this Proxy Statement/Prospectus or
as incorporated herein by reference to other documents. The pro forma data in
the table, presented as of and for the year ended December 31, 1995, are
presented for comparative and illustrative purposes only and are not necessarily
indicative of the combined financial position or results of operations in the
future or what the combined financial position or results of operations would
have been had the Reorganization been consummated during the periods or as of
the dates for which the information in the table is presented:
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------- ----------------------------
Zions
and Southern Southern
Arizona Arizona
Southern Pro-Forma Equivalent
Per Common Share Zions Arizona Combined(4) Pro-Forma(5)
- ---------------- ----- ------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME (1)
For the year ended
December 31, 1995 $ 5.53 $1.58 $ 5.41 $1.51
CASH DIVIDENDS(2)
For the year ended
December 31, 1995 $ 1.41 $ .36 $ 1.41 $ .39
BOOK VALUE:(3)
As of December 31, 1995 $29.44 $7.00 $30.33 $8.46
- ----------------------
<FN>
(1) Net Income per share is based on weighted average common and common
equivalent shares outstanding.
(2) Pro forma cash dividends represent historical cash dividends of Zions.
(3) Book value per common share is based on total period-end of Zions
shareholders' equity.
(4) Pro forma combined net income per share represents historical net
income of Zions and Southern Arizona adjusted for expenses related to
prepayment of $2,500,000, 8.75% Senior Notes of Southern Arizona
Bancorp Inc. and amortization of goodwill resulting from purchase
accounting computed using historical weighted average common and common
equivalent shares of Zions adjusted by computed common and common
equivalent shares to be issued in the purchase. Pro forma combined book
value per share represents historical total shareholders' equity of
Zions adjusted by the purchase price less expenses related to
prepayment of Senior Notes and amortization of goodwill resulting from
purchase accounting computed using Zions' historical common shares
outstanding adjusted by computed common shares to be issued in the
purchase.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the estimated exchange ratio as of April __ 1996
and assume a Benchmark Price of $_____, an Average Closing Price of
$_____ as of April __, 1996, and a resulting exchange ratio of ___
shares of Zions Common Stock for each share of Southern Arizona Common
Stock.
</FN>
</TABLE>
SUPERVISION AND REGULATION
The information contained in this section summarizes portions of the
applicable laws and regulations relating to the supervision and regulation of
Zions and its subsidiaries. These summaries do not purport to be complete, and
they are qualified in their entirety by reference to the particular statutes and
regulations described.
Zions
Zions is a bank holding company within the meaning of the Bank Holding
Company Act and is registered as such with the Federal Reserve Board. Under the
current terms of that Act, Zions' activities, and those of companies which it
- 37 -
<PAGE>
controls or in which it holds more than 5% of the voting stock, are limited to
banking or managing or controlling banks or furnishing services to or performing
services for its subsidiaries, or any other activity which the Federal Reserve
Board determines to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In making such determinations, the
Federal Reserve Board is required to consider whether the performance of such
activities by a bank holding company or its subsidiaries can reasonably be
expected to produce benefits to the public such as greater convenience,
increased competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
Bank holding companies, such as Zions, are required to obtain prior
approval of the Federal Reserve Board to engage in any new activity or to
acquire more than 5% of any class of voting stock of any company. Pursuant to
the Riegle-Neal Interstate Branching and Efficiency Act of 1994 ("Riegle-Neal
Act"), subject to approval by the Federal Reserve Board, bank holding companies
are authorized acquire either control of, or substantial assets of, a bank
located outside the bank holding company's home state. These acquisitions are
subject to limitations, the most significant of which include adequate
capitalization and management of the acquiring bank holding company, existence
of the acquired bank for up to five years before purchase where required under
state law, existence of state laws that condition acquisitions on institutions
making assets available to a "state-sponsored housing entity," limitations on
control by the acquiring bank holding company of not more than 10% of the total
amount of deposits in insured depository institutions in the United States or
not more than 30% of the deposits in insured depository institutions within that
state. States may impose lower deposit concentration limits, so long as those
limits apply to all bank holding companies equally. The Riegle-Neal Act
reaffirms the right of states to segregate and tax separately incorporated
subsidiaries of a bank or bank holding company. The Riegle-Neal Act also affects
interstate branching and mergers. See "Interstate Banking" below.
The Federal Reserve Board is authorized to adopt regulations affecting
various aspects of bank holding companies. Pursuant to the general supervisory
authority of the Bank Holding Company Act and directives set forth in the
International Lending Supervision Act of 1983, the Federal Reserve Board has
adopted capital adequacy guidelines prescribing both risk-based capital and
leverage ratios.
Regulatory Capital Requirements
Risk-Based Capital Guidelines. The Federal Reserve Board established
risk- based capital guidelines for bank holding companies effective March 15,
1989. The guidelines define Tier 1 Capital and Total Capital. Tier 1 Capital
consists of common and qualifying preferred shareholders' equity and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and 50%
(and in some cases up to 100%) of investment in unconsolidated subsidiaries.
Total Capital consists of Tier 1 Capital plus qualifying mandatory convertible
debt, perpetual debt, certain hybrid capital instruments, certain preferred
stock not qualifying as Tier 1 Capital, subordinated and other qualifying term
debt up to specified limits, and a portion of the allowance for credit losses,
less investments in unconsolidated subsidiaries and in other designated
subsidiaries or other associated companies at the discretion of the Federal
Reserve Board,
- 38 -
<PAGE>
certain intangible assets, a portion of limited-life capital instruments
approaching maturity and reciprocal holdings of banking organizations' capital
instruments. The Tier 1 component must constitute at least 50% of qualifying
Total Capital.
Risk-based capital ratios are calculated with reference to
risk-weighted assets, which include both on-balance sheet and off-balance sheet
exposures. The risk-based capital framework contains four risk weight categories
for bank holding company assets -- 0%, 20%, 50% and 100%. Zero percent
risk-weighted assets include, generally, cash and balances due from Federal
Reserve Banks and obligations unconditionally guaranteed by the U.S. government
or its agencies. Twenty percent risk-weighted assets include, generally, claims
on U.S. Banks and obligations guaranteed by U.S. government sponsored agencies
as well as general obligations of states or other political subdivisions of the
United States. Fifty percent risk-weighted assets include, generally, loans
fully secured by first liens on one-to-four family residential properties,
subject to certain conditions. All assets not included in the foregoing
categories are assigned to the 100% risk-weighted category, including loans to
commercial and other borrowers. As of year-end 1992, the minimum required ratio
for qualifying Total Capital became 8%, of which at least 4% must consist of
Tier 1 Capital. At December 31, 1995, Zions' Tier 1 and Total Capital ratios
were 11.38% and 14.23% respectively.
The current risk-based capital ratio analysis establishes minimum
supervisory guidelines and standards. It does not evaluate all factors affecting
an organization's financial condition. Factors which are not evaluated include
(i) overall interest rate exposure; (ii) liquidity, funding and market risks;
(iii) quality and level of earnings; (iv) investment or loan portfolio
concentrations; (v) quality of loans and investments; (vi) the effectiveness of
loan and investment policies; (vii) certain risks arising from nontraditional
activities; and (viii) management's overall ability to monitor and control other
financial and operating risks, including the risks presented by concentrations
of credit and nontraditional activities. The capital adequacy assessment of
federal bank regulators will, however, continue to include analyses of the
foregoing considerations and in particular, the level and severity of problem
and classified assets.
- 39 -
<PAGE>
The following table presents Zions' regulatory capital position at
December 31, 1995 under the risk-based capital guidelines and as adjusted to
give effect to the offering of its stock in the Reorganization.
<TABLE>
<CAPTION>
Risk-Based Capital
Zions Pro Forma Combined
--------------------------- ----------------------------
(Dollars in thousands)
Percent Percent
of Risk- of Risk-
Adjusted Adjusted
Amount Assets Amount Assets
------ ------ ------ ------
<S> <C> <C> <C> <C>
Tier 1 Capital................................... $ 370,931 11.38% $ 379,815 11.33%
Minimum Requirement.............................. 130,340 4.00 134,103 4.00
--------- ------- ---------- -----
Excess......................................... $ 240,591 7.38% $ 245,712 7.33%
========= ======= ========== =====
Total Capital.................................... $ 463,593 14.23% $ 473,669 14.13%
Minimum Requirement.............................. 260,679 8.00 268,206 8.00
--------- ------- ---------- -----
Excess......................................... $ 202,914 6.23% $ 205,463 6.13%
========= ======= ========== =====
Risk-Adjusted Assets,
net of goodwill, excess deferred
tax assets and excess allowance................ $3,258,488 100.00% $3,352,576 100.00%
========== ======= ========== ======
</TABLE>
Minimum Leverage Ratio. On June 20, 1990 the Federal Reserve Board adopted new
capital standards and leverage capital guidelines that include a minimum
leverage ratio of 3% Tier 1 Capital to total assets (the "leverage ratio"). The
leverage ratio is used in tandem with the final risk-based ratio of 8% that took
effect at the end of 1992.
The Federal Reserve Board has emphasized that the leverage ratio
constitutes a minimum requirement for well-run banking organizations having
well- diversified risk, including no undue interest rate exposure, excellent
asset quality, high liquidity, good earnings, and a composite rating of 1 under
the Interagency Bank Rating System. Banking organizations experiencing or
anticipating significant growth, as well as those organizations which do not
exhibit the characteristics of a strong, well-run banking organization described
above, will be required to maintain strong capital positions substantially above
the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve Board has indicated that it will
consider a "tangible Tier I Capital Leverage Ratio" (deducting all intangibles)
and other indices of capital strength in evaluating proposals for expansion or
new activities.
The following table presents Zions' leverage ratio at December 31, 1995
as adjusted to give effect to the offering of its common stock made hereby. A
leverage ratio of 3% will be the minimum required for the most highly rated
banking organizations, and according to the Federal Reserve Board, other banking
organizations would be expected to maintain capital at higher levels.
- 40 -
<PAGE>
<TABLE>
<CAPTION>
Zions Pro Forma Combined
--------------------------- -----------------------------
(Dollars in thousands)
Percent Percent
of Average of Average
Assets, Net Assets, Net
Amount of Goodwill Amount of Goodwill
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Tier 1 Capital. . . . . . . . . . . $ 370,931 6.28 $ 379,815 6.29
Minimum Requirement . . . . . . . . 177,262 3.00 181,190 3.00
---------- --------- ---------- -------
Excess. . . . . . . . . . . . . . . $ 193,669 3.28% $ 198,625 3.29%
========== ========= ========== ========
Average Assets, net of goodwill and
deferred tax assets . . . . . . . $5,908,733 100.00% $6,039,678 100.00%
========== ========= ========== ========
</TABLE>
Other Issues and Developments Relating to Regulatory Capital. Pursuant
to such authority and directives set forth in the International Lending
Supervision Act of 1983, the Comptroller, the FDIC and the Federal Reserve Board
have issued regulations establishing the capital requirements for banks under
federal law. The regulations, which apply to Zions' banking subsidiaries,
establish minimum risk-based and leverage ratios which are substantially similar
to those applicable to Zions. As of December 31, 1995, the risk-based and
leverage ratios of each of Zions' banking subsidiaries exceeded the minimum
requirements.
By Federal Register notice dated August 2, 1995, the Federal Reserve
Board, the Comptroller and the FDIC sought public comment on a proposed policy
statement pursuant to which a bank's interest risk exposure would be measured
utilizing a supervisory model or approved internal bank model, but would also
take into account such factors as the quality of an institution's interest rate
risk management, internal controls and overall financial condition, including
earnings capacity, capital base and the level of other risks which may impair
future earnings or capital. Unless specifically exempted, banks would be
required to submit additional information to their primary federal regulator
regarding the maturity, repricing or price sensitivity of their various on- and
off-balance sheet instruments. The agencies expect that they will incorporate an
explicit minimum capital charge for interest rate risk (based in part on their
experience in applying the proposed policy statement) into their risk-based
capital standards. Zions does not anticipate that the adoption of the proposed
policy statement in its current form will result in a material increase in the
capital requirements applicable to it. However, until the final terms of the
proposed policy statement are known, Zions cannot predict the effect of its
implementation on the capital requirements applicable to it.
On December 19, 1991, the Federal Deposit Insurance Corporation Act of
1991 ("FDICIA") was signed into law. Among other changes to federal banking law
effected by the legislation, FDICIA amended Section 38 of the Federal Deposit
Insurance Act to require the federal banking regulators to take "prompt
corrective action" in respect of banks that do not meet minimum capital
requirements and imposes certain restrictions upon banks which meet minimum
capital requirements but are not "well capitalized" for purposes of FDICIA.
FDICIA establishes five capital tiers: "well capitalized," "adequately
- 41 -
<PAGE>
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." Implementing regulations adopted by the federal
banking agencies in September 1992 and effective on December 19, 1992 define the
capital categories for banks which will determine the necessity for prompt
corrective action by the federal banking agencies. A bank may be placed in a
capitalization category that is lower than is indicated by its capital position
if it receives an unsatisfactory examination rating with respect to certain
matters.
Failure to meet capital guidelines could subject a bank to a variety of
restrictions and enforcement remedies. Under FDICIA, all insured banks are
generally prohibited from making any capital distributions and from paying
management fees to persons having control of the bank where such payments would
cause the bank to be undercapitalized. Holding companies of significantly
undercapitalized, critically undercapitalized and certain undercapitalized banks
may be required to obtain the approval of the Federal Reserve Board before
paying capital distributions to their shareholders. Moreover, a bank that is not
well capitalized is generally subject to various restrictions on "pass through"
insurance coverage for certain of its accounts and is generally prohibited from
accepting brokered deposits and offering interest rates on any deposits
significantly higher than the prevailing rate in its normal market area or
nationally (depending upon where the deposits are solicited). Such banks and
their holding companies are also required to obtain regulatory approval prior to
their retention of senior executive officers.
Banks which are classified undercapitalized, significantly
undercapitalized or critically undercapitalized are required to submit capital
restoration plans satisfactory to their federal banking regulator and guaranteed
within stated limits by companies having control of such banks (i.e., to the
extent of the lesser of five percent of the institution's total assets at the
time it became undercapitalized or the amount necessary to bring the institution
into compliance with all applicable capital standards as of the time the
institution fails to comply with its capital restoration plan, until the
institution is adequately capitalized on average during each of four consecutive
calendar quarters), and are subject to regulatory monitoring and various
restrictions on their operations and activities, including those upon asset
growth, acquisitions, branching and entry into new lines of business and may be
required to divest themselves of or liquidate subsidiaries under certain
circumstances. Holding companies of such institutions may be required to divest
themselves of such institutions or divest themselves of or liquidate
nondepository affiliates under certain circumstances. Critically
undercapitalized institutions are also prohibited from making payments of
principal and interest on debt subordinated to the claims of general creditors
as well as to the mandatory appointment of a conservator or receiver within 90
days of becoming critically undercapitalized unless periodic determinations are
made by the appropriate federal banking agency, with the concurrence of the
FDIC, that forbearance from such action would better protect the affected
deposit insurance fund. Unless appropriate findings and certifications are made
by the appropriate federal banking agency with the concurrence of the FDIC, a
critically undercapitalized institution must be placed in receivership if it
remains critically undercapitalized on average during the calendar quarter
beginning 270 days after the date it became critically undercapitalized.
- 42 -
<PAGE>
Other Regulatory and Supervisory Issues
FDICIA requires the federal banking agencies to adopt regulations
prescribing standards for safety and soundness of insured banks and their
holding companies, including standards relating to internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation, fees and
benefits, asset quality, earnings and stock valuation, as well as other
operational and managerial standards deemed appropriate by the agencies. Upon a
determination by a federal banking agency that an insured bank has failed to
satisfy any such standard, the bank will be required to file an acceptable plan
to correct the deficiency. If the bank fails to submit or implement an
acceptable plan, the federal banking agency may, and in some instances must,
issue an order requiring the institution to correct the deficiency, restrict its
asset growth or increase its ratio of tangible equity to assets, or imposing
other operating restrictions. The Riegle Community Development and Regulatory
Improvement Act of 1994, signed into law on September 23, 1994 (the "Riegle
Act"), modified this provision of FDICIA to authorize the federal banking
agencies to prescribe safety and soundness standards by regulation or by
guidelines for all insured depository institutions, afford the federal banking
agencies flexibility to establish asset quality, earnings and stock valuation
standards that they determine to be appropriate and eliminate the requirement
that such standards apply to depository institution holding companies.
On July 10, 1995, the federal banking agencies published proposed
guidelines setting forth standards for asset quality and earnings, final
guidelines with respect to other safety and soundness standards required under
FDICIA and a final rule establishing deadlines and procedures for submission and
review of safety and soundness compliance plans and issuance of compliance
orders. In the view of the federal banking agencies, neither the proposed nor
the final standards represents a change in existing policies but, instead,
formalizes fundamental standards already applied by the agencies. In general,
the standards establish objectives of proper operations and management while
leaving the specific methods for achieving those objectives to each institution.
The final rule also implements the requirements of FDICIA regarding the
submission and review of safety and soundness plans by institutions failing to
meet the prescribed standards and the issuance of orders where institutions have
failed to submit acceptable compliance plans or implement an accepted plan in
any material respect. Zions does not believe that implementation of the final
guidelines and rule will have a material adverse effect upon the operations or
earnings of its bank subsidiaries. Until final guidelines prescribing asset
quality and earnings standards are adopted by the federal banking agencies,
Zions cannot predict the effect of their application to its operations or
earnings or the operations or earnings of its subsidiaries.
FDICIA also contains provisions which, among other things, restrict
investments and activities as principal by state nonmember banks to those
eligible for national banks, impose limitations on deposit account balance
determinations for the purpose of the calculation of interest, and require the
federal banking regulators to prescribe, implement or modify standards,
respectively, for extensions of credit secured by liens on interests in real
estate or made for the purpose of financing construction of a building or other
improvements to real estate, loans to bank insiders, regulatory accounting and
reports, internal control reports, independent audits, exposure on interbank
- 43 -
<PAGE>
liabilities, contractual arrangements under which institutions receive goods,
products or services, deposit account-related disclosures and advertising as
well as to impose restrictions on federal reserve discount window advances for
certain institutions and to require that insured depository institutions
generally be examined on-site by federal or state personnel at least once every
12 months.
In connection with an institutional failure or FDIC rescue of a
financial institution, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") grants to the FDIC the right, in many
situations, to charge its actual or anticipated losses against commonly
controlled depository institution affiliates of the failed or rescued
institution (although not against a bank holding company itself). FIRREA also
explicitly allows bank holding companies to acquire healthy as well as troubled
savings associations (including savings and loan associations and federal
savings banks) without geographic restriction under Section 4 of the Bank
Holding Company Act. In connection with this authorization, the Federal Reserve
Board has been instructed not to impose so-called "tandem operating
restrictions" which might otherwise limit the joint marketing or joint
operations of affiliated banks and thrifts beyond those restrictions otherwise
embodied in law. FIRREA also relieves bank holding companies that own savings
associations of certain duplicative or intrusive savings and loan holding
company regulations and, in some instances, allows savings associations that
have been acquired by bank holding companies to merge into affiliated banks or
become banks themselves.
The nature of the banking and financial services industry, as well as
banking regulation, may be further affected by various legislative and
regulatory measures currently under consideration. The most important of such
measures include legislation designed to permit increased affiliations between
commercial and financial firms (including securities firms) and
federally-insured banks, reduce regulatory burdens on financial institutions,
limit the prerogative of federal banking regulators to expand the range of
permissible activities for banks (particularly in the field of insurance),
eliminate or revise the features of the specialized savings association charter,
and establish standards for federal supervision of derivatives activities of
insured institutions. It is impossible to predict whether or in what form these
proposals may be adopted in the future and, if adopted, what the effect of their
adoption will be on the Zions or its subsidiaries.
Deposit Insurance Assessments
The insured bank subsidiaries of Zions are required to pay semiannual
deposit insurance assessments to the BIF. Pursuant to a directive in FDICIA, the
FDIC revised its deposit insurance regulation, effective October 1, 1993, to
establish a permanent risk-based assessment system. Under this system, each
insured bank's insurance assessment rate is determined by the risk assessment
classification into which it has been placed by the FDIC. The FDIC places each
insured bank in one of nine risk assessment classifications based upon its level
of capital and supervisory evaluations by its regulators: "well capitalized"
banks, "adequately capitalized" banks or "less than adequately capitalized"
banks, with each category of banks divided into subcategories of banks which are
either "healthy," of "supervisory concern" or of "substantial supervisory
concern."
- 44 -
<PAGE>
Until May 31, 1995, the FDIC deposit insurance regulation established
an eight basis point spread between the assessment rate established for the
highest and lowest risk classification, so that banks classified as strongest by
the FDIC were subject to a rate of .23% while those classified as weakest by the
FDIC were subject to a rate of .31% (with intermediate rates of .26%, .29% and
.30%). On August 8, 1995, in recognition of the achievement by the BIF of a
target reserve ratio of 1.25% of insured deposits mandated by FDICIA, the FDIC
adopted a new assessment schedule, applied retroactively as of June 1, 1995,
providing for an assessment rate range of up to .31% (with intermediate rates of
.07%, .14%, .21% and .28%, depending upon an institution's supervisory risk
group). (The revised regulation also established a procedure for adjusting
assessment rates semiannually within a range up to five basis points without
seeking public comment.) The FDIC acted on November 14, 1995 to further reduce
BIF assessment rates, effective for the semiannual period commencing on January
1, 1996 and ending on June 30, 1996. The rate schedule adopted establishes an
assessment rate range of 0% to .27% (with intermediate rates of .03%, .10%, .17%
and .24%, depending upon an institution's supervisory risk group) subject to a
minimum assessment of $1,000 per semiannual period. The FDIC also possesses
authority to impose special assessments from time to time. Implementation of the
permanent risk-based deposit insurance assessment system has not had a material
adverse impact on the financial condition or results of operations of the Zions
or upon those of its bank subsidiaries.
The FDIC is also considering whether the deposit assessment base,
against which the applicable assessment rate is multiplied in determining the
deposit insurance assessment to be paid by each insured institution, should be
redefined in light of the adoption of the risk-based assessment system and
certain statutory and other developments effecting insured depository
institutions. Currently, the assessment base is defined to include the total
domestic deposits of each insured institution as adjusted for certain elements.
Depending upon the nature of the changes, if any, made by the FDIC to the
definition of the assessment base, the aggregate liabilities of each insured
institution subject to assessment could increase or could be reduced, or an
assessment base consisting of other than bank liabilities could be adopted,
thereby potentially affecting the earnings of each institution. Until the nature
of the changes to be adopted by the FDIC to the assessment base definition are
known, Zions cannot predict their effect upon its overall financial condition or
results of operations or upon those of its bank subsidiaries.
Interstate Banking
Existing laws and various regulatory developments have allowed
financial institutions to conduct significant activities on an interstate basis
for a number of years. During recent years, a number of financial institutions
have expanded their out-of-state activities and various states and the Congress
have enacted legislation intended to allow certain interstate banking
combinations.
The Riegle-Neal Act dramatically affects interstate banking activities.
As discussed previously, the Riegle-Neal Act allows the Federal Reserve Board to
approve the acquisition by a bank holding company of control or substantial
assets of a bank located outside the bank holding company's home state.
Beginning on June 1, 1997, and earlier if permitted by applicable state law, an
insured bank may apply to the appropriate federal agency for permission to merge
with an out-of-state bank and convert its offices into branches of the resulting
- 45 -
<PAGE>
bank. States retain the option to prohibit out-of-state mergers if they enact a
statute specifically barring such mergers before June 1, 1997 and such law
applies equally to all out-of-state banks.
Interstate mergers authorized by the Riegle-Neal Act are subject to
conditions and requirements, the most significant of which include adequate
capitalization and management of the acquiring bank or bank holding company,
existence of the acquired bank for up to five years before purchase where
required under state law, and limitations on control by the acquiring bank
holding company of not more than 10% of the total amount of deposits in insured
depository institutions in the United States or not more than 30% of the
deposits in insured depository institutions within that state. States may impose
lower deposit concentration limits, so long as those limits apply to all bank
holding companies equally. Additional requirements placed on mergers include
conformity with state law branching requirements and compliance with "host
state" merger filing requirements to the extent that those requirements do not
discriminate against out-of-state banks or out-of-state bank holding companies.
The Riegle-Neal Act also permits banks to establish and operate a "de
novo branch" in any state that expressly permits all out-of-state banks to
establish de novo branches in such state, if the law applies equally to all
banks. (A "de novo branch" is a branch office of a national bank or state bank
that is originally established as a branch and does not become a branch as a
result of an acquisition, conversion, merger, or consolidation.) Utilization of
this authority is conditioned upon satisfaction of most of the conditions
applicable to interstate mergers under the Riegle-Neal Act, including adequate
capitalization and management of the branching institution, satisfaction with
certain filing and notice requirements imposed under state law and receipt of
federal regulatory approvals.
Because important components of the Riegle-Neal Act have not yet become
effective, Zions cannot predict the effects of the Act's implementation upon its
operations or earnings or upon those of its subsidiaries.
NBA
NBA, as a national bank, is subject to the supervision of, and
regulation and examination by, the Comptroller. Deposits, reserves, investments,
loans, consumer law compliance, issuance of securities, payment of dividends,
mergers and consolidations, electronic funds transfers, management practices,
and other aspects of NBA's operations are subject to regulation. The approval of
the Comptroller is required for the establishment of additional branch offices
by NBA, subject to applicable state law restrictions.
NBA is a member of the Federal Reserve System, and the deposits of NBA
are insured by the FDIC. Accordingly, NBA is subject to certain regulations of
the Federal Reserve Board and the FDIC as well as those of the Comptroller. Some
of the aspects of the lending and deposit business of NBA that are subject to
regulation by the Federal Reserve Board or the FDIC include disclosure
requirements in connection with personal and mortgage loans, interest on
deposits, and reserve requirements. In addition, NBA is subject to numerous
federal, state, and local laws and regulations which set forth specific
restrictions and procedural requirements with respect to the extension of
credit,
- 46 -
<PAGE>
credit practices, the disclosure of credit terms, and discrimination in credit
transactions.
As a consequence of the extensive regulation of the commercial banking
business in the United States, the business of NBA is particularly susceptible
of being affected by federal and state legislation and regulations, which may
increase the cost of doing business.
MONETARY POLICY
The earnings of Zions, NBA, Southern Arizona, and the Bank are directly
affected by the monetary and fiscal policies of the federal government and
governmental agencies. The Federal Reserve Board has broad powers to expand and
constrict the supply of money and credit and to regulate the reserves which its
member banks must maintain based on deposits. These broad powers are used to
influence the growth of bank loans, investments and deposits, and may affect the
interest rates which will prevail in the market for loans and investments and
deposits. Governmental and Federal Reserve Board monetary policies have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. The future impact of such policies and
practices on the growth or profitability of Zions, NBA, Southern Arizona, and
the Bank cannot be predicted.
INFORMATION CONCERNING ZIONS BANCORPORATION
Selected Financial Data
The following unaudited table of selected financial data should be read
in conjunction with the related notes included herein and Zions' consolidated
financial statements and the related notes thereto incorporated by reference
herein. See "Zions Documents Incorporated by Reference."
- 47 -
<PAGE>
<TABLE>
<CAPTION>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
As of, and for the
Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
- ----------------
Taxable-equivalent net interest income $ 232,417 $ 203,313 $ 178,636 $ 160,854 $ 142,614
Net interest income 227,094 198,606 174,657 157,282 139,871
Noninterest income 86,714 73,202 79,880 62,849 52,456
Provision for loan losses 2,800 2,181 2,993 10,929 25,561
Noninterest expenses (1) 188,730 174,900 167,750 139,069 122,999
Income taxes 40,950 30,900 27,248 22,924 13,318
Income before cumulative effect of changes
in accounting principles 81,328 63,827 56,546 47,209 30,449
Cumulative effect of changes in
accounting principles (2) - - 1,659 - -
Net income 81,328 63,827 58,205 47,209 30,449
COMMON STOCK DATA
- ------------------
Earnings per common share:
Income before cumulative effect of
changes in accounting principles $ 5.53 $ 4.37 $ 3.96 $ 3.42 $ 2.23
Net income 5.53 4.37 4.08 3.42 2.23
Dividends paid per share 1.41 1.16 .98 .75 .72
Dividend payout ratio (%) 25.27% 27.06% 21.81% 20.31% 29.89%
Book value per share at year end 29.44 25.12 22.01 18.95 16.23
Market to book value at year end (%) 272.59% 142.83% 168.11% 200.53% 132.47%
Weighted average common and common
equivalent shares outstanding during the year 14,717,000 14,601,000 14,280,000 13,790,000 13,634,000
Common shares outstanding at year end 14,555,920 14,559,552 14,201,367 13,727,544 13,603,812
AVERAGE BALANCE SHEET DATA
- --------------------------
Money market investments $ 936,846 $ 869,709 $ 788,694 $ 469,062 $ 670,584
Securities 1,632,253 1,545,704 1,209,165 927,976 702,027
Loan and leases, net 2,599,071 2,574,995 2,222,182 2,104,679 1,875,928
Total interest-earning assets 5,168,170 4,990,408 4,220,041 3,501,717 3,248,539
Total assets 5,658,690 5,456,613 4,643,918 3,807,832 3,536,809
Interest-bearing deposits 3,021,060 2,744,976 2,449,275 2,356,384 2,219,341
Total deposits 3,858,271 3,583,094 3,178,926 2,912,860 2,701,131
FHLB advances and other borrowings 114,270 151,164 195,097 128,856 154,564
Long-term debt 57,506 59,493 75,623 82,219 86,967
Total interest-bearing liabilities 4,320,229 4,197,865 3,556,746 2,962,079 2,792,239
Shareholders' equity 397,268 339,181 286,331 240,411 208,729
YEAR END BALANCE SHEET DATA
- ---------------------------
Money market investments $ 687,251 $ 403,446 $ 597,680 $ 616,180 $ 714,238
Securities 1,540,489 1,663,433 1,258,939 981,695 852,861
Loans and leases, net 2,806,956 2,391,278 2,486,346 2,107,433 1,979,726
Allowance for loan losses 67,555 67,018 68,461 59,807 58,238
Total assets 5,620,646 4,934,095 4,801,054 4,107,924 3,883,938
Total deposits 4,097,114 3,705,976 3,432,289 3,075,110 2,877,860
FHLB advances and other borrowings 101,084 127,319 288,249 205,222 203,685
Long-term debt 56,229 58,182 59,587 99,223 81,134
Shareholders' equity 428,506 365,770 312,592 260,070 220,753
</TABLE>
- 48 -
<PAGE>
<TABLE>
<CAPTION>
As of, and for the
Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 7,438 $ 13,635 $ 23,364 $ 21,556 $ 33,497
Restructured loans 249 567 4,006 4,003 3,225
Other real estate owned and other
nonperforming assets 1,609 4,741 3,267 5,971 9,938
Total nonperforming assets 9,296 18,943 30,637 31,530 46,660
Accruing loans past due 90 days or more 5,232 3,041 10,821 6,409 5,315
SELECTED RATIOS
Net interest margin (3) 4.50% 4.07% 4.23% 4.59% 4.39%
Return on average assets 1.44% 1.17% 1.25% 1.24% .86%
Return on average common equity 20.47% 18.82% 20.33% 19.64% 14.59%
Ratio of average common equity to average assets 7.02% 6.22% 6.17% 6.31% 5.90%
Tier I risk-based capital - year end 11.38% 11.81% 10.85% 10.23% 8.40%
Total risk-based capital - year end 14.23% 14.96% 14.12% 15.13% 12.09%
Leverage ratio - year end 6.28% 6.24% 5.44% 6.21% 5.86%
Ratio of nonperforming assets to total
assets - year end .17% .38% .64% .77% 1.20%
Ratio of nonperforming assets to net loans and
leases and other real estate owned and
other nonperforming assets at year end .33% .79% 1.23% 1.49% 2.35%
Ratio of net charge-offs (recoveries) to average
loans and leases .10% .19% (.23)% .44% 1.51%
Ratio of allowance for loan losses to net loans
and leases outstanding at year end 2.41% 2.80% 2.75% 2.84% 2.94%
Ratio of allowance for loan losses to
nonperforming loans at year end 878.82% 471.89% 250.13% 234.00% 158.59%
<FN>
(1) Noninterest expenses for the year ended December 31, 1993 included a
one-time expense of $6,022,000 in the first quarter of 1993, related to
the early extinguishment of debt which was necessitated by the decision in
March 1993, to notify holders of floating rate notes totaling $37,450,000
and industrial revenue bonds totaling $4,720,000 that the debt would be
redeemed during the second quarter of 1993. The expense consisted of
marking to market an interest rate exchange agreement entered into several
years ago in conjunction with the issuance of the floating rate notes and
writing off deferred costs associated with the notes and bonds. Early
redemption of the bonds and notes in the second quarter of 1993, allowed
Zions Bancorporation to avail itself of lower cost funding.
(2) Cumulative effect of changes in accounting principles for the year ended
December 31, 1993 resulted from the cumulative effect of changes in
accounting principles in the first quarter of 1993, arising from the
adoption as of January 1, 1993, of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," and SFAS No. 109, "Accounting for Income
Taxes." The election of immediate recognition of the cumulative effect
(transition obligation) of such change in accounting method for
postretirement benefit other than pensions of SFAS No. 106 decreased
pretax and after-tax net income by $5,760,000 and $3,631,000,
respectively. In addition to the $2,129,000 deferred tax benefit resulting
from the adoption of SFAS No. 106, the election to apply SFAS No. 109
prospectively and not restate prior years resulted in net deferred tax
benefits of $5,290,000 for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
other assets and liabilities.
(3) Net interest margin represents net interest income on a taxable-equivalent
basis as a percentage of average earning assets.
</FN>
</TABLE>
- 49 -
<PAGE>
Stock Prices and Dividends on Zions Common Stock
Zions Common Stock is traded in the over-the-counter market under the
symbol "ZION" and is listed in the NASDAQ National Market System. The following
table sets forth the high and low bid quotations for Zions Common Stock for the
periods indicated, in each case as reported by NASDAQ, and the cash dividends
per share declared on Zions Common Stock for such periods. Such over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarterly Bid
Price Range Cash
------------------------ Dividends
High Low Declared
---- --- --------
<S> <C> <C> <C>
1993
First Quarter........................... $49.00 $41.50 $ .21
Second Quarter.......................... 48.75 38.50 .21
Third Quarter........................... 44.25 38.50 .28
Fourth Quarter.......................... 45.50 36.00 .28
-----
$ .98
=====
1994
First Quarter........................... $39.75 $36.50 $ .28
Second Quarter.......................... 42.00 37.00 .28
Third Quarter........................... 40.63 38.50 .30
Fourth Quarter.......................... 39.25 33.50 .30
-----
$1.16
=====
1995
First Quarter........................... $40.50 $35.50 $ .30
Second Quarter.......................... 50.00 38.13 .35
Third Quarter........................... 61.50 49.50 .35
Fourth Quarter.......................... 81.13 60.88 .41
-----
$1.41
=====
1996
First Quarter
(through March 31, 1996).............. $_____ $______ $___
</TABLE>
On January 16, 1996, the last NASDAQ trading day prior to the public
announcement of the Reorganization, the closing sale price for the Zions Common
Stock was $66.75. On April __, 1996, the date this Proxy Statement/Prospectus
was sent to the printers, the closing sale price for the Zions Common Stock was
$_____. On February 27, 1996, there were approximately 14,500,299 shares of
Zions Common Stock outstanding, held by approximately 3,889 shareholders of
record.
While Zions is not obligated to pay cash dividends, Zions' Board of
Directors presently intends to continue the policy of paying quarterly cash
dividends. Future dividends will depend, in part, upon the earnings and
financial condition of Zions.
- 50 -
<PAGE>
Principal Holders of Zions Common Stock
The following table sets forth as of February 27, 1996, the record and
beneficial ownership of Zions Common Stock by the principal common shareholders
of Zions.
<TABLE>
<CAPTION>
No. of % of % of Class After
Name and Address Type of Ownership Shares Class Reorganization(4)
- ---------------- ----------------- ------ ----- -----------------
<S> <C> <C> <C> <C>
Roy W. Simmons, David E. Simmons, Record 614,132 4.24% ____%
Harris H. Simmons, I.J. Wagner,
and Louis H. Callister, Jr., as
Voting Trustees(1)
One Main Street
Salt Lake City, Utah 84133
Roy W. Simmons Record and Beneficial 423,721 2.91% ____%
One Main Street Beneficial(2) 635,238 4.36% %
--------- ---- ----
Salt Lake City, Utah 84133 1,058,959 7.27% ____%
Zions First National Bank Record(3) 1,107,956 7.64% ____%
One Main Street
Salt Lake City, Utah 84133
- ---------------------
<FN>
(1) The voting trust will expire on December 31, 1996, unless sooner
terminated by a vote of two-thirds of the shares deposited under the
voting trust. The voting trustees, three of the five of whom are
directors of Zions and/or its subsidiaries, have exclusive voting
rights with respect to the shares, and have the further right to sell
any or all of the shares after consultation with the beneficial owners
as to their desires to such sale and the price thereof. The beneficial
owners may transfer their voting trust certificates, but are prohibited
from selling any of the underlying shares held by the voting trustees
without the consent of a majority of the voting trustees. The addresses
of the voting trustees are as follows: Roy W. Simmons, 1 South Main
Street, Salt Lake City, Utah; David E. Simmons, 1000 Kennecott
Building, Salt Lake City, Utah; Harris H. Simmons, 1 South Main Street,
Salt Lake City, Utah; I.J. Wagner, 680 Kennecott Building, Salt Lake
City, Utah; and Louis H. Callister, Jr., 900 Kennecott Building, Salt
Lake City, Utah.
(2) Includes Roy W. Simmons' beneficial ownership interest in 89,084 shares
deposited with the voting trust referred to in note (1) above, and
497,844 shares held by a company in which Mr. Simmons serves as a
director.
(3) These shares are owned of record as of February 27, 1996, by Zions
First National Bank, a subsidiary of Zions, in its capacity as
fiduciary for various trust and advisory accounts. Of the shares shown,
Zions First National Bank has sole voting power with respect to a total
of 776,743 shares (5.36% of the class) it holds as trustee for the
Zions Bancorporation Employee Stock Savings Plan, the Zions
Bancorporation Employee Investment Savings Plan, and the Zions
Bancorporation Dividend Reinvestment Plan, which holds 253,136 shares
(1.75% of the class) and the Zions Bancorporation PAYSOP Plan, which
holds 78,077 shares (.54% of the class) as to which Zions First
National Bank does not have or share voting power.
- 51 -
<PAGE>
(4) Assumes a Benchmark Price of $_____, an Average Closing Price of Zions
Common Stock of $_____ as of April ___, 1996, and the issuance of ____
shares of Zions Common Stock in the Reorganization.
</FN>
</TABLE>
Set forth below is the beneficial ownership, as of February 27, 1996,
of the Company's common stock by each of the Company's directors, and all
directors and officers as a group.
<TABLE>
<CAPTION>
No. of Shares % of % of Class After
Directors Beneficially Owned Class Reorganization (5)
- --------- ------------------ ----- --------------
<S> <C> <C> <C>
Jerry C. Atkin 1,700 * (1) * (1)
R.D. Cash 6,000 * (1) * (1)
Grant R. Caldwell 1,000 * (1) * (1)
Richard H. Madsen 49,129 * (1) * (1)
Roger B. Porter -- * (1) * (1)
Robert G. Sarver 115,577 * (1) * (1)
Harris H. Simmons 578,381 (2)(4) 3.97
L. E. Simmons 535,288 (2)(4) 3.67
Roy W. Simmons 1,058,959 (2)(4) 7.27
I. J. Wagner 103,028 (2) * (1) * (1)
Dale W. Westergard 40,391 * (1) * (1)
All directors and officers
as a group 2,344,408 (3) 16.09
(32 persons)
- ----------------------------
<FN>
(1) Immaterial percentage of ownership.
(2) Totals shown do not include shares of which the following persons may
be deemed beneficial owners as trustees of the Zions Bancorporation
Voting Trust in the respective amounts as follows: Roy W. Simmons
(525,048 shares); Harris H. Simmons (606,772 shares); and I. J. Wagner
(554,132 shares). Such persons disclaim beneficial ownership in such
shares.
(3) Includes all 614,132 shares held by the Zions Bancorporation Voting
Trust.
(4) Totals include 497,844 shares attributed to each individual through
serving as a director in a company holding such shares in the Company.
Of such 497,844 shares attributed to Harris H. Simmons, Mr. Simmons
holds an option to acquire 46,698 shares, all of which are vested and
presently exercisable.
(5) Assumes a Benchmark Price of $____, an Average Closing Price of Zions
Common Stock of $___ as of April __, 1996, and the issuance of ____
shares of Zions Common Stock in the Reorganization.
</FN>
</TABLE>
- 52 -
<PAGE>
Zions Documents Incorporated By Reference
The following document previously filed by Zions with the SEC pursuant
to the Exchange Act is hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. Zions' Annual Report on Form 10-K for the year ended December
31, 1995 ("Zions Form 10-K").
For the convenience of Southern Arizona shareholders, a copy of Zions'
1995 Annual Report to Shareholders ("Zions Annual Report") is being mailed to
Southern Arizona shareholders along with this Proxy Statement/Prospectus. No
portion of the Zions Annual Report has been incorporated herein by reference
into this Proxy Statement/Prospectus and therefore the Zions Annual Report is
not part of this Proxy Statement/Prospectus. Southern Arizona shareholders who
wish to obtain copies of Zions Form 10-K or any other document incorporated by
reference herein may do so by following the instructions under "Available
Information" above.
All documents filed by Zions with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
INFORMATION CONCERNING SOUTHERN ARIZONA
Southern Arizona is an Arizona corporation incorporated in 1985 and is
registered as a bank holding company under the Bank Holding Company Act. Its
sole subsidiary is Southern Arizona Bank (the "Bank"). The Bank provides a wide
variety of general commercial and retail banking services, which include
lending, depository, and related financial services to individuals, businesses,
governmental units, and financial institutions in Arizona. The Bank is a state
banking association chartered under the laws of the State of Arizona. It
commenced operations in Yuma, Arizona on August 2, 1982. At December 31, 1995,
the Bank had assets of $127 million, net loans of $85 million, and deposits of
$115 million. The Bank operates five banking facilities in Yuma County, Arizona.
Commercial Banking and Related Services. The Bank is engaged in the
financing of commerce and industry by providing credit facilities and related
services for business of all sizes. The bank offers all forms of commercial
lending, including lines of credit, revolving credits, term loans, accounts
receivable financing, residential mortgage lending and commercial real estate
and other forms of secured financing.
Personal Banking Services. A wide range of personal banking services is
provided to individuals at each of the Bank's branch offices. Among the services
provided are interest-bearing and non-interest-bearing checking accounts,
savings
- 53 -
<PAGE>
and time accounts, installment and other personal loans, home improvement loans,
home equity loans, automobile and other consumer financing, safe deposit
services and residential mortgage loans. The Bank is a member of regional,
national, and international automated teller machine ("ATM") networks, which
permit customers to access their accounts at thousands of electronic terminals
in the Southwest region, as well as nationally and internationally.
See "Selected Financial Data," "Management's Discussion and Analysis,"
"Consolidated Financial Statements," and "Statistical Information" for
additional information concerning the business of Southern Arizona and the Bank.
Selected Financial Data
The following selected financial data should be read in conjunction
with Southern Arizona's consolidated financial statements and the related notes
and with Southern Arizona's management's discussion and analysis of financial
condition and results of operations, provided elsewhere herein. See "Index to
Financial Statements" for the historical financial statements of, and other
financial information regarding, Southern Arizona.
- 54 -
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN ARIZONA BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
As of, and for the
Year Ended December 31,
------------------------------------------------------------
(Dollars and outstanding shares in thousands, 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------
except per share and ratio data)
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income $7,042 $6,049 $5,162 $4,474 $3,652
Provision for loan losses 401 429 756 753 422
Other operating income 1,281 1,221 1,394 733 438
Other operating expense 4,700 4,289 3,828 3,136 2,714
Net income 1,999 1,632 1,291 950 719
COMMON STOCK DATA
Earnings per common share $1.58 $1.29 $1.02 $0.75 $0.57
Book value per share at period end 7.00 5.75 4.76 3.98 3.40
Weighted average common and common
equivalent shares outstanding during
the period 1,266 1,266 1,266 1,266 1,266
Common shares outstanding at period end 1,266 1,266 1,266 1,266 1,266
AVERAGE BALANCE SHEET DATA
Securities $ 10,637 $ 12,650 $ 14,990 $ 14,830 $ 10,737
Loans and leases, net 82,615 71,365 57,553 48,198 40,987
Total interest-earning assets 105,018 91,575 79,442 66,579 54,746
Total assets 112,240 97,323 84,742 71,245 59,314
Interest-bearing deposits 73,063 63,464 57,390 50,882 43,290
Total deposits 100,619 87,532 77,596 66,336 54,790
Long-term debt 2,980 2,500 1,143 -- --
Shareholders' equity 8,071 6,654 5,530 4,669 4,025
END OF PERIOD BALANCE SHEET DATA
Securities $ 1,887 $ 7,672 $13,552 $13,477 $10,665
Loans and leases, net 85,585 80,689 65,147 54,388 43,515
Allowance for loan losses 2,467 2,393 1,990 1,332 873
Total assets 127,418 101,254 91,225 81,938 71,600
Total deposits 114,762 91,205 82,316 76,435 66,981
Long-term debt 2,980 2,500 2,500 -- --
Shareholders' equity 8,858 7,284 6,024 5,036 4,302
Nonperforming assets:
Nonaccrual loans 11 202 18 82 --
Other real estate owned -- 15 18 -- 59
Total nonperforming assets 11 217 36 82 59
SELECTED RATIOS
Net interest margin 69.08% 74.53% 73.67% 68.97% 59.86%
Return on average assets 1.78% 1.68% 1.52% 1.33% 1.21%
Ratio of average common equity to
average assets 7.19% 6.84% 6.53% 6.55% 6.79%
Ratio of nonperforming assets to total
assets .01% .22% .04% .12% .10%
Ratio of allowance for loan losses to
net loans and leases outstanding at
period end 2.88% 2.97% 3.05% 2.45% 2.01%
Ratio of allowance for loan losses to
nonperforming loans 22,427.27% 1,184.65% 11,055.56% 1,624.39% infinite
</TABLE>
- 55 -
<PAGE>
Stock Prices and Dividends on Southern Arizona Common Stock
Southern Arizona Common Stock is not listed with a national securities
exchange or quoted on any automated quotation system. No established public
trading market for Southern Arizona Common Stock presently exists and the
private market that has existed is thin and not necessarily indicative of the
value of Southern Arizona Common Stock. There have been no trades in Southern
Arizona Common Stock in the fourth quarter of 1995 and the first quarter of 1996
and since the date of the public announcement of the Plan of Reorganization on
January 17, 1996. The following table sets forth the high and low prices for
Southern Arizona Common Stock during the calendar quarters shown below, through
March 31, 1996, of which Southern Arizona is aware, and the cash dividends per
share declared on Southern Arizona Common Stock for such periods.
<TABLE>
<CAPTION>
Sales Prices Cash
----------------------- Dividends
High Low Declared
---- ----- --------
<S> <C> <C> <C> <C> <C>
1994 First Quarter................. $ 9.00 $ 7.62 $ --
Second Quarter................ 9.00 9.00 --
Third Quarter................. 9.50 9.00 --
Fourth Quarter................ 10.50 10.00 .30
-----
$ .30
=====
1995 First Quarter................. $15.00 $11.00 $ --
Second Quarter................ 12.50 12.50 --
Third Quarter................. 15.00 14.00 --
Fourth Quarter................ NO SALES NO SALES .36
-----
$ .36
=====
1996 First Quarter
(through March 31, 1996)...... NO SALES NO SALES --
</TABLE>
Based upon information available to management of Southern Arizona, it
appears that during the years ended December 31, 1994 and 1995, a total of
159,869 shares and 169,424 shares, respectively, of Southern Arizona Common
Stock were traded (some of which may not have effected changes in the beneficial
ownership of the shares transferred). The foregoing table may not accurately
reflect the full trading range of Southern Arizona Common Stock during the
periods indicated because other transactions may have occurred during such
periods, the terms of which were not conveyed to management. Additionally,
Southern Arizona's books and records do not reflect trading prices. Other than
with respect to trades involving officers and directors and trades for which
management may have received information relating to prices, Southern Arizona
has no mechanism by which to reconstruct information relating to the per share
market price at which its shares have historically traded.
The holders of Southern Arizona Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor. Southern Arizona's ability to pay dividends is
governed by Arizona law. Generally, Arizona law prohibits corporations from
paying dividends when after giving the dividend effect, the corporation would
not be able to pay its debts as they become due in the usual course of business
or the corporation's
- 56 -
<PAGE>
total assets would be less than the sum of its total liabilities plus the amount
that would be needed if the corporation were to be dissolved at the time of the
distribution to satisfy the preferential rights on dissolution of shareholders
whose preferential rights are superior to those receiving the distribution.
Southern Arizona's articles provide that the Board of Directors may, from time
to time, distribute dividends out of the capital surplus of Southern Arizona.
The Bank is subject to certain limitations on the amount of cash
dividends that it can pay. Arizona law allows the board of directors of a bank
to declare dividends as permitted by the general laws governing Arizona
corporations, except that dividends payable other than in the bank's own stock
may be paid out of capital surplus only with the approval of the superintendent
of banks. Additionally, the prior approval of the Board of Governors of the
Federal Reserve System (herein, the "Board") is required if the total of all
cash dividends declared by a state-chartered member bank, such as the Bank, in
any calendar year will exceed the total of such bank's net profits (as defined
by statute) for that year combined with its retained net profits for the
preceding two calendar years less any required transfers to surplus. In
addition, the Board is authorized to determine under certain circumstances
relating to the financial condition of a state-chartered member bank that the
payment of dividends would be an unsafe and unsound practice and to prohibit
payment thereof.
Under FDICIA, all insured banks are generally prohibited from making
any capital distributions and from paying management fees to persons having
control of the bank where such payments would cause the bank to be
undercapitalized. Holding companies of undercapitalized banks may be required to
obtain the approval of the Board before making capital distributions to their
shareholders. See "Supervision and Regulation -- Regulatory Capital Requirements
- -- Other Issues and Developments Relating to Regulatory Capital."
On April ___, 1996, the record date for the Special Meeting, Southern
Arizona had approximately 500 stockholders, based upon the number of
stockholders of record. At such date, 1,266,362 shares of Southern Arizona
Common Stock were outstanding.
Stockholdings of Directors, Officers and Certain Others
Persons who were beneficial owners of 5% or more of the issued and
outstanding Southern Arizona Common Stock as of the record date are shown in the
following table:
Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner(1) Ownership(2) Common Stock
- ------------------- ------------ ------------
Forrest C. Braden 71,511(3) 5.65%
Stephen P. Shadle 75,325(4) 5.95%
Southern Arizona Bank 69,111 5.46%
Employee Stock Ownership
Plan
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- --------------------------
(1) The address of each named individual is that of Southern Arizona.
(2) The table includes, when applicable, any shares owned of record by
such person's minor children and spouse, and by other individuals and
entities over whose shares such person has custody, voting control, or
power of disposition. The number of shares shown includes shares owned
by trusts of which the beneficial owner is trustee, with sole voting
and investment power.
(3) Includes 21,300 shares of Common Stock as to which Mr. Braden has sole
voting power as the trustee of the Braden Trust, 1,800 shares of
Common Stock as to which Mr. Braden has sole voting power as the
trustee of a trust for his grandson, Charles Arthur Braden, and 2,500
shares of Common Stock as to which Mr. Braden has sole voting power as
trustee of a trust for his granddaughter, Meghann Braden.
(4) Includes 2,000 shares of Common Stock as to which Mr. Shadle has sole
voting power as the general partner of the Shadle Family Limited
Partnership, 3,150 shares of Common Stock as to which Mr. Shadle has
sole voting power as the personal representative of the Francis T.
Shadle Estate, 600 shares of Common Stock as to which Mr. Shadle has
sole voting power as the trustee of the Robert E. Harman Children's
Trust, 56,857 shares of Common Stock as to which Mr. Shadle has shared
voting power as the co-trustee of the Stephen P. Shadle and Roberta G.
Shadle Trust, and 12,718 shares of Common Stock as to which Mr. Shadle
has sole voting power as the trustee of the Westover, Choules & Shadle
401(k) Profit Sharing Trust.
As of the record date, directors and officers as a group were
beneficial owners of that number of shares of Common Stock shown below.
Amount of
Name of and Nature of Percent of
Beneficial Owner(1) Beneficial Common Stock
- ------------------- ---------- ------------
Ownership(2)
------------
Forrest C. Braden 71,511 (3) 5.65%
John E. Byrd 40,523 3.20%
Thomas M. Howell 50,238 (4) 3.97%
Robert W. Kennerly 4,274 *
Jimmy J. Naquin 37,598 (5) 2.97%
Colleen J. Newman 11,000 (6) *
Donald S. Olsen 10,000 *
Stephen P. Shadle 75,325 (7) 5.95%
Charles N. Urtuzuastegui 9,443 (8) *
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<PAGE>
Amount of
Name of and Nature of Percent of
Beneficial Owner(1) Beneficial Common Stock
- ------------------- ---------- ------------
Ownership(2)
------------
All directors and officers 310,150 (3)(4)(5)(6)(7)(8) 24.49%
as a group (12 persons)
- -----------------------
* Less than 1.0% of the outstanding securities or voting power.
(1) The address of each named individual is that of Southern Arizona.
(2) The table includes, when applicable, shares owned of record by such
person's minor children and spouse, and by other related individuals
and entities over whose shares such person has custody, voting
control, or power of disposition. The number of shares shown includes
shares owned by trusts of which the beneficial owner is trustee, with
sole voting and investment power.
(3) Includes 21,300 shares of Common Stock as to which Mr. Braden has sole
voting power as the trustee of the Braden Trust, 1,800 shares of
Common Stock as to which Mr. Braden has sole voting power as the
trustee of a trust for his grandson, Charles Arthur Braden, and 2,500
shares of Common Stock as to which Mr. Braden has sole voting power as
trustee of a trust for his granddaughter, Meghann Braden.
(4) Includes 100 shares of Common Stock as to which Mr. Howell has shared
voting power as a one-half owner of Quail Trail Corporation and 50,138
shares of Common Stock as to which Mr. Howell has shared voting power
as a co-trustee of the Thomas M. Howell & Lea Rae Howell Trust.
(5) Includes 3,098 shares of Common Stock as to which Mr. Naquin has sole
voting power as the manager of the Naquin Farms Inc. Profit Sharing
Plan.
(6) Includes 2,306 shares held by the Colleen Newman Realty, Inc.
Employees Defined Contribution Plan & Trust-Money Purchase Plan and
4,449 shares held by Colleen Newman Realty, Inc. Employees Defined
Contribution Plan & Trust-Profit Sharing.
(7) Includes 2,000 shares of Common Stock as to which Mr. Shadle has sole
voting power as the general partner of the Shadle Family Limited
Partnership, 3,150 shares of Common Stock as to which Mr. Shadle has
sole voting power as the personal representative of the Francis T.
Shadle Estate, 600 shares of Common Stock as to which Mr. Shadle has
sole voting power as the trustee of the Robert E. Harman Children's
Trust, 56,857 shares of Common Stock as to which Mr. Shadle has shared
voting power as the co-trustee of the Stephen P. Shadle and Roberta G.
Shadle Trust, and 12,718 shares of Common Stock as to which Mr. Shadle
has sole voting power as the trustee of the Westover, Choules & Shadle
401(k) Profit Sharing Trust.
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<PAGE>
(8) Includes 630 shares of Common Stock as to which Mr. Urtuzuastegui has
sole voting power as the trustee of a trust for his granddaughter,
Erica Urtuzuastegui, and 630 shares of Common Stock as to which Mr.
Urtuzuastegui has sole voting power as the trustee of a trust for his
granddaughter, Melisa Urtuzuastegui.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
The following analysis of Southern Arizona's financial condition and
results of operations as of and for the three year period ended December 31,
1995, should be read in conjunction with the Consolidated Financial Statements
of Southern Arizona.
Overview
Southern Arizona does not engage in any substantial business activity
other than as a bank holding company that holds all of the issued and
outstanding stock of Southern Arizona Bank (herein, the "Bank"), its principal
asset. Unless otherwise noted, the following discussion relates to Southern
Arizona and the Bank on a consolidated basis.
Results of Operations
Net Income
Net income for 1995 was $1,999,007, increasing $366,793, or 22.5%,
from 1994. This increase was primarily attributable to growth in Southern
Arizona's assets, which resulted in an increase in net interest income of
$992,387.
Net income for 1994 was $1,632,214 compared to $1,291,151 in 1993. The
1994 increase of $341,063, or 26,4%, was primarily attributable to growth in
Southern Arizona's assets as well as a decrease in Southern Arizona's provision
for loan losses, which resulted from improvement in the quality of Southern
Arizona's loan portfolio.
Net-Interest Income
Net interest income, the difference between interest earned on loans
and investments and interest paid on deposits and debt, is the principal
component of Southern Arizona's earnings.
During 1995, net interest income was $7,041,643, increasing $992,387,
or 16.4%, from 1994. This increase was primarily attributable to growth in
Southern Arizona's earning assets as well as the utilization of pricing
strategies aimed at maintaining an appropriate net interest spread. Average
interest-earning assets of Southern Arizona were $105,018,000 during 1995, an
increase of 14.7% or $13,443,000 from $91,575,000 in 1994.
During 1994, net interest income was $6,049,256 compared lo $5,162,110
in 1993. The 1994 increase of $887,146, or 17.2%, was primarily attributable to
growth in Southern Arizona's earning assets. Average interest-earning assets of
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Southern Arizona were $91,575,000 during 1994, an increase of $12,133,000, or
15.3% from $79,442,000 in 1993.
Non-Interest Income
During 1995, non-interest income was $1,280,584, an increase of 4.9%
from $1,220,741 in 1994. This increase was primarily attributable to an increase
in customer service fees of $136,564 resulting from increased volume, pricing of
the Bank's services, and fees income from additional checking accounts opened
and maintained at the Bank.
Non-interest income for 1994 had decreased $172,790, or 12.4%, from
the non-interest income of $1,393,531 in 1993. This decrease was primarily
attributable to exceptional gains on the sale of loans and investments realized
in 1993. In 1993, due to favorable interest rates and Southern Arizona's focus
on optimum asset allocation, Southern Arizona realized gains on the sale of
mortgage loans and investment securities of $882,406 as compared to $513,741 in
1994.
Non-Interest Expense
Non-interest expense was $4,699,650 for the year ended December 31,
1995 compared to $4,288,619 and $3,827,811 for the years ended December 31, 1994
and December 31, 1993, respectively. Historically, Southern Arizona's
non-interest expense has increased relatively proportionately to the growth of
Southern Arizona's assets. The increases in non-interest expense for the years
1995 and 1994 have resulted from Southern Arizona's expansion of staff,
premises, and other resources to support the economic progress of Southern
Arizona.
Financial Condition
Assets
At December 31, 1995, total assets were $127,417,893 as compared to
$101,254,421 on December 31, 1994, representing an increase of 25.8%. This
increase was primarily attributable to the Bank's implementation of an
aggressive strategy to acquire large, commercial deposits.
Total assets for 1994 had increased 12.7% from total assets of
$90,116,000 in 1993. This increase was primarily attributable to an increase in
net loans of $15,542,000 and branch remodelings that facilitated customer
service.
Investment
Investment securities held by Southern Arizona were $1,886,870 at
December 31, 1995 compared to $7,672,189 at December 31, 1994. This decrease was
primarily attributable to a reallocation of investment securities to Fed Funds.
In addition, Southern Arizona had short-term investments in time deposits with
other banks and Fed Funds sold of $25,788,000. Southern Arizona's portfolio mix
is structured to meet the liquidity needs of the Bank brought about by loan
demand and seasonal swings in the deposit base.
Investment securities held by Southern Arizona as of December 31, 1994
decreased 43.4% from investment securities held by Southern Arizona of
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<PAGE>
$13,551,719 as of December 31, 1993. This decrease was primarily attributable to
strong loan demand for the year 1994, which was partially funded by matured
securities.
Loans
Loan growth has been somewhat lower than asset growth in order to
maintain acceptable liquidity and to reduce Southern Arizona's loan deposit
ratio to between 75% and 80%.
Southern Arizona's loan portfolio grew in 1995 to $85,584,967,
increasing $4,895,982, or 6.1%, from 1994. Southern Arizona's loan portfolio
also grew in 1994 to $80,688,985, increasing $15,541,589, or 23.9%, from 1993.
This growth in Southern Arizona's loan portfolio in both 1995 and 1994 was
primarily attributable to Southern Arizona's emphasis on competitive pricing,
favorable interest rates, and strength in the local economy.
Southern Arizona's loan portfolio mix has not varied significantly
over the last three years. Commercial loans comprised 73.7% of Southern
Arizona's loan portfolio in 1995, decreasing from 77.3% and 77.0% of Southern
Arizona's loan portfolio in 1994 and 1993, respectively. Real Estate loans
comprised 11.6% of Southern Arizona's loan portfolio in 1995, compared to 10.2%
and 11.5% of Southern Arizona's loan portfolio in 1994 and 1993, respectively.
Installment and other loans comprised primarily of automobile loans and home
improvement loans, made up 18.2% of Southern Arizona's loan portfolio in 1995,
compared to 16.2% and 15.3% of Southern Arizona's loan portfolio in 1994 and
1993, respective]y. The 1995 increase in installment loans was primarily
attributable to Southern Arizona's emphasis on mobile home lending and Southern
Arizona's management's desire for greater liquidity. The Bank does not have
foreign or energy loans.
Loans that were 90-days or more past due or non-accrual constituted
.01% of Southern Arizona's net loan portfolio as of December 31, 1995, compared
to .27% and .06% of Southern Arizona's loan portfolio at December 31, 1994 and
December 31, 1993, respectively. The 1995 decrease was primarily attributable to
Southern Arizona's management's desire to reduce the delinquency ratio of the
Southern Arizona loan portfolio. Management does not presently anticipate any
material changes in the percentage of loans which are 90-days or more past due
or non-accrual as compared to Southern Arizona's net loan portfolio for the
period ending December 31, 1996.
Allowance for Loan Losses
Southern Arizona's allowance for loan losses at December 31, 1995, was
$2,466,513, compared to $2,393,242 and $1,990,428 at December 31, 1994 and
December 31, 1993, respectively. The allowance for loan losses as a percent of
gross loans was 2.78%, 2.86%, and 2.94% for the years 1995, 1994, and 1993,
respectively.
Amounts charged-off to the allowance for loan losses in 1995 were
$349,214, compared to $45,294 and $109,455 in 1994 and 1993, respectively.
Factors such as economic conditions and problems with individual borrowers have
affected amounts charged-off to the allowance for loan losses over the last
three
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<PAGE>
years. However, as a result of prudent lending policies and periodic review,
Southern Arizona has experienced minimal loan losses.
Deposits
Typically, Southern Arizona experiences a large increase in deposits
at year end due to the seasonal local economy, which is not accompanied by a
large increase in loan demand.
Southern Arizona's deposits at December 31, 1995 were $114,761,830,
increasing $23,556,446, or 25.8%, from 1994. This increase was primarily
attributable to Southern Arizona's focus on acquiring larger, commercial
depositors. Additionally, the merger and closing of several competitors
contributed to the growth in Southern Arizona's deposits.
Southern Arizona's deposits at December 31, 1994 were $91,205,384,
increasing $8,889,090, or 10.8%, from 1993. This increase was primarily
attributable to the growing local economy and the expansion of two branch
facilities.
Liquidity
Southern Arizona has maintained liquidity and continues to maintain
adequate liquidity. Although Southern Arizona's loan/deposit ratio was 85.10% in
1995, Southern Arizona has reduced its loan growth to lower its loan/deposit
ratio to between 75% and 80% and, as a result, has adequately maintained its
liquidity. Additionally, Southern Arizona had $25,194,000 in Federal Funds as of
December 31, 1995 and currently has substantial unused borrowing lines available
through correspondent banks. These borrowing lines are available to Southern
Arizona in the event that the seasonal swing in deposits is greater than
anticipated.
One source of funds for Southern Arizona is dividends received from
the Bank. The amount of dividends that a bank may pay in any year is subject to
certain regulatory restrictions. Generally, dividends paid in a given year by a
bank are limited to its net profit, as defined by regulatory agencies, for the
year combined with its retained net income for the preceding two years. However,
a bank may not pay dividends if such payments would leave the bank inadequately
capitalized. Hence, the ability of the Bank to pay dividends will depend on its
future net income and capital requirements.
Capital Resources
In 1993, Southern Arizona issued $2,500,000 in senior notes. The
proceeds of such issuance were used as capital for the continued expansion of
the Bank. Quantitative measures established by regulation to ensure capital
adequacy require the bank to maintain certain minimum amounts and ratios of
total and Tier I capital (as defined in the regulations) to risk-weighted
assets, and of Tier I capital to average assets. As of December 31, 1995,
management believes that the Bank has met all capital adequacy requirements to
which it is subject. Southern Arizona has maximized growth opportunities while
maintaining adequate levels of capital.
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Effects of Inflation
The net income of Southern Arizona depends to a great extent upon its
net interest margin. Net interest margin is the difference between the income
Southern Arizona receives from its loans, securities, and other interest earning
assets and the interest it pays on its deposits and other interest paying
liabilities. Inflation and interest rates are highly sensitive to many factors
beyond the control of Southern Arizona, including general economic conditions
and policies of various governmental and regulatory authorities. Southern
Arizona attempts to limit adverse exposure to inflation and interest rate
changes by properly matching rate sensitive assets and liabilities.
COMPARISON OF ZIONS COMMON STOCK AND SOUTHERN ARIZONA COMMON STOCK
General
Upon consummation of the Reorganization, shareholders of Southern
Arizona will become shareholders of Zions, a Utah corporation. Thus, the Utah
Revised Business Corporation Act and Zions' Articles of Incorporation
("Articles") and Bylaws will govern the rights of the Southern Arizona
shareholders who become shareholders of Zions. In addition, since the Articles
and Bylaws of Zions and Southern Arizona are not the same, the Reorganization
will result in certain differences in the rights of the holders of Southern
Arizona Common Stock. The following is a summary of certain of the more
significant differences.
Voting Rights
General. The holders of Zions Common Stock like the holders of
Southern Arizona Common Stock (except as stated below), are generally entitled
to one vote for each share held of record on all matters submitted to a
shareholder vote. The holders of Southern Arizona Common Stock currently have
cumulative voting rights in the election of directors, meaning that in all
elections for directors every shareholder shall have the right to vote, in
person or by proxy, that number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's shares are
entitled and give one candidate that resulting amount or distribute the
shareholder's votes in the manner and among as many candidates as the
shareholder so determines. The directors who receive the most votes are elected
for the available directorships being voted upon. The holders of Zions Common
Stock do not have cumulative voting rights. The absence of cumulative voting
means that a nominee for director must receive the votes of a plurality of the
shares voted in order to be elected.
Special Votes for Certain Transactions. The Articles of Zions contain
provisions requiring special shareholder votes to approve certain types of
transactions. In the absence of these provisions, either the transactions would
require approval by a majority of the shares voted at a meeting or no
shareholder vote would be required.
Zions' Articles require that certain "business transactions" between
Zions or a subsidiary and a "related person" be approved by the affirmative
votes of the holders of not less than 80% of the voting power of all outstanding
voting stock of Zions. A "related person" is generally defined by Zions'
Articles to
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mean a person, corporation, partnership, or group acting in concert that
beneficially owns 10% or more of the voting power of Zions' outstanding voting
stock.
The "business transactions with a related person" subject to Zions'
special vote requirements include (1) a merger or consolidation involving Zions
or a subsidiary of Zions with a related person; (2) the sale, lease, exchange,
transfer or other disposition of all or any substantial part of the assets of
either Zions or a subsidiary of Zions to, with or for the benefit of a related
person; (3) the issuance, sale, exchange or other disposition by Zions or a
subsidiary of Zions to a related person of securities of Zions or a subsidiary
of Zions having an aggregate fair market value of $5 million or more; (4) any
liquidation, spinoff, splitoff, splitup, or dissolution of Zions by or on behalf
of a related person; (5) any recapitalization or reclassification of the
securities of Zions or other transaction that would have the effect of
increasing the voting power of a related person or reducing the number of shares
of each class of voting securities outstanding; and (6) any agreement, contract,
or other arrangement providing for any of the transactions set forth above.
Zions' special shareholder vote requirements for business transactions
with related persons do not apply to any transaction approved by a majority of
the "continuing directors" or if various specified conditions are met. A
continuing director is any member of the Zions Board who is not a related person
or an interested shareholder or an affiliate or associate of a related person
and who (1) was a director on February 21, 1986 or (2) became a director
subsequent to that date and whose election or nomination for election by Zions'
shareholders was approved by a majority of the continuing directors then on the
Board.
Southern Arizona's bylaws require Southern Arizona's Board of
Directors, when evaluating certain transactions, including tender or exchange
offers, mergers or consolidations with another entity, or the sale of all or
substantially all of the assets of Southern Arizona, in connection with the
exercise of its judgment in determining what is in the best interests of
Southern Arizona and its shareholders, to give due consideration to all relevant
factors. Such factors include, without limitation, the social and economic
effects of acceptance of such offer on the customers and employees of the Bank
and Southern Arizona and on the community in which the Bank operates. Other
factors include whether a more favorable offer could be obtained for Southern
Arizona and the Bank, whether the offer is acceptable based upon the historical
operating results and financial condition of Southern Arizona and the Bank, the
reputation and business practices of the acquiring party and its management and
affiliates as they would affect the employees and customers of Southern Arizona,
the future value of Southern Arizona's stock, the value of the acquiring party's
stock, and other legal and regulatory issues raised by the offer. Southern
Arizona's Board of Directors carefully considered these factors in determining
to recommend approval of the Plan of Reorganization by shareholders. See "Plan
of Reorganization -- Background of and Reasons for the Reorganization."
Under Arizona law, Southern Arizona may not merge or consolidate with
another entity or conduct a sale of substantially all of its assets without the
prior approval of a majority of its outstanding voting stock. However, Southern
Arizona's articles of incorporation and bylaws require the affirmative vote of
two-thirds of the holders of Southern Arizona Common Stock and two-thirds of the
outstanding shares of Southern Arizona Common Stock to approve a merger,
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consolidation, or sale of all or substantially all of its assets if such merger,
consolidation or sale is approved by the Board of Directors. In the event that
the Board of Directors has not approved such merger, consolidation or sale,
Southern Arizona's articles require an affirmative vote of three-fourths of the
holders of Southern Arizona Common Stock for approval. See "Plan of
Reorganization -- Vote Required; Management Recommendation."
Board of Directors
Director Liability. Zions' articles of incorporation contain a
"director liability" provision. This provision generally shields a director from
monetary damages to the corporation or its shareholders for a breach of
fiduciary duty as a director other than (i) a breach of a director's duty of
loyalty, (ii) acts or omissions not taken in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) authorizing the
unlawful payment of dividends, and (iv) transactions in which a director
receives an improper benefit.
Arizona law provides that a corporation's articles of incorporation
may set forth a provision that eliminates or limits the liability of a director
to the corporation for money damages for any action taken or any failure to take
any action as a director, except liability for (i) the amount of a financial
benefit received by a director to which the director is not entitled, (ii) an
intentional infliction of harm on the corporation or the shareholders, (iii) a
violation involving an unlawful distribution as described in Arizona Revised
Statutes ss.10- 833, and (iv) an intentional violation of criminal law. Southern
Arizona's articles do not contain any provision that eliminates director
liability to the corporation as provided for by Arizona law.
Classified Board. The articles of incorporation of Zions and the
bylaws of Southern Arizona divide the Board of Directors into three classes,
each consisting of one-third (or as near as may be) of the whole number of the
Board of Directors. Arizona law requires that each class have at least three
directors and contain as equal a number of directors as possible. One class of
directors is elected at each annual meeting of shareholders, and each class
serves for a term of three years.
The number of directors which constitute Zions' full Board of
Directors may be increased or decreased only by amendment of the bylaws, which
requires the affirmative vote of two-thirds of the total number of directors
constituting the entire Board, or by the shareholders of Zions at a regular or
special meeting by the affirmative vote of two-thirds of the outstanding and
issued shares entitled by statute to vote. Except as otherwise required by law,
vacancies on Zions' Board of Directors, including vacancies resulting from an
increase in the size of the Board, may be filled by the affirmative vote of a
majority of the remaining directors even though less than a quorum of the Board
of Directors. Zions' directors elected by the Board to fill vacancies serve for
the full remainder of the term of the class to which they have been elected. Any
directorship filled by reason of an increase in the number of directors may be
filled for a term of office continuing only until the next election of directors
by the shareholders.
Southern Arizona's articles of incorporation provide for a Board of
Directors to be comprised of a maximum of fifteen persons. The bylaws provide
for the number of directors to be no fewer than five nor more than fifteen, as
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determined by resolution of the Board of Directors. Southern Arizona's bylaw
provisions governing vacancies are similar to Zions', with the exception that
any directors elected by the Board shall continue in office only until their
successor has been elected at the next annual election.
Removal of Directors. Zions' articles provide that any director (or
the entire Board of Directors) may be removed from office by shareholder vote
only if such removal is approved by the holders of two-thirds of the issued and
outstanding shares then entitled to vote at an election of directors.
Southern Arizona's bylaws provide that, at a meeting of shareholders
called expressly for that purpose, any or all directors may be removed with or
without cause by a vote of the holders of a majority of the shares then entitled
to vote at an election of directors. However, if less than the entire Board is
to be removed, no director may be removed if the number of votes cast against
his removal would be enough to elect him if then cumulatively voted at an
election of the entire Board of Directors.
Shareholder Meetings
Utah law provides that special meetings of a corporation's
shareholders may be called by the board of directors or such other persons
authorized by the bylaws to call a special meeting or by the holders of at least
ten percent of all the votes entitled to be cast on any issue proposed to be
considered at the special meeting. Under Zions' bylaws, special meetings may be
called by the president or by the Board of Directors.
Under Southern Arizona's bylaws, special meetings of shareholders may
be called by the president, the Board of Directors, or shareholders entitled to
cast at least one-half of the shares entitled to vote.
Amendment of Articles and Bylaws
Zions' articles require the affirmative votes of the holders of
two-thirds of all outstanding voting stock of Zions to approve any amendment to
Zions' articles, except that to repeal or amend the provisions in the article
regarding business transactions with related persons requires the affirmative
vote of 80% of the issued and outstanding stock entitled to vote. Zions' bylaws
may be amended by an affirmative vote of two-thirds of the total number of
directors constituting the entire Board or by the affirmative vote of two-thirds
of the issued and outstanding shares entitled to vote.
Under Arizona law, Southern Arizona's articles of incorporation may be
amended at an annual or special shareholder meeting by an affirmative majority
vote of all holders of the shares entitled to vote. Nevertheless, Southern
Arizona's articles of incorporation require the affirmative vote of
three-fourths of the Southern Arizona shareholders to amend Southern Arizona's
articles. Southern Arizona's bylaws may be amended at an annual or special
shareholder meeting by an affirmative vote of the majority of all shares
entitled to vote, or, with respect to those matters which are not by statute
reserved exclusively to the shareholders, by an affirmative vote of a majority
of the Board of Directors at any Board meeting.
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Dissenters' Rights
Zions is incorporated under the laws of Utah. Utah law provides for
dissenters' rights in a variety of transactions including: (i) any plan of
merger to which a corporation is a party (other than mergers or consolidations
not requiring a shareholder vote); (ii) certain sales, leases, exchanges or
other dispositions of all or substantially all of the assets of a corporation;
and (iii) certain share exchanges. However, shareholders of a Utah business
corporation are not entitled to dissenters' rights in any of the transactions
mentioned above if their stock is either listed on a national securities
exchange or on the National Market System of NASDAQ or held of record by 2,000
or more shareholders. The aforementioned provisions do not apply if the
shareholder will receive for his shares anything except (a) shares of the
corporation surviving the consummation of the plan of merger or share exchange,
(b) shares of a corporation whose shares are listed on a national securities
exchange or the National Market System of NASDAQ or held of record by not less
than 2,000 holders, or (c) cash in lieu of fractional shares. Zions Common Stock
currently is listed for trading in the National Market System of NASDAQ and has
more than 2,000 shareholders of record.
Southern Arizona is incorporated under the laws of Arizona. Arizona
law provides that any shareholder of an Arizona corporation shall have the right
to dissent from any of the following corporate actions in which such shareholder
is entitled to vote: (1) consummation of a plan of merger to which the
corporation is a party if either (i) shareholder approval is required by Arizona
Revised Statutes ss. 10-1103 or the corporation's articles or (ii) the
corporation is a subsidiary that is merged with its parent under Arizona Revised
Statute ss.10-1104; (2) consummation of a sale or exchange of all, or
substantially all, of the property of the corporation not made in the usual and
regular course of business; (3) consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will be
acquired. In addition, Arizona Law provides shareholders with the right to
dissent from (1) any corporate action taken pursuant to a shareholder vote to
the extent the articles, the bylaws or resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares or (2) any amendment of the corporation's
articles that materially and adversely affects rights in respect of a dissenting
shareholder's shares because it (i) alters or abolishes a preferential right of
the shares, (ii) creates, alters or abolishes a right in respect of redemption,
(iii) alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities, (iv) excludes or limits the right of the
shares to vote on any matter or to accumulate votes other than a limitation by
dilution through issuance of shares or other securities with similar voting
rights or (v) 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 Arizona Revised Statutes ss.10-604.
Shareholders of an Arizona corporation are not entitled to dissent
from a plan of merger if the shares held by the shareholders are part of a class
or series of shares registered on a national securities exchange, were listed on
the national market system of NASDAQ or were held of record by at least 2,000
shareholders on the date fixed to determine the shareholders entitled to vote on
the proposed corporate action. Southern Arizona's common stock is held by fewer
than 2,000 holders of record and is not traded on a national securities exchange
or such national market system. As a result, shareholders of Southern Arizona
- 68 -
<PAGE>
will be entitled to exercise all applicable rights of dissenting shareholders
under Arizona law. See "Plan of Reorganization--Dissenters' Rights of Southern
Arizona Shareholders."
Preferred Stock
The articles of Zions authorize the corporation to issue shares of
preferred stock. Zions' articles authorize up to 3,000,000 shares of Zions
preferred stock.
The authorized shares of preferred stock are issuable in one or more
series on the terms set by the resolution or resolutions of the Board of
Directors of Zions providing for the issuance thereof. Each series of preferred
stock would have such dividend rate, which might or might not be cumulative,
such voting rights, which might be general or special, and such liquidation
preferences, redemption and sinking funds provisions, conversion rights or other
rights and preferences, if any, as the Board of Directors may determine. Except
for such rights as may be granted to the holders of any series of preferred
stock in the resolution establishing such series or as required by law, all of
the voting and other rights of the shareholders of Zions belong exclusively to
the holders of common stock.
Southern Arizona's articles of incorporation do not authorize the
issuance of preferred stock.
Dividend Rights
Utah law generally allows a corporation, subject to restrictions in
its certificate of incorporation, to declare and pay dividends in cash or
property, but only if the corporation is solvent and payment would not render
the corporation insolvent. Zions' articles place no further restrictions on
distributions. Thus, the holders of Zions Common Stock are entitled to dividends
when, as and if declared by their Board of Directors out of funds legally
available therefor. However, if Zions preferred stock is issued, the Board of
Directors of the corporation may grant preferential dividend rights to the
holders of such stock which would prohibit payment of dividends on the
corporation's common stock unless and until specified dividends on the preferred
stock had been paid.
Arizona law prohibits corporations from paying dividends when, after
giving the dividend effect, the corporation would not be able to pay its debts
as they become due in the usual course of business or the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights on dissolution of shareholders
whose preferential rights are superior to those receiving the distribution.
Southern Arizona's articles provide that the Board of Directors may, from time
to time, distribute dividends out of the capital surplus of Southern Arizona.
Liquidation Rights
Upon liquidation, dissolution or winding up of Zions, whether
voluntary or involuntary, the holders of Zions Common Stock are entitled to
share ratably in the assets of the corporation available for distribution after
all liabilities
- 69 -
<PAGE>
of the corporation have been satisfied. However, if preferred stock is issued by
Zions, the Board of Directors may grant preferential liquidation rights to the
holders of such stock which would entitle them to be paid out of the assets of
Zions available for distribution before any distribution is made to the holders
of Zions Common Stock.
The rights of the holders of Southern Arizona Common Stock in the
event of a liquidation are substantially similar to those applicable to Zions
shareholders. Under Arizona law, upon dissolution or liquidation by a court,
after all liabilities and obligations of the corporation have been satisfied,
any remaining assets or proceeds shall be distributed among its shareholders
according to their respective rights and interests.
Miscellaneous
There are no preemptive rights, sinking fund provisions, conversion
rights, or redemption provisions applicable to Zions Common Stock or Southern
Arizona Common Stock. Holders of fully paid shares of Zions Common Stock and
Southern Arizona Common Stock are not subject to any liability for further calls
or assessments.
LEGAL OPINIONS
Opinions with respect to certain legal matters in connection with the
Reorganization will be rendered by Metzger, Hollis, Gordon & Alprin, Washington,
D.C., as counsel for Zions, and by O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A., Phoenix, Arizona, as counsel for Southern Arizona.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995, incorporated by reference herein have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of such firm as experts in auditing and accounting.
The consolidated financial statements of Southern Arizona as of
December 31, 1995 and 1994, and for each of the years then ended, included
herein have been included herein in reliance upon the report of McGladrey &
Pullen LLP, independent certified public accountants, appearing elsewhere
herein, and upon their authority as experts in auditing and accounting.
The consolidated financial statements of Southern Arizona for the year
ended December 31, 1993, included herein have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein, and are
so included in reliance upon the report of such firm given upon their authority
as experts in auditing and accounting.
The opinion as to the fairness of the consideration paid pursuant to
the Plan of Reorganization to the shareholders of Southern Arizona from a
financial point of view which has been presented in Appendix C to this Proxy
Statement/Prospectus has been prepared by M One, Inc., Phoenix, Arizona, an
independent financial advisory and consulting firm.
- 70 -
<PAGE>
OTHER MATTERS
The management of Southern Arizona does not know of any other matters
intended to be presented for shareholder action at the Special Meeting. If any
other matter does properly come before the Special Meeting and is put to a
shareholder vote, the proxies solicited hereby will be voted in accordance with
the judgment of the proxyholders named thereon.
- 71 -
<PAGE>
SOUTHERN ARIZONA BANCORP, INC.
FINANCIAL REPORT
DECEMBER 31, 1995
F-1
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORTS F-3
FINANCIAL STATEMENTS
Consolidated balance sheets F-5
Consolidated statements of income F-6
Consolidated statements of stockholders' equity F-7
Consolidated statements of cash flows F-8
Notes to consolidated financial statements F-9
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Southern Arizona Bancorp, Inc.
and Subsidiary
Yuma, Arizona
We have audited the accompanying consolidated balance sheet of Southern Arizona
Bancorp, Inc. and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Bancorp's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The statements of income,
stockholders' equity and cash flows of Southern Arizona Bancorp, Inc. for the
year ended December 31, 1993 were audited by other auditors whose report, dated
January 21, 1994, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Southern Arizona Bancorp, Inc. and Subsidiary as of December 31, 1995 and 1994
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/McGladrey & Pullen LLP
Phoenix, Arizona
January 24, 1996
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Southern Arizona Bancorp, Inc.
Yuma, Arizona
We have audited the accompanying consolidated statement of income, stockholders'
equity and cash flows of Southern Arizona Bancorp, Inc. and subsidiary for the
year ended December 31, 1993. These financial statements are the responsibility
of the Bancorp's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting priciples used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Southern Arizona
Bancorp, Inc. and subsidiary for the year ended December 31, 1993 in conformity
with generally accepted accounting principles.
/s/Deloltte & Touche LLP
January 21, 1994
F-4
<PAGE>
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks (Note 2) $ 7,701,102 $ 6,459,750
Interest bearing deposits in financial institutions 594,000 297,000
Federal funds sold 25,194,000 1,536,000
Securities (Note 3)
Held to maturity (fair value 1995 $499,400; 1994 $250,850) 498,687 251,283
Available for sale securities 1,388,183 7,420,906
Loans, net of allowance for credit losses 1995 $2,466,513;
1994 $2,393,242 (Notes 4 and 10) 84,532,153 79,646,615
Loans held for sale (Note 4) 1,052,814 1,042,370
Bank premises and equipment, net (Notes 5 and 8) 4,129,523 2,398,755
Accrued interest receivable 537,524 557,000
Deferred income taxes (Note 7) 973,755 871,544
Other assets 816,152 773,198
-------------------------------
$ 127,417,893 $ 101,254,421
-------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing demand $ 34,453,718 $ 26,290,478
Interest bearing:
NOW accounts 24,362,291 21,412,280
Savings 8,158,478 7,666,686
Time certificates $100,000 and over (Note 6) 13,140,246 8,501,417
Time certificates under $100,000 34,647,097 27,334,523
-------------------------------
114,761,830 91,205,384
Accrued interest payable and other liabilities 817,687 265,338
Senior notes payable (Note 8) 2,500,000 2,500,000
Other note payable (Note 8) 480,000 -
-------------------------------
118,559,517 93,970,722
-------------------------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Notes 9 and 12)
Common stock, no par value, authorized 2,000,000 shares;
issued and outstanding, 1,266,362 shares 2,483,013 2,483,013
Retained earnings 6,336,125 4,793,010
Unrealized gain on securities available for sale, net 39,238 7,676
-------------------------------
8,858,376 7,283,699
-------------------------------
$ 127,417,893 $ 101,254,421
-------------------------------
</TABLE>
See Accompanying Notes to Consolidated Statements
F-5
<PAGE>
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994, and 1993
- ----------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans $ 9,045,120 $ 7,344,146 $ 6,165,863
Securities:
U.S. Government agencies 447,475 368,123 375,069
Other investments 207,524 215,795 333,811
Federal funds sold 492,948 188,978 132,770
-----------------------------------------------
10,193,067 8,117,042 7,007,513
Interest expense (Note 11) 3,151,424 2,067,786 1,845,403
-----------------------------------------------
Net interest income 7,041,643 6,049,256 5,162,110
Provision for loan losses (Note 4) 401,000 429,000 755,500
-----------------------------------------------
Net interest income after provision for loan losses 6,640,643 5,620,256 4,406,610
-----------------------------------------------
Other income:
Customer service fees 728,028 591,464 487,990
Gain on sale of loans and investments 446,715 513,741 882,406
Other income 105,841 115,536 23,135
-----------------------------------------------
1,280,584 1,220,741 1,393,531
-----------------------------------------------
Other expenses:
Salaries and employee benefits 2,453,244 2,203,215 1,859,691
Occupancy (Note 9) 294,023 271,317 216,013
Equipment expenses 361,207 308,707 228,098
Supplies and services 773,413 723,570 653,548
Other 817,763 781,810 870,461
-----------------------------------------------
4,699,650 4,288,619 3,827,811
-----------------------------------------------
Income before income taxes 3,221,577 2,552,378 1,972,330
Income taxes (Note 7) 1,222,570 920,164 681,179
-----------------------------------------------
Net income $ 1,999,007 $ 1,632,214 $ 1,291,151
-----------------------------------------------
Net earnings per share $ 1.58 $ 1.29 $ 1.02
-----------------------------------------------
Common shares outstanding 1,266,362 1,266,362 1,266,362
-----------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Statements
F-6
<PAGE>
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, and 1993
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain on
Retained securities available
Common stock earnings for sale, net Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 $ 2,483,013 $ 2,553,477 $ - $ 5,036,490
Cash dividend - (303,927) - (303,927)
Net income - 1,291,151 - 1,291,151
--------------------------------------------------------------------------
Balance, December 31, 1993 2,483,013 3,540,701 - 6,023,714
Cash dividend - (379,905) - (379,905)
Net income - 1,632,214 - 1,632,214
Net change in unrealized gain on
securities available for sale - - 7,676 7,676
--------------------------------------------------------------------------
Balance, December 31, 1994 2,483,013 4,793,010 7,676 7,283,699
Cash dividend - (455,892) - (455,892)
Net income - 1,999,007 - 1,999,007
Net change in unrealized gain on
securities available for sale - - 31,562 31,562
--------------------------------------------------------------------------
Balance, December 31, 1995 $ 2,483,013 $ 6,336,125 $ 39,238 $ 8,858,376
--------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Statements
F-7
<PAGE>
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,999,007 $ 1,632,214 $ 1,291,151
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 344,893 295,399 207,372
Provision for loan losses 401,000 429,000 755,500
Amortization of premium (259,859) (59,937) (174,007)
Origination of loans available for sale (21,786,419) (19,737,152) (27,089,894)
Proceeds from sale of loans available for sale 21,775,975 20,208,926 27,305,470
Deferred income tax benefit (102,211) (155,030) (286,167)
Gain on sale of securities available for sale (90,014) (156,474) (387,612)
Change in assets and liabilities:
Accrued income receivable and other assets (23,478) 14,789 66,318
Accrued interest payable and other liabilities 552,349 (120,147) (126,693)
-----------------------------------------------
Net cash provided by operating activities 2,811,243 2,351,588 1,561,438
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities held to maturity 250,000 - -
Purchase of securities held to maturity (489,639) (260,938) -
Purchase of interest bearing deposit in financial institutions (1,980,000) (2,082,000) -
Maturities of interest bearing deposit in financial institutions 1,683,000 2,869,000 -
Purchase of securities available for sale (11,341,297) (14,351,783) (21,312,774)
Proceeds from maturities of securities available for sale 15,500,000 19,250,000 14,000,000
Proceeds from sale of securities available for sale 2,247,690 1,466,338 8,085,700
(Increase) decrease in federal funds sold (23,658,000) 886,000 896,000
Loans made to customers, net (5,286,538) (16,442,363) (11,730,805)
Purchase of bank premises and equipment (2,075,661) (705,645) (402,492)
-----------------------------------------------
Net cash used in investing activities (25,150,445) (9,371,391) (10,464,371)
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 23,556,446 8,889,090 5,880,880
Dividends paid (455,892) (379,905) (303,927)
Proceeds from issuance of other notes payable 480,000 - 2,500,000
Cost of issuing senior notes payable - - (153,515)
-----------------------------------------------
Net cash provided by financing activities 23,580,554 8,509,185 7,923,438
-----------------------------------------------
Increase (decrease) in cash and due from banks 1,241,352 1,489,382 (979,495)
Cash and due from banks:
Beginning 6,459,750 4,970,368 5,949,863
-----------------------------------------------
Ending $ 7,701,102 $ 6,459,750 $ 4,970,368
-----------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Statements
F-8
<PAGE>
SOUTHERN ARIZONA BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Interest paid to depositors $ 2,756,010 $ 1,789,401 $ 1,758,500
-----------------------------------------------
Interest paid on senior notes payable $ 218,750 $ 210,243 $ -
-----------------------------------------------
Income taxes paid $ 1,337,145 $ 1,198,800 $ 1,234,500
-----------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Unrealized gain on securities available for sale, net $ 31,562 $ 7,676 $ -
-----------------------------------------------
Land acquired in exchange for other note payable $ 480,000 $ - $ -
-----------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Statements
F-9
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
Nature of banking activities:
Southern Arizona Bancorp, Inc. (the Bancorp) is a holding company which owns
100% of the stock of Southern Arizona Bank (the Bank). The Bank provides a full
range of banking service to its commercial, SBA, residential, agricultural and
consumer customers through its facilities located in Yuma, Arizona.
The Bank grants commercial, residential and consumer loans to customers located
primarily in southern Arizona. The loan portfolio includes a significant credit
exposure to the real estate industry of this area. As of December 31, 1995,
loans with real estate as collateral accounted for approximately 54.9% of total
loans. Substantially all of these loans are secured by first liens with an
initial loan to value ratio of generally not more than 60%.
The loans are expected to be repaid from cash flows or proceeds from the sale of
selected assets of the borrowers. The Bank's policy requires that collateral be
obtained on substantially all loans. Such collateral is primarily first trust
deeds on property.
Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent asset and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Basis of consolidation:
The consolidated financial statements include all the accounts of the Bancorp
and the Bank. All material intercompany accounts and transactions have been
eliminated.
Earnings per share:
Earnings per share are computed using the weighted average method. The effect of
stock options on earnings per share was not material.
Cash and cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents includes cash on
hand, amounts due from banks (including cash items in process of clearing). Cash
flows from loans originated by the Bank, deposits, and federal funds purchased
are reported net.
The Bank maintains amounts due from banks which, at times, may exceed federally
insured limits. The bank has not experienced any losses in such accounts.
F-10
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
(Continued)
Held to maturity securities:
Securities classified as held to maturity are those debt securities the Bank has
both the intent and ability to hold to maturity regardless of changes in market
conditions, liquidity needs or changes in general economic conditions. These
securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
The sale of a security within three months of maturity date or after at least 85
percent of the principal outstanding has been collected is considered a maturity
for purposes of classification and disclosure.
Available for sale securities:
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available for sale would
be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar factors. Securities
available for sale are carried at fair value. Unrealized gains or losses are
reported as increases or decreases in stockholders' equity, net of the related
deferred tax effect. Realized gains or losses, determined on the basis of the
cost of specific securities sold, are included in earnings.
Transfers:
Transfers of debt securities into the held-to-maturity classification from the
available-for-sale classification are made at fair value on the date of
transfer. The unrealized holding gains or losses on the date of transfer are
retained as a separate component of stockholders' equity and in the carrying
value of the held-to-maturity securities. Such amounts are amortized over the
remaining contractual lives of the securities by the interest method.
Loans:
Loans are stated at the amount of unpaid principal, reduced by net deferred loan
costs and an allowance for possible loan losses.
The allowance for credit losses is established through a provision for credit
losses charged to expense. Loans are charged against the allowance for credit
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans that may become uncollectible,
based on evaluation of the collectibility of loans and prior loan loss
experience. This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. While management uses the best
information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic or other
conditions. In addition, the Federal Deposit Insurance Corporation (FDIC), as an
integral part of their examination process, periodically reviews the Bank's
allowance for credit losses, and may require the Bank to make additions to the
allowance based on their judgment about information available for them at the
time of their examinations.
F-11
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
(Continued)
Impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
Interest and fees on loans:
Interest on loans is recognized over the terms of the loans and is calculated on
principal amounts outstanding. The accrual of interest on impaired loans is
discontinued when, in management's opinion, the borrower may be unable to meet
payments as they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
Loan origination and commitment fees and certain direct loan origination costs
are deferred and the net amount amortized as an adjustment of the related loan's
yield. The Bank is generally amortizing these amounts over the contractual life.
Sales of loans:
The Bank sells loans to provide funds for additional lending and to generate
servicing income. Under such agreement, the Bank may continue to service the
loans with the buyer receiving the principal collected together with interest.
Loans held for sale are valued at the lower of cost or market value.
Gains and losses on sales are recognized at the time of sale are calculated
based on the difference between the selling price and the book value of loans
sold. Any inherent risk of loss on loans sold is transferred to the buyer at the
date of sale.
Other real estate owned:
Other real estate (OREO) represents properties acquired through foreclosure or
other proceedings. OREO is held for sale and is recorded at the lower of the
recorded amount of the loan or fair value of the properties less estimated costs
of disposal. Any write-down to fair value at the time of transfer to OREO is
charged to the allowance for loan losses. Property is evaluated regularly to
ensure the recorded amount is supported by its current fair value and valuation
allowances to reduce the carrying amounts to fair value less estimated costs to
dispose. Depreciation is recorded based on the recorded amount of depreciable
assets after they have been owned for one year. Depreciation and additions to or
reductions from valuation allowances are recorded in income.
F-12
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
(Continued)
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
following estimated useful lives:
Years
-----
Furniture, fixtures, and equipment 3 - 25
Building and improvements 30
Income taxes:
The Bank files its income tax return on a consolidated basis. Deferred taxes are
provided on a liability method whereby deferred tax assets are recognized for
deductible temporary differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
Fair value of financial instruments:
Effective January 1, 1995, the Bank adopted FASB Statement No. 107, Disclosures
About Fair Value of Financial Instruments, which requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
Management uses its best judgment in estimating the fair value of the Bank's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates presented herein are not necessarily indicative of the amounts
the Bank could have realized in a sales transaction at December 31, 1995. The
estimated fair value amounts for 1995 have been measured as of year end, and
have not been reevaluated or updated for purposes of these financial statements
subsequent to that date. As such, the estimated fair values of these financial
instruments subsequent to the reporting date may be different than the amounts
reported at each year end.
This disclosure of fair value amounts does not include the fair values of any
intangibles, including core deposit intangibles.
Due to the wide range of valuation techniques and the degree of subjectivity
used in making the estimate, comparisons between the Bank's disclosures and
those of the banks may not be meaningful.
F-13
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
(Continued)
The following methods and assumptions were used by the Bank in estimating the
fair value of its financial instruments:
Cash and short-term instruments: The carrying amounts reported in the balance
sheet for cash and due from banks, interest bearing deposits and federal
funds sold approximate their fair values.
Securities: Carrying amounts approximate fair values for securities available
for sale. Fair values for securities held to maturity are based on quoted
market prices.
Loans: For variable-rate loans that reprice frequently and that have
experienced no significant change in credit risk, fair values are based on
carrying values. At December 31, 1995, variable rate loans comprised
approximately 71% of the loan portfolio. Fair values for all other loans are
estimated based on discounted cash flows, using interest rates currently
being offered for loans with similar terms to borrowers with similar credit
quality. Prepayments prior to the repricing date are not expected to be
significant. Loans are expected to be held to maturity and any unrealized
gains or losses are not expected to be realized.
Loans held for sale: Fair value of loans held for sale are estimated based
upon the subsequent selling price.
Off-balance sheet instruments: Fair values of off-balance sheet instruments
are not considered material.
Deposit liabilities: Fair values disclosed for demand deposits equal their
carrying amounts, which represent the amount payable on demand. The carrying
amounts for variable-rate money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregate expected monthly maturities on time
deposits. Early withdrawals of fixed-rate certificates of deposit are not
expected to be significant.
Accrued interest receivable and payable: The fair values of both accrued
interest receivable and payable approximate their carrying amounts.
Accounting by creditors for impairment of a loan:
On January 1, 1995, the Bank adopted Financial Accounting Standards Board (FASB)
Statement No. 114, Accounting by Creditors for Impairment of a Loan, as amended
by FASB Statement No. 118, Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures. There was no effect on the Bank's financial
statements for this change, which generally requires impaired loans to be
measured on the present value of expected future cash flows discounted at the
loan's effective interest rate, or as an expedient at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will be unable to
collect all contractual principal and interest payments due in accordance with
the terms of the loan agreement. At January 1, 1995, the Bank has classified
$1,313,529 of its loans as impaired with a specific loss reserve of $387,000.
F-14
<PAGE>
Note 1. Nature of Banking Activities and Significant Accounting Policies
(Continued)
Accounting for the impairment of long-lived assets and long-lived assets to be
disposed of:
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. Statement No.
121 establishes accounting standard for the impairment of long- lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long- lived assets and certain identifiable intangibles to
be disposed of. Statement No. 121 will first be required for the Bank's year
ending December 31, 1996. Based on its preliminary analysis, the Bank does not
anticipate that the adoption of Statement No. 121 will have a material impact on
the financial statements as of the date of adoption.
Accounting for mortgage servicing rights:
In May 1995, the FASB issued Statement No. 122, Accounting for Mortgage
Servicing Rights an Amendment of Financial Accounting Standards Board Statement
No. 65. Statement No. 122 requires a mortgage banking enterprise to recognize as
separate assets, rights to service mortgage loans for others, whenever those
servicing rights are acquired. Statement No. 122 will first be required for the
Bank's year ending December 31, 1996. The Bank has not addressed the potential
future impact of the application of this Statement.
Accounting for stock-based compensation:
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-Based
Compensation. Statement No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans such as a stock purchase
plan. The statement generally suggests, but does not require, stock-based
compensation transactions be accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. An enterprise may continue to follow the
requirements of Accounting Principles Board (APB) Opinion No. 25, which does not
require compensation to be reported if the consideration to be received is at
least equal to its fair value at the measurement date. If an enterprise elects
to follow APB Opinion No. 25, it must disclose the proforma effects on net
income as if the compensation were measured in accordance with the guidelines of
Statement No. 123. The Bank has not determined if it will continue to follow APB
Opinion No. 25 or follow the guidance of Statement No. 123. However, if adopted
in 1996, this pronouncement is not expected to have a material impact on the
financial statements.
Note 2. Restrictions on Cash and Due From Banks
The Bank is required to maintain reserve balances with Federal Reserve Banks.
The total of those reserve balances were approximately $51,000 and $63,000 at
December 31, 1995 and 1994, respectively.
F-15
<PAGE>
Note 3. Securities
Carrying amounts and approximate fair values of securities held to maturity as
of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Security $ 498,687 $ 713 $ - $ 499,400
------------------------------------------------------------------
1994
-----------------------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
------------------------------------------------------------------
United States Treasury Security $ 251,283 $ - $ 433 $ 250,850
------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of securities being held to maturity as of
December 31, 1995 by contractual maturity are shown below.
Approximate
Amortized fair
cost value
-------------------------------
Due in one year or less $ 498,687 $ 499,400
-------------------------------
Carrying amounts and approximate fair values of investment securities available
for sale as of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $ 798,204 $ 17,166 $ - $ 815,370
Obligations of states and political
subdivisions 524,583 48,230 - 572,813
------------------------------------------------------------------
$ 1,322,787 $ 65,396 $ - $ 1,388,183
------------------------------------------------------------------
</TABLE>
F-16
<PAGE>
Note 3. Securities (Continued)
<TABLE>
<CAPTION>
1994
-----------------------------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $ 4,723,062 $ 7,886 $ (22,818) $ 4,708,130
Obligations of states and political
subdivisions 2,685,050 66,091 (38,365) 2,712,776
------------------------------------------------------------------
$ 7,408,112 $ 73,977 $ (61,183) $ 7,420,906
------------------------------------------------------------------
</TABLE>
The amortized cost and approximate fair value of investment securities available
for sale as of December 31, 1995 by contractual maturity are shown below.
Amortized Approximate fair
cost value
-------------------------------
Due in one year or less $ 300,110 $ 301,770
Due after one year through 5 years 498,094 513,600
Due after 5 years through ten years 524,583 572,813
-------------------------------
$ 1,322,787 $ 1,388,183
-------------------------------
Realized gains on the sale of investment securities available for sale amounted
to $90,014, $156,474, and $387,612 for the years ended December 31, 1995, 1994,
and 1993, respectively.
Securities available for sale with an amortized cost of $1,821,484 and $733,980
as of December 31, 1995 and 1994, respectively, were pledged as collateral in
public deposits and for other purposes as required or permitted by law.
F-17
<PAGE>
Note 4. Loans
Loans consist of the following at December 31:
1995 1994
-------------------------------
Commercial $ 63,062,496 $ 62,336,364
Real estate - mortgage 9,503,874 7,273,963
Real estate - construction 435,006 939,898
Installment - mobile home 5,604,752 4,757,365
Installment - other 9,466,726 7,894,146
Personal credit line 338,779 362,196
Other 164,498 38,497
-------------------------------
88,576,131 83,602,429
Deduct:
Unearned net loan fees and costs (524,651) (520,202)
Allowance for loan losses (2,466,513) (2,393,242)
-------------------------------
$ 85,584,967 $ 80,688,985
-------------------------------
Classified as:
Loans, net $ 84,532,153 $ 79,646,615
Loans held for sale 1,052,814 1,042,370
At December 31, 1995 and 1994, the total of Small Business Administration (SBA)
loans serviced for others amounted to approximately $793,000 and $17,500,
respectively. Loans totaling approximately $850,000 and $862,000 were secured by
Bank time certificates of deposit at December 31, 1995 and 1994.
Changes in the allowance for loan losses are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
Balance, beginning $ 2,393,242 $ 1,990,428 $ 1,332,068
Provision charged to operating expense 401,000 429,000 755,500
Recoveries of amounts charged off 21,485 19,108 12,315
-------------------------------------------------
2,815,727 2,438,536 2,099,833
Amounts charged off (349,214) (45,294) (109,455)
-------------------------------------------------
Balance, ending $ 2,466,513 $ 2,393,242 $ 1,990,428
-------------------------------------------------
</TABLE>
F-18
<PAGE>
Note 4. Loans (Continued)
Impaired loans: Impairment of loans, having recorded investments of $4,466,859
at December 31, 1995, has been recognized in conformity with FASB Statement No.
114 as amended by FASB Statement No. 118. The total allowance for credit losses
related to these loans was $1,066,483 on December 31, 1995 and are fully or
partially allowed for.
Management believes commercial real estate loans have a greater risk of
uncollectibility because repayment depends on income production from the
property or future development of the real estate. Commercial loans summarized
by type of collateral are as follows at December 31, 1995: real estate
non-residential, $36,408,913; multi-family residential, $2,265,642; accounts
receivable, inventory and contract rights, $9,170,308; agriculture, $8,142,940;
unsecured, $4,141,161; and other, $2,933,532.
During the years ended December 31, 1995, 1994, and 1993, residential mortgage
loans totaling $21,775,975, $20,208,296, and $27,305,470, respectively, were
sold. Total income from such loan sales was $558,577, $357,267, and $494,794 for
the years ended December 31, 1995, 1994, and 1993, respectively.
Note 5. Bank Premises and Equipment
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows at December 31:
1995 1994
-------------------------------
Land $ 1,067,453 $ 477,000
Building improvements 2,652,944 1,701,815
Furniture and equipment 2,313,943 1,779,864
-------------------------------
6,034,340 3,958,679
Less accumulated depreciation (1,904,817) (1,559,924)
-------------------------------
$ 4,129,523 $ 2,398,755
-------------------------------
F-19
<PAGE>
Note 6. Time Certificates of Deposit
Aggregate maturities of time certificates $100,000 and over are as follows at
December 31:
1995 1994
-------------------------------
Three months or less $ 4,168,319 $ 4,258,472
Three through six months 6,123,001 1,000,000
Six through twelve months 1,116,361 1,526,000
Over twelve months 1,732,565 1,716,945
-------------------------------
$ 13,140,246 $ 8,501,417
-------------------------------
Note 7. Income Tax Matters
The following table shows the cumulative tax effects of the primary temporary
differences as of December 31:
<TABLE>
<CAPTION>
1995 1994
-------------------------------
<S> <C> <C>
Deferred tax assets:
Loan loss allowances $ 834,755 $ 731,544
Deferred loan fees 226,000 224,000
-------------------------------
Total deferred tax assets 1,060,755 955,544
-------------------------------
Deferred tax liabilities:
Property and equipment (70,000) (81,000)
Unrealized gain on available-for-sale securities (17,000) (3,000)
-------------------------------
Total deferred tax liabilities (87,000) (84,000)
-------------------------------
Net deferred tax asset $ 973,755 $ 871,544
-------------------------------
F-20
<PAGE>
Note 7. Income Tax Matters (Continued)
The provision for income taxes charged to operations consists of the following
for the years ended December 31:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Current tax expense $ 1,324,781 $ 1,075,194 $ 967,346
Deferred tax expense (benefit) (102,211) (155,030) (286,167)
-----------------------------------------------
$ 1,222,570 $ 920,164 $ 681,179
-----------------------------------------------
</TABLE>
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income for the years ended
December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 1,127,000 $ 893,000 $ 690,000
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit 258,000 204,000 158,000
Tax-exempt interest income (net of disallowed expenses) (59,000) (64,000) -
Other (103,430) (112,836) (166,821)
-----------------------------------------------
$ 1,222,570 $ 920,164 $ 681,179
-----------------------------------------------
</TABLE>
Note 8. Notes Payable
Senior notes payable:
Bancorp has issued $2,500,000 of 8.75% Senior Notes payable which require that
interest be paid semi-annually. These notes are due July 1, 2000. The net
proceeds from the issuance were contributed to be capital of the Bank. The terms
of the Senior Notes include certain restrictions on the issuance of additional
debt and payment of dividends. The costs, totaling approximately $154,000, of
issuing the Senior Notes have been deferred and are being amortized over the
contract terms of such notes.
Other notes payable:
Other notes payable consists of a 8.5% note payable to a director arising from
the purchase of the land for the Bank's San Luis branch. Principal in the amount
of $120,000 per year, plus interest, is due commencing January 1996.
Final payment is due January 1999. The note is secured by real estate.
F-21
<PAGE>
Note 9. Commitments and Contingencies
Financial instruments with off-balance-sheet risk:
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments consist of commitments to extend credit. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies in making conditional obligations as they do for
on-balance-sheet instruments. A summary of the Bank's commitments at December
31, 1995 and 1994 are as follows:
1995 1994
-------------------------------
Commitments to extend credit $ 16,384,611 $ 12,604,126
-------------------------------
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the party. Collateral held
varies, but may include accounts receivable, inventory, property and equipment,
residential real estate and income-producing commercial properties.
Concentrations of credit risk:
All of the Bank's loans and commitments to extend credit have been granted to
customers in the Bank's market area. The concentrations of credit by type of
loan are set forth in Note 4. The distribution of commitments to extend credit
approximates the distribution of commercial and real estate loans outstanding.
The Bank, as a matter of policy, does not extend credit to any single borrower
or group of related borrowers in excess of the Bank's legal lending limit.
F-22
<PAGE>
Note 9. Commitments and Contingencies (Continued)
Lease commitments:
The Bank leases two of its branches under terms of noncancellable operating
leases.
At December 31, 1995, approximate future minimum lease payments under this
agreement is as follows:
Year
1996 $ 43,624
1997 38,850
1998 38,850
1999 38,850
2000 22,663
-----------
$ 182,837
-----------
Rent expense totaled approximately $52,063, $33,768, and $32,436 for the years
ended December 31, 1995, 1994, and 1993, respectively, and is included in
occupancy expense.
Contingencies:
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Bank's financial
statements.
Stock options:
At December 31, 1995 and 1994, there were 57,000 shares of stock available for
grant under a company stock option plan. No options were outstanding. The option
price of the shares may not be less than the fair market value of common shares
as of the date of grant.
Sales of loans:
The Bank has issued various representations and warranties associated with the
sale of loans. These representations and warranties may require the Bank to
repurchase loans with underwriting deficiencies as defined per the applicable
sales agreements. The Bank experienced no losses during the years ended December
31, 1995 and 1994, regarding these representations and warranties.
F-23
<PAGE>
Note 10. Transactions with Related Parties
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), all of which
have been, in the opinion of management, on the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others.
Aggregate loan transactions with related parties were as follows for the years
ended December 31:
1995 1994
-------------------------------
Balance, beginning $ 2,351,175 $ 1,735,788
New loans 64,350 944,647
Repayments (1,008,468) (329,260)
-------------------------------
Balance, ending $ 1,407,057 $ 2,351,175
-------------------------------
Note 11. Interest Expense
The components of interest are as follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
NOW accounts $ 486,186 $ 559,383 $ 495,015
Savings accounts 147,428 151,504 141,982
Time certificates of deposit $100,000 and over 502,455 292,005 258,002
Certificates under $100,000 1,755,415 842,341 848,932
Senior notes payable 218,750 218,750 100,128
Other 41,190 3,803 1,344
--------------------------------------------
$ 3,151,424 $ 2,067,786 $ 1,845,403
---------------------------------------------
</TABLE>
F-24
<PAGE>
Note 12. Employee Benefit Plan
The Bank has adopted a 401(k) plan (the Plan) and sponsored an employee stock
ownership plan (ESOP) to which the Bank makes contributions. All full-time and
part-time employees of the Bank who have completed 1,000 hours per year and have
reached 21 years of age are eligible to participate.
Under the 401(k) plan, the Bank matches 100% of employee contributions.
Contributions to the Plan totalled approximately $89,000, $83,000, and $71,000
for the years ended December 31, 1995, 1994, and 1993, respectively.
The Bank makes voluntary contributions to the ESOP each year. Participants vest
in the contributions over a five year period. Common stock of the Bancorp held
by the ESOP is voted by the ESOP's administrative committee, consisting of three
members of the Board of Directors. For the years ended December 31, 1995, 1994,
and 1993, contributions were approximately $54,000, $123,000, and $128,000,
respectively.
In the event a terminated ESOP participant desires to sell his or her shares of
the Company's stock, the Company may be required to purchase the shares from the
participant. At December 31, 1995, the ESOP held 66,851 shares of Bancorp stock.
Note 13. Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve qualitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1995, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1995, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that management
believes have changed the institution's category.
F-25
<PAGE>
Note 13. Regulatory Capital Requirements (Continued)
The Bank's actual capital amounts and ratios are presented in the following
table:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
----------------------------------------------------------
As of December 31, 1995:
<S> <C> <C> <C>
Total Capital (to Risk Weighted Assets) 12.8% 8% 10%
Tier I Capital (to Risk Weighted Assets) 11.7% 4% 6%
Tier I Capital (to Average Assets) 8.4% 4% 5%
As of December 31, 1994:
Total Capital (to Risk Weighted Assets) 9.9% 8% 10%
Tier I Capital (to Risk Weighted Assets) 8.7% 4% 6%
Tier I Capital (to Average Assets) 9.4% 4% 5%
</TABLE>
Note 14. Merger
During January, 1996 Southern Arizona Bancorp, Inc. entered into an Agreement
and Plan of Reorganization with Zions Bancorporation. Under the terms of this
agreement, the stockholders of the Bancorp will exchange their shares for shares
of Zions Bancorporation. The exchange rate will be set at the time of closing so
that the Bancorp shareholders collectively receive Zions Bancorporation stock
valued at $25,330,000, plus earnings of the Bancorp for the period October 1,
1995 through the closing date. This merger is contingent upon and awaiting
governmental regulatory approval.
Note 15. Fair Values of Financial Instruments
The fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
Carrying Fair
-------------------------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 7,701,102 $ 7,701,102
Interest bearing deposits in financial institutions 594,000 594,000
Federal funds sold 25,194,000 25,194,000
Securities 1,886,870 1,888,000
Loans, net 84,532,153 84,815,000
Loans available for sale 1,052,814 1,053,000
Accrued interest receivable 537,524 537,000
Financial liabilities:
Deposits 114,761,830 113,787,000
Senior notes payable 2,500,000 2,500,000
Other note payable 480,000 480,000
</TABLE>
Fair value of commitments: The estimated fair value of off-balance-sheet loan
commitments are not considered to be significant.
F-26
<PAGE>
Note 16. Parent Only Financial Information
<TABLE>
<CAPTION>
BALANCE SHEETS
1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 115,322 $ 118,838
Investment in Southern Arizona Bank 11,004,815 9,506,650
Prepaid senior note costs and other assets 104,758 126,941
Deferred taxes 250,049 147,838
-------------------------------
$ 11,474,944 $ 9,900,267
-------------------------------
Liabilities and Stockholders' Equity
Interest payable and other accrued liabilities $ 116,568 $ 116,568
Note payable 2,500,000 2,500,000
-------------------------------
2,616,568 2,616,568
-------------------------------
Stockholders' Equity
Common Stock 2,483,013 2,483,013
Retained earnings 6,336,125 4,793,010
Net unrealized gain 39,238 7,676
-------------------------------
8,858,376 7,283,699
-------------------------------
$ 11,474,944 $ 9,900,267
-------------------------------
</TABLE>
F-27
<PAGE>
Note 16. Parent Only Financial Information (Continued)
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Revenues
Equity in earnings of Southern Arizona Bank $ 2,151,244 $ 1,784,665 $ 1,360,461
Other income 1,475 2,500 5,912
-----------------------------------------------
2,152,719 1,787,165 1,366,373
-----------------------------------------------
Expenses
Interest expense on senior notes $ 218,750 $ 218,750 $ 110,080
Amortization of senior note cost 22,183 22,183 -
Other expense 14,990 15,649 11,348
-----------------------------------------------
255,923 256,582 121,428
-----------------------------------------------
Income tax benefit 102,211 101,631 46,206
-----------------------------------------------
Net income $ 1,999,007 $ 1,632,214 $ 1,291,151
-----------------------------------------------
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income 1,999,007 1,632,214 1,291,151
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Undistributed equity in income of subsidiary (1,466,603) (1,186,004) (884,666)
Amortization expense 22,183 22,183 8,402
Deferred taxes (102,211) (101,632) (46,206)
Changes in assets and liabilities:
Accrued interest payable and other liabilities - 6,955 102,418
-----------------------------------------------
Net cash provided by operating activities 452,376 373,716 471,099
-----------------------------------------------
Cash flows used in investing activities,
capital contribution to Southern Arizona Bank - - (2,390,000)
-----------------------------------------------
</TABLE>
F-28
<PAGE>
Note 16. Parent Only Financial Information (Continued)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Cash flows used in financing activities:
Payment of dividends $ (455,892) $ (379,905) $ (303,927)
Proceeds from issuance of senior notes payable - - 2,500,000
Cost of issuing senior notes payable - - (153,515)
-----------------------------------------------
Net cash (used in) provided by financing activities (455,892) (379,905) 2,042,558
-----------------------------------------------
Net (decrease) increase in cash (3,516) (6,189) 123,657
Cash and due from banks
Beginning of year 118,838 125,027 1,370
-----------------------------------------------
End of year $ 115,322 $ 118,838 $ 125,027
-----------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash payments for interest $ 218,750 $ 210,243 $ 9,212
-----------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Unrealized gain on available for sale securities $ 31,562 $ 7,676 $ -
-----------------------------------------------
</TABLE>
F-29
<PAGE>
STATISTICAL INFORMATION AND ANALYSIS
The following tables present certain statistical information regarding
Southern Arizona and should be read in connection with Southern Arizona
Consolidated Financial Statements and Notes set forth elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SOUTHERN ARIZONA BANCORP, INC.
Allocation of the Allowance for Loan Losses
As of December 31, 1995
1995 1994 1993 1992 1991
---------------------- ------------------- -------------------- -------------------- ---------------------
% of Loans % of Loans % of Loans % of Loans % of Loans
Per Catagory Per Catagory Per Catagory Per Catagory Per Catagory
(000's) Amount To Total Lns Amount To Total Lns Amount To Total Lns Amount To Total Lns Amount To Total Lns
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 2,237 71.20 2,083 74.56 1,772 74.20 1,077 71.03 758 71.34
Real Estate 36 11.22 49 9.83 38 11.06 61 11.16 22 12.85
Consumer Loans 194 17.58 261 15.61 180 14.74 194 17.81 93 15.81
---------------------- ---------------------- --------------------- ------------------------- --------------------
Total 2,467 100% 2,393 100% 1,990 100% 1,332 100% 873 100%
====================== ====================== ===================== ========================= ====================
</TABLE>
ST-1
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN ARIZONA BANCORP, INC.
Analysis of the Allowance for Loan Losses
Years Ended December 31, 1991 - 1995
--------------------------------------------------------------------------------------
(000's) 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period 2,393 1,990 1,332 873 679
Charge-offs:
Commercial 291 37 65 143 131
Real Estate 48 0 3 149 74
Installment 10 8 41 23 97
--------------------------------------------------------------------------------------
Total 349 45 109 315 302
Recoveries:
Commercial 14 14 7 18 35
Real Estate 6 0 0 0 0
Installment 2 5 4 3 39
--------------------------------------------------------------------------------------
Total 22 19 11 21 74
Net (charge-offs) / recoveries (327) (26) (98) (294) (228)
Additions charged to operations 401 429 756 753 422
--------------------------------------------------------------------------------------
Balance at end of period 2,467 2,393 1,990 1,332 873
--------------------------------------------------------------------------------------
Ratio of net charge-offs during
the period to average loans
outstanding during the period 0.40 0.04 0.16 0.60 0.55
--------------------------------------------------------------------------------------
</TABLE>
ST-2
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN ARIZONA BANCORP, INC.
Deposit Analysis
Based on Averages
Years Ended December 31, 1993 - 1995
1995 1994 1993
-------------------------- --------------------------- --------------------------
Average Average Average Average Average Average
(000's) Amount Rate Paid Amount Rate Paid Amount Rate Paid
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand deposits 27,556 0 24,068 0 20,206 0
Interest bearing demand deposits 22,819 2.13 27,045 2.07 22,523 2.20
Savings deposits 9,632 1.53 8,538 1.78 7,704 1.84
Certificates of deposit 40,612 5.56 27,881 4.07 27,163 4.08
------------------------- --------------------------- ----------------------------
Total 100,619 87,532 77,596
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Time Deposit Maturity Schedule
$100,000 and over
As of December 31, 1995
-----------------------------------------------------------------------------------
3 Months 3 - 6 6 -12 Over
or Less Months Months One Year
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 and over 4,168 6,123 1,116 1,733
================ ================ ================ ================
</TABLE>
ST-3
<PAGE>
SOUTHERN ARIZONA BANCORP, INC.
Return on Equity and Assets
Years Ended December 31, 1993 - 1995
1995 1994 1993
---- ---- ----
Return on average assets 1.78 1.68 1.52
Return on average equity 24.77 24.53 23.35
Dividend payout ratio 22.78 23.26 23.53
Average equity to average assets 7.19 6.84 6.53
ST-4
<PAGE>
<TABLE>
<CAPTION>
Southern Arizona Bancorp, Inc.
Balance Sheets
Based on Average Balances
Years Ended December 31
(000) 1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks 5,673 4,913 4,509
Federal funds sold 8,757 4,878 4,766
US Treasury obligations 7,202 8,769 9,180
Municipal obligations 2,302 2,485 3,742
Other investments 1,133 1,396 2,068
Loans
Commercial loans 54,465 49,275 38,751
Agriculture loans 6,926 5,599 4,509
Real estate loans 9,605 7,410 6,401
Installment loans 14,628 11,763 10,025
Less - Deferred loan fees (571) (509) (422)
Allowance for loan losses (2,438) (2,173) (1,711)
-----------------------------------------------
Total loans 82,615 71,365 57,553
Fixed and other assets 4,558 3,517 2,924
-----------------------------------------------
Total Assets 112,240 97,323 84,742
===============================================
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing demand 27,556 24,068 20,206
Interest bearing demand 22,819 27,045 22,523
Money market and savings 9,632 8,538 7,704
Certificates of deposit 40,612 27,881 27,163
-----------------------------------------------
Total deposits 100,619 87,532 77,596
Other Liabilities 570 637 473
Senior Notes Payable 2,980 2,500 1,143
-----------------------------------------------
Total liabilities 104,169 90,669 79,212
Stockholders' equity 8,071 6,654 5,530
-----------------------------------------------
Total Liabilities and
Stockholders' equity 112,240 97,323 84,742
===============================================
</TABLE>
<PAGE>
Southern Arizona Bancorp, Inc.
Analysis of Net Interest Earnings
Years Ended December 31, 1993-1995
Results of Operations
Average Balance, Interest Rates and Yields. The following table presents for the
periods indicated the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollar
amounts and rates, and the net interest margin. The table does not reflect any
effect of income taxes. All average balances are monthly average balances and
include the balances of non-accuring loans. The yields and costs for the periods
indicated include fees which are considered adjustments to yield.
<TABLE>
<CAPTION>
1995 (000) Avg. Amt Interest Average
- ---------------------------------- Outstanding Earned Yield
<S> <C> <C> <C>
Assets
Federal funds sold 8,757 493 5.63%
US Treasury obligations 7,202 447 6.21%
Other investments 3,435 208 6.06%
Loans 85,624 9,045 10.56%
--------------------------------------------------
Total 105,018 10,193 9.71%
==================================================
Liabilities
Deposits
Interest bearing demand 22,819 486 2.13%
Money market and savings 9,632 147 1.53%
Certificates of deposit 40,612 2,258 5.56%
Long-Term Debt 2,980 261 8.76%
--------------------------------------------------
Total 76,043 3,152 4.15%
==================================================
Avg. Yield Int Earning Assets 9.71%
Avg. Rate Pd Int Earning Liabilities 4.15%
Net Yield on Assets 6.70%
1994 (000) Avg. Amt Interest Average
- ------------------------------------------------- Outstanding Earned Yield
Assets --------------------------------------------------
Federal funds sold 4,878 189 3.87%
US Treasury obligations 8,769 368 4.20%
Other investments 3,881 216 5.57%
Loans 74,047 7,344 9.92%
--------------------------------------------------
Total 91,575 8,117 8.86%
==================================================
Liabilities
Deposits
Interest bearing demand 27,045 559 2.07%
Money market and savings 8,538 152 1.78%
Certificates of deposit 27,881 1,134 4.07%
Other 90 4 4.44%
Long-Term Debt 2,500 219 8.76%
--------------------------------------------------
Total 66,054 2,068 3.13%
==================================================
Avg. Yield Int Earning Assets 8.86%
Avg. Rate Pd Int Earning Liabilities 3.13%
Net Yield on Assets 6.61%
</TABLE>
<TABLE>
<CAPTION>
1993 (000) Avg. Amt Interest Average
- ------------------------------------------------- Outstanding Earned Yield
--------------------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 4,766 133 2.79%
US Treasury obligations 9,180 375 4.08%
Other investments 5,810 334 5.75%
Loans 59,686 6,166 10.33%
--------------------------------------------------
Total 79,442 7,008 8.82%
==================================================
Liabilities
Deposits
Interest bearing demand 22,523 495 2.20%
Money market and savings 7,704 142 1.84%
Certificates of deposit 27,163 1,107 4.08%
Other 42 1 2.38%
Long-Term Debt 1,143 100 8.75%
--------------------------------------------------
Total 58,575 1,845 3.15%
==================================================
Avg. Yield Int Earning Assets 8.82%
Avg. Rate Pd Int Earning Liabilities 3.15%
Net Yield on Assets 6.50%
</TABLE>
ST-6
<PAGE>
Southern Arizona Bancorp, Inc.
Analysis of Change in Interest
Years Ended December 31, 1994 - 1995
Rate/Volume of Net Interest Income
The following schedule presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the increase related to
higher outstanding balances and that due to interest rates. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (i.e., changes in
volume multiplied by old rate) and (ii) changes in rate multiplied by old
volume. Changes attributable to both rate and volume which cannot be segregated
have been allocated proportionately to the change due to volume and the change
due to rate.
<TABLE>
<CAPTION>
Interest Int Change Int Change
Change Due To Due To
1995 1994-1995 Volume Rates
- ------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C>
Assets
Federal funds sold 304 193 111
US Treasury obligations 79 (74) 153
Other investments (8) (26) 18
Loans 1,701 1,201 500
-----------------------------------------------
Total 2,076 1,294 782
===============================================
Liabilities
Deposits
Interest bearing demand (73) (90) 17
Money market and savings (5) 18 (23)
Certificates of deposit 1,124 623 501
Senior Notes 42 42 0
Short term borrowings (4) (2) (2)
-----------------------------------------------
Total 1,084 591 493
===============================================
1994 Interest Int Change Int Change
- ------------------------------------------------- Change Due To Due To
Assets 1993-1994 Volume Rates
-----------------------------------------------
Federal funds sold 56 3 53
US Treasury obligations (7) (17) 10
Other investments (118) (107) (11)
Loans 1,178 1,433 (255)
-----------------------------------------------
Total 1,109 1,312 (203)
===============================================
Liabilities
Deposits
Interest bearing demand 64 94 (30)
Money market and savings 10 15 (5)
Certificates of deposit 27 29 (2)
Senior Notes 119 119 0
Short term borrowing 3 1 2
-----------------------------------------------
Total 223 258 (35)
===============================================
</TABLE>
ST-7
<PAGE>
<TABLE>
<CAPTION>
Southern Arizona Bancorp, Inc.
Loan Portfolio
As of December 31,
-------------------------------------------------------------------------------
(000) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial 63,062 62,336 50,155 39,820 31,893
Real Estate - Mortgage 9,504 7,274 6,946 5,976 4,184
Real Estate - Construction 435 940 531 277 254
Installment - Mobile Home 5,605 4,757 3,501 1,363 1,307
Installment - Other 9,467 7,894 5,972 8,044 6,504
Personal Credit Line 339 362 428 522 527
Other 164 39 63 57 37
-------------------------------------------------------------------------------
Total 88,576 83,602 67,596 56,059 44,706
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Loan Portfolio Maturity Schedule
As of December 31, 1995
---------------------------------------------------------------
Within 1 - 5 After 5
(000) 1 year years years Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans at fixed interest rates 4,421 9,437 12,328 26,186
Loans at variable interest rates 24,889 26,108 11,393 62,390
---------------------------------------------------------------
Total 29,310 35,545 23,721 88,576
---------------------------------------------------------------
</TABLE>
ST-8
<PAGE>
Southern Arizona Bancorp, Inc.
Investment Portfolio
As of December 31,
1995 Book 1994 Book 1993 Book
(000) Value Value Value
-----------------------------------------------
U.S Treasury Obligations 1,314 4,959 10,296
Municipal Obligations 573 2,713 3,256
-----------------------------------------------
Total 1,887 7,672 13,552
-----------------------------------------------
<TABLE>
<CAPTION>
Investment Portfolio Maturity Schedule
As of December 31, 1995
------------------------------------------------------------------------------
Within 1 - 5 6 - 10 After 10
(000) 1 year years years Years Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Obligations
Carrying amount 800 514 0 0 1,314
Weighted average yield 7.10% 8.39% 7.59%
Municipal obligations
Carrying amount 0 0 573 573
Weighted yield 7.00% 7.00%
---------------------------------------------------------------------------
Total 800 514 573 0 1,887
----------------------------------------------------------------------------
</TABLE>
ST-9
<PAGE>
<TABLE>
<CAPTION>
Southern Arizona Bancorp, Inc.
Past Due and Nonaccrual Loans
As of December 31,
(000) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccural Loans 0 15 18 0 59
Other Real Estate Owned 11 202 18 82 0
-------------------------------------------------------------------------
Total 11 217 36 82 59
-------------------------------------------------------------------------
</TABLE>
ST-10
<PAGE>
Southern Arizona Bancorp, Inc.
<TABLE>
<CAPTION>
Average Balance Sheet Data
- --------------------------
Years Ended Ended December 31,
(000) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities 10,637 12,650 14,990 14,830 10,737
Loans and Leases, net 82,615 71,365 57,553 48,198 40,987
Total interest earning assets 105,018 91,575 79,442 66,579 54,746
Total assets 112,240 97,323 84,742 71,245 59,314
Total deposits 100,619 87,532 77,596 66,336 54,790
Interest bearing deposits 73,063 63,464 57,390 50,882 43,290
Long-term debt 2,980 2,500 1,143 0 0
Shareholders' Equity 8,071 6,654 5,530 4,669 4,025
</TABLE>
ST-11
<PAGE>
APPENDIX A
ARIZONA BUSINESS CORPORATION ACT
CHAPTER 13. DISSENTERS' RIGHTS
ARTICLE 1. DISSENT AND PAYMENT FOR SHARES
ss. 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 ss. 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.
ss. 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 ss. 10-1103 or
the articles of incorporation and if the shareholder is entitled to vote on the
merger.
A-1
<PAGE>
(b) The corporation is a subsidiary that is merged with its parent
under ss. 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 issuances 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
ss. 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 ss. 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
A-2
<PAGE>
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.
ss. 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
ss. 10-1320. NOTICE OF DISSENTERS' RIGHTS
A. If proposed corporate action creating dissenters' rights under ss.
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 ss. 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 ss. 10-1322.
ss. 10-1321. NOTICE OF INTENT TO DEMAND PAYMENT
A. If proposed corporate action creating dissenters' rights under ss.
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.
A-3
<PAGE>
ss. 10-1322. DISSENTERS' NOTICE
A. If proposed corporate action creating dissenters' rights under ss.
10- 1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of ss. 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.
ss. 10-1323. DUTY TO DEMAND PAYMENT
A. A shareholder sent a dissenters' notice described in ss. 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 ss. 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.
ss. 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 ss. 10-1326.
A-4
<PAGE>
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.
ss. 10-1325. PAYMENT
A. Except as provided in ss. 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 ss. 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 ss. 10-
1328.
5. A copy of this article.
ss. 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 ss. 10-1322 and shall repeat the payment demand
procedure.
ss. 10-1327. AFTER-ACQUIRED SHARES
A. A corporation may elect to withhold payment required by ss.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
A-5
<PAGE>
calculated and a statement of the dissenters' right to demand payment under ss.
10- 1328.
ss. 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 ss. 10-1325, or reject the corporation's offer under ss. 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 ss. 10-1325 or
offered under ss. 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 ss. 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
ss. 10-1330. COURT ACTION
A. If a demand for payment under ss. 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 offices 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
A-6
<PAGE>
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 ss. 10-1327.
ss. 10-1331. COURT COSTS AND ATTORNEY FEES
A. The court in an appraisal proceeding commenced under ss. 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 amounts offered by the corporation
pursuant to ss.ss. 10-1325 and 10-1327 or that the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under ss. 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 ss.ss. 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 benefitted.
A-7
<PAGE>
APPENDIX B
O'CONNOR, CAVANAGH, ANDERSON,
KILLINGSWORTH & BESHEARS, P.A.
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012
602-263-2400
March 28, 1996
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Yuma, Arizona 85364
Re: Certain Federal Income Tax Consequences
Associated with Merger Agreement and Plan of
Reorganization
Gentlemen:
We have acted as special legal counsel to Southern Arizona
Bancorp, Inc., an Arizona corporation ("Southern Arizona"), in connection with
the proposed merger of Southern Arizona with and into Zions Bancorporation, a
Utah corporation ("Zions"), under the laws of the states of Arizona and Utah
(the "Holding Company Merger"), and the proposed merger of Southern Arizona
Bank, an Arizona banking corporation and Southern Arizona's wholly-owned
subsidiary ("SAB"), with and into National Bank of Arizona, a national banking
corporation ("NBA"), one of Zions' wholly-owned subsidiaries (the "Bank Merger")
pursuant to the Agreement and Plan of Reorganization dated January 17, 1996 (the
"Agreement") between Southern Arizona, Zions, NBA and SAB. The Holding Company
Merger is described in the Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") constituting the proxy statement of Southern Arizona
Bancorp, Inc. for a shareholders' meeting to be held in March 1996.
Pursuant to Section 3.3 of the Agreement, you have requested
our opinion as to certain federal income tax consequences to the shareholders of
Southern Arizona of the Holding Company Merger. All terms contained herein,
unless otherwise specified, have the meaning assigned to them in the Agreement.
Subject to the assumption that (i) the Holding Company Merger
and the Bank Merger will take place as described in the Proxy
Statement/Prospectus and in the Agreement, (ii) the documents and signatures
examined by us are genuine and authentic, (iii) persons executing the documents
examined by us have the legal capacity to execute such documents, and (iv) the
cash received by the Southern Arizona shareholders will not exceed the fair
market value of the Zions Common Stock received by the Southern Arizona
shareholders in the Holding Company Merger, and subject to the further
limitations, assumptions and qualifications set forth below, it is our opinion
that under present law for federal income tax purposes:
B-1
<PAGE>
(1) The Holding Company Merger will qualify as a
reorganization within the meaning of section
368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
(2) Southern Arizona will recognize no taxable gain or
loss as a result of the Holding Company Merger.
(3) Southern Arizona shareholders will recognize no
taxable gain or loss upon the receipt of Zions Common
Stock pursuant to the Holding Company Merger.
(4) Southern Arizona shareholders may have to recognize
taxable gain if any cash ("Boot") is received
pursuant to the Holding Company Merger. Such gain
will be recognized to the extent of the lesser of (a)
the gain which would have been realized by such
shareholder had the Holding Company Merger been a
fully taxable transaction or (b) the Boot received.
Such gain will be capital gain if the Southern
Arizona Common Stock surrendered by a Southern
Arizona shareholder in the Holding Company Merger was
a capital asset in the hands of that Southern Arizona
shareholder.
(5) The holding period of the Zions Common Stock received
by the Southern Arizona shareholders in the Holding
Company Merger will include the period during which
the shares of Southern Arizona Common Stock were
held, provided such shares were held
as a capital asset.
(6) If any cash is received in lieu of a fractional share
of Zions Common Stock, gain (or loss) will be
recognized in an amount equal to the difference
between the cash received and the shareholder's basis
in that fractional share.
(7) The tax basis of the Zions Common Stock received by
the Southern Arizona shareholders in the Holding
Company Merger will be the same as the tax basis of
the Southern Arizona Common Stock surrendered in
exchange therefor, decreased by any cash received and
increased by any gain recognized.
With respect to the opinions set forth above, we have examined
and relied upon the accuracy and completeness of the facts, covenants, and
representations relating to the proposed Holding Company Merger transactions
contemplated by the Agreement and contained in the Proxy Statement/Prospectus
and such other documents as we have deemed necessary or appropriate. In
addition, we have relied upon certain statements, representations, and covenants
certified by Southern Arizona, Zions, and certain shareholders of Southern
Arizona and our opinion is conditioned, among other things, upon the initial and
continued accuracy of those statements, representations, and covenants, as well
as upon facts, covenants, and representations set forth in the documents
referred to above. Finally, we have assumed that there is no existence of a plan
by any other shareholders of Southern Arizona to sell the Zions Common Stock
received in the Holding Company Merger constituting 50 percent or more of the
total consideration received in the Holding Company Merger.
B-2
<PAGE>
We render the foregoing opinions in our capacity as attorneys
admitted to practice law in the State of Arizona. We do not opine or purport to
opine in any manner to the extent that the Holding Company Merger involves the
laws of any jurisdiction other than the United States of America. You should be
aware that the foregoing opinion is not binding upon the Internal Revenue
Service or courts and represents only our good faith evaluations of the
provisions of the Code and applicable Treasury regulations promulgated
thereunder, published rulings of the Internal Revenue Service and court
decisions, any of which could be changed or overruled at a future date with
retroactive effect. In rendering the foregoing opinion, we have relied upon
those authorities available to us as of the business day preceding the day of
this letter, and we assume no responsibility for changes in applicable law
occurring after such date.
We hereby expressly consent to any reference to our firm in
the Proxy Statement/Prospectus, the inclusion of this opinion as an exhibit to
that Proxy Statement/Prospectus, and the filing of this opinion with any
appropriate governmental agency.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
B-3
<PAGE>
APPENDIX C
M ONE, INC.
<PAGE>
- --------------------------------------------------------------------------------
SOUTHERN ARIZONA BANCORP, INC.
FAIRNESS
OPINION
- --------------------------------------------------------------------------------
February 29, 1996
The Board of Directors
Southern Arizona Bancorp, Inc.
P. O. Box 5148
Yuma, AZ 84364
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock (the "Common
Shares") of Southern Arizona Bancorp, Inc. (the "Company") of the consideration,
as herein defined, offered by Zions Bancorporation ("Zions") to such holders in
the proposed merger (the "Merger") of the Company into Zions, pursuant to the
Agreement and Plan of Reorganization as of January 17, 1996 between the Company
and Zions (the "Agreement"). The number of shares of Zions common stock that
will be exchanged for each share of the Company common stock will be determined
by applying a formula as set forth in the Agreement.
M ONE, Inc. ("M ONE") is a financial advisory and consulting firm whose
principals and Advisory Board members have extensive experience in the
strategic, operations and financial affairs of American depository institutions,
including mergers and acquisitions. M ONE has not been retained to provide
investment banking or advisory services to the Company outside of rendering this
fairness opinion and did not determine or recommend the kind or amount of
consideration to be paid in the Merger. We have acted exclusively for the Board
of Directors of the Company in rendering this fairness opinion and will receive
a fee from the Company for our services. M ONE's opinion is directed only to the
consideration to be received by the Company shareholders in the Merger and does
not constitute a recommendation to any Company shareholder as to how such
shareholder should vote at the Annual Meeting.
In arriving at our opinion, we have reviewed and analyzed, among other things:
1. Agreement and Plan of Reorganization between Zions Bancorporation and
Southern Arizona Bancorp, Inc. dated 01/17/96
2. Zions Bancorporation Form S-4 Dated 01/31/96 as well as the last three
Form 10-K Annual Statements
3. Zions Bancorporation Unaudited 1995 Annual Financial Statements
4. Zions Bancorporation last three Annual Reports
5. Zions Bancorporation last two Proxy Reports
6. Zions Bancorporation Quarterly Reprort dated 09/30/95
7. Southern Arizona Bancorp, Inc. Preliminary 1995 Annual Financial
Statements
8. Southern Arizona Bancorp, Inc. last two Annual Reports
<PAGE>
9. Southern Arizona Bank - Bank Deposit By County Report - Yuma County dated
12/31/95
We also have held discussions with members of the Senior Management of the
Company and Zions regarding their respective past and current business
operations, financial condition and future prospects. In addition, we have
reviewed the reported price and trading history for the Company's and Zions'
Common Shares, compared certain financial and stock market information for the
Company and Zions with similar information for certain other companies, reviewed
the financial terms of certain recent business combinations in the commercial
banking industry and performed such other studies and analyses as we considered
relevant.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
the purposes of this opinion. In this regard, we have assumed that the financial
forecasts have been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the management of the Company and Zions. We
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company and Zions
or any of their subsidiaries, and we have not been furnished with any such
evaluation or appraisal. We have not independently evaluated the allowance for
loan losses of the respective companies in relation to their loan portfolios and
have assumed that the allowance for the Company and Zions are adequate to cover
future loan portfolio losses as they may occur from time to time.
Set forth below is a brief summary of selected analyses undertaken by M ONE in
connection with rendering its opinion to the Company's Board of Directors.
Analysis of the Zions' Offer
M ONE reviewed the terms of the proposed transaction as reflected in the Merger
Agreement. The Agreement established a fixed purchase price of $25,330,000, plus
consolidated net undistributed income of the Company after October 1 as defined
in the Agreement (the "Benchmark Price"). The Benchmark Price is constant, as
defined, between the price range of Zions's stock from $59.00 per share to
$72.00 per share. M ONE has calculated that each share of the Company common
stock has an economic value of $20.00 at the Benchmark Price of $25,330,000. The
number of shares of Zions' stock exchanged for the Company stock will vary
according to the average price of Zions' stock divided into the Benchmark Price.
The economic value of the exchange price of $20.00 compares to $14.70 per share
for the average trading value of the Company's stock for the 90 days prior to
September 30, 1995. The
2
<PAGE>
Benchmark consideration represents a purchase price which was 2.86 times the
Company's book value as of 09/30/95; as of that date, the Company's book value
and tangible book value were the same.
Dividend Analysis
M ONE analyzed the effect of the Zions' offer on the dividends received by
Company shareholders. Assuming the current indicated annual dividends for Zions'
common stock of $1.64 per share, the annual yield is 2.46% at the closing price
at the date that the Agreement was signed. Assuming the current indicated annual
dividend for the Company common stock of $0.36 per share, the annual yield is
2.4% at the closing price at the date the Agreement was signed. The equivalent
Zions' dividend is $0.49 per share based upon the $20.00 economic value of the
exchange offer compared to the $0.36 dividend per share currently received on
the Company Common Shares.
Analysis of Selected Merger Transactions
M ONE reviewed certain financial data related to bank holding company
acquisitions of banks announced during 1995 throughout the United States. In
addition, we reviewed similar data for selected transactions that were announced
in certain Southwestern states where the acquired banks had an asset size
ranging from $70 million to $350 million - Exhibit A).
For each of the selected transactions, M ONE reviewed the purchase price as a
percentage of the acquiree's book value, tangible book value and total assets;
as a multiple of the acquiree's latest twelve months earnings per share; and as
a premium over the acquiree's market price in recent public share purchases
prior to the acquisition. The calculations yielded the following statistics,
utilizing the Company's full year results for 1995, compared to the most
recently available figures in the Bank universe (Exhibit A) at 09/30/95:
1. The purchase price offered as a percentage of book value ranged from 254%
to 98% with an average of 154% and a median of 147% as compared to 286%
for the merger.
2. The price offered as a percentage of assets ranged from 23.3% to 7.2% with
an average of 14.2% and a median of 14.5% as compared to 19.9% for the
merger.
3. The price offered as a multiple of the latest twelve months earnings per
share ranged from 60.7 times to 6.9 times with an average of 17.5 times
and a median of 12.9 times as compared to 12.67 times associated with the
merger. The price earnings ratio can vary significantly in peer companies
depending upon bank performance. To better focus this comparison, M ONE
conducted an additional sampling of the 80 commercial banks acquired
during 1995 with return on equity levels greater than 15% (i.e., high
performing, like Southern
3
<PAGE>
Arizona - Exhibit B). For this focused peer comparison, the average
acquisition price/earnings ratio was 12.5 and the median was 12.0 as
compared to 12.67 for the merger.
4. The core deposit premium (price offered, less tangible book value divided
by core deposits) ranged from 15.4% to 6.00% with an average of 6.57% and
a median of 6.62% as compared to 14.4% with the merger.
The aforementioned comparisons are limited in that no company or transaction is
identical to Southern Arizona or Zions. Previous transactions generally occurred
in different stock markets and economic conditions. As such, an analysis of the
results of the foregoing involves judgments associated with differences in
financial, operating, geographic and other factors that could affect the public
trading value of companies to which they are being compared.
Discounted Cash Flow Analysis
- -----------------------------
M ONE completed a discounted cash flow analysis to compare the offered merger
price against the intrinsic value of Southern Arizona Bancorp as an ongoing
concern - Exhibits C(1) and C(2). Based upon projected earnings and reasonable
assumptions concerning a future terminal value and discount rate on cash flows,
the analysis concluded the current intrinsic value of the Company as an ongoing
concern to range between $13.30 and $17.66, depending on the discount rate
applied and the timing of a future sale. This analysis is not necessarily
indicative of actual future results and does not purport to reflect pricing
multiples at which any securities may trade at any time in the future.
Zions' Analyses
- ---------------
M ONE reviewed the historical performance of Zions, the historical performance
of publicly traded peers, the historical and current stock market valuation of
Zions and its peers, and management and financial analysts' earnings projections
for Zions. M ONE compared the financial performance of Zions based on various
financial measures of earnings performance, capital adequacy, asset quality and
operating efficiencies with selected other banking companies that operate in the
Western states - Exhibit D). The calculations yielded the following statistics
as of 09/30/95 (the most recent statement date where comparable statistics are
available):
1. The price to earnings ratio for the peer group ranged from 16.17 to 10.46
with an average of 12.56 compared to Zions' 13.47 times.
2. The price to book value ratio for the peer group ranged from 3.51 to 1.41
with an average of 1.92 compared to Zions' 2.64 times.
3. The return on assets ratio for the peer group ranged from 1.60% to .45%
with an average of 1.22% compared to Zions' 1.31%.
4
<PAGE>
4. The return on equity ratio for the peer group ranged from 23.01 to 5.90
with an average of 15.87 compared to Zions' 18.82%.
5. The dividend pay out ratio for the peer group ranged from 77.74 to 20.96
with an average of 34.26 compared to Zions' 26.30%.
6. The reserve for loan losses as a percentage of total loans for the peer
group ranged from 5.46 to 1.40 with an average of 2.16 compared to Zions'
2.68.
7. The non-performing assets as a percentage of total loans for the peer
group ranged from 2.40 to .33 with an average of .87 compared to Zions'
.83.
8. The tangible book value to asset ratio for the peer group ranged from 8.99
to 5.27 with an average of 6.80 compared to Zions' 6.65%(1).
The preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. M ONE believes that its analysis and the
summary set forth above must be considered as a whole and that selecting
portions of its analysis without considering all analyses or without considering
all factors relevant thereto would create an incomplete view of the process
underlying M ONE's review and opinion.
The fact that any specific analysis or factor has been referred to in the
summary above is not meant to indicate that such analyses or factors were given
greater weight than any other.
M ONE made numerous assumptions with respect to industry performance, general
business and economic conditions, the legislative and regulatory environment for
depository institutions and other matters relevant to the commercial banking
industry.
Based upon and subject to the foregoing and other such matters we consider
relevant, it is our opinion that, as of the date thereof, the consideration
offered in the merger is fair, from a financial point of view, to the holders of
the Common Shares of the Company.
Sincerely, M ONE, Inc.
BY: /s/Marilyn Seymann BY:/s/L. William Seidman
-------------------- ---------------------
Marilyn R. Seymann L. William Seidman
President & CEO Chairman - Advisory Board
Attachments
- --------
1 Tangible book value calculated utilizing 12/31/95 figures.
5
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Bank/
Acquiror St. Thrift Seller St.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vectra Banking Group CO Bank Bank Land Company CO
CVB Financial Corp CA Bank Citizens Commercial CA
Pacific Bank, NA CA Bank Burlingame Bancorp CA
Shinhan Bank ROK Bank Marine National Bank CA
First Fnc'l Bnkshrs TX Bank Citizens Equity Corp TX
FP Bancorp CA Bank Rancho Santa Fe NB CA
Cullen/Frost Bankers TX Bank Park NB of Houston TX
Dartmouth Capital NH NonDep Liberty Nat'l Bk - CA CA
ValliCorp Holdings CA Bank CoBank Financial Corp CA
Norwest Corporation MN Bank Bank of Robstown TX
California St. Bank CA Bank Landmark Bancorp CA
Comerica Inc. MI Bank QuestStar Bank, N.A. TX
Plains Capital Corp TX Bank Friona Bancorp TX
Norwest Corporation MN Bank Liberty National Bank TX
Norwest Corporation MN Bank Alice Bancshares TX
Coastal Bancorp TX Thrift Texas Capital Bncshrs TX
Eldorado Bancorp CA Bank Mariners Bancorp CA
ValliCorp Holdings CA Bank El Capitan Bncshrs CA
Texas Bncp Shares TX Bank Camino Real Bncshrs TX
Norwest Corporation MN Bank First NB - Big Spring TX
Victoria Bankshares TX Bank Cattlemen's Financial TX
California Bancshares CA Bank Centennial Bank CA
Norwest Corporation MN Bank Valley - Hi Inv. Co TX
First Interstate CA Bank Tomball Nat'l Bncshrs TX
CRB Financial Corp. TX Bank Camino Real Bncshrs TX
Northern Trust Corp IL Bank Tanglewood Bncshrs TX
Texas Fin'l Bancorp MN Bank First Bank TX
Western Bank OR Bank Pacific Bank, NA CA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit B
- -----------------------------------------------------------------------------------------------------------------------------------
1995 Commercial Bank Transactions
(comparison of high performing institutions)
(P)ool, Deal Seller Information:
P(u)rch Deal Price/ Deal --------------------------------------
Ann- Deal (N)A, Not Price/ Tng.Price/ Total Total Equity YTD YTD NPA
Bank/ ounce Value (D)is- Book Bk 4-Qtr Assets Equity Assets ROAA ROAE Assets
Acquiror St. Thrift Seller St. Date ($M) closed (%) (%) EPS ($000s) ($000s) (%) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vectra Banking Group CO Bank Bank Land Company CO 12/27/95 22.3 U 176.75 176.75 11.39 109,529 12,617 11.52 1.73 15.84 0.42
Colonial BancGroup Southern Banking 18.56 207,204 15.95
ABC Bancorp. Inc GA Bank Southland Bancorp AL 12/19/95 11.2 U 180.00 180.00 13.21 102,336 7,197 7.03 1.15 16.71 1.16
Community Bnkshrs Commerce Bank of VA 12.56 68,277 15.33
Bank of Boston BayBanks, Inc 15.33 11,524,770 15.84
Charter Bancshares Texas Bank 9.36 36,247 15.53
Compass Bancshares Post Oak Bank NA 299,458 17.40
Compass Bancshares Peoples Bncshrs NA 129,279 20.68
CNB Bancshares, Inc Du Quoin Bancorp 13.21 86,756 15.34
Whitaker Bank Corp Mount Sterling Nat'l 16.67 67,356 19.79
First Bank System First Interstate 12.03 55,067,000 23.86
Fort Wayne National Valley Financial Srvcs 13.00 728,857 15.80
Fulton Fin'l Corpp Gloucester County 13.98 185,323 20.36
Peoples Heritage Fin Bank of NH Corp 15.50 960,052 15.78
First Michigan Arcadia Fin'l Group NA 97,632 20.84
George Mason Bnkshrs Palmer National Bcrp 12.86 91,392 16.16
Gulf Coast B&T Co Gulf South Bncshrs 6.62 51,690 22.08
Washington Mutual Bk Western Bank 16.67 738,572 15.42
Magna Group River Bend Bcshrs 12.36 160,657 15.16
Citi-Bancshares Citizens First Bnshr 22.13 38,481 15.28
Whitney Holding Corp First Citizens Bncsh 18.03 231,697 14.89
MidAmerica Bancshares Minnesota State Bcsh NA 93,317 25.47
First Fnc'l Bkshrs Weatherford Nat Bksh 12.15 56,070 17.31
Chittenden Corp Flagship B&T 13.21 258,296 18.00
LUB Financial Summit Bancorp 34.70 5,512,343 15.78
First Fnc'l Bnkshrs TX Bank Citizens Equity Corp TX 9/8/95 13.1 U 162.83 164.66 10.68 91,134 8,045 8.83 1.43 16.14 1.12
Cullen/Frost Bankers TX Bank Park NB of Houston TX 8/18/95 34.0 U 216.44 216.44 12.69 225,249 15,709 6.97 1.17 16.26 0.29
Norwest Corporation Irene Bancorporation 9.49 35,995 19.60
National City Corp Integra Financial 13.12 14,810,861 17.06
First Bank System FirsTier Financial 12.61 3,580,427 15.69
Colonial BancGroup Southland Bancorp NA 102,336 16.71
UMB Financial Group First Sooner Bncshrs NA 120,162 18.72
NationsBank Corp North Florida Bk Crp NA 51,770 18.72
First Nat'l Bancorp Bank of Heard County 14.95 38,644 17.10
South Banking Comp Pineland State Bank NA 26,412 16.44
Compass Bancshares Flower Mound Bncshrs NA 45,307 22.49
First Chicago Corp NBD Bancorp, Inc 9.13 47,755,844 16.12
PNC Bank Corp Midatlantic Corp 11.29 13,634,216 15.30
BancMidwest Corp South St. Paul Bcshr 9.07 38,661 20.70
Comerica Inc. MI Bank QuestStar Bank, N.A. TX 6/29/95 25.0 U 253.73 253.73 10.71 190,418 9,853 5.17 1.48 25.48 0.02
First Bank System Midwestern Services 16.77 223,661 15.40
Bank Corporation-GA Effingham Bank & Trust NA 28,127 24.72
First Union Corp First Fidelity Bncp 12.44 35,399,736 15.79
Norwest Corporation MN Bank Liberty National Bank TX 6/16/95 27.3 U 200.94 212.56 9.03 147,119 13,586 9.23 2.09 24.45 0.86
Hibernia Corporation FNB Bancshares, Inc 12.91 57,705 15.25
Central Bancompany Pleasant Hope Bncshr 10.97 100,532 17.13
Barnett Banks, Inc Community Bk-Islands 12.65 82,782 18.84
Coastal Bancorp TX ThriftTexas Capital Bncshrs TX 5/30/95 21.1 U 167.61 168.92 11.99 176,930 12,589 7.12 1.20 16.77 0.15
Norwest Corporation State National Bank 13.87 1,098,189 20.13
First Commercial Crp West-Ark Bancshares 9.14 133,025 17.00
First Commerce Corp Central Corporation 18.05 820,150 16.00
Private Investor Delhi Bancshares Inc 10.11 14,220 16.02
Texas Bncp Shares TX Bank Camino Real Bncshrs TX 5/10/95 12.9 U 123.23 137.35 9.83 123,809 10,043 8.11 1.19 15.53 0.15
US Bancorp West One Bancorp 13.85 8,656,701 15.41
Premier Bancorp HNB Corporation 10.25 93,452 21.18
Mountain Parks Fin'l Midway Investment 5.81 42,544 27.98
Lenard C. Briscoe Dewey County Bancorp 11.11 15,055 17.75
Rice Insurance Agency Collegiate Peaks Bcp 8.94 18,766 21.04
National City Bncs First National Bank 17.03 16,529 16.12
Fifth Third Bancorp Bank of Naples 13.66 47,443 21.24
Bank of New York Putnam Trust Co 15.27 686,406 15.57
BayBanks, Inc Cornerstone Finc'l 10.00 142,891 22.99
Victoria Bankshares TX Bank Cattlemen's Financial TX 4/27/95 13.1 U 165.32 165.32 12.96 108,225 7,924 7.32 0.99 14.71 0.85
Norwest Corporation MN Bank Valley - Hi Inv. Co TX 3/22/95 10.7 U 123.54 123.54 6.87 121,728 8,661 7.12 1.32 16.97 0.65
Private Investors-CA Grossmont Bank NA 462,253 15.31
International Bancorp American Bncp 11.15 43,304 22.50
First NB in Cameron Lee County National 8.60 22,378 21.72
Central Community Citizens State Bank NA 15,896 48.95
United Security Bank Golden Oak Bank 9.98 42,222 25.62
Northern Trust Corp IL Bank Tanglewood Bncshrs TX 2/8/95 33.0 U 219.50 219.50 12.92 233,188 15,004 6.74 1.32 20.21 0.65
Texas Fin'l Bancorp MN Bank First Bank TX 2/7/95 13.2 U 162.64 162.64 11.00 73,201 8,116 11.09 1.73 14.87 0.55
First Interst Bncsvs First Park City Bshrs 11.11 60,088 17.36
Nat'l Australia Bank Michigan Nat'l Corp 10.05 8,691,969 19.50
Buerge Bancshares Peoples State Bank 9.49 21,171 17.64
Mercantile Bancorp Southwest Bancshares 11.50 174,098 16.57
Hibernia Corporation Bank of St. John 9.12 113,341 28.76
Norwest Corporation First Tule Bancorp 9.52 60,924 15.55
Western Bank OR Bank Pacific Bank, NA CA 1/17/95 57.2 U 121.65 123.08 NA 354,144 45,205 12.76 3.35 34.37 5.40
Aspen Bancshares Val Cor Bancorp 10.61 59,329 19.74
Rebank-Dutch Antilles Plaza Bank of Miami NA 99,352 16.06
---------------------------------------------------------------------------------
HIGH 57.2 253.73 253.73 34.70 55,067,000 45,205 12.76 3.35 48.95 5.40
LOW 10.7 121.65 123.08 5.81 14,220 7,197 5.17 0.99 14.71 0.02
MEAN 22.6 174.94 177.27 12.51 2,706,658 13,427 8.39 1.55 18.90 0.94
MEDIAN 21.1 167.61 168.92 12.09 105,281 10,043 7.32 1.32 17.03 0.65
---------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit C
Summary of Assumptions to Discounted Cash Flow Model
- --------------------------------------------------------------------------------
o Discounted cash flow was based upon 1995 actual financial results for
Southern Arizona Bancorp, 1996 budgeted earnings projections, and
discussions with Southern Arizona management.
o The scenario assumes the repayment of principal of $2.5 million of holding
company debt from the years 1997 to 2001. While interest expense for this
debt is included in overhead expenses, the repayment of principal does not
impact net income.
o Based upon very slow asset growth projected in 1996 (3.4%), asset growth in
the future is projected to average 7% annually, a long-term industry
average.
o Profitability is budgeted to decline slightly during 1996 to a 1.58% return
on assets. A steady 1.52% ROA is projected for years thereafter.
o Due to slower asset growth, the bank's dividends are projected to increase
significantly over the projected periods in order to manage core capital at
the 7.0 - 8.0% level.
o Terminal values were calculated and weighted according to two factors:
o 50% to the Price/Earnings ratio. The national average during 1995 for
commercial banks earning at least 15% ROE was 12.5 times earnings.
This ratio was utilized for the discounted cash flow.
o 50% to Price/Book ratio. A 2.75 price/book ratio was assumed, based
upon current and historical offers for Southern Arizona Bancorp.
o Two scenarios were run using two separate discount rates for the analysis:
12.20% and 15.20%. These rates represent a reasonable range for Southern
Arizona's cost of capital, based upon the current 30-year treasury bond
rate of 6.5% plus a historical risk premium for small bank stocks of 5.7%
to 8.7%.
o The intrinsic value (or net present value) of Southern Arizona Bancorp as a
going concern appears to range between $16.73 and $17.66 per share
utilizing a 12.20% discount rate, and between $13.30 and $17.20 per share
utilzing a 15.20% discount rate. The range of these of these values depends
on when the Company is assumed to be sold in the analysis. Due to slowing
earnings growth, the net present value to shareholders declines slightly
over time in the discounted cash flow projections.
<PAGE>
<TABLE>
<CAPTION>
Exhibit C(1) - Intrinsic Value Of Southern Arizona Bancorp
1993 1994 1995* 1996** 1997 1998 1999 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Drivers
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Assets 91,225 101,254 127,417 131,711 140,931 150,796 161,352 172,646 184,731 197,663 211,499 226,304
Average Assets 96,240 114,336 129,564 136,321 145,863 156,074 166,999 178,689 191,197 204,581 218,902
Shareholder Equity 6,024 7,284 8,828 10,261 11,104 11,931 12,614 13,380 14,234 15,684 17,234 18,893
- -----------------------------------------------------------------------------------------------------------------------------------
Statement of Operations 7
- -----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 7,042 7,583 7,979 8,537 9,135 9,774 10,459 11,191 11,974 12,812
- Loan Loss Provisions 401 763 545 583 624 668 715 765 818 876
+ Non Interest Income 1,281 2,112 1,704 1,823 1,951 2,087 2,234 2,390 2,557 2,736
Operating Income 0 7,922 8,932 9,138 9,777 10,462 11,194 11,978 12,816 13,713 14,673
- Overhead 4,700 5,620 5,794 6,199 6,633 7,097 7,594 8,126 8,695 9,303
Pretax Profit 0 3,222 3,312 3,344 3,578 3,828 4,096 4,383 4,690 5,018 5,370
- Taxes 1,223 1,265 1,277 1,367 1,462 1,565 1,674 1,792 1,917 2,051
Net Income 0 1,999 2,047 2,067 2,211 2,366 2,532 2,709 2,898 3,101 3,318
- Dividends and Debt Repayment 455 614 1,223 1,384 1,683 1,766 1,854 1,449 1,551 1,659
Transfer to Retained Earnings 0 1,544 1,433 843 827 683 766 854 1,449 1,551 1,659
- -----------------------------------------------------------------------------------------------------------------------------------
Key Ratios
- -----------------------------------------------------------------------------------------------------------------------------------
Return on Average Assets 1.75% 1.58% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52%
Return on Average Equity 24.82% 21.44% 19.34% 19.20% 19.28% 19.48% 19.62% 19.38% 18.84% 18.37%
Efficiency Ratio 56.47% 57.97% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83%
Core Capital 7.19% 6.93% 7.79% 7.88% 7.91% 7.82% 7.75% 7.71% 7.93% 8.15% 8.35%
- --------------------------------------------------------------------------------------------------------------------------------
Assumptions
- --------------------------------------------------------------------------------------------------------------------------------
Total Asset Growth 25.84% 3.37% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
----------------------------------------------------------------------------------------------
Net Interest Income/Avg. Assets 0.00% 6.16% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85%
----------------------------------------------------------------------------------------------
Loan Loss Provisions/Avg. Assets 0.00% 0.35% 0.59% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
----------------------------------------------------------------------------------------------
Noninterest Income 0.00% 1.12% 1.63% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
----------------------------------------------------------------------------------------------
Overhead/Avg. Assets 0.00% 4.11% 4.34% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
----------------------------------------------------------------------------------------------
Tax Rate 37.95% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20%
- --------------------------------------------------------------------------------------------------------------------------------
Dividend Payout 22.75% 30.00% 35.00% 40.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Intrinsic Value
- -----------------------------------------------------------------------------------------------------------------------------------
Discount Rate 12.20%
- ------------------------------------------------------------
Terminal Value
PER Value 24,991 25,583 25,832 27,640 29,575 31,645 33,861 36,231 38,767 41,481
Driver: Price Earnings Multiplier (PER) 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50
Driver: Weighting 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- ----------------------------------------------------------------------------------------------------------------------------------
PB Value 24,278 28,218 30,537 32,810 34,689 36,795 39,144 43,130 47,394 51,957
Driver: Price/Book Multiplier (PB) 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75
Driver: Weighting 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- ---------------------------------------------------
Perpetuity Value 16,387 16,775 16,939 18,125 19,393 20,751 22,204 55,740 25,421 27,200
Driver: Long Term Sustainable Growth 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 7.00% 0.00% 0.00%
Driver: Weighting 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Average Terminal Value 24,634 26,900 28,184 30,225 32,132 34,220 36,502 39,680 43,080 46,719
Investor Cashflows: Dividends 455 614 1,223 1,384 1,683 1,766 1,854 1,449 1,551 1,659
- ----------------------------------------------------------------------------------------------------------------------------------
Terminal Value 24,634 26,900 28,184 30,225 32,132 34,220 36,502 39,680 43,080 46,719
- ----------------------------------------------------------------------------------------------------------------------------------
Intrinsic Value (Net Present Value) 22,361 22,261 21,713 21,705 21,650 21,617 21,600 21,669 21,708 21,721
- ----------------------------------------------------------------------------------------------------------------------------------
Net Present Value Per Share $17.66 $17.58 $17.15 $17.14 $17.10 $17.07 $17.06 $17.11 $17.14 $17.15
- ----------------------------------------------------------------------------------------------------------------------------------
Terminal Value Per Share $19.45 $21.24 $22.26 $23.87 $25.38 $27.03 $28.83 $31.34 $34.02 $36.90
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Earnings Growth 2.37% 0.98% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Price to Book Value (NPV) 2.53 2.52 2.46 2.46 2.45 2.45 2.45 2.45 2.46 2.46
- ----------------------------------------------------------------------------------------------------------------------------------
*1995 numbers are actual
**1996 numbers are based upon Southern Arizona's 1996 budget
***1996 overhead includes $153,000 holding company interest expense
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit C(2) - Intrinsic Value Of Southern Arizona Bancorp
1993 1994 1995* 1996** 1997 1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Drivers
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Assets 91,225 101,254 127,417 131,711 140,931 150,796 161,352 172,646 184,731 197,663 211,499 226,304
Average Assets 96,240 114,336 129,564 136,321 145,863 156,074 166,999 178,689 191,197 204,581 218,902
Shareholder Equity 6,024 7,284 8,828 10,261 11,604 12,931 14,114 15,127 15,939 16,519 17,139 17,803
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of Operations 7
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 7,042 7,583 7,979 8,537 9,135 9,774 10,459 11,191 11,974 12,812
- Loan Loss Provisions 401 763 545 583 624 668 715 765 818 876
+ Non Interest Income 1,281 2,112 1,704 1,823 1,951 2,087 2,234 2,390 2,557 2,736
Operating Income 0 7,922 8,932 9,138 9,777 10,462 11,194 11,978 12,816 13,713 14,673
- Overhead 4,700 5,620 5,794 6,199 6,633 7,097 7,594 8,126 8,695 9,303
Pretax Profit 0 3,222 3,312 3,344 3,578 3,828 4,096 4,383 4,690 5,018 5,370
- Taxes 1,223 1,265 1,277 1,367 1,462 1,565 1,674 1,792 1,917 2,051
Net Income 0 1,999 2,047 2,067 2,211 2,366 2,532 2,709 2,898 3,101 3,318
- Dividends 455 614 723 884 1,183 1,519 1,896 2,319 2,481 2,655
Transfer to Retained Earnings 0 1,544 1,433 1,343 1,327 1,183 1,013 813 580 620 664
- ------------------------------------------------------------------------------------------------------------------------------------
Key Ratios
- ------------------------------------------------------------------------------------------------------------------------------------
Return on Average Assets 1.75% 1.58% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52%
Return on Average Equity 24.82% 21.44% 18.90% 18.02% 17.50% 17.32% 17.44% 17.86% 18.43% 18.99%
Efficiency Ratio 56.47% 57.97% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83% 59.83%
Core Capital 7.19% 6.93% 7.79% 8.23% 8.58% 8.75% 8.76% 8.63% 8.36% 8.10% 7.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Assumptions
- ------------------------------------------------------------------------------------------------------------------------------------
Total Asset Growth 25.84% 3.37% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
-----------------------------------------------------------------------------------------------
Net Interest Income/Avg. Assets 0.00% 6.16% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85% 5.85%
-----------------------------------------------------------------------------------------------
Loan Loss Provisions/Avg. Assets 0.00% 0.35% 0.59% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
-----------------------------------------------------------------------------------------------
Noninterest Income 0.00% 1.12% 1.63% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
-----------------------------------------------------------------------------------------------
Overhead/Avg. Assets 0.00% 4.11% 4.34% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
-----------------------------------------------------------------------------------------------
Tax Rate 37.95% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20% 38.20%
- ---------------------------------------------------------------------------------------------------------------------------------
Dividend Payout 22.75% 30.00% 35.00% 40.00% 50.00% 60.00% 70.00% 80.00% 80.00% 80.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Intrinsic Value
- ------------------------------------------------------------------------------------------------------------------------------------
Discount Rate 15.20%
- ------------------------------------------------------------
Terminal Value
PER Value 24,991 25,583 25,832 27,640 29,575 31,645 33,861 36,231 38,767 41,481
Driver: Price Earnings Multiplier (PER) 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50
Driver: Weighting 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- ------------------------------------------------------------------------------------------------------------------------------------
PB Value 24,278 28,218 31,912 35,560 38,814 41,598 43,833 45,427 47,133 48,958
Driver: Price/Book Multiplier (PB) 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75 2.75
Driver: Weighting 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- ------------------------------------------------------------
Perpetuity Value 13,153 13,464 13,596 14,548 15,566 16,655 17,821 35,347 20,404 21,832
Driver: Long Term Sustainable Growth 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 7.00% 0.00% 0.00%
Driver: Weighting 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Average Terminal Value 24,634 26,900 28,872 31,600 34,194 36,622 38,847 40,829 42,950 45,219
Investor Cashflows: Dividends 455 614 723 884 1,183 1,519 1,896 2,319 2,481 2,655
Terminal Value 24,634 26,900 28,872 31,600 34,194 36,622 38,847 40,829 42,950 45,219
- ------------------------------------------------------------------------------------------------------------------------------------
Intrinsic Value (Net Present Value) 21,779 21,127 20,216 19,775 19,269 18,734 18,197 17,680 17,231 16,842
- ------------------------------------------------------------------------------------------------------------------------------------
Net Present Value Per Share $17.20 $16.69 $15.97 $15.62 $15.22 $14.80 $14.37 $13.96 $13.61 $13.30
- ------------------------------------------------------------------------------------------------------------------------------------
Terminal Value Per Share $19.45 $21.24 $22.80 $24.96 $27.00 $28.92 $30.68 $32.24 $33.92 $35.71
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Earnings Growth 2.37% 0.98% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Price to Book Value (NPV) 2.47 2.39 2.29 2.24 2.18 2.12 2.06 2.00 1.95 1.91
- ------------------------------------------------------------------------------------------------------------------------------------
*1995 numbers are actual
**1996 numbers are based upon Southern Arizona's 1996 budget
***1996 overhead includes $153,000 holding company interest expense
</TABLE>
<PAGE>
Exhibit D
Banking Companies That Operate in the Western States
- --------------------------------------------------------------------------------
Banc One Corp. First Security Corp/Del.
Bancorp Hawaii Inc. Norwest Corp.
BankAmerica Corp Union Bank/San Francisco
Comerica Inc. US Bancrop
First Bank System Inc. Wells Fargo & Co.
First Interstate Bancorp WestAmerica Bancorporation
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Utah law provides for indemnification of directors and
officers as follows:
16-10a-902 AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in Subsection (4), a corporation may indemnify an
individual made a party to a proceeding because he is or was a director, against
liability incurred in the proceeding if:
(a) his conduct was in good faith; and
(b) he reasonably believed that his conduct was in, or not opposed to,
the corporation's best interests; and
(c) in the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful.
(2) A director's conduct with respect to any employee benefit plan for a
purpose he reasonably believed to be in or not opposed to the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of Subsection (1)(b).
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation;
or
(b) in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in
his official capacity, in which proceeding he was adjudged liable on the
basis that he derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
16-10a-903 MANDATORY INDEMNIFICATION OF DIRECTORS.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was successful, on the merits or otherwise, in the
defense of any proceeding, or in the defense of any claim, issue, or matter in
the proceeding, to which he was a party because he is or was a director of the
corporation, against reasonable expenses incurred by him in connection with the
proceeding or claim with respect to which he has been successful.
<PAGE>
16-10a-907 INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
Unless a corporation's articles of incorporation provide otherwise:
(1) an officer of the corporation is entitled to mandatory indemnification
under Section 16-10a-903, and is entitled to apply for court-ordered
indemnification under Section 16-10a-905, in each case to the same extent as a
director;
(2) the corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(3) a corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater extent, if not
inconsistent with public policy, and if provided for by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract.
16-10a-908 INSURANCE.
A corporation may purchase and maintain liability insurance on behalf of a
person who is or was a director, officer, employee, fiduciary, or agent of the
corporation, or who, while serving as a director, officer, employee, fiduciary,
or agent of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary, or agent of
another foreign or domestic corporation or other person, or of an employee
benefit plan, against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee, fiduciary,
or agent, whether or not the corporation would have power to indemnify him
against the same liability under Sections 16-10a-902, 16-10a-903, or 16-10a-907.
Insurance may be procured from any insurance company designated by the board of
directors, whether the insurance company is formed under the laws of this state
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity or any other interest
through stock ownership or otherwise.
16-10a-909 LIMITATIONS OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification of, or advance
for expenses to, directors that is contained in its articles of incorporation or
bylaws, in a resolution of its shareholders or board of directors, or in a
contract (except an insurance policy) or otherwise, is valid only if and to the
extent the provision is not inconsistent with this part. If the articles of
incorporation limit indemnification or advance of expenses, indemnification and
advance of expenses are valid only to the extent not inconsistent with the
articles of incorporation.
(2) This part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with the director's appearance as
a witness in a proceeding at a time when the director has not been made a named
defendant or respondent to the proceeding.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. An Exhibit Index, containing a list of all exhibits filed
with this Registration Statement, is included beginning on page II-7.
(b) Financial Statement Schedules. Not applicable.
(c) Report, Opinion or Appraisal. Not applicable.
Item 22. Undertakings.
The undersigned registrant hereby undertakes as follows:
(1) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) to deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(3) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(4) that every prospectus (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933, as amended, and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
II-3
<PAGE>
persons of the registrant pursuant to the provisions described under Item 20
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) to respond to requests for information that is incorporated by
reference into the Proxy Statement/Prospectus pursuant to Items 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
Effective Date of the registration statement through the date of responding to
the request.
(7) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Salt Lake City, Utah,
on the 2nd day of April, 1996.
Zions Bancorporation
By: /s/ Harris H. Simmons
------------------------------
Harris H. Simmons, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Harris H. Simmons, Roy W. Simmons, and
Gary L. Anderson, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ Harris H. Simmons
- ------------------------ President, Chief Executive April 2, 1996
Harris H. Simmons Officer and Director
/s/ Gary L. Anderson
- ------------------------ Secretary, Senior Vice April 2, 1996
Gary L. Anderson President and Chief
Financial Officer
/s/ Walter E. Kelly Controller April 2, 1996
- ------------------------
Walter E. Kelly
II-5
<PAGE>
/s/ Roy W. Simmons Chairman and Director April 2, 1996
- ------------------------
Roy W. Simmons
/s/ Jerry C. Atkin Director April 2, 1996
- ------------------------
Jerry C. Atkin
/s/ R. D. Cash Director April 2, 1996
- ------------------------
R. D. Cash
/s/ L. E. Simmons Director April 2, 1996
- ------------------------
L. E. Simmons
/s/ Grant R. Caldwell Director April 2, 1996
- ------------------------
Grant R. Caldwell
/s/ I. J. Wagner Director April 2, 1996
- ------------------------
I. J. Wagner
/s/ Roger B. Porter Director April 2, 1996
- ------------------------
Roger B. Porter
/s/ Dale W. Westergard Director April 2, 1996
- ------------------------
Dale W. Westergard
/s/ Richard H. Madsen Director April 2, 1996
- ------------------------
Richard H. Madsen
/s/ Robert G. Sarver Director April 2, 1996
- ------------------------
Robert G. Sarver
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Page Number
in Sequential
Exhibit Numbering
No. Description and Method of Filing System
--- -------------------------------- ------
<C> <C> <C>
2.1 Agreement and Plan of Reorganization dated as of January 17, 1996 among
Zions Bancorporation, National Bank of Arizona, Southern Arizona
Bancorp, Inc. and Southern Arizona Bank (filed herewith)
3.1 Restated Articles of Incorporation of Zions Bancorporation dated *
November 8, 1993, and filed with the Department of Business Regulation,
Division of Corporations of the State of Utah on November 9, 1993
(incorporated by reference to Exhibit 3.1 to the Registrant's Form S-4
Registration Statement, File No. 33-51145, filed on Novem- ber 22,
1993)
3.2 Restated Bylaws of Zions Bancorporation, dated November 8, 1993 *
(incorporated by reference to Exhibit 3.2 to the Registrant's Form S-4
Registration Statement, File No. 33-51145, filed November 22, 1993)
5 Opinion of Metzger, Hollis, Gordon & Alprin regarding the legality of
the shares of Common Stock being registered (filed herewith)
8 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
regarding tax matters (filed herewith as Appendix B to the Proxy
Statement/Prospectus)
9 Voting Trust Agreement, dated December 31, 1991 (incorporated by *
reference to Exhibit 9 of Zions Bancorporation's Annual Report on Form
10-K for the year ended December 31, 1991)
10.1 Amended and Restated Zions Bancorporation Pension Plan (incorporated by *
reference to Exhibit 10.1 of Zions Bancorporation's Annual Report on
Form 10-K for the year ended December 31, 1994)
10.2 Amendment to Zions Bancorporation Pension Plan effective December 1, *
1994 (incorporated by reference to Exhibit 10.2 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1994)
II-7
<PAGE>
10.3 Zions Utah Bancorporation Supplemental Retirement Plan Form *
(incorporated by reference to Exhibit 19.4 of Zions Utah
Bancorporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1985)
10.4 Zions Utah Bancorporation Key Employee Incentive Stock Option Plan *
approved by the shareholders of the Company on April 28, 1982
(incorporated by reference to Exhibit 10.1 of Zions Bancorporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995)
10.5 Amendment No. 1 to Zions Bancorporation Key Employee Incentive Stock *
Option Plan approved by the shareholders of the Company on April 27,
1990 (incorporated by reference to Exhibit 10.2 of Zions
Bancorporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995)
10.6 Amendment No. 2 to Zions Bancorporation Key Employee Incentive Stock *
Option Plan approved by the shareholders of the Company of April 28,
1995 (incorporated by reference to Exhibit 10.3 of Zions
Bancorporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995)
10.7 Zions Bancorporation Deferred Compensation Plan for Directors, as *
amended May 1, 1991 (incorporated by reference to Exhibit 19 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1991)
10.8 Zions Bancorporation Senior Management Value Sharing Plan, Award Period *
1991-1994 (incorporated by reference to Exhibit 19 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1992)
10.9 Zions Bancorporation Senior Management Value Sharing Plan, Award Period *
1992-1995 (incorporated by reference to Exhibit 10.6 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1992)
10.10 Zions Bancorporation Senior Management Value Sharing Plan, Award Period *
1993-1996 (incorporated by reference to Exhibit 10.8 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1993)
II-8
<PAGE>
10.11 Zions Bancorporation Senior Management Value Sharing Plan, Award Period *
1994-1997 (incorporated by reference to exhibit 10.9 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1994)
10.12 Zions Bancorporation Senior Management Value Sharing Plan Award Period *
1995-1998 (incorporated by reference to Exhibit 10.14 of Zions
Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1995)
10.13 Zions Bancorporation Executive Management Pension Plan (incorporated by *
reference to Exhibit 10.10 of Zions Bancorporation's Annual Report on
Form 10-K for the year ended December 31, 1994)
10.14 Employment Agreement with Mr. John J. Gisi (incorporated by reference *
to Exhibit 10.13 of Zions Bancorporation's Annual Report on Form 10-K
for the year ended December 31, 1995)
10.15 Form of Employment Agreement between National Bank of Arizona and John
E. Byrd (filed herewith as Exhibit III to Agreement and Plan of
Reorganization, filed as Exhibit 2.1)
21 List of subsidiaries of Zions Bancorporation (incorporated by reference *
to Exhibit 21 of Zions Bancorporation's Annual Report on Form 10-K for
the year ended December 31, 1995)
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants for Zions Bancorpora- tion (filed herewith)
23.2 Consent of McGladrey & Pullen, independent certified public accountants
for Southern Arizona Bancorp, Inc. (filed herewith)
23.3 Consent of Deloitte & Touche LLP independent certified public
accountants for Southern Arizona Bancorp, Inc. (filed herewith)
23.4 Consent of Metzger, Hollis, Gordon & Alprin (contained in their opinion
filed as Exhibit 5)
23.5 Consent of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
with respect to certain tax matters (filed herewith in Appendix B to
the Proxy Statement/Prospectus)
23.6 Consent of M One, Inc. (filed herewith)
II-9
<PAGE>
24.1 Power of Attorney (set forth on Page II-5 of the Registration
Statement)
99.1 Preliminary copy of letter to shareholders of Southern Arizona Bancorp,
Inc. (filed herewith)
99.2 Preliminary copy of Notice of Special Meeting of Shareholders of
Southern Arizona Bancorp, Inc. (filed herewith)
99.3 Preliminary copy of form of proxy for use by shareholders of Southern
Arizona Bancorp, Inc. (filed herewith)
99.4 Agreement between Zions Bancorporation and each director of Southern
Arizona Bancorp, Inc. (filed herewith as part of Agreement and Plan of
Reorgani- zation, filed as Exhibit 2.1)
99.5 Fairness Opinion of M One, Inc. (filed herewith as Appendix C to the
Proxy Statement/Prospectus)
* incorporated by reference
II-8
<PAGE>
</TABLE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the seventeenth
day of January, 1996, between ZIONS BANCORPORATION ("Zions Bancorp"), a Utah
corporation having its principal office in Salt Lake City, Utah, NATIONAL BANK
OF ARIZONA ("NBA"), a national banking association having its head office in
Tucson, Arizona, SOUTHERN ARIZONA BANCORP, INC. (the "Company"), an Arizona
corporation having its principal office in Yuma, Arizona, and SOUTHERN ARIZONA
BANK, an Arizona banking corporation having its head office in Yuma, Arizona
(the "Bank")
W I T N E S S E T H T H A T :
WHEREAS, Zions Bancorp is a bank holding company and NBA is a national
banking association and each of them desires to affiliate with the Company and
its subsidiary, the Bank; and
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of the Company, its shareholders, its customers,
and the areas served by it to become affiliated with Zions Bancorp and NBA;
WHEREAS, the Board of Directors of the Bank has determined that it
would be in the best interests of the Bank, its customers, and the areas served
by it to become affiliated with Zions Bancorp and NBA;
WHEREAS, the respective Boards of Directors of the Company and Zions
Bancorp have agreed to the merger (the "Holding Company Merger") of the Company
with and into Zions Bancorp pursuant to the provisions of section 10-071 et seq.
of the Arizona General Corporation Law and section 16-10a-1101 et seq. of the
Utah Business Corporation Act;
WHEREAS, the respective Boards of Directors of the Bank and NBA have
agreed to the merger (the "Bank Merger") of the Bank with and into NBA pursuant
to the provisions of section 215a of the National Bank Act (12 U.S.C. ss. 215a)
and section 6-212 of the Arizona Revised Statutes; and
WHEREAS, the parties intend that the transactions contemplated by the
Holding Company Merger and the Bank Merger (collectively, the "Mergers") qualify
as one or more tax-free reorganizations under section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
<PAGE>
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Combinations.
1.1. Form of Combinations.
(a) Holding Company Combination. Zions Bancorp and the Company
will execute a merger agreement (the "Holding Company Merger Agreement")
substantially in the form of Exhibit I annexed hereto. Subject to the provisions
of the Holding Company Merger Agreement, the Company will be merged with and
into Zions Bancorp, and Zions Bancorp shall be the surviving corporation. The
shares of common stock of the Company shall be immediately converted into the
right to receive, subject to the terms, conditions, and limitations set forth
herein, such consideration as is provided in section 1.2(b) hereof.
(b) Bank Combination. NBA and the Bank will execute a merger
agreement (the "Bank Merger Agreement") substantially in the form of Exhibit II
annexed hereto. Immediately following the effectiveness of the Holding Company
Merger, and subject to the provisions of the Bank Merger Agreement, the Bank
will be merged with and into NBA, under the charter and title of NBA, and NBA
shall be the surviving association. The shares of common stock of the Bank shall
be canceled.
1.2. Consideration for Holding Company Merger.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein.
(i) Average Closing Price. The average (rounded to the nearest
penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the effective date of the Holding Company Merger (the "Effective Date").
Notwithstanding the foregoing, (A) if the result of the calculation described in
the previous sentence is less than $59.00, then the Average Closing Price shall
be $59.00, and (B) if the result of the calculation described in the previous
sentence is more than $72.00, then the Average Closing Price shall be $72.00.
(ii) Benchmark Price. The sum of:
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<PAGE>
(A) $25,330,000.00;
(B) the consolidated net undistributed income of the
Company during the period beginning on October 1, 1995 and ending on the close
of business on the last day of the calendar month preceding the Effective Date,
calculated in accordance with generally accepted accounting principles in a
manner consistent with the Company Financial Statements (as defined in section
6.13 of this Agreement). For the purpose of calculating net undistributed income
of the Company, any undistributed gain, net of taxes, derived from activities or
transactions which are not in the ordinary course of its banking operations
(such as, without limitation, the sale of securities or loans, of capital
assets, or of lines of business), all of which shall be determined in accordance
with generally accepted accounting principles, shall be excluded except as
mutually agreed by the parties hereto. It is understood that the amount
calculated under this section 1.2(a)(ii)(B) may be a negative number and that
the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 1.2(a)(ii);
and
(C) if the Effective Date does not occur on the first
day of a calendar month, an amount calculated by computing the daily average of
the net undistributed income of the Company for the period and in the manner
prescribed in section 1.2(a)(ii)(B) hereof and multiplying the result of such
computation by the number of days elapsing during the period beginning on the
first day of the month in which the Effective Date occurs and ending on the day
immediately preceding the Effective Date. It is understood that the amount
calculated under this section 1.2(a)(ii)(C) may be a negative number and that
the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 1.2(a)(ii).
(iii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in the
over-the-counter market as such prices are reported by the automated quotation
system of the National Association of Securities Dealers, Inc., or in the
absence thereof by such other source upon which Zions Bancorp and the Company
shall mutually agree.
(iv) Dissenting Shares. The shares of Company Common Stock
held by those shareholders of the Company who have timely and properly exercised
their dissenters' rights in accordance with all applicable laws (the "Appraisal
Laws").
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<PAGE>
(v) Zions Bancorp Stock. The common stock of Zions Bancorp, no
par value.
(b) Form of Consideration. Subject to the terms, conditions and
limitations set forth herein, upon surrender of his or her certificate or
certificates in accordance with Section 1.1 hereof, each holder of shares of
Company Common Stock shall be entitled to receive in the Holding Company Merger,
in exchange for each share of Company Common Stock held of record by such
stockholder as of the Effective Date:
(i) that number of shares of Zions Bancorp Stock calculated
by dividing the Benchmark Price by the Average Closing Price, and by further
dividing the number so reached by the number of shares of Company Common Stock
that shall be issued and outstanding at the Effective Date, and
(ii) in the event that the average (rounded to the nearest
penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date (the "Unadjusted Average Price") shall be less than $59.00,
that amount of cash (the "Cash Component") calculated by dividing the amount by
which the Benchmark Price exceeds the product of the Unadjusted Average Price
and the number of shares of Zions Bancorp Stock issuable under subsection (b)(i)
of this section 1.2 by the number of shares of Company Common Stock that shall
be issued and outstanding at the Effective Date.
1.3. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions Bancorp
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Bancorp Stock shall receive an amount of cash equal to the
product of such fraction times the Average Closing Price. Such fractional share
interest shall not include the right to vote or to receive dividends or any
interest thereon.
1.4. Dissenting Shares. Notwithstanding anything to the contrary
herein, each Dissenting Share whose holder, as of the Effective Date, has not
effectively withdrawn or lost his or her dissenters' rights under the Appraisal
Laws, shall not be converted into or represent a right to receive Zions Bancorp
Stock or Cash Component, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting Shares
who becomes entitled to payment for his or her Company Common Stock pursuant to
the provisions of the Appraisal Laws shall receive payment therefor from Zions
Bancorp (but only
- 4 -
<PAGE>
after the amount thereof shall have been agreed upon or finally determined
pursuant to such provisions).
1.5. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his or her Zions Bancorp Stock until he or she
exchanges his or her certificates representing Company Common Stock for Zions
Bancorp Stock and, if applicable, Cash Component. Any dividends declared on
Zions Bancorp Stock (which stock is to be delivered pursuant to this Agreement)
to holders of record on or after the Effective Date shall be paid to the
Exchange Agent (as designated in Section 1.6 of this Agreement) and, upon
receipt of the certificates representing shares of Company Common Stock, the
Exchange Agent shall forward to the former shareholders entitled to receive
Zions Bancorp Stock (i) certificates representing their shares of Zions Bancorp
Stock, (ii) dividends declared thereon subsequent to the Effective Date (without
interest), (iii) the cash value of any fractional shares determined in
accordance with Section 1.3 hereof (without interest), and (iv) any Cash
Component (without interest).
1.6. Designation of Exchange Agent. The parties to this Agreement
hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions Bank")
as Exchange Agent to effect the exchange contemplated hereby. Zions Bancorp
will, promptly after the Effective Date, issue and deliver to Zions Bank the
share certificates representing shares of Zions Bancorp Stock and the cash in
lieu of fractional shares and any Cash Component to be paid to holders of
Company Common Stock in accordance with this Agreement.
1.7. Notice of Exchange. Promptly after the Effective Date, Zions
Bancorp shall cause Zions Bank to mail to each holder of one or more
certificates formerly representing Company Common Stock, except to such holders
as shall have waived the notice required by this Section 1.7, a notice
specifying the Effective Date and notifying such holder to surrender his or her
certificate or certificates to Zions Bank for exchange for a certificate
representing the appropriate number of shares of Zions Bancorp Stock and cash in
lieu of any fractional share and any Cash Component. Such notice shall be mailed
to holders by regular mail at their addresses on the records of the Company.
Zions Bancorp shall cause Zions Bank to deliver certificates representing Zions
Bancorp Stock and cash to such holders who comply with the terms and conditions
of the notice of exchange.
1.8. Employee Benefits. If any employee of the Company or the Bank
becomes a participant in any employment benefit plan, practice, or policy of
Zions Bancorp or NBA, such employee shall be given credit under such plan,
practice, or policy for all service
- 5 -
<PAGE>
prior to the Effective Date with the Company and the Bank for purposes of
eligibility and vesting, but not for benefit accrual purposes, for which such
service is taken into account or recognized, provided that there be no
duplication of such benefits as are provided under any employee benefit plans,
practices, or policies of the Company or the Bank that continue in effect
following the Effective Date.
2. Effective Date.
---------------
The Effective Date shall be the date 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 Business Corporation Act and the Secretary of
State of the State of Arizona pursuant to section 10-074 of the Arizona General
Corporation Law, which date shall be the latest of:
2.1. Company Shareholder Approval. The date following the day upon
which the shareholders of the Company approve, ratify, and confirm the
transactions contemplated by this Agreement; or
2.2. Bank Shareholder Approval. The date following the day upon which
the shareholder of the Bank approves, ratifies, and confirms the transactions
contemplated by this Agreement; or
2.3. Federal Reserve Approval. The first to occur of (a) the date
thirty days following the date of the order of the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of San Francisco acting
pursuant to authority delegated to it by the Board of Governors of the Federal
Reserve System (collectively, the "Board of Governors") approving the Holding
Company Merger, or (b) if, pursuant to section 321(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act"), 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 (c) the date ten days following the date on
which the Board of Governors indicates its waiver of jurisdiction over the
Holding Company Merger; or
2.4. Comptroller Approval. The first to occur of (a) the date thirty
days following the date of the order of the Comptroller of the Currency (the
"Comptroller") approving the Bank Merger, or (b) if, pursuant to section 321(b)
of the Riegle Act, the Comptroller 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
- 6 -
<PAGE>
2.5. State Regulatory Approvals.
--------------------------
(a) If such an order shall be required by law, the date ten days
following the date of the order of the Commissioner of Financial Institutions of
the State of Utah (the "Commissioner") approving the transactions contemplated
by this Agreement; or
(b) If such an order shall be required by law, the date ten days
following the date of the order of the Superintendent of Banks of the State of
Arizona (the "Superintendent") approving the transactions contemplated by this
Agreement; or
2.6. Other Regulatory Approvals. The date upon which any other material
order, approval, or consent of a federal or state regulator of financial
institutions or financial institution holding companies authorizing consummation
of the transactions contemplated by this Agreement is obtained or any waiting
period mandated by such order, approval or consent has run; or
2.7. Expiration of Stays. Ten days after any stay of the approvals of
any of the Comptroller, the Board of Governors, the 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
2.8. Mutual Agreement. Such other date as shall be mutually agreed to
by Zions Bancorp and the Company.
3. Conditions Precedent to Performance of Obligations of the Parties.
------------------------------------------------------------------
The obligations of Zions Bancorp and the Company to consummate the
Holding Company Merger and the obligations of NBA and the Bank to consummate the
Bank Merger shall be subject to the conditions that on or before the Effective
Date:
3.1. Regulatory Approvals. Orders, consents, and approvals, in form and
substance reasonably satisfactory to Zions Bancorp and the Company, shall have
been entered by the requisite governmental authorities, granting the authority
necessary for consummation of the transactions contemplated by this Agreement
and the operation by Zions Bancorp of the business of the Company and by NBA of
the business of the Bank and each of the branches of the Bank as branches of
NBA, pursuant to the provisions of applicable law; and all other requirements
prescribed by law or by the rules and regulations of any other regulatory
authority having jurisdiction over such transactions shall have been satisfied.
- 7 -
<PAGE>
3.2. Registration Statement.
----------------------
(a) Effectiveness. The registration statement to be filed by
Zions Bancorp with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Act of 1933 (the "Securities Act") in connection with the
registration of the shares of Zions Bancorp Stock to be used as consideration in
connection with the Holding Company Merger (the "Registration Statement") shall
have become effective under that Act, and Zions Bancorp 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 Bancorp Stock in the Holding
Company Merger.
(b) Absence of Stop-Order. Neither the Registration Statement nor
any such required permit, authorization or confirmation shall be subject to a
stop-order or threatened stop-order by the SEC or any state securities
authority.
3.3. Federal Income Taxation. The Company and the Bank shall have
received, and Zions Bancorp shall have been furnished a copy of, a written
opinion of O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears,
P.A. or of McGladrey & Pullen, LLP or of another firm mutually agreeable to
Zions Bancorp and the Company, applying existing law, that the reorganization
contemplated by this Agreement shall qualify as one or more tax-free
reorganizations under the Code and the regulations and rulings promulgated
thereunder. Each of the Company and the Bank agrees to use its best efforts to
solicit such opinion in good faith and in a timely manner.
3.4. Absence of Litigation. No action, suit, or proceeding shall have
been instituted or shall have been threatened before any court or other
governmental body or by any public authority to restrain, enjoin, or prohibit
the Mergers, or which might restrict the operation of the business of the
Company or that of the Bank or the exercise of any rights with respect thereto
or to subject any of the parties hereto or any of their directors or officers to
any liability, fine, forfeiture, divestiture, or penalty on the ground that the
transactions contemplated hereby, the parties hereto, or their directors or
officers have breached or will breach any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby and with respect to which the parties hereto have been advised by counsel
that, in the opinion of such counsel, such action, suit, or proceeding raises
substantial questions of law or fact which could reasonably be decided adversely
to any party hereto or its directors or officers.
- 8 -
<PAGE>
3.5. Adverse Legislation. No legislation shall have been enacted and no
regulation or other governmental requirement shall have been adopted or imposed
that has rendered or will render consummation of any of the material
transactions contemplated by this Agreement impossible, or that would materially
and adversely affect the economic assumptions of the material transactions
contemplated hereby or the business, operations, financial condition, properties
or assets of the combined enterprise of Zions Bancorp and the Company or
otherwise materially impair the value of the Company to Zions Bancorp.
3.6. Employment and Competition Agreement. NBA and John E. Byrd shall
have executed an employment and non-competition agreement substantially in form
and substance as that set forth as Exhibit III attached hereto.
4. Conditions Precedent to Performance of the Obligations of Zions
----------------------------------------------------------------
Bancorp and NBA.
----------------
The obligations of Zions Bancorp and NBA hereunder are subject to the
satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived in
whole or in part by Zions Bancorp in writing:
4.1. Approval by Shareholders of the Company and the Bank.
-----------------------------------------------------
(a) The shareholders of the Company, acting at a meeting duly and
properly called for such purpose pursuant to a proxy statement in form and
substance reasonably satisfactory to Zions Bancorp and its counsel, shall have
approved, ratified, and confirmed the Holding Company Merger by not less than
the requisite percentage of the outstanding voting stock of each class of the
Company, in accordance with the applicable laws of the State of Arizona, and
dis- senters' rights of appraisal under the Appraisal Laws shall have been
effectively preserved as of the Effective Date by owners of not more than 6
percent of the outstanding shares of Company Common Stock.
(b) The shareholders of the Bank shall have approved, ratified,
and confirmed the Bank Merger by not less than the requisite percentage of the
outstanding voting stock of each class of the Bank, in accordance with the
applicable laws of the State of Arizona.
- 9 -
<PAGE>
4.2. Representations and Warranties; Performance of Obligations.
-----------------------------------------------------------
All representations and warranties of the Company and the Bank
contained in this Agreement shall be true and correct in all material respects
as of the Effective Date 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 the Company and the Bank contained in this
Agreement which specifically relate to an earlier date shall be true and correct
in all material respects as of such earlier date. All covenants and obligations
to be performed or met by the Company or the Bank on or prior to the Effective
Date shall have been so performed or met. On the Effective Date, each of the
Company and the Bank shall deliver to Zions Bancorp its certificate signed by
its chairman, its president, and its chief financial officer to that effect. The
delivery of such certificate shall in no way diminish the warranties,
representations, covenants, and obligations of the Company or the Bank made in
this Agreement.
4.3. Opinion of Company Counsel. Zions Bancorp and NBA shall have
received a favorable opinion from O'Connor, Cavanagh, Anderson, Westover,
Killingsworth & Beshears, P.A., dated the Effective Date, substantially in form
and substance as that set forth as Exhibit IV attached hereto.
4.4. Opinion of Company Litigation Counsel. Zions Bancorp and NBA shall
have received a favorable opinion dated the Effective Date, in form and
substance reasonably satisfactory to its counsel, from litigation counsel to the
Company and the Bank, whose identity shall be acceptable to Zions Bancorp. Such
opinion shall state that except with respect to matters set forth in Schedule
4.4 to this Agreement or in a schedule to the opinion, the contents of the
latter of which schedules shall be acceptable to Zions Bancorp in its sole
discretion, (a) to the best of the knowledge of counsel, there is no action,
suit, or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the Company or the Bank
which might result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, or business prospects of the
Company or the Bank considered as one enterprise, or which might materially and
adversely affect the properties or assets of the Company or the Bank considered
as one enterprise or which might prevent, hinder, or delay the consummation of
the transactions contemplated by this Agreement; and (b) to the best of the
knowledge of counsel, all pending legal or governmental proceedings to which the
Company or the Bank is a party or of which any of their respective properties or
assets is the subject,
- 10 -
<PAGE>
including ordinary routine litigation incidental to its business are, considered
in the aggregate, not material. If any matters are set forth in a schedule to
the opinion, the opinion shall also state that the statements in that schedule
regarding such matters fairly summarize the matters therein described.
4.5. Delivery of Branch Authorizations. The Bank shall have delivered
to Zions Bancorp originals or certified copies of all of its regulatory
authorizations entitling the Bank to operate each of its branch offices,
together with a certification by the Bank dated the Effective Date, signed by
its chairman, its president, and its chief financial officer, certifying that
such branch certificates have not been revoked or threatened to be revoked and
that such certificates are in full force and effect.
4.6. No Adverse Developments.
------------------------
(a) During the period from September 30, 1995 to the Effective
Date, (i) there shall not have been any material adverse change in the financial
position or results of operations of the Company or the Bank taken as a whole,
nor in the financial position or results of operations of the Bank, nor shall
the Company or the Bank have sustained any material loss or damage to its
properties, whether or not insured, which materially affects its ability to
conduct its business; (ii) neither the Company nor the Bank shall have become a
party to any litigation or been threatened to be made a party to any litigation
which, in the judgment of Zions Bancorp, makes or would make either of the
Mergers inadvisable or impracticable to Zions Bancorp or NBA; and (iii) none of
the events described in clauses (a) through (f) of Section 6.16 of this
Agreement shall have occurred, and each of the practices and conditions
described in clauses (x) through (z) of that section shall have been maintained.
(b) As of the Effective Date, the authorized capital stock and
the status and characteristics of subscriptions, warrants, options, rights,
convertible securities, similar arrangements and commitments in respect of
capital stock, transfer restrictions, and stock reservations of the Company and
the Bank and the status of shareholder agreements and other agreements,
understandings, and commitments relating to the voting or disposition of capital
stock of the Company and the Bank shall be as stated in section 6.9. As of the
Effective Date, the Company shall hold of record and beneficially all of the
capital stock of the Bank.
(c) As of the Effective Date, other than liabilities incurred
subsequent to September 30, 1995 either in the ordinary
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<PAGE>
course of business or with the consent of Zions Bancorp, there shall be no
liabilities of the Company or the Bank which were not reflected on the September
30, 1995 statement of condition of the Company.
(d) Zions Bancorp shall have received a certificate of each of
the Company and the Bank dated the Effective Date, signed by its chairman, its
president, and its chief financial officer, certifying to the matters set forth
in paragraphs (a), (b), and (c) of this section 4.6. The delivery of such
certificate shall in no way diminish the warranties and representations of the
Company or the Bank made in this Agreement.
4.7. Consolidated Net Worth. On and as of the Effective Date, the
consolidated net worth of the Company as determined in accordance with generally
accepted accounting principles shall not be less than the consolidated net worth
of the Company as of September 30, 1995 as determined in accordance with
generally accepted accounting principles.
4.8. Loan Loss Reserve Method. During the period from September 30,
1995 to the Effective Date, the Bank shall have continued to employ the loan
loss reserve methodology which it employed at September 30, 1995 and shall have
maintained an aggregate reserve for loan losses not less than that which it
maintained at September 30, 1995.
5. Conditions Precedent to Performance of Obligations of the Company
-----------------------------------------------------------------
and the Bank.
-------------
The obligations of the Company and the Bank hereunder are subject to
the satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived in
whole or in part by the Company in writing:
5.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of Zions Bancorp and NBA contained in this
Agreement shall be true and correct in all material respects as of the Effective
Date 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 Bancorp and NBA contained in this Agreement which specifically relate
to an earlier date shall be true and correct in all material respects as of such
earlier date. All covenants and obligations to be performed or met by Zions
Bancorp and NBA on or prior to the Effective Date shall have been so performed
or met.
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<PAGE>
On the Effective Date, each of Zions Bancorp and NBA shall deliver to the
Company its certificate signed by either its Chairman of the Board or its
President to that effect. The delivery of such certificate shall in no way
diminish the warranties, representations, covenants, and obligations of Zions
Bancorp or NBA made in this Agreement.
5.2. Opinion of Zions Bancorp Counsel. The Company and the Bank shall
have received a favorable opinion of Metzger, Hollis, Gordon & Mortimer, dated
the Effective Date, substantially in form and substance as that set forth as
Exhibit V attached hereto.
5.3. No Adverse Developments. During the period from September 30, 1995
to the Effective Date, there shall not have been any material adverse change in
the financial position or results of operations of Zions Bancorp nor shall Zions
Bancorp have sustained any material loss or damage to its properties, whether or
not insured, which materially affects its ability to conduct its business; and
the Company shall have received a certificate of Zions Bancorp dated the
Effective Date, signed by either its Chairman of the Board or its President, to
the foregoing effect. The delivery of such certificate shall in no way diminish
the warranties and representations of Zions Bancorp or those of NBA made in this
Agreement.
5.4. Status of Zions Bancorp Stock. Zions Bancorp Stock, including the
Zions Bancorp Stock to be issued in the Holding Company Merger, shall be quoted
on the National Market System of the National Association of Securities Dealers'
Automated Quotation System (or else shall become listed on the New York Stock
Exchange or the American Stock Exchange).
5.5. Receipt of Fairness Opinion. The Company shall have received a
favorable opinion from M-One, Inc. with respect to the fairness of the terms of
the Holding Company Merger to the shareholders of the Company from a financial
point of view (the "Fairness Opinion").
6. Representations and Warranties of the Company and the Bank.
-----------------------------------------------------------
The Company and the Bank (collectively the "Warrantors" and each
individually a "Warrantor") jointly and severally represent and warrant to Zions
Bancorp and NBA as follows:
6.1. Organization, Powers, and Qualification. The Warrantor is a
corporation which is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation
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<PAGE>
and has all requisite corporate power and authority to own and operate its
properties and assets, to lease the properties used in its business, and to
carry on its business as now conducted. The Warrantor 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 adversely affect the operation and properties of the
Warrantor in any material respect. The Warrantor is duly qualified and licensed
to do business and is in good standing in every jurisdiction with respect to
which the failure to be so qualified or licensed could result in liability
exceeding $25,000 or adversely affect the operation and properties of the
Warrantor in an amount exceeding $25,000.
6.2. Execution and Performance of Agreement. The Warrantor has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder.
6.3. Absence of Violations.
---------------------
(a) The Warrantor is not in violation of its charter documents or
bylaws, or of any applicable federal, state, or local law or ordinance or any
order, rule, or regulation of any federal, state, local, or other governmental
agency or body, in any material respect, or in default with respect to any
order, writ, injunction, or decree of any court, or in default under any order,
license, regulation, or demand of any governmental agency, any of which
violations or defaults might have a materially adverse effect on the business,
properties, liabilities, financial position, results of operations, or prospects
of the Warrantor; and the Warrantor has not received any claim or notice of
violation with respect thereto.
(b) Neither the Warrantor nor any member of its management is a
party to any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the Board of Governors, the Federal
Deposit Insurance Corporation (the "FDIC"), any other banking or securities
authority of the United States or the State of Utah or the State of Arizona, or
any other regulatory agency that relates to the conduct of the business of the
Warrantor or its assets. Except as previously disclosed to Zions Bancorp in
writing, no such agreement, memorandum, order, condition, or decree is pending
or threatened.
(c) The Warrantor has established policies and procedures to
provide reasonable assurance of compliance in a safe and
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<PAGE>
sound manner with the federal banking, credit, housing, consumer protection, and
civil rights laws and with all other laws applicable to the operations of the
Warrantor and the regulations adopted under each of those laws, so that
transactions are executed and assets are maintained in accordance with such laws
and regulations. The policies and practices of the Warrantor with respect to all
such laws and regulations reasonably limit noncompliance and detect and report
noncompliance to management of the Warrantor.
6.4. Compliance with Agreements. The Warrantor is not in violation of
any material term of any material security agreement, mortgage, indenture, or
any other contract, agreement, instrument, lease, or certificate. The capital
ratios of the Warrantor comply fully with all terms of all currently outstanding
supervisory and regulatory requirements and with the conditions of all
regulatory orders and decrees.
6.5. Binding Obligations; Due Authorization. Subject to the approval of
its shareholders, this Agreement constitutes valid, legal, and binding
obligations of the Warrantor, enforceable against it 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 the Warrantor. Subject to approval by the shareholders of the
Warrantor of this Agreement, no other corporate proceedings on the part of the
Warrantor are necessary to authorize the execution and delivery of this
Agreement or the carrying out of the transactions contemplated hereby.
6.6. Absence of Default. None of the execution or the delivery of this
Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under the organizational documents or bylaws of the Warrantor. None of
such execution, consummation, or fulfillment will (a) conflict with, or result
in a material breach of the terms, conditions, or provisions of, or constitute a
material 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 the
Warrantor pursuant to any material agreement or instrument under which the
Warrantor is obligated or by which any of its properties or assets may be bound,
including without limitation any material lease, contract, mortgage, promissory
note, deed of trust, loan, credit arrangement or other commitment or
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<PAGE>
arrangement of the Warrantor in respect of which it is an obligor; (b) if the
Holding Company Merger is approved by the Board of Governors under the Bank
Holding Company Act of 1956, as amended (the "BHC Act") or if the Board of
Governors waives jurisdiction under that act, and if the Bank Merger is approved
by the Comptroller, and if the transactions contemplated by this Agreement are
approved by the Commissioner and the Superintendent, violate any law, statute,
rule, or regulation of any government or agency to which the Warrantor is
subject and which is material to its operations; or (c) violate any judgment,
order, writ, injunction, decree, or ruling to which the Warrantor or any of its
properties or assets is subject or bound. None of the execution or delivery of
this Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will require any
authorization, consent, approval, or exemption by any person which has not been
obtained, or any notice or filing which has not been given or done, other than
approval of or waiver of jurisdiction over the transactions contemplated by this
Agreement by the Board of Governors, the Comptroller, the Commissioner, and the
Superintendent.
6.7. Compliance with BHC Act.
------------------------
(a) The Company is registered as a bank holding company under the
BHC Act. All of the activities and investments of the Company 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 corporation or other entity, other than the Company, is
registered or is required to be registered as a bank holding company under the
BHC Act by virtue of its control over the Bank or over any company that directly
or indirectly has control over the Bank.
6.8. Subsidiaries.
-------------
(a) Other than (with respect to the Company) the Bank, which is a
direct, wholly owned subsidiary of the Company, neither of the Warrantors has
any subsidiaries or directly or indirectly owns, controls, or holds with the
power to vote any shares of the capital stock of any company (except shares held
by the Bank for the account of others in a fiduciary or custodial capacity in
the ordinary course of its business and shares lawfully acquired by the Bank in
satisfaction of a debt previously contracted in good faith). There are no
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, or agreements calling for or requiring the issuance, transfer,
sale, or other disposition
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<PAGE>
of any shares of the capital stock of the Bank, or calling for or requiring the
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of the Bank. Other than entities whose shares were lawfully
acquired by the Bank in satisfaction of a debt previously contracted in good
faith, there are no other direct or indirect subsidiaries of the Company or the
Bank which are required to be consolidated or accounted for on the equity method
in the consolidated financial statements of the Company or the financial
statements of the Bank prepared in accordance with generally accepted accounting
principles.
(b) Neither the Bank nor the Company has a direct or indirect
equity or ownership interest which represents 5 percent or more of the aggregate
equity or ownership interest of any entity (including, without limitation,
corporations, partnerships, and joint ventures).
6.9. Capital Structure.
(a) The authorized capital stock of the Company consists of
2,000,000 shares of Company Common Stock, no par value, of which, as of the date
of this Agreement, 1,266,362 shares have been duly issued and are validly
outstanding, fully paid, and held by approximately 514 shareholders of record;
no shares of Company Common Stock are held by the Company as treasury shares.
The aforementioned shares of Company Common Stock are the only voting securities
of the Company authorized, issued, or outstanding as of such date; and no
subscriptions, warrants, options, rights, convertible securities, or similar
arrangements or commitments in respect of securities of the Company are
authorized, issued, or outstanding which would enable the holder thereof to
purchase or otherwise acquire shares of any class of capital stock of the
Company. None of the Company Common Stock is subject to any restrictions upon
the transfer thereof under the terms of the corporate charter or bylaws of the
Company.
(b) The authorized capital stock of the Bank consists of
1,149,898 shares of Bank Common Stock, no par value, of which, as of the date of
this Agreement, 1,149,898 shares have been duly issued and are validly
outstanding, fully paid, and all of which are held of record and beneficially by
the Company. The aforementioned shares of Bank Common Stock are the only voting
securities of the Bank authorized, issued, or outstanding as of such date; and
no subscriptions, warrants, options, rights, convertible securities, or similar
arrangements or commitments in respect of securities of the Bank are authorized,
issued, or outstanding which would enable the holder thereof to purchase or
otherwise acquire shares of any class of capital stock of the Bank. None of the
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<PAGE>
Bank Common Stock is subject to any restrictions upon the transfer thereof under
the terms of the corporate charter or bylaws of the Bank.
(c) None of the shares of Company Common Stock or Bank Common
Stock has been issued in violation of the preemptive rights of any shareholder.
(d) As of the date hereof, to the best of the knowledge of the
Warrantor, and except for this Agreement, there are no shareholder agreements,
or other agreements, understandings, or commitments relating to the right of any
holder or beneficial owner of more than 1 percent of the issued and outstanding
shares of any class of the capital stock of either Warrantor to vote or to
dispose of his, her or its shares of capital stock of that Warrantor.
(e) The Company has issued $2,500,000 principal amount of 8.75%
Senior Notes Due July 1, 2000 (the "Notes"), all of which as of the date of this
Agreement are outstanding and held by approximately 62 holders of record. The
Notes are the only nonvoting securities of the Company authorized, issued, or
outstanding as of such date. The Notes may be prepaid at the election of the
Company as of the date of this Agreement at 102 percent of principal amount, and
after July 1, 1996 at no more than 101 percent of principal amount, provided
that accrued interest must also be paid at time of prepayment. The Company is
not and has never been in violation of any material affirmative or negative
covenant contained in the Note and Agency Agreement governing the Notes, and no
Event of Default under the Note and Agency Agreement has occurred or is
continuing.
6.10. Articles of Incorporation, Bylaws, and Minute Books. The copies
of the articles of incorporation and all amendments thereto and of the bylaws,
as amended, of the Warrantor that have been made available for inspection by
Zions Bancorp are true, correct, and complete copies thereof. The minute books
of the Warrantor which have been made or will, no later than ten business days
after the date hereof, be made available for inspection by Zions Bancorp until
the Effective Date contain accurate minutes of all meetings and accurate
consents in lieu of meetings of the board of directors (and any committee
thereof) and of the shareholders of the Warrantor since its inception. These
minute books accurately reflect all transactions referred to in such minutes and
consents in lieu of meetings and disclose all material corporate actions of the
shareholders and boards of directors of the Warrantor and all committees
thereof. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of
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<PAGE>
the board of directors (or any committee thereof) or of shareholders of the
Warrantor.
6.11. Books and Records. The books and records of the Warrantor fairly
reflect the transactions to which it is a party or by which its properties are
subject or bound. Such books and records have been properly kept and maintained
and are in compliance in all material respects with all applicable legal and
accounting requirements. The Warrantor follows generally accepted accounting
principles applied on a consistent basis in the preparation and maintenance of
its books of account and financial statements, including but not limited to the
application of the accrual method of accounting for interest income on loans,
leases, discounts, and investments, interest expense on deposits and all other
liabilities, and all other items of income and expense. The Warrantor has made
all accruals in amounts which accurately report income and expense in the proper
periods in accordance with generally accepted accounting principles. The
Warrantor has filed all material reports and returns required by any law or
regulation to be filed by it.
6.12. Regulatory Approvals and Filings, Contracts, Commitments, etc.
The Company has made or will, no later than ten business days after the date
hereof, make available for inspection by Zions Bancorp until the Effective Date
originals or copies of the following documents relating to the Company and the
Bank:
(a) All regulatory approvals received since January 1, 1989, of
the Company and the Bank relating to all bank and nonbank acquisitions or the
establishment of de novo operations;
(b) All employment contracts, deferred compensation,
non-competition, bonus, stock option, profit-sharing, pension, retirement,
consultation after retirement, incentive, insurance arrangements or plans
(including medical, disability, group life or other insurance plans), and any
other remuneration or fringe benefit arrangements applicable to employees,
officers, or directors of the Company or the Bank, accompanied by any
agreements, including trust agreements, embodying such contracts, plans, or
arrangements, and all employee manuals and memoranda relating to employment and
benefit policies and practices of any nature whatsoever (whether or not
distributed to employees or any of them), and any actuarial reports and audits
relating to such plans;
(c) All material contracts, agreements, leases, mortgages, and
commitments, except those entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound; or, if any of the same
be oral, written
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<PAGE>
summaries of all such oral contracts, agreements, leases, mortgages, and
commitments;
(d) All material contracts, agreements, leases, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound and which require the
consent or approval of third parties to the execution and delivery of this
Agreement or to the consummation or performance of any of the transactions
contemplated thereby, or, if any of the same be oral, written summaries of all
such oral contracts, agreements, leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound and which relate to
land, buildings, fixtures, or other real property upon or within which the
Company or the Bank operates its businesses or is authorized to operate its
businesses, or with respect to which the Company or the Bank has any application
pending for authorization to operate its businesses;
(f) Any pending application, including any documents or materials
related thereto, which has been filed by the Company or the Bank with any
federal or state regulatory agency with respect to the establishment of a new
office or the acquisition or establishment of any additional banking or
nonbanking subsidiary; and
(g) All federal and state tax returns filed by the Company or the
Bank for the years 1988 through 1994, a copy of the most recent audit
examination of each of the Company and the Bank by the Internal Revenue Service
("IRS"), if any, a copy of the most recent state revenue agency examination, if
any, of each of the Company and the Bank, and all tax rulings with respect to
the Company or the Bank received from the IRS since January 1, 1987.
6.13. Financial Statements. The Company has furnished to Zions Bancorp
its consolidated statement of condition as of each of December 31, 1992,
December 31, 1993, December 31, 1994, and September 30, 1995, and its related
consolidated statement of income, consolidated statement of changes in financial
position, and consolidated statement of changes in stockholders' equity for each
of the periods then ended, and the notes thereto (collectively, the "Company
Financial Statements"). All of the Company Financial Statements, including the
related notes, (a) were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of
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<PAGE>
income and expense on a consistent basis throughout the periods involved, and
(b) are in accordance with the books and records of the Company which have been
maintained in accordance with generally accepted accounting principles or the
requirements of financial institution regulatory authorities, as the case may
be, and (c) fairly and accurately reflect the consolidated financial position of
the Company as of such dates, and the consolidated results of operations of the
Company for the periods ended on such dates, and do not fail to disclose any
material extraordinary or out-of-period items, and (d) reflect, in accordance
with generally accepted accounting principles applied in all material respects
and as to each category of assets and liabilities and each category of income
and expense on a consistent basis throughout the periods involved, adequate
provision for, or reserves against, the possible loan losses of the Company as
of such dates.
6.14. Call Reports; Bank Holding Company Reports.
------------------------------------------
(a) The Bank has furnished to Zions Bancorp its Consolidated
Reports of Condition and Consolidated Reports of Income for the calendar
quarters dated March 31, 1994 and thereafter. All of such Consolidated Reports
of Condition and Consolidated Reports of Income, including the related schedules
and memorandum items, were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved.
(b) No adjustments are required to be made to the equity capital
account of the Bank as reported on any of the Consolidated Reports of Condition
referred to in Subsection 6.14(a) hereof, in any material amount, in order to
conform such equity capital account to equity capital as would be determined in
accordance with generally accepted accounting principles.
(c) The Company has furnished to Zions Bancorp the annual report
on Form FR Y-6 as filed with the Board of Governors as of December 31, 1994 on
behalf of the Company.
6.15. Absence of Undisclosed Liabilities. At September 30, 1995, the
Company had no obligation or liability of any nature (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due) which was material,
or that when combined with all similar obligations or liabilities would have
been material, to the Company, except (a) as disclosed in the Company Financial
Statements, or (b) as set forth on Schedule 6.15 hereof,
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<PAGE>
or (c) for unfunded loan commitments made by the Company or the Bank in the
ordinary course of its business consistent with past practice; nor does there
exist a set of circumstances resulting from transactions effected or events
occurring on or prior to September 30, 1995 or from any action omitted to be
taken during such period that could reasonably be expected to result in any such
material obligation or liability, except as disclosed or provided for in the
Company Financial Statements. The amounts set up as current liabilities for
taxes in the Company Financial Statements are sufficient for the payment of all
taxes (including, without limitation, federal, state, local, and foreign excise,
franchise, property, payroll, income, capital stock, and sales and use taxes)
accrued in accordance with generally accepted accounting principles and unpaid
at September 30, 1995. Since September 30, 1995, neither the Company nor the
Bank has incurred or paid any obligation or liability that would be material (on
a consolidated basis) to the Company, except (x) for obligations incurred or
paid in connection with transactions by it in the ordinary course of its
business consistent with past practices, or (y) as set forth on Schedule 6.15
hereof, or (z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since September 30, 1995, there
has been (a) no material adverse change in the condition, financial or
otherwise, or, taken as a whole, to the assets, properties, liabilities, or
businesses of the Company or the Bank; (b) no material deterioration in the
quality of the loan portfolio of the Bank or of any major component thereof, and
no material increase in the level of nonperforming assets or non-accrual loans
at the Bank or in the level of its provision for credit losses or its reserve
for possible credit losses; (c) no declaration, setting aside, or payment by the
Company or the Bank of any regular dividend, special dividend, or other
distribution with respect to any class of capital stock of the Company or the
Bank, other than customary cash dividends paid by the Bank whose amounts have
not exceeded past practice and the intervals between which dividends have not
been more frequent than past practice; (d) no repurchase by the Company of any
of its capital stock; (e) no material loss, destruction, or damage to any
material property of the Company or the Bank, which loss, destruction, or damage
is not covered by insurance; and (f) no material acquisition or disposition of
any asset, nor any material contract outside the ordinary course of business
entered into by the Company or the Bank nor any substantial amendment or
termination of any material contract outside the ordinary course of business to
which the Company or the Bank is a party, nor any other transaction by the
Company or the Bank involving an amount in excess of $50,000 other than for fair
value in the ordinary course of its business. Since September 30, 1995, (x) the
Warrantor has conducted its business only in the
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ordinary course of such business and consistent with past practice; (y) the
Company, on a consolidated basis, has maintained the quality of its loan
portfolio and that of each of its major components at approximately the same
level as existed at September 30, 1995; and (z) the Company, on a consolidated
basis, has administered its investment portfolio pursuant to essentially the
same policies and procedures as existed during 1993 and 1994 and the first nine
months of 1995, and has taken no action to lengthen the average maturity of the
investment portfolio, or of any significant category thereof, to any material
extent.
6.17. Reserve for Possible Credit Losses. The Company's consolidated
reserve for possible credit losses as of September 30, 1995 was adequate to
absorb reasonably anticipated losses in the consolidated loan and lease
portfolios of the Company, in view of the size and character of such portfolios,
current economic conditions, and other pertinent factors. Management
periodically reevaluates the adequacy of such reserve based on portfolio
performance, current economic conditions, and other factors.
6.18. Tax Matters.
------------
(a) All federal, state, local, and foreign tax returns and
reports (including, without limitation, all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school, and any other tax under laws
of the United States or any state or municipal or political subdivision thereof)
required to be filed by or on behalf of the Warrantor have been timely filed
with the appropriate governmental agencies 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, 1994, and all returns filed are complete and accurate to the best
of the knowledge of the Warrantor and properly reflect the taxes of the
Warrantor for the periods covered thereby. All taxes shown on filed returns have
been paid. As of the date hereof, there is no audit examination, deficiency, or
refund litigation or tax claim or any notice of assessment or proposed
assessment by the IRS or any other taxing authority, or any other matter in
controversy with respect to any taxes that might result in a determination
adverse to the Warrantor, except as reserved against in the Company Financial
Statements. All federal, state, and local taxes, assessments, interest,
additions, deficiencies, fees, penalties, and other governmental charges or
impositions due with respect to completed and settled examinations or concluded
litigation have been properly accrued or paid.
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<PAGE>
(b) The Warrantor has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect.
(c) To the extent any federal, state, local, or foreign taxes are
due from the Warrantor for the period or periods beginning January 1, 1995 or
thereafter through and including the Effective Date, adequate provision on an
estimated basis has been or will be made for the payment of such taxes by
establishment of appropriate tax liability accounts on the last monthly
financial statements of the Company prepared before the Effective Date.
(d) Deferred taxes of the Warrantor have been provided for in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement.
(e) The Bank's deduction for bad debts taken and the reserve for
loan losses for federal income tax purposes at September 30, 1995, were not
greater than the maximum amount permitted under the provisions of section 585 of
the Code.
(f) Other than liens arising under the laws of the State of
Arizona with respect to taxes assessed and not yet due and payable, there are no
tax liens on any of the properties or assets of the Company or any of its
subsidiaries.
(g) The Company and the Bank have timely filed all information
returns required by sections 6041, 6041A, 6042, 6045, 6049, 6050H, and 6050J of
the Code and have exercised due diligence in obtaining certified taxpayer
identification numbers as required pursuant to Treasury Regulations ss.
35a.9999.
(h) The taxable year end of the Company for federal income tax
purposes is, and since the inception of the Company has continuously been,
December 31.
6.19. Consolidated Net Worth. The consolidated net worth of the Company
on the date of this Agreement, as determined in accordance with generally
accepted accounting principles, is not less than the consolidated net worth of
the Company as of September 30, 1995 as determined in accordance with generally
accepted accounting principles.
6.20. Examinations. To the extent consistent with law, each of the
Company and the Bank has heretofore disclosed to Zions Bancorp relevant
information contained in its most recent Report of Examination issued by the
Board of Governors or the FDIC, as the case may be. Such information so
disclosed consists of all
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<PAGE>
material information with respect to the financial condition of the Warrantor
included in such reports, and does not omit or will not omit any information
necessary to make the information disclosed not misleading.
6.21. Reports. Since January 1, 1991, the Warrantor has effected all
registrations and filed all reports and statements, together with any amendments
required to be made with respect thereto, which the Warrantor 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 Superintendent, and (e) any other
governmental or regulatory authority or agency having jurisdiction over the
operations of the Warrantor. None of such registrations, reports, and documents,
including the financial statements, exhibits, and schedules thereto, contains
any statement which, at the time and in the light of the circumstances under
which it was made, is false or misleading with respect to any material fact or
which omits to state any material fact necessary in order to make the statements
contained therein not false or misleading.
6.22. FIRA Compliance and Other Transactions with Affiliates. To the
best of the knowledge of the Warrantor:
(a) none of the officers, directors, or beneficial holders of 5
percent or more of the common stock of the Warrantor and no person "controlled"
(as that term is defined in the Financial Institutions Regulatory and Interest
Rate Control Act of 1978) by the Warrantor, has any ongoing material transaction
with the Warrantor or any other Warrantor on the date of this Agreement;
(b) none of such officers, directors, holders, or other persons
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 the Warrantor or any other Warrantor not in the
ordinary course of business; and
(c) any other extensions of credit by the Warrantor to such
officers, directors, and other persons have heretofore been disclosed in writing
by the Warrantor to Zions Bancorp.
6.23. SEC Registered Securities. No equity or debt securities of the
Company or the Bank are registered or required to be registered under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
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6.24. Legal Proceedings. Except as disclosed in the Company Financial
Statements, there is no claim, action, suit, arbitration, investigation, or
other proceeding pending before any court, governmental agency, authority or
commission, arbitrator, or "impartial mediator" (of which the Company or any of
its subsidiaries has been served with process or otherwise been given notice)
or, to the best of the knowledge of the Warrantor, threatened or contemplated
against or affecting it or its property, assets, interests, or rights, or any
basis therefor of which notice has been given, which, if adversely determined,
would have a material adverse effect (financial or otherwise) on the business,
operating results, or financial condition of the Company or which otherwise
could prevent, hinder, or delay consummation of the transactions contemplated by
this Agreement.
6.25. Absence of Governmental Proceedings. The Warrantor is not a party
defendant or respondent to any pending legal, equitable, or other proceeding
commenced by any governmental agency and, to the best of its knowledge, no such
proceeding is threatened.
6.26. Federal Deposit Insurance. The deposits held by the Bank are
insured within statutory limits by the Bank Insurance Fund of the FDIC pursuant
to the provisions of the Federal Deposit Insurance Act, as amended (12 U.S.C.
ss. 1811 et seq.), and the Bank has paid all assessments and filed all related
reports and statements required under the Federal Deposit Insurance Act. None of
the deposits of the Bank are insured by the Savings Association Insurance Fund
of the FDIC.
6.27. Other Insurance. The Warrantor carries insurance with reputable
insurers, including blanket bond coverage, in such amounts as are reasonable to
cover such risks as are customary in relation to the character and location of
its properties and the nature of its businesses. All such policies of insurance
are in full force and effect, and no notice of cancellation has been received.
All premiums to date have been paid in full. The Warrantor is not in default
with respect to any such policy which is material to the Company.
6.28. Flood Hazards. The financial statements of the Bank reflect
adequate provision for, or reserves against, contingencies relating to the risk
of flooding within its lending area. The Bank is in material compliance with
Part 339 of the rules and regulations of the FDIC ("Loans in Areas Having
Special Flood Hazards").
6.29. Labor Matters. The Warrantor is not a party to or bound by any
collective bargaining contracts with respect to any employees of the Warrantor.
Since January 1, 1985, there has not
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<PAGE>
been, nor to the best of the knowledge of the Warrantor was there or is there
threatened, any strike, slowdown, picketing, or work stoppage by any union or
other group of employees against the Warrantor or any of its premises, or any
other labor trouble or other occurrence, event, or condition of a similar
character. As of the date hereof, the Warrantor is not aware of any attempts to
organize a collective bargaining unit to represent any of its employee groups.
6.30. Employee Benefit Plans.
-----------------------
(a) Schedule 6.30 hereto contains a list and brief descriptions
of all pension, retirement, stock purchase, stock bonus, stock ownership, stock
option, performance share, stock appreciation right, phantom stock, savings, or
profit-sharing plans, any employment, deferred compensation, consultant, bonus,
or collective bargaining agreement, or group insurance contract or any other
incentive, welfare, life insurance, death or survivor's benefit, health
insurance, sickness, disability, medical, surgical, hospital, severance, layoff
or vacation plans, contracts, and arrangements or employee benefit plans or
agreements sponsored, maintained, or contributed to by the Warrantor for the
employees or former employees of the Warrantor. The Company has previously made
available and will continue to make available to Zions Bancorp for its
inspection until the Effective Date true, complete, and accurate copies of all
plans and arrangements listed on Schedule 6.30, together with (i) the most
recent actuarial and financial report prepared with respect to any such plans
which constitute "qualified plans" under section 401(a) of the Code, and (ii)
the most recent annual reports, if any, filed with any government agency and all
IRS rulings and determination letters and any open requests for such rulings and
letters that pertain to any such plan.
(b) Except for liabilities to the Pension Benefit Guaranty
Corporation ("PBGC") pursuant to section 4007 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), all of which have been fully paid,
and except for liabilities to the IRS under section 4971 of the Code, all of
which have been fully paid, the Warrantor has no liability with respect to any
pension plan qualified under section 401 of the Code. The Warrantor does not
sponsor or maintain any defined benefit plan and has never sponsored or
maintained any defined benefit plan.
(c) All "employee benefit plans," as defined in section 3(3) of
ERISA, that cover one or more employees employed by the Warrantor (each
individually a "Plan" and collectively the "Plans"), comply in all material
respects with ERISA and, where
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<PAGE>
applicable for tax-qualified or tax-favored treatment, with the Code. As of
September 30, 1995, the Warrantor had no material liability under any Plan which
is not reflected on the Company Financial Statements as of such date (other than
such normally unrecorded liabilities under the Plans for sick leave, holiday,
education, bonus, vacation, incentive compensation, and anniversary awards,
provided that such liabilities are not in any event material). Neither the
Plans, the Warrantor nor any trustee or administrator of the Plans has ever
engaged in a "prohibited transaction" with respect to the Plans within the
meaning of section 406 of ERISA or, where applicable, section 4975 of the Code
for which no exemption is applicable, nor have there been any "reportable
events" within section 4043 of ERISA for which the thirty-day notice therefor
has not been waived. The Warrantor has not incurred any liability under section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan.
(d) 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, where the Warrantor 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.
6.31. Employee Relations. As of the date hereof, the Warrantor is, to
the best of its knowledge, in compliance in all material respects with all
federal and state laws, regulations, and orders respecting employment and
employment practices (including Title VII of the Civil Rights Act of 1964),
terms and conditions of employment, and wages and hours; and the Warrantor is
not engaged in any unfair labor practice. As of the date hereof, no dispute
exists between the Warrantor, and any of its employee groups regarding any
employee organization, wages, hours, or conditions of employment which would
materially interfere with the business or operations of the Warrantor.
6.32. Fiduciary Activities. The Bank is duly qualified and registered
and in good standing in accordance with the laws of each jurisdiction in which
it is required to so qualify or register as a result of or in connection with
its fiduciary or custodial activities as conducted as of the date hereof. The
Bank is duly registered under and in compliance with all requirements of the
federal Investment Advisers Act of 1940 as amended, or is exempt from
registration thereunder and from compliance with the requirements thereof. Since
January 1, 1992, the Bank has conducted, and
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<PAGE>
currently is conducting, all fiduciary and custodial activities in all material
respects in accordance with all applicable law.
6.33. Environmental Liability.
-----------------------
(a) The Warrantor is not in violation of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental matters,
including those arising under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("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 pertaining to environmental matters ("Environmental Laws").
(b) Neither the Warrantor nor, with respect to any real property
at any time held as collateral for any outstanding loan by the Warrantor
(collectively, the "Collateral Real Estate") and to the knowledge of the
Warrantor, any borrower of the Warrantor 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 the Warrantor or, with
respect to any Collateral Real Estate and to the knowledge of the Warrantor, any
borrower of the Warrantor received any notification that any hazardous waste, as
defined by 42 U.S.C. ss. 6903(5), any hazardous substances, as defined by 42
U.S.C. ss. 9601(14), any "pollutant or contaminant," as defined by 42 U.S.C. ss.
9601(33), or any toxic substance, hazardous materials, oil, or other chemicals
or substances regulated by any Environmental Laws ("Hazardous Substances") that
it has disposed of has been found at any site at which a federal or state agency
is conducting a remedial investigation or other action pursuant to any
Environmental Law.
(c) No portion of any real property at any time owned or leased
by the Warrantor (collectively, the "Warrantor Real Estate") has been used by
the Warrantor for the handling, processing, storage or disposal of Hazardous
Substances in a manner which violates any Environmental Laws and, to the best of
the knowledge of the Warrantor, no underground tank or other underground storage
receptacle for Hazardous Substances is located on any of the Warrantor Real
Estate. In the course of its activities, the Warrantor has not generated and is
not generating any hazardous waste on any of the Warrantor Real Estate in a
manner which violates any Environmental Laws. There has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
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<PAGE>
discharging, injecting, escaping, leaching, disposing or dumping (collectively,
a "Release") of Hazardous Substances by the Warrantor on, upon, or into any of
the Warrantor Real Estate. In addition, to the best of the knowledge of the
Warrantor, there have been no such Releases on, upon, or into any real property
in the vicinity of any of the Warrantor Real Estate that, through soil or
groundwater contamination, may be located on any of such Warrantor Real Estate.
(d) With respect to any Collateral Real Estate, the Warrantor has
not at any time received notice from any borrower thereof or third party and has
no knowledge that such borrower has generated or is generating any hazardous
waste on any of the Collateral Real Estate in a manner which violates any
Environmental Laws or that there has been any Release of Hazardous Substances by
such borrower on, upon, or into any of the Collateral Real Estate, or that there
has been any Release on, upon, or into any real property in the vicinity of any
of the Collateral Real Estate that, through soil or groundwater contamination,
may be located on any of such Collateral Real Estate.
(e) As used in this Section 6.33, the term "Warrantor" includes
the applicable Warrantor and any partnership or joint venture in which it has an
interest, except that neither the "knowledge" nor the "best of the knowledge" of
a Warrantor shall be deemed by virtue of this section 6.33(e) to include the
knowledge of any partner or joint venturer of a Warrantor.
6.34. Intangible Property. To the best of its knowledge, the Warrantor
owns or possesses the right, free of the claims of any third party, to use all
material trademarks, service marks, trade names, copyrights, patents, and
licenses currently used by it in the conduct of its business. To the best of the
knowledge of the Warrantor, no material product or service offered and no
material trademark, service mark, or similar right used by the Warrantor (a)
invades the interest of any person in reputation (such as by libel or slander)
or privacy; (b) interferes with the contractual relations or prospective
business advantages of any person; (c) adversely affects the interest of any
person in freedom from unjustifiable litigation (such as by malicious
prosecution, abuse of process or other wrongful civil proceeding); or (d)
infringes the trademark, trade name, fictitious name, service mark, patent or
copyright rights of any person; and, as of the date hereof, the Warrantor has
not received any written or oral notice of any claim of such invasion,
interference, adverse effect, or infringement.
6.35. Real and Personal Property. Except for property and assets
disposed of in the ordinary course of business, the
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<PAGE>
Warrantor possesses good and marketable title to and owns, free and clear of any
mortgage, pledge, lien, charge, or other encumbrance which would materially
interfere with the business or operations of the Warrantor, its real and
personal property and other assets, including without limitation those
properties and assets reflected in the Company Financial Statements as of
September 30, 1995, or acquired by the Warrantor subsequent to the date thereof.
The leases pursuant to which the Warrantor leases real or personal property are
valid and effective in accordance with their respective terms; and there is not,
under any such lease, any material existing default or any event which, with the
giving of notice or lapse of time or otherwise, would constitute a default. The
real and personal property leased by the Warrantor is free from any adverse
claim which would materially interfere with the business or operation of the
Company taken as a whole. The material properties and equipment owned or leased
by the Warrantor are in normal operating condition, free from any known defects,
except such minor defects as do not materially interfere with the continued use
thereof in the conduct of the normal operations of the Warrantor.
6.36. Loans, Leases, and Discounts. To the best of the knowledge of the
Warrantor, each loan, lease, and discount reflected as an asset of the Company
in the Company Financial Statements as of September 30, 1995, 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
$50,000 is subject to any asserted defense, offset, or counterclaim known to the
Warrantor.
6.37. Material Contracts. Neither the Warrantor nor any of the assets,
businesses, or operations of the Warrantor is as of the date hereof a party to,
or is bound or affected by, or receives benefits under any material agreement,
arrangement, or commitment not cancelable by it without penalty, other than (a)
the agreements set forth on Schedule 6.37 hereof, and (b) agreements,
arrangements, or commitments entered into in the ordinary course of its business
consistent with past practice, or, if there has been no past practice,
consistent with prudent banking practices.
6.38. Employment and Severance Arrangements.
--------------------------------------
(a) Except as set forth on Schedule 6.30 with respect to John E.
Byrd, it is not the policy and has never been the practice of the Warrantor to
grant any of its officers, directors, consultants, or other management officials
or any officer, director, consultant, or management official of any other
Warrantor employment contracts providing for increased or accelerated
compensation
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<PAGE>
in the event of a change of control with respect to the Warrantor or any other
event affecting the ownership, control, or management of the Warrantor.
(b) Except as set forth on Schedule 6.30 with respect to John E.
Byrd and William R. Esmeier, there are no employment or severance contracts,
agreements, or arrangements between the Warrantor or any other Warrantor and any
officer, director, consultant, or other management official.
6.39. Material Contract Defaults. All contracts, agreements, leases,
mortgages, or commitments referred to in Section 6.12(c) hereof are valid and in
full force and effect on the date hereof. The Warrantor is not in default in any
material respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a party
or by which its assets, business, or operations may be bound or under which it
or its assets, business, or operations receive benefits; and there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default.
6.40. Capital Expenditures. The Warrantor has no outstanding
commitments in the nature of capital expenditures which in the aggregate exceed
$25,000 except as set forth in the Company Financial Statements as of September
30, 1995 and the period then ended or as set forth on Schedule 6.40.
6.41. Repurchase Agreements. With respect to all agreements pursuant to
which the Warrantor has purchased securities subject to an agreement to resell,
the Warrantor 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.
6.42. Dividends. The Warrantor has not paid any dividend to its
shareholders which caused the regulatory capital of the Warrantor to be less
than the amount then required by applicable law, or which exceeded any other
limitation on the payment of dividends imposed by law, agreement, or regulatory
policy.
6.43. Interest Rate Risk Management Instruments.
------------------------------------------
(a) Schedule 6.43 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 the Warrantor is a party or
by which any of its properties or assets may be bound.
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<PAGE>
(b) All interest rate swaps, caps, floors, and option agreements
and other interest rate risk management arrangements to which the Warrantor is a
party or by which any of its properties or assets may be bound were entered into
in the ordinary course of its business and, to the best of its knowledge, in
accordance with prudent banking practice and applicable rules, regulations, and
regulatory policies and with counterparties believed to be financially
responsible at the time and are legal, valid, and binding obligations
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. The Warrantor has duly performed in all
material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued; and to the best of its knowledge, there are
no breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
6.44. Brokers and Advisers. Except as set forth on Schedule 6.44,
--------------------
(a) there are no claims for brokerage commissions, finder's fees,
or similar compensation arising out of or due to any act of the Warrantor in
connection with the transactions contemplated by this Agreement or, except as
entered into in the ordinary course of business, based upon any agreement or
arrangement made by or on behalf of the Warrantor or any other Warrantor; and
(b) except with respect to the receipt of the Fairness Opinion,
the Warrantor has not entered into any agreement or understanding with any party
relating to financial advisory services provided or to be provided with respect
to the transactions contemplated by this Agreement.
6.45. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by the Warrantor hereunder
or in connection with this Agreement or any of the transactions contemplated
hereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Warrantor (except facts common to
financial institutions in the United States which are known generally within the
U.S. banking community) which reasonably might materially adversely affect the
business, assets, liabilities, financial condition, results of operations, or
prospects of the Warrantor which has not been disclosed in the Company Financial
Statements, Schedule 6.45, or a certificate
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<PAGE>
delivered to Zions Bancorp by the Warrantor. Copies of all documents referred to
in this Agreement, unless prepared solely by Zions Bancorp or NBA or solely by
Zions Bancorp and NBA and third parties hereto, are true, correct, and complete
copies thereof and include all amendments, supplements, and modifications
thereto and all waivers thereunder.
6.46. Regulatory and Other Approvals. As of the date hereof, the
Warrantor is not aware of any reason why all material consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement, as shall be necessary for (a)
consummation of the transactions contemplated by this Agreement, and (b) the
continuation by the Warrantor after the Effective Date of the business of the
Warrantor as such business is carried on immediately prior to the Effective
Date, free of any conditions or requirements which, in the reasonable opinion of
the Warrantor, could have a material adverse effect upon the business,
operations, activities, earnings, or prospects of the Company. As of the date
hereof, the Warrantor is not aware of any reason why all material consents and
approvals shall not be procured from all other persons whose consent or approval
shall be necessary for (y) consummation of the transactions contemplated by this
Agreement, or (z) the continuation by the Warrantor after the Effective Date of
the business of the Warrantor as such business is carried on immediately prior
to the Effective Date.
7. Covenants of the Company and the Bank.
-------------------------------------
The Company and the Bank hereby jointly and severally covenant and
agree as follows:
7.1. Rights of Access. In addition to and not in limitation of any
other rights of access provided to Zions Bancorp and NBA herein, until the
Effective Date the Company and the Bank will give to Zions Bancorp and to its
representatives, including its certified public accountants, KPMG Peat Marwick,
full access during normal business hours to all of the property, documents,
contracts, books, and records of the Company and the Bank, and such information
with respect to their business affairs and properties as Zions Bancorp from time
to time may reasonably request.
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<PAGE>
7.2. Corporate Records, Contracts, etc.
----------------------------------
(a) The Company and the Bank will make available for inspection
by Zions Bancorp copies of the articles of incorporation and bylaws of the
Company and the Bank, and will make available for inspection by Zions Bancorp
minute books of the Company and the Bank, all of which shall be certified to be
complete and true copies.
(b) The Company and the Bank will make available for inspection
by Zions Bancorp copies of all contracts or agreements involving amounts in
excess of $25,000 to which the Company or the Bank is a party, including but not
limited to data processing contracts, service contracts, contracts to purchase
or lease real property or equipment, guaranties, employment contracts, and
insurance contracts pertaining to fire, accident, indemnity, fidelity, health,
life, hospitalization, or other employee benefits.
(c) The Company and the Bank will furnish to Zions Bancorp the
following information with respect to properties owned by the Company and the
Bank: (i) a brief description and location of each parcel of real property owned
by the Company or the Bank and (ii) a brief description of personal property
covered by lease or other rental arrangements to which the Company or the Bank
is a party, if the applicable personal property has a fair value of $10,000 or
more or if the term of the lease or other rental arrangement exceeds one year,
including a copy of the relevant leases.
7.3. Monthly and Quarterly Financial Statements; Minutes of Meetings
and Other Materials.
(a) Each of the Company and the Bank shall 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
October 1, 1995 and the Effective Date which it customarily prepared during the
period between January 1, 1993 and September 30, 1995 and shall promptly provide
Zions Bancorp with copies of all such financial statements and reports. Such
financial statements and reports shall be verified by the chief financial
officer of the reporting entity. All of such financial statements and reports,
including the related notes, schedules, and memorandum items, will have been
prepared in accordance with generally accepted accounting principles applied in
all material respects and as to each category of assets and liabilities and each
category of income and expense on a consistent basis throughout the periods
involved (except that Consolidated
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<PAGE>
Reports of Condition and Consolidated Reports of Income required to be filed by
the Bank under federal law may be prepared in accordance with the official
instructions applicable thereto at the time of filing).
(b) Each of the Company and the Bank shall promptly provide Zions
Bancorp with (i) copies of all of its periodic reports to directors and to
shareholders, whether or not such reports were prepared or distributed in
connection with a meeting of the board of directors or a meeting of the
shareholders, prepared or distributed between the date of this Agreement and the
Effective Date, and (ii) complete copies of all minutes of meetings of its board
of directors and its shareholders which meetings take place between the date of
this Agreement and the Effective Date, certified by the secretary or cashier or
an assistant secretary or assistant cashier of the Company or the Bank, as the
case may be. Notwithstanding the previous sentence, the Company and the Bank may
withhold from Zions Bancorp copies of internal studies, surveys, analyses, and
reports that were prepared by or for any officers or directors for the purpose
of evaluating or analyzing the transactions contemplated by this Agreement.
7.4. Extraordinary Transactions. Without the prior written consent of
Zions Bancorp, neither the Company nor the Bank shall, on or after the date of
this Agreement: (a) declare or pay any cash dividends or property dividends with
respect to any class of its capital stock, with the exception of customary
periodic cash dividends paid by the Bank to holders of its common stock at such
intervals and in such amounts as are in every case consistent with the amounts
and intervals characteristic of the Bank; (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) merge into, consolidate with, or sell its assets
to any other person, or enter into any other transaction or agree to effect any
other transaction not in the ordinary course of its business except as
explicitly contemplated herein, or engage in any discussions concerning such a
possible transaction except as explicitly contemplated herein; (d) convert the
charter or form of entity of the Bank from that of an Arizona banking
corporation 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) incur any liability or obligation, make any commitment or disbursement,
acquire or dispose of any property or asset, make any contract or agreement, or
engage in any transaction, except in the ordinary course of its business; (g)
other than
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<PAGE>
in the ordinary course of business, subject any of its properties or assets to
any lien, claim, charge, option, or encumbrance; (h) except for increases in the
ordinary course of business in accordance with past practices which together
with all other compensation rate increases do not exceed 4 percent per annum of
the aggregate payroll as of October 1, 1995, increase the rate of compensation
of any employee or enter into any agreement to increase the rate of compensation
of any employee; (i) 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; nor (j) enter into any
employment or personal services contract with any person, including without
limitation any contract, agreement, or arrangement described in Section 6.38(a)
hereof, except directly to facilitate the transactions contemplated by this
Agreement.
7.5. Preservation of Business. Each of the Company and the Bank (a)
will carry on its business and manage its assets and properties diligently and
substantially in the same manner as heretofore; (b) will maintain the ratio of
its loans to its deposits at approximately the same level as existed at
September 30, 1995, as adjusted to allow for seasonal fluctuations of loans and
deposits of a kind and amount experienced traditionally by the Company and the
Bank; (c) will manage its investment portfolio in substantially the same manner
and pursuant to substantially the same investment policies as in 1993 and 1994
and the first nine months of 1995, and will take no action to change the
percentage which the aggregate investment portfolio of the Company or the Bank
bears to the total assets of the Company or the Bank, as the case may be, or to
lengthen the average maturity of the investment portfolio, or of any significant
category thereof, to any material extent; (d) will continue in effect its
present insurance coverage on all properties, assets, business, and personnel;
(e) will use its best efforts to preserve its business organization intact;
except as otherwise consented to by Zions Bancorp, will use its best efforts to
keep available its present employees; and will use its best efforts to preserve
its present relationships with customers and others having business dealings
with it; (f) in accordance with the ordinary course of business and consistent
with good banking and business practices, will not do anything nor will it fail
to do anything which will cause a breach of or default in any contract,
agreement, commitment, or obligation to which it is a party or by which it may
be bound; and (g) will not amend its articles of incorporation or bylaws or
permit any of its subsidiaries to amend its articles of incorporation or bylaws.
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<PAGE>
7.6. Comfort Letter. At the time of the effectiveness of the
Registration Statement, but prior to the mailing of the proxy materials, and at
the Effective Date, the Company shall furnish Zions Bancorp with a letter from
McGladrey & Pullen, LLP, in form and substance reasonably acceptable to Zions
Bancorp, stating that (a) they are independent accountants with respect to the
Company and the Bank within the meaning of the 1933 Act and the published rules
and regulations thereunder, (b) in their opinion the consolidated financial
statements of the Company included in the Registration Statement and examined by
them comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder,
and (c) a reading of the Company's compiled consolidated financial statements
and the Bank's audited financial statements and the latest available unaudited
consolidated financial statements of the Company and financial statements of the
Bank and inquiries of certain officials of the Company and the Bank responsible
for financial and accounting matters as to transactions and events since
December 31, 1994 did not cause them to believe that (i) the Company's compiled
consolidated financial statements and such latest available consolidated
financial statements are not stated on a basis consistent with that followed in
the Company's compiled consolidated financial statements; (ii) the Bank's
audited consolidated financial statements and such latest available unaudited
consolidated financial statements are not stated on a basis consistent with that
followed in the Bank's audited consolidated financial statements; (iii) 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 the Company's capital
stock or any change in consolidated long-term debt or any decrease in the
consolidated net assets of the Company as compared with the respective amounts
shown in the most recent Company compiled consolidated financial statements; or
(iv) 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 the
Bank's capital stock or any change in consolidated long-term debt or any
decrease in the consolidated net assets of the Bank as compared with the
respective amounts shown in the most recent Bank audited consolidated financial
statements. The letter shall also cover such other matters pertaining to the
Company's and the Bank's financial data and statistical information included in
the Registration Statement as may reasonably be requested by Zions Bancorp.
7.7. Affiliates' Agreements. The Company will furnish to Zions Bancorp
a list of all persons known to the Company who at the date of the Company's
special meeting of shareholders to vote upon the transactions contemplated by
this Agreement may be deemed to be
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"affiliates" of the Company within the meaning of Rule 145 under the 1933 Act.
The Company will use its best efforts to cause each such "affiliate" of the
Company to deliver to Zions Bancorp not later than thirty days prior to the
Effective Date a written agreement providing that such person will not sell,
pledge, transfer, or otherwise dispose of the shares of Company Common Stock or
Bank Common Stock beneficially owned by such person, or the shares of Zions
Bancorp Stock to be received by such person in the Holding Company Merger or the
Bank Merger, or any other shares of Zions Bancorp Stock held by such person,
except in compliance with the applicable provisions of the 1933 Act and the
rules and regulations thereunder.
7.8. Inconsistent Activities.
------------------------
(a) Subject to subsection (b) of this section 7.8, unless and
until the Mergers have been consummated or this Agreement has been terminated in
accordance with its terms, the Company and the Bank will not (i) solicit or
encourage, directly or indirectly, any inquiries or proposals (each an
"Alternative Proposal") to acquire more than 1 percent of the Company Common
Stock or any capital stock of the Bank or any significant portion of its or the
Bank's assets (whether by tender offer, merger, purchase of assets or other
transactions of any type) (each an "Alternative Transaction"); (ii) afford any
third party which may be considering any Alternative Proposal or Alternative
Transaction access to its or the Bank's properties, books or records except as
required by mandatory provisions of law; (iii) enter into any discussions or
negotiations for, or enter into any agreement or understanding which provides
for, any Alternative Transaction; or (iv) authorize or permit any of its
directors, officers, employees or agents to do or permit any of the foregoing.
If the Company or the Bank becomes aware of any Alternative Proposal or of any
other matter which could adversely affect this Agreement or the Mergers or
either of them, the Company and the Bank shall immediately give notice thereof
to Zions Bancorp.
(b) Nothing contained in subsection (a) of this section 7.8 shall
prohibit the board of directors of the Company from furnishing information to or
entering into discussions or negotiations with any person that makes an
unsolicited bona fide Alternative Proposal if, and only to the extent that, (i)
the board of directors of the Company, based upon the advice of outside counsel,
determines in good faith that such action is required for the board of directors
to comply with its fiduciary duties to stockholders imposed by law, (ii) prior
to furnishing such information to, or entering into discussions or negotiations
with, such person, the Company provides written notice to Zions Bancorp to the
effect that
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it is furnishing information to, or entering into discussions or negotiations
with, such person, and (iii) the Company keeps Zions Bancorp informed of the
status and all material information with respect to any such discussions or
negotiations.
(c) Nothing in subsection (b) of this section 7.8 shall (i)
permit the Company or the Bank to terminate this Agreement (except as
specifically provided in section 10.1 or 10.2 of this Agreement), (ii) permit
the Company of the Bank to enter into any agreement with respect to an
Alternative Transaction for as long as this Agreement remains in effect (it
being agreed that for as long as this Agreement remains in effect, the Company
and the Bank shall not enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Transaction (other than a
confidentiality agreement in customary form)), or (iii) affect any other
obligation of the Company or the Bank under this Agreement.
8. Representations and Warranties of Zions Bancorp and NBA.
--------------------------------------------------------
Zions Bancorp (with respect to itself and NBA) and NBA (with respect to
itself) represent and warrant to the Company and the Bank as follows:
8.1. Organization, Powers, and Qualification. It 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 the properties
used in its business, and to carry on its business as now conducted. It 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 adversely affect its operation and properties in any
material respect. It is duly qualified and licensed to do business and is in
good standing in every jurisdiction in which such qualification or license is
required or with respect to which the failure to be so qualified or licensed
could result in material liability or adversely affect its operation and
properties in any material respect.
8.2. Execution and Performance of Agreement. It has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its terms.
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8.3. Binding Obligations; Due Authorization. This Agreement constitutes
its valid, legal, and binding obligations enforceable against it 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 hereby have been duly and validly authorized by its board of
directors. Subject to approval by the shareholders of NBA of this Agreement, no
other corporate proceedings on its part are necessary to authorize the execution
and delivery of this Agreement or the carrying out of the transactions
contemplated hereby.
8.4. Absence of Default. None of the execution or the delivery of this
Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under its organizational documents or bylaws. None of such execution,
consummation, or fulfillment will (a) conflict with, or result in a material
breach of the terms, conditions, or provisions of, or constitute a material
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 its property or assets pursuant to any
material agreement or instrument under which it is obligated or by which any of
its properties or assets may be bound, including without limitation any material
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, 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 jurisdiction
under that Act, and if the Bank Merger is approved by the Comptroller, and if
the transactions contemplated by this Agreement are approved by the Commissioner
and the Superintendent, violate any law, statute, rule, or regulation of any
government or agency to which it is subject and which is material to its
operations, or (c) violate any judgment, order, writ, injunction, decree, or
ruling to which it or any of its properties or assets is subject or bound. None
of the execution or delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the compliance with or fulfillment of the
terms hereof will require any authorization, consent, approval, or exemption by
any person which has not been obtained, or any notice or filing which has not
been given or done, other than approval of or waiver of jurisdiction over the
transactions contemplated by this Agreement by the Board of Governors, the
Comptroller, the Commissioner, and the Superintendent.
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<PAGE>
8.5. Brokers and Advisers.
---------------------
(a) There are no claims for brokerage commissions, finder's fees,
or similar compensation arising out of or due to any act of its in connection
with the transactions contemplated by this Agreement or based upon any agreement
or arrangement made by or on behalf of it.
(b) It has not entered into any agreement or understanding with
any party relating to financial advisory services provided or to be provided
with respect to the transactions contemplated by this Agreement.
8.6. Books and Records. Its books and records fairly reflect the
transactions to which it is a party or by which its properties are subject or
bound. Such books and records have been properly kept and maintained and are in
compliance in all material respects with all applicable legal and accounting
requirements. It follows generally accepted accounting principles applied on a
consistent basis in the preparation and maintenance of its books of account and
financial statements, including but not limited to the application of the
accrual method of accounting for interest income on loans, leases, discounts,
and investments, interest expense on deposits and all other liabilities, and all
other items of income and expense. It has made all accruals in amounts which
accurately report income and expense in the proper periods in accordance with
generally accepted accounting principles. It has filed all material reports and
returns required by any law or regulation to be filed by it.
8.7. Financial Statements. Zions Bancorp has furnished to the Company
its consolidated statement of condition as of each of December 31, 1993,
December 31, 1994, and September 30, 1995, and its related consolidated
statement of income, consolidated statement of changes in financial position,
and consolidated statement of changes in stockholders' equity for each of the
periods then ended, and the notes thereto (collectively, the "Zions Bancorp
Financial Statements"). All of the Zions Bancorp Financial Statements, including
the related notes, (a) were prepared in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved, and (b) are in accordance with
the books and records of Zions Bancorp which have been maintained in accordance
with generally accepted accounting principles, and (c) fairly and accurately
reflect the consolidated financial position of Zions Bancorp as of such dates,
and the consolidated results of operations of Zions Bancorp for the periods
ended on
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such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles applied in all material respects and as to each category
of assets and liabilities and each category of income and expense on a
consistent basis throughout the periods involved, adequate provision for, or
reserves against, the possible loan losses of Zions Bancorp as of such dates.
8.8. Absence of Certain Developments. Since September 30, 1995, there
has been (a) no material adverse change in the condition, financial or
otherwise, assets, properties, liabilities, or businesses of Zions Bancorp, and
(b) no material deterioration in the quality of the loan portfolio of Zions
Bancorp or of any major component thereof, and no material increase in the level
of nonperforming assets or nonaccrual loans at Zions Bancorp or in the level of
its provision for credit losses or its reserve for possible credit losses.
8.9. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by it hereunder or in
connection with this Agreement or any of the transactions contemplated hereunder
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to it which might materially adversely affect its business,
assets, liabilities, financial condition, results of operations, or prospects
which has not been disclosed in the Zions Bancorp Financial Statements or a
certificate delivered by it to the Company or the Bank. Copies of all documents
referred to in this Agreement, unless prepared solely by the Company or the Bank
or solely by the Company and the Bank and third parties hereto, are true,
correct, and complete copies thereof and include all amendments, supplements,
and modifications thereto and all waivers thereunder.
8.10. Zions Bancorp Stock. The shares of Zions Bancorp Stock to be
issued by Zions Bancorp pursuant to this Agreement, when issued pursuant to and
in accordance with this Agreement, will be duly authorized and legally issued,
fully paid, and non-assessable.
9. Closing.
--------
9.1. Place and Time of Closing. Closing shall take place at the offices
of Zions Bancorp, 1380 Kennecott Building, Salt Lake City, Utah, or such other
place as the parties choose, commencing at 10:00 a.m., local time, on the
Effective Date, provided that all
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conditions precedent to the obligations of the parties hereto to close have then
been met or waived.
9.2. 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 on or prior to the Effective Date 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 and of
the right to receive cash incident to the Holding Company Merger shall be
effected; provided, however, that the administrative and ministerial aspects of
the issuance of stock certificates and cash incident to the Holding Company
Merger will be settled as soon thereafter as shall be reasonable under the
circumstances; and then
(c) The Bank Merger shall be effected.
10. Termination, Damages for Breach, Waiver, and Amendment.
-------------------------------------------------------
10.1. Termination by Reason of Lapse of Time. This Agreement may be
terminated by Zions Bancorp or the Company on or after August 31, 1996, by
instrument duly authorized and executed and delivered to the other such party,
unless the Effective Date shall have occurred on or before such date.
10.2. Grounds for Termination. This Agreement may be terminated by
written notice of termination at any time before the Effective Date (whether
before or after action by shareholders of the Company or shareholders of the
Bank):
(a) by mutual consent of the parties hereto;
(b) by Zions Bancorp, upon written notice to the Company given at
any time (i) if any of the representations and warranties of the Company or the
Bank contained in Section 6 hereof was materially incorrect when made, or (ii)
in the event of a material breach or material failure by the Company or the Bank
of any covenant or agreement of the Company or the 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 the Company;
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<PAGE>
(c) by the Company, upon written notice to Zions Bancorp given at
any time (i) if any of the representations and warranties of Zions Bancorp or
NBA contained in Section 8 hereof was materially incorrect when made, or (ii) in
the event of a material breach or material failure by Zions Bancorp or NBA of
any covenant or agreement of Zions Bancorp 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 Bancorp, or (iii) if the board of
directors of the Company, based upon the advice of outside counsel, 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 the Company shall notify Zions
Bancorp promptly of its intention to terminate this Agreement or enter into a
definitive agreement with respect to any Alternative Proposal, but in no event
shall such notice be given less than 48 hours prior to the public announcement
of the Company's termination of this Agreement; or
(d) by either Zions Bancorp or the Company upon written notice
given to the other if the board of directors of either Zions Bancorp or the
Company shall have determined in its sole judgment made in good faith, after due
consideration and consultation with counsel, that the Mergers have become
inadvisable or impracticable by reason of the institution of litigation by the
federal government, the government of the State of Utah, or the government of
the State of Arizona to restrain or invalidate the transactions contemplated by
this Agreement.
10.3. Effect of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of Section 10.1 or Section 10.2,
this Agreement shall become void and have no force or effect, without any
liability on the part of Zions Bancorp, NBA, the Company, or the Bank or their
respective directors or officers or shareholders in respect of this Agreement.
Notwithstanding the foregoing:
(a) as provided in Section 11.4 of this Agreement, the
confidentiality agreement contained in that section shall survive such
termination;
(b) except as subsection (c) of this section 10.3 shall apply, if
such termination is a result of any of the representations and warranties of a
party being materially incorrect when made or a result of the material breach or
material failure by a party of a covenant or agreement hereunder, such party
whose representations and warranties were materially incorrect or who materially
breached or failed to perform its covenant or agreement
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<PAGE>
shall be liable to the other party or parties hereto solely to the extent of the
actual, reasonable out-of-pocket expenses, not to exceed $250,000, incurred by
the other party in connection with the negotiation and preparation of this
Agreement and the carrying out of the transactions contemplated hereby; and
(c) if
(i) such termination is pursuant to section 10.2(c)(iii) of
this Agreement, or if
(ii) this Agreement is terminated for any reason specified in
section 10.2(b)(i) or 10.2(b)(ii) of this Agreement and a definitive agreement
with respect to an Alternative Proposal is executed by the Company or the Bank
within one year after such termination,
then in either case, the Company shall be liable to Zions Bancorp in the amount
of $750,000, which amount will be payable to Zions Bancorp in immediately
available funds within two business days after such amount becomes due. The
Company acknowledges that the agreements contained in subsection (c) of this
section 10.3 are an integral part of the transactions contemplated in this
Agreement and that, without these agreements, Zions Bancorp would not enter into
this Agreement.
10.4. Waiver of Terms or Conditions. Any of the terms or conditions of
this Agreement may be waived at any time prior to the Effective Date by the
party which is, or whose shareholders are, entitled to the benefit thereof, by
action taken by the board of directors of such party, or by its president;
provided, however, that such waiver shall be in writing and shall be taken only
if, in the judgment of the board of directors or officer taking such action,
such waiver will not have a materially adverse effect on the benefits intended
hereunder to the shareholders of its or his corporation; and the other parties
hereto may rely on the delivery of such a waiver as conclusive evidence of such
judgment and the validity of the waiver.
10.5. Amendment.
----------
(a) 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 Date by
written instrument duly authorized and executed by each of the parties hereto;
provided, however, that this Agreement may not be amended after the action by
shareholders of the Company in any respect that would prejudice the
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economic interests of such Company shareholders, or any of them, except as
specifically provided herein or by like action of such shareholders.
(b) If Zions Bancorp and the Company should mutually determine
(following receipt of advice of legal or other counsel) that it has become
inadvisable or inexpedient to effectuate the transactions contemplated by this
Agreement through means of a sequence of mergers such as is contemplated herein,
then subject to compliance with applicable laws, the parties hereto agree to
effect such change in the form of transaction as described especially in
Sections 1.1 and 9.2 of this Agreement by written instrument in amendment of
this Agreement.
11. General Provisions.
-------------------
11.1. Allocation of Costs and Expenses. Except as provided in Section
10.3 and this Section, each party hereto shall pay its own fees and expenses,
including without limitation the fees and expenses of its own counsel and its
own accountants, tax and financial advisers, and investment bankers incurred in
connection with this Agreement and the transactions contemplated hereby. For
purposes of this Section, (i) the cost of printing and delivering the proxy
statement and other material to be transmitted to shareholders of the Company
shall be deemed to be incurred on behalf of the Company and Zions Bancorp in
equal shares and, accordingly, will be paid one-half by the Company and one-half
by Zions Bancorp, and (ii) the cost of registering under federal and state
securities laws the stock of Zions Bancorp to be received by the shareholders of
the Company and the shareholders of the Bank shall be deemed to be incurred on
behalf of Zions Bancorp. The costs to be apportioned by operation of the
previous sentence shall not include any professional fees paid to counsel,
accountants, tax or financial advisers, or investment bankers. The cost of the
Fairness Opinion and any other oral or written opinion rendered by a financial
adviser or investment banker to the Company or its board of directors or
shareholders with respect to the fairness of the terms of the Holding Company
Merger from a financial point of view shall be deemed to be incurred on behalf
of the Company. All costs described in this section to be incurred or paid by
the Company or the Bank shall be expensed or fairly reserved against by the
Company or the Bank, as the case may be, not later than the close of business on
the last day of the calendar month preceding the Effective Date.
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<PAGE>
11.2. Mutual Cooperation; Access.
---------------------------
(a) Subject to the terms and conditions herein provided, each
party shall use its best efforts, and shall cooperate fully with the other
party, in carrying out the provisions of this Agreement and in making all
filings and obtaining all necessary governmental approvals, and 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 the transactions contemplated hereby. The
Company shall take timely action in its capacity as shareholder of the Bank to
cause its shares of Bank Common Stock to be voted in favor of the Bank Merger.
Zions Bancorp shall take timely action in its capacity as shareholder of NBA to
cause its shares of the common stock of NBA to be voted in favor of the Bank
Merger.
(b) Each party acknowledges to the other its understanding that
further investigation of it by the other party may be necessary that such other
party may more fully evaluate the merits of the transactions contemplated by
this Agreement. To permit such investigation, and not in lieu or prejudice of
any other right conferred hereunder, each of the parties shall afford to the
other, and to the accountants, counsel, and other representatives of the other,
full access during normal business hours, during the period prior to the
Effective Date, to all of its properties, books, contracts, commitments and
records and, during such period, each shall furnish promptly, or make available
for inspection, to the other all information concerning its business, properties
and personnel as the other party may reasonably request.
11.3. Form of Public Disclosures. Zions Bancorp and the Company shall
mutually agree in advance upon the form and substance of all public disclosures
concerning this Agreement and the transactions contemplated hereby.
11.4. Confidentiality. Zions Bancorp and its subsidiaries (including
NBA) and the Company and the Bank shall use all information that each obtains
from the other pursuant to this Agreement (except Public Information, as defined
below) solely for the effectuation of the transactions contemplated by this
Agreement or for other purposes consistent with the intent of this Agreement.
Neither Zions Bancorp, nor its subsidiaries (including NBA), nor the Company nor
the Bank shall use any of such information (except Public Information) for any
other purpose, including, without limitation, the competitive detriment of any
party. Each of Zions Bancorp and its subsidiaries (including NBA) and the
Company and
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<PAGE>
the Bank shall maintain as strictly confidential all information (except Public
Information) it learns from the other and shall, at any time, 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 advisers, and consultants.
The confidentiality agreement contained in this Section 11.4 shall remain
operative and in full force and effect, and shall survive the termination of
this Agreement. As used in this section 11.4, the term "Public Information"
means (a) information obtained from a party or one of its affiliates that is or
has become available to the public other than as a result of a disclosure by the
party obtaining the information or one of its affiliates; and (b) information
obtained from a party or one of its affiliates that was known to the party
obtaining the information or one of its affiliates outside of and apart from the
restrictions against use and disclosure described herein, or had been previously
possessed by the party obtaining the information or one of its affiliates at the
time of receipt thereof (in circumstances not giving rise to obligations of
confidentiality).
11.5. Claims of Brokers.
-----------------
(a) The Company and the Bank shall indemnify, defend, and hold
Zions Bancorp and NBA harmless for, from, and against any claim, suit,
liability, fees or expenses (including, without limitation, attorneys' fees and
costs of court) arising out of any claim for brokerage commissions, finder's
fees, or similar compensation arising out of or due to any act of the Company or
the Bank in connection with the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by or on behalf of the Company or
the Bank with respect to Zions Bancorp or NBA.
(b) Zions Bancorp and NBA shall indemnify, defend, and hold the
Company and the Bank harmless for, from, and against any claim, suit, liability,
fees or expenses (including, without limitation, attorneys' fees and costs of
court) arising out of any claim for brokerage commissions, finder's fees, or
similar compensation arising out of or due to any act of Zions Bancorp or NBA in
connection with any of the transactions contemplated by this Agreement or based
upon any agreement or arrangement made by or on behalf of Zions Bancorp or NBA
with respect to the Company or the Bank.
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<PAGE>
11.6. Information for Applications and Registration Statement.
--------------------------------------------------------
(a) Each party represents and warrants that all information
concerning it which is included in any statement and application (including the
Registration Statement) made to any governmental agency in connection with the
transactions contemplated by this Agreement shall not, with respect to such
party, 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, but not limited to, the Securities Act and the
Exchange Act) and rules and regulations thereunder and will reimburse them for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any actions whether or not resulting in liability,
insofar as such losses, claims, damages, expenses, liabilities, or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein. Each party
agrees at any time upon the request of the other to furnish to the other a
written letter or statement confirming the accuracy of the information contained
in any proxy statement, registration statement, report, or other application or
statement, and confirming that the information contained in such document was
furnished expressly for use therein or, if such is not the case, indicating the
inaccuracies contained in such document or draft or indicating the information
not furnished expressly for use therein. The indemnity agreement contained in
this Section 11.6(a) shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the other party, and
shall survive the termination of this Agreement or the consummation of the
transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in Section 11.6(a) of
this Agreement is for any reason held by a
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court of competent jurisdiction to be unenforceable as to any or all parties,
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.
11.7. Standard of Materiality.
-----------------------
(a) For purposes of Sections 4, 6, and 7 of this Agreement, the
terms "material" and "materially," when used with reference to items normally
expressed in dollars, shall be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity of the Company
as of September 30, 1995, as determined in accordance with generally accepted
accounting principles.
(b) For purposes of Sections 5 and 8 of this Agreement, the
terms "material" and "materially," when used with reference to items normally
expressed in dollars, shall be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity of Zions
Bancorp as of September 30, 1995, as determined in accordance with generally
accepted accounting principles.
(c) For other purposes and, notwithstanding subsections (a) and
(b) of this section 11.7, when used anywhere in this Agreement with explicit
reference to any of the federal securities laws or to the Registration
Statement, the terms "material" and "materially" shall be construed and
understood in accordance with standards of materiality as judicially determined
under the federal securities laws.
11.8. Covenants of Zions Bancorp.
---------------------------
(a) From the date hereof to the Effective Date, Zions Bancorp
shall, contemporaneously with the filing with the SEC of any current report on
Form 8-K pursuant to section 13 of the Securities Exchange Act of 1934, or the
public dissemination of any news release, in either case describing or relating
to any material adverse change in Zions Bancorp, deliver a copy of such report
or release to the Company.
(b) During the twenty consecutive trading days ending on and
including the fifth trading day preceding the Effective Date,
- 51 -
<PAGE>
Zions Bancorp shall not repurchase Zions Common Stock in the open market unless
done both (a) in connection with, and consistently with established patterns of
stock repurchases with regard to, a dividend reinvestment plan, employee stock
savings plan, employee investment savings plan, 401(k) plan, or similar plan, or
to satisfy the exercise of outstanding options on Zions Common Stock, or for
similar corporate purposes, and (b) following the receipt of favorable advice
from independent securities counsel for Zions Bancorp.
11.9. Adjustments for Certain Events. Anything in this agreement to the
contrary notwithstanding, all prices per share and exchange ratios referred to
in this Agreement shall be appropriately adjusted to account for stock
dividends, split-ups, mergers, recapitalizations, combinations, conversions,
exchanges of shares or the like, but not for normal and recurring cash dividends
declared or paid in a manner consistent with the established practice of the
payer.
11.10. Stock Repurchases. The Company and the Bank acknowledge that
from time to time Zions Bancorp repurchases shares of its common stock in the
open market in accordance with market conditions. Nothing in this Agreement
except section 11.8(b) hereof shall be construed to abridge the right of Zions
Bancorp to continue to do so in compliance with Exchange Act rules and
regulations and pursuant to advice of independent securities counsel for Zions
Bancorp.
11.11. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart.
11.12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to their commitments to each
other and their undertakings vis-a-vis each other on the subject matter hereof.
Any previous agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this Agreement. Nothing
in this Agreement express or implied is intended or shall be construed to confer
upon or to give any person, other than Zions Bancorp and NBA and the Company and
the Bank and their respective shareholders, any rights or remedies under or by
reason of this Agreement.
- 52 -
<PAGE>
11.13. Reliance Upon Representations, Warranties, and Covenants. 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.
11.14. Section Headings. The section and subsection headings herein
have been inserted for convenience of reference only and shall in no way modify
or restrict any of the terms or provisions hereof. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
11.15. Notices. All notices, consents, waivers, or other communications
which are required or permitted hereunder shall be in writing and deemed to have
been duly given if delivered personally or by messenger, transmitted by telex or
telegram, by express courier, or sent by registered or certified mail, return
receipt requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
If to Zions Bancorp or NBA:
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
If to the Company or the Bank:
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Attention: Mr. John E. Byrd
President and Chief Executive Officer
- 53 -
<PAGE>
With a required copy to:
Robert S. Kant, Esq.
O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears, P.A.
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
All such notices shall be deemed to have been given on the date
delivered, transmitted, or mailed in the manner provided above.
11.16. 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 and Yuma County, Arizona, to be proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues 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 or Arizona. 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.
11.17. Knowledge of a Party. References in this Agreement to the
knowledge of a party shall mean the knowledge possessed by any of such parties
or the present executive officers of such party including, without limitation,
information which is or has been in the books and records of such party.
11.18. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
- 54 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ZIONS BANCORPORATION
Attest: /s/ John J. Gisi By: /s/ Harris H. Simmons
--------------------- ------------------------------
John J. Gisi Harris H. Simmons
Sr. V.P. President and Chief Executive
Officer
NATIONAL BANK OF ARIZONA
Attest: /s/ Harris H. Simmons By: /s/ John J. Gisi
--------------------- ------------------------------
SOUTHERN ARIZONA BANCORP, INC.
Attest: /s/ Mary L. Pool By: /s/ John E. Byrd
--------------------- ------------------------------
John E. Byrd
President and Chief Executive
Officer
SOUTHERN ARIZONA BANK
Attest: /s/ Mary L. Pool By: /s/ John E. Byrd
--------------------- ------------------------------
John E. Byrd
President and Chief Executive
Officer
- 55 -
<PAGE>
- ------------------------
- ---------------------------------------------------------)
State of Arizona )
) ss.
County of Yuma )
)
- --------------------------------
On this seventeenth day of January, 1996, before me personally appeared
Harris H. Simmons, to me known to be the President and Chief Executive Officer
of Zions Bancorporation, and John J. Gisi, to me known to be the Chairman +
President of National Bank of Arizona, and acknowledged said instrument to be
the free and voluntary act and deed of each of said corporations, for the uses
and purposes therein mentioned, and each on oath stated that he was authorized
to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Mary L. Pool
---------------------------
Notary Public
"OFFICIAL SEAL"
Mary L. Pool
Notary Public-Arizona
Yuma County
My Commission Expires 9/7/97
- 56 -
<PAGE>
- ------------------------
- ---------------------------------------------------------)
State of Arizona )
) ss.
County of Yuma )
)
- --------------------------------
On this seventeenth day of January, 1996, before me personally appeared
John E. Byrd, to me known to be the President and Chief Executive Officer of
Southern Arizona Bancorp, Inc., and to be the President and Chief Executive
Officer of Southern Arizona Bank, and acknowledged said instrument to be the
free and voluntary act and deed of each of said corporations, for the uses and
purposes therein mentioned, and on oath stated that he was authorized to execute
said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
/s/ Mary L. Pool
---------------------------
Notary Public
"OFFICIAL SEAL"
Mary L. Pool
Notary Public-Arizona
Yuma County
My Commission Expires 9/7/97
- 57 -
<PAGE>
The undersigned members of the Board of Directors of SOUTHERN
ARIZONA BANCORP, INC. (the "Company"), acknowledging that Zions Bancorporation
("Zions Bancorp") has relied upon the action heretofore taken by the board of
directors in entering into the Agreement, and has required the same as a
prerequisite to Zions Bancorp's execution of the Agreement, do individually and
as a group agree, subject to termination of the Agreement pursuant to section
10.1 or 10.2 of the Agreement (including section 10.2(c)(iii) of this
Agreement), to vote the shares of capital stock each owns in favor of the
Agreement and to support the Agreement and to recommend its adoption by the
other shareholders of the Company.
The undersigned do hereby, individually and as a group, until
the Effective Date or termination of the Agreement pursuant to section 10.1 or
10.2 of the Agreement (including section 10.2(c)(iii) of this Agreement),
further agree to refrain from soliciting or, subject to their fiduciary duties
to shareholders and to section 7.8 of the Agreement, negotiating or accepting
any offer of merger, consolidation, or acquisition of any of the shares or all
or substantially all of the assets of the Company or the Bank.
/s/ John E. Byrd /s/ Thomas M. Howell
- ----------------------- ---------------------------
/s/ Donald S. Olsen /s/ C.N. Urtuzuastegui
- ----------------------- ---------------------------
/s/ Stephen P. Shadle /s/ Robt W. Kennerly
- ----------------------- ---------------------------
/s/ Jimmy Naquin /c/ Forrest Braden
- ----------------------- ---------------------------
/s/ Colleen Newman
- ----------------------- ---------------------------
- ----------------------- ---------------------------
- 58 -
<PAGE>
EXHIBIT I
---------
HOLDING COMPANY MERGER AGREEMENT
<PAGE>
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of [-
_______________], 1996, between ZIONS BANCORPORATION ("Zions Bancorp"), a
corporation organized under the laws of the State of Utah, and SOUTHERN ARIZONA
BANCORP, INC. (the "Company"), a corporation organized under the laws of the
State of Arizona. Zions Bancorp and the Company are hereinafter sometimes
individually called a "Constituent Corporation" and collectively called the
"Constituent Corporations."
RECITALS
Zions Bancorp is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah. As of
[_______________], 1996, the authorized capital stock of Zions Bancorp consisted
of [_________] shares of Common Stock, no par value, of which [_______] shares
were issued and outstanding; no shares of capital stock were held in its
treasury on such date.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona. As of
[_______________], 1996, the authorized capital stock of the Company consisted
of [___________] shares of Common Stock, $[____] par value (the "Company Common
Stock"), of which [___________] shares were issued and outstanding; no shares of
capital stock were held in its treasury on such date.
Zions Bancorp and its affiliate, NATIONAL BANK OF ARIZONA
("NBA"), and the Company and its affiliate, SOUTHERN ARIZONA BANK (the "Bank"),
have entered into an Agreement and Plan of Reorganization, dated January 17,
1996 (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 the Company with and into
Zions Bancorp (the "Merger") in accordance with this Agreement of Merger (the
"Agreement"). NBA and the Bank are hereinafter sometimes collectively called the
"Affiliated Corporations."
The Boards of Directors of each of Zions Bancorp, the Company,
and the Affiliated Corporations deem the Merger advisable and in the best
interests of each corporation and its stockholders. The Boards of Directors of
each of Zions Bancorp, the Company, and the Affiliated Corporations, by
resolutions duly adopted, have approved the Plan of Reorganization. The Boards
of Directors of each of Zions Bancorp and the Company, by resolutions duly
adopted,
<PAGE>
have approved this Agreement. The Board of Directors of the Company has directed
that this Agreement, and authorization for the transactions contemplated hereby,
be submitted to stockholders of the Company for approval. Pursuant to section
16-10a-1103 of the Utah Business Corporation Act, approval by the shareholders
of Zions Bancorp is not required.
At the Effective Date (as defined in Section 1.1 below) shares
of Company Common Stock shall be converted into the right to receive shares of
the common stock of Zions Bancorp, no par value (the "Zions Bancorp Stock"), and
cash, as provided herein.
In consideration of the premises and the mutual covenants and
agreements herein contained and subject to the terms and conditions of the
Agreement, the parties hereto hereby covenant and agree as follows:
ARTICLE I
1.1. Merger of the Company into Zions Bancorp. The Company shall
be merged with and into Zions Bancorp 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 Business
Corporation Act and the Secretary of State of the State of Arizona pursuant to
section 10-074 of the Arizona General Corporation Law (such date and time being
referred to herein as the "Effective Date").
1.2. Effect of the Merger. At the Effective Date:
(a) The Company and Zions Bancorp shall be a single corporation,
which shall be Zions Bancorp. Zions Bancorp is hereby designated as the
surviving corporation in the Merger and is hereinafter sometimes called the
"Surviving Corporation."
(b) The separate existence of the Company shall cease.
(c) The Surviving Corporation 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 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
- 2 -
<PAGE>
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 the Company'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) The Articles of Incorporation of Zions Bancorp as they exist
immediately prior to the Effective Date shall be the Articles of Incorporation
of the Surviving Corporation until later amended pursuant to Utah law.
(g) At the Effective Date and until surrendered for exchange and
payment, each outstanding stock certificate which, prior to the Effective Date,
represents shares of Company Common Stock shall, without further action, cease
to be an issued and existing share and, subject to the rights any holder may
have under Section 10-080 et seq. of the Arizona General Corporation Law, shall
be converted into a right to receive from Zions Bancorp and shall, for all
purposes represent the right to receive, upon surrender of the certificate
representing such shares, the number of shares of Zions Bancorp Stock and the
amount of cash specified in Article III; provided that, with respect to any
matters relating to stock certificates representing Company Stock, Zions Bancorp
may rely conclusively upon the record of stockholders maintained by the Company
containing the names and addresses of the holders of record of the Company's
Common Stock at the Effective Date.
1.3. Acts to Carry Out This Merger Plan.
----------------------------------
(a) The Company and its proper officers and directors shall and
will do all such acts and things as may be necessary or proper to vest, perfect
or confirm title to such property or rights
- 3 -
<PAGE>
in Zions Bancorp and otherwise to carry out the purposes of this Agreement.
(b) If, at any time after the Effective Date, Zions Bancorp
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 Bancorp its right, title, or interest in or under
any of the rights, properties or assets of the Company acquired or to be
acquired by Zions Bancorp as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to Zions Bancorp
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 Bancorp and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of Zions Bancorp are fully
authorized in the name of the Company or otherwise to take any and all such
action.
ARTICLE II
2.1. Capitalization. The authorized shares of capital stock of
Zions Bancorp as of the Effective Date shall be [_______] shares of Common
Stock, no par value.
2.2. By-Laws. The By-Laws of Zions Bancorp as they exist
immediately prior to the Effective Date shall be the By-Laws of Zions Bancorp
until later amended pursuant to Utah law.
ARTICLE III
3.1. Manner of Converting Shares.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein.
(i) Average Closing Price. The average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date. Notwithstanding the foregoing, (A) if the result of the
calculation described in the previous sentence is less than $59.00, then the
Average Closing Price shall be $59.00, and (B) if the result of the calculation
- 4 -
<PAGE>
described in the previous sentence is more than $72.00, then the Average Closing
Price shall be $72.00.
(ii) Benchmark Price. The sum of:
----------------
(A) $25,330,000.00;
(B) the consolidated net undistributed income
of the Company during the period beginning on October 1, 1995 and ending on the
close of business on the last day of the calendar month preceding the Effective
Date, calculated in accordance with generally accepted accounting principles in
a manner consistent with the Company Financial Statements (as defined in section
6.13 of the Plan of Reorganization). For the purpose of calculating net
undistributed income of the Company, any undistributed gain, net of taxes,
derived from activities or transactions which are not in the ordinary course of
its banking operations (such as, without limitation, the sale of securities or
loans, of capital assets, or of lines of business), all of which shall be
determined in accordance with generally accepted accounting principles, shall be
excluded except as mutually agreed by the parties hereto. It is understood that
the amount calculated under this section 3.1(a)(ii)(B) may be a negative number
and that the effect of summing such a negative number would be a reduction in
the Benchmark Price as otherwise would be calculated under this section
3.1(a)(ii); and
(C) if the Effective Date does not occur on
the first day of a calendar month, an amount calculated by computing the daily
average of the net undistributed income of the Company for the period and in the
manner prescribed in section 3.1(a)(ii)(B) hereof and multiplying the result of
such computation by the number of days elapsing during the period beginning on
the first day of the month in which the Effective Date occurs and ending on the
day immediately preceding the Effective Date. It is understood that the amount
calculated under this section 3.1(a)(ii)(C) may be a negative number and that
the effect of summing such a negative number would be a reduction in the
Benchmark Price as otherwise would be calculated under this section 3.1(a)(ii).
(iii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in the
over-the-counter market as such prices are reported by the automated quotation
system of the National Association of Securities Dealers, Inc., or in the
absence thereof by such other source upon which Zions Bancorp and the Company
shall mutually agree.
- 5 -
<PAGE>
(iv) Dissenting Shares. The shares of Company Common Stock
held by those shareholders of the Company who have timely and properly exercised
their dissenters' rights in accordance with all applicable laws (the "Appraisal
Laws").
(v) Zions Bancorp Stock. The common stock of Zions Bancorp,
no par value.
(b) Form of Consideration. Subject to the terms, conditions and
limitations set forth herein, upon surrender of his or her certificate or
certificates, each holder of shares of Company Common Stock shall be entitled to
receive in the Merger, in exchange for each share of Company Common Stock held
of record by such stockholder as of the Effective Date:
(i) that number of shares of Zions Bancorp Stock calculated
by dividing the Benchmark Price by the Average Closing Price, and by further
dividing the number so reached by the number of shares of Company Common Stock
that shall be issued and outstanding at the Effective Date, and
(ii) in the event that the average (rounded to the nearest
penny) of each Daily Sales Price of Zions Bancorp Stock for the twenty
consecutive trading days ending on and including the fifth trading day preceding
the Effective Date (the "Unadjusted Average Price") shall be less than $59.00,
that amount of cash (the "Cash Component") calculated by dividing the amount by
which the Benchmark Price exceeds the product of the Unadjusted Average Price
and the number of shares of Zions Bancorp Stock issuable under subsection (b)(i)
of this section 3.1 by the number of shares of Company Common Stock that shall
be issued and outstanding at the Effective Date.
3.2. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions Bancorp
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Bancorp Stock shall receive an amount of cash equal to the
product of such fraction times the Average Closing Price. Such fractional share
interest shall not include the right to vote or to receive dividends or any
interest thereon.
3.3. Dissenting Shares. Notwithstanding anything to the contrary herein,
each Dissenting Share whose holder, as of the Effective Date, has not
effectively withdrawn or lost his or her dissenters' rights under the Appraisal
Laws, shall not be converted into or represent a right to receive Zions Bancorp
Stock or Cash Component, but the holder thereof shall be entitled only to such
- 6 -
<PAGE>
rights as are granted by the Appraisal Laws. Each holder of Dissenting Shares
who becomes entitled to payment for his or her Company Common Stock pursuant to
the provisions of the Appraisal Laws shall receive payment therefor from Zions
Bancorp (but only after the amount thereof shall have been agreed upon or
finally determined pursuant to such provisions).
3.4. Dividends; Interest. No shareholder of the Company will be entitled
to receive dividends on his or her Zions Bancorp Stock until he or she exchanges
his or her certificates representing Company Common Stock for Zions Bancorp
Stock and, if applicable, Cash Component. Any dividends declared on Zions
Bancorp Stock (which stock is to be delivered pursuant to this Agreement) to
holders of record on or after the Effective Date shall be paid to the Exchange
Agent (as designated in Section 3.5) and, upon receipt of the certificates
representing shares of Company Common Stock, the Exchange Agent shall forward to
the former shareholders entitled to receive Zions Bancorp Stock (i) certificates
representing their shares of Zions Bancorp Stock, (ii) dividends declared
thereon subsequent to the Effective Date (without interest), (iii) the cash
value of any fractional shares determined in accordance with Section 3.2 hereof
(without interest), and (iv) any Cash Component (without interest).
3.5. Designation of Exchange Agent. The Company and Zions
Bancorp hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions
Bank") as Exchange Agent to effect the exchange contemplated hereby. Zions
Bancorp will, promptly after the Effective Date, issue and deliver to Zions Bank
the share certificates representing shares of Zions Bancorp Stock and the cash
in lieu of fractional shares and any Cash Component to be paid to holders of
Company Common Stock in accordance with this Agreement.
3.6. Notice of Exchange. Promptly after the Effective Date,
Zions Bancorp shall cause Zions Bank to mail to each holder of one or more
certificates formerly representing Company Common Stock, except to such holders
as shall have waived the notice required by this Section 3.6, a notice
specifying the Effective Date and notifying such holder to surrender his or her
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 the
Company. Zions Bancorp shall cause Zions Bank to deliver shares and cash to such
holders who comply with the terms and conditions of the notice of exchange.
- 7 -
<PAGE>
ARTICLE IV
4.1. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart.
4.2. Section Headings. The section and subsection headings
herein have been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof. Any reference to a
"person" herein shall include an individual, firm, corporation, partnership,
trust, government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
4.3. 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 and Yuma County, Arizona, to be proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues 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 or Arizona. 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.
4.4. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
4.5. Amendment. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement may be amended,
supplemented, or interpreted at any time prior to the Effective Date by written
instrument duly authorized and executed by each of the parties hereto; provided,
however, that this Agreement may not be amended after the action by shareholders
of the Company in any respect that would prejudice the economic
- 8 -
<PAGE>
interests of such Company shareholders, or any of them, except as specifically
provided herein or by like action of such shareholders.
4.6. Termination. This Agreement shall terminate and be
abandoned upon (i) termination of the Plan of Reorganization or (ii) the mutual
consent of Zions Bancorp and the Company at any time prior to the Effective
Date, 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 Agreement as of the
date first above written.
ZIONS BANCORPORATION
Attest: By:
--------------------- ----------------------------------
Gary L. Anderson Harris H. Simmons
Secretary President and Chief Executive
Officer
SOUTHERN ARIZONA BANCORP, INC.
Attest: By:
--------------------- ----------------------------------
John E. Byrd
President and Chief Executive
Officer
- 9 -
<PAGE>
- ---------------------------------------------------------
)
State of Utah )
) ss.
)
County of Salt Lake )
)
- ---------------------------------------------------------
On this [________] day of [_______], 1996, before me personally appeared
Harris H. Simmons, to me known to be the President and Chief Executive Officer
of Zions Bancorporation, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
--------------------------
Notary Public
- 10 -
<PAGE>
- ---------------------------------------------------------
)
State of Arizona )
) ss.
)
County of Yuma )
)
- ---------------------------------------------------------
On this [________] day of [_______], 1996, before me personally appeared
John E. Byrd, to me known to be the President and Chief Executive Officer of
Southern Arizona Bancorp, Inc., and acknowledged said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument.
In Witness Whereof I have hereunto set my hand and affixed my official seal
the day and year first above written.
--------------------------
Notary Public
- 11 -
<PAGE>
EXHIBIT II
----------
BANK MERGER AGREEMENT
<PAGE>
AGREEMENT TO MERGE
SOUTHERN ARIZONA BANK
with and into
NATIONAL BANK OF ARIZONA
under the charter and title of
NATIONAL BANK OF ARIZONA
THIS AGREEMENT made between Southern Arizona Bank (hereinafter referred
to as the "Bank"), an Arizona banking corporation organized under the laws of
the State of Arizona, being located in the County of Yuma, in the State of
Arizona, with a Capital of $[_________], divided into [_______] shares of common
stock, each of $[_____] par value, Surplus of $[_________], and Undivided
Profits of $[- _________], as of [______________], 1996, and National Bank of
Arizona (herein referred to as "NBA"), a national banking association organized
under the laws of the United States of America, being located in the County of
Pima, in the State of Arizona, with a Capital of $[_______], divided into
[_______] shares of common stock, each of $[____] par value, Surplus of
$[_________], and Undivided Profits of $[_________], as of [___________], 1996,
each acting pursuant to a resolution of its Board of Directors, adopted by the
vote of a majority of its directors, pursuant to the authority given by and in
accordance with the provisions of the Act of November 7, 1918, as amended (12
U.S.C. ss. 215a) witnesseth as follows:
SECTION 1
The Bank shall be merged into NBA under the charter of the latter (the
"Merger").
SECTION 2
The name of the resulting association (hereinafter referred to as the
"Association") shall be National Bank of Arizona.
SECTION 3
The business of the Association shall be that of a national banking
association. This business shall be conducted by the
<PAGE>
Association at its main office which shall be located at 335 North Wilmot Road,
Tucson, Arizona and at its legally established branches.
SECTION 4
The amount of capital stock of the Association shall be $[_________],
divided into [_________] shares of common stock, each of $[____] par value, and
at the time the Merger shall become effective (the "Effective Date"), the
Association shall have [_______] shares issued and outstanding for capital of
$[_________]. Surplus of the Association will be $[_________], and undivided
profits, including capital reserves, when combined with the capital and surplus,
will be equal to the combined capital structures of the merging banks as stated
in the preamble to this Agreement, adjusted, however, for normal earnings and
expenses between [___________], 1996, and the Effective Date.
SECTION 5
(a) At the Effective Date, the corporate existence of the Bank and NBA
shall be merged into and continued in the Association as provided in 12 U.S.C.
ss. 215a; and the Association shall be deemed to be the same corporation as the
Bank and NBA. All assets, rights, franchises and interests of the Bank and NBA
respectively, in and to every type of property (real, personal and mixed) and
choses in action, as they exist at the Effective Date, shall be transferred to
and vested in the Association by virtue of the Merger without any deed or other
transfer. At the Effective Date and without any order or other action on the
part of any court or otherwise, the Association shall hold and enjoy all rights
of property, franchises and interests, including appointments, powers,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, agent, transfer agent, and registrar of stocks and
bonds, guardian of estates, assignee, receiver and conservator, and in every
other fiduciary capacity, and every agency capacity, in the same manner and to
the same extent as such rights, franchises and interests were held or enjoyed by
the Bank and NBA, respectively, immediately prior to the Effective Date.
(b) At the Effective Date, the Association shall be liable for all
liabilities of the Bank and NBA, including liabilities arising out of the
operation of a Trust Department, and (except as so provided) all deposits,
debts, liabilities, obligations and contracts of the Bank and NBA, respectively,
matured or unmatured,
- 2 -
<PAGE>
whether accrued, absolute, contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account or records of the Bank
or NBA, as the case may be, shall be those of and are hereby expressly assumed
by the Association and shall not be released or impaired by the Merger; and all
rights of creditors and other obligees and all liens on property of either the
Bank or NBA shall be preserved unimpaired. At the Effective Date, the
Association shall be liable for all then existing indemnification obligations of
the Bank and NBA under their respective Articles of Association or By-Laws or
under any other agreement. At the Effective Date, the Association shall have all
rights, and shall be liable for all obligations of the Bank and NBA under all
employee compensation and benefit plans and arrangements of the Bank and NBA,
and such plans and related trusts, if any, shall continue in effect without any
interruption or termination.
SECTION 6
(a) At the Effective Date, the currently outstanding [_______] shares
of common stock of NBA, each of $[____] par value, will remain outstanding as
shares of the $[____] par value common stock of the Association, and the holders
of such stock shall retain their present rights.
(b) No other capital stock of NBA will be issued in the Merger.
(c) At the Effective Date, the shares of common stock of the Bank shall
be canceled.
SECTION 7
Between the date of this Merger Agreement and the Effective Date,
without the written consent of NBA, the Bank will not declare or distribute any
stock dividend, authorize a stock split or issue or authorize or make any
distribution of its capital stock, or merge with, consolidate with or sell its
assets to any other corporation or person, or permit any other corporation to be
merged or consolidated with it, to acquire all the assets of any other
corporation or person, or to enter into any other transaction not in the
ordinary course of the business of banking, or to dispose of any of its assets
in any other manner except in the ordinary course of business and for adequate
value.
- 3 -
<PAGE>
SECTION 8
At and after the Effective Date, the Board of Directors of the
Association will be composed of the following persons:
The Board of Directors of the Association as so constituted shall serve
until the next annual meeting or until such time as their successors have been
elected and have qualified.
SECTION 9
The Effective Date shall be the date upon which the last of the
following events shall occur:
(a) The first to occur of (a) the date thirty days following the date
of the order of the Comptroller of the Currency (the "Comptroller") approving
the Merger, or (b) if, pursuant to section 321(b) of the Riegle Community
Development and Regulatory Improvement Act of 1994, the Comptroller 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;
(b) The date as of which this Agreement shall have been ratified and
confirmed by the affirmative vote of the owners of at least two-thirds of the
outstanding shares of each of the Bank and NBA; or
(c) Such later date as mutually agreed upon by the Presidents of the
Bank and NBA.
- 4 -
<PAGE>
SECTION 10
This Agreement may be terminated by the unilateral action of the Board
of Directors of any participant prior to the approval of the shareholders of
said participant or by the mutual consent of the Boards of Directors of both
participants after any shareholder group has taken affirmative action.
SECTION 11
This Agreement shall be ratified and confirmed by the affirmative vote
of the shareholders of each of the banks owning at least two-thirds of its
capital stock outstanding, at a meeting held on the call of the Directors, or by
a consent in lieu of such a meeting; and the merger shall become effective at
the time specified in a certificate to be issued by the Comptroller, under the
seal of his office, approving the Merger.
[the remainder of this page is intentionally left blank]
- 5 -
<PAGE>
WITNESS the signatures and seals of said merging banks this [_____] day
of [__________], 1996, each hereunto set by its President and attested by its
Cashier or Secretary or Assistant Secretary, pursuant to a resolution of the
Board of Directors, acting by a majority thereof, and witness the signatures
hereto of a majority of each of said Boards of Directors.
SOUTHERN ARIZONA BANK
Attest: ____________________ By: _________________________
- -------------------------- -------------------------
- -------------------------- -------------------------
- -------------------------- -------------------------
- -------------------------- -------------------------
--------------------------
Directors of Southern Arizona Bank
- 6 -
<PAGE>
STATE OF ARIZONA )
) ss.
COUNTY OF YUMA )
On this [_____] day of [__________], 1996, before me, a Notary Public
for the State and County aforesaid, personally came John E. Byrd, as President
and Chief Executive Officer, and [____________], as [Secretary] [Cashier], of
Southern Arizona Bank, and each in his or her said capacity acknowledged the
foregoing instrument to be the act and deed of said bank and the seal affixed
thereto to be its seal; and came also:
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
___________________________________
Notary Public, Grand County
My commission expires:
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<PAGE>
NATIONAL BANK OF ARIZONA
Attest:_______________________ By:_________________________
- ----------------------------- --------------------------
- ----------------------------- --------------------------
- ----------------------------- --------------------------
-----------------------------
Directors of National Bank of Arizona
- 8-
<PAGE>
STATE OF ARIZONA )
) ss:
COUNTY OF MARICOPA )
On this [_____] day of [_____], 1996, before me, a Notary Public for
the State and County aforesaid, personally came [____________] as
[____________], and [____________], as [Cashier] [Secretary], of National Bank
of Arizona, and each in his said capacity acknowledged the foregoing instrument
to be the act and deed of said association and the seal affixed thereto to be
its seal; and came also:
being a majority of the Board of Directors of said association, and each of them
acknowledged said instrument to be the act and deed of said association and of
himself or herself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
(SEAL OF NOTARY)
___________________________________
Notary Public, Maricopa County
My commission expires:
- 9 -
<PAGE>
EXHIBIT III
-----------
EMPLOYMENT AGREEMENT
BY AND BETWEEN JOHN E. BYRD
AND NATIONAL BANK OF ARIZONA
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered
into this [___] day of [______________], 1996, by and among JOHN E. BYRD
("Executive") and NATIONAL BANK OF ARIZONA, a national banking association
organized under the laws of the United States, having its head office in Tucson,
Arizona ("NBA")
WITNESSETH THAT:
----------------
WHEREAS, the Agreement and Plan of Reorganization (the "Plan")
dated as of January 17, 1996, by and among Zions Bancorporation ("Zions
Bancorp"), NBA, Southern Arizona Bancorp, Inc. (the "Company"), and Southern
Arizona Bank (the "Bank") provides that the Company will be merged with and into
Zions Bancorp and that the Bank will be merged with and into NBA;
WHEREAS, Executive is the President and Chief Executive
Officer of each of the Company and the Bank;
WHEREAS, NBA desires to secure the employment of Executive
upon consummation of the transactions contemplated in the Plan;
WHEREAS, Executive is desirous of entering into the Agreement
for such periods and upon the terms and conditions set forth herein; and
WHEREAS, to assist in achieving the objectives of the
transactions described in the Plan, section 3.6 of the Plan contemplates that
Executive will enter into an employment and non-competition agreement as a
condition to the consummation of the transactions described therein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
1. Employment; Responsibilities and Duties.
----------------------------------------
(a) NBA hereby agrees to employ Executive, and Executive
hereby agrees to serve, at the locations specified in section 4, as an executive
vice president of NBA during the Term of Employment, reporting directly to the
chief executive officer of NBA. Executive shall be responsible for the general
banking operations of NBA in Yuma County, Arizona, and shall have such other
duties, responsibilities, and authority of an executive nature as shall be set
forth in the by-laws of NBA on the date of this Agreement or as
<PAGE>
may otherwise from time to time reasonably be assigned to Executive by the board
of directors or the chief executive officer of NBA.
(b) Executive shall devote his full working time and best
efforts to the performance of his responsibilities and duties hereunder. During
the Term of Employment, Executive shall not, without the prior written consent
of the Board of Directors of NBA, render services as an employee, independent
contractor, or otherwise, whether or not compensated, to any person or entity
other than NBA or a company affiliated with NBA; provided, however, that
Executive may, where involvement in such activities does not individually or in
the aggregate significantly interfere with the performance by Executive of his
duties or violate the provisions of section 5 hereof, (i) render services to
charitable organizations, (ii) manage his personal investments, and (iii) with
the prior permission of the Board of Directors of NBA, hold such other
directorships or part-time academic appointments or have such other business
affiliations as would otherwise be prohibited under this section 1.
2. Term of Employment.
-------------------
(a) The term of this Agreement ("Term of Employment") shall be
the period commencing on the date hereof (the "Commencement Date") and
continuing until the Termination Date, which shall mean the earliest to occur
of:
(i) the third anniversary of the Commencement Date,
unless the Term of Employment shall be extended by mutual written agreement of
Executive and NBA;
(ii) the death of Executive;
(iii) Executive's inability to perform his duties
hereunder, as a result of physical or mental disability as reasonably determined
by the personal physician of Executive, for a period of at least 180 consecutive
days or for at least 180 days during any period of twelve consecutive months
during the Term of Employment; or
(iv) the discharge of Executive by NBA "for cause,"
which shall mean one or more of the following:
(A) any willful or gross misconduct by
Executive with respect to the business and affairs of NBA;
(B) the conviction of Executive of a felony
(after the earlier of the expiration of any applicable appeal
- 2-
<PAGE>
period without perfection of an appeal by Executive or the denial of any appeal
as to which no further appeal or review is available to Executive) whether or
not committed in the course of his employment by NBA;
(C) Executive's willful neglect, failure, or
refusal to carry out his duties hereunder in a reasonable manner; or
(D) the breach by Executive of any
representation or warranty in section 7(a) hereof or of any agreement contained
in section 1, 5, 6, or 7(b) hereof, which breach is material and adverse to NBA;
or
(v) Executive's resignation from his position as a
senior officer of NBA; or
(vi) the termination of Executive's employment by
NBA, for any reason other than those set forth in subsections (i), (ii), (iii),
or (iv) of this section 2(a), at any time, upon the thirtieth day following
notice to Executive.
(b) In the event that the Term of Employment shall be
terminated for any reason other than that set forth in section 2(a)(vi) hereof,
Executive shall be entitled to receive, upon the occurrence of any such event:
(i) any salary (as hereinafter defined) payable
pursuant to section 3(a)(i) hereof which shall have accrued as of the
Termination Date; and
(ii) such rights as Executive shall have accrued as
of the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to sections 3(b) or (c) hereof, any right to reimbursement
for expenses accrued as of the Termination Date payable pursuant to section 3(b)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(e) hereof.
(c) In the event that the Term of Employment shall be
terminated for the reason set forth in section 2(a)(vi) hereof, Executive shall
be entitled to receive:
(i) for the period commencing on the date immediately
following the Termination Date and ending upon and including the third
anniversary of the Commencement Date, salary payable at the rate established
pursuant to Section 3(a)(i) hereof for the
- 3 -
<PAGE>
year in which the Termination Date occurs, in a manner consistent with the
normal payroll practices of NBA with respect to executive personnel as in effect
from time to time; and
(ii) such rights as Executive may have accrued as of
the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to sections 3(b) or (c) hereof, any right to reimbursement
for expenses accrued as of the Termination Date payable pursuant to section 3(b)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(e) hereof.
(d) At or about six months before the third anniversary of the
Commencement Date, NBA and Executive will each review the employment
relationship between NBA and Executive in order to evaluate the desirability of
maintaining that relationship for an additional term beyond that provided for in
section 2(a)(i) of this Agreement, or of modifying such relationship for such
additional term, and NBA and Executive will engage in discussions with respect
to mutually agreeable terms and conditions for such employment; provided,
however, that nothing in this section 2(d) shall constitute an offer or
guarantee of employment.
3. Compensation. For the services to be performed by Executive
for NBA under this Agreement, Executive shall be compensated in the following
manner:
(a) Salary and Bonus.
------------------
(i) Salary. During the Term of Employment, NBA shall
pay Executive an initial base salary of $158,291 per annum. The amount of the
salary hereunder shall be reviewed at least annually in accordance with the
procedures and standards established for review of executive compensation for
other senior officers of NBA, and changes thereto may be made in accordance with
the compensation policies of NBA. Salary shall be payable in accordance with the
normal payroll practices of NBA with respect to executive personnel as in effect
from time to time.
(ii) Covenant Bonus. On the Commencement Date,
Executive shall receive a one-time cash bonus of $250,000, which is in payment
for and allocable to the noncompetition agreement contained in section 5(b) of
this Agreement.
(iii) Discretionary Bonuses. During the Term of
Employment and beginning with respect to the calendar year ending as of December
31, 1996, Executive shall be considered annually for a discretionary bonus
payment by NBA. The payment of this bonus
- 4 -
<PAGE>
and its amount shall be based upon the financial performance of NBA and upon
individual performance factors. The target level for this bonus will be 25
percent to 35 percent of the salary of Executive, provided that this target
level shall not bind NBA in any way with regard to the amount of bonus to be
awarded to Executive or to whether any bonus will be awarded to Executive. Any
bonus awarded by NBA under this subsection with respect to any calendar year
shall be paid to Executive during the first calendar quarter of the succeeding
calendar year. The award and amount of this bonus shall be reviewed at least
annually in accordance with the procedures and standards established for review
of executive compensation for other senior officers of NBA, and changes thereto
may be made in accordance with the compensation policies of Zions Bancorp.
(b) Value-Sharing Plan and Incentive Stock Option Plan. During
the Term of Employment, Executive shall be entitled to receive units of
participation under the Value-Sharing Plan and stock options under the Incentive
Stock Option Plan of Zions Bancorp, as each is in effect as of the Commencement
Date or as may be modified by Zions Bancorp from time to time, in such amounts
and upon such terms as may be prescribed by the Executive Compensation Committee
of the Board of Directors of Zions Bancorp at its sole discretion.
(c) Employee Benefit Plans or Arrangements. During the Term of
Employment, subject to the following sentence Executive shall be entitled to
participate in all employee benefit plans of NBA, as presently in effect or as
they may be modified or added to by Zions Bancorp or NBA from time to time,
under such terms as may be applicable to officers of NBA of Executive's rank,
including, without limitation, plans providing retirement benefits, medical
insurance, life insurance, disability insurance, and accidental death or
dismemberment insurance. During the Term of Employment the coverages and
benefits to which Executive is entitled with respect to disability insurance and
dental insurance will not be less than those afforded to Executive by the Bank
as of September 30, 1995, and the cost to Executive of these disability and
dental insurance coverages will not be greater than that assessed against
Executive by the Bank for such insurance as of September 30, 1995.
(d) Automobile Allowance. During the Term of Employment, in
lieu of providing Executive with the use, maintenance, insurance, or garaging of
an automobile, NBA will pay to Executive an automobile allowance of $375 per
month.
(e) Vacation and Sick Leave. During the Term of Employment,
Executive shall be entitled to paid annual vacation periods and sick leave in
accordance with the policies of NBA as in
- 5 -
<PAGE>
effect as of the Commencement Date or as may be modified by NBA from time to
time as may be applicable to officers of NBA of Executive's rank, provided that
during the Term of Employment the number of Executive's paid annual vacation
days shall not be fewer than 33 per twelve-month period.
(f) Country Club. During the Term of Employment, NBA shall pay
for Executive's continued membership in such country clubs whose membership fees
are paid by the Company or the Bank as of September 30, 1995.
(g) Retirement Life Insurance Policy. During the Term of
Employment, NBA will honor the New York Life Insurance Company retirement policy
which is currently in place with respect to Executive.
(h) Life Insurance. During the Term of Employment, NBA will
pay the premiums (currently approximately $1,550 annually) with respect to the
life insurance policy currently in place with respect to Executive, provided
that in lieu of maintaining this policy NBA may make arrangements for such
equivalent life insurance benefits with respect to Executive, the cost of which
arrangements shall be borne by NBA, as shall be acceptable to Executive.
(i) Withholding. All compensation to be paid to Executive
hereunder shall be subject to required withholding and other taxes.
(j) Expenses. During the Term of Employment, Executive shall
be reimbursed for reasonable travel and other expenses incurred or paid by
Executive in connection with the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as may from time to time be requested, in accordance with
such policies of NBA as are in effect as of the Commencement Date and as may be
modified by NBA, under such terms as may be applicable to officers of NBA of
Executive's rank.
(k) Medical Examinations. NBA shall reimburse Executive for
the reasonable cost of one medical examination undergone by Executive in each
twelve-month period following the Commencement Date, provided that any such
examination shall have occurred during the Term of Employment.
(l) Carry-Over of Sick Leave. NBA shall credit Executive with
the number of hours of unused and unforfeited sick leave with which Executive
was credited by the Bank as of the day before the Commencement Date, provided
that such sick leave may be
- 6 -
<PAGE>
taken only with respect to actual illnesses, injuries, appointments with medical
practitioners, or other legitimate medical conditions or occurrences which
prevent Executive from reporting to work.
4. Place of Employment. The place of employment of Executive,
during the Term of Employment, shall be in Yuma County, Arizona, or such other
locations as may be agreed upon by NBA and Executive, with such business travel
outside Yuma County, Arizona or such other locations as shall be reasonably
necessary to the performance of his duties.
5. Confidential Business Information; Non-Competition.
---------------------------------------------------
(a) Executive acknowledges that certain business methods,
creative techniques, and technical data of NBA and the like are deemed by NBA to
be and are in fact confidential business information either of NBA or are
entrusted to NBA by third parties. Such confidential information includes but is
not limited to procedures, methods, sales relationships developed while in NBA's
service, knowledge of customers and their requirements, marketing plans,
marketing information, studies, forecasts, and surveys, competitive analyses,
mailing and marketing lists, new business proposals, lists of vendors,
consultants, and other persons who render service or provide material to NBA,
and compositions, ideas, plans, and methods belonging to or related to the
affairs of NBA. In this regard, NBA asserts proprietary rights in all of its
business information except for such information as is clearly in the public
domain. Notwithstanding the foregoing, information which would be generally
known or available to persons skilled in Executive's fields shall be considered
to be "clearly in the public domain" for the purposes of the preceding sentence.
Executive agrees that he will not disclose or divulge to any third party, except
as may be required by his duties hereunder, by law, regulation, or order of a
court or government authority, or as directed by NBA, nor shall he use to the
detriment of NBA or use in any business or on behalf of any business competitive
with or substantially similar to any business of NBA, any confidential business
information obtained during the course of his employment by NBA. The foregoing
shall not be construed as restricting Executive from disclosing such information
to the employees of NBA.
(b) Executive hereby agrees that during the Term of Employment
and, following the termination of Executive's employment pursuant to sections
2(a)(i), (iv), (v) or (vi) hereof, for the additional period from the
Termination Date until the fifth anniversary of the Commencement Date, Executive
will not (i) engage in the banking business other than on behalf of NBA or any
company that is affiliated with NBA, within the Market Area (as hereinafter
- 7 -
<PAGE>
defined), (ii) directly or indirectly own, manage, operate, control, be employed
by, or provide management or consulting services in any capacity to any firm,
corporation, or other entity (other than NBA or any company that is affiliated
with NBA) engaged in the banking business in the Market Area, or (iii) directly
or indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Board of Directors of NBA to engage in any action prohibited under
(i) or (ii) of this section 5(b); provided that the ownership by Executive as an
investor of not more than five percent of the outstanding shares of stock of any
corporation whose stock is listed for trading on any securities exchange or is
quoted on the automated quotation system of the National Association of
Securities Dealers, Inc. (or the shares of any investment company as defined in
section 3 of the Investment Company Act of 1940, as amended), shall not in
itself constitute a violation of Executive's obligations under this section
5(b). As used herein, "Market Area" shall mean Yuma County in the state of
Arizona.
(c) Executive acknowledges and agrees that irreparable injury
will result to NBA in the event of a breach of any of the provisions of this
section 5 (the "Designated Provisions") and that NBA will have no adequate
remedy at law with respect thereto. Accordingly, in the event of a material
breach of any Designated Provision, and in addition to any other legal or
equitable remedy NBA may have, NBA shall be entitled to the entry of a
preliminary and permanent injunction (including, without limitation, specific
performance) by a court of competent jurisdiction in Yuma County, Arizona or
elsewhere, to restrain the violation or breach thereof by Executive or any
affiliates, agents, or any other persons acting for or with Executive in any
capacity whatsoever, and Executive submits to the jurisdiction of such court in
any such action.
(d) It is the desire and intent of the parties that the
provisions of this section 5 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this section
5 shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, should any court determine that the provisions of this section 5 shall
be unenforceable with respect to scope, duration, or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to NBA, to the
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<PAGE>
fullest extent permitted by applicable law, the benefits intended by this
section 5.
6. Life Insurance. In light of the unusual abilities and
experience of Executive, NBA in its discretion may apply for and procure as
owner and for its own benefit insurance on the life of Executive, in such amount
and in such form as NBA may choose. NBA shall make all payments for such
insurance and shall receive all benefits from it. Executive shall have no
interest whatsoever in any such policy or policies but, at the request of NBA,
shall submit to medical examinations and supply such information and execute
such documents as may reasonably be required by the insurance company or
companies to which NBA has applied for insurance.
7. Representations and Warranties.
-------------------------------
(a) Executive represents and warrants to NBA that (i) his
execution, delivery, and performance of this Agreement will not result in or
constitute a breach of or conflict with any term, covenant, condition, or
provision of any commitment, contract, or other agreement or instrument,
including, without limitation, any other employment agreement, to which
Executive is or has been a party, and (ii) the retirement arrangement that
relates to the subject matter of section 3(g) of this Agreement is fully funded
by a fully-paid New York Life Insurance Company life insurance policy.
(b) Executive shall indemnify, defend, and hold harmless NBA
for, from, and against any and all losses, claims, suits, damages, expenses, or
liabilities, including court costs and counsel fees, which NBA has incurred or
to which NBA may become subject, insofar as such losses, claims, suits, damages,
expenses, liabilities, costs, or fees arise out of or are based upon any failure
of any representation or warranty of Executive in section 7(a) hereof to be true
and correct when made.
8. Notices. All notices, consents, waivers, or other
communications which are required or permitted hereunder shall be in writing and
deemed to have been duly given if delivered personally or by messenger,
transmitted by telex or telegram, by express courier, or sent by registered or
certified mail, return receipt requested, postage prepaid. All communications
shall be addressed to the appropriate address of each party as follows:
- 9 -
<PAGE>
If to NBA:
National Bank of Arizona
3101 North Central Avenue
Phoenix, Arizona 85012
Attention: Mr. John J. Gisi
Chairman, President and
Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
If to Executive:
Mr. John E. Byrd
1373 Gateway
Yuma, Arizona 85364
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
9. Assignment. Neither party may assign this Agreement or any
rights or obligations hereunder without the consent of the other party.
10. Governing Law. This Agreement shall be construed and
governed in all respects by the law applicable to contracts made and to be
performed in the State of Arizona.
11. Entire Agreement. This Agreement constitutes the entire
understanding between NBA and Executive relating to the subject matter hereof.
Any previous agreements or understandings between the parties hereto or between
Executive and Southern Arizona Bank regarding the subject matter hereof,
including without limitation the terms and conditions of employment,
compensation, benefits, retirement, competition following employment, and the
like, are merged into and superseded by this Agreement. Neither this Agreement
nor any provisions hereof can be modified, changed, discharged, or terminated
except by an instrument in writing signed by the party against whom any waiver,
change, discharge, or termination is sought.
- 10 -
<PAGE>
12. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever:
(a) the validity, legality, and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal, or unenforceable) shall not in any way be affected or
impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provisions held to be invalid, illegal, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal, or unenforceable.
13. Costs of Litigation. In the event litigation is commenced
to enforce any of the provisions hereof, or to obtain declaratory relief in
connection with any of the provisions hereof, the prevailing party shall be
entitled to recover reasonable attorney's fees. In the event this Agreement is
asserted in any litigation as a defense to any liability, claim, demand, action,
cause of action, or right asserted in such litigation, the party prevailing on
the issue of that defense shall be entitled to recovery of reasonable attorney's
fees.
14. Affiliation. A company will be deemed to be "affiliated"
with NBA according to the definition of "Affiliate" set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934.
15. Headings. All headings and captions are for convenience
only and shall not limit or define the text hereof.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
ATTEST: NATIONAL BANK OF ARIZONA
_________________________ By: ________________________________
WITNESS:
- ------------------------- ------------------------------------
John E. Byrd
- 12 -
<PAGE>
EXHIBIT IV
----------
OPINION OF O'CONNOR, CAVANAGH, ANDERSON,
WESTOVER, KILLINGSWORTH & BESHEARS, P.A.
<PAGE>
[_______________], 1996
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
National Bank of Arizona
3101 North Central Avenue
Phoenix, Arizona 85012
Re: Merger of Southern Arizona Bancorp, Inc. With and
Into Zions Bancorporation, and of Southern Arizona
Bank With and Into National Bank of Arizona, In
Exchange for Stock of Zions Bancorporation
Ladies and Gentlemen:
We are special counsel to Southern Arizona Bancorp, Inc., an
Arizona corporation (the "Company"), and its subsidiary, Southern Arizona Bank,
an Arizona banking corporation organized under the laws of the state of Arizona
with its head office located at Yuma, County of Yuma, State of Arizona (the
"Bank"), in connection with the merger (the "Holding Company Merger") of the
Company with and into Zions Bancorporation, a Utah corporation ("Zions
Bancorp"), pursuant to the provisions of section 10-071 et seq. of the Arizona
General Corporation Law and section 16-10a-1101 et seq. of the Utah Business
Corporation Act, and the merger (the "Bank Merger") of the Bank with and into
National Bank of Arizona, a national banking association organized under the
laws of the United States with its head office located at Tucson, County of
Pima, State of Arizona ("NBA"), pursuant to the provisions of section 215a of
the National Bank Act (12 U.S.C. ss. 215a), in exchange for which shareholders
of the Company will receive shares
<PAGE>
Zions Bancorporation
National Bank of Arizona
_______________, 1996
Page 2
of the common stock of Zions Bancorp pursuant to an Agreement and Plan of
Reorganization dated January 17, 1996 (the "Agreement") and certain additional
agreements whose execution is contemplated in the Agreement, including the
Agreement of Merger by and between Zions Bancorp and the Company (the "Holding
Company Merger Agreement"), and the Agreement of Merger by and between NBA and
the Bank (the "Bank Merger Agreement") (the Agreement, the Holding Company
Merger Agreement, and the Bank Merger Agreement to be referred to collectively
as the "Agreements").
This opinion is provided to you pursuant to Section 4.3 of the
Agreement.
In our capacity as special counsel, we have participated in
the preparation of a Prospectus/Proxy Statement for the shareholders of the
Company (the "Prospectus/Proxy Statement"). In addition, in rendering the
opinions that follow, we have examined the Agreements and the exhibits and
schedules appended thereto; the articles of incorporation and by-laws of the
Company and the articles of incorporation and by-laws of the Bank; the minutes
of certain meetings of the respective boards of directors of the Company and the
Bank, and such other corporate documents and corporate records of the Company
and the Bank as we have deemed necessary or appropriate for the purpose of
rendering the following opinions. In addition, we have interviewed officers of
the Company and the Bank and undertaken and performed such other procedures as
we have deemed necessary or appropriate for the purpose of rendering the
following opinions. In these regards, we have examined and relied upon
representations of Zions Bancorp and NBA contained in the Agreements, and, where
we have deemed appropriate, representations or certifications of officers or
public officials.
We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
natural persons, and the conformity to the originals of all documents submitted
to us as copies. In making our examination of any documents, we have assumed
that all parties other than the Company and the Bank had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties other than the Company and the Bank, we have also assumed the execution
and delivery of such documents and the validity and binding effect and
enforceability thereof. We have also assumed that the Agreements have not been
otherwise amended by oral or written agreement or by conduct of the parties
thereto. We have assumed that the certifications and representations dated
earlier than the date hereof on which we have expressed reliance herein
<PAGE>
Zions Bancorporation
National Bank of Arizona
_______________, 1996
Page 3
continue to remain accurate, insofar as material to our opinions, from such
earlier date through the date hereof.
On the foregoing basis, and as otherwise described herein, we
are of the opinion that:
(a) Organization, Powers and Qualifications.
----------------------------------------
(i) The Company is a corporation which is duly
organized, validly existing and in good standing under the laws of the State of
Arizona and has the 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. The Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended. All outstanding
shares of capital stock of the Company have been duly and validly authorized and
issued, and are fully paid and non-assessable.
(ii) The Bank is a national banking association which
is duly organized, validly existing and in good standing under the laws of the
United States, and has the 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. The deposit accounts of the Bank are insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation and, to the
best of our knowledge, no proceedings for the termination of such insurance are
pending or threatened. All outstanding shares of capital stock of the Bank have
been duly and validly authorized and issued and are fully paid and non-assess-
able. All shares of the Bank held of record by the Company are owned directly by
the Company free and clear of any adverse claims.
(b) Execution and Performance of Agreements. Each of the
Company and the Bank has the corporate power and authority to execute, deliver
and perform each of the Agreements to which it is a party and to carry out the
terms thereof and the transactions contemplated thereby.
(c) Absence of Violations. To the best of our knowledge,
neither the Company nor the Bank is in violation of its articles of
incorporation or its bylaws, or any law, regulation, ordinance, order or
restriction imposed by the United States, any state, municipality, or other
political subdivision or agency thereof, or any order of any court or other
competent tribunal having jurisdiction over the Company in respect of the
conduct of its business or the ownership of its
<PAGE>
Zions Bancorporation
National Bank of Arizona
_______________, 1996
Page 4
properties, or over the Bank in respect of the conduct of its business or the
ownership of its properties, which, either individually or in the aggregate with
all such other violations, would materially and adversely affect the business,
operations, or condition (financial or otherwise) of the Company or the Bank or
its observance or performance of the terms of any of the Agreements to which it
is a party.
(d) Compliance with Corporate Documents and Agreements.
Neither the execution, delivery, or performance by the Company or the Bank of
the Agreements to which it is a party nor the consummation of the transactions
contemplated therein will violate, conflict with, constitute a breach of or
default under the articles of incorporation or by-laws of the Company, or the
articles of incorporation or by-laws of the Bank, or any agreement or instrument
of which we have knowledge to which the Company or the Bank is a party (or which
is binding on them or their assets) or by which the Company or the Bank is
bound, and will not result in the creation of any lien on, or security interest
in, any of their respective assets.
(e) Binding Obligations; Due Authorization. Each of the
Agreements to which the Company or the Bank is a party has been duly authorized
by all necessary corporate action on the part of the Company or the Bank, as the
case may be, has been duly executed and delivered by the Company or the Bank, as
the case may be, and constitutes a valid, legal and binding obligation of the
Company or the Bank, as the case may be, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other similar laws
or judicial decisions relating to or affecting creditors' rights and remedies
generally or the rights of creditors, or of the FDIC as insurer, regulator,
conservator or receiver, of banks the accounts of which are insured by the FDIC
in particular, or by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) as to whose
availability we express no opinion. No other corporate proceedings on the part
of the Company or the Bank are necessary to authorize each of the Agreements to
which either is a party or the carrying out of the transactions contemplated
hereby.
(f) Absence of Default. Except for those consents (including,
but not limited to, approvals, licenses, registrations or declarations) that
have been obtained, the execution and delivery by each of the Company and the
Bank of each of the Agreements to which it is a party and consummation by each
of them of the transactions contemplated thereby do not require the approval or
consent of any governmental authority or third party. The execution and delivery
by each of the Company and the Bank of
<PAGE>
Zions Bancorporation
National Bank of Arizona
_______________, 1996
Page 5
each of the Agreements to which it is a party, the consummation by it of the
transactions contemplated thereby and the compliance with and fulfillment by it
of the terms thereof by each of the Company and the Bank, respectively, will not
require any authorization, consent, approval or exemption by any person which
has not been obtained or any notice or filing which has not been given or done.
(g) Compliance with Securities Laws.
--------------------------------
(i) No equity or debt securities of the Company or
the Bank are registered or required to be registered under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.
(ii) In connection with our participation in the
preparation of the Prospectus/Proxy Statement, we have not independently
verified the accuracy, completeness or fairness of the statements contained
therein or of documents incorporated by reference therein, and we cannot make
any representation to you as to the accuracy or completeness of statements of
fact contained or incorporated by reference in the Prospectus/Proxy Statement.
Nothing, however, has come to our attention that would lead us to believe that
the Prospectus/Proxy Statement as of its issue date or the date hereof, insofar
as it relates to the Company or the Bank, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (other than the financial statements
and schedules and other financial and statistical data included or incorporated
by reference therein, as to which we make no statement) and that no event has
occurred which should have been set forth in an amendment or supplement to the
Prospectus/Proxy Statement which has not been set forth in such amendment or
supplement.
This opinion is given solely for your benefit in connection
with the transactions contemplated by the Agreements, and no other person or
entity is entitled to rely thereon, nor may copies be delivered or furnished to
any other party, nor may all or portions of this opinion be quoted, circulated,
or referred to in any other document without our prior consent.
Respectfully submitted,
<PAGE>
EXHIBIT V
OPINION OF METZGER, HOLLIS, GORDON & MORTIMER
<PAGE>
[_______________], 1996
Southern Arizona Bancorp, Inc.
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Southern Arizona Bank
1800 Fourth Avenue
Post Office Box 5148
Yuma, Arizona 85364
Re: Merger of Southern Arizona Bancorp, Inc. With and
Into Zions Bancorporation, and of Southern Arizona
Bank With and Into National Bank of Arizona, In
Exchange for Stock of Zions Bancorporation
Ladies and Gentlemen:
We are special counsel to Zions Bancorporation, a Utah
corporation ("Zions Bancorp"), and its wholly owned subsidiary (except for
directors' qualifying shares), National Bank of Arizona, a national banking
association organized under the laws of the United States with its head office
located at Tucson, County of Pima, State of Arizona ("NBA"), in connection with
the merger (the "Holding Company Merger") of Southern Arizona Bancorp, Inc., an
Arizona corporation (the "Company"), with and into Zions Bancorp, pursuant to
the provisions of section 10-071 et seq. of the Arizona General Corporation Law
and section 16-10a-1101 et seq. of the Utah Business Corporation Act, and the
merger (the "Bank Merger") of Southern Arizona Bank, an Arizona banking
corporation organized under the laws of the state of Arizona with its head
office located
<PAGE>
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
_______________, 1996
Page 2
at Yuma, County of Yuma, State of Arizona (the "Bank"), with and into NBA,
pursuant to the provisions of section 215a of the National Bank Act (12 U.S.C.
ss. 215a) and section 6-212 of the Arizona Revised Statutes, in exchange for
which shareholders of the Company will receive shares of the common stock of
Zions Bancorp pursuant to an Agreement and Plan of Reorganization dated January
17, 1996 (the "Agreement") and certain additional agreements whose execution is
contemplated in the Agreement, including the Agreement of Merger by and between
Zions Bancorp and the Company (the "Holding Company Merger Agreement"), and the
Agreement of Merger by and between NBA and the Bank (the "Bank Merger
Agreement") (the Agreement, the Holding Company Merger Agreement, and the Bank
Merger Agreement to be referred to collectively as the "Agreements").
This opinion is provided to you pursuant to Section 5.2 of the
Agreement.
In our capacity as special counsel, we have participated in
the preparation of a Registration Statement filed with the Securities and
Exchange Commission on Form S-4 covering the shares of Zions Bancorp stock to be
issued in connection with the Holding Company Merger (the "Registration
Statement"). In addition, in rendering the opinions that follow, we have
examined the Agreements and the exhibits and schedules appended thereto; the
articles of incorporation and by-laws of Zions Bancorp and the Articles of
Association and by-laws of NBA; the minutes of certain meetings of the
respective boards of directors of Zions Bancorp and NBA, and such other
corporate documents and corporate records of Zions Bancorp and NBA as we have
deemed necessary or appropriate for the purpose of rendering the following
opinions. We have also examined a document dated [_______________], 1996 of the
Comptroller of the Currency (the "Comptroller") approving the application of NBA
and the Bank to merge pursuant to Section 18(c) of the Federal Deposit Insurance
Act, as amended, the document dated [_______________], 1996 of the Federal
Reserve Bank of San Francisco waiving the requirement to submit an application
under the Bank Holding Company Act of 1956, as amended, and documents
respectively dated [________- ________], 1996 and [________________], 1996 of
the Commissioner of Financial Institutions of the State of Utah (the
"Commissioner") and the Superintendent of Banks of the State of Arizona (the
"Superintendent") approving the transactions contemplated by the Agreements. In
addition, we have interviewed officers of Zions Bancorp and NBA and undertaken
and performed such other procedures as we have deemed necessary or appropriate
for the purpose of rendering the following opinions. In these regards, we have
<PAGE>
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
_______________, 1996
Page 3
examined and relied upon representations of the Company and the Bank contained
in the Agreements, and, where we have deemed appropriate, representations or
certifications of officers or public officials.
We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
natural persons, and the conformity to the originals of all documents submitted
to us as copies. In making our examination of any documents, we have assumed
that all parties other than Zions Bancorp and NBA had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties other than Zions Bancorp and NBA, we have also assumed the execution and
delivery of such documents and the validity and binding effect and
enforceability thereof. We have also assumed that the Agreements have not been
otherwise amended by oral or written agreement or by conduct of the parties
thereto. We have assumed that the certifications and representations dated
earlier than the date hereof on which we have expressed reliance herein continue
to remain accurate, insofar as material to our opinions, from such earlier date
through the date hereof.
Based on the foregoing, and as otherwise described herein, we
are of the opinion that:
(a) Organization, Powers and Qualifications.
---------------------------------------
(i) Zions Bancorp is a corporation which is duly
organized, validly existing and in good standing under the laws of the State of
Utah and has all the 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.
(ii) NBA is a national banking association which is
duly organized, validly existing, and in good standing under the laws of the
United States and has the 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. The deposit accounts of NBA are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation and, to the
best of our knowledge, no proceedings for the termination of such insurance are
pending or threatened.
(b) Execution and Performance of Agreements. Each of Zions
Bancorp and NBA has the corporate power and authority to execute, deliver, and
perform each of the Agreements to which it
<PAGE>
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
_______________, 1996
Page 4
is a party and to carry out the terms thereof and the transactions contemplated
thereby.
(c) Compliance with Corporate Documents. Neither the
execution, delivery, or performance by Zions Bancorp or NBA of the Agreements to
which it is a party nor the consummation of the transactions contemplated
therein will violate, conflict with, or constitute a breach of or default under
the articles of incorporation or by-laws of Zions Bancorp or the articles of
association or by-laws of NBA.
(d) Binding Obligations; Due Authorization. Each of the
Agreements to which Zions Bancorp and NBA is a party has been duly authorized by
all necessary corporate action on the part of each of Zions Bancorp and NBA, has
been duly executed and delivered by each of Zions Bancorp and NBA, and
constitutes a valid, legal and binding obligation of each of Zions Bancorp and
NBA, as appropriate, enforceable against each in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship or similar laws or judicial decisions
relating to or affecting creditors' rights generally or the rights of creditors,
or of the FDIC as insurer, regulator, conservator or receiver, of banks the
accounts of which are insured by the FDIC in particular, or by general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) as to whose availability we express no opinion. No other
corporate proceedings on the part of Zions Bancorp and NBA are necessary to
authorize each of the Agreements to which either is a party or the carrying out
of the transactions contemplated hereby.
(e) Regulatory Approvals. All approvals required to be
obtained from the Comptroller, the Board of Governors of the Federal Reserve
System, the Commissioner, and the Superintendent to consummate the transactions
contemplated by the Agreement and Plan of Reorganization have been obtained.
Except for those approvals, the execution and delivery by each of Zions Bancorp
and NBA of each of the Agreements to which it is a party and consummation of the
transactions contemplated thereby do not require the approval or consent of any
bank regulatory authority.
(f) Issuance of Zions Bancorp Common Stock. The shares of the
common stock of Zions Bancorp, no par value per share, to be issued by Zions
Bancorp pursuant to the Agreement and the Holding Company Merger Agreement, when
issued pursuant to and in accordance with the Agreement and the Holding Company
Merger Agreement, will
<PAGE>
Southern Arizona Bancorp, Inc.
Southern Arizona Bank
_______________, 1996
Page 5
be, when issued in exchange for the assets of the Company, duly authorized and
legally issued, fully paid, and non-assessable.
(g) Compliance with Securities Laws.
--------------------------------
(i) The Registration Statement has become effective
under the Securities Act of 1933 (the "Act") and, to the best of our knowledge,
no stop order proceedings with respect thereto have been instituted or are
pending or threatened under the Act with respect to the Registration Statement.
(ii) In connection with our participation in the
preparation of the Registration Statement, we have not independently verified
the accuracy, completeness or fairness of the statements contained therein or of
documents incorporated by reference therein, and we cannot make any
representation to you as to the accuracy or completeness of statements of fact
contained or incorporated by reference in the Registration Statement. Nothing,
however, has come to our attention that would lead us to believe that the
Registration Statement as of the effective date or the date hereof, insofar as
it relates to Zions Bancorp or NBA, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading (other than the financial statements and schedules and
other financial and statistical data included or incorporated by reference
therein, as to which we make no statement) or that any event has occurred which
should have been set forth in an amendment or supplement to the Registration
Statement and which has not been set forth in such amendment or supplement.
This opinion is given to you for your sole benefit in
connection with the transactions contemplated in the Agreements, and no other
person or entity is entitled to rely thereon, nor may copies be delivered or
furnished to any other party, nor may all or portions of this opinion be quoted,
circulated, or referred to in any other document without our prior written
consent.
Very truly yours,
METZGER, HOLLIS, GORDON & MORTIMER
By:_______________________________
Brian D. Alprin
<PAGE>
EXHIBIT VI
<PAGE>
Average Number Product of ACP Sum of Third
Closing of Shares and Number of Cash and Fourth
Price ("ACP") Issued Shares Issued Component Columns
------------- ------ ------------- --------- -------
$49.00 429,322 $21,036,780 $4,293,220 $25,330,000
50.00 429,322 21,466,102 3,863,898 25,330,000
51.00 429,322 21,895,424 3,434,576 25,330,000
52.00 429,322 22,324,746 3,005,254 25,330,000
53.00 429,322 22,754,068 2,575,932 25,330,000
54.00 429,322 23,183,390 2,146,610 25,330,000
55.00 429,322 23,612,712 1,717,288 25,330,000
56.00 429,322 24,042,034 1,287,966 25,330,000
57.00 429,322 24,471,356 858,644 25,330,000
58.00 429,322 24,900,678 429,322 25,330,000
59.00 429,322 25,330,000 0 25,330,000
60.00 422,167 25,330,000 0 25,330,000
61.00 415,246 25,330,000 0 25,330,000
62.00 408,548 25,330,000 0 25,330,000
63.00 402,063 25,330,000 0 25,330,000
64.00 395,781 25,330,000 0 25,330,000
65.00 389,692 25,330,000 0 25,330,000
66.00 383,788 25,330,000 0 25,330,000
67.00 378,060 25,330,000 0 25,330,000
68.00 372,500 25,330,000 0 25,330,000
69.00 367,101 25,330,000 0 25,330,000
70.00 361,857 25,330,000 0 25,330,000
71.00 356,761 25,330,000 0 25,330,000
72.00 351,806 25,330,000 0 25,330,000
73.00 351,806 25,681,806 0 25,681,806
74.00 351,806 26,033,611 0 26,033,611
75.00 351,806 26,385,417 0 26,385,417
76.00 351,806 26,737,222 0 26,737,222
77.00 351,806 27,089,028 0 27,089,028
78.00 351,806 27,440,833 0 27,440,833
79.00 351,806 27,792,639 0 27,792,639
80.00 351,806 28,144,444 0 28,144,444
81.00 351,806 28,496,250 0 28,496,250
Note. -- This exhibit assumes that the Benchmark Price, as defined in the
Agreement and Plan of Reorganization, will equal $25,330,000.
<PAGE>
EXHIBIT 5
---------
Metzger, Hollis, Gordon & Alprin
1275 K Street, N.W., Suite 1000
Washington, D.C. 20005
(202) 842-1600
April 1, 1996
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Gentlemen:
We have acted as counsel to Zions Bancorporation ("Zions") in
connection with the Agreement and Plan of Reorganization among Southern Arizona
Bancorp, Inc. ("Southern Arizona"), Southern Arizona Bank (the "Bank"), Zions,
and National Bank of Arizona ("NBA"), dated January 17, 1996 and a related Plan
of Merger between Southern Arizona and Zions, and an Agreement to Merge between
the Bank and NBA (collectively, the "Plan of Reorganization"), whereby Southern
Arizona will be merged into Zions, with Zions being the surviving corporation,
and whereby the Bank will be merged into NBA (collectively, the
"Reorganization"). At the time the Reorganization becomes effective, all of the
issued and outstanding shares of common stock, no par value, of Southern Arizona
("Southern Arizona Common Stock"), other than shares as to which the holders
exercise dissenters' rights, will be exchanged for shares of common stock, no
par value, of Zions ("Zions Common Stock").
We are also acting as counsel to Zions in connection with the
Registration Statement on Form S-4 (the "Registration Statement") to be filed by
Zions with the Securities and Exchange Commission for the purpose of registering
under the Securities Act of 1933, as amended, the aggregate maximum of 500,000
shares of Zions Common Stock into which outstanding Southern Arizona Common
Stock may be converted upon effectiveness of the Reorganization. This opinion is
being furnished for the purpose of being filed as an exhibit to the Registration
Statement.
In connection with this opinion, we have examined, among other
things:
<PAGE>
(1) an executed copy of the Plan of Reorganization;
(2) a copy certified to our satisfaction of the Restated
Articles of Incorporation of Zions as in effect on
the date hereof;
(3) copies certified to our satisfaction of resolutions
adopted by the Board of Directors of Zions on
November 8, 1995, including resolutions approving the
Plan of Reorganization; and
(4) such other documents, corporate proceedings, and
statutes as we considered necessary to enable us to
furnish this opinion.
We have assumed for the purpose of this opinion that:
(1) the Plan of Reorganization has been duly and validly
autho- rized, executed, and delivered by Southern
Arizona; and
(2) the Reorganization will be consummated in accordance
with the terms of the Plan of Reorganization.
We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
natural persons, and the conformity to the originals of all documents submitted
to us as copies. In making our examination of any documents, we have assumed
that all parties other than Zions and NBA had the corporate power and authority
to enter into and perform all obligations thereunder and, as to such parties, we
have also assumed the execution and delivery of such documents and the validity
and binding effect and enforceability thereof. We have also assumed that the
Plan of Reorganization has not been otherwise amended by oral or written
agreement or by conduct of the parties thereto. We have assumed that the
certifications and representations dated earlier than the date hereof on which
we have expressed reliance herein continue to remain accurate, insofar as
material to our opinions, from such earlier date through the date hereof.
Based upon the foregoing, we are of the opinion that the
shares of Zions Common Stock into which the outstanding Southern Arizona Common
Stock will be converted in the Reorganization will, at the time such
Reorganization becomes effective, be duly authorized, validly issued, fully paid
and nonassessable shares of Zions Common Stock.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the caption
"Legal Opinions" in Proxy Statement/Prospectus forming a part of the
Registration Statement.
Very truly yours,
METZGER, HOLLIS, GORDON & ALPRIN
By /S/ Laurence S. Lese
----------------------
Laurence S. Lese
LSL/sls
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 22, 1996, with respect to the
consolidated financial statements of Zions Bancorporation as of December 31,
1995 and 1994, and for each of the years in the three-year period ended December
31, 1995 incorporated herein by reference, and to the reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
April 8, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Southern Arizona Bancorp, Inc.:
We consent to the use of our report dated January 24, 1996, with respect to the
consolidated financial statements of Southern Arizona Bancorp, Inc. as of
December 31, 1995 and 1994, and for each of the years then ended included
herein, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ MCGLADREY & PULLEN LLP
---------------------------
MCGLADREY & PULLEN LLP
Phoenix, Arizona
April 8, 1996
<PAGE>
EXHIBIT 23.3
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of Zions
Bancorporation of our report dated January 21, 1994, on the consolidated
financial statements of Southern Arizona Bancorp, Inc. and subsidiary for the
year ended December 31, 1993, appearing in the Proxy Statement, which is a part
of this Registration statement.
We also consent to the reference to us under the heading "Experts" in such
Proxy.
/s/ DELOITTE & TOUCHE LLP
--------------------------
DELOITTE & TOUCHE LLP
Phoenix, Arizona
April 9, 1996
<PAGE>
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
The Board of Directors
Southern Arizona Bancorp, Inc.:
We hereby expressly consent to any reference to our firm in the Proxy State-
ment/Prospectus, the inclusion of our opinion, dated February 29, 1996, as an
exhibit to the Proxy Statement/Prospectus, and to the filing of our opinion with
any other appropriate governmental agency.
M ONE, Inc.
By: /s/ Marilyn R. Seymann
------------------------------------
Marilyn R. Seymann
President and Chief Executive Officer
Phoenix, Arizona
April 3, 1996
<PAGE>
EXHIBIT 99.1
------------
[SOUTHERN ARIZONA LETTERHEAD]
April ___, 1996
Shareholders of Southern Arizona Bancorp, Inc.
Dear Shareholder:
A Special Meeting of the Shareholders of Southern Arizona Bancorp, Inc.
("Southern Arizona") has been called for 6:30 p.m., Arizona Time, on May ___,
1996, at Best Western Chilton Inn and Conference Center, 300 East 32nd Street,
Yuma, Arizona.
The purpose of the Special Meeting is to consider and act upon an
Agreement and Plan of Reorganization (the "Plan of Reorganization") among
Southern Arizona, Zions Bancorporation ("Zions"), National Bank of Arizona
("NBA") and Southern Arizona Bank (the "Bank").
If the Plan of Reorganization is approved, and all conditions are met,
the Plan of Reorganization will result in the merger of Southern Arizona into
Zions and the merger of the Bank into NBA. Upon consummation of the Plan of
Reorganization, each holder of Southern Arizona's Common Stock will, upon
surrender of the shareholder's stock certificate, be entitled to receive in
exchange for each share held as of the effective date of the Plan of
Reorganization, that number of shares of Zions Common Stock calculated by
dividing the Benchmark Price (as defined in the Plan of Reorganization) of
$25,330,000 plus certain accretions by the average closing price (as defined) of
Zions Common Stock and by further dividing the number so reached by the number
of shares of Southern Arizona Common Stock issued and outstanding as of the
effective date of the merger. No fractional shares of Zions Common Stock will be
issued. Instead, cash in an amount equal to the fractional part of a share
multiplied by the average closing price of Zions Common Stock (as determined
under the Plan of Reorganization) will be paid to Southern Arizona shareholders.
For example, if the Plan of Reorganization had been consummated as of
April __, 1996, and the average closing price of Zions Common Stock was $ _____,
the Reorganization would have resulted in an exchange ratio of ___ shares of
Zions Common Stock for each share of Southern Arizona Common Stock, or an
equivalent consideration to holders of Southern Arizona's Common Stock of $ ____
per share.
The accompanying Proxy Statement details the terms of the proposed Plan
of Reorganization and provides information concerning Southern Arizona, Zions,
NBA, and the Plan of Reorganization. The Proxy Statement contains important
information necessary for you to make a decision about how to vote at the
Special Meeting. Please read it carefully.
The affirmative vote of at least two-thirds of the holders of Southern
Arizona Common Stock and two-thirds of the issued and outstanding shares of
Southern Arizona is required for approval of the Plan of Reorganization.
Therefore, it is important that you vote. Failure to vote will have the same
<PAGE>
Shareholders of Southern Arizona Bancorp, Inc.
April __, 1996
Page 2
effect as a vote against the Reorganization. Consequently, please mark, sign,
date and return the enclosed proxy as soon as possible.
Any shareholder may attend the Special Meeting and vote in person if he
desires.
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies and to certain other conditions,
including the maintenance of Southern Arizona's financial condition. If
approved, the Plan of Reorganization will most likely be consummated sometime in
the second quarter of 1996, assuming that all banking regulatory approvals are
received timely.
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the Reorganization is in the best interests
of Southern Arizona, its shareholders, employees and the community it serves.
The Board of Directors of Southern Arizona has also received the opinion dated
February 29, 1996 of M One, Inc., Southern Arizona's independent financial
advisory consultant, that the consideration offered in the Plan of
Reorganization is fair to shareholders of Southern Arizona from a financial
point of view. The Board of Directors unanimously recommends that you vote to
approve to Plan of Reorganization.
If the Plan of Reorganization is approved by the shareholders, on or
shortly after the effective date of the Plan of Reorganization, Zions will send
you instructions describing the procedure to be followed to exchange your
Southern Arizona stock certificate for common stock of Zions. Please do not send
your certificates to the Southern Arizona prior to receiving these instructions.
Sincerely,
-------------------------------------
John F. Byrd
President and Chief Executive Officer
<PAGE>
EXHIBIT 99.2
------------
SOUTHERN ARIZONA BANCORP, INC.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Southern Arizona Bancorp,
Inc. ("Southern Arizona") will be held at 6:30 p.m., local time, on May , 1996,
at Best Western Chilton Inn and Conference Center, 300 East 32nd Street, Yuma,
Arizona, to consider and act upon an Agreement and Plan of Reorganization dated
as of January 17, 1996 (the "Plan of Reorganization"), between Zions Bancorpora-
tion ("Zions"), National Bank of Arizona ("NBA"), a subsidiary of Zions,
Southern Arizona and Southern Arizona Bank (the "Bank"), which agreement
provides for the merger of Southern Arizona into Zions with Zions being the
surviving corporation and the merger of the Bank into NBA with NBA being the
surviving institution.
Upon the consummation of the Plan of Reorganization, each
holder of shares of Southern Arizona Common Stock will be entitled to receive,
in exchange for each share held as of the effective date of the Plan of
Reorganization, that number of shares of Zions Common Stock calculated by
dividing the Benchmark Price (as defined in the Plan of Reorganization) of
$25,330,000 plus certain accretions by the average closing price (as defined in
the Plan of Reorganization) of Zions Common Stock and by further dividing the
number so reached by the number of shares of Southern Arizona Common Stock that
are issued and outstanding as of the effective date of the merger.
The Board of Directors has set April __, 1996, as the record
date for determining shareholders entitled to notice of and to vote at the
Special Meeting.
Southern Arizona shareholders are entitled to assert
dissenters' rights under Arizona law. Pursuant to Section 10-1301 et seq. of the
Arizona Business Corporation Act, dissenting shareholders are entitled to
payment in cash of the value of those shares for which dissenters' rights are
perfected in accordance with the procedures established by the Arizona General
Corporation Law.
By order of the Board of Directors
Dated: April __, 1996.
-------------------------------------
John E. Byrd,
President and Chief Executive Officer
Please mark, sign and return the enclosed proxy in the envelope
provided.
<PAGE>
EXHIBIT 99.3
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF SOUTHERN ARIZONA BANCORP, INC.
MAY __, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen P. Shadle, and John E.
Byrd, and each of them, as proxies of the undersigned to vote as designated
below on behalf of the undersigned as a holder of Southern Arizona Common Stock
and to vote as designated below all shares of the common capital stock of
Southern Arizona Bancorp, Inc. (the "Southern Arizona Common Stock") that the
undersigned held of record on April __, 1996, which the undersigned is entitled
to vote, at the special meeting of shareholders to be held May ___, 1996, or at
any postponement or adjournment thereof, for the purpose of considering and
acting on the proposal to approve the Agreement and Plan of Reorganization dated
January 17, 1996 (the "Plan of Reorganization"), among Zions Bancorporation
("Zions"), National Bank of Arizona ("NBA"), Southern Arizona Bancorp, Inc.
("Southern Arizona") and Southern Arizona Bank (the "Bank") which provides for
the merger of Southern Arizona into Zions, the merger of the Bank into NBA, and
the conversion of each outstanding share of Southern Arizona Common Stock into
the right to receive that number of shares of Zions Common Stock calculated by
dividing the Benchmark Price (as defined in the Plan of Reorganization) of
$25,330,000 plus certain accretions by the average closing price (as defined in
the Plan of Reorganization) of Zions and by further dividing the number so
reached by the total number of shares of Southern Arizona Common Stock issued
and outstanding as of the Effective Date of the Plan of Reorganization. Each
Proxy shall have full power of substitution. Approval of the Plan of
Reorganization requires the affirmative vote of at least two-thirds of the
holders of Southern Arizona Common Stock and at least two-thirds of the
outstanding shares of Southern Arizona Common Stock. The act by a majority of
the Proxies or their substitutes present at the meeting shall control; however,
if only one proxy be present, that one shall have all powers hereunder.
The Directors recommend a vote FOR Proposal:
1. Approval of the Plan of Reorganization.
----- ----- -----
| | FOR | | AGAINST | | ABSTAIN
----- ----- -----
A vote by the undersigned in one of the above boxes will constitute a
vote by the undersigned as a holder of Southern Arizona Common Stock and also a
vote of the undersigned's shares of Southern Arizona Common Stock.
2. The Proxies, in their discretion, are authorized to vote on such other
business as may properly come before the meeting.
<PAGE>
When properly completed, this proxy will be voted in the manner directed
herein by the undersigned. If no direction is given, this proxy will be voted
FOR the approval of the Plan of Reorganization.
(Each person whose name is on the Southern Arizona
Common Stock certificate should sign below in the
same manner in which such person's name appears. If
signing as a fiduciary, give title.)
-----------------------------------
Signature
-----------------------------------
Printed Name
Dated:
----------------------------
Please date, sign,
and return promptly
<PAGE>
