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As filed with the Securities and Exchange Commission on , 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ZIONS BANCORPORATION
(Exact name of registrant as specified in its charter)
Utah 6712 87-0227400
---------------- --------------- ------------
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
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(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
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Brian D. Alprin, Esq. Herbert H. Davis, III, Esq.
Laurence S. Lese, Esq. Rothgerber, Appel, Powers & Johnson LLP
Duane, Morris & Heckscher LLP Suite 3000, One Tabor Center
Suite 700 1200 17th Street
1667 K Street, N.W. Denver, Colorado 80202-5839
Washington, D.C. 20006-1608 (303) 623-9000
(202) 776-7800
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 maximum Proposed maximum
Title of securities to Amount to be offering price aggregate offering Amount of
be registered registered per share price(1) registration fee
- --------------------- ------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, no par 1,100,000 NA $13,208,000 $4,003
value
</TABLE>
- ----------
(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 outstanding shares of 1992 Series Preferred Stock, $100 par
value, and the outstanding shares of Common Stock, $.01 par value, of Sun
State Capital Corporation on June 30, 1997 (the latest practicable date
prior to filing the registration statement) of $13,208,000 such stock to
be cancelled upon effectiveness of the Reorganization described herein.
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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.
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<PAGE>
SUN STATE CAPITAL CORPORATION
Proxy Statement
Special Meeting of Common Shareholders
To be Held on , 1997
and
ZIONS BANCORPORATION
Prospectus
Up to 1,100,000 Shares of
Common Stock
This Proxy Statement/Prospectus is being furnished to the shareholders
of Sun State Capital Corporation, a Nevada corporation ("Sun State"), in
connection with the solicitation of proxies by its Board of Directors for use at
a Special Meeting of Common Shareholders of Sun State to be held on , 1997
(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 Sun State as of , 1997 (the "Record Date")
on or about , 1997.
At the Special Meeting, the holders of Sun State common stock, par
value $.01 per share ("Sun State Common Stock") will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Reorganization dated as
of May 21, 1997 among Sun State, Sun State Bank, Sun State's wholly-owned
subsidiary, a banking corporation organized under the laws of Nevada (the
"Bank"), Zions Bancorporation, a Utah corporation ("Zions"), and Zions'
wholly-owned subsidiary, Nevada State Bank, a banking corporation organized
under the laws of Nevada ("NS Bank"), an accompanying Agreement to Merge between
Sun State and Zions, and an Agreement to Merge between the Bank and NS Bank
(collectively the "Plan of Reorganization"). Pursuant to the Plan of
Reorganization, Sun State will merge with and into Zions with Zions being the
surviving corporation and the Bank will merge with and into NS Bank, with NS
Bank being the surviving banking corporation (the "Reorganization"). Holders of
Sun State Preferred Stock, as defined below, will have no right to vote their
shares of Preferred Stock at the Special Meeting.
Upon consummation of the Reorganization, the holders of each
outstanding share of Sun State Common Stock and the holders of each outstanding
share of Sun State's 1992 Series Preferred Stock (the "Preferred Stock") will be
entitled to elect to receive, in exchange for each share of Sun State Common
Stock and for each share of Preferred Stock, cash or shares of Zions common
stock, no par value ("Zions Common Stock") or a combination of cash and Zions
Common Stock or to indicate that such holder has no preference as between
receiving cash or Zions Common Stock (a "Non-Election").
Holders of Sun State Common Stock who elect to receive shares of Zions
Common Stock will receive, in exchange for each share of Sun State Common Stock,
that number of shares of Zions Common Stock calculated by dividing the Purchase
Price (as defined in the Plan of Reorganization) of $37,000,000 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 Sun State
Common Stock issued and outstanding as of the Effective Date (as defined) of the
<PAGE>
Reorganization. If an election adjustment is not required (see the second
succeeding paragraph), holders of the Sun State Common Stock who elect to
receive cash will receive, in exchange for each share of Sun State Common Stock,
an amount of cash calculated by dividing the Purchase Price by the number of
shares of Sun State Common Stock issued and outstanding as of the Effective Date
of the Reorganization. If an election adjustment is not required (see the second
succeeding paragraph), each share of Sun State Common Stock which constitutes a
Non-Election share will be converted into the right to receive cash, except as
otherwise stated in the following sentence. In the event that conversion of the
Sun State Common Stock Non-Election shares into the right to receive cash would
result in more than 49% of the total consideration to be paid in the
Reorganization being in the form of cash, then such Non-Election shares will be
converted into the right to receive cash and shares of Zions Common Stock in
such proportions that no more than 49% of the total consideration to be paid in
the Reorganization will be in the form of cash.
Holders of Preferred Stock who elect to receive Zions Common Stock will
receive, in exchange for each share of Preferred Stock, that number of shares of
Zions Common Stock calculated by dividing $110 plus accrued and unpaid dividends
on one share of Preferred Stock by the Average Closing Price. Holders of
Preferred Stock who elect to receive cash will receive, in exchange for each
share of Preferred Stock, $110 plus accrued and unpaid dividends on one share of
Preferred Stock. With respect to each share of Preferred Stock covered by a
Non-Election, an election to receive cash will be deemed to have been made by
the holder of such share.
In the event that as a group the holders of Sun State Common Stock and
Preferred Stock do not elect to receive sufficient consideration in the form of
shares of Zions Common Stock, such that, including the consideration to holders
of the Sun State Common Stock Non-Election Shares, at least 51% of the total
consideration to these holders as a group will be in the form of Zions Common
Stock, the elections of the holders of Sun State Common Stock to receive cash
will be adjusted so that a portion of the consideration to be received by such
holders will be in the form of shares of Zions Common Stock rather than in cash,
in order that the total merger consideration to be paid to holders of Sun State
Common Stock and Preferred Stock will be 49% in cash and 51% in shares of Zions
Common Stock. The terms and conditions of the election readjustment are more
fully set forth in the Plan of Reorganization.
On August 13, 1997, the closing price of Zions Common Stock was
$35.6875 per share and Sun State had issued and outstanding 286,884 shares of
its Common Stock and 5,719 shares of its Preferred Stock. Additionally, at that
date Sun State had 2,750 shares of its Common Stock in its treasury, of which
250 shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Assuming that the Purchase Price
equaled $37,944,285 on August 13, 1997, and the Average Closing Price was
$35.78, shareholders of Sun State under such circumstances would have received
3.6317 shares of Zions Common Stock for each share of Sun State Common Stock or
cash equal to $129.94 per share of Sun State Common Stock, and holders of shares
of Preferred Stock under such circumstances would have received 3.0964 shares of
Zions Common Stock for each share of Sun State's Preferred Stock or cash of
$110.79 per share.
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<PAGE>
All references to shares of Zions Common Stock and the market price of
Zions Common Stock in this Proxy Statement/Prospectus reflect the four
shares-for-one share Zions stock split which was effective with respect to Zions
shareholders of record on May 9, 1997.
The Zions Common Stock to be distributed to Sun State shareholders will
be registered with the Securities and Exchange Commission and for all
shareholders, other than shareholders who are affiliates of Sun State or who
become affiliates of Zions, will be immediately tradable. See "Plan of
Reorganization--Conversion of Sun State Shares." 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 Sun State. 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, HOLDERS OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF SUN STATE MUST
VOTE IN FAVOR OF THE REORGANIZATION. ALL REGULATORY APPROVALS HAVE BEEN
OBTAINED.
--------------------
THE SHARES OF ZIONS COMMON STOCK TO BE ISSUED IN THE REORGANIZATION
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 Sun State. 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 has been supplied by Zions. The information contained in this
Proxy Statement/Prospectus with respect to Sun State has been supplied by Sun
State. Neither Zions nor Sun State warrants the accuracy or completeness of
information relating to the other.
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<PAGE>
Forward-looking Statements
Certain statements contained herein are not based on historical facts,
but are forward-looking statements that are based upon numerous assumptions
about future conditions that could prove not to be accurate. Actual events,
transactions and results may materially differ from the anticipated events,
transactions or results described in such statements. Zions' ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of Zions' products
and services, regulatory approvals and developments, economic conditions, the
impact of competition and pricing, results of financing efforts and other
factors affecting Zions' business that are beyond Zions' control. Factors that
could cause future results to vary from current management expectations include,
but are not limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes in tax
policies, rates and regulations of federal and local tax authorities, changes in
interest rates, deposit flows, the cost of funds, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of Zions' loan and investment portfolios, changes in accounting
principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting Zions' operations, markets,
products, services and prices.
The date of this Proxy Statement/Prospectus is September , 1997.
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<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 (hereinafter, the "NASDAQ-NMS"), and
such reports, proxy statements and other information can also be inspected at
the offices of NASDAQ Operations, 1735 K Street, N.W., Washington, D.C. The SEC
maintains a Web site that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
SEC (http://www.sec.gov).
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, One South Main, Suite 1380, Salt Lake City, Utah 84111,
Attention: Dale M. Gibbons, Senior Vice President, (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 September , 1997.
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<PAGE>
TABLE OF CONTENTS
Page
SUMMARY........................................................................1
INTRODUCTION..................................................................17
Record Date; Voting Rights...........................................17
Purpose of the Special Meeting.......................................18
Opinion of Sun State's Financial Advisor.............................19
Voting and Revocation of Proxies.....................................20
Solicitation of Proxies..............................................20
PLAN OF REORGANIZATION........................................................20
The Reorganization...................................................20
Background of and Reasons for the Reorganization.....................22
Voting Agreements....................................................24
Required Vote; Management Recommendation.............................24
Opinion of Sun State's Financial Advisor.............................25
Conversion of Sun State Shares; Election to Receive Cash or Stock....29
Federal Income Tax Consequences of the Reorganization................33
Dissenters' Rights...................................................34
Interests of Certain Persons in the Transaction......................37
Outstanding Stock Options............................................37
Inconsistent Activities..............................................38
Conduct of Business Pending the Reorganization.......................39
Conditions to the Reorganization.....................................39
Representations and Warranties.......................................41
Amendment and Waiver.................................................41
Authorized Termination and Damages for Breach........................42
Restrictions on Resales by Sun State Affiliates......................42
Expenses.............................................................42
Government Approvals.................................................43
Effective Date of the Reorganization.................................43
Accounting Treatment.................................................43
Relationship Between Zions and Sun State.............................43
Unaudited Pro Forma Combined Financial Information...................43
SUPERVISION AND REGULATION....................................................45
Zions................................................................45
Regulatory Capital Requirements......................................46
Other Regulatory and Supervisory Issues..............................49
Deposit Insurance and Other Assessments..............................50
Interstate Banking...................................................51
MONETARY POLICY...............................................................53
INFORMATION CONCERNING ZIONS BANCORPORATION...................................53
Selected Financial Data..............................................53
Stock Prices and Dividends on Zions Common Stock.....................56
Principal Holders of Zions Common Stock..............................57
Zions Documents Incorporated By Reference............................58
INFORMATION CONCERNING SUN STATE CAPITAL CORPORATION..........................59
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<PAGE>
Selected Financial Data..............................................67
Stock Prices and Dividends on Sun State Common Stock.................69
Stockholdings of Directors, Officers and Certain Others..............69
CERTAIN TRANSACTIONS OF SUN STATE.............................................70
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF SUN STATE CAPITAL CORPORATION........................71
COMPARISON OF ZIONS COMMON STOCK AND SUN STATE COMMON STOCK...................88
LEGAL OPINIONS................................................................96
EXPERTS.......................................................................96
OTHER MATTERS.................................................................96
CONTENTS TO FINANCIAL STATEMENTS.............................................F-1
Appendix A - Fairness Opinion of Hoefer & Arnett, Incorporated
Appendix B - Opinion of Rothgerber, Appel, Powers & Johnson LLP as to Tax
Matters
Appendix C - Rights of Dissenters under ss. 92A.300 et seq. of the Nevada
General Corporation Law
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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 One South Main,
Suite 1380, Salt Lake City, Utah 84111 (telephone: 801/524-4787). Zions is the
second largest bank holding company headquartered in Utah. Zions First National
Bank, Salt Lake City, Utah ("ZFNB"), founded in 1873, is a wholly-owned
subsidiary of Zions (except for directors' qualifying shares) and currently has
108 offices located throughout the state of Utah as well as fourteen offices in
various communities in Idaho, plus one foreign office, for a total of 123
banking offices, including its Head Office. ZFNB is the second largest banking
organization in the state of Utah. Zions also owns Nevada State Bank, Las Vegas,
Nevada, and National Bank of Arizona, Tucson, Arizona ("NBA"). NBA currently has
28 offices in Arizona and is the fifth largest banking organization in Arizona.
On May 16, 1997, Zions acquired Aspen Bancshares, Inc. ("Aspen"), a bank holding
company headquartered in Aspen, Colorado. The operations acquired in the Aspen
merger are conducted through 12 offices/branches in western Colorado and one
branch in northeastern New Mexico. As of December 31, 1996, Aspen had total
consolidated assets of $451 million, deposits of $399 million, and shareholders'
equity of $31 million. On July 11, 1997, Zions also acquired Zions Bank
(formerly Tri-State Bank) in Montpelier, Idaho. Subsequent to the acquisition by
Zions of Zions Bank, Zions Bank acquired 10 branches from Wells Fargo Bank,
N.A., located in Idaho, and opened two de novo branches in Idaho. On July 19,
1997, Zions completed its acquisition of 27 former branches of Wells Fargo Bank
in Arizona (11 branches), Idaho (10 branches), Nevada (5 branches), and Utah (1
branch). The acquisition included $378 million in deposit accounts and the
branch offices. The acquisition of four additional branches from Wells Fargo is
pending. On August 15, 1997, Zions Bank merged with ZFNB. As a result, ZFNB now
operates 14 branches in Idaho. On July 7, 1997, Zions and GB Bancorporation
("Grossmont"), the parent company of Grossmont Bank, announced a definitive
agreement whereby Grossmont will merge with Zions. Grossmont shareholders will
receive common shares of Zions. Grossmont Bank has approximately $720 million in
assets and 14 offices in San Diego County, California. See "Summary--Proposed
Acquisitions," below. This acquisition is pending. As of December 31, 1996 Zions
had total consolidated assets of $6.49 billion, deposits of $4.55 billion, and
shareholders' equity of $507.5 million; as of June 30, 1997, Zions had total
consolidated assets of $8.05 billion, deposits of $5.16 billion, and
shareholders' equity of $589.2 million. See "Information Concerning Zions
Bancorporation."
Nevada State Bank ("NS Bank") was organized as a state banking
institution under the laws of Nevada in 1959 and with 32 offices in Nevada, is
the seventh largest banking organization in Nevada. NS Bank, whose principal
executive office is located in Las Vegas, operates 15 branches in Las Vegas and
17 other branches throughout the major population areas in Nevada. NS Bank's
service area
<PAGE>
currently includes all of Clark County, Washoe County, Carson City,
Gardnerville, Elko, and Pahrump, Nevada. In addition, the acquisition of the
former Wells Fargo Bank branches added branches in Eureka, Fernley, Lovelock,
Tonopah, and Wells, Nevada. NS Bank extends the following types of credit to the
communities it serves: personal loans; home improvement and home equity loans;
home equity credit lines; automobile and other vehicle financing; commercial
loans; real estate and construction loans, commercial and residential;
MasterCard and Visa accounts; as well as other credit services. NS Bank
pioneered the concept of in-store banking in Nevada with the opening of banking
centers in Smith's Food and Drug Stores in Las Vegas, North Las Vegas, and
Henderson. In addition, NS Bank offers a wide variety of banking services
including interest and non-interest bearing checking accounts, savings accounts,
money market accounts, time certificates of deposits, individual retirement
accounts, safe deposit boxes, trust services, direct deposit and night
depository services. As of December 31, 1996, NS Bank had total assets of
$570.93 million, total deposits of $500.50 million, total loans of $268.33
million, and shareholders' equity of $46.70 million; as of June 30, 1997, NS
Bank had total assets of $633.91 million, total loans of $333.02 million, and
shareholders' equity of $40.49 million. NS Bank's deposits are insured by the
FDIC and its primary banking regulator is the FDIC.
Sun State Capital Corporation ("Sun State") is a bank holding company
organized in 1989 under the laws of the State of Nevada and is registered under
the Bank Holding Company Act of 1956, as amended. Sun State operates through its
wholly-owned subsidiary, Sun State Bank (the "Bank"), a commercial banking
corporation which was organized in 1981 under the laws of Nevada and which
commenced operations in 1982. The Bank maintains its main office in Las Vegas,
Nevada, and operates its commercial banking business through three branches in
Las Vegas, a Henderson branch, and a Boulder City branch, which are all in
southern Nevada and one office in Reno/Sparks, in northern Nevada. As of
December 31, 1996, Sun State had total assets of $157.69 million, deposits of
$144.28 million, and shareholders' equity of $12.0 million; as of June 30, 1997,
Sun State had total assets of $162.1 million, deposits of $147.8 million, and
shareholders' equity of $13.2 million. Sun State's principal executive offices
are located at 4240 West Flamingo Road, Las Vegas, Nevada and its telephone
number is 702/364-2440.
The Bank provides a full range of commercial and retail bank services,
including the acceptance of demand, savings, money market and time deposits. Sun
State Bank emphasizes residential real estate lending to individuals residing
primarily in the Las Vegas and Reno, Nevada areas. Commercial lending, primarily
real estate loans and equipment financing, also constitutes a substantial part
of the business of Sun State Bank. Consumer loans make up a small portion of Sun
State Bank's business.
The Special Meeting; Purpose
The Special Meeting of Common Shareholders of Sun State (the "Special
Meeting") will be held at 9:00 a.m., local time, on August , 1997 at Sun State
Bank, 4240 West Flamingo Road, Las Vegas, Nevada.
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, $.01 par value, of Sun State ("Sun State Common Stock") at the close of
business on August , 1997, the record date, will be entitled to vote at the
Special
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<PAGE>
Meeting. At that date, 286,884 shares of Sun State Common Stock were
outstanding, each share being entitled to one vote. Additionally, at that date
Sun State had 2,750 shares of its Common Stock in its treasury, of which 250
shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Shares of Sun State 1992 Series
Preferred Stock, $100 par value ("Preferred Stock") will not be entitled to vote
at the Special Meeting. See "Introduction."
Vote Required for Approval
Approval of the Plan of Reorganization requires the affirmative vote of
a majority of the outstanding shares of Sun State Common Stock entitled to vote.
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 approval of the
Plan of Reorganization. See "Plan of Reorganization--Required Vote; Management
Recommendation." Shares of Preferred Stock are not entitled to vote at the
Special Meeting.
As of June 30, 1997, the directors and executive officers of Sun State
beneficially owned an aggregate of approximately 66.73% of the outstanding Sun
State Common Stock. As an inducement to Zions to enter into the Plan of
Reorganization, all of the directors of Sun State 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 approximately 65% of the outstanding Sun State Common Stock. See
"Plan of Reorganization--Voting Agreements."
Opinion of Sun State's Financial Advisor
Sun State has retained an independent financial advisor, Hoefer &
Arnett, Incorporated to evaluate the merger consideration offered to Sun State
shareholders by Zions. The financial advisor has rendered an opinion that the
merger consideration to be paid pursuant to the Plan of Reorganization is fair
to the shareholders of Sun State from a financial point of view. See "Plan of
Reorganization--Opinion of Sun State's Financial Advisor."
Proposed Reorganization
At the Special Meeting, the holders of Sun State Common Stock will be
asked to consider and approve an Agreement and Plan of Reorganization among
Zions, NS Bank, Sun State and the Bank, an Agreement of Merger between Sun State
and Zions and an Agreement of Merger between the Bank and NS Bank (collectively,
the "Plan of Reorganization"). The Plan of Reorganization provides for the
merger of Sun State into Zions, whereby Zions will be the surviving corporation,
and for the merger of the Bank into NS Bank, with NS Bank being the surviving
entity. See "Plan of Reorganization."
Upon consummation of the Reorganization, holders of Sun State Common
Stock and holders of Preferred Stock will be entitled to receive, at their
individual election (subject to adjustment in certain circumstances described
below), either cash or shares of Zions common stock, no par value ("Zions Common
Stock") or a combination of cash and stock or may also indicate that they have
no preference between cash and stock. A holder of Sun State Common Stock who
chooses cash or
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<PAGE>
stock will receive an amount of cash or Zions Common Stock according to a
formula established in the Plan of Reorganization. Each holder who elects to
receive stock will receive, in exchange for each share of Sun State Common
Stock, that number of shares of Zions Common Stock calculated by dividing the
Purchase Price (as defined below) of $37 million plus accretions by the Average
Closing Price (as defined) of Zions Common Stock over the Pricing Period (as
defined) and by further dividing the number so reached by the number of shares
of Sun State Common Stock issued and outstanding as of the Effective Date (as
defined). If an election adjustment is not required (see the next succeeding
paragraph), a holder of Sun State Common Stock who elects to receive cash will
receive, in exchange for each share of Sun State Common Stock, an amount of cash
calculated by dividing the Purchase Price by the number of shares of Sun State
Common Stock issued and outstanding as of the Effective Date. Holders of Sun
State Common Stock who indicated no preference on their election form (a
"Non-Election") will receive cash and/or shares of Zions Common Stock in
accordance with a formula established in the Plan of Reorganization. A holder of
Sun State Preferred Stock who elects to receive Zions Common Stock will receive,
in exchange for each share of Preferred Stock, that number of shares of Zions
Common Stock calculated by dividing $110 plus accrued and unpaid dividends on
one share of Preferred Stock by the Average Closing Price. A holder of Preferred
Stock who elects to receive cash will receive, in exchange for each share of
Preferred Stock, $110 plus accrued and unpaid dividends on one share of
Preferred Stock.
Notwithstanding the right of holders of Sun State Common Stock to elect
the form of consideration to be received from Zions in exchange for their shares
of Sun State Common Stock, the actual distribution of cash and shares of Zions
Common Stock may in fact differ from the form of consideration as elected by the
holders of Sun State Common Stock. In the event that upon receipt of all
elections, including those where a no-preference choice was indicated, it is
determined that more than 49% of the total merger consideration to be paid to
holders of Sun State Common Stock and Preferred Stock would be in the form of
cash, all shares of Sun State Common Stock whose holders elected to receive
Zions Common Stock or who indicated no preference will be converted into the
right to receive Zions Common Stock; and the elections of holders of Sun State
Common Stock to receive cash will be adjusted on a pro rata basis so that those
shareholders will be allocated an amount of cash and shares of Zions Common
Stock in order that the total merger consideration to be paid to the holders of
Sun State Common Stock and Preferred Stock will be 49% in cash and 51% in shares
of Zions Common Stock (an "Election Adjustment," as defined). The elections of
holders of Preferred Stock will not be adjusted; holders of Preferred Stock who
elect to receive Zions Common Stock will receive Zions Common Stock, while
holders of Preferred Stock who elect to receive cash or who indicate no
preference (a "Non-Election") as to the form of consideration to be received
will receive cash. See "Certain Definitions" below for the definitions of "Cash
Election Number," "Election Adjustments," and "Non-Election Adjustments."
Zions First National Bank, the Exchange Agent, has prepared a form to
allow the Sun State shareholders to elect to receive cash, shares of Zions
Common Stock, or a combination of cash and stock, or to indicate no preference
between cash and stock. This election form will be mailed to all holders of
record of shares of Sun State Common Stock and Preferred Stock together with
this Proxy Statement/Prospectus. Elections must be made by such shareholders by
mailing the completed and signed election form to the Exchange Agent. To be
effective, a form of election must be received
-4-
<PAGE>
by the Exchange Agent by the close of business on the tenth day following the
Effective Date (the "Election Deadline").
On August 13, 1997, the closing price of Zions Common Stock was
$35.6875 per share and Sun State had issued and outstanding 286,884 shares of
its Common Stock and 5,719 shares of Preferred Stock. Additionally, at that date
Sun State had 2,750 shares of its Common Stock in its treasury, of which 250
shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Assuming that the Purchase Price
equaled $37,944,285 on August 13, 1997, and the Average Closing Price was
$35.78, shareholders of Sun State under such circumstances would have received
3.6317 shares of Zions Common Stock for each share of Sun State Common Stock or
cash equal to $129.94 per share of Sun State Common Stock and 3.0964 shares of
Zions Common Stock for each share of Preferred Stock or $110.79 in cash per
share of Preferred Stock.
Fractional shares of Zions Common Stock will not be issued in the
Reorganization. Sun State 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 Sun State Shares -- Payment for Fractional
Shares."
Because the market price of the shares of Zions Common Stock is subject
to fluctuation, the per share stock distribution may change before the
Reorganization. See "Plan of Reorganization." Sun State shareholders are
encouraged to obtain current market quotations for Zions Common Stock and to
consider the interplay between the quotations and the definition of "Average
Closing Price." See "Certain Definitions" below. No assurance can be given as to
the market price of Zions Common Stock at or after the Effective Date.
Certain Definitions
In connection with the description of the Reorganization in this Proxy
Statement/Prospectus, shareholders of Sun State 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 over the Pricing Period.
"Bank Merger" means the merger of the Bank with and into NS Bank.
"Cash Election Number" means the maximum number of shares of Sun State
Common Stock to be converted into the right to receive the Cash Consideration
(as defined in the Plan of Reorganization) in the Merger, which shall be (i) 49
percent of the sum of (A) the number of shares of Sun State Common Stock issued
and outstanding or held in Sun State's treasury immediately prior to the
Effective Date and (B) the product of a fraction, the numerator of which is the
Preferred Cash Consideration (as defined) and the denominator of which is the
Common Cash Consideration (as defined) (such fraction the "Preferred/Common
Conversion Factor"), times the number of shares of Preferred Stock issued and
outstanding or held in Sun State's treasury immediately prior to the Effective
Date, less (ii) the sum of (A) the dissenting shares and (B) the quotient
computed by dividing the aggregate amount of cash to be received by holders of
-5-
<PAGE>
Preferred Stock by the Common Cash Consideration and (C) the quotient computed
by dividing the aggregate amount of cash to be received by the shareholders of
Sun State in lieu of fractional shares of Zions Common Stock by the Common Cash
Consideration.
"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 Sun State shall mutually agree.
"Effective Date" means the date which is the latest of (a) the date
following the day upon which the Sun State 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 merger of the Bank with NS Bank; (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 Sun State 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, as
defined herein; (d) the first to occur of (a) the date thirty days following the
date of the order of the Federal Deposit Insurance Corporation (the "FDIC")
authorizes the Bank Merger, as defined herein, or (b) if, pursuant to section
321(a) of the Riegle Act, the FDIC 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 "Utah
Commissioner") approving the transactions contemplated by the Plan of
Reorganization; (f) the date ten days following the date upon which the
Commissioner of Financial Institutions of the State of Nevada (the "Nevada
Commissioner") approves the transactions contemplated by the Plan of
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 FDIC, the Utah
Commissioner, or the Nevada Commissioner of 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 Sun State.
"Election Adjustments" refers to the procedures by means of which, if
the aggregate number of shares of Sun State Common Stock covered by Cash
Elections (as defined in the Plan of Reorganization) (the "Cash Election
Shares") exceeds the Cash Election Number, (i) all shares of Sun State Common
Stock covered by Stock Elections (as defined) (the "Stock Election Shares") and
all shares of Sun
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<PAGE>
State Common Stock covered by Non-Elections (as defined) (the "Non-Election
Shares") shall be converted into the right to receive the Stock Consideration
(as defined), and (ii) all Cash Election Shares shall be converted into the
right to receive Zions Common Stock and cash in the following manner: each Cash
Election Share shall be converted into the right to receive (A) an amount in
cash, without interest, equal to the product of (1) the Common Cash
Consideration and (2) a fraction (the "Cash Fraction"), the numerator of which
shall be the Cash Election Number and the denominator of which shall be the
total number of Cash Election Shares, and (B) a number of shares of Zions Common
Stock equal to the product of (1) the Common Stock Consideration and (2) a
fraction equal to one minus the Cash Fraction.
"Non-Election Adjustments" refers to the procedures by means of which,
in the event that an Election Adjustment is not applicable, all Cash Election
Shares and all shares of Preferred Stock covered by Non-Elections shall be
converted into the right to receive the Common Cash Consideration and Preferred
Cash Consideration, respectively, all Stock Election Shares shall be converted
into the right to receive Stock Consideration, and the Non-Election Shares, if
any, shall be converted into the right to receive (i) if the aggregate number of
Cash Election Shares and Non-Election Shares does not exceed the Cash Election
Number, Common Cash Consideration for each Non-Election Share and (ii) if such
aggregate number does exceed the Cash Election Number, Zions Common Stock and
cash in the following manner:(i) an amount in cash, without interest, equal to
the product of (x) the Common Cash Consideration and (y) a fraction (the
"Non-Election Fraction"), the numerator of which shall be the excess of (A) the
Cash Election Number over (B) the total number of Cash Election Shares and the
denominator of which shall be the total number of Non-Election Shares and (ii) a
number of shares of Zions Common Stock equal to the product of (x) the Common
Stock Consideration and (y) a fraction equal to one minus the Non-Election
Fraction.
"Merger" means the merger of Sun State with and into Zions.
"Pricing Period" means the twenty consecutive trading days ending on
and including the fifth trading day preceding the Effective Date, with certain
exceptions relating to a change in control of Zions.
"Purchase Price" means the sum of (i) $37,000,000; and (ii) the
consolidated net undistributed income of Sun State during the period beginning
on May 1, 1997 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 and calculated in the manner set forth
in the Plan of Reorganization (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 Purchase Price as otherwise would be calculated); (iii) the
product of the daily average of the consolidated net undistributed income of Sun
State during the period set forth in the preceding clause and calculated in the
manner set forth in the Plan of Reorganization (first reduced by the expenses of
Sun State between May 1, 1997 and the close of business on the last day of the
calendar month preceding the Effective Date with respect to (a) attorneys,
accountants, investment bankers, consultants, brokers and finders, and other
third parties who have or will render services to Sun State or the Bank in
connection with the Merger and (b) Third Party Termination Costs, as defined)
times the number of days in the month of the Effective Date which precede the
Effective Date (the amount under this subclause (iii) may be a negative number);
-7-
<PAGE>
(iv) the aggregate contributions to the capital of Sun State resulting from the
exercise of any stock options after April 30, 1997; and (v) the proceeds to Sun
State resulting from sales of treasury shares after April 30, 1997, net of the
cost to Sun State of purchases of shares into the treasury after April 30, 1997
(the amount under this subclause (v) may be a negative number); the above
amounts being reduced by (vi) the excess of the dividends and distributions
declared or paid by Sun State with respect to all classes of its capital stock
between January 1, 1997 and April 30, 1997 over the dividends and distributions
that are customarily paid by Sun State to holders of all classes of its capital
stock during the January 1 - April 30 period (the amount under this subclause
(vi) may be a negative number and in such case would result in an increase in
the Purchase Price); (vii) the consolidated net after-tax expenses of Sun State
between January 1, 1997 and April 30, 1997 with respect to attorneys,
accountants, investment bankers, consultants, brokers and finders, and other
third parties who have rendered services to Sun State or the Bank in connection
with any potential change in control, including the Merger and Bank Merger; and
(viii) the consolidated expenses of Sun State between January 1, 1997 and April
30, 1997 with respect to Third Party Termination Costs, as defined, without the
accrual of any offsetting income tax benefit unless the accrual of such income
tax benefit is concurred in by Zions, which concurrence will not be unreasonably
withheld.
"Third Party Termination Costs" means damages, penalties, liquidated
damages, termination fees, break-up fees, topping fees, expense-reimbursement
provisions, repurchases of stock options, fees in settlement of actual or
threatened litigation, and other similar costs and related expenses incurred to
resolve outstanding claims or relationships with any party other than Zions and
NS Bank in connection with a potential change in control.
Reasons for the Reorganization
Management and the directors of Sun State believe that it is in the
best interest of Sun State and its shareholders for Sun State to merge with a
larger financial institution in a tax-free reorganization (with respect to the
receipt by Sun State shareholders of shares of Zions Common Stock). Management
and the directors of Sun State believe that the proposed merger with Zions in an
exchange whereby Sun State shareholders can elect to receive cash or Zions
Common Stock in exchange for their Sun State Common Stock or Preferred Stock
provides Sun State's shareholders with the greatest available monetary value
based upon Zions' offer as compared to other offers received as well as
increased liquidity for their investment, prospects for greater yield of their
investment through increased dividends and prospects for growth in their
investment due to the prospects for Zions generally or, if they so elect,
immediate cash. In addition, management and the directors of Sun State believe
the combined institution will be more competitive in Sun State's market area due
to Zions' greater resources. Management and the directors of Sun State have
received an opinion of Hoefer & Arnett, Incorporated of Austin, Texas, that the
Reorganization is fair to Sun State's shareholders from a financial point of
view. See "Plan of Reorganization--Background of and Reasons for the
Reorganization" for a description of the factors considered by Sun State's board
of directors in determining to recommend the Reorganization to shareholders for
their approval. Sun State's board of directors believes that the merger with
Zions will realize substantial value for Sun State's shareholders and provides
them the option of realizing a significant return on their original investment
and continuing to
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<PAGE>
participate in the development of banking in Nevada by holding the Zions Common
Stock they will receive in the Reorganization.
For Zions, the Reorganization will provide the opportunity to expand
its franchise in the Reno, Las Vegas and southern Nevada markets, within which
Zions currently has a presence where NS Bank operates through six branch offices
in the Reno area and 21 branch offices in Las Vegas and southern Nevada, by
broadening its geographical base in the Las Vegas market and thereby
diversifying its banking operations, and by expanding the banking services it is
able to provide. The combination of the different skills, resources and services
offered by Sun State and Zions, together with the additional skills and
resources available in the broader Zions organization, will make the resulting
banking group 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 Sun State unanimously believes that the
Reorganization is in the best interests of the shareholders, employees, and
customers of Sun State and recommends that the common shareholders of Sun State
vote "FOR" approval of the Plan of Reorganization. Sun State has retained Hoefer
& Arnett, Incorporated, an independent financial advisor, to render an opinion
regarding the fairness to the Sun State shareholders of the consideration
provided in the Plan of Reorganization. Hoefer & Arnett, Incorporated has opined
that the merger consideration to be paid to the shareholders of Sun State by
Zions is fair to the shareholders of Sun State from a financial point of view.
COMMON SHAREHOLDERS OF SUN STATE ARE REQUESTED TO COMPLETE, DATE, AND
SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that, following the Reorganization,
Mr. John Dedolph, currently president and chief executive officer of Sun State
and the Bank, will become executive vice president and a corporate lending
division manager of NS Bank. Mr. Dedolph will enter into an employment agreement
with NS Bank effective as of the Effective Date. The Sun State Board of
Directors was aware of these interests when it considered and approved the Plan
of Reorganization. See "Plan of Reorganization--Interests of Certain Persons in
the Transaction."
Tax Consequences
Sun State will receive an opinion from Rothgerber, Appel, Powers &
Johnson LLP, legal counsel to Sun State (the "Rothgerber Opinion") that, based
upon the facts, representations, and assumptions set forth or referred to in
such opinion, the merger of Sun State 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. As a result, Sun State shareholders, who elect to
receive solely Zions Common Stock, will recognize no gain or loss upon the
exchange of their shares of Sun State Common Stock for Zions Common Stock in the
Merger, except with respect to cash received in lieu of fractional shares and
any gain
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<PAGE>
realized by a shareholder who elects to receive cash for all or any portion of
his or her shares of Sun State Common Stock or Preferred Stock will be
recognized in an amount not in excess of the amount of cash received. For
further discussion, see "Federal Income Tax Consequences of the Reorganization."
A copy of the Rothgerber Opinion is attached to this Proxy Statement/Prospectus
in Appendix B.
Dissenters' Rights
Under Nevada law, common shareholders of Sun State will be entitled to
dissenters' rights. The Nevada General Corporation Law (ss.ss. 92A.300 et seq.)
permits a shareholder to dissent to a merger and to receive the fair value for
such shares in accordance with procedures established by Nevada law. Since
exercise and preservation of dissenters' rights are conditioned on strict
observance of the applicable section of the Nevada General Corporation Law, each
Sun State shareholder who might exercise dissenters' rights should consult and
strictly observe the statute, a copy of which is attached as Appendix C to this
Proxy Statement/Prospectus. Failure to follow the statutory provisions precisely
may result in loss of dissenters' rights under Nevada law. Holders of Preferred
Stock are not entitled to exercise dissenters' rights under Nevada law. See
"Plan of Reorganization--Dissenters' Rights," "Comparison of Zions Common Stock
and Sun State Common Stock--Dissenters' Rights" and Appendix C to this Proxy
Statement/Prospectus.
Conditions; Regulatory Approval
Consummation of the Reorganization is subject to satisfaction of a
number of conditions, including (i) obtaining requisite approval from Sun State
common shareholders, (ii) obtaining regulatory approvals from the Board of
Governors, the FDIC, the Utah Commissioner, and the Nevada Commissioner, (iii)
the receipt of an opinion of counsel with respect to certain tax aspects of the
Reorganization, (iv) the absence of any material adverse change with respect to
Sun State, and (v) the satisfaction of other customary closing conditions. See
"Plan of Reorganization--Conditions to the Reorganization." All regulatory
approvals have been obtained.
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 Sun State
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 Sun State; (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 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; (iii) 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 (iv) by either party on or after March 31, 1998, if the
Effective Date has not occurred on or before that date.
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<PAGE>
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of Sun State, the Reorganization will become
effective in the fourth quarter of 1997. 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 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"). See "Plan of
Reorganization--Accounting Treatment."
Comparison of Shareholders' Rights
See "Comparison of Zions Common Stock and Sun State Common Stock" for a
summary of the material differences between the rights of holders of shares of
Sun State 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.
Additionally, Zions has adopted a shareholders' rights plan which will have the
effect of encouraging entities interested in acquiring Zions to negotiate any
such transactions with Zions' management and of deterring or discouraging
unfriendly takeovers by making any such takeover substantially more expensive to
the entity sponsoring the unfriendly takeover. See "Comparison of Zions Common
Stock and Sun State Common Stock."
Exchange of Certificates
Instructions on how to effect the exchange of Sun State Common Stock
certificates for Zions Common Stock certificates or for cash will be sent, as
promptly as practicable after the Reorganization becomes effective, to each
shareholder of record of Sun State. 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
the National Market System of NASDAQ ("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 May 20, 1997, the last trading day
prior to the first public announcement of the Reorganization, was $33.50.
The outstanding shares of Sun State Common Stock and Preferred Stock
are not listed or traded on any market or stock exchange. Such shares when
traded are traded infrequently in privately-negotiated transactions. Sun State
has no
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<PAGE>
reliable information as to the prices at which the shares have traded.
See "Stock Prices and Dividends on Sun State Common Stock," below.
Selected Financial Information
The following table sets forth certain historical financial information
for Zions and Sun State. 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 respective historical
financial statements of Zions incorporated herein by reference and of Sun State
which are included in this Proxy Statement/Prospectus and should be read in
conjunction with such statements and information and the related notes.
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<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------ ------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts) Zions
<S> <C> <C> <C> <C> <C> <C> <C>
Zions
Earnings
Net interest income ................. $ 143,650 $ 123,439 $ 260,473 $ 227,094 $ 198,606 $ 174,657 $ 157,282
Provision for loan losses ........... 1,810 1,360 3,540 2,800 2,181 2,993 10,929
Net income .......................... 54,739 48,735 101,350 81,328 63,827 58,205 47,209
Per Share
Net income .......................... $ .92 $ .83 $ 1.71 $ 1.38 $ 1.09 $ 1.02 $ .86
Cash Dividends ...................... .23 .21 .43 .35 .29 .25 .19
Statement of Condition at Period End
Assets .............................. $8,049,952 $6,087,914 $6,484,964 $5,620,646 $4,934,095 $4,801,054 $4,107,924
Deposits ............................ 5,159,917 4,340,316 4,552,017 4,097,114 3,705,976 3,432,289 3,075,110
Long-term debt ...................... 251,171 55,992 251,620 56,229 58,182 59,587 99,223
Shareholders' equity ................ 589,194 473,522 507,452 428,506 365,770 312,592 260,070
Sun State
Earnings
Net interest income ................. $ 4,702 $ 3,635 $ 7,738 $ 6,858 $ 5,988 $ 5,133 $ 3,738
Provision for loan losses ........... 73 150 40 512 285 414 396
Net income .......................... 1,135 1,002 2,225 2,201 1,677 1,221 748
Per Common Share
Net income .......................... 3.90 3.46 7.69 7.69 5.75 4.23 2.94
Cash Dividends ...................... -0- 1.00 2.00 2.00 1.25 -0- -0-
Statement of Condition at Period End
Assets .............................. $ 162,117 $ 125,613 $ 157,690 $ 112,320 $ 86,773 $ 85,968 $ 72,909
Deposits ............................ 147,849 113,812 144,279 101,043 75,120 75,556 62,018
Short-term debt ..................... -0- -0- -0- -0- 2,900 2,150 4,125
Shareholders' equity ................ 13,208 11,113 12,025 10,411 8,697 7,491 6,202
</TABLE>
Comparative Per Share Data
The following table sets forth for the periods indicated historical
earnings, book values and dividends per share for Zions and Sun State Common
Stock. The following data are based on the respective historical financial
statements of Zions incorporated herein by reference and of Sun State included
herein and should be read in conjunction with such financial statements and such
information and the related notes to each.
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<PAGE>
<TABLE>
<CAPTION>
Six Months ended
June 30, Year Ended December 31,
---------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income Per Common Share
Zions........................ $ .92 $ .83 $ 1.71 $ 1.38 $ 1.09 $ 1.02 $ .86
Sun State ................... 3.90 3.46 7.69 7.69 5.75 4.23 2.94
Book Value Per Common Share
Zions........................ $ 9.82 $ 8.01 $ 8.61 $ 7.36 $ 6.28 $ 5.50 $ 4.74
Sun State.................... 44.38 37.37 40.41 34.98 29.06 24.52 20.31
Cash Dividends Declared Per Common
Share
Zions (1).................... $ .23 $ .21 $ .43 $ .35 $ .29 $ .25 $ .19
Sun State.................... .00 1.00 2.00 2.00 1.25 .00 .00
</TABLE>
- ----------
(1) While Zions is not obligated to pay cash dividends, the Board of Directors
presently intends to continue its policy of paying quarterly cash dividends.
Future dividends will depend, in part, upon the earnings and financial
condition of Zions.
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
tables, which show comparative historical per Common Share data for Zions and
Sun State (separately and pro forma combined) and equivalent pro forma per share
data for Sun State, should be read in conjunction with the financial information
as incorporated herein by reference to other documents and as included herein.
The pro forma data in the table, presented as of and for the year ended December
31, 1996 and for the six months ended June 30, 1997, 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 period or as of the date for which
the information in the table is presented:
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<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
Zions and
Sun State Sun State
Pro-Forma Equivalent
Per Common Share Zions Sun State Combined(4) Pro-Forma(5)
----- ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME(1)
For the year ended
December 31, 1996 $ 1.71 $ 7.69 $ 1.70 $ 6.17
For the six months
ended June 30, 1997 .92 3.90 .91 3.30
CASH DIVIDENDS(2)
For the year ended
December 31, 1996 $ .43 $ 2.00 $ .43 $ 1.56
For the six months
ended June 30, 1997 .23 -0- .23 .84
BOOK VALUE:(3)
As of December 31, 1996 $ 8.61 $40.41 $9.05 $32.87
As of June 30, 1997 9.82 44.38 10.25 37.22
</TABLE>
- ----------------------
(1) Assumes the acquisition took place at the beginning of each period
presented. Net Income per share is based on weighted average common and
common equivalent shares outstanding for Zions. Net income per share
for Sun State is based on weighted average number of shares outstanding
and excludes common stock equivalents pursuant to APB Opinion 15
because the dilution is less than 3%.
(2) Assumes the acquisition took place at the beginning of each period
presented. Pro forma cash dividends represent historical cash dividends
of Zions.
(3) Book value per common share is based on total period-end common
shareholders' equity, assuming the acquisition was effective as of the
date indicated.
(4) Pro-forma combined net income per share represents historical net
income of Zions and Sun State adjusted for 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 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 August 13, 1997
and assume a Purchase Price of $37,944,285, an Average Closing Price of
$35.78 as of August 13, 1997, and a resulting exchange ratio of 3.6317
shares of Zions Common Stock for each share of Sun State Common Stock.
Proposed Acquisitions
On July 7, 1997, Zions and GB Bancorporation ("Grossmont"), the parent
company of Grossmont Bank, announced that a definitive agreement has been signed
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<PAGE>
under which Grossmont will merge with and into Zions, with Grossmont
shareholders receiving common shares of Zions. Grossmont Bank has approximately
$720 million in assets and 14 offices in San Diego County, California. It is
both the largest and oldest independent bank in the San Diego area. The merger
is subject to the approval of Grossmont shareholders and banking regulators and
is expected to close in the fourth quarter of 1997.
The merger is structured to be tax-free and is intended to be accounted
for as a pooling-of-interests. Zions has owned approximately 4.5% of Grossmont
since October 1995. The agreement provides for the issuance of 4.7 million
shares of Zions Common Stock for the remaining 95.5% of Grossmont common stock
that it does not presently own. Based upon Zions' July 7 closing price of $36
3/8 per share, the transaction (including Zions' basis in its original
investment) is valued at $173 million, which is 3.3 times Grossmont's book
value. Zions will incur $2 million in merger related charges in the fourth
quarter of 1997.
On July 25, 1997, Zions and Sky Valley Bank Corp. ("Sky Valley"), the
parent company of The First National Bank in Alamosa, announced that a
definitive agreement had been signed under which Sky Valley and its banking
subsidiary will merge with subsidiaries of Zions, with Sky Valley shareholders
receiving common shares of Zions. The First National Bank in Alamosa has
approximately $120 million in assets in three offices in southern Colorado. The
merger is subject to the approval of Sky Valley shareholders and banking
regulators and is expected to close in the fourth quarter of 1997.
The merger is structured to be tax-free and is intended to be accounted
for as a pooling-of-interests. The agreement provides for the issuance of
573,134 shares of Zions Common Stock for all of the equity interests of Sky
Valley. Based upon Zions' July 24 closing price of $35.50 per share, the
transaction is valued at $20.3 million, which is 2.7 times Sky Valley's book
value at June 30, 1997.
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<PAGE>
SUN STATE CAPITAL CORPORATION
Proxy Statement
for
Special Meeting of Common Shareholders
of Sun State Capital Corporation
to be held on
, 1997
and
ZIONS BANCORPORATION
Prospectus
Up to 1,100,000 Shares of
Common Stock
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Sun State Capital Corporation ("Sun
State") of proxies to be voted at the Special Meeting of Common Shareholders of
Sun State to be held on , 1997 and at any postponements or adjournments
thereof. The Special Meeting will be held at 9:00 a.m., local time, at Sun State
Bank, 4240 West Flamingo Road, Las Vegas, Nevada. The approximate date on which
this Proxy Statement/Prospectus will first be mailed to the shareholders of Sun
State is , 1997.
Record Date; Voting Rights
The Board of Directors of Sun State has fixed the close of business on
August , 1997 as the record date for determining the shareholders of Sun State
entitled to notice of and to vote at the Special Meeting or any postponements or
adjournments thereof. At that date, 286,884 shares of Common Stock, $.01 par
value, of Sun State ("Sun State Common Stock") were outstanding, held by
approximately 76 shareholders of record. Each such share of Sun State 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. Additionally, at that date Sun State had 2,750 shares of
its Common Stock in its treasury, of which 250 shares are subject to binding
subscriptions and will be issued prior to the Special Meeting, and 6,266 shares
are subject to outstanding options which are exercisable prior to the Special
Meeting. Sun State has issued 5,719 shares of preferred stock, $100 par value,
designated as 1992 Series Preferred Stock ("Preferred Stock"), held by 21
persons as of the date of this Proxy Statement/Prospectus. While Sun State will
send a copy of this Proxy Statement/Prospectus to each holder of the Preferred
Stock to be able to make an informed judgment regarding the exchange of his or
her Preferred Stock for cash or shares of Zions Common Stock, no holder of
Preferred Stock will be entitled to vote on the Plan of Reorganization with
respect to shares of Preferred Stock. See "Plan of Reorganization -- Required
Vote; Management Recommendation" below.
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<PAGE>
Purpose of the Special Meeting
At the Special Meeting, the holders of Sun State Common Stock will be
asked to consider and vote upon a proposal to approve an Agreement and Plan of
Reorganization dated as of May 21, 1997, among Sun State, Sun State Bank (the
"Bank"), a wholly-owned subsidiary of Sun State, Zions Bancorporation ("Zions")
and Nevada State Bank ("NS Bank"), a wholly-owned subsidiary of Zions, a related
Agreement of Merger between Sun State and Zions, and a related Agreement of
Merger between the Bank and NS Bank (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 Sun State into Zions with Zions being the surviving corporation, and
the merger of the Bank with and into NS Bank with NS Bank being the surviving
entity. Upon the Effective Date (as defined in "Summary" above), each holder of
Sun State Common Stock will be entitled to elect to receive, in exchange for
each share of Sun State Common Stock held by him, either cash, shares of Zions
Common Stock or a combination of cash and stock, or indicate no preference as to
receiving cash or stock. If the shareholder elects to receive stock, he will be
entitled to receive that number of shares of Zions Common Stock calculated by
dividing the Purchase Price (as defined in "Summary" above) of $37,000,000 plus
certain 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
number of outstanding shares of Sun State Common Stock as of the Effective Date.
If the shareholder elects to receive cash, if an election adjustment is not
required, he will be entitled to receive, in exchange for each share of Sun
State Common Stock, that amount of cash calculated by dividing the Purchase
Price by the number of shares of Sun State Common Stock issued and outstanding
as of the Effective Date. A holder of Sun State Common Stock who indicates on
his or her election form no preference between receiving cash or stock will
receive cash and/or shares of Zions Common Stock in accordance with a formula
and certain adjustments established in the Plan of Reorganization.
In addition, a holder of Preferred Stock upon the Effective Date of the
Reorganization will be entitled to elect to receive, in exchange for each share
of Preferred Stock held by him, either cash or shares of Zions Common Stock or a
combination of cash and stock, or indicate no preference between cash and stock.
A holder of Preferred Stock who chooses to receive stock will be entitled to
receive, in exchange for each share of Preferred Stock, that number of shares of
Zions Common Stock calculated by dividing $110 plus accrued and unpaid dividends
on one share of Preferred Stock by the Average Closing Price. A holder of
Preferred Stock who elects to receive cash will be entitled to receive for each
share of Preferred Stock, $110 plus accrued and unpaid dividends on one share of
Preferred Stock. A holder of Preferred Stock who indicates no preference between
receiving cash or stock will be deemed to have elected to receive cash.
In general, each Sun State shareholder is entitled to expect to receive
the type of consideration (cash, shares of Zions Common Stock or a combination
of cash and shares) that he or she elects to receive. However, it is possible
that an Election Adjustment may be necessary in the event that the holders of
Sun State Common Stock and Preferred Stock elect to receive more than 49% of the
total consideration to be paid in the Reorganization in the form of cash. In the
event that more than 49% of such consideration is elected to be in the form of
cash, those holders of Sun State Common Stock who elected to receive Zions
Common
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<PAGE>
Stock or indicated no preference will receive shares of Zions Common Stock.
Those holders of Sun State Common Stock who elected to receive cash will have
their elections adjusted so that such shareholders will receive shares of Zions
Common Stock and cash in amounts that will ensure that upon consummation of the
Reorganization not more than 49% of the merger consideration will be in the form
of cash. Holders of Preferred Stock will receive cash and/or Zions Common Stock
in accordance with their elections, without adjustment. If an election
adjustment is not required, each share of Sun State Common Stock which
constitutes a Non-Election share will be converted into the right to receive
cash, except as otherwise stated in the following sentence. In the event that
conversion of the Sun State Common Stock Non-Election shares into the right to
receive cash would result in more than 49% of the total consideration to be paid
in the Reorganization being in the form of cash, then such Non-Election shares
will be converted into the right to receive cash and shares of Zions Common
Stock in such proportions that no more than 49% of the total consideration to be
paid in the Reorganization will be in the form of cash.
On August 13, 1997, the closing price of Zions Common Stock was
$35.6875 per share and Sun State had issued and outstanding 286,884 shares of
its Common Stock and 5,719 shares of its Preferred Stock. Additionally, at that
date Sun State had 2,750 shares of its Common Stock in its treasury, of which
250 shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Assuming that the Purchase Price
equaled $37,944,285 on August 13, 1997 and the Average Closing Price had been
$35.78, shareholders of Sun State under such circumstances would have received
3.6317 shares of Zions Common Stock for each share of Sun State Common Stock or
cash equal to $129.94 per share and shareholders of Preferred Stock under such
circumstances would have received 3.0964 shares of Zions Common Stock for each
share of Preferred Stock or cash equal to $110.79 per share.
Opinion of Sun State's Financial Advisor
In order to evaluate the merger consideration offered to Sun State
shareholders by Zions, Sun State retained the investment banking firm, Hoefer &
Arnett, Incorporated which is unrelated to Sun State or Zions or any of their
respective affiliates, to render an opinion on the fairness of Zions' offer from
a financial point of view. Sun State has received an opinion from Hoefer &
Arnett, Incorporated that the merger consideration to be paid pursuant to the
Plan of Reorganization is fair to the shareholders of Sun State from a financial
point of view. Sun State has also utilized the services of Hoefer & Arnett,
Incorporated to advise the Sun State board of directors with respect to the
Reorganization and to assist Sun State in negotiating the terms of the Plan of
Reorganization. The opinion of Hoefer & Arnett, Incorporated is attached as
Appendix A 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 Sun State's Financial
Advisor."
THE BOARD OF DIRECTORS OF SUN STATE UNANIMOUSLY BELIEVES THAT THE
REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF SUN STATE AND
RECOMMENDS THAT SUN STATE COMMON SHAREHOLDERS VOTE TO APPROVE THE PLAN OF
REORGANIZATION.
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<PAGE>
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. Sun State 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. Only shares of Sun State Common Stock will be
entitled to vote at the Special Meeting; shares of Preferred Stock will not be
entitled to any vote at the Special Meeting.
A common shareholder who has executed and returned a proxy may revoke
it at any time before it is voted by filing with the Secretary of Sun State
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 Sun State may solicit proxies from the common shareholders of Sun State 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. Sun State will pay all
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 Dale M. Gibbons, Senior Vice President, Zions
Bancorporation. See "Available Information."
The Reorganization
The Plan of Reorganization provides for the merger of Sun State into
Zions with Zions being the surviving corporation and for the merger of the Bank
into NS Bank with NS Bank being the surviving entity. Zions is a bank holding
company incorporated in Utah. The principal subsidiaries of Zions are Zions
First National Bank ("ZFNB") with 108 offices located throughout the state of
Utah as well as fourteen offices in various communities in Idaho and one foreign
office, Nevada State Bank with 32 offices in Nevada, and National Bank of
Arizona with 28 offices in Arizona. Additionally, in May 1997, Zions acquired
Aspen, whose operations are conducted through 12 offices/branches in western
Colorado and one branch in northeastern New Mexico. On July 11, 1997 Zions
acquired Zions Bank
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<PAGE>
(formerly Tri-State Bank) in Montpelier, Idaho. Subsequent to the acquisition by
Zions of Zions Bank, Zions Bank acquired 10 branches from Wells Fargo Bank,
N.A., located in Idaho, and opened two de novo branches in Idaho; and in July
1997, Zions completed its purchase of 27 former branches of Wells Fargo Bank in
Arizona (11 branches), Idaho (10 branches), Nevada (5 branches), and Utah (1
branch). The acquisition by Zions Bank of four additional branches from Wells
Fargo is pending. On August 15, 1997, Zions Bank merged into ZFNB. As a result,
ZFNB now operates 14 branches in Idaho. On July 7, 1997, Zions and GB
Bancorporation ("Grossmont"), the parent company of Grossmont Bank, announced a
definitive agreement whereby Grossmont will merge with Zions. Grossmont
shareholders will receive common shares of Zions. Grossmont Bank has
approximately $720 million in assets and 14 offices in San Diego County,
California. See "Summary - Proposed Acquisition," above. This acquisition is
pending. Sun State is a bank holding company incorporated in Nevada. Sun State
operates through its subsidiary, Sun State Bank (the "Bank"). The Bank operates
a commercial banking business through four offices/branches in the Las Vegas
area and one in Reno/Sparks, Nevada.
In the Reorganization, the shareholders of Sun State will be given the
right to elect to receive cash, shares of Zions Common Stock, or a combination
of cash and stock, or to indicate no preference between cash and stock upon
consummation of the Plan of Reorganization. Shareholders of Sun State, whether
they hold Sun State Common Stock or Preferred Stock, who elect to receive stock
will become shareholders of Zions (unless a shareholder would become entitled to
less than one whole share of Zions Common Stock, in which case such shareholder
would receive cash in lieu of such fractional share). For those shareholders who
elect to receive stock, each outstanding share of Sun State Common Stock will be
converted into the right to receive that number of shares of Zions Common Stock
calculated by dividing the Purchase Price of $37,000,000 plus certain accretions
determined on the Effective Date of the Reorganization by the Average Closing
Price of Zions Common Stock and by dividing the number so reached by the number
of shares of Sun State Common Stock outstanding as of the Effective Date.
Holders of Preferred Stock who elect to receive stock will receive that number
of shares of Zions Common Stock calculated by dividing $110 plus accrued and
unpaid dividends on one share of Preferred Stock by the Average Closing Price.
If an election adjustment is not required, holders of Sun State Common Stock who
elect to receive cash will receive that amount of cash calculated by dividing
the Purchase Price by the number of shares of Sun State Common Stock outstanding
on the Effective Date. Holders of Preferred Stock who elect to receive cash will
receive $110 per share of Preferred Stock plus accrued and unpaid dividends on
one share of Preferred Stock.
Notwithstanding the right of holders of Sun State Common Stock to elect
the form of consideration to be received from Zions in exchange for their shares
of Sun State Common Stock, the actual distribution of cash and shares of Zions
Common Stock may in fact differ from the form of consideration as elected by the
holders of Sun State Common Stock. In the event that upon receipt of all
elections, including those where a no-preference choice was indicated, it is
determined that more than 49% of the merger consideration to be paid to holders
of Sun State Common Stock and Preferred Stock, including those who dissent from
the transaction or receive cash in lieu of fractional shares, would be in the
form of cash, all shares of Sun State Common Stock whose holders elected to
receive Zions Common Stock or who indicated no preference will be converted into
the right to receive Zions Common Stock; and the elections of holders of Sun
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<PAGE>
State Common Stock to receive cash will be adjusted on a pro rata basis so that
the holders will be allocated an amount of cash and shares of Zions Common Stock
in order that the total merger consideration to be paid to holders of Sun State
Common Stock and Preferred Stock will be 49% in cash and 51% in shares of Zions
Common Stock. Holders of Sun State Common Stock who indicate on their election
form no preference between receiving cash or stock will receive cash and/or
shares of Zions Common Stock in accordance with a formula and certain
adjustments established by the Plan of Reorganization. The elections of holders
of Preferred Stock will not be adjusted; holders of Preferred Stock who elect to
receive Zions Common Stock will receive Zions Common Stock, while holders of
Preferred Stock who elect to receive cash or who indicate no preference as to
the form of consideration to be received will receive cash. See "Conversion of
Sun State Shares."
Background of and Reasons for the Reorganization
Sun State.
Background. In January 1997, the president of the Bank was contacted by
the president of Zions who expressed, on behalf of Zions and NS Bank, an
interest in acquiring the Bank if the board of directors of Sun State ever
determined it was in the best interest of Sun State to merge with or sell to a
larger banking institution. The president of the Bank informed the board of
directors of Sun State of this contact which led to various Sun State Board
discussions as to the desirability of remaining independent or merging with a
larger bank holding company. At meetings in January and February, the Sun State
Board considered its strategic options, the bank acquisition market in Nevada,
the competitive banking environment in Nevada, the prospects for the Bank if it
remained independent and the prospects for NS Bank and other larger banking
institutions in Nevada. The Sun State Board identified one additional potential
merger candidate.
Sun State management solicited specific offers from Zions and the other
identified merger candidate. After considering the terms of the offers and the
prospects for each potential merger candidate, the Sun State Board determined to
continue discussions with Zions with the goal of negotiating a definitive merger
agreement.
In April 1997, negotiations between Zions and Sun State stalled over
certain issues affecting pricing of the merger consideration. At that time the
other merger candidate made an enhanced offer to the Sun State Board. After
considering Zions' offer as then existing and the offer of the other potential
merger candidate, the Sun State Board decided that the offer of the other merger
candidate was superior and Sun State entered into a binding letter of intent
with the other potential merger candidate and informed Zions of that fact. Zions
then made an unsolicited enhanced counteroffer containing substantially the
terms currently set forth in the definitive merger agreement. The Sun State
Board determined that the offer of Zions was significantly better than the offer
of the other merger candidate and authorized management and legal counsel to
negotiate an agreement terminating the agreement with the other merger candidate
including the payment by Sun State of a termination fee. This was done and on
May 21, 1997, the definitive Plan of Reorganization was executed by NS Bank and
the Bank and their respective parent companies providing for the proposed merger
of the Bank into NS Bank.
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<PAGE>
Sun State Board's Reasons for the Reorganization. The Sun State Board
believes that the Reorganization is fair to, and in the best interests of, Sun
State and its shareholders. Accordingly, the Board unanimously approved the Plan
of Reorganization and recommends that Sun State shareholders vote FOR the
approval and adoption of the Plan of Reorganization.
In reaching its determination that the Reorganization is fair to, and
in the best interests of, Sun State and its shareholders, the Board considered a
number of factors including, without limitation, the following:
o the current condition and growth prospects of Sun State and the
Bank, their historical results of operations and their prospective
results of operations were Sun State to remain independent;
o the economic, business and competitive climate for banking and
financial institutions in Nevada, with special consideration given
to recent transactions that have increased the competitive
environment in the financial services and banking industry,
including the adoption by Congress of interstate branch banking;
o the monetary value of the stock and cash (pursuant to the election
right) offered to Sun State shareholders by Zions (i) in absolute
terms, (ii) as compared to the value of other offers received by
Sun State by qualified and informed potential acquirers, whose
offers were each less than Zions' offer, and (iii) as compared to
recent mergers and acquisitions involving other banking and
financial institutions in Nevada;
o the potential market value, liquidity and dividend yield of Sun
State Common Stock and the Preferred Stock if Sun State were to
remain independent;
o the historically greater liquidity and dividend yield represented
by the Zions Common Stock to be received in the Reorganization;
o the greater financial and management resources and customer product
offerings of Zions which could increase the competitiveness of the
combined institution in Sun State's market area and its ability to
serve the depositors, customers and communities currently served by
Sun State;
o the historical results of operations and financial condition of
Zions and the future prospects for Zions, including anticipated
benefits of the Reorganization;
o the future growth prospects of Zions following the Reorganization;
o the fact that the Reorganization will be a tax-free reorganization
to Sun State shareholders for federal income tax purposes with
respect to those shareholders of Sun State who receive shares of
Zions Common Stock in the Reorganization (but not with respect to
any cash received in the Reorganization); and
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<PAGE>
o the presentation of Hoefer & Arnett, Incorporated and the fact that
Hoefer & Arnett, Incorporated would render an opinion that the
consideration to be received in the Reorganization by Sun State's
shareholders was fair to such holders from a financial point of
view.
THE SUN STATE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE PLAN OF REORGANIZATION.
Zions. For Zions, the Reorganization will provide the opportunity to
continue its recent expansion. In acquiring Sun State, Zions will be expanding
its presence in the Nevada market in the southern Nevada and Las Vegas regions.
The expansion will be evidenced by Zions' both broadening its geographical base
in these markets and expanding the banking services it is able to provide.
Additionally, the Zions' expansion in the Las Vegas and southern Nevada region
will allow Zions further to diversify its banking operations.
The acquisition by Zions of Sun State 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 Sun State's geographic area.
Voting Agreements
In connection with the Plan of Reorganization, all of the
shareholder-directors of Sun State, whose common share holdings aggregate
approximately 65% of the outstanding Sun State Common Stock as of June 30, 1997,
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 Sun State.
The voting agreements are applicable to the directors only in their
capacities as shareholders and do not legally affect the exercise of their
responsibilities as directors of Sun State. 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, negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of Sun State or any of its
subsidiaries.
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
the holders of a majority of the outstanding shares of Sun State Common Stock
entitled to vote at the Special Meeting. Shares of Preferred Stock are not
entitled to vote at the Special Meeting. Because approval requires the
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<PAGE>
affirmative votes of a majority of all outstanding shares of Sun State Common
Stock, 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. THE BOARD OF DIRECTORS OF SUN STATE UNANIMOUSLY
RECOMMENDS THAT SUN STATE COMMON 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 Sun State's Financial Advisor
Sun State's Board of Directors retained Hoefer & Arnett, Incorporated
("Hoefer") to render a written opinion (the "Fairness Opinion") as investment
bankers as to the fairness, from a financial point of view, to the Board of
Directors and shareholders of Sun State of the terms of the proposed merger of
Sun State with and into Zions. No limitations were imposed by the Sun State
Board of Directors upon Hoefer with respect to the investigations made or
procedures followed in rendering the Fairness Opinion.
A copy of the Fairness Opinion of Hoefer, dated as of June 5, 1997,
which sets forth certain assumptions made, matters considered and limits on the
review undertaken by Hoefer, is attached as an Exhibit to this Proxy
Statement/Prospectus. Sun State shareholders are urged to read the Fairness
Opinion in its entirety. The following summary of the procedures and analysis
performed, and assumptions used by Hoefer is qualified in its entirety by
reference to the text of such Fairness Opinion. Hoefer s Fairness Opinion is
directed to the Sun State Board of Directors only and is directed only to the
financial terms of the transaction and does not constitute a recommendation to
any Sun State shareholder as to how such shareholder should vote at the Special
Meeting.
In arriving at its opinion, Hoefer reviewed and analyzed, among other
things, the following: (i) the Plan of Reorganization; (ii) Annual Reports to
Shareholders of Zions and Sun State for the years ended December 31, 1995 and
December 31, 1996; (iii) Quarterly FDIC Call reports for the quarters ended June
30, 1996, September 30, 1996, December 31, 1996 and March 31, 1997; (iv) certain
other publicly available financial and other information concerning Zions and
Sun State and the trading markets for the publicly traded securities of Zions;
and (v) publicly available information concerning other banks and holding
companies, the trading markets for their securities and the nature and terms of
certain other merger transactions we believe relevant to our inquiry. Hoefer
held discussions with senior management of Zions and Sun State concerning their
past and current operations, financial condition and prospects, as well as the
results of regulatory examinations.
Hoefer reviewed with senior management of Zions earnings projections
for 1997 through 2001 for Zions as a stand-alone entity, assuming the Merger
does not occur. Hoefer reviewed with senior management of Sun State earnings
projections for 1997 through 2001 as a stand-alone entity, assuming the Merger
does not occur, as well as projected operating cost savings expected to be
achieved in each such years resulting from the Merger. Such projections were
prepared by Sun State senior management. Certain pro forma financial projections
for the years
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<PAGE>
1997 through 2001 for the combined entity were derived by Hoefer based partially
upon the projections discussed above, as well its own assessment of general
economic, market and financial conditions. In certain cases, such combined pro
forma financial projections included projected operating cost savings derived by
Hoefer partially based upon the projections discussed above to be realizable in
the Merger.
In conducting its review and in arriving at its opinion, Hoefer relied
upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available, and did not attempt to
independently verify the same. Hoefer relied upon the managements of Zions and
Sun State as to the reasonableness of the financial and operating forecasts,
projections and possible operating cost savings (and the assumptions and bases
therefor) provided to it, and Hoefer assumed that such forecasts, projections
and possible operating cost savings reflect the best currently available
estimates and judgments of the applicable managements. Hoefer also assumed,
without independent verification, that the aggregate allowance for loan losses
for Zions and Sun State are adequate to cover such losses. Hoefer did not make
or obtain any evaluations or appraisals of the properties of Zions or Sun State,
nor did it examine any individual loan credit files. For purposes of its
opinion, Hoefer assumed that the Merger will have the tax, accounting and legal
effects described in the Plan of Reorganization and relied, as to legal matters,
exclusively on counsel to Company, as to the accuracy of the disclosures set
forth in the Plan of Reorganization. Hoefer's opinion is limited to the
fairness, from a financial point of view, to the holders of the Sun State Common
Stock of the terms of the Merger and does not address Sun State underlying
business decision to proceed with the Merger.
As more fully discussed below, Hoefer considered such financial and
other factors as Hoefer deemed appropriate under the circumstances, including
among others the following: (i) the historical and current financial position
and results of operations of Zions and Sun State, including interest income,
interest expense, net interest income, net interest margin, provision for loan
losses, non-interest income, non-interest expense, earnings, dividends, internal
capital generation, book value, intangible assets, return on assets, return on
shareholders equity, capitalization, the amount and type of non-performing
assets, loan losses and the reserve for loan losses, all as set forth in the
financial statements for Zions and Sun State; (ii) the assets and liabilities of
Zions and Sun State, including the loan, investment and mortgage portfolios,
deposits, other liabilities, historical and current liability sources and costs
and liquidity; and (iii) the nature and terms of certain other merger
transactions involving banks and bank holding companies. Hoefer also took into
account its own assessment of general economic, market and financial conditions
and its experience in other transactions, as well as its experience in
securities valuation and its knowledge of the banking industry generally. Hoefer
s opinion is necessarily based upon conditions as they existed and can be
evaluated on the date of its opinion and the information made available to it
through that date.
In connection with rendering its Fairness Opinion to the Sun State
Board of Directors, Hoefer performed certain financial analyses, which are
summarized below. Hoefer believes that its analysis must be considered as a
whole and that selecting portions of such analysis and the factors considered
therein, without considering all factors and analysis, could create an
incomplete view of the analysis and the processes underlying Hoefer's Fairness
Opinion. The preparation
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of a fairness opinion is a complex process involving subjective judgments and is
not necessarily susceptible to partial analysis or summary description. In its
analyses, Hoefer made numerous assumptions with respect to industry performance,
business and economic conditions, and other matters, many of which are beyond
the control of Sun State or Zions. Any estimates contained in Hoefer's analyses
are not necessarily indicative of future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect the prices at
which companies or their securities may actually be sold. None of the financial
analyses performed by Hoefer was assigned a greater significance by Hoefer than
any other.
The financial forecasts and projections of Sun State and Zions prepared
by Hoefer were based on projections provided by the respective companies as well
as Hoefer's own assessment of general economic, market and financial conditions.
All such information was reviewed with the respective managements of Sun State
and Zions. Sun State does not publicly disclose internal management financial
forecasts and projections of the type provided to Hoefer in connection with its
review of the Merger. Such forecasts and projections were not prepared with a
view towards public disclosure. The forecasts, projections, and possible
operating cost savings prepared by Hoefer were based on numerous variables and
assumptions which are inherently uncertain, including, without limitation,
factors related to general economic and market conditions. Accordingly, actual
results could vary significantly from those set forth in such forecasts and
projections.
Summary of Proposal. Hoefer reviewed the terms of the proposed
transaction, including the Common Stock Consideration and the Common Cash
Consideration and the aggregate transaction value. A purchase price of $38.5
million (base purchase price of $37.0 million plus adjustments), or $131.33 per
share, represents a price to stated book value at March 31, 1997 of 3.13 times,
a price to 1996 earnings of 17.68 times and a price to assets ratio of 25.60%.
Comparable Transaction Analysis. Hoefer reviewed certain information
relating to mergers or acquisitions of banking organizations located in the
Western region of the United States in the first quarter of 1997 (the
"Comparable Transactions"). This data was obtained from SNL Securities, L.P. and
is shown on the attached chart.
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Mergers and Acquisitions of Banking Organizations
National Averages
1st Quarter 1997
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Performance Data Pricing Data
--------------------------------------- -----------------------------------------------
Total Return Return Equity Price Price Price Number
Assets on on to to to to of
$(000) Assets Equity Assets Equity Earnings1 Assets Transactions
--------- ------ ------ ------- ------ --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
All Banking Organizations: 1,259,006 1.04 11.68 9.13 2.10 18.22 19.03 37
Total Assets:
Over $500MM 8,420,570 0.70 7.85 9.25 2.26 18.39 19.85 5
$100MM to $499MM 195,239 1.18 13.67 8.48 2.22 17.53 19.50 19
$50MM to $99MM 74,065 0.99 10.66 9.30 2.05 20.44 18.96 9
Under $50MM 26,065 0.93 9.30 11.69 1.48 15.46 15.95 4
Return on Assets:
Over 1.50% 6,859,798 1.75 18.40 9.46 2.74 15.66 25.61 5
1.00% to 1.49% 485,534 1.24 13.85 9.07 2.12 16.37 19.46 17
0.50% to 0.99% 245,933 0.76 8.56 9.22 1.91 21.84 16.34 12
Under 0.50% 359,653 -0.06 0.62 8.55 1.78 22.64 16.42 3
Structure of Transaction:
100% Cash 253,769 1.02 10.84 10.14 1.70 15.22 15.96 8
100% Stock 189,803 1.14 12.82 8.83 2.27 19.38 20.24 21
All Other 5,070,902 0.81 9.50 8.90 2.08 17.92 18.93 8
Region:
New England 89,533 1.04 11.45 9.57 1.82 16.05 17.54 3
Mid-Atlantic 1,574,672 0.95 10.23 8.53 2.07 20.92 18.10 4
Southeast 173,652 1.10 12.46 9.22 2.11 18.63 19.56 13
Midwest 207,047 1.12 10.98 10.13 1.68 16.67 17.56 6
Southwest 147,681 1.20 15.08 7.93 2.59 18.98 20.26 5
West 5,962,963 0.78 8.92 9.12 2.27 17.57 19.70 6
</TABLE>
________________
1 Deals with a P/E multiple greater than 30 have been excluded from the
averages.
Source: SNL Securities, L.P.
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On the basis of the Comparable Transactions, Hoefer calculated a
purchase price as a multiple of stated book value of $95.18 per share for Sun
State (based on March 31, 1997 equity and the average price to book value
multiple of 2.27 for the Comparable Transactions).
On the basis of the Comparable Transactions, Hoefer calculated a
purchase price as a multiple of earnings of $130.52 per share for Sun State
(based on 1996 earnings and the average price to earnings multiple of 17.57 for
the Comparable Transactions).
Finally, Hoefer calculated an average purchase price as a percentage of
total assets of 19.70% for the Comparable Transactions.
The price to book value multiple, the price to earnings multiple and
the price to assets ratio resulting at the transaction value all compare
favorably with the prices paid in the Comparable Transactions.
Present Value Analysis. Hoefer calculated the present value of Sun
State assuming that Sun State remained independent. Based on projected earnings
for Sun State for 1997 through 2001 and using a discount rate of 14%, an
acceptable discount rate considering the risk-return relationship most investors
would demand for an investment of this type as of the valuation date, the
present value equaled $143.25 per share.
Stock Trading History. Hoefer reviewed and analyzed the historical
trading prices and volumes for the Zions Common Stock on a monthly basis from
January 1, 1995 to May 28, 1997. Zions Common Stock price has ranged from a low
of $9.44 to a high of $31.625 (adjusted for 4:1 split on May 15, 1997). The
stock price to trailing 12 months earnings per share has ranged from a low of
8.6 to a high of 18.2, with an average of 13.2. The stock price to book value
has ranged from a low of 1.50 to a high of 3.65, with an average of 2.53. The
volume of shares traded during a one month period has ranged from 256,700 to
2,036,300 indicating an active market for Zions Common Stock.
Other Analysis. Hoefer also reviewed selected investment research
reports on and earnings estimates for Zions. In addition, Hoefer prepared an
overview of historical financial performance of both Sun State and Zions.
The opinion expressed by Hoefer was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of the
date of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of Sun
State could materially affect the assumptions used in preparing the opinion.
Financial Advisory Fees. Pursuant to an engagement letter dated January
28, 1997, Sun State engaged Hoefer to act as its financial advisor in the
potential sale of Sun State and to render a fairness opinion in connection with
a transaction for $40,000 plus out-of-pocket expenses.
Conversion of Sun State Shares; Election to Receive Cash or Stock
Election; Election Adjustment. Under the Plan of Reorganization,
holders of shares of Sun State Common Stock and Preferred Stock have the right
to elect
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to receive cash or shares of Zions Common Stock or a combination of cash and
stock, or to indicate no preference between cash and stock, upon consummation of
the Plan of Reorganization. In general, each Sun State shareholder is entitled
to expect to receive the type of consideration (cash, shares of Zions Common
Stock or a combination of cash and shares) that he or she elects to receive.
However, it is possible that an Election Adjustment may be necessary in the
event that the holders of Sun State Common Stock and Preferred Stock elect to
receive more than 49% of the total consideration to be paid in the
Reorganization in the form of cash. In the event that more than 49% of such
consideration is elected to be in the form of cash, those holders of Sun State
Common Stock who elected to receive Zions Common Stock or indicated no
preference will receive shares of Zions Common Stock. Those holders of Sun State
Common Stock who elected to receive cash will have their elections adjusted so
that such shareholders will receive shares of Zions Common Stock and cash in
amounts that will ensure that upon consummation of the Reorganization not more
than 49% of the merger consideration will be in the form of cash. In the event
that an Election Adjustment is not applicable, holders of Sun State Common Stock
who indicate on their election form no preference between receiving cash or
stock will receive cash and/or shares of Zions Common Stock in accordance with a
formula established by the Plan of Reorganization. Holders of Preferred Stock
who make an election of cash or shares of Zions Common Stock will receive cash
or Zions Common Stock as they elected. Holders of Preferred Stock who indicate
no preference between cash and stock will be deemed to have elected to receive
cash. See the definitions of "Cash Election Number," "Election Adjustments," and
"Non-Election Adjustments" under "Summary--Certain Definitions," above.
Non-Election Adjustments. Each holder of Sun State Common Stock and
Preferred Stock has the right to indicate on his or her election form that such
holder has no preference as between receipt of shares of Zions Common Stock or
receipt of cash (referred to herein as a "Non-Election"). With respect to each
share of Preferred Stock covered by a Non-Election, the holder will be deemed to
have made an election to receive cash. In the event that the holders of Sun
State Common Stock and Preferred Stock elect to receive more than 49% of the
total consideration to be paid in the Reorganization in the form of cash, all
shares of Sun State Common Stock covered by Non-Elections will be converted into
the right to receive shares of Zions Common Stock. In the event that the holders
of Sun State Common Stock and Preferred Stock elect to receive not more than 49%
of the total consideration to be paid in the Reorganization in the form of cash,
all shares of Sun State Common Stock covered by Non-Elections will be converted
into the right to receive cash and shares of Zions Common Stock in such
proportions that no more than 49% of the total consideration to be paid in the
Reorganization will be in the form of cash.
Exchange Formula. According to the valuation formula set forth in the
Plan of Reorganization, the total number of shares of Zions Common Stock to be
received by each Sun State shareholder who will receive such shares will not be
determined until the Effective Date of the Reorganization. The number of shares
of Zions Common Stock to be received by each Sun State shareholder is based upon
the actual average trading price of Zions Common Stock as reported on NASDAQ-NMS
during the Pricing Period, (the "Average Closing Price") and upon the Purchase
Price, as defined above, under "Summary--Certain Definitions." On the Effective
Date of the Reorganization, each outstanding share of Sun State Common Stock as
of the Effective Date whose owner will receive stock will be converted into the
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right to receive that number of shares of Zions Common Stock calculated by
dividing the Purchase Price of $37,000,000 plus certain accretions by the
Average Closing Price of Zions Common Stock, and by further dividing the number
so reached by the number of shares of Sun State Common Stock outstanding at the
Effective Date. On the Effective Date, each outstanding share of Sun State
Common Stock as of the Effective Date whose owner will receive cash will be
converted into the right to receive that amount of cash calculated by dividing
the Purchase Price by the number of shares of Sun State Common Stock that are
issued and outstanding as of the Effective Date. Holders of Preferred Stock on
the Effective Date (a) who elect to receive stock will be entitled to receive
for each share of Preferred Stock held as of the Effective Date that number of
shares of Zions Common Stock calculated by dividing $110 plus accrued and unpaid
dividends on one share of Preferred Stock by the Average Closing Price or (b)
who elect to receive cash will be entitled to receive for each share of
Preferred Stock held as of the Effective Date $110 per share plus accrued and
unpaid dividends on one share of Preferred Stock.
On August 13, 1997, the closing price of Zions Common Stock was
$35.6875 per share and Sun State had issued and outstanding 286,884 shares of
its Common Stock and 5,719 shares of its Preferred Stock. Additionally, at that
date Sun State had 2,750 shares of its Common Stock in its treasury, of which
250 shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Assuming that the Reorganization had
been consummated as of August 13, 1997, and that for the purpose of the
calculation that follows that the Average Closing Price was equal to the closing
price of Zions on the NASDAQ-NMS on August 13, 1997, or $35.78. Assuming further
that the Purchase Price equaled $37,944,285 on August 13, 1997, holders of Sun
State Common Stock under such circumstances would have received 3.6317 shares of
Zions Common Stock for each share of Sun State Common Stock or cash equal to
$129.94 per share of Sun State Common Stock; additionally, holders of Preferred
Stock under such circumstances would have received for each share of Preferred
Stock 3.0964 shares of Zions Common Stock or cash equal to $110.79 per share of
Preferred Stock.
Because the market price of the shares of Zions Common Stock is subject
to fluctuation, the per share stock distribution may change before the
Reorganization. See "Plan of Reorganization." Sun State shareholders are
encouraged to obtain current market quotations for Zions Common Stock and to
consider the interplay between the quotations and the definition of "Average
Closing Price." See "Summary--Certain Definitions" above. No assurance can be
given as to the market price of Zions Common Stock at or after the Effective
Date.
Exercise of Election. Zions First National Bank, the exchange agent
designated by Sun State and Zions in the Plan of Reorganization (the "Exchange
Agent"), has prepared a form to allow Sun State shareholders to elect to receive
cash, stock, or a combination of cash and stock or to indicate no preference
between cash and stock. This form is being mailed to all holders of record of
shares of Sun State Common Stock and Preferred Stock together with this Proxy
Statement/Prospectus. Elections must be made by such shareholders by mailing the
completed and signed election form to the Exchange Agent. Any Sun State
shareholder may allocate his or her Sun State stock among the various
alternatives as he or she sees fit, by electing to allocate all to one category
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<PAGE>
(cash, shares of Zions Common Stock, or no preference) or by dividing his or her
stock among more than one category. A form of election must be received by the
Exchange Agent by the close of business on the tenth day following the Effective
Date (the "Election Deadline") in order to be effective. Any shareholder who has
made an election may at any time prior to the Election Deadline change his or
her election by submitting a revised form of election. A shareholder who does
not submit a form of election which is received by the Exchange Agent prior to
the Election Deadline will be deemed not to have made an election, the result
being that a holder of Preferred Stock will be deemed to have elected to receive
cash whereas a holder of Sun State Common Stock will be subject to the
adjustment provisions of the Plan of Reorganization.
Surrender of Certificates. The letter of transmittal will contain
instructions as to how to exchange Sun State Common Stock and Preferred Stock
certificates for cash and/or certificates representing the shares of Zions
Common Stock into which their shares have been converted. Sun State 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 Sun State Common Stock and Preferred Stock will have been
converted in the Reorganization. However, no former Sun State shareholder will
be entitled to receive any such dividend until such shareholder's Sun State
Common Stock or Preferred 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(s) (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 Sun
State shareholder who surrenders for exchange Sun State Common Stock or
Preferred 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 Sun State will be closed, and no further transfers
of Sun State Common Stock or Preferred Stock will be made or recognized.
Certificates for Sun State Common Stock or Preferred Stock not surrendered for
exchange will entitle the holder to receive, upon surrender as provided in the
letter of transmittal, only cash or a certificate for whole shares of Zions
Common Stock, as the former Sun State shareholder has elected, 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
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<PAGE>
Zions Common Stock or the Sun State Common Stock or Preferred Stock which occurs
prior to the Reorganization. Nevertheless, the Purchase Price will not be less
than $37,000,000 plus certain accretions (or, if accretions are a negative
number, minus their absolute value) and will not be adjusted except for such
accretions. Neither Zions nor Sun State anticipates declaring any stock
dividend, stock split, or recapitalization prior to the Effective Date.
Federal Income Tax Consequences of the Reorganization
The following discussion is a summary of the material federal income
tax consequences of the merger of Sun State with and into Zions (herein, the
"Merger") to Sun State and to the existing shareholders of Sun State, 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 Sun State are urged to consult their own tax advisors as to
specific tax consequences to them of the Merger.
Sun State will receive an opinion from Rothgerber, Appel, Powers &
Johnson LLP, legal counsel to Sun State (the "Rothgerber 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. 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 Rothgerber Opinion, such opinion will provide, among other
things, that Sun State will not recognize gain or loss for federal income tax
purposes upon the Merger and that the shareholders of Sun State will have the
following federal income tax consequences upon the Merger: (1) The Merger
qualifies as a "reorganization" within the meaning of Section 368(a)(1)(A). Sun
State and Zions each are a "party to a reorganization" within the meaning of
Section 368(b)(2); (2) No gain or loss will be recognized for federal income tax
purposes by Sun State and Zions in connection with the Merger; (3) No gain or
loss will be recognized for federal income tax purposes by holders of the Sun
State 1992 Series Preferred shares or holders of shares of Sun State Common
Stock upon the conversion in the Merger of such shares solely into shares of
Zions Common Stock. Any gain realized by shareholders of Sun State 1992 Series
Preferred shares and Sun State Common Stock who receive Zions Common Stock and
cash (excluding any cash received in lieu of a fractional share of Zions Common
Stock) in exchange for Sun State 1992 Series Preferred shares and Sun State
Common Stock pursuant to the Merger will be recognized in an amount not in
excess of the amount of the cash received (excluding any cash received in lieu
of a fractional share of Zions Common Stock), that gain will be capital gain
unless the receipt of the cash has the effect of the distribution of a dividend,
and any loss on the exchange will not be recognized. Shareholders of Sun State
1992
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<PAGE>
Series Preferred shares and Sun State Common Stock who receive cash in lieu of a
fractional share of Zions Common Stock will recognize gain or loss equal to the
difference between the cash received and the shareholder's basis in that
fractional share, and that gain or loss will be capital gain or loss if the
fractional share would have been a capital asset in the hands of the
shareholder. Cash received by shareholders of Sun State 1992 Series Preferred
shares and Sun State Common Stock who have elected pursuant to a Cash Election
to receive only cash and have received only cash will be treated as a
distribution in redemption of the Sun State 1992 Series Preferred shares and Sun
State Common Stock held by such shareholders, subject to the provisions and
limitations of Section 302 of the Code; (4) The basis of shares of Zions Common
Stock received in the Merger by holders of 1992 Series Preferred shares and of
Sun State Common Stock who receive solely Zions Common Stock will be the same as
the basis of such shares of such 1992 Series Preferred shares or Sun State
Common Stock surrendered in exchange therefor. The basis of shares of Zions
Common Stock received in the Merger by the holders of 1992 Series Preferred
shares or Sun State Common Stock who receive also receive cash will be the Sun
State Shareholders' basis in the Sun State Common Stock and 1992 Series
Preferred stock surrendered in exchange therefor, decreased by the cash received
and increased by the gain recognized by such shareholder with respect to the
cash received pursuant to the terms of the Merger Agreement; and (5) The holding
period of shares of Zions Common Stock received in the Merger by holders of Sun
State Common Stock will include the period during which such shares of Sun State
Common Stock or 1992 Series Preferred stock surrendered in exchange therefor
were held by the holder thereof, provided such shares of Sun State Common Stock
and 1992 Series Preferred shares were held as capital assets.
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 Sun State Common Stock pursuant to an employee stock option or
other special circumstances. Accordingly, it is recommended that Sun State
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 Rothgerber 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.
Dissenters' Rights
A holder of shares of Sun State Common Stock is entitled to exercise
the rights of a dissenting shareholder under the Nevada General Corporation Law.
ss.ss. 92A.300 et seq., to object to the Plan of Reorganization and make written
demand that Zions pay in cash the fair value of the shares of Sun State Common
Stock held as determined in accordance with such statutory provisions. The
following summary does not purport to be a complete statement of the provisions
of Nevada law and is qualified in its entirety by reference to such statutory
provisions, which are set forth in full as Appendix C to this Proxy
Statement/Prospectus.
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<PAGE>
Under Nevada law holders of Preferred Stock are not entitled to exercise
dissenters' rights with regard to the Preferred Stock.
Nevada law requires that holders of Sun State Common Stock follow
certain prescribed procedures in the exercise of their statutory right to
dissent in connection with the Reorganization. The failure to follow such
procedures on a timely basis and in the precise manner required by Nevada law
may result in a loss of a shareholder's dissenters' rights.
Overview. Holders of Sun State Common Stock have the right under the
Nevada General Corporation Law to dissent from the Reorganization and obtain
payment of the fair value of his or her shares. Because holders of Sun State
Preferred Stock do not have the right to vote on the Reorganization, they do not
have the right to dissent from the Reorganization. Their only alternatives are
to receive the Cash Consideration or the Stock Consideration. Fair value means
the value of the shares immediately before the Effective Date, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. If Zions and a shareholder who has exercised his
or her right to dissent (a "Dissenting Shareholder") are not able to agree on a
fair value, Zions must petition a court in Clark county for a determination of
fair value.
Procedure for Dissenting. A shareholder wishing to dissent from the
Reorganization must deliver to Sun State, before the Special Meeting, written
notice of his or her intent to demand payment form his or her shares if the
Reorganization is consummated. The written notice should be sent to Sun State at
4240 West Flamingo Road, Las Vegas, Nevada 89126 long enough before the Special
Meeting so that Sun State receives it before the Special Meeting. A shareholder
wishing to dissent must also not vote in favor of the Reorganization. If a
shareholder's written notice of intent to demand payment is not received by Sun
State before the Special Meeting, or if the shareholder votes in favor of the
Reorganization, such shareholder will not have the right to dissent and will be
required to participate in the Reorganization.
Within 10 days after the Effective Date, Zions will deliver to each
Dissenting Shareholder a written notice instructing the Dissenting Shareholder
to demand payment and send his or her Sun State Common Stock certificates to
Zions. The notice will include a form for demanding payment and will show the
deadline for submitting the payment demand form and the Sun State Common Stock
certificates. The form will also show the date that the Reorganization was first
announced to the news media or the shareholders, and the Dissenting Shareholder
will be required to state whether or not he or she acquired his or her shares
before that date.
The Dissenting shareholder must then properly complete and sign the
payment demand form, and submit it to Zions along with his or her Sun State
Common Stock certificates by the deadline shown in the notice from Zions. If the
payment demand form and the Sun State Common Stock certificates are not
submitted by the deadline, the shareholder will no longer be a Dissenting
Shareholder and will not be entitled to receive payment of the fair value of his
or her shares. Such a shareholder will be required to participate in the
Reorganization. The payment demand form and Sun State Common Stock certificates
should be sent to Zions at One South Main, Suite 1380, Salt Lake City, UT 84111.
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<PAGE>
Payment for Shares. Within 30 days after receiving a Dissenting
Shareholder's payment demand form and Sun State Common Stock certificates, Zions
will pay such Dissenting Shareholder Zions' estimate of the fair value of the
Sun State Common Stock for which certificates were submitted, plus accrued
interest. Accompanying the payment will be financial information for Sun State
as of the end of a fiscal year ending not more than 16 months before the date of
payment, and for the year then ended, as well as the latest available interim
financial information. Also accompanying the payment will be a statement of
Zions' estimate of the fair value of the shares, an explanation of how the
interest was calculated, a statement of the Dissenting Shareholder's rights to
demand additional payment and a copy of the relevant Nevada statute. Zions'
obligation to pay fair value may be enforced by a court. However, if the
Dissenting Shareholder did not own the shares before the date the Reorganization
was first announced to the news media or the shareholders, Zions will have the
right to withhold payment, and to instead offer to pay Zions' estimate of the
fair value of the shares. Such an offer will be accompanied by a statement of
Zions' estimate of the fair value of the shares, an explanation of how the
interest was calculated and a statement of the Dissenting Shareholder's rights
to demand payment.
If a Dissenting Shareholder estimates the fair value of his or her
shares and the amount of accrued interest to be higher than the amount paid by
Zions, the Dissenting Shareholder may send a notice to Zions demanding payment
of the difference between the Dissenting Shareholder's estimate and the amount
paid by Zions. Or, if the Dissenting Shareholder was only entitled to receive
Zions' offer to pay fair value, the Dissenting Shareholder may reject the offer
and demand payment of the Dissenting Shareholder's estimate of the fair value of
his or her shares and accrued interest. If a Dissenting Shareholder does not
send a notice demanding payment within 30 days after Zions has made its payment
or offer, the Dissenting Shareholder will not have the right to receive any
amount in excess of the fair value plus interest already paid or offered by
Zions.
Court Proceeding to Determine Fair Value. If a demand for payment
remains unsettled for 60 days following Zions' receipt of the demand, Zions will
petition a court in Clark county to determine the fair value of the shares and
accrued interest. Court costs will be paid by Zions unless the court finds that
one or more Dissenting Shareholders acted arbitrarily, vexatiously or not in
good faith in demanding payment, in which case some or all court costs may be
allocated to such Dissenting Shareholder or Shareholders. Attorneys' and
experts' fees may be assessed against Zions if the court finds that Zions did
not comply with the applicable statute or acted arbitrarily, vexatiously or not
in good faith, or such fees may be assessed against one or more Dissenting
Shareholders if the same acted arbitrarily, vexatiously or not in good faith.
Holders of Sun State Common Stock considering seeking appraisal by
exercising their dissenters' rights should be aware that the fair value of their
Sun State Common Stock determined pursuant to Nevada law could be more than, the
same as, or less than their pro rata share of the Purchase Price that they are
entitled to receive pursuant to the Plan of Reorganization if they do not seek
appraisal of their Sun State Common Stock.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROCEDURES TO BE FOLLOWED BY HOLDERS OF SUN STATE COMMON STOCK DESIRING TO
EXERCISE APPRAISAL RIGHTS AND, IN VIEW OF THE FACT THAT EXERCISE OF SUCH RIGHTS
REQUIRES
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<PAGE>
STRICT ADHERENCE TO THE RELEVANT PROVISIONS OF THE NEVADA GENERAL CORPORATION
LAW, EACH SHAREHOLDER WHO MAY DESIRE TO EXERCISE APPRAISAL RIGHTS IS ADVISED
INDIVIDUALLY TO CONSULT THE LAW (AS SET FORTH IN APPENDIX C TO THIS PROXY
STATEMENT/PROSPECTUS) AND COMPLY WITH THE PROVISIONS THEREOF.
HOLDERS OF SUN STATE COMMON STOCK WISHING TO EXERCISE DISSENTERS'
RIGHTS ARE ADVISED TO CONSULT THEIR OWN COUNSEL TO ENSURE THAT THEY FULLY AND
PROPERLY COMPLY WITH THE REQUIREMENTS OF NEVADA LAW.
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that after the Reorganization
becomes effective, NS Bank will employ John Dedolph, currently president and
chief executive officer of Sun State and the Bank, pursuant to an agreement
terminating December 31, 1999 as executive vice president and a corporate
lending division manager of NS Bank. The Board of Directors of Sun State was
aware of these interests when it considered and approved the Plan of
Reorganization. The agreement provides that Mr. Dedolph will receive an initial
annual salary not less than the aggregate salary paid to Mr. Dedolph by the Bank
as of December 31, 1996. Mr. Dedolph will be considered annually for a
discretionary bonus based upon his performance, and will be entitled to other
benefits normally afforded executive employees, including employee benefit and
stock option plans participation, retirement and life insurance policies, and
consideration for periodic raises or bonuses, based upon performance and
responsibility.
The employment agreement provides for severance benefits for Mr.
Dedolph 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. Dedolph will receive salary (as defined in the employment
agreement) which will have accrued as of the termination date of his employment.
Mr. Dedolph will also receive such rights as he will have accrued as of the
termination date of his employment under the terms of any plans or arrangements
in which he participates, reimbursement for expenses accrued as of such
termination date, and the cash equivalent of paid annual leave and sick leave
accrued as of such termination date.
Under his employment agreement, Mr. Dedolph has agreed that he will not
during the term of five years commencing with his employment by NS Bank (i)
engage in the banking business other than on behalf of Zions, NS Bank, or their
affiliates within a prescribed market area; (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
Zions or NS Bank or their affiliates) engaged in the banking business in such
market area, or (iii) directly or indirectly solicit or otherwise intentionally
cause any employee, officer, or member of the respective Boards of Directors of
Zions or NS Bank or any of their affiliates to engage in any action prohibited
under (i) or (ii) above. The employment agreement has described the prescribed
market area as Clark and Washoe Counties, Nevada.
Outstanding Stock Options
At the date of this Proxy Statement/Prospectus, Sun State has
outstanding under its stock option plan options representing a total of 6,266
shares of Sun
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State Common Stock exercisable at prices ranging from $28.79 per share to $37.50
per share. These options are held by a total of four individuals, each of whom
is a Sun State executive officer or director. The exercise dates of these
options range from December 31, 1995 to December 31, 2000. These options were
granted by Sun State from May 26, 1994 to September 1, 1996.
In accordance with the terms of the Sun State's stock option plan,
significant corporate transactions, including the Reorganization, will
accelerate the exercise dates of the outstanding options, making all outstanding
options immediately exercisable. The Plan of Reorganization provides that each
stock option to purchase Sun State Common Stock not exercised prior to the
Effective Date will be cancelled.
Executive officers and non-employee directors of Sun State currently
hold options to purchase additional shares of Sun State Common Stock at such
prices as follows:
<TABLE>
<CAPTION>
Average Range of
Number of Exercise Expiration
Name Position with Sun State Options Held Price Dates
- ---- ----------------------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Dennis Guldin Executive Vice President 166 $28.79 12/31/97--3/31/98
and Chief Credit Officer, 2,400 30.59 12/31/95--12/31/99
Loan Administration
Grant Markham Senior Vice President 2,800 $37.50 12/31/96--12/31/2000
Ronald M. Zurek Director 900 $37.50 9/30/97
</TABLE>
Inconsistent Activities
Sun State has 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, neither Sun State nor the Bank
will (i) solicit or encourage any inquiries or proposals by any third person to
acquire more than 1% of the Sun State Common Stock or any capital stock of the
Bank or any significant portion of Sun State'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 its 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 its directors, officers, employees or agents to
do any of the foregoing. If Sun State or the Bank becomes aware of any offer or
proposed offer to acquire any of its shares or any significant portion of its
assets or of any other matter which could adversely affect the Plan of
Reorganization, Sun State and the Bank are required to give immediate notice
thereof to Zions and to keep Zions informed of the matter.
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<PAGE>
Conduct of Business Pending the Reorganization
The Plan of Reorganization contains covenants, representations and
warranties by Sun State and the Bank as to matters which are typical in
transactions similar to the Reorganization.
Prior to the Effective Date, Sun State and the Bank have each agreed
that each will not without Zions' prior written consent: (i) declare or pay cash
dividends or property dividends with the exception of customary cash dividends
paid by Sun State or the Bank in a manner consistent with past practice;(ii)
declare or distribute any stock dividend, authorize any stock split, authorize,
issue or make any distribution of its capital stock or other securities except
for the issuance of Sun State Common Stock already subscribed for or upon
exercise of existing stock options, or grant any option to acquire such
securities except pursuant to existing stock option plans and in a number not
exceeding 8,400 option shares; (iii) except as contemplated by the Plan of
Reorganization, 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 or engage in any
discussions concerning such a possible transaction; (iv) convert the charter or
form of entity of the Bank 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 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 (when aggregated with
all other such increases) 4.5% per annum of the aggregate payroll as of January
1, 1997; (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
termination pay benefit or any other fringe benefit; (x) except to directly
facilitate the Reorganization, enter into any employment or personal services
contract with any person; (xi) purchase any loans or loan-participation
interests from, or participate in any loan originated by any person other than
Sun State or the Bank.
Sun State and the Bank have also agreed to carry on their businesses
and manage their assets and property diligently in the same manner as they have
previously done and to use their best efforts to preserve their business
organization. Pending completion of Reorganization or termination of the Plan of
Reorganization, Sun State and the Bank have agreed to provide Zions with certain
information and reports and access to other information.
Conditions to the Reorganization
The obligations of Sun State, the Bank, and Zions and NS Bank to
consummate the Reorganization are subject to, among other things, the
satisfaction of the following conditions: (i) the parties shall have received
all orders, consents and approvals from all requisite governmental authorities
for the completion of the Reorganization; (ii) certain litigation, as specified
in the Plan of Reorganization, shall not have been instituted or threatened;
(iii) the
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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 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; (iv) Sun State 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 (v) there shall be no
adverse legislation or government regulation which would make the transaction
contemplated impossible.
The obligations of Zions and NS Bank to consummate the Reorganization
are subject to satisfaction or waiver of certain additional conditions,
including: (i) the shareholders of Sun State and the Bank shall have authorized
the Merger and Bank Merger, respectively; (ii) all representations and
warranties made by Sun State and the Bank in the Plan of Reorganization shall be
true and correct in all material respects on the Effective Date and Sun State
and the Bank shall have performed in all material respects all of their
respective obligations under the Plan of Reorganization on or prior to the
Effective Date; (iii) Rothgerber, Appel, Powers & Johnson LLP, special counsel
to Sun State, shall have rendered a legal opinion to Zions in form and substance
as set forth in the Plan of Reorganization; (iv) Zions shall have received a
favorable opinion from litigation counsel for Sun State and the Bank
substantially in form and substance as set forth in the Plan of Reorganization;
(v) Sun State shall have delivered all regulatory authorizations entitling the
Bank to operate its branches; (vi) during the period from December 31, 1996 to
the Effective Date, there shall be no material adverse change in the financial
position or results of operations of Sun State or the Bank nor shall Sun State
or the Bank have sustained any material loss or damage to its properties which
materially affects its ability to conduct its business; (vii) on the Effective
Date the consolidated net worth of Sun State as determined in accordance with
generally accepted accounting principles shall not be less than the sum of (a)
$12,649,648, (b) the amount of the quarterly cash dividend of Sun State to the
holders of its Common Stock that would have been paid with respect to the first
quarter of 1997 had its declaration not been foregone by Sun State, (c) the
aggregate contributions to capital caused by the payments accompanying the
exercise of any stock options on or after December 31, 1996, and (d) the
proceeds of resale by Sun State of shares of Sun State Common Stock subscribed
for or held in the treasury on the date of the Plan of Reorganization;(viii) on
and as of the Effective Date, the aggregate reserve for loan losses of the Bank
as determined in accordance with generally accepted accounting principles shall
not be less than $1,865,790; (ix) the CRA rating of the Bank shall be no lower
than "satisfactory";(x) Mr. Dedolph shall have entered into an employment
agreement with NS Bank in the form set forth in the Plan of Reorganization; and
(xi) Sun State and the Bank shall have terminated the contract with EDS for data
processing services, such termination to be effective no later than the
Effective Date.
The obligations of Sun State and the Bank to consummate the
Reorganization are subject to the satisfaction or waiver of certain additional
conditions, including: (i) the shareholders of NS Bank shall have authorized the
Bank
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<PAGE>
Merger; (ii) all representations and warranties made by Zions and NS Bank in the
Plan of Reorganization shall be true and correct in all material respects on the
Effective Date and Zions and NS Bank shall have performed all of their
respective obligations under the Plan of Reorganization on or prior to the
Effective Date; (iii) receipt of a legal opinion of Duane, Morris & Heckscher
LLP, special counsel to Zions, in form and substance as set forth in the Plan of
Reorganization; (iv) during the period from December 31, 1996 to the Effective
Date, there shall be no material adverse change in the financial position or
results of operations of Zions nor shall Zions have sustained any material loss
or damage to its properties which materially affects its ability to conduct its
business; (v) Zions Common Stock shall be quoted on NASDAQ or shall be listed on
a national securities exchange.
Representations and Warranties
The representations and warranties of Zions, NS Bank and Sun State and
the Bank contained in the Plan of Reorganization relate, among other things, to
the organization and good standing of the parties; the capitalization of the
parties; the authorization by the parties 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 December 31, 1996 with respect to
Sun State and the Bank, and since March 31, 1997 with respect to Zions; the
absence of undisclosed liabilities; and compliance with laws. Sun State has
additionally warranted that there has been since December 31, 1996 no material
deterioration in the quality of its consolidated loan portfolio and no material
increase in the consolidated level of its nonperforming assets or non-accrual
loans or in the level of its consolidated provision for credit losses or its
consolidated reserve for possible credit losses. Sun State has also warranted
that its consolidated reserve for possible credit losses is adequate to absorb
reasonably anticipated losses in the consolidated loan and lease portfolios of
Sun State in view of the size and character of such portfolios, current economic
conditions, and other factors.
Zions and Sun State have additionally warranted that there are no facts
known to them respectively which reasonably 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 common shareholders of Sun State,
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 Sun State. Zions or
Sun State 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.
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<PAGE>
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 common shareholders
of Sun State, as follows: (i) by mutual consent of Zions, NS Bank, Sun State,
and the Bank; (ii) unilaterally, by either Sun State or Zions 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 either Sun State or
Zions if the Merger has become inadvisable by reason of federal or state
litigation to restrain or invalidate the transactions contemplated by the Plan
of Reorganization; or (iv) by any party on or after March 31, 1998, 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 was materially incorrect when
made, or because of a material breach or material failure by a party of a
covenant or agreement made under the Plan of Reorganization, then such party
whose representations and warranties were materially incorrect or who materially
breached or failed to perform its covenant or agreement shall be liable to the
other party or parties to the Plan of Reorganization not affiliated with it in
the amount of $1 million.
Restrictions on Resales by Sun State 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 Sun State shareholders who receive Zions shares as a
result of the Reorganization. However, the registration does not cover resales
by Sun State shareholders who may be deemed to control or be under common
control with Sun State or Zions and who therefore may be deemed "affiliates" of
Sun State 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 Sun State 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. Sun State will pay the cost of
printing and delivering this Proxy Statement/Prospectus and other material to
the Sun State shareholders. Zions will pay the costs attributable to registering
its stock issuable pursuant to this Proxy Statement/Prospectus under federal and
state securities laws.
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<PAGE>
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, Utah, and Nevada regulators,
including the Board of Governors, the FDIC, the Commissioner of Financial
Institutions of Utah, and the Commissioner of Financial Institutions of Nevada.
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 with the concurrence of the Attorney General of the United States. All
regulatory approvals or waivers have been obtained.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the common shareholders of Sun State, the Reorganization will become
effective in the fourth quarter of 1997. 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 in the fourth
quarter of 1997. In addition, as also noted above, Zions and Sun State 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 Sun State 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 Sun State prior to the
Effective Date.
Relationship Between Zions and Sun State
Neither Zions nor Sun State is aware of any material relationship
between Zions, its directors or officers or their affiliates, and Sun State, its
directors or executive officers or their affiliates, except as contemplated by
the Plan of Reorganization or as described herein.
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
tables, which show comparative historical per Common Share data for Zions and
Sun State (separately and pro-forma combined) and equivalent pro-forma per share
data for Sun State, should be read in conjunction with the financial information
included herein or incorporated herein by reference to other documents. The
pro-forma data
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in the table, presented as of and for the year ended December 31, 1996, and as
of and for the six months ended June 30, 1997, 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
Sun State Sun State
Pro-Forma Equivalent
Per Common Share Zions Sun State Combined(4) Pro-Forma(5)
- ---------------- ------ --------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME(1)
For the year ended
December 31, 1996 $ 1.71 $ 7.69 $ 1.70 $ 6.17
For the six months
ended June 30, 1997 .92 3.90 .91 3.30
CASH DIVIDENDS(2)
For the year ended
December 31, 1996 $ .43 $ 2.00 $ .43 $ 1.56
For the six months
ended June 30, 1997 .23 -0- .23 .84
BOOK VALUE:(3)
As of December 31, 1996 $ 8.61 $40.41 $ 9.05 $32.87
As of June 30, 1997 9.82 44.38 10.25 37.22
</TABLE>
- ----------
(1) Assumes that the acquisition took place at the beginning of each period
presented. Net Income per share is based on weighted average common and
common equivalent shares outstanding for Zions. Net income per share for Sun
State is based on weighted average number of shares outstanding and excludes
common stock equivalents pursuant to APB opinion 15 because the dilution is
less than 3%.
(2) Assumes the acquisition took place at the beginning of each period
presented. Pro forma cash dividends represent historical cash dividends of
Zions.
(3) Book value per common share is based on total period-end common
shareholders' equity, assuming the acquisition was effective as of the date
indicated.
(4) Pro forma combined net income per share represents historical net income of
Zions and Sun State adjusted for 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
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<PAGE>
Zions adjusted by the 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 August 13, 1997 and
assume a Purchase Price of $37,944,285, an Average Closing Price of $35.78
as of August 13, 1997, and a resulting exchange ratio of 3.6317 share of
Zions Common Stock for each share of Sun State Common Stock.
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
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, as amended
("Riegle-Neal Act"), subject to approval by the Federal Reserve Board, bank
holding companies are authorized to 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," 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. 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.
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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 has
established risk-based capital guidelines for bank holding companies. 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, 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, 1996, Zions' Tier 1 and Total Capital ratios
were 14.38% and 18.31%, 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) quality and level of earnings; (iii)
investment or loan portfolio concentrations; (iv) quality of loans and
investments; (v) the effectiveness of loan and investment policies; (vi) certain
risks arising from nontraditional activities; and (vii) 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
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<PAGE>
and severity of problem and classified assets. Market risk of a banking
organization -- risk of loss stemming from movements in market prices -- is not
evaluated under the current risk-based capital ratio analysis (and is therefore
analyzed by the bank regulators through a general assessment of an
organization's capital adequacy) unless trading activities constitute 10 percent
or $1 billion or more of the assets of such organization. Such an organization
(unless exempted by the banking regulators) and certain other banking
organizations designated by the banking regulators must, beginning on or before
January 1, 1998, include in its risk-based capital ratio analysis charges for,
and hold capital against, general market risk of all positions held in its
trading account and of foreign exchange and commodity positions wherever
located, as well as against specific risk of debt and equity positions located
in its trading account. Currently, Zions does not calculate a risk-based capital
charge for its market risk.
The following table presents Zions' regulatory capital position at June
30, 1997 under the risk-based capital guidelines.
Risk-Based Capital
(Dollars in thousands)
Percent
of Risk-
Adjusted
Amount Assets
--------- ---------
Tier 1 Capital............................. $ 636,178 14.16%
Minimum Requirement........................ 179,695 4.00
---------- ------
Excess.................................. $ 456,483 10.16%
========== ======
Total Capital.............................. $ 757,497 16.86%
Minimum Requirement........................ 359,391 8.00
---------- ------
Excess.................................. $ 398,106 8.86%
========== ======
Risk-Adjusted Assets,
net of goodwill, excess deferred
tax assets and excess allowance......... $4,492,385 100.00%
========== ======
Minimum Leverage Ratio. The Federal Reserve Board has adopted 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 a risk-based ratio of 8% that took effect at the end of 1992. At
June 30, 1997, Zions' leverage ratio was 7.70%.
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.
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<PAGE>
Further-more, 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 June 30, 1997.
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.
(Dollars in thousands)
Percent
of Average
Assets, Net
Amount of Goodwill
------ -----------
Tier 1 Capital............................. $ 636,178 7.70%
Minimum Requirement........................ 247,999 3.00
---------- ------
Excess..................................... $ 388,179 4.70%
========== ======
Average Assets, net of goodwill and
deferred tax assets...................... $8,266,641 100.00%
========== ======
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 of the Currency, 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.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires 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 capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized."
Implementing regulations adopted by the federal banking agencies 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 except that it may not be categorized as critically undercapitalized
unless actually indicated by its capital position.
Failure to meet capital guidelines could subject a bank to a variety
of restrictions and enforcement remedies. 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
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<PAGE>
to be undercapitalized. Holding companies of significantly undercapitalized,
critically undercapitalized and certain undercapitalized banks are 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.
Other Regulatory and Supervisory Issues
Pursuant to FDICIA, the federal banking agencies have adopted
regulations or guidelines prescribing standards for safety and soundness of
insured banks and in some instances 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 and earnings, 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
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<PAGE>
asset growth or increase its ratio of tangible equity to assets, or imposing
other operating restrictions.
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 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 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).
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 and
eliminate or revise the features of the specialized savings association charter.
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 and Other Assessments
Insured banks (including the bank subsidiaries of Zions) are required
to make quarterly deposit insurance assessment payments to the BIF, and most
savings associations to the SAIF, under a risk-based assessment system
established by the FDIC. (In addition, certain banks must also pay deposit
insurance assessments to the SAIF and certain savings associations, to the BIF
alone or to both funds.) Under this system, each institution'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 institution in one
of nine risk assessment classifications based upon its level of capital and
supervisory evaluations by its regulators: "well capitalized," "adequately
capitalized" or "less than adequately capitalized" institutions, with each
category of institution divided into subcategories of institutions which are
either "healthy," of "supervisory concern" or of "substantial supervisory
concern." Those institutions deemed weakest by the FDIC are subject to the
highest assessment rates; those deemed strongest are subject to the lowest
assessment rates. The FDIC establishes semi-annual assessment rates with the
objective of enabling the affected insurance
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<PAGE>
fund to achieve or maintain a statutorily-mandated target reserve ratio of 1.25%
of insured deposits. In establishing assessment rates, the FDIC Board of
Directors is required to consider (i) expected operating expenses, case
resolution expenditures and income of the FDIC; (ii) the effect of assessments
upon members' earnings and capital; and (iii) any other factors deemed
appropriate by it.
Until December 31, 1997, both BIF- and SAIF-assessable deposits will
be subject to an assessment schedule providing for an assessment range of 0% to
.27% (with intermediate rates of .03%, .10%, .17% and .24%, depending upon an
institution's supervisory risk group). Both BIF and SAIF assessment rates are
subject to semi-annual adjustment by the FDIC Board of Directors within a range
of up to five basis points without public comment. The FDIC Board of Directors
also possesses authority to impose special assessments from time to time.
In addition to the payment of deposit insurance assessments,
depository institutions are required to make quarterly assessment payments to
the FDIC on both their BIF and SAIF assessable deposits which will be paid to
the Financing Corporation to enable it to pay interest and certain other
expenses on bonds which it issued pursuant to FIRREA to facilitate the
resolution of failed savings associations. Pursuant to the Federal Home Loan
Bank Act, the Financing Corporation, with the approval of the FDIC Board of
Directors, establishes assessment rates based upon estimates of (i) expected
operating expenses, case resolution expenditures and income of the Financing
Corporation; (ii) the effect of assessments upon members' earnings and capital;
and (iii) any other factors deemed appropriate by it. Additionally, the
Financing Corporation is required to assess BIF-assessable deposits at a rate
one-fifth the rate applicable to SAIF-assessable deposits until the first to
occur of the merger of the BIF and SAIF funds or January 1, 2000. Assessment
rates for the second semi-annual period of 1997 have been set at .63 basis
points annually for BIF-assessable deposits and 3.15 basis points annually for
SAIF-assessable deposits, subject to quarterly review and adjustment.
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. Since June 1, 1997, and earlier where permitted by applicable state law,
an insured bank has been authorized to apply to the appropriate federal agency
for permission to merge with an out-of-state bank and convert the branch offices
of the out-of-state bank to those of its own or, alternatively, convert its
branch offices to those of the out-of-state bank, unless its home state or the
home state of the out-of-state bank had adopted qualifying legislation barring
this form of interstate expansion by June 1, 1997.
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<PAGE>
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.
Pursuant to FIRREA, bank holding companies may acquire savings
associations (including savings and loan associations and federal savings banks)
without geographic restriction under the Bank Holding Company Act.
Bank holding companies whose home state is Utah are authorized to
acquire control of depository institutions and depository institution holding
companies located in other states. Nevada law provides that an out-of-state bank
holding company may, with the prior approval of the Nevada Commissioner, acquire
a Nevada bank or bank holding company unless the Commissioner finds that (i) the
proposed acquisition would be detrimental to the safety and soundness of the
acquiring company or any party to the transaction(or to a subsidiary or
affiliate thereof), (ii) the financial condition of the acquiring company or any
other participating institution is such that the financial stability of any such
entity would be jeopardized thereby or the interests of depositors, other
customers or other institutions might be prejudiced, (iii) the acquiring company
or its executive officers, directors or principal shareholders have not
established a record of sound performance, efficient management, financial
responsibility or integrity such that it would be against the interests of
depositors, other customers, creditors or shareholders of a financial
institution or the public interest to approve the acquisition, (iv) the
consummation of the transaction would tend substantially to lessen competition
within the state (unless the Nevada Commissioner finds that the anticompetitive
effects are clearly outweighed by the benefit of meeting the convenience and
needs of the relevant market to be served), or (v) the acquiring company has not
established a record of meeting the credit needs of the communities which it or
its subsidiary financial institutions serve. Zions knows of no basis on which
the Nevada Commissioner is likely to withhold his approval of the Merger.
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<PAGE>
MONETARY POLICY
The earnings of Zions and Sun State 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 and Sun State 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. The per share information presented reflects Zions' May 9,
1997 stock split. See "Zions Documents Incorporated by Reference."
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<PAGE>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of, and for the Six As of, and for the
Months Ended June 30, Year Ended December 31,
----------------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Taxable-equivalent net interest income $ 146,939 $ 126,628 $ 267,583 $ 232,417 $ 203,313 $ 178,636
Net interest income 143,650 123,439 260,473 227,094 198,606 174,657
Noninterest income 63,958 52,603 110,891 88,014 73,202 79,880
Provision for loan losses 1,810 1,360 3,540 2,800 2,181 2,993
Noninterest expense (1) 121,719 101,192 214,332 190,030 174,900 167,750
Income taxes 29,340 24,755 52,142 40,950 30,900 27,248
Income before cumulative effect of changes
in accounting principles 54,739 48,735 101,350 81,328 63,827 56,546
Cumulative effect of changes in
accounting principles (2) - - - - - 1,659
Net income 54,739 48,735 101,350 81,328 63,827 58,205
COMMON STOCK DATA
Earnings per common share:
Income before cumulative effect of
changes in accounting principles $ .92 $ .83 $ 1.71 $ 1.38 $ 1.09 $ .99
Net income .92 .83 1.71 1.38 1.09 1.02
Dividends paid per share .23 .21 .43 .35 .29 .25
Dividend payout ratio (%) 24.80% 24.66% 24.66% 25.27% 27.06% 21.81%
Book value per share at period end 9.82 8.01 8.61 7.36 6.28 5.50
Market to book value at period end (%) 383.15 227.06% 301.89% 272.59% 142.83% 168.11%
Weighted average common and common
equivalent shares outstanding during the period 59,473,000 58,844,000 59,228,000 58,868,000 58,404,000 57,120,000
Common shares outstanding at period end 60,025,863 59,090,660 58,918,880 58,223,680 58,238,208 56,805,468
AVERAGE BALANCE SHEET DATA
Money market investments $1,611,305 $ 981,449 $ 909,470 $ 936,846 $ 869,709 $ 788,694
Securities 2,143,241 1,743,036 1,827,300 1,632,253 1,545,704 1,209,165
Loan and leases, net 3,670,569 2,975,685 3,126,899 2,599,071 2,574,995 2,222,182
Total interest-earning assets 7,425,115 5,700,170 5,863,669 5,168,170 4,990,408 4,220,041
Total assets 8,012,036 6,208,569 6,377,695 5,658,690 5,456,613 4,643,918
Interest-bearing deposits 3,601,086 3,236,956 3,324,536 3,021,060 2,744,976 2,449,275
Total deposits 4,641,091 4,136,808 4,258,270 3,858,271 3,583,094 3,178,926
FHLB advances and other borrowings 90,762 103,485 96,496 114,270 151,164 195,097
Long-term debt 251,218 56,001 58,466 57,506 59,493 75,623
Total interest-bearing liabilities 6,325,010 4,756,592 4,872,070 4,320,229 4,197,865 3,556,746
Shareholders' equity 524,403 441,709 468,573 397,268 339,181 286,331
PERIOD END BALANCE SHEET DATA
Money market investments $ 831,176 $ 386,382 $ 613,429 $ 687,251 $ 403,446 $ 597,680
Securities 2,549,715 1,942,302 1,809,688 1,540,489 1,663,433 1,258,939
Loans and leases, net 3,923,890 3,212,191 3,452,543 2,806,956 2,391,278 2,486,346
Allowance for loan losses 71,538 69,272 69,954 67,555 67,018 68,461
Total assets 8,049,952 6,087,914 6,484,964 5,620,646 4,934,095 4,801,054
Total deposits 5,159,917 4,340,316 4,552,017 4,097,114 3,705,976 3,432,289
FHLB advances and other borrowings 149,918 96,335 87,194 101,084 127,319 288,249
Long-term debt 251,171 55,992 251,620 56,229 58,182 59,587
Shareholders' equity 589,194 473,522 507,452 428,506 365,770 312,592
</TABLE>
<PAGE>
As of, and for the
Year Ended December 31,
-----------------------
1992
----
EARNINGS SUMMARY $ 160,854
Taxable-equivalent net interest income 157,282
Net interest income 62,849
Noninterest income 10,929
Provision for loan losses 139,069
Noninterest expense (1) 22,924
Income taxes
Income before cumulative effect of changes 47,209
in accounting principles
Cumulative effect of changes in -
accounting principles (2) 47,209
Net income
COMMON STOCK DATA
Earnings per common share:
Income before cumulative effect of
changes in accounting principles $ .86
.86
Net income .19
Dividends paid per share 20.31%
Dividend payout ratio (%) 4.74
Book value per share at period end 200.53%
Market to book value at period end (%)
Weighted average common and common 55,160,000
equivalent shares outstanding during the
period 54,910,176
Common shares outstanding at period end
AVERAGE BALANCE SHEET DATA $ 469,062
Money market investments 927,976
Securities 2,104,679
Loan and leases, net 3,501,717
Total interest-earning assets 3,807,832
Total assets 2,356,384
Interest-bearing deposits 2,912,860
Total deposits 128,856
FHLB advances and other borrowings 82,219
Long-term debt 2,962,079
Total interest-bearing liabilities 240,411
Shareholders' equity
PERIOD END BALANCE SHEET DATA $ 616,180
Money market investments 981,695
Securities 2,107,433
Loans and leases, net 59,807
Allowance for loan losses 4,107,924
Total assets 3,075,110
Total deposits 205,222
FHLB advances and other borrowings 99,223
Long-term debt 260,070
Shareholders' equity
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<PAGE>
<TABLE>
<CAPTION>
As of, and for the Six As of, and for the
Months Ended June 30, Year Ended December 31,
---------------------- -----------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $11,908 $8,501 $11,526 $ 7,438 $ 13,635 $ 23,364
Restructured loans 830 206 857 249 567 4,006
Other real estate owned and other
nonperforming assets 920 259 138 1,609 4,741 3,267
Total nonperforming assets 13,658 8,966 12,521 9,296 18,943 30,637
Accruing loans past due 90 days or more 7,070 5,494 3,553 5,232 3,041 10,821
SELECTED RATIOS
Net interest margin (3) 3.99% 4.47% 4.56% 4.50% 4.07% 4.23%
Return on average assets 1.38% 1.58% 1.59% 1.44% 1.17% 1.25%
Return on average common equity 21.05% 22.19% 21.63% 20.47% 18.82% 20.33%
Ratio of average common equity to average assets 6.55% 7.11% 7.35% 7.02% 6.22% 6.17%
Tier I risk-based capital - period end 14.16% 11.13% 14.38% 11.38% 11.81% 10.85%
Total risk-based capital - period end 16.86% 13.82% 18.31% 14.23% 14.96% 14.12%
Leverage ratio - period end 7.70% 6.45% 8.77% 6.28% 6.24% 5.44%
Ratio of nonperforming assets to total
assets - period end .17% .15% .19% .17% .38% .64%
Ratio of nonperforming assets to net loans and
leases and other real estate owned and
other nonperforming assets at period end .35% .28% .36% .33% .79% 1.23%
Ratio of net charge-offs (recoveries) to average
loans and leases .19% .15% .12% .10% .19% (.23)%
Ratio of allowance for loan losses to net loans
and leases outstanding at period end 1.82% 2.16% 2.03% 2.41% 2.80% 2.75%
Ratio of allowance for loan losses to
nonperforming loans at period end 561.61% 795.59% 564.92% 878.82% 471.89% 250.13%
</TABLE>
<PAGE>
1992
----
Nonperforming assets:
Nonaccrual loans $ 21,556
Restructured loans 4,003
Other real estate owned and other
nonperforming assets 5,971
Total nonperforming assets 31,530
Accruing loans past due 90 days or more 6,409
SELECTED RATIOS
Net interest margin (3) 4.59%
Return on average assets 1.24%
Return on average common equity 19.64%
Ratio of average common equity to average assets 6.31%
Tier I risk-based capital - period end 10.23%
Total risk-based capital - period end 15.13%
Leverage ratio - period end 6.21%
Ratio of nonperforming assets to total
assets - period end .77%
Ratio of nonperforming assets to net loans and
leases and other real estate owned and
other nonperforming assets at period end 1.49%
Ratio of net charge-offs (recoveries) to average
loans and leases .44%
Ratio of allowance for loan losses to net loans
and leases outstanding at period end 2.84%
Ratio of allowance for loan losses to
nonperforming loans at period end 234.00%
(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.
-55-
<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 has been adjusted to reflect Zions' May 9, 1997 stock split and 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.
Quarterly Bid
Price Range Cash
------------- Dividends
High Low Declared
---- --- --------
1994
First Quarter............................ $ 9.94 $ 9.13 $ .07
Second Quarter........................... 10.50 9.25 .07
Third Quarter............................ 10.16 9.63 .075
Fourth Quarter........................... 9.81 8.38 .075
------
$ .29
======
1995
First Quarter............................ $10.13 $ 8.88 $ .075
Second Quarter........................... 12.50 9.53 .0875
Third Quarter............................ 15.38 12.38 .0875
Fourth Quarter........................... 20.28 15.22 .1025
-------
$ .3525
=======
1996
First Quarter............................ $19.81 $ 16.69 $ .1025
Second Quarter .......................... 19.75 17.00 .1025
Third Quarter............................ 22.44 18.00 .11
Fourth Quarter........................... 26.00 21.69 .11
--------
$ .425
========
1997
First Quarter............................ $33.25 $ 25.69 $ .11
Second Quarter........................... 37.63 28.38 .12
Third Quarter (through August 13, 1997).. 37.50 34.69 --
On May 20, 1997, the last NASDAQ-NMS trading day prior to the public
announcement of the Reorganization, the closing sale price for the Zions Common
Stock was $33.50. On August 13, 1997, the last trading date before this Proxy
Statement/Prospectus was sent to the printers, the closing sale price for the
Zions Common Stock was $ . On June 30, 1997, there were 60,025,863 shares of
Zions Common Stock outstanding, held by approximately 4,616 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.
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<PAGE>
Principal Holders of Zions Common Stock
The following table sets forth as of June 30, 1997, the record and
beneficial ownership of Zions Common Stock by the principal common shareholders
of Zions.
No. of % of
Name and Address Type of Ownership Shares Class
---------------- ----------------- ------ -----
Roy W. Simmons Record and Beneficial 2,276,812 3.79%
One South Main Beneficial(1) 1,991,376 3.32%
Salt Lake City, Utah 84111 --------- ----
4,268,188 7.11%
Zions First National Bank Record(2) 4,512,012 7.52%
One South Main
Salt Lake City, Utah 84111
- ---------------------
(1) Represents Roy W. Simmons' ownership interest in 1,991,376 shares held by a
company in which Mr. Simmons serves as a director.
(2) These shares are owned of record as of February 24, 1997, 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 3,197,376
shares (5.33% 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 Profit Sharing Plan. Zions First
National Bank also acts as trustee for the Zions Bancorporation Dividend
Reinvestment Plan, which holds 1,014,756 shares (1.69% of the class) and the
Zions Bancorporation PAYSOP Plan, which holds 299,880 shares (.50% of the
class) as to which Zions First National Bank does not have or share voting
power.
Set forth below is the beneficial ownership, as of June 30, 1997, of
Zions' common stock by each of Zions' directors, and all directors and officers
as a group.
No. of Shares % of
Directors Beneficially Owned Class
--------- ------------------ -----
Jerry C. Atkin 7,800 * (1)
R.D. Cash 25,000 * (1)
Grant R. Caldwell 5,000 * (1)
Richard H. Madsen 199,620 * (1)
Roger B. Porter 1,000 * (1)
Robert G. Sarver 412,840 * (1)
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<PAGE>
Harris H. Simmons 2,323,580(2) 3.87
L. E. Simmons 2,142,324(2) 3.57
Roy W. Simmons 4,268,188(2) 7.11
I. J. Wagner 283,000(2) * (1)
Dale W. Westergard 161,752 * (1)
All directors and officers
as a group 7,478,716 12.39
(32 persons)
_____________
(1) Immaterial percentage of ownership.
(2) Totals include 1,991,376 shares attributed to each individual through
serving as a director in a company holding such shares in Zions. Of such
1,991,376 shares attributed to Harris H. Simmons, Mr. Simmons holds an
option to acquire 186,792 shares, all of which are vested and presently
exercisable.
Zions Documents Incorporated By Reference
The following documents previously filed by Zions with the SEC
pursuant to the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. Zions' Annual Report on Form 10-K for the year ended December 31,
1996 ("Zions Form 10-K"); and
2. Zions' Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997 and June 30, 1997;
3. Zions Current Report on Form 8-K filed by Zions on July 9, 1997;
4. Zions' Form 8-A Registration Statement dated October 10, 1996.
For the convenience of Sun State shareholders, a copy of Zions' 1996
Annual Report to Shareholders ("Zions Annual Report") and Zions' Quarterly
Report to Shareholders for the quarter ended June 30, 1997 ("Quarterly Report")
are being mailed to Sun State shareholders along with this Proxy
Statement/Prospectus. The Zions Annual Report and the Quarterly Report are not
part of this Proxy Statement/Prospectus. The Zions Annual Report and Quarterly
Report do not contain all of the information contained in the Zions Form 10-K.
Sun State shareholders who wish to obtain copies of any Zions 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 Effective Date shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be a part
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<PAGE>
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 SUN STATE CAPITAL CORPORATION
General
Sun State is a bank holding company organized under the laws of the
State of Nevada in 1989 and registered under the Bank Holding Company Act. Sun
State has one subsidiary, Sun State Bank. Total assets have grown from
$72,908,714 at December 31, 1992, to $162,117,255 at June 30, 1997. For the six
months ended June 30, 1997, Sun State Bank's net income after taxes was
$1,134,598, compared to $1,001,977 for the six months ended June 30, 1996. On
June 30, 1997, deposit liabilities were $147,849,043 and net loans were
$120,869,129 compared to $113,811,538 and $82,051,035, respectively, at June 30,
1996. Net interest income for the six months ended June 30, 1997, was $4,701,575
compared to $3,634,729 at June 30, 1996.
Business of Sun State Bank
Sun State Bank (the "Bank") is a Nevada banking organization located
in Las Vegas, Nevada. In 1989, Sun State was formed for the purpose of acquiring
all of the outstanding stock of the Bank.
The Bank offers traditional commercial bank services including
checking, savings and money market accounts, time deposits and safe deposit
services. A variety of loans including commercial, real estate and installment
loans are offered to businesses and individuals located primarily in the Las
Vegas and Reno-Sparks, Nevada areas. The Bank also offers cash management
services to its customers.
The Bank was organized in 1981 as Pan American International Bank of
Nevada, Inc., a Nevada banking corporation and commenced operations in 1982. The
name was changed to Sun State Bank in 1984. The Bank currently operates through
its main office located at 4240 West Flamingo Road, Las Vegas, Nevada 89126, and
four branch offices in the Las Vegas and Reno-Sparks, Nevada, areas.
Lending
Sun State concentrates its lending activities in the following
principal areas: commercial, real estate construction, real estate mortgage and
installment. At June 30, 1997, these categories accounted for approximately
21.3%, 20.6%, 51.7% and 6.4%, respectively, of Sun State's loan portfolio. On
the same date in 1996, these categories accounted for 26.1%, 12.9%, 54.7% and
6.3%, respectively, of Sun State's loan portfolio. The interest rates charged
for the loans made by Sun State vary with the degree of risk, the size and
maturity of the loans, the borrower's relationship with Sun State, and
prevailing
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<PAGE>
money market rates indicative of Sun State's cost of funds. The majority of Sun
State's loans are generated in the Las Vegas, Nevada area.
The following table sets forth the amounts of loans outstanding by
category as of the dates indicated:
<TABLE>
<CAPTION>
June 30 December 31
------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial, industrial $26,290 $22,060 $19,648 $20,171 $16,897 $26,697 $17,901
Real estate--construction* 25,405 10,901 17,421 10,420 9,113 11,416 13,561
Real estate--mortgage* 63,739 46,289 49,207 42,415 32,683 22,121 11,922
Installment** 7,965 5,324 6,276 4,587 1,434 809 3,722
Less: unearned income 639 548 506 507 573 529 300
------- -------- ------- ------- ------- ------- -------
Total loans 122,760 $84,026 $92,046 $77,086 $59,554 $60,514 $46,806
Allowance for loan losses (1,891) (1,975) (1,866) (1,842) (1,214) (1,147) (878)
------- ------- ------- ------- ------- ------- -------
Net loans 120,869 $82,051 $90,180 $75,244 $58,340 $59,367 $45,928
</TABLE>
________________
* Residential and commercial.
** Includes some commercial loans.
Average loan balances were up 11.7% in 1996 over 1995, and 20.3% in
1995 over 1994. The 1996 year-end loan balance of $92,045,913 was 19.4% higher
than the balance of $77,085,988 on the same date in 1995, which in turn was
29.4% higher than the balance of $59,554,173 on the same date in 1994. At
year-end 1996, the loan to deposit ratio was 63.8%, versus 76.3% at December 31,
1995, and 79.3% at December 31, 1994. These changes resulted from more rapid
growth in deposit balances than in loan balances. Average loan balances for the
six months ended June 30, 1997, reflected a $29,081,000 or 37.0% (74.0%
annualized) increase from December 31, 1996. The loan to deposit ratio also
increased to 83.0% at June 30, 1997, due to increased loan growth.
Sun State relies substantially on local promotional activities and
personal service to compete with other financial institutions. Sun State makes
loans to borrowers whose applications include a sound purpose, a viable
repayment source and a plan of repayment established at inception and generally
backed by a secondary source of repayment. Sun State has established a written
loan policy for each of its categories of loans which is reviewed periodically
by the Board of Directors. The loan portfolio is reviewed periodically by Sun
State's Loan Committee to initiate steps to accelerate the collections of past
due loans and other actions deemed necessary in order to maintain a good quality
loan portfolio.
Short-term commercial loans consist of real estate construction
loans, land acquisition and/or development, secured and unsecured lines of
credit and
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<PAGE>
equipment financing. Except construction and equipment loans, the loans have
variable interest rates and mature within one year. Construction loans may
either have fixed or variable interest rates and generally mature within one
year. Equipment financing may have fixed or variable interest rates with
maturity normally in the three- to five-year range.
Long-term commercial loans consist of loans which are secured by
various types of commercial properties and are used to acquire or refinance
related properties. These loans normally amortize over a 20-year schedule but
mature in ten years. Interest rates are generally variable and repriceable
within a five-year time frame. Long-term commercial loans also include fixed
rate equipment loans with a maturity of three to seven years.
Approximately 72.3% of the total loan portfolio at June 30, 1997, was
secured by real estate. Sun State's residential real estate loans include tract
development loans, owner-occupied one- to four-family properties, multi-family
housing, "spec" homes, lot development and raw land. Loan-to-value ratios are
generally 65% to 75%, except on loans secured by raw land, which generally have
50% loan-to-value ratios. Commercial real estate loans include owner-occupied
properties, nonowner-occupied properties, lot development and raw land. Except
loans secured by raw land, which again generally carry a 50% loan-to-value
ratio, the loans generally have 65% to 70% loan-to-value ratios.
Sun State uses only state licensed or certified appraisers in
connection with its appraisal reports on real estate related transactions. In
general, an independent appraisal is required on all loans secured by real
estate that are in excess of $250,000, unless the transaction meets one of the
exemptions contained in Part 323 of the FDIC's Rules and Regulations. Appraisers
are selected based upon their qualifications, with particular attention to their
education and experience relating to the competency provisions of the Uniform
Standards of Professional Appraisal Practice. Once selected, the appraiser is
added to Sun State's approved appraiser list which is approved annually by
management and the board of directors of Sun State Bank.
Sun State's consumer lending is a small portion of its overall
business, and includes overdraft protection, automobile loans and loans secured
by residential dwellings (first and second deeds of trust) for varying purposes.
As of June 30, 1997, $24,676,000 of loans (20.0% of the portfolio)
were secured by commercial real estate income properties. At December 31, 1996,
$14,809,000 or 16.1% of the portfolio was secured by such properties. Also at
December 31, 1996, $9,966,000 or 10.8% of the loan portfolio was secured by raw
land.
Investment Portfolio
Sun State's investment portfolio consists primarily of U.S. agency
securities. Government regulations limit the type and quality of investments in
which Sun State may invest its funds. See "Supervision and Regulation of Sun
State."
Sun State has established a written investment policy which is
reviewed by the Board of Directors, at least annually, and was last approved on
May 31, 1997.
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<PAGE>
This policy identifies investment criteria and states specific objections in
terms of risk, interest rate sensitivity and liquidity.
Sun State has established an Executive Committee which is comprised
of all directors. The Executive Committee monitors Sun State's investment
portfolio to ensure compliance with guidelines.
The following tables present the mix of the investment portfolio
along with the book and market values of those components as of June 30, 1997,
and 1996, and as of December 31, 1996, 1995 and 1994:
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<PAGE>
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996 December 31, 1996
--------------------- -------------------- --------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
--------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity
U.S. Treasury $ 441 $ 450 $ 142 $ 142 $ 934 $ 934
U.S. agencies 0 0 0 0 0 0
States and political subdivisions 1,282 1,313 1,348 1,369 1,308 1,346
Other 434 434 515 515 422 422
--------- -------- -------- ------- ------- -------
Total securities held to maturity $ 2,157 $ 2,197 $ 2,005 $ 2,026 $ 2,664 $ 2,702
Securities available for sale
U.S. Treasury 0 0 0 0 0 0
U.S. agencies 12,132 12,188 19,166 19,262 18,671 18,700
States and political subdivisions 0 0 0 0 0 0
Other 0 0 0 0 0 0
-------- -------- ------- ------- ------- ------
Total securities available for sale $ 12,132 $ 12,188 $19,166 $19,262 $18,671 $18,700
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------ ---------- ------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Securities held to maturity
U.S. Treasury $ 146 $ 149 $ 146 $ 141
U.S. agencies 0 0 7,335 7,335
States and political subdivisions 1,403 1,447 1,482 1,409
Other 204 204 0 0
------- -------- ----------- ------
Total securities held to maturity $ 1,753 $ 1,800 $8,963 $8,885
Securities available for sale
U.S. Treasury 0 0 0 0
U.S. agencies 10,885 11,009 0 0
States and political subdivisions 0 0 0 0
Other 0 0 0 0
------- ------- ----------- ------
Total securities available for sale $10,885 $11,009 $ 0 $ 0
</TABLE>
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<PAGE>
Investment securities held to maturity are carried at cost, adjusted
for the accretion of discounts and amortization of premiums using the interest
method. Amortization and accretion are recognized as adjustments to interest
income.
The portfolio includes no obligation of a single state or political
subdivision issuer with an aggregate book value in excess of 10% of
shareholders' equity.
Deposits
Growth in deposits is the primary source of funds used by Sun State
for lending and other general business purposes. Sun State may derive additional
funds from principal repayments on loans, the sale of loans and investment
securities and borrowings from correspondent banks. The level of deposit
liabilities can vary significantly and is influenced by prevailing interest
rates, money market conditions, general economic conditions and competition.
Sun State offers a full range of depository accounts including
checking, savings, money market accounts and certificates of deposit. Sun State
also offers Individual Retirement Accounts. Management believes that the
customers provide a strong and relatively stable core deposit base.
Average deposits were 34.9% higher in 1996 than in 1995, and were
16.8% higher in 1995 than in 1994. Total deposits at year-end 1996 were
$144,279,202, 42.8% higher than year-end 1995 total deposits of $101,043,215,
which in turn were 34.5% higher than year-end 1994 total deposits of
$75,120,028. Average deposits during the first half of 1997 reflected an
$18,726,000 or 15.6% (31.2% annualized) increase over 1996 average deposits. The
average deposit mix remained relatively consistent during the first half of 1996
and the first half of 1997. The most significant change was interest-bearing
demand accounts increasing from 10.5% to 13.4% of total deposits.
Property
Sun State operates in five locations--its headquarters in Las Vegas
and four branches. Following are descriptions of the five locations:
Location Sq. Ft. Owned/Leased Conveniences
- -------- ------- ------------ ------------
Corporate Headquarters 16,744+/- Owned Handicap Access
4240 West Flamingo Road bldg.
Las Vegas, Nevada 89103
This facility houses not only the main office branch location but the corporate
offices, the southern region lending division and various back office functions
such as loan servicing, controllers, human resources, administration, etc. This
property was constructed for the Bank, occupied in November, 1993 and is owned
free and clear (fee simple).
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<PAGE>
Location Sq. Ft. Owned/Leased Conveniences
- -------- ------- ------------ ------------
Summerlin/Sun City Office 4,500+/- Leased Handicap Access
9454 Del Webb Blvd. bldg.
Las Vegas, Nevada 89134
This property was originally leased from Sun West Assoc. (now known as Plaza
South) for a term of 10 years maturing May 31, 2000 with a provision for
additional 5-year extensions. The current rent for this facility is $6,705.95,
subject to increases over time based on the Consumer Price Index.
Henderson/Green Valley Office 6,000+/- Leased Handicap Access
4343 E. Sunset Road bldg. 2 drive-in lanes
Henderson, Nevada 89014
This property was originally leased from Sunset Athenian, Ltd. Partnership for a
term of 15 years maturing July 31, 2011 with a provision for a term of 3
additional 5-year extensions. The current rent for this facility is $7,500.00.
Boulder City Office 2,096+/- Land Lease Handicap Access
1027 Nevada Highway bldg.
Boulder City, Nevada 89005
This property has a land lease with Margaret Shave which was assumed by the Bank
on October 1, 1996 with a remaining term of approximately 32 years maturing in
the year 2029 with a provision for 2 additional 20-year extensions. The current
rent for the land is $1,339.25, and the building is owned.
Reno Regional Center 9,703+/- Owned Handicap Access
580 E. Plumb Lane bldg.
Reno, Nevada 89502
This facility operates as Sun State's regional center for northern Nevada and
houses the Reno main branch office location and the northern region lending
division. This property was purchased on August 8, 1996 and is owned free and
clear (fee simple).
Competition
The primary service areas for Sun State are in the Nevada metropolitan
markets of Las Vegas in the southern region of the state and Reno-Sparks in the
northern region of the state. Las Vegas, still the fastest growing city in the
nation, is the center of a densely populated market with a base of nearly
1,200,000 people supported largely by the gaming industry, construction,
government and other services. Many large planned residential communities as
well as general residential neighborhoods support the housing needs for the
workers of the large commercial base of hotels and businesses in the Las Vegas
market. Reno-Sparks by comparison is a smaller market base with an estimated
population of 300,000 and has a similar profile to that of southern Nevada but
on a smaller scale and a slower growth pattern.
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<PAGE>
Sun State has competition within these markets from many of the
well-established larger financial institutions and a variety of smaller
community banks. In addition to competition from other commercial banking
institutions, there is competition from savings and loan companies, credit
unions, investment companies and other types of financial services companies.
Many of Sun State's competitors are larger and substantially more capitalized
than Sun State for lending and to pay for mass advertising, technology and
physical facilities.
The primary factors affecting competition for deposits are interest
rates, cost of services, the quality and range of financial products offered and
the convenience of locations and office hours. The primary factors in competing
for loans are interest rates, loan origination fees and the quality and range of
lending products offered. Other factors which affect competition include the
general availability and reliability of lendable funds/credit, general and local
economic conditions and the quality of service and loan approval turn-around
provided to the customers.
Sun State operates a niche market community bank and relies
substantially on its local promotional activities, personal contact by its
officers, directors, employees and shareholders, personalized service, courier
service and its reputation with its customers and the communities in which it
serves to compete effectively.
Legal Proceedings
Sun State is not presently involved in any legal proceedings which Sun
State's management believes to be material to its financial condition or results
of operations. As the nature of Sun State's business involves providing certain
financial services, the collection of loans and the enforcement and validity of
mortgages and other liens, Sun State and the Bank are parties in various legal
proceedings (such as garnishment proceedings) which may be considered as arising
in the ordinary course of their business.
Employees
As of June 30, 1997, Sun State employed 61 persons on a full time basis
and three persons on a part time basis. Sun State's employees are not parties to
any collective bargaining agreement. Sun State provides a variety of employee
benefits and believes employee relations are good.
Regulatory Matters
As a registered bank holding company under the Bank Holding Company Act
of 1956, Sun State is subject to the regulations and supervision of the Federal
Reserve Board. The Bank Holding Company Act requires Sun State to file reports
with the Federal Reserve Board and provide any additional information requested
thereby.
The Bank is a state bank organized under the laws of the State of
Nevada. The Bank is a member of the Federal Reserve System and its deposits are
insured by the FDIC. The Bank is subject to regulation, supervision and regular
examination by the Federal Reserve Board and the Nevada Commissioner.
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Selected Financial Data
The following selected financial data should be read in conjunction
with Sun State's consolidated financial statements and the related notes and
with Sun State's management's discussion and analysis of financial condition and
results of operations, which are included in this Proxy Statement/Prospectus.
67
<PAGE>
SUN STATE CAPITAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
As of, and for the Six As of, and for the
Months Ended June 30, Year Ended December 31,
----------------------- ------------------------------------------------------
(Dollars and outstanding shares in thousands, 1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- ------ ------- ------ -------
except per share and ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income $ 4,702 $ 3,635 $ 7,738 $ 6,858 $ 5,988 $ 5,133 $ 3,738
Provision for loan losses 73 150 40 512 285 414 396
Noninterest income 300 208 430 533 328 326 183
Noninterest expense 3,206 2,178 4,761 3,558 3,456 3,204 2,449
Net income 1,135 1,002 2,225 2,201 1,677 1,221 748
COMMON STOCK DATA
Earnings per common share $ 3.90 $ 3.46 $ 7.69 $ 7.69 $ 5.75 $ 4.23 $ 2.94
Book value per share at period end 44.38 37.37 40.41 34.98 29.06 24.52 20.31
Weighted average common shares
outstanding during the period 284 282 282 280 281 281 255
AVERAGE BALANCE SHEET DATA
Securities $ 15,624 $ 14,048 $ 17,711 $ 9,326 $ 8,848 $ 8,849 $ 9,328
Loans and leases, net 105,868 75,397 76,798 68,870 57,325 51,101 49,741
Total interest-earning assets 135,220 104,316 114,051 88,439 75,421 68,969 53,648
Total assets 152,878 119,459 131,097 99,171 84,607 77,528 58,840
Interest-bearing deposits 105,870 82,548 94,540 67,179 55,776 54,221 50,222
Total deposits and short-term debt 138,802 108,235 120,076 89,018 76,186 70,337 53,884
END OF PERIOD BALANCE SHEET DATA
Securities $ 14,344 $ 21,266 $ 21,364 $ 12,762 $ 8,963 $ 8,956 $ 10,225
Loans, net 120,869 82,051 90,180 75,244 58,340 59,367 45,928
Allowance for loan losses 1,891 1,975 1,866 1,842 1,214 1,147 878
Total assets 162,117 125,613 157,690 112,320 86,773 85,968 72,909
Total deposits 147,849 113,812 144,279 101,043 75,120 75,556 62,018
Shareholders' equity 13,208 11,113 12,025 10,411 8,697 7,491 6,202
Nonperforming assets:
Nonaccrual loans and loans past due 90
days or more 1,900 170 -0- 485 -0- 221 805
Other real estate owned -0- -0- 191 -0- 587 103 104
Total nonperforming assets 1,900 170 191 485 587 324 909
SELECTED RATIOS
Net interest margin 6.95% 6.97% 6.78% 7.75% 7.94% 7.47% 6.99%
Return on average assets 1.48% 1.68% 1.68% 2.22% 1.98% 1.57% 1.27%
Ratio of ending equity to
ending assets 8.15% 8.85% 7.63% 9.27% 10.02% 8.71% 8.51%
Ratio of nonperforming assets to total
assets 1.17% .13% .12% .43% .69% .38% 1.25%
Ratio of allowance for loan losses to
net loans outstanding at
period end 1.56% 2.41% 2.07% 2.45% 2.08% 1.93% 1.91%
Ratio of allowance for loan losses to
nonperforming loans 100% 1,160% 977% 380% 207% 354% 97%
Dividend payout ratio 0% 28.15% 25.39% 25.45% 20.82% 0% 0%
</TABLE>
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<PAGE>
Stock Prices and Dividends on Sun State Common Stock and Preferred Stock
Sun State's Common Stock and Preferred Stock are not listed with a
national securities exchange or quoted on any automated quotation system. The
Common Stock and the Preferred Stock occasionally trade through private
negotiated transactions between individuals. As a result, no established public
trading market for Sun State Common Stock or the Preferred Stock presently
exists. Over the years little trading has occurred in the stock. Reliable
information concerning the prices at which Sun State's stock has traded in
private, negotiated transactions is not publicly available or generally known to
Sun State. On occasion, Sun State has become aware of the trading price of its
stock in private transactions. Information concerning those trading prices has
been omitted based on Sun State's belief that such prices are not necessarily
representative of the market price for the Common Stock or the Preferred Stock
during any particular period. Since May 21, 1997, the date the Plan of
Reorganization was publicly announced, there have been no trades in Sun State's
stock.
In 1995 Sun State paid cash dividends totaling $2.00 per share ($.50
per quarter) of Sun State Common Stock and $7.78 per share of Preferred Stock,
while in 1996 Sun State paid cash dividends of $2.00 per share ($.50 per
quarter) of Sun State Common Stock and $9.34 per share of Preferred Stock.
During the first six months of 1997, Sun State has paid no cash dividends on the
Sun State Common Stock and $2.31 per share of Preferred Stock. The holders of
Preferred Stock are entitled to cumulative dividends. The dividends, as a per
annum percentage of par value, are at a floating rate of 1% over the quarterly
average of The Wall Street Journal prime rate, but at least 8% and no more than
12%. Such dividends are payable in cash on the last day of each quarter of Sun
State's fiscal year.
As of the date of this Information Statement/Offering Memorandum, there
were 76 record holders of Sun State Common Stock and 21 record holders of the
Preferred Stock.
Stockholdings of Directors, Officers and Certain Others
On June 30, 1997, there were 284,750 shares of Sun State's common stock
outstanding, including 2,750 Treasury shares (of which 250 are subject to
binding subscriptions), held of record by 76 shareholders. Only shareholders of
record as of , 1997, will be entitled to vote at the Special Meeting and each
share is entitled to one vote. As of June 30, 1997, Sun State's Board of
Directors owned approximately 65% of the outstanding shares of Sun State's
common stock. Each director has indicated his intention to vote in favor of the
Merger Agreement.
The following table sets forth information with respect to the
beneficial ownership of the common stock of Sun State as of June 30, 1997, by
(i) each person known by Sun State to own beneficially more than 5% of the
outstanding common stock, (ii) each current director of Sun State, and (iii) all
executive officers and directors of Sun State as a group.
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<PAGE>
Name (and address of 5% Amount and Nature Percent
Beneficial Owners) of Beneficial Ownership of Class
- --------------------- ----------------------- --------
Larry E. Carter 20,713 7.27
5114 Turnberry
Las Vegas, Nevada 89113
John F. Dedolph 15,237 5.35
1427 Radig Court
Boulder City, Nevada 89005
Steven C. Kalb 29,793 10.46
3250 West Spring Mountain Road
Las Vegas, Nevada 89102
Luther D. Kutcher 32,468 11.40
4120 Tomsik
Las Vegas, Nevada 89129
Mark A. Stout 16,928 5.94
2320 Paseo del Prado, Bldg B # 101
Las Vegas, Nevada 89102
Kenneth L. Templeton 59,168 20.78
8019 Silver King Drive
Las Vegas, Nevada 89129
Jerome Snyder 6,948 2.44
Ronald M. Zurek 1,000(1) *
All executive officers and
directors as a group (20 persons) 195,605(2) 66.73
_______________________
* Less than 1%.
(1) Includes 900 shares issuable pursuant to stock options.
(2) Includes 8,400 shares issuable pursuant to stock options.
CERTAIN TRANSACTIONS OF SUN STATE
The Bank has had banking transactions in the ordinary course of its
business with directors, officers, principal shareholders and their associates
on the same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with unaffiliated
parties. To the extent that such transactions consisted of extensions of credit,
they did not, in the opinion of management, involve more than a normal risk of
collectibility or present other unfavorable features. As of June 30, 1997, Sun
State's directors, executive officers, employees and their affiliates were
indebted to the Bank in the aggregate amount of $3,412,379, none of which such
loans were delinquent.
The partners in Plaza Properties (formerly Sun West Associates), the
landlord of the Sun City/Summerlin branch of Sun State Bank, consist of the
following directors of the Bank: Kenneth L. Templeton, General Partner; Larry E.
Carter, Limited Partner; Steven C. Kalb, Limited Partner; and Hugh Templeton,
Limited Partner. The initial lease is for a term of ten years beginning
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<PAGE>
September 1989, with four options to extend for five years each. The current
monthly rent is at $6,705.95. The lease agreement was approved by a majority of
the entire Board of Directors, and the Board is of the opinion that the lease is
on terms no less favorable to Sun State than would be available in the open
market.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
SUN STATE CAPITAL CORPORATION
The following analysis of Sun State's financial condition and results
of operations for the six months ended June 30, 1997, and 1996 and for the years
ended December 31, 1996, 1995 and 1994 should be read in conjunction with the
audited Consolidated Financial Statements of Sun State and notes thereto, and
information presented elsewhere herein. Average balance sheet data are based on
daily averages, except that average non-interest-bearing demand deposit accounts
for June 30, 1997 are averages of period-ending balances for December of 1996
and March and June of 1997.
Financial Condition
Total assets were $157,690,311, $112,319,662 and $86,773,462 at
December 31, 1996, 1995 and 1994, respectively. These increases, 40.4% from 1995
to 1996 and 29.4% from 1994 to 1995, were caused by overall growth in Sun
State's customer base, both in loans and deposits. Total assets also increased
by $36,504,521 or 29.1% from June 30, 1996, to the same date in 1997. The
Company's total loan portfolio was $92,045,913, $77,085,988 and $59,554,173 at
year-end 1996, 1995 and 1994, respectively, increasing by 19.4% from 1995 to
1996 and by 29.4% from 1994 to 1995. Total loans also increased from $84,025,917
at mid-year 1996 to $122,759,919 at mid-year 1997, a 46.1% increase. Total
deposits were $144,279,202, $101,043,215 and $75,120,028 at year-end 1996, 1995
and 1994, respectively, increasing by 42.8% from 1995 to 1996 and by 34.5% from
1994 to 1995. Total deposits also increased from $113,811,538 at mid-year 1996
to $147,849,043 at mid-year 1997, a 29.9% increase.
Investment securities held-to-maturity were $2,663,611, $1,752,682 and
$8,962,572 at December 31, 1996, 1995 and 1994, respectively. Investment
securities available-for-sale were $18,700,008, $11,008,570 and $0 at the same
respective dates. The annual overall increase in the securities portfolio was
caused by growth in Sun State's deposit base, which provided funds that needed
to be invested until sufficient loan opportunities become available. The
decrease in securities held-to-maturity from 1994 to 1995 and the corresponding
increase in securities available-for-sale resulted from management's review of
Sun State's investment objectives and a reclassification of many of Sun State's
securities based on the results of that review and in accordance with the
"Financial Accounting Standards Board Guide to Implementation of Statement 115
on Accounting for Certain Investments in Debt and Equity Securities."
Investment securities held-to-maturity also increased from $2,004,092
at mid-year 1996 to $2,156,514 at mid-year 1997. However, securities
available-for-sale decreased from $19,261,510 at mid-year 1996 to $12,187,516 at
mid-year 1997. The decrease was caused by sales of securities in order to help
fund Sun State's 46.1% growth in loans during the same period.
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<PAGE>
Overnight federal funds sold totaled $29,098,000, $10,160,000 and
$8,695,000 at December 31, 1996, 1995 and 1994, respectively. Federal funds sold
also totaled $10,900,000 at June 30, 1996, and $4,530,000 at June 30, 1997. The
increases through year-end 1996 were caused by deposit growth in excess of
same-period loan growth, and the decrease at mid-year 1997 resulted from the
funding of increased loan demand, as well as the withdrawal of a single $14.2
million deposit which had been invested in federal funds sold.
Stockholders' equity was $12,024,825, $10,411,020 and $8,696,980 at
year-end 1996, 1995 and 1994, respectively. Stockholders' equity also increased
by 18.8% from $11,112,956 at June 30, 1996, to $13,207,895 at June 30, 1997. The
growth for these periods was generated through earnings retention.
Comparison of Operating Results
Net Income. Net income was $2,225,084 for the year ended December 31,
1996, compared to $2,200,849 for the year ended December 31, 1995, an increase
of 1.1%. From 1994 to 1995, net income increased by $523,827 or 31.2%, due
primarily to increased net interest income, as well as increased other operating
income. These increases were offset in part by increases in the provision for
loan losses, other operating expenses and income tax expense.
Net income was $1,134,598 the six months ended June 30, 1997, compared
to net income of $1,001,977 for the comparable period in 1996.
Net Interest Income. Sun State's results of operations depend primarily
on its net interest income, which is the difference between interest income on
its interest-earning assets, such as loans and investment securities, and the
interest paid on its interest-bearing liabilities, such as deposits. The amount
of net interest income is a function of the difference (known as the "spread")
between the weighted average rate received on interest-earning assets and the
weighted average rate paid on interest-bearing liabilities, as well as the
average level of interest-earning assets compared with the average level of
interest-bearing liabilities. Interest rates are highly sensitive to many
factors, including domestic and international economic and political conditions
and governmental monetary policies. Conditions such as inflation, recession,
unemployment, money supply, international disorders and other factors beyond the
control of Sun State may affect interest rates and Sun State's operations.
Net interest income was $7,738,401 in 1996, an increase of $880,682 or
12.8% over the 1995 level of $6,857,719, which in turn was an increase of
$869,878 or 14.5% over 1994. Net interest income was $4,701,575 for the six
months ended June 30, 1997, an increase of $1,066,846 or 29.4% compared to the
net interest income of $3,634,729 for the six months ended June 30, 1996.
Interest income increased by greater amounts during these periods than interest
expense did. The reasons for this are discussed in detail below in this section
and in the following two sections, Interest Income and Interest Expense.
Sun State's cost of funds increased from 2.88% in 1994 to 4.58% in
1995, and decreased slightly to 4.45% in 1996. In the same periods, the average
yield on interest-earning assets increased from 10.08% to 11.24% and decreased
to 10.47% in 1996. As a result, the interest rate spread decreased from 7.20% in
1994 to 6.66% in 1995 and 6.02% in 1996. Similarly, the net interest rate
margin, which is the weighted average yield on interest-earning assets divided
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<PAGE>
by the weighted average rate paid on interest-bearing liabilities, consistently
decreased: in 1994, the average yield was 3.50 times the average cost, in 1995
the average yield was 2.46 times the average cost and in 1996 the average yield
was 2.36 times the average cost of funds. These decreases caused net interest
income to increase less than it would have if the decreases had not occurred.
The cost of funds decreased from 4.49% in the first six months of 1996
to 4.26% in the first six months of 1997, while the average yield on
interest-earning assets decreased from 10.52% to 10.28% for the same respective
periods. These changes caused the interest rate spread to decrease slightly from
6.03% in the first half of 1996 to 6.02% in the first half of 1997, slightly
offsetting other gains in net interest income from period to period.
Net interest margin is net interest income divided by average earning
assets. This measures the net productivity of earning assets. Net interest
margin decreased from 7.94% during 1994 to 7.75% during 1995, and again to 6.78%
during 1996. These results are consistent with the decreases in the interest
rate spread discussed above. Net interest margin increased during the first half
of 1997 to 6.95%.
The following tables provide condensed average balance sheets together
with analyses of Sun State's net interest income, net interest spread, net
interest rate margin and net interest margin for the periods included.
-73-
<PAGE>
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
----------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate* Balance Interest Rate*
------- -------- ----- ------- -------- -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Securities--taxable $ 14,321 $ 433 6.05% $ 12,660 $ 388 6.13%
Securities--non-taxable** 1,303 38 5.83% 1,388 42 6.05%
Money market instruments 824 16 3.88% 686 15 4.37%
Federal funds sold 12,904 296 4.59% 14,185 360 5.08%
Loans 107,733 6,170 11.45% 77,308 4,683 12.12%
Less allowance for loan losses (1,866) -- -- (1,911) -- --
-------- ------ -------- ------
Net interest-earning assets 135,219 6,953 10.28% 104,316 5,488 10.52%
Noninterest-earning assets 17,659 15,143
-------- --------
Total assets $152,878 $119,459
======== ========
Liabilities
Interest-bearing DDA $ 18,580 $ 271 2.92% $11,395 $ 168 2.95%
MMDA 41,761 907 4.34% 33,231 763 4.59%
Saving accounts 14,017 286 4.08% 10,320 185 3.59%
Time deposits $100,000 and over 11,542 272 4.71% 9,318 249 5.34%
Other time deposits 19,970 517 5.18% 18,284 488 5.34%
-------- -------- ----- -------- ------ -----
Total interest-bearing liabilities $105,870 $2,253 4.26% $82,548 $1,853 4.49%
Noninterest-bearing DDA $ 32,932 $25,687
-------- --------
Total deposits $138,802 $108,235
======== ========
Net interest income $4,700 $3,635
Interest rate spread 6.02% 6.03%
Net interest rate margin 2.41:1 2.34:1
Net interest margin* 6.95% 6.97%
</TABLE>
- --------------------------
* Net interest margin and the average rates are annualized.
** Interest not calculated on a tax equivalent basis.
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<PAGE>
Sun State Bank Balance Sheet Items
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995 December 31, 1994
------------------------------- -------------------------- ----------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Securities--taxable $ 16,347 $ 1,090 6.67% $ 7,887 $ 489 6.20% $ 7,808 $ 333 4.26%
Securities--non-taxable* 1,364 82 6.01% 1,439 82 5.70% 1,040 57 5.48%
Money market instruments 576 22 3.82% 710 39 5.50% 1,809 65 3.59%
Federal funds sold 18,966 995 5.25% 9,533 542 5.69% 7,439 296 3.98%
Loans 78,652 9,752 12.40% 70,399 8,789 12.48% 58,505 6,855 11.72%
Less allowance for loan losses (1,854) -- -- (1,529) -- -- (1,181) -- --
-------- ------- ------- ------ ------- ------
Net interest-earning assets $114,051 $11,941 10.47% $ 88,439 $9,941 11.24% $75,420 $7,606 10.08%
Noninterest-earning assets 17,047 10,732 9,187
-------- -------- -------
Total assets $131,098 $ 99,171 $84,607
======== ======== =======
Liabilities
Interest-bearing DDA $ 12,630 $ 375 2.97% $ 9,346 $ 300 3.21% $ 8,912 $ 198 2.22%
MMDA 34,897 1,657 4.39% 28,537 1,332 4.67% 23,790 700 2.94%
Saving accounts 11,272 421 3.74% 8,483 356 4.20% 8,692 236 2.72%
Time deposits $100,000 and over 17,021 758 4.45% 7,782 400 5.14% 6,169 179 2.90%
Other time deposits 18,720 992 5.30% 13,033 684 5.25% 8,213 298 3.63%
Short-term debt 0 0 0.00% 162 11 6.81% 369 6 1.63%
======== ======= ======== ====== ======= ======
Total interest-bearing
liabilities $ 94,540 $4,203 4.45% $ 67,343 $3,083 4.58% $56,145 $1,617 2.88%
Noninterest-bearing DDA 25,536 21,675 20,041
-------- -------- -------
Total deposits and short-term
debt $120,076 $ 89,018 $76,186
======== ======== =======
Net interest income $7,738 $6,858 $5,989
Interest rate spread 6.02% 6.66% 7.20%
Net interest rate margin 2.36:1 2.46:1 3.50:1
Net interest margin 6.78% 7.75% 7.94%
</TABLE>
- ----------------
*Interest not calculated on a tax equivalent basis.
-75-
<PAGE>
Interest Income. Total interest income for the year ended December 31,
1996, was $11,941,294, an increase of $2,000,305 or 20.1% over the total
interest income of $9,940,989 for the year ended December 31, 1995, which in
turn was a $2,336,182 or 30.7% increase over total interest income of $7,604,807
for the year ended December 31, 1994. Loans represent the largest component of
interest-earning assets. Interest and fees on loans during 1996 were $9,752,295,
which is $963,153 or 11.0% higher than interest and fees on loans of $8,789,142
during 1995, due primarily to increased loans outstanding, and offset slightly
by reduced yields on loans. Interest and fees on loans were $1,933,273 or 28.2%
higher in 1995 than in 1994, due primarily to increased loans outstanding, and
supplemented by increased yields on loans. Interest income on investment
securities increased to $1,171,740 in 1996 from $571,692 in 1995, an increase of
105.0%, and increased by $182,626 or 46.9% in 1995 from $389,066 in 1994. The
increase in 1996 over 1995 was primarily due to increased volume in investment
securities, whereas the increase in 1995 over 1994 was primarily due to
increased yield. Interest income on federal funds sold and money market
investments also increased by $437,104 or 75.3% in 1996 over 1995, and by
$220,283 or 61.2% in 1995 over 1994. The increase in 1996 over 1995 was due to
increased amounts outstanding, offset in part by decreased yield. The increase
in 1995 over 1994 was due primarily to increased yield.
Total interest income increased from $5,488,025 in the first six months
of 1996 to $6,953,308 in the comparable 1997 period, an increase of 26.7%.
Nearly all of the increase is attributable to increased interest and fees on
loans, as interest on investment securities increased only slightly and interest
on federal funds sold decreased.
Interest Expense. Total interest expense in 1996 was $4,202,893
compared to $3,083,270 in 1995 and $1,616,966 in 1994. The increase in 1996
compared to 1995 was 36.3% and the increase in 1995 compared to 1994 was 90.7%.
Interest-bearing demand accounts, savings accounts and time deposits all
experienced increases in amounts outstanding in 1996 over 1995, the costs of
which were partially offset by decreases in rates paid. Money market accounts
also experienced increased volume, but experienced a slight increase in rate
paid, as well. In 1995 compared to 1994, all categories of interest-bearing
deposits experienced substantial increases in rates paid. Money market accounts
and both categories of time deposits also had material increases in their
amounts outstanding, contributing to increased interest expense.
Total interest expense was $2,251,733 for the six months ended June 30,
1997, compared to $1,853,296 in the prior comparable period, an increase of
21.5%. Interest expense increased in all categories of interest-bearing
deposits. A portion of the increase is also due to interest paid during the
first quarter of 1997 on a $14.2 million deposit which was not present during
the first half of 1996 and which has been withdrawn.
The following table shows the total year-to-year change in interest
income and interest expense for various assets and liabilities. The total change
is also broken into the amount of change due to a change in the volume of the
asset or liability and the amount of change due to a change in the interest
rates on the asset or liability.
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<PAGE>
<TABLE>
<CAPTION>
1996 over 1995 1995 over 1994
--------------------------------- ---------------------------------
Due to Due to Due to Due to
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Securities--taxable $ 525 $ 76 $ 601 $ 3 $ 153 $ 156
Securities--nontaxable (4) 4 0 22 3 25
Money market instruments (7) (10) (17) (40) 14 (26)
Federal funds sold 536 (83) 453 83 163 246
Loans net of unearned income 1,030 (67) 963 1,394 540 1,934
------- ----- ------ ------- ------ ------
Total interest income $ 2,080 $ (80) $2,000 $ 1,462 $ 873 $2,335
Interest-bearing liabilities
Interest-bearing DDA 105 (30) 75 10 92 102
MMDA 297 28 325 140 492 632
Saving accounts 117 (52) 65 (6) 126 120
Time deposits $100,000 and over 475 (117) 358 47 174 221
Other time deposits 298 10 308 175 211 386
Short-term borrowings (11) 0 (11) (3) 8 5
------- ----- ------ ------- ------ ------
Total interest expense $ 1,281 $(161) $1,120 $ 363 $1,103 $1,466
Net interest income $ 799 $ 81 $880 $ 1,099 $ (230) $ 869
======= ===== ====== ======= ====== ======
</TABLE>
1994 over 1993
-------------------------------
Due to Due to
Volume Rate Total
------ ---- -----
(Amounts in thousands)
Interest-earning assets $ (13) $ 36 $ 23
Securities--taxable 19 (3) 16
Securities--nontaxable (20) 18 (2)
Money market instruments 28 81 109
Federal funds sold 888 (170) 718
Loans net of unearned income ----- ----- -----
$ 902 $ (38) $ 864
Total interest income
Interest-bearing liabilities 34 20 54
Interest-bearing DDA 91 48 139
MMDA (25) (8) (33)
Saving accounts (44) (36) (80)
Time deposits $100,000 and over (51) (25) (76)
Other time deposits 8 (3) 5
Short-term borrowings ----- ------ -----
$ 13 $ (4) $ 9
Total interest expense
$ 889 $ (34) $ 855
Net interest income ===== ===== =====
____________________
Notes: Non-accrual loans are included.
Interest income on loans includes fees on loans.
Tax exempt income is not calculated on a tax equivalent basis.
The rate/volume variance is allocated to the change due to rate.
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<PAGE>
Allowanceand Provision for Loan Losses; Non-Performing Loans.
Regardless of credit standards, there is a risk of loss in every loan portfolio.
The allowance for loan losses is a reserve against possible future loan losses
established through charges to earnings. These charges are called provisions for
loan losses. Management establishes a provision for loan losses based upon its
assessment of the appropriate level for the allowance for loan losses. The
factors considered in determining that level are discussed below. The provision
for loan losses was $40,000 in 1996, $512,001 in 1995 and $285,000 in 1994. As
of December 31, 1996, the allowance for loan losses was $1,865,790 or 2.03% of
total loans, compared to $1,841,774 or 2.39% of total loans as of December 31,
1995, and $1,214,114 or 2.04% of total loans as of December 31, 1994.
The provision for loan losses was $72,860 for the six months of 1997,
compared to $150,000 for the comparable prior period. As of June 30, 1997, the
allowance for loan losses was $1,890,790 or 1.54% of total loans, compared to
$1,974,882 or 2.35% of total loans as of June 30, 1996.
The following tables provide analyses of Sun State's allowance for loan
losses, including allocations of the allowance among types of loans, as of the
dates indicated: (1)
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<PAGE>
<TABLE>
<CAPTION>
June 30 December 31
---------------------- ------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $1,866 $1,842 $1,842 $1,214 $1,147
Loans charged off
Commercial 49 68 83 80 252
Real estate 0 0 0 0 1
Construction 0 0 0 0 0
Mortgage 0 0 0 0 0
Installment 0 5 5 2 3
Recoveries on loans previously charged off
Commercial 1 21 37 191 37
Real estate 0 0 0 0 0
Construction 0 0 0 0 0
Mortgage 0 0 0 0 0
Installment 0 35 35 7 1
Net charge-offs 48 17 16 (116) 218
Additions charged to operations
(including provisions) 73 150 40 512 285
------ ------ ------ ------ ------
Balance at end of period $1,891 $1,975 $1,866 $1,842 $1,214
====== ====== ====== ====== ======
Ratio of net charge-offs during period to
average loans outstanding during period 0.04% 0.02% 0.02% (0.16%) 0.37%
</TABLE>
December 31
-----------------
1993 1992
---- ----
Balance at beginning of year $ 878 $503
Loans charged off
Commercial 174 35
Real estate 19 25
Construction 0 0
Mortgage 0 0
Installment 7 0
Recoveries on loans previously charged off
Commercial 53 39
Real estate 1 0
Construction 0 0
Mortgage 0 0
Installment 1 0
Net charge-offs 145 21
Additions charged to operations
(including provisions) 414 396
------ -----
Balance at end of period $1,147 $ 878
====== =====
Ratio of net charge-offs during period to
average loans outstanding during period 0.28% 0.05%
- ------------------------
(1) As of June 30, 1997, December 31, 1996, and December 31, 1995, no loans were
classified as "troubled debt restructuring" as defined in Statement of
Financial Accounting Standards No.15--"Accounting by Debtors and Creditors
for Troubled Debt Restructuring."
-79-
<PAGE>
Allocation of the Allowance for Loan Losses*
<TABLE>
<CAPTION>
June 30 December 31
---------------------------------- --------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
--------------- ---------------- ---------------- -------------- -------------- --------------
$(1) %(2) $(1) %(2) $(1) %(2) $(1) %(2) $(1) %(2) $(1) %(2)
- - - - - - - - - - - -
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 580 21.3% $ 682 26.1% $ 667 21.2% $ 693 26.0% $ 526 28.1% $ 409 43.7%
Real estate--construction 301 20.6% 84 12.9% 538 18.8% 78 13.4% 60 15.2% 113 18.7%
Real estate--mortgage 622 51.7% 478 54.7% 110 53.2% 472 54.7% 258 54.4% 275 36.2%
Installment loans to
individuals 104 6.4% 72 6.3% 94 6.8% 48 5.9% 30 2.3% 36 1.4%
Unallocated 284 --% 659 --% 457 --% 551 --% 340 --% 314 --%
----------------------------------------------------------------------------------------------------------
Total $1,891 100% $1,975 100% $1,866 100% $1,842 100% $1,214 100% $1,147 100%
==========================================================================================================
</TABLE>
December 31
----------------------------------
1994 1993
----------------------------------
$(1) %(2) $(1) %(2)
- - - -
(Dollars amounts in thousands)
Commercial 526 28.1% $ 409 43.7%
Real estate--construction 60 15.2% 113 18.7%
Real estate--mortgage 258 54.4% 275 36.2%
Installment loans to individuals 30 2.3% 36 1.4%
Unallocated 340 --% 314 --%
-----------------------------------
Total $1,214 100% $1,147 100%
==================================
____________________
* 1992 allocations are not readily available.
(1) Amount of allowance for loan losses for each respective category.
(2) Percentage of loans in each category to total loans.
-80-
<PAGE>
In general, a loan is placed on non-accrual status when it becomes 90
days past due, unless the loan is both well-secured and in process of
collection. At June 30, 1997, Sun State had no non-accrual loans, $1,900,000 of
accruing loans past due 90 days and no other real estate owned. The entire
balance of loans past due 90 days at June 30, 1997, is one loan secured by a
first deed of trust on raw land. Management believes that the value of the land
is well in excess of the amount of the loan, and foreclosure proceedings have
commenced. There were no commitments as of June 30, 1997, to lend additional
funds to borrowers whose loans were classified as non-performing.
The amount of the provisions for loan losses is driven by the level of
the allowance for loan losses and management's conclusions regarding its
adequacy. Management considers the following factors when assessing the adequacy
of the level of the allowance for loan losses: portfolio composition, volume and
trend of loan delinquencies and non-performing loans, trends in criticized and
classified assets, historical trends in actual loan losses and recoveries,
changes in national and local economic and business conditions, anticipated loan
growth and known loss risk. The allowance for loan losses is reviewed quarterly
by management for adequacy purposes. Should management determine the existing
level of the allowance for loan losses to be deficient, an immediate provision
for loan losses is made to alleviate the deficiency. As a result of its
quarterly assessments, management believes the level of the allowance for loan
losses has been maintained at an adequate level as in the past. Management last
reviewed the allowance for loan losses on June 30, 1997, and believes the level
of the allowance for loan losses to be adequate to absorb future loan losses
given the level of risk in the portfolio. 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 FDIC, as an integral part of its examination
process, periodically reviews Sun State's allowance for loan losses, and may
require Sun State to make additions to the allowance based on its judgment about
information available to the FDIC at the time of its examinations.
The following table summarizes the composition of Sun State's
non-performing assets as of the dates indicated:
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<TABLE>
<CAPTION>
June 30 December 31
------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Non-accrual $ 0 $ 170 $ 0 $ 0 $ 0 $ 0 $ 136
Other loans past due 90 days or more 1,900 0 0 485 0 0 391
Other real estate owned 0 0 191 0 587 103 104
Troubled debt restructurings 0 0 0 0 0 221 278
-------- ------- ------- ------- ------- ------- -------
Total non-performing assets $ 1,900 $ 170 $ 191 $ 485 $ 587 $ 324 $ 909
Non-accrual loans to total loans 0.00% 0.20% 0.00% 0.00% 0.00% 0.00% 0.29%
Non-performing assets to total loans 1.55% 0.20% 0.21% 0.63% 0.99% 0.54% 1.94%
Total loans $122,760 $84,026 $92,046 $77,086 $59,555 $60,514 $46,806
</TABLE>
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Management is not aware of any significant possible credit problems of
borrowers which cause management to have serious doubts as to the ability of
such borrowers to comply with their present loan repayment terms and which may
cause such loans to be accounted for on a non-accrual basis. However, there can
be no assurance that borrowers who currently comply with their loan repayment
terms will continue to do so or that any loans not accounted for on a
non-accrual basis as of June 30, 1997, will not thereafter be accounted for on a
non-accrual basis.
In addition, as of June 30, 1997, Sun State had no interest bearing
assets (other than loans) that would be accounted for on a non-accrual basis if
they were loans, or that were accruing interest and were contractually past due
90 days or more.
Other Operating Income. Other operating income totaled $429,625 in
1996, compared to $532,569 in 1995 and $328,285 in 1994, a decrease of $102,944
or 19.3% from 1995 to 1996 and an increase of $204,284 or 62.2% from 1994 to
1995. The decrease from 1995 to 1996 was due principally to a decrease in gain
on sale of other real estate owned to zero in 1996 from $217,660 in 1995. This
decrease was offset by an increase in service charges on deposit accounts of
$18,407 or 7.2% compared to 1995, and an increase in other income of $96,309 or
166.8% due primarily to income on insurance policies purchased in 1996 as part
of the Salary Continuation Program for executive officers. The increase in 1995
over 1994 was due to the 1995 gain on the sale of other real estate owned,
offset by small decreases in service charges and other income. Total other
operating income represented 3.47% of total income in 1996 compared to 5.08% of
total income in 1995 and 4.14% of total income in 1994.
Other operating income amounted to $300,476 for the six months ended
June 30, 1997, compared to $208,932 for the six months ended June 30, 1996, an
increase of $91,544 or 43.8%. The increase is primarily attributable to a
$33,988 gain on the sale of available for sale securities and a $30,505 gain on
the sale of other real estate owned.
Other Operating Expense. Other operating expenses increased by
$1,203,069 or 33.8% in 1996 compared to in 1995, and increased by $101,691 or
2.9% in 1995 compared to 1994. The main contributors to the increase in 1996
over 1995 were increases in salaries and related expenses of $630,499 or 32.3%,
in occupancy expense of $220,091 or 46.1% and in advertising expenses of
$143,042 or 97.4%. These increases were primarily attributable to the opening of
three new branches in 1996.
Other operating expenses increased by $1,028,343 or 47.2% for the six
months ended June 30, 1997, from the comparable prior period. Salaries and
related expenses increased $425,917 or 36.1% from the comparable prior period.
Occupancy expense increased $247,643 or 88.3% from the comparable prior period.
Other expenses increased $170,117 or 43.3% from the comparable prior period.
These increases were primarily attributable to the opening of three new branches
during the second half of 1996.
Interest Rate Sensitivity and Liquidity
Interest Rate Sensitivity. Sun State seeks to manage interest rate
sensitivity to avoid net interest margin risk and to enhance consistent growth
of net interest income through periods of changing rates. Interest rate risk
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arises from timing mismatches between repricing or maturity of assets and
repricing or maturity of liabilities. More assets repricing or maturing than
liabilities during a given period is considered asset sensitive, and more
liabilities repricing or maturing than assets during a given period is
considered liability sensitive. An asset sensitive position will generally
enhance earnings in a rising interest rate environment and will negatively
impact earnings in a falling interest rate environment. A liability sensitive
position will generally enhance earnings in a falling interest rate environment
and negatively impact earnings in a rising interest rate environment.
Interest rate sensitivity varies with different types of
interest-earning assets and interest-bearing liabilities. Overnight Federal
funds (with respect to which rates change daily) and loans which are tied to the
prime rate differ considerably from long-term investment securities and
fixed-rate loans. Similarly, time deposits are generally more interest sensitive
than savings accounts.
The following table sets forth the contractual maturity or repricing
distribution of Sun State's interest-earning assets and interest-bearing
liabilities as of June 30, 1997, Sun State's interest sensitivity gap (i.e.,
interest sensitive assets less interest-sensitive liabilities), the ratio of
cumulative total interest-earning assets to cumulative total interest-bearing
liabilities, and Sun State's ratio of cumulative interest sensitivity gap to
total assets:
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Assets/Liabilities Subject to Interest Rate Adjustments
<TABLE>
<CAPTION>
Within Within Within Within
3 Months 6 Months 1 Year 5 Years Over
9-30-97 12-31-97 6-30-98 6-30-02 5 Years Total
-------- -------- ------- ------- ------- -----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans
Fixed rate by maturity/payment $4,393 $3,354 $5,122 $16,908 $4,831 $34,608
Floating rate by repricing interval 61,580 0 4,186 0 23,025 88,791
Securities
Available for sale
U.S. agencies (Small Business
Administration loan pools) 12,132 0 0 0 0 12,132
Held to maturity
U.S. Treasury 299 0 142 0 0 441
States and political subdivisions 0 42 345 95 800 1,282
Other 433 0 0 0 0 433
Money market investments 953 0 0 0 0 953
Federal funds sold 4,530 0 0 0 0 4,530
------ ----- ------ ------ ------ -------
Total interest-bearing assets $84,320 $ 3,396 $ 9,795 $17,003 $28,656 $143,170
Deposits
Interest-bearing DDA 18,213 0 0 0 0 18,213
MMDA and saving accounts 54,054 0 1,325 2,955 0 58,334
Time deposits $100,000 and over 3,143 4,216 2,990 0 0 10,349
Other time deposits 5,848 11,906 5,794 86 0 23,634
------ ------ ----- ----- ------ ------
Total interest-bearing liabilities $81,258 $16,122 $10,109 $ 3,041 $ 0 $110,530
Net position (interest sensitivity gap) 3,062 (12,726) (314) 13,962 28,656
Cumulative interest sensitivity gap 3,062 (9,664) (9,978) 3,984 32,640
Ratio of cumulative gap to total assets 1.89% (5.96)% (6.15)% 2.46% 20.13%
</TABLE>
The amount of Sun State's interest-sensitive liabilities (generally
deposits with maturities of one year or less) have in the past not matched the
amount of its interest-sensitive assets (assets which reprice based on an index
or have short term maturities). This imbalance is referred to as an interest
sensitivity gap, and measures the potential impact of changes to earnings based
on changes in the general level of interest rates. The negative gap in the 6
months and 1 year horizons may result in a negative impact on earnings in the
event that interest rates rise during those periods.
For a number of reasons, the table set forth above reflecting Sun
State's interest rate sensitivity analysis is not a complete picture of the
possible effect of interest rate changes in net interest income. First, changes
in the general level of interest rates will not affect all categories of assets
and liabilities equally or simultaneously. Second, the table represents a
one-day position; variations occur daily as Sun State adjusts its interest
sensitivity throughout the year. Third, assumptions must be made to construct
such a table. For example, there are several savings products categorized as
interest sensitive in the 30 day interval; however, they may be adjusted less
frequently than changes in the leading rate indicators. Fourth, the repricing
distribution of interest-sensitive assets may not be indicative of the liquidity
of those assets.
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Finally, since the table is based on contractual maturities, it
does not include scheduled pre-maturity principal payments or estimates of early
principal payment on mortgage and installment loans.
Liquidity. Liquidity is a measure of Sun State's ability to fund loans,
withdrawals of deposits and other cash outflows in a cost effective manner. Sun
State's principal sources of funds are increases in deposits. In periods of
especially high loan growth, such as the first half of 1997, Sun State may also
liquidate federal funds sold and/or investment securities available for sale. In
addition, Sun State has available other sources of credit, including lines of
credit with Zions First National Bank and First Security Bank. While loan
payments and maturing investments are relatively predictable sources of funds,
deposit flows are greatly influenced by general interest rates, economic
conditions and competition.
It has been Sun State's goal to invest the funds obtained from its
primary financing activities in its loan portfolio as quickly as practicable,
consistent with sound lending standards and without sacrificing liquidity. The
funds provided by Sun State's primary financing activities have been more than
sufficient to provide for Sun State's lending demand. During 1996 and 1995, the
increases in total net loans were $14,935,909 and $16,904,155, respectively. The
increase in total net loans from December 31, 1996, to June 30, 1997, was
$30,689,006.
Capital
The Federal Reserve Board has adopted a bank holding company capital
guideline using a leverage-based capital measure. The measure stipulates that
bank holding companies maintain a minimum level of Tier 1 capital (discussed
below) to total assets. The most highly rated bank holding companies in terms of
safe and sound operation that are not experiencing or anticipating significant
growth must maintain a minimum leverage ratio of at least 3%. All other bank
holding companies must maintain a minimum leverage ratio of 4% to 5%, depending
on the condition of the company. The Federal Reserve Board's guidelines also
provide that all bank holding companies generally, and particularly those with
high or inordinate levels of risk and those experiencing or anticipating
significant growth, are expected to maintain capital positions that are
substantially above the minimum supervisory levels.
The Federal Reserve Board has also adopted bank holding company capital
guidelines utilizing risk-based capital measures to supplement the
leverage-based measure. The risk-based guidelines require a bank holding company
to maintain a level of consolidated capital based primarily on the risk of its
assets and off-balance sheet items. Each asset and off-balance sheet item is
placed in one of four risk categories. Those in the first category, such as
cash, have no risk and, therefore, carry a zero percent risk-weight and require
no capital support. Capital support is required for assets and off-balance sheet
items in the remaining three risk categories--those categories having a
risk-weight of 20%, 50% and 100%, respectively. The higher the presumed risk of
the asset or off-balance sheet item, the higher the percentage risk category and
the higher the required capital support.
A company's risk-based capital ratio is calculated by dividing its
qualifying total capital base by its risk-weighted assets. Qualifying capital
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is divided into two tiers. Tier 1 (or "core") capital consists of common
shareholders' equity capital, noncumulative perpetual preferred stock and
minority interests in equity capital accounts of consolidated subsidiaries, less
goodwill and other intangible assets. Tier 2 (or "supplementary") capital
consists of, among other items, allowance for possible loan and lease losses (up
to 1.25% of total assets), cumulative and limited-life preferred stock,
mandatory convertible securities and subordinated debt. Supplementary capital
will qualify as a part of a bank holding company's total capital up to a maximum
of 100% of the company's core capital. Amounts in excess of these limits may be
issued but are not included in the calculation of the risk-based capital ratio.
In order to be "well capitalized" under current guidelines, Sun State must
establish and maintain a total (core plus supplementary) risk-based capital
ratio of 10%, including at least a 6% core risk-based capital ratio.
At June 30, 1997, Sun State's leverage ratio, core risk-based capital
ratio and total risk-based capital ratio were 8.46%, 9.89% and 11.14%,
respectively. On December 31, 1996, these ratios were 7.87%, 10.76 and 12.01%,
respectively. On December 31, 1995, these ratios were 10.59%, 12.89% and 14.16%,
respectively. On December 31, 1994, these ratios were 11.65%, 13.19% and 15.10%,
respectively.
The leverage-based capital requirement was designed to establish, in
conjunction with other federal bank regulatory agencies, uniform capital
standards for all federally-regulated banking organizations. The purpose of the
risk-based capital guidelines is to make capital requirements more sensitive to
differences in risk profiled among banking organizations. To achieve this
purpose, the guidelines recognize the riskiness of assets by lowering capital
requirements for some assets that clearly have less risk than others, and that
there are risks inherent in off-balance sheet activities. The guidelines require
that banking organizations hold capital to support such activities. In addition,
the guidelines establish a definition of capital and minimum risk-based capital
standards which are consistent on an international basis and that place a
greater emphasis on equity capital.
Impact of Inflation
The financial statements and related financial data and notes presented
herein have been prepared in accordance with generally accepted accounting
principles, which requires the measurement of financial position and operating
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation.
Unlike most industrial companies, virtually all of assets and
liabilities of Sun State are monetary in nature. As a result, interest rates
have a more significant impact than inflation on performance. Although interest
rates generally move in the same direction as inflation, the magnitude of such
changes varies.
Current Accounting Developments
The Financial Accounting Standards Board has issued Statement No. 125
(as amended by FASB No. 127 which defers implementation of certain provisions of
the FASB No. 125 to January 1, 1998) Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, which becomes effective for
transactions occurring after December 31, 1996. The Statement does not permit
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earlier or retroactive application. The Statement distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings. A
transfer of financial assets in which the transferor surrenders control over
those assets is accounted for as a sale to the extent that consideration other
than beneficial interests in the transferred assets is received in exchange. The
Statement also establishes standards on the initial recognition and measurement
of servicing assets and other retained interests and servicing liabilities, and
their subsequent measurement.
The Statement requires that debtors reclassify financial assets pledged
as collateral and that secured parties recognize those assets and their
obligation to return them in certain circumstances in which the secured party
has taken control of those assets. In addition, the Statement requires that a
liability be derecognized only if the debtor is relieved of its obligation
through payment to the creditor or by being legally released from being the
primary obligor under the liability either judicially or by the creditor.
Management does not believe the application of the Statement to
transactions of Sun State that have been typically in the past will materially
affect Sun State's financial position and results of operations.
Effective for financial statements issued after December 15, 1997, Sun
State will be required to implement FASB Statement No. 128, Earnings per Share.
The Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or potential
common stock. It replaces the presentation of primary EPS with a presentation of
basic EPS and also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
Sun State has not determined what effect the adoption of this Statement will
have on its EPS calculations.
The FASB has issued Statement No. 130 Reporting Comprehensive Income.
Statement No. 130 requires that an enterprise (a) classify items of other
comprehensive income (as defined in the Statement) by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the statement of financial position. Management
does not believe the application of this Statement will materially affect Sun
State's financial reporting.
The FASB has also issued Statement No. 131 Disclosures about Segments
of an Enterprise and Related Information. Statement No. 131 modifies the
disclosure requirements for reportable segments and is effective for Sun State's
year ending December 31, 1998. Sun State has not determined the effect the
adoption of this Statement would have on Sun State's financial statements.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
OF ZIONS AND SUN STATE
General
Upon consummation of the Reorganization, shareholders of Sun State, a
Nevada corporation, will become shareholders of Zions, a Utah corporation. Thus,
the Utah Revised Business Corporation Act and Zions' Articles of Incorporation
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("Articles") and Bylaws will govern the rights of the Sun State shareholders who
become Zions shareholders. In addition, since the Articles and Bylaws of Zions
and Sun State are not the same, the Reorganization will result in certain
differences in the rights of the holders of Sun State Common Stock or Sun State
Preferred Stock. Following is a summary of certain significant differences.
General. Each holder of Sun State Common Stock and Sun State Preferred
Stock is entitled to one vote for each share held on all matters submitted to
the shareholders for a vote, except as described below under Extraordinary
Transactions. Holders of a majority of the voting power of Sun State constitute
a quorum for the transaction of business. Each holder of Zions Common Stock is
generally entitled to one vote for each share held of record on all matters
submitted to a shareholder vote, and holders of a majority of the outstanding
shares of Zions Common Stock constitute a quorum for the transaction of
business.
Extraordinary Transactions. In a merger or consolidation of Sun State
with or into another corporation or a sale of all or substantially all the
assets of Sun State, the vote of the holders of a majority of the shares of Sun
State Common Stock is the act of the shareholders. Holders of Sun State
Preferred Stock do not have the right to vote on such mergers, consolidations
and asset sales, and in such transactions do not hold any voting power for
quorum or voting purposes. Holders of Sun State Preferred Stock who become
holders of Zions Common Stock will have the right to vote on matters such as
mergers, consolidations and sales of all or substantially all of Zions' assets
when such matters are presented to Zions' shareholders for a vote.
Cumulative Voting. Neither Sun State shareholders nor Zions
shareholders have cumulative voting rights in the election of directors.
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 percent of the voting power of all
outstanding voting stock of Zions. A "related person" is generally defined by
Zions' Articles to mean a person, corporation, partnership, or group acting in
concert that beneficially owns 10 percent or more of the voting power of Zions'
outstanding voting stock.
The "business transactions" with a "related person" which are 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
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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.
Sun State's Articles and Bylaws have no similar provision.
Shareholder Rights Plan
The Board of Directors of Zions in September 1996 adopted a Shareholder
Protection Rights Plan and declared a dividend of one Right on each outstanding
share of Zions Common Stock. The Rights Plan was not adopted in response to any
specific effort to acquire control of Zions. Rather, it was adopted to deter
abusive takeover tactics that can be used to deprive shareholders of the full
value of their investment.
Until it is announced that a person or group has acquired 10 percent or
more of Zions Common Stock (an "Acquiring Person") or commences a tender offer
that will result in such person or group owning 10 percent or more of Zions
Common Stock, the Rights will be evidenced by the Common Stock certificates,
will automatically trade with the Common Stock and will not be exercisable.
Thereafter, separate Rights certificates will be distributed and each Right will
entitle its holder to purchase Participating Preferred Stock having economic and
voting terms similar to those of Zions Common Stock for an exercise price of
$360.00.
Upon announcement that any person or group has become an Acquiring
Person, then 10 days thereafter (or such earlier or later date as the Board may
decide) (the "Flip-in Date") each Right (other than Rights beneficially owned by
any Acquiring Person or transferees thereof, which Rights become void) will
entitle its holder to purchase, for the exercise price, a number of shares of
Zions Common Stock or Participating Preferred Stock having a market value of
twice the exercise price.
Also, if after an Acquiring Person controls Zions' Board of Directors
Zions is involved in a merger or sells more than 50 percent of its assets or
earning power (or has entered an agreement to do any of the foregoing) and, in
the case of a merger, the Acquiring Person will receive different treatment than
all other shareholders or the person with whom the merger occurs is the
Acquiring Person or a person affiliated or associated with the Acquiring Person,
each Right will entitle its holder to purchase, for the exercise price, a number
of shares of common stock of the Acquiring Person having a market value of twice
the exercise price. If any person or group acquires between 10 percent and 50
percent of the Zions Common Stock, Zions' Board of Directors may, at its option,
exchange one share of Zions Common Stock for each Right.
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The Rights may be redeemed by the Board of Directors for $0.01 per
Right prior to the Flip-in Date.
Sun State has no shareholder rights plan.
Board of Directors
Director Liability and Indemnification. Zions' Articles contain a
"director liability" provision. The provision generally shields a director from
monetary damages to Zions 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.
Sun State's Articles contain a "director and officer liability"
provision. This provision protects a director or officer from personal liability
to Sun State and its shareholders for damages for breach of fiduciary duty as a
director or officer involving any act or omission occurring on or after August
23, 1989. However, there is no elimination or limitation of liability for acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law or the payment of dividends in violation of law.
Sun State's Bylaws direct that Sun State shall, to the fullest extent
permitted by Nevada law, advance expenses to and indemnify any of its agents
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any action, suit or proceeding arising
because such person is or was an agent of Sun State. An "agent" is defined as a
person who is or was a director, officer, employee or other agent of Sun State
or a predecessor corporation, or is or was serving at the request of Sun State
or a predecessor corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
Classified Board. Zions' Articles divide the Board of Directors into
three classes, each consisting of one-third (or as near as may be) of the whole
number of directors. Utah law requires that each class 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 3 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.
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Sun State's Articles and Bylaws do not provide for a classified Board
of Directors. Instead, Sun State's Bylaws provide for a Board of Directors
consisting of not less than 5 nor more than 9 individuals, who are to be elected
by the shareholders annually. The current number of directors is 7, which may be
changed within the range of 5 to 9 by an amendment to the Bylaws adopted by the
Board or the shareholders. The range of 5 to 9 may only be changed by a vote of
the shareholders. Sun State's Bylaws governing vacancies on the Board are
similar to Zions' except that a vacancy created by the removal of a director may
only be filled by a vote of the shareholders.
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.
Sun State's Articles and Bylaws do not expressly provide for the power
to remove directors. However, the Nevada General Corporation law provides that
any director may be removed form office by the vote of shareholders representing
at least two-thirds of the voting power of the issued and outstanding stock
entitled to vote.
Special Shareholders' 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 10 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.
Sun State's Bylaws permit special meetings to be called at any time by
the Board of Directors, the president or by the holders of shares entitled to
cast not less than 10 percent of the votes at such meeting.
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 Articles
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.
Sun State's Articles may be amended by the vote of holders of a
majority of the outstanding shares of Sun State Common and Preferred Stock. The
approval of holders of a majority of the outstanding shares of Sun State
Preferred Stock is required for any adverse change in the rights of Sun State
Preferred Stock or for the issuance of any shares having priority over the Sun
State Preferred Stock.
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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.
Sun State is incorporated under Nevada law. Nevada law provides for
dissenters' rights to any shareholder of a Nevada corporation in the event of
any of the following corporate actions: (i) a merger to which the corporation is
a party if approval by the shareholders is required for the merger and the
shareholder is entitled to vote on the merger, or if the corporation is a
subsidiary being merged into a parent corporation; (ii) a plan of exchange where
the corporation is a party as the corporation whose subject owner's interests
will be acquired, if the shareholder is entitled to vote on the plan of
exchange; and (iii) any corporate action taken pursuant to a vote of the
shareholders where the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting shareholders are entitled
to dissent.
Preemptive Rights
Holders of Zions Common Stock do not have the preemptive right to
purchase unissued or treasury shares of Zions Common Stock or any other
securities of Zions in the event of an issuance of Zions Common Stock or such
other securities.
Holders of Sun State Preferred Stock also do not have the preemptive
right to purchase unissued or treasury shares of Sun State Common or Preferred
Stock or any other securities of Sun State.
Holders of Sun State Common Stock have the preemptive right to purchase
unissued or treasury shares of Sun State Common Stock, or any securities
convertible thereto, but not Sun State Preferred Stock. The preemptive right
does not exist to acquire (i) any shares issued to directors, officers or
employees pursuant to approval by the affirmative vote of the holders of a
majority of the shares entitled to vote or when authorized by a plan approved by
such a vote of shareholders; (ii) any shares sold for a consideration other than
cash; (iii) any shares issued at the same time that the shareholder who claims a
preemptive right acquired his shares; (iv) any shares issued as a part of the
same offering in which the shareholder who claims a preemptive right acquired
his shares; or (v) any unissued or treasury shares or securities convertible
thereto
-93-
<PAGE>
if the shares are registered pursuant to section 12 of the Securities
Exchange Act of 1934 upon issuance.
Preferred Stock
Zions' Articles authorize Zions to issue up to 3,000,000 shares of
Zions preferred stock, no par value.
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.
Zions has reserved 160,000 shares of Participating Preferred Stock for
issuance upon exercise of the Rights under Zions' Shareholder Rights Plan.
Sun State's Articles authorize Sun State to issue up to 1,000,000
shares of preferred stock. The Board of Directors may by resolution prescribe
the series and number shares of any such series of preferred stock, and may
determine, alter or revoke the voting powers, designations, preferences,
limitations, restrictions and relative rights pertaining to any wholly unissued
series. The Board of Directors may thereafter in the same manner increase or
decrease the number of shares of any such series (but not below the number of
shares of that series then outstanding).
Sun State has designated 40,000 shares with a stated value of $100.00
per share as the "1992 Series Preferred Stock," known herein as the Sun State
Preferred Stock.
Dividend Rights
Utah law generally allows a corporation, subject to restrictions in its
articles 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 the Board of Directors out of funds legally available therefor.
However, if Zions preferred stock is issued, the Board of Directors of Zions may
grant preferential dividend rights to the holders of such stock which would
prohibit payment of dividends on Zions Common Stock unless and until specified
dividends on the preferred stock had been paid.
Nevada law generally allows a corporation to make distributions to its
stockholders in cash or other property or indebtedness. However, no distribution
may be made if, after giving it effect: (i) The corporation would not be able to
pay its debts as they become due in the usual course of business; or (ii) Except
as otherwise specifically allowed by the corporation's articles of
-94-
<PAGE>
incorporation, 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 distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution. Sun State's Articles do not contain any other
specific allowance. Thus, holders of Sun State Common Stock are entitled to
distributions when, as and if declared by the Board of Directors out of funds
legally available therefor, subject to the distribution rights of holders of Sun
State Preferred Stock.
Holders of Sun State Preferred Stock are entitled to dividends when and
as declared by the Board of Directors out of funds legally available therefore,
at the rate of 1 percent over the quarterly average of the Wall Street Journal
prime rate, but in no case less than 8 percent or more than 12 percent.
Dividends are payable in cash on a quarterly basis before any dividends on Sun
State Common Stock are paid or declared and set apart. Dividends on Sun State
Preferred Stock are also cumulative, meaning that if dividends required to be
paid have not been paid or set apart, the amounts of the deficiencies shall be
first fully paid or declared and set apart, without interest, before any
distribution on Sun State Common Stock (other than a stock dividend) is paid or
declared and set apart.
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 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.
Upon liquidation, dissolution or winding up of Sun State, whether
voluntary or involuntary, the holders of Sun State Common Stock are entitled to
share ratably in the assets of the corporation available for distribution after
all liabilities of the corporation, and the liquidation preference of the Sun
State Preferred Stock, have been satisfied. The liquidation preference of the
Sun State Preferred Stock $100.00 per share of Sun State Preferred Stock, plus
accrued and unpaid dividends, whether or not declared, before any payment or
distribution of assets to holders of the Sun State Common Stock. If the assets
available for distribution after all liabilities of Sun State have been
satisfied are insufficient to satisfy in full the liquidation preference of the
Sun State Preferred Stock, then all remaining assets of the corporation shall be
distributed ratably among the holders of the Sun State Preferred Stock.
Miscellaneous
There are no sinking fund provisions, conversion rights, or redemption
provisions applicable to Zions Common Stock or Sun State Common Stock. There are
no sinking fund provisions or conversion rights applicable to Sun State
Preferred Stock, but share of Sun State Preferred Stock may be redeemed in whole
or in part at the option of Sun State. Any partial redemption shall be at a
price agreed upon by Sun State and the holder of the shares being redeemed. A
whole redemption shall be at the price of $110.00 per share plus accrued and
unpaid
-95-
<PAGE>
dividends. Holders of fully paid shares of Zions Common Stock and Sun
State Common and Preferred 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 Duane, Morris & Heckscher LLP, Washington,
D.C., as counsel for Zions, and by Rothgerber, Appel, Powers & Johnson LLP,
Denver, Colorado, as counsel for Sun State.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, 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 Sun State as of December 31,
1996 and 1995, and for 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.
OTHER MATTERS
The management of Sun State 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.
-96-
<PAGE>
CONTENTS TO
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT F-2
FINANCIAL STATEMENTS
Consolidated balance sheets F-3
Consolidated statements of income F-4
Consolidated statements of stockholders' equity F-5
Consolidated statements of cash flows F-6
Notes to financial statements F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Sun State Capital Corporation
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of SUN STATE
CAPITAL CORPORATION AND SUBSIDIARY as of December 31, 1996 and 1995, 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 Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SUN STATE CAPITAL
CORPORATION AND S UBSIDIARY as of December 31, 1996 and 1995, 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
- ---------------------------
McGLADREY & PULLEN, LLP
Las Vegas, Nevada
January 14, 1997
F-2
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Information Relating to June 30, 1997 is Unaudited)
<TABLE>
<CAPTION>
December 31,
------------------------------------
ASSETS June 30, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Cash and due from banks (Note 2) $ 12,934,193 $ 8,491,984 $ 9,586,796
Money market investment 952,818 370,506 653,377
Federal funds sold (Note 8) 4,530,000 29,098,000 10,160,000
------------------------------------------------------
Cash and cash equivalents 18,417,011 37,960,490 20,400,173
Available-for-sale securities (Notes 3, 7 and 8) 12,187,518 18,700,008 11,008,570
Held-to-maturity securities, estimated fair value (June 30, 1997
unaudited) $2,196,515; (1996) $2,701,873; (1995) $1,800,318
(Note 3) 2,156,514 2,663,611 1,752,682
Loans receivable, net of allowance for loan losses (June 30, 1997
unaudited) $1,890,790; (1996) $1,865,790 (1995) $1,841,774
(Notes 4, 8 and 9) 120,869,129 90,180,123 75,244,214
Bank premises and equipment, net (Note 5) 4,686,020 4,634,679 2,712,555
Accrued interest receivable 1,246,222 872,532 614,537
Prepaid expenses and other assets (Note 14) 1,935,885 1,860,136 147,011
Other real estate owned - 190,609
Deferred taxes (Note 6) 618,956 628,123 439,920
------------------------------------------------------
Total assets $162,117,255 $157,690,311 $112,319,662
======================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits: (Note 8)
Non-interest bearing demand $ 37,319,049 $ 28,868,032 $ 22,585,013
Interest bearing:
Checking 62,824,060 56,151,824 42,403,330
Savings 13,723,787 8,701,119 9,445,573
Time, $100,000 and over 10,348,277 25,539,138 8,154,078
Other time 23,633,870 25,019,089 18,455,221
------------------------------------------------------
Total deposits 147,849,043 144,279,202 101,043,215
Accrued interest and other liabilities (Note 14) 1,060,317 1,386,284 865,427
------------------------------------------------------
Total liabilities 148,909,360 145,665,486 101,908,642
------------------------------------------------------
Commitments and contingencies (Notes 8, 9, 10 and 14)
Stockholders' equity (Notes 3, 10, 11, and 13)
Preferred stock, $100 par value, authorized 1,000,000 shares; 5,719
issued and outstanding shares 571,900 571,900 571,900
Common stock, $.01 par value, authorized 10,000,000 shares;
shares issued: (June 30, 1997 unaudited) 287,500; (1996) 287,000;
(1995) 285,801; shares outstanding: (June 30, 1997 unaudited)
284,750; (1996) 283,450, (1995) 281,301 2,875 2,870 2,858
Surplus 3,322,085 3,297,444 3,251,179
Retained earnings 9,341,555 8,220,543 6,613,739
Unrealized gain on available-for-sale securities, net of income taxes 36,910 19,114 81,684
------------------------------------------------------
13,275,325 12,111,871 10,521,360
Less treasury stock at cost, (June 30, 1997 unaudited) 2,750 shares
(1996) 3,550 shares, (1995) 4,500 shares 67,430 87,046 110,340
------------------------------------------------------
Total stockholders' equity 13,207,895 12,024,825 10,411,020
------------------------------------------------------
Total liabilities and stockholders' equity $162,117,255 $157,690,311 $112,319,662
======================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Information Relating to the Six Months Ended June 30, 1997
and 1996 is Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, Years ended December 31,
------------------------------------- ---------------------------------
1997 1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income on:
Loans receivable $6,170,222 $4,683,414 $9,752,295 $8,789,142
Available for sale securities 385,538 353,534 1,028,487 476,601
Held to maturity securities 85,952 76,308 143,253 95,091
Federal funds sold and money market investment 311,596 374,769 1,017,259 580,155
-------------------------------------------------------------------------
Total interest income 6,953,308 5,488,025 11,941,294 9,940,989
Interest expense on deposits 2,251,733 1,853,296 4,202,893 3,083,270
-------------------------------------------------------------------------
Net interest income 4,701,575 3,634,729 7,738,401 6,857,719
Provision for loan losses (Note 4) 72,860 150,000 40,000 512,001
-------------------------------------------------------------------------
Net interest income after provision
for loan losses 4,628,715 3,484,729 7,698,401 6,345,718
-------------------------------------------------------------------------
Non-interest income:
Service charges 140,372 142,146 275,569 257,162
Gain on sale of available for sale securities 33,988 - - -
Gain on sale of other real estate owned 30,505 - - 217,660
Other 95,611 66,786 154,056 57,747
-------------------------------------------------------------------------
Total non-interest income 300,476 208,932 429,625 532,569
-------------------------------------------------------------------------
Non-interest expense:
Salaries, wages and employee benefits
(Notes 12 and 14) 1,604,806 1,178,889 2,580,275 1,949,776
Advertising and public relations 170,845 137,735 289,893 146,851
Occupancy (Note 8) 528,048 280,405 697,445 477,354
Directors' fees and expenses 94,984 72,945 173,445 186,710
Data processing 244,578 115,061 245,100 184,672
Other 562,630 392,513 774,706 612,432
-------------------------------------------------------------------------
Total non-interest expense 3,205,891 2,177,548 4,760,864 3,557,795
-------------------------------------------------------------------------
Income before income taxes 1,723,300 1,516,113 3,367,162 3,320,492
Provision for income taxes (Note 6) 588,702 514,136 1,142,078 1,119,643
-------------------------------------------------------------------------
Net income (Note 11) $1,134,598 $1,001,977 $2,225,084 $2,200,849
=========================================================================
Earnings per common share $ 3.90 $ 3.46 $ 7.69 $ 7.69
=========================================================================
Weighted-Average Common Shares Outstanding 284,100 281,701 282,376 280,451
=========================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Information Relating to June 30, 1997 is Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- -------------------- Retained
Shares Par Value Shares Par Value Surplus Earnings
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 5,719 $571,900 284,201 $2,842 $3,206,034 $5,028,996
Sale of treasury stock (100 shares) - - - - 427 -
Stock options exercised (Note 11) - - 1,600 16 44,718 -
Cash dividends declared; $7.78 per
preferred share - - - - - (44,504)
Cash dividends declared; $2.00 per
common share - - - - - (571,602)
Unrealized gain on available-for-sale
securities, net of income taxes (Note 3) - - - - - -
Net income - - - - - 2,200,849
-------------------------------------------------------------------------
Balance, December 31, 1995 5,719 571,900 285,801 2,858 3,251,179 6,613,739
Cash dividends declared; $9.34 per
preferred share - - - - - (53,403)
Cash dividends declared, $2.00 per
common share - - - - - (564,877)
Change in unrealized gain on available-
for-sale securities, net of income
taxes (Note 3) - - - - - -
Sale of treasury stock (950 shares) - - - - 10,607 -
Stock options exercised (Note 11) - - 1,199 12 35,658 -
Net income - - - - - 2,225,084
-------------------------------------------------------------------------
Balance, December 31, 1996 5,719 571,900 287,000 2,870 3,297,444 8,220,543
Cash dividends declared; $2.31 per
preferred
share (unaudited) (Note 10) - - - - - (13,586)
Change in unrealized gain on available-for-
sale securities, net of income taxes
(unaudited) (Note 3) - - - - - -
Sale of treasury stock (800 shares) - - - - 11,856 -
(unaudited)
Stock option exercised (unaudited) (Note 11) - - 500 5 12,785 -
Net income (unaudited) - - - - - 1,134,598
-------------------------------------------------------------------------
Balance, June 30, 1997 (unaudited) 5,719 $571,900 287,500 $2,875 $3,322,085 $9,341,555
=========================================================================
<CAPTION>
Unrealized Gain
on Available-for-
Sale Securities, net Treasury
of income taxes Stock Total
-------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $ - $(112,792) $ 8,696,980
Sale of treasury stock (100 shares) - 2,452 2,879
Stock options exercised (Note 11) - - 44,734
Cash dividends declared; $7.78 per
preferred share - - (44,504)
Cash dividends declared; $2.00 per
common share - - (571,602)
Unrealized gain on available-for-sale
securities, net of income taxes (Note 3) 81,684 - 81,684
Net income - - 2,200,849
-------------------------------------------------
Balance, December 31, 1995 81,684 (110,340) 10,411,020
Cash dividends declared; $9.34 per
preferred share - - (53,403)
Cash dividends declared, $2.00 per
common share - - (564,877)
Change in unrealized gain on available-
for-sale securities, net of income
taxes (Note 3) (62,570) - (62,570)
Sale of treasury stock (950 shares) - 23,294 33,901
Stock options exercised (Note 11) - - 35,670
Net income - - 2,225,084
-------------------------------------------------
Balance, December 31, 1996 19,114 (87,046) 12,024,825
Cash dividends declared; $2.31 per
preferred
share (unaudited) (Note 10) - - (13,586)
Change in unrealized gain on available-for-
sale securities, net of income taxes
(unaudited) (Note 3) 17,796 - 17,796
Sale of treasury stock (800 shares) - 19,616 31,472
(unaudited)
Stock option exercised (unaudited) (Note 11) - - 12,790
Net income (unaudited) - - 1,134,598
-------------------------------------------------
Balance, June 30, 1997 (unaudited) $36,910 $ (67,430) $13,207,895
=================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Information Relating to the Six Months Ended June 30, 1997
and 1996 is Unaudited)
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
------------------------------- -----------------------------
1997 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,134,598 $ 1,001,977 $ 2,225,084 $ 2,200,849
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 208,910 108,912 256,503 213,565
Net (accretion) amortization of securities premium and 18,677 (8,176) (6,974) (29,159)
discount
Gain on sale of other real estate owned (30,505) - - (217,660)
Gain on sale of securities (33,988) - - -
Provision for loan losses 72,860 150,000 40,000 512,001
Deferred taxes - - (155,960) (153,000)
Increase in accrued interest receivable (373,690) (88,101) (257,995) (72,298)
Increase in prepaid expenses and other assets (75,749) (4,940) (145,689) -
Increase (decrease) in accrued interest and other liabilities (171,744) (23,302) 520,857 654,503
---------------------------------------------------------------
Net cash provided by operating activities 749,369 1,136,370 2,475,826 3,108,801
---------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from available-for-sale securities principal pay-downs 559,383 807,968 1,275,764 507,657
Proceeds from sale of available-for-sale securities 6,004,298 - - -
Purchases of available-for-sale securities - (9,081,151) (9,081,151) (4,041,270)
Proceeds from maturities of held-to-maturity securities 498,180 189,242 453,310 230,000
Purchases of held-to-maturity securities - (440,652) (1,338,129) (342,143)
Increase in loans made to customers, net (30,761,866) (6,956,820) (15,166,518) (17,416,156)
Proceeds from sale of other real estate owned 221,114 - - 809,426
Purchase of bank premises and equipment (260,251) (506,031) (2,178,627) (118,510)
Other - (1,163,094) (1,567,436) -
---------------------------------------------------------------
Net cash (used in) investing activities (23,739,142) (17,150,538) (27,602,787) (20,370,996)
---------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from sale of treasury stock 31,472 28,000 33,901 2,879
Stock options exercised 12,790 - 35,670 44,734
Net increase in deposits 3,569,841 12,768,323 43,235,987 25,923,186
Net decrease in repurchase agreements - - - (2,900,000)
Dividends paid (167,809) (463,170) (618,280) (462,000)
---------------------------------------------------------------
Net cash provided by financing activities 3,446,294 12,333,153 42,687,278 22,608,799
---------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (19,543,479) (3,681,015) 17,560,317 5,346,604
Cash and cash equivalents
Beginning 37,960,490 20,400,173 20,400,173 15,053,569
---------------------------------------------------------------
Ending $18,417,011 $16,719,158 $37,960,490 $20,400,173
===============================================================
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest $ 2,564,323 $ 1,829,074 $ 3,845,417 $ 2,922,979
Income taxes 588,992 509,499 1,138,382 950,728
Supplemental Schedule of Noncash Investing and Financing Activities:
Securities held-to-maturity transferred to securities - - - 8,761,063
available-for-sale
Transfer real estate from loan foreclosure to other real estate - - 190,609 -
Change in unrealized gain on available-for-sale securities 26,963 (28,419) (62,750) -
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997
and 1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies
Nature of business
Sun State Capital Corporation is a bank holding company providing a full range
of banking services to commercial and consumer customers through its subsidiary
Sun State Bank.
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 assets and liabilities at the date of the financial statement and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of Sun State Capital
Corporation and its wholly-owned subsidiary, Sun State Bank (the "Bank"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Unaudited interim financial statements: The accompanying unaudited consolidated
financial statements have been prepared in accordance with the requirements for
presentation of interim financial statements and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
consisting only of normal recurring adjustments that are necessary for a fair
presentation for interim periods presented have been reflected. The results for
the six months ended June 30, 1997 are not necessarily indicative of the results
which will be reported for the entire year.
A summary of the Company's significant accounting policies follows:
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),
money market investments and federal funds sold. Cash flows from loans
originated by the Company, and deposits, are reported net.
The Company maintains amounts due from banks, which at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
F-7
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)
Available-for-sale securities
Securities classified as available-for-sale include those debt securities that
the Company 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 Company'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.
Held-to-maturity securities
Securities classified as held-to-maturity are those debt securities the Company
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.
Loans receivable
Loans receivable are stated at the amount of unpaid principal, reduced by
unearned fees and allowance for loan losses.
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan 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 credit 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 credits, 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 Company's allowance for loan losses, and may
require the Company to make additions to the allowance based on their judgment
about information available to them at the time of their examinations.
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 Company will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
F-8
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)
Interest and fees on loans
Interest on loans is recognized over the terms of the loans and is calculated
under the effective interest method. 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 are deferred and amortized as an adjustment
of the related loan's yield. The Company is generally amortizing these amounts
over the contractual life. Commitment fees based upon a percentage of a
customer's unused line of credit and fees related to standby letters of credit,
are recognized over the commitment period.
Bank premises and equipment
Land is carried at cost. Bank premises and equipment are stated at cost less
accumulated depreciation and amortization computed principally by the
straight-line method over estimated useful lives. Improvements to leased
property are amortized over the lesser of the term of the lease or life of the
improvements.
Other real estate owned
Other real estate owned acquired through foreclosure are initially recorded at
the lower of cost or fair value less selling costs at the date of foreclosure.
Costs relating to development and improvement of property are capitalized,
whereas costs relating to the holding of property are expensed. No valuation
allowance is recorded since management has determined that the market value of
the property (less estimated selling costs) exceeds the carrying value.
Income taxes
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
effect of changes in tax laws and rates on the date of enactment.
Earnings per common share
Earnings per common share were computed by dividing net income less cash
dividends paid on preferred shares by the weighted average number of shares of
common stock outstanding. The stock options discussed in Note 11 to the
financial statements were not included in the computation of earnings per common
share pursuant to APB Opinion No. 15 since the dilution is less than 3%.
F-9
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)
Fair value of financial instruments
Financial Accounting Standards Board Statement No. 107, Disclosures About Fair
Value of Financial Instruments, 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. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and due from banks
The carrying amount reported in the consolidated balance sheet for cash and
due from banks, approximates its fair value.
Money market investment
The carrying amount reported in the consolidated balance sheet for the money
market investment approximates its fair value.
Federal funds sold
The carrying amount reported in the consolidated balance sheet for federal
funds sold approximates its fair value.
Securities
Fair values for securities are based on quoted market prices, dealer quotes
or quoted market prices of comparable instruments. Fair values of securities
with prepayment risk such as Small Business Administration loan pools do not
necessarily represent the actual trade price which could be obtained on any
given day for any particular security.
F-10
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)
Fair value of financial instruments (continued)
Loans receivable
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, 1996, variable rate loans comprised approximately 74% of the
loan portfolio. The fixed rate loans have an average maturity of
approximately 3 years and an average interest rate which approximates the
market interest rate at December 31, 1996 for loans with similar terms.
Management estimates that the aggregate fair value of the Bank's fixed rate
loans approximates its aggregate carrying value.
Deposit liabilities
Fair values of demand deposits equal their carrying amounts, which represent
the amounts payable on demand. The carrying amounts for variable-rate deposit
accounts approximate their fair values. Fair values for fixed-rate
certificates of deposit are estimated to approximate their carrying values
based on their maturity dates and interest rates. Early withdrawals of
fixed-rate certificates of deposit are not expected to be significant.
Accrued interest receivable and accrued interest payable
The carrying amounts reported in the consolidated balance sheet for accrued
interest receivable and accrued interest payable approximate their fair
values.
Commitments to extend credit and standby letters of credit
The fair values of commitments to extend credit and standby letters of credit
are considered equal to their national values, based on the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and credit worthiness of the counterparties.
Current accounting developments
The Financial Accounting Standards Board has issued Statement No. 125, (as
amended by FASB No. 127 which defers implementation of certain provisions of the
FASB No. 125 to January 1, 1998) Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, which becomes effective for
transactions occurring after December 31, 1996. The Statement does not permit
earlier or retroactive application. The Statement distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings. A
transfer of financial assets in which the transferor surrenders control over
those assets is accounted for as a sale to the extent that consideration other
than beneficial interests in the transferred assets is received in exchange. The
Statement also establishes standards on the initial recognition and measurement
of servicing assets and other retained interests and servicing liabilities, and
their subsequent measurement.
F-11
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)
Current accounting developments (continued)
The Statement requires that debtors reclassify financial assets pledged as
collateral and that secured parties recognize those assets and their obligation
to return them in certain circumstances in which the secured party has taken
control of those assets. In addition, the Statement requires that a liability be
derecognized only if the debtor is relieved of its obligation through payment to
the creditor or by being legally released from being the primary obligor under
the liability either judicially or by the creditor.
Management does not believe the application of the Statement to transactions of
the Company that have been typically in the past will materially affect the
Company's financial position and results of operations.
Effective for financial statements issued after December 15, 1997, the Company
will be required to implement FASB Statement No. 128, Earnings per Share. The
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. It replaces the presentation of primary EPS with a presentation of
basic EPS and also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
The Company has not determined what effect the adoption of this Statement will
have on it's earnings per share calculations.
The FASB has issued Statement No. 130 Reporting Comprehensive Income. Statement
No. 130 requires that an enterprise (a) classify items of other comprehensive
income (as defined in the Statement) by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid in capital in the equity section of
the statement of financial position. Management does not believe the application
of this Statement will materially affect the Company's financial reporting.
The FASB has also issued Statement No. 131 Disclosures about Segments of an
Enterprise and Related Information. Statement No. 131 modifies the disclosure
requirements for reportable segments and its effective for the Company's year
ending December 31, 1998. The Company has not determined the effect of the
adoption of this Statement would have on the Company's financial statements.
Note 2.Restrictions on Cash and Due from Banks
The Company is required to maintain balances in cash or on deposit with the
Federal Reserve Bank. The total of those reserve balances was approximately
$631,000 as of December 31, 1996.
F-12
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 3. Securities
Amortized cost and estimated fair values of available-for-sale securities are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 1997 (unaudited)
------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Business Administration loan pools $ 12,131,605 $ 79,319 $ 23,406 $ 12,187,518
==================================================================
<CAPTION>
December 31, 1996
------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Business Administration loan pools $ 18,671,057 $ 105,314 $ 76,363 $ 18,700,008
==================================================================
<CAPTION>
December 31, 1995
------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Business Administration loan pools $ 10,884,806 $ 123,764 $ - $ 11,008,570
==================================================================
</TABLE>
F-13
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 3. Securities (continued)
Carrying amounts and estimated fair values of held-to-maturity securities are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 1997 (unaudited)
-------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 440,652 $ 9,348 $ - $ 450,000
Municipal bonds (Nevada Housing Bonds) 1,282,368 30,653 - 1,313,021
Other 433,494 - - 433,494
-------------------------------------------------------------------
$ 2,156,514 $ 40,001 $ - $ 2,196,515
===================================================================
<CAPTION>
December 31, 1996
-------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 934,211 $ - $ - $ 934,211
Municipal bonds (Nevada Housing Bonds) 1,308,050 38,262 - 1,346,312
Other 421,350 - - 421,350
-------------------------------------------------------------------
$ 2,663,611 $ 38,262 $ - $ 2,701,873
===================================================================
<CAPTION>
December 31, 1995
------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 146,047 $ 3,623 $ - $ 149,670
Municipal Bonds (Nevada Housing Bonds) 1,403,311 44,013 - 1,447,324
Other 203,324 - - 203,324
------------------------------------------------------------------
$ 1,752,682 $ 47,636 $ - $ 1,800,318
==================================================================
</TABLE>
F-14
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 3. Securities (continued)
The amortized cost and estimated fair value of securities by contractual
maturity are shown below. Maturities may differ from contractual maturities of
Small Business Administration loan pools because the loans underlying the
securities may be prepaid without any penalties. Therefore, these securities are
listed separately in the maturity schedule.
The municipal bonds have been listed at their contractual maturities, but the
actual maturities may differ due to the call provisions.
<TABLE>
<CAPTION>
June 30, 1997 (unaudited)
----------------------------------------------------------------------------
Held-to-Maturity Available-for-Sale
---------------------------------- ------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 923,493 $ 923,716 $ - $ -
Due from one through five years 440,000 427,751 - -
Due from five through ten years 100,194 102,069 - -
Due thereafter 692,827 742,979 - -
Small Business Administration
loan pools - - 12,131,605 12,187,518
----------------------------------------------------------------------------
$ 2,156,514 $ 2,196,515 $ 12,131,605 $ 12,187,518
============================================================================
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------
Held-to-Maturity Available-for-Sale
---------------------------------- ------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,355,561 $ 1,355,561 $ - $ -
Due from one through five years 440,669 449,581 - -
Due from five through ten years 145,198 149,011 - -
Due thereafter 722,183 747,720 - -
Small Business Administration
loan pools - - 18,671,057 18,700,008
----------------------------------------------------------------------------
$ 2,663,611 $ 2,701,873 $ 18,671,057 $ 18,700,008
============================================================================
</TABLE>
There were no sales of securities during the years ended December 31, 1996 and
1995.
F-15
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 3. Securities (continued)
Available-for-sale securities with carrying amounts of $18,700,008 and
$8,022,908 at December 31, 1996 and 1995, respectively, and held-to-maturity
securities with book values of $1,436,031 and $1,146,047 at December 31, 1996
and 1995, respectively, were pledged to secure public deposits, federal funds
line of credit arrangements and for other purposes as required or permitted by
law.
On December 27, 1995, the Company reassessed the appropriateness of the
classification of the Small Business Administration loan pools in accordance
with the issuance of Financial Accounting Standards Board Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities. As a result, the Company transferred $8,761,063 of
securities previously classified as held-to-maturity into available-for-sale
securities. The Company recognized an unrealized pretax holding gain of $123,764
as a result of the transfer.
Note 4.Loans receivable
The composition of the Company's loan portfolio is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
-----------------------------------
1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C>
Real estate loans: (unaudited)
Construction $ 25,405,274 $ 17,421,078 $ 10,420,267
Commercial (secured by real estate) 63,739,202 49,207,139 42,415,032
Commercial, financial and industrial 26,289,789 19,648,040 20,171,101
Installment 7,964,484 6,276,371 4,587,008
----------------------------------------------------------
123,398,749 92,552,628 77,593,408
Less:
Allowance for loan losses (1,890,790) (1,865,790) (1,841,774)
Deferred loan fees (638,830) (506,715) (507,420)
----------------------------------------------------------
Loans, net $ 120,869,129 $ 90,180,123 $ 75,244,214
==========================================================
</TABLE>
F-16
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 4. Loans receivable (continued)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Six months ended June 30, Years ended December 31,
--------------------------------- -------------------------------
1997 1996 1996 1995
-------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Balance, beginning $ 1,865,790 $ 1,841,774 $ 1,841,774 $ 1,214,114
Provision charged to operating expense 72,860 150,000 40,000 512,001
Recoveries of amounts charged-off 604 55,506 64,359 197,200
Less amounts charged-off (48,464) (72,397) (80,343) (81,541)
-------------------------------------------------------------------
Balance, ending $ 1,890,790 $ 1,974,883 $ 1,865,790 $ 1,841,774
===================================================================
</TABLE>
The Bank has no significant loans at December 31, 1996 which were classified as
impaired loans in accordance with FASB Statement No. 114 as amended by FASB
Statement No. 118.
Note 5. Bank Premises and Equipment
The major classes of bank premises and equipment and the total accumulated
depreciation as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------------
1997 1996 1995
---------------------------------------------
(unaudited)
<S> <C> <C> <C>
Land $ 972,829 $ 972,829 $ 559,829
Building 2,600,015 2,568,690 1,612,051
Leasehold improvements 504,278 508,205 153,064
Equipment and furniture 1,679,019 1,446,166 1,014,544
Automobiles 57,139 57,139 36,285
---------------------------------------------
5,813,280 5,553,029 3,375,773
Less accumulated depreciation
and amortization 1,127,260 918,350 663,218
---------------------------------------------
$ 4,686,020 $ 4,634,679 $ 2,712,555
=============================================
</TABLE>
F-17
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 6. Income Tax Matters
The cumulative tax effects of principal temporary differences are shown in the
following table:
December 31,
----------------------------
1996 1995
----------------------------
Deferred tax liabilities:
Accelerated tax depreciation $ (100,300) $ (90,820)
Unrealized gain on available-for-sale
securities (9,837) (42,080)
Other (10,000) (11,960)
----------------------------
Total deferred tax liabilities (120,137) (144,860)
----------------------------
Deferred tax assets:
Allowance for loan losses 541,200 527,660
Other 207,060 57,120
---------------------------
Total deferred tax assets 748,260 584,780
---------------------------
Net deferred tax assets $ 628,123 $ 439,920
============================
As of December 31, 1996 and 1995, no valuation reserve was considered necessary
as management believes it is more likely than not that the deferred tax assets
will be realized.
There have been no changes in the deferred tax components through June 30, 1997
other than the increase in the deferred tax liability associated with the
unrealized gain on available-for-sale securities in the amount of $9,167
(unaudited).
The provision for income taxes charged to operations is comprised of the
following for the years ended December 31:
1996 1995
--------------------------------------
Current $ 1,298,038 $ 1,272,643
Deferred (155,960) (153,000)
--------------------------------------
$ 1,142,078 $ 1,119,643
======================================
The effective tax rate (provision for income taxes divided by pretax net income)
approximates the expected tax rate of 34% for the years ended December 31, 1996
and 1995 and the six months ended June 30, 1997 and 1996 (unaudited).
Note 7.Line of Credit
The Company has a $14,000,000 line of credit which is secured by the Small
Business Administration loan pools. Outstanding balances bear interest at the
federal funds rate plus a variable factor set by the creditor. There are no
borrowings outstanding on the line of credit at December 31, 1996 or as of June
30, 1997 (unaudited).
F-18
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 7. Line of Credit (continued)
In 1997, the Company received a $10,000,000 line of credit with Zion's First
National Bank. There were no borrowings outstanding under this line of credit as
of June 30, 1997 (unaudited).
Note 8. Commitments and Contingencies
Contingencies
In the normal course of business, the Company 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 consolidated
financial statements.
Financial instruments with off-balance-sheet risk
The Company is 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 include commitments to extend credit and standby letters
of credit. They involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other parties to the financial instrument for these commitments is represented
by the contractual amounts of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
A summary of the contract amount of the Company's exposure to off-balance-sheet
risk is as follows:
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------------------
1997 1996 1995
--------------------- --------------------------------------
(unaudited)
<S> <C> <C> <C>
Commitments to extend credit $ 35,761,000 $ 42,562,455 $ 20,046,877
Standby letters of credit 673,000 419,760 912,595
--------------------- --------------------------------------
$ 36,434,000 $ 42,982,215 $ 20,959,472
===================== ======================================
</TABLE>
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. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do 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.
F-19
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 8. Commitments and Contingencies (continued)
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held varies
as specified above and is required as the Bank deems necessary.
Lease Commitments
The Company leases certain premises under noncancelable operating leases
expiring in various years through 2029. The following is a schedule of future
minimum rental payments under these leases:
1997 $ 222,000
1998 219,000
1999 184,000
2000 184,000
2001 145,000
Thereafter 1,308,000
-------------------
Total $ 2,262,000
===================
Total rental expense was $192,606 and $114,499, for the years ended December 31,
1996 and 1995, respectively. Total rent expense for the six months ended June
30, 1997 and 1996 was $118,365 and $60,037, respectively (unaudited).
Financial instruments with concentration
The Company grants commercial, construction, real estate and consumer loans to
customers. The Company's business is concentrated in Southern Nevada and Reno,
Nevada, and the loan portfolio includes significant credit exposure to the
commercial real estate industry of these areas. As of December 31, 1996, real
estate related loans accounted for approximately 72% of the total loans.
Substantially, all of these loans are secured by first liens with an initial
loan to value ratio of generally not more than 75%.
The loans are expected to be repaid from cash flows or proceeds from the sale of
selected assets of the borrowers. The Company's policy for requiring collateral
is to obtain collateral whenever it is available or desirable, depending upon
the degree of risk the Company is willing to take.
The Company has a concentration of federal funds on deposit at Zion's First
National Bank at December 31, 1996 in the amount of approximately $22,600,000
and $4,530,000 as of June 30, 1997 (unaudited).
The Company has approximately $14,200,000 on deposit from one customer as of
December 31, 1996 which is anticipated to be withdrawn in February 1997.
F-20
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 9. Transactions with Directors and Officers
In the ordinary course of business, the Company has granted loans to certain
directors, officers, and their associates and the businesses with which they are
associated. All such loans and commitments to loan were made under terms which
are substantially consistent with the Company's normal lending policies.
The approximate aggregate activity in such loans including loan participations
which are stated at their net amounts is as follows:
December 31,
June 30, -----------------------------------
1997 1996 1995
-----------------------------------------------------
(unaudited)
Balance, beginning $ 4,376,000 $ 1,677,000 $ 2,745,000
New loans 3,038,000 4,900,000 2,704,000
Repayments (4,002,000) (2,201,000) (3,772,000)
-----------------------------------------------------
Balance, ending $ 3,412,000 $ 4,376,000 $ 1,677,000
=====================================================
The balance of commitments to extend credit was approximately $4,000,000 and
$1,569,000 at December 31, 1996 and 1995, respectively.
Note 10. Preferred Stock
The Company's stockholders have authorized the issuance of up to 1,000,000
shares of $100 par value preferred stock. Of the 1,000,000 shares, 40,000 such
shares are designated as 1992 Series Preferred Stock ("1992 Preferred Stock").
As of December 31, 1996, 5,719 shares of 1992 Preferred Stock are issued and
outstanding.
Each share of 1992 Preferred Stock possesses voting rights equal to one share of
the Company's common stock, except that holders of 1992 Preferred Stock have no
right to vote upon any consolidation, merger or sale of all or substantially all
of the assets of the Company.
The holders of 1992 Preferred Stock are entitled to cumulative dividends. The
dividends, as a per annum percentage of par value, are at a floating rate of 1%
over the quarterly average of the Wall Street Journal prime rate, but at least
8% and no more than 12%. Such dividends are payable in cash on the last day of
each quarter of the Company's fiscal year.
In the event the Company is liquidated, no distributions shall be made to the
holders of shares of common stock, unless, prior thereto, the holders of shares
of 1992 Preferred Stock shall have received a liquidation preference payment of
$100 per share plus all accrued and unpaid dividends through the date of such
payment.
F-21
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 10. Preferred Stock (continued)
The Company may, at its option, subject to approval of the Board of Governors of
the Federal Reserve System, redeem the 1992 Preferred Stock at a price to be
agreed upon by the Company and the holders of such stock or at $110 per share
plus accrued and unpaid dividends.
Dividends in arrears as of June 30, 1997 total approximately $13,600 and were
paid in July, 1997.
Note 11. Stock Options
The Company has granted certain officers options to purchase shares of the
Company's common stock at prices equal to or greater than the fair market value
at the date of grant. Options generally become exercisable in annual
installments of one fifth of the amount granted each year end and expire ten
years after the date of grant. Stock prices of the options range from $23.97 to
$37.50 and are based on the value of the Company's common stock at the time the
option is granted. The Company applies APB Opinion 25 and related
interpretations in accounting for its options. Accordingly, no compensation cost
has been recognized. The Company has elected not to adopt FASB Statement No.
123, Accounting for Stock Based Compensation. Had compensation cost for the
Company's stock option plan been determined based on the minimum value at the
grant dates for awards under this plan consistent with the method of Statement
No. 123, the Company's proforma net income and earnings per common share would
have been $2,214,000 and $7.65, respectively, for the year ended December 31,
1996 and $2,182,000 and $7.62, respectively, for the year ended December 31,
1995.
Information concerning stock options is as follows:
December 31,
June 30, ---------------------
1997 1996 1995
------------------------------------
(unaudited)
Options outstanding, beginning of period 8,900 6,299 2,499
Granted - 3,800 5,400
Exercised 500 1,199 1,600
------------------------------------
Options outstanding, end of period 8,400 8,900 6,299
====================================
December 31,
June 30, ---------------------
1997 1996 1995
------------------------------------
(unaudited)
Options exercisable, end of period 2,420 2,920 480
Available to grant, end of period 31,300 31,300 35,100
Average price under option, end of period $ 33.53 $ 33.08 $ 29.78
Average price of options granted, during
the period $ - $ 37.50 $ 30.59
F-22
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 12. Profit Sharing Plan
The Bank has a Profit Sharing Plan for those employees who meet the eligibility
requirements set forth in the Plan. The amount of the contributions to the plan
is at the discretion of the Bank's Board of Directors. Substantially all of the
Bank's full-time employees are covered by the Plan. The Bank contributed $89,241
and $87,840 to the Plan for the years ended December 31, 1996 and 1995,
respectively.
Note 13. Regulatory Capital
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
Company's consolidated financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative 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 to average assets (as
defined). Management believes, as of December 31, 1996, that the Bank meets all
capital adequacy requirements to which it is subject.
The most recent notification from the Federal Deposit Insurance Corporation
(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 the
notification that management believes have changed the Bank's category.
F-23
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 13. Regulatory Capital (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
--------------------------- ------------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997 (unaudited):
Total Capital (to Risk
Weighted Assets) $ 14,753,000 11.14% 10,594,000 8% 13,242,000 10%
Tier I Capital (to Risk
Weighted Assets) $ 13,095,000 9.89% 5,297,000 4% 7,945,000 6%
Tier I Capital
(to Average Assets) $ 13,095,000 8.46% 6,188,000 4% 7,736,000 5%
As of December 31, 1996:
Total Capital (to Risk
Weighted Assets) $ 13,403,299 12.01% $ 8,924,000 8% $ 11,155,000 10%
Tier I Capital (to Risk
Weighted Assets) $ 12,003,047 10.76% $ 4,462,000 4% $ 6,693,000 6%
Tier I Capital
(to Average Assets) $ 12,003,047 7.87% $ 6,099,000 4% $ 7,624,000 5%
As of December 31, 1995:
Total Capital (to Risk
Weighted Assets) $ 11,409,778 14.16% $ 6,448,000 8% $ 8,061,000 10%
Tier I Capital (to Risk
Weighted Assets) $ 10,391,907 12.89% $ 3,224,000 4% $ 4,836,000 6%
Tier I Capital
(to Average Assets) $ 10,391,907 10.59% $ 3,926,000 4% $ 4,907,000 5%
</TABLE>
Additionally, State of Nevada banking regulations restrict distribution of the
net assets of the Bank because such regulations require the sum of the Bank's
stockholders' equity and reserve for loan losses to be at least 6% of the
average of the Bank's total daily deposit liabilities for the preceding 60 days.
As a result of these regulations, approximately $8,519,000 of the Bank's
stockholders' equity was restricted at December 31, 1996.
F-24
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 14. Deferred Compensation and Salary Continuation Plan
Members of the Board of Directors and certain employees at the discretion of the
Board are eligible to participate in the Directors Fees Deferral Plan and Trust
Agreement (the "Plan") executed on June 21, 1989. The Plan allows participants
to elect to defer receipt of some portion or all fees or compensation to be
earned in the subsequent calendar year. Such deferred amounts are placed in a
trust account with a national brokerage house and are recorded as compensation
expense in the year when earned. Deferred amounts are held in trust on behalf of
a participant until the earlier of the participant's death, retirement or
attainment of age 65. The amounts held in trust and the equal offsetting
liabilities, approximately $537,000 and $428,000 at December 31, 1996 and 1995,
respectively, and are not recorded on the Company's consolidated balance sheet.
In 1996, the Company implemented a salary continuation plan for certain
executive officers. This is a non- qualified benefit plan in which the Company
agrees to pay the executives additional benefits at retirement, or in the event
of death, disability, sale of business or termination, as outlined in the
agreement, in return for continued current satisfactory performance by the
executives. Salary continuation expense of $119,982 was charged to operations
under this plan during the year ended December 31, 1996 and the total liability
recorded related to this plan was $119,982 at December 31, 1996. In addition,
the plan requires the Company to pay three of the executives specified amounts
in the event of their death prior to retirement. This contingent liability
totals $1,800,000.
The salary continuation plan is informally linked with single premium universal
life insurance policies. The Company paid $1,530,000 to fund these life
insurance policies during the year ended December 31, 1996.
The net cash surrender value of these life insurance policies totaling
$1,567,436 at December 31, 1996 is included in prepaid expenses and other assets
on the consolidated balance sheet.
F-25
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 15. Fair Value of Financial Instruments
The carrying amount and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------------------------- -----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 8,491,984 $ 8,491,984 $ 9,586,796 $ 9,586,796
Money market investment 370,506 370,506 653,377 653,377
Federal funds sold 29,098,000 29,098,000 10,160,000 10,160,000
Available-for-sale securities 18,700,008 18,700,008 11,008,570 11,008,570
Held-to-maturity securities 2,663,611 2,701,873 1,752,682 1,800,318
Loans, net 90,180,123 90,180,123 75,244,214 75,244,214
Accrued interest receivable 872,532 872,532 614,537 614,537
Financial liabilities:
Deposits 144,279,202 144,279,202 101,043,215 101,043,215
Accrued interest payable 613,835 613,835 256,359 256,359
Unrecognized Financial Instruments:
Commitments to extend credit
and standby letters of credit - - - -
</TABLE>
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, the fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are less likely to prepay in a rising rate
environment and more likely to prepay in a falling rate environment. Also,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
F-26
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 16. Parent Company Financial Information
Condensed financial information of the Company (parent only) is provided below:
Sun State Capital Corporation
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------------
1997 1996 1995
----------------- ------------------------------
Assets (unaudited)
<S> <C> <C> <C>
Cash on account with Sun State Bank $ 46,526 $ 124,333 $ 52,862
Investment in Sun State Bank 13,131,874 12,022,161 10,473,590
Other assets 29,495 32,554 38,674
--------------------------------------------------
Total assets $ 13,207,895 $ 12,179,048 $ 10,565,126
==================================================
Liabilities and Stockholders' Equity
Liabilities, dividends payable $ $ 154,223 $ 154,106
Stockholders' Equity 13,207,895 12,024,825 10,411,020
--------------------------------------------------
Total liabilities and
stockholders' equity $ 13,207,895 $ 12,179,048 $ 10,565,126
==================================================
</TABLE>
F-27
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 16. Parent Financial Information (continued)
Sun State Capital Corporation
Condensed Statements of Income
<TABLE>
<CAPTION>
For the six months ending For the year ending
June 30, December 31,
--------------------------------- -----------------------------
1997 1996 1996 1995
-----------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Equity in undistributed income of Sun State Bank $ 1,091,917 $ 622,499 $ 1,611,024 $ 1,830,646
Dividends from Sun State Bank 45,240 382,537 618,280 384,000
Other expense 2,559 3,059 4,220 13,797
-----------------------------------------------------------------
Net income $ 1,134,598 $ 1,001,977 $ 2,225,084 $ 2,200,849
=================================================================
Sun State Capital Corporation
Condensed Statements of Cash Flows
<CAPTION>
For the six months ending For the year ending
June 30, December 31,
--------------------------------- ------------------------------
1997 1996 1996 1995
------------------------------------------------------------------
(unaudited) (unaudited)
Cash Flows from Operating Activities
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 1,134,598 $ 1,001,977 $ 2,225,084 $ 2,200,849
Undistributed income from Sun State Bank (1,091,917) (622,499) (1,611,024) (1,830,646)
Other 3,059 3,059 6,120 (44,085)
-------------------------------------------------------------------
Net cash provided by
operating activities 45,740 382,537 620,180 326,118
-------------------------------------------------------------------
Cash Flows from Financing Activities
Dividends paid (167,809) (463,170) (618,280) (462,000)
Stock options exercised 12,790 - 35,670 44,734
Proceeds from sale of treasury stock 31,472 28,000 33,901 2,879
-------------------------------------------------------------------
Net cash (used in)
financing activities (123,547) (435,170) (548,709) (414,387)
-------------------------------------------------------------------
Net increase (decrease) in cash (77,807) (52,633) 71,471 (88,269)
Cash, beginning 124,333 52,862 52,862 141,131
--------------------------------------------------------------------
Cash, ending $ 46,526 $ 229 $ 124,333 $ 52,862
====================================================================
</TABLE>
F-28
<PAGE>
SUN STATE CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information Relating to the Six Months Ended June 30, 1997 and
1996 is Unaudited)
- --------------------------------------------------------------------------------
Note 17. Unaudited Subsequent Event
On May 21, 1997, the Company entered into an agreement and plan of
reorganization with Zions Bancorporation (Zions). Under the terms of the
agreement, shareholders of the Company will be entitled to receive shares of
Zions common stock or a combination of Zion's common stock and cash
consideration (with the cash consideration being no more than 49% of the total
consideration) as defined in the agreement.
This agreement is subject to the approval of the shareholders of the Company as
well as approval of certain regulatory agencies.
It is intended that the reorganization will be accounted for as a purchase under
generally accepted accounting principles.
F-29
<PAGE>
APPENDIX A
<PAGE>
HOEFER & ARNETT
INCORPORATED
INVESTMENT BANKERS
101 W. SIXTH STREET, SUITE 416
AUSTIN, TEXAS 78701
(512) 495-9890
June 5, 1997
Members of the Board of Directors
Sun State Capital Corporation
4240 West Flamingo Road
Las Vegas, Nevada 89126
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the shareholders of Sun State Capital Corporation,
Las Vegas, Nevada ("Company") of the terms of the proposed merger of Company
with and into Zions Bancorporation, Salt Lake City, Utah ("Zions Bancorp") as
defined in the Agreement and Plan of Reorganization, dated as of May 12, 1997
(the "Agreement"). Pursuant to the Agreement and subject to the terms and
conditions therein, the aggregate purchase price to be received by Company is
equal to $37,000,000 (base purchase price) plus the amounts described in
subsections (B) through (D) of section 1.2(v), reduced by the amounts described
in subsections (E) through (G) of section 1.2(v). Each holder of shares of
Company Common Stock shall be entitled to receive, in exchange for each share of
Company Common Stock held of record by such stockholder as of the Effective
Date, at his or her election except as provided in the Agreement one of the
following, or a combination of Zions Bancorp Stock and cash determined in
accordance with section 1.3 of the Agreement:
(a) that number of shares of Zions Bancorp Stock calculated by dividing
the Purchase 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
(the "Common Stock Consideration"); or
(b) that amount of cash calculated by dividing the Purchase Price by
the number of shares of Company Common Stock that shall be issued and
outstanding at the Effective Date (the "Common Cash Consideration").
As part of its investment banking business, Hoefer & Arnett, Incorporated is
continually engaged in the valuation of bank, bank holding company and thrift
securities in connection with mergers and acquisitions nationwide. We have not
previously provided investment banking and financial advisory services to the
Company.
In arriving at our opinion, we have reviewed and analyzed, among other things,
the following: (i) the Agreement; (ii) Annual Reports to Shareholders of Zions
<PAGE>
Bancorp and Company for the years ended December 31, 1995 and December 31, 1996;
(iii) Quarterly FDIC Call reports for the quarters ended June 30, 1996,
September 30, 1996, December 31, 1996 and March 31, 1997; (iv) certain other
publicly available financial and other information concerning Zions Bancorp and
Company and the trading markets for the publicly traded securities of Zions
Bancorp; and (v) publicly available information concerning other banks and
holding companies, the trading markets for their securities and the nature and
terms of certain other merger transactions we believe relevant to our inquiry.
We have held discussions with senior management of Zions Bancorp and Company
concerning their past and current operations, financial condition and prospects,
as well as the results of regulatory examinations.
We have reviewed with senior management of Zions Bancorp earnings projections
for 1997 through 2001 for Zions Bancorp as a stand-alone entity, assuming the
merger does not occur. We reviewed with senior management of Company earnings
projections for 1997 through 2001 as a stand-alone entity, assuming the merger
does not occur, as well as projected operating cost savings expected to be
achieved in each such years resulting from the merger. Such projections were
prepared by Company senior management. Certain pro forma financial projections
for the years 1997 through 2001 for the combined entity were derived by us based
partially upon the projections discussed above, as well as our own assessment of
general economic, market and financial conditions. In certain cases, such
combined pro forma financial projections included projected operating cost
savings derived by us partially based upon the projections discussed above to be
realizable in the merger.
In conducting our review and in arriving at our opinion, we have relied upon and
assumed the accuracy and completeness of the financial and other information
provided to us or publicly available, and we have not assumed any responsibility
for independent verification of the same. We have relied upon the managements of
Zions Bancorp and Company as to the reasonableness of the financial and
operating forecasts, projections and projected operating cost savings (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts, projections and projected operating cost savings reflect the best
currently available estimates and judgments of the applicable managements. We
have also assumed, without assuming any responsibility for the independent
verification of the same, that the aggregate allowances for loan losses for
Zions Bancorp and Company are adequate to cover such losses. We have not made or
obtained any evaluations or appraisals of the property of Zions Bancorp or
Company, nor have we examined any individual loan credit files. For purposes of
this opinion, we have assumed that the merger will have the tax, accounting and
legal effects described in the Agreement and assumed the accuracy of the
disclosures set forth in the Agreement. Our opinion as expressed herein is
limited to the fairness, from a financial point of view, to the holders of the
Common Shares of Company of the terms of the proposed merger of Company with and
into Zions Bancorp and does not address Company s underlying business decision
to proceed with the merger.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of Zions
Bancorp and Company, including interest income, interest expense, net interest
income, net interest margin, provision for loan losses, non-interest income,
non-interest expense, earnings, dividends, internal capital generation, book
value, intangible
<PAGE>
assets, return on assets, return on shareholders equity, capitalization, the
amount and type of non-performing assets, loan losses and the reserve for loan
losses, all as set forth in the financial statements for Zions Bancorp and
Company; (ii) the assets and liabilities of Zions Bancorp and Company, including
the loan, investment and mortgage portfolios, deposits, other liabilities,
historical and current liability sources and costs and liquidity; and (iii) the
nature and terms of certain other merger transactions involving banks and bank
holding companies. We have also taken into account our assessment of general
economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
It is understood that this letter is for the information of the Board of
Directors of Company only and may not be relied upon by any other person or used
for any other purpose without our prior written consent. This letter does not
constitute a recommendation to the Board of Directors or to any shareholder of
Company with respect to any approval of the merger.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that, as of the date hereof, the terms of proposed merger of Company
with and into Zions Bancorp are fair, from a financial point of view, to the
holders of the Common Shares of Company.
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Very truly yours,
Hoefer & Arnett, Incorporated
<PAGE>
APPENDIX B
September 3, 1997
Zions Bancorporation
Attn: Mr. Harris H. Simmons
President and Chief Executive Officer
One South Main Street, Suite 1380
Salt Lake City, UT 84111
Sun State Capital Corporation
Attn: Mr. John Dedolph
President and Chief Executive Officer
4240 West Flamingo Road
Las Vegas, NE 89126
Re: Merger of Sun State Capital Corporation With and Into Zions
Bancorporation
Gentlemen:
We have represented Sun State Capital Corporation, a Nevada corporation
which is a registered bank holding company ("Sun State"), in the proposed merger
of Sun State with and into Zions Bancorporation, a Utah corporation which is a
registered bank holding company ("Zions"), under the laws of Nevada and Utah and
federal law (the "Merger"). The Merger shall be effected pursuant to the
provisions of the Agreement and Plan of Reorganization among Zions
Bancorporation, Nevada State Bank, Sun State Capital Corporation and Sun State
Bank, dated May 21, 1997, (the "Merger Agreement"). We deliver this opinion
pursuant to Section 3.5 of the Merger Agreement. The Merger Agreement defines
those capitalized terms appearing in this letter which are not defined in this
letter. Unless otherwise indicated, all sections refer to the Internal Revenue
Code of 1986, as amended (the "Code").
Pursuant to the Merger Agreement, the Merger shall be effectuated
through the merger of Sun State with and into Zions, with Zions surviving in
accordance with federal and Utah law. Upon consummation of the Merger Agreement,
the shares of 1992 Series Preferred Stock of Sun State and the shares of Common
Stock of Sun State shall be canceled and immediately converted into the right to
receive certain consideration set forth in Sections 1.2(b)(i) and 1.2(b)(ii) of
the Merger Agreement.
Under these two provisions, Sun State shareholders will receive shares
of Zions Common Stock with the ability to elect to receive cash in lieu of such
stock consideration. In the event a Sun State shareholder chooses cash, the
amount of cash that will be paid will be determined based upon a formula with
certain "election" adjustments and certain "non-election" adjustments. Based
upon our review of the operation of the formula along with the adjustments, not
more than 49% of the total consideration received by Sun State shareholders will
be in the form of cash consideration.
<PAGE>
Zions Bancorporation
Sun State Capital Corporation
__________, 1997
Page 2
No fractional shares of Zions Common Stock will be issued in exchange
for Sun State Common Stock. Instead, each Sun State shareholder who surrenders
an Sun State Common Stock certificate 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 of
Zions Common Stock.
In addition to the foregoing facts, on the date of this letter, you
have delivered to us certificates in which you have made certain
representations, which we consider relevant to this opinion, in regard to the
Merger and have authorized us to rely on such representations in expressing the
opinions contained in this letter.
As counsel to Sun State, we have examined the Merger Agreement and
copies of ancillary agreements, certificates, instruments and documents
pertaining to the Merger delivered by the parties to the Merger. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us. As to any facts material to our
opinions expressed in this letter, we have relied on representations of the
parties to the Merger and have not undertaken to verify any of those
representations by independent investigation. We have based our opinions
contained in this letter on our analysis of the Code, Treasury Regulations
promulgated thereunder, and relevant interpretive authorities as in effect on
the date of this letter.
Based on the foregoing, we are of the opinion that:
1. The Merger qualifies as a "reorganization" within the meaning of
Section 368(a)(1)(A). Sun State and Zions each are a "party to a reorganization"
within the meaning of Section 368(b)(2).
2. No gain or loss will be recognized for federal income tax purposes
by Sun State and Zions in connection with the Merger. Sections 361(a) and
1032(a).
3. No gain or loss will be recognized for federal income tax purposes
by holders of the Sun State 1992 Series Preferred shares or holders of shares of
Sun State Common Stock upon the conversion in the Merger of such shares solely
into shares of Zions Common Stock. Section 354(a). Any gain realized by
shareholders of Sun State 1992 Series Preferred shares and Sun State Common
Stock who receive Zions Common Stock and cash (excluding any cash received in
lieu of a fractional share of Zions Common Stock) in exchange for Sun State 1992
Series Preferred shares and Sun State Common Stock pursuant to the Merger will
be recognized in an amount not in excess of the amount of the cash received
(excluding any cash received in lieu of a fractional share of Zions Common
Stock), the gain will be capital gain unless the receipt of the cash has the
effect of the distribution of a dividend, and any loss on the exchange will not
be recognized. Section 356(a); Commissioner v. Clark, 109 S. Ct. 1456 (1989).
Shareholders of Sun State 1992 Series Preferred shares and Sun State Common
Stock who receive cash in lieu of a fractional share of Zions Common Stock will
<PAGE>
Zions Bancorporation
Sun State Capital Corporation
__________, 1997
Page 3
recognize gain or loss equal to the difference between the cash received and the
shareholder's basis in that fractional share, and that gain or loss will be
capital gain or loss if the fractional share would have been a capital asset in
the hands of the shareholder. See Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev.
Proc. 77-41, 1977-2 C.B. 574. Cash received by shareholders of Sun State 1992
Series Preferred shares and Sun State Common Stock who have elected pursuant to
a Cash Election to receive only cash and have received only cash will be treated
as a distribution in redemption of the Sun State 1992 Preferred shares and Sun
State Common Stock held by such shareholders, subject to the provisions and
limitations of Section 302 of the Code.
4. The basis of shares of Zions Common Stock received in the Merger by
holders of 1992 Series Preferred shares and of Sun State Common Stock who
receive solely Zions Common Stock will be the same as the basis of such shares
of such 1992 Series Preferred shares or Sun State Common Stock surrendered in
exchange therefor. Section 358(a)(1). The basis of shares of Zions Common Stock
received in the Merger by the holders of 1992 Series Preferred shares or Sun
State Common Stock who receive also receive cash will be the Sun State
Shareholders' basis in the Sun State Common Stock and 1992 Series Preferred
stock surrendered in exchange therefor, decreased by the cash received and
increased by the gain recognized by such shareholder with respect to the cash
received pursuant to the terms of the Merger Agreement. Section 358(a)(1).
5. The holding period of shares of Zions Common Stock received in the
Merger by holders of Sun State Common Stock will include the period during which
such shares of Sun State Common Stock or 1992 Series Preferred stock surrendered
in exchange therefor were held by the holder thereof, provided such shares of
Sun State Common Stock and 1992 Series Preferred shares were held as capital
assets. Section 1223(1).
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to Rothgerber, Appel, Powers &
Johnson LLP under the caption "Legal Opinions" in the Proxy Statement/Prospectus
forming a part of the Registration Statement.
Very truly yours,
ROTHGERBER, APPEL, POWERS & JOHNSON LLP
<PAGE>
APPENDIX C
[Nevada Dissenters' Rights]
<PAGE>
APPENDIX C
NEVADA GENERAL CORPORATION LAW
Rights of Dissenting Owners
92A.300 DEFINITIONS.--As used in NRS 92A.300 to 92A.500, inclusive,
unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those
sections.
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED.--"Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or by
a nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED.--"Corporate action" means the
action of a domestic corporation.
92A.315 "DISSENTER" DEFINED.--"Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.410 to
92A.480, inclusive.
92A.320 "FAIR VALUE" DEFINED.--"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 he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
92A.325 "STOCKHOLDER" DEFINED.--"Stockholder" means a stockholder of
record or a beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED.--"Stockholder of record" means
the person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED.--"Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
92A.340 COMPUTATION OF INTEREST.--Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.
. . .
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS
AND TO OBTAIN PAYMENT FOR SHARES.--1. Except as otherwise provided in NRS
92A.370 to 92A.390, a stockholder is entitled to dissent from, and obtain
payment of the fair value of his shares in the event of any of the following
corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation
is a party:
<PAGE>
(1) If approval by the stockholders is required for the merger by NRS
92A.120 to 92A.160, inclusive, or the articles of incorporation and he is
entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with its
parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests will
be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders
to the event that the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting stockholders are entitled
to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under
NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN
CLASSES OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.--1.
There is no right of dissent with respect to a plan of merger or exchange in
favor of stockholders of any class or series which, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or exchange is to be acted on, were either
listed on a national securities exchange, included in the national market system
by the National Association of Securities Dealers, Inc., or held by at least
2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the shares
provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu of
fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the plan of
merger or exchange, were either listed on a national securities exchange,
included in the national market system by the National Association of Securities
Dealers, Inc., or held of record by a least 2,000 holders of owner's interests
of record; or
(2) A combination of cash and owner's interests of the kind described
in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require action of
the stockholders of the surviving domestic corporation under NRS 92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY
TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.--1. A
stockholder of record may assert dissenter's rights as to fewer than all of the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the subject corporation in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
<PAGE>
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.--1. If
a proposed corporate action creating dissenters' rights is submitted to a vote
at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken without
a vote of the stockholders, the domestic corporation shall notify in writing all
stockholders entitled to assert dissenters' rights that the action was taken and
send them the dissenter's notice described in NRS 92A.430.
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.--1. If a
proposed corporate action creating dissenters' rights is submitted to a vote at
a stockholders meeting, a stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection I
is not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS.--1. If a proposed corporate action creating dissenters' rights
is authorized at a stockholders meeting, the subject corporation shall deliver a
written dissenter's notice to all stockholders who satisfied the requirements to
assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the demand for
payment is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the demand
for payment, which may not be less than 30 nor more than 60 days after the date
the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF
RIGHTS OF STOCKHOLDER.--1. A stockholder to whom a dissenter's notice is sent
must:
(a) Demand payment;
<PAGE>
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms of
the notice.
2. The stockholder who demands payment and deposits his certificates,
if any, retains all other rights of a stockholder until those rights are
canceled or modified by the taking of the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER
DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.--1. The subject
corporation may restrict the transfer of shares not represented by a certificate
from the date the demand for their payment is received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.--1. Except as
otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for
payment, the subject corporation shall pay each dissenter who complied with NRS
92A.440 the amount the subject corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the subject corporation under
this subsection may be enforced by the district court:
(a) Of the county where the corporation's registered office is located;
or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has its
registered office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, a statement of
income for that year, a statement of changes in the stockholders' equity for
that year and the latest available interim financial if any;
(b) A statement of the subject corporation's estimate of the fair value
of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF
DISSENTER'S NOTICE.--1. A subject corporation may elect to withhold payment from
a dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenter's notice as the date of the first announcement to the
news media or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate of the
fair value of the
<PAGE>
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE.--1. A dissenter may notify the
subject corporation in writing of his own estimate of the fair value of his
shares and the amount of interest due, and demand payment of his estimate, less
any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470
and demand payment of the fair value of his shares and interest due, if he
believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS
92A.470 is less than the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for his
shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER.--1. If a demand for payment
remains unsettled, the subject corporation shall commence a proceeding within 60
days after receiving the demand and petition the court to determine the fair
value of the shares and accrued interest. If the subject corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or any amendment thereto. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to
a judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the subject corporation;
or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment pursuant to
NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS
AND FEES.--1. The court in a proceeding to determine fair value shall determine
all of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
<PAGE>
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if
the court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject 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 NRS 92A.300 to 92A.500, inclusive.
3. if the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the subject corporation,
the court may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115.
* * * * *
<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
persons of the registrant pursuant to the provisions described under Item 20
II-3
<PAGE>
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.
<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 3rd day of September, 1997.
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
Dale M. Gibbons, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Harris H. Simmons President, Chief Executive September 3, 1997
- ----------------------- Officer and Director
Harris H. Simmons
/s/ Dale M. Gibbons Senior Vice President September 3, 1997
- ----------------------- Chief Financial Officer
Dale M. Gibbons
/s/ Walter E. Kelly Controller September 3, 1997
- -----------------------
Walter E. Kelly
/s/ Roy W. Simmons Chairman and Director September 3, 1997
- -----------------------
Roy W. Simmons
II-5
<PAGE>
Director ___________, 1997
- -----------------------
Jerry C. Atkin
/s/ R. D. Cash Director September 3, 1997
- -----------------------
R. D. Cash
Director ___________, 1997
- -----------------------
L. E. Simmons
/s/ Grant R. Caldwell Director September 3, 1997
- -----------------------
Grant R. Caldwell
/s/ I. J. Wagner Director September 3, 1997
- -----------------------
I. J. Wagner
Director ___________, 1997
- -----------------------
Roger B. Porter
/s/ Dale W. Westergard Director September 3, 1997
- -----------------------
Dale W. Westergard
Director ___________, 1997
- -----------------------
Richard H. Madsen
Director ___________, 1997
- -----------------------
Robert G. Sarver
II-6
<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 th day of August, 1997.
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
Dale M. Gibbons, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
President, Chief Executive August ___, 1997
- --------------------- Officer and Director
Harris H. Simmons
Senior Vice President August ___, 1997
- --------------------- Chief Financial Officer
Dale M. Gibbons
- --------------------- Controller August ___, 1997
Walter E. Kelly
- --------------------- Chairman and Director August ___, 1997
Roy W. Simmons
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<PAGE>
Director __________, 1997
- ---------------------
Jerry C. Atkin
Director __________, 1997
- ---------------------
R. D. Cash
Director __________, 1997
- ---------------------
L. E. Simmons
Director __________, 1997
- ---------------------
Grant R. Caldwell
Director __________, 1997
- ---------------------
I. J. Wagner
Director __________, 1997
- ---------------------
Roger B. Porter
Director __________, 1997
- ---------------------
Dale W. Westergard
Director __________, 1997
- ---------------------
Richard H. Madsen
Director __________, 1997
- ---------------------
Robert G. Sarver
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<PAGE>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Page Number
in Sequential
Exhibit Numbering
No. Description and Method of Filing System
--- -------------------------------- ------
2.1 Agreement and Plan of Reorganization dated as
of May 21, 1997 among Zions Bancorporation,
Nevada State Bank, Sun State Capital
Corporation, and Sun State 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
November 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) *
3.3 Articles of Amendment to the Restated Articles *
of Incorporation of Zions Bancorporation dated
April 30, 1997 and filed with the Department
of Business Regulation, Division of
Corporations of the State of Utah on May 2,
1997 (incorporated by reference to Exhibit 3.1
of Zions Bancorporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997,
File No. 0-2610)
5 Opinion of Duane, Morris & Heckscher LLP
regarding the legality of the shares of Common
Stock being registered (filed herewith)
8 Opinion of Rothgerber, Appel, Powers & Johnson
LLP regarding tax matters (filed herewith as
Appendix A to the Proxy Statement/Prospectus)
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, File No. 0-2610)
10.2 Amendment to Zions Bancorporation Pension Plan *
effective December 1, 1994 (incorporated by
II-7
<PAGE>
reference to Exhibit 10.2 of Zions
Bancorporation's Annual Report on Form 10-K
for the year ended December 31, 1994, File No.
0-2610)
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, File
No. 0-2610)
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,
File No. 0-2610)
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, File No. 0-2610)
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, File No. 0-2610)
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,
File No. 0-2610)
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,
File No. 0-2610)
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,
File No. 0-2610)
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,
File No. 0-2610)
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<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,
File No. 0-2610)
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,
File No. 0-2610)
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, File No. 0-2610)
10.14 Employment agreement between Zions *
Bancorporation and Zions First National Bank
of Arizona and 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, File No.
0-2610)
10.15 Zions Bancorporation Non-Employee Directors *
Stock Option Plan approved by the shareholders
of the Company on April 26, 1996 (incorporated
by reference to Exhibit 10 of Zions
Bancorporation's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, File No.
0-2610)
10.16 Form of Employment Agreement between Pitkin *
County Bank & Trust Company and Charles B.
Israel (incorporated by reference to Exhibit
10.16 to the Registrant's Form S-4
Registration Statement, File No. 333-23839,
filed on March 24, 1997)
10.17 Form of Employment Agreement between Nevada *
State Bank and John Dedolph (filed as Exhibit
VI to the Agreement and Plan of
Reorganization, incorporated by reference as
Exhibit 2.1 above)
10.18 Zions Bancorporation Pension Plan amended and *
restated effective April 1, 1997 (incorporated
by reference to Exhibit 10 of Zions
Bancorporation's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, File No.
0-2610)
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,
File No. 0-2610)
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<PAGE>
23.1 Consent of KPMG Peat Marwick LLP, independent
certified public accountants for Zions
Bancorporation (filed herewith)
23.2 Consent of McGladrey & Pullen LLP, independent
certified public accountants for Sun State
Capital Corporation (filed herewith)
23.3 Consent of Duane, Morris & Heckscher LLP
(contained in their opinion filed as Exhibit 5)
23.4 Consent of Rothgerber, Appel, Powers & Johnson
LLP (contained in their opinion filed as
Exhibit 8)
23.5 Consent of Hoefer & Arnett, Incorporated
(contained in Appendix A)
24.1 Power of Attorney (set forth on Page II-5 of
the Registration Statement)
99.1 Preliminary copy of letter to shareholders of
Sun State Capital Corporation (filed herewith)
99.2 Preliminary copy of Notice of Special Meeting
of Shareholders of Sun State Capital
Corporation (filed herewith)
99.3 Preliminary copy of form of proxy for use by
shareholders of Sun State Capital Corporation
(filed herewith)
99.4 Agreement between Zions Bancorporation and
each director of Sun State Capital Corporation
(filed herewith as part of Agreement and Plan
of Reorganization, filed as Exhibit 2.1)
99.5 Voting agreements between Zions Bancorporation
and various executive officers, directors, and
principal shareholders of Sun State Capital
Corporation (filed herewith as a part of
Agreement and Plan of Reorganization, filed as
Exhibit 2.1)
99.6 Form of election (filed herewith)
- ----------------
* incorporated by reference
II-10
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the twenty-first
day of May, 1997, between ZIONS BANCORPORATION ("Zions Bancorp"), a Utah
corporation having its principal office in Salt Lake City, Utah, NEVADA STATE
BANK, a banking corporation organized under the laws of the State of Nevada ("NS
Bank"), SUN STATE CAPITAL CORPORATION (the "Company"), a Nevada corporation
having its principal office in Las Vegas, Nevada, and SUN STATE BANK, a banking
corporation organized under the laws of the State of Nevada ("SS Bank")
W I T N E S S E T H T H A T:
WHEREAS, Zions Bancorp is a bank holding company which desires to
affiliate with the Company and, in addition, to cause the merger of its
subsidiary, NS Bank, with the subsidiary of the Company, SS Bank, with NS Bank
to be the resulting banking corporation; 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 those of SS Bank and the areas served by the Company and SS Bank to become
affiliated with Zions Bancorp and to cause the merger of SS Bank with and into
NS Bank (the "Bank Merger");
WHEREAS, the respective boards of directors of NS Bank and SS Bank have
determined that it would be in the best interests of NS Bank or SS Bank, as the
case may be, its shareholders and customers, for NS Bank and SS Bank to merge
with each other;
WHEREAS, the respective Boards of Directors of the Company and Zions
Bancorp have agreed to the merger (the "Merger") of the Company with and into
Zions Bancorp pursuant to the provisions of section 92A.005 et seq. of the
Nevada Revised Statutes and section 16-10a-1101 et seq. of the Utah Business
Corporation Act; and to cause the Bank Merger pursuant to the provisions of
section 666.015 et seq. of the Nevada Revised Statutes and section 92A.005 et
seq. of the Nevada Revised Statutes; and
WHEREAS, the parties intend that the Merger and the Bank Merger qualify
as one or more tax-free reorganizations under section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
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) Zions Bancorp and the Company will execute a merger agreement
(the "Merger Agreement") substantially in the form of Exhibit I annexed hereto.
Subject to the provisions of the Merger Agreement, the Company will be merged
<PAGE>
with and into Zions Bancorp (the "Merger"), and Zions Bancorp shall be the
surviving corporation. The shares of 1992 Series Preferred Stock of the Company
(the "Company Preferred Stock") and the shares of common stock of the Company
(the "Company Common Stock") shall be canceled and immediately converted into
the right to receive, subject to the terms, conditions, and limitations set
forth herein, such consideration as is respectively provided in section
1.2(b)(i) and 1.2(b)(ii) hereof.
(b) Zions Bancorp and the Company will respectively cause NS Bank
and SS Bank to execute a merger agreement (the "Bank Merger Agreement")
substantially in the form of Exhibit II annexed hereto. Immediately following
the effectiveness of the Merger, and subject to the provisions of the Bank
Merger Agreement, SS Bank will be merged with and into NS Bank (the "Bank
Merger"), and NS Bank shall be the surviving banking corporation. The shares of
common stock of SS Bank shall be canceled.
1.2. Consideration for 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 over the Pricing Period.
(ii) 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.
(iii) 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").
(iv) Pricing Period. The twenty consecutive trading days
ending on and including the fifth trading day preceding the Effective Date,
except that if prior to the fifth trading day preceding the Effective Date Zions
Bancorp shall have publicly announced its entry into a definitive agreement
providing for a change in control (which for purposes of this paragraph means a
sale of more than 50 percent of the voting stock of Zions Bancorp to an
unaffiliated person, or a sale of more than 50 percent of the voting stock of
Zions First National Bank ("Zions Bank") to an unaffiliated person, or a merger
or consolidation or a sale of all or substantially all of the assets of Zions
Bancorp or Zions Bank with or to an unaffiliated person in a transaction in
which individuals who constitute the board of directors of Zions Bancorp or
Zions Bank, as the case may be, prior to the transaction cease to constitute at
least a majority thereof following the transaction), then the Pricing Period
shall be the twenty consecutive trading days ending on and including the trading
day preceding such public announcement.
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<PAGE>
(v) Purchase Price. The sum of the amounts described in
subsections (A) through (E) of this section 1.2(a)(v), reduced by the amounts
described in subsections (F) through (H) of this section 1.2(a)(v).
(A) Base Purchase Price. $37,000,000.
(B) Earn-Out. The consolidated net undistributed income of the
Company during the period beginning on May 1, 1997 and ending on the close of
business on the last day of the calendar month preceding the effective date of
the Merger (the "Effective Date"), calculated in accordance with generally
accepted accounting principles. For the purpose of calculating consolidated net
undistributed income of the Company, (I) the effect of 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;
and (II) any loss, net of taxes, resulting from operating transactions
recommended by the Company to Zions Bancorp as likely to produce economic
benefits to the Company and approved in writing by Zions Bancorp prior to their
effectuation shall be excluded. It is understood that the amount calculated
under this section 1.2(a)(v)(B) may be a negative number and that the effect of
summing such a negative number would be a reduction in the Purchase Price.
(C) Prorated Earn-Out. The product of the daily average of the
consolidated net undistributed income of the Company during the period and
calculated in the manner prescribed in section 1.2(a)(v)(B) hereof (first
reduced, however, solely for purposes of performing calculations under this
section 1.2(a)(v)(C), by the expenses of the Company between May 1, 1997 and the
close of business on the last day of the calendar month preceding the Effective
Date (net of any applicable tax benefit or expense) with respect to (I)
attorneys, accountants, investment bankers, consultants, brokers and finders,
and other third parties who have or will have rendered services to the Company
or SS Bank in connection with the Merger, and (II) Third Party Termination
Costs, which for purposes of this Agreement mean damages, penalties, liquidated
damages, termination fees, break-up fees, topping fees, expense-reimbursement
provisions, repurchases of stock options, fees in settlement of actual or
threatened litigation, and other similar costs and related expenses incurred to
resolve outstanding claims or relationships with any party other than Zions
Bancorp and NS Bank in connection with a potential change in control) times the
number of days in the month of the Effective Date which precede the Effective
Date. It is understood that the amount calculated under this section
1.2(a)(v)(C) may be a negative number and that the effect of summing such a
negative number would be a reduction in the Purchase Price.
(D) Option-Exercise Proceeds. The aggregate contributions to
capital of the Company caused by the payments accompanying the exercise of any
stock options after April 30, 1997.
(E) Proceeds of Sale of Treasury Shares. The proceeds to the
Company of sales of shares out of the treasury after April 30, 1997, net of the
cost to the Company of purchases of shares into the treasury after April 30,
1997. It is understood that the amount calculated under this section
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<PAGE>
1.2(a)(v)(E) may be a negative number and that the effect of summing such a
negative number would be a reduction in the Purchase Price.
(F) Reduction for Extraordinary Dividends. The excess of the
dividends and distributions declared or paid by the Company with respect to all
classes of its capital stock between January 1, 1997 and April 30, 1997 over the
dividends and distributions that are customarily paid by the Company to holders
of all classes of its capital stock during the January 1-April 30 period. It is
understood that the amount calculated under this section 1.2(a)(v)(F) may be a
negative number and that the effect of reducing the Purchase Price by such a
negative number would be an increase in the Purchase Price.
(G) Reduction for Transaction Fees. The consolidated net
after-tax expenses of the Company between January 1, 1997 and April 30, 1997
with respect to attorneys, accountants, investment bankers, consultants, brokers
and finders, and other third parties who have or will have rendered services to
the Company or SS Bank in connection with any potential change in control (which
for purposes of this paragraph, paragraph (H) immediately below, and section
7.10(f) of this Agreement means a potential sale of more than 50 percent of the
voting stock of the Company to an unaffiliated person, or a potential sale of
more than 50 percent of the voting stock of SS Bank to an unaffiliated person,
or a potential merger or consolidation or a potential sale of all or
substantially all of the assets of the Company or SS Bank with or to an
unaffiliated person in a transaction in which individuals who constitute the
board of directors of the Company or SS Bank, as the case may be, prior to the
transaction would cease to constitute at least a majority thereof following the
transaction), including, without limitation, the Merger and the Bank Merger.
(H) Reduction for Third Party Termination Costs. The
consolidated expenses of the Company between January 1, 1997 and April 30, 1997
with respect to Third Party Termination Costs, without the accrual of any
offsetting income tax benefit unless the accrual of such income tax benefit is
concurred in by Zions Bancorp, which concurrence will not be unreasonably
withheld.
(vi) 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:
(i) Holders of Company Preferred Stock. Each holder of shares
of Company Preferred Stock shall be entitled to receive, in exchange for each
share of Company Preferred Stock held of record by such stockholder as of the
Effective Date, at his or her election except as provided herein one of the
following, or a combination of Zions Bancorp Stock and cash determined in
accordance with section 1.3:
(A) that number of shares of Zions Bancorp Stock calculated by
dividing $110 plus accrued and unpaid dividends on one share of Company
Preferred Stock by the Average Closing Price (the "Preferred Stock
Consideration"); or
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<PAGE>
(B) $110 per share plus accrued and unpaid dividends on one
share of Company Preferred Stock (the "Preferred Cash Consideration").
(ii) Holders of Company Common Stock. Each holder of shares of
Company Common Stock shall be entitled to receive, in exchange for each share of
Company Common Stock held of record by such stockholder as of the Effective
Date, at his or her election except as provided herein one of the following, or
a combination of Zions Bancorp Stock and cash determined in accordance with
section 1.3:
(A) that number of shares of Zions Bancorp Stock calculated by
dividing the Purchase 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 (the "Common Stock
Consideration"); or
(B) that amount of cash calculated by dividing the Purchase
Price by the number of shares of Company Common Stock that shall be issued and
outstanding at the Effective Date (the "Common Cash Consideration").
1.3. Elections.
(a) Certain Definitions.
(i) Stock Consideration. Preferred Stock Consideration and
Common Stock Consideration are referred to collectively in this Agreement as
"Stock Consideration."
(ii) Cash Consideration. Preferred Cash Consideration and
Common Cash Consideration are referred to collectively in this Agreement as
"Cash Consideration."
(iii) Company Stock. Company Preferred Stock and Company
Common Stock are referred to collectively in this Agreement as "Company Stock."
(b) Entitlement to Elect. Subject to the election and allocation
procedures set forth in this section, each holder of Company Stock (other than
holders of dissenting shares) will be entitled, with respect to each share of
Company Stock held by such holder, to (i) elect to receive the Stock
Consideration (a "Stock Election"), or (ii) elect to receive the Cash
Consideration (a "Cash Election"), or (iii) indicate that such holder has no
preference as between receipt of the Stock Consideration and receipt of the Cash
Consideration (a "Non-Election"). With respect to each share of Company
Preferred Stock covered by a Non-Election, a Cash Election shall be deemed to
have been made by the holder of such share.
(c) Cash Election Number. The number of shares of Company Common
Stock to be converted into the right to receive the Cash Consideration in the
Merger shall be no greater than (i) 49 percent of the sum of (A) the number of
shares of Company Common Stock issued and outstanding or held in the Company's
treasury immediately prior to the Effective Time and (B) the product of a
fraction, the numerator of which is the Preferred Cash Consideration and the
denominator of which is the Common Cash Consideration (such fraction the
"Preferred/Common Conversion Factor"), times the number of shares of Company
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<PAGE>
Preferred Stock issued and outstanding or held in the Company's treasury
immediately prior to the Effective Time, less (ii) the sum of (A) the Dissenting
Shares and (B) the quotient computed by dividing the aggregate amount of cash to
be received by holders of Company Preferred Stock pursuant to section 1.2(b)(i)
of this Agreement by the Common Cash Consideration and (C) the quotient computed
by dividing the aggregate amount of cash to be received by each shareholder of
the Company pursuant to Section 1.4 hereof by the Common Cash Consideration. The
maximum number of shares of Company Common Stock to be converted into the right
to receive the Cash Consideration, as calculated pursuant to this paragraph, is
referred to in this Agreement as the "Cash Election Number."
(d) Election -Adjustments. If the aggregate number of shares
of Company Common Stock covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, (i) all shares of Company Common Stock covered
by Stock Elections (the "Stock Election Shares") and all shares of Company
Common Stock covered by Non-Elections (the "Non-Election Shares") shall be
converted into the right to receive the Stock Consideration, and (ii) all Cash
Election Shares shall be converted into the right to receive Zions Bancorp Stock
and cash in the following manner: each Cash Election Share shall be converted
into the right to receive (A) an amount in cash, without interest, equal to the
product of (1) the Common Cash Consideration and (2) a fraction (the "Cash
Fraction"), the numerator of which shall be the Cash Election Number and the
denominator of which shall be the total number of Cash Election Shares, and (B)
a number of shares of Zions Bancorp Stock equal to the product of (1) the Common
Stock Consideration and (2) a fraction equal to one minus the Cash Fraction.
(e) Non-Election Adjustments. In the event that Section 1.3(d)
of this Agreement is not applicable, all Cash Election Shares and all shares of
Company Preferred Stock covered by Non-Elections shall be converted into the
right to receive the Common Cash Consideration and Preferred Cash Consideration,
respectively, all Stock Election Shares shall be converted into the right to
receive the Stock Consideration, and the Non-Election Shares, if any, shall be
converted into the right to receive (i) if the aggregate number of Cash Election
Shares and Non-Election Shares does not exceed the Cash Election Number, Common
Cash Consideration for each Non-Election Share and (ii) if such aggregate number
does exceed the Cash Election Number, Zions Bancorp Stock and cash in the
following manner: each Non-Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product of (x) the
Common Cash Consideration and (y) a fraction (the "Non-Election Fraction"), the
numerator of which shall be the excess of (A) the Cash Election Number over (B)
the total number of Cash Election Shares and the denominator of which shall be
the total number of Non- Election Shares and (ii) a number of shares of Zions
Bancorp Stock equal to the product of (x) the Common Stock Consideration and (y)
a fraction equal to one minus the Non-Election Fraction.
(f) Adjustments Relating to Tax Opinions. If the tax opinion
referred to in section 3.4 of this Agreement cannot be rendered (as reasonably
determined by the person that is to render such opinion and reasonably concurred
in by Duane, Morris & Heckscher), as a result of the Merger potentially failing
to satisfy continuity of interest requirements under applicable federal income
tax principles relating to reorganizations under Section 368(a) of the Code,
then Zions Bancorp shall decrease the Cash Election Number to the minimum extent
necessary to enable the relevant tax opinion or opinions, as the case may be, to
be rendered.
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<PAGE>
(g) Exercise of Election.
(i) All Cash Elections, Stock Elections, and Non-Elections
shall be made on a form designed for that purpose by the Exchange Agent
designated in section 1.6 of this Agreement (a "Form of Election") and mailed to
holders of record of shares of Company Stock as of the record date for the
meeting at which the shareholders of the Company meet to approve, ratify, and
confirm the transactions contemplated by this Agreement or such other date as
Zions Bancorp and the Company shall mutually agree (the "Election Form Record
Date"). Zions Bancorp and the Company shall make available one or more Forms of
Election as may be reasonably requested by all persons who become holders or
beneficial owners of Company Stock between the Election Form Record Date and the
close of business on the day prior to the Election Deadline.
(ii) Elections shall be made by holders of Company Stock
by mailing to the Exchange Agent a Form of Election. Any holder of Company Stock
may allocate his or her Company Stock among Cash Election Shares, Stock Election
Shares, and Non-Election Shares as he or she sees fit, that is, by electing to
allocate all to one category or by dividing his or her Company Stock among more
than one category, provided that if the sum of the shares of any holder as to
which Cash Elections, Stock Elections, and Non-Elections are made exceed the
total number of shares held by that holder, the Exchange Agent shall consider
all the elections submitted by that holder to have been not properly made and,
accordingly, subject to the procedures set forth in section 1.3(i).
(iii) To be effective, a Form of Election must be properly
completed, signed, and submitted to the Exchange Agent; and the Exchange Agent
must also have received, no later than the Election Deadline, the certificates
representing the shares of Company Stock as to which the election is being made
(or an appropriate guarantee of delivery by an appropriate trust company in the
United States or a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc.).
(iv) The Exchange Agent will have the discretion to
reasonably determine whether Forms of Election have been properly completed,
signed, and submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of the Exchange Agent in such matters shall be conclusive
and binding. Zions Bancorp will not be under any obligation to notify any person
of any defect in a Form of Election submitted to the Exchange Agent, but the
Exchange Agent shall use commercially reasonable efforts to notify a holder of
any such defect.
(v) The Exchange Agent shall make all computations
contemplated by this Section 1.3, and all computations shall be conclusive and
binding on the holders of Company Stock.
(h) Election Deadline. A Form of Election must be received by
the Exchange Agent by the close of business on the tenth business day following
the Closing Date (the "Election Deadline") in order to be effective. Any holder
of Company Stock who has made an election by submitting a Form of Election to
the Exchange Agent may at any time prior to the Election Deadline change his or
her election by submitting a revised Form of Election, properly completed and
signed, that is received by the Exchange Agent prior to the Election Deadline.
Any holder of Company Stock may at any time prior to the Election Deadline
revoke his
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or her election and withdraw his or her certificates deposited with the Exchange
Agent by written notice to the Exchange Agent received by the close of business
on the day prior to the Election Deadline. As soon as practicable after the
Election Deadline, the Exchange Agent shall determine the allocation of the cash
portion of the Merger Consideration and the stock portion of the Merger
Consideration and shall notify Zions Bancorp of its determination.
(i) Deemed Non-Election. For the purposes hereof, a holder of
Company Common Stock (including a holder of Dissenting Shares who shall have
failed to perfect, or shall have effectively withdrawn or lost, his or her right
to dissent from the Merger under the Appraisal Laws) who does not submit a Form
of Election which is received by the Exchange Agent prior to the Election
Deadline shall be deemed to have made a Non-Election. If the Exchange Agent
shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall be deemed to
be of no force and effect and the shareholder making such purported Cash
Election or Stock Election shall for purposes hereof be deemed to have made a
Non-Election.
1.4. 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.
1.5. 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 Stock for Zions Bancorp
Stock. 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 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) and (iii) the cash value of any fractional
shares determined in accordance with Section 1.4 hereof.
1.6. Designation of Exchange Agent. The Company and Zions Bancorp
hereby designate Zions Bank as Exchange Agent to effect the exchange
contemplated hereby. Zions Bancorp will, promptly after the Election Deadline,
issue and deliver to Zions Bank the share certificates representing shares of
Zions Bancorp Stock and the cash to be paid to holders of Company Stock in
accordance with this Agreement.
1.7. Notice of Exchange. Promptly after the Effective Date, Zions
Bank shall mail to each holder of one or more certificates formerly representing
Company 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. Such notice shall be mailed to holders by regular mail at their
addresses on the records of the Company.
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1.8. Treatment of Stock Options. Each stock option to purchase
Company Common Stock not exercised prior to the Effective Date shall
automatically be canceled on and as of the Effective Date.
1.9 Voting Agreements. Simultaneously herewith, each person listed on
Schedule 1.9 hereof shall enter into an agreement with Zions Bancorp,
substantially in form and substance as that set forth as Exhibit III attached
hereto, in which he or she agrees to vote all shares of the Company which may be
voted, or whose vote may be directed, by him or her, in favor of the
transactions contemplated by this Agreement at the meeting of shareholders at
which such transaction shall be considered.
1.10. Employee Benefits. If any employee of the Company or of SS Bank
becomes a participant in any employment benefit plan, practice, or policy of
Zions Bancorp, such employee shall be given credit under such plan, practice, or
policy for all service prior to the Effective Date with the Company or SS 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 SS Bank that continue in effect
following the Effective Date.
2. Effective Date.
The Effective Date shall be the date which is the latest of:
2.1. 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 SS Bank approves, ratifies, and confirms the Bank Merger; 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 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 Merger; or
2.4. FDIC Approval. The first to occur of (a) the date thirty days
following the date of the order of the Federal Deposit Insurance Corporation
(the "FDIC") approving the Bank Merger, or (b) if, pursuant to section 321(b) of
the Riegle Act, the FDIC 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
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2.5. Utah Commissioner Approval. 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 "Utah Commissioner") approving
the transactions contemplated by this Agreement; or
2.6. Nevada Commissioner Approval. The date ten days following the
date of the order of the Commissioner of Financial Institutions of the State of
Nevada (the "Nevada Commissioner") approving the transactions contemplated by
this Agreement; or
2.7. 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
2.8. Expiration of Stays. Ten days after any stay of the approvals of
any of the Board of Governors, the FDIC, the Utah Commissioner, or the Nevada
Commissioner of the transactions contemplated by this Agreement or any
injunction against closing of said transactions is lifted, discharged, or
dismissed; or
2.9. 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
Merger and the obligations of NS Bank and SS 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, the
business of SS Bank, and each of the branches of SS Bank, 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.
3.2. 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 Merger or the Bank Merger, or which would reasonably be expected to restrict
materially the operation of the business of the Company or that of SS Bank or
the exercise of any rights with respect thereto or to subject either of the
parties hereto or any of their subsidiaries, directors, or officers to any
liability, fine, forfeiture, divestiture, or penalty on the ground that the
transactions contemplated hereby, the parties hereto, or their subsidiaries,
directors, or officers have breached or will breach any applicable law or
regulation or have otherwise acted improperly in connection with the
transactions contemplated hereby and with respect to which the parties hereto
have been advised by counsel that, in the opinion of such counsel, such action,
suit, or proceeding raises
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substantial questions of law or fact which could reasonably be decided
materially adversely to either party hereto or its subsidiaries, directors, or
officers.
3.3. 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 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 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.
3.4. Federal Income Taxation. Zions Bancorp and the Company shall
have received a written opinion of Rothgerber, Appel, Powers & Johnson LLP, 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 reorganizations
under section 368(a)(1) of the Code and the regulations and rulings promulgated
thereunder.
3.5. Adverse Legislation. Subsequent to the date of this Agreement no
legislation shall have been enacted and no regulation or other governmental
requirement shall have been adopted or imposed that renders or will render
consummation of any of the material transactions contemplated by this Agreement
impossible.
4. Conditions Precedent to Performance of the Obligations of Zions
Bancorp and NS Bank.
The obligations of Zions Bancorp and NS 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 Zions Bancorp in writing unless not so permitted by law:
4.1. Approval by Shareholders of the Company and SS Bank.
(a) The shareholders of the Company, acting pursuant to a
proxy statement in form and substance satisfactory to Zions Bancorp and its
counsel, shall have authorized, ratified, and confirmed the 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 Nevada.
(b) The shareholders of SS Bank shall have authorized,
ratified, and confirmed the Bank Merger by not less than the requisite
percentage of the outstanding voting stock of each class of SS Bank, in
accordance with the applicable laws of the State of Nevada.
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<PAGE>
4.2. Representations and Warranties; Performance of Obligations. All
representations and warranties of the Company and SS 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 representatives and warranties
of the Company or SS 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 SS Bank on or prior to the Effective Date shall have been so
performed or met. On the Effective Date, the president and chief executive
officer and the chief financial officer of each of the Company and SS Bank shall
deliver to Zions Bancorp a certificate to that effect. The delivery of such
officers' certificate shall in no way diminish the warranties, representations,
covenants, and obligations of the Company and SS Bank made in this Agreement.
4.3. Opinion of Company Counsel. Zions Bancorp shall have received a
favorable opinion from Rothgerber, Appel, Powers & Johnson LLP, 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 shall have
received a favorable opinion from legal counsel handling litigation matters for
the Company and SS Bank dated the Effective Date, substantially in form and
substance as that set forth as Exhibit V attached hereto.
4.5. Delivery of Branch Authorizations. The Company shall have
delivered to Zions Bancorp originals or certified copies of all of the
regulatory authorizations entitling SS Bank to operate each of its branch
offices, together with a certification by the president and chief executive
officer and the chief financial officer of SS Bank dated the Effective Date,
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 December 31, 1996 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 SS Bank taken as a whole,
nor shall the Company or SS Bank have sustained any material loss or damage to
its properties, whether or not insured, which materially affects its ability to
conduct its business; and (ii) 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, except as adjusted to account
for issuances of Company Common Stock pursuant to the exercise of options
described in section 6.9 of this Agreement and the resale by the Company of
shares of Company Common Stock held in the treasury on the date of this
Agreement consistent with section 7.4(b) of this Agreement, the capital
structure of the Company and the capital structure of SS Bank shall be as stated
in section 6.9.
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(c) As of the Effective Date, other than liabilities incurred
in the ordinary course of business subsequent to December 31, 1996, there shall
be no liabilities of the Company or SS Bank which are material to the Company on
a consolidated basis which were not reflected on the consolidated statement of
condition of the Company as of December 31, 1996 or in the related notes to the
consolidated statement of condition of the Company as of December 31, 1996.
(d) No adverse action shall have been instituted or threatened
by any governmental authority, or referred by a governmental authority to
another governmental authority, for the enforcement or assessment of penalties
for the violation of any laws of regulations relating to equal credit
opportunity, fair housing, or fair lending.
(e) Zions Bancorp shall have received a certificate dated the
Effective Date, signed by the chairman and president and the chief financial
officer of the Company and the chairman and president and the chief financial
officer of SS Bank, certifying to the matters set forth in paragraphs (a), (b),
(c), and (d) of this section 4.6. The delivery of such officers' certificate
shall in no way diminish the warranties and representations of the Company or
those of SS 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 sum of (a)
$12,649,648, (b) the amount of the quarterly cash dividend of the Company to
holders of its common stock that, pursuant to the historical practice of the
Company, would have been paid with respect to the first quarter 1997 had its
declaration not been forgone by the directors of the Company; (c) the aggregate
contributions to capital caused by the payments accompanying the exercise of any
stock options on or after December 31, 1996, and (d) the proceeds of the resale
by the Company of shares of Company Common Stock subscribed for or held in the
treasury on the date of this Agreement consistent with section 7.4(b) of this
Agreement.
4.8. Loan Loss Reserve. On and as of the Effective Date, the
aggregate reserve for loan losses of SS Bank as determined in accordance with
generally accepted accounting principles shall not be less than $1,865,790.
4.9. CRA Rating. The CRA rating of SS Bank shall be no lower than
"satisfactory."
4.10. Termination of EDS Contract. The Company and SS Bank shall have
terminated the contract with EDS for data processing services, such termination
to have been carried out in a manner consistent with the objectives of section
11.2(b) of this Agreement and to be effective no later than the Effective Date.
4.11. Employment Agreement. John Dedolph shall have entered into an
employment agreement with NS Bank substantially in form and substance as that
set forth as Exhibit VI attached hereto.
5. Conditions Precedent to Performance of Obligations of the Company and
SS Bank.
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<PAGE>
The obligations of the Company and SS 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 unless not so permitted by law:
5.1. Approval by Shareholders of NS Bank. The shareholders of NS Bank
shall have authorized, ratified, and confirmed the Bank Merger by not less than
the requisite percentage of the outstanding voting stock of each class of NS
Bank, in accordance with the applicable laws of the State of Nevada.
5.2. Representations and Warranties; Performance of Obligations. All
representations and warranties of Zions Bancorp and NS 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 Zions Bancorp and NS 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
Zions Bancorp or NS Bank on or prior to the Effective Date shall have been so
performed or met. On the Effective Date, either the Chairman of the Board or the
President of Zions Bancorp and either the Chairman of the Board or the President
of NS Bank shall deliver to the Company a certificate to that effect. The
delivery of such officer's certificate shall in no way diminish the warranties,
representations, covenants, and obligations of Zions Bancorp and NS Bank made in
this Agreement.
5.3. Opinion of Zions Bancorp Counsel. The Company shall have
received a favorable opinion of Duane, Morris & Heckscher, dated the Effective
Date, substantially in form and substance as that set forth as Exhibit VII
attached hereto.
5.4. No Adverse Developments. During the period from December 31,
1996 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 dated
the Effective Date signed by either the Chairman of the Board or the President
of Zions Bancorp to the foregoing effect. The delivery of such officer's
certificate shall in no way diminish the warranties and representations of Zions
Bancorp or those of NS Bank made in this Agreement.
5.5. Status of Zions Bancorp Stock. Zions Bancorp Stock shall be
listed on the National Association of Securities Dealers' Automated Quotation
System (or else shall become listed on a national securities exchange).
6. Representations and Warranties of the Company and SS Bank.
The Company (with respect to itself and SS Bank) and SS Bank (solely
with respect to itself) each represents and warrants to Zions Bancorp and NS
Bank as follows:
6.1. Organization, Powers, and Qualification. Each of the Company and
SS Bank is a corporation which is duly organized, validly existing, and in good
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standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and
assets, to lease properties used in its business, and to carry on its business
as now conducted. Each of the Company and SS Bank 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
Company or SS Bank in any material respect. Each of the Company and SS Bank 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 material liability or adversely affect the operation and
properties of the Company or SS Bank in any material respect.
6.2. Execution and Performance of Agreement. Each of the Company and
SS Bank has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its respective terms.
6.3. Absence of Violations.
(a) Neither the Company nor SS Bank is in violation of its
respective charter documents or bylaws, nor of any applicable federal, state, or
local law or ordinance nor 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 could reasonably be expected to have
a materially adverse effect on its business, properties, liabilities, financial
position, results of operations, or prospects; and neither the Company nor SS
Bank has received any claim or notice of violation with respect thereto;
(b) Neither the Company nor SS Bank nor any member of the
management of any of them is a party to any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the Board of Governors,
the Federal Deposit Insurance Corporation (the "FDIC"), any other banking or
securities authority of the United States or the State of Nevada, or any other
regulatory agency that relates to the conduct of the business of the Company or
SS Bank or their assets; and except as previously disclosed to Zions Bancorp in
writing, no such agreement, memorandum, order, condition, or decree is pending
or threatened;
(c) Each of the Company and SS Bank has established policies
and procedures to provide reasonable assurance of compliance in a safe and sound
manner with the federal banking, credit, housing, consumer protection, and civil
rights laws and with all other laws applicable to the operations of the Company
and SS Bank and the regulations adopted under each of those laws, so that
transactions be executed and assets be maintained in accordance with such laws
and regulations; and the policies and practices of each of the Company and SS
Bank with respect to all such laws and regulations reasonably limit
noncompliance and detect and report noncompliance to its management; and
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(d) SS Bank has established a CRA policy which provides for
(i) goals and objectives consistent with CRA; (ii) a methodology for
self-assessment by the board of directors of SS Bank; (iii) ongoing CRA training
of all personnel of SS Bank, including the members of its board of directors;
and (iv) procedures whereby all significant CRA-related activity is documented;
and SS Bank has officially designated a CRA officer who reports directly to the
board of directors and is responsible for the CRA program of SS Bank.
6.4. Compliance with Agreements. Neither the Company nor SS Bank is
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 each of the Company and SS Bank 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 each of the Company and SS Bank, 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 each of the Company and SS Bank. Subject to approval by
its shareholders of this Agreement, no other corporate proceedings on the part
of either the Company or SS Bank are necessary to authorize 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 thereby, or
the compliance with or fulfillment of the terms thereof 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 Company
or SS Bank. Such execution, consummation, or fulfillment will not (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 Company or SS Bank pursuant to any material agreement or
instrument under which the Company or SS Bank 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 the Company or SS Bank in
respect of which it is an obligor; (b) if the 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 its jurisdiction over the Merger, and
if the transactions contemplated by this Agreement are approved by the FDIC, the
Nevada Commissioner, and the Utah Commissioner, violate any law, statute, rule,
or regulation of any government or agency to which the Company or SS Bank is
subject and which is material to its operations; or (c) violate any judgment,
order, writ, injunction, decree, or ruling to which the Company or SS Bank 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
thereby, or the compliance with or fulfillment of the terms thereof will require
any authorization, consent, approval, or exemption by any person which has not
been obtained, or any notice
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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 FDIC, the Nevada Commissioner, and the Utah Commissioner.
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 SS Bank or over any company that directly
or indirectly has control over SS Bank.
6.8. Subsidiaries.
(a) Other than SS Bank, which is a direct, wholly-owned
subsidiary of the Company, the Company does not have any direct or indirect
subsidiaries and does not directly or indirectly own, control, or hold with the
power to vote any shares of the capital stock of any company (except shares held
by SS Bank for the account of others in a fiduciary or custodial capacity in the
ordinary course of its business). There are no outstanding subscriptions,
options, warrants, convertible securities, calls, commitments, or agreements
calling for or requiring the issuance, transfer, sale, or other disposition of
any shares of the capital stock of SS Bank, or calling for or requiring the
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of SS Bank. There are no other direct or indirect subsidiaries
of the Company 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 SS Bank prepared in accordance with generally accepted
accounting principles.
(b) Except as specified in the previous subsection, neither
the Company nor SS Bank 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
(i) 1,000,000 shares of preferred stock, $100 par value, of which 40,000 are
designated as 1992 Series Preferred Stock (the "Company Preferred Stock"), of
which Company Preferred Stock, as of the date of this Agreement, 5,719 shares
have been duly issued and are validly outstanding, fully paid, and held by
approximately 21 stockholders of record, and (ii) 10,000,000 shares of Company
Common Stock, $0.01 par value, of which, as of the date of this Agreement,
284,750 shares have been duly issued and are validly outstanding, fully paid,
and held by approximately 76 shareholders of record, and 2,750 additional shares
are issued and held in the treasury of the Company, 250 of which have been
subscribed for. The aforementioned shares of Company Preferred Stock and Company
Common Stock are the only voting securities of the Company authorized, issued,
outstanding, or subscribed for as of such date; and except as set forth in this
Section
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6.9 or on Schedule 6.9 hereof, 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. No shares of Company Preferred Stock or Company
Common Stock are held by the Company as treasury shares except for the 2,750
shares of Company Common Stock aforesaid. 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) Schedule 6.9 hereof lists all options to purchase Company
securities currently outstanding and, for each such option, the date of
issuance, date of exercisability, exercise price, type of security for which
exercisable, and date of expiration. Schedule 6.9 hereof further lists all
shares of Company Preferred Stock and Company Common Stock reserved for issuance
pursuant to stock option plans, agreements, or arrangements but not yet issued
and all options upon shares of Company Preferred Stock or Company Common Stock
designated or made available for grant but not yet granted.
(c) The authorized capital stock of SS Bank consists of 400
shares of common stock, $12,500 par value (the "SS Bank Common Stock"), of
which, as of the date of this Agreement, 258 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 SS Bank Common Stock
are the only voting securities of SS 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
SS 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
SS Bank. None of the SS Bank Common Stock is subject to any restrictions upon
the transfer thereof under the terms of the corporate charter or bylaws of SS
Bank.
(d) None of the shares of Company Common Stock or SS Bank
Common Stock has been issued in violation of the preemptive rights of any
shareholder.
(e) As of the date hereof, to the best of the knowledge of the
Company and SS Bank, 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 the Company or SS
Bank to vote or to dispose of his or its shares of capital stock of that entity.
(f) The Company has not granted any shareholders' rights to
dissent from any merger.
(g) Holders of Company Preferred Stock have no right to vote
upon any consolidation, merger, or sale of all or substantially all of the
assets of the Company.
(h) No dividends on Company Preferred Stock are in arrears.
(i) No balance is outstanding under the $14-million line of
credit which the Company maintains secured by Small Business Administration loan
pools.
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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 Company and SS Bank that have been provided to Zions Bancorp
and certified by the Company as complete and true copies are true, correct, and
complete copies thereof. The minute books of the Company and SS Bank which have
been made available to Zions Bancorp for its continuing inspection 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 Company and SS Bank since their respective inceptions.
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 Company and SS Bank
and all committees thereof. Except as reflected in such minute books, there are
no minutes of meetings or consents in lieu of meetings of the board of directors
(or any committee thereof) or of shareholders of the Company or SS Bank.
6.11. Books and Records. The books and records of each of the Company
and SS Bank fairly reflect the transactions to which it is a party or by which
its properties are subject or bound. Such books and records have been properly
kept and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. Each of the Company and SS Bank
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 Company and SS Bank have made all accruals in amounts
which fairly report income and expense in the proper periods in accordance with
generally accepted accounting principles. Each of the Company and SS Bank 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 to Zions Bancorp or grant to Zions Bancorp continuing
access until the Effective Date to originals or copies of the following
documents relating to the Company and SS Bank:
(a) All regulatory approvals received since January 1, 1992,
of the Company and SS Bank relating to all bank and nonbank acquisitions or the
establishment of de novo operations;
(b) All employment contracts, election contracts, retention
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
SS 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;
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(c) All material contracts, agreements, leases, mortgages, and
commitments, except those entered into in the ordinary course of business, to
which the Company or SS Bank is a party or may be bound; or, if any of the same
be oral, true, accurate, and complete written summaries of all such oral
contracts, agreements, leases, mortgages, and commitments;
(d) All material contracts, agreements, leases, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or SS 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, true, accurate, and
complete written summaries of all such oral contracts, agreements, leases,
mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or SS 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 SS Bank operates its businesses or is authorized to operate its
businesses, or with respect to which the Company or SS 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 SS 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
SS Bank for the years 1991 through 1996, a copy of the most recent audit
examination of each of the Company and SS 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 SS Bank, and all tax rulings with respect to the
Company or SS Bank received from the IRS since January 1, 1988.
6.13. Financial Statements. The Company has furnished to Zions
Bancorp its consolidated statement of condition as of each of December 31, 1994,
December 31, 1995, December 31, 1996, March 31, 1997, and April 30, 1997, 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 (b) are in
accordance with the books and records of the Company and SS Bank 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 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,
adequate provision for, or reserves against, the possible loan losses of the
Company as of such dates.
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6.14. Call Reports; Bank Holding Company Reports.
(a) SS Bank has made available to Zions Bancorp its
Consolidated Reports of Condition and Consolidated Reports of Income for the
calendar quarters dated March 31, 1995 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 or, to the
extent different from generally accepted accounting principles, accounting
principles mandated by the applicable instructions to such Consolidated Reports
of Condition or Consolidated Reports of Income.
(b) No adjustments are required to be made to the equity
capital account of SS 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 as of
such date.
(c) The Company has furnished to Zions Bancorp (i) its annual
report on Form FR Y-6 as filed with the Board of Governors as of December 31,
1996, and (ii) its quarterly reports on Forms FR Y-9C and FR Y-9LP as filed with
the Board of Governors as of March 31, 1997.
6.15. Absence of Undisclosed Liabilities. At April 30, 1997, neither
the Company nor SS Bank had any obligation or liability of any nature (whether
absolute, accrued, contingent, or otherwise, and whether due or to become due)
which was material, or which when combined with all similar obligations or
liabilities would have been material, to the Company, except (a) as disclosed in
the Company Financial Statements, or (b) for unfunded loan commitments made by
the Company or SS Bank in the ordinary course of their business consistent with
past practice. 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 December 31, 1996. Since December 31, 1996, neither the Company nor SS Bank
has incurred or paid any obligation or liability that would be material (on a
consolidated basis) to the Company, except (y) for obligations incurred or paid
in connection with transactions by it in the ordinary course of its business
consistent with past practices, or (z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since December 31, 1996,
except as set forth on Schedule 6.16 hereof, there has been (a) no material
adverse change in the condition, financial or otherwise, or to the assets,
properties, liabilities, or businesses of the Company and SS Bank, (b) no
material deterioration in the quality of the consolidated loan portfolio of the
Company, and no material increase in the consolidated level of nonperforming
assets or non-accrual loans at the Company or in the level of its consolidated
provision for credit losses or its consolidated reserve for possible credit
losses; (c) no declaration, setting aside, or payment by the Company or SS Bank
of any regular dividend, special dividend, or other distribution with respect to
any class of capital stock of the Company or SS Bank, other than customary cash
dividends paid by the Company or SS Bank whose amounts have not exceeded past
practice and the intervals between which dividends have not been more frequent
than past practice;
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(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 SS 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 SS Bank
nor any substantial amendment or termination of any material contract outside
the ordinary course of business to which the Company or SS Bank is a party, nor
any other transaction by the Company or SS Bank involving an amount in excess of
$50,000 other than for fair value in the ordinary course of its business. Since
December 31, 1996, except as set forth on Schedule 6.16 hereof, (x) each of the
Company and SS Bank has conducted its business only in the 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
December 31, 1996; and (z) the Company, on a consolidated basis, has
administered its investment portfolio pursuant to essentially the same policies
and procedures as existed during 1995 and 1996, 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 is 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 Company or SS Bank 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, 1996, and all returns filed are complete and accurate to the
best information and belief of the management of the Company and SS Bank and
properly reflect its taxes 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 Company or SS Bank, 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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(b) Neither the Company nor SS Bank has executed an extension
or waiver of any statute of limitations on the assessment or collection of any
tax due that is currently in effect.
(c) To the extent any federal, state, local, or foreign taxes
are due from the Company or SS Bank for the period or periods beginning January
1, 1997 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 Company and SS Bank have been
provided for in accordance with generally accepted accounting principles as in
effect on the date of this Agreement.
(e) The deductions of SS Bank for bad debts taken and the
reserve of SS Bank for loan losses for federal income tax purposes at December
31, 1996, 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
Nevada 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 SS Bank.
(g) The Company and SS 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 $12,500,000.
6.20. Examinations. To the extent consistent with law, the Company
has heretofore disclosed to Zions Bancorp relevant information contained in the
most recent safety-and-soundness, compliance, Community Reinvestment Act, and
other Reports of Examination with respect to the Company issued by the Board of
Governors and the most recent safety-and-soundness, compliance, Community
Reinvestment Act, and other Reports of Examination with respect to SS Bank
issued by the FDIC and the Nevada Commissioner. Such information so disclosed
consists of all material information with respect to the financial, operational,
and legal condition of the entity under examination which is included in such
reports, and does not omit or will not omit any information necessary to make
the information disclosed not misleading.
6.21. Reports. Since January 1, 1994, each of the Company and SS Bank
has effected all registrations and filed all reports and statements, together
with any amendments required to be made with respect thereto, which it was
required to effect or file with (a) the Board of Governors, (b) the FDIC, (c)
the United States Department of the Treasury, (d) the Nevada Commissioner, and
(e)
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any other governmental or regulatory authority or agency having jurisdiction
over its operations. Each of such registrations, reports, and documents,
including the financial statements, exhibits, and schedules thereto, does not
contain any statement which, at the time and in the light of the circumstances
under which it was made, is false or misleading with respect to any material
fact or which omits to state any material fact necessary in order to make the
statements contained therein not false or misleading.
6.22. FIRA Compliance and Other Transactions with Affiliates. Except
as set forth on Schedule 6.22 hereof, (a) none of the officers, directors, or
beneficial holders of 5 percent or more of the common stock of the Company or SS
Bank and no person "controlled" (as that term is defined in the Financial
Institutions Regulatory and Interest Rate Control Act of 1978) by the Company or
SS Bank (collectively, "Insiders") has any ongoing material transaction with the
Company or SS Bank on the date of this Agreement; (b) no Insider has any
ownership interest in any business, corporate or otherwise, which is a party to,
or in any property which is the subject of, business arrangements or
relationships of any kind with the Company or SS Bank not in the ordinary course
of business; and (c) all other extensions of credit by the Company or SS Bank to
any Insider have heretofore been disclosed in writing by the Company to Zions
Bancorp.
6.23. SEC Registered Securities. No equity or debt securities of the
Company or SS Bank are registered or required to be registered under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
6.24. Legal Proceedings. Except as disclosed in the Company Financial
Statements or as set forth on Schedule 6.24 hereof, 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 SS Bank has been served with process or
otherwise been given notice) or, to the best of the knowledge of the Company and
SS Bank, 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. Neither the Company nor SS
Bank is a party defendant or respondent to any pending legal, equitable, or
other proceeding commenced by any governmental agency and, to the best of the
knowledge of the Company and SS Bank, no such proceeding is threatened.
6.26. Federal Deposit Insurance.
(a) The deposits held by SS 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 SS
Bank has paid all assessments and filed all related reports and statements
required under the Federal Deposit Insurance Act.
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(b) SS Bank is a member of and pay insurance assessments to
the Bank Insurance Fund of the FDIC ("BIF"), and its deposits are insured by the
BIF. None of the deposits of SS Bank are insured by the Savings Association
Insurance Fund of the FDIC ("SAIF"), and SS Bank pays no insurance assessments
to the SAIF.
6.27. Other Insurance. Schedule 6.27 hereof lists each policy of
insurance carried by the Company and SS Bank, including blanket bond coverage.
All such policies of insurance are in full force and effect, and no notice of
cancellation has been received. All premiums to date have been paid in full.
Neither the Company nor SS Bank is in default with respect to any such policy
which is material to it.
6.28. Labor Matters. Neither the Company nor SS Bank is a party to or
bound by any collective bargaining contracts with respect to any employees of
the Company or SS Bank. Since their respective inceptions there has not been,
nor to the best of the knowledge of the Company and SS Bank was there or is
there threatened, any strike, slowdown, picketing, or work stoppage by any union
or other group of employees against the Company or SS Bank 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, neither the Company nor SS Bank is
aware of any attempts to organize a collective bargaining unit to represent any
of its employee groups.
6.29. Employee Benefit Plans.
(a) Schedule 6.29 hereto contains a list or 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 Company or SS Bank
for the employees or former employees of the Company or SS Bank. The Company has
previously made available and will continue to make available to Zions Bancorp
for its continuing review until the Effective Date true, complete, and accurate
copies of all plans and arrangements listed on Schedule 6.29, 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, neither the Company nor SS Bank has any liability
with respect to any pension plan qualified under section 401 of the Code.
Neither the Company nor SS Bank sponsors or maintains any defined benefit plan
and has never sponsored or maintained any defined benefit plan.
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(c) All "employee benefit plans," as defined in section 3(3)
of ERISA, that cover one or more employees employed by the Company or SS Bank
(each individually a "Plan" and collectively the "Plans"), comply in all
material respects with ERISA and, where applicable for tax-qualified or
tax-favored treatment, with the Code. As of December 31, 1996, neither the
Company nor SS Bank had any 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). None of the
Plans, the Company, SS Bank, 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. Neither the Company nor SS Bank has 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 Company or SS Bank may be either (i) liable directly on such
action, claim, or demand; or (ii) obligated to indemnify any person, group of
persons, or entity 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.
6.30. Employee Relations. As of the date hereof, each of the Company
and SS Bank 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 neither
the Company nor SS Bank is engaged in any unfair labor practice. As of the date
hereof, no dispute exists between the Company or SS Bank 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 Company or SS Bank.
6.31. Fiduciary Activities. SS 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. SS
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, 1994, SS Bank has conducted, and currently is conducting, all
fiduciary and custodial activities in all material respects in accordance with
all applicable law.
6.32. Environmental Liability.
(a) Neither the Company nor SS Bank is in material violation
of any judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including those arising under the Resource Conservation
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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 relating to health, safety or the environment
("Environmental Laws").
(b) Neither the Company, SS Bank, nor, to the best of the
knowledge of either of them, any borrower of the Company or of SS Bank has
received notice that it has been identified by the United States Environmental
Protection Agency as a potentially responsible party under CERCLA with respect
to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B,
nor has the Company or SS Bank or, to the best of the knowledge of either of
them, any borrower of the Company or of SS Bank 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 Company or SS Bank (collectively, the "Company Real Estate") has
been used by the Company or SS Bank 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 Company and SS Bank, no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any of the Company Real Estate. In the course of its
activities, neither the Company nor SS Bank has generated or is generating any
hazardous waste on any of the Company Real Estate in a manner which violates any
Environmental Laws. There has been no past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping (collectively, a "Release") of Hazardous
Substances by the Company or SS Bank on, upon, or into any of the Company Real
Estate. In addition, to the best of the knowledge of the Company and SS Bank,
there have been no such Releases on, upon, or into any real property in the
vicinity of any of the Company Real Estate that, through soil or groundwater
contamination, may be located on any of such Company Real Estate.
(d) With respect to any real property at any time held as
collateral for any outstanding loan by the Company or SS Bank (collectively, the
"Collateral Real Estate"), neither the Company nor SS Bank has since January 1,
1988 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.
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(e) As used in this Section 6.32, each of the terms "Company"
and "SS Bank" includes the applicable entity and any partnership or joint
venture in which it has an interest.
6.33. Intangible Property. To the best of the knowledge of the
Company and SS Bank, each of the Company and SS Bank 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 Company
and SS Bank, no material product or service offered and no material trademark,
service mark, or similar right used by the Company or SS Bank infringes any
rights of any other person, and, as of the date hereof, neither the Company nor
SS Bank has received any written or oral notice of any claim of such
infringement.
6.34. Real and Personal Property. Except for property and assets
disposed of in the ordinary course of business, each of the Company and SS Bank
possesses good and marketable title to and owns, free and clear of any mortgage,
pledge, lien, charge, or other encumbrance or other third party interest of any
nature whatsoever which would materially interfere with the business or
operations of either the Company or SS Bank, its real and personal property and
other assets, including without limitation those properties and assets reflected
in the Company Financial Statements as of December 31, 1996, or acquired by the
Company or SS Bank subsequent to the date thereof. The leases pursuant to which
the Company and SS Bank lease 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 material default. The
real and personal property leased by either the Company or SS Bank is free from
any adverse claim which would materially interfere with its business or
operation taken as a whole. The material properties and equipment owned or
leased by the Company and SS Bank are in normal operating condition, free from
any known defects, except such minor defects as do not materially interfere with
the continued use thereof in the conduct of its normal operations.
6.35. Loans, Leases, and Discounts.
(a) To the best of the knowledge of the Company and SS Bank,
each loan, lease, and discount reflected as an asset of the Company in the
Company Financial Statements as of December 31, 1996, 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 Company or
SS Bank.
(b) Except as set forth on Schedule 6.35 hereof, neither the
Company nor SS Bank holds any loans or loan-participation interests purchased
from, or participates in any loans originated by, any person other than the
Company or SS Bank.
6.36. Material Contracts. Neither the Company nor SS Bank nor any of
the assets, businesses, or operations of any of them 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 6.36 hereof, and (b)
agreements,
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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.
6.37. Employment and Severance Arrangements. Schedule 6.37 hereof
sets forth
(a) all employment contracts granted by the Company or SS Bank
to any of its officers, directors, consultants, or other management officials
and any officer, director, consultant, or management official of any affiliate
providing for increased or accelerated compensation in the event of a change of
control with respect to the Company or SS Bank or any other event affecting the
ownership, control, or management of the Company or SS Bank; and
(b) all employment and severance contracts, agreements, and
arrangements between the Company or SS Bank and any officer, director,
consultant, or other management official of any of them.
6.38. 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. As of the date of this Agreement and
as of the Effective Date, neither the Company nor SS Bank is or will be in
default in any material respect under any material contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its assets, business, or operations may be bound or
affected or under which it or its assets, business, or operations receive
benefits; and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default.
6.39. Capital Expenditures. Neither the Company nor SS Bank has any
outstanding commitments in the nature of capital expenditures which in the
aggregate exceed $25,000.
6.40. Repurchase Agreements. With respect to all agreements pursuant
to which the Company or SS Bank has purchased securities subject to an agreement
to resell, it has a valid, perfected first lien or security interest in the
securities securing the agreement, and the value of the collateral securing each
such agreement equals or exceeds the amount of the debt secured by such
collateral under such agreement.
6.41. [reserved]
6.42. Internal Controls. Each of the Company and SS Bank maintains
internal controls to provide reasonable assurance to its board of directors and
officers that its assets are safeguarded, its records and reports are prepared
in compliance with all applicable legal and accounting requirements and with its
internal policies and practices, and applicable federal, state, and local laws
and regulations are complied with. These controls extend to the preparation of
its financial statements to provide reasonable assurance that the statements are
presented fairly in conformity with generally accepted accounting principles or,
in the case of SS Bank and to the extent different from generally accepted
accounting principles, accounting principles mandated by the FDIC. The controls
contain self-monitoring mechanisms, and appropriate actions are taken on
significant deficiencies as they are identified.
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6.43. Dividends. Neither the Company nor SS Bank has paid any
dividend to its shareholders which caused its regulatory capital 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.
6.44. Brokers and Advisers. Except as set forth on Schedule 6.44
hereof, (a) there are no claims for brokerage commissions, finder's fees, or
similar compensation arising out of or due to any act of the Company or SS 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 SS Bank, and
(b) neither the Company nor SS Bank has entered into any agreement or
understanding with any party relating to financial advisory services provided or
to be provided with respect to the transactions contemplated by this Agreement.
6.45. Interest Rate Risk Management Instruments. Neither the Company
nor SS Bank is a party to, and none of its properties or assets may be bound by,
any interest-rate swaps, caps, floors, or options agreements or other
interest-rate risk management arrangements.
6.46. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by the Company or SS Bank
hereunder or in connection with this Agreement or any of the transactions
contemplated thereunder contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Company which reasonably might
materially adversely affect the business, assets, liabilities, financial
condition, results of operations, or prospects of the Company or SS Bank which
has not been disclosed in the Company Financial Statements or a certificate
delivered to Zions Bancorp by the Company. Copies of all documents referred to
in this Agreement, unless prepared solely by Zions Bancorp or NS Bank or solely
by Zions Bancorp or NS Bank and third parties hereto, are true, correct, and
complete copies thereof and include all amendments, supplements, and
modifications thereto and all waivers thereunder.
6.47. Regulatory and Other Approvals. As of the date hereof, neither
the Company nor SS Bank is 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 after the Effective Date of the business of the Company and SS Bank
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 Company,
could have a material adverse effect upon the business, operations, activities,
earnings, or prospects of the Company. As of the date hereof, neither the
Company nor SS Bank is aware of any reason why all material consents and
approvals shall not be procured from all other persons and entities whose
consent or approval shall be necessary for (y) consummation of the transactions
contemplated by this Agreement, or (z) the continuation after the Effective Date
of the business of the Company and SS Bank as such business is carried on
immediately prior to the Effective Date.
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7. Covenants of the Company and SS Bank.
The Company (on behalf of itself and SS Bank) and SS Bank (on behalf
of itself) each hereby covenants and agrees as follows:
7.1. Rights of Access. In addition and not in limitation of any other
rights of access provided to Zions Bancorp and NS Bank herein, until the
Effective Date the Company and SS Bank will give to Zions Bancorp and NS Bank
and to their representatives, including their 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 NS Bank, and such
information with respect to their business affairs and properties as Zions
Bancorp or NS Bank from time to time may reasonably request; provided that
copies of documents may be redacted to remove material whose disclosure is, in
the judgment of independent counsel to the company, inconsistent with the
fiduciary obligations of the directors of the Company or SS Bank.
7.2. Corporate Records, Contracts, etc.
(a) The Company and SS Bank will make available to Zions
Bancorp and NS Bank copies of their respective articles of incorporation and
bylaws, and will make available their respective minute books, all of which
shall be certified to be complete and true copies.
(b) The Company and SS Bank will make available copies of all
contracts or agreements involving amounts in excess of $25,000 to which the
Company or SS 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 SS Bank will furnish to Zions Bancorp and
NS Bank the following information with respect to properties owned by the
Company and SS Bank: (i) a brief description and location of each parcel of real
property owned by the Company or SS Bank, (ii) a brief description of real
property covered by lease or other rental arrangements to which the Company or
SS Bank is a party, including a copy of the relevant leases; and (iii) a brief
description of personal property with a value in excess of $25,000 covered by
lease or other rental arrangements to which the Company or SS Bank is a party,
including a copy of the relevant leases.
7.3. Monthly and Quarterly Financial Statements; Minutes of Meetings
and Other Materials.
(a) The Company and SS Bank will continue to prepare all of
the monthly and quarterly financial statements and financial reports to
regulatory authorities for the months and quarterly periods ending between
January 1, 1997 and the Effective Date which it customarily prepared during the
period between January 1, 1995 and December 31, 1996 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
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accordance with generally accepted accounting principles applied in all material
respects (except that Consolidated Reports of Condition and Consolidated Reports
of Income required to be filed by SS Bank under federal law may be prepared in
accordance with the official instructions applicable thereto at the time of
filing).
(b) The Company and SS 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 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 SS Bank, as the case
may be; provided that the copies so provided may be redacted to remove material
whose disclosure is, in the judgment of independent counsel to the company,
inconsistent with the fiduciary obligations of the directors of the Company or
SS Bank.
7.4. Extraordinary Transactions. Without the prior written consent of
Zions Bancorp, neither the Company nor SS Bank will, 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 Company or SS 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 that payer; (b) declare or
distribute any stock dividend, authorize a stock split, or authorize, issue or
make any distribution of its capital stock or any other securities (except for
issuances of Company Common Stock already subscribed for or upon exercise of
stock options outstanding on the date of this Agreement or issued subsequent to
the date of this Agreement consistently with the next parenthetical phrase of
this sentence, and except for the sale to one or more officers or employees of
the Company or SS Bank, in such amounts and in a manner which are in every case
consistent with past practice of the Company, of shares of Company Common Stock
held in the treasury on December 31, 1996), or grant any options to acquire such
additional securities (except pursuant to stock option plans in existence on the
date of this Agreement and in amounts and on terms which are in every case
consistent with past practice of the Company and which, in any event, will not
cover more than 8,400 shares of Company Common Stock); (c) merge into,
consolidate with, or sell its assets to any other corporation or 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 tity
of SS Bank from that in existence on the date of this Agreement to any other
charter or form of entity; (e) make any direct or indirect redemption, purchase,
or other acquisition of any of its capital stock; (f) except in the ordinary
course of its business or to accomplish the transactions contemplated by this
Agreement, incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset, make any contract or
agreement, or engage in any transaction; (g) other than in the ordinary course
of business, subject any of its properties or assets to any lien, claim, charge,
option, or encumbrance; (h) except for increases in the ordinary course of
business in accordance with past practices, which together with all other
compensation rate increases do not
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exceed 4.5 percent per annum of the aggregate payroll as of January 1, 1997,
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;
(j) enter into any employment or personal services contract with any person or
firm, including without limitation any contract, agreement, or arrangement
described in Section 6.37(a) hereof, except directly to facilitate the
transactions contemplated by this Agreement; nor (k) purchase any loans or
loan-participation interests from, or participate in any loans originated by,
any person other than the Company or SS Bank.
7.5. Preservation of Business. Each of the Company and SS Bank will
(a) carry on its business and manage its assets and properties diligently and
substantially in the same manner as heretofore; (b) maintain the ratio of its
loans to its deposits at approximately the same level as existed at December 31,
1996, as adjusted to allow for seasonal fluctuations of loans and deposits of a
kind and amount experienced traditionally by it; (c) manage its investment
portfolio in substantially the same manner and pursuant to substantially the
same investment policies as in 1995 and 1996, and will take no action to change
the percentage which its investment portfolio bears to its total assets, or to
lengthen the average maturity of its investment portfolio, or of any significant
category thereof, to any material extent; (d) continue in effect its present
insurance coverage on all properties, assets, business, and personnel; (e) use
its best efforts to preserve its business organization intact; except as
otherwise consented to by Zions Bancorp, to keep available its present
employees; and to preserve its present relationships with customers and others
having business dealings with it; (f) not do anything and not fail to do
anything which will cause a breach of or default in any contract, agreement,
commitment, or obligation to which it is a party or by which it may be bound;
(g) not amend its articles of incorporation or bylaws; and (h) not grant or
expand any shareholders' rights to dissent from any merger.
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 acceptable to Zions Bancorp,
stating that (a) they are independent accountants with respect to the Company
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 audited consolidated financial statements and the latest
available unaudited consolidated financial statements of the Company and
unaudited financial statements of SS Bank and inquiries of certain officials of
the Company and SS Bank responsible for financial and accounting matters as to
transactions and events since the date of the most recent consolidated statement
of condition included in their most recent audit report with respect to the
Company did not cause them to believe that (i) the Company'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 Company's audited consolidated financial statements; or (ii)
except as disclosed
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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 audited consolidated financial statements. The letter shall also
cover such other matters pertaining to the Company's and SS 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 "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 Zions Bancorp Stock to be received by such
person in the Merger except in compliance with the applicable provisions of the
1933 Act and the rules and regulations thereunder.
7.8. Inconsistent Activities. Unless and until the Merger has been
consummated or this Agreement has been terminated in accordance with its terms,
neither the Company nor SS Bank will (a) solicit or encourage, directly or
indirectly, any inquiries or proposals to acquire more than 1 percent of the
Company Common Stock or any capital stock of SS Bank or any significant portion
the assets of either of them (whether by tender offer, merger, purchase of
assets or other transactions of any type); (b) afford any third party which may
be considering any such transaction access to its properties, books or records
except as required by mandatory provisions of law; (c) enter into any
discussions or negotiations for, or enter into any agreement or understanding
which provides for, any such transaction, or (d) authorize or permit any of its
directors, officers, employees or agents to do or permit any of the foregoing.
If the Company or SS Bank becomes aware of any offer or proposed offer to
acquire any shares of its capital stock or any significant portion of its assets
(regardless of the form of the proposed transaction) or of any other matter
which could adversely affect this Agreement, the Merger, or the Bank Merger, the
Company and SS Bank shall immediately give notice thereof to Zions Bancorp.
7.9. [reserved]
7.10. Certain Accruals. As of or before the close of business on the
last day of the calendar month preceding the Effective Date, the Company shall
have accrued the following items of expense or income, net of any applicable tax
benefit or expense:
(a) the benefit liability of SS Bank under the Sun State Bank
Salary Continuation Plan, with respect to each executive of SS Bank covered
thereby, through the Effective Date;
(b) the cost of having terminated the EDS Contract as required
by section 4.10 of this Agreement, and the cost of complying with section
11.2(b) of this Agreement;
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(c) the expense or income accompanying the conforming of the
reserve for loan and lease losses of SS Bank to the requirements of section 4.8
of this Agreement and generally accepted accounting principles;
(d) the cost of (i) continuation or extension after the
Effective Date of any existing directors and officers liability insurance policy
covering the errors and omissions of directors and officers of the Company or SS
Bank preceding the Effective Date, and (ii) continuation or extension after the
Effective Date of any other errors and omissions, liability, or property and
casualty insurance policy providing coverage to any directors, officers or
employees of the Company or SS Bank preceding the Effective Date;
(e) the expense, through the Effective Date, of the attorneys,
accountants, investment bankers, consultants, brokers and finders, and other
third parties who will have rendered services to the Company or SS Bank through
the Effective Date; and
(f) the expenses of the Company and SS Bank from May 1, 1997
through the Effective Date with respect to Third Party Termination Costs,
including reasonable provision for any such costs and related expenses which
foreseeably may be incurred by the Company or SS Bank following the Effective
Date, in all cases without the accrual of any offsetting income tax benefit
unless the accrual of such income tax benefit is concurred in by Zions Bancorp,
which concurrence will not be unreasonably withheld.
8. Representations and Warranties of Zions Bancorp and NS Bank.
Zions Bancorp (with respect to itself and NS Bank) and NS Bank
(solely with respect to itself) each represents and warrants to the Company and
SS Bank as follows:
8.1. Organization, Powers, and Qualification. Each of Zions Bancorp
and NS Bank is a corporation which is duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and
assets, to lease properties used in its business, and to carry on its business
as now conducted. Each of Zions Bancorp and NS Bank 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. Each of Zions Bancorp and NS Bank 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. Each of Zions Bancorp
and NS Bank has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its respective terms.
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8.3. Binding Obligations; Due Authorization. This Agreement
constitutes the valid, legal, and binding obligations of each of Zions Bancorp
and NS Bank 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 each of Zions
Bancorp and NS Bank. No other corporate proceedings on the part of either of
them are necessary to authorize this Agreement or the carrying out of the
transactions contemplated hereby.
8.4. Absence of Default. None of the execution or the delivery of
this Agreement, the consummation of the transactions contemplated thereby, or
the compliance with or fulfillment of the terms thereof 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 Zions
Bancorp or NS Bank. 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 the property or assets of Zions Bancorp or NS Bank 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 Merger is approved by the Board of Governors under the
BHC, or if the Board of Governors waives its jurisdiction over the Merger, and
if the transactions contemplated by this Agreement are approved by the FDIC, the
Nevada Commissioner, and the Utah Commissioner, violate any law, statute, rule,
or regulation of any government or agency to which Zions Bancorp or NS Bank 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 thereby, or the
compliance with or fulfillment of the terms thereof 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 FDIC, the Nevada Commissioner, and the
Utah Commissioner.
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 Zions Bancorp
or NS Bank in connection with the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by or on behalf of either of them.
(b) Neither Zions Bancorp nor NS Bank has entered into any
agreement or understanding with any party relating to financial advisory
services provided or to be provided with respect to the transactions
contemplated by this Agreement.
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8.6. Books and Records. The books and records of each of Zions
Bancorp and NS Bank fairly reflect the transactions to which it is a party or by
which its properties are subject or bound. Such books and records have been
properly kept and maintained and are in compliance in all material respects with
all applicable legal and accounting requirements. Each of Zions Bancorp and NS
Bank 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. Each of Zions Bancorp and NS Bank has made all accruals in
amounts which accurately report income and expense in the proper periods in
accordance with generally accepted accounting principles. Each of Zions Bancorp
and NS Bank 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, 1994,
December 31, 1995, December 31, 1996, and March 31, 1997, 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 (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 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 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,
adequate provision for, or reserves against, the possible loan losses of Zions
Bancorp as of such dates.
8.8. Absence of Certain Developments. Since March 31, 1997, 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
thereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to 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. Copies of all documents referred to
in this Agreement, unless prepared solely by the Company or solely by the
Company and third parties
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hereto, are true, correct, and complete copies thereof and include all
amendments, supplements, and modifications thereto and all waivers thereunder.
9. Closing.
9.1. Place and Time of Closing. Closing shall take place at the
offices of Zions Bancorp, One South Main Street, Suite 1380, 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 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 Merger and the issuance of shares incident thereto
shall be effected; provided, however, that the administrative and ministerial
aspects of the issuance of shares incident to the Merger will be settled as soon
thereafter as shall be reasonable under the circumstances; 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 any party on or after March 31, 1998, by instrument duly
authorized and executed and delivered to the other parties, 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):
(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
SS Bank contained in Section 6 hereof was materially incorrect when made, or
(ii)
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in the event of a material breach or material failure by the Company or SS Bank
of any covenant or agreement of the Company or SS 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 or SS Bank, as
the case may be;
(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
NS Bank 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
NS Bank of any covenant or agreement of Zions Bancorp or NS 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 Zions Bancorp or NS Bank,
as the case may be; 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 Merger has become
inadvisable or impracticable by reason of the institution of litigation by the
federal government or the government of the State of Nevada or the State of Utah
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, NS Bank the Company, or SS 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, and (b) 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 shall be liable in the amount of $1,000,000 to the other
party or parties hereto that are not affiliated with it.
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 chairman, or by
its president; provided 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 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
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Agreement through means of a sequence of mergers such as is contemplated herein,
then 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 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 and tax advisers, incurred in connection with this Agreement and the
transactions contemplated thereby. 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, (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
shall be deemed to be incurred on behalf of Zions Bancorp, and (iii) the costs
referred to in Section 7.10 shall be deemed to be incurred on behalf of the
Company.
11.2. Mutual Cooperation.
(a) General. 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.
(b) Data Processing Conversion. Prior to the Effective Date,
the parties shall cooperate, and shall make all reasonable efforts to cause
their respective data processing service providers to cooperate, to complete all
reasonable steps for an orderly transfer of all applicable data tapes and
processing information, and to facilitate an electronic and systematic
conversion of all applicable data regarding SS Bank to NS Bank's own system of
electronic data processing by the next business day following the Effective
Date. Each party shall bear its own costs associated with the transfer of tapes
and information and the conversion of data. Prior to the Effective Date, SS Bank
will provide all test tapes and reports necessary to complete the transfer and
will provide a test tape and deconversion reports within fifteen days of the
date of this Agreement, a preliminary tape and set of deconversion reports six
weeks prior to the Effective Date, and an updated preliminary tape and set of
deconversion reports no more than two weeks prior to the Effective Date. SS Bank
shall also arrange the delivery to NS Bank at the main office of NS Bank (or at
such other location as has been designated in writing by NS Bank no later than
five business days before the Effective Date) no later than 6:00 a.m. Pacific
time on the day immediately following the Effective Date, two duplicate final
data processing conversion file packages and deconversion reports in an industry
standard format.
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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, NS Bank, the Company, SS Bank,
and their respective subsidiaries shall use all information that each obtains
from the other pursuant to this Agreement solely for the effectuation of the
transactions contemplated by this Agreement or for other purposes consistent
with the intent of this Agreement. Neither Zions Bancorp, NS Bank, the Company,
SS Bank, nor their respective subsidiaries shall use any of such information for
any other purpose, including, without limitation, the competitive detriment of
the other party. Zions Bancorp and NS Bank, on the one hand, and the Company and
SS Bank, on the other hand, shall maintain as strictly confidential all
information each of them 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.
11.5. Claims of Brokers.
(a) Each of the Company and SS Bank shall indemnify, defend,
and hold Zions Bancorp and NS 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 of its acts
in connection with the transactions contemplated by this Agreement or based upon
any agreement or arrangement made by it or on its behalf with respect to Zions
Bancorp or NS Bank.
(b) Each of Zions Bancorp and NS Bank shall indemnify, defend,
and hold the Company and SS 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 of its acts
in connection with any of the transactions contemplated by this Agreement or
based upon any agreement or arrangement made by it or on its behalf with respect
to the Company or SS Bank.
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
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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 any of the other
parties, and shall survive the termination of this Agreement or the consummation
of the transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in Section 11.6(a) of
this Agreement is for any reason held by a court of competent jurisdiction to be
unenforceable as to any or every party, then the parties in such circumstances
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding or
any claims asserted) to which any party may be subject in such proportion as the
court of law determines based on the relative fault of the parties.
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 December 31, 1996, 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 December 31, 1996, 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
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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 periodic or current
report pursuant to section 13 of the Exchange Act, deliver a copy of such report
to the Company.
(b) During the twenty consecutive trading days ending on and
including the fifth trading day preceding the Effective Date, except such days
within such period as are not within the Pricing Period, Zions Bancorp shall not
repurchase Zions Bancorp Stock in the open market unless done both (i) 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, and (ii)
following the receipt of favorable advice from independent securities counsel
for Zions Bancorp.
(c) Following the Effective Date neither Zions Bancorp nor NS
Bank will take any action to abrogate or diminish any right accorded under the
articles of incorporation or by-laws of the Company or SS Bank as they existed
immediately prior to the Effective Date to any person who, on or prior to the
Effective Date, was a director or officer of the Company or SS Bank to
indemnification from or against losses, expenses, claims, demands, damages,
liabilities, judgments, fines, penalties, costs, expenses (including without
limitation reasonable attorneys fees) and amounts paid in settlement pertaining
to or incurred in connection with any threatened or actual action, suit, claim,
or proceeding (whether civil, criminal, administrative, arbitration, or
investigative) arising out of events, matters, actions, or omissions occurring
on or prior to the Effective Date. To the extent not provided by the foregoing,
following the Effective Date and to the extent permitted by law, all rights to
such indemnification accorded under the articles of incorporation and by-laws of
the Company or SS Bank to any person who, on or prior to the Effective Date, was
a director or officer of the Company or SS Bank shall survive the Effective Date
and, following the Merger and the Bank Merger, to the extent permitted by law,
Zions Bancorp and NS Bank will honor such obligations in accordance with their
terms with respect to events, acts, or omissions occurring prior to the
Effective Date.
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 SS 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
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.
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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 one
another and their undertakings vis-a-vis one another on the subject matter
hereof. Any previous agreements or understandings among the parties regarding
the subject matter hereof are merged into and superseded by this Agreement.
Nothing in this Agreement express or implied is intended or shall be construed
to confer upon or to give any person, other than Zions Bancorp, NS Bank, the
Company, SS Bank, and their respective shareholders, any rights or remedies
under or by reason of this Agreement. Nothing in this Agreement express or
implied is intended or shall be construed to make shareholders or former
shareholders of the Company, in their capacities as shareholders or former
shareholders, liable for any damages incurred by Zions Bancorp, NS Bank or any
other person for whose benefit the Company or SS Bank has made or makes any
representation, warranty, covenant, or agreement hereunder.
11.13. Survival of Representations, Warranties, and Covenants. Except
as otherwise provided in this Agreement, the respective representations,
warranties, and covenants of each party to this Agreement shall not survive the
Effective Date. If either party should breach a representation, warranty, or
covenant contained in this Agreement through fraud, deliberate
misrepresentation, or other intentional tortious conduct, or through gross
negligence, then the representation, warranty, or covenant so breached shall be
deemed to have survived for six years following the Effective Date. 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. Officers' Certificates. Each certificate executed and
delivered by an officer of a party pursuant to this Agreement shall be deemed to
have been executed and delivered by such officer in his or her capacity as an
officer of the party on whose behalf the certificate is executed and delivered,
and not in his or her personal capacity, and such officer shall have no personal
liability by reason of his or her execution or delivery of any such certificate
in the absence of fraud, deliberate misrepresentation, other intentional
tortious conduct, or gross negligence on the part of that officer.
11.15. 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.
11.16. 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
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receipt requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
If to Zions Bancorp or NS Bank:
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
If to the Company or SS Bank:
Sun State Capital Corporation
4240 West Flamingo Road
Las Vegas, Nevada 89126
Attention: Mr. John Dedolph
President and Chief Executive Officer
With a required copy to:
Herbert H. Davis, III, Esq.
Rothgerber, Appel, Powers & Johnson LLP
Suite 3000, One Tabor Center
1200 Seventeenth Street
Denver, Colorado 80202-5839
All such notices shall be deemed to have been given on the date
delivered, transmitted, or mailed in the manner provided above.
11.17. 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 Clark County, Nevada to be the proper jurisdiction and venue
for any suit or action arising out of this Agreement. Each of the parties
consents to personal jurisdiction in such venue for such a proceeding and agrees
that it may be served with process in any action with respect to this Agreement
or the transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of Nevada. 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.
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11.18. 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.
11.19. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ZIONS BANCORPORATION
Attest:__________________________ By:_____________________________
Dale M. Gibbons Harris H. Simmons
Senior Vice President President and
and Secretary Chief Executive Officer
NEVADA STATE BANK
Attest:__________________________ By:_____________________________
Gordon E. Bywater George B. Hofmann III
Senior Vice President President and
and Secretary Chief Executive Officer
SUN STATE CAPITAL CORPORATION
Attest:__________________________ By:_____________________________
John Dedolph
President and
Chief Executive Officer
SUN STATE BANK
Attest:__________________________ By:_____________________________
John Dedolph
President and
Chief Executive Officer
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)
State of Utah )
) ss.
County of Salt Lake )
)
On this twenty-first day of May, 1997, 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
and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
____________________________
Notary Public
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)
State of Nevada )
) ss.
County of Clark )
)
On this twenty-first day of May, 1997, before me personally appeared
George B. Hofmann III, to me known to be the President and Chief Executive
Officer of Nevada State Bank, 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 and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
______________________________
Notary Public
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)
State of Nevada )
) ss.
County of Clark )
)
On this twenty-first day of May, 1997, before me personally appeared
John Dedolph, to me known to be the President and Chief Executive Officer of Sun
State Capital Corporation and the President and Chief Executive Officer of Sun
State 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
and that the seals affixed are the respective corporate seals of said
corporations.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
_____________________________
Notary Public
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The undersigned members of the Board of Directors of Sun State Capital
Corporation (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 their fiduciary duties to shareholders, 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, further agree to refrain from
soliciting or, subject to their fiduciary duties to shareholders, negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of the Company or Sun State
Bank.
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ ______________________________
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EXHIBIT I
MERGER AGREEMENT
<PAGE>
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of
[_______________], 1997, between ZIONS BANCORPORATION ("Zions Bancorp"), a
corporation organized under the laws of the State of Utah, and SUN STATE CAPITAL
CORPORATION (the "Company"), a corporation organized under the laws of the State
of Nevada. 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 [_______________],
1997, 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 Nevada. As of [_______________],
1997, the authorized capital stock of the Company consisted of (i) 1,000,000
shares of preferred stock, $100 par value, of which 40,000 were designated as
1992 Series Preferred Stock (the "Company Preferred Stock"), of which [_______]
were issued and outstanding, and non of which were held in its treasury on such
date; and (ii) 10,000,000 shares of Company Common Stock, $0.01 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 the Company have entered into an Agreement and Plan
of Reorganization, dated May 21, 1997 (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").
The Boards of Directors of each of Zions Bancorp and the Company deem
the Merger advisable and in the best interests of each corporation and its
stockholders. The Boards of Directors of each of Zions Bancorp and the Company,
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, 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"), or
cash, or a combination of 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:
<PAGE>
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 Division of Corporations and
Commercial Code 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 Nevada
pursuant to section 92A.200 of the Nevada 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 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 shall be converted into a right to
receive
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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 Common 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 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 over the Pricing Period.
<PAGE>
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(ii) 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.
(iii) 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").
(iv) Pricing Period. The twenty consecutive trading
days ending on and including the fifth trading day preceding the Effective Date,
except that if prior to the fifth trading day preceding the Effective Date Zions
Bancorp shall have publicly announced its entry into a definitive agreement
providing for a change in control (which for purposes of this paragraph means a
sale of more than 50 percent of the voting stock of Zions Bancorp to an
unaffiliated person, or a sale of more than 50 percent of the voting stock of
Zions First National Bank ("Zions Bank") to an unaffiliated person, or a merger
or consolidation or a sale of all or substantially all of the assets of Zions
Bancorp or Zions Bank with or to an unaffiliated person in a transaction in
which individuals who constitute the board of directors of Zions Bancorp or
Zions Bank, as the case may be, prior to the transaction cease to constitute at
least a majority thereof following the transaction), then the Pricing Period
shall be the twenty consecutive trading days ending on and including the trading
day preceding such public announcement.
(v) Purchase Price. The sum of the amounts described
in subsections (A) through (E) of this section 3.1(a)(v), reduced by the amounts
described in subsections (F) through (H) of this section 3.1(a)(v).
(A) Base Purchase Price. $37,000,000.
(B) Earn-Out. The consolidated net
undistributed income of the Company during the period beginning on May 1, 1997
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. For the purpose of calculating consolidated net
undistributed income of the Company, (I) the effect of 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;
and (II) any loss, net of taxes, resulting from operating transactions
recommended by the Company to Zions Bancorp as likely to produce economic
benefits to the Company and approved in writing by Zions Bancorp prior to their
effectuation shall be excluded. It is understood that the amount calculated
under this section 3.1(a)(v)(B) may be a negative number and that the effect of
summing such a negative number would be a reduction in the Purchase Price.
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(C) Prorated Earn-Out. The product of the
daily average of the consolidated net undistributed income of the Company during
the period and calculated in the manner prescribed in section 3.1(a)(v)(B)
hereof (first reduced, however, solely for purposes of performing calculations
under this section 3.1(a)(v)(C), by the expenses of the Company between May 1,
1997 and the close of business on the last day of the calendar month preceding
the Effective Date (net of any applicable tax benefit or expense) with respect
to (I) attorneys, accountants, investment bankers, consultants, brokers and
finders, and other third parties who have or will have rendered services to the
Company or SS Bank in connection with the Merger, and (II) Third Party
Termination Costs, which for purposes of this Agreement mean damages, penalties,
liquidated damages, termination fees, break-up fees, topping fees,
expense-reimbursement provisions, repurchases of stock options, fees in
settlement of actual or threatened litigation, and other similar costs and
related expenses incurred to resolve outstanding claims or relationships with
any party other than Zions Bancorp and its subsidiary, Nevada State Bank, in
connection with a potential change in control) times the number of days in the
month of the Effective Date which precede the Effective Date. It is understood
that the amount calculated under this section 3.1(a)(v)(C) may be a negative
number and that the effect of summing such a negative number would be a
reduction in the Purchase Price.
(D) Option-Exercise Proceeds. The aggregate
contributions to capital of the Company caused by the payments accompanying the
exercise of any stock options after April 30, 1997.
(E) Proceeds of Sale of Treasury Shares. The
proceeds to the Company of sales of shares out of the treasury after April 30,
1997, net of the cost to the Company of purchases of shares into the treasury
after April 30, 1997. It is understood that the amount calculated under this
section 3.1(a)(v)(E) may be a negative number and that the effect of summing
such a negative number would be a reduction in the Purchase Price.
(F) Reduction for Extraordinary Dividends.
The excess of the dividends and distributions declared or paid by the Company
with respect to all classes of its capital stock between January 1, 1997 and
April 30, 1997 over the dividends and distributions that are customarily paid by
the Company to holders of all classes of its capital stock during the January
1-April 30 period. It is understood that the amount calculated under this
section 3.1(a)(v)(F) may be a negative number and that the effect of reducing
the Purchase Price by such a negative number would be an increase in the
Purchase Price.
(G) Reduction for Transaction Fees. The
consolidated net after-tax expenses of the Company between January 1, 1997 and
April 30, 1997 with respect to attorneys, accountants, investment bankers,
consultants, brokers and finders, and other third parties who have or will have
rendered services to the Company or its subsidiary, Sun State Bank, in
connection with any potential change in control (which for purposes of this
paragraph and paragraph (H) immediately below means a potential sale of more
than 50 percent of the voting stock of the Company to an unaffiliated person, or
a potential sale of more than 50 percent of the voting stock of Sun State Bank
to an unaffiliated person, or a potential merger or consolidation or a potential
sale of all or substantially all of the assets of the Company or Sun State Bank
with or to an unaffiliated person in a transaction in which individuals who
constitute the board of directors of the Company or Sun State Bank, as the case
may be, prior to the
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transaction would cease to constitute at least a majority thereof following the
transaction), including, without limitation, the Merger and the merger of Sun
State Bank with and into Nevada State Bank.
(H) Reduction for Third Party Termination
Costs. The consolidated expenses of the Company between January 1, 1997 and
April 30, 1997 with respect to Third Party Termination Costs, without the
accrual of any offsetting income tax benefit unless the accrual of such income
tax benefit is concurred in by Zions Bancorp, which concurrence will not be
unreasonably withheld.
(vi) 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:
(i) Holders of Company Preferred Stock. Each holder
of shares of Company Preferred Stock shall be entitled to receive, in exchange
for each share of Company Preferred Stock held of record by such stockholder as
of the Effective Date, at his or her election except as provided herein one of
the following, or a combination of Zions Bancorp Stock and cash determined in
accordance with section 3.2 of this Agreement:
(A) that number of shares of Zions Bancorp
Stock calculated by dividing $110 plus accrued and unpaid dividends on one share
of Company Preferred Stock by the Average Closing Price (the "Preferred Stock
Consideration"); or
(B) $110 per share plus accrued and unpaid
dividends on one share of Company Preferred Stock (the "Preferred Cash
Consideration").
(ii) Holders of Company Common Stock. Each holder of
shares of Company Common Stock shall be entitled to receive, in exchange for
each share of Company Common Stock held of record by such stockholder as of the
Effective Date, at his or her election except as provided herein one of the
following, or a combination of Zions Bancorp Stock and cash determined in
accordance with section 3.2 of this Agreement:
(A) that number of shares of Zions Bancorp
Stock calculated by dividing the Purchase 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 (the
"Common Stock Consideration"); or
(B) that amount of cash calculated by
dividing the Purchase Price by the number of shares of Company Common Stock that
shall be issued and outstanding at the Effective Date (the "Common Cash
Consideration").
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3.2. Elections.
(a) Certain Definitions.
(i) Stock Consideration. Preferred Stock
Consideration and Common Stock Consideration are referred to collectively in
this Agreement as "Stock Consideration."
(ii) Cash Consideration. Preferred Cash Consideration
and Common Cash Consideration are referred to collectively in this Agreement as
"Cash Consideration."
(iii) Company Stock. Company Preferred Stock and
Company Common Stock are referred to collectively in this Agreement as "Company
Stock."
(b) Entitlement to Elect. Subject to the election and
allocation procedures set forth in this section, each holder of Company Stock
(other than holders of dissenting shares) will be entitled, with respect to each
share of Company Stock held by such holder, to (i) elect to receive the Stock
Consideration (a "Stock Election"), or (ii) elect to receive the Cash
Consideration (a "Cash Election"), or (iii) indicate that such holder has no
preference as between receipt of the Stock Consideration and receipt of the Cash
Consideration (a "Non-Election"). With respect to each share of Company
Preferred Stock covered by a Non-Election, a Cash Election shall be deemed to
have been made by the holder of such share.
(c) Cash Election Number. The number of shares of Company
Common Stock to be converted into the right to receive the Cash Consideration in
the Merger shall be no greater than (i) 49 percent of the sum of (A) the number
of shares of Company Common Stock issued and outstanding or held in the
Company's treasury immediately prior to the Effective Time and (B) the product
of a fraction, the numerator of which is the Preferred Cash Consideration and
the denominator of which is the Common Cash Consideration (such fraction the
"Preferred/Common Conversion Factor"), times the number of shares of Company
Preferred Stock issued and outstanding or held in the Company's treasury
immediately prior to the Effective Time, less (ii) the sum of (A) the Dissenting
Shares and (B) the quotient computed by dividing the aggregate amount of cash to
be received by holders of Company Preferred Stock pursuant to section 3.1(b)(i)
of this Agreement by the Common Cash Consideration and (C) the quotient computed
by dividing the aggregate amount of cash to be received by each shareholder of
the Company pursuant to Section 3.3 hereof by the Common Cash Consideration. The
maximum number of shares of Company Common Stock to be converted into the right
to receive the Cash Consideration, as calculated pursuant to this paragraph, is
referred to in this Agreement as the "Cash Election Number."
(d) Election -Adjustments. If the aggregate number of shares
of Company Common Stock covered by Cash Elections (the "Cash Election Shares")
exceeds the Cash Election Number, (i) all shares of Company Common Stock covered
by Stock Elections (the "Stock Election Shares") and all shares of Company
Common Stock covered by Non-Elections (the "Non-Election Shares") shall be
converted into the right to receive the Stock Consideration, and (ii) all Cash
Election Shares shall be converted into the right to receive Zions Bancorp Stock
and cash in the following manner: each Cash Election Share shall be converted
into the right to receive (A) an amount in cash, without interest, equal to the
product
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<PAGE>
of (1) the Common Cash Consideration and (2) a fraction (the "Cash Fraction"),
the numerator of which shall be the Cash Election Number and the denominator of
which shall be the total number of Cash Election Shares, and (B) a number of
shares of Zions Bancorp Stock equal to the product of (1) the Common Stock
Consideration and (2) a fraction equal to one minus the Cash Fraction.
(e) Non-Election Adjustments. In the event that Section 3.2(d)
of this Agreement is not applicable, all Cash Election Shares and all shares of
Company Preferred Stock covered by Non-Elections shall be converted into the
right to receive the Common Cash Consideration and Preferred Cash Consideration,
respectively, all Stock Election Shares shall be converted into the right to
receive the Stock Consideration, and the Non-Election Shares, if any, shall be
converted into the right to receive (i) if the aggregate number of Cash Election
Shares and Non-Election Shares does not exceed the Cash Election Number, Common
Cash Consideration for each Non-Election Share and (ii) if such aggregate number
does exceed the Cash Election Number, Zions Bancorp Stock and cash in the
following manner: each Non-Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product of (x) the
Common Cash Consideration and (y) a fraction (the "Non-Election Fraction"), the
numerator of which shall be the excess of (A) the Cash Election Number over (B)
the total number of Cash Election Shares and the denominator of which shall be
the total number of Non- Election Shares and (ii) a number of shares of Zions
Bancorp Stock equal to the product of (x) the Common Stock Consideration and (y)
a fraction equal to one minus the Non-Election Fraction.
(f) Adjustments Relating to Tax Opinions. If the tax opinion
referred to in section 3.4 of the Plan of Reorganization cannot be rendered (as
reasonably determined by the person that is to render such opinion and
reasonably concurred in by Duane, Morris & Heckscher), as a result of the Merger
potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, then Zions Bancorp shall decrease the Cash Election
Number to the minimum extent necessary to enable the relevant tax opinion or
opinions, as the case may be, to be rendered.
(g) Exercise of Election.
(i) All Cash Elections, Stock Elections, and
Non-Elections shall be made on a form designed for that purpose by the Exchange
Agent designated in section 3.5 of this Agreement (a "Form of Election") and
mailed to holders of record of shares of Company Stock as of the record date for
the meeting at which the shareholders of the Company meet to approve, ratify,
and confirm the transactions contemplated by this Agreement or such other date
as Zions Bancorp and the Company shall mutually agree (the "Election Form Record
Date"). Zions Bancorp and the Company shall make available one or more Forms of
Election as may be reasonably requested by all persons who become holders or
beneficial owners of Company Stock between the Election Form Record Date and the
close of business on the day prior to the Election Deadline.
(ii) Elections shall be made by holders of Company
Stock by mailing to the Exchange Agent a Form of Election. Any holder of Company
Stock may allocate his or her Company Stock among Cash Election Shares, Stock
Election Shares, and Non-Election Shares as he or she sees fit, that is, by
electing to allocate all to one category or by dividing his or her Company Stock
among more
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<PAGE>
than one category, provided that if the sum of the shares of any holder as to
which Cash Elections, Stock Elections, and Non-Elections are made exceed the
total number of shares held by that holder, the Exchange Agent shall consider
all the elections submitted by that holder to have been not properly made and,
accordingly, subject to the procedures set forth in section 3.2(i).
(iii) To be effective, a Form of Election must be
properly completed, signed, and submitted to the Exchange Agent; and the
Exchange Agent must also have received, no later than the Election Deadline, the
certificates representing the shares of Company Stock as to which the election
is being made (or an appropriate guarantee of delivery by an appropriate trust
company in the United States or a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc.).
(iv) The Exchange Agent will have the discretion to
reasonably determine whether Forms of Election have been properly completed,
signed, and submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of the Exchange Agent in such matters shall be conclusive
and binding. Zions Bancorp will not be under any obligation to notify any person
of any defect in a Form of Election submitted to the Exchange Agent, but the
Exchange Agent shall use commercially reasonable efforts to notify a holder of
any such defect.
(v) The Exchange Agent shall make all computations
contemplated by this Section 3.2, and all computations shall be conclusive and
binding on the holders of Company Stock.
(h) Election Deadline. A Form of Election must be received by
the Exchange Agent by the close of business on the tenth business day following
the Closing Date (the "Election Deadline") in order to be effective. Any holder
of Company Stock who has made an election by submitting a Form of Election to
the Exchange Agent may at any time prior to the Election Deadline change his or
her election by submitting a revised Form of Election, properly completed and
signed, that is received by the Exchange Agent prior to the Election Deadline.
Any holder of Company Stock may at any time prior to the Election Deadline
revoke his or her election and withdraw his or her certificates deposited with
the Exchange Agent by written notice to the Exchange Agent received by the close
of business on the day prior to the Election Deadline. As soon as practicable
after the Election Deadline, the Exchange Agent shall determine the allocation
of the cash portion of the Merger Consideration and the stock portion of the
Merger Consideration and shall notify Zions Bancorp of its determination.
(i) Deemed Non-Election. For the purposes hereof, a holder of
Company Common Stock (including a holder of Dissenting Shares who shall have
failed to perfect, or shall have effectively withdrawn or lost, his or her right
to dissent from the Merger under the Appraisal Laws) who does not submit a Form
of Election which is received by the Exchange Agent prior to the Election
Deadline shall be deemed to have made a Non-Election. If the Exchange Agent
shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall be deemed to
be of no force and effect and the shareholder making such purported Cash
Election or Stock Election shall for purposes hereof be deemed to have made a
Non-Election.
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3.3. 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.
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 Stock for Zions Bancorp
Stock. 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
of this Agreement) and, upon receipt of the certificates representing shares of
Company 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) and (iii) the cash value of any fractional
shares determined in accordance with Section 3.3 hereof.
3.5. Designation of Exchange Agent. The Company and Zions Bancorp
hereby designate Zions Bank as Exchange Agent to effect the exchange
contemplated hereby. Zions Bancorp will, promptly after the Election Deadline,
issue and deliver to Zions Bank the share certificates representing shares of
Zions Bancorp Stock and the cash to be paid to holders of Company Stock in
accordance with this Agreement.
3.6. Notice of Exchange. Promptly after the Effective Date, Zions
Bank shall mail to each holder of one or more certificates formerly representing
Company 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.
3.7. Treatment of Stock Options. Each stock option to purchase
Company Common Stock not exercised prior to the Effective Date shall
automatically be canceled on and as of the Effective Date.
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,
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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 Clark County, Nevada to be the proper jurisdiction and venue
for any suit or action arising out of this Agreement. Each of the parties
consents to personal jurisdiction in such venue for such a proceeding and agrees
that it may be served with process in any action with respect to this Agreement
or the transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of Nevada. 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
that this Agreement may not be amended after the action by shareholders of the
Company in any respect that would prejudice the economic 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ZIONS BANCORPORATION
Attest:_______________________ By:____________________________
Dale M. Gibbons Harris H. Simmons
Senior Vice President President and
and Secretary Chief Executive Officer
SUN STATE CAPITAL CORPORATION
Attest:_______________________ By:____________________________
John Dedolph
President and
Chief Executive Officer
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)
State of Utah )
) ss.
County of Salt Lake )
)
On this ________ day of [____________], 1997, 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 and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
_____________________________
Notary Public
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)
State of Nevada )
) ss.
County of Clark )
)
On this ________ day of [____________], 1997, before me personally
appeared John Dedolph, to me known to be the President and Chief Executive
Officer of Sun State Capital Corporation, 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 and that the seal affixed is the corporate seal of said
corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
____________________________
Notary Public
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EXHIBIT II
BANK MERGER AGREEMENT
<PAGE>
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of
[_______________], 1997, between NEVADA STATE BANK ("NS Bank"), a banking
corporation organized under the laws of the State of Nevada, and SUN STATE BANK
("SS Bank"), a banking corporation organized under the laws of the State of
Nevada. NS Bank and SS Bank are hereinafter sometimes individually called a
"Constituent Corporation" and collectively called the "Constituent
Corporations."
RECITALS
NS Bank is a banking corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. As of [_______________],
1997, the authorized capital stock of NS Bank 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.
SS Bank is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. As of [_______________], 1997,
the authorized capital stock of SS Bank consisted of 400 shares of Common Stock,
$12,500 par value (the "SS Bank Common Stock"), of which 258 shares were issued
and outstanding; no shares of capital stock were held in its treasury on such
date.
NS Bank and SS Bank have entered into an Agreement and Plan of
Reorganization, dated May 21, 1997 (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
SS Bank with and into NS Bank (the "Merger") in accordance with this Agreement
of Merger (the "Agreement").
The Boards of Directors of each of NS Bank and SS Bank deem the Merger
advisable and in the best interests of each banking corporation and its
stockholders. The Boards of Directors of each of NS Bank and SS Bank, by
resolutions duly adopted, have approved the Plan of Reorganization. The Boards
of Directors of each of NS Bank and SS Bank, by resolutions duly adopted, have
approved this Agreement. The Boards of Directors of each of NS Bank and SS Bank
have directed that this Agreement, and authorization for the transactions
contemplated hereby, be submitted to stockholders of SS Bank for approval.
At the Effective Date (as defined in Section 1.1 below) shares of SS
Bank Common Stock shall be canceled 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 SS Bank into NS Bank. SS Bank shall be merged with and
into NS Bank 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 Nevada pursuant
<PAGE>
to section 92A.200 of the Nevada 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) SS Bank and NS Bank shall be a single banking corporation,
which shall be NS Bank. NS Bank is hereby designated as the surviving
corporation in the Merger and is hereinafter sometimes called the "Surviving
Corporation."
(b) The separate existence of SS Bank 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 Nevada General
Corporation Law.
(d) The Surviving Corporation shall thereupon and thereafter
possess all of the rights, privileges, immunities, and franchises, of a public
as well as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares and all other choses in action, and all and
every other interest of and belonging to or due to each of the Constituent
Corporations shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger.
(e) The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities and obligations of each of the Constituent
Corporations; and any claim existing or action or proceeding pending by or
against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place, or the Surviving Corporation may be substituted in
its place. The Surviving Corporation expressly assumes and agrees to perform all
of the liabilities and obligations of SS Bank. 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 NS Bank as they exist
immediately prior to the Effective Date shall be the Articles of Incorporation
of the Surviving Corporation until later amended pursuant to Nevada 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 SS Bank Common Stock shall, without further action,
cease to be an issued and existing share.
1.3. Acts to Carry Out This Merger Plan.
(a) SS Bank 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 in NS Bank and otherwise to carry
out the purposes of this Agreement.
-2-
<PAGE>
(b) If, at any time after the Effective Date, NS Bank 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 NS Bank its right, title, or interest in or under any of
the rights, properties, or assets of SS Bank acquired or to be acquired by NS
Bank as a result of, or in connection with, the Merger, or (ii) otherwise carry
out the purposes of this Agreement, SS Bank and its proper officers and
directors shall be deemed to have granted to NS Bank 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 NS Bank
and otherwise to carry out the purposes of this Agreement; and the proper
officers and directors of NS Bank are fully authorized in the name of SS Bank or
otherwise to take any and all such action.
1.4. Approvals. This Agreement is subject to the approvals of the
Commissioner of Financial Institutions of the State of Nevada and of the Federal
Deposit Insurance Corporation and to the approval of the shareholders of the
Constituent Banks, in accordance with applicable law.
ARTICLE II
2.1. Capitalization. The authorized shares of capital stock of NS Bank
as of the Effective Date shall be [__________] shares of Common Stock, par value
$[_____] per share..
2.2. By-Laws. The By-Laws of NS Bank as they exist immediately prior
to the Effective Date shall be the By-Laws of NS Bank until later amended
pursuant to Nevada law.
ARTICLE III
3.1. Cancellation of Shares. At the Effective Date, the currently
outstanding [______] shares of common stock of NS Bank, each of $[______] par
value, will remain outstanding as shares of the $[______] par value common stock
of the Surviving Corporation, and the holders of such stock shall retain their
present rights. At the Effective Time, each share of SS Bank Common Stock
outstanding shall be canceled.
3.2. Treatment of Stock Options. Each stock option to purchase capital
stock of SS Bank shall automatically be canceled on and as of the Effective
Date.
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.
-3-
<PAGE>
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 Clark County, Nevada to be the proper jurisdiction and venue
for any suit or action arising out of this Agreement. Each of the parties
consents to personal jurisdiction in such venue for such a proceeding and agrees
that it may be served with process in any action with respect to this Agreement
or the transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of Nevada. 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.
4.6. Termination. This Agreement shall terminate and be abandoned upon
(i) termination of the Plan of Reorganization or (ii) the mutual consent of NS
Bank and SS Bank 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.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEVADA STATE BANK
Attest:__________________________ By:__________________________
Gordon E. Bywater George B. Hofmann III
Senior Vice President President and
and Secretary Chief Executive Officer
SUN STATE BANK
Attest:__________________________ By:___________________________
John Dedolph
President and
Chief Executive Officer
-5-
<PAGE>
)
State of Nevada )
) ss.
County of Clark )
)
On this ________ day of [____________], 1997, before me personally
appeared George B. Hofmann III, to me known to be the President and Chief
Executive Officer of Nevada State Bank, 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 and that the seal affixed is the corporate seal of said
corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
_______________________________
Notary Public
-6-
<PAGE>
)
State of Nevada )
) ss.
County of Clark )
)
On this ________ day of [____________], 1997, before me personally
appeared John Dedolph, to me known to be the President and Chief Executive
Officer of Sun State Bank, 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
and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
_____________________________
Notary Public
-7-
<PAGE>
EXHIBIT III
VOTING AGREEMENT
<PAGE>
May 21, 1997
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Mesdames and Gentlemen:
The undersigned understands that Zions Bancorporation ("Zions Bancorp")
is about to enter into an Agreement and Plan of Reorganization with Sun State
Capital Corporation (the "Company") (the "Agreement"). The Agreement provides
for the merger of the Company with and into Zions Bancorp (the "Merger") and the
conversion of outstanding shares of Company Stock into Zions Bancorp Common
Stock and cash in accordance with the formula therein set forth.
In order to induce Zions Bancorp to enter into the Agreement, and
intending to be legally bound hereby, the undersigned, subject to the conditions
hereinafter stated, represents, warrants, and agrees that at the Company
Shareholders' Meeting contemplated by Section 4.1 of the Agreement and Plan of
Reorganization (the "Meeting"), and any adjournment thereof, the undersigned
will, in person or by proxy, vote or cause to be voted in favor of the Agreement
and the Merger the shares of Company Common Stock beneficially owned by the
undersigned individually or, to the extent of the undersigned's proportionate
voting interest, jointly with other persons, as well as, to the extent of the
undersigned's proportionate voting interest, any other shares of Company Common
Stock over which the undersigned may hereafter acquire beneficial ownership in
such capacities (collectively, the "Shares"). Subject to the final paragraph of
this agreement, the undersigned further agrees that he will use his best efforts
to cause any other shares of Company Common Stock over which he has or shares
voting power to be voted in favor of the Agreement and the Merger.
The undersigned further represents, warrants, and agrees that beginning
upon the authorization and execution of the Agreement by the Company until the
earlier of (i) the consummation of the Merger or (ii) the termination of the
Agreement in accordance with its terms, the undersigned will not, directly or
indirectly:
(a) vote any of the Shares, or cause or permit any of the Shares to be
voted, in favor of any other sale of control, merger, consolidation, plan of
liquidation, sale of assets, reclassification, or other transaction involving
the Company or any of its subsidiaries which would have the effect of assisting
or facilitating the acquisition of control by any person other than Zions
Bancorp or an affiliate thereof over the Company or any substantial portion of
its assets or assisting or facilitating the acquisition of control by any person
other than Zions Bancorp or an affiliate, or the Company or a wholly-owned
subsidiary of the Company, of any subsidiary of the Company or any substantial
portion of its assets. As used herein, the term "control" means (1) the ability
to direct the
<PAGE>
Zions Bancorporation
May 21, 1997
Page 2
voting of 10% or more of the outstanding voting securities of a person having
ordinary voting power in the election of directors or in the election of any
other body having similar functions or (2) the ability to direct the management
and policies of a person, whether through ownership of securities, through any
contract, arrangement, or understanding or otherwise.
(b) voluntarily sell or otherwise transfer any of the Shares, or cause
or permit any of the Shares to be sold or otherwise transferred (i) pursuant to
any tender offer, exchange offer, or similar proposal made by any person other
than Zions Bancorp or an affiliate thereof, (ii) to any person seeking to obtain
control (as the term "control" is defined in paragraph (a), above) of the
Company, any of its subsidiaries or any substantial portion of the assets of the
Company or any subsidiary thereof or to any other person (other than Zions
Bancorp or an affiliate thereof) under circumstances where such sale or transfer
may reasonably be expected to assist a person seeking to obtain such control,
(iii) for the purpose of avoiding the obligations of the undersigned under this
agreement, or (iv) to any transferee unless such transferee expressly agrees in
writing to be bound by the terms of this agreement in all events.
It is understood and agreed that this agreement relates solely to the
capacity of the undersigned as a shareholder or other beneficial owner of the
Shares and does not prohibit the undersigned, if a member of the Board of
Directors of the Company or a member of the Board of Directors of Sun State
Bank, from acting, in his or her capacity as a director, as the undersigned may
determine to be appropriate in light of the obligations of the undersigned as a
director. It is further understood and agreed that the term "Shares" shall not
include any securities beneficially owned by the undersigned as a trustee or
fiduciary for another, and that this agreement is not in any way intended to
affect the exercise by the undersigned of the undersigned's fiduciary
responsibility in respect of any such securities.
Very truly yours,
__________________________
Accepted and Agreed to:
ZIONS BANCORPORATION
By:____________________________
Title:_________________________
<PAGE>
Zions Bancorporation
May 21, 1997
Page 3
Name of Shareholder:
Shares of Common Stock of Sun State Capital Corporation
Beneficially Owned
As of May 21, 1997
Name(s) of Number of
Record Owner(s) Beneficial Ownership 1 Shares
--------------- ---------------------- ------
_______________
1 For purposes of this Agreement, shares are beneficially owned by the
shareholder named above if held in any capacity other than a fiduciary capacity
(other than a revocable living trust) and if the shareholder named above has the
power (alone or, in the case of shares held jointly with his or her spouse,
together with his or her spouse) to direct the voting of such shares.
<PAGE>
EXHIBIT IV
OPINION OF ROTHGERBER, APPEL, POWERS & JOHNSON LLP
<PAGE>
[____________________], 1997
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Nevada State Bank
201 East Fourth Street
Las Vegas, Nevada 89101-5716
Re: Merger of Sun State Capital Corporation With Zions
Bancorporation, In Exchange for Stock of Zions
Bancorporation and Cash; Merger of Sun State Bank With
Nevada State Bank
Mesdames and Gentlemen:
We are special counsel to Sun State Capital Corporation, a corporation
organized under the laws of the State of Nevada with its head office located at
Las Vegas, County of Clark, State of Nevada ("the Company"), and its
wholly-owned subsidiary, Sun State Bank, a banking corporation organized under
the laws of the State of Nevada with its head office located at Las Vegas,
County of Clark, State of Nevada ("SS Bank"), in connection with the merger (the
"Merger") of the Company with and into Zions Bancorporation, a corporation
organized under the laws of the State of Utah with its head office located at
Salt Lake City, County of Salt Lake, State of Utah ("Zions Bancorp") in exchange
for which shareholders of the Company will receive shares of the common stock of
Zions Bancorp and cash pursuant to an Agreement and Plan of Reorganization dated
May 21, 1997 (the "Agreement") and an Agreement of Merger dated as of
[____________], 1997 (the "Merger Agreement"), and in connection with the merger
(the "Bank Merger") of SS Bank with and into Nevada State Bank, a banking
corporation organized under the laws of the State of Nevada with its head office
located at Las Vegas, County of Clark, State of Nevada and a wholly-owned
subsidiary of Zions Bancorp ("NS Bank") pursuant to the Agreement and an
Agreement of Merger dated as of [____________], 1997 (the "Bank Merger
Agreement") (the Agreement, the 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.
<PAGE>
Zions Bancorporation
Nevada State Bank
[____________________], 1997
Page 2
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 Merger (the "Registration Statement") including the
Prospectus/Proxy Statement for the shareholders of the Company (the
"Prospectus/Proxy Statement"). In addition, in rendering the opinions that
follow, we have examined executed copies of the Agreements and the exhibits and
schedules appended thereto; the articles of incorporation and by-laws of the
Company and SS Bank; the minutes of certain meetings of the board of directors
of the Company and SS Bank; and such other corporate documents and corporate
records of the Company and SS 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 SS 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 NS 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 the Company and SS 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 SS 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 continue
to remain accurate, insofar as material to our opinions, from such earlier date
through the date hereof.
Based on the foregoing, and solely in reliance thereon, 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 Nevada 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.
<PAGE>
Zions Bancorporation
Nevada State Bank
[____________________], 1997
Page 3
(ii) SS Bank is duly organized, validly existing and in good
standing under the laws of the State of Nevada 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 SS Bank are insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation (the "FDIC") 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 SS Bank have been duly and validly
authorized and issued and are fully paid and non-assessable. All shares of SS
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 SS
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 SS 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 it 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 SS Bank or
the observance or performance by the Company or SS Bank 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 either the Company or SS Bank of any 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 respective articles of incorporation or by-laws of the Company
or SS Bank, or any agreement or instrument to which the Company or SS Bank is a
party (or which is binding on either of them or its assets) or by which the
Company or SS Bank is bound, and will not result in the creation of any lien on,
or security interest in, any of the assets of either of them.
(e) Binding Obligations; Due Authorization. Each of the Agreements to
which it is a party has been duly authorized by all necessary corporate action
on the part of each of the Company and SS Bank, has been duly executed and
delivered by each of the Company and SS Bank, and constitutes a valid, legal,
and binding obligation of the Company and SS Bank, enforceable against it 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,
<PAGE>
Zions Bancorporation
Nevada State Bank
[___________________], 1997
Page 4
or receiver, of banks or savings associations 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 either the Company or SS Bank are necessary to authorize any of the
Agreements to which it is a party or the carrying out of the transactions
contemplated thereby.
(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 the Company and SS Bank 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 governmental
authority or third party. The execution and delivery by the Company and SS Bank
of each of the Agreements to which it is a party, the consummation of the
transactions contemplated thereby, and the compliance with and fulfillment of
the terms thereof by the Company and SS Bank 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. The Prospectus/Proxy Statement
complies on its face as to form in all material respects with the requirements
of the federal securities laws and published rules and regulations of the
Securities and Exchange Commission as of the date thereof.
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 make no representation to you as to
the accuracy or completeness of statements of fact contained or incorporated by
reference in the Prospectus/Proxy Statement or the Registration 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, or the
Registration Statement as of the effective date or the date hereof, 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 Prospectus/Proxy Statement or Registration Statement 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,
<PAGE>
EXHIBIT V
OPINION OF COMPANY AND SS BANK LITIGATION COUNSEL
<PAGE>
[____________________], 1997
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Nevada State Bank
201 East Fourth Street
Las Vegas, Nevada 89101-5716
Re: Merger of Sun State Capital Corporation With Zions
Bancorporation, In Exchange for Stock of Zions Bancorporation
and Cash; Merger of Sun State Bank With Nevada State Bank
Mesdames and Gentlemen:
We are special counsel to Sun State Capital Corporation, a corporation
organized under the laws of the State of Nevada with its head office located at
Las Vegas, County of Clark, State of Nevada ("the Company"), and its
wholly-owned subsidiary, Sun State Bank, a banking corporation organized under
the laws of the State of Nevada with its head office located at Las Vegas,
County of Clark, State of Nevada ("SS Bank"), in connection with the merger (the
"Merger") of the Company with and into Zions Bancorporation, a corporation
organized under the laws of the State of Utah with its head office located at
Salt Lake City, County of Salt Lake, State of Utah ("Zions Bancorp") in exchange
for which shareholders of the Company will receive shares of the common stock of
Zions Bancorp and cash pursuant to an Agreement and Plan of Reorganization dated
May 21, 1997 (the "Agreement") and an Agreement of Merger dated as of
[____________], 1997 (the "Merger Agreement"), and in connection with the merger
(the "Bank Merger") of SS Bank with and into Nevada State Bank, a banking
corporation organized under the laws of the State of Nevada with its head office
located at Las Vegas, County of Clark, State of Nevada and a wholly-owned
subsidiary of Zions Bancorp ("NS Bank") pursuant to the Agreement and an
Agreement of Merger dated as of [____________], 1997 (the "Bank Merger
Agreement") (the Agreement, the Merger Agreement, and the Bank Merger Agreement
to be referred to collectively as the "Agreements").
We have been requested by the Company and SS Bank to furnish to you our opinion
pursuant to Section 4.4 of the Agreement.
<PAGE>
Zions Bancorporation
Nevada State Bank
[____________________], 1997
Page 2
In rendering the opinion that follows, we have examined the Agreements
and such other documents and records as we have deemed necessary or appropriate
for the purpose of rendering the following opinion. In addition, we have
interviewed officers of the Company and SS Bank and undertaken and performed
such other procedures as we have deemed necessary or appropriate for the purpose
of rendering the following opinion. In these regards, we have examined and
relied upon representations of Zions Bancorp and NS 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. 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 solely in reliance thereon, we are of the
opinion that: (a) 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 SS 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 SS Bank, or which might materially and
adversely affect the properties or assets thereof or which might prevent, hinder
or delay the consummation of the transactions contemplated in the Agreements;
and (b) all pending legal or governmental proceedings to which the Company or SS
Bank is a party or to which any of its property or assets is the subject,
including ordinary routine litigation incidental to its business, are,
considered in the aggregate, not material.
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,
<PAGE>
EXHIBIT VI
EMPLOYMENT AGREEMENT
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
[___] day of [__________], 1997, by and between JOHN DEDOLPH ("Executive") and
NEVADA STATE BANK, a Nevada banking corporation, having its principal office in
Las Vegas, Nevada ("NS Bank")
W I T N E S S E T H T H A T :
WHEREAS, the Agreement and Plan of Reorganization (the "Plan") dated as
of May 21, 1997, by and between Zions Bancorporation ("Zions Bancorp"), NS Bank,
Sun State Capital Corporation ("the Company"), and Sun State Bank, provides that
the Company will be merged into Zions Bancorp and that Sun State Bank will be
merged with and into NS Bank;
WHEREAS, Executive is the President and Chief Executive Officer of each
of the Company and SS Bank;
WHEREAS, NS Bank 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 4.11 of the Plan contemplates that Executive will
enter into an employment 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) NS Bank hereby agrees to employ Executive, and Executive hereby
agrees to serve as [______________________________] of NS Bank during the Term
of Employment. Executive shall have such duties, responsibilities, and authority
of an executive nature as shall be set forth in the bylaws of NS Bank on the
date of this Agreement or as may otherwise be determined by NS Bank.
(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 NS Bank, render services as an employee, independent contractor,
or otherwise, whether or not compensated, to any person or entity other than NS
Bank or its affiliates; provided 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 4 hereof, (i) render services to charitable organizations, (ii) manage
his personal investments, and (iii) with the prior permission of the Board of
Directors of NS Bank, hold such other directorships or part-time academic
appointments or have such other business affiliations as would otherwise be
prohibited under this section 1.
<PAGE>
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) December 31, 1999, unless the Term of Employment shall be
extended by mutual written agreement of Executive and NS Bank;
(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 NS Bank "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 NS Bank, or with respect to any of their
affiliates for which Executive is assigned material responsibilities or duties;
(B) the conviction of Executive of a felony (after
the earlier of the expiration of any applicable appeal 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 NS Bank;
(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 6(a) hereof or of any agreement contained in section 1, 4,
5, or 6(b) hereof, which breach is material and adverse to NS Bank or any of its
affiliates for which Executive is assigned material responsibilities or duties;
or
(v) Executive's resignation from his position as
[___________________] of NS Bank; or
(vi) the termination of Executive's employment by NS Bank
"without cause," which shall be 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
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(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(h)
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 second
anniversary of the Commencement Date, salary payable at the rate established
pursuant to section 3(a)(i) hereof for the year in which the Termination Date
occurs, in a manner consistent with the normal payroll practices of NS Bank with
respect to executive personnel as presently in effect or as they may be modified
by NS Bank 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(h)
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.
3. Compensation. For the services to be performed by Executive for NS
Bank under this Agreement, Executive shall be compensated in the following
manner:
(a) Salary and Bonus.
(i) Salary. During the Term of Employment NS Bank shall pay
Executive a salary, the amount of which shall be reviewed at least annually, but
which in any event shall not be less than the aggregate salary paid to Executive
by SS Bank as of December 31, 1996. Salary shall be payable in accordance with
the normal payroll practices of NS Bank with respect to executive personnel as
presently in effect or as they may be modified by NS Bank from time to time.
(ii) Discretionary Bonuses. During the Term of Employment and
beginning with respect to the calendar year ending as of December 31, 1997,
Executive shall be considered annually by the Executive Compensation Committee
of the Board of Directors of Zions Bancorp for a discretionary bonus payment by
NS Bank made in accordance with the compensation policies of Zions Bancorp as
presently in effect or as they may be modified by Zions Bancorp from time to
time.
(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.
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<PAGE>
(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 Zions Bancorp, as presently in
effect or as they may be modified by Zions Bancorp from time to time, under such
terms as may be applicable to officers of Executive's rank employed by Zions
Bancorp or its subsidiaries, including, without limitation, plans providing
retirement benefits, medical insurance, life insurance, disability insurance,
and accidental death or dismemberment insurance.
(d) 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 Zions Bancorp as in effect as of the Commencement Date or
as may be modified by Zions Bancorp from time to time as may be applicable to
officers of Executive's rank employed by Zions Bancorp or its subsidiaries, but
in no event less than that provided to Executive by SS Bank at December 31,
1996.
(e) Withholding. All compensation to be paid to Executive hereunder
shall be subject to required withholding and other taxes.
(f) 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 Zions Bancorp as are in effect as of the Commencement Date and
as may be modified by Zions Bancorp from time to time, under such terms as may
be applicable to officers of Executive's rank employed by Zions Bancorp or its
subsidiaries.
4. Confidential Business Information; Non-Competition.
(a) Executive acknowledges that certain business methods, creative
techniques, and technical data of Zions Bancorp and NS Bank and their affiliates
and the like are deemed by Zions Bancorp and NS Bank to be and are in fact
confidential business information either of Zions Bancorp or NS Bank or their
affiliates or are entrusted to third parties. Such confidential information
includes but is not limited to procedures, methods, sales relationships
developed while in the service of Zions Bancorp or NS Bank or their affiliates,
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 Zions Bancorp or NS Bank
or their affiliates, and compositions, ideas, plans, and methods belonging to or
related to the affairs of Zions Bancorp or NS Bank or their affiliates. In this
regard, each of Zions Bancorp and NS Bank asserts proprietary rights in all of
its business information and that of NS Bank and that of their affiliates except
for such information as is clearly in the public domain. Notwithstanding the
foregoing, information that 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 Zions Bancorp or NS Bank, nor shall he use to the
detriment of Zions Bancorp or NS Bank or their affiliates or use in any business
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<PAGE>
or on behalf of any business competitive with or substantially similar to any
business of Zions Bancorp or NS Bank or their affiliates, any confidential
business information obtained during the course of his employment by NS Bank.
The foregoing shall not be construed as restricting Executive from disclosing
such information to the employees of NS Bank or its affiliates.
(b) Executive hereby agrees that from the Commencement Date until the
fifth anniversary of the Commencement Date, Executive will not (i) engage in the
banking business other than on behalf of NS Bank or its affiliates within the
Designated Area (as hereinafter 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
NS Bank or its affiliates) engaged in the banking business in the Designated
Area, or (iii) directly or indirectly solicit or otherwise intentionally cause
any employee, officer, or member of the respective Boards of Directors of NS
Bank or Zions Bancorp or any of their affiliates to engage in any action
prohibited under (i) or (ii) of this section 4(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 4(b).
(c) Executive acknowledges and agrees that irreparable injury will
result to NS Bank and Zions Bancorp in the event of a breach of any of the
provisions of this section 4 (the "Designated Provisions") and that NS Bank and
Zions Bancorp 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 NS Bank or Zions Bancorp may
have, NS Bank and Zions Bancorp shall be entitled to the entry of a preliminary
and permanent injunction (including, without limitation, specific performance)
by a court of competent jurisdiction in Clark County, Nevada, 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 4 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 4 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 4 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 NS Bank and Zions Bancorp, to the
fullest extent permitted by applicable law, the benefits intended by this
section 4.
(e) As used herein, "Designated Area" shall mean the Nevada counties of
Clark and Washoe.
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<PAGE>
5. Life Insurance. In light of the unusual abilities and experience of
Executive, NS Bank and Zions Bancorp in their 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 NS Bank and Zions Bancorp may choose. NS Bank or
Zions Bancorp 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 NS Bank or Zions Bancorp, 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 NS
Bank or Zions Bancorp has applied for insurance.
6. Representations and Warranties.
(a) Executive represents and warrants to NS Bank that 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.
(b) Executive shall indemnify, defend, and hold harmless NS Bank and
Zions Bancorp for, from, and against any and all losses, claims, suits, damages,
expenses, or liabilities, including court costs and counsel fees, which NS Bank
or Zions Bancorp has incurred or to which NS Bank or Zions Bancorp 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 6(a) hereof to be true and correct when
made.
7. 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:
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
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<PAGE>
If to Executive:
Mr. John Dedolph
[___________________________]
[___________________________]
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
8. Assignment. Neither party may assign this Agreement or any rights or
obligations hereunder without the consent of the other party.
9. Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Nevada, without giving
effect to the principles of conflict of law thereof. The parties hereby
designate Clark County, Nevada, to be the proper jurisdiction and venue for any
suit or action arising out of this Agreement. Each of the parties consents to
personal jurisdiction in such venue for such a proceeding and agrees that he or
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 Nevada. Each of the parties irrevocably and unconditionally waives and
agrees, to the fullest extent permitted by law, not to plead any objection that
he or 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.
10. Entire Agreement. This Agreement constitutes the entire
understanding between NS Bank and Executive relating to the subject matter
hereof. Any previous agreements or understandings between the parties hereto or
between Executive and the Company or SS 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.
11. 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.
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<PAGE>
12. Arbitration. Subject to the right of each party to seek specific
performance (which right shall not be subject to arbitration), if a dispute
arises out of or related to this Agreement, or the breach thereof, such dispute
shall be referred to arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). A dispute subject to the
provisions of this section will exist if either party notifies the other party
in writing that a dispute subject to arbitration exists and states, with
reasonable specificity, the issue subject to arbitration (the "Arbitration
Notice"). The parties agree that, after the issuance of the Arbitration Notice,
the parties will try in good faith to resolve the dispute by mediation in
accordance with the Commercial Rules of Arbitration of AAA between the date of
the issuance of the Arbitration Notice and the date the dispute is set for
arbitration. If the dispute is not settled by the date set for arbitration, then
any controversy or claim arising out of this Agreement or the breach hereof
shall be resolved by binding arbitration and judgment upon any award rendered by
arbitrator(s) may be entered in a court having jurisdiction. Any person serving
as a mediator or arbitrator must have at least ten years' experience in
resolving commercial disputes through arbitration. In the event any claim or
dispute involves an amount in excess of $100,000, either party may request that
the matter be heard by a panel of three arbitrators; otherwise all matters
subject to arbitration shall be heard and resolved by a single arbitrator. The
arbitrator shall have the same power to compel the attendance of witnesses and
to order the production of documents or other materials and to enforce discovery
as could be exercised by a United States District Court judge sitting in the
District of Nevada. In the event of any arbitration, each party shall have a
reasonable right to conduct discovery to the same extent permitted by the
Federal Rules of Civil Procedure, provided that such discovery shall be
concluded within ninety days after the date the matter is set for arbitration.
Any provision in this Agreement to the contrary notwithstanding, this section
shall be governed by the Federal Arbitration Act and the parties have entered
into this Agreement pursuant to such Act.
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 NS
Bank or Zions Bancorp 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, as amended.
15. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
NEVADA STATE BANK
Attest:__________________________ By:___________________________
Gordon E. Bywater George B. Hofmann III
Senior Vice President President and
and Secretary Chief Executive Officer
JOHN DEDOLPH
Witness:_________________________ ______________________________
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EXHIBIT VII
OPINION OF DUANE, MORRIS & HECKSCHER
<PAGE>
[____________________], 1997
Sun State Capital Corporation
4240 West Flamingo Road
Las Vegas, Nevada 89126
Sun State Bank
4240 West Flamingo Road
Las Vegas, Nevada 89126
Re: Merger of Sun State Capital Corporation With Zions
Bancorporation, In Exchange for Stock of Zions Bancorporation
and Cash; Merger of Sun State Bank With Nevada State Bank
Mesdames and Gentlemen:
We are special counsel to Zions Bancorporation, a corporation organized
under the laws of the State of Utah with its head office located at Salt Lake
City, County of Salt Lake, State of Utah ("Zions Bancorp"), and its wholly-owned
subsidiary, Nevada State Bank, a banking corporation organized under the laws of
the State of Nevada with its head office located at Las Vegas, County of Clark,
State of Nevada ("NS Bank"), in connection with the merger (the "Merger") of Sun
State Capital Corporation, a corporation organized under the laws of the State
of Nevada with its head office located at Las Vegas, County of Clark, State of
Nevada (the "Company"), with and into Zions Bancorp in exchange for which
shareholders of the Company will receive shares of the common stock of Zions
Bancorp and cash pursuant to an Agreement and Plan of Reorganization dated May
21, 1997 (the "Agreement") and an Agreement of Merger dated as of
[____________], 1997 (the "Merger Agreement"), and in connection with the merger
(the "Bank Merger") of Sun State Bank, a banking corporation organized under the
laws of the State of Nevada with its head office located at Las Vegas, County of
Clark, State of Nevada and a wholly-owned subsidiary of the Company ("SS Bank"),
with and into NS Bank pursuant to the Agreement and an Agreement of Merger dated
as of [____________], 1997 (the "Bank Merger Agreement") (the Agreement, the
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.
<PAGE>
Sun State Capital Corporation
Sun State Bank
[____________________], 1997
Page 2
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 Merger (the "Registration Statement") including the
Prospectus/Proxy Statement for the shareholders of the Company (the
"Prospectus/Proxy Statement"). In addition, in rendering the opinions that
follow, we have examined executed copies of the Agreements and the exhibits and
schedules appended thereto; the articles of incorporation and by-laws of Zions
Bancorp and NS Bank; the minutes of certain meetings of the board of directors
of Zions Bancorp and NS Bank; and such other corporate documents and corporate
records of Zions Bancorp and NS Bank as we have deemed necessary or appropriate
for the purpose of rendering the following opinions. We have also examined
documents dated (i) [________________], 1997 of the Federal Reserve Bank of San
Francisco (the "Reserve Bank") approving the application of Zions Bancorp to
merge with the Company and thereby acquire control of SS Bank; (ii)
[________________], 1997 of the Commissioner of Financial Institutions of the
State of Nevada approving the merger of the Company and Zions Bancorp and the
merger of SS Bank with and into NS Bank; (iii) [_________________], 1997 of the
Federal Deposit Insurance Corporation approving the application of NS Bank to
merge with SS Bank; and (iv) [________________], 1997 of the Department of
Financial Institutions of the State of Utah concurring in the opinion of Duane,
Morris & Heckscher as special counsel to Zions Bancorp and NS Bank that the
Merger is authorized for Zions Bancorp pursuant to Utah Code Ann. ss. 7-1-702(l)
and that, by operation of Utah Code Ann. ss. 7-1-502, the approval of the
Department of Financial Institutions of the State of Utah is not required prior
to the consummation of the Merger. In addition, we have interviewed officers of
Zions Bancorp and NS 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 the Company and SS 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 NS Bank had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties other than Zions Bancorp and NS 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 continue
to remain accurate, insofar as material to our opinions, from such earlier date
through the date hereof. In rendering the opinion set forth in paragraph (e)
hereof, we have assumed that neither the Company nor SS Bank is subject to any
order or directive from, or memorandum of understanding or similar supervisory
<PAGE>
Sun State Capital Corporation
Sun State Bank
[____________________], 1997
Page 3
agreement entered into with, any bank regulatory authority which would
necessitate the receipt of approvals or consents from any such bank regulatory
authority prior to consummation of the transactions contemplated in the
Agreements other than those approvals and consents contemplated in the Agreement
and Plan of Reorganization and those generally applicable to such transactions.
Based on the foregoing, and solely in reliance thereon, 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 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) NS Bank is a banking corporation which is duly organized,
validly existing, and in good standing under the laws of the State of Nevada 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 NS 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.
(b) Execution and Performance of Agreements. Each of Zions Bancorp and
NS 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) Compliance with Corporate Documents. Neither the execution,
delivery, or performance by Zions Bancorp or NS Bank of the Agreements nor the
consummation of the transactions contemplated therein will violate, conflict
with, or constitute a breach of or default under the respective articles of
incorporation or by-laws of Zions Bancorp or NS Bank.
(d) Binding Obligations; Due Authorization. Each of the Agreements to
which it is a party has been duly authorized by all necessary corporate action
on the part of each of Zions Bancorp and NS Bank, has been duly executed and
delivered by each of Zions Bancorp and NS Bank, and constitutes a valid, legal,
and binding obligation of Zions Bancorp and NS Bank, enforceable against it 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 or savings associations the accounts of which
are insured by the FDIC in particular, or by general equitable principles
(regardless of whether
<PAGE>
Sun State Capital Corporation
Sun State Bank
[____________________], 1997
Page 4
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 either Zions Bancorp or NS Bank are necessary to authorize any of the
Agreements to which it is a party or the carrying out of the transactions
contemplated thereby.
(e) Regulatory Approvals. All approvals or waivers required to be
obtained from the Reserve Bank, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Commissioner of Financial
Institutions of the State of Nevada, and the Department of Financial
Institutions of the State of Utah to consummate the transactions contemplated by
the Agreement have been obtained. Except for those approvals or waivers, the
execution and delivery by Zions Bancorp and NS Bank 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 or savings association
regulatory authority.
(f) Issuance of Zions Bancorp Common Stock. The shares of the Common
Stock of Zions Bancorp, no par value, to be issued by Zions Bancorp pursuant to
the Agreement and the Merger Agreement, when issued pursuant to and in
accordance with the Agreement and the Merger Agreement, will be 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, as amended (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) The Registration Statement complies on its face as to
form in all material respects with the requirements of the federal securities
laws and published rules and regulations of the Securities and Exchange
Commission as of the date thereof.
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 make no representation to you as to
the accuracy or completeness of statements of fact contained or incorporated by
reference in the Registration Statement or the Prospectus/Proxy 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, or the
Prospectus/Proxy Statement as of the issue date or the date hereof, 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
<PAGE>
Sun State Capital Corporation
Sun State Bank
[____________________], 1997
Page 5
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 or Prospectus/Proxy 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,
EXHIBIT 5
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006-1608
(202) 776-7800
September 3, 1997
Zions Bancorporation
Suite 1380
One South Main
Salt Lake City, Utah 84111
Gentlemen:
We have acted as counsel to Zions Bancorporation ("Zions") in
connection with the Agreement and Plan of Reorganization among Sun State Capital
Corporation ("Sun State"), Sun State Bank ("SS Bank"), Zions, and Nevada State
Bank ("NS Bank"), dated May 21, 1997, a related Plan of Merger between Sun State
and Zions, and a related Plan of Merger between SS Bank and NS Bank
(collectively, the "Plan of Reorganization"), whereby Sun State will be merged
into Zions, with Zions being the surviving corporation and SS Bank will be
merged into NS Bank, with NS Bank being the surviving entity (the
"Reorganization"). At the time the Reorganization becomes effective, the holders
of shares of Sun State common stock, par value $.01 per share ("Sun State Common
Stock") and shares of Sun State preferred stock, par value $100 per share, and
designated by Sun State as 1992 Series Preferred Stock ("Preferred Stock") will
have the right to elect to receive, in exchange for their shares of Sun State
Common Stock and shares of Preferred Stock, either cash or shares of common
stock, no par value, of Zions ("Zions Common Stock") or a combination of cash
and stock. Upon the effective date of the Reorganization, all issued and
outstanding shares of Sun State Common Stock and Preferred Stock will be
cancelled.
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 1,100,000
shares of Zions Common Stock into which outstanding Sun State 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:
(1) an executed copy of the Plan of Reorganization;
<PAGE>
Zions Bancorporation
September 3, 1997
Page 2
(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 March 21,
1997, 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
authorized, executed, and delivered by Sun State and the
Bank and such authorization remains fully effective and
has not been revised, superseded or rescinded as of the
date of this opinion; 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, NS Bank, Sun State, and SS Bank 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 shares of Sun State
Common Stock and shares of Preferred Stock will be converted in the
Reorganization will, when issued in accordance with the terms of the Plan of
Reorganization, be duly authorized, validly issued, fully paid and nonassessable
shares of Zions Common Stock.
This opinion has been delivered to the addressee to be used
solely by the addressee for inclusion as an exhibit in the Registration
Statement, and the opinion is not to be used, circulated, or otherwise referred
to for any other purpose, nor is the opinion to be relied upon by any person
other than the addressee.
<PAGE>
Zions Bancorporation
September 3, 1997
Page 3
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,
DUANE, MORRIS & HECKSCHER LLP
LSL/sls
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 16, 1997, with respect to the
consolidated financial statements of Zions Bancorporation as of December 31,
1996 and 1995, and for each of the years in the three-year period ended December
31, 1996 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
September 4, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of our
report dated January 14, 1997, with respect to the consolidated financial
statements of Sun State Capital Corporation and subsidiary. We also consent to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ McGladrey & Pullen LLP
MCGLADREY & PULLEN LLP
Las Vegas, Nevada
September 2, 1997
EXHIBIT 99.1
[letterhead of Sun State]
September , 1997
Shareholders of Sun State Capital Corporation
Dear Shareholder:
A Special Meeting of the Common Shareholders of Sun State Capital
Corporation ("Sun State") has been called for 9:00 a.m., Nevada time, on , 1997,
at Sun State Bank, 4240 West Flamingo Road, Las Vegas, Nevada.
The purpose of the Special Meeting is to consider and vote upon an
Agreement and Plan of Reorganization among Sun State, Sun State Bank (the
"Bank"), Zions Bancorporation ("Zions") and Nevada State Bank ("NS Bank"), a
wholly-owned subsidiary of Zions, which includes an Agreement to Merge between
Sun State and Zions and an Agreement to Merge between the Bank and NS Bank
(collectively, the "Plan of Reorganization"). If the Plan of Reorganization is
approved, and all conditions are met, the Plan of Reorganization will result in
the merger of Sun State into Zions, with Zions being the surviving corporation
and the merger of the Bank into NS Bank, with NS Bank being the surviving
entity.
Upon consummation of the Plan of Reorganization, each holder of Sun
State Common Stock and each holder of Sun State Preferred Stock will be entitled
to elect to receive, in exchange for their shares of Sun State Common Stock and
shares of Sun State Preferred Stock, either cash or shares of Zions Common Stock
or a combination of cash and stock, or indicate no preference between cash and
stock. The election choice of each Sun State shareholder will be fulfilled
unless the holders of Sun State Common Stock elect to receive more than 49% of
the merger consideration in the form of cash; in that case, there will be a
readjustment of the elections of holders of Sun State Common Stock so that a
portion of the cash so elected will instead be paid in shares of Zions Common
Stock in order that 51% of the merger consideration will be in the form of Zions
Common Stock. Holders of Preferred Stock will receive either cash or stock or a
combination of cash and stock in accordance with their elections. The terms and
conditions of the Plan of Reorganization, including the provisions regarding
readjustments of the shareholders' elections, are summarized in the accompanying
Proxy Statement/Prospectus. See "Summary--Certain Definitions" in the Proxy
Statement/Prospectus and the definitions of "Cash Election Number," "Election
Adjustments," and "Non-Election Adjustments."
A holder of Sun State Common Stock who chooses to receive Zions Common
Stock will receive in exchange for each share of Sun State Common Stock that
number of shares of Zions Common Stock calculated by dividing the Purchase Price
(as defined in the Plan of Reorganization) of $37,000,000 plus accretions by the
Average Closing Price (as defined) of Zions Common Stock and by further dividing
<PAGE>
Shareholders of Sun State Capital Corporation
July ___, 1997
Page 2
the number so reached by the number of shares of Sun State Common Stock issued
and outstanding on the effective date of the Reorganization. A holder of Sun
State Common Stock who chooses to receive cash and whose choice can be
accommodated in full will receive in exchange for each share of Sun State Common
Stock an amount of cash calculated by dividing the Purchase Price by the number
of shares of Sun State Common Stock issued and outstanding on the effective date
of the Reorganization.
A holder of Preferred Stock who chooses to receive Zions Common Stock
will receive in exchange for each share of Preferred Stock that number of shares
of Zions Common Stock calculated by dividing $110 plus accrued and unpaid
dividends on one share of Preferred Stock by the Average Closing Price. A holder
of Preferred Stock who chooses to receive cash will receive in exchange for each
share of Preferred Stock $110 plus accrued and unpaid dividends on one share of
Preferred Stock. A holder of Preferred Stock who indicates no preference will be
deemed to have elected to receive cash.
On August 13, 1997, the closing price of Zions Common Stock was
$35.6875 per share and Sun State had issued and outstanding 286,884 shares of
its Common Stock and 5,719 shares of its Preferred Stock. Additionally, at that
date Sun State had 2,750 shares of its Common Stock in its treasury, of which
250 shares are subject to binding subscriptions and will be issued prior to the
Special Meeting, and 6,266 shares are subject to outstanding options which are
exercisable prior to the Special Meeting. Assuming that the Reorganization had
been consummated as of August 13, 1997 and the Average Closing Price had been
$35.78, and assuming further that the Purchase Price equaled $37,944,285 on
August 13, 1997, shareholders of Sun State under such circumstances would have
received 3.6317 shares of Zions Common Stock for each share of Sun State Common
Stock or cash equal to $129.94 per share of Sun State Common stock; and holders
of Preferred Stock under such circumstances would have received 3.0964 shares of
Zions Common Stock for each share of Preferred Stock or cash equal to $110.79
for each share of Preferred Stock.
Because the market price of the shares of Zions Common Stock is subject
to fluctuation, the per share consideration is likely to change before the
Reorganization. See "Plan of Reorganization." Sun State shareholders are
encouraged to obtain current market quotations for Zions Common Stock and to
consider the interplay between the quotations and the definition of "Average
Closing Price." See "Certain Definitions" in the Proxy Statement/Prospectus. No
assurance can be given as to the market price of Zions Common Stock at or after
the Effective Date.
The accompanying Proxy Statement/Prospectus details the terms of the
proposed Plan of Reorganization and provides information concerning Sun State,
SS Bank, Zions, and NS Bank as well as the Plan of Reorganization. The Proxy
Statement/Prospectus contains important information necessary for the Common
Shareholders to make a decision about how to vote at the Special Meeting. Please
read it carefully.
<PAGE>
Shareholders of Sun State Capital Corporation
July ___, 1997
Page 3
The affirmative vote of a majority of the issued and outstanding shares
of Sun State Common Stock is required for approval of the Plan of
Reorganization. Therefore, it is important that the Common Shareholders vote.
Failure to vote will have the same effect as a vote against the Reorganization.
Consequently, please mark, sign, date and return the enclosed proxy as soon as
possible.
Holders of Sun State Preferred Stock will have no right to vote their
shares of Preferred Stock at the Special Meeting.
Any holder of Sun State Common Stock may attend the Special Meeting and
vote in person if he or she desires, even if he or she has already submitted a
proxy.
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies which approvals have been received
and to certain other conditions, including the maintenance of Sun State's
financial condition. If approved, the Plan of Reorganization will most likely be
consummated sometime in fourth quarter of 1997.
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the Reorganization is in the best interests
of Sun State, its shareholders, employees and the community it serves. The Board
of Directors unanimously recommends that the Common Shareholders vote to approve
the Plan of Reorganization.
Instructions describing the procedure to be followed to make your
election to choose to receive cash, shares of Zions Common Stock, or a
combination of cash and stock, or to indicate no preference between cash and
stock are included with the accompanying Proxy Statement/Prospectus. 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 Sun State stock
certificate for the selected Reorganization consideration. Please do not send
your certificates to Sun State prior to receiving these instructions.
Sincerely,
John Dedolph
President and Chief Executive Officer
EXHIBIT 99.2
SUN STATE CAPITAL CORPORATION
NOTICE OF SPECIAL MEETING
OF COMMON SHAREHOLDERS
A Special Meeting of common shareholders of Sun State Capital
Corporation ("Sun State") will be held at 9:00 a.m., local time, on , 1997, at
Sun State Bank, 4240 West Flamingo Road, Las Vegas, Nevada, to consider and vote
upon an Agreement and Plan of Reorganization dated as of May 21, 1997, among
Zions Bancorporation ("Zions"), Nevada State Bank ("NS Bank"), a wholly-owned
subsidiary of Zions, Sun State and Sun State Bank (the "Bank"), an Agreement to
Merge between Sun State and Zions and an Agreement to Merge between the Bank and
NS Bank (collectively, the "Plan of Reorganization"). The Plan of Reorganization
provides for the merger of Sun State into Zions with Zions being the surviving
corporation and for the merger of the Bank into NS Bank with NS Bank being the
surviving entity (the aforementioned mergers being referred to herein
collectively as the "Reorganization").
Upon the consummation of the Plan of Reorganization, each
holder of shares of Sun State Common Stock and each holder of Sun State
Preferred Stock will be entitled to elect to receive, in exchange for each share
held as of the effective date of the Plan of Reorganization, either cash or
shares of Zions Common Stock or a combination of cash and stock, or to indicate
no preference between cash and stock. The terms and conditions of the
Reorganization and the various formulas for exchange of Sun State Common Stock
and Preferred Stock for cash and/or shares of Zions Common Stock are set forth
in the accompanying Proxy Statement/Prospectus. Holders of Sun State Preferred
Stock will have no right to vote their shares of Preferred Stock at the Special
Meeting.
The Board of Directors has set July , 1997, as the record date
for determining common shareholders entitled to notice of and to vote at the
Special Meeting.
Holders of Sun State Common Stock are entitled to assert
dissenters' rights under Nevada law. Holders of Sun State Preferred Stock have
no right to assert dissenters' rights under Nevada law.
By order of the Board of Directors
Dated: September , 1997.
John Dedolph
President and Chief Executive Officer
Please mark, sign and return the enclosed proxy in the envelope
provided.
EXHIBIT 99.3
PROXY
SPECIAL MEETING OF COMMON SHAREHOLDERS
OF SUN STATE CAPITAL CORPORATION
September , 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Dedolph and , and each of
them, as proxies of the undersigned to vote as designated below on behalf of the
undersigned as a holder of the common stock of Sun State Capital Corporation
("Sun State Common Stock") and to vote as designated below all shares of Sun
State Common Stock that the undersigned held of record on August , 1997, which
the undersigned is entitled to vote, at the special meeting of common
shareholders of Sun State Capital Corporation ("Sun State") to be held , 1997,
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 May 21, 1997 among Zions Bancorporation ("Zions"), Nevada State Bank ("NS
Bank"), a wholly-owned subsidiary of Zions, Sun State, and Sun State Bank (the
"Bank"), an Agreement to Merge between Sun State and Zions and an Agreement to
Merge between the Bank and NS Bank (collectively, the "Plan of Reorganization"),
whereby Sun State will merge into Zions with Zions being the surviving
corporation and the Bank will merge into NS Bank with NS Bank being the
surviving entity (the aforementioned mergers being referred to collectively as
the "Reorganization"). Pursuant to the Plan of Reorganization, the holders of
shares of Sun State Common Stock and shares of Sun State's Preferred Stock will
be entitled to elect to receive, for each share of Sun State Common Stock and
for each share of Sun State Preferred Stock, either cash or shares of Zions
Common Stock or a combination of cash and stock, or to indicate no preference
between cash and stock. The terms and conditions of the Plan of Reorganization
and the formulas for calculating the amount of cash or shares of Zions Common
Stock to be received for each share of Sun State Common Stock and each share of
Sun State Preferred Stock are set forth in the accompanying Proxy
Statement/Prospectus. Each Proxy shall have full power of substitution. Approval
of the Plan of Reorganization requires the affirmative vote of a majority of the
outstanding shares of Sun State 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.
1. Approval of the Plan of Reorganization and the Merger of Sun State
Capital Corporation into Zions Bancorporation and the Bank into NS Bank.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 Sun State 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
EXHIBIT 99.6
FORM OF ELECTION AS TO SHARES OF
COMMON STOCK AND 1992 SERIES PREFERRED STOCK
OF SUN STATE CAPITAL CORPORATION
This Form of Election is provided in connection with the proposed merger (the
"Merger") of Sun State Capital Corporation ("Sun State") with and into Zions
Bancorporation ("Zions Bancorp") pursuant to the Agreement and Plan of
Reorganization among them, Nevada State Bank, and Sun State Bank dated as of May
21, 1997 (the "Agreement").
ALL FORMS OF ELECTION MUST BE DELIVERED TO THE
EXCHANGE AGENT BEFORE THE ELECTION DEADLINE AS DESCRIBED
HEREIN. ALL FORMS OF ELECTION MUST BE DELIVERED IN A MANNER
CONSISTENT WITH THE INSTRUCTIONS PROVIDED WITH THIS FORM OF ELECTION.
This Form of Election must be completed by holders of shares of Common Stock,
$0.01 par value, of Sun State (the "Common Shares") and holders of shares of
1992 Series Preferred Stock, $100.00 par value, of Sun State (the "Preferred
Shares") (together the "Shares") who wish to make an election (an "Election") as
to the form of consideration (the "Merger Consideration") into which such
holders' Shares are to be converted in the Merger. For an Election to be
properly made and effective, this Form of Election, properly completed, must be
received by the Exchange Agent prior to 5:00 p.m., Mountain Standard Time, on
the tenth business day following the Merger (the "Election Deadline"). Such
Election is subject to (a) the terms, conditions, and limitations set forth in
the Agreement, which is incorporated by reference and summarized by the Proxy
Statement/Prospectus relating to the Merger dated [ ], 1997 (the "Proxy
Statement/Prospectus"), and (b) the accompanying instructions. The Agreement and
the Proxy Statement/Prospectus are incorporated herein by reference. Any
capitalized terms used in this Form of Election but not defined herein shall
have the meanings given to them in the Proxy Statement/Prospectus. Additional
copies of the Proxy Statement/Prospectus are available from Zions Bancorp upon
request (see Instruction B8). THE INSTRUCTIONS TO THIS FORM OF ELECTION SHOULD
BE READ CAREFULLY BEFORE THIS FORM OF ELECTION IS COMPLETED.
Shareholders should deliver this Form of Election, properly completed and
accompanied by all required documents no later than the Election Deadline, to
the Exchange Agent at the address set forth below.
The Exchange Agent is:
ZIONS FIRST NATIONAL BANK
CORPORATE TRUST DEPARTMENT
10 EAST SOUTH TEMPLE, THIRD FLOOR
SALT LAKE CITY, UTAH 84111
or
POST OFFICE BOX 30880
SALT LAKE CITY, UTAH 84130
TELEPHONE: (801) 524-4624
Delivery of this Form of Election to an address other than as set forth above
will not constitute a valid delivery. You must sign this Form of Election where
indicated below.
This Form of Election, completed and signed, should be returned to the Exchange
Agent in the accompanying self-addressed, postage-paid envelope. DO NOT SUBMIT
YOUR STOCK CERTIFICATES AT THIS TIME. Unless you intend to exercise dissenters'
rights (see Instruction A9), you should complete and return this Form of
Election prior to the Election Deadline, whether or not you intend to vote "for"
the Agreement and the Merger.
You may enclose the proxy card with this Form of Election.
<PAGE>
ALL SHAREHOLDERS SHOULD COMPLETE THE DESCRIPTION OF SHARES IN BOX A
TO SPECIFY THE SHARES COVERED HEREBY.
BOX A
DESCRIPTION OF SHARES
LIST BELOW THE SHARES TO WHICH THIS FORM OF ELECTION RELATES
(ATTACH ADDITIONAL SHEETS IF NECESSARY)
NAME AND ADDRESS OF REGISTERED HOLDER(S):
(PLEASE FILL IN, IF BLANK)
>
>
>
>
<TABLE>
<CAPTION>
- ---------------------------------------- ---------------------------------------- ----------------------------------
Certificate Number; Specify Whether Number of Shares Represented Number of Shares as to Which
Common or Preferred by Such Certificate Election is Made
<S> <C> <C>
- ---------------------------------------- ---------------------------------------- ----------------------------------
- ---------------------------------------- ---------------------------------------- ----------------------------------
- ---------------------------------------- ---------------------------------------- ----------------------------------
- ---------------------------------------- ---------------------------------------- ----------------------------------
- ---------------------------------------- ---------------------------------------- ----------------------------------
- ---------------------------------------- ---------------------------------------- ----------------------------------
Total Shares: Total Shares:
- ---------------------------------------- ---------------------------------------- ----------------------------------
</TABLE>
<PAGE>
To: Zions First National Bank
Corporate Trust Department
10 East South Temple, Third Floor
Salt Lake City, Utah 84111
Mesdames and Gentlemen:
The undersigned hereby makes the Election set forth in Box B below, or, if an
Election is not duly made, elects to have the undersigned's Shares treated as
Non-Election Shares.
The undersigned understands that the purposes of the election procedures
described herein are to permit holders of Shares to express their preferences
for the type of consideration they wish to receive in the Merger, and further
understands that no less than 51 percent of the total consideration to be paid
by Zions Bancorp in the Merger will be in the form of shares of Zions Bancorp
Stock. In addition, the Election by each holder of Shares, including this
Election by the undersigned, will be subject to the results of the election and
proration procedures set forth in the Agreement and summarized in the Proxy
Statement/Prospectus under the caption "PLAN OF REORGANIZATION--Conversion of
Sun State Shares; Election to Receive Cash or Stock." Accordingly, there can be
no assurance that the undersigned holder will receive the proportion of cash
indicated by such holder's Election. Receipt of the Proxy Statement/Prospectus,
including the Agreement incorporated by reference and summarized by the Proxy
Statement/Prospectus, is hereby acknowledged.
Neither the Zions Bancorp Board of Directors nor the Sun State Board of
Directors makes any recommendation as to the type of consideration
shareholders should elect to receive. Each shareholder
must make his or her own decision
with respect to such Election.
By completing Box B below, each Sun State shareholder may choose to make a Cash
Election, a Stock Election, a Combination Election, or no election with respect
to the Shares held by such holder. BOX B
ELECTION
(Check only one box)
The undersigned, subject to the terms and conditions set forth in this Form of
Election, including the Agreement incorporated herein by reference, makes the
following Election with respect to the undersigned's Shares covered hereby:
/ / A Stock Election with respect to ALL of such Shares.
/ / A Cash Election with respect to ALL of such Shares.
/ / A Combination Election, in which the following numbers of such
Shares will be converted into Zions Bancorp Stock and cash,
respectively:
COMBINATION ELECTION
(FILL IN NUMBERS OF SHARES TO BE SO CONVERTED)
(ATTACH ADDITIONAL SHEETS IF NECESSARY)
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------ ------------------------ --------------------------
Certificate Number; Specify Whether Election of Stock Election of Cash Total
Common or Preferred (Number of Shares) (Number of Shares) (Number of Shares)
- --------------------------------------- ------------------------ ------------------------ --------------------------
<S> <C> <C> <C>
- --------------------------------------- ------------------------ ------------------------ --------------------------
- --------------------------------------- ------------------------ ------------------------ --------------------------
- --------------------------------------- ------------------------ ------------------------ --------------------------
</TABLE>
/ / No Election.
Any Shares of the undersigned as to which the undersigned has not made an
effective Election will constitute Non-Election Shares.
THE UNDERSIGNED HEREBY CERTIFIES THAT THE ELECTION SET FORTH HEREIN COVERS ALL
OF THE SHARES OF SUN STATE STOCK REGISTERED IN THE NAME OF THE UNDERSIGNED AND
EITHER (I) BENEFICIALLY OWNED BY THE UNDERSIGNED, OR (II) OWNED BY THE
UNDERSIGNED IN ANY REPRESENTATIVE OR FIDUCIARY CAPACITY FOR A PARTICULAR
BENEFICIAL OWNER OR FOR ONE OR MORE BENEFICIAL OWNERS.
The undersigned understands and acknowledges that all questions as to the
validity, form, and eligibility of any Election and delivery and/or surrender of
Certificates and Shares hereunder shall be determined by the Exchange Agent, or
as otherwise provided by the Agreement or Instruction A6 hereof, and any such
determinations shall be final and binding. No authority herein conferred or
agreed to be conferred shall be affected by, and all such authority shall
survive, the death or incapacity of the undersigned. All obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors, and assigns of the undersigned.
IMPORTANT!
ALL SUN STATE SHAREHOLDERS SUBMITTING
THIS FORM OF ELECTION MUST SIGN HERE
The undersigned hereby represents and warrants that the undersigned has full
power and authority to complete and deliver this Form of Election. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Exchange Agent or Zions Bancorp to be necessary or desirable to
complete the election.
BOX C
SHAREHOLDERS(S) SIGN HERE
===============================================================================
===============================================================================
Name(s):_________________________________
(Please Print)
Address:_________________________________
_________________________________
(Include Zip Code)
_____________________________ ___________________________________________
(Area Code and Telephone No.) (Tax Identification or Social Security No.)
Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s). If signature is by attorney, executor, administrator, trustee or
guardian or other acting in a fiduciary capacity, set forth full title and see
Instruction A4.
<PAGE>
INSTRUCTIONS TO FORM OF ELECTION
A. FORM OF ELECTION
1. DELIVERY OF FORM OF ELECTION. THE SHARES OF SUN STATE SHAREHOLDERS
WHOSE PROPERLY COMPLETED AND EXECUTED FORMS OF ELECTION ARE NOT RECEIVED PRIOR
TO THE ELECTION DEADLINE WILL BE TREATED AS NON-ELECTION SHARES (AS DEFINED IN
THE AGREEMENT). These instructions need not be returned.
2. SHARES HELD BY NOMINEES, TRUSTEES, OR OTHER REPRESENTATIVES. Any
record holder of Shares who holds such Shares as a nominee, trustee, or in
another representative or fiduciary capacity (a "nominee") may submit one or
more Forms of Election covering the aggregate number of Shares held by such
nominee for the beneficial owners for whom the nominee is making an Election;
provided, that each submission of a Form of Election by a nominee shall be
deemed to constitute a certification by such nominee that such Form of Election
covers all of the Shares held by such nominee for a particular beneficial owner.
If any Shares held by a nominee are not covered by an effective Election, they
will be deemed to be Non-Election Shares.
3. METHOD OF DELIVERY. THE METHOD OF DELIVERY OF THIS FORM OF ELECTION
IS AT THE OPTION AND RISK OF THE SENDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. The risk of loss of a Form of
Election shall pass only after the Exchange Agent has actually received the Form
of Election. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery by the Election Deadline.
4. SIGNATURES ON FORM OF ELECTION. If this Form of Election is signed
by the registered holder(s) of the Shares covered hereby, the signature(s) must
correspond with the name(s) on the face of the Certificates evidencing such
Shares without alteration, enlargement, or any other change whatsoever.
If any of the Shares covered hereby are owned of record by two or more
persons, all such persons must sign this Form of Election. If any Certificates
delivered herewith are registered in the names of different holders, it will be
necessary to complete, sign, and submit as many separate Forms of Election as
there are different registrations of such Certificates.
IF THIS FORM OF ELECTION IS SIGNED BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION, OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON SHOULD SO
INDICATE WHEN SIGNING, AND PROPER EVIDENCE SATISFACTORY TO THE EXCHANGE AGENT OF
SUCH PERSON'S AUTHORITY TO SO ACT MUST BE SUBMITTED.
5. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Form of Election.
6. DETERMINATION OF PROPER ELECTION. The Exchange Agent will have the
reasonable discretion to determine whether Forms of Election have been properly
or timely completed, signed, and submitted, modified or revoked, and to
disregard immaterial defects in Forms of Election. In all such matters, the
decision of the Exchange Agent, and any decision of Zions Bancorp and Sun State
required by the Exchange Agent and made in good faith, shall be conclusive and
binding. The Exchange Agent will not be under any obligation to notify any
person of any defect in a Form of Election or other documents submitted to the
Exchange Agent. The Exchange Agent shall make all proration computations
contemplated by the Agreement (other than computation of the Exchange Ratio) and
all such computations shall be conclusive and binding on the holders of Shares.
No alternative, conditional, or contingent Elections will be accepted. If the
Exchange Agent shall reasonably determine that any purported Stock Election,
Cash Election, or Combination Election was not properly made, such purported
Stock Election, Cash Election, or Combination Election will be of no force and
effect, and the shareholder making such purported Stock Election, Cash Election,
or Combination Election shall, for purposes hereof and the Agreement, be deemed
not to have made an Election, and the Shares covered thereby shall be deemed to
be Non-Election Shares.
<PAGE>
7. INADEQUATE SPACE. If the space provided in Box A under "Description
of Shares" is inadequate, the Certificate numbers, the specification of whether
they represent Common Shares or Preferred Shares, the number of Shares evidenced
by such Certificates, and the number of Shares with respect to which Elections
are made should be listed on a separate schedule and attached to the Form of
Election. If the space provided in Box B under "Combination Election" is
inadequate, the Certificate numbers, the specification of whether they represent
Common Shares or Preferred Shares, the number of Shares to be converted into
Zions Bancorp Stock, and the number of Shares to be converted into cash should
be listed on a separate schedule and attached to the Form of Election.
8. TERMINATION OF AGREEMENT. All Elections will be revoked
automatically if the Agreement has been terminated.
9. DISSENTERS' RIGHTS. Holders of Common Shares who wish to exercise
dissenters' rights should not complete this Form of Election. Any record holder
of Common Shares who has delivered a written demand for dissenters' rights and
who subsequently delivers a Form of Election to the Exchange Agent will be
regarded as having withdrawn such demand for dissenters' rights. Any holder who
has delivered a Form of Election and who simultaneously or subsequently makes a
written demand for dissenters' rights will be regarded as having revoked his or
her Election. For information concerning dissenters' rights, see the information
set forth in Appendix C of the Proxy Statement/Prospectus and the summary set
forth therein under the caption "PLAN OF REORGANIZATION--Dissenters' Rights."
B. ELECTION PROCEDURES
1. ELECTIONS. By completing Box B entitled "Election" and this Form of
Election, and making the deliveries required hereby, each in accordance with
these instructions, a Sun State shareholder will be permitted to make a Stock
Election, Cash Election, or Combination Election with respect to the Shares held
by such holder. All Elections are subject to the election and proration
procedures set forth in the Agreement. In connection with making any Election, a
Sun State shareholder should also carefully read, among other items, the
information contained in the Proxy Statement/Prospectus under "PLAN OF
REORGANIZATION--Federal Income Tax Consequences of the Reorganization." Each Sun
State shareholder should consult his or her own tax advisor as to the specific
tax consequences of an Election and the Merger to such shareholder.
2. TREATMENT OF NON-ELECTING SHARES. Any Shares (other than Dissenting
Shares) with respect to which the Exchange Agent does not receive an effective,
properly completed Form of Election prior to the Election Deadline will be
deemed to be Non-Election Shares. This Form of Election will be deemed properly
completed only if an Election is indicated for each Share covered by this Form
of Election.
3. ELECTION DEADLINE. In order for an Election to be effective, the
Exchange Agent must receive a properly completed Form of Election, accompanied
by all required documents, no later than 5:00 p.m., Mountain Standard Time, on
the tenth business day following the Merger (the "Election Deadline").
4. CHANGES TO ELECTIONS. Any holder of Shares who has made an Election
may, at any time prior to the Election Deadline, change his or her Election by
submitting to the Exchange Agent a properly completed and signed revised Form of
Election with all required additional documents, provided that the Exchange
Agent receives such revised Form of Election and other necessary documents prior
to the Election Deadline. Any holder of Shares may at any time prior to the
Election Deadline revoke his or her Election by written notice to the Exchange
Agent received prior to the Election Deadline. If an Election is revoked prior
to the Election Deadline, the related Shares will automatically become
Non-Election Shares unless and until a new Election is properly made with
respect to such Shares prior to the Election Deadline.
5. NO FRACTIONAL SHARES. No certificates representing fractional shares
of Zions Bancorp Stock will be issued in the Merger. In lieu of any fractional
share of Zions Bancorp Stock, holders of Shares that are converted into the
right to receive Zions Bancorp Stock will receive cash (without interest) in an
amount equal to such fractional share of Zions Bancorp Stock multiplied by the
Average Closing Price of Zions Bancorp Stock.
6. NO LIABILITY. Neither Zions Bancorp, Sun State, nor the Exchange
Agent will be liable to any holder of Shares for any shares of Zions Bancorp
Stock (or dividends or distributions with respect thereto) or cash delivered to
a public official pursuant to any applicable abandoned property, escheat, or
similar law.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance may be directed to the Exchange Agent at the address or telephone
number set forth in the Form of Election. Additional copies of this Form of
Election and Instructions may also be obtained from the Exchange Agent.
Additional copies of the Proxy Statement/Prospectus may be obtained from Mr.
Dale M. Gibbons, Senior Vice President and Secretary, Zions Bancorp, One South
Main, Salt Lake City, Utah 84111, Telephone (801) 524-4787.
