As filed with the Securities and Exchange Commission on _____________, 1998
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------
ZIONS BANCORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Utah 6712 87-0227400
- ------------------------------- ---------------------------- -------------------
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-------------
Harris H. Simmons
President and Chief Executive Officer
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Brian D. Alprin, Esq. Ernest J. Panasci, Esq.
Laurence S. Lese, Esq. Slivka Robinson Waters & O'Dorisio, P.C.
Duane, Morris & Heckscher LLP 1099 Eighteenth Street
Suite 700 Suite 2600
1667 K Street, N.W. Denver, CO 80202-1926
Washington, D.C. 20006-1608 (303) 297-2600
(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>
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
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========================================================================================================================
Proposed Proposed
Amount to be maximum maximum Amount of
Title of securities to be registered offering price per aggregate registration fee
registered share offering price(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 230,000 Shares NA $2,918,679 $862
========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the
outstanding shares of Common Stock, no par value, of Eagle Holding
Company on March 31, 1998 (the latest practicable date prior to filing
the registration statement) of $2,918,679, such stock to be canceled
upon effectiveness of the Reorganization described in this Proxy
Statement/Prospectus.
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 Securities and Exchange Commission, acting under
Section 8(a), may determine.
================================================================================
<PAGE>
EAGLE HOLDING COMPANY
Proxy Statement
For
Special Meeting of Shareholders
To be Held on __________, 1998
and
ZIONS BANCORPORATION
Prospectus
Up to 230,000 Shares of
Common Stock
Eagle Holding Company (the "Company") is furnishing this Proxy
Statement/Prospectus to its shareholders in connection with the solicitation of
proxies by its Board of Directors for use at a special meeting of shareholders
of the Company which will be held on _________, 1998 (the "Special Meeting")
and at any adjournments or postponements of the Special Meeting. The Company has
first mailed this Proxy Statement/Prospectus and accompanying notice of special
meeting and form of proxy ("Proxy") on or about _________, 1998 to the
shareholders of the Company of record as of _________, 1998 (the "Record Date").
At the Special Meeting, the holders of Company common stock, no par
value (the "Company Common Stock") will consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Reorganization, dated as of June 3,
1998, among the Company, the Company's wholly-owned subsidiary, Eagle Bank (the
"Bank"), Zions Bancorporation ("Zions"), Zions' wholly-owned subsidiary, Val Cor
Bancorporation, Inc. ("Val Cor"), and Val Cor's wholly-owned subsidiary, Vectra
Bank Colorado, National Association ("Vectra Bank"), an Agreement of Merger
between the Company and Val Cor and an Agreement of Merger between the Bank and
Vectra Bank (collectively the "Plan of Reorganization"). If the Company's
shareholders approve the Plan of Reorganization, and all other conditions are
met, the Company will merge with and into Val Cor, with Val Cor being the
surviving corporation (the "Holding Company Merger") and the Bank will merge
with and into Vectra Bank, with Vectra Bank being the surviving national banking
association (the "Bank Merger"; collectively the Holding Company Merger and the
Bank Merger are referred to as the "Reorganization").
As a result of the Reorganization, Company shareholders will receive,
in exchange for each share of Company Common Stock, that number of shares of
Zions Common Stock, no par value ("Zions Common Stock") calculated by dividing
the Merger Consideration (as defined) of 230,000 shares of Zions Common Stock,
subject to downward adjustment if Transaction Expenses (as defined) exceed
$65,000, by the total number of shares of Company Common Stock issued and
outstanding as of the Effective Date of the Reorganization. As of July ___,
1998, a total of 33,562 shares of Company Common Stock were issued and
outstanding, including options held by Mr. David T. Manley to purchase 1,250
shares. In accordance with this formula and assuming that Transaction Expenses
do not exceed $65,000, Company shareholders under such circumstances would be
entitled to receive approximately 6.85 shares of Zions Common Stock for each
share of Company Common Stock that they own or an equivalent market value of
$____ per share of Company Common Stock.
For the action of the shareholders to be effective, holders of a
majority of the issued and outstanding shares of Company Common Stock must vote
in favor of the Reorganization. All regulatory approvals have [NOT YET] been
obtained.
Neither the Securities and Exchange Commission Nor Any State Securities
Commission Has Approved or Disapproved the Shares of Zions Common Stock to Be
Issued in the Reorganization or Determined If this Proxy Statement/Prospectus is
Truthful or Complete. Any Representation to the Contrary Is a Criminal Offense.
The Shares of Zions Common Stock Offered 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.
The date of this Proxy Statement/Prospectus is _________, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
SUMMARY .........................................................................................................1
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING
INFORMATION.............................................................................................12
WHERE YOU CAN FIND MORE INFORMATION..............................................................................13
ZIONS DOCUMENTS INCORPORATED BY REFERENCE........................................................................14
THE SPECIAL MEETING..............................................................................................15
Date, Time, and Place...................................................................................15
Matters to be Considered at the Special Meeting.........................................................15
Record Date; Voting Rights..............................................................................15
Quorum; Vote Required for Approval......................................................................15
Voting and Revocation of Proxies........................................................................16
Solicitation of Proxies.................................................................................16
Security Ownership by Certain Beneficial Owners and Management..........................................16
PLAN OF REORGANIZATION...........................................................................................17
The Reorganization......................................................................................17
Certain Definitions.....................................................................................18
Background of and Reasons for the Reorganization........................................................19
Voting Agreements.......................................................................................21
Required Vote; Management Recommendation................................................................22
No Opinion of a Financial Advisor.......................................................................23
Conversion of Company Shares............................................................................23
Federal Income Tax Consequences of the Reorganization...................................................24
Rights of Dissenting Shareholders.......................................................................25
Interests of Certain Persons in the Transaction.........................................................27
Company Stock Options...................................................................................29
Inconsistent Activities.................................................................................29
Conduct of Business Pending the Reorganization..........................................................29
Conditions to the Reorganization........................................................................30
Representations and Warranties..........................................................................32
Amendment and Waiver....................................................................................32
Authorized Termination and Damages for Breach...........................................................33
Restrictions on Resales by Company Affiliates...........................................................33
Expenses ...............................................................................................34
Government Approvals....................................................................................34
Effective Date of the Reorganization....................................................................34
Accounting Treatment....................................................................................35
Relationship Between Zions and the Company..............................................................35
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUPERVISION AND REGULATION.......................................................................................35
Zions ...............................................................................................35
Regulatory Capital Requirements.........................................................................36
Other Regulatory and Supervisory Issues.................................................................40
Deposit Insurance and Other Assessments.................................................................41
Interstate Banking......................................................................................42
MONETARY POLICY..................................................................................................43
INFORMATION CONCERNING ZIONS BANCORPORATION......................................................................43
Selected Financial Data.................................................................................43
Stock Prices and Dividends on Zions Common Stock........................................................45
INFORMATION CONCERNING THE COMPANY AND THE BANK..................................................................46
General ...............................................................................................46
The Bank ...............................................................................................47
Investment Securities...................................................................................53
Deposits ...............................................................................................55
Competition.............................................................................................56
The Bank's Facilities...................................................................................57
Legal Proceedings.......................................................................................57
Employees...............................................................................................57
Regulatory Matters......................................................................................57
Selected Financial Data.................................................................................57
Stock Prices and Dividends on Company Common Stock......................................................59
Certain Transactions of the Company.....................................................................59
Stockholdings of Directors, Officers and Certain Others.................................................60
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF EAGLE HOLDING COMPANY......................................................61
General ...............................................................................................61
Net Interest Income.....................................................................................61
Results of Operations...................................................................................66
Liquidity and Sources of Funds..........................................................................68
Capital Resources.......................................................................................68
Effects of Inflation and Changing Prices................................................................69
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF ZIONS AND
THE COMPANY.............................................................................................69
General ...............................................................................................69
Authorized Capital......................................................................................69
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Anti-Takeover Matters...................................................................................70
Shareholder Rights Plan.................................................................................72
Board of Directors......................................................................................72
Special Shareholders' Meetings..........................................................................74
Amendment of Articles and Bylaws........................................................................74
Dissenters' Rights......................................................................................75
Preemptive Rights.......................................................................................75
Dividend Rights.........................................................................................76
Liquidation Rights......................................................................................76
Miscellaneous...........................................................................................76
LEGAL OPINIONS...................................................................................................77
EXPERTS ........................................................................................................77
OTHER MATTERS....................................................................................................77
Appendix A - Agreement and Plan of Reorganization
Appendix B - Rights of Dissenters under ss.ss. 7-113-101 to 701-113-302 of the
Colorado Business Corporation Act
</TABLE>
iii
<PAGE>
SUMMARY
This summary highlights selected information from this Proxy
Statement/Prospectus and may not contain all of the information that is
important to you. To understand the Reorganization fully and for a more complete
description of the legal terms of the Reorganization, you should read carefully
this entire document, including the Appendices and the documents we have
referred you to. A copy of the Plan of Reorganization is attached as Appendix A
to this Proxy Statement/Prospectus. See "Where You Can Find More Information."
The Parties
Zions Bancorporation ("Zions") is a multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"), and organized under the laws of Utah, engaged primarily
in the commercial banking business through its banking subsidiaries. Zions is
the second largest bank holding company headquartered in Utah. In 1997, Zions
achieved a significant expansion of commercial banking operations in Utah,
Nevada, and Arizona, and expanded its franchise by adding banking operations in
Colorado, New Mexico, Idaho and California. Its principal subsidiaries are
banking subsidiaries which include Zions First National Bank, the second largest
commercial banking organization in Utah; Nevada State Bank, the 2th largest
commercial bank in Nevada; and National Bank of Arizona, the fifth largest
commercial bank in Arizona. Additionally, Zions has significant banking
operations in Colorado through its subsidiaries, Val Cor Bancorporation, Inc.,
which operates through its subsidiary Vectra Bank Colorado, National
Association, the [FIFTH] largest commercial bank in Colorado, Pitkin County Bank
and Trust Co., and Centennial Savings Bank, F.S.B.; and in California through
its subsidiary Grossmont Bank. Upon completion of the pending acquisition of
Sumitomo Bank of California, these two California banks will combine to form
California Bank and Trust, which will be the fifth largest commercial bank in
California. See "Recent Developments" below. Acquisitions during 1997 consisted
of Aspen Bancshares and its affiliate banks with branches in Colorado and New
Mexico; Tri-State Bank in Idaho, which was merged into Zions First National
Bank; 31 Wells Fargo branches in Utah, Idaho, Arizona and Nevada; Sun State Bank
in Nevada which was merged into Nevada State Bank; Grossmont Bank in San Diego,
California; and the public finance firms of Howarth & Associates in Nevada and
Kelling, Northcross and Nobriga, Inc. in California; and during 1998 consisted
of Vectra Banking Corporation and its banking subsidiary, Vectra Bank, located
in Denver, Colorado; Sky Valley Bank Corp. and its banking subsidiary, The First
National Bank in Alamosa, with offices in Alamosa, Center, and Saguache,
Colorado; Tri-State Finance Corporation and its banking subsidiary, Tri-State
Bank, in Denver; FP Bancorp, Inc. and its banking subsidiary, First Pacific
National Bank, with eight offices in San Diego and Riverside Counties,
California; SBT Bankshares, Inc. and its banking subsidiary, State Bank and
Trust of Colorado Springs, with offices in Colorado Springs, Colorado; and Routt
County National Bank Corporation and its banking subsidiary, First National Bank
of Colorado, with offices in Steamboat Springs, Colorado. As of March 31, 1998,
Zions had total consolidated assets of $10.6 billion, deposits of $7.8 billion,
and shareholders' equity of $724 million. See "Information Concerning Zions
Bancorporation." Zions' principal executive offices are at One South Main, Suite
1380, Salt Lake City, Utah 84111 (telephone: 801/524-4787).
<PAGE>
Val Cor Bancorporation, Inc. ("Val Cor"), a Colorado corporation, is a
bank holding company registered under the Bank Holding Company Act. Zions
acquired Val Cor in May 1997. Val Cor's principal asset consists of its 100%
ownership interest in Vectra Bank Colorado, National Association.
Vectra Bank Colorado, National Association ("Vectra Bank") is a
national banking association with its primary market areas located in Denver,
Boulder, Montezuma, Alamosa, Routt, El Paso and Saguache Counties, Colorado.
Vectra Bank is the successor-in-interest to Bank Colorado, National Association.
Vectra Bank offers traditional banking services through its offices in the
above-referenced counties. At March 31, 1998, Vectra Bank had total assets of $
million, total deposits of $ million, and shareholders' equity of $ million.
Vectra Bank's main office is located at 1650 South Colorado Boulevard, Suite
320, Denver, Colorado 80222, and its telephone number is 303/782-7440.
Eagle Holding Company (the "Company"), a Colorado corporation, is a
bank holding company registered under the Bank Holding Company Act whose sole
activity is the ownership and operation of Eagle Bank. The Company has no other
subsidiaries. The Company's principal asset consists of its 100% ownership
interest in Eagle Bank. The Company's main office is located at 1990 West Tenth
Avenue, Broomfield, Colorado 80020-1071 and its telephone number is
303/460-9991. As of March 31, 1998, the Company had total consolidated assets of
$40.79 million and shareholders' equity of $2.9 million.
Eagle Bank (the "Bank") is a banking corporation organized under the
laws of Colorado. The Bank offers traditional banking services through its only
office in the City of Broomfield, Boulder County, Colorado. As of March 31,
1998, the Bank had total assets of $40.79 million, total deposits of $37.46
million, net loans of $27.55 million, and total shareholders' equity of $2.89
million. The Bank's office is located at 1990 West Tenth Avenue, Broomfield,
Colorado 80020-1071, and its telephone number is 303/460-9991.
The Special Meeting; Purpose
The Special Meeting of Shareholders of the Company (the "Special
Meeting") will be held at ________ a.m., local time, on _________, 1998 at 1990
West Tenth Avenue, Broomfield, Colorado. The purpose of the Special Meeting is
to consider and vote upon a proposal to approve the Plan of Reorganization and
to transact such other business as may properly come before the Special Meeting.
See "The Special Meeting -- Matters to be Considered at the Special Meeting."
2
<PAGE>
Record Date; Voting Rights
The Record Date for determining the shareholders of the Company
entitled to notice of and to vote at the Special Meeting or any postponements or
adjournments of the Special Meeting is the close of business on _________, 1998.
Each outstanding share of Company Common Stock entitles its holder of record on
the Record Date to one vote on each matter properly submitted to the
shareholders for action at the Special Meeting. See "Plan of Reorganization --
Required Vote; Management Recommendation."
Vote Required for Approval
Approval of the Plan of Reorganization requires the affirmative vote of
a majority of the outstanding shares of Company Common Stock entitled to vote at
the Special Meeting. See "Plan of Reorganization--Required Vote; Management
Recommendation."
Dissenters' Rights
Under Colorado law, shareholders of the Company are entitled to dissent
from the Reorganization and to receive cash equal to the fair value for such
shares in accordance with procedures established by Colorado law. Since exercise
and preservation of dissenters' rights are conditioned on strict observance of
the applicable section of Colorado law, each Company shareholder who chooses to
exercise dissenters' rights should consult and strictly observe the statute, a
copy of which is attached as Appendix B to this Proxy Statement/Prospectus.
Failure to follow the statutory provisions precisely may result in loss of such
shareholder's dissenters' rights under Colorado law. See "Plan of
Reorganization--Rights of Dissenting Shareholders" and Appendix B to this Proxy
Statement/Prospectus.
Security Ownership of Certain Beneficial Owners and Management
As of June 30, 1998, directors, executive officers, and other
affiliates of the Company who beneficially owned 26,930 shares, including 1,250
shares subject to stock options held by Mr. Manley, or 80.24% of the outstanding
shares of Company Common Stock have agreed with Zions, in their capacity as
shareholders, to vote their shares in favor of the Plan of Reorganization. Such
a vote will be sufficient to approve the Plan of Reorganization. If these
shareholders vote their shares in favor of the Plan of Reorganization as each
has agreed, approval of the Plan of Reorganization is assured.
Proposed Reorganization
At the Special Meeting, the Company will ask its shareholders to
consider and approve the Plan of Reorganization. The Plan of Reorganization
provides for the merger of the Company into Val Cor, whereby Val Cor will be the
surviving corporation, and for the merger of the Bank into Vectra Bank, with
Vectra Bank being the surviving national banking association. See "Plan of
Reorganization." A copy of the Plan of Reorganization is attached to this Proxy
Statement/Prospectus as Appendix A.
3
<PAGE>
Reorganization Consideration
Upon consummation of the Reorganization, Zions will issue up to a total
of 230,000 shares of its Common Stock to the Company's shareholders. At the
Effective Date of the Reorganization, the shares of Company Common Stock will be
canceled and immediately converted into the right for Company shareholders to
receive, in exchange for each share of Company Common Stock that they own, that
number of shares of Zions Common Stock calculated by dividing the Merger
Consideration of 230,000 shares of Zions Common Stock, which may be adjusted
downward if Transaction Expenses exceed $65,000, by the total number of shares
of Company Common Stock issued and outstanding as of the Effective Date of the
Reorganization.
On ______________, 1998, the closing price of Zions Common Stock was
$____________ per share. On that date the Company had 33,562 shares of its
Common Stock issued and outstanding including 1,250 shares subject to stock
options held by Mr. Manley. Assuming that the Reorganization had been
consummated on that date, and that Transaction Expenses had not exceeded
$65,000, Company shareholders under those circumstances would have been entitled
to receive approximately 6.85 shares of Zions Common Stock for each share of
Company Common Stock that they own, or an equivalent market value of
approximately $____per share of Company Common Stock. Because the Merger
Consideration represents a variable amount, the precise exchange rate and the
precise number of shares of Zions Common Stock that shareholders of the Company
will receive for each share of Company Common Stock will not be known until the
Effective Date.
Zions will not issue fractional shares of its common stock in the
Reorganization. Instead, each shareholder of the Company who is entitled to a
fractional share of Zions Common Stock (after aggregating all shares of Zions
Common Stock to which such shareholder is entitled) will receive an amount of
cash equal to the product of such fraction times $50.375. Shareholders will have
no further rights as shareholders with respect to the fractional shares. See
"Plan of Reorganization."
Reasons for the Reorganization
Management and the Board of Directors of the Company believe that it is
in the best interests of the Company and its shareholders for the Company to
merge with Zions. In considering the Plan of Reorganization, the Board
determined that the Zions offer would increase value for the Company's
shareholders, while providing a favorable structure for the transaction in which
the Company's shareholders would receive liquid securities without triggering
tax consequences (except for shareholders receiving cash in the Reorganization).
Further, the Board believes that the Zions transaction will result in positive
effects for the employees of the Company and the Bank, the customers of the
Bank, and the community in which the Bank operates. See "Plan of
Reorganization--Background of and Reasons for the Reorganization" for a
description of the factors considered by the Company's Board of Directors in
determining to recommend the Plan of Reorganization to the Company's
shareholders for their approval.
4
<PAGE>
For Zions, the Reorganization will provide an opportunity to further
broaden its franchise in Colorado through its expansion into the Broomfield,
Colorado market, where Zions has not previously had a presence. Zions proposes
to broaden its geographical base in the Colorado market and diversify its
banking operations. The combination of the different skills, resources and
services offered by the Company and Zions, together with the additional skills
and resources available in the broader Zions organization, will make the
resulting banking group able to compete more effectively in its markets with
other full-service financial institutions. See "Plan of
Reorganization--Background of and Reasons for the Reorganization."
No Opinion of a Financial Advisor
The Company's Board of Directors has not retained an independent
financial advisor to evaluate the Merger Consideration offered to the Company's
shareholders by Zions. However, management and the directors of the Company
believe that the Merger Consideration to be paid pursuant to the Plan of
Reorganization is fair to the shareholders of the Company from a financial point
of view. See "Plan of Reorganization--Background of and Reasons for the
Reorganization."
Board of Directors Recommendation
The Board of Directors of the Company unanimously believes that the
Reorganization is in the best interests of the Company, its shareholders, and
the employees and customers of the Bank and recommends that the shareholders of
the Company vote "FOR" approval of the Plan of Reorganization. See "Plan of
Reorganization--Background of and Reasons for the Reorganization."
Shareholders of the Company 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,
David T. Manley, currently chairman, president and chief executive officer of
the Company and the Bank, will become an executive officer of Vectra Bank. Mr.
Manley will enter into an employment agreement with Vectra Bank effective as of
the Effective Date. The Plan of Reorganization further required that
simultaneously with the execution of the Plan of Reorganization, MCR, Thomas
Family Partnership, LLLP, and the Bank enter into a Consent to Assignment and
Amendment to Lease Agreement, the result of which is that the landlords
consented to the lease being assigned to Vectra Bank as tenant as of the
Effective Date. The general partner of MCR, John Claus, is a shareholder and
member of the Board of Directors of the Company. The general partner of Thomas
Family Partnership, LLLP, Sue Thomas, is the wife of Don Alan Thomas, a
shareholder and member of the Board of Directors of the Company. The Company's
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."
5
<PAGE>
Company Stock Options
Pursuant to an employment agreement with the Bank dated January 1,
1995, the Company has granted David T. Manley, chairman, president and chief
executive officer of the Company and the Bank, options to purchase a total of
1,250 shares of Company Common Stock. Mr. Manley entered into an agreement with
Zions to exercise all such stock options to purchase Company Common Stock prior
to the Effective Date of the Reorganization. The number of shares of Company
Common Stock issued and outstanding includes the 1,250 shares of Company Common
Stock that will be purchased by Mr. Manley upon exercising all of his stock
options.
Tax Consequences
The parties to the Reorganization intend that the Reorganization will
be treated for federal income tax purposes as a tax-free reorganization. In a
tax-free reorganization, Company shareholders will recognize no gain or loss
upon the exchange of their shares of Company Common Stock for Zions Common Stock
(except with respect to cash received by such shareholders in lieu of fractional
shares). See "Plan of Reorganization--Federal Income Tax Consequences of the
Reorganization."
Conditions to the Reorganization; Regulatory Approval
Consummation of the Reorganization is subject to satisfaction of a
number of conditions, including (i) obtaining requisite approval from the
Company shareholders, (ii) obtaining regulatory approvals from the Board of
Governors, the Comptroller, the Commissioner, and the State Banking Board, (iii)
receiving an opinion of counsel with respect to certain tax aspects of the
Reorganization, (iv) the absence of any material adverse change with respect to
the operations and financial condition of the Company, (v) concurrence to the
Company's determination that the Reorganization will be treated for accounting
purposes as a pooling of interests, and (vi) the satisfaction of other customary
closing conditions. All regulatory approvals have [NOT YET] been obtained. See
"Plan of Reorganization--Conditions to the Reorganization; Government
Approvals."
Effective Date of the Reorganization
If the shareholders of the Company approve the Plan of Reorganization,
the parties expect that the Reorganization will become effective in the [THIRD]
quarter of 1998. 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."
6
<PAGE>
Accounting Treatment
The parties expect the Reorganization to qualify as a "pooling of
interests" in accordance with APB Opinion No. 16, which means that the companies
will be treated for accounting purposes as if they had always been combined. As
a condition to closing, the Plan of Reorganization requires receipt of a
concurrence of the Company's determination that the Reorganization should be
treated as a pooling of interests. See "Plan of Reorganization--Accounting
Treatment."
Selected Financial Information
The following table provides certain unaudited historical financial
information for Zions and the Company. With respect to pro forma combined
financial information for Zions giving effect to the Reorganization using the
pooling of interests method of accounting, see "Unaudited Pro Forma Combined
Financial Information," below. This information is based on the respective
historical financial statements of Zions incorporated in this Proxy Statement/
Prospectus by reference and of the Company which are included in this Proxy
Statement/ Prospectus. Shareholders of the Company should read the financial
statements and the related notes with respect to Zions and the Company.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
Zions
Earnings
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income................ $ 107,943 $ 82,898 $ 351,799 $ 289,166 $ 233,547 $ 198,606 $ 174,657
Provision for loan losses.......... 3,256 1,835 6,175 4,640 3,000 2,181 2,993
Net income......................... 36,441 30,585 122,362 107,423 82,385 63,827 58,205
Per Share
Net income (basic)................. $ 0.53 $ 0.46 $ 1.92 $ 1.70 $ 1.39 $ 1.11 $ 1.03
Net income (diluted)............... 0.52 0.45 1.89 1.68 1.37 1.09 1.02
Cash Dividends..................... 0.12 0.11 0.47 0.425 0.3525 0.29 0.245
Statement of Condition at Period End
Assets............................. $10,611,585 $8,508,537 $9,521,770 $7,116,413 $6,095,515 $4,934,095 $4,801,054
Deposits........................... 7,799,027 5,728,585 6,854,462 5,119,692 4,511,184 3,705,976 3,432,289
Long-term debt..................... 276,387 258,704 258,566 251,620 56,229 58,182 59,587
Shareholders' equity............... 723,814 591,581 655,460 554,610 469,678 365,770 312,592
</TABLE>
7
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<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Eagle
Earnings
Net interest income................ $ 608 $ 471 $ 2,227 $ 1,585 $ 1,297
Provision for loan losses.......... 60 43 220 90 49
Net income......................... 185 110 689 333 175
Per Share
Net income (basic)................. $ 5.72 $ 3.48 $ 21.53 $ 10.73 $ 5.74
Net income (diluted)............... 5.72 3.48 21.53 10.73 5.74
Cash Dividends..................... -- -- -- -- --
Statement of Condition at Period End
Assets.............................. $ 40,786 $ 32,701 $ 41,510 $ 30,974 $ 23,254
Deposits............................ 37,430 28,955 38,189 28,745 21,533
Long-term debt......................
Shareholders' equity................ 2,919 2,062 2,736 2,003 1,660
</TABLE>
Comparative Per Share Data
The following table provides historical net income, book values and
dividends per share for Zions Common Stock and Company Common Stock for the
periods indicated. The following data are based on the respective historical
financial statements of Zions incorporated in this Proxy Statement/Prospectus by
reference and of the Company included in this Proxy Statement/Prospectus and
should be read in conjunction with such financial statements and such
information and the related notes to each.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------- -----------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income Per Common Share (diluted)
Zions.......................................... $ 0.52 $ 0.45 $ 1.89 $ 1.68 $ 1.37
Eagle.......................................... 5.72 3.48 21.53 10.73 5.74
Book Value Per Common Share
Zions.......................................... $ 10.48 $ 8.75 $ 10.25 $ 8.72 $ 7.46
Eagle.......................................... 90.33 65.07 84.69 63.22 54.53
Cash Dividends Declared Per Common Share
Zions(1)....................................... $ 0.12 $ 0.11 $ 0.47 $ 0.42 $ 0.3525
Eagle.......................................... -- -- -- -- --
</TABLE>
8
<PAGE>
- ---------------------------
(1) While Zions is not obligated to pay cash dividends, the Board of Directors
presently intends to continue its policy of paying quarterly 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 pooling of interests method of accounting.
Shareholders of the Company should read the following tables, which show
comparative historical per common share data for Zions and the Company
(separately and pro forma combined) and equivalent pro forma per share data for
the Company, in conjunction with the financial information of Zions as
incorporated in this Proxy Statement/Prospectus by reference to other documents
and of the Company as included in this Proxy Statement/Prospectus. The pro forma
data in the table, presented as of and for each of the years in the three year
period ended December 31, 1997, and as of and for the three months ended March
31, 1998, 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.
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------- ---------------------------------------
Zions and Eagle Zions and Eagle
Pro Forma Equivalent
Per Common Share Zions Eagle Combined(4) Pro Forma(5)
- ---------------- ----- ----- ----------- ------------
<S> <C> <C>
Net Income (diluted)(1)
For the three months ended:
March 31, 1998 $ 0.52 $ 5.72
For the years ended:
December 31, 1997 $ 1.89 21.53
December 31, 1996 1.68 10.73
December 31, 1995 1.37 5.74
Cash Dividends(2)
For the three months ended:
March 31, 1998 $ .12 --
For the years ended:
December 31, 1997 $ .4700 --
December 31, 1996 .4250 --
December 31, 1995 .3525 --
</TABLE>
9
<PAGE>
Book Value(3)
As of:
March 31, 1998 $ 10.48 $ 90.33
December 31, 1997 10.25 84.69
December 31, 1996 8.72 63.22
December 31, 1995 7.46 54.53
- ----------
(1) Net income per share is based on weighted average common and common
equivalent shares outstanding.
(2) Pro forma cash dividends per share represent historical cash dividends of
Zions.
(3) Book value per common share is based on total period-end shareholders'
equity.
(4) Pro forma combined net income per share represents historical net income of
Zions and the Company computed using historical weighted average common and
common equivalent shares of Zions adjusted by imputed common and common
equivalent shares which will be issued in the transaction. Pro forma
combined book value per share represents historical total shareholders'
equity of Zions and the Company computed using Zions' historical common
shares outstanding adjusted by imputed common shares which will be issued
in the transaction.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the exchange ratio of one share of Company Common Stock
for 6.85 shares of Zions Common Stock, which would have been the applicable
exchange ratio had the Reorganization occurred on _________, 1998. The
actual exchange ratio will not be known until the Effective Date.
Recent Developments
On May 26, 1998, Zions and FP Bancorp, Inc. ("FP Bancorp"), the parent
company of First Pacific National Bank ("First Pacific") completed their merger,
whereby FP Bancorp merged with and into Zions. FP Bancorp shareholders received
1,956,240 shares of Zions Common Stock at closing. First Pacific had
approximately $359 million in assets in eight offices in San Diego and Riverside
Counties, California. On June 19, 1998, First Pacific merged with and into
Grossmont Bank, with Grossmont being the surviving banking corporation.
Zions and SBT Bancshares, Inc. ("SBT"), the holding company of State Bank
and Trust of Colorado Springs ("SBTCS"), completed their merger on May 29, 1998.
SBT merged with and into Val Cor Bancorporation, Inc. ("Val Cor"), a
wholly-owned subsidiary of Zions in exchange for 546,403 shares of Zions Common
Stock. SBTCS and Vectra Bank Colorado, National Association, a wholly-owned
subsidiary of Val Cor, consolidated to form a new national banking association
named Vectra Bank Colorado, National Association ("Vectra Bank"). SBTCS operated
through two banking offices in Colorado Springs, Colorado. At December 31, 1997,
SBT had assets of $86 million. The merger was accounted for as a
pooling-of-interests.
On May 29, 1998, Zions and Routt County National Bank Corporation
("Routt"), the holding company of First National Bank of Colorado ("FNBC"),
completed their merger, whereby Routt merged with and into Val Cor and FNBC
merged with and into Vectra Bank. At closing, Zions issued 650,000 shares of its
Common Stock to the former shareholders of Routt. FNBC operated through two
banking offices in Steamboat Springs, Colorado. At December 31, 1997, Routt had
assets of $93 million. The merger was accounted for as a pooling-of-interests.
10
<PAGE>
On March 25, 1998, Zions and Sumitomo Bank of California ("Sumitomo")
entered into a definitive agreement whereby Sumitomo will merge with a
subsidiary of Zions. Zions will pay approximately $546 million in cash for
Sumitomo. Sumitomo is currently California's sixth largest bank, with assets of
approximately $5.1 billion as of December 31, 1997, and with 47 branches. Zions
will combine Sumitomo with Grossmont Bank upon completion of the Sumitomo
acquisition. The combined subsidiary, with California assets of over $6 billion
and 71 banking offices in California, will rank as the fifth largest commercial
bank in the state and will be named California Bank and Trust. The merger is
subject to the approval of Sumitomo shareholders and banking regulators and is
expected to close in the third quarter of 1998. Zions expects to finance the
purchase through a combination of existing resources, the sale of a minority
interest in Sumitomo, and the proceeds from the issuance of shares of Zions
Common Stock. The acquisition will be accounted for as a purchase. Zions expects
to name Robert Sarver, currently chairman of Grossmont and a director of Zions,
as chief executive officer of California Bank and Trust. In order to provide an
appropriate incentive to Mr. Sarver to expand Zions' California franchise, Zions
has agreed to sell him a portion of Sumitomo at Zions' cost basis. When Sumitomo
is combined with Grossmont Bank and First Pacific, he will control 5% of
California Bank and Trust at a purchase price of approximately $34 million.
Zions will retain the exclusive right to repurchase this ownership interest.
In recent months Zions has entered into agreements to acquire additional
bank holding companies. Zions expects that each of these transactions will be
accounted for as a pooling of interests, and expects each transaction to close
during the third quarter of 1998. Each of the following transactions is
conditioned upon shareholder approval, federal and state regulatory approval,
and other conditions of closing.
On May 8, 1998, Zions, Val Cor, and Vectra Bank (as successor-in-interest
to Bank Colorado, National Association ("BCNA")) entered into an agreement with
Kersey Bancorp, Inc., a Colorado corporation ("Kersey") and its wholly-owned
subsidiary, Independent Bank, a commercial bank organized under Colorado law
("Independent"). Upon completion of this transaction, Kersey will merge with and
into Val Cor with Val Cor being the surviving corporation, and Independent will
merge with and into Vectra Bank, with Vectra Bank being the surviving national
banking association. As of March 31, 1998, Kersey had consolidated assets of
approximately $144.3 million, consolidated deposits of approximately $133.2
million, loans of approximately $112.3 million, and shareholders' equity of
approximately $8.5 million. Independent conducts its commercial banking
operations through seven offices in Larimer, Logan, Morgan, and Weld Counties,
Colorado. Zions will issue up to 684,466 shares of its Common Stock to the
Kersey shareholders upon completion of the transaction.
On May 13, 1998, Zions and The Commerce Bancorporation, a Washington
corporation ("Commerce") entered into an agreement whereby Commerce will merge
with and into Zions with Zions being the surviving corporation. Commerce
conducts its commercial banking operations in one office in Seattle, Washington,
through its wholly-owned subsidiary, The Commerce Bank of Washington, National
Association, a commercial bank organized under the laws of the United States
("CBW"). Upon completion of this transaction, CBW will become a wholly-owned
subsidiary of Zions. As of March 31, 1998, Commerce had consolidated assets of
approximately $237.5 million consolidated deposits of approximately $185.7
million, loans of approximately $130.0 million, and shareholders' equity of
approximately $20.3 million. Upon completion of this transaction, Zions will
issue up to 2,020,791 of its shares of Common Stock to the shareholders of
Commerce.
11
<PAGE>
On May 14, 1998, Zions, Val Cor, and Vectra Bank (successor-in-interest to
BCNA) entered into an agreement with Mountain Financial Holding Company, a
Colorado corporation ("Mountain") and its wholly-owned subsidiary Mountain
National Bank, a commercial bank organized under the laws of the United States
("Mountain Bank"). Upon completion of this transaction, Mountain will merge with
and into Val Cor with Val Cor being the surviving corporation, and Mountain Bank
will merge with and into Vectra Bank, with Vectra Bank being the surviving
national banking association. Mountain Bank conducts a commercial banking
business through one office in Woodland Park, Teller County, Colorado. As of
March 31, 1998, Mountain had consolidated assets of approximately $86.7 million,
consolidated deposits of approximately $77.7 million, loans of approximately
$53.0 million, and shareholders' equity of approximately $8.5 million. Upon
completion of this transaction, Zions will issue to the shareholders of Mountain
608,000 shares of its Common Stock.
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION
Please note that certain statements in this Proxy Statement/Prospectus
(including information included or incorporated by reference) are not based on
historical facts, but are forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended, that are based upon
numerous assumptions about future conditions that could prove to be inaccurate.
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.
12
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This Proxy Statement/Prospectus constitutes the Prospectus portion of a
registration statement (the "Registration Statement") that Zions has filed with
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933 (the "Securities Act") 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. You can inspect the
Registration Statement and its exhibits at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C., and you can
obtain copies of such material 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"). Zions files annual, quarterly and
current reports, proxy statements and other information with the SEC. You can
inspect and copy such reports, proxy statements and other information at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C.; and at the following regional offices of the
SEC: 7 World Trade Center, Suite 1300, New York, NY 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can also
obtain copies of such material at prescribed rates by mail addressed to the SEC,
Public Reference Section, Washington, D.C. 20549. The public may obtain
information on the operations of the Public Reference Room by calling the SEC at
800/SEC-0330. Zions Common Stock is quoted on the Nasdaq National Market
("Nasdaq-NMS"). You can inspect such reports, proxy statements and other
information 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).
No person is authorized to give any information or to make any
representation that is different from what is 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
the Company. This Proxy Statement/Prospectus does not constitute an offer to
sell securities or a solicitation of an offer to purchase securities by any
person in any state in which such offer or solicitation is not authorized by
that state's laws 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 to
Company shareholders shall imply that the information in this Proxy
Statement/Prospectus is correct as of any time subsequent to its date.
Zions has supplied the information contained in this Proxy
Statement/Prospectus with respect to Zions. The Company has supplied the
information contained in this Proxy Statement/Prospectus with respect to the
Company. Neither Zions nor the Company warrants the accuracy or completeness of
information relating to the other.
13
<PAGE>
This Proxy Statement/Prospectus incorporates by reference certain
documents relating to Zions which are not presented in this document or
delivered with this Proxy Statement/Prospectus, including certain exhibits to
the Plan of Reorganization (as described in this document). 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 Zions documents
should be directed to Zions Bancorporation, One South Main, Suite 1380, Salt
Lake City, Utah 84111, Attention: Dale M. Gibbons, Executive Vice President,
(telephone: 801/524-4787). In order to ensure timely delivery of Zions
documents, you should make your request not later than _________, 1998.
ZIONS DOCUMENTS INCORPORATED BY REFERENCE
SEC regulations allow Zions to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that Zions can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Proxy Statement/Prospectus, except for any information superseded by information
in this Proxy Statement/Prospectus. Zions incorporates by reference in this
Proxy Statement/Prospectus the following documents that it previously filed with
the SEC pursuant to the Exchange Act: (a) Zions' Annual Report on Form 10-K for
the year ended December 31, 1997; (b) Zions' Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998; (c) Zions' Current Reports on Form 8-K filed
by Zions on February 6, 1998, April 3, 1998, April 15, 1998, and May 18, 1998,
as amended on May 27, 1998; (d) the description of Zions Common Stock which is
contained in Zions' registration statement on Form 10, and any amendment or
report filed to update such description; and (e) the description of the Zions
Rights Plan contained in Zions' registration statement on Form 8-A dated October
10, 1996, and any amendment or report filed to update such description.
Any Company shareholder who wishes to obtain copies of any Zions document
incorporated by reference in this document may do so by following the
instructions under the section titled "Where You Can Find More Information,"
above.
Zions further incorporates by reference in this Proxy Statement/Prospectus
all documents filed by it 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. Such incorporated documents shall be deemed a part
of this document from the date of filing of such documents. Any statement
contained in this document or in a document incorporated or deemed to be
incorporated by reference in this document shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained in this document or in any other subsequently filed document
which also is or is deemed to be incorporated by reference in this document
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.
14
<PAGE>
THE SPECIAL MEETING
Date, Time, and Place
This Proxy Statement/Prospectus is being furnished to the shareholders of
the Company in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Company's Special Meeting of
Shareholders to be held on ______________, 1998 at 1990 West Tenth Avenue,
Broomfield, Colorado at ____ a.m., local time, or at any adjournments or
postponements thereof.
Matters to be Considered at the Special Meeting
The purposes of the Special Meeting are (1) to consider and vote upon a
proposal of the Board of Directors to approve the Plan of Reorganization and the
transactions contemplated thereby and (2) to transact such other business as may
properly come before the Special Meeting or any adjournments or postponements of
the Special Meeting.
The Board of Directors of the Company unanimously approved the Plan of
Reorganization and recommends that the shareholders of the Company vote "FOR"
approval of the Plan of Reorganization.
Record Date; Voting Rights
Shareholders of the Company, as reflected on the Company's stock transfer
records as of the close of business on _________, 1998 (the "Record Date"), are
entitled to notice of and to vote at the Special Meeting or any postponements or
adjournments of the Special Meeting. On the Record Date, 33,562 shares of
Company Common Stock were outstanding, held by six shareholders of record. The
number of outstanding shares includes 1,250 shares acquired by Mr. Manley upon
exercise of certain Company stock options prior to the Effective Date. Each such
share of Company Common Stock entitles its holder to one vote on each matter
properly submitted to the shareholders for action at the Special Meeting. See
"Plan of Reorganization -- Required Vote; Management Recommendation."
Quorum; Vote Required for Approval
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of Company Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum at the Special Meeting.
Approval of the Plan of Reorganization requires the affirmative vote of a
majority of the outstanding shares of Company Common Stock entitled to vote at
the Special Meeting. A failure to vote, an abstention, or a broker non-vote of
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."
15
<PAGE>
Voting and Revocation of Proxies
Shareholders may vote at the Special Meeting either in person or by proxy.
All properly executed Proxies which have not been previously revoked will be
voted at the Special Meeting, or any postponements or adjournments of the
Special Meeting, in accordance with the instructions on the Proxy. Properly
executed Proxies which contain 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 named proxyholders.
A shareholder who has executed and returned a Proxy may revoke it at any
time before it is voted by filing with the Secretary of the Company written
notice of such revocation or a later dated and properly executed 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
the Company may solicit Proxies from the shareholders of the Company in person
or by telephone or otherwise for no additional compensation. Zions will pay all
expenses in connection with the printing and delivery of the proxy soliciting
materials to the Company shareholders for the Special Meeting.
Security Ownership by Certain Beneficial Owners and Management
As of June 30, 1998, the directors and executive officers of the Company,
together with their affiliated entities, beneficially owned 26,930 shares, or
80.24% of the outstanding shares of Company Common Stock. The 1,250 shares of
Company Common Stock subject to stock options held by Mr. Manley and required by
the Plan of Reorganization to be exercised prior to the Effective Date are
included in number of shares owned by such directors and officers. As an
inducement to Zions to enter into the Plan of Reorganization, these directors
and executive officers of the Company and their affiliated entities 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. All
of these shareholders are directors of the Company. See "Plan of
Reorganization--Voting Agreements" and "Information Concerning the Company and
the Bank--Stockholdings of Directors, Officers and Certain Others." Such a vote
will be sufficient to approve the Plan of Reorganization. If these shareholders
vote their shares in favor of the Plan of Reorganization as each has agreed,
approval of the Plan of Reorganization is assured.
16
<PAGE>
PLAN OF REORGANIZATION
This section of the Proxy Statement/Prospectus describes certain important
aspects of the Plan of Reorganization. The following description is not complete
and is qualified in its entirety by reference to the Plan of Reorganization,
which is attached as Appendix A to this Proxy Statement/Prospectus. Certain
exhibits to the Plan of Reorganization have been filed with the SEC as an
exhibit to the Registration Statement. Such exhibits to the Plan of
Reorganization are incorporated into this Proxy Statement/Prospectus by
reference to such filing and are available upon request to Dale M. Gibbons,
Executive Vice President, Zions Bancorporation. See "Where You Can Find More
Information" and Appendix A to this Proxy Statement/Prospectus.
The Reorganization
The Plan of Reorganization provides for the merger of the Company into Val
Cor, with Val Cor being the surviving corporation (the "Holding Company
Merger"), and for the merger of the Bank into Vectra Bank, with Vectra Bank
being the surviving national banking association (the "Bank Merger").
Upon consummation of the Reorganization, Zions will issue up to a total of
230,000 shares of its Common Stock to the Company's shareholders. At the
Effective Date of the Reorganization, the shares of Company Common Stock will be
canceled and immediately converted into the right for Company shareholders to
receive shares of Zions Common Stock. In exchange for each share of Company
Common Stock that they own, Company shareholders will receive that number of
shares of Zions Common Stock calculated by dividing the Merger Consideration of
230,000 shares of Zions Common Stock, subject to downward adjustment if
Transaction Expenses exceed $65,000, by the total number of shares of Company
Common Stock issued and outstanding as of the Effective Date of the
Reorganization. Zions will not issue fractional shares of its Common Stock in
the Reorganization. Instead, each shareholder of the Company who is entitled to
a fractional share of Zions Common Stock (after aggregating all shares of Zions
Common Stock to which such shareholder is entitled) will receive an amount of
cash equal to the product of such fraction times $50.375. Shareholders will have
no further rights as shareholders with respect to the fractional shares.
On __________, 1998, the closing price of Zions Common Stock on Nasdaq-NMS
was $_______ per share. On that date there were issued and outstanding 33,562
shares of Company Common Stock, including 1,250 shares subject to options held
by Mr. Manley and to be acquired by Mr. Manley by exercise prior to the
Effective Date. Assuming that the Reorganization had been consummated on that
date, and that the Transaction Expenses had not exceeded $65,000, Company
shareholders under such circumstances would have been entitled to receive
approximately 6.85 shares of Zions Common Stock for each share of Company Common
Stock that they own, or an equivalent market value of approximately $_________
per share of Company Common Stock. Because the Merger Consideration represents a
variable amount, the precise exchange rate that the shareholders of the Company
will receive in exchange for each share of Company Common Stock will not be
known until the Effective Date.
17
<PAGE>
Certain Definitions
In connection with the description of the Reorganization in this Proxy
Statement/Prospectus, shareholders of the Company 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.
"Bank Merger" means the merger of the Bank with and into Vectra Bank, with
Vectra Bank being the surviving national banking association.
"Effective Date" means the date which is the latest of (a) the day upon
which the shareholders of the Company approve, ratify, and confirm the Holding
Company Merger; (b) the first to occur of (i) 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 under authority delegated to it by
the Board of Governors of the Federal Reserve System (collectively, the "Board
of Governors") approving the Holding Company Merger; or (ii) if, under 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 Holding Company Merger; (c) the first to occur
of (1) the date thirty days following the date of the order of the Office of the
Comptroller of the Currency (the "Comptroller") approving the Bank Merger, or
(2) if, under section 321(b) of the Riegle Act, the Comptroller shall have
prescribed a shorter period of time with the concurrence of the Attorney General
of the United States, the date on which such shorter period of time shall
elapse; (d) if such an order shall be required by law, the date ten days
following the date of the order of the Commissioner of Financial Institutions of
the State of Utah (the "Commissioner") approving the transactions contemplated
by the Plan of Reorganization; (e) if such an order shall be required by law,
the date ten days following the date of the order of the Colorado State Banking
Board (the "State Banking Board") approving the transactions contemplated by the
Plan of Reorganization; (f) 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; (g) ten
days after any stay of the approvals of the Board of Governors, the Comptroller,
the Commissioner, or the State Banking Board of the transactions contemplated by
the Plan of Reorganization, or any injunction against closing of such
transactions is lifted, discharged, or dismissed; or (h) such other date as
shall be mutually agreed upon by Zions and the Company.
"Holding Company Merger" means the merger of the Company with and into Val
Cor, with Val Cor being the surviving corporation.
"Merger Consideration" means the aggregate of 230,000 shares of Zions
Common Stock to be issued to the holders of Company Common Stock upon
consummation of the Holding Company Merger, except that if Transaction Expenses
determined on a pre-tax basis in accordance with generally accepted accounting
principles exceed $65,000, then the Merger Consideration shall be the difference
between 230,000 and the number calculated by dividing such excess, net of any
associated tax benefit, by $50.375.
18
<PAGE>
"Transaction Expenses" means all expenses incurred from April 1, 1998
through the Effective Date with respect to attorneys, accountants, investment
bankers, consultants, brokers and finders who will have rendered services to the
Company or the Bank in connection with the transactions contemplated by the Plan
of Reorganization. Transaction Expenses do not include (i) the cost of the audit
of the financial statements of the Company and the Bank as of the year ended
December 31, 1997; (ii) the monthly accrual of the expense associated with the
audit of the financial statements of the Company and the Bank as of the year
ended December 31, 1998; (iii) the cost of addressing the risk that certain
computer applications used by the Company and the Bank may be unable to
recognize and perform properly date-sensitive functions involving dates prior to
and after December 31, 1999; (iv) costs incurred at the request of Zions, Val
Cor or Vectra Bank to prepare for the electronic and systematic conversion of
data regarding the Bank to Zions' own system of electronic data processing; (v)
distribution of benefits accrued for the benefit of participants in the Profit
Sharing Plan of the Bank; or (vi) costs of sponsoring Broomfield High School and
City of Broomfield scoreboards committed to before May 1, 1998 and related
advertising costs incurred by the Bank and accounted for under generally
accepted accounting principles.
Background of and Reasons for the Reorganization
The Company. During March, April and May 1998, Chairman and President
David T. Manley, Jr. discussed with the Board of Directors of the Company that
the economic, business and competitive climate for banking and financial
institutions had reached a state that might warrant consideration by the
shareholders of the Company of a business combination transaction with a major
regional banking organization. After consideration of research of bank merger
and acquisition transactions, a select number of potential acquirors were
identified, including, but not limited, to Zions. In evaluating potential
acquirors, the Board of Directors of the Company considered a variety of
factors, including, but not limited to, the following: (a) maximizing value to
the Company's shareholders; (b) potential transaction structures offered by
potential acquirors; (c) the risks and benefits (including tax benefits) of
associating with an acquiror in a stock-for- stock transaction; (d) the ability
of potential acquirors to complete the transaction, (e) the tax consequences to
the Company's shareholders of a cash transaction; and (f) the effect of any
proposed transaction on employees, customers, and the local community. In
considering the effect of any proposed transaction on employees, customers, and
the local community, the Board of Directors of the Company gave due
consideration to whether a proposed transaction would result in improved banking
services for the community or branch closings.
Management of Zions contacted Mr. Manley to determine if the Board of
Directors of the Company was interested in entering into a transaction with
Zions. Thereafter, the Board of Directors decided to investigate the feasibility
of entering into a transaction with a potential acquiror and which acquirors
were active in the market. Mr. Manley identified Zions as a potential acquiror
because Zions was in an acquisition mode for high performing commercial banking
institutions in mountain states, including Colorado. Research of Zions and other
potential acquirors was conducted. Based on the prices Zions had paid for
similarly performing institutions in the past, Mr. Manley identified Zions as a
favored potential acquiror. Several rounds of discussions resulted in an initial
offer in March 1998 for an exchange of the stock of the Company for stock of
Zions. After discussing the initial offer, the Board authorized Mr. Manley to
negotiate the terms of the offer and a definitive agreement with Zions.
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In May 1998, Mr. Manley and the Board negotiated the terms of a definitive
agreement with Zions. The Board met again during June 1998 to review and vote
upon the Plan of Reorganization and the transactions contemplated thereby. In
considering the Plan of Reorganization and the transactions contemplated
thereby, the Board determined that the Zions offer would maximize value for the
Company's shareholders, while providing a favorable structure for the
transaction in which the Company's shareholders would receive liquid securities
without triggering tax consequences (except for shareholders receiving cash in
the Reorganization). Further, the Board believes that Zions is fully capable of
consummating the Reorganization. Moreover, the Board believes that the Zions
transaction will result in positive effects for the employees of the Company and
the Bank, the customers of the Bank, and the communities in which the Bank
operates. Based on the foregoing, the Board of Directors of the Company approved
the Plan of Reorganization, and the Plan of Reorganization was executed on
behalf of the Company and the Bank effective June 3, 1998.
The Company Board believes that the Reorganization is fair to, and in the
best interests of, the Company and its shareholders. Accordingly, the Board of
Directors of the Company unanimously approved the Plan of Reorganization and
recommends that the Company 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, the Company and its shareholders, the Board of Directors
of the Company considered a number of factors, including, without limitation,
the following:
o the current condition and growth prospects of the Company and the
Bank, their historical results of operations and their
prospective results of operations were the Company and the Bank
to remain independent;
o the economic, business and competitive climate for banking and
financial institutions in Colorado, 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 offered to the Company
shareholders by Zions (i) in absolute terms, (ii) as compared to
the value of other merger and acquisition pricing reported by
qualified and informed investment banking organizations, and
(iii) as compared to recent mergers and acquisitions involving
other banking and financial institutions in Colorado;
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o the potential market value, liquidity and dividend yield of the
Company Common Stock if the Company were to remain independent;
o the historically greater liquidity 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 the Company's
market area and its ability to serve the depositors, customers
and communities currently served by the Company and the Bank;
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; and
o the fact that the Reorganization will be a tax-free
reorganization to the Company shareholders for federal income tax
purposes with respect to shareholders of the Company who receive
shares of Zions Common Stock in the Reorganization (but not with
respect to any cash received in the Reorganization).
The Board of Directors of the Company unanimously recommends that
shareholders vote "FOR" approval and adoption of the Plan of Reorganization.
Zions. For Zions, the Reorganization will provide the opportunity to
continue its recent expansion. In acquiring the Company, Zions will be entering
into the Broomfield, Colorado market. Zions does not currently have any offices
in Broomfield, Colorado. Zions' expansion will be evidenced by Zions' broadening
its geographical base in Colorado by establishing a presence in this market.
Additionally, the Zions' expansion in the Broomfield, Colorado area will allow
Zions further to diversify its banking operations.
The acquisition by Zions of the Company will bring together the different
skills and resources of the two organizations and, together with the additional
skills and resources available in the broader Zions organization, will result in
the ability to make a wider spectrum of banking services available to consumers,
businesses and professionals in the Company's geographic area.
Voting Agreements
All of the directors of the Company have agreed to support the Plan of
Reorganization, to recommend its adoption by the other shareholders of the
Company, and to vote their shares of Company Common Stock in favor of the Plan
of Reorganization. As of June 30, 1998, these four individuals beneficially
owned 26,930 shares or approximately 80.24% of the outstanding shares of Company
Common Stock. Such vote will be sufficient to approve the Plan of
Reorganization. If these individuals vote their shares of Company Common Stock
in accordance with the requirements of the voting agreements, approval of the
Plan of Reorganization by the Company shareholders is assured.
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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 a member of the Board of Directors of the Company. The
directors also agreed in their capacity as directors, subject to their fiduciary
duties to shareholders, until the Effective Date 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 the Company or the Bank.
The form of the voting agreements has been filed with the SEC as an
exhibit to the Registration Statement and is incorporated in this Proxy
Statement/Prospectus 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 and the Reorganization requires the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote at the Special Meeting. Because approval
requires the affirmative vote of a majority of all outstanding shares of Company
Common Stock, a failure to vote, an abstention, or a broker non-vote of shares
held in street name will have the same legal effect as a vote against approval
of the Plan of Reorganization. See "Voting Agreements" immediately above for a
discussion of the ownership of Company Common Stock by various officers,
directors, and shareholders of the Company. The Board of Directors of the
Company unanimously recommends that the Company shareholders vote "FOR" approval
of the Plan of Reorganization and urges each shareholder to complete, sign and
return a Proxy to ensure that his or her shares are represented at the Special
Meeting.
The Board of Directors of Zions has approved the Plan of Reorganization.
In addition, Zions, as the sole shareholder of Val Cor, has approved the Holding
Company Merger and the merger of Val Cor with the Company (the "Holding Company
Merger"). Under the Utah Business Corporation Act, no approval of the Plan of
Reorganization by the shareholders of Zions is required.
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No Opinion of a Financial Advisor
The Company's Board of Directors has not retained an independent financial
advisor to evaluate the Merger Consideration offered to the Company's
shareholders by Zions. However, management and the directors of the Company
believe that the Merger Consideration to be paid pursuant to the Plan of
Reorganization is fair to the shareholders of the Company from a financial point
of view. See "Background of and Reasons for the Reorganization" above.
Conversion of Company Shares
Under the Plan of Reorganization, Company shareholders will receive shares
of Zions Common Stock. As a result of the Reorganization, the shares of Company
Common Stock will be canceled and immediately converted into the right for
Company shareholders to receive shares of Zions Common Stock. In exchange for
each share of Company Common Stock that they own, Company shareholders will
receive that number of shares of Zions Common Stock calculated by dividing the
Merger Consideration of 230,000 shares of Zions Common Stock, subject to
downward adjustment if Transaction Expenses exceed $65,000, by the total number
of shares of Company Common Stock issued and outstanding as of the Effective
Date of the Reorganization. Because of the variable nature of the Merger
Consideration, the precise rate of exchange and the precise number of shares of
Zions Common Stock that the shareholders of the Company will receive in exchange
for each share of Company Common Stock will not be known until the Effective
Date.
Exchange of Stock Certificates. Zions First National Bank, a national
banking association with its head office located in Salt Lake City, Utah and a
subsidiary of Zions ("Zions Bank"), is the exchange agent designated by the
parties in the Plan of Reorganization (the "Exchange Agent"). As the Exchange
Agent, Zions Bank will, promptly after the Effective Date, mail to each holder
of one or more stock certificates formerly representing shares of Company Common
Stock, except to those holders who shall have waived the notice of exchange, a
notice specifying the Effective Date and notifying the holder to surrender his
or her certificate or certificates to Zions Bank for exchange. The notice will
be mailed to holders by regular mail at their addresses on the records of the
Company. Company shareholders should not send in their certificates until they
receive written instructions from the Exchange Agent. However, Company
shareholders should surrender their certificates promptly after receiving
instructions to do so.
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 Company Common Stock will have been converted in the
Reorganization. However, no former Company shareholder will be entitled to
receive any dividends until he or she has surrendered his or her Company Common
Stock certificates for exchange as provided in the letter of transmittal sent by
the Exchange Agent. Upon surrender, the shareholder will be entitled to receive
all dividends payable on the whole shares of Zions Common Stock represented by
the surrendered certificate(s) (without interest on such shares and less the
amount of taxes, if any, which may have been imposed or paid on such shares).
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Payment for Fractional Shares. Zions will not issue any fractional shares
of its Common Stock in connection with the Reorganization. Instead, each Company
shareholder who surrenders for exchange Company Common Stock certificates
representing a fraction of a share of Zions Common Stock will 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 the product of the
fraction times $50.375. Shareholders will have no further rights as shareholders
with respect to fractional shares.
Unexchanged Certificates. On the Effective Date of the Reorganization, the
Company will close its stock transfer books, and the Company will permit or
recognize no further transfers of its Common Stock. Certificates for Company
Common Stock not surrendered for exchange will entitle the holder to receive,
upon surrender as provided in the letter of transmittal, a certificate for whole
shares of Zions Common Stock, plus payment of any amount for a fractional share
or dividends to which such holder is entitled as outlined above, and without any
interest on such shares.
Federal Income Tax Consequences of the Reorganization
The following discussion is a summary of the material federal income tax
consequences of the Reorganization to the Company and to the existing
shareholders of the Company, but does not purport to be a complete analysis of
all the potential tax effects of the Reorganization. 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 the
Company are urged to consult their own tax advisors as to specific tax
consequences to them of the Reorganization.
The Reorganization is intended to qualify as a tax-free reorganization
under Section 368(a) of the Code. Accordingly, the Company will not recognize
gain or loss for federal income tax purposes upon completion of the
Reorganization. The shareholders of the Company will have the following federal
income tax consequences upon the Reorganization: (i) no gain or loss will be
recognized upon the receipt of Zions Common Stock, except to the extent that
cash, if any, is received in lieu of fractional shares of Zions Common Stock;
(ii) the tax basis of the Zions Common Stock to be received in the
Reorganization (including any fractional share interest) will be the same as the
tax basis of the Company Common Stock surrendered in exchange therefor; (iii)
the holding period of the Zions Common Stock to be received in the
Reorganization will include the holding period of the Company Common Stock
surrendered in exchange therefor, provided the Company Common Stock was held as
a capital asset on the date of the exchange; (iv) if any cash is received in
lieu of a fractional share of Zions Common Stock, gain or loss will be
recognized in an amount equal to the difference between the cash received and
the shareholder's basis in that fractional share and such 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; and (v) cash received by a dissenter who has
perfected dissenters' rights under the Colorado Business Corporation Act, ss.ss.
7-113-101 et seq., as to his or her Company Common Stock will be treated as a
distribution in redemption of such shares, subject to the provisions of Section
302 of the Code.
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The Company will receive an opinion from Slivka Robinson Waters &
O'Dorisio, P.C., legal counsel to the Company (the "Slivka Opinion") as to the
tax consequences of the Reorganization. No ruling will be requested from the IRS
with respect to the federal income tax consequences of the Reorganization. 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 Reorganization, or that such a challenge, if made, will not be
successful.
A copy of the Slivka Opinion which will be rendered as to the material
federal income tax consequences relating to the Reorganization has been filed
with the SEC as an exhibit to the Registration Statement and is incorporated in
this Proxy Statement/Prospectus by reference. The foregoing summary of the
Slivka Opinion is qualified in its entirety by reference to such filing.
Rights of Dissenting Shareholders
A holder of shares of Company Common Stock is entitled to exercise the
rights of a dissenting shareholder under the Colorado Business Corporation Act,
ss.ss. 7-113-101 et seq., to object to the Plan of Reorganization, and to make
written demand that Val Cor pay in cash the fair value of the shares of Company
Common Stock held as determined in accordance with such statutory provisions.
The following summary is not a complete statement of the provisions of Colorado
law and is qualified in its entirety by reference to such statutory provisions,
which are provided in full as Appendix B to this Proxy Statement/Prospectus.
Colorado law requires Company shareholders to follow certain prescribed
procedures in the exercise of their statutory right to dissent in connection
with the Reorganization. The failure by a shareholder to follow such procedures
on a timely basis and in the precise manner required by Colorado law may result
in a loss of that shareholder's dissenters' rights.
Overview. Company shareholders have the right under the Colorado Business
Corporation Act to dissent from the Reorganization and obtain payment of the
fair value of their shares of Company Common Stock. Fair value means the value
of the shares of Company Common Stock immediately before the Effective Date,
excluding any appreciation or depreciation in anticipation of the corporate
action except to the extent exclusion would be inequitable. If Val Cor and a
shareholder who has exercised his or her right to dissent (a "Dissenting
Shareholder") are not able to agree on a fair value, Val Cor must petition a
court in Boulder County, Colorado for a determination of fair value.
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Procedure for Dissenting. A shareholder wishing to dissent from the
Reorganization must deliver to the Company, before the vote is taken at the
Special Meeting, written notice of his or her intent to demand payment for his
or her shares if the Reorganization is consummated. The written notice should be
sent to the Company at 1990 West Tenth Avenue, Broomfield, Colorado 80020-1071
long enough before the Special Meeting so that the Company receives such notice
before the vote is taken at 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 the Company 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. A vote by a shareholder at the Special
Meeting against the Plan of Reorganization will not constitute notice under
Colorado law of an intent to exercise appraisal rights.
Within 10 days after the Effective Date, Val Cor will deliver to each
Dissenting Shareholder a written notice instructing the Dissenting Shareholder
to demand payment and send his or her Company Common Stock certificates to Val
Cor. The notice will include a form for demanding payment and will show the
deadline for submitting the payment demand form and the Company Common Stock
certificates. The form may also show the date that the Reorganization was first
announced to the news media or the shareholders, and the Dissenting Shareholder
may 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 Val Cor along with his or her Company
Common Stock certificates by the deadline shown in the notice from Val Cor. If
the payment demand form and the Company 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 under the dissenters' rights provisions of Colorado law. Such a
shareholder will be required to participate in the Reorganization. The payment
demand form and Company Common Stock certificates should be sent to Val Cor at
1650 South Colorado Boulevard, Suite 320, Denver, Colorado 80222.
Payment for Shares. Upon the later of the Effective Date or the receipt of
a Dissenting Shareholder's payment demand form and Company Common Stock
certificates, Val Cor will pay such Dissenting Shareholder Val Cor's estimate of
the fair value of the Company Common Stock for which certificates were
submitted, plus accrued interest. Accompanying the payment will be financial
information for the Company as of the end of its most recent fiscal year, as
well as the latest available interim financial information. Also accompanying
the payment will be a statement of Val Cor's estimate of the fair value of the
shares, an explanation of how the interest was calculated, a statement of the
Dissenting Shareholder's rights if such shareholder is dissatisfied with Val
Cor's payment, and a copy of the relevant Colorado statute.
If a Dissenting Shareholder estimates the fair value of his or her shares
and the amount of accrued interest is higher than the amount paid by Val Cor,
the Dissenting Shareholder may send a notice to Val Cor demanding payment of the
difference between the Dissenting Shareholder's estimate and the amount paid by
Val Cor. The Dissenting Shareholder may reject Val Cor's offer to pay fair value
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 Val Cor 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
Val Cor.
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Court Proceeding to Determine Fair Value. If a demand for payment remains
unsettled for 60 days following Val Cor's receipt of the demand, Val Cor may
petition a court in Boulder County, Colorado to determine the fair value of the
shares and accrued interest. Court costs will be paid by Val Cor 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 Val Cor if the court finds
that Val Cor 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.
Company shareholders considering seeking appraisal by exercising their
dissenters' rights should be aware that the fair value of their Company Common
Stock determined under Colorado law could be more than, the same as, or less
than their pro rata share of the merger consideration that they are entitled to
receive under the Plan of Reorganization if they do not seek appraisal of their
Company Common Stock.
The foregoing is not a complete statement of the procedures to be followed
by Company shareholders desiring to exercise appraisal rights and, because
exercise of such rights requires strict adherence to the relevant provisions of
the Colorado Business Corporation Act, each shareholder desiring to exercise
appraisal rights is advised individually to consult the law (as provided in
Appendix B to this Proxy Statement/ Prospectus) and comply with the relevant
provisions of the law.
Company shareholders wishing to exercise dissenters' rights are advised to
consult their own counsel to ensure that they fully and properly comply with the
requirements of Colorado law.
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that after the Reorganization becomes
effective Mr. Manley, currently chairman, president and chief executive officer
of the Bank, will become an executive officer of Vectra Bank. Mr. Manley will
enter into an employment agreement with Vectra Bank effective as of the
Effective Date. The Board of Directors of the Company was aware of these
interests when it considered and approved the Plan of Reorganization. The terms
of the agreement will continue until the third anniversary of the commencement
of the agreement. The agreement provides that Mr. Manley will receive a salary
not less than $110,000 per annum. Mr. Manley will be eligible to be considered
for salary increases, upon review, and will be entitled to other benefits
normally afforded executive employees, including employee benefit plan
participation, retirement and life insurance policies. Mr. Manley will have
exclusive use of a Ford Explorer vehicle which the Bank permitted him to use in
1997, and the reasonable expenses of maintaining, insuring and garaging the
vehicle will be paid by Vectra Bank. Mr. Manley will be entitled to purchase the
Ford Explorer vehicle from Vectra Bank at a price equal to its book value net of
accumulated depreciation on the books of Vectra Bank within thirty days after
the termination of his employment under the agreement.
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The employment agreement provides for severance benefits for Mr. Manley
upon the termination of his employment agreement for reasons other than
completion of the employment term, his resignation, his death or disability, or
"for cause" (as defined in his employment agreement). In the event of
termination for reasons other than those described in the preceding sentence,
Mr. Manley would receive his salary (as defined in the employment agreement)
payable at the rate established in his employment agreement for the year in
which termination occurs, payable until the third anniversary of the
commencement of the agreement. Mr. Manley would also receive such rights as he
would 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. Manley will agree that, during the
term of his employment and until the second anniversary of the date of
termination of his employment by Vectra Bank under the employment agreement, he
will not (i) engage in the banking business other than on behalf of Zions or
Vectra Bank or their affiliates within the market area of Adams, Arapahoe,
Boulder, Denver, Douglas, Jefferson and Weld Counties, Colorado; (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 Vectra 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 Vectra Bank or any of its affiliates to engage
in any action prohibited under (i) or (ii) above; provided, however, that
employment by Bankers' Bank of the West, Denver, Colorado, will not constitute a
violation of Mr. Manley's obligations under the employment agreement if he does
not maintain an office or provide or solicit retail or wholesale services as
discussed in the employment agreement.
The Plan of Reorganization further provides that MCR, Thomas Family
Partnership, LLLP, and the Bank shall have entered into a Consent to Assignment
and Amendment to Lease Agreement, in form and substance as provided in the Plan
of Reorganization. Such Consent and Amendment expressly permit the assignment of
the lease from the Bank to Vectra Bank and the continuation of the lease
agreement by Vectra Bank. The Bank's facility is leased from MCR and Thomas
Family Partnership, LLLP. The general partner of MCR, John Claus, is a
shareholder and member of the Board of Directors of the Company. The general
partner of Thomas Family Partnership, LLLP, Sue Thomas, is the wife of Don Alan
Thomas, a shareholder and member of the Board of Directors of the Company.
Following the Reorganization, Vectra Bank will continue to lease such facility
pursuant to the Lease Agreement. The lease costs are considered competitive with
the local marketplace.
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Company Stock Options
The Company granted Mr. Manley, chairman, president and chief executive
officer of the Company, options to purchase a total of 1,250 shares of Company
Common Stock. Mr. Manley entered into an agreement with Zions to exercise all
such stock options to purchase Company Common Stock prior to the Effective Date
of the Reorganization. The number of shares of Company Common Stock issued and
outstanding includes the 1,250 shares of Company Common Stock purchased by Mr.
Manley upon the exercise of all of his stock options.
Inconsistent Activities
The Company and the Bank have agreed that unless and until the Holding
Company Merger has been consummated or the Plan of Reorganization has been
terminated in accordance with its terms, neither the Company nor the Bank will
(i) solicit or encourage any inquiries or proposals by any third person to
acquire more than 1% of the Company Common Stock or any capital stock of the
Bank or any significant portion of the Company'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 the Company 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, the Holding Company Merger, or the Bank Merger, the Company is
required to give immediate notice thereof to Zions and to keep Zions informed of
the matter.
Conduct of Business Pending the Reorganization
The Plan of Reorganization contains covenants, representations and
warranties by the Company and the Bank as to matters which are typical in
transactions similar to the Reorganization.
Prior to the Effective Date, the Company and the Bank have each agreed
that neither will without Zions' prior written consent: (i) declare or pay any
cash dividends or property dividends with respect to any class of its capital
stock; (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 Company Common Stock upon exercise of
existing stock options, or grant any options to acquire such securities; (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
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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 April 1, 1998; (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) enter into
any employment or personal services contract with any person or firm except
directly to facilitate the Reorganization; (xi) purchase any loans or loan-
participation interests from, or participate in any loan originated by, any
person other than the Company or the Bank; nor (xii) take any action, or allow
any action to be taken, that would render delivery on the Effective Date of the
officers' certificate described in the Plan of Reorganization impossible.
The Company 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 the Reorganization or termination of the
Plan of Reorganization, the Company 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 the parties to consummate the Reorganization are
subject to, among other things, the satisfaction of the following conditions:
(i) the shareholders of the Company shall have authorized the Holding Company
Merger; (ii) the parties shall have received all orders, consents and approvals
from all requisite governmental authorities for the completion of the
Reorganization; (iii) certain litigation restraining, enjoining, or prohibiting
the Reorganization, as more fully specified in the Plan of Reorganization, shall
not have been instituted or threatened; (iv) the registration statement to be
filed by Zions under the Securities Act in connection with the registration of
the shares of Zions Common Stock which will 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; (v) the
Company and Zions shall have received a written opinion from tax counsel that
the Reorganization will qualify as a tax free reorganization under the Code and
the regulations and rulings promulgated thereunder; and (vi) there shall be no
adverse legislation or governmental regulation which would make the transaction
contemplated impossible.
The obligations of Zions, Val Cor and Vectra Bank to consummate the
Reorganization are subject to satisfaction or waiver of certain additional
conditions, including: (i) all representations and warranties made by the
Company and the Bank in the Plan of Reorganization
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shall be true and correct in all material respects on the Effective Date and the
Company and the Bank shall have performed all of their respective obligations
under the Plan of Reorganization on or prior to the Effective Date; (ii) Slivka
Robinson Waters & O'Dorisio, P.C., legal counsel to the Company, shall have
rendered a legal opinion to Zions in form and substance as provided in the Plan
of Reorganization; (iii) litigation counsel to the Company shall have rendered a
legal opinion to Zions in form and substance as provided in the Plan of
Reorganization; (iv) the Company shall have delivered to Zions all regulatory
authorizations entitling the Bank to operate each of its branches; (v) during
the period from March 31, 1998 to the Effective Date, there shall have been no
material adverse change in the financial position or results of operations of
the Company or the Bank nor shall the Company or the Bank have sustained any
material loss or damage to its properties which materially affects its ability
to conduct its business; (vi) 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) $2,917,000 and (b)
the aggregate contributions to capital caused by the payments accompanying the
exercise of any stock options on or after March 31, 1998; (vii) 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 $371,294; (viii) the CRA rating of the Bank shall be no lower than
"satisfactory"; (ix) Mr. Manley shall have entered into an employment agreement
with Vectra Bank in the form provided in the Plan of Reorganization; (x) the
president and chief financial officer of each of the Company and the Bank shall
have delivered a certificate to Zions regarding pooling matters; (xi) Zions and
the Company shall have received concurrence of their respective determinations
that the Reorganization contemplated by the Plan of Reorganization will qualify
for "pooling of interests" accounting treatment; (xii) the audit of the
consolidated accounts of the Company and the Bank by Van Dorn & Bossi,
independent auditors of the Company and the Bank, as of December 31, 1997 and
for the year then ended shall have been completed, and no material adverse
change to the financial condition of the Company shall have been revealed, nor
shall any material adjustments to the financial accounts of the Company or the
Bank have been recorded, as a result thereof; and (xiii) Zions shall have
received a written agreement from each "affiliate" of the Company not to sell,
pledge or otherwise dispose of their shares of Company Common Stock or Zions
Common Stock for specified periods prior to and subsequent to the Effective Date
and except in compliance with the applicable provisions of the Securities Act.
The obligations of the Company and the Bank to consummate the
Reorganization are subject to the satisfaction or waiver of certain additional
conditions, including: (i) all representations and warranties made by Zions, Val
Cor and Vectra Bank in the Plan of Reorganization shall be true and correct in
all material respects on the Effective Date and Zions, Val Cor and Vectra Bank
shall have performed all of their respective obligations under the Plan of
Reorganization on or prior to the Effective Date; (ii) Duane, Morris & Heckscher
LLP, legal counsel to Zions, shall have rendered to the Company a legal opinion,
in form and substance as provided in the Plan of Reorganization; (iii) during
the period from March 31, 1998 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; and (iv) Zions Common
Stock shall be listed on Nasdaq-NMS or shall be listed on a national securities
exchange, and the shares of Zions Common Stock issuable in the Holding Company
Merger shall have been approved for inclusion on the Nasdaq-NMS or another
national securities exchange subject only to official notice of issuance.
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Representations and Warranties
The representations and warranties of the parties 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 Reorganization and the absence of
conflict with laws or other agreements to which the respective parties are
subject; the accuracy and completeness of the financial statements and other
information furnished to the other party; the absence of material adverse
changes in the condition, assets, properties or businesses since March 31, 1998
with respect to Zions, the Company and the Bank; the absence of undisclosed
material liabilities; and compliance with laws. The Company has additionally
warranted that since March 31, 1998 there has been 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. The Company 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 the Company.
The parties have additionally warranted that they do not know of any facts
which reasonably might materially adversely affect the respective businesses,
assets, liabilities, financial condition, results of operations or prospects of
the Company, the Bank, Zions, Val Cor or Vectra Bank which have not been
disclosed in the financial statements or a certificate delivered to the other
party.
Amendment and Waiver
Notwithstanding prior approval by the shareholders of the Company or
Vectra Bank, 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 the
Company or Vectra Bank unless shareholder approval of the amendment is procured.
Zions or the Company may also, at any time prior to the Effective Date, waive
any condition or term of the Plan of Reorganization, unless the term or
condition is required by law, provided that any such waiver must be in writing
signed by the party entitled to such benefit and will be permitted only if it
will not have a materially adverse effect on the benefits intended under the
Plan of Reorganization to its shareholders.
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Authorized Termination and Damages for Breach
The Plan of Reorganization may be terminated and abandoned at any time
prior to the Effective Date, notwithstanding approval of the shareholders of the
Company, as follows: (i) by mutual consent of the parties to the Plan of
Reorganization; (ii) unilaterally, by Zions if any of the representations and
warranties of the Company or the Bank was materially incorrect when made or in
the event of a material breach or material failure by the Company or the Bank of
any covenant or agreement of the Company or the Bank contained in the Plan of
Reorganization which has not been, or cannot be, cured within thirty days after
written notice has been given; (iii) unilaterally, by the Company if any of the
representations and warranties of Zions, Val Cor or Vectra Bank was materially
incorrect when made or in the event of a material breach or material failure by
Zions, Val Cor or Vectra Bank of any covenant or agreement of Zions, Val Cor or
Vectra Bank contained in the Plan of Reorganization which has not been, or
cannot be, cured within thirty days after written notice has been given; (iv) by
either the Company or Zions if the board of directors of either has determined
in good faith that the Holding Company Merger has become inadvisable or
impracticable by reason of federal or state litigation to restrain or invalidate
the transactions contemplated by the Plan of Reorganization; (v) by any party on
or after January 31, 1999, if the Effective Date has not occurred on or before
that date; or (vi) by any party if, within thirty days after the filing of the
Registration Statement, the SEC shall have advised Zions that no review of the
Registration Statement has been or will be made, after November 30, 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 $500,000.
Restrictions on Resales by Company Affiliates
In general, Company shareholders who receive Zions shares as a result
of the Reorganization will be able to sell such shares freely and without
restriction. However, directors, executive officers, and 10% shareholders of the
Company, who generally are considered "affiliates" of the Company, are subject
to restrictions on the sales of shares received in the Reorganization.
Accordingly, these shareholders will not be permitted to sell their shares of
Zions Common Stock acquired in the Reorganization except under (i) an effective
registration statement under the Securities Act; (ii) the provisions of Rules
144 and 145 under the Securities Act; or (iii) an exemption from the
registration requirements of the Securities Act.
Additionally, to ensure the Reorganization may be accounted for as a
pooling of interests, such Company affiliates will not be permitted to sell any
shares of Company Common Stock or Zions Common Stock during the 30 day period
preceding the Effective Date, nor will they be permitted to sell any shares of
Zions Common Stock following the Effective Date until such time
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<PAGE>
as financial results covering at least 30 days of post-Holding Company Merger
combined operations are published by Zions. The management of the Company will
notify those persons who it believes may be deemed to be affiliates subject to
the foregoing restrictions. The Plan of Reorganization requires the Company to
use its best efforts to have each affiliate of the Company sign an agreement to
limit that affiliate's ability to effect any such sales. Zions may place
restrictive legends on certificates representing Zions Common Stock issued in
the Reorganization to all persons who are deemed affiliates under Rule 145 of
the Securities Act. Appropriate stop transfer instructions may be given to the
transfer agent for such certificates.
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. Zions will pay the cost of printing
and delivering this Proxy Statement/ Prospectus and other material to the
Company shareholders and the costs attributable to registering under federal and
state securities laws its stock issuable pursuant to the Plan of Reorganization.
Zions will also pay the costs incurred by the Company or the Bank at the request
of Zions to prepare for the electronic and systematic conversion of data
regarding the Bank to Zions' own system of electronic data processing. The
Company will pay the cost of procuring the Slivka Opinion concerning the federal
income tax consequences of the Reorganization.
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 Colorado regulators,
including the Board of Governors, the Comptroller, the Commissioner, and the
State Banking Board. Submissions have been made to each of these regulatory
authorities. Federal law prohibits consummation of the Reorganization until
thirty 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 have [NOT YET] been
obtained.
Effective Date of the Reorganization
If the Plan of Reorganization is approved by the shareholders of the
Company, the parties expect that the Reorganization will become effective in the
[THIRD] quarter of 1998. 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 [THIRD] quarter
of 1998. In addition, as also noted above, the parties 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.
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Accounting Treatment
The parties expect that the Reorganization will be treated for
accounting purposes as a "pooling of interests" in accordance with APB Opinion
No. 16. A condition to consummation of the Plan of Reorganization is that the
parties shall have received concurrence to the above effect as well as a
certificate to the above effect signed by the president and chief financial
officer of each of the Company and the Bank. This method of accounting views the
Reorganization as a uniting of the separate ownership interests through an
exchange of shares. As such, the pro forma financial information represents the
combined historical financial data of Zions and the Company, subject only to
certain adjustments described in the notes to the data presented.
Relationship Between Zions and the Company
Neither Zions nor the Company is aware of any material relationship
between Zions, its directors or officers or their affiliates, and the Company,
its directors or executive officers or their affiliates, except as contemplated
by the Plan of Reorganization or as described in this Proxy
Statement/Prospectus.
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 are not 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 Board of Governors. 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 Board of
Governors 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 Board of Governors 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 Board of Governors to engage in any new activity or to acquire
more than 5% of any class of voting stock of any company. Under the Riegle-Neal
Interstate Branching and Efficiency Act of 1994, as amended ("Riegle-Neal Act"),
subject to approval by the Board of Governors, bank
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<PAGE>
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 more stringent deposit
concentration limits, so long as those limits apply to all bank holding
companies equally. The Riegle-Neal Act reaffirms the right of states to
segregate and tax separately incorporated subsidiaries of a bank or bank holding
company. The Riegle-Neal Act also affects interstate branching and mergers. See
"Interstate Banking" below.
The Board of Governors is authorized to adopt regulations affecting
various aspects of bank holding companies. Under the general supervisory
authority of the Bank Holding Company Act and directives provided in the
International Lending Supervision Act of 1983, the Board of Governors has
adopted capital adequacy guidelines prescribing both risk-based capital and
leverage ratios.
Regulatory Capital Requirements
Risk-Based Capital Guidelines. The Board of Governors 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 Board of Governors, 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
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<PAGE>
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 March 31, 1998, Zions' Tier 1 and Total Capital ratios were
11.73% and 13.62%, 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 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 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
March 31, 1998 under the risk-based capital guidelines.
Risk-Based Capital
(Dollars in thousands)
Percent
of Risk-
Adjusted
Amount Assets
------ ---------
Tier 1 Capital............................... $ 739,427 11.73%
Minimum Requirement.......................... 252,629 4.00
----------- ------
Excess..................................... $ 486,798 7.73%
=========== ======
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Total Capital................................ $ 858,374 13.62%
Minimum Requirement.......................... 505,258 8.00
----------- ------
Excess..................................... $ 353,116 5.62%
=========== ======
Risk-Adjusted Assets,
net of goodwill, excess deferred
tax assets and excess allowance............ $ 6,315,727 100.00%
=========== ======
Minimum Leverage Ratio. The Board of Governors 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 March 31, 1998, Zions' leverage ratio was 6.89%.
The Board of Governors has emphasized that the leverage ratio
constitutes a minimum requirement for well-run banking organizations having
well-diversified risk, including no undue interest rate exposure, excellent
asset quality, high liquidity, good earnings, and a composite rating of 1 under
the Interagency Bank Rating System. Banking organizations experiencing or
anticipating significant growth, as well as those organizations which do not
exhibit the characteristics of a strong, well-run banking organization described
above, will be required to maintain strong capital positions substantially above
the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Board of Governors 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 March 31, 1998. A
leverage ratio of 3% will be the minimum required for the most highly rated
banking organizations, and according to the Board of Governors, 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............................. $ 739,427 6.89%
Minimum Requirement........................ 321,985 3.00
----------- ------
Excess..................................... $ 417,442 3.89%
=========== ======
Average Assets, net of goodwill and
deferred tax assets...................... $10,732,823 100.00%
=========== ======
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Other Issues and Developments Relating to Regulatory Capital. Under
such authority and directives provided in the International Lending Supervision
Act of 1983, the Comptroller, the FDIC and the Board of Governors 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.
The Federal Deposit Insurance Corporation Improvement Act of 1991, as
amended ("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
to be undercapitalized. Holding companies of critically undercapitalized,
significantly undercapitalized and certain undercapitalized banks are required
to obtain the approval of the Board of Governors 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 hiring 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
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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
Under 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
asset growth or increase its ratio of tangible equity to assets, or impose other
operating restrictions.
FDICIA also contains provisions which, among other things, restrict
investments and activities as principal by state nonmember banks to those for
which national banks are eligible, impose limitations on deposit account balance
determinations for calculating 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 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).
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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 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 Bank Insurance
Fund (the "BIF"), and most savings associations to the Savings Association
Insurance Fund (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 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.
At June 30, 1998, 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, established by the Federal Housing Finance Board under FIRREA, to
enable it to pay interest and certain other expenses on bonds which it issued to
facilitate the resolution of failed savings associations. Under the Federal Home
Loan Bank Act, the Financing Corporation, with the approval of the FDIC Board
41
<PAGE>
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. At June 30,
1998, assessment rates were set at 1.22 basis points annually for BIF-assessable
deposits and 6.10 basis points annually for SAIF-assessable deposits.
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 Board of Governors 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.
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 and not more than 30% of the
deposits in insured depository institutions within that state. States may impose
more stringent 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.
42
<PAGE>
Under 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. Colorado law authorizes an out-of-state bank
holding company, with the prior approval of the Division, to acquire a Colorado
bank holding company whose operations are principally conducted within the state
irrespective of the number of years the depository institution subsidiaries of
the Colorado bank holding company have been in operation provided that at the
time of acquisition, the out-of-state bank holding company will not control more
than 25 percent of the aggregate deposits made in federally-insured banks,
savings and loan associations, federal savings banks, industrial banks, bank
holding companies, thrift holding companies and industrial bank holding
companies located in the state and certain other requirements are satisfied.
MONETARY POLICY
Our earnings are directly affected by the monetary and fiscal policies
of the federal government and governmental agencies. The Board of Governors 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. We cannot
predict the future impact of such policies and practices on our growth or
profitability.
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, which are incorporated by
reference in this Proxy Statement/Prospectus. See "Zions Documents Incorporated
by Reference."
43
<PAGE>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of, and for the Three As of, and for the
Months Ended March 31, Year Ended December 31,
--------------------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Taxable-equivalent net interest income $ 110,812 $ 84,643 $ 358,676 $ 296,372 $ 238,880 $ 203,313 $ 178,636
Net interest income 107,943 82,898 351,799 289,166 233,547 198,606 174,657
Noninterest income 43,794 34,136 143,167 114,270 88,811 73,202 79,880
Provision for loan losses 3,256 1,835 6,175 4,640 3,000 2,181 2,993
Noninterest expenses (1) 95,414 68,176 301,218 235,272 195,186 174,900 167,750
Income taxes 16,626 16,438 65,211 56,101 41,787 30,900 27,248
Income before cumulative effect of changes
in accounting principles 36,441 30,585 122,362 107,423 82,385 63,827 56,546
Cumulative effect of changes in
accounting principles (2) -- -- - - - - 1,659
Net income 36,441 30,585 122,362 107,423 82,385 63,827 58,205
COMMON STOCK DATA Earnings per
common share:
Income before cumulative effect of
changes in accounting principles
- diluted $ .52 $ .45 $ 1.89 1.68 1.37 1.09 .99
Net income - basic .53 .46 1.92 1.70 1.39 1.11 1.03
Net income - diluted .52 .45 1.89 1.68 1.37 1.09 1.02
Dividends declared per share .12 .11 .47 .425 .3525 .29 .245
Dividend payout ratio (%) 22.75% 20.89% 23.20% 23.27% 24.95% 27.06% 21.81%
Book value per share at period end 10.48 8.75 10.25 8.72 7.46 6.28 5.50
Market to book value at period end (%) 442.73% 298.17% 268.90% 142.83% 168.18%
Average common shares outstanding 69,102,000 66,334,000 63,868,000 63,194,000 59,435,000 57,754,000 56,636,000
Weighted average common and common
equivalent shares outstanding
during the period 70,159,000 68,025,000 64,629,000 63,787,000 60,013,000 58,404,000 57,120,000
Common shares outstanding at period end 69,075,665 67,641,324 63,962,100 63,468,480 62,773,280 58,238,208 56,805,468
AVERAGE BALANCE SHEET DATA
Money market investments $ 1,589,899 $ 1,574,842 $ 1,490,772 $ 923,670 $ 945,842 $ 869,709 $ 788,694
Securities 2,948,283 2,313,412 2,575,295 1,977,875 1,665,500 1,545,704 1,209,165
Loan and leases, net 5,433,927 4,248,672 4,341,674 3,432,347 2,662,753 2,574,995 2,222,182
Total interest-earning assets 9,972,109 8,136,926 8,407,741 6,333,892 5,274,095 4,990,408 4,220,041
Total assets 10,944,611 8,811,521 9,214,155 6,914,213 5,779,025 5,456,613 4,643,918
Interest-bearing deposits 5,686,951 4,173,813 4,410,491 3,653,420 3,095,714 2,744,976 2,449,275
Total deposits 9,799,027 5,470,654 5,783,370 4,731,889 3,963,702 3,583,094 3,178,926
FHLB advances and other borrowings
over one year 155,287 71,520 136,381 87,700 96,305 118,607 111,974
Long-term debt 277,934 255,024 257,779 55,187 57,506 59,493 75,623
Total interest-bearing liabilities 8,233,290 6,803,097 7,067,324 5,208,318 4,397,582 4,197,865 3,556,746
Shareholders' equity 709,097 597,689 615,535 512,739 407,498 339,181 286,331
PERIOD END BALANCE SHEET DATA
Money market investments $ 1,154,038 $ 1,046,568 $ 814,088 $ 613,429 $ 687,251 $ 403,446 $ 597,680
Securities 2,622,465 2,276,470 2,712,094 1,983,643 1,694,669 1,663,433 1,258,939
Loans and leases, net 5,649,602 4,450,448 4,871,650 3,837,149 3,068,057 2,391,278 2,486,346
Allowance for loan losses 91,857 81,113 80,481 76,803 73,437 67,018 68,461
Total assets 10,611,585 8,508,537 9,521,770 7,116,413 6,095,515 4,934,095 4,801,054
Total deposits 7,799,027 5,728,585 6,854,462 5,119,692 4,511,184 3,705,976 3,432,289
FHLB advances and other borrowings
over one year 121,421 69,530 210,681 81,875 95,817 101,571 152,109
Long-term debt 276,387 258,704 258,566 251,620 56,229 58,182 59,587
Shareholders' equity 723,814 591,581 655,460 554,610 469,678 365,770 312,592
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
As of, and for
the Three As of, and for the
Months Ended March 31, Year Ended December 31,
---------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $16,807 $ 13,851 $ 11,907 $ 12,704 $10,875 $13,635 $23,364
Restructured loans 1,222 1,608 691 857 249 567 4,006
Other real estate owned and other
nonperforming assets 2,377 2,524 3,371 138 1,609 4,741 3,267
Total nonperforming assets 20,406 17,983 15,969 13,699 12,733 18,943 30,637
Accruing loans past due 90 days or more 11,714 5,638 9,944 3,563 5,309 3,041 10,821
SELECTED RATIOS
Net interest margin (3) 4.51% 4.22% 4.27% 4.68% 4.53% 4.07% 4.23%
Return on average assets 1.35% 1.41% 1.33% 1.55% 1.43% 1.17% 1.25%
Return on average common equity 20.84% 20.75% 19.88% 20.95% 20.22% 18.82% 20.33%
Ratio of average common equity to average assets 6.48% 6.78% 6.68% 7.42% 7.05% 6.22% 6.17%
Tier I risk-based capital - period end 11.73% 13.95% 11.74% 14.16% 11.33% 11.81% 10.85%
Total risk-based capital - period end 13.62% 16.52% 13.75% 17.52% 14.03% 14.96% 14.12%
Leverage ratio - period end 6.89% 8.09% 6.75% 8.70% 6.33% 6.24% 5.44%
Ratio of nonperforming assets to total
assets - period end .19% .21% .17% .19% .21% .38% .64%
Ratio of nonperforming assets to net loans and
leases and other real estate owned and
other nonperforming assets at period end .36% .40% .33% .36% .41% .79% 1.23%
Ratio of net charge-offs (recoveries) to average
loans and leases .05% .17% .19% .11% .10% .19% (.23)%
Ratio of allowance for loan losses to net loans
and leases outstanding at period end 1.63% 1.82% 1.65% 2.00% 2.39% 2.80% 2.75%
Ratio of allowance for loan losses to
nonperforming loans at period end 509.50% 524.70% 638.84% 566.35% 660.17% 471.89% 250.13%
</TABLE>
(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 earlier 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.
Stock Prices and Dividends on Zions Common Stock
Zions Common Stock is traded on the Nasdaq-NMS under the symbol "ZION".
The following table provides the high and low daily sales prices for Zions
Common Stock for the
45
<PAGE>
periods indicated, in each case as reported by the Nasdaq Stock Market, and the
cash dividends per share declared on Zions Common Stock for such periods.
Cash
Dividends
High Low Declared
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 21.94 .11
------
$.425
======
1997
First Quarter.............................. $ 33.25 $ 25.69 $.11
Second Quarter............................. 37.63 28.38 .12
Third Quarter.............................. 41.13 34.69 .12
Fourth Quarter............................. 46.00 37.63 .12
------
$.47
======
1998
First Quarter.............................. $ 55.69 $ 39.56 $ .12
======
Second Quarter............................. 53.13 48.06
======= =======
Third Quarter (through_______, 1998).......
On June 3, 1998, the last trading date prior to the public announcement
of the Reorganization, the closing sale price for the Zions Common Stock was
$__________. On ____________, 1998, 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 ______________, 1998, there were
approximately [69,138,844] shares of Zions Common Stock outstanding, held by
approximately [5,438] 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.
INFORMATION CONCERNING THE COMPANY AND THE BANK
General
Eagle Bank (hereafter referred to as the "Bank") was organized under
the laws of the State of Colorado in July 1985 as a national association to
engage in commercial banking under the name Eagle National Bank. In June 1992,
the Bank converted from a national bank to a state
46
<PAGE>
bank chartered under the laws of the State of Colorado. The Bank is a
wholly-owned subsidiary of Eagle Holding Company (hereafter referred to as the
"Company"). The Company was incorporated in November 1996. The Company became a
registered bank holding company under the Bank Holding Company Act on January
31, 1997. As of June 30, 1998, the outstanding common stock of the Company was
owned by six shareholders of record with 32,312 shares issued and outstanding.
Since its formation, the activities of the Company have been limited to
ownership and operation of the Bank. As a registered bank holding company, the
Company is subject to regulation and examination by the Board of Governors of
the Federal Reserve System and the Division of Banking for the State of
Colorado. The Bank is subject to regulation and examination by the Federal
Deposit Insurance Corporation (the "FDIC") and the Division of Banking for the
State of Colorado.
Since its inception, the Bank has grown to become a strong community
bank, with over $40 million in assets. Over the past several years, the bank has
prospered by establishing and maintaining beneficial relationships with large
and small commercial businesses and increasing the Bank's visibility as a small
business, construction, real estate and commercial lending bank in the Bank's
geographic area.
The Bank serves its depositors and customers by delivering a broad
range of traditional retail, deposit, and loan services through its location.
The main, and only, office of the Bank is located at 1990 West Tenth Avenue,
Broomfield, Colorado.
The Bank
The Bank is located in the county of Boulder in the state of Colorado.
As of March 31, 1998, the Bank had total assets of $40.79 million, total
deposits of $37.46 million, and total stockholders' equity of $2.89 million.
Over the period from December 31, 1996 to December 31, 1997 the Bank experienced
continued growth. Assets and deposits grew at a 34.1% and 32.9% compound annual
rate, respectively. The Company has continually improved its profitability over
the last year achieving a 1.98% annualized return on average assets in the last
year.
Total assets of the Bank have grown from $30.97 million at December 31,
1996, to $41.50 million at December 31, 1997. For this same period, the Bank's
net income after taxes was $688,823 compared to $333,358 for the same period in
1996. On December 31, 1997, deposits were $38,189,014 and net loans were
$26,899,261 compared to $28,744,540 and $19,354,110 respectively, at December
31, 1996. Net interest income for 1997 was $2.27 million compared to $1.58
million for 1996.
Technology. Management of the Bank believes that investments in
technology improve the service provided by the Bank to its depositors and
customers. The Bank has installed an automatic teller machine at its location.
In addition, the Bank has an agreement with US Bank to use their on-site ATM
machines without assessing any initial transaction fee to customers. The Bank
also has invested in computers and network capabilities. However, management of
the
47
<PAGE>
Bank believes that affiliation with a larger banking organization is necessary
to keep pace with rapidly changing technologies and services.
Market Areas Served. The Bank's facility is located in Broomfield,
Colorado. This location includes a drive-up facility and an ATM machine.
Broomfield is a community with a population of greater than 30,000 located off
of the highway connecting Denver to Boulder. The Boulder corridor is one of the
strongest real estate markets in Denver and Colorado. Business conditions are
excellent and growth is very high in the entire Colorado market place. Colorado,
Denver and Boulder have all enjoyed strong economic trends over the past three
years.
The City of Broomfield is located in the center of this market and
benefits by its proximity to the Denver and Boulder markets. The Interlocken
Business park located in Broomfield is nationally known as a premiere business
facility and has experienced tremendous growth and is expected to continue in
the future. It has become known as the high tech corridor including major
companies such as Sun Microsystems, Level 3 Communications and many others.
There is a new regional mall to be completed in the next two years, two
additional golf courses, many acres of open space and a new resort hotel under
construction.
Additionally, Broomfield has many other noteworthy strengths: growth in
housing, high occupancy rates for commercial and residential real estate as well
as low unemployment rates. Home valuations in Broomfield have continued to rise
at approximately 8% to 10% per year. Real estate in this market has reasonable
time frames of around 90 days on the market. Retail sales are also strong. All
of these indicate a generally strong local market.
The Broomfield household income averages $61,200 according to the HMDA
report in June 1997. Businesses report strong sales and steady operating
margins. Occupancy of local apartment complexes is continuing to stay around 95%
with additional developments completed this year. There are many single-family
residential projects in process and yet to be completed.
The personal lifestyles of the residents of Broomfield include many
activities. This is a family oriented community offering excellent sports
programs, strong school systems, community involvement and services for young
and old, as well as many recreational opportunities. The close proximity to
Boulder, the mountains and Denver add the best in additional recreational and
cultural activities that attract people to this community.
Loans. The Bank follows a uniform credit policy for its loans which
sets forth underwriting and loan administration criteria, including levels of
loan commitments, loan types, credit criteria, concentration limits, loan
administration, loan review and grading and related matters. The Bank monitors
asset quality utilizing an internal and external loan review program. Interest
rates charged on loans vary with the degree of risk, maturity, underwriting and
servicing costs, loan amount and extent of other banking relationships
maintained with customers, and are further subject to competitive pressures,
money market rates, availability of funds and government regulations. At
December 31, 1997, approximately 49.4% of the Bank's loan
48
<PAGE>
portfolio for loans due after one year had interest rates that float daily with
the Bank's base rate or some other published reference rate.
In the ordinary course of business, the Bank enters into various types
of transactions that include commitments to extend credit and stand by letters
of credit. The Bank uses the same credit policies in underwriting these
commitments as it uses in all its lending activities and includes these
commitments in its lending risk evaluations. The Bank's exposure to credit loss
under commitments to extend credit is represented by the amount of the
commitments. Under applicable federal and state law, permissible loans by the
Bank to one borrower were limited to an aggregate of $450,000 at December 31,
1997.
Loan Portfolio. The following table sets forth the classification of
loans of the Bank by major categories at the dates indicated.
(In Thousands) March 31, December 31,
1998 1997 1996
-------- -------- ------
Commercial $ 9,675 $ 8,525 $ 6,332
Construction 4,777 4,94 2,045
Real Estate Mortgage 11,134 11,413 7,674
Consumer 2,368 2,434 3,514
--------- -------- -------
Total Loans $ 27,954 $ 27,315 $19,565
Less Unearned Income (33) (38) (12)
Less Allowance for Loan Losses (371) (378) (199)
--------- -------- -------
Net Loans $ 27,550 $ 26,899 $19,354
========= ======== =======
The Bank's focus has been on Small Business Administration (SBA),
commercial and consumer loans. The Bank primarily accepts real estate as
collateral, but also accepts accounts receivable, inventory, furniture, fixtures
and equipment.
Over the years, the Bank has developed a reputation as a leading SBA
lender in the State of Colorado and has been designated as a Preferred Lending
Participant ("PLP") by the U.S.S.B.A. The Bank generates SBA 7(a), 504 and LoDoc
loans in the portfolio primarily to small businesses needing equipment, working
capital or real estate financing. During 1996 and 1997, the Bank generated $2.7
million and $13.3 million, respectively, from SBA loans.
The real estate loan category consists principally of improved
residential real estate and commercial owner occupied real estate loans. The
Bank makes some land loans but is not actively engaged in the origination of
first mortgage loans for single family homes. The Bank does not have a mortgage
loan department.
Personal loans and credit lines represent a small percentage of total
loans. These loans are typically to individuals for non-business purposes (such
as household, family and other personal purposes), including new and used car
loans. The Bank has minimal student loans. For
49
<PAGE>
the past several years, the Bank's strategy has been to focus on floating rate
loans with maturities up to five years. Accordingly, a majority of the Bank's
existing loans are floating rate loans. Most floating rate loans have interest
rates from prime to 3.0% over prime as reported in the Wall Street Journal. Of
the Bank's $28 million of outstanding credit commitments and $9.5 million of
unfunded commitments at December 31, 1997, the majority were loans with floating
rates.
The following table presents at December 31, 1997, loans by maturity.
Actual maturities may differ from the contractual maturities as a result of
renewals and prepayments. In addition, all loans due after one year that have
predetermined interest rates and that have floating or adjustable rates are
shown below:
(In Thousands)
MATURITY December 31, 1997
- -------- -----------------
Less than 1 year $ 9,971
One year to 5 years 8,878
Over 5 years 8,466
--------
TOTAL $ 27,315
========
LOANS DUE AFTER ONE YEAR
Fixed interest rate $ 8,774
Floating rate $ 8,570
Approximately $16,356,000 at December 31, 1997, and $9,719,000 at
December 31, 1996, represent loans collateralized by real estate.
Non-Performing Assets. The Bank knows of no material loans that are now
current where there are serious doubts as to the ability of the borrower to
comply with present loan repayment terms. At March 31, 1998, the Bank had total
criticized assets (i.e. non-performing, doubtful, substandard, or loss loans) of
$342,000, representing 1.22% of total loans and 11.72% of capital.
<TABLE>
<CAPTION>
March 31, December 31,
--------- --------------
1998 1997 1996
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Non performing loans:
Loans 90 days or more delinquent and still accruing................................. $ -- $ 54 $ 87
Nonaccrual loans.................................................................... 342 86 28
Troubled debt restructurings........................................................ -- -- --
---- ----- ----
Total nonperforming loans....................................................... $342 $ 140 $115
==== ===== ====
</TABLE>
50
<PAGE>
<TABLE>
<S> <C> <C> <C>
Other real estate owned.................................................................. $ -- $ -- $ --
Other assets acquired by foreclosure..................................................... -- -- --
----- ----- -----
Total nonperforming assets...................................................... $ 342 $ 140 $ 115
===== ===== =====
Allowance for loan losses................................................................ $ 371 $ 378 $ 199
===== ===== =====
Ratio of total nonperforming assets to total assets...................................... 0.84% 0.34% 0.37%
Ratio of total nonperforming loans to total loans........................................ 1.22% 0.51% 0.59%
Ratio of allowance for loan losses to total loans........................................ 1.33% 1.39% 1.02%
Ratio of allowance for loan losses to total nonperforming loans.......................... 108.48% 270.00% 173.04%
</TABLE>
Non-performing loans. Non-performing loans consist of loans 90 days or
more delinquent and still accruing interest, non-accrual loans and troubled debt
restructurings. At December 31, 1997 and 1996, the recorded investment in loans
for which impairment has been recognized totaled $86,000 and $28,000,
respectively.
Non-accrual loans are loans on which the accrual of interest has been
discontinued. When, in the opinion of the Bank management, a reasonable doubt
exists as to the full, timely collection of interest or principal, regardless of
the delinquency status of a loan, the accrual of interest income is discontinued
and all interest previously accrued, but not collected, is reversed against
current period interest income. While the loan is on a non-accrual status,
interest income is recognized only upon receipt and only if, in the judgment of
management, future collection of principal is probable. Loans 90 days or more
delinquent are changed to non-accrual status unless the loan is in the process
of collection and management determines that full collection of principal and
accrued interest is probable. Interest accruals are resumed on non-accrual loans
only when, in the judgment of the Bank management, the loans are estimated to be
fully collectible as to both principal and interest.
Additional interest income on non-accrual loans that would have been
recognized in 1997 had the loans been current in accordance with their original
terms was not material. No interest income was collected in 1997 on non-accrual
loans.
Troubled debt restructurings are loans that have been re-negotiated to
provide a reduction or deferral of interest or principal balance because of a
deterioration in the financial position of the borrower.
Other Real Estate Owned. Other real estate owned ("OREO") includes
property acquired in foreclosure proceedings or under agreements with delinquent
borrowers. There is no other real estate owned by the Bank.
Analysis of Allowance for Loan Losses. The allowance for loan losses is
established through charges to earnings in the form of provisions for loan
losses. Charge off(s) or recoveries are charged or credited directly to the
allowance. In general, the amount charged to earnings each year, if any, by the
Bank is based on the Bank management's judgment, which takes into consideration
a number of factors, including: (a) the Bank's historic loss experience in
relation to outstanding loans and the existing level of the allowance; (b)
recommendations by the Bank's
51
<PAGE>
external auditors; and (c) estimates by lending officers of the true dollar loss
exposure on classified loans. At March 31, 1998, the Bank had an allowance for
loan losses of $371,294.
The following table sets forth the historical relationship between the
Bank's loan charge off(s) and recoveries and allowance for loan losses at the
dates indicated:
<TABLE>
<CAPTION>
Year ended
Three Months December 31,
Ended March 31, --------------------------
1998 1997 1996
---- ------ -----
(Dollars in thousands)
<S> <C> <C> <C>
Balance of allowance for loan
losses at beginning of period.............. $ 378 $ 199 $ 156
Charge Offs:
Real Estate loans.......................... -- -- --
Installment loans.......................... (11) (37) (38)
Credit cards and related plans............. (3) (1) (3)
Commercial and all other loans............. (55) (21) (13)
------- ------- -------
Total (charge-offs)........................... (69) (59) (54)
------- ------- -------
Recoveries:
Real Estate loans.......................... -- -- --
Installment loans.......................... 2 12 6
Credit cards and related plans............. -- -- 1
Commercial and all other loans............. -- 6 --
------- ------- -------
Total recoveries.............................. 2 18 7
------- ------- -------
Net (charge-offs)............................. (67) (41) (47)
Provision for loan losses..................... 60 220 90
------- ------- -------
Balance of allowance for loan losses
at end of period........................... $ 371 $ 378 $ 199
======= ======= =======
Ratio of net (charge-offs) recoveries
to average loans........................... (0.25%) (.017%) (0.28%)
Average loans outstanding during period....... $27,313 $24,504 $16,854
</TABLE>
52
<PAGE>
Investment Securities
The Bank maintains a portfolio of investment securities to provide
additional diversification and earnings on funds not being utilized for loan
activity or other purposes. The Bank has formalized an investment policy that
the Bank may invest in direct obligations of the U.S. Treasury; securities
backed by Federal agencies; state, county and municipal securities that
represent general obligations of the issuer; revenue bonds rated Baa or higher
by Moody's or Standard & Poor's; money market instruments of federally insured
institutions; and corporate securities rated Baa or higher. To reduce investment
risk and ensure that investments do not exceed legal investment limits, the
Bank's Investment Committee meets at least monthly to consider the investment
securities portfolio and its quality, maturity, marketability and risk
diversification. The Investment Committee meets jointly with the Board of
Directors of the Bank on a monthly basis.
The following table sets forth the amortized cost and market value of
the Bank's investment securities by class of security at the date indicated.
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997 December 31, 1996
-------------- ----------------- -----------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR
SALE:
U.S. Treasury $5,417 $5,452 $ 5,568 $ 5,599 $5,369 $ 5,376
U.S. Agency 2,556 2,560 1,604 1,612 1,059 1,070
Other 159 160 197 202 162 163
------ ------ ------- ------- ------ -------
Total securities available for sale $8,132 $8,172 $ 7,369 $ 7,413 $6,590 $ 6,609
====== ====== ======= ======= ====== =======
</TABLE>
53
<PAGE>
The following table sets forth the carrying values, maturities and
weighted average yields of the Bank's securities portfolio at December 31, 1997
<TABLE>
<CAPTION>
Due after one year Due after five years
Due in one year or less through five years through ten years
----------------------- ------------------ ---------------------
(Dollars in Thousands) Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury $1,601 5.75% $3,794 6.08% $ 204 6.50%
U.S. Government Agencies -- 0.00% 1,612 6.29% -- 0.00%
Mortgage backed securities -- 0.00% 16 9.00% -- 0.00%
Other -- 0.00% -- 0.00% -- 0.00%
State and political subdivisions -- 0.00% -- 0.00% -- 0.00%
Federal Home Loan Bank and Federal Reserve Bank
Stock -- 0.00% -- 0.00% -- 0.00%
TOTAL $1,601 5.75% $5,422 6.15% $ 204 6.50%
====== ====== ======
<CAPTION>
Due after ten years
-------------------
Total
------------------
(Dollars in Thousands) Amount Yield Amount Yield
------ ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury $ -- 0.00% $5,599 6.00%
U.S. Government Agencies -- 0.00% 1,612 6.29%
Mortgage backed securities -- 0.00% 16 9.00%
Other 186 7.27% 186 7.27%
State and political subdivisions -- 0.00% -- 0.00%
Federal Home Loan Bank and Federal Reserve Bank -- 0.00%
Stock -- 0.00%
TOTAL $ 186 7.27% $7,413 6.10%
===== ======
</TABLE>
The following table sets forth the carrying values, maturities and weighted
average yields of the Bank's securities portfolio at March 31, 1998
<TABLE>
<CAPTION>
Due after one year Due after five years
Due in one year or less through five years through ten years
----------------------- ------------------ --------------------
(Dollars in Thousands) Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury $1,652 5.78% $3,800 6.07% $ -- 0.00%
U.S. Government Agencies -- 0.00% 2,560 6.05% -- 0.00%
Mortgage backed securities -- 0.00% 15 9.00% -- 0.00%
Other -- 0.00% -- 0.00% -- 0.00%
State and political subdivisions -- 0.00% -- 0.00% -- 0.00%
Federal Home Loan Bank and Federal Reserve Bank
Stock -- 0.00% -- 0.00% -- 0.00%
TOTAL $1,652 5.78% $6,375 6.07% $ -- 0.00%
====== ====== =====
<CAPTION>
Due after ten years
-------------------
Total
-----------------
(Dollars in Thousands) Amount Yield Amount Yield
------ ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury $ -- 0.00% $5,452 5.98%
U.S. Government Agencies -- 0.00% 2,560 6.05%
Mortgage backed securities -- 0.00% 15 9.00%
Other 145 7.15% 145 7.15%
State and political subdivisions -- 0.00% -- 0.00%
Federal Home Loan Bank and Federal Reserve Bank
Stock -- 0.00% -- 0.00%
TOTAL $ 145 7.15% $8,172 6.03%
===== ======
</TABLE>
54
<PAGE>
Deposits
The following table presents the average balances of the Bank for each
major category of deposits and the weighted average interest rate paid for
interest-bearing deposits for the periods indicated:
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
---------------------------- ----------------------------
Weighted Weighted
Average Interest Average Interest
Average Rate Average Rate
(Dollars in Thousands) Balance ---- Balance ----
------- -------
<S> <C> <C> <C> <C>
NOW and MMDA $18,594 4.04% $11,516 3.44%
Savings 2,917 2.88% 2,704 2.96%
Time CD's >100K 2,095 5.73% 1,687 5.45%
Time CD's <100K 4,677 5.39% 3,678 5.11%
------- -------
Total Interest Bearing Deposits
28,283 4.27% 19,585 3.86%
Non-Interest Bearing Deposits
9,283 7,790
------- -------
TOTAL DEPOSITS $37,566 $27,375
======= =======
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- ----------------------------
Weighted Weighted
Average Interest Average Interest
Average Rate Average Rate
(Dollars in Thousands) Balance ---- Balance ----
------- -------
<S> <C> <C> <C> <C>
NOW and MMDA $13,558 3.81% $10,859 3.35%
Savings 2,915 2.95% 2,262 2.96%
Time CD's >100K 2,062 5.63% 2,020 5.64%
Time CD's <100K 4,087 5.33% 3,109 5.31%
------- -------
Total Interest Bearing Deposits
22,622 4.14% 18,250 3.89%
Non-Interest Bearing Deposits
8,664 6,960
------- -------
TOTAL DEPOSITS $31,286 $25,210
======= =======
</TABLE>
The following table sets forth the amount and maturity of certificates
of deposit with balances of more than $100,000 as of March 31, 1998 and December
31, 1997.
Remaining maturity MARCH 31, 1998 DECEMBER 31, 1997
- ------------------ -------------- -----------------
(Dollars in Thousands)
Under 3 months $ 1,193 $ 400
3 to 6 months $ 200 $ 779
6 to 12 months $ 230 $ 532
Over 12 months $ 564 $ 455
--------- ---------
Total $ 2,187 $ 2,166
========= =========
55
<PAGE>
Return on Bank Assets and Equity. The following table sets forth for
the Bank as of December 31, 1997, 1996 and 1995 returns on assets, returns on
equity and certain related ratios:
Years ended December 31,
1997 1996 1995
---- ---- ----
Return on assets* 1.98% 1.23% 0.80%
Return on equity** 29.33% 18.71% 11.39%
Equity to assets ratio*** 6.86% 6.57% 7.01%
Dividend payout ratio**** N/A N/A N/A
* Net income divided by average total assets.
** Net income divided by average stockholders' equity.
*** Average total equity divided by average total assets.
**** Dividends paid per share divided by net income per share.
Competition
The banking industry in the Broomfield area is highly competitive. The
Bank faces competition from regional bank holding companies, such as Community
First Bankshares, Inc., Norwest Bank, Banc One, Key Bank and US Bank.
Additionally, there is competition from savings and loan companies, credit
unions, investment companies and other types of financial services companies and
from smaller independent banks located in nearby communities.
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. Some of the Bank's competitors are larger and
substantially more capitalized than the Bank for lending and to pay for mass
advertising, technology and physical facilities. Furthermore, because larger
financial institutions frequently benefit from economies of scale, many of the
Bank's competitors are able to offer more attractive interest rates, lower cost
services and a wider range of services and products.
The Bank believes that it has been successful in the past in competing
due to its focus in the community banking market segment on building and
maintaining comprehensive banking relationships. However, in light of
competitive trends in the industry and the Bank's geographic area, management of
the Company and the Bank believe that the Bank will face increasing competitive
pressure from larger, regional bank holding companies that currently have
acquired or will acquire banks or branches serving the Boulder County market.
56
<PAGE>
The Bank's Facilities
The Bank's main office facility, and the attached drive-up facility,
are leased from MCR and Thomas Family Partnership, LLLP which are principally
owned by John Claus, a shareholder and member of the Board of Directors of the
Company, and Sue C. Thomas, the wife of Company shareholder and member of the
Board of Directors Don Alan Thomas, respectively. Lease costs are considered
competitive with the local marketplace.
Legal Proceedings
From time to time, the Bank is involved in routine litigation,
including foreclosure proceedings, in the ordinary course of its business. Other
than one arbitration proceeding which has been settled at no material cost to
the Bank, the Bank is not involved in any litigation as of the date of this
Proxy Statement/Prospectus. The Company is involved in no litigation as of the
date of this Proxy Statement/Prospectus.
Employees
At March 31, 1998, the Company and Bank had 26 full-time equivalent
employees. None of the employees is covered by a collective bargaining
agreement. Management of the Bank and Company believe that their relationships
with their employees are good.
Regulatory Matters
As a registered bank holding company under the Bank Holding Company
Act, the Company is subject to the regulations and supervision of the Board of
Governors of the Federal Reserve System and the Division of Banking for the
State of Colorado. The Bank Holding Company Act requires the Company to file
reports with the Board of Governors of the Federal Reserve System and the
Division of Banking for the State of Colorado and to provide any additional
information requested thereby.
The Bank is a state banking corporation organized under the laws of the
State of Colorado. The Bank is subject to the regulation of the FDIC, which
insures its deposits. The Bank is subject to regulation, supervision and regular
examination by the Division of Banking for the State of Colorado and the FDIC.
Selected Financial Data
The following selected financial data should be read in conjunction
with the Company's Consolidated Financial Statements and the related notes and
with the Company's Management's Discussion and Analysis of Financial Condition
and Results of Operations, which are included in this Proxy
Statement/Prospectus.
57
<PAGE>
Eagle Holding Company and Eagle Bank
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
As of and for the three As of and for the year ended December 31,
(Dollars in Thousands, Except Per Share Data) months ended March 31, -----------------------------------------
-----------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
- ----------------
Net interest income $ 608 $ 471 $ 2,227 $ 1,585 $ 1,297
Provision for loan losses 60 43 220 90 49
Noninterest income 274 173 1,171 541 251
Noninterest expense 526 429 2,101 1,531 1,236
Income taxes 111 62 388 172 89
------- ------- ------- ------- -------
Net Income $ 185 $ 110 $ 689 $ 333 $ 175
======= ======= ======= ======= =======
COMMON STOCK DATA
- -----------------
Net Income per Common Share $ 5.72 $ 3.48 $ 21.53 $ 10.73 $ 5.74
Dividends Per Common Share N/A N/A N/A N/A N/A
Book Value per Share outstanding at Period end 90.33 65.07 84.69 63.22 54.53
Weighted Average Common Shares Outstanding during the 32,312 31,684 31,998 31,067 30,450
Period
AVERAGE BALANCE SHEET DATA
- --------------------------
Securities $ 7,985 $ 6,383 $ 6,356 $ 5,066 $ 5,529
Loans and Leases, Net 26,922 20,764 24,217 16,677 12,910
Total Interest-Earning Assets 38,173 27,314 31,136 23,696 18,690
Total Assets 40,975 30,890 34,773 27,110 21,915
Interest-bearing deposits 28,283 19,585 22,622 18,250 13,219
Total deposits 37,566 27,375 31,286 25,210 19,570
Equity 2,845 2,057 2,353 1,780 1,537
END OF PERIOD BALANCE SHEET DATA
- --------------------------------
Securities 8,172 6,057 7,413 6,609 4,749
Loans and leases, net 27,549 22,431 26,899 19,354 14,023
Allowance for loan losses 371 224 378 199 156
Total assets 40,786 32,701 41,510 30,974 23,254
Total deposits 37,430 28,955 38,189 28,745 21,533
Shareholders' equity 2,919 2,062 2,736 2,003 1,660
NON-PERFORMING ASSETS
- ---------------------
Nonaccrual loans and loans past due 90 days or more $ 342 $ 116 $ 140 $ 115 $ 9
Other real estate owned -- -- -- -- --
------- ------- ------- ------- -------
Total non-performing assets $ 342 $ 116 $ 140 $ 115 $ 9
======= ======= ======= ======= =======
SELECTED RATIOS
- ---------------
Net Interest margin 6.37% 6.90% 7.15% 6.69% 6.94%
Return on average assets 1.81% 1.42% 1.98% 1.23% 0.80%
Return on average equity 26.01% 21.39% 29.28% 18.71% 11.39%
Ratio of ending equity to ending assets 7.16% 6.31% 6.59% 6.47% 7.14%
Ratio of non-performing assets to total assets 0.84% 0.35% 0.34% 0.37% 0.04%
Ratio of ALLL to loans and leases outstanding at period end 1.33% 0.99% 1.39% 1.02% 1.10%
Ratio of ALLL to non-performing loans 108.48% 193.10% 270.00% 173.04% 1733.33%
</TABLE>
58
<PAGE>
Stock Prices and Dividends on Company Common Stock
No established trading market for the Company Common Stock exists. Over
the years, no trading in the Company Common Stock has occurred. Reliable
information concerning the prices at which the Company Common Stock has traded
in private, negotiated transactions is not publicly available or generally known
to the Company. On occasion, the Company has become aware of the trading price
of its stock in private transactions. Information concerning those trading
prices has been omitted based on the Company's belief that such prices are not
necessarily representative of a fair market price for the Company Common Stock
during any particular period. Since June 3, 1998, the date the Plan of
Reorganization was executed and publicly announced, there have been no trades in
the Company's Common Stock.
The Company has not paid any cash dividends since its incorporation in
November 1996.
As of June 3, 1998 there were six holders of record of the Company
Common Stock.
Certain Transactions of the Company
David T. Manley, Jr., president and chief executive officer of the
Bank, will serve as an executive officer of Vectra Bank pursuant to an
employment agreement to be executed at Closing. See "Plan of Reorganization --
Interests of Certain Persons in the Transaction" for information concerning the
employment agreement and other matters relating to Mr. Manley and the
transaction.
The Bank's facility is leased from MCR and Thomas Family Partnership,
LLLP. John Claus, a shareholder and member of the Board of Directors of the
Company is the general partner of MCR. Sue C. Thomas, wife of Don Alan Thomas, a
shareholder and member of the Board of Directors of the Company, is the general
partner of Thomas Family Partnership, LLLP. On June 3, 1998, MCR, Thomas Family
Partnership, LLLP, and the Bank entered into a consent to assignment and
amendment to lease agreement, in form and substance as provided in the Plan of
Reorganization. Following the Reorganization, Vectra Bank will lease such
facility pursuant to the lease agreement.
The Bank has had banking transactions in the ordinary course of its
business with directors, officers, principal shareholders and their associates
on substantially 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, 1998, the Company's directors and executive officers and their
related parties were indebted to the Bank in the aggregate amount of $595,157
none of which loans were delinquent. In addition, unused commitments to extend
credit to these individuals approximated $994,993 at June 30, 1998.
59
<PAGE>
Stockholdings of Directors, Officers and Certain Others
The following table sets forth as of June 30, 1998, the beneficial
ownership of the Company's Common Stock (i) by each person known by the Company
to own beneficially more than 5% of the outstanding shares of such class, (ii)
by each executive officer of the Company, (iii) by each director of the Company,
and (iv) by all directors and executive officers of the Company as a group.
Except as set forth in the notes to the table, each person, to the Company's
knowledge, has sole voting and investment power over the shares stated as
beneficially owned.
<TABLE>
<CAPTION>
Name, Title, and Address
of Executive Officers,
Directors and 5% Beneficial Owners Number of Shares Percent of Class(1)
- ---------------------------------- ---------------- -------------------
<S> <C> <C>
David T. Manley, Jr. 3,359(1) 10.01%
Chairman, President and CEO
of Company and Bank
1407 Dunsford Way
Broomfield, Colorado 80020
Don Alan Thomas 12,275 36.57%
Director
6600 Sims
Arvada, Colorado 80004
John Claus 5,719 17.04%
Director
30594 Golf Club Point
Evergreen, Colorado 80439
Allan Hallock 5,577 16.62%
Director
#2 Cleek Way
Columbine Valley, Colorado 80123
Laura Skaer 2,671 7.99%
5831 S. Mt. Vernon St.
Spokane, Washington 99223
James Ryall 3,961 11.80%
P.O. Box 4145
Carmel, California 93921
</TABLE>
60
<PAGE>
<TABLE>
<S> <C> <C>
All directors and executive officers
as a group (4 persons) 26,390 80.24%
</TABLE>
- ----------
(1) Mr. Manley's holdings include 1,250 shares of Company Common Stock which he
will receive prior to the Effective Date upon exercising all of his options to
purchase Company Common Stock. The percentage ownership set forth in this column
reflects the exercise by Mr. Manley of his stock options, which will take place
before the Effective Date.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
EAGLE HOLDING COMPANY
The following analysis of the Company's financial condition and the
results of operations for the three months ended March 31, 1998 and 1997 and for
the years ended December 31, 1997, 1996, and 1995 should be read in conjunction
with the audited Consolidated Financial Statements of the Company and notes
thereto, and information presented elsewhere herein. Average balance sheet data
are based on average daily balances outstanding for the period.
General
The Company's Consolidated Financial Statements show its financial
condition and information on a consolidated basis for 1997. As the Company was
incorporated in November 1996, the financial statements for 1996 and 1995 are
for the Bank only. The Bank is the only operating unit of the Company.
Net Interest Income
For most financial institutions, the primary component of earnings is
net interest income. Net interest income is the difference between interest
income, principally from loan and investment securities portfolios, and interest
expense, principally on customer deposits and borrowings. Changes in net
interest income result from changes in volume, spread and margin. Volume refers
to the average dollar level of interest-earning assets and interest-bearing
liabilities. Spread refers to the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities.
Margin refers to net interest income divided by average interest-earning assets
and is influenced by the level and relative mix of interest-earning assets and
interest-bearing liabilities. During the fiscal years ended December 31, 1997,
1996, and 1995, average interest earning assets were $31.136 million, $23.696
million and $18.690 million, respectively. During the same periods, net interest
margin was 7.15%, 6.69% and 6.94%, respectively. At March 31, 1998, average
interest-earning assets were $38.173 million and net interest margin was 6.36%.
See "Results of Operations."
61
<PAGE>
The following tables set forth for the periods indicated information
with regard to average balances of assets and liabilities, as well as the total
dollar amounts of interest income from interest earning assets and interest
expense on interest-bearing liabilities, resultant yields or costs, net interest
income, net interest spread and net interest margin.
62
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1998
(Dollars in Thousands) Average Interest Average Rate
------- -------- ------------
Balance
-------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Securities - Taxable 7,928 118 5.95%
Federal Funds Sold 3,266 43 5.27%
Other Investments
Loans 27,313 748 10.95%
Less Allowance for loan losses (391)
Less unrealized gain (loss) on securities
available for sale 57
------- --------
Net interest earning assets 38,173 909 9.53%
Noninterest earning assets 2,802
------- --------
TOTAL ASSETS $40,975 909 8.87%
======= --------
LIABILITIES
Interest-Bearing DDA 5,354 25 1.87%
MMDA 13,240 163 4.92%
Savings 2,917 21 2.88%
Time Deposits $100,000> 2,095 30 5.73%
Other time deposits 4,677 63 5.39%
------- --------
Total Interest-Bearing Deposits 28,283 302 4.27%
Fed funds & Repurchase Agreements
------- --------
Total Interest bearing liabilities 28,283 302 4.27%
Non-Interest-bearing DDA 9,283
------- --------
Total Deposits and Interest-bearing Liability $37,566 302 3.22%
======= --------
Net Interest Income $ 607
========
Interest Rate Spread 5.26%
Net Interest Rate Margin 6.36%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
(Dollars in Thousands) Average Interest Average Rate
------- -------- ------------
Balance
-------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Securities - Taxable 6,384 91 5.70%
Federal Funds Sold 67 1 5.97%
Other Investments 100 1 4.00%
Loans 20,968 582 11.10%
Less Allowance for loan losses (204)
Less unrealized gain (loss) on securities
available for sale (1)
------- --------
Net interest earning assets 27,314 675 9.89%
Noninterest earning assets 3,577
------- --------
TOTAL ASSETS $30,891 675 8.74%
======= --------
LIABILITIES
Interest-Bearing DDA 4,395 20 1.82%
MMDA 7,121 79 4.44%
Savings 2,704 20 2.96%
Time Deposits $100,000> 1,687 23 5.45%
Other time deposits 3,678 47 5.11%
------ --------
Total Interest-Bearing Deposits 19,585 189 3.86%
Fed funds & Repurchase Agreements 1,192 16 5.37%
------- --------
Total Interest bearing liabilities 20,777 205 3.95%
Non-Interest-bearing DDA 7,790
------- --------
Total Deposits and Interest-bearing Liability $28,567 205 2.87%
======= --------
Net Interest Income $ 470
========
Interest Rate Spread 5.94%
Net Interest Rate Margin 6.88%
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
(Dollars in Thousands) Average Interest Average Average Interest Average
------- -------- ------- ------- -------- -------
Balance Rate Balance Rate
------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Securities - Taxable $ 6,355 378 5.95% $ 5,073 298 5.87%
Federal Funds Sold 471 25 5.31% 1,936 101 5.22%
Other Investments 92 6 6.52% 17 1 5.88%
Loans 24,504 2,798 11.42% 16,854 1,895 11.24%
Less Allowance for loan losses (287) (177)
Less unrealized gain (loss) on securities
P available for sale 1 (7)
------- --------- ------- --------
Net interest earning assets 31,136 3,207 10.30% 23,696 2,295 9.69%
Noninterest earning assets 3,637 3,414
------- -------- ------- --------
TOTAL ASSETS $34,773 3,207 9.22% $27,110 2,295 8.47%
======= -------- ======= --------
LIABILITIES
Interest-Bearing DDA 4,463 81 1.81% 4,058 82 2.02%
MMDA 9,095 436 4.79% 6,801 282 4.15%
Savings 2,915 86 2.95% 2,262 67 2.96%
Time Deposits $100,000> 2,062 116 5.63% 2,020 114 5.64%
Other time deposits 4,087 218 5.33% 3,109 165 5.31%
------- -------- ------- --------
Total Interest-Bearing Deposits 22,622 937 4.14% 18,250 710 3.89%
Fed funds & Repurchase Agreements 758 43 5.67% 0 0
------- -------- ------- --------
Total Interest bearing liabilities 23,380 980 4.19% 18,250 710 3.89%
Non-Interest-bearing DDA 8,664 6,960
------- -------- ------- --------
Total Deposits and Interest-bearing Liability $32,044 980 3.06% $25,210 710 2.82%
======= -------- ======= --------
Net Interest Income $ 2,227 $ 1,585
======== ========
Interest Rate Spread 6.11% 5.80%
Net Interest Rate Margin 7.15% 6.69%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
(Dollars in Thousands) Average Interest Average
------- -------- -------
Balance Rate
------- ----
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Securities - Taxable $ 5,573 315 5.65%
Federal Funds Sold 202 11 5.45%
Other Investments 49 3 6.12%
Loans 13,051 1,521 11.65%
Less Allowance for loan losses (141)
Less unrealized gain (loss) on securities
available for sale (44)
-------
Net interest earning assets 18,690 1,850 9.90%
Noninterest earning assets 3,225
-------
TOTAL ASSETS $21,915 1,850 8.44%
======= --------
LIABILITIES
Interest-Bearing DDA 3,168 73 2.30%
MMDA 5,217 215 4.12%
Savings 1,803 60 3.33%
Time Deposits $100,000> 1,318 72 5.46%
Other time deposits 1,713 86 5.02%
------- --------
Total Interest-Bearing Deposits 13,219 506 3.83%
Fed funds & Repurchase Agreements 734 47 6.40%
------- --------
Total Interest bearing liabilities 13,953 553 3.96%
Non-Interest-bearing DDA 6,351
-------
Total Deposits and Interest-bearing Liability $20,304 553 2.72%
======= --------
Net Interest Income $ 1,297
========
Interest Rate Spread 5.94%
Net Interest Rate Margin 6.94%
</TABLE>
64
<PAGE>
The following table illustrates the changes in the net interest income
due to changes in volume and changes in interest rate. Changes attributable to
the combined effect of volume and interest rate have been allocated to the
change due to volume.
<TABLE>
<CAPTION>
MARCH 31, 1998 over 1997 DECEMBER 31, 1997 over 1996
------------------------ ---------------------------
(Dollars in Thousands) Due to Volume Due to Rate Total Due to Volume Due to Rate Total
------------- ----------- ----- ------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Securities - Taxable 23 7 30 76 4 80
Federal Funds Sold 42 42 (78) 2 (76)
Other Investments (4) (4) 5 5
Loans 174 (8) 166 874 29 903
--------- --------- ----- --------- -------- ------
TOTAL INTEREST INCOME 235 (1) 234 877 35 912
INTEREST-BEARING
LIABILITIES
Interest-Bearing DDA 4 1 5 7 (8) (1)
MMDA 75 9 84 110 44 154
Savings 2 (1) 1 19 0 19
Time Deposits $100,000 & Over 6 1 7 2 0 2
Other time deposits 13 3 16 52 1 53
--------- --------- ----- --------- -------- ------
Total Interest-Bearing Deposits 100 13 113 190 37 227
Fed funds & Repurchase Agreements (16) (16) 43 0 43
--------- --------- ----- --------- -------- ------
Total Interest bearing liabilities 84 13 97 233 37 270
--------- --------- ----- --------- -------- ------
Increase (Decrease) in Net Interest $ 151 $ (14) $ 137 $ 644 $ (2) 642
========= ========= ===== ========= ========= ======
Income
</TABLE>
DECEMBER 31, 1996 over 1995
---------------------------
(Dollars in Thousands) Due to Volume Due to Rate Total
------------- ----------- -----
INTEREST-EARNING ASSETS
Securities - Taxable (29) 12 (17)
Federal Funds Sold 90 0 90
Other Investments (2) 0 (2)
Loans 428 (54) 374
-------- -------- ------
TOTAL INTEREST INCOME 487 (42) 445
INTEREST-BEARING
LIABILITIES
Interest-Bearing DDA 18 (9) 9
MMDA 66 1 67
Savings 14 (7) 7
Time Deposits $100,000 & Over 40 2 42
Other time deposits 74 5 79
-------- -------- ------
Total Interest-Bearing Deposits 212 (8) 204
Fed funds & Repurchase Agreements (47) 0 (47)
-------- -------- ------
Total Interest bearing liabilities 165 (8) 157
-------- -------- ------
Increase (Decrease) in Net Interest $ 322 $ (34) $ 288
======== ======== ======
Income
65
<PAGE>
The change in interest income/expense attributable to volume reflects
the change in volume times the current year's rate and the change in interest
income/expense attributable to rate reflects the change in rates times the prior
year's volume.
Results of Operations
Years ended December 31, 1997 and 1996
Overview. Consolidated net income increased by $355,465 for 1997 to
$688,823 from $333,358 for 1996. The principal component of the Bank's net
income, net interest income (i.e., the difference between interest income,
principally from loans, and interest expense, principally on customer deposits
and borrowings), increased $642,146 to $2,227,093 for 1997 from $1,584,947 for
1996. Noninterest income increased $630,270 from $540,756 for 1996 to
$1,171,026 for 1997. Noninterest expense increased by $570,361 from $1,530,745
for 1996 to $2,101,106 for 1997. Income tax expense increased $216,140 for 1997
to $387,740 from $171,600 for 1996. Return on average assets and return on
average equity were 1.98% and 29.33%, respectively, for 1997 compared to 1.23%
and 18.73%, respectively, for 1996.
Interest Income. Interest income increased $912,293 to $3,207,591 for
1997 from $2,295,298 for 1996. Interest income on loans increased $902,803 and
interest income on U.S. treasury securities $83,646 for 1997 compared to 1996.
The increase in interest income on loans was due to a prosperous local economy
and the Bank's business development efforts. The increase in interest income
from securities was the result of the overall growth of the Bank. The rates
earned on loans and investments have remained relatively stable.
Interest Expense. Interest expense increased $270,147 to $980,498 for
1997 from $710,351 for 1996. The increase in interest expense was primarily due
to increased interest-bearing deposits. Interest-bearing deposits were up
$7,607,087 for 1997 to $28,139,123 at December 31, 1997, from $20,532,036 at
December 31, 1996. Rates paid on interest-bearing deposits have remained
relatively stable.
Net Interest Income. Net interest income increased $642,146 to
$2,227,093 for 1997 from $1,584,947 for 1996. During 1997, average loans
outstanding increased $7,650,000, average securities, including federal funds
sold, decreased $100,000, while net interest margin (i.e., net interest income
divided by average interest-earning assets) increased 0.46% (from 6.69% for 1996
to 7.15% for 1997).
Noninterest Income. Noninterest income increased $630,270 to $1,171,026
for 1997 from $540,756 for 1996. The increase was due primarily to the increase
from gains on the sale of SBA loans from $221,465 in 1996 to $805,631 in 1997.
Noninterest Expense. Noninterest expense increased by $570,361 from
$1,530,745 for 1996 to $2,101,106 for 1997. Income tax expense increased
$216,140 for 1997 to $387,740 from $171,600 for 1996. The increase was primarily
the result of an increase in salaries and employee benefits of $424,222 during
1997.
66
<PAGE>
Provision for Loan Losses. Provision for loan losses increased $130,450
to $220,450 in 1997 from $90,000 in 1996.
Income Taxes. The Company's income tax expense increased $216,140 to
$387,740 for 1997 from $171,600 for 1996.
Years ended December 31, 1996 and 1995
Overview. Net income increased by $158,607 for 1996 to $333,358 from
$174,751 for 1995. Net interest income increased $287,669 to $1,584,947 for 1996
from $1,297,278 for 1995. Noninterest income increased $289,563 from $251,193
for 1995 to $540,756 for 1996. Noninterest expense increased by $294,525 for
1996 to $1,530,745 from $1,236,220 for 1995. Income tax expense increased
$83,100 for 1996 to $171,600 from $88,500 for 1995. Return on average assets and
return on average equity were 1.23% and 18.71%, respectively, for 1996 compared
to 0.80% and 11.39%, respectively, for 1995.
Interest Income. Interest income increased $445,197 to $2,295,298 for
1996 from $1,850,101 for 1995. Interest income on loans increased $374,454 and
interest income on U.S. Treasury securities increased $64,058 for 1996 compared
to 1995. The increase in interest income on loans was due to a prosperous local
economy and the Bank's business development efforts. The increase in interest
income from securities was the result of the overall growth of the Bank.
Interest Expense. Interest expense increased $157,528 to $710,351 for
1996 from $552,823 for 1995. The increase in interest expense was primarily due
to increased interest-bearing deposits. Interest-bearing deposits were up
$6,086,075 for 1996 to $20,532,036 from $14,445,961 for 1995.
Net Interest Income. Net interest income increased $287,669 to
$1,584,947 for 1996 from $1,297,278 for 1995. During 1996, average loans
outstanding increased $3,803,000, average securities increased $1,239,000, and
net interest margin decreased 0.25% (from 6.94% for 1995 to 6.69% for 1996).
Noninterest Income. Noninterest income increased $289,563 from $251,193
for 1995 to $540,756 for 1996. The increase was primarily due to the gain on the
sale of SBA loans in 1996. No such gain was recognized in 1995.
Noninterest Expense. Noninterest expense increased by $294,525 for 1996
to $1,530,745 from $1,236,220 for 1995. The increase was primarily the result of
an increase in salaries and employee benefits of $165,234 during 1996.
67
<PAGE>
Provision for Loan Losses. Provisions for loan losses increased $41,000
from $49,000 in 1995 to $90,000 in 1996.
Income Taxes. The Company's income tax expense increased $83,100 for
1996 to $171,600 from $88,500 for 1995.
Liquidity and Sources of Funds
The Bank's primary sources of funds are customer core deposits, sales
and maturities of investment securities, loan repayments, sales of the
guaranteed portion of SBA loans, and federal funds purchased or borrowings from
Banker's Bank of the West. These funds are used to make loans, acquire
investment securities and other assets, and to fund the operations of the Bank.
During 1997, deposits increased to $38,189,014 at December 31, 1997 from
$28,744,540 at December 31, 1996 and $21,533,468 at December 31, 1995. None of
the deposits at December 31, 1997, 1996 or 1995 were brokered funds. Management
believes the increases in deposits in 1997, 1996 and 1995 were from (1)
referrals from existing customers, and (2) the overall growth in Broomfield,
Colorado and Boulder, Jefferson and Adams counties, Colorado. At December 31,
1997, net loans were $26,899,261 compared to $19,354,110 at December 31, 1996
and $14,023,401 at December 31, 1995.
Management believes that the Bank will continue to rely primarily on
core customer deposits, sales of investment securities, sales of SBA guaranteed
loans, loan repayments, and retained earnings to provide liquidity, and will use
the funds so provided to make loans and purchase securities. The Bank believes
that customer deposits provide a strong source of liquidity because of the high
percentage of core deposits. As a secondary source of funds, management uses
federal funds purchased and borrowings from Banker's Bank of the West.
Capital Resources
The Company's total shareholders' equity increased to $2,736,475 at
December 31, 1997 from $2,002,952 at December 31, 1996. This is an increase of
$733,523 and is primarily the result of increased retained earnings. At December
31, 1997 shareholders' equity was 6.59% of total assets compared to 6.47% of
total assets at December 31, 1996. No dividends were paid in 1997 or 1996.
The Federal Reserve Board and the FDIC call for a 4% Tier 1 capital to
risk weighted assets ratio, 8% total capital to risk weighted assets ratio, and
a 5% leverage ratio. The Bank currently exceeds the applicable regulatory
capital requirements. The following table sets forth the Bank's capital ratios
at December 31, 1997.
68
<PAGE>
<TABLE>
<CAPTION>
Bank
----
<S> <C> <C>
Tier 1 Capital $ 2,674,000
Tier 2 Capital 3,039,000
Risk Weighted Assets 29,185,000
Tier 1 Capital to Risk Weighted Assets 9.17%
Total Capital to Risk Weighted Assets 10.41%
Leverage Ratio 6.85%
</TABLE>
The Company anticipates no material capital expenditures during calendar year
1998.
Effects of Inflation and Changing Prices
The primary impact of inflation on the Bank's operations is the effect
it has on operating costs. Unlike most industrial companies, almost all of the
Bank's resources are monetary in nature. As a result, increases in interest
rates have more of an impact on the Bank (and therefore the Company) than does
inflation. Although interest rates do not necessarily track with inflation, the
Federal Reserve has generally used an increase in interest rates to dampen
inflation. The effects of inflation can magnify the growth of assets in the
banking industry. This could serve to cause the demands on capital to be greater
than would otherwise be necessary.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
OF ZIONS AND THE COMPANY
General
Upon consummation of the Reorganization, shareholders of the Company, a
Colorado corporation, will become shareholders of Zions, a Utah corporation.
Thus, the Utah Revised Business Corporation Act and Zions' Articles of
Incorporation ("Articles") and Bylaws will govern the rights of the Company
shareholders who become Zions shareholders. In addition, since the Articles and
Bylaws of Zions and the Company are not the same, the Reorganization will result
in certain differences in the rights of the holders of Company Common Stock.
Following is a summary of certain significant differences.
Authorized Capital
Zions' Articles authorize a total of 203,000,000 shares of capital
stock, divided into two classes: 200,000,000 shares of common stock, without par
value ("Zions Common Stock"), and 3,000,000 shares of preferred stock, without
par value. 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 transacting business.
69
<PAGE>
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 of such preferred stock. 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.
The Company's Articles of Incorporation authorize 50,000 shares of
common stock, with no par value ("Company Common Stock"). The Company's Articles
do not authorize the Company to issue preferred stock. Each holder of Company
Common Stock is entitled to one vote for each share held on all matters
submitted to the shareholders for a vote. A majority of votes cast shall decide
each matter submitted to the shareholders at any shareholder meeting except in
cases where, by law, a larger vote is required. A majority of the members of the
Board of Directors of the Company shall constitute a quorum for the transaction
of business.
Anti-Takeover Matters
Utah and Colorado Law. Utah's only anti-takeover statute is the Control
Shares Acquisitions Act, which is discussed below. Colorado law, on the other
hand, does not include any anti-takeover statutes.
Utah law provides that the voting rights to be accorded Control Shares
(as defined below) of a Utah corporation that has (i) one hundred or more
shareholders, (ii) its principal place of business, its principal office, or
substantial assets in Utah, and (iii) either (a) more than 10% of its
shareholders reside in Utah, (b) more than 10% of its shares owned by Utah
residents, or (c) 10,000 shareholders residing in Utah, must be approved by a
majority of each class of voting securities of the corporation, excluding those
shares held by interested persons, before the Control Shares will be granted any
voting rights.
"Control Shares" are defined under Utah law as shares acquired by a
person, either directly or indirectly, that when added to all other shares of
the issuing corporation owned by such a person, would entitle such person to
exercise, either directly or indirectly, voting power of 20% or more of all
voting power of the corporation's voting securities. Such provisions do not
apply to shares acquired under, among other things, an agreement or plan of
merger or share exchange effected in compliance with the relevant provisions of
Utah's Revised Business Corporation Act and to which the corporation is a party
or an acquisition of shares previously approved by the board of directors of the
corporation.
70
<PAGE>
In addition, unless otherwise provided in a corporation's articles of
incorporation or bylaws, in the event Control Shares acquired in a control share
acquisition are accorded full voting rights and the acquiring person has
acquired Control Shares with a majority or more of all voting power, all
shareholders of the issuing public corporation will have dissenters' rights.
Special Votes for Certain Transactions. Zions' Articles 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% 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
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.
The Company's Articles do not contain any provision requiring a special
shareholder vote to approve certain types of transactions.
71
<PAGE>
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% or more
of Zions Common Stock (an "Acquiring Person") or commenced a tender offer that
will result in such person or group owning 10% 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
$90.00.
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% 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% and 50% of the
Zions Common Stock, Zions' Board of Directors may, at its option, exchange one
share of Zions Common Stock for each Right.
The Rights may be redeemed by the Board of Directors for $0.01 per
Right prior to the Flip-in Date.
The Company 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.
72
<PAGE>
The Company's Articles provide that, to the fullest extent permitted by
Colorado law, no director shall be liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director. The Company's
Articles further provide that the Company has the power to indemnify current or
former directors, officers, employees or agents in connection with a proceeding
to the fullest extent permitted by Colorado law. The Company's Bylaws explain
that the Company has the power to indemnify directors against judgements and
accompanying reasonable litigation expenses, except in relation to matters where
a director is adjudged liable to the Company or liable on the basis that he or
she derived an improper personal benefit. The Company's Bylaws further provide
that the Company can indemnify and advance expenses to an officer, employee,
fiduciary or agent of the Company to the same or greater extent as a director.
The Company may also purchase and maintain insurance of behalf of a director,
officer, employee, fiduciary or agent of the Company for any liability asserted
against or incurred by him or her in such capacity, regardless of whether the
Company has the power to indemnify him or her against such liability.
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 three years.
The number of directors which constitute Zions' full Board of Directors
may be increased or decreased only by amendment of the Bylaws, which requires
the affirmative vote of two-thirds of the total number of directors constituting
the entire Board, or by the shareholders of Zions at a regular or special
meeting by the affirmative vote of two-thirds of the outstanding and issued
shares entitled by statute to vote. Except as otherwise required by law,
vacancies on Zions' Board of Directors, including vacancies resulting from an
increase in the size of the Board, may be filled by the affirmative vote of a
majority of the remaining directors even though less than a quorum of the Board
of Directors. Zions' directors elected by the Board to fill vacancies serve for
the full remainder of the term of the class to which they have been elected. Any
directorship filled by reason of an increase in the number of directors may be
filled for a term of office continuing only until the next election of directors
by the shareholders.
The Company's Articles and Bylaws do not provide for a classified Board
of Directors. Instead, the Company's Bylaws provide for a Board of Directors
consisting of not less than one individual, with the number of directors to be
determined by Board resolution. Directors are elected at the shareholders annual
meeting by a majority vote, for a one year term. Any vacancy occurring on the
Company's Board may be filled by the Board of Directors, the shareholders at the
next annual meeting or at a special meeting called for the purpose, or if the
directors remaining in office constitute fewer than a quorum of the Board, such
directors may fill the vacancy by the affirmative vote of a majority of all the
directors remaining in office.
73
<PAGE>
Cumulative Voting. Neither Zions nor the Company's shareholders have
cumulative voting rights in the election of directors. The absence of cumulative
voting means that a nominee for director must receive the votes of a plurality
of the shares voted in order to be elected.
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.
The Company's Bylaws provide that the entire Board of Directors or any
lesser number of directors may be removed from office, with or without cause, at
a meeting called for that purpose by a majority vote of the shares entitled to
vote at an election of directors.
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% of all the
votes entitled to be cast on any issue proposed for consideration at the special
meeting. Under Zions' Bylaws, special meetings may be called by the President or
by the Board of Directors.
The Company's Bylaws permit special meetings of shareholders to be
called by the President, the Board of Directors, or at the request of the
holders of not less than 10% of all shares entitled to vote at the 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 certain
amendments 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.
The Company's Articles do not discuss amendments to the Articles. In
the absence of such a provision, Colorado law requires the affirmative vote of
two-thirds of all outstanding voting stock of the Company in order to amend the
Articles. The Company's Bylaws may be amended by the Board of Directors.
74
<PAGE>
Dissenters' Rights
Zions is incorporated under the laws of Utah. Utah law provides for
dissenters' rights in a variety of transactions including: (i) consummation of
any plan of merger to which a corporation is a party (other than mergers or
consolidations not requiring a shareholder vote); (ii) consummation of certain
sales, leases, exchanges or other dispositions of all or substantially all of
the assets of a corporation; and (iii) consummation of 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 Nasdaq-NMS 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 Nasdaq-NMS 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 Nasdaq-NMS and has more than 2,000 shareholders of record.
See "Plan or Reorganization--Rights of Dissenting Shareholders" for a more
detailed discussion of dissenters' rights under Colorado law.
The Company is incorporated under Colorado law. Colorado law provides
for dissenters' rights to any shareholder of a Colorado corporation in the event
of any of the following corporate actions: (i) consummation of a merger to which
the corporation is a party if approval by the shareholders is required for the
merger or the corporation is a subsidiary that is merged with its parent
corporation; (ii) consummation of a plan of exchange where the corporation is a
party as the corporation whose subject owner's interests will be acquired; (iii)
consummation of a disposition of all or substantially all of the property of the
corporation for which a shareholder vote is required; (iv) consummation of a
disposition of all or substantially all of the property of an entity controlled
by the corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to such disposition; or (v) in the event of
any corporate action to the extent provided by the bylaws or a board resolution.
Colorado law regarding dissenters' rights contains the same provisions as Utah
law described in the third and fourth sentences of the previous paragraph.
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 Company Common Stock do not have the preemptive right to
acquire any unissued shares of Company Common Stock or any other securities
convertible into shares of Company Common Stock, or securities carrying stock
purchase warrants or privileges.
75
<PAGE>
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 have been paid.
Colorado law generally allows a corporation to make distributions to
its shareholders in cash, property or its own shares. 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
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 shareholders whose preferential rights are superior to those
receiving the distribution. The Company's Articles do not contain any other
specific allowance. Thus, holders of Company Common Stock are entitled to
distributions when, as and if declared by the Board of Directors out of funds
legally available therefor.
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 the Company, whether
voluntary or involuntary, the holders of Company 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.
Miscellaneous
There are no sinking fund provisions, conversion rights, or redemption
provisions applicable to Zions Common Stock or Company Common Stock. Holders of
fully paid shares of Zions Common Stock and Company Common Stock are not subject
to any liability for further calls or assessments.
76
<PAGE>
LEGAL OPINIONS
An opinion 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 Slivka Robinson Waters & O'Dorisio, P.C.,
Denver, Colorado, as counsel for the Company.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December 31,
1997, have been incorporated by reference in this Registration Statement and
Proxy Statement/Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference in this
Registration Statement and Proxy Statement/Prospectus, and upon the authority of
such firm as experts in auditing and accounting.
The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, have been included in this Proxy Statement/Prospectus and in the
Registration Statement in reliance upon the report of Van Dorn & Bossi,
independent certified public accountants, appearing elsewhere in this Proxy
Statement/Prospectus, and upon the authority of such firm as experts in auditing
and accounting.
The balance sheets at December 31, 1997 and 1996 and the related
statements of income, changes in shareholders' equity and cash flows for the
years ended December 31, 1997, 1996 and 1995 for Sumitomo Bank of California
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report (dated January 16, 1998), and have been incorporated
by reference in this Proxy Statement/Prospectus in reliance upon the report of
said firm, and upon the authority of such firm as experts in accounting and
auditing.
OTHER MATTERS
The Company does not expect its principal accountants to attend the
Special Meeting.
77
<PAGE>
The management of the Company 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 proxyholder named on such Proxies.
By Order of the Board of Directors,
________________________________________
David T. Manley, Jr.
President and Chief Executive Officer
Eagle Holding Company
July ____, 1998
78
<PAGE>
EAGLE HOLDING COMPANY
REPORT ON AUDITS OF
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
Eagle Bank
Broomfield, Colorado
We have audited the accompanying consolidated statements of condition of Eagle
Holding Company and subsidiary as of December 31, 1997 and 1996, and the related
statements of income, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Bank'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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle Holding
Company and subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Van Dorn & Bossi
Certified Public Accountants
February 22, 1998
<PAGE>
EAGLE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31,
----------------------------
ASSETS 1997 1996
------ ----------- ----------
Cash and due from banks $ 2,108,350 $ 1,671,440
Interest bearing deposits 100,000
Federal funds sold 3,145,000 1,290,000
Investment securities available
for sale (Note B) 7,413,020 6,609,366
Loans (Note C):
Commercial 21,579,122 13,483,705
Consumer 5,290,247 5,708,628
Other 408,103 360,609
----------- -----------
27,277,472 19,552,942
Less allowance for loan losses 378,211 198,832
----------- -----------
Net loans 26,899,261 19,354,110
Premises and equipment, net (Note D) 1,586,223 1,582,125
Accrued interest receivable 258,987 247,896
Other assets 99,466 118,613
----------- -----------
$41,510,307 $30,973,550
=========== ===========
See notes to consolidated financial statements.
<PAGE>
DECEMBER 31,
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
------------------------------------ ---------- -----------
Deposits:
Demand:
Regular $10,049,891 $ 8,212,504
N.O.W 5,442,709 4,894,948
Other interest bearing 13,188,499 7,528,268
Savings 2,792,460 2,564,247
Certificates of deposit:
$100,000 and over 2,165,689 1,940,786
Under $100,000 4,549,766 3,603,787
----------- -----------
38,189,014 28,744,540
Accrued interest payable 50,462 35,236
Income taxes payable (Note E):
Currently payable 288,222 83,122
Deferred 43,513 35,300
Other liabilities 202,621 72,400
----------- -----------
Total liabilities 38,773,832 28,970,598
Commitments and contingencies (Note F)
Shareholders' equity (Note A):
Common stock, no par value, 50,000 shares
authorized; 32,312 and 31,684 issued and
outstanding 774,571 745,813
Undivided profits 1,932,932 1,244,109
Net unrealized appreciation on securities
available for sale, net of tax of
$14,925 and $6,712 28,972 13,030
----------- -----------
Total shareholders' equity 2,736,475 2,002,952
----------- -----------
$41,510,307 $30,973,550
=========== ===========
0 0
<PAGE>
EAGLE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996
---------- ----------
Interest income:
Interest and fees on loans $2,798,075 $1,895,272
Investment securities:
U.S. Treasury securities 307,718 224,072
U.S. Government agencies 61,593 52,529
Other investments 14,875 22,774
Federal funds sold 25,330 100,651
---------- ----------
Total interest income 3,207,591 2,295,298
Interest expense:
Deposits:
Demand 517,188 363,218
Savings 85,666 67,314
Certificates of deposit 334,285 279,819
Federal funds purchased and other 43,359
---------- ----------
Total interest expense 980,498 710,351
---------- ----------
Net interest income before
provision for loan losses 2,227,093 1,584,947
Provision for loan losses 220,450 90,000
---------- ----------
Net interest income after
provision for loan losses $2,006,643 $1,494,947
(Continued on following page)
<PAGE>
EAGLE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
-------------------------
(Continued from preceding page) 1997 1996
--------- ----------
Noninterest income:
Service charges, commissions and fees $ 275,543 $ 244,467
Gain on sale of SBA loans 805,631 221,465
Other 89,852 74,824
---------- ----------
Total noninterest income 1,171,026 540,756
Noninterest expense:
Salaries and employee benefits 1,180,163 755,941
Occupancy expense 267,562 212,346
Advertising and public relations 110,587 79,938
Data processing 89,426 83,652
Legal and professional 52,326 29,923
Printing and supplies 50,834 51,774
Postage 42,475 33,373
Telephone 19,436 15,273
Regulatory assessments 10,163 6,446
Other 278,134 262,079
---------- ----------
Total noninterest expense 2,101,106 1,530,745
---------- ----------
Income before income taxes 1,076,563 504,958
Provision for income taxes (Note E):
Currently payable 387,740 100,302
Deferred 71,298
---------- ----------
Provision for income taxes 387,740 171,600
---------- ----------
Net income $ 688,823 $ 333,358
========== ==========
See notes to consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
Unrealized
Appreciation
on Securities
Common Undivided Available for
Stock profits Sale
-------- --------- -------------
Balance -- January 1, 1996 $ 745,813 $ 910,751 $ 3,745
Net income 333,358
Net change in unrealized
appreciation on securities
available for sale 9,285
---------- ---------- ----------
Balance -- December 31, 1996 745,813 1,244,109 13,030
Net income 688,823
Issuance of 628 shares of
common stock 28,758
Net change in unrealized
appreciation on securities
available for sale 15,942
---------- ---------- ----------
Balance -- December 31, 1997 $ 774,571 $1,932,932 $ 28,972
========== ========== ==========
See notes to consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
----------- ----------
Cash flows from operating activities:
Net income $ 688,823 $ 333,358
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax provision 71,298
Depreciation expense 124,914 98,405
Provision for loan losses 220,450 90,000
(Increase) in accrued interest receivable (11,091) (76,587)
Increase in accrued interest payable
and other liabilities 145,447 47,499
Increase in income taxes payable 213,313 83,122
Decrease (increase) in other assets 19,147 (22,819)
----------- -----------
Net cash provided by operating activities 1,401,003 624,276
----------- -----------
Cash flows from investing activities:
Proceeds from maturities of securities:
Available for sale 1,570,500 3,353,411
Purchases of securities:
Available for sale (2,374,154) (5,214,068)
Change in unrealized appreciation of
securities available for sale, net of tax 15,942 9,285
Decrease in deferred income taxes 4,783
Increase in loans, net (7,765,601) (5,420,709)
Purchase of premises and equipment (129,012) (97,347)
----------- -----------
Net cash (used in) investing activities (8,682,325) (7,364,645)
----------- -----------
Cash flows from financing activities:
Net increase in deposits 9,444,474 7,211,072
Proceeds from sale of common stock 28,758
----------- -----------
Net cash provided by financing activities 9,473,232 7,211,072
----------- -----------
Net increase in cash and cash equivalents 2,191,910 470,703
Cash and cash equivalents - January 1 3,061,440 2,590,737
----------- -----------
Cash and cash equivalents - December 31 $ 5,253,350 $ 3,061,440
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 965,272 $ 693,517
Cash paid for income taxes 182,640 16,754
See notes to consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------------------------------
Eagle Holding Company (EHC) was incorporated in November 1996 for the
purpose of becoming a bank holding company intending to own all of the
outstanding shares of the common stock of Eagle Bank (the Bank) via the
completion of an Exchange Agreement between EHC and the shareholders of
the Bank. EHC filed a Registration Statement with the Federal Reserve
Bank of Kansas City and received approval to complete the exchange in
January 1997. Accordingly, the exchange of shares was consummated in
January 1997.
The accompanying consolidated financial statements have been prepared
as if a pooling of interests has occurred in accordance with generally
accepted accounting principles. Amounts presented in the financial
statements for 1996 represent the Bank's financial statements as of
December 31, 1996 and for the year then ended.
Eagle Bank (the Bank) was incorporated in 1985 in Colorado as a national
association to engage in general commercial banking. In June 1992, the Bank
converted from a national bank to a state bank chartered under the laws of
the State of Colorado. In accordance with applicable laws, the deficit in
undivided profits of $1,015,874 as of June 1992 was permanently capitalized
into surplus.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Material estimates that are particularly
susceptible to significant change in the near term include the
determination of the allowance for loan losses.
EHC and the Bank have adopted the following significant generally
accepted accounting principles and policies.
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally
federal funds are sold for one-day periods.
The Bank adopted Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (FAS 115).
Management determines the appropriate classification of investment
securities at the time of purchase. In accordance with FAS 115,
investment securities are classified based upon management's
determination and are accounted for as follows:
Securities available for sale consist of securities not classified as
held to maturity. Available for sale securities are stated at fair
value, with the unrealized gains and losses, net of tax, reported as a
component of shareholders' equity until realized.
<PAGE>
Declines in the fair value of individual held to maturity and available
for sale securities below their cost that are other than temporary are
written down to their fair value with such write downs included in
income as realized losses. No such write downs occurred in 1997 or
1996.
Gains and losses on the sale of securities available for sale are
determined using the specific identification method.
Interest on loans is accrued based on principal amounts outstanding. Loans
are reviewed regularly by management and placed on nonaccrual when the
collection of principal or interest is considered unlikely or when the loan
is ninety days or more past due and the loan is not fully collateralized
and in the process of collection. When a loan is placed on nonaccrual,
interest accrued in the current year is charged against income and interest
accrued in any prior year is charged against the allowance for loan losses
unless there is a clear and documented abundance of collateral and the
collection of the interest is assured within a reasonable period of time.
Thereafter, interest income is not recognized until received in cash or
until such time as the borrower demonstrates the ability to pay principal
and interest. Placement of a loan on nonaccrual does not necessarily
indicate a probable loss of principal or previously accrued but unpaid
interest.
The allowance for loan losses is established through charges to income in
the form of provisions for loan losses. Losses or recoveries are charged or
credited directly to the allowance. In general, the amount charged to
income is based on management's periodic evaluation of the loan portfolio
which considers factors such as historical loss experience, specific
problem loans, an evaluation of collateral and current economic, geographic
and industry conditions.
Bank premises and equipment are carried at cost, less accumulated
depreciation. Depreciation is charged to income over the estimated useful
lives using the straight-line method of accounting.
The Bank adopted Bank FAS 109--Accounting for Income Taxes--in 1993
which required the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. At December 31, 1997 and 1996, net deferred tax charges
principally relate to differences between financial and tax return bases of
the allowance for loan losses and property and equipment and the use of the
cash method of reporting results of operations for income tax reporting
purposes. The cumulative effect of the adoption of FAS 109 in January 1993
was the recording of the future tax benefits of federal income tax net
operating loss carryforwards expected to be realized during the applicable
carryforward periods. Accordingly, the provision for income taxes in 1996
represents a reduction of such deferred income tax charges; all
carryforwards had been utilized as of December 31, 1996.
<PAGE>
In the normal course of business, the Bank enters into off-balance sheet
financial instruments including commitments to extend credit under credit
card arrangements, commercial letters of credit and standby letters of
credit. Such financial instruments are recorded in the financial statements
when they are funded or related fees are incurred or received.
B. INVESTMENT SECURITIES:
---------------------
The amortized cost and approximate fair values of investment securities
as of December 31, 1997 and 1996 follow (rounded):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
December 31, 1997:
Available for sale:
U.S. Treasury
securities $5,568,300 $ 32,700 $ 2,200 $5,598,800
U.S. Government
agencies 1,604,100 8,600 400 1,612,300
Other 196,700 5,200 201,900
---------- ---------- ---------- ----------
$7,369,100 $ 46,500 $ 2,600 $7,413,000
========== ========== ========== ==========
December 31, 1996:
Available for sale:
U.S. Treasury
securities $5,368,400 $ 18,500 $ 11,300 $5,375,600
U.S. Government
agencies 1,059,100 11,800 500 1,070,400
Other 162,100 1,200 163,300
---------- ---------- ---------- ----------
$6,589,600 $ 31,500 $ 11,700 $6,609,400
========== ========== ========== ==========
Securities having a carrying amount of approximately $700,300 and $751,300
at December 31, 1997 and 1996, respectively, were pledged to secure public
deposits and for other purposes required or permitted by law.
The scheduled maturities of securities available for sale at December 31,
1997 are shown below. Maturities may differ from contractual maturities as
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties (rounded).
<PAGE>
Amortized Fair
Cost Value
---------- ----------
Securities available for sale:
Due in one year or less $1,600,000 $1,600,900
Due after one year through five years 5,388,200 5,422,500
Due after five years through ten years 199,900 204,000
Due after ten years 181,000 185,600
---------- ----------
$7,369,100 $7,413,000
========== ==========
C. LOANS AND ALLOWANCE FOR LOAN LOSSES:
-----------------------------------
The Bank has made loans to certain directors and shareholders, including
their affiliated companies. These loans approximated $423,100 and $538,200
at December 31, 1997 and 1996, respectively. In addition, unused
commitments to extend credit approximated $1,046,000 at December 31, 1997.
An analysis of the allowance for loan losses for the years ended December
31, 1997 and 1996 follows:
1997 1996
-------- --------
Balance, January 1 $198,832 $155,846
Charge-offs (59,226) (53,824)
Recoveries 18,155 6,810
Provision for loan losses 220,450 90,000
-------- --------
Balance, December 31 $378,211 $198,832
======== ========
D. PREMISES AND EQUIPMENT:
----------------------
Bank premises and equipment consist of the following:
DECEMBER 31,
-----------------------------
1997 1996
---------- ----------
Land and related improvements $176,000 $218,206
Bank building 1,125,743 1,116,262
Furniture, fixtures and equipment 609,353 522,399
---------- ----------
1,911,096 1,856,867
Less accumulated depreciation (324,873) (274,742)
---------- ----------
$1,586,223 $1,582,125
========== ==========
<PAGE>
E. INCOME TAXES:
------------
The components of deferred income taxes included in the accompanying
statements of income principally relate to differences between financial
and income tax reporting for depreciation expense, the provision for loan
losses and the utilization of the cash method of reporting financial
statement results of operations.
Deferred income tax payable at December 31, 1997 and 1996 primarily
consists of the following:
1997 1996
------- -------
Statements of condition:
Deferred tax liabilities:
Cash to accrual $98,995 $68,113
Depreciation expense 53,650 23,330
Unrealized appreciation of securities
available for sale 14,925 6,712
------- -------
167,570 98,155
------- -------
Deferred tax assets:
Allowance for loan losses 124,057 62,855
------- -------
Deferred tax liability, net $43,513 $35,300
======= =======
F. OTHER MATTERS:
-------------
The President of the Bank has options to purchase 625 shares of common
stock at $54.53 and 625 shares at $ 63.22 per share, which represent book
value per share when the options were granted. The options may be exercised
at various times through 1999.
The Bank is subject to dividend restrictions set forth by the Colorado
Division of Banking (Division of Banking). The Bank may not, without
the prior approval of the Division of Banking, declare dividends in
excess of the sum of the current year's earnings and the retained net
profits, as defined, from the preceding two years. The dividends that
the Bank could declare at December 31, 1997 without approval
approximated $1,348,000.
A bank is required to maintain minimum amounts of capital to total "risk
weighted" assets and to also maintain a minimum leverage ratio, as defined.
A bank is considered adequately capitalized if its Tier 1 risk-based
capital ratio is 4%, its total risk-based capital ratio is 8% and its
leverage ratio is 3%. At December 31, 1997, Eagle Bank maintained a Tier 1
risk-based capital ratio of 9.17%, a total risk-based capital ratio of
10.41% and a leverage ratio of 6.85%, respectively.
<PAGE>
In the normal course of business, the Bank enters into commitments to
extend credit under lines of credit, standby letters of credit and
revolving credit arrangements, including credit cards. These credit
instruments involve varying degrees of credit and interest rate risk not
reflected in the accompanying financial statements. These instruments
generally have fixed expiration dates and do not necessarily represent
future cash requirements since they often expire unused. The Bank's
criteria for entering into such instruments are generally the same as those
for loans made in the normal course of business, including obtaining
collateral acceptable to the Bank. In addition, the Bank uses the same
evaluation methodology in determining if any credit losses may be incurred
as a result of utilization by the borrower. As a matter of practice, the
Bank normally includes as a condition for advance that the Bank, at any
time, in its absolute discretion, may terminate the right of the borrower
to borrow additional amounts pursuant to the terms of the note.
At December 31, 1997 and 1996, such unused commitments to extend credit
approximated $8,577,600 and $6,183,000, respectively; the Bank anticipates
no losses resulting from these commitments.
<PAGE>
EAGLE BANK
REPORT ON AUDIT OF
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
Eagle Bank
Broomfield, Colorado
We have audited the accompanying statements of condition of Eagle Bank as of
December 31, 1995, and the related statements of income, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eagle Bank as of December 31,
1995, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Certified Public Accountants
February 24, 1996
<PAGE>
EAGLE BANK
STATEMENT OF CONDITION
DECEMBER 31, 1995
ASSETS
------
Cash and due from banks $1,510,737
Federal funds sold 1,080,000
Investment securities available
for sale (Note B) 4,748,709
Loans (Note C):
Commercial 9,349,116
Consumer 4,554,590
Other 275,541
-----------
14,179,247
Less allowance for loan losses 155,846
-----------
Net loans 14,023,401
Premises and equipment, net (Note D) 1,583,183
Accrued interest receivable 171,309
Deferred income taxes (Note E) 40,781
Other assets 95,794
-----------
$23,253,914
===========
See notes to financial statements.
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
Demand:
Regular $7,087,507
N.O.W. 3,518,807
Other interest bearing 5,418,051
Savings 2,132,864
Certificates of deposit:
$100,000 or over 1,039,443
Under $100,000 2,336,796
-----------
21,533,468
Accrued interest payable 18,402
Income taxes payable (Note E):
Currently payable
Deferred
Other liabilities 41,735
-----------
Total liabilities 21,593,605
Commitments and contingencies (Note G)
Shareholders' equity (Note A):
Common stock, par value $5 per share;
100,000 shares authorized; 60,900
shares issued and outstanding 304,500
Surplus 441,313
Undivided profits 910,751
Net unrealized appreciation on securities
available for sale, net of tax of $1,929 3,745
-----------
Total shareholders' equity 1,660,309
-----------
$23,253,914
===========
0
<PAGE>
EAGLE BANK
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
Interest income:
Interest and fees on loans $1,520,818
Investment securities:
U.S. Treasury securities 160,014
U.S. Government agencies 82,300
Other investments 75,597
Federal funds sold 11,372
----------
Total interest income 1,850,101
Interest expense:
Deposits:
Demand 287,227
Savings 60,038
Certificates of deposit 158,108
Federal funds purchased and other 47,450
----------
Total interest expense 552,823
----------
Net interest income before
provision for loan losses 1,297,278
Provision for loan losses 49,000
----------
Net interest income after
provision for loan losses $1,248,278
(Continued on following page)
<PAGE>
EAGLE BANK
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(Continued from preceding page)
Noninterest income:
Service charges, commissions and fees $197,105
Gain on sale of SBA loans
Other 54,088
---------
Total noninterest income 251,193
Noninterest expense:
Salaries and employee benefits 590,707
Occupancy expense 170,745
Data processing 77,977
Advertising and public relations 73,603
Printing and supplies 41,160
Postage 35,166
Legal and professional 20,744
Telephone 12,260
Regulatory assessments 25,731
Other 188,127
---------
Total noninterest expense 1,236,220
---------
Income before income taxes 263,251
Provision for income taxes (Note E):
Deferred 88,500
---------
Net income $174,751
=========
See notes to financial statements.
<PAGE>
EAGLE BANK
STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Unrealized
Appreciation
on Securities
Common Undivided Available for
Stock Surplus profits Sale
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Balance -- January 1,
1995 $304,500 $441,313 $736,000 ($89,965)
Net income 174,751
Net change in
unrealized
appreciation
(depreciation) on
securities
available for sale 93,710
-------- -------- -------- --------
Balance -- December 31,
1995 $304,500 $441,313 $910,751 $3,745
======== ======== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
EAGLE BANK
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities:
Net income $174,751
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax provision 88,500
Depreciation and amortization 75,825
Provision for loan losses 49,000
(Increase) in accrued interest receivable (21,226)
(Decrease) in accrued interest payable and
other liabilities (19,337)
(Increase) in other assets (48,709)
----------
Net cash provided from operating activities 298,804
----------
Cash flows from investing activities:
Proceeds from maturities of securities:
Held to maturity 54,723
Available for sale 2,189,656
Purchases of securities:
Available for sale (691,985)
Change in unrealized appreciation of
securities available for sale, net of tax 93,710
Decrease in deferred income taxes 48,275
Increase in loans, net (2,939,657)
Purchase of premises and equipment (786,237)
Sales of premises and equipment 2,584
----------
Net cash (used in) investing activities (2,028,931)
----------
Cash flows from financing activities:
Net increase in deposits 2,351,103
----------
Net increase in cash and cash equivalents 620,976
Cash and cash equivalents - January 1 1,969,761
----------
Cash and cash equivalents - December 31 $2,590,737
==========
Supplemental cash flow information:
Cash paid for interest $546,574
See notes to financial statements.
<PAGE>
EAGLE BANK
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------------------------------
Eagle Bank (the Bank) was incorporated in 1985 in Colorado as a national
association to engage in general commercial banking. In June 1992, the Bank
converted from a national bank to a state bank chartered under the laws of
the State of Colorado. In accordance with applicable laws, the deficit in
undivided profits of $1,015,874 as of June 1992 was permanently capitalized
into surplus.
The financial statements have been prepared in accordance with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. Material
estimates that are particularly susceptible to significant change in the
near term include the determination of the allowance for loan losses.
The Bank has adopted the following significant accounting policies:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally
federal funds are sold for one-day periods.
The Bank adopted Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (FAS 115).
Management determines the appropriate classification of investment
securities at the time of purchase. In accordance with FAS 115,
investment securities are classified based upon management's
determination and are accounted for as follows:
Securities available for sale consist of securities not classified as held
to maturity. Available for sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a component of
shareholders' equity until realized.
Declines in the fair value of individual held to maturity and available for
sale securities below their cost that are other than temporary are written
down to their fair value with such write downs included in income as
realized losses. No such write downs occurred in 1995.
Gains and losses on the sale of securities available for sale are
determined using the specific identification method.
<PAGE>
Interest on loans is accrued based on principal amounts outstanding. Loans
are reviewed regularly by management and placed on nonaccrual when the
collection of principal or interest is considered unlikely or when the loan
is ninety days or more past due and the loan is not fully collateralized
and in the process of collection. When a loan is placed on nonaccrual,
interest accrued in the current year is charged against income and interest
accrued in any prior year is charged against the allowance for loan losses
unless there is a clear and documented abundance of collateral and the
collection of the interest is assured within a reasonable period of time.
Thereafter, interest income is not recognized until received in cash or
until such time as the borrower demonstrates the ability to pay principal
and interest. Placement of a loan on nonaccrual does not necessarily
indicate a probable loss of principal or previously accrued but unpaid
interest.
The allowance for loan losses is established through charges to income in
the form of provisions for loan losses. Losses or recoveries are charged or
credited directly to the allowance. In general, the amount charged to
income is based on management's periodic evaluation of the loan portfolio
which considers factors such as historical loss experience, specific
problem loans, an evaluation of collateral and current economic, geographic
and industry conditions.
Bank premises and equipment are carried at cost, less accumulated
depreciation and amortization. Depreciation and amortization are charged to
income over the estimated useful lives or lease periods, if shorter, using
the straight-line method of accounting.
The Bank adopted Bank FAS 109 -- Accounting for Income Taxes -- in 1993
which required the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. At December 31, 1995, net deferred tax charges principally relate
to differences between financial and tax return bases of the allowance for
loan losses and property and equipment and the use of the cash method of
reporting results of operations for income tax reporting purposes. The
cumulative effect of the adoption of FAS 109 in January 1993 was the
recording of the future tax benefits of federal income tax net operating
loss carryforwards expected to be realized during the applicable
carryforward periods. Accordingly, the provision for income taxes in 1995
represents a reduction of such deferred income tax charges. All such
carryforwards have been utilized as of December 31, 1995.
In the normal course of business, the Bank enters into off-balance sheet
financial instruments including commitments to extend credit under credit
card arrangements, commercial letters of credit and standby letters of
credit. Such financial instruments are recorded in the financial statements
when they are funded or related fees are incurred or received.
<PAGE>
B. INVESTMENT SECURITIES:
---------------------
The amortized cost and approximate fair values of investment securities as
of December 31, 1995 follow (rounded):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
Available for sale:
U.S. Treasury
securities $2,458,000 $ 11,900 $ 1,500 $2,468,400
U.S. Government
agencies 1,071,700 10,800 6,100 1,076,400
Other 1,213,300 4,900 14,200 1,204,000
---------- ---------- ---------- ----------
$4,743,000 $ 27,500 $ 21,800 $4,748,700
========== ========== ========== ==========
Securities having a carrying amount of approximately $2,717,400 at December
31, 1995 were pledged to secure public deposits and for other purposes
required or permitted by law.
The scheduled maturities of securities available for sale at December 31,
1995 are shown below. Maturities may differ from contractual maturities as
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties (rounded).
Amortized Fair
Cost Value
---------- ----------
Securities available for sale:
Due in one year or less $1,701,100 $1,711,500
Due after one year through five years 2,190,900 2,179,500
Due after five years through ten years 191,900 194,200
Due after ten years 659,100 663,500
---------- ----------
$4,743,000 $4,748,700
========== ==========
C. LOANS AND ALLOWANCE FOR LOAN LOSSES:
-----------------------------------
The Bank has made loans to certain directors and shareholders, including
their affiliated companies. These loans approximated $258,000 at December
31, 1995.
An analysis of the allowance for loan losses for 1995 follows:
Balance, January 1 $130,040
Charge-offs (32,464)
Recoveries 9,270
Provision for loan losses 49,000
--------
Balance, December 31 $155,846
========
<PAGE>
D. PREMISES AND EQUIPMENT:
----------------------
Bank premises and equipment consist of the following:
Land and related improvements $218,206
Bank building 1,114,037
Leasehold improvements 70,622
Furniture, fixtures and equipment 442,677
----------
1,845,542
Less accumulated depreciation (262,359)
----------
$1,583,183
==========
E. INCOME TAXES:
------------
The components of deferred income taxes included in the accompanying
statement of income and statement of condition are as follows:
Statement of income:
Cash to accrual conversion $14,500
Utilization of tax net operating loss $90,700
carryforwards ($16,700)
Provision for loan losses --------
$88,500
========
Statement of condition:
Deferred tax assets:
Net operating loss carryforwards $62,300
Allowance for loan losses 30,700
All other 1,210
Provision for loan losses --------
94,210
Provision for loan losses --------
Deferred tax liabilities:
Cash to accrual (51,500)
Unrealized appreciation of securities
available for sale (1,929)
Provision for loan losses --------
(53,429)
Provision for loan losses --------
Deferred tax asset, net $40,781
========
<PAGE>
F. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS:
------------------------------------------------
FAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value of all financial instruments for which it
is practicable to estimate that value. Fair value is defined in FAS No. 107
as the amount at which an instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. In defining fair value, FAS No. 107 indicates that quoted market
prices are the preferred means of estimating the value of a specific
instrument. However, when quoted market prices are not available, fair
values should be determined using various valuation techniques such as
discounted cash flow calculations.
Due to the nature of its business and the financing needs of its customers,
the Bank is involved with a large number of financial instruments, many of
which an active market does not exist. Accordingly, the Bank has used
various valuation techniques to estimate the fair value of its financial
instruments. These techniques are significantly affected by the assumptions
used, including the discount rate and the estimated timing and amount of
cash flows, to value similar instruments. As a result, the fair value
estimates cannot be substantiated by comparisons to independent markets
and, in many cases, could not be realized by the immediate sale or
settlement of the instrument. Furthermore, the estimates reflect a point in
time valuation that could change significantly based on changes in outside
economic factors such as the general level of interest rates. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts the Bank could realize in a current market exchange. Because FAS
No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements, any aggregation of the fair
value amounts presented would not represent the underlying market value of
the Bank.
In cases where quoted market prices were not available, fair values were
estimated using discounted cash flow. For financial instruments with a
remaining average life to maturity of one year or less, carrying amounts
were used as an approximation of fair values. The use of discount rates and
cash flow estimates could have a significant effect on fair value amounts.
In accordance with the provisions of FAS No. 107, the estimated fair values
of credit card loans, residential real estate mortgage loans and deposits
do not take into account the fair values of long-term relationships, which
are integral parts of the related financial instruments. The disclosed
estimated fair values of such instruments would increase significantly if
the fair values of the long-term relationships were considered.
The following assumptions were used in estimating the fair value of
specific financial instruments.
Cash and due from banks, including federal funds sold--fair value equals
or approximates carrying amount as these items have no interest rate or
credit risk.
<PAGE>
Investment securities -- fair value is based primarily on available market
quotes. If market quotes were not available, fair values were based on
market quotes of similar instruments.
Loans -- the loan portfolio consists of both variable and fixed rate loans.
The carrying amounts of variable rate loans, a majority of which reprice
within the next twelve months and for which there has been no significant
change in credit risk, were assumed to approximate fair values. The fair
values for fixed rate loans were estimated using discounted cash flows,
where possible. The discount rates applied were based on the current
interest rates for loans with similar terms to borrowers of similar credit
quality.
Deposit liabilities -- the fair value of demand deposits, savings accounts
and certain money market deposits is defined by FAS No. 107 to be equal to
the amount payable on demand at the date of the financial statements. Fair
value of fixed rate deposits were estimated based on discounted cash flows.
Loan commitments and Letters of Credit -- in that the majority of the
Bank's commitments have variable rates, it was estimated that such
instruments do not expose the Bank to interest rate risk. In addition, the
Bank normally includes as a condition for advance that the Bank, at any
time, in its absolute discretion, may terminate the right of the borrower
to borrow additional amounts pursuant to the terms of the note.
The estimated fair values of the financial instruments at December 31, 1995
are as follows (rounded):
Carrying
Amount Fair Value
---------- -----------
Financial assets:
Cash and due from banks $1,510,700 $1,510,700
Federal funds sold 1,080,000 1,080,000
Securities available for sale 4,748,700 4,748,700
Loans, net of allowance 14,023,400 13,953,900
Financial liabilities:
Deposits:
Non-interest bearing 7,087,500 7,087,500
Interest bearing:
N.O.W. and other interest bearing 8,936,900 8,936,900
Savings 2,132,900 2,132,900
Time deposits 3,376,200 3,381,400
G. OTHER MATTERS:
-------------
Through March 1995, the Bank had entered into operating leases for its
facilities and adjacent real estate with a partnership owned by certain of
the Bank's Board of Directors. Lease expense for 1995 aggregated $7,910.
<PAGE>
The Bank, as landlord, has entered into operating leases for excess space
with lessees. The leases range from 2-5 years and call for maximum
aggregate monthly rentals of $1,092. During 1995, the Bank earned $9,828
from these leases. Future rentals will approximate $13,104 in 1996 to $750
in 2000.
The President of the Bank has options to purchase 2,400 shares of common
stock at $27.20 and $24.33 per share, which represent book value per share
at the date the options were granted. The options may be exercised at
various times through 1998. The President has been granted additional
options for 1,200 shares based upon book value per share at December 31,
1996; these options are conditioned upon employment and would be
exercisable through 1999.
The Bank is subject to dividend restrictions set forth by the Colorado
Division of Banking (Division of Banking). The Bank may not, without the
prior approval of the Division of Banking, declare dividends in excess of
the sum of the current year's earnings and the retained net profits, as
defined, from the preceding two years. The dividends that the Bank could
declare at December 31, 1995 without approval approximated $921,000.
A bank is required to maintain minimum amounts of capital to total "risk
weighted" assets and to also maintain a minimum leverage ratio, as defined.
A bank is considered adequately capitalized if its Tier 1 risk-based
capital ratio is 4%, its total risk-based capital ratio is 8% and its
leverage ratio is 4%. At December 31, 1995, Eagle Bank maintained a Tier 1
risk-based capital ratio of 9.86%, a total risk-based capital ratio of
10.78% and a leverage ratio of 7.09%, respectively.
In the normal course of business, the Bank enters into commitments to
extend credit under lines of credit, standby letters of credit and
revolving credit arrangements, including credit cards. These credit
instruments involve varying degrees of credit and interest rate risk not
reflected in the accompanying financial statements. These instruments
generally have fixed expiration dates and do not necessarily represent
future cash requirements since they often expire unused. The Bank's
criteria for entering into such instruments are generally the same as those
for loans made in the normal course of business, including obtaining
collateral acceptable to the Bank. In addition, the Bank uses the same
evaluation methodology in determining if any credit losses may be incurred
as a result of utilization by the borrower. As a matter of practice, the
Bank normally includes as a condition for advance that the Bank, at any
time, in its absolute discretion, may terminate the right of the borrower
to borrow additional amounts pursuant to the terms of the note.
At December 31, 1995, such unused commitments to extend credit approximated
$4,493,000; the Bank anticipates no losses resulting from these
commitments.
<PAGE>
EAGLE HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
MARCH 31,
-------------------------------
ASSETS 1998 1997
------ ----------- -----------
Cash and due from banks $1,963,497 $2,179,381
Interest bearing deposits 100,000
Federal funds sold 2,445,000
Investment securities available for sale 8,172,252 6,056,953
Loans, net of allowances of $371,294 and
$224,369 for loan losses 27,549,444 22,431,258
Accrued interest receivable 259,107 227,980
Premises and equipment, net 306,851 1,576,109
Other assets 90,001 129,281
----------- -----------
$40,786,152 $32,700,962
=========== ===========
MARCH 31,
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
------------------------------------ ----------- -----------
Deposits:
Demand $8,856,794 $8,866,722
N.O.W., Money Market and Savings 21,335,823 14,753,291
Time deposits 7,237,352 5,334,589
----------- -----------
37,429,969 28,954,602
Federal funds purchased 1,445,000
Accrued interest payable 52,089 35,088
Other liabilities 385,415 204,663
----------- -----------
Total liabilities 37,867,473 30,639,353
SHAREHOLDERS' EQUITY:
Common stock, no par value; 50,000
shares authorized; 32,312 and 31,684
shares issued and outstanding 774,571 745,813
Retained earnings 2,117,747 1,354,489
Net unrealized appreciation (depreciation)
on securities available for sale, net 26,361 (38,693)
----------- -----------
Total shareholders' equity 2,918,679 2,061,609
----------- -----------
$40,786,152 $32,700,962
=========== ===========
0 0
See notes to condensed consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
-------- --------
Interest income:
Loans $748,346 $581,786
Investment securities 117,467 92,566
Federaltfunds soldmand other 43,215 1,115
-------- --------
Total interest income 909,028 675,467
Interest expense:
Deposits:
N.O.W., Money Market and Savings 209,326 118,258
Total Certificates of deposit 92,295 70,106
Federal funds purchased and other 16,140
-------- --------
Total interest expense 301,621 204,504
Net interest income before
provision for loan losses 607,407 470,963
Provision for loan losses 60,000 42,625
-------- --------
Net interest income after
provision for loan losses 547,407 428,338
Noninterest income 274,316 173,431
Noninterest expenses:
Salaries and employee benefits 260,047 202,436
Data processing 22,242 20,807
Occupancy expense 93,840 60,741
Other 149,779 145,605
-------- --------
Total noninterest expense 525,908 429,589
-------- --------
Income before income taxes 295,815 172,180
Provision for income taxes 111,000 61,800
-------- --------
Net income $184,815 $110,380
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
----------- -----------
Cash flows from operating activities
Net income $ 184,815 $ 110,380
Adjustments to reconcile net income to net cash
provided by (applied to) operating activities:
Provision for loan losses 60,000 42,625
(Increase) decrease in accrued interest
receivable (120) 19,916
Decrease (increase) in other assets 9,465 (10,668)
Increase (decrease) in accrued interest
payable 1,627 (148)
(Decrease) increase in other liabilities (148,941) 13,841
----------- -----------
Net cash provided by operating activities 106,846 175,946
Cash flows from investing activities:
(Purchases) sales of securities, net:
Available for sale (759,232) 552,413
(Increase) in loans, net (710,183) (3,119,773)
Decrease in premises and equipment, net 1,279,372 6,016
----------- -----------
Net cash (used in) investing activities (190,043) (2,561,344)
Cash flows from financing activities:
Net change in noninterest bearing deposits (1,193,097) 654,218
Net change in interest bearing deposits 434,052 (444,156)
Increase in federal funds purchased 1,445,000
Net change in unrealized depreciation of
securities available for sale (2,611) (51,723)
----------- -----------
Net cash (used in) provided by financing
activities (761,656) 1,603,339
----------- -----------
Net (decrease) in cash and cash equivalents (844,853) (782,059)
Cash and cash equivalents, beginning of period 5,253,350 3,061,440
----------- -----------
Cash and cash equivalents, end of period $ 4,408,497 $ 2,279,381
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
EAGLE HOLDING COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------------
Eagle Holding Company (the Company) is a unitary bank holding company whose
primary asset is 100% of the capital stock of Eagle Bank (the bank) which
is engaged in general commercial banking in Broomfield, Colorado and the
surrounding north Denver metropolitan communities. The condensed
consolidated financial statements include the accounts of the Company and
the Bank. All significant intercompany transactions and accounts have been
eliminated in consolidation.
Reference is made to the consolidated financial statements of the Company
included elsewhere in this Registration Statement for disclosure of the
Company's significant accounting policies used in the preparation of the
financial statements. Those consolidated financial statements, including
notes thereto, should be read in conjunction with the condensed financial
statements.
The financial information as of March 31, 1998 and 1997 and for the three
month periods ended March 31, 1998 and 1997 is unaudited. In the opinion of
the Company, the condensed statements included all adjustments, consisting
only of normal recurring adjustments, which are necessary for a fair
presentation of the financial position, results of operations and cash
flows for the interim periods. Operating results for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
B. AGREEMENT AND PLAN OF MERGER:
-----------------------------
On June 3, 1998, the Company entered into an Agreement and Plan of Merger
(the Agreement) with Zions Bancorporation (Zions) whereby the shareholders
of the Company will receive shares of Zions in a non-taxable exchange. The
Agreement is conditioned upon the completion of certain requirements
including, but not limited to, approval by the shareholders of the Company.
The Company has received requisite approvals from both federal and State of
Colorado regulatory agencies.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the third day of
June, 1998, among ZIONS BANCORPORATION ("Zions Bancorp"), a Utah corporation
having its principal office in Salt Lake City, Utah, VAL COR BANCORPORATION,
INC. ("Val Cor"), a Colorado corporation having its principal office in Denver,
Colorado, VECTRA BANK COLORADO, NATIONAL ASSOCIATION ("Vectra"), a national
banking association organized under the laws of the United States, EAGLE HOLDING
COMPANY (the "Company"), a Colorado corporation having its principal office in
Broomfield, Colorado, and EAGLE BANK (the "Bank"), a banking corporation
organized under the laws of the State of Colorado
W I T N E S S E T H T H A T :
WHEREAS, the Company is a bank holding company and the sole shareholder
of the Bank;
WHEREAS, Zions Bancorp is a bank holding company and the sole
shareholder of Val Cor;
WHEREAS, Val Cor is a bank holding company and the sole shareholder of
Vectra;
WHEREAS, Zions Bancorp and Val Cor each desire to affiliate with the
Company through the merger of the Company with and into Val Cor, with Val Cor to
be the surviving corporation (the "Holding Company Merger") and, in addition, to
cause the merger of the Bank with and into Vectra, with Vectra to be the
surviving national banking association (the "Bank Merger");
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 the Bank and the areas served by the Company and the Bank to become
affiliated with Zions Bancorp through the Holding Company Merger and to cause
the Bank Merger;
WHEREAS, the respective boards of directors of Vectra and the Bank have
determined that it would be in the best interests of Vectra or the Bank, as the
case may be, its shareholders and customers, for Vectra and the Bank to merge
with each other;
WHEREAS, the respective Boards of Directors of Zions Bancorp, Val Cor,
and the Company have agreed to cause the Holding Company Merger pursuant to the
provisions of section 7-111-101 et seq. of the Colorado Business Corporation
Act; and to cause the Bank Merger pursuant to the provisions of section 215a of
the National Bank Act (12 U.S.C. ss. 215a) and section 11-4-102 et seq. of the
Colorado Revised Statutes;
<PAGE>
WHEREAS, the respective Boards of Directors of Vectra and the Bank have
agreed to cause the Bank Merger pursuant to the provisions of section 215a of
the National Bank Act and section 11-4-102 et seq. of the Colorado Revised
Statutes; and
WHEREAS, the parties intend that the Holding Company 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) Val Cor and the Company will execute a merger agreement
(the "Holding Company Merger Agreement") substantially in the form of Exhibit I
attached hereto. Subject to the provisions of the Holding Company Merger
Agreement, the Company will be merged with and into Val Cor in the Holding
Company Merger with Val Cor as the surviving corporation. The shares of common
stock, no par value, 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
provided in section 1.2(a) hereof.
(b) Vectra and the Bank will execute a merger agreement (the
"Bank Merger Agreement") substantially in the form of Exhibit II attached
hereto. Immediately following the effectiveness of the Holding Company Merger,
and subject to the provisions of the Bank Merger Agreement, the Bank will be
merged with and into Vectra in the Bank Merger with Vectra as the surviving
national banking association. The shares of common stock of the Bank shall be
canceled.
1.2. Consideration for Holding Company Merger.
(a) Subject to the terms, conditions, and limitations set
forth herein, upon surrender of his, her or its certificate or certificates in
accordance with Section 1.1 hereof, 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 (as
hereinafter defined), that number of shares of the common stock of Zions
Bancorp, no par value (the "Zions Bancorp Stock") calculated by dividing the
Consideration Number by the total number of shares of Company Common Stock that
shall be issued and outstanding at the Effective Date.
2
<PAGE>
(b) As used in paragraph (a) of this section 1.2, the term
"Consideration Number" means 230,000. Notwithstanding the foregoing, if the
Transaction Expenses (as hereinafter defined), determined on a pre-tax basis in
accordance with generally accepted accounting principles, exceed $65,000, then
the "Consideration Number" shall be equal to 230,000 less the number calculated
by dividing the Transaction Expenses in excess of $65,000, net of any associated
tax benefit, by $50.375. As used in the preceding sentence, "Transaction
Expenses" are all expenses incurred from April 1, 1998 through the Effective
Date with respect to attorneys, accountants, investment bankers, consultants,
brokers and finders who will have rendered services to the Company or the Bank
in connection with the transactions contemplated by this Agreement, it being
agreed that none of the following expenses are Transaction Expenses: (i) the
cost of the audit of the financial statements of the Company and the Bank as of
December 31, 1997 and the year then ended; (ii) the monthly accrual of the
expense associated with the audit of the financial statements of the Company and
the Bank as of December 31, 1998 and the year then ended; (iii) the cost of
addressing the risk that certain computer applications used by the Company and
the Bank may be unable to recognize and perform properly date-sensitive
functions involving dates prior to and after December 31, 1999; (iv) costs
incurred at the request of Zions Bancorp, Val Cor or Vectra to prepare for the
electronic and systematic conversion of data regarding the Bank to Zions
Bancorp's own system of electronic data processing; (v) distribution of benefits
accrued for the benefit of participants in the Profit Sharing Plan of the Bank;
or (vi) costs of sponsoring Broomfield High School and City of Broomfield
scoreboards committed to before May 1, 1998 and related advertising costs
incurred by the Bank and accounted for under generally accepted accounting
principles.
1.3. No Fractional Shares. Zions Bancorp will not issue fractional
shares of its 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 $50.375. Such fractional share interest shall not include the
right to vote or to receive dividends or any interest thereon.
1.4. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his, her or its Zions Bancorp Stock until he,
she or it exchanges his, her or its certificates representing Company Common
Stock for Zions Bancorp Stock. Any dividends declared on Zions Bancorp Stock to
holders of record on or after the Effective Date shall, with respect to stock to
be delivered pursuant to this Agreement to shareholders of the Company who have
not exchanged their certificates representing Company Common Stock for Zions
Bancorp Stock, be paid to the Exchange Agent (as designated in Section 1.5 of
this Agreement) and, upon receipt from a former shareholder of the Company of
certificates representing shares of Company Common Stock, the Exchange Agent
shall forward to such former shareholder of the Company (i) certificates
representing his or her 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 1.3 hereof.
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1.5. Designation of Exchange Agent.
(a) The parties to this Agreement hereby designate Zions First
National Bank, a national banking association with its head office located in
Salt Lake City, Utah ("Zions Bank"), as Exchange Agent to effect the exchanges
contemplated hereby.
(b) Zions Bancorp will, on the Effective Date or as soon
thereafter as is practicable, issue and deliver to Zions Bank the share
certificates representing shares of Zions Bancorp Stock and the cash in lieu of
fractional shares to be paid to holders of Company Common Stock in accordance
with this Agreement.
1.6. Notice of Exchange. Promptly after the Effective Date, Zions Bank
shall mail to each holder of one or more certificates formerly representing
Company Common Stock, except to such holders as shall have waived the notice
required by this Section 1.6, a letter of transmittal specifying the Effective
Date and notifying such holder of the procedures to be followed in surrendering
his, her or its certificate or certificates to Zions Bank for exchange. Such
notice shall be mailed to holders by regular mail at their addresses on the
records of the Company.
1.7. Treatment of Stock Options.
(a) Simultaneously herewith, David T. Manley shall enter into
an agreement with Zions Bancorp, substantially in form and substance as that set
forth in Exhibit III attached hereto, in which he agrees that prior to the
Effective Date (as herein defined) he will exercise all stock options to
purchase Company Common Stock which he owns and which by their terms are then
exercisable.
(b) 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.
1.8. Voting Agreements. Simultaneously herewith, each shareholder of
the Company who is listed on Schedule 1.8 annexed hereto shall enter into an
agreement with Zions Bancorp, substantially in form and substance as that set
forth as Exhibit IV attached hereto, in which he or she agrees to vote all
shares of Company Common Stock which may be voted, or whose vote may be
directed, by him or her, in favor of the transactions contemplated by this
Agreement at the meeting of shareholders at which such transaction shall be
considered.
1.9. Consent to Assignment and Amendment to Lease Agreement.
Simultaneously herewith, MCR, Thomas Family Partnership, LLLP, and the Bank
shall enter into a Consent to Assignment and Amendment to Lease Agreement,
substantially in form and substance as that set forth as Exhibit V attached
hereto.
1.10. Employee Benefits. If any employee of the Company or of the 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
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with the Company or the Bank for purposes of eligibility and vesting, but not
for benefit accrual purposes, for which such service is taken into account or
recognized, provided that there be no duplication of such benefits as are
provided under any employee benefit plans, practices, or policies of the Company
or the Bank that continue in effect following the Effective Date.
2. Effective Date.
The Effective Date shall be the date specified in the Articles of
Merger to be filed with the Secretary of State of the State of Colorado to
effectuate the Holding Company Merger, which date shall be the latest of:
2.1. Shareholder Approval. The day upon which the shareholders of the
Company approve, ratify, and confirm the Holding Company Merger; or
2.2. Federal Reserve Approval. The first to occur of (a) the date
thirty days following the date of the order of the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of San Francisco acting
pursuant to authority delegated to it by the Board of Governors of the Federal
Reserve System (collectively, the "Board of Governors") approving the Holding
Company Merger, or (b) if, pursuant to section 321(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act"), the Board
of Governors shall have prescribed a shorter period of time with the concurrence
of the Attorney General of the United States, the date on which such shorter
period of time shall elapse, or (c) the date ten days following the date on
which the Board of Governors indicates its waiver of jurisdiction over the
Holding Company Merger; or
2.3. OCC Approval. The first to occur of (a) the date thirty days
following the date of the order of the Office of the Comptroller of the Currency
(the "OCC") approving the Bank Merger, or (b) if, pursuant to section 321(b) of
the Riegle Act, the OCC shall have prescribed a shorter period of time with the
concurrence of the Attorney General of the United States, the date on which such
shorter period of time shall elapse; or
2.4. 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 "Commissioner") approving the
transactions contemplated by this Agreement; or
2.5. Colorado Banking Board Approval. If such an order shall be
required by law, the date ten days following the date of the order of the
Colorado State Banking Board (the "Banking Board") approving the transactions
contemplated by this Agreement; or
2.6. Other Regulatory Approvals. The date upon which any other material
order, approval, or consent of a federal or state regulator of financial
institutions or financial institution
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holding companies authorizing consummation of the transactions contemplated by
this Agreement is obtained or any waiting period mandated by such order,
approval, or consent has run; or
2.7. Expiration of Stays. Ten days after any stay of the approvals of
any of the Board of Governors, the OCC, the Commissioner, or the Banking Board
of the transactions contemplated by this Agreement or any injunction against
closing of said transactions is lifted, discharged, or dismissed; or
2.8. Mutual Agreement. Such other date as shall be mutually agreed to
by Zions Bancorp and the Company.
3. Conditions Precedent to Performance of Obligations of the Parties.
The obligations of Zions Bancorp, Val Cor, and the Company to
consummate the Holding Company Merger and the obligations of Vectra and the Bank
to consummate the Bank Merger shall be subject to the conditions that on or
before the Effective Date:
3.1. Approval by Shareholders of the Company. 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 Holding Company Merger by not less than the requisite percentage of the
outstanding voting stock of each class of the Company, in accordance with the
applicable laws of the State of Colorado and the articles of incorporation and
by-laws of the Company.
3.2. 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 and Val Cor of the business of the Company,
the business of the Bank, and each of the branches of the 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.
3.3. 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 Holding Company 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 the 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
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by counsel that, in the opinion of such counsel, such action, suit, or
proceeding raises substantial questions of law or fact which could reasonably be
decided materially adversely to either party hereto or its subsidiaries,
directors, or officers.
3.4. 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, as amended (the "Securities Act"), in connection
with the registration of the shares of Zions Bancorp Stock to be issued as
consideration in connection with the Holding Company Merger (the "Registration
Statement") shall have become effective under the Securities Act, and Zions
Bancorp shall have received all required state securities laws or "blue sky"
permits and other required authorizations or confirmations of the availability
of exemptions from registration requirements necessary to issue Zions Bancorp
Stock in the Holding Company Merger.
(b) Absence of Stop-Order. Neither the Registration Statement
nor any such required permit, authorization, or confirmation shall be subject to
a stop-order or threatened stop-order by the SEC or any state securities
authority.
3.5. Federal Income Taxation. Zions Bancorp and the Company shall have
received a written opinion of Slivka Robinson Waters & O'Dorisio, P.C., or of
Duane, Morris & Heckscher LLP, or of another firm mutually agreeable to Zions
Bancorp and the Company, applying existing law, that the Holding Company Merger
and the Bank Merger shall qualify as one or more reorganizations under section
368(a)(1) of the Code and the regulations and rulings promulgated thereunder. In
rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Zions Bancorp, the Company, and others.
3.6. 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, Val Cor, and Vectra.
The obligations of Zions Bancorp, Val Cor, and Vectra 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:
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4.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of the Company and the Bank contained in this
Agreement shall be true and correct in all material respects as of the Effective
Date with the same effect as if such representations and warranties had been
made or given at and as of such date, except that representations and warranties
of the Company or the Bank contained in this Agreement which specifically relate
to an earlier date shall be true and correct in all material respects as of such
earlier date. All covenants and obligations to be performed or met by the
Company or the Bank on or prior to the Effective Date shall have been so
performed or met. On the Effective Date, the president and chief executive
officer and the chief financial officer of each of the Company and the Bank
shall deliver to Zions Bancorp a certificate to that effect. The delivery of
such certificates shall in no way diminish the warranties, representations,
covenants, and obligations of the Company and the Bank made in this Agreement.
4.2. Opinion of Company Counsel. Zions Bancorp shall have received an
opinion letter from Slivka Robinson Waters & O'Dorisio, P.C., dated the
Effective Date, substantially in form and substance as that set forth as Exhibit
VI attached hereto.
4.3. Opinion of Company Litigation Counsel. Zions Bancorp shall have
received an opinion letter from legal counsel handling litigation matters for
the Company and the Bank, dated the Effective Date, substantially in form and
substance as that set forth as Exhibit VII attached hereto.
4.4. Delivery of Branch Authorizations. The Company shall have
delivered to Zions Bancorp originals or certified copies of all of the
regulatory authorizations entitling the 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 the 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.
4.5. No Adverse Developments.
(a) During the period from March 31, 1998 to the Effective
Date, (i) there shall not have been any material adverse change in the financial
position or results of operations of the Company or the Bank taken as a whole,
nor shall the Company or the Bank have sustained any material loss or damage to
its properties, whether or not insured, which materially affects its ability to
conduct its business; 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, the capital structure of the
Company and the capital structure of the Bank shall be as stated in section 6.9.
(c) As of the Effective Date, other than liabilities incurred
in the ordinary course of business subsequent to March 31, 1998, there shall be
no liabilities of the Company or the Bank which are material to the Company on a
consolidated basis which were not reflected on the balance sheet of the Company
or the Bank as of March 31, 1998.
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(d) No adverse action shall have been instituted or threatened
against the Company or the Bank by any governmental authority, or referred by a
governmental authority to another governmental authority, for the enforcement or
assessment of penalties for the violation of any laws 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 president and the chief financial officer of the
Company and the president and the chief financial officer of the Bank,
certifying to the matters set forth in paragraphs (a), (b), (c), and (d) of this
section 4.5. The delivery of such officers' certificate shall in no way diminish
the warranties and representations of the Company or those of the Bank made in
this Agreement.
4.6. 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) $2,917,000
and (b) the aggregate contributions to capital caused by the payments
accompanying the exercise of any stock options on or after March 31, 1998.
4.7. Loan Loss Reserve. 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 $371,294.
4.8. CRA Rating. The CRA rating of the Bank shall be no lower than
"satisfactory."
4.9. Employment Agreement. David T. Manley shall have entered into an
employment agreement with Vectra substantially in form and substance as that set
forth as Exhibit VIII attached hereto.
4.10. Accounting Treatment.
(a) Zions Bancorp shall have received a certificate dated the
Effective Date, signed by the president and the chief financial officer of the
Company and the president and the chief financial officer of the Bank, in form
and substance satisfactory to Zions Bancorp, certifying to the matters set forth
in Exhibit IX attached hereto.
(b) Unless repurchases by Zions Bancorp of shares of its
common stock shall have made the receipt of such letters impracticable,
(i) Zions Bancorp shall have received letters from
KPMG Peat Marwick LLP ("KPMG"), its independent auditing firm, dated the date
of or shortly prior to each of the mailing date of the proxy materials to the
shareholders of the Company, and the Effective Date, stating its opinion that
the reorganization contemplated by this Agreement shall qualify for
pooling-of-interest accounting treatment; and
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(ii) the Company shall have received letters from Van
Dorn & Bossi, its independent auditing firm, dated the date of or shortly prior
to each of the mailing date of the proxy materials to the shareholders of the
Company, and the Effective Date, stating its opinion that the reorganization
contemplated by this Agreement shall qualify for pooling-of-interest accounting
treatment.
4.11. Consolidated Audit. The audit of the consolidated accounts of the
Company and the Bank by Van Dorn & Bossi as of December 31, 1997 and for the
year then ended shall have been completed, and no material adverse change to the
financial condition of the Company shall have been revealed, nor shall any
material adjustments to the financial accounts of the Company or the Bank have
been recorded, as a result thereof.
4.12. Affiliates' Agreements. Zions Bancorp shall, not later than
thirty days prior to the Effective Date, have received a written agreement from
each "affiliate" of the Company (as that term is used in section 7.7 of this
Agreement) reasonably acceptable to Zions and consistent with section 7.7 of
this Agreement.
5. Conditions Precedent to Performance of Obligations of the Company and
the Bank.
The obligations of the Company and the Bank hereunder are subject to
the satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived in
whole or in part by the Company in writing unless not so permitted by law:
5.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of Zions Bancorp, Val Cor, and Vectra 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, Val Cor, and Vectra 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, Val Cor, or Vectra on or prior to the
Effective Date shall have been so performed or met. On the Effective Date,
either the President or an Executive Vice President of Zions Bancorp and either
the Chairman, the President or an Executive Vice President of each of Val Cor
and Vectra 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, Val Cor, and
Vectra made in this Agreement.
5.2. Opinion of Zions Bancorp Counsel. The Company shall have received
an opinion letter from Duane, Morris & Heckscher LLP, dated the Effective Date,
substantially in form and substance as that set forth as Exhibit X attached
hereto.
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5.3. No Adverse Developments. During the period from March 31, 1998 to
the Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of Zions Bancorp and its
subsidiaries, taken as a whole, nor shall Zions Bancorp and its subsidiaries,
taken as a whole, have sustained any material loss or damage to their
properties, whether or not insured, which materially affects their ability to
conduct their business; and the Company shall have received a certificate dated
the Effective Date signed by either the President of Zions Bancorp or an
Executive Vice 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 made in this Agreement.
5.4. Status of Zions Bancorp Stock.
(a) Zions Bancorp Stock shall be listed on the Nasdaq National
Market (or else shall be listed on the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "Amex")).
(b) The shares of Zions Bancorp Stock issuable in the Holding
Company Merger shall have been approved for inclusion on the Nasdaq National
Market subject only to official notice of issuance (or if Zions Bancorp Stock
shall be listed on the NYSE or the Amex, such shares shall be approved for
inclusion on the NYSE or Amex, as appropriate).
6. Representations and Warranties of the Company and the Bank.
The Company (with respect to the Company and the Bank) and the Bank
(solely with respect to itself) each represent and warrant to Zions Bancorp, Val
Cor, and Vectra as follows:
6.1. Organization, Powers, and Qualification. Each of the Company and
the 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 the Company and the 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 the Bank in any material respect. Each of the Company and the 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 the Bank in any material respect.
6.2. Execution and Performance of Agreement. Each of the Company and
the Bank has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its terms.
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6.3. Absence of Violations. Except as set forth on Schedule 6.3 hereof:
(a) neither the Company nor the Bank is in violation of its
charter documents or bylaws, nor in any material respect 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, 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 the
Bank has received any claim or notice of violation with respect thereto;
(b) neither the Company nor the Bank nor any member of the
management of either of them is a party to any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the Board of Governors,
the Federal Reserve Bank of Kansas City, the Federal Deposit Insurance
Corporation (the "FDIC"), any other banking or securities authority of the
United States or the State of Colorado, or any other regulatory agency that
relates to the conduct of the business of the Company or the 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, to the
knowledge of the Company and the Bank, threatened;
(c) each of the Company and the 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 the 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 each of the Company and the Bank has established
policies and practices with respect to all such laws and regulations to
reasonably limit noncompliance and detect and report noncompliance to its
management; and
(d) the 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 the Bank; (iii) ongoing CRA
training of all personnel of the Bank; and (iv) procedures whereby all
significant CRA-related activity is documented; and the Bank has officially
designated a CRA officer who reports directly to the board of directors and is
responsible for the CRA program of the Bank.
6.4. Compliance with Agreements. Neither the Company nor the 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 the Bank comply fully with all
terms of all currently outstanding supervisory and regulatory requirements and
with the conditions of all regulatory orders and decrees.
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6.5. Binding Obligations; Due Authorization. Subject to the approval of
its shareholders and all necessary bank regulatory authorities, this Agreement
constitutes valid, legal, and binding obligations of each of the Company and the
Bank, enforceable against each of the Company and the Bank in accordance with
its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar law, or by general principles of equity. The
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of each of the Company and the Bank. Subject to approval by its
shareholders of this Agreement and all necessary bank regulatory authorities, no
other corporate proceedings on the part of either the Company or the 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 hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under the organizational documents or bylaws of the Company or the 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, except as set
forth on Schedule 6.6 hereof, 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 the
Bank pursuant to any material agreement or instrument under which the Company or
the 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 the Bank in respect of which it is an obligor; (b)
if the Holding Company Merger is approved by the Board of Governors under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), or if the Board of
Governors waives its jurisdiction over the Holding Company Merger, and if the
Bank Merger is approved by the OCC, the Commissioner, and the Banking Board,
violate any law, statute, rule, or regulation of any government or agency to
which the Company or the 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 the 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 hereby, 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 OCC, the Commissioner, and the Banking Board.
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
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applicable generally to bank holding companies under the BHC Act and the
regulations of the Board of Governors adopted thereunder.
(b) No corporation or other entity, other than the Company, is
registered or is required to be registered as a bank holding company under the
BHC Act by virtue of its control over the Bank or over any company that directly
or indirectly has control over the Bank.
6.8. Subsidiaries.
(a) Other than the 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 the 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 the Bank, or calling for or requiring the
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of the Bank. 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 the Bank prepared in accordance with generally accepted
accounting principles.
(b) Except as specified in the previous subsection, neither
the Company nor the 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) 50,000 shares of Company Common Stock, of which, as of the date of this
Agreement, 32,312 shares have been duly issued and are validly outstanding,
fully paid, nonassessable, and held by approximately six shareholders of
record. The aforementioned shares of Company Common Stock are the only voting
securities of the Company authorized, issued, or outstanding as of such date;
and except as set forth 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 Common Stock are
held by the Company as treasury shares. 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,
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exercise price, type of security for which exercisable, and date of expiration.
Schedule 6.9 hereof further lists all shares of 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 Common Stock designated or
made available for grant but not yet granted.
(c) The authorized capital stock of the Bank consists of
100,000 shares of common stock, $5.00 par value (the "Bank Common Stock"), of
which, as of the date of this Agreement, 63,368 shares have been duly issued and
are validly outstanding, fully paid, nonassessable, and all of which are held
of record and beneficially by the Company. The aforemen tioned shares of Bank
Common Stock are the only voting securities of the Bank authorized, issued, or
outstanding as of such date; and no subscriptions, warrants, options, rights,
convertible securities, or similar arrangements or commitments in respect of
securities of the Bank are authorized, issued, or outstanding which would
enable the holder thereof to purchase or otherwise acquire shares of any class
of capital stock of the Bank. None of the Bank Common Stock is subject to any
restrictions upon the transfer thereof under the terms of the corporate charter
or bylaws of the Bank.
(d) None of the shares of Company Common Stock or Bank Common
Stock has been issued in violation of the preemptive rights of any shareholder.
(e) As of the date hereof, to the knowledge of the Company and
the Bank, and except as contemplated by 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
the Bank to vote or to dispose of his or its shares of capital stock of that
entity.
(f) The Company has not granted any shareholder rights to
dissent from any merger.
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 the 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 the 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 the 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 the 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 the Bank.
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6.11. Books and Records. The books and records of each of the Company
and the 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 the Bank
follows generally accepted accounting principles applied on a consistent basis
(except to the extent that different accounting principles are mandated by a
bank or bank holding company regulatory agency with jurisdiction over it) 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 the 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 the 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 the Bank:
(a) All regulatory approvals received since January 1, 1992,
of the Company and the Bank relating to all bank and nonbank acquisitions or the
establishment of de novo operations;
(b) All employment 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 the Bank, accompanied by any
agreements, including trust agreements, embodying such contracts, plans, or
arrangements, and all employee manuals and memoranda relating to employment and
benefit policies and practices of any nature whatsoever (whether or not
distributed to employees or any of them), and any actuarial reports and audits
relating to such plans;
(c) All material contracts, agreements, leases, mortgages, and
commitments, except those entered into in the ordinary course of business, to
which the Company or the Bank is a party or may be bound; or, if any of the same
be oral, 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 the Bank is a party or may be bound and which require the
consent or approval of third parties to the execution and delivery of this
Agreement or to the consummation or performance of any of the
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transactions contemplated hereby, 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 the Bank is a party or may be bound and which relate to
land, buildings, fixtures, or other real property upon or within which the
Company or the Bank operates its businesses or is authorized to operate its
businesses, or with respect to which the Company or the Bank has any application
pending for authorization to operate its businesses;
(f) Any pending application, including any documents or
materials related thereto, which has been filed by the Company or the Bank with
any federal or state regulatory agency with respect to the establishment of a
new office or the acquisition or establishment of any additional banking or
nonbanking subsidiary; and
(g) All federal, state, and local tax returns, including any
amended returns, filed by the Company or the Bank for the years 1991 through
1997, a copy of the most recent audit examination of each of the Company and the
Bank by the Internal Revenue Service ("IRS"), and a copy of all correspondence
or other documents with respect to any examination that has not yet been
resolved, a copy of the most recent state or local tax agency examination, if
any, of each of the Company and the Bank, and a copy of all correspondence or
other documents with respect to any examination that has not yet been resolved,
and all tax rulings, closing agreements, settlement agreements, or similar
documents with respect to the Company or the Bank received from or entered into
with the IRS or any other taxing authority since January 1, 1988 or that would
have continuing effect after the Effective Date.
6.13. Financial Statements. The Company has furnished to Zions Bancorp
its consolidated statement of condition as of each of December 31, 1995,
December 31, 1996, and December 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; the parent-only statement of
condition of the Company as of March 31, 1998 and its related statement of
income; and the statement of condition of the Bank as of March 31, 1998 and its
related statement of income (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 the Bank which have been maintained in accordance with generally
accepted accounting principles or the requirements of bank or bank holding
company 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 (or, in the case of March 31,
1998, the unconsolidated financial position of the Company and the Bank) 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
17
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applied in all material respects, adequate provision for, or reserves against,
the possible loan losses of the Company (or, in the case of March 31, 1998, of
the Bank) as of such dates.
6.14. Call Reports; Bank Holding Company Reports.
(a) The 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 the Bank as reported on any of the Consolidated Reports of
Condition referred to in Subsection 6.14(a) hereof, in any material amount, in
order to conform such equity capital account to equity capital as would be
determined in accordance with generally accepted accounting principles 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,
1997, and (ii) its semiannual report on Form FR Y-9SP as filed with the Board of
Governors as of December 31, 1997.
6.15. Absence of Undisclosed Liabilities. At March 31, 1998, neither
the Company nor the 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) as set forth on Schedule 6.15 hereof,
or (c) for unfunded loan commitments made by the Company or the 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 and any interest, penalties, or additions to tax
with respect thereto ("Tax" or "Taxes")) accrued in accordance with generally
accepted accounting principles and unpaid at December 31, 1997. Since December
31, 1997, neither the Company nor the Bank has incurred or paid any obligation
or liability that would be material (on a consolidated basis) to the Company,
except (x) for obligations incurred or paid in connection with transactions by
it in the ordinary course of its business consistent with past practices, or (y)
as set forth on Schedule 6.15 hereof, or (z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since March 31, 1998, except as
set forth on Schedule 6.16 hereof, there has been (a) no material adverse change
in the condition, financial or
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otherwise, or to the assets, properties, liabilities, or businesses of the
Company and the 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 the Bank of any regular dividend, special
dividend, or other distribution with respect to any class of capital stock of
the Company or the Bank; (d) no repurchase by the Company of any of its capital
stock; (e) no material loss, destruction, or damage to any material property of
the Company or the Bank, which loss, destruction, or damage is not covered by
insurance; and (f) no material acquisition or disposition of any asset, nor any
material contract outside the ordinary course of business entered into by the
Company or the Bank nor any substantial amendment or termination of any material
contract outside the ordinary course of business to which the Company or the
Bank is a party, nor any other transaction by the Company or the Bank involving
an amount in excess of $25,000 other than for fair value in the ordinary course
of its business. Since March 31, 1998, except as set forth on Schedule 6.16
hereof, (x) each of the Company and the 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 at a level not materially lower than the level of quality that existed
at March 31, 1998; and (z) the Company, on a consolidated basis, has
administered its investment portfolio pursuant to essentially the same policies
and procedures as existed during 1996 and 1997, 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. Management
periodically reevaluates the adequacy of such reserve based on portfolio
performance, current economic conditions, and such other factors as in its
judgment are necessary to determine the adequacy of the reserve.
6.18. Tax Matters.
(a) Except as set forth on Schedule 6.18 hereof, all Tax
returns and reports required to be filed by or on behalf of the Company or the
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 and properly reflect its Taxes for the periods covered
thereby. All Taxes shown or required to be 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 the Bank, except as reserved against in the Company
Financial Statements. All Taxes 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 the 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 Taxes are due from, but have not yet
been paid by, the Company or the 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 made for the payment of such taxes by
establishment of appropriate tax liability accounts on the monthly financial
statements of the Company.
(d) Except as set forth on Schedule 6.18 hereof, deferred
Taxes of the Company and the 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 the Bank for bad debts taken and the
reserve of the 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 by law with respect to taxes
assessed and not yet due and payable, there are no tax liens on any of the
properties or assets of the Company or the Bank.
(g) The Company and the Bank (A) have timely filed all
information returns or reports required to be filed with respect to Taxes,
including but not limited to those required by sections 6041, 6041A, 6042, 6045,
6049, 6050H, and 6050J of the Code, (B) have properly and timely provided to all
persons, other than taxing authorities, all information reports or other
documents (for example, Form 1099s, Form W-2s, and so forth) required to be
provided to such persons under applicable law, and (C) have exercised due
diligence in obtaining certified taxpayer identification numbers as required
under applicable law.
(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.
(i) The Company and the Bank have in all material respects
satisfied all federal, state, local, and foreign withholding tax requirements
including but not limited to income, social security, and employment tax
withholding.
(j) Neither the Company nor the Bank (A) is, or has been, a
member of a group filing a consolidated, combined, or unitary tax return, other
than a group the common parent of which is or was the Company, or (B) has any
liability for the Taxes of any person (other than the Company and the Bank)
under Treas. Reg. Sec. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
20
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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 $2,917,000.
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 the Bank
issued by each of the Banking Board and the Federal Reserve Bank of Kansas City.
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, 1995, each of the Company and the 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 Federal
Reserve Bank of Kansas City, (c) the FDIC, (d) the United States Department of
the Treasury, (e) the Colorado Division of Banking, (f) the Banking Board, and
(g) 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
the 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
the Bank (collectively, "Insiders") has any ongoing material transaction with
the Company or the Bank on the date of this Agreement; and (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 the Bank not in the ordinary
course of business. All other extensions of credit by the Company or the Bank to
any Insider are set forth on Schedule 6.22 hereof.
6.23. SEC Registered Securities. No equity or debt securities of the
Company or the Bank are registered or required to be registered under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
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
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other proceeding pending before any court, governmental agency, authority or
commission, arbitrator, or "impartial mediator" (of which the Company or the
Bank has been served with process or otherwise been given notice) or, to the
knowledge of the Company and the 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. Except as set forth on
Schedule 6.25 hereof, neither the Company nor the Bank is a party defendant or
respondent to any pending legal, equitable, or other proceeding commenced by any
governmental agency (of which the Company or the Bank has been served with
process or otherwise been given notice) and, to the knowledge of the Company and
the Bank, no such proceeding is threatened.
6.26. Federal Deposit Insurance.
(a) The deposits held by the Bank are insured within statutory
limits by the Bank Insurance Fund of the FDIC pursuant to the provisions of the
Federal Deposit Insurance Act, as amended (12 U.S.C. ss. 1811 et seq.), and the
Bank has paid all assessments and filed all related reports and statements
required under the Federal Deposit Insurance Act.
(b) The Bank is a member of and pays insurance assessments to
the Bank Insurance Fund of the FDIC ("BIF"), and its deposits are insured by the
BIF. None of the deposits of the Bank are insured by the Savings Association
Insurance Fund of the FDIC ("SAIF"), and the Bank pays no insurance assessments
to the SAIF.
6.27. Other Insurance. Each of the Company and the Bank carries
insurance with reputable insurers, including blanket bond coverage, in such
amounts as are reasonable to cover such risks as are customary in relation to
the character and location of its properties and the nature of its businesses.
All such policies of insurance are in full force and effect, and no notice of
cancellation has been received. All premiums to date have been paid in full.
Neither the Company nor the Bank is in default with respect to any such policy
which is material to it.
6.28. Labor Matters. Neither the Company nor the Bank is a party to or
bound by any collective bargaining contracts with respect to any employees of
the Company or the Bank. Since their respective inceptions there has not been,
nor to the knowledge of the Company and the 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 the 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 the Bank is aware of
any attempts to organize a collective bargaining unit to represent any of its
employee groups.
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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 the Bank
for the employees or former employees of the Company or the 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 the Bank has any liability
with respect to any pension plan qualified under section 401 of the Code.
Neither the Company nor the Bank sponsors or maintains any defined benefit plan
or has ever sponsored or maintained any defined benefit plan.
(c) All "employee benefit plans," as defined in section 3(3)
of ERISA, that cover one or more employees employed by the Company or the 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 March 31, 1998, neither the Company
nor the 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,
the 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 the 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 the Bank may be
23
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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 the Bank is, to its knowledge, in compliance in all material respects with
all federal and state laws, regulations, and orders respecting employment and
employment practices (including Title VII of the Civil Rights Act of 1964),
terms and conditions of employment, and wages and hours; and neither the Company
nor the Bank is engaged in any unfair labor practice. As of the date hereof,
except as set forth on Schedule 6.30 hereof, no dispute exists between the
Company or the 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 the Bank.
6.31. Fiduciary Activities. The Bank is duly qualified and registered
and in good standing in accordance with the laws of each jurisdiction in which
it is required to so qualify or register as a result of or in connection with
its fiduciary or custodial activities as conducted as of the date hereof. The
Bank engages in no activities which would require its registration under the
federal Investment Advisers Act of 1940 as amended, or its compliance with the
requirements thereof. Since January 1, 1995, the 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) Except as set forth on Schedule 6.32 hereof, neither the
Company nor the 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 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) Except as set forth on Schedule 6.32 hereof, neither the
Company, the Bank, nor, to the knowledge of either of them, any borrower of the
Company or of the 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 the Bank or, to the knowledge
of either of them, any borrower of the Company or of the 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
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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 the Bank (collectively, the "Company Real Estate") has
been used by the Company or the Bank for the handling, processing, storage or
disposal of Hazardous Substances in a manner which violates any Environmental
Laws and, to the knowledge of the Company and the 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 the 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
the Bank on, upon, or into any of the Company Real Estate. In addition, to the
knowledge of the Company and the Bank, except as set forth on Schedule 6.32
hereof, 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 the Bank (collectively,
the "Collateral Real Estate"), except as set forth on Schedule 6.32 hereof,
neither the Company nor the 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.
(e) As used in this Section 6.32, each of the terms "Company"
and "Bank" includes the applicable entity and any partnership or joint venture
in which it has an interest.
6.33. Intangible Property. To the knowledge of the Company and the
Bank, each of the Company and the 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 knowledge of the Company and the Bank, no material product
or service offered and no material trademark, service mark, or similar right
used by the Company or the Bank infringes any rights of any other person, and,
as of the date hereof, neither the Company nor the 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, and except as set forth on
Schedule 6.34 hereof, each of the
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Company and the 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 the Bank, its real and
personal property and other assets, including without limitation those
properties and assets reflected in the Company Financial Statements as of March
31, 1998, or acquired by the Company or the Bank subsequent to the date thereof.
The leases pursuant to which the Company and the 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 the 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 the 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 knowledge of the Company and the Bank, each loan,
lease, and discount reflected as an asset of the Company in the Company
Financial Statements as of March 31, 1998, or acquired since that date, is the
legal, valid, and binding obligation of the obligor named therein, enforceable
in accordance with its terms; and, to the knowledge of the Company and the Bank,
no loan, lease, or discount having an unpaid balance (principal and accrued
interest) in excess of $25,000 is subject to any asserted defense, offset, or
counterclaim.
(b) Except as set forth on Schedule 6.35 hereof, neither the
Company nor the Bank holds any loans or loan-participation interests purchased
from, or participates in any loans originated by, any person other than the
Company or the Bank.
6.36. Material Contracts. Neither the Company nor the Bank nor any of
the assets, businesses, or operations of either 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, 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 the
Bank to any of its officers, directors, shareholders, consultants, or other
management officials and any officer, director, shareholder, consultant, or
management official of any affiliate providing for increased or accelerated
compensation in the event of a change of control with respect to the Company or
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the Bank or any other event affecting the ownership, control, or management of
the Company or the Bank; and
(b) all employment and severance contracts, agreements, and
arrangements between the Company or the Bank and any officer, director,
consultant, or other management official of any of them.
6.38. Material Contract Defaults. All material 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 the 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. Except as set forth on Schedule 6.39
hereof, neither the Company nor the 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 the 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. Internal Controls. Each of the Company and the 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 the Bank and to the extent different from generally accepted
accounting principles, accounting principles mandated by the Board of Governors.
The controls contain self-monitoring mechanisms, and appropriate actions are
taken on significant deficiencies as they are identified.
6.42. Dividends. Neither the Company nor the 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.
6.43. Brokers and Advisers. 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 the Bank in
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connection with the transactions contemplated by this Agreement or based upon
any agreement or arrangement made by or on behalf of the Company or the Bank.
Neither the Company nor the 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.
6.44. Interest Rate Risk Management Instruments.
(a) Schedule 6.44 contains a true, correct, and complete list
of all interest-rate swaps, caps, floors, and options agreements and other
interest-rate risk management arrangements to which the Company or the Bank is
a party or by which any of its properties or assets may be bound.
(b) All interest rate swaps, caps, floors, and option
agreements and other interest rate risk management arrangements to which the
Company or the Bank is a party or by which any of its properties or assets may
be bound were entered into in the ordinary course of its business and, to its
knowledge, in accordance with prudent banking practice and applicable rules,
regulations, and regulatory policies and with counterparties believed to be
financially responsible at the time and are legal, valid, and binding
obligations enforceable in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. The Company and the Bank have duly performed
in all material respects of all of their respective obligations thereunder to
the extent that such obligations to perform have accrued; and to the knowledge
of the Company and the Bank, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
6.45. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by the Company or the 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 the 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, Val Cor, or Vectra
or solely by Zions Bancorp, Val Cor, or Vectra and third parties hereto, are
true, correct, and complete copies thereof and include all amendments,
supplements, and modifications thereto and all waivers thereunder.
6.46. Regulatory and Other Approvals.
(a) As of the date hereof, except as set forth on Schedule
6.46 hereof, neither the Company nor the 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
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contemplated by this Agreement, as shall be necessary for (i) consummation of
the transactions contemplated by this Agreement, and (ii) the continuation after
the Effective Date of the business of the Company and the 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.
(b) As of the date hereof, neither the Company nor the 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 (i) consummation of the transactions contemplated by this
Agreement, or (ii) the continuation after the Effective Date of the business of
the Company and the Bank as such business is carried on immediately prior to the
Effective Date.
(c) As of the date hereof, except as set forth on Schedule
6.46 hereof, neither the Company nor the Bank is aware of any reason why (i) the
certificate set forth as Exhibit IX attached hereto cannot be delivered at the
Effective Date, or (ii) the Mergers shall not be treated for accounting purposes
as a "pooling of interests" in conformity with the requirements of Opinion No.
16 (Business Combinations) of the Accounting Principles Board and the related
interpretations of the American Institute of Certified Public Accountants (APB
No. 16), as amended by Statements of the Financial Accounting Standards Board.
7. Covenants of the Company and the Bank.
The Company (on behalf of itself and the Bank) and the Bank (on behalf
of itself) each hereby covenant and agree as follows:
7.1. Rights of Access. In addition and not in limitation of any other
rights of access provided to Zions Bancorp, Val Cor, and Vectra herein, until
the Effective Date the Company and the Bank will give to Zions Bancorp, Val Cor,
and Vectra and to their representatives, including KPMG, full access during
normal business hours to all of the property, documents, contracts, books, and
records of the Company and the Bank, and such information with respect to their
business affairs and properties as Zions Bancorp, Val Cor, or Vectra from time
to time may reasonably request, provided that until the transactions
contemplated by this Agreement have been announced to the public, all such
access shall be coordinated with management of the Company in an effort to
safeguard the confidentiality of the transactions contemplated by this
Agreement.
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7.2. Corporate Records, Contracts, etc.
(a) The Company and the Bank will make available to Zions
Bancorp, Val Cor, and Vectra 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 the Bank will make available a copy of
each contract or agreement to which the Company or the Bank is a party and which
requires one or more payments by the Company or the Bank in excess of $25,000 in
the aggregate to which the Company or the Bank is a party, including but not
limited to data processing contracts, service contracts, contracts to purchase
or lease real property or equipment, guaranties, employment contracts, and
insurance contracts pertaining to fire, accident, indemnity, fidelity, health,
life, hospitalization, or other employee benefits.
(c) The Company and the Bank will furnish to Zions Bancorp,
Val Cor, and Vectra the following information with respect to properties owned
by the Company and the Bank: (i) a brief description and location of each parcel
of real property owned by the Company or the Bank, (ii) a brief description of
real property covered by lease or other rental arrangements to which the Company
or the 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 the 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 the 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 April
1, 1998 and the Effective Date which it customarily prepared during the period
between January 1, 1995 and March 31, 1998 and shall promptly provide Zions
Bancorp with copies of all such financial statements and reports. Such financial
statements and reports shall be verified by the chief financial officer of the
reporting entity. All of such financial statements and reports, including the
related notes, schedules, and memorandum items, will have been prepared in
accordance with generally accepted accounting principles applied in all material
respects (except to the extent that different accounting principles are mandated
by a bank or bank holding company regulatory agency with jurisdiction over the
Company or the Bank, as the case may be).
(b) The Company and the Bank shall promptly provide Zions
Bancorp with (i) copies of all of its periodic reports to directors and to
shareholders, whether or not such reports were prepared or distributed in
connection with a meeting of the board of directors or a meeting of the
shareholders, prepared or distributed between the date of this Agreement and the
Effective Date, and (ii) complete copies of all minutes of meetings of its board
of directors and
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shareholders which meetings take place between the date of this Agreement and
the Effective Date, certified by the secretary or cashier or an assistant
secretary or assistant cashier of the Company or the Bank, as the case may be.
7.4. Extraordinary Transactions. Without the prior written consent of
Zions Bancorp, neither the Company nor the 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; (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 upon exercise of stock options outstanding on the date of this
Agreement), or grant any options to acquire such additional securities; (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 explicitly contemplated herein; (d) convert the charter or
form of entity of the 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, or (with respect to the sale of loans
originated pursuant to lending programs administered by the Small Business
Administration) as consistent with the historical practices of the Company prior
to April 1, 1998, incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset, make any contract or
agreement, pay or become obligated to pay any legal, accounting, or
miscellaneous other expense, or engage in any transaction; (g) other than in
the ordinary course of business, subject any of its properties or assets to any
lien, claim, charge, option, or encumbrance; (h) except for increases in the
ordinary course of business in accordance with past practices, which together
with all other compensation rate increases do not exceed 4.5 percent per annum
of the aggregate payroll as of April 1, 1998, increase the rate of compensation
of any employee or enter into any agreement to increase the rate of compensation
of any employee; (i) except as required by law, create or modify any pension or
profit sharing plan, bonus, deferred compensation, death benefit, or retirement
plan, or the level of benefits under any such plan, nor increase or decrease any
severance or termination pay benefit or any other fringe benefit; (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; (k) purchase any loans or loan-participation interests from, or
participate in any loans originated by, any person other than the Company or the
Bank; nor (l) take any action, or allow any action to be taken, that would
render the delivery on the Effective Date of the officers' certificate described
in Section 4.10(a) of this Agreement impossible.
7.5. Preservation of Business. Each of the Company and the Bank will
(a) carry on its business and manage its assets and properties diligently and
substantially in the same manner as heretofore; (b) ensure that the ratio of its
loans to its deposits at the Effective Date is at approximately the same level
as existed at March 31, 1998, as adjusted to allow for seasonal fluctuations of
loans and deposits of a kind and amount experienced traditionally by it; (c)
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manage its investment portfolio in substantially the same manner and pursuant to
substantially the same investment policies as in 1996 and 1997, 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
Van Dorn & Bossi, its independent auditors, 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 Securities 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 Securities 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 the Bank and inquiries of
certain officials of the Company and the Bank responsible for financial and
accounting matters as to transactions and events since 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 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 the Bank's financial data and
statistical information included in the Registration Statement as may reasonably
be requested by Zions Bancorp.
7.7. Affiliates' Agreements. The Company will furnish to Zions Bancorp
a list of all persons known to the Company who at the date of the Company's
special meeting of shareholders to vote upon the transactions contemplated by
this Agreement may be deemed to be "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act and for purposes of qualifying the
Holding Company Merger for "pooling of interests" accounting treatment. The
Company will use its best efforts to cause each such "affiliate" of the Company
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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 (a) the shares of Company Common Stock
beneficially owned by such person, or the shares of Zions Bancorp Stock to be
received by such person in the Holding Company Merger (the "Company Merger
Shares") or any other shares of Zions Bancorp Stock held by such person during
the period commencing thirty days prior to the Effective Date and ending at such
time as financial results covering at least thirty days of post-Holding Company
Merger combined operations have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies or (b) the
Company Merger Shares except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
7.8. Inconsistent Activities. Unless and until the Holding Company
Merger has been consummated or this Agreement has been terminated in accordance
with its terms, neither the Company nor the 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 the Bank or any
significant portion of the assets of either of them (whether by tender offer,
merger, purchase of assets, or other transactions of any type); (b) afford any
third party which may be considering any such transaction access to its
properties, books or records except as required by 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 the 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 Holding Company Merger, or the
Bank Merger, the Company shall immediately give notice thereof to Zions Bancorp.
8. Representations and Warranties of Zions Bancorp, Val Cor, and Vectra.
Zions Bancorp (with respect to itself, Val Cor, and Vectra), Val Cor
(with respect to itself and Vectra), and Vectra (solely with respect to itself)
each represent and warrant to the Company and the Bank as follows:
8.1. Organization, Powers, and Qualification. Each of Zions Bancorp,
Val Cor, and Vectra 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, Val Cor, and Vectra 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, Val Cor, and Vectra 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
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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, Val
Cor, and Vectra has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its respective terms.
8.3. Binding Obligations; Due Authorization. Subject to the approval of
all necessary bank regulatory authorities, this Agreement constitutes the valid,
legal, and binding obligations of each of Zions Bancorp, Val Cor, and Vectra
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, Val Cor,
and Vectra. Subject to the approval of all necessary bank regulatory
authorities, no other corporate proceedings on the part of any 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 hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under the organizational documents or bylaws of Zions Bancorp, Val Cor,
or Vectra. 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 of the
property or assets of Zions Bancorp, Val Cor, or Vectra 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; (b) if the Holding Company Merger is approved by the Board of
Governors under the BHC, or if the Board of Governors waives its jurisdiction
over the Holding Company Merger, and if the transactions contemplated by this
Agreement are approved by the OCC, the Commissioner, and the Banking Board,
violate any law, statute, rule, or regulation of any government or agency to
which Zions Bancorp, Val Cor, or Vectra 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 OCC,
the Commissioner, and the Banking Board.
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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,
Val Cor, or Vectra in connection with the transactions contemplated by this
Agreement or based upon any agreement or arrangement made by or on behalf of
any of them.
(b) None of Zions Bancorp, Val Cor, nor Vectra 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.
8.6. Books and Records. The books and records of each of Zions Bancorp,
Val Cor, and Vectra 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,
Val Cor, and Vectra 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, Val Cor, and Vectra
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, Val Cor, and Vectra 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, 1995,
December 31, 1996, December 31, 1997, and March 31, 1998, 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, each as filed with the SEC
(collectively, the "Zions Bancorp Financial Statements"). Each of the
consolidated balance sheets included in the Zions Bancorp Financial Statements
complied as to form in all material respects with applicable accounting
requirements (including accounting requirements of financial institution
regulatory authorities) and the published rules and regulations of the SEC with
respect thereto, fairly presented the consolidated financial position of Zions
Bancorp and its subsidiaries as of its date, and each of the consolidated
statements of income, of stockholders' equity, and of cash flows included in the
Zions Bancorp Financial Statements fairly presented the results of operations,
stockholders' equity, and cash flows of Zions Bancorp and its subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments), in each case in accordance with generally
accepted accounting principles, consistently applied, and the accounting
requirements of financial institution regulatory authorities, during the periods
involved, except as may be noted therein.
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8.8. Securities Filings. Since January 1, 1997, Zions Bancorp has filed
all periodic and current reports it was required to file pursuant to Section 13
of the Exchange Act. Such reports do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make such
reports, in light of the circumstances under which they were filed, not
misleading.
8.9. Absence of Certain Developments. Since March 31, 1998, 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.
8.10. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by Zions Bancorp, Val Cor,
or Vectra hereunder or in connection with this Agreement or any of the
transactions contemplated thereunder contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading. There is no fact known to Zions Bancorp, Val Cor, or Vectra 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 Zions
Bancorp to the Company. Copies of all documents referred to in this Agreement,
unless prepared solely by the Company and the Bank or solely by the Company and
the Bank and third parties hereto, are true, correct, and complete copies
thereof and include all amendments, supplements, and modifications thereto and
all waivers thereunder.
8.11. Regulatory and Other Approvals. As of the date hereof, except as
set forth on Schedule 8.11 hereof, none of Zions Bancorp, Val Cor, nor Vectra 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 consummation of the
transactions contemplated by this Agreement. As of the date hereof, none of
Zions Bancorp, Val Cor, nor Vectra 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 consummation of the
transactions contemplated by this Agreement.
9. Closing.
9.1. Place and Time of Closing. Closing shall take place at the offices
of Vectra Bank, 1650 South Colorado Boulevard, Denver, Colorado, 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.
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9.2. Events To Take Place at Closing. At the Closing, the following
actions will be taken:
(a) Such certificates and other documents as are required by
this Agreement to be executed and delivered on or prior to the Effective Date
and have not been so executed and delivered, and such other certificates and
documents as are mutually deemed by the parties to be otherwise desirable for
the effectuation of the Closing, will be so executed and delivered; and then
(b) the Holding Company Merger and the issuance of shares
incident thereto shall be effected; provided, however, that the administrative
and ministerial aspects of the issuance of shares incident to the Holding
Company Merger will be settled as soon thereafter as shall be reasonable under
the circumstances; 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, by instrument duly authorized and executed and
delivered to the other parties, unless the Effective Date shall have occurred on
or before such date:
(a) on or after January 31, 1999, or
(b) if, within thirty days after the filing of the
Registration Statement, the SEC shall have advised Zions Bancorp that no review
of the Registration Statement has been or will be made, after November 30, 1998.
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
the Bank contained in Section 6 hereof was materially incorrect when made, or
(ii) in the event of a material breach or material failure by the Company or the
Bank of any covenant or agreement of the Company or the Bank contained in this
Agreement which has not been, or cannot be, cured within thirty days after
written notice of such breach or failure is given to the Company or the 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,
Val Cor, or Vectra contained in
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Section 8 hereof was materially incorrect when made, or (ii) in the event of a
material breach or material failure by Zions Bancorp, Val Cor, or Vectra of any
covenant or agreement of Zions Bancorp, Val Cor, or Vectra 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, Val Cor, or
Vectra, 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 Holding Company Merger has
become inadvisable or impracticable by reason of the institution of litigation
by the federal government or the government of the State of Colorado 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, Val Cor, Vectra, the Company, the Bank,
or their respective directors or officers or shareholders, in respect of this
Agreement. Notwithstanding the foregoing, (a) as provided in Section 11.4 of
this Agreement, the confidentiality agreement contained in that section shall
survive such termination, and (b) if such termination is a result of any of the
representations and warranties of a party being materially incorrect when made,
or subsequent thereto, 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 aggregate amount of
$500,000 to the other party or parties hereto (collectively and not
individually) that are not affiliated with it. The $500,000 referred to in the
previous sentence represents full liquidated damages the payment of which shall
terminate all of the rights and remedies of the receiving party or parties, at
law or in equity, against the paying party or parties in respect of the material
incorrectness of its or their representations and warranties or its or their
material breach or failure to perform.
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 that party (if an individual) or by the board of directors of
such party (if a corporation), 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 party, board of directors, or officer taking such action, such waiver
will not have a materially adverse effect on the benefits intended hereunder to
it or 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,
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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 or shareholders of Vectra in any respect that would prejudice the
economic interests of such Company shareholders or Vectra shareholders, as the
case may be, or any of them, except as specifically provided herein or by like
action of such shareholders.
(b) If Zions Bancorp and the Company should mutually determine
(following receipt of advice of legal or other counsel) that it has become
inadvisable or inexpedient to effectuate the transactions contemplated by this
Agreement through means of a sequence of mergers such as is contemplated herein,
then 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, provided, however, that such change
shall not adversely affect the financial consideration to be received by
shareholders of the Company nor affect the qualification of the Holding Company
Merger and the Bank Merger as one or more tax-free reorganizations under the
Code.
(c) The parties to this Agreement acknowledge that Vectra is a
party to an unrelated agreement and plan of reorganization pursuant to which
Vectra is scheduled to be consolidated with State Bank and Trust of Colorado
Springs, a Colorado banking corporation, in a transaction that will cause a new
national banking association to be formed under the name of Vectra (the
"Consolidation"). The parties hereto agree that nothing in this Agreement shall
preclude or condition the right of Vectra to participate in the Consolidation.
The parties hereto further agree that, if the Consolidation shall have occurred
prior to the Effective Date, then the parties will effect such change in the
form of transaction, by written instrument in amendment of this Agreement and of
such other agreements between or among the parties hereto or any of them as
shall be implicated herein, as shall be necessary or advisable to cause the Bank
to merge into the new national banking association resulting from the
Consolidation.
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 materials to be transmitted to shareholders of
the Company and 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, (ii) costs incurred
by the Company or the Bank at the request of Zions Bancorp, Val Cor or Vectra to
prepare for the electronic and systematic conversion of data regarding the Bank
to Zions Bancorp's own system of electronic data processing shall be deemed to
be incurred on behalf of Zions Bancorp, and (iii) the cost of procuring the tax
opinion referred to in Section 3.5 of this Agreement shall be deemed to be
incurred on behalf of the Company.
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11.2. Mutual Cooperation. Subject to the terms and conditions herein
provided, each party shall use its best efforts, and shall cooperate fully with
the other party, in expeditiously carrying out the provisions of this Agreement
and in expeditiously making all filings and obtaining all necessary governmental
approvals, and as soon as practicable shall execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional documents
and instruments and do or cause to be done all additional things necessary,
proper, or advisable under applicable law to consummate and make effective on
the earliest practicable date the transactions contemplated hereby.
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, Val Cor, Vectra, the Company, the
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, Val Cor, Vectra, the
Company, the Bank, nor their respective subsidiaries shall use any of such
information for any other purpose, including, without limitation, the
competitive detriment of any other party. Zions Bancorp, Val Cor, and Vectra, on
the one hand, and the Company and the 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 the Bank shall indemnify, defend,
and hold Zions Bancorp, Val Cor, and Vectra 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 or his acts in connection with the transactions contemplated by this
Agreement or based upon any agreement or arrangement made by it or him or on its
or his behalf with respect to Zions Bancorp, Val Cor, or Vectra.
(b) Each of Zions Bancorp, Val Cor, and Vectra shall
indemnify, defend, and hold the Company and the Bank harmless for, from, and
against any claim, suit, liability, fees, or expenses (including, without
limitation, attorneys' fees and costs of court) arising out of any claim for
brokerage commissions, finder's fees, or similar compensation arising out of or
due to any of its acts in connection with any of the transactions contemplated
by this Agreement or
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based upon any agreement or arrangement made by it or on its behalf with respect
to the Company or the 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 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.
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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 5 percent of the shareholders' equity of the
Company as of March 31, 1998, 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 5 percent of the shareholders' equity of Zions
Bancorp as of March 31, 1998, as determined in accordance with generally
accepted accounting principles.
(c) For other purposes and, notwithstanding subsections (a)
and (b) of this Section 11.7, when used anywhere in this Agreement with explicit
reference to any of the federal securities laws or to the Registration
Statement, the terms "material" and "materially" shall be construed and
understood in accordance with standards of materiality as judicially determined
under the federal securities laws.
11.8. Covenants of Zions Bancorp.
(a) From the date hereof to the Effective Date, Zions Bancorp
shall, contemporaneously with the filing with the SEC of any periodic or current
report pursuant to section 13 of the Exchange Act, deliver a copy of such report
to the Company.
(b) Following the Effective Date neither Val Cor nor Vectra
will take any action to abrogate or diminish any right accorded under the
articles of incorporation or by-laws of the Company or the 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 the 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 the Bank to any person who, on or prior to the Effective Date,
was a director or officer of the Company or the Bank shall survive the Effective
Date and, following the Holding Company Merger and the Bank Merger, to the
extent permitted by law, Val Cor and Vectra will honor such obligations in
accordance with their terms with respect to events, acts, or omissions occurring
prior to the Effective Date.
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(c) Zions Bancorp in cooperation with the Company and the Bank
will arrange for directors and officers insurance coverage for the directors and
officers of the Company and the Bank, not in excess of the coverage enjoyed by
the directors and officers of the Company and the Bank on March 31, 1998,
against claims made after the Effective Date with respect to acts that occurred
prior to the Effective Date until the fourth anniversary of the Effective Date.
The cost of such coverage will be borne by Zions Bancorp.
11.9. Adjustments for Certain Events. Anything in this agreement to the
contrary notwithstanding, all prices per share, share amounts, and per-share
amounts referred to in this Agreement shall be appropriately adjusted to account
for stock dividends, split-ups, mergers, recapitalizations, combinations,
conversions, exchanges of shares or the like, but not for normal and recurring
cash dividends declared or paid in a manner consistent with the established
practice of the payer.
11.10. Stock Repurchases. The Company and the Bank acknowledge that
from time to time Zions Bancorp repurchases shares of its common stock in the
open market in accordance with market conditions. Nothing in this Agreement
shall be construed to abridge the right of Zions Bancorp to continue to do so in
compliance with Exchange Act rules and regulations and pursuant to advice of
independent securities counsel for Zions Bancorp.
11.11. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart.
11.12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to their commitments to 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, Val Cor, Vectra,
the Company, the Bank, and their respective shareholders, any rights or remedies
under or by reason of this Agreement.
11.13. Survival of Representations, Warranties, and Covenants. The
respective representations, warranties, and covenants of each party to this
Agreement are hereby declared by the other parties to have been relied on by
such other parties and shall survive for one year following the Effective Date,
provided that if any party should breach a representation, warranty, or covenant
contained in this Agreement through fraud, deliberate misrepresentation, or
other intentional tortious conduct, 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.
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11.14. Section Headings. The section and subsection headings herein
have been inserted for convenience of reference only and shall in no way modify
or restrict any of the terms or provisions hereof. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
11.15. Notices. All notices, consents, waivers, or other communications
which are required or permitted hereunder shall be in writing and deemed to have
been duly given if delivered personally or by messenger, transmitted by telex or
telegram, by express courier, or sent by registered or certified mail, return
receipt requested, postage prepaid. All communications shall be addressed to
the appropriate address of each party as follows:
If to Zions Bancorp, Val Cor, or Vectra:
Zions Bancorporation
One South Main, 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 LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
If to the Company or the Bank:
Eagle Holding Company
1990 West 10th Avenue
Broomfield, Colorado 80020-1071
Attention: David T. Manley
Chairman, President and Chief Executive Officer
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With a required copy to:
Ernest J. Panasci, Esq.
Slivka Robinson Waters & O'Dorisio, P.C.
1099 Eighteenth Street, Suite 2600
Denver, Colorado 80202
All such notices shall be deemed to have been given on the date
delivered, transmitted, or mailed in the manner provided above.
11.16. Choice of Law and Venue. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Utah,
without giving effect to the principles of conflict of law thereof. The parties
hereby designate Salt Lake County, Utah and Boulder County, Colorado to be
proper jurisdictions and venues for any suit or action arising out of this
Agreement. Each of the parties consents to personal jurisdiction in each of such
venues for such a proceeding and agrees that it may be served with process in
any action with respect to this Agreement or the transactions contemplated
thereby by certified or registered mail, return receipt requested, or to its
registered agent for service of process in the state of Utah or Colorado. Each
of the parties irrevocably and unconditionally waives and agrees, to the fullest
extent permitted by law, not to plead any objection that it may now or hereafter
have to the laying of venue or the convenience of the forum of any action or
claim with respect to this Agreement or the transactions contemplated thereby
brought in the courts aforesaid.
11.17. Knowledge of a Party. References in this Agreement to the
knowledge of a party shall mean the knowledge possessed by the present executive
officers of such party including, without limitation, information which is or
has been in the books and records of such party.
11.18. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ZIONS BANCORPORATION
Attest: -------------------- By: ------------------------
Jennifer R. Jolley Nolan X. Bellon
Assistant Secretary Senior Vice President
and Controller
VAL COR BANCORPORATION, INC.
Attest: -------------------- By: ------------------------
Ray L. Nash
Chief Financial Officer
and Secretary
VECTRA BANK COLORADO, NATIONAL
ASSOCIATION
Attest: -------------------- By: ------------------------
Ray L. Nash
Chief Financial Officer
and Secretary
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EAGLE HOLDING COMPANY
Attest: -------------------- By: ------------------------
David T. Manley
Chairman, President and
Chief Executive Officer
EAGLE BANK
Attest: -------------------- By: ------------------------
David T. Manley
Chairman, President and
Chief Executive Officer
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_______________________________________
)
State of Utah )
) ss.
County of Salt Lake )
_______________________________________)
On this third day of June, 1998, before me personally appeared Nolan
X. Bellon, to me known to be the Senior Vice President and Controller 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 Colorado )
) ss.
County of Denver )
_______________________________________
On this third day of June, 1998, before me personally appeared Ray L.
Nash, to me known to be the Chief Financial Officer and Secretary of each of Val
Cor Bancorporation, Inc. and Vectra Bank Colorado, National Association, 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
each stated that he was authorized to execute said instrument and that the
respective 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
49
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_______________________________________
)
State of Colorado )
) ss.
County of Boulder )
_______________________________________
On this third day of June, 1998, before me personally appeared David
T. Manley, to me known to be the Chairman, President and Chief Executive Officer
of Eagle Holding Company and the Chairman, President and Chief Executive Officer
of Eagle 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 Eagle Holding
Company (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 Eagle Bank.
- ------------------------------- ----------------------------------
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SCHEDULE 1.8
John Claus
Allan Hallock
David T. Manley
Don Alan Thomas
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APPENDIX B
COLORADO BUSINESS CORPORATION ACT
Rights of Dissenting Owners
7-113-101 DEFINITIONS.--For purposes of this article:
1. "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
2. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
3. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
4. "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
5. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
6. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
7. "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.--1. A shareholder, whether or not entitled
to vote, is entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
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(II) The corporation is a subsidiary that is merged with its
parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition under section 7-112-102(2).
1.3. A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended or on
the national market system of the national association of securities dealers
automated quotation system, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
1.8. The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by more
than two thousand shareholders;
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(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
2.
2.5. A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
3. A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
4. A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--1. A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by any one person and
causes the corporation to receive written notice which states such dissent and
the name, address, and federal taxpayer identification number, if any, of each
person on whose behalf the record shareholder asserts dissenters' rights. The
rights of a record shareholder under this subsection (1) are determined as if
the shares as to which the record shareholder dissents and the other shares of
the record shareholder were registered in the names of different shareholders.
2. A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
3. The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability
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to exercise dissenters' rights. Any such requirement shall be stated in the
dissenters' notice given pursuant to section 7-113-203.
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--1. If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1) shall not affect any action taken
at the shareholders' meeting for which the notice was to have been given, but
any shareholder who was entitled to dissent but who was not given such notice
shall not be precluded from demanding payment for the shareholder's shares under
this article by reason of the shareholder's failure to comply with the
provisions of section 7-113-202(1).
2. If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--1. If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting and if notice of dissenters'
rights has been given to such shareholder in connection with the action pursuant
to section 7-113-201(1), a shareholder who wishes to assert dissenters' rights
shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
2. If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to
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section 7-113-201(2) a shareholder who wishes to assert dissenters' rights shall
not execute a writing consenting to the proposed corporate action.
3. A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--1. If a proposed corporate action
creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
2. The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.--1. A shareholder who is given
a dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly completed, or
may be stated in another writing; and
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(b) Deposit the shareholder's certificates for certificated shares.
2. A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
3. Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
4. A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.--1. Upon receipt of a demand for
payment under section 7-113-204 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer thereof.
2. In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--1. Except as provided in section 7-113-208, upon
the effective date of the corporate action creating dissenters' rights under
section 7-113-102 or upon receipt of a payment demand pursuant to section
7-113-204, whichever is later, the corporation shall pay each dissenter who
complied with section 7-113-204, at the address stated in the payment demand, or
if no such address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
2. The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as of
the end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, and, if the corporation customarily
provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
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(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.--1. If the effective date of the
corporate action creating dissenters' rights under section 7-113-102 does not
occur within sixty days after the date set by the corporation by which the
corporation must receive the payment demand as provided in section 7-113-203,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
2. If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set
by the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--1. The corporation may, in
or with the dissenters' notice given pursuant to section 7-113-203, state the
date of the first announcement to news media or to shareholders of the terms of
the proposed corporate action creating dissenters' rights under section
7-113-102 and state that the dissenter shall certify in writing, in or with the
dissenter's payment demand under section 7-113-204, whether or not the dissenter
(or the person on whose behalf dissenters' rights are asserted) acquired
beneficial ownership of the shares before that date. With respect to any
dissenter who does not so certify in writing, in or with the payment demand,
that the dissenter or the person on whose behalf the dissenter asserts
dissenters' rights acquired beneficial ownership of the shares before such date,
the corporation may, in lieu of making the payment provided in section
7-113-206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
2. An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR
OFFER.--1. A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the corporation
must receive the payment demand; or
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(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
2. A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
7-113-301 COURT ACTION.--1. If a demand for payment under section
7-113-209 remains unresolved, the corporation may, within sixty days after
receiving the payment demand, commence a proceeding and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay to
each dissenter whose demand remains unresolved the amount demanded.
2. The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the corporation has
no principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
3. The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against their
shares, and all parties shall be served with a copy of the petition. Service on
each dissenter shall be by registered or certified mail, to the address stated
in such dissenter's payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, or as
provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
5. Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COSTS AND COUNSEL FEES.--1. The court in an appraisal
proceeding commenced under Section 7-113-301 shall determine all costs of the
proceeding,
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including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation; except that
the court may assess costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
section 7-113-209.
2. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the requirements of part
2 of this article; or
(b) Against either the corporation or one of more dissenters, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to said counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
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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.
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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.
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
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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.
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.
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(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
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.
(8) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement.
II-4
<PAGE>
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(9) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(10) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-5
<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 21st day of July, 1998.
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 July 21, 1998
- ---------------------- Officer and Director
Harris H. Simmons
/s/ Dale M. Gibbons Executive Vice President July 21, 1998
- ---------------------- and Chief Financial Officer
Dale M. Gibbons
II-6
<PAGE>
/s/ Nolan X. Bellon Senior Vice President July 21, 1998
- --------------------- and Controller
Nolan X. Bellon
/s/ Roy W. Simmons Chairman and Director July 21, 1998
- ---------------------
Roy W. Simmons
/s/ Jerry C. Atkin Director July 21, 1998
- ---------------------
Jerry C. Atkin
/s/ R. D. Cash Director July 21, 1998
- ---------------------
R. D. Cash
/s/ L. E. Simmons Director July 21, 1998
- ---------------------
L. E. Simmons
/s/ Grant R. Caldwell Director July 21, 1998
- ---------------------
Grant R. Caldwell
/s/ I. J. Wagner Director July 21, 1998
- ---------------------
I. J. Wagner
/s/ Roger B. Porter Director July 21, 1998
- ---------------------
Roger B. Porter
/s/ Richard H. Madsen Director July 21, 1998
- ---------------------
Richard H. Madsen
/s/ Robert G. Sarver Director July 21, 1998
- ---------------------
Robert G. Sarver
II-7
<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 June 3, 1998 among Zions Bancorporation,
Val Cor Bancorporation, Inc., Bank Colorado,
National Association, Eagle Holding Company
and Eagle Bank (included in the Proxy
Statement/Prospectus as Appendix A; Exhibits
I, II, III, IV, V and VIII to the Agreement
and Plan of Reorganization are 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)
4 Shareholder Protection Rights Agreement, dated *
as of September 27, 1996, between Zions
Bancorporation and Zions First National Bank
as Rights Agent (incorporated by reference to
Exhibit 1 to the Registrant's Form 8-K, filed
October 12, 1996)
II-8
<PAGE>
5 Opinion of Duane, Morris & Heckscher LLP
regarding the legality of the shares of Common
Stock being registered (filed herewith)
8 Opinion of Slivka Robinson Waters & O'Dorisio,
P.C. regarding tax matters (filed herewith)
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
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)
II-9
<PAGE>
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 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)
10.9 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)
10.10 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)
10.11 Zions Bancorporation Senior Management Value *
Sharing Plan Award Period 1996-1999
(incorporated by reference to Exhibit 10.16 of
Zions Bancorporation's Annual Report on Form
10-K for the year ended December 31, 1996,
File No. 0-2610)
10.12 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)
10.13 Employment Agreement between Zions *
Bancorporation and Mr. John 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)
II-10
<PAGE>
10.14 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)
10.15 Form of Employment Agreement between Pitkin *
County Bank & Trust Company and Charles B.
Israel (incorporated by reference to Exhibits
10.16 to the Registrant's Form S-4
Registration Statement, File No. 333-23839,
filed on March 24, 1997)
10.16 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)
10.17 Form of Employment Agreement between The First *
National Bank in Alamosa and David E. Broyles
(incorporated by reference to Exhibit 10.17 to
the Registrant's Form S-4 Registration
Statement, File No. 333-41821, filed on
December 10, 1997)
10.18 Form of Employment Agreement between Valley *
National Bank of Cortez and Richard C. Tucker
(incorporated by reference to Exhibit 10.21 to
the Registrant's Form S-4 Registration
Statement, File No. 333-43405, filed on
December 29, 1997)
10.19 Form of Employment Agreement between Vectra *
Bank Colorado, National Association and James
A. Simon (incorporated by reference to Exhibit
10.21 to the Registrant's Form S-4
Registration Statement, File No. 333-50733,
filed on April 22, 1998)
10.20 Form of Employment Agreement between Vectra *
Bank Colorado, National Association and John
G. Jackson (incorporated by reference to
Exhibit 10.24 to the Registrant's Form S-4
Registration Statement, File No. 333-50823,
filed on April 23, 1998)
II-11
<PAGE>
10.21 Form of Employment Agreement between Vectra *
Bank Colorado, National Association and Larry
G. Neuschwanger (incorporated by reference to
Exhibit 10.21 to the Registrant's Form S-4
Registration Statement, File No. 333-59445,
filed on July 20, 1998)
10.22 Form of Employment Agreement between Zions *
Bancorporation and James C. Hawkanson
(incorporated by reference to Exhibit 10.21 to
the Registrant's Form S-4 Registration
Statement, File No. 333-59335, filed on July
17, 1998)
10.23 Form of Employment Agreement between Vectra
Bank Colorado, National Association and David
T. Manley (filed as Exhibit VIII to the
Agreement and Plan of Reorganization, filed
herewith)
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, 1997,
File No. 0-2610)
23.1 Consent of KPMG Peat Marwick LLP, independent
certified public accountants for Zions
Bancorporation (filed herewith)
23.2 Consent of Van Dorn & Bossi, independent
certified public accountants for Eagle Holding
Company (filed herewith)
23.3 Consent of Arthur Andersen LLP, independent
certified public accountants for Sumitomo Bank
of California (filed herewith)
23.4 Consent of Duane, Morris & Heckscher LLP
(contained in their opinion filed as Exhibit 5)
23.5 Consent of Slivka Robinson Waters & O'Dorisio,
P.C. (contained in their opinion filed as
Exhibit 8)
24.1 Power of Attorney (set forth on Page II-6 of
the Registration Statement)
99.1 Preliminary copy of letter to shareholders of
Eagle Holding Company (filed herewith)
II-12
<PAGE>
99.2 Preliminary copy of Notice of Special Meeting
of Shareholders of Eagle Holding Company
(filed herewith)
99.3 Preliminary copy of form of proxy for use by
shareholders of Eagle Holding Company (filed
herewith)
99.4 Form of Voting Agreement between Zions
Bancorporation and various shareholders of
Eagle Holding Company (filed herewith as
Exhibit IV to the Agreement and Plan of
Reorganization, filed as Exhibit 2.1 above)
* incorporated by reference
II-13
EXHIBIT 2.1
EXHIBIT I
HOLDING COMPANY MERGER AGREEMENT
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of [___________],
1998, between VAL COR BANCORPORATION, INC. ("Val Cor"), a corporation organized
under the laws of the State of Colorado, and EAGLE HOLDING COMPANY (the
"Company"), a corpora tion organized under the laws of the State of Colorado.
Val Cor and the Company are herein after sometimes individually called a
"Constituent Corporation" and collectively called the "Constituent
Corporations."
RECITALS
Val Cor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado. As of [___________], 1998, the
authorized capital stock of Val Cor consisted of [___________] shares of Common
Stock, [___________] par value, of which [___________] shares were issued and
outstanding; no shares of capital stock were held in its treasury on such date.
All of the capital stock of Val Cor is owned of record and beneficially by Zions
Bancorpo ration, a corporation organized under the laws of the State of Utah
("Zions Bancorp").
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado. As of [___________] 1998,
the authorized capital stock of the Company consisted of [___________] shares of
Company Common Stock, [___________] par value (the "Company Common Stock"), of
which [___________] shares were issued and out standing; no shares of capital
stock were held in its treasury on such date.
Val Cor and the Company have entered into an Agreement and Plan of
Reorganization, dated June 3, 1998 (the "Plan of Reorganization"), setting forth
certain representations, warran ties, and agreements in connection with the
transactions therein and herein contemplated, which contemplates the merger of
the Company with and into Val Cor (the "Merger") in accordance with this
Agreement of Merger (the "Agreement").
The Boards of Directors of each of Val Cor 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 Val Cor and the Company, by
resolutions duly adopted, have approved the Plan of Reorganization. The Boards
of Directors of each of Val Cor and the Company, by resolutions duly adopted,
have approved this Agreement. The Boards of Directors of each of Val Cor and the
Company have directed that this Agreement, and authorization for the
transactions contem plated hereby, be submitted to stockholders of Val Cor and
the Company respectively for approval.
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"), as
provided herein.
<PAGE>
In consideration of the premises and the mutual covenants and
agreements herein contained and subject to the terms and conditions of the
Agreement, the parties hereto hereby covenant and agree as follows:
ARTICLE I
1.1. Merger of the Company into Val Cor. The Company shall be merged
with and into Val Cor 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
Colorado pursuant to section 7-111-105 of the Colorado Business Corporation Act
(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 Val Cor shall be a single corporation, which
shall be Val Cor. Val Cor is hereby designated as the surviving corporation in
the Merger and is herein after sometimes called the "Surviving Corporation."
(b) The separate existence of the Company shall cease.
(c) The Surviving Corporation shall have all the rights,
privileges, immuni ties, and powers and shall assume and be subject to all the
duties and liabilities of a corporation organized under the Colorado 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 Consti tuent
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 Val Cor as they exist
immediately prior to the Effective Date shall be the Articles of Incorporation
of the Surviving Corporation until later amended pursuant to Colorado law.
- 2 -
<PAGE>
(g) At the Effective Date and until surrendered for exchange and
payment, each outstanding stock certificate which, prior to the Effective Date,
represented 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 from Zions Bancorp, and shall for all purposes represent the right to
receive, upon surrender of the certificate formerly representing such shares,
the number of shares of Zions Bancorp Stock 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 Val Cor and otherwise to carry
out the purposes of this Agreement.
(b) If, at any time after the Effective Date, Val Cor 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 Val Cor its right, title, or interest in or under any of
the rights, properties, or assets of the Company acquired or to be acquired by
Val Cor 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 Val Cor 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 Val Cor
and otherwise to carry out the purposes of this Agreement; and the proper
officers and directors of Val Cor 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 Val Cor
as of the Effective Date shall be [___________] shares of Common Stock,
[___________] par value.
2.2. By-Laws. The By-Laws of Val Cor as they exist immediately prior to
the Effective Date shall be the By-Laws of Val Cor until later amended pursuant
to Colorado law.
ARTICLE III
3.1. Manner of Converting Shares.
- 3 -
<PAGE>
(a) Subject to the terms, conditions, and limitations set forth
herein, upon surrender of his, her or its certificate or certificates, 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, that number of shares of the common stock
of Zions Bancorp, no par value (the "Zions Bancorp Stock") calculated by
dividing the Consideration Number by the total number of shares of Company
Common Stock that shall be issued and outstanding at the Effective Date.
(b) As used in paragraph (a) of this section 3.2, the term
"Consideration Number" means 230,000. Notwithstanding the foregoing, if the
Transaction Expenses (as hereinafter defined), determined on a pre-tax basis in
accordance with generally accepted accounting principles, exceed $65,000, then
the "Consideration Number" shall be equal to 230,000 less the number calculated
by dividing the Transaction Expenses in excess of $65,000, net of any associated
tax benefit, by $50.375. As used in the preceding sentence, "Transaction
Expenses" are all expenses incurred from April 1, 1998 through the Effective
Date with respect to attorneys, accountants, investment bankers, consultants,
brokers and finders who will have rendered services to the Company or the Bank
in connection with the transactions contemplated by this Agreement, it being
agreed that none of the following expenses are Transaction Expenses: (i) the
cost of the audit of the financial statements of the Company and the Bank as of
December 31, 1997 and the year then ended; (ii) the monthly accrual of the
expense associated with the audit of the financial statements of the Company and
the Bank as of December 31, 1998 and the year then ended; (iii) the cost of
addressing the risk that certain computer applications used by the Company and
the Bank may be unable to recognize and perform properly date- sensitive
functions involving dates prior to and after December 31, 1999; (iv) costs
incurred at the request of Zions Bancorp, Val Cor or Vectra to prepare for the
electronic and systematic conversion of data regarding the Bank to Zions
Bancorp's own system of electronic data processing; (v) distribution of benefits
accrued for the benefit of participants in the Profit Sharing Plan of the Bank;
or (vi) costs of sponsoring Broomfield High School and City of Broomfield
scoreboards committed to before May 1, 1998 and related advertising costs
incurred by the Bank and accounted for under generally accepted accounting
principles.
3.2. No Fractional Shares. Zions Bancorp will not issue fractional
shares of its 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 $50.375. Such fractional share interest shall not include the
right to vote or to receive dividends or any interest thereon.
3.3. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his, her or its Zions Bancorp Stock until he,
she or it exchanges his, her or its certificates representing Company Common
Stock for Zions Bancorp Stock. Any dividends declared on Zions Bancorp Stock to
holders of record on or after the Effective Date shall, with respect to stock to
be delivered pursuant to this Agreement to shareholders of the Company who have
not exchanged their certificates representing Company Common Stock for Zions
Bancorp Stock, be paid to the Exchange Agent (as designated in Section 3.4 of
this Agreement) and, upon
- 4 -
<PAGE>
receipt from a former shareholder of the Company of certificates representing
shares of Company Common Stock, the Exchange Agent shall forward to such former
shareholder of the Company (i) certificates representing his or her 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 3.2 hereof.
3.4. Designation of Exchange Agent.
(a) The parties to this Agreement hereby designate Zions First
National Bank, a national banking association with its head office located in
Salt Lake City, Utah ("Zions Bank"), as Exchange Agent to effect the exchanges
contemplated hereby.
(b) Zions Bancorp will, on the Effective Date or as soon
thereafter as is practicable, issue and deliver to Zions Bank the share
certificates representing shares of Zions Bancorp Stock and the cash to be paid
in lieu of fractional shares to holders of Company Common Stock in accordance
with this Agreement.
3.5. Notice of Exchange. Promptly after the Effective Date, Zions Bank
shall mail to each holder of one or more certificates formerly representing
Company Common Stock, except to such holders as shall have waived the notice
required by this Section 3.5, a letter of transmittal specifying the Effective
Date and notifying such holder of the procedures to be followed in surrendering
his, her or its certificate or certificates to Zions Bank for exchange. Such
notice shall be mailed to holders by regular mail at their addresses on the
records of the Company.
3.6. 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, corpora tion, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
- 5 -
<PAGE>
4.3. Choice of Law and Venue. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Utah,
without giving effect to the principles of conflict of law thereof. The parties
hereby designate Salt Lake County, Utah and Boulder County, Colorado to be
proper jurisdictions and venues for any suit or action arising out of this
Agreement. Each of the parties consents to personal jurisdiction in each of such
venues for such a proceeding and agrees that it may be served with process in
any action with respect to this Agreement or the transactions contemplated
thereby by certified or registered mail, return receipt requested, or to its
registered agent for service of process in the State of Utah or Colorado. 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 trans actions 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) termina tion of the Plan of Reorganization or (ii) the mutual consent of Val
Cor 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.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
<TABLE>
<S> <C>
VAL COR BANCORPORATION, INC.
Attest:____________________________________ By:____________________________________________
Ray L. Nash Gary S. Judd
Chief Financial Officer and Secretary President and Chief Executive Officer
EAGLE HOLDING COMPANY
Attest:____________________________________ By:____________________________________________
David T. Manley
Chairman, President and Chief Executive Officer
</TABLE>
- 7 -
<PAGE>
- --------------------
)
State of Colorado )
) ss.
County of Denver )
)
- --------------------
On this [___________] day of [___________], 1998, before me personally
appeared Gary S. Judd, to me known to be the President and Chief Executive
Officer of Val Cor Bancorporation, Inc., and acknowledged said instrument to be
the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he was authorized to execute
said instrument 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
- 8 -
<PAGE>
- --------------------
)
State of Colorado )
) ss.
County of Boulder )
)
- --------------------
On this [___________] day of [___________] 1998, before me personally
appeared David T. Manley, to me known to be the Chairman, President and Chief
Executive Officer of Eagle Holding Company, 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
- 9 -
<PAGE>
EXHIBIT II
BANK MERGER AGREEMENT
AGREEMENT OF MERGER
This Agreement of Merger is made and entered into as of [___________],
1998, between VECTRA BANK COLORADO, NATIONAL ASSOCIATION ("Vectra"), a national
banking association organized under the laws of the United States, and EAGLE
BANK (the "Bank"), a banking corporation organized under the laws of the State
of Colorado. Vectra and the Bank are hereinafter sometimes individually called a
"Constituent Association" and collectively called the "Constituent
Associations."
RECITALS
Vectra is a national banking association duly organized, validly
existing and in good standing under the laws of the United States. As of
[___________], 1998, the authorized capital stock of Vectra consisted of
[___________] shares of Common Stock, $5.00 par value, of which [___________]
shares were issued and outstanding; no shares of capital stock were held in its
treasury on such date.
The Bank is a banking corporation organized under the laws of the State
of Colorado. As of [___________], 1998, the authorized capital stock of the Bank
consisted of [___________] shares of Bank Common Stock, [___________] par value
(the "Bank Common Stock"), of which [___________] shares were issued and
outstanding; no shares of capital stock were held in its treasury on such date.
Vectra and the Bank have entered into an Agreement and Plan of
Reorganization, dated June 3, 1998 (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 Bank with and into Vectra (the "Merger") in accordance with this Agreement
of Merger (the "Agreement").
The Boards of Directors of each of Vectra and the Bank deem the Merger
advisable and in the best interests of each association and its stockholders.
The Boards of Directors of each of Vectra and the Bank, by resolutions duly
adopted, have approved the Plan of Reorganization. The Boards of Directors of
each of Vectra and the Bank, by resolutions duly adopted, have approved this
Agreement. The Boards of Directors of each of Vectra and the Bank have directed
that this Agreement, and authorization for the transactions contemplated hereby,
be submitted to stockholders of Vectra and the Bank respectively for approval.
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 Bank into Vectra. The Bank shall be merged with and
into Vectra on the date and at the time to be specified in the Articles of
Merger to be filed with the Comptroller of the Currency pursuant to the National
Bank Act (such date and time being referred to herein as the "Effective Date").
1.2. Effect of the Merger. At the Effective Date:
(a) The Bank and Vectra shall be a single association, which
shall be Vectra. Vectra is hereby designated as the surviving association in the
Merger and is hereinafter some times called the "Surviving Association."
(b) The separate existence of the Bank shall cease.
(c) The currently outstanding [___________] shares of common
stock of Vectra, each of $5.00 par value, will remain outstanding as shares of
the $5.00 par value common stock of Vectra, and the holders of such stock shall
retain their present rights.
(d) The shares of Bank Common Stock shall be canceled.
(e) The Surviving Association shall have all the rights,
privileges, immunities, and powers and shall assume and be subject to all the
duties and liabilities of a national banking association organized under the
National Bank Act.
(f) The Surviving Association 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 Associations; 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
Associations shall be taken and deemed to be transferred to and vested in the
Surviving Association without further act or deed; and the title to any real
estate, or any interest therein, vested in either of the Constituent
Associations shall not revert or be in any way impaired by reason of the Merger.
(g) The Surviving Association shall thenceforth be responsible
and liable for all the liabilities and obligations of each of the Constituent
Associations; and any claim existing or action or proceeding pending by or
against either of the Constituent Associations may be prosecuted as if the
Merger had not taken place, or the Surviving Association may be substituted in
its place. The Surviving Association expressly assumes and agrees to perform all
of the liabilities and obligations of the Bank. Neither the rights of creditors
nor any liens upon the property of either Constituent Association shall be
impaired by the Merger.
(h) The name of the Surviving Association shall be "Vectra
Bank Colorado, National Association."
- 2 -
<PAGE>
(i) The Articles of Association of Vectra as they exist
immediately prior to the Effective Date shall be the Articles of Association of
the Surviving Association until later amended pursuant to the laws of the United
States.
(j) The By-Laws of Vectra as they exist immediately prior to
the Effective Date shall be the By-Laws of Vectra until later amended pursuant
to the laws of the United States.
1.3. Acts to Carry Out This Merger Plan.
(a) The 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 Vectra and otherwise to carry out
the purposes of this Agreement.
(b) If, at any time after the Effective Date, Vectra 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 Vectra its right, title, or interest in or under any of
the rights, properties, or assets of the Bank acquired or to be acquired by
Vectra as a result of, or in connection with, the Merger, or (ii) otherwise
carry out the purposes of this Agreement, the Bank and its proper officers and
directors shall be deemed to have granted to Vectra an irrevocable power of
attorney to execute and deliver all such proper deeds, assign ments, 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 Vectra
and otherwise to carry out the purposes of this Agreement; and the proper
officers and directors of Vectra are fully authorized in the name of the Bank or
otherwise to take any and all such action.
ARTICLE II
2.1. 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.
2.2. 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.
2.3. Choice of Law and Venue. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Utah,
without giving effect to the principles of conflict of law thereof. The parties
hereby designate Salt Lake County, Utah and Boulder
- 3 -
<PAGE>
County, Colorado to be proper jurisdictions and venues for any suit or action
arising out of this Agreement. Each of the parties consents to personal
jurisdiction in each of such venues for such a proceeding and agrees that it may
be served with process in any action with respect to this Agreement or the
transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of Utah or Colorado. 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 trans actions contemplated thereby brought in the courts aforesaid.
2.4. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
2.5. 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.
2.6. Termination. This Agreement shall terminate and be abandoned upon
(i) termination of the Plan of Reorganization or (ii) the mutual consent of
Vectra and the 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.
<TABLE>
<S> <C>
VECTRA BANK COLORADO, NATIONAL
ASSOCIATION
Attest:____________________________________ By:____________________________________________
Ray L. Nash Gary S. Judd
Chief Financial Officer and Secretary President and Chief Executive Officer
EAGLE BANK
Attest:____________________________________ By:____________________________________________
David T. Manley
Chairman, President and Chief Executive Officer
</TABLE>
- 5 -
<PAGE>
- --------------------
)
State of Colorado )
) ss.
County of Denver )
)
- --------------------
On this [___________] day of [___________], 1998, before me personally
appeared Gary S. Judd, to me known to be the President and Chief Executive
Officer of Vectra Bank Colorado, National Association, and acknowledged said
instrument to be the free and voluntary act and deed of said association, 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 association.
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 Colorado )
) ss.
County of Boulder )
)
- --------------------
On this [___________] day of [___________], 1998, before me personally
appeared David T. Manley, to me known to be the Chairman, President and Chief
Executive Officer of Eagle Bank, and acknowledged said instrument to be the free
and voluntary act and deed of said association, 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 association.
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
AGREEMENT TO EXERCISE OPTIONS
June 3, 1998
Zions Bancorporation
One South Main, 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 Eagle
Holding Company (the "Company") (the "Agreement"). The Agreement provides for
the merger of the Company with and into Val Cor Bancorporation, Inc., a
wholly-owned subsidiary of Zions Bancorp (the "Merger") and the conversion of
outstanding shares of Company Stock into Zions Bancorp Common Stock and cash in
lieu of fractional shares 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 represents, warrants, and
agrees that prior to the Effective Date (as defined in the Agreement) of the
Merger he will exercise all stock options to purchase Company Common Stock which
he owns and which by their terms are then exercisable.
Very truly yours,
___________________________
David T. Manley
Accepted and Agreed to:
ZIONS BANCORPORATION
By:______________________
Title:___________________
<PAGE>
EXHIBIT IV
VOTING AGREEMENT
June 3, 1998
Zions Bancorporation
One South Main, 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 Eagle
Holding Company (the "Company") (the "Agreement"). The Agreement provides for
the merger of the Company with and into Val Cor Bancorporation, Inc., a
wholly-owned subsidiary of Zions Bancorp (the "Merger") and the conversion of
outstanding shares of Company Stock into Zions Bancorp Common Stock and cash in
lieu of fractional shares 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 3.1 of the Agreement and Plan of
Reorganization (the "Meeting"), and any adjournment thereof, the under signed
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 individu ally 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
(not including the payment of money or other consideration) 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,
<PAGE>
Zions Bancorporation
June 3, 1998
Page 2
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
voting of 10 percent or more of the outstanding voting securities of a person
having ordinary voting power in the election of directors or in the election of
any other body having similar functions or (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 Eagle 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 (unless such other person is affiliated with the
undersigned or is bound by an agreement with Zions Bancorp substantially
<PAGE>
Zions Bancorporation
June 3, 1998
Page 3
similar to this agreement), and that this agreement is not in any way intended
to affect the exercise by the undersigned of the undersigned's fiduciary
responsibility in respect of any such securities.
Very truly yours,
___________________________
Accepted and Agreed to:
ZIONS BANCORPORATION
By:_______________________
Title:____________________
<PAGE>
Zions Bancorporation
June 3, 1998
Page 4
Name of Shareholder:
Shares of Common Stock of Eagle Holding Company
Beneficially Owned
As of June 3, 1998
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 other than a fiduciary capacity on
behalf of a person who is affiliated with the shareholder or is bound by an
agree ment with Zions Bancorp substantially similar to this agreement) 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 V
CONSENT TO ASSIGNMENT AND AMENDMENT TO LEASE AGREEMENT
CONSENT TO ASSIGNMENT
Pursuant to Section 7.01 of the Lease Agreement dated January 1, 1998
("the Lease") by and between MCR, a Colorado general partnership ("MCR") and
Thomas Family Partnership, LLLP, a Colorado limited liability limited
partnership ("Thomas") (MCR and Thomas being collectively referred to herein as
"Landlord"), and Eagle Bank, a Colorado corporation ("Tenant"), Landlord hereby
consents to the assignment of the Lease by virtue of the merger of Tenant with
Vectra Bank Colorado, National Association, and the merger of Eagle Holding
Company, Tenant's parent, with Val Cor Bancorporation, Inc.
TENANT: LANDLORD:
EAGLE BANK, MCR,
a Colorado banking corporation a Colorado general partnership
By: __________________________ By:____________________________________
Name: David T. Manley, Jr. Name: John Claus a/k/a John C. Claus
Title: President Title: General Partner
Date:_________________________ Date:__________________________________
By: Mountaire, Inc.,
a Colorado corporation, General
Partner
By:_____________________________
Name: John Claus
Title: President
Date:___________________________
THOMAS FAMILY PARTNERSHIP, LLLP,
a Colorado limited liability limited
partnership
By:____________________________________
Name: Sue C. Thomas
Title: General Partner
Date:__________________________________
<PAGE>
AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT TO LEASE AGREEMENT ("Amendment") is made this third day
of June, 1998 by and between MCR, a Colorado general partnership ("MCR") and
Thomas Family Partnership, LLLP, a Colorado limited liability limited
partnership ("Thomas") (MCR and Thomas being collectively referred to herein as
"Landlord"), and Eagle Bank, a Colorado corporation ("Tenant"), Landlord and
Tenant collectively referred to as the parties.
WHEREAS, the parties hereto entered into a Lease Agreement dated
January 1, 1998 ("the Lease") pursuant to which Landlord leased to Tenant
approximately 8474 square feet of rentable area known commonly as Eagle Bank
Building located at 1990 West Tenth Avenue, Broomfield, County of Boulder, in
the State of Colorado; and
WHEREAS, the parties desire to modify the Lease as more particularly
described herein.
NOW, THEREFORE, in consideration of the premises, mutual promises and
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Defined Terms. Unless otherwise specified herein, all terms
contained in this Amendment that are defined in the Lease shall have the same
meaning ascribed to them in the Lease.
2. Term. Section 1.05 of the Lease is hereby amended to read as
follows:
The term of this Lease shall be the period commencing on the
Commencement Date as hereinafter defined and continuing for
one hundred twenty (120) full months following the
Commencement Date, unless sooner terminated as provided in
this Lease. Options to extend the Term are addressed in
Exhibit C attached hereto and made a part hereof. The
provisions of this section 1.05, including the options
addressed in Exhibit C to the Lease, shall apply equally to
any assignee of Tenant who has taken an assignment subject to
the provisions of Section 7.01.
3. Minimum Rent. Section 1.07 of the Lease is hereby amended to
read as follows:
Tenant shall pay to Landlord as Minimum Rent, at the address
for payments set forth in Section 8.02 below, without notice
or demand and without set off or deduction for any reason
whatsoever, during the Term of this Lease the total sum
determined in accordance
<PAGE>
with the following table, payable in advance, on the first day
of each calendar month during the Term in the monthly
installments:
AMOUNT OF AMOUNT
MONTHS MONTHLY OF ANNUAL
PAYMENTS RENT
Month 1 through the end of
the month in which Tenant
merges with an affiliate
of Zions Bancorporation $10,000.00 $120,000.00
The month following the
month in which Tenant
merges with an affiliate
of Zions Bancorporation
through month 60 $11,000.00 $132,000.00
Month 61 through month 120 $12,000.00 $144,000.00
Landlord hereby acknowledges receipt of Ten
Thousand and 00/100 Dollars ($10,000.00), which
amount represents payment of Minimum Rent for
the first month of the Term.
4. Use. Section 1.10 of the Lease is hereby amended to add at the
end of that section the following language:
Tenant shall have the right, subject to the
provisions of Section 7.01, to sublet space in
the Premises to other business concerns
reasonably acceptable to Landlord, whether or
not such other business concerns are engaged in
financial services and related general office
uses.
5. Assignee Sublease or Assignment. Section 7.01(B)(3) of the
Lease is hereby deleted.
6. Assignment or Sublease Consideration. Section 7.01(B)(5) of
the Lease is hereby deleted.
- 2 -
<PAGE>
7. Remedies Upon Default. Section 7.04(A)(i) of the Lease is
hereby amended to read as follows:
Terminate this Lease by written notice to
Tenant, in which event Tenant shall immediately
surrender the Premises to Landlord, and if
Tenant fails to do so, Landlord may without
prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon
and take possession of the Premises and expel or
remove Tenant and any other person occupying the
Premises, or any part thereof. This may be done
by peaceful means or by other means available
under applicable law, including, without
limitation, an action for forcible detainer,
without being liable for prosecution or any
claim or constructive eviction or for damages of
any kind; and Tenant agrees to pay to Landlord,
on demand, damages in an amount equal to the
present value (calculated at a discount rate of
ten percent per annum) of the amount of Minimum
Rent, Additional Rent and other payments
provided for in this Lease for the remainder of
the term to be paid by Tenant, less the fair
rental value of the Premises for the remainder
of the term, plus all expenses incurred by
Landlord in taking possession (including all
court costs and reasonable attorneys' fees) and
plus all Minimum Rent, Additional Rent and other
indebtedness owed by Tenant to the date of
termination.
8. Landlord Liability. Section 8.18 of the Lease is hereby
deleted.
9. Extension of Terms. Section (1)(b) of Exhibit C of the Lease
is hereby amended to read as follows:
Tenant gives and Landlord receives written
notice not less than twelve (12) months prior to
the expiration of the initial Term of the Lease,
or the expiration of the most recent Extended
Term (as hereinafter defined) as the case may
be, of Tenant's intention to extend the Term of
the Lease (the "Extended Term"); and
10. Rent During Extension of Terms. Section (2) of Exhibit C of
the Lease is hereby amended to read as follows:
- 3 -
<PAGE>
(2) THEN:
Landlord will grant to Tenant the right to
extend the term of this Lease upon the
expiration of the initial Term (or the most
recent Extended Term, as the case may be) for
one or two consecutive periods of sixty (60)
months each (each an Extended Term) for a total
of one hundred twenty (120) months upon the same
terms and conditions herein except that
(a) after the second Extended Term there shall
be no further right to extend the Term; and
(b) the Minimum Rent payable during each rental
year during the Extended Term shall be as
follows:
AMOUNT OF AMOUNT
MONTHS MONTHLY OF ANNUAL
PAYMENTS RENT
121 through 180 $13,100.00 $157,200.00
181 through 240 $14,310.00 $171,720.00
11. No Modification. Except as specifically modified and amended
hereby, the Lease shall remain in full force and effect.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment under seal
as of the date first above written.
TENANT: LANDLORD:
EAGLE BANK, MCR,
a Colorado banking corporation a Colorado general partnership
By:___________________________ By:____________________________________
Name: David T. Manley, Jr. Name: John Claus a/k/a John C. Claus
Title: President Title: General Partner
Date:_________________________ Date:__________________________________
By: Mountaire, Inc.,
a Colorado corporation, General
Partner
By:_______________________________
Name: John Claus
Title: President
Date:_____________________________
THOMAS FAMILY PARTNERSHIP, LLLP,
a Colorado limited liability limited
partnership
By:____________________________________
Name: Sue C. Thomas
Title: General Partner
Date:__________________________________
- 5 -
<PAGE>
EXHIBIT VIII
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
[___________] day of [___________], 1998, by and between DAVID T. MANLEY
("Executive") and VECTRA BANK COLORADO, NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States ("Resulting 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 June 3, 1998 by and among Zions Bancorporation, a Utah corporation, ("Zions
Bancorp"), Val Cor Bancorporation, Inc., a Colorado corporation, Resulting Bank,
Eagle Holding Company, a Colorado corporation, and Eagle Bank, a banking
corporation organized under the laws of the State of Colorado (the "Bank"),
provides that the Bank will be merged with and into Resulting Bank;
WHEREAS, Executive is Chairman, President and Chief Executive Officer
of the Bank;
WHEREAS, Resulting 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 4.9 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 agree ments hereinafter set forth, the parties agree as follows:
1. Employment; Responsibilities and Duties.
(a) Resulting Bank hereby agrees to employ Executive, and Executive
hereby agrees to serve as [___________] of Resulting Bank and of any depository
institution which is successor-in-interest thereto ("Resulting Bank" hereafter
to include any depository institution which is successor-in-interest thereto)
during the Term of Employment. Executive shall have primarily management
responsibility for the lending, deposit gathering, and other banking activities
of Resulting Bank within the community formerly served by the Bank and shall
have such other reasonable duties, responsibilities, and authority as shall be
set forth in the bylaws of Resulting Bank on the date of this Agreement or as
may otherwise be determined by Resulting Bank.
<PAGE>
(b) Executive shall devote his full working time and best efforts to
the performance of his responsibilities and duties hereunder and to the
retention of the customer relationships to which the Bank has been a party prior
to the date of this Agreement. During the Term of Employment, Executive shall
not, without the prior written consent of the Board of Directors of Resulting
Bank, render services as an employee, independent contractor, or otherwise,
whether or not compensated, to any person or entity other than Resulting 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) render
to any organization set forth in Schedule A to this Agreement the services
described in Schedule A under the caption of such organization, (iii) manage his
personal investments, and (iv) with the prior permission of the Board of
Directors or the chief executive officer of Resulting 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. In the event
that Executive should wish to procure the prior permission of the Board of
Directors or the chief executive officer of Resulting Bank under clause (iv) of
the previous sentence he will provide to the chief executive officer of
Resulting Bank a written summary of the organization and proposed services to be
rendered to it and shall be entitled to receive a response within five working
days; in the absence of such a response, the prior permission of the Resulting
Bank will be deemed to have been granted.
2. Term of Employment.
(a) The term of this Agreement ("Term of Employment") shall be the
period com mencing on the date hereof (the "Commencement Date") and continuing
until the Termination Date, which shall mean the earliest to occur of:
(i) the third anniversary of the Commencement Date, unless the
Term of Employment shall be extended by mutual written agreement of Executive
and Resulting 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 Resulting 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 Resulting Bank, or with respect to any of
its affiliates for which Executive is assigned material responsibilities or
duties;
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<PAGE>
(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 Resulting 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 Resulting 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
Resulting Bank; or
(vi) the termination of Executive's employment by Resulting
Bank "without cause," which shall be for any reason other than those set forth
in subsections (i), (ii), (iii), (iv), or (v) of this section 2(a), at any time,
upon the thirtieth day following notice to Executive.
(b) In the event that the Term of Employment shall be terminated for
any reason other than that set forth in section 2(a)(vi) hereof, Executive shall
be entitled to receive, upon the occurrence of any such event:
(i) any salary (as hereinafter defined) payable pursuant to
section 3(a)(i) hereof which shall have accrued as of the Termination Date; and
(ii) such rights as Executive shall have accrued as of the
Termination Date under the terms of any plans or arrangements in which he
participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(e)
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(c) 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) any salary (as hereinafter defined) payable pursuant to
section 3(a)(i) hereof which shall have accrued as of the Termination Date;
(ii) for the period commencing on the date immediately
following the Termination Date and ending upon and including the third
anniversary of the Commencement Date, salary payable at the rate established
pursuant to section 3(a)(i) hereof, in a manner consistent
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<PAGE>
with the normal payroll practices of Resulting Bank with respect to executive
personnel as presently in effect or as they may be modified by Resulting Bank
from time to time;
(iii) 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 section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(e)
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(c) hereof;
and
(iv) for the period commencing on the date immediately
following the Termination Date and ending upon and including the earlier of (A)
the first anniversary of the Termination Date, (B) the third anniversary of the
Commencement Date, or (C) the date on which Executive ceases to be covered under
the health insurance plan of Resulting Bank (the "Health Plan") under section
4980B of the Internal Revenue Code (also known as COBRA) ("COBRA"), the
difference between the monthly premium payment that is charged to continue
coverage for Executive under the Health Plan under COBRA and the portion of the
monthly premium payment that would have been charged to Executive to continue
coverage for Executive under the Health Plan of Resulting Bank had he remained
employed by Resulting Bank during such period.
3. Compensation. For the services to be performed by Executive for
Resulting Bank under this Agreement, Executive shall be compensated in the
following manner:
(a) Salary.
(i) During the Term of Employment Resulting Bank shall pay
Executive a salary which shall not be less than $110,000 per annum. Salary shall
be payable in accordance with the normal payroll practices of Resulting Bank
with respect to executive personnel as presently in effect or as they may be
modified by Resulting Bank from time to time.
(ii) During the Term of Employment Executive shall be eligible
to be considered for salary increases, upon review, in accordance with the
compensation policies of Resulting Bank with respect to executive personnel as
presently in effect or as they may be modified by Resulting Bank from time to
time.
(b) Employee Benefit Plans or Arrangements. During the Term of
Employment, Executive shall be entitled to participate in all employee benefit
plans of Resulting Bank, as presently in effect or as they may be modified or
added by Resulting Bank from time to time, under such terms as may be applicable
to officers of Executive's rank employed by Resulting Bank or its affiliates,
including, without limitation, plans providing retirement benefits, profit
sharing, benefits under senior-management bonus programs, medical insurance,
life insurance, disability insurance, and accidental death or dismemberment
insurance, and any other benefit programs available to other executives of
Executive's rank with Resulting Bank.
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<PAGE>
(c) 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 Resulting Bank as in effect as of the Commencement Date or
as may be modified by Resulting Bank from time to time as may be applicable to
officers of Executive's rank employed by Resulting Bank or its affiliates, but
in no event less than that provided to Executive by the Bank at March 31, 1998.
(d) Withholding. All compensation to be paid to Executive hereunder
shall be subject to required withholding and other taxes.
(e) 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 Resulting Bank as are in effect as of the Commencement Date and
as may be modified by Resulting Bank from time to time, under such terms as may
be applicable to officers of Executive's rank employed by Resulting Bank or its
affiliates.
(f) Vehicle. During the Term of Employment, (i) Executive shall have
exclusive use of the Ford Explorer vehicle which the Bank permitted him to use
in 1997, and (ii) Resulting Bank shall pay the reasonable expenses of
maintaining, insuring, and garaging that vehicle. For a period of thirty days
after the Termination Date, Executive shall be entitled to purchase that vehicle
from Resulting Bank at a price equal to its book value net of accumulated
depreciation on the books of Resulting Bank.
4. Confidential Business Information; Non-Competition.
(a) Executive acknowledges that certain business methods, creative
techniques, and technical data of Zions Bancorp and Resulting Bank and their
affiliates and the like are deemed by Resulting Bank to be and are in fact
confidential business information either of Zions Bancorp or Resulting 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 Resulting Bank or its
affiliates, knowledge of customers and their require ments, 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 Resulting Bank or their affiliates, and compositions, ideas, plans,
and methods belonging to or related to the affairs of Zions Bancorp or Resulting
Bank or their affiliates. In this regard, Resulting Bank asserts proprietary
rights in all of its business information and that of its 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
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<PAGE>
required by his duties hereunder, by law, regulation, or order of a court or
government authority, or as directed by Resulting Bank, nor shall he use to the
detriment of Resulting Bank or its affiliates or use in any business or on
behalf of any business competitive with or substantially similar to any business
of Zions Bancorp or Resulting Bank or their affiliates, any confidential
business information obtained during the course of his employment by Resulting
Bank. The foregoing shall not be construed as restricting Executive from
disclosing such information to the employees of Zions Bancorp or Resulting Bank
or their affiliates.
(b) Executive hereby agrees that from the Commencement Date until the
second anniversary of the Termination Date, Executive will not (i) engage in the
banking business other than on behalf of Zions Bancorp or Resulting Bank or
their affiliates within the Market 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 Zions Bancorp or Resulting Bank or their affiliates)
engaged in the banking business in the Market Area, or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the respective Boards of Directors of Resulting Bank or any of its
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); and provided further that
employment by Bankers' Bank of the West, Denver, Colorado shall not in itself
constitute a violation of Executive's obligations under this section 4(b) if
Executive does not provide retail or wholesale services or solicit retail or
wholesale business within the Market Area, and does not provide retail or
wholesale services to or solicit retail or wholesale business from any client or
customer or potential client or potential customer of Bankers' Bank of the West
that is engaged in the banking business in the Market Area.
(c) Executive acknowledges and agrees that irreparable injury will
result to Resulting Bank in the event of a breach of any of the provisions of
this section 4 (the "Designated Provisions") and that Resulting Bank 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 Resulting Bank may have, Resulting Bank shall be entitled to
the entry of a preliminary and permanent injunction (including, without
limitation, specific performance) by a court of competent jurisdiction in Denver
County, Colorado or Boulder County, Colorado 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 juris-
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<PAGE>
diction 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 Resulting Bank, to the fullest extent permitted by applicable law,
the benefits intended by this section 4.
(e) As used herein, "Market Area" shall mean the Colorado counties of
Adams, Arapahoe, Boulder, Denver, Douglas, Jefferson, and Weld.
(f) As used in this section 4, "banking business" includes businesses
(including commercial banks, trust companies, savings banks, savings and loan
associations, and credit unions) primarily engaged in lending and the extension
of credit, accepting federally insured deposits, or engaging in the trust
business, and does not include businesses (including firms primarily engaged in
the sale of insurance or in the businesses of a broker-dealer, investment
adviser, or financial planner) for which the foregoing activities are not
performed or are merely incidental.
5. Life Insurance. In light of the unusual abilities and experience of
Executive, Resulting Bank in its discretion may apply for and procure as owner
and for its own benefit insurance on the life of Executive, in such amount and
in such form as Resulting Bank may choose. Resulting Bank 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 Resulting Bank, 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 Resulting Bank has applied for
insurance. Ineligibility for insurance shall not be a basis for termination.
6. Representations and Warranties.
(a) Executive represents and warrants to Resulting 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 a party.
(b) Executive shall indemnify, defend, and hold harmless Resulting Bank
for, from, and against any and all losses, claims, suits, damages, expenses, or
liabilities, including court costs and counsel fees, to which Resulting Bank may
become subject, insofar as such losses, claims, suits, damages, expenses,
liabilities, costs, or fees arise out of or are based upon any
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<PAGE>
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 Resulting Bank:
Vectra Bank Colorado, N.A.
1650 South Colorado Boulevard
Denver, Colorado 80222-4029
Attention: Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
If to Executive:
Mr. David T. Manley
1407 Dunsford Way
Broomfield, Colorado 80020
With a required copy to:
Keith D. Lapuyade, Esq.
4100 E. Mississippi Avenue, Suite 600
Denver, Colorado 80246
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
obliga tions hereunder without the consent of the other party.
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<PAGE>
9. Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Colorado, without giving
effect to the principles of conflict of law thereof. The parties hereby
designate Denver County, Colorado and Boulder County, Colorado to be proper
jurisdictions and venues for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in each of such venues for
such a proceeding and agrees that 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 Colorado. 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.
10. Entire Agreement. This Agreement constitutes the entire
understanding between Resulting Bank and Executive relating to the subject
matter hereof. Any previous agreements or understandings between the parties
hereto or between Executive and the Bank or any of its affiliates or Resulting
Bank or any of its affiliates 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 contain ing 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.
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
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<PAGE>
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 Colorado. 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 Zions
Bancorp, Resulting Bank, or the Bank 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.
VECTRA BANK COLORADO, NATIONAL
ASSOCIATION
Attest:_________________________ By:___________________________
DAVID T. MANLEY
Witness:________________________ ______________________________
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<PAGE>
SCHEDULE A
Broomfield Economic Development Corporation
Board member and member of executive committee (since 1990)
Broomfield Community Foundation
Board member since 1996
Broomfield Rotary Club
Club member and chairman of foundation committee since 1990
Bal Swan Children's Center
Board member since 1992
Member of finance committee, building committee
Broomfield Blast Soccer Club
Coach of girls team since 1993
Broomfield United Methodist Church
Member of building committee and building finance committee
EXHIBIT 5
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006-1608
(202) 776-7800
July 20, 1998
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 dated as of June 3,
1998, among Eagle Holding Company (the "Company"), Eagle Bank (the "Bank"),
Zions, Val Cor Bancorporation, Inc. ("Val Cor"), and Vectra Bank Colorado,
National Association ("Vectra Bank"), a related Agreement of Merger between the
Company and Val Cor, and a related Agreement of Merger between the Bank and
Vectra Bank (collectively, the "Plan of Reorganization"), whereby the Company
will be merged into Val Cor, with Val Cor being the surviving corporation (the
"Holding Company Merger") and the Bank will be merged into Vectra Bank, with
Vectra Bank being the surviving entity (the "Bank Merger"; the Holding Company
Merger and the Bank Merger being referred to herein collectively as the
"Reorganization"). Upon consummation of the Reorganization, the holders of the
outstanding shares of Company Common Stock will receive in the aggregate up to
230,000 shares (the "Shares") of Zions Common Stock, no par value ("Zions Common
Stock"). Upon the Effective Date of the Reorganization, the shares of Company
Common Stock will be canceled and immediately converted into the right of
holders of Company Common Stock to receive, in exchange for each share of
Company Common Stock, that number of shares of Zions Common Stock calculated by
dividing the Merger Consideration (as defined in the Plan of Reorganization)
consisting of the Shares, by the total number of shares of Company Common Stock
issued and outstanding as of the Effective Date of the Reorganization.
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 Shares into which outstanding
Company Common
<PAGE>
Zions Bancorporation
July 20, 1998
Page 2
Stock will 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;
(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 April 24, 1998, including
resolutions approving the Plan of Reorganization and the issuance
of the Shares; 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 the Company and the Bank to the extent
they are parties thereto 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; and
(3) all documents which must be submitted and filed with government
authorities to effectuate the Reorganization will be so submitted
and filed and all government approvals required by ss. 3.2 of the
Plan of Reorganization shall have been obtained.
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 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.
<PAGE>
Zions Bancorporation
July 20, 1998
Page 3
Based upon the foregoing, we are of the opinion that the Shares to be
issued by Zions as described in the Registration Statement, when and to the
extent issued in accordance with the Plan of Reorganization, will be legally
issued, fully paid and nonassessable.
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 the Proxy Statement/Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ DUANE, MORRIS & HECKSCHER LLP
EXHIBIT 8
July 22, 1998
Zions Bancorporation
Attn: Mr. Harris Simmons, President
and Chief Executive Officer
One South Main, Suite 1380
Salt Lake City, Utah 84111
Ladies and Gentleman:
This letter sets forth the opinion of Slivka Robinson Waters &
O'Dorisio, P.C., regarding material Federal income tax consequences of the
merger (the "Holding Company Merger") of Eagle Holding Company, a Colorado
corporation ("Company"), with and into Val Cor Bancorporation, Inc., a Colorado
corporation ("VCBI"), and the merger (the "Bank Merger") of the Eagle Bank
("Bank") with and into Vectra Bank Colorado, National Association ("Vectra
Bank"), in the manner and on the terms described in the Agreement and Plan of
Reorganization dated June 3, 1998 ("Plan of Merger"). Zions Bancorporation
("Zions Bancorp") is a bank holding company and the sole shareholder of VCBI.
The holders 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, that number of shares of Zions Bancorp Common Stock as set
forth in the Plan of Merger. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Plan of Merger.
In rendering the opinions expressed in this letter, Slivka Robinson
Waters & O'Dorisio, P.C. has, without verification, relied upon and assumed the
accuracy of all of the information contained in the following documents (the
"Relevant Documents"): (1) the Plan of Merger; (2) the Company 1998 statement of
facts and representations provided to us by the management of Company (the
"Company Statement of Facts and Representation"); (3) the Zions Bancorp 1998
statement of facts and representations provided to us by the management of Zions
Bancorp (the "Zions Bancorp Statement of Facts and Representations") and (4)
other documents we considered relevant. Slivka Robinson Waters & O'Dorisio, P.C.
also has assumed, without independent verification, that the parties to the Plan
of Merger have acted (and will continue to act) in accordance with all of the
information and descriptions contained in the Relevant Documents. Further,
Slivka Robinson Waters & O'Dorisio, P.C. has assumed, without independent
verification, that the Holding Company Merger and the Bank Merger will be
consummated as mergers in accordance with applicable federal law, Colorado law
and the National Banking Act.
Based on our analysis of Federal income tax law in light of the facts,
representations and other information stated in the Relevant Documents, and
subject to and contingent upon the accuracy of the Company Statement of Facts
and Representations, the Zions Bancorp Statement of Facts and Representations
and of the assumptions identified in this letter, Slivka Robinson Waters &
O'Dorisio, P.C. is of the opinion that, for Federal income tax purposes:
<PAGE>
Slivka Robinson Waters & O'Dorisio, P.C.
Legal Tax Opinion
July 22, 1998
Page 2
(1) The Holding Company Merger will be treated as a
reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code");
(2) Zions Bancorp, VCBI and Company will each be a party
to the reorganization within the meaning of Section
368(b) of the Code;
(3) Shareholders of Company who exchange their shares of
Company Common Stock for shares of Zions Bancorp
Common Stock will not recognize gain or loss, except
to the extent of the cash received in lieu of
fractional shares;
(4) The tax basis of the Company Common Stock surrendered
in the Holding Company Merger will be allocated to
the Zions Bancorp Common Stock to be received in the
Holding Company Merger (including any fractional
share to which that shoulder may be entitled);
(5) The holding period of the Zions Bancorp Common Stock
to be received in the Holding Company Merger by a
shareholder of Company will include the holding
period of the Company Common Stock surrendered in
exchange therefor provided the Company Common Stock
is held as a capital asset by the shareholder on the
Effective Date of the Holding Company Merger;
(6) Company will not recognize gain or loss as a result
of the Holding Company Merger;
(7) Neither Zions Bancorp nor VCBI will recognize gain or
loss as a result of the Holding Company Merger;
(8) The basis of Company's assets in the hands of VCBI
will be the same as the basis of those assets in the
hands of Company immediately prior to the Holding
Company Merger;
(9) The holding period of Company's assets received by
VCBI will include the period during which such assets
were held by Company immediately prior to the Holding
Company Merger;
(10) A shareholder of Company who receives cash in lieu of
a fractional share of Zions Bancorp 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
-2-
<PAGE>
Slivka Robinson Waters & O'Dorisio, P.C.
Legal Tax Opinion
July 22, 1998
Page 3
shareholder (Rev. Rul. 66-365, 1966-2 C.B. 116; Rev.
Proc. 77-41, 1977-2 C.B. 574);
(11) Cash received by a shareholder of Company who has
perfected dissenters' rights under the provisions of
sections 7-113-101 et seq. of the Colorado Business
Corporation Act as to his or her Company Common Stock
will be treated as a distribution in redemption of
such shares, subject to the provisions and
limitations of Section 302 of the Code;
(12) The Bank Merger will qualify as a "reorganization"
under Section 368(a)(1)(A) of the Code;
(13) Vectra Bank and Bank will each be a "party to the
reorganization" within the meaning of Section 368(b)
of the Code;
(14) Neither Vectra Bank, Company nor Bank will recognize
gain or loss as a result of the Bank Merger;
(15) The basis of Bank's assets in the hands of Vectra
Bank will be the same as the basis of those assets in
the hands of Bank immediately prior to Bank Merger;
and
(16) The holding period of Bank's assets received by
Vectra Bank will include the period during which such
assets were held by Bank immediately prior to Bank
Merger.
The scope of this opinion letter is expressly limited to the Federal
income tax issues directly addressed in the sixteen (16) enumerated paragraphs
above. Slivka Robinson Waters & O'Dorisio, P.C. expresses no opinion regarding
any other issue.
The opinions expressed herein are based upon the provisions of the Code
and the Treasury Regulations promulgated thereunder, as well as upon the
Internal Revenue Service rulings and guidelines and court decisions, all valid
as of the date of this letter. However, these opinions are not binding upon the
Internal Revenue Service or any court, and no ruling confirming these opinions
will be sought from the Internal Revenue Service or any court. Moreover, the
provisions, rulings, guidelines and court decisions upon which Slivka Robinson
Waters & O'Dorisio, P.C. has relied in forming its opinions are subject to
revision, and in some cases such revisions may be given effect retroactively. In
the event of such a retroactive revision, the opinions expressed in this letter
may be invalidated. Slivka Robinson Waters & O'Dorisio, P.C. assumes no
obligation to update this opinion letter to reflect changes in facts or law
occurring after the date of this letter.
-3-
<PAGE>
Slivka Robinson Waters & O'Dorisio, P.C.
Legal Tax Opinion
July 22, 1998
Page 4
The opinions expressed in this letter are provided solely for the
benefit of VCBI and Company, and their respective shareholders. This letter
should not be distributed to, nor may it be relied upon by, and other
organization or person.
We consent to the naming of this firm under legal opinions in the
Prospectus and to the filing of this opinion letter as an exhibit to the
Registration Statement pertaining to the registration of shares of Zions Bancorp
Common Stock to be issued to the shareholders of Company upon consummation of
the Merger and to all references to us therein. In giving this consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules or
regulations of the SEC thereunder.
Very truly yours,
SLIVKA ROBINSON WATERS & O'DORISIO, P.C.
-4-
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 26, 1998 with respect to the
consolidated financial statements of Zions Bancorporation as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997 incorporated herein by reference, and to the reference to our firm
under the heading "Experts" in the Registration Statement and Proxy
Statement/Prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
July 22, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Eagle Holding Company:
We consent to the use in this Registration Statement on Form S-4 of our report
dated February 22, 1998 with respect to the consolidated financial statements of
Eagle Holding Company as of December 31, 1997 and 1996, and for each of the
years in the three-year period ended December 31, 1997, and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ VAN DORN & BOSSI
VAN DORN & BOSSI
Broomfield, Colorado
July 22, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this S-4 Registration Statement of Zions Bancorporation of our
report dated January 16, 1998 on Sumitomo Bank of California's 1997 financial
statements included in Zions Bancorporation's previously filed Form 8-K (filed
April 15, 1998) and to all references to our firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
San Francisco, California
July 22, 1998
EXHIBIT 99.1
[Letterhead of Eagle Holding Company]
_________, 1998
Shareholders of Eagle Holding Company
Dear Shareholder:
The Board of Directors of Eagle Holding Company (the "Company") has
called a Special Meeting of the shareholders of the Company for a.m., Colorado
time, on _______ , 1998, at the Company's offices at 1990 West Tenth Avenue,
Broomfield, Colorado. The Board is furnishing the accompanying Proxy
Statement/Prospectus to all holders of the Company's Common Stock.
The purpose of the Special Meeting is to consider and vote upon an
Agreement and Plan of Reorganization dated June 3, 1998 among the Company, its
wholly-owned subsidiary Eagle Bank (the "Bank"), Zions Bancorporation ("Zions"),
Val Cor Bancorporation, Inc. ("Val Cor"), a wholly-owned subsidiary of Zions,
and Vectra Bank Colorado, National Association ("Vectra Bank"), Val Cor's
wholly-owned subsidiary, an Agreement of Merger between the Company and Val Cor
and an Agreement of Merger between the Bank and Vectra Bank (collectively, the
"Plan of Reorganization"). If the Plan of Reorganization is approved, and all
other conditions are met, the Plan of Reorganization will result in the merger
of the Company into Val Cor, with Val Cor being the surviving corporation and
the merger of the Bank into Vectra Bank, with Vectra Bank being the surviving
national banking association (collectively, the "Reorganization").
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the Reorganization is in the best interests
of the Company, its shareholders, its employees and the community it serves. The
Board of Directors unanimously recommends that the shareholders vote to approve
the Plan of Reorganization.
Upon consummation of the Plan of Reorganiza tion, the Company
shareholders will receive up to an aggregate of 230,000 shares of Zions Common
Stock in exchange for the outstanding shares of Company Common Stock. The terms
and conditions of the Plan of Reorganization are summarized in the accompanying
Proxy Statement/Prospectus. See "Plan of Reorganization" in the Proxy
Statement/Prospectus.
<PAGE>
Shareholders of Eagle Holding Company
__________, 1998
Page 2
At the Effective Date (as defined), the shares of Company Common Stock
will be canceled and immediately converted into the right for Company
shareholders to receive, in exchange for each share of Company Common Stock,
that number of shares of Zions Common Stock calculated by dividing the Merger
Consideration (as defined) of 230,000 shares of Zions Common Stock, no par value
("Zions Common Stock"), subject to downward adjustment if Transaction Expenses
(as defined) exceed $65,000, by the total number of shares of Company Common
Stock issued and outstanding as of the Effective Date of the Reorganization.
On _______ , 1998, the closing price of Zions Common Stock on the
Nasdaq-NMS was $____ per share. On that date there were 33,562 shares of Company
Common Stock issued and outstanding. Assuming that the Reorganization had been
consummated on that date, and that Transaction Expenses had not exceeded
$65,000, shareholders of the Company under such circumstances would have been
entitled to receive approximately 6.85 shares of Zions Common Stock for each
share of Company Common Stock that they own, or an equivalent market value of
approximately $____ per share of Company Common Stock. Because the Merger
Consideration represents a variable amount, the precise exchange rate and the
precise number of shares of Zions Common Stock that the shareholders of the
Company will receive in exchange for each share of Company Common Stock will not
be known until the Effective Date.
The accompanying Proxy Statement/Prospectus details the terms of the
proposed Plan of Reorganization and provides information concerning the Company,
the Bank, Zions, Val Cor and Vectra Bank as well as the Plan of Reorganization.
The Proxy Statement/Prospectus contains important information necessary for the
shareholders to make a decision about how to vote at the Special Meeting. Please
read it carefully.
Approval of the Plan of Reorganization requires the affirmative vote of
a majority of the issued and outstanding shares of the Company's Common Stock.
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.
Any holder of Company 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.
<PAGE>
Shareholders of Eagle Holding Company
__________, 1998
Page 3
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies, all of which approvals have [NOT
YET] been received, and to certain other conditions, including maintenance of
the Company's financial condition. If approved, the Plan of Reorganization will
most likely be consummated sometime in the [THIRD] quarter of 1998.
Instructions describing the procedure for receiving shares of Zions
Common Stock are not 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 for exchanging your Eagle Holding Company
stock certificate for the Reorganization consideration. Please do not send your
certificates to the Company prior to receiving these instructions.
Sincerely,
-------------------------------------
David T. Manley, Jr.
President and Chief Executive Officer
EXHIBIT 99.2
EAGLE HOLDING COMPANY
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Eagle Holding Company (the
"Company") will be held at ______ a.m., Colorado time, on _____________, 1998,
at the Company's offices at 1990 West Tenth Avenue, Broomfield, Colorado, to
consider and vote upon an Agreement and Plan of Reorganization dated as of June
3, 1998 among the Company, its wholly-owned subsidiary Eagle Bank (the "Bank"),
Zions Bancorporation ("Zions"), Val Cor Bancorporation, Inc. ("Val Cor"), a
wholly-owned subsidiary of Zions, and Vectra Bank Colorado, National Association
("Vectra Bank"), Val Cor's wholly-owned subsidiary, an Agreement of Merger
between the Company and Val Cor and an Agreement of Merger between Vectra Bank
and the Bank (collectively, the "Plan of Reorganization"), and the transactions
contemplated thereby. The Plan of Reorganization provides for the merger of the
Company into Val Cor, with Val Cor being the surviving corporation, and for the
merger of the Bank into Vectra Bank, with Vectra Bank being the surviving
national banking association (the aforementioned mergers being referred to
herein collectively as the "Reorganization").
Upon the consummation of the Plan of Reorganization, each Company
shareholder will receive shares of Zions Common Stock in exchange for each share
of Company Common Stock held as of the Effective Date (as defined) of the Plan
of Reorganization. The terms and conditions of the Reorganization are set forth
in the accompanying Proxy Statement/Prospectus.
The Board of Directors has set _______, 1998, as the record date for
determining shareholders entitled to notice of and to vote at the Special
Meeting.
Holders of Company Common Stock are entitled to assert dissenters'
rights under Colorado law. A copy of the applicable statute is attached to the
Proxy Statement/Prospectus.
By order of the Board of Directors,
-----------------------------------
David T. Manley, Jr.
President and Chief Executive Officer
Dated: _________, 1998
Please mark, sign and return the enclosed proxy in the envelope
provided.
EXHIBIT 99.3
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF EAGLE HOLDING COMPANY
________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David T. Manley, Jr. as proxy of the
undersigned as a holder of the Common Stock of Eagle Holding Company ("Company
Common Stock") to vote as designated below all shares of Company Common Stock
that the undersigned held of record on ______, 1998, at the special meeting of
shareholders of Eagle Holding Company (the "Company") to be held on _____, 1998,
or at any postponement or adjournment thereof. The purpose of the special
meeting is to consider and act on the proposal to approve the Agreement and Plan
of Reorganization dated June 3, 1998, among the Company, its wholly-owned
subsidiary Eagle Bank (the "Bank"), Zions Bancorporation ("Zions"), Val Cor
Bancorporation, Inc. ("Val Cor"), a wholly-owned subsidiary of Zions, and Vectra
Bank Colorado, National Association ("Vectra Bank"), Val Cor's wholly-owned
subsidiary, an Agreement of Merger between the Company and Val Cor and an
Agreement of Merger between Vectra Bank and the Bank (collectively, the "Plan of
Reorganization"), whereby the Company will merge into Val Cor, with Val Cor
being the surviving corporation, and the Bank will merge into Vectra Bank, with
Vectra Bank being the surviving national banking association (the aforementioned
mergers being referred to collectively as the "Reorganization"). Pursuant to the
Plan of Reorganization, Company shareholders will receive, in exchange for each
share of Company Common Stock, that number of shares of Zions Common Stock
calculated by dividing the Merger Consideration (as defined) of 230,000 shares
of Zions Common Stock, no par value ("Zions Common Stock"), subject to downward
adjustment if Transaction Expenses exceed $65,000, by the total number of shares
of Company Common Stock issued and outstanding as of the Effective Date of the
Reorganization. The terms and conditions of the Plan of Reorganization are set
forth in the accompanying Proxy Statement/Prospectus.
The Directors recommend a vote FOR Proposal 1.
1. Approval of the Plan of Reorganization.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The Proxyholder, in his discretion, is 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 Company 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
