FILE PURSUANT TO RULE 424B3
REGISTRATION NO. 333-65671
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CITIZENS BANCO, INC. ZIONS BANCORPORATION
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PROXY STATEMENT FOR SPECIAL MEETING PROSPECTUS FOR UP TO 257,225 SHARES
OF SHAREHOLDERS TO BE HELD ON NOVEMBER 24, 1998 OF COMMON STOCK
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Citizens Banco, Inc. (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 November 24, 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 October 26, 1998 to the
shareholders of record of the Company.
At the Special Meeting, the holders of Company Class A Common Stock, par
value $1.00 per share, will consider and vote upon a proposal to approve, ratify
and adopt the exchange of certain rights (the "Class B Rights") of the former
holders of the Company's Debentures for shares of Company Class B Common Stock,
no par value (the "Class B Exchange"). The holders of Company Class A Common
Stock and the holders of Company Class B Common Stock (collectively, the holders
of "Company Equity") will consider and vote upon a proposal to approve and adopt
the Agreement and Plan of Reorganization, dated as of August 12, 1998, (the
"Plan of Reorganization") among the Company, the Company's subsidiary, Citizens
Bank (the "Bank"), Zions Bancorporation ("Zions"), Zions' subsidiary, Val Cor
Bancorporation, Inc. ("Val Cor"), and Val Cor's subsidiary, Vectra Bank
Colorado, National Association ("Vectra Bank"). If the holders of the Company
Equity approve the Plan of Reorganization, and all other conditions are met,
including the approval, ratification and adoption of the Class B Exchange, 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, holders of Company Equity will receive,
in exchange for each share of Company Equity, that number of shares of Zions
Common Stock, no par value, calculated by dividing 251,225 shares of Zions
Common Stock (the "Merger Consideration") by the total number of shares of
Company Equity issued and outstanding as of the Effective Date of the
Reorganization. The Merger Consideration is subject to downward adjustment if
Transaction Expenses (as defined) exceed $100,000. As of October 22, 1998, a
total of 82,816 shares of Company Class A Common Stock and Class B Rights
representing the right to acquire 33,150 shares of Company Class B Common Stock
were issued and outstanding. In accordance with this formula and assuming that
Transaction Expenses do not exceed $100,000, Company shareholders would be
entitled to receive approximately 2.17 shares of Zions Common Stock for each
share of Company Equity that they own or an equivalent market value of
approximately $108.77 per share of Company Equity as of October 21, 1998. Zions
Common Stock is listed for trading on the Nasdaq National Market under the
symbol "ZION."
Approval of the Class B Exchange requires more shares of Company Class A
Common Stock represented and voting at the Special Meeting voting for the
approval of the Class B Exchange than voting against the Class B Exchange. In
order to satisfy a condition to Zions' obligation to participate in the
Reorganization, however, the unanimous vote of the shares of Company Class A
Common Stock is required. The affirmative vote of the holders of two-thirds of
the issued and outstanding shares of Company Class A Common Stock and Company
Class B Common Stock, entitled to vote at the Special Meeting and voting as
separate classes, is required to approve the Reorganization. The requisite
regulatory approvals have not yet been obtained.
Neither the Securities and Exchange Commission ("SEC") 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 October 22, 1998.
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TABLE OF CONTENTS
Page
SUMMARY ......................................................................1
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING
INFORMATION..............................................................13
WHERE YOU CAN FIND MORE INFORMATION...........................................14
ZIONS DOCUMENTS INCORPORATED BY REFERENCE.....................................15
THE SPECIAL MEETING...........................................................16
Date, Time, and Place....................................................16
Matters to be Considered at the Special Meeting..........................16
Record Dates; Voting Rights..............................................16
Quorum; Vote Required for Approval.......................................16
Voting and Revocation of Proxies.........................................17
Solicitation of Proxies..................................................17
Security Ownership by Certain Beneficial Owners and Management...........18
CLASS B EXCHANGE..............................................................18
Background...............................................................18
Class B Exchange.........................................................18
Conditions to the Obligations of Zions, Val Cor and Vectra Bank..........19
Waivers and Releases.....................................................19
Interests of Certain Persons in the Class B Exchange.....................20
Required Vote; Management Recommendation.................................20
PLAN OF REORGANIZATION.......................................................21
The Reorganization.......................................................21
Background of and Reasons for the Reorganization.........................22
Voting Agreements........................................................24
Required Vote; Management Recommendation.................................24
No Opinion of a Financial Advisor........................................25
Conversion of Company Shares.............................................25
Existing Company Contingency.............................................26
Federal Income Tax Consequences of the Reorganization....................27
Rights of Dissenting Shareholders........................................27
Interests of Certain Persons in the Transaction..........................29
Inconsistent Activities..................................................31
Conduct of Business Pending the Reorganization...........................31
Conditions to the Reorganization.........................................32
Representations and Warranties...........................................34
Amendment and Waiver.....................................................34
Authorized Termination and Damages for Breach............................34
Restrictions on Resales by Company Affiliates............................35
Expenses ................................................................35
Government Approvals.....................................................35
Effective Date of the Reorganization.....................................36
Accounting Treatment.....................................................36
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Relationship Between Zions and the Company...............................36
SUPERVISION AND REGULATION....................................................36
Zions ................................................................36
Regulatory Capital Requirements..........................................37
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.........................46
BUSINESS OF THE COMPANY AND THE BANK..........................................46
The Company..............................................................46
The Bank ................................................................47
Market Area Served.......................................................47
Loans....................................................................48
Analysis of Allowance for Loan Losses....................................51
Investment Securities....................................................52
Deposits ................................................................54
Return on Equity and Assets..............................................54
Competition..............................................................55
Property ................................................................55
Legal Proceedings........................................................56
Employees................................................................56
Regulatory Matters.......................................................56
Year 2000 Compliance.....................................................56
Selected Financial Data..................................................57
Stock Prices and Dividends on Company Common Stock.......................58
Information Concerning the Chairman, President and Chief
Executive Officer of the Company and Chairman of the Bank................58
Certain Transactions of the Company......................................59
Stock Ownership of Directors, Officers and Certain Others................59
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY.....................................60
Results of Operations for the Six Months ending June 30, 1998 and
June 30, 1997............................................................61
Results of Operations for the Years Ending December 31, 1997,
1996 and 1995............................................................63
Liquidity and Sources of Funds...........................................65
Capital Resources........................................................65
Effects of Inflation and Changing Prices.................................66
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF ZIONS AND THE COMPANY.............66
General ................................................................66
Authorized Capital.......................................................66
Anti-Takeover Matters....................................................67
Shareholder Rights Plan..................................................68
Board of Directors.......................................................69
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Special Shareholders' Meetings...........................................70
Amendment of Articles and Bylaws.........................................70
Dissenters' Rights.......................................................71
Preemptive Rights........................................................71
Dividend Rights..........................................................71
Liquidation Rights.......................................................72
Miscellaneous............................................................72
LEGAL OPINIONS................................................................72
EXPERTS .....................................................................72
OTHER MATTERS.................................................................73
FINANCIAL STATEMENTS OF CITIZENS BANCO, INC...................................73
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
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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 to which we
have referred you. 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. Banking operations were added in the
State of Washington in 1998. Zions' principal subsidiaries are banking
subsidiaries which include Zions First National Bank, the second largest
commercial banking organization in Utah; Nevada State Bank, the fifth 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, and Centennial
Savings Bank, F.S.B.; and in California through its subsidiary California Bank
and Trust, 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, with
offices 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; Routt
County National Bank Corporation and its banking subsidiary, First National Bank
of Colorado, with offices in Steamboat Springs, Colorado; Kersey Bancorp and its
banking subsidiary, Independent Bank, with seven offices in northeastern
Colorado; Eagle Holding Company and its banking subsidiary, Eagle Bank, with one
office in Boulder County, Colorado; The Commerce Bancorporation and its banking
subsidiary, The Commerce Bank of Washington, National Association, with one
office in Seattle, Washington; and Sumitomo Bank of California, with 47 banking
offices in the State of California. As of June 30, 1998, Zions had total
consolidated assets of $11.8 billion, deposits of $8.3 billion, and
shareholders' equity of $925 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).
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
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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 offices in Denver, Adams, Alamosa, Arapahoe,
Boulder, Douglas, El Paso, Jefferson, Larimer, Logan, Montezuma, Morgan, Routt,
Saguache and Weld Counties, Colorado. Vectra Bank offers traditional banking
services through its offices in the above-referenced counties. At June 30, 1998,
Vectra Bank had total assets of $1,183 million, total deposits of $1,017
million, total loans of $723 million, and shareholders' equity of $119 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.
Citizens Banco, Inc. (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 Citizens Bank. The Company has no
other direct subsidiaries. The Company's principal asset consists of its 100%
ownership interest in Citizens Bank. The Company's main office is located at
3300 West 72nd Avenue, Westminster, Adams County, Colorado 80030- 5300, and its
telephone number is 303/428-7536. As of June 30, 1998, the Company had total
consolidated assets of $50.2 million and shareholders' equity of $5.8 million.
Citizens Bank (the "Bank") is a banking corporation organized under the
laws of Colorado. The Bank offers traditional banking services through two
offices in Westminster, Colorado. The Bank has a wholly-owned subsidiary named
Citizens Bank Building Corporation, a Colorado corporation, which owns the main
banking office and improvements at 3300 West 72nd Avenue, Westminster. As of
June 30, 1998, the Bank had total assets of $50.1 million, total deposits of
$44.0 million, net loans of $27.1 million, and total shareholders' equity of
$4.8 million . The Bank's main office is located at 3300 West 72nd Avenue,
Westminster, Colorado 80030-5300, and its telephone number is 703/428-7536.
THE SPECIAL MEETING; PURPOSES
The Special Meeting will be held at 9:00 a.m., local time, on November 24,
1998 at 3300 West 72nd Avenue, Westminster, Colorado. Holders of Company Class A
Common Stock, par value $1.00 per share ("Company Class A Common Stock") will
consider and vote upon a proposal to approve, ratify and adopt the Class B
Exchange and will transact such other business as may properly come before the
Special Meeting; and the holders of Company Class A Common Stock and the holders
of Company Class B Common Stock, no par value ("Company Class B Common Stock"),
voting as separate classes, will consider and vote upon a proposal to approve
the Plan of Reorganization. See "The Special Meeting -- Matters to be Considered
at the Special Meeting."
RECORD DATES; VOTING RIGHTS
The Record Dates 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 are the close of business on October 26,
1998 with respect to the holders of Company Class A Common Stock and on the
close of business on the date of the Class B Exchange with respect to holders of
Company Class B Common Stock (the respective record dates cited above being
referred to herein collectively as the "Record Date"). Each outstanding share of
Company Equity 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 as to which each share is entitled to vote. See "Class B Exchange --
Required Vote; Management Recommendation" and "Plan of Reorganization --
Required Vote; Management Recommendation."
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VOTE REQUIRED FOR APPROVAL
Under Colorado law, assuming the presence of a quorum of Company Class A
Common Stock, approval, ratification and adoption of the Class B Exchange
requires the vote at the Special Meeting of more shares of Company Class A
Common Stock in favor of the Class B Exchange than shares voted against the
Class B Exchange. In order to satisfy a condition to Zions' obligation to
participate in the Reorganization, however, the vote of the holders of the
issued and outstanding shares of Company Class A Common Stock must be unanimous.
See "Class B Exchange -- Required Vote; Management Recommendation." Approval of
the Plan of Reorganization requires the affirmative vote of at least two-thirds
of the outstanding shares of Company Class A Common Stock and the affirmative
vote of at least two-thirds of the outstanding shares of Company Class B 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 October 22, 1998, certain directors and executive officers of the
Company, a spouse of an executive officer and director, and the father of a
director, together with their affiliated entities, who beneficially owned 56,380
shares, or approximately 68.1% of the outstanding shares, of Company Class A
Common Stock and Class B Rights representing all 33,150 shares of Company Class
B Common Stock to be outstanding following the Class B Exchange 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 they have agreed, approval of the Plan of Reorganization is
assured. See "Plan of Reorganization -- Voting Agreements" and "Information
Concerning the Company and the Bank -- Stockholdings of Directors, Officers and
Certain Others."
CLASS B EXCHANGE
Holders of Four Year Mandatory Convertible Debentures due 1993 (the
"Company Debentures") purportedly converted the Company Debentures into Company
Class B Common Stock on December 10, 1997. However, the amendment to the
articles of incorporation of the Company authorizing the issuance of the Company
Class B Common Stock, although approved by the shareholders, was not filed with
the Colorado Secretary of State until July 17, 1998, after the purported
conversion of the Company Debentures into Company Class B Common Stock. The
parties to the Plan of Reorganization recognize that the former holders of the
Company Debentures have certain contractual rights to acquire equity in the
Company in the form and substance equivalent to the Company Class B Common Stock
(the "Class B Rights"). Pursuant
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to the Plan of Reorganization, the holders of Company Class A Common Stock will
consider and vote upon approval, ratification and adoption of the Class B
Exchange, which vote must be unanimous to satisfy a condition in the Plan of
Reorganization. Pursuant to the Class B Exchange, the holders of the Class B
Rights will exchange such rights for 33,150 shares of Company Class B Common
Stock. The Plan of Reorganization requires that the Class B Exchange shall have
occurred not later than twenty business days prior to the Special Meeting. The
approval, ratification and adoption of the Class B Exchange by a unanimous vote
of the holders of the Class A Common Stock is a condition precedent to
consummation of the Reorganization. See "Class B Exchange," below.
WAIVERS AND RELEASES
The Plan of Reorganization requires as a condition to consummation of the
Reorganization that all of the holders of Company Class A Common Stock and all
of the holders of Class B Rights execute waivers and releases ("Waivers and
Releases") in the forms provided by the Plan of Reorganization. By executing the
Waivers and Releases required of them, holders of Company Class A Common Stock
will relinquish all rights to contest (i) the validity of the Company Class B
Common Stock, (ii) the Class B Exchange, and (iii) the payment, and timing of
the payment, of dividends to the holders of Class B Rights and the Company Class
B Common Stock from December 10, 1997 until the Effective Date of the
Reorganization. By executing the Waivers and Releases required of them, holders
of Class B Rights will relinquish all rights to contest (i) the adequacy of the
Class B Exchange to honor the full rights of the holders of Company Debentures
and Class B Rights; and (ii) the payment, and timing of the payment, of
dividends to the holders of Class B Rights and the Company Class B Common Stock
from December 10, 1997 until the Effective Date of the Reorganization.
Holders of Company Class A Common Stock are requested to execute and return
the enclosed Waiver and Release with their completed and executed Proxies. If
the holders of the Company Class A Common Stock do not return their executed
Waivers and Releases with their Proxies, the Waivers and Releases must be
returned no later than the Effective Date of the Reorganization. ALL HOLDERS OF
COMPANY CLASS A COMMON STOCK MUST RETURN AN EXECUTED WAIVER AND RELEASE PRIOR TO
THE EFFECTIVE DATE AS A CONDITION TO THE REORGANIZATION. THEREFORE, HOLDERS OF
COMPANY CLASS A COMMON STOCK ARE STRONGLY ENCOURAGED TO RETURN THEIR EXECUTED
WAIVERS AND RELEASES WITH THEIR PROXIES IN THE ENCLOSED PRE-ADDRESSED ENVELOPE.
HOLDERS OF CLASS B RIGHTS MUST EXECUTE AND RETURN THEIR WAIVERS AND
RELEASES NO LATER THAN OCTOBER 26, 1998. Upon receipt of an executed Waiver and
Release from each holder of Class B Rights, the Company will conduct the Class B
Exchange. THE EXECUTION AND RETURN OF WAIVERS AND RELEASES BY ALL HOLDERS OF
CLASS B RIGHTS IS A CONDITION TO THE CLASS B EXCHANGE. THEREFORE, IT IS
EXTREMELY IMPORTANT THAT ALL HOLDERS OF CLASS B RIGHTS RETURN AN EXECUTED WAIVER
AND RELEASE BY OCTOBER 26, 1998 IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. Holders
of Class B Rights are not permitted to vote on the Reorganization until after
the Class B Exchange has occurred. Once the Class B Exchange has occurred,
persons who received Company Class B Common Stock in the Class B Exchange will
receive notice of the Special Meeting and a proxy card with which they may vote
upon the Reorganization.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Joayne B. Hogoboom, the spouse of the Company's chairman and president,
Donald K. Hogoboom, holds Class B Rights entitling her to convert such rights
into 11,050 shares of
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Company Class B Common Stock. Ms. Hogoboom's Class B Rights represent the right
to acquire 33.33% of the Company Class B Common Stock. Edward P. Tepper, the
father of a director of the Company, holds Class B Rights entitling him to
convert such rights into 22,100 shares of Company Class B Common Stock. Mr.
Tepper's Class B Rights represent the right to acquire 66.67% of the Company
Class B Common Stock. Ms. Hogoboom and Mr. Tepper have agreed to vote their
shares of Company Equity in favor of the Reorganization.
BOARD OF DIRECTORS RECOMMENDATION
Since approval, ratification and adoption of the Class B Exchange by a
unanimous vote of the holders of the Company Class A Common Stock is a condition
to the closing of the Reorganization, the Board of Directors of the Company
unanimously recommends that the holders of the Company Class A Common Stock vote
"FOR" approval, ratification and adoption of the Class B Exchange. See "Class B
Exchange -- Required Vote; Management Recommendation."
Holders of Company Class A Common Stock are requested to vote on Proposal 1
on the accompanying Proxy, and date, sign and return the Proxy promptly in the
enclosed postage-paid envelope. Holders of Company Class A Common Stock are also
requested to execute the enclosed Waiver and Release and return it along with
the Proxy in the enclosed postage-paid envelope.
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.
REORGANIZATION CONSIDERATION
The shares of Company Equity will be canceled on the Effective Date of the
Reorganization and immediately converted into the right for Company shareholders
to receive, in exchange for each share of Company Equity that they own, that
number of shares of Zions Common Stock calculated by dividing 251,225 shares of
Zions Common Stock by the total number of shares of Company Equity issued and
outstanding as of the Effective Date of the Reorganization (the "Merger
Consideration"). The Merger Consideration is subject to downward adjustment if
Transaction Expenses (as defined) exceed $100,000.
On October 21, 1998, the closing price of Zions Common Stock was $50.125
per share. On that date, the Company had 82,816 shares of its Company Class A
Common Stock and Class B Rights representing the right to acquire 33,150 shares
of its Company Class B Common Stock issued and outstanding. Assuming that the
Reorganization had been consummated on that date, and that Transaction Expenses
had not exceeded $100,000, Company shareholders under such circumstances would
be entitled to receive approximately 2.17 shares of Zions Common Stock for each
share of Company Equity that they own or an equivalent market value of
approximately $108.77 per share of Company Equity as of October 21, 1998.
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 Equity will
not be known until the Effective Date. Further, due to a contingency whose
resolution may result in
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the distribution of additional shares of Zions Common Stock to holders of
Company Equity, as described in the second following paragraph, the total number
of shares to be ultimately received by holders of Company Equity may not be
known until after the third anniversary of 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 will receive an amount of cash equal to
the product of such fraction times $47.125. Shareholders will have no further
rights as shareholders with respect to the fractional shares. See "Plan of
Reorganization -- Conversion of Company Equity."
On and after the Effective Date, the Merger Consideration is subject to
upward adjustment depending upon the satisfaction of a certain Company
contingency. On the date that the parties entered into the Plan of
Reorganization, the Company had a certain outstanding contingency that might not
be resolved until after the Effective Date. To absorb the costs of that
contingency, Zions will place 6,000 shares of Zions Common Stock in escrow on
the Effective Date of the Reorganization. If after resolution of the contingency
there remain any shares of Zions Common Stock in escrow, such shares would be
distributed ratably to those persons who are holders of Company Equity as of the
Effective Date. There is no assurance that after the contingency is fully
satisfied any shares of Zions Common Stock will remain in escrow and be
available for distribution to such holders of Company Equity. Shareholders
should not vote in favor of the Reorganization based on an assumption that any
of the 6,000 shares of Zions Common Stock placed in escrow will be available for
distribution to them after resolution and satisfaction of the Company's subject
contingency. See "Plan of Reorganization -- Existing Company Contingency."
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 maximize value for the Company's shareholders, while
providing a favorable structure for the transaction in which the Company's
shareholders would receive readily marketable securities without recognizing
taxable gain or loss upon the receipt of such securities (except for gain or
loss recognized with respect to any cash received in the Reorganization).
Further, the Board believes that the Reorganization 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.
For Zions, the Reorganization will provide an opportunity to further deepen
its franchise in the Denver metropolitan area through its expansion into
Westminster, Colorado. 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."
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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 "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."
Holders of shares of Company Class A Common Stock are requested to
complete, date, and sign the accompanying Proxy and return it promptly in the
enclosed postage-paid envelope. Holders of Class B Rights will receive a Proxy
after they have executed and returned a Waiver and Release and the Class B
Exchange has occurred.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
The Plan of Reorganization provides that, following the Reorganization,
Thomas M. Jones, currently president and chief executive officer of the Bank,
will become an executive officer of Vectra Bank. Mr. Jones will enter into an
employment agreement with Vectra Bank effective as of the Effective Date. The
Plan of Reorganization also provides that, following the Reorganization, Donald
K. Hogoboom, currently chairman and president of the Company and chairman of the
Bank, will become a consultant of Vectra Bank. Mr. Hogoboom will enter into a
consulting agreement with Vectra Bank effective as of the Effective Date. 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."
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 Equity 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."
7
<PAGE>
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 sections of Colorado law, each Company shareholder who chooses to
exercise dissenters' rights should consult and strictly observe the procedures
set forth in 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.
CONDITIONS TO THE REORGANIZATION; REGULATORY APPROVAL
Consummation of the Reorganization is subject to satisfaction of a number
of conditions, including (i) obtaining unanimous approval of the Class B
Exchange from the holders of the Company Class A Common Stock, (ii) obtaining
requisite approval of the Plan of Reorganization from the Company shareholders,
(iii) receipt of Waivers and Releases from each of the holders of Company Class
A Common Stock and of Class B Rights, (iv) obtaining regulatory approvals or
waivers from 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"), the Office of the Comptroller of the Currency (the "Comptroller"),
the Commissioner of Financial Institutions of the State of Utah (the
"Commissioner"), and the Colorado State Banking Board (the "State Banking
Board"), (v) receipt of an opinion with respect to certain federal income tax
consequences of the Reorganization, (vi) the absence of any material adverse
change with respect to the operations and financial condition of the Company,
(vii) receipt of an opinion that the Reorganization will be treated for
accounting purposes as a pooling-of-interests, and (viii) the satisfaction of
other customary closing conditions. The requisite regulatory approvals or
waivers have not yet been obtained. See "Plan of Reorganization -- Conditions to
the Reorganization; Government Approvals."
EFFECTIVE DATE OF THE REORGANIZATION
If the holders of Company Class A Common Stock and Company Class B Common
Stock approve the Plan of Reorganization, the parties expect that the
Reorganization will become effective in the fourth quarter of 1998. However,
there can be no assurance that all conditions necessary to consummation of the
Reorganization will be satisfied or, if satisfied, that they will be satisfied
in time to permit the Reorganization to become effective at the anticipated
time. See "Plan of Reorganization -- Effective Date of the Reorganization."
ACCOUNTING TREATMENT
The parties expect the Reorganization to qualify as a
"pooling-of-interests" in accordance with Accounting Principles Board 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 by Zions of a written opinion that the
Reorganization will qualify for pooling-of-interests accounting treatment. See
"Plan of Reorganization -- Accounting Treatment."
8
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table provides certain unaudited historical financial
information for Zions and the Company. 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. With respect to pro forma combined financial information for Zions
giving effect to the Reorganization using the pooling-of-interests method of
accounting, see "Comparative Per Share Data," below.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------- ------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
ZIONS
Earnings
Net interest income................ $ 231,341 $ 185,243 $ 351,799 $ 289,166 $ 233,547 $ 198,606 $ 174,657
Provision for loan losses.......... 6,741 3,710 6,175 4,640 3,000 2,181 2,993
Net income......................... 75,157 64,836 122,362 107,423 82,385 63,827 58,205
Per Share
Net income (basic)................. $ 1.04 $ 0.94 $ 1.92 $ 1.70 $ 1.39 $ 1.11 $ 1.03
Net income (diluted)............... 1.03 0.91 1.89 1.68 1.37 1.09 1.02
Cash Dividends..................... 0.26 0.23 0.47 0.425 0.3525 0.29 0.245
Statement of Condition at Period End
Assets............................. $11,780,537 $9,696,279 $9,521,770 $7,116,413 $6,095,515 $4,934,095 $4,801,054
Deposits........................... 8,312,094 6,529,716 6,854,462 5,119,692 4,511,184 3,705,976 3,432,289
Long-term debt..................... 386,243 263,246 258,566 251,620 56,229 58,182 59,587
Shareholders' equity............... 924,645 704,498 655,460 554,610 469,678 365,770 312,592
CITIZENS
Earnings
Net interest income................ $ 1,201 $ 1,127 $ 2,314 $ 2,277 $ 2,179 $ 2,064 $ 1,910
Provision for loan losses.......... (20) -- -- -- -- -- (64)
Net income......................... 345 337 710 721 632 569 689
Per Share
Net income (basic)................. $ 4.17 $ 4.07 $ 8.58 $ 8.70 $ 7.62 $ 6.59 $ 7.99
Net income (diluted)............... 2.98 3.07 6.45 6.54 5.82 5.03 6.00
Cash Dividends..................... 2.13 0.85 1.70 1.70 0.85 -- --
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------- ------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Condition at Period End
Assets.............................. $50,185 $45,431 $48,622 $45,715 $43,627 $41,329 $39,034
Deposits............................ 44,038 39,770 42,669 39,696 38,155 37,094 34,805
Shareholders' equity................ 5,805 4,665 4,980 4,404 3,831 3,328 2,907
</TABLE>
COMPARATIVE PER SHARE DATA
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 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 tables 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. The
following historical 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. 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 six months ended June 30, 1998, are
presented for comparative and illustrative purposes only. These data 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.
10
<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- ---------------------------------------
Zions and Citizens Zions and Citizens
Pro Forma Equivalent
Per Common Share Zions Citizens Combined(4) Pro Forma(5)
- ---------------- ----- -------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME (DILUTED)(1)
For the six months ended:
June 30, 1998 $ 1.03 $2.98 $1.03 $2.24
For the years ended:
December 31, 1997 $ 1.89 $6.45 $1.90 $4.12
December 31, 1996 1.68 6.54 1.69 3.67
December 31, 1995 1.37 5.82 1.38 2.99
CASH DIVIDENDS(2)
For the six months ended:
June 30, 1998 $ 0.26 $2.13 $0.26 $0.56
For the years ended:
December 31, 1997 $ 0.47 $1.70 $0.47 $1.02
December 31, 1996 0.425 1.70 0.425 0.92
December 31, 1995 0.3525 0.85 0.3525 0.76
BOOK VALUE(3)
As of:
June 30, 1998 $12.32 $50.06 $12.36 $26.82
December 31, 1997 10.25 60.13 10.30 22.35
December 31, 1996 8.72 53.15 8.78 19.05
December 31, 1995 7.46 46.23 7.52 16.32
</TABLE>
- --------------------
(1) Net income per share is based on weighted average common and common
equivalent shares outstanding. (2) 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. 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 Equity for
approximately 2.17 shares of Zions Common Stock, which would have been the
applicable exchange ratio had the Merger Consideration equaled 251,225
shares.
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
11
<PAGE>
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. The merger was accounted for as a
pooling-of-interests.
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.
On August 28, 1998, Zions completed its acquisition of Kersey Bancorp, 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 merged with and into Val Cor with Val Cor
being the surviving corporation, and Independent merged 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 conducted its commercial banking operations through seven offices in
Larimer, Logan, Morgan, and Weld Counties, Colorado. Zions issued 620,000 shares
of its Common Stock to the former Kersey shareholders upon completion of the
transaction, which was accounted for as a pooling-of-interests.
On August 31, 1998, Zions completed its acquisition of Eagle Holding
Company, a Colorado corporation ("Eagle"), and its wholly-owned subsidiary Eagle
Bank, a Colorado- chartered commercial bank ("Eagle Bank"). Upon completion of
this transaction, Eagle merged with and into Val Cor with Val Cor being the
surviving corporation, and Eagle Bank merged with and into Vectra Bank with
Vectra Bank being the surviving national banking association. Eagle Bank
conducted a commercial banking business through one office in Broomfield,
Boulder County, Colorado. As of March 31, 1998, Eagle had consolidated assets of
approximately $40.8 million, consolidated deposits of approximately $37.5
million, loans of approximately $27.5 million, and shareholders' equity of
approximately $2.9 million. Upon completion of this transaction, Zions issued to
the former shareholders of Eagle 230,000 shares of its Common Stock. The
transaction was accounted for as a pooling-of-interests.
On September 8, 1998, Zions completed its acquisition of The Commerce
Bancorporation, a Washington corporation ("Commerce"), whereby Commerce merged
with and into Zions with Zions being the surviving corporation. Commerce
conducted its commercial banking operations in one office in Seattle,
Washington, through its wholly-owned subsidiary,
12
<PAGE>
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 became a wholly-owned subsidiary of Zions. As of March 31,
1998, Commerce had consolidated assets of approximately $330.2 million,
consolidated deposits of approximately $245.3 million, loans of approximately
$151.0 million, and shareholders' equity of approximately $24.5 million. Zions
issued 1,938,927 of its shares of Common Stock to the former shareholders of
Commerce upon completion of the transaction, which was accounted for as a
pooling-of-interests.
On October 1, 1998, Zions and Sumitomo Bank of California ("Sumitomo")
completed their merger whereby Sumitomo merged with and into a subsidiary of
Zions, Grossmont Bank. Grossmont Bank has been renamed California Bank & Trust
paid approximately $546 million in cash for Sumitomo. California Bank & Trust,
with California assets of over $6 billion and 70 banking offices in California,
ranks as the fifth largest commercial bank in the state. Zions financed 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 and the sale of subordinated notes. As of March 31, 1998, Sumitomo
had assets of approximately $4.9 billion, deposits of approximately $4.3
billion, loans of approximately $3.9 billion, and shareholders' equity of
approximately $506 million. The acquisition was accounted for as a purchase.
On May 14, 1998, Zions, Val Cor, and Vectra Bank (successor-in-interest to
Bank Colorado, National Association) 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 two offices in Woodland Park and
Cripple Creek, Teller County, Colorado. As of June 30, 1998, Mountain had
consolidated assets of approximately $90.8 million, consolidated deposits of
approximately $81.8 million, loans of approximately $54.3 million, and
shareholders' equity of approximately $8.4 million. Upon completion of this
transaction, which is expected to be accounted for as a pooling-of-interests,
Zions will issue to the shareholders of Mountain 608,000 shares of its Common
Stock. The transaction is expected to close in the fourth quarter of 1998.
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
13
<PAGE>
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.
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 at 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.
14
<PAGE>
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.
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 NOVEMBER 17, 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 Reports on Form 10-Q for
the quarters ended March 31, 1998 and June 30, 1998; (c) Zions' Current Reports
on Form 8-K filed by Zions on February 6, 1998, April 3, 1998, April 15, 1998,
May 18, 1998, as amended on May 27, 1998, and October 14, 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 (see "Comparison
of the Rights of Shareholders of Zions and the Company -- Shareholder Rights
Plan," below) 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.
15
<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 November 24, 1998 at 3300 West 72nd Avenue,
Westminster, Colorado at 9:00 a.m., local time, or at any adjournments or
postponements thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of Company Class A Common Stock will
be asked to consider and vote upon a proposal to approve, ratify and adopt the
Class B Exchange, and to transact such other business as may properly come
before the Special Meeting or any adjournments or postponements of the Special
Meeting. The holders of Company Class A Common Stock and the holders of Company
Class B Common Stock will be asked to consider and vote upon a proposal to
approve and adopt the Plan of Reorganization and the transactions contemplated
thereby.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY APPROVED THE CLASS B
EXCHANGE AND THE PLAN OF REORGANIZATION AND RECOMMENDS THAT THE HOLDERS OF CLASS
A COMMON STOCK VOTE "FOR" APPROVAL OF THE CLASS B EXCHANGE AND THAT THE HOLDERS
OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK VOTE "FOR" APPROVAL OF THE PLAN
OF REORGANIZATION.
RECORD DATES; VOTING RIGHTS
Holders of Company Class A Common Stock, as reflected on the Company's
stock transfer records as of the close of business on October 26, 1998, 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, 82,816 shares of
Company Class A Common Stock were outstanding, held by 35 shareholders of
record. Holders of Company Class B Common Stock, as reflected on the Company's
stock transfer records as of the close of business on the date of the Class B
Exchange, will be entitled to notice of and to vote on the Reorganization at the
Special Meeting or any postponements or adjournments of the Special Meeting. Two
persons hold all Class B Rights, which represent the right to receive a total of
33,150 shares of Company Class B Common Stock. Each share of Company Class A
Common Stock entitles its holder to one vote on the proposal to approve, ratify
and adopt the Class B Exchange and one vote on the proposal to approve the Plan
of Reorganization. Each share of Company Class B Common Stock entitles its
holder to one vote on the proposal to approve the Plan of Reorganization. See
"Class B Exchange -- Required Vote; Management Recommendation" and "Plan of
Reorganization -- Required Vote; Management Recommendation."
QUORUM; VOTE REQUIRED FOR APPROVAL
The Plan of Reorganization requires that holders of Company Class A Common
Stock vote upon the Class B Exchange as described herein. The presence, in
person or by proxy, of the holders of a majority of the issued and outstanding
shares of Company Class A Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum at the Special Meeting
16
<PAGE>
for purposes of voting on the Class B Exchange. Under Colorado law, approval of
the Class B Exchange requires that more shares of Company Class A Common Stock
must be voted in favor of the proposal to approve, ratify and adopt the Class B
Exchange than shares voted against the proposal. In order to satisfy a condition
of Zions' obligation to participate in the Reorganization, however, the vote of
the holders of the issued and outstanding shares of Company Class A Common Stock
must be unanimous. The presence, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Company Class A Common Stock
entitled to vote at the Special Meeting and the presence, in person or by proxy,
of the holders of a majority of the issued and outstanding shares of Company
Class B Common Stock entitled to vote at the Special Meeting are necessary to
constitute respective quorums at the Special Meeting for purposes of voting on
the Plan of Reorganization. Approval of the Plan of Reorganization requires the
affirmative vote of two-thirds of the outstanding shares of Company Class A
Common Stock and the affirmative vote of two-thirds of the outstanding shares of
Company Class B 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. Additionally, a failure to vote, an abstention, or a broker
non-vote of shares held in street name with respect to the Class B Exchange will
cause the failure of a condition precedent to the Reorganization. See "Class B
Exchange -- Required Vote; Management Recommendation" and "Plan of
Reorganization --Required Vote; Management Recommendation."
VOTING AND REVOCATION OF PROXIES
Shareholders may vote at the Special Meeting either in person or by proxy.
All properly executed Proxies that are entitled to vote on a matter 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 which are returned by holders of shares of Company Class A Common
Stock that are entitled to vote on a matter will be voted in favor of approval
of the Class B Exchange and the Plan of Reorganization. Properly executed
Proxies which contain no voting instructions which are returned by holders of
shares of Company Class B Common Stock entitled to vote on a matter 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 best judgment of the named proxy holders.
The Board of Directors is not aware of any other matters that might be presented
at the Special Meeting.
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. The Company will
pay all expenses in connection with the printing and delivery of the proxy
soliciting materials to the Company shareholders for the Special Meeting.
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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of October 22, 1998, certain directors and executive officers of the
Company, the spouse of an executive officer and a director, and the father of a
director, together with their affiliated entities, beneficially owned 56,380
shares of Company Class A Common Stock, or approximately 68.1% of the
outstanding shares of such stock, and Class B Rights representing the right to
receive all 33,150 shares of Company Class B Common Stock. As an inducement to
Zions to enter into the Plan of Reorganization, these persons 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. See
"Plan of Reorganization -- Voting Agreements" and "Information Concerning the
Company and the Bank -- Stockholdings of Directors, Officers and Certain
Others."
CLASS B EXCHANGE
This section of the Proxy Statement/Prospectus describes certain important
aspects of the Class B Exchange. 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 which have a direct bearing on the Class B
Exchange 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.
BACKGROUND
On December 13, 1989, the Board of Directors of the Company authorized the
issuance of Four Year Mandatory Convertible Debentures Due 1993 in the aggregate
amount of $600,000, convertible into an aggregate of 33,150 shares of Company
Class B Common Stock (the "Company Debentures"). On December 20, 1989, the
Company issued the Company Debentures and on December 13, 1993, the holders of
the Company Debentures extended the term of the Company Debentures for an
additional four years. The terms of the Company Debentures permitted the
extension of the term of the Company Debentures.
On January 20, 1990, the holders of the Company's common stock (prior to
the establishment of the Company Class A Common Stock) approved an amendment to
the Company's articles of incorporation authorizing the Company Class B Common
Stock (and designating the Company's common stock as the Company Class A Common
Stock). However, the amendment to the articles of incorporation was not filed
with the Secretary of State of Colorado until July 17, 1998. Prior to the filing
of the amendment with the Secretary of State, the holders of the Company
Debentures purportedly converted the Company Debentures into Company Class B
Common Stock. Because the amendment to the articles of incorporation was not
filed with the Secretary of State at the time of the conversion, the conversion
was legally invalid.
CLASS B EXCHANGE
The parties to the Plan of Reorganization recognize that the former
holders of the Company Debentures have certain contractual rights to acquire
equity in the Company in the form and substance equivalent to the Company Class
B Common Stock (the "Class B Rights").
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Pursuant to the Plan of Reorganization, the holders of Company Class A Common
Stock will consider and vote upon approval, ratification and adoption of the
exchange of Class B Rights for 33,150 shares of Company Class B Common Stock
(the "Class B Exchange"). The Plan of Reorganization requires the unanimous vote
of the Company Class A Common Stock as a condition precedent to the
Reorganization.
The Company is soliciting Waivers and Releases from the holders of Company
Class A Common Stock, in favor of the Company and the holders of the Company
Class B Common Stock and from the holders of Company Class B Common Stock, in
favor of the Company. The Class B Exchange is expected to take place following
the receipt of the Waivers and Releases from the holders of Company Class B
Common Stock described below under " -- Waivers and Releases." Once the Class B
Exchange has taken place, holders of Company Class B Common Stock will be
entitled to notice of and to vote on the Reorganization at the Special Meeting
or any postponement or adjournments of the Special Meeting.
CONDITIONS TO THE OBLIGATIONS OF ZIONS, VAL COR AND VECTRA BANK UNDER THE PLAN
OF REORGANIZATION
The obligations of Zions, Val Cor and Vectra Bank under the Plan of
Reorganization are subject to the satisfaction of certain conditions prior to
the Effective Date of the Reorganization. Conditions that must be satisfied
include the following: (i) the Company's board of directors must authorize the
Class B Exchange and obtain executed Waivers and Releases from each of the
holders of the Company Class A Common Stock prior to the Effective Date and from
each of the holders of Company Class B Rights prior to or contemporaneously with
the Class B Exchange; and (ii) the holders of the Company Class A Common Stock
must unanimously approve, ratify and adopt the Class B Exchange. The Plan of
Reorganization requires that the Class B Exchange shall have occurred not later
than twenty business days prior to the Special Meeting.
WAIVERS AND RELEASES
The Plan of Reorganization requires that all of the holders of Company
Class A Common Stock and all of the holders of Class B Rights execute certain
Waivers and Releases in the form provided by the Plan of Reorganization. By
executing the Waivers and Releases required of them, holders of Company Class A
Common Stock will relinquish all rights to contest (i) the validity of the
Company Class B Common Stock; (ii) the Class B Exchange, and (iii) the payment
and timing of the payment of dividends to the holders of Class B Rights and the
Company Class B Common Stock from December 10, 1997 until the Effective Date of
the Reorganization. By executing the Waivers and Releases required of them,
holders of Class B Rights will relinquish all rights to contest (i) the adequacy
of the Class B Exchange to honor the full rights of the holders of Company
Debentures and Class B Rights; and (ii) the payment and timing of the payment of
dividends to the holders of Class B Rights and the Company Class B Common Stock
from December 10, 1997 until the Effective Date of the Reorganization.
Holders of Company Class A Common Stock are requested to execute and
return the enclosed Waiver and Release with their completed and executed
Proxies. If any holders of Company Class A Common Stock do not return their
executed Waivers and Releases with their Proxies, they must return their Waivers
and Releases no later than the Effective Date of the Reorganization. AS A
CONDITION TO THE REORGANIZATION, EACH HOLDER OF COMPANY CLASS A COMMON STOCK
MUST RETURN AN EXECUTED WAIVER AND RELEASE PRIOR TO THE EFFECTIVE DATE.
THEREFORE, HOLDERS OF COMPANY CLASS A
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COMMON STOCK ARE STRONGLY ENCOURAGED TO RETURN THEIR EXECUTED WAIVERS AND
RELEASES WITH THEIR PROXIES IN THE ENCLOSED PRE-ADDRESSED ENVELOPE.
HOLDERS OF CLASS B RIGHTS MUST EXECUTE AND RETURN THEIR WAIVERS AND
RELEASES NO LATER THAN OCTOBER 26, 1998. Upon receipt of an executed Waiver and
Release, from each holder of Class B Rights, the Company will conduct the Class
B Exchange. THE EXECUTION AND RETURN OF WAIVERS AND RELEASES BY ALL HOLDERS OF
CLASS B RIGHTS IS A CONDITION TO THE CLASS B EXCHANGE. THEREFORE, IT IS
EXTREMELY IMPORTANT THAT EACH HOLDER OF CLASS B RIGHTS RETURN AN EXECUTED WAIVER
AND RELEASE BY OCTOBER 26, 1998 IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. Holders
of Class B Rights are not permitted to vote on the Reorganization until after
the Class B Exchange has occurred. Once the Class B Exchange has occurred,
persons who received Company Class B Common Stock in the Class B Exchange will
receive notice of the Special Meeting and a proxy card with which they may vote
upon the Reorganization.
INTERESTS OF CERTAIN PERSONS IN THE CLASS B EXCHANGE
Joayne B. Hogoboom, the spouse of the Company's chairman and president,
Donald K. Hogoboom, holds Class B Rights entitling her to convert such rights
into 11,050 shares of Company Class B Common Stock. Ms. Hogoboom's Class B
Rights represent the right to acquire 33.33% of the Company Class B Common Stock
to be issued and outstanding following the Class B Exchange. Edward P. Tepper,
the father of a director of the Company, has Class B Rights entitling him to
convert such rights into 22,100 shares of Company Class B Common Stock. Mr.
Tepper's Class B Rights represent the right to acquire 66.67% of the Company
Class B Common Stock to be issued and outstanding following the Class B
Exchange. Together, Ms. Hogoboom and Mr. Tepper will own 100% of the issued and
outstanding shares of Company Class B Common Stock upon issuance of such stock.
At the Special Meeting, the holders of the Company Class B Common Stock will
vote as a separate class with respect to approval of the Plan of Reorganization.
Ms. Hogoboom and Mr. Tepper have agreed that they will vote their shares of
Company Class B Common Stock in favor of the Plan of Reorganization.
REQUIRED VOTE; MANAGEMENT RECOMMENDATION
The Plan of Reorganization requires that holders of Company Class A Common
Stock vote upon the Class B Exchange as described herein. Under Colorado law,
approval, ratification and adoption of the Class B Exchange requires that more
shares of Company Class A Common Stock entitled to vote at the Special Meeting
must be voted in favor of the proposal to approve, ratify and adopt the Class B
Exchange than are voted against the proposal. In order to satisfy a condition to
Zions' obligation to participate in the Reorganization, however, the vote of the
holders of the issued and outstanding shares of Company Class A Common Stock
must be unanimous. Because the Plan of Reorganization requires the unanimous
approval of the holders of Company Class A 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 the Class B Exchange and could result in the
Plan of Reorganization not being effected. Since approval, ratification and
adoption of the Class B Exchange by a unanimous vote of the holders of the
Company Class A Common Stock is a condition to the closing of the
Reorganization, the Board of Directors of the Company unanimously recommends
that the holders of Company Class A Common Stock vote "FOR" approval,
ratification and adoption of the Class B Exchange. The Board of Directors of the
Company urges each holder of Company Class A Common Stock to vote on Proposal 1
on the enclosed Proxy, and date, sign and return the Proxy to ensure that his or
her shares are represented at the Special Meeting.
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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
On the Effective Date, 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"). "Effective Date" means the date when all required conditions set forth
in the Plan of Reorganization have been fulfilled and when the Reorganization
shall have been consummated. For a detailed definition of "Effective Date," see
Article 2 of the Plan of Reorganization, attached hereto as Appendix A.
On the Effective Date of the Reorganization, Company shareholders will
receive, in exchange for each share of Company Equity that they own, that number
of shares of Zions Common Stock calculated by dividing the Merger Consideration
of 251,225 shares of Zions Common Stock by the total number of shares of Company
Equity issued and outstanding as of the Effective Date of the Reorganization,
subject to downward adjustment if Transaction Expenses exceed $100,000. The
115,966 shares of Company Equity will be canceled and immediately converted into
the right for Company shareholders to receive approximately 2.17 shares of Zions
Common Stock for each share of Company Equity owned. If Transaction Expenses
determined on a pre-tax basis in accordance with generally accepted accounting
principles exceed $100,000, then the Merger Consideration shall be the
difference between 251,225 and the number calculated by dividing such excess,
net of any associated tax benefit, by $47.125. "Transaction Expenses" means all
expenses incurred from January 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. For a listing of
expenses that are not included in the definition of "Transaction Expenses,"
please see Section 1.2(c) of the Plan of Reorganization, attached hereto as
Appendix A.
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 will receive an amount of cash equal to
the product of such fraction times $47.125. Shareholders will have no further
rights as shareholders with respect to the fractional shares.
On October 21, 1998, the closing price of Zions Common Stock on Nasdaq-NMS
was $50.125 per share. On that date there were issued and outstanding 115,966
shares of Company Equity, including Class B Rights held by two persons which
represent the right to acquire Company Class B Common Stock in the Class B
Exchange. If the Reorganization had been consummated on that date, and
Transaction Expenses had not exceeded $100,000, Company shareholders under such
circumstances would be entitled to receive approximately 2.17 shares of Zions
Common Stock for each share of Company Equity that they own or an equivalent
market value of approximately $108.77 per share of Company Equity.
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On and after the Effective Date, the Merger Consideration is subject to
upward adjustment depending upon the satisfaction of a certain Company
contingency. On the date that the parties entered into the Reorganization
Agreement, the Company had a certain outstanding contingency that might not be
resolved until after consummation of the Reorganization. To absorb the cost of
that contingency, Zions will place 6,000 shares of Zions Common Stock in escrow
on the Effective Date of the Reorganization. If after resolution of the
contingency there remain any shares of Zions Common Stock in escrow, such shares
would be distributed ratably to those persons who are holders of Company Equity
as of the Effective Date. There is no assurance that after the contingency is
resolved any shares of Zions Common Stock will remain in escrow and be available
for distribution to Company shareholders. See "Plan of Reorganization --
Existing Company Contingency."
BACKGROUND OF AND REASONS FOR THE REORGANIZATION
The Company. During April 1998, the Chairman, Mr. Hogoboom, 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 considering bank merger and acquisition transaction research, the Board of
Directors selected a number of potential acquirors, 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. Hogoboom 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. Hogoboom learned through the market place that
Zions was in a favorable acquisition mode for high performing commercial banking
institutions in mountain states, including Colorado. Based on Zions' status as
one of the nations's top performing banking organization, Mr. Hogoboom
identified Zions as a favored potential acquiror. Subsequently, Mr. Hogoboom
initiated contact with management of Zions. Several rounds of discussions
resulted in an initial offer in April 1998 for an exchange of the stock of the
Company for stock of Zions. After discussing the initial offer, the Board
authorized Mr. Hogoboom to negotiate the terms of the offer and a definitive
agreement with Zions.
In August 1998, Mr. Hogoboom and the Board negotiated the terms of a
definitive agreement with Zions. The Board met again during August 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
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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 August 12, 1998.
The Company Board believes that the Reorganization is fair to, and in the
best interests of, the Company and its shareholders. 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 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 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 for federal income tax purposes the Reorganization
will be a tax-free reorganization for the Company and for
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 by deepening its franchise in the Denver
metropolitan area by opening offices in Westminster, Colorado, in the northern
suburbs of Denver.
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.
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VOTING AGREEMENTS
Certain of the directors and executive officers of the Company and the
Bank, the spouse of the chairman and president of the Company and the father of
a director have agreed to vote their shares of Company Equity in favor of the
Plan of Reorganization. As of June 30, 1998, these individuals beneficially
owned 56,380 shares of Company Class A Common Stock, or approximately 68% of the
outstanding shares of Company Class A Common Stock and Class B Rights
representing the right to acquire 33,150 shares of Company Class B Common Stock,
or 100% of the Class B Rights (and, therefore, 100% of the shares of Company
Class B Common Stock). Such vote will be sufficient to approve the Plan of
Reorganization. If these individuals vote their shares of Company Equity in
accordance with the requirements of the voting agreements, approval of the Plan
of Reorganization by the Company shareholders is assured. For those individuals
who are directors of the Company, the voting agreements are applicable to such
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.
Subject to their fiduciary duties to the shareholders of the Company, the
directors also agreed in their capacity as directors to support the Plan of
Reorganization and to recommend its adoption by the other shareholders of the
Company. The directors also agreed, 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 two-thirds of the outstanding shares of Company Class A
Common Stock and the affirmative vote of two-thirds of the outstanding shares of
Company Class B Common Stock entitled to vote at the Special Meeting. Because
approval requires the affirmative vote of two-thirds of the outstanding stock of
each class of Company Equity, 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 Equity 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 vote on
Proposal 2 on the enclosed Proxy, and date, sign and return the 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 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 Company 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
As a result of the Reorganization, shares of Company Equity 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
Equity that they own, Company shareholders will receive that number of shares of
Zions Common Stock calculated by dividing the Merger Consideration of 251,225
shares of Zions Common Stock, subject to downward adjustment if Transaction
Expenses exceed $100,000, by the total number of shares of Company Equity issued
and outstanding as of the Effective Date of the Reorganization. Because the
Merger Consideration might be adjusted downward if Transaction Expenses exceed
$100,000, 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 Equity will not be known until the Effective Date.
Further, due to a contingency whose resolution may result in the distribution of
additional shares of Zions Company Stock to holders of Company Equity, the total
number of shares of Zions Common Stock to be ultimately received by holders of
Company Equity may not be known until after the third anniversary of the
Effective Date. See "Existing Company Contingency," below.
On October 21, 1998, the closing price of Zions Common Stock was $50.125
per share. On that date, the Company had 82,816 shares of its Company Class A
Common Stock and Class B Rights representing the right to acquire 33,150 shares
of its Company Class B Common Stock issued and outstanding. If the
Reorganization had been consummated on that date and Transaction Expenses had
not exceeded $100,000, Company shareholders under such circumstances would be
entitled to receive approximately 2.17 shares of Zions Common Stock for each
share of Company Equity that they own or an equivalent market value of
approximately $108.77 per share of Company Equity.
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
Equity, 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 Equity 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
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Company Equity 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).
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 Equity 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 $47.125. 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
Equity 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.
EXISTING COMPANY CONTINGENCY
On the Effective Date of the Reorganization, Zions will deliver to Zions
First National Bank as escrow agent 6,000 shares of Zions Common Stock which
otherwise would have been issued in the Holding Company Merger to Company
shareholders but for a certain existing contingency of the Company. The sole
purpose of establishing the escrow is to provide funding for payment of certain
costs and expenses as a result of such contingency incurred by the Company or
any of its subsidiaries or assumed by Zions or any of its subsidiaries upon
consummation of the Reorganization. The contingency relates to finders' fees,
brokerage commissions or compensation for financial or advisory services claimed
to have been rendered by Professional Bank Consultants, Inc. or Alan W. Noyes in
connection with the sale or merger of the Company and the Bank to or with Zions
or any affiliate of Zions. The 6,000 shares of Zions Common Stock are to be used
to satisfy the resolution of such claim. If Zions or any of its subsidiaries or
the Company or any of its subsidiaries must make payment to Professional Bank
Consultants, Inc. or to Mr. Noyes in satisfaction of the subject contingency,
the escrow agent will return to Zions that number of shares of Zions Common
Stock valued at $47.125 per share in an amount (up to 6,000 shares in the
aggregate) equal to the financial payment made to Professional Bank Consultants,
Inc. or Mr. Noyes.
If the escrowed shares of Common Stock are not needed to absorb any
payments resulting from the contingency, or if after resolution of the
contingency some of the escrowed shares of Zions Common Stock remain, they will
be distributed ratably to Company shareholders. Neither management of the
Company nor management of Zions can predict whether any of the 6,000 shares of
Zions Common Stock will remain after the contingency has been resolved or, if
so, how many of the 6,000 shares will remain. Company shareholders should not
vote in favor of the Reorganization based on an assumption that any of the 6,000
shares of Zions Common Stock will be available for distribution to them after
resolution of the contingency that has been described. Any dividends declared on
Zions Common Stock after the 6,000 shares of Zions Common Stock are placed into
escrow will apply to such shares of Zions Common Stock.
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FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The following discussion is a summary of the material federal income tax
consequences of the 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. Shareholders of the Company will have the following federal
income tax consequences upon the Reorganization: (i) no taxable 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 Equity 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 Equity surrendered in exchange
therefor, provided the Company Equity 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 Equity will be treated as a distribution in redemption of
such shares, subject to the provisions of Section 302 of the Code.
Zions and the Company will receive an opinion from Rothgerber Johnson &
Lyons LLP, legal counsel to the Company (the "Rothgerber 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 Rothgerber 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
Rothgerber Opinion is qualified in its entirety by reference to such filing.
RIGHTS OF DISSENTING SHAREHOLDERS
A holder of shares of Company Equity 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 Equity
held as determined in accordance with such statutory provisions.
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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 Equity. Fair value means the value of the
shares of Company Equity 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 Adams County,
Colorado for a determination of fair value.
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 3300 West 72nd Avenue, Westminster, Colorado 80030-5300
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 vote at 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 Equity 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 Equity 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
Equity certificates by the deadline shown in the notice from Val Cor. If the
payment demand form and the Company Equity 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 Equity 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 Equity certificates,
Val Cor will pay such Dissenting Shareholder Val Cor's estimate of the fair
value of the Company Equity for which
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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.
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 Adams 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 EQUITY
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 EQUITY.
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 on the Effective Date of the
Reorganization, Thomas M. Jones, currently president and chief executive officer
of the Bank, will become an executive officer of Vectra Bank. Mr. Jones will
enter into an employment agreement with Vectra Bank effective as of the
Effective Date. The terms of the agreement will continue until the third
anniversary of the commencement of the agreement unless extended by mutual
agreement. The agreement provides that Mr. Jones will receive a salary not less
than the
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aggregate salary paid to him by the Bank as of January 1, 1998. During the term
of his employment agreement, Mr. Jones 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.
The employment agreement provides for severance benefits for Mr. Jones
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. Jones 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. Jones 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. Jones will agree that, during the term
of his employment and until the second anniversary of the date of termination of
his employment 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.
The Plan of Reorganization also provides that on the Effective Date of the
Reorganization, Donald K. Hogoboom, currently chairman and president of the
Company and chairman of the Bank, will become a consultant for Vectra Bank. Mr.
Hogoboom will enter into a consulting agreement with Vectra Bank effective as of
the Effective Date. The terms of the agreement will continue until the third
anniversary of the commencement of the agreement, unless extended by mutual
agreement. The agreement provides that Mr. Hogoboom will receive a consulting
fee of $100,000 for the first year and $50,000 for each of the second and third
years of the term. The consulting agreement provides that Mr. Hogoboom will
maintain a work schedule at the current main office of the Bank substantially
similar to that which he maintained for the year preceding the date of the
consulting agreement for a period of at least three months but not more than six
months. After such period, Mr. Hogoboom will serve as a consultant for Vectra
Bank on such part-time basis mutually acceptable to Mr. Hogoboom and Vectra
Bank. In addition to his consulting fee, Mr. Hogoboom is entitled to the
furniture, wall hangings and the other appointments currently in his office at
the Bank.
Pursuant to the consulting agreement, Mr. Hogoboom is subject to
confidentiality and non-competition provisions. Mr. Hogoboom is also required to
repay certain pre-paid premiums advanced by the Bank on a split-dollar,
last-to-die life insurance policy on him and his spouse in the amount of
$71,340.
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The Board of Directors of the Company was aware of the interests of both
Mr. Jones and Mr. Hogoboom when it considered and approved the Plan of
Reorganization.
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 one percent of the Company Equity 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, with the exception of customary periodic cash dividends paid by the
Company and the Bank to holders of its Company Equity in such periodic amounts
as are in every case consistent with the periodic amounts characteristic of that
payor; (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 to effectuate the Class B Exchange and except for issuances
of Company Equity upon exercise of stock options outstanding as of August 12,
1998), or grant any options to acquire such additional securities; (iii) except
as contemplated by the Plan of Reorganization, 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, or engage in any discussions concerning such a possible
transaction, except as deemed necessary or advisable by management of the Bank
to cause to open for business any unopened branch office of the Bank for which
the Bank as of August 12, 1998 has all necessary governmental approvals; (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 contract or agreement, pay or become obligated to pay any legal,
accounting or miscellaneous other expenses, or engage in any transaction, except
in the ordinary course of its business and except as deemed necessary or
advisable by management of the Bank to cause to open for business any unopened
branch office of the Bank for which the Bank as of August 12, 1998 has all
necessary governmental approvals; (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
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increases) 4.5% per annum of the aggregate payroll as of January 1, 1998 (it
being agreed that neither (a) the salaries of new personnel hired to staff any
approved but unopened branch, which salaries are not disproportionate to
salaries of comparable employees in the market area of such branch, nor (b) any
one-time payment of additional salary to Mr. Jones in an amount not in excess of
the equivalent of twenty working days of salary in exchange for his surrender of
an equivalent number of accrued but unused days of vacation, will be taken into
account in determining whether the aforesaid 4.5% limit is exceeded); (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 as deemed necessary or advisable by
management of the Bank to cause to open for business any unopened branch office
of the Bank for which the Bank as of August 12, 1998 has all necessary
governmental approvals, and 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, ratified and
confirmed the Plan of Reorganization by the requisite percentage of each class
of the outstanding Company Equity entitled under law to vote on the Plan of
Reorganization in accordance with the applicable laws of the state of Colorado;
(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 filed by
Zions under the Securities Act in connection with the registration of the shares
of Zions Common Stock to be used as consideration in connection with the
Reorganization shall have become effective under the Securities Act, and Zions
shall have received all required state securities laws permits and other
required authorizations or confirmations of the availability of exemption from
registration requirements necessary to issue Zions Common Stock in the
Reorganization, and neither the Registration Statement nor any such required
permit, authorization or confirmation shall be subject to a stop-order or
threatened stop-order by the SEC or any state securities authority; (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 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
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or prior to the Effective Date; (ii) Rothgerber Johnson & Lyons LLP, 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, or Zions shall have received a
certificate signed by the president of the Company and the president of the Bank
stating that there is no pending or threatened litigation against the Company or
the Bank or to which any of its assets or property is subject; (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) $5,755,230 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 $283,494; (viii) the CRA
rating of the Bank shall be no lower than "satisfactory"; (ix) Mr. Jones shall
have entered into an employment agreement with Vectra Bank in the form provided
in the Plan of Reorganization; (x) Mr. Hogoboom shall have entered into a
consulting agreement with Vectra Bank in the form provided in the Plan of
Reorganization; (xi) 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 shall have received an opinion that the
Reorganization contemplated by the Plan of Reorganization will qualify for
"pooling-of-interests" accounting treatment; (xii) 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 Equity 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; (xiii) the
Company's Board of Directors shall have authorized the Class B Exchange and such
exchange shall have occurred not later than twenty business days prior to the
Special Meeting; (xiv) the holders of Company Class A Common Stock shall have
approved, adopted and ratified by a unanimous vote the Class B Exchange in
accordance with the Proxy Statement/Prospectus and (xv) the holders of Company
Class A Common Stock and the holders of Class B Rights shall have executed
Waivers and Releases in the form provided in the Plan of Reorganization.
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.
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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 among the parties, except that after such shareholder approval no
amendment may prejudice the economic interests of the shareholders of the
Company 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.
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 by 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 30 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 30 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
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invalidate the transactions contemplated by the Plan of Reorganization; or (v)
by any party on or after April 10, 1999, 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 $350,000.
RESTRICTIONS ON RESALES BY COMPANY AFFILIATES
In general, Company shareholders who receive shares of Zions Common
Stock as a result of the Reorganization will be able to sell such shares freely
and without restriction. However, directors, executive officers, and
shareholders of the Company who beneficially own more than 10 percent of the
outstanding shares of Company Class A Common Stock are considered "affiliates"
of the Company and are subject to restrictions on the sales of shares of Zions
Common Stock 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 Equity 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 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. The Company will pay the cost of
printing and delivering this Proxy Statement/ Prospectus and other material to
the Company shareholders. Zions will pay the costs attributable to registering
under federal and state securities laws its stock issuable pursuant to the Plan
of Reorganization. The Company will pay the cost of procuring the Rothgerber
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
or waivers 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
35
<PAGE>
each of these regulatory authorities. Federal law prohibits consummation of the
Reorganization until 30 days after the approvals of the federal regulators have
been obtained, except that this period may be shortened with the concurrence of
the Attorney General of the United States. The requisite 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
fourth 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 fourth 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.
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 an opinion 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
36
<PAGE>
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 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
37
<PAGE>
and obligations guaranteed by U.S. government sponsored agencies as well as
general obligations of states or other political subdivisions of the United
States. Fifty percent risk- weighted assets include, generally, loans fully
secured by first liens on one-to-four family residential properties, subject to
certain conditions. All assets not included in the foregoing categories are
assigned to the 100% risk-weighted category, including loans to commercial and
other borrowers. As of year-end 1992, the minimum required ratio for qualifying
Total Capital became 8%, of which at least 4% must consist of Tier 1 Capital. At
June 30, 1998, Zions' Tier 1 and Total Capital ratios were 13.51% and 16.90%,
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
June 30, 1998 under the risk-based capital guidelines.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL
(DOLLARS IN THOUSANDS)
Percent
of Risk-
Adjusted
Amount Assets
------ ------
<S> <C> <C>
Tier 1 Capital....................................... $ 943,769 13.51%
Minimum Requirement........................ ......... 279,504 4.00
----------- --------
Excess............................................. $ 664,265 9.51%
=========== ========
Total Capital........................................ $ 1,181,221 16.90%
Minimum Requirement.................................. 559,007 8.00
----------- --------
Excess............................................. $ 622,214 8.90%
=========== ========
Risk-Adjusted Assets,
net of goodwill, excess deferred
tax assets and excess allowance.................... $ 6,987,589 100.00%
=========== =======
</TABLE>
38
<PAGE>
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 June 30, 1998, Zions' leverage ratio was 8.06%.
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 June 30, 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.
<TABLE>
<CAPTION>
(Dollars in thousands)
Percent
of Average
Assets, Net
Amount of Goodwill
------ -----------
<S> <C> <C>
Tier 1 Capital....................................... $ 943,769 8.06%
Minimum Requirement.................................. 351,161 3.00
------------ --------
Excess............................................... $ 592,608 5.06%
============ ========
Average Assets, net of goodwill and
deferred tax assets............................. $11,705,366 100.00%
=========== ======
</TABLE>
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
39
<PAGE>
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 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,
40
<PAGE>
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).
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.
41
<PAGE>
As of June 30, 1998, both BIF- and SAIF-assessable deposits were
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 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.
42
<PAGE>
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.
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
The earnings of Zions and the Company 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. The future impact of such policies and practices on the
growth or profitability of Zions and the Company cannot be predicted.
INFORMATION CONCERNING ZIONS BANCORPORATION
SELECTED FINANCIAL DATA
The following unaudited table of selected financial data should be read
in conjunction with the related notes included herein and Zions' consolidated
financial statements and the related notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus. See "Zions Documents Incorporated
by Reference."
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<PAGE>
<TABLE>
<CAPTION>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
As of, and for the Six As of, and for the
Months Ended June 30, Year Ended December 31,
--------------------- -----------------------
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
EARNINGS SUMMARY
- ----------------
Taxable-equivalent net interest income $235,378 $188,704 $ 358,676 $ 296,372
Net interest income 231,341 185,243 351,799 289,166
Noninterest income 91,100 69,930 143,167 114,270
Provision for loan losses 6,741 3,710 6,175 4,640
Noninterest expenses (1) 205,399 150,817 301,218 235,272
Income taxes 35,144 35,810 65,211 56,101
Income before cumulative effect of changes
in accounting principles 75,157 64,836 122,362 107,423
Cumulative effect of changes in
accounting principles (2) - - - -
Net income 75,157 64,836 122,362 107,423
COMMON STOCK DATA
- -----------------
Earnings per common share:
Income before cumulative effect of
changes in accounting principles - diluted $ 1.03 $ 0.91 $ 1.89$ 1.68
Net income - basic 1.04 0.94 1.92 1.70
Net income - diluted 1.03 0.91 1.89 1.68
Dividends declared per share 0.26 0.23 0.47 0.425
Dividend payout ratio (%) 25.01% 20.93% 23.20% 23.27%
Book value per share at period end 12.32 10.13 10.25 8.72
Average common shares outstanding 71,931,0000 68,279,000 63,868,000 63,194,000
Weighted average common and common
equivalent shares outstanding during the period 73,037,000 70,436,000 64,629,000 63,787,000
Common shares outstanding at period end 75,033,242 69,562,253 63,962,100 63,468,480
6201,3672
AVERAGE BALANCE SHEET DATA
- --------------------------
Money market investments $ 1,688,894 $ 1,622,619 $ 1,490,772 $ 923,670
Securities 2,906,621 2,558,495 2,575,295 1,977,875
Loan and leases, net 5,831,128 4,641,846 4,341,674 3,432,347
Total interest-earning assets 10,426,643 8,822,960 8,407,741 6,333,892
Total assets 11,430,048 9,580,772 9,214,155 6,914,213
Interest-bearing deposits 6,028,136 4,551,467 4,410,491 3,653,420
Total deposits 7,979,270 5,956,348 5,783,370 4,731,889
FHLB advances and other borrowings over one year 145,817 75,523 136,381 87,700
Long-term debt 277,447 267,390 257,779 55,187
Total interest-bearing liabilities 8,557,515 7,398,800 7,067,324 5,208,318
Shareholders' equity 773,734 641,047 615,535 512,739
PERIOD END BALANCE SHEET DATA
- -----------------------------
Money market investments $1,241,097 $ 831,176 $ 814,088 $ 613,429
Securities 3,128,036 2,974,116 2,712,094 1,983,643
Loans and leases, net 6,125,107 4,962,866 4,871,650 3,837,149
Allowance for loan losses 96,043 86,869 80,481 76,803
Total assets 11,780,537 9,696,279 9,521,770 7,116,413
Total deposits 8,312,094 6,529,716 6,854,462 5,119,692
FHLB advances and other borrowings over one year 118,011 110,132 210,681 81,875
Long-term debt 386,243 263,246 258,566 251,620
Shareholders' equity 924,645 704,498 655,460 554,610
<CAPTION>
As of, and for the
Year Ended December 31,
-------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
EARNINGS SUMMARY
- ----------------
Taxable-equivalent net interest income $ 238,880 $ 203,313 $ 178,636
Net interest income 233,547 198,606 174,657
Noninterest income 88,811 73,202 79,880
Provision for loan losses 3,000 2,181 2,993
Noninterest expenses (1) 195,186 174,900 167,750
Income taxes 41,787 30,900 27,248
Income before cumulative effect of changes
in accounting principles 82,385 63,827 56,546
Cumulative effect of changes in
accounting principles (2) - - 1,659
Net income 82,385 63,827 58,205
COMMON STOCK DATA
- -----------------
Earnings per common share:
Income before cumulative effect of
changes in accounting principles - diluted $ 1.37 $ 1.09 $ .99
Net income - basic 1.39 1.11 1.03
Net income - diluted 1.37 1.09 1.02
Dividends declared per share 0.3525 0.29 0.245
Dividend payout ratio (%) 24.95% 27.06% 21.81%
Book value per share at period end 7.46 6.28 5.50
Average common shares outstanding 59,435,000 57,754,0005 56,636,000
Weighted average common and common
equivalent shares outstanding during the period 60,013,000 58,404,000 57,120,000
Common shares outstanding at period end 62,773,280 58,238,208 56,805,468
7,544
AVERAGE BALANCE SHEET DATA
- --------------------------
Money market investments $ 945,842 $ 869,709 $ 788,694
Securities 1,665,500 1,545,704 1,209,165
Loan and leases, net 2,662,753 2,574,995 2,222,182
Total interest-earning assets 5,274,095 4,990,408 4,220,041
Total assets 5,779,025 5,456,613 4,643,918
Interest-bearing deposits 3,095,714 2,744,976 2,449,275
Total deposits 3,963,702 3,583,094 3,178,926
FHLB advances and other borrowings over one year 96,305 118,607 111,974
Long-term debt 57,506 59,493 75,623
Total interest-bearing liabilities 4,397,582 4,197,865 3,556,746
Shareholders' equity 407,498 339,181 286,331
PERIOD END BALANCE SHEET DATA
- -----------------------------
Money market investments $ 687,251 $ 403,446 $ 597,680
Securities 1,694,669 1,663,433 1,258,939
Loans and leases, net 3,068,057 2,391,278 2,486,346
Allowance for loan losses 73,437 67,018 68,461
Total assets 6,095,515 4,934,095 4,801,054
Total deposits 4,511,184 3,705,976 3,432,289
FHLB advances and other borrowings over one year 95,817 101,571 152,109
Long-term debt 56,229 58,182 59,587
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
As of, and for the Six As of, and for the
Months Ended June 30, Year Ended December 31,
--------------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 25,055 $ 15,953 $ 11,907 $ 12,704 $ 10,875 $ 13,635 $ 23,364
Restructured loans 685 830 691 857 249 567 4,006
Other real estate owned and other
nonperforming assets 3,593 3,998 3,371 138 1,609 4,741 3,267
Total nonperforming assets 29,333 20,781 15,969 13,699 12,733 18,943 30,637
Accruing loans past due 90 days or more 15,566 8,170 9,944 3,563 5,309 3,041 10,821
SELECTED RATIOS
- ---------------
Net interest margin (3) 4.55% 4.31% 4.27% 4.68% 4.53% 4.07% 4.23%
Return on average assets 1.33% 1.36% 1.33% 1.55% 1.43% 1.17% 1.25%
Return on average common equity 19.59% 20.40% 19.88% 20.95% 20.22% 18.82% 20.33%
Ratio of average common equity to average assets 6.77% 6.69% 6.68% 7.42% 7.05% 6.22% 6.17%
Tier I risk-based capital - period end 13.50% 13.69% 11.74% 14.16% 11.33% 11.81% 10.85%
Total risk-based capital - period end 16.90% 15.83% 13.75% 17.52% 14.03% 14.96% 14.12%
Leverage ratio - period end 8.06% 7.84% 6.75% 8.70% 6.33% 6.24% 5.44%
Ratio of nonperforming assets to total
assets - period end .25% .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 .48% .42% .33% .36% .41% .79% 1.23%
Ratio of net charge-offs (recoveries) to average
loans and leases .13% .18% .19% .11% .10% .19% (.23)%
Ratio of allowance for loan losses to net loans
and leases outstanding at period end 1.57% 1.75% 1.65% 2.00% 2.39% 2.80% 2.75%
Ratio of allowance for loan losses to
nonperforming loans at period end 373.13% 517.60% 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.
45
<PAGE>
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 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.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW DECLARED
---- --- --------
<S> <C> <C> <C>
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 .14
Third Quarter.................................................. 57.25 38.38 .14
Fourth Quarter (through October 21, 1998)...................... $ 50.13 $39.13 $ --
</TABLE>
On August 13, 1998, the last trading date prior to the public
announcement of the Reorganization, the closing sale price for the Zions Common
Stock was $46.25. On October 21, 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 $50.125. On October 21, 1998, there were approximately
77,564,668 shares of Zions Common Stock outstanding, held by approximately 6,070
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.
TRANSACTIONS WITH MANAGEMENT
In connection with Zions' acquisition of Sumitomo (for a description of
the transaction, see "Summary -- Recent Developments" and "Zions Documents
Incorporated by Reference," above), Robert Sarver, a director of Zions, serves
as the chief executive officer of California Bank & Trust under an employment
agreement. To provide an incentive for Mr. Sarver to expand Zions' California
franchise, Zions sold 5% of the stock of California Bank & Trust to a trust of
which Mr. Sarver serves as trustee (the "Sarver Trust") and two companies
affiliated with Mr. Sarver for approximately $33 million. To finance part of the
minority interest in California Bank & Trust, the Sarver Trust entered into a
loan agreement with Zions for $14.85 million. The loan is collateralized by
certain shares of Zions Common Stock, the shares of California Bank & Trust
stock owned by the Sarver Trust, and the proceeds of such shares of Zions Common
Stock and California Bank & Trust stock. The loan accrues interest at the rate
of 6.39%, compounded annually, and matures on March 31, 2003.
BUSINESS OF THE COMPANY AND THE BANK
THE COMPANY
The Company was organized as a Colorado corporation in 1980 and became
a holding company under the Bank Holding Company Act in 1980 when it acquired
Citizens Bank, Westminster, Colorado (the "Bank"). The Bank was chartered by the
State of Colorado in 1970 and continues to operate from its primary location at
3300 West 72nd Avenue in Westminster, Colorado, a suburb in the northwestern
Denver metropolitan area.
The Company has also served as a holding company for two additional
subsidiary banks. In 1981 Citizens Bank, Littleton, Colorado, was chartered by
the State of Colorado and became
46
<PAGE>
an affiliate of the Company. It operated from its primary location in Littleton,
Colorado, a suburb in the southern Denver metropolitan area, until it was closed
by the FDIC in September 1988 and subsequently sold to Equitable Bank of
Littleton. In 1984 Citizens Bank, Glendale, Colorado, was chartered by the State
of Colorado and became an affiliate of the Company. It operated from its primary
location in Glendale, Colorado, a suburb in the eastern Denver metropolitan
area, until it was closed by the FDIC in 1987 and subsequently sold to
Prudential Bank of Denver.
Since 1988, the Company's activities have been limited to ownership and
operation of the Bank. The Company's principal assets are its investment in the
Bank and cash. The Company's primary source of income is Bank dividends. Since
December 31, 1993, the Company has experienced continued growth. Assets and
deposits grew 28.57% and 26.53%, respectively, from December 31, 1993, to June
30, 1998. Over the same period loan growth was 22.94%. The Company has
continually improved its profitability over the last several years, achieving a
1.50% return on average assets for 1997, and 1.40% for the first six months of
1998.
For the six months ending June 30, 1998, the Company's net income after
taxes was $345,000, compared to $337,000 for the same period in 1997. On June
30, 1998, deposits were $44,038,000 and net loans were $27,120,000 compared to
$39,770,000 and $26,281,000, respectively, at June 30, 1997. At June 30, 1998,
the Company had total assets of $50,185,000 and total stockholders' equity of
$5,805,000 compared to $45,431,000 and $4,665,000, respectively, at June 30,
1997. Net interest income for the six months ending June 30, 1998, was
$1,201,000 as compared to $1,127,000 for the same period in 1997.
THE BANK
The Bank has operated at its current location in Westminster, Colorado,
since 1970 and in September 1998 opened a branch office in the northwestern
Denver metropolitan area. The Bank offers general commercial banking services to
its customers and caters to small and medium-sized businesses located primarily
in the northwestern Denver metropolitan area by providing a comprehensive
banking relationship. The Bank engages in most banking activities, including
accepting checking and savings deposits, and making commercial, installment, and
real estate mortgage loans. It also offers a variety of other banking products
including safe deposit boxes, debit and credit cards, money orders, cashiers
checks, 24-hour ATM access, 24- hour telephone banking, U.S. Savings Bonds, U.S.
Treasury Securities, ACH transfers, wire transfers and safekeeping for
municipalities and bankruptcy trustees. The Bank is not authorized to offer, and
does not offer, trust services. The Bank leases space in its lobby to a national
investment firm that sells non-deposit investment products such as stocks,
bonds, mutual funds, money market funds, retirement plans and annuities.
The Bank is a member of the Federal Reserve System and is subject to
examination by the Colorado Division of Banking and the Federal Reserve Bank of
Kansas City.
MARKET AREA SERVED
The Bank's two facilities are both located within the northwestern
Denver metropolitan area. The main office is located on 72nd Avenue three blocks
west of Federal Boulevard, a major thoroughfare which provides access to US
Highway 36 (the Boulder Turnpike) and Interstates I-25 and I-70. This area is
experiencing extensive redevelopment with the demolition of the forty year old
Westminster Plaza Shopping Center and the erection of a new 55,000 square foot
Safeway store and adjoining retail shops. In addition, on both Federal Boulevard
and West 72nd Avenue, utility lines have been relocated underground, streets
have been widened and
47
<PAGE>
resurfaced with new curbs and gutters, and planters and trees have been added.
Although the area surrounding the main Bank office is considered to be largely
"blue collar," household income exceeds other locations in the Denver
metropolitan area primarily because of the existence of many two-income
households.
The Bank opened a new branch office in September 1998 located eight
miles northwest of the main office in the Church Ranch Office Park at 103rd
Avenue and Church Ranch Boulevard, a new exit from the Boulder Turnpike. This
Office Park includes a new Country Inn and a facility of Children's Hospital,
and is home to numerous high tech firms such as Level Three, Match Logic and
Itelco. Nearby is the new Westminster Promenade, a development accommodating a
24-screen AMC theater, a 3-sheet ice arena, a Westin Hotel and conference center
and other retail development nearing completion, under construction, or in the
planning stage. The Office Park is surrounded by new up-scale residential
developments, including apartments, condominiums, patio homes and other single
family houses.
LOANS
General. The Bank follows a uniform credit policy for its loans, which
sets forth underwriting and loan administration criteria, including 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.
Approximately 11.59% of the Bank's loan portfolio at June 30, 1998, had interest
rates that float with the Bank's base rate or some other reference rate. Most of
the Bank's loans are generated in the Denver metropolitan area.
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 for these commitments as it
uses in all its lending activities and has included 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 $758,472 at June 30, 1998.
Loan Portfolio. The Company concentrates its lending activities in the
following areas: real estate, commercial and industrial, and individual. At June
30, 1998, these categories accounted for approximately 76.5%, 13.7% and 9.3%,
respectively, of the Company's loan portfolio, compared to 79.0%, 12.9% and
7.7%, respectively, at June 30, 1997. The following table sets forth the
Company's loans by major category at the dates indicated:
48
<PAGE>
<TABLE>
<CAPTION>
6-30-98 6-30-97 12-31-97 12-31-96
------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Real estate loans $20,953 $20,972 $21,254 $19,182
Commercial and industrial 3,747 3,420 3,507 3,807
Individual loans 2,549 2,044 2,044 1,776
Other loans and leases 152 119 343 120
--------- --------- --------- ---------
Total loans $27,401 $26,555 $27,148 $24,885
Less allowance for loan and lease losses 281 274 264 276
--------- --------- --------- ---------
Net loans $27,120 $26,281 $26,884 $24,609
======= ======= ======= =======
</TABLE>
Real estate loans primarily consist of amortized loans secured by
improved real estate at less than 75% loan to value with fixed rates and
maturities of five years or less. Many of these loans are made to small and
medium-sized businesses and some have additional collateral such as furniture,
fixtures, equipment, accounts receivable and inventory.
Commercial and industrial loans are generally credit lines to small and
medium-sized businesses with annual maturities and interest collected quarterly.
Individual loans are typically made for non-business purposes and
include new and used car loans, recreational vehicle loans, home improvement
loans and small revolving lines of credit. Over the years it has become
increasingly difficult to compete with the interest rates and terms offered by
automobile and recreational vehicle dealers and manufacturers. As a result,
these types of loans have decreased significantly and the Bank has focused on
first mortgage real estate loans to individuals. Most of these real estate loans
are fixed rate loans amortizing in twenty years or less with maturities of five
years or less. Many loans are characterized as "non-conforming" in the
traditional mortgage market because the borrowers may lack credit history, may
not have sufficient income to qualify, or may not be unable to satisfy the
lender's employment requirements. However, most of these loans are characterized
by large down payments or secured by other properties with sufficient equity to
meet the Bank's loan to value requirements. Many of these loans are to recent
immigrants from eastern Europe or southeast Asia who have referred their
families, friends and co-workers to the Bank as new customers.
The following table presents loans by maturity for the dates indicated.
Actual maturities may differ from the contractual maturities shown below as a
result of renewals and prepayments.
49
<PAGE>
<TABLE>
<CAPTION>
Maturity 6-30-98 6-30-97 12-31-97
- -------- ------- ------- --------
(in thousands)
<S> <C> <C> <C>
One year or less $ 7,942 $ 5,740 $ 6,973
One to five years 18,525 19,491 18,756
Over five years 934 1,324 1,419
------- ------- -------
Total $27,401 $26,555 $27,148
======= ======= =======
Loans due after one year
Fixed interest rate $19,459 $20,815 $20,175
Floating interest rate --- --- ---
</TABLE>
Nonperforming Assets and Loans. The following table sets forth
information concerning the Company's nonperforming assets and loans at the dates
indicated:
<TABLE>
<CAPTION>
6-30-98 6-30-97 12-31-97 12-31-96
------- ------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Nonperforming loans:
Loans 90 days or more delinquent
and still accruing interest $ 10 $ 0 $ 10 $ 19
Nonaccrual loans 21 0 0 20
Troubled debt restructurings 0 0 0 0
------ ------ ------ ------
Total nonperforming loans $ 31 $ 0 $ 10 $ 39
====== ===== ===== =====
Other real estate owned 0 74 72 76
Other assets acquired by foreclosure 0 0 0 0
------ ------ ------ ------
Total nonperforming assets $ 31 $ 74 $ 82 $ 115
====== ====== ===== =====
Allowance for loan losses $ 281 $ 274 $ 264 $ 276
====== ====== ===== =====
Ratio of total nonperforming assets
to total assets 0.06% 0.16% 0.17% 0.25%
Ratio of total nonperforming loans
to total loans 0.11% 0.00% 0.04% 0.16%
Ratio of allowance for loan losses
to total loans 1.04% 1.04% 0.98% 1.12%
Ratio of allowance for loan losses
to total nonperforming loans 906.45% NA 2,640.00% 707.69%
</TABLE>
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.
Nonperforming loans consist of loans 90 days or more delinquent and
still accruing interest, nonaccrual loans and troubled debt restructurings.
There were no material nonperforming loans at June 30, 1998.
50
<PAGE>
Nonaccrual 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 the loan, the accrual of interest is discontinued and
all interest previously accrued, but not collected, is reversed against current
period interest income. While the loan is on nonaccrual status, interest income
is recognized only upon receipt and then only if, in the judgment of management,
future collection of principal and interest is probable. Loans 90 days or more
delinquent are changed to nonaccrual status unless the loan is in the process of
collection and management determines that full collection of principal and
interest is probable. Interest accruals are resumed on nonaccrual loans only
when, in the judgment of Bank management, the loans are estimated to be fully
collectible as to both principal and interest.
Troubled debt restructurings are loans that have been renegotiated to
provide a reduction or deferral of interest or principal balance because of a
deterioration in the financial condition of the borrower.
Additional interest income on nonaccrual 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 nonaccrual
loans.
Other real estate owned includes property acquired in foreclosure
proceedings or under agreements with delinquent borrowers. When the Bank sells
other real estate and finances more than 90% of the purchase price it is
required by federal regulation to carry the loan as other real estate owned
until such time as the loan balance falls below 90% of the purchase price.
Amounts carried in other real estate owned as of December 31, 1996, and December
31, 1997, represent the balances of loans that exceeded 90% of the purchase
price at the time the Bank sold the properties, even though such loans were not
delinquent. The Bank did not actually own any other real estate as of the
aforementioned dates and as of June 30, 1998, there were no amounts carried as
other real estate owned.
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-offs or recoveries
are charged or credited directly to the allowance. In general, the amount
charged to earnings each year by the Bank is based on the Bank management's
judgment, which takes into consideration a number of factors, including: (a) the
Bank's loss experience in relation to outstanding loans and the existing level
of the allowance; (b) a continuing review of problem loans, related uncollected
interest and overall portfolio quality; (c) regular examinations and appraisals
of loan portfolios conducted by the Bank's internal and external auditors and
state and federal supervisory authorities; and (d) current economic conditions.
51
<PAGE>
The following table sets forth the historical relationship between the
Bank's loan charge-offs and recoveries and allowance for loan losses at the
dates indicated:
<TABLE>
<CAPTION>
6-30-98 6-30-97 12-31-97 12-31-96
------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance of allowance for loan losses at
beginning of period $264 $276 $276 $294
Charge-offs:
Real estate loans 0 0 0 0
Installment loans (4) (10) (16) (28)
Commercial loans (3) 0 (11) (9)
Credit card and related plans (1) (2) (3) (3)
----- ------ ----- -----
Total charge-offs $ (8) $(12) $(30) $(40)
Recoveries:
Real estate loans 0 2 4 3
Installment loans 2 2 3 7
Credit card and related plans 0 0 0 1
Commercial loans 43 6 11 11
---- ------ ----- -----
Total recoveries $ 45 $ 10 $ 18 $ 22
Net (charge-offs) recoveries 37 (2) (12) (18)
Provision for credit losses (20) 0 0 0
---- ------ ------ ------
Balance at end of period $281 $274 $264 $276
==== ==== ==== ====
Ratio of net charge-offs (recoveries)
average loans (annualized for
June 30, 1998 and 1997) (0.28%) 0.02% 0.05% 0.07%
Average loans outstanding during period $26,888 $25,717 $26,221 $24,652
======= ======= ======= =======
</TABLE>
52
<PAGE>
INVESTMENT SECURITIES
The Company's investment portfolio consists primarily of U.S. Treasury
and U.S. Agency securities held available for sale. The Company holds no
securities as "held to maturity." Government regulations limit the type and
quality of investments in which the Company may invest its funds. The following
table sets forth the amortized cost and market value of the Company's investment
securities by class of security at the dates indicated:
<TABLE>
<CAPTION>
6-30-98 6-30-97 12-31-97 12-31-96
----------------- ----------------- --------------- -----------------
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
--------- ------ --------- ------ --------- ------ --------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale
U.S. Treasury $12,293 $12,317 $11,289 $11,312 $11,891 $11,931 $10,716 $10,742
U.S. agencies 700 701 0 0 500 502 0 0
States & political subdivisions 0 0 175 176 0 0 175 176
Mortgage backed 0 0 0 0 0 0 0 0
All other 212 212 201 201 206 206 197 197
--------- --------- ------- ------- ------------------ --------- ---------
Total securities available
for sale $13,205 $13,230 $11,665 $11,689 $12,597 $12,639 $11,088 $11,115
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The following tables set forth the carrying values, maturities and
weighted average yields of the Company's investment portfolio at June 30, 1998,
and December 31, 1997, respectively:
53
<PAGE>
<TABLE>
<CAPTION>
Due in
1 Year or Less Due 1-5 Years Due 5-10 Years
------------------- ------------------- -------------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
(in thousands)
June 30, 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity 0 0 0 0 0 0
Securities available for sale
U.S. Treasury $6,298 6.04% $5,995 5.66% $ 0
U.S. Agencies 0 0 700 6.46%
States & political subdivisions 0 0 0
Mortgage backed securities 0 0 0
Other securities 212 0 0
------ ------ ------
Total $6,510 6.04% $5,995 5.66% $700 6.46%
December 31, 1997
----------------------------------------------------------------------
Securities held to maturity 0 0 0 0 0 0
Securities available for sale
U.S. Treasury $5,896 5.93% $5,995 5.97% 0
U.S. Agencies 0 0 $500 6.80%
States & political subdivisions 0 0 0
Mortgage backed securities 0 0 0
Other securities 206 0 0
------ ------ ------
Total $6,102 5.93% $5,995 5.97% $500 6.80%
<CAPTION>
Due After 10 Years Total
------------------ ---------------------
Amount Yield Amount Yield
------ ----- ------ -----
------------------------------------------
<S> <C> <C> <C> <C>
Securities held to maturity 0 0 0 0
Securities available for sale
U.S. Treasury 0 $12,293 5.87%
U.S. Agencies 0 700 6.46%
States & political subdivisions 0 0
Mortgage backed securities 0 0
Other securities 0 212
--- ---------
Total 0 $13,205 5.90%
-------------------------------------------
Securities held to maturity 0 0 0 0
Securities available for sale
U.S. Treasury 0 $11,891 5.97%
U.S. Agencies 0 500 6.80%
States & political subdivisions 0 0
Mortgage backed securities 0 0
Other securities 0 206
--- ---------
Total 0 $12,597 6.00%
</TABLE>
54
<PAGE>
DEPOSITS
Growth in deposits was the primary source of funds used by the Company
for lending and other general business purposes. The Company may derive
additional funds from principal repayment on loans, the sale of loans and
investment securities and borrowings from correspondent banks. The level of
deposit liabilities can vary significantly and is influenced by prevailing
interest rates, money market conditions, general economic conditions and
competition. The Company offers a full range of depository accounts, including
checking, savings, money market accounts and certificates of deposit. Management
believes that the customers provide a strong and relatively stable core deposit
base.
The following table presents the average balances for each of the
Company's major category of deposits and the weighted average interest rate paid
for interest-bearing deposits for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ending Six Months Ending Years Ending December 31
----------------- ----------------- --------------------------------
June 30, 1998 June 30, 1997 1997 1996
--------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Average Interest Average Interest Average Interest Average Interest
Balance Rate Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ---- ------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOW and MM accounts $19,276 3.10% $18,116 2.84% $17,971 2.96% $17,010 2.67%
Savings 5,585 2.94% 5,526 2.86% 5,543 2.92% 5,739 2.84%
Time certificates of deposit
under $100,000 4,433 5.05% 4,361 4.91% 4,393 4.96% 4,834 4.92%
Time certificates of deposit
$100,000 and over 2,378 5.21% 2,135 4.87% 2,129 5.12% 1,533 4.63%
--------- --------- --------- ---------
Total interest-bearing deposits 31,672 3.50% 30,138 3.28% 30,036 3.40% 29,116 3.18%
Noninterest-bearing demand
deposits 12,468 11,430 11,991 11,119
-------- -------- -------- --------
Total deposits $44,140 $41,568 $42,027 $40,235
======= ======= ======= =======
</TABLE>
The following table sets forth the amount and maturity of certificates
of deposit with balances of more that $100,000 at June 30, 1998, June 30, 1997,
and December 31, 1997:
<TABLE>
<CAPTION>
6-30-98 6-30-97 12-31-97
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Remaining maturity
Under 3 months $1,391 $1,295 $1,515
3 to 12 months 1,047 810 830
Over 12 months 0 0 0
------ ------ ------
Total $2,438 $2,105 $2,345
====== ====== ======
</TABLE>
RETURN ON EQUITY AND ASSETS
The following table sets forth the return on the Company's average
assets and equity and various other ratios for the periods indicated:
55
<PAGE>
<TABLE>
<CAPTION>
Six Months Ending Year Ending December 31
----------------------- -----------------------
6-30-98 6-30-97 1997 1996
------- ------- ---- ----
<S> <C> <C> <C> <C>
Return on assets(1) 1.40% 1.45% 1.51% 1.59%
Return on equity(2) 11.94% 14.77% 14.96% 17.21%
Equity to assets ratio(3) 11.74% 9.80% 10.10% 9.24%
Dividend payout ratio(4) 28.61% 20.89% 19.82% 19.55%
</TABLE>
1 Net income divided by average total assets (annualized for June 30, 1998,
and June 30, 1997).
2 Net income divided by average stockholders' equity (annualized for June 30,
1998, and June 30, 1997).
3 Average total equity divided by average total assets.
4 Dividends paid per share divided by net income per share.
COMPETITION
The banking industry in the Denver metropolitan area is highly
competitive. Throughout the 1980s and 1990s, major regional publicly-traded bank
holding companies such as Norwest, First Bank System, Banc One, KeyCorp, Wells
Fargo, Community First Bancshares and Zions Bancorporation established a
presence in the Colorado banking market by acquiring financial institutions in
the Denver metropolitan area and throughout Colorado. Currently, the banking
environment in the Denver metropolitan area can be characterized by three
different groups of banks: (i) regional bank holding companies headquartered
outside of Colorado; (ii) two large financial institutions with local
headquarters (FirstBank Holding Company and First Colorado Bancorp); and (iii) a
number of smaller local banks.
The Company has competition within its markets from both the
locally-owned financial institutions and the major regional banks. Additionally,
there is competition from savings and loan associations, credit unions,
investment companies and other types of financial service providers. Many of the
Company's competitors are larger and substantially more capitalized than the
Company with higher lending limits and the ability to pay for mass advertising,
technology and physical facilities. The primary factors affecting competition
for deposits are interest rates, cost of services, the quality and range of
financial products offered and the convenience of locations and office hours.
The primary factors in competing for loans are interest rates, loan origination
fees and the quality and range of lending products offered. Other factors which
affect competition include the general availability and reliability of lendable
funds, credit, general and local economic conditions and the quality of service
and loan approval turn-around provided to the customers.
The Company believes that is has been successful in developing niches
of (i) catering to small businesses by providing comprehensive banking
relationships, and (ii) fostering a real estate loan program for the area's
immigrant population by eliminating the difficulties usually associated with
real estate transactions in the traditional mortgage market. Management further
believes that the Company's success is also attributable to personal service and
striving to meet the customers' essential banking needs.
PROPERTY
The Bank owns all of its banking facilities except for the main office
building at 3300 West 72nd Avenue which is owned by Citizens Bank Building
Corporation, a wholly owned subsidiary of the Bank. The following table sets
forth certain information concerning the Bank's properties:
56
<PAGE>
<TABLE>
<CAPTION>
Facility Address Square Footage
- -------- ------- --------------
<S> <C> <C>
Main office 3300 West 72nd Avenue 8,000
Branch office 7180 West 103rd Avenue 2,000
Employees' parking lot 71st Avenue & Julian Streets Not meaningful
Warehouse 851B Highway 224, Unit B1 Not meaningful
</TABLE>
The Bank also owns two ATMs, one located at the main office and the
other located at the branch office.
LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings which
the Company's management believes to be material to its financial conditions or
results of operations. As the nature of the Company's business involves
providing certain financial services, the collection of loans and the
enforcement and validity of mortgages and other liens, the Company and the Bank
are parties in various legal proceedings (such as garnishment proceedings) which
may be considered arising in the ordinary course of its business.
EMPLOYEES
At June 30, 1998, the Company and the Bank employed 34 full-time
equivalent employees. None of the employees is covered by a collective
bargaining agreement. The Company provides a variety of employee benefits and
management believes that employee relations 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 Federal
Reserve Board. The Bank Holding Company Act requires the Company to file reports
with the Federal Reserve Board and provide any additional information requested
thereby.
The Bank is a banking corporation organized under the laws of the State
of Colorado. It is a member of the Federal Reserve System and its deposits are
insured by the FDIC. The Bank is subject to regulation, supervision and regular
examination by the Federal Reserve Board and the Colorado Division of Banking.
See "Supervision and Regulation," above.
YEAR 2000 COMPLIANCE
In 1997, the Company began efforts to identify and assess any issues
associated with its software's ability to properly utilize dates and process
data beyond the year 2000. The Company has already invested approximately
$300,000 to convert critical mainframe and PC-based operating systems and
software to year 2000 compliant hardware and software. Management believes that
the Company's operations affected by year 2000 issues will be tested and
compliant in advance of year 2000. Management also believes that the financial
impact upon the Company to complete systems projects and ensure year 2000
compliance will not be material to the Company's financial position or results
of operations.
57
<PAGE>
SELECTED FINANCIAL DATA
The following unaudited table of selected financial data should be read
in conjunction with the Company's consolidated financial statements and the
related notes thereto and with the Company's management discussion and analysis
of financial condition and results of operations, which are included elsewhere
in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
As of and for the As of and for the
Six Months Years Ending
Ending June 30 December 31
------------------------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(in thousands, except per share and ratio data)
<S> <C> <C> <C> <C> <C>
Earnings summary:
- -----------------
Net interest income $1,201 $1,127 $2,314 $2,277 $2,179
Provision for loan losses (20) 0 0 0 0
Noninterest income 295 287 590 592 585
Noninterest expense 993 902 1,836 1,773 1,804
Income taxes 178 175 358 375 328
------- ------- ------- ------- --------
Net income $ 345 $ 337 $ 710 $ 721 $ 632
======= ======= ======= ======= =======
Common Stock data:
- ------------------
Earnings per common share (diluted) $ 2.98 $ 3.07 $ 6.45 $ 6.54 $ 5.82
Book value per share at period end $50.06 $56.33 $60.13 $53.15 $46.23
Weighted average common shares
outstanding during period 82,816 82,816 82,816 82,866 82,266
Average balance sheet data:
- ---------------------------
Securities $12,641 $10,958 $11,429 $10,342 $10,614
Loans and leases, net 26,565 24,870 25,648 24,858 24,192
Total interest-earning assets 45,010 42,454 42,830 41,476 37,114
Total assets 49,233 46,542 46,998 45,351 40,768
Interest-bearing deposits 31,672 30,138 30,036 29,116 25,220
Total deposits 44,140 41,568 42,027 40,235 36,422
Equity 5,780 4,562 4,745 4,190 3,676
End of period balance sheet data:
- ---------------------------------
Securities $13,205 $11,665 $12,597 $11,088 $10,186
Loans and leases, net 27,120 26,281 26,884 24,609 25,262
Allowance for loan losses 281 274 264 276 294
Total assets 50,185 45,431 48,622 45,715 43,627
Total deposits 44,038 39,770 42,669 39,696 38,155
Shareholders' equity 5,805 4,665 4,980 4,404 3,831
Nonperforming assets:
- ---------------------
Non-accrual loans and loans past
due 90 days or more $ 31 $ 0 $ 10 $ 39 $ 56
Other real estate owned 0 74 72 76 80
------- -------- -------- -------- --------
Total nonperforming assets $ 31 $ 74 $ 82 $ 115 $ 136
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Selected ratios:
- ----------------
Net interest margin 5.34%* 5.31%* 5.40% 5.49% 5.87%
Return on average assets 1.40%* 1.45%* 1.51% 1.59% 1.55%
Return on average equity 11.94%* 14.77%* 14.96% 17.21% 17.19%
Ratio of ending equity to ending assets 11.57% 10.27% 10.24% 9.63% 8.78%
Ratio of nonperforming assets to
total assets 0.06% 0.16% 0.17% 0.25% 0.31%
Ratio of allowance for loan losses to loans
& leases outstanding at period end 1.04% 1.04% 0.98% 1.12% 1.16%
Ratio of allowance for loan losses to
nonperforming loans 906.45% NA 2,640.00% 707.69% 525.00%
</TABLE>
*Annualized.
STOCK PRICE AND DIVIDENDS ON COMPANY COMMON STOCK
The Company Equity is not listed with any national securities exchange
or recorded on any automated quotation system. The Company Class A Common Stock
occasionally trades through privately negotiated transactions between
individuals. As a result, no established trading market for the Company Class A
Common Stock exists. Over the years, little trading in the Company Class A
Common Stock has occurred. Reliable information concerning the prices at which
the Company Class A Common Stock has traded in privately 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 these trading prices has been omitted based
on the Company's belief that such prices are not necessarily representative of
the market price for the Company's Common Stock during any particular period.
Since August 13, 1998, the date the Plan of Reorganization was publicly
announced, there have been no trades in the Company Equity.
The Company has paid cash dividends on the Company Class A Common Stock
each year since 1995. The following table sets forth the per share dividends
declared and paid on shares of Company Class A Common Stock since June 1995.
Dividends
Year Per Share
---- ---------
1995 $0.85
1996 1.70
1997 1.70
1998 2.13
In 1998, the Company has declared and paid cash dividends of $1.28 per
Class B Right. As of October 21, 1998, there were 35 holders of record of the
Company Class A Common Stock and two holders of Class B Rights which represent
the right to acquire shares of the Company Class B Common Stock.
INFORMATION CONCERNING THE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
THE COMPANY AND CHAIRMAN OF THE BANK
Donald K. Hogoboom, Chairman, President and Chief Executive Officer of
the Company, and Chairman of the Bank, age 71, founded the Bank in 1970 and the
Company in 1980. He has served as Chairman, President and Chief Executive
Officer of the Company and as Chairman of the Bank since their respective
formations. Mr. Hogoboom has over 50 years of
59
<PAGE>
banking experience, starting his career in 1948 with a bank in North Dakota. Mr.
Hogoboom has been actively involved with the banking industry and served as a
past director of the Independent Bankers Association of Colorado. He has been
involved with community activities for many years.
CERTAIN TRANSACTIONS OF THE COMPANY
The Bank has had banking transactions in the ordinary course of its
business with directors, officers, principal shareholders and their associates
on the same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with unaffiliated
parties. To the extent that such transactions consisted of extensions of credit,
they did not, in the opinion of management, involve more than a normal risk of
collectibility or present other unfavorable features. As of June 30, 1998, the
Company's directors, executive officers, employees and their affiliates were
indebted to the Bank in the aggregate amount of $2,073,631, none of which such
loans were delinquent.
STOCK OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN OTHERS
On October 21, 1998, there were 82,816 shares of the Company Class A Common
Stock outstanding and Class B Rights representing the right to acquire 33,150
shares of the Company Class B Common Stock, held of record by 35 and two
holders, respectively. Only shareholders of Company Class A Common Stock of
record as of October 26, 1998, and holders of Company Class B Common Stock as of
the class of business on the date of the Class B Exchange will be entitled to
vote at this special meeting and each share is entitled to one vote. As of
October 22, 1998, the Company's board of directors directly or beneficially
owned approximately 46.41% of the outstanding shares of the Company's Class A
Common Stock. Each director, Ms. Hogoboom, wife of the Company's chairman, and
Edward Tepper, the father of a director, have indicated his or her intention to
vote in favor of the Plan of Reorganization.
The following table sets forth as of October 22, 1998, the beneficial
ownership of the Company Class A Common Stock and Class B Rights by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares or interests of each such class, (ii) each director of the Company, and
(iii) all directors and executive officers of the Company as a group. Beneficial
ownership includes shares over which the indicated beneficial owner exercises
voting and/or investment powers.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percentage of
----------------------- -------------
Class A Class B Rights Class A Class B Rights
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Joayne B. Hogoboom 21,775(1) 11,050 26.29% 33.33%
407 South Vine
Denver, CO 80209
Edward P. Tepper 2,500 22,100 3.02% 66.67%
7225 North Sheridan
Arvada, CO 80003
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Donald K. Hogoboom 20,075(2) --- 24.24% ---
Chairman and Chief
Executive Officer of
the Company
407 South Vine
Denver, CO 80209
DLJSC as Custodian 6,280 --- 7.58% ---
for the benefit of
Jerry J. Tepper IRA
One Pershing Plaza
Jersey City, NJ 07399
Jerry J. Tepper, Director 2,530 --- 3.05% ---
Thomas M. Jones 9,500(3) --- 11.47% ---
President and Director
of Bank
32 W. 81st Lane
Arvada, CO 80005
Stephen C. Thomason, Director 50 --- 0.06% ---
Wilbur E. Flachman, Director ---(4) --- --- ---
Paul F. Glasgow, Director ---(5) --- --- ---
All directors and executive
officers as a group (6 persons) 38,435(6) --- 46.41% ---
</TABLE>
(1) Excludes 20,075 shares held by Mrs. Hogoboom's husband and 600 shares held
by her children to which she disclaims beneficial ownership.
(2) Excludes 21,775 shares held by Mr. Hogoboom's wife and 600 shares held by
his children to which he disclaims beneficial ownership.
(3) Includes 2,900 shares held jointly with his wife and 6,600 shares held in
various trusts for the benefit of Mr. and Mrs. Hogoboom's children for
which Mr. Jones is the trustee.
(4) Excludes 784 shares held by Mr. Flachman's daughter as to which he
disclaims beneficial ownership.
(5) Excludes 400 shares held by Mr. Glasgow's wife as to which he disclaims
beneficial ownership.
(6) Excludes shares held by spouses and children of certain directors and
executive officers.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
THE COMPANY
The following analysis of the Company's financial condition and the
results of operations for the six months ending June 30, 1998, and 1997 and for
the years ending December 31, 1997, 1996, and 1995 should be read in conjunction
with the Company's consolidated financial statements and accompanying notes and
other information presented elsewhere herein. Average balance sheet data are
based on average daily balances outstanding for the period. The Bank is the only
operating unit of the Company.
61
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDING JUNE 30, 1998, AND JUNE 30, 1997
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 results 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. At
June 30, 1998, average interest-earning assets were $45.0 million, and net
interest margin was 5.26%.
The following table sets forth for the periods indicated information
with regard to the Company's 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:
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
-----------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities--taxable $12,641 $ 375 5.93% $10,958 $ 325 5.93%
Securities--non-taxable --- --- 175 4 4.57%
Federal funds sold 5,480 148 5.40% 5,970 158 5.29%
Other investments 292 10 6.85% 503 12 4.77%
Loans 26,839 1,223 9.11% 25,145 1,159 9.22%
Less allowance for
loan losses (274) (275)
Less unrealized gain (loss) on
securities available for sale 32 (22)
------- ---------- ------- -----
Net interest-earning assets $45,010 $1,756 7.80% $42,454 $1,658 7.81%
Noninterest-earning assets 4,223 --- 4,088 ---
------- ---------- ------- ------
Total assets $49,233 $1,756 7.13% $46,542 $1,658 7.12%
======= ====== ===== ======= ====== =====
Liabilities:
Interest-bearing DDA $ 9,115 $ 92 2.02% $ 8,713 $ 86 1.97%
MMDA 10,161 207 4.07% 9,403 171 3.64%
Savings 5,585 82 2.94% 5,526 79 2.86%
Other time deposits 6,811 174 5.11% 6,496 159 4.90%
------- -------- --------- --------
Total interest-bearing deposits $31,672 $ 555 3.50% $30,138 $ 495 3.28%
Notes payable --- --- --- ---
Other borrowings --- --- 846 36 8.51%
------- --------- --------- ---------
Total interest-bearing liabilities $31,672 $ 555 3.50% $30,984 $ 531 3.43%
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Noninterest-bearing DDA 12,468 --- 11,430 ---
-------- --------- -------- ---------
Total deposits and interest-
bearing liabilities $44,140 555 2.51% $42,414 531 2.50%
======= -------- ======= --------
Net interest income $1,201 $1,127
====== ======
Interest rate spread 4.30% 4.38%
Net interest rate margin 5.34% 5.31%
</TABLE>
Net interest income increased $74,000 for the six months ending June
30, 1998, to $1,201,000 from $1,127,000 for the six months ending June 30, 1997.
The provision for loan losses decreased $20,000 in the six months ending June
30, 1998, and there was no change in the six months ending June 30, 1997.
Noninterest income remained relatively stable, while noninterest expenses
increased $70,000 to $973,000 for the six months ending June 30, 1998, from
$902,000 for the six months ending June 30, 1997. There was little change in
income tax expense from June 30, 1997, to June 30, 1998. Return on average
assets and return on average equity were 1.40% and 11.94%, respectively, for the
six months ending June 30, 1998 compared to 1.45% and 14.77%, respectively, for
the six months ending June 30, 1997.
Interest and Fee Income. Interest income increased $98,000 to
$1,785,000 for the six months ending June 30, 1998 from $1,687,000 for the six
months ending June 30, 1997. Interest income on loans increased $64,000 and
interest income on securities increased $47,000 for the six months ending June
30, 1998 compared to the same period in 1997. These increases were somewhat
offset by a decrease in interest on federal funds sold of $13,000 to $150,000
for the six months ending June 30, 1998, from $163,000 for the same period in
1997. These increases in loans were the result of overall growth in the Bank and
planned increases in the Bank's loan and securities portfolios rather than the
rates earned on loans and investments which have remained relatively stable.
Interest Expense. Interest expense increased $24,000 to $555,000 for
the six months ending June 30, 1998 from $531,000 for the six months ending June
30, 1997. Interest expense on interest-bearing deposits increased $60,000 from
June 30, 1997, to June 30, 1998, and interest expense on other borrowings
decreased $36,000 from June 30, 1997, to June 30, 1998. The increase in interest
expense on interest-bearing deposits was primarily due to greater deposit volume
in the six months ending June 30, 1998, and a shift to higher yielding money
market accounts and certificates of deposit from other deposit accounts other
than the rates paid on deposits which have remained relatively stable. The
decrease in interest expense on other borrowings was due to the Company's
conversion of convertible debentures in January 1998, which previously had
required semi-annual interest payments to the debenture holders.
Net Interest Income. Net interest income increased $74,000 to
$1,201,000 for the six months ending June 30, 1998, from $1,127,000 for the same
period in 1997. During the six months ending June 30, 1998, average loans
outstanding increased $1,695,000 and average securities increased $1,683,000
while net interest spread decreased from 4.38% for the period ending June 30,
1997, to 4.30% for the period ending June 30, 1998.
Noninterest Income. Noninterest income increased $7,000 to $266,000 for
the six months ending June 30, 1998, from $259,000 for the six months ending
June 30, 1997, due to a $3,000 increase in service charge income and a $4,000
increase in other noninterest income.
Noninterest Expense. Noninterest expense increased $70,000 to $973,000
in the six months ending June 30, 1998, from $902,000 for the same period in
1997 due to increased salaries and employee benefits.
63
<PAGE>
Provision for Loan Losses. The Company's provision for loan losses for
the period ending June 30, 1998, was ($20,000) resulting from the recovery of a
loan charged off in a prior period. The provision for loan losses for the period
ending June 30, 1997, was $0.
Income Taxes. The Company's income tax expense for the six months
ending June 30, 1998, and 1997 was $178,000 and $175,000, respectively.
RESULTS OF OPERATIONS FOR THE YEARS ENDING DECEMBER 31, 1997, 1996 AND 1995
Net Interest Income. During the years ending December 31, 1997, 1996
and 1995 the Company's average interest-earning assets were $42.8 million, $41.5
million and $37.1 million, respectively. During these same periods, net interest
margin was 5.48%, 5.59% and 6.01%, respectively. The following table sets forth
for the periods indicated information with regard to the Company's 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:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 31, 1995
------------------------------------------------------------------------------------
Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ---------------- ---- ------- -------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities--taxable $11,269 $671 5.95% $10,058 $617 6.13% $10,122 $575 5.68%
Securities--non-taxable 160 8 5.00% 284 13 4.58% 492 24 4.88%
Federal funds sold 5,295 288 5.44% 5,940 313 5.27% 2,049 119 5.81%
Other investments 457 24 5.25% 313 18 5.75% 271 16 5.90%
Loans 25,923 2,409 9.29% 25,152 2,337 9.29% 24,478 2,284 9.33%
Less allowance for loan losses (275) --- (294) --- (286) ---
Less unrealized gain on
securities available for sale 1 23 (12)
------- ------- -------
Net interest-earning assets 42,830 3,400 7.94% $41,476 3,298 7.95% $37,114 3,018 8.13%
Noninterest-earning assets 4,168 --- 3,875 --- 3,654 ---
------- ------ ------- ----- -------- ------
Total assets $46,998 $3,400 7.23% $45,351 $3,298 7.27% $40,768 $3,018 7.40%
======= ====== ======= ====== ======= ======
Liabilities:
Interest-bearing DDA $ 8,569 $ 174 2.03% $ 8,281 $ 159 1.92% $ 7,657 $ 153 2.00%
MMDA 9,402 358 3.81% 8,729 296 3.39% 6,295 199 3.16%
Savings 5,543 162 2.92% 5,739 163 2.84% 5,747 163 2.84%
Other time deposits 6,522 327 5.01% 6,367 309 4.85% 5,521 251 4.55%
------- ------- -------- ------- -------- -------
Total interest-bearing deposits $30,036 $1,021 3.40% $ 29,116 $ 927 3.18% $ 25,220 $ 766 3.04%
Notes payable --- --- --- --- --- ---
Other borrowings 722 65 9.00% 1164 94 8.08% 788 73 9.26%
------- ------ -------- ------- -------- -------
Total interest-bearing liabilities $30,758 $1,086 3.53% $ 30,280 $ 1,021 3.37% $26,008 $ 839 3.23%
Noninterest-bearing DDA 11,991 --- 11,119 --- 11,202 ---
------- ------ -------- ------- ------- --------
Total deposits and interest-
bearing liabilities $42,749 $1,086 2.54% $41,399 $ 1,021 2.47% $37,210 $ 839 2.25%
======= ------ ======= ------- ======= -------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net interest income $2,314 $2,277 $2,179
====== ====== ======
Interest rate spread 4.41% 4.58% 4.90%
Net interest rate margin 5.40% 5.49% 5.87%
</TABLE>
Net income decreased $11,000 to $710,000 in 1997 from $721,000 in 1996
and increased $89,000 in 1996 from $632,000 in 1995. Net interest income
increased $37,000 from 1996 to 1997 and increased $98,000 from 1995 to 1996. The
Company's provision for loan loss was $0 in all three years. Noninterest income
decreased $7,000 to $535,000 in 1997 from $542,000 in 1996, while noninterest
expenses increased $62,000 to $1,835,000 in 1997 from $1,773,000 in 1996 and
decreased $31,000 in 1996 from $1,804,000 in 1995. Income tax expense decreased
$17,000 to $358,000 in 1997 from $375,000 in 1996 and increased $47,000 in 1996
from $328,000 in 1995. Return on average assets and return on average equity
were 1.51% and 14.96%, respectively, for 1997 compared to 1.59% and 17.21%,
respectively, for 1996, and 1.55% and 17.19%, respectively, for 1995.
Interest and Fee Income. Interest income increased $107,000 in 1997 to
$3,455,000 from $3,348,000 in 1996 and increased $286,000 in 1996 from
$3,062,000 in 1995. Interest income from loans increased $78,000 and interest
income from securities increased $50,000 from 1996 to 1997 primarily due to an
increase in the total loans and securities outstanding. Interest rates remained
relatively stable from 1996 to 1997. Interest income from loans increased
$57,000 and interest income from securities increased $33,000 from 1995 to 1996
primarily due to an increase in interest rates. Interest income on federal funds
sold decreased $20,000 in 1997 due primarily to decreased amounts outstanding.
Interest income on federal funds sold increased $195,000 from 1995 to 1996
primarily due to increased amounts outstanding.
Interest Expense. Interest expense increased $65,000 to $1,086,000 in
1997 from $1,021,000 in 1996 and increased $182,000 in 1996 from $839,000 in
1995. Interest expense on interest-bearing deposits increased $94,000 from 1996
to 1997. Interest expense on notes and other borrowings decreased $29,000 from
$94,000 in 1996 to $65,000 in 1997 and increased $21,000 from $73,000 in 1995 to
1996. The volume of other borrowings decreased slightly at year-end 1996 from
year-end 1995 because of the repayment of principal on a Community Investment
Program advance from the Federal Home Loan Bank of Topeka and increased $162,000
from 1995 to 1996 primarily due to greater deposit volume in 1997, as the rates
paid on interest-bearing deposits remained relatively unchanged in these years.
Net Interest Income. Net interest income increased $43,000 to
$2,369,000 in 1997 from $2,326,000 in 1996 and increased $102,000 in 1996 from
$2,224,000 in 1995 due to the increased percentage of loans to total assets.
During 1997 average loans outstanding increased $1,569,000 and average
securities outstanding increased $1,142,000. During 1996 the average rates on
loans outstanding decreased from 9.30% to 9.23%, and average rates earned on
federal funds sold decreased from 5.81% to 5.27%. The net interest spread
decreased from 5.05% for 1995 to 4.66% for 1996 and to 4.47% in 1997.
Noninterest Income. Noninterest income decreased $7,000 to $535,000 in
1997 from $543,000 for 1996 due to a $11,000 decrease in service charge income
and a $4,000 increase in other income. Noninterest income increased $3,000 in
1996 from $540,000 in 1995 due to a $39,000 decrease in service charge income
offset by a $41,000 increase in other noninterest income.
Noninterest Expense. Noninterest expense increased $62,000 to
$1,835,000 in 1997 from $1,773,000 in 1996 due to a $38,000 increase in
salaries, wages and employee benefits, a $9,000 increase in net occupancy
expenses and a $16,000 increase in other operating expenses. Noninterest expense
decreased $31,000 to $1,773,000 in 1996 from $1,804,000 in 1995 due to a
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$60,000 increase in salaries and wages, a $9,000 decrease in occupancy expense
because of the full depreciation of some fixed assets, and a $83,000 decrease in
other operating expenses.
Provision for Loan Losses. The Company's provision for loan losses for
all three years was $0.
Income Taxes. The Company's income tax expense for the years ending
December 31, 1997, 1996 and 1995 was $358,000, $375,000 and $328,000,
respectively.
LIQUIDITY AND SOURCES OF FUNDS
The Company's primary sources of funds are customer deposits, sales and
maturities of investment securities and loan repayments. These funds are used to
make loans to acquire investment securities and other assets and to fund the
operations of the Company. During the year ending December 31, 1997, deposits
increased to $42,669,000 from $39,696,000 and $38,155,000 at December 31, 1996
and 1995, respectively. Deposits for the six months ending June 30, 1998,
increased $4,268,000 to $44,038,000 from $39,770,000 at June 30, 1997. None of
the deposits at these dates were brokered funds. Management believes the
increases in the deposits were due primarily to (i) the marketing efforts of the
Bank's officers, (ii) the referrals from existing customers, and (iii) overall
growth in and economic strength of the Denver metropolitan area. At December 31,
1997, net loans were $26,956,000 compared to $24,687,000 and $25,343,000 at
December 31, 1996, and 1995, respectively.
Management anticipates that the Company will continue to rely primarily
on customer deposits, sales of investment securities, loan sales and loan
repayments as well as retained earnings to provide liquidity. The Company
believes customer deposits provide a strong source of liquidity because of the
high percentage of core deposits. As a secondary source of funds, management
uses advances from the Federal Home Loan Bank of Topeka and federal funds
purchased.
CAPITAL RESOURCES
Total stockholders' equity increased to $4,980,000 at December 31,
1997, from $4,404,000 at December 31, 1996, and $3,831,000 at December 31, 1995,
due to retained earnings. Total stockholders' equity increased $1,140,000 to
$5,805,440 at June 30, 1998, compared to $4,665,239 at June 30, 1997. At
December 31, 1997, stockholders' equity was 10.04% of total assets compared to
9.19% at December 31, 1996, and 8.78% at December 31, 1995. Dividends of
$141,000 were paid in 1997 compared to $140,000 in 1996 and $71,000 in 1995.
Management expects no material change in this dividend policy.
Federal Reserve Board and FDIC guidelines require a ratio of 4% for
Tier 1 capital to risk-weighted assets, a ratio of 8% for total capital to
risk-weighted assets, and a 5% leverage ratio. The Company and the Bank
currently exceed the applicable regulatory capital requirements. The following
table sets forth the Bank's capital ratios at December 31, 1997, and June 30,
1998.
<TABLE>
<CAPTION>
12-31-97 6-30-98
-------- -------
<S> <C> <C> <C>
Tier 1 Capital $ 4,602,000 $ 4,775,000
Total Capital $ 4,866,000 $ 5,056,000
Risk-Weighted Assets $25,743,000 $25,966,000
Tier 1 Capital to Risk-Weighted Assets 17.88% 18.39%
Total Capital to Risk-Weighted Assets 18.90% 19.47%
Leverage Ratio 9.70% 9.64%
</TABLE>
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Other than the costs associated with opening its new branch facility, the
Company anticipates no material capital expenditures for the remainder of 1998.
EFFECTS OF INFLATION AND CHANGING PRICE
The primary impact of inflation on the Company's operation is the
effect it has on operating costs. Unlike most industrial companies, almost all
of the Company's resources are monetary in nature. As a result, increases in
interest rates have more of an impact on the Company than does the effects of
inflation. Although interest rates do not necessarily track 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 Equity. 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.
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 1,000,000 shares of
Class A Common Stock, par value $1.00 per share, and 33,150 shares of non-voting
Class B Common Stock, without par value. The Company's Articles do not authorize
the Company to issue preferred stock. Each holder of the Company's Class A
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 shareholders meeting except in
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<PAGE>
cases where, by law, a larger vote is required. A majority of the shares of
Class A Common Stock, represented in person or by proxy, constitutes a quorum
for the transaction of business. Holders of the Company Class B Common Stock
have all rights and priorities as those enjoyed by holders of the Company Class
A Common Stock, except that holders of the Company Class B Common Stock have no
right to vote on any question or in any proceeding, or to be represented at, or
to receive notice of any meeting of the shareholders of the Company, except as
may be required by applicable law. The Class B Common Stock is the subject of
the Class B Exchange to be voted on at the Special Meeting.
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.
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
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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.
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.
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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.
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 and Bylaws 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
Articles and Bylaws explain that the Company has the power to indemnify
directors against judgments and accompanying reasonable litigation expenses,
except in relation to matters where a director is adjudged liable for negligence
or misconduct in the performance of his duty to the Company, unless the court in
which such action or suit was brought determines upon application that such
person is fairly and reasonably entitled to indemnification. The Company's
Articles and 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 on 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. The Company's Bylaws provide for a Board of Directors consisting
of not less than five nor more than eleven individuals. Directors are elected at
the annual meeting of shareholders by a majority vote, for a one year term. Any
vacancy occurring on the Company's Board may be filled by the affirmative vote
of a majority of the remaining directors though less than a quorum. A
directorship to be filled by reason of an increase in the number of directors
shall be filled by election at any annual meeting or at a special meeting of
shareholders called for that purpose.
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 in order to be elected must receive the
votes of a plurality of the shares voted.
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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 directors are removable in the manner
provided by the statutes of the State of Colorado which provide, among other
things that: (i) the shareholders may remove one or more directors with or
without cause unless the articles of incorporation provide that directors may
only be removed for cause; (ii) if a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove that director; (iii) a director may be removed only if the number
of votes cast in favor of removal exceeds the number of votes cast against
removal (except if cumulative voting is in effect); and (iv) a director may be
removed by the shareholders only at a meeting called for that purpose.
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, a Vice 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
a majority of the issued and outstanding shares entitled to vote, provided,
however, an affirmative vote of two-thirds of the issued and outstanding shares
entitled to vote shall be required if the amendment would restrict, limit or
alter the power or authority of the board of directors or any other officer or
agent of Zions; would vest any powers of Zions in any other officer or agent
other than the board of directors, or officers and agents appointed by or under
the authority of the board of directors; would require the approval of any
shareholders in order for the board of directors or any officer or agent to take
any action; or would change the number of directors, the quorum requirements for
any meeting of the board of directors, the vote by which it must act in
connection with any matter, the manner of calling or conducting meetings of
directors, or the place of such meetings.
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, or by
the shareholders in accordance with Colorado law.
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DISSENTERS' RIGHTS
Zions is incorporated under the laws of Utah. Utah law provides for
dissenters' rights in a variety of transactions including: (i) 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.
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 share exchange where the corporation
is a party as the corporation whose shares will be acquired; (iii) 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; (iv)
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 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. See "Plan or
Reorganization -- Rights of Dissenting Shareholders" for a more detailed
discussion of dissenters' rights under Colorado law.
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 Equity do not have the preemptive right to purchase
any unissued shares of Company Equity or any other securities convertible into
shares of Company Equity, or securities carrying stock purchase warrants or
privileges.
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
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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 provide that the holders of
its Common Stock shall be entitled to receive, when and as declared by the Board
of Directors, dividends in cash, property, or in shares of capital stock of the
Company.
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 Equity are entitled to share
ratably in the assets of the Company available for distribution after all
liabilities of the Company have been satisfied.
MISCELLANEOUS
There are no sinking fund provisions, conversion rights, or redemption
provisions applicable to Zions Common Stock or Company Equity. Holders of fully
paid shares of Zions Common Stock and Company Equity are not subject to any
liability for further calls or assessments.
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 Rothgerber Johnson & Lyons LLP, 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 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 certified public
accountants, as indicated in their report (dated January 16, 1998), and have
been
73
<PAGE>
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
auditing and accounting.
OTHER MATTERS
The Company does not expect its principal accountants to attend the
Special Meeting.
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 proxyholders named on such Proxies.
FINANCIAL STATEMENTS OF CITIZENS BANCO, INC.
The following financial statements of the Company have not been
audited. The Company's balance sheets and income statements have never been
audited. Management believes that it is not practical to obtain audited
financial statements for purposes of the Reorganization because it would be
unduly expensive and difficult to produce the required information.
74
<PAGE>
CITIZENS' BANCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF
--------------------------------------------------------------
JUNE 30 DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1997 1996
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks ........................... $ 3,081,763 $ 3,251,600 $ 3,931,631 $ 3,175,974
Investments securities ............................ 13,221,230 12,624,377 11,680,390 11,105,355
Federal funds sold and temporary investments....... 4,710,000 4,085,000 1,970,000 5,320,000
Finance receivables ............................... 27,422,424 27,220,487 26,628,737 24,962,280
Less: Allowance for loan losses ................... (280,711) (264,475) (274,374) (275,702)
----------- ----------- ----------- -----------
Total finance receivables ...................... 27,141,713 26,956,012 26,354,363 24,686,578
Accrued interest receivable ....................... 313,209 309,237 304,852 282,401
Furniture, equipment and leasehold improve-
ments, net of accumulated depreciation ........... 1,020,707 789,281 815,740 820,392
Other real estate owned ........................... -- -- -- --
Deferred income tax benefits ...................... 106,610 112,761 118,599 123,998
Other Assets ...................................... 589,272 493,746 255,747 200,000
----------- ----------- ----------- -----------
Total Assets ................................... $50,184,504 $48,622,014 $45,431,322 $45,714,698
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Deposits .......................................... 44,038,129 42,669,077 39,769,862 39,696,030
Accrued interest payable .......................... 94,890 93,045 136,191 126,785
FHLB CIP Advances ................................. -- -- -- 562,264
Convertible debentures ............................ -- 600,000 600,000 600,000
Income taxes payable .............................. 87,018 91,039 127,279 147,001
Other liabilities ................................. 159,027 189,303 132,751 178,511
----------- ----------- ----------- -----------
Total liabilities .............................. 44,379,064 43,642,464 40,766,083 41,310,591
----------- ----------- ----------- -----------
Stockholders' Equity:
Common stock, Class A $1 par value................ 82,816 82,816 82,816 100,610
Common stock Class B no par value ................ 600,000 -- -- --
Additional paid in capital ....................... 194,704 194,704 194,704 937,177
Treasury stock ................................... -- -- -- (758,087)
Unrealized securities gains (losses) ............. 16,518 26,939 15,720 18,494
Undivided profits ................................ 4,911,402 4,675,091 4,371,999 4,105,913
----------- ----------- ----------- -----------
Total Stockholders' Equity ....................... 5,805,440 4,979,550 4,665,239 4,404,107
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity ..... $ 50,184,504 $ 48,622,014 $ 45,431,322 $ 45,714,698
=========== =========== =========== ===========
</TABLE>
<PAGE>
CITIZENS' BANCO, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED
--------------------------------------------------------------
6 MONTHS ENDED YEAR ENDED 6 MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1997 1996
---------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Income:
Interest and fees on loans .................. $1,252,220 $2,463,800 $1,187,889 $2,386,035
Services charges and fees ................... 188,055 392,809 190,571 409,591
Interest on investments ..................... 382,548 692,804 335,868 642,491
Federal funds sold and short term investments 149,827 298,653 162,912 319,145
Other exchange service charges .............. 37,320 74,458 31,764 67,976
Gain on sale of assets ...................... -- -- -- 4,826
Other income ................................ 40,765 68,844 36,473 60,302
---------- ---------- ---------- ----------
Total income .............................. 2,050,735 3,990,648 1,945,477 3,890,366
Expenses:
Salaries .................................... 549,759 1,009,448 487,371 985,709
Taxes and employee benefits ................. 90,054 154,890 79,375 140,848
Interest: paid on deposits .................. 554,803 1,020,634 494,666 927,077
paid on notes and other borrowings .......... 159 65,799 36,665 94,888
Use and occupancy ........................... 42,674 79,974 38,038 77,991
Furniture and fixtures ...................... 36,947 94,464 49,064 87,247
Management fees and expenses ................ 67,412 125,809 60,216 115,880
Insurance and bonds ......................... 12,780 28,653 13,985 22,643
Loan collateral expense ..................... 12,829 18,018 9,226 17,985
Operating expenses .......................... 180,442 324,212 165,202 324,345
Loss on sale of other real estate ........... -- -- -- --
Loss on sale of securities .................. -- -- -- --
Provision for loan losses ................... (20,000) -- -- --
---------- ---------- ---------- ----------
Total expenses ............................ 1,527,859 2,921,901 1,433,808 2,794,613
---------- ---------- ---------- ----------
Income before income taxes ................ 522,876 1,068,747 511,669 1,095,753
Income tax expense .......................... 178,363 358,289 174,696 375,062
---------- ---------- ---------- ----------
Net income ................................ $ 344,513 $ 710,458 $ 336,973 $ 720,691
========== ========== ========== ==========
</TABLE>
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the twelfth day of
August, 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, CITIZENS
BANCO, INC. (the "Company"), a Colorado corporation having its principal office
in Westminster, Colorado, and CITIZENS 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 7-111-101 et seq. of the
Colorado Business Corporation Act;
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 7-111-101 et seq. of the Colorado Business
Corporation Act;
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");
WHEREAS, on December 13, 1989 the board of directors of the Company
authorized the issuance of Four Year Mandatory Convertible Debentures Due 1993
in the aggregate amount of
<PAGE>
$600,000, convertible into an aggregate of 33,150 shares of Class B nonvoting
common stock of the Company (the "Company Debentures");
WHEREAS, on December 20, 1989 the Company issued the Company
Debentures, and on December 13, 1993 the holders of the Company Debentures
extended their term for an additional four years as permitted pursuant to the
terms of the Company Debentures;
WHEREAS, on January 22, 1990, the holders of the common stock, $1.00
par value, of the Company (the "Company Common Stock") approved amending the
articles of incorporation of the Company to create a second class of capital
stock of the Company, to wit, Class B Common Stock, no par value, with the same
rights and priorities as those enjoyed by holders of the Company Common Stock
except the right or power to vote on any question or in any proceeding, or to be
represented at, or to receive notice of any meeting of the stockholders of the
Company, except as may be required by applicable law (the "Company Class B
Stock"), and designating the Company Common Stock as Class A Common Stock, $1.00
par value per share (the "Company Class A Stock");
WHEREAS, the amendment to the articles of incorporation of the Company
contem plated by the aforesaid shareholder action (the "Articles of Amendment")
was not filed with the Secretary of State until July 17, 1998;
WHEREAS, on or about December 10, 1997 the holders of the Company
Debentures purported to convert the Company Debentures into Company Class B
Stock, and were thereafter treated in every respect as holders of Company Class
B Stock;
WHEREAS, the shares of Company Class B Stock purportedly issued on or
about December 10, 1997 were in fact issued before the Articles of Amendment
were filed on July 17, 1998;
WHEREAS, the parties to this Agreement recognize that the former
holders of Company Debentures have certain contractual rights pursuant to the
terms of the Company Debentures to acquire equity in the Company in form and
substance equivalent to the shares of Company Class B Stock (the "Company Class
B Rights" and, with respect to each share of Company Class B Stock, a "Company
Class B Right");
WHEREAS, the Company desires to permit the holders of the Class B
Rights to exchange such Rights for Company Class B Stock prior to the Holding
Company Merger, and Zions Bancorp, Val Cor, and Vectra are agreeable to such an
exchange taking place prior to the Holding Company Merger provided that certain
conditions are met;
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 Company Class A
Stock and the Company Class B Stock (together, the "Company Equity")
A-2
<PAGE>
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. Subject to the terms,
conditions, and limitations set forth herein:
(a) as soon after the Effective Date as shall be reasonable
under the circum stances, Zions Bancorp will deliver to Zions First National
Bank, a national banking association with its head office located in Salt Lake
City, Utah ("Zions Bank"), as Escrow Agent pursuant to that certain Escrow
Agreement to be entered into pursuant to section 1.10 of this Agreement (the
"Escrow Agreement"), 6,000 shares of the Common Stock of Zions Bancorp, no par
value ("Zions Bancorp Stock"); and
(b) upon surrender of his, her or its certificate or
certificates in accordance with Section 1.1 hereof, each holder of shares of
Company Equity shall be entitled to receive, in exchange for each share of
Company Equity held of record by such stockholder as of the Effec tive Date,
that number of shares of Zions Bancorp Stock calculated by dividing the Consi
deration Number by the total number of shares of Company Equity that shall be
issued and outstanding at the Effective Date.
(c) As used in paragraph (b) of this section 1.2, the term
"Consideration Number" means 251,225, except that if the Transaction Expenses
(as hereinafter defined), determined on a pre-tax basis in accordance with
generally accepted accounting principles, exceed $100,000, then the
"Consideration Number" shall be the difference between 251,225 and the number
calculated by dividing such excess, net of any associated tax benefit, by
$47.125. As used in the preceding sentence, "Transaction Expenses" are all
expenses incurred from January 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, however, that
(i) the costs of any audit of the financial statements of the Company and the
Bank as of December 31, 1997 and the year then ended which is required to be
obtained to comply with requirements imposed by the Securities and Exchange
Commission (the "SEC") in connection with the registration of the stock to be
used as consideration in connection with the Holding Company Merger are not
Transaction Expenses for purposes of the previous sentence, and (ii) if the
matter set forth in Schedule 1.2 attached hereto is finally resolved prior to
the Effective Date and if the aggregate loss, cost, expense, liability, or
damage incurred by the Company and its subsidiaries in connection with its final
resolution is $282,750 or less, then the amount of such aggregate loss, cost,
expense, liability, or damage shall not be Transaction Expenses for purposes of
the previous sentence.
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 holder of Company Equity 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 $47.125. Such fractional share interest shall not include the
right to vote or to receive dividends or any interest thereon.
A-3
<PAGE>
1.4. Dividends; Interest. No holder of Company Equity 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 Equity 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 holders of Company Equity who have not
exchanged their certificates representing Company Equity 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 holder of Company Equity of
certificates representing shares of Company Equity, the Exchange Agent shall
forward to such former holder of Company Equity (i) certificates representing
his, her, or its shares of Zions Bancorp Stock, (ii) dividends declared thereon
subse quent to the Effective Date (without interest) and (iii) the cash value of
any fractional shares determined in accordance with Section 1.3 hereof.
1.5. Designation of Exchange Agent.
(a) The parties to this Agreement hereby designate Zions Bank
as Exchange Agent to effect the exchanges contemplated hereby.
(b) Zions Bancorp will, promptly after the Effective Date, (i)
issue and deliver to Zions Bank the share certificates representing shares of
Zions Bancorp Stock and the cash to be paid to holders of Company Equity in
accordance with this Agreement, and (ii) issue and deliver to Zions Bank the
share certificates representing shares of Zions Bancorp Stock to be delivered to
the Escrow Agent 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 Equity except to such holders as shall have waived the notice required
by this Section 1.6, a notice specifying the Effective Date and notifying such
holder to surrender his, her, or its certificate or certificates to Zions Bank
for exchange. Such notice shall be mailed to holders by regular mail at their
addresses on the records of the Company.
1.7. Treatment of Stock Options. Each stock option to purchase Company
Equity 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 attached hereto shall each enter into
an agreement with Zions Bancorp, substantially in form and substance as that set
forth as Exhibit III attached hereto, in which he or she agrees to vote all
shares of Company Equity 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. 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 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.
A-4
<PAGE>
1.10. Designation of Escrow Agent.
(a) The parties of this Agreement hereby designate Zions Bank
as Escrow Agent to discharge the responsibilities of the escrow agent as
described in the Escrow Agreement.
(b) Simultaneously herewith, Zions Bancorp and the Company
shall execute and deliver the Escrow Agreement substantially in the form
attached hereto as Exhibit IV.
1.11. Employment Agreement and Consulting Agreement. On the Effective
Date, Vectra will:
(a) tender to Thomas M. Jones an employment agreement
substantially in form and substance as that set forth as Exhibit V attached
hereto; and
(b) tender to Donald K. Hogoboom a consulting agreement
substantially in form and substance as that set forth as Exhibit VI attached
hereto.
2. EFFECTIVE DATE.
The Effective Date shall be the date which is the latest of:
2.1. Shareholder Approval. The date immediately following 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
A-5
<PAGE>
2.6. Other Regulatory Approvals. The date upon which any other material
order, approval, or consent of a federal or state regulator of financial
institutions or financial institution holding companies authorizing consummation
of the transactions contemplated by this Agree ment 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 each
class of the outstanding stock of the Company entitled under law to vote on the
Holding Company Merger, in accordance with the applicable laws of the State of
Colorado.
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 (except
in an action, suit, or proceeding relating principally to the matter set forth
in Schedule 1.2 attached hereto) to subject either of the parties hereto or any
of their subsidiaries, directors, or officers to any liability, fine,
forfeiture, divestiture, or penalty on the ground that the transactions
contemplated hereby, the parties hereto, or their subsidiaries, directors, or
officers have breached or will breach any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby and with respect to which the parties hereto have been advised by counsel
that, in the opinion of such counsel, such action, suit, or proceeding raises
substantial questions of law or fact which could reasonably be decided
materially adversely to either party hereto or its subsidiaries, directors, or
officers.
A-6
<PAGE>
3.4. Registration Statement.
(a) Effectiveness. The registration statement to be filed by
Zions Bancorp with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") in connection with the registration of the shares of Zions
Bancorp Stock to be used as consideration in connection with the Holding Company
Merger (the "Registration Statement") shall have become effective under that
Act, and Zions Bancorp shall have received all required state securities laws or
"blue sky" permits and other required authorizations or confirmations of the
availability of exemptions from registration requirements necessary to issue
Zions Bancorp Stock in the Holding Company Merger.
(b) Absence of Stop-Order. Neither the Registration Statement
nor any such required permit, authorization, or confirmation shall be subject to
a stop-order or threatened stop-order by the SEC or any state securities
authority.
3.5. Federal Income Taxation. Zions Bancorp and the Company shall have
received a written opinion of Rothgerber, Johnson & Lyons 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:
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 represen tations 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 a
favorable opinion from Rothgerber, Johnson & Lyons LLP, dated the Effective
Date, substantially in form and substance as that set forth as Exhibit VII
attached hereto.
A-7
<PAGE>
4.3. Opinion of Company Litigation Counsel. Either:
(a) Zions Bancorp shall have received a certificate dated the
Effective Date, signed by the president of the Company and the president of the
Bank, certifying that (with the exception of actions, suits, or proceedings
relating solely to the matter set forth in Schedule 1.2 attached hereto) there
is no action, suit, or proceeding before or by any court or governmental agency
or body, domestic or foreign, now pending, or threatened, against the Company or
the Bank, or to which any of its property or assets is the subject (the delivery
of which officers' certificate shall in no way diminish the warranties and
representations of the Company or those of the Bank made in this Agreement); or
(b) Zions Bancorp shall have received a favorable opinion 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 VIII 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, except in connection with the matter set forth in Schedule 1.2 attached
hereto (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 or any subsidiary of either of them
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
except as changed through the effectuation of the Class B Exchange (as defined
in section 4.13 of this Agreement).
(c) As of the Effective Date, other than liabilities incurred
in the ordinary course of business subsequent to March 31, 1998 or in connection
with the matter set forth in Schedule 1.2 attached hereto, 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 consolidated statement of
condition of the Company as of March 31, 1998 or in the related notes to the
consolidated statement of condition of the Company as of March 31, 1998.
(d) No adverse action shall have been instituted or threatened
by any govern mental 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),
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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) $5,755,230
and (b) the aggregate contributions to capital caused by the payments
accompanying the exercise of any stock options on or after March 31, 1998,
reduced by (c) Losses as defined in section 2.1(b) of the Escrow Agreement.
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 $283,494.
4.8. CRA Rating. The CRA rating of the Bank shall be no lower than
"satisfactory."
4.9. Employment Agreement. Thomas M. Jones shall have entered into an
employment agreement with Vectra substantially in form and substance as that set
forth as Exhibit V attached hereto.
4.10. Consulting Agreement. Donald K. Hogoboom shall have entered into
a consulting agreement with Vectra substantially in form and substance as that
set forth as Exhibit VI attached hereto.
4.11. 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 acts or omissions of Zions Bancorp shall have made
the receipt of such letters impracticable, 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.
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.
4.13. Exchange of Company Class B Rights for Company Class B Stock. The
board of directors of the Company shall have authorized the exchange of one
share of Company Class B Stock for each outstanding Company Class B Right (the
"Class B Exchange"), subject to the execution by each of the holders of the
Company Class B Rights of the waivers and releases contemplated by section
4.15(b) of this Agreement; and not later than twenty business days prior to the
meeting of the shareholders of the Company contemplated by section 3.1 of this
Agreement, the Class B Exchange shall have occurred.
4.14. Shareholder Vote as to Class B Exchange. The holders of the
Company Class A Stock shall have approved, ratified, and adopted by a unanimous
vote the Class B Exchange in
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accordance with a Prospectus/Proxy Statement which shall be in form and
substance satisfactory to Zions Bancorp and its counsel.
4.15. Waivers and Releases.
(a) Those persons who, as of the Effective Date, are holders
of all of the Company Class A Stock then outstanding shall each have executed
waivers and releases in favor of the Company and the holders of the Company
Class B Stock, substantially in form and substance as those set forth as Exhibit
X attached hereto, waiving all rights to contest (i) the validity of the Company
Class B Stock, (ii) the Class B Exchange, and (iii) the payment, and the timing
of payment, of dividends to the holders of Company Class B Rights and Company
Class B Stock from December 10, 1997 until the Effective Date.
(b) Prior to or contemporaneous with the Class B Exchange, the
holders of all of the Company Class B Rights shall each have executed waivers
and releases in favor of the Company, substantially in form and substance as
those set forth as Exhibit XI attached hereto, waiving all rights to contest (i)
the adequacy of the Class B Exchange to honor in full the rights of the holders
of Company Debentures and Company Class B Rights and (ii) the payment, and the
timing of payment, of dividends to the holders of Company Class B Rights and
Company Class B Stock from December 10, 1997 until the Effective Date.
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
a favorable opinion of Duane, Morris & Heckscher LLP, dated the Effective Date,
substantially in form and substance as that set forth as Exhibit XII attached
hereto.
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
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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. Zions Bancorp Stock shall be listed
on the Nasdaq National Market (or else shall become listed on another national
securities exchange).
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, the
Bank, and Citizens Bank Building Corporation ("CBBC") 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, the Bank, and CBBC 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, the Bank, and CBBC 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 respective terms.
6.3. Absence of Violations. Except as set forth on Schedule 6.3 hereof:
(a) none of the Company, the Bank, nor CBBC is in violation of
its respective charter documents or bylaws, nor of any applicable federal,
state, or local law or ordinance nor any order, rule, or regulation of any
federal, state, local, or other governmental agency or body, in any material
respect, or in default with respect to any order, writ, injunction, or decree of
any court, or in default under any order, license, regulation, or demand of any
governmental agency, any of which violations or defaults could reasonably be
expected to have a materially adverse effect on the business, properties,
liabilities, financial position, results of operations, or prospects of the
Company or the Bank; 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 OCC, 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 threatened;
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(c) each of the Company and the Bank has established policies
and proce dures 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 the policies and practices of each of the Company and
the Bank with respect to all such laws and regulations 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) ongoing CRA training of all
employees of the Bank; and (iii) procedures whereby all significant CRA-related
activity is documented; and the Bank has officially designated a compliance
officer who reports directly to the board of directors and is responsible for
the CRA program of the Bank.
6.4. Compliance with Agreements. None of the Company, the Bank, nor
CBBC 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.
6.5. Binding Obligations; Due Authorization. Subject to the approval of
its share holders, this Agreement constitutes valid, legal, and binding
obligations of each of the Company and the Bank, enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar law, or by general principles of
equity. The execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by the
board of directors of each of the Company and the Bank. Subject to approval by
its shareholders of this Agreement, 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 thereby, or the
compliance with or fulfillment of the terms thereof will conflict with, or
result in a breach of any of the terms, conditions, or provisions of, or
constitute a default under the organizational documents or bylaws of the
Company, the Bank, or CBBC. 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, the Bank, or CBBC pursuant to any material agreement or instrument
under which the Company, the Bank, or CBBC 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, the Bank, or
CBBC 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, the Bank, or CBBC
is subject and which is material to its operations; or (c) violate any judgment,
order, writ, injunction, decree, or ruling to which the Company, the Bank, or
any of its properties or assets is subject or bound. None of the execution or
delivery of this
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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.
6.7. Compliance with BHC Act.
(a) The Company is registered as a bank holding company under
the BHC Act. All of the activities and investments of the Company conform to the
requirements applicable generally to bank holding companies under the BHC Act
and the regulations of the Board of Governors adopted thereunder.
(b) No corporation or other entity, other than the Company, is
registered or is required to be registered as a bank holding company under the
BHC Act by virtue of its control over the Bank or over any company that directly
or indirectly has control over the Bank.
6.8. Subsidiaries.
(a) Other than the Bank, which is a direct, wholly-owned
subsidiary of the Company, and other than CBBC, which is a direct, wholly-owned
subsidiary of the Bank, 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 CBBC, or calling for or requiring
the issuance of any securities or rights convertible into or exchangeable for
shares of capital stock of the Bank or CBBC. There are no other direct or
indirect subsid iaries 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).
(c) All of the activities and investments of CBBC conform to
the require ments applicable generally to national banking associations under
the National Bank Act, 12 U.S.C. ss. 1 et seq., and the regulations of the
Comptroller of the Currency adopted thereunder.
6.9. Capital Structure.
(a) The authorized capital stock of the Company consists of
(i) 1,000,000 shares of Company Class A Stock, of which, as of the date of this
Agreement, 82,816 shares have been duly issued and are validly outstanding,
fully paid, and held by approximately 37 shareholders of record, and (ii) 33,150
shares of Company Class B Stock, of which, as of the date of this Agreement,
none are issued or outstanding. No shares of Company Equity are issued and held
in the treasury of the Company. The aforementioned shares of Company Equity are
the only voting securities of the Company authorized, issued, or outstanding as
of such date; and except for the Company Class B Rights, of which 33,150 exist
as of the date of this Agreement and are held by two individuals, and except as
set forth on Schedule 6.9 hereof, no subscriptions,
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warrants, options, rights, rights of first refusal, convertible securities, or
similar arrangements or commitments in respect of securities of the Company are
authorized, issued, or outstanding which would enable the holder thereof to
purchase or otherwise acquire shares of any class of capital stock of the
Company. None of the Company Equity is subject to any restrictions upon the
transfer thereof under the terms of the corporate charter or bylaws of the
Company.
(b) Schedule 6.9 hereof lists all options to purchase Company
securities currently outstanding and, for each such option, the date of
issuance, date of exercisability, exercise price, type of security for which
exercisable, and date of expiration. Schedule 6.9 hereof further lists all
shares of Company Equity reserved for issuance pursuant to stock option plans,
agreements, or arrangements but not yet issued and all options upon shares of
Company Equity 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, $10.00 par value (the "Bank Common Stock"), of
which, as of the date of this Agreement, 100,000 shares have been duly issued
and are validly outstanding, fully paid, and all of which are held of record and
beneficially by the Company free and clear of any adverse claims. The
aforementioned shares of Bank Common Stock are the only voting securities of the
Bank authorized, issued, or outstanding as of such date; and no subscriptions,
warrants, options, rights, convertible securities, or similar arrangements or
commitments in respect of securities of the Bank are authorized, issued, or
outstanding which would enable the holder thereof to purchase or otherwise
acquire shares of any class of capital stock of the Bank. None of the 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) The authorized capital stock of CBBC consists of 500
shares of common stock, $1,000.00 par value (the "CBBC Common Stock"), of which,
as of the date of this Agreement, 100 shares have been duly issued and are
validly outstanding, fully paid, and all of which are held of record and
beneficially by the Bank free and clear of any adverse claims. The
aforementioned shares of CBBC Common Stock are the only voting securities of
CBBC autho rized, 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 CBBC are authorized, issued, or
outstanding which would enable the holder thereof to purchase or otherwise
acquire shares of any class of capital stock of CBBC. None of the CBBC Common
Stock is subject to any restrictions upon the transfer thereof under the terms
of the corporate charter or bylaws of CBBC.
(e) None of the shares of Company Equity or Bank Common Stock
has been issued in violation of the preemptive rights of any shareholder.
(f) As of the date as of which this Agreement has been
executed, to the best of the knowledge of the Company and the Bank, and except
for this Agreement, there are no shareholder agreements, or other agreements,
understandings, or commitments relating to the right of any holder or beneficial
owner of more than 1 percent of the issued and outstanding shares of any class
of the capital stock of either the Company or the Bank to vote or to dispose of
his or its shares of capital stock of that entity.
(g) The Company has not granted, nor expanded beyond those
rights granted by applicable statute, any shareholders' 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
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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.
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
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 as
of which this Agreement has been executed, 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, election contracts, retention
contracts, deferred compensation, non-competition, bonus, stock option,
profit-sharing, pension, retirement, consultation after retirement, incentive,
insurance arrangements or plans (including medical, disability, group life or
other insurance plans), and any other remuneration or fringe benefit
arrangements applicable to employees, officers, or directors of the Company or
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 thereby, or, if any of the same be oral, true,
accurate, and complete written summaries of all such oral contracts, agreements,
leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not entered into in the ordinary course of business, to
which the Company or 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, December 31, 1997, and March 31, 1998, and its related
consolidated statement of income for each of the periods then ended, and the
notes thereto (collectively, the "Company Financial Statements"). All of the
Company Financial Statements, including the related notes, (a) were prepared in
accordance with generally accepted accounting principles applied in all material
respects, and (b) are in accordance with the books and records of the Company
and the Bank which have been maintained in accordance with generally accepted
accounting principles or the requirements of financial institution regulatory
authorities, as the case may be, and (c) fairly reflect the consolidated
financial position of the Company as of such dates, and the consolidated results
of operations of the Company for the periods ended on such dates, and do not
fail to disclose any material extraordinary or out-of-period items, and (d)
reflect, in accordance with generally accepted accounting principles applied in
all material respects, adequate provision for, or reserves against, the possible
loan losses of the Company as of such dates.
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.
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(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 March 31, 1998. Since March 31,
1998, 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 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, other than customary cash dividends
paid by the Company or the Bank whose amounts have not exceeded past practice
and the intervals between which dividends have not been more frequent than past
practice; (d) no repurchase by the Company of any of its capital stock; (e) no
material loss, destruction, or damage to any material property of the Company,
the Bank, or CBBC, 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, the Bank, or CBBC nor any substantial amendment or termination of any
material contract outside the ordinary course of business to which the Company,
the Bank, or CBBC is a party, nor any other transaction by the Company, the
Bank, or CBBC 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 and that of each of its major
components at approximately the same level as 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
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lengthen the average maturity of the investment portfolio, or of any significant
category thereof, to any material extent.
6.17. Reserve for Possible Credit Losses. The Company's consolidated
reserve for possible credit losses is adequate to absorb reasonably anticipated
losses in the consolidated loan and lease portfolios of the Company, in view of
the size and character of such portfolios, current economic conditions, and
other pertinent factors. Management periodically reevaluates the adequacy of
such reserve based on portfolio performance, current economic conditions, and
other factors.
6.18. Tax Matters.
(a) 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, the
Bank, or CBBC 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 March 31, 1998, 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 as of which this Agreement has been executed, 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 State ments. All Taxes due with respect to
completed and settled examinations or concluded litigation have been properly
accrued or paid.
(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 April
1, 1998 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 quarterly financial
statements of the Company or the monthly financial statements of the Bank, as
the case may be.
(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 March 31,
1998, were not greater than the maximum amount permitted under the provisions of
section 585 of the Code.
(f) Other than liens arising under the laws of the State of
Colorado with respect to taxes assessed and not yet due and payable, there are
no tax liens on any of the proper ties or assets of the Company, the Bank, or
CBBC.
(g) The Company, the Bank, and CBBC (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
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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) None of the Company, the Bank, nor CBBC (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, the
Bank, and CBBC) 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.
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 $5,755,230.
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 Colorado Division of Banking 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 OCC, (d) the FDIC, (e) the United States
Department of the Treasury, (f) the Colorado Division of Banking, (g) the
Banking Board, and (h) 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; (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
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ordinary course of business; and (c) all other extensions of credit by the
Company or the Bank to any Insider have heretofore been disclosed in writing by
the Company to Zions Bancorp.
6.23. SEC Registered Securities. No equity or debt securities of the
Company or 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 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 best of 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, none of the Company, the Bank, nor CBBC is a party
defendant or respondent to any pending legal, equitable, or other proceeding
commenced by any governmental agency and, to the best of the knowledge of the
Company and 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 those of its subsidiaries and
the nature of its and their 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 best of 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 as of which this Agreement has been
executed, 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 except
for ordinary funding obligations pursuant to the terms of such plan. 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 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 as of which this Agreement has
been executed, each of the Company and the Bank is, to the best of its
knowledge, in compliance in all material respects with all federal and state
laws, regulations, and orders respecting employment and
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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 as of which
this Agreement has been executed, 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 as of which
this Agreement has been executed. The Bank is duly registered under and in
compliance with all requirements of the federal Investment Advisers Act of 1940
as amended, or is exempt from registration thereunder and from compliance with
the requirements thereof. Since January 1, 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 best of 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 Protec tion 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 best of 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 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) Except as set forth on Schedule 6.32 hereof, 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 best of 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 best of the knowledge
of the
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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 subsidiary, partnership, or
joint venture in which it has an interest.
6.33. Intangible Property. To the best of 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 best of 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 as of which this Agreement has been
executed, 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, each of the Company, the Bank,
and CBBC 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, the Bank, and CBBC 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 the Company, the
Bank, and CBBC 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, the Bank, and CBBC are in normal
operating condition, free from any known defects, except such minor defects as
do not materially interfere with the continued use thereof in the conduct of its
normal operations.
6.35. Loans, Leases, and Discounts.
(a) To the best of the knowledge of the Company and 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 no loan, lease, or discount
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having an unpaid balance (principal and accrued interest) in excess of $25,000
is subject to any asserted defense, offset, or counterclaim known to the Company
or the Bank.
(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. None of the Company, the Bank, nor CBBC nor
any of the assets, businesses, or operations of any of them is as of the date as
of which this Agreement has been executed 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
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 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 as of which this Agreement has been executed.
As of the date of this Agreement and as of the Effective Date, none of the
Company, the Bank, nor CBBC 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, none of the Company, the Bank, nor CBBC 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 safe guarded, 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
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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.
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. Except as set forth on Schedule 6.43
hereof, (a) there are no claims for brokerage commissions, finder's fees, or
similar compensation arising out of or due to any act of the Company or the Bank
in connection with the transactions contemplated by this Agreement or based upon
any agreement or arrangement made by or on behalf of the Company or the Bank,
and (b) neither the Company nor the Bank has entered into any agreement or under
standing 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 arrange ments 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 the
best of its knowledge, in accordance with prudent banking practice and
applicable rules, regulations, and regulatory policies and with counterparties
believed to be financially responsible at the time and are legal, valid, and
binding obligations enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. The 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 best of 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 Agree ment, 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.
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6.46. Regulatory and Other Approvals.
(a) As of the date as of which this Agreement has been
executed, 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 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 as of which this Agreement has been
executed, 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 as of which this Agreement has been
executed, 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 their certified public
accountants, KPMG, full access during normal business hours to all of the
property, documents, contracts, books, and records of the Company, the Bank, and
CBBC, 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.
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 and CBBC's respective articles of
incorporation and bylaws, and will make available their and CBBC's 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, the Bank, or CBBC is a party
and which requires one or more payments by the Company, the Bank, or CBBC in
excess of $25,000 in the aggregate to which the Company, the Bank, or CBBC is a
party, including but not limited to data processing
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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, the Bank, and CBBC: (i) a brief description and location of each
parcel of real property owned by the Company, the Bank, or CBBC, (ii) a brief
description of real property covered by lease or other rental arrangements to
which the Company, the Bank, or CBBC 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, the Bank, or CBBC is a party, including a copy of the relevant leases.
(d) The Company and the Bank will furnish to KPMG the
officers' certificate contemplated by Section 4.11(a) hereof, and such other
information as KPMG may reasonably request, to enable it to provide the letter
contemplated in Section 4.11(b) hereof.
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 that Consolidated Reports of Condition and Consolidated Reports
of Income required to be filed by the Bank under federal law may be prepared in
accordance with the official instructions applicable thereto at the time of
filing).
(b) 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 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, with the exception of customary
periodic cash dividends paid by the Company or the Bank to holders of its common
stock in such periodic amounts as are in every case consistent with the periodic
amounts characteristic of that payer; (b) declare or distribute any stock
dividend, authorize a stock split, or authorize, issue or make any distribution
of its capital stock or any other securities (except to effectuate the Class B
Exchange and except for issuances of Company Equity 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 deemed necessary or advisable by
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management of the Bank to cause to open for business any unopened branch office
of the Bank for which the Bank as of the date of this Agreement has all
necessary governmental approvals, or as explicitly contemplated herein, or
engage in any discussions concerning such a possible transaction except as
deemed necessary or advisable by management of the Bank to cause to open for
business any unopened branch office of the Bank for which the Bank as of the
date of this Agreement has all necessary governmental approvals, and 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, incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset, make any contract or
agreement, pay or become obligated to pay any legal, accounting, or
miscellaneous other expense, or engage in any transaction, except as deemed
necessary or advisable by management of the Bank to cause to open for business
any unopened branch office of the Bank for which the Bank as of the date of this
Agreement has all necessary governmental approvals; (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 January 1, 1998, increase the rate of
compensation of any employee or enter into any agreement to increase the rate of
compensation of any employee (it being agreed that neither (i) the salaries of
new personnel hired to staff any approved but unopened branch, which salaries
are not dispropor tionate to salaries of comparable employees in the market area
of such branch, nor (ii) any one-time payment of additional salary to Thomas M.
Jones in an amount not in excess of the equivalent of twenty working days of
salary in exchange for his surrender of an equivalent number of accrued but
unused days of vacation, will be taken into account in determining whether the
aforesaid 4.5-percent limit is exceeded); (i) create or modify any pension or
profit sharing plan, bonus, deferred compensation, death benefit, or retirement
plan, or the level of benefits under any such plan, nor increase or decrease any
severance or termination pay benefit or any other fringe benefit; (j) enter into
any employment or personal services contract with any person or firm, including
without limitation any contract, agreement, or arrangement described in Section
6.37(a) hereof, except as deemed necessary or advisable by management of the
Bank to cause to open for business any unopened branch office of the Bank for
which the Bank as of the date of this Agreement has all necessary governmental
approvals, and 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 4.11(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) maintain the ratio of its
loans to its deposits 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) 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
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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) employ its
best efforts to do or to cause to be done all things necessary, proper, or
advisable to cause and permit, at the Effective Date, none of its
representations and warranties to be inaccurate by reason of its acts or
omissions, none of its covenants and agreements to be breached by reason of its
acts or omissions, and no condition in this Agreement to remain unfulfilled by
reason of its actions or omissions; (h) not amend its articles of incorporation
or bylaws; and (i) not grant, nor expand beyond those rights granted by
applicable statute, 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
its chief financial officer, in form and substance acceptable to Zions Bancorp,
stating that he or she has no reason to believe that (i) the Company's latest
available unaudited consolidated financial statements are not stated on a basis
consistent with that followed in the Company's consolidated financial statements
as of December 31, 1997 and for the year then ended; 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
Company consolidated financial statements as of December 31, 1997 and for the
year then ended. 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 share holders to vote upon the transactions contemplated by
this Agreement may be deemed to be "affiliates" of the Company within the
meaning of Rule 145 under the 1933 Act 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
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 Equity 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 1933 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 Equity or any capital stock of the Bank or any
significant portion the assets of either of them (whether by tender offer,
merger, purchase of assets, or other transactions of any type); (b) afford any
third party which may be considering any such transaction access to its
properties, books or records except as required by mandatory provisions of law;
(c) enter into any discussions or negotiations for, or enter into any agreement
or understanding which provides for, any such transaction, or (d) authorize or
permit any of its directors, officers, employees or agents to do or permit any
of the foregoing. If the Company or 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
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any other matter which could adversely affect this Agreement, the Holding
Company Merger, or the Bank Merger, the Company and the Bank 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 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. 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. 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. None of such execution, consummation, or fulfillment will (a)
conflict with, or result in a material breach of the terms, conditions, or
provisions of, or constitute a material violation, conflict, or default under,
or give rise to any right of termination, cancellation, or acceleration with
respect to, or result in the creation of any lien, charge, or encumbrance upon,
any of the property or assets of Zions Bancorp, 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, or (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
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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.
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 arrange ment made by or on behalf of
any of them.
(b) None of Zions Bancorp, Val Cor, nor Vectra has entered
into any agree ment 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 compli ance 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. 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.
8.9. Zions Bancorp Stock. The shares of the Zions Bancorp Stock to be
issued by Zions Bancorp pursuant to the Holding Company Merger, when issued
pursuant to and in accordance with this Agreement, will be validly authorized
and issued, fully paid, and non-assessable.
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 materi ally 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 certifi cate 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.
9. CLOSING.
9.1. Place and Time of Closing. Closing shall take place at the offices
of Vectra, 1650 S. 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.
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.
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10. TERMINATION, DAMAGES FOR BREACH, WAIVER, AND AMENDMENT.
10.1. Termination by Reason of Lapse of Time. This Agreement may be
terminated by any party on or after April 10, 1999, by instrument duly
authorized and executed and delivered to the other parties, unless the Effective
Date shall have occurred on or before such date.
10.2. Grounds for Termination. This Agreement may be terminated by
written notice of termination at any time before the Effective Date (whether
before or after action by shareholders of the Company):
(a) by mutual consent of the parties hereto;
(b) by Zions Bancorp, upon written notice to the Company given
at any time (i) if any of the representations and warranties of the Company or
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 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 pursuant to section
10.2(b) or 10.2(c) of this Agreement, the party whose representations and
warranties were materially incorrect or who materially breached or failed to
perform its covenant or agreement shall be liable in the amount of $350,000 in
the aggregate to the other party or parties hereto that are not affiliated with
it; it being agreed that the failure of any condition set forth in section 3,
section 4, or section 5 of this Agreement to be satisfied or waived shall not,
in and of itself, give rise to any liability under clause (b) of this section
10.3.
10.4. Waiver of Terms or Conditions. Any of the terms or conditions of
this Agreement may be waived at any time prior to the Effective Date by the
party which is, or whose shareholders are, entitled to the benefit thereof, by
action taken by the board of directors of such party, or by its chairman, or by
its president; provided that such waiver shall be in writing and shall be taken
only if, in the judgment of the board of directors or officer taking such
action, such waiver will not have a materially adverse effect on the benefits
intended hereunder to it or to the
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shareholders of its or his corporation; and the other parties hereto may rely on
the delivery of such a waiver as conclusive evidence of such judgment and the
validity of the waiver.
10.5. Amendment.
(a) Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement and the exhibits
hereto may be amended, supplemented, or interpreted at any time prior to the
Effective Date by written instrument duly authorized and executed by each of the
parties hereto; provided, however, that this Agreement may not be amended after
the action by shareholders of the Company in any respect that would prejudice
the economic interests of such Company shareholders, or any of them, except as
specifically provided herein or by like action of such shareholders.
(b) If Zions Bancorp and the Company should mutually determine
(following receipt of advice of legal or other counsel) that it has become
inadvisable or inexpedient to effectuate the transactions contemplated by this
Agreement through means of a sequence of mergers such as is contemplated herein,
then the parties hereto agree to effect such change in the form of transaction
as described especially in Sections 1.1 and 9.2 of this Agreement by written
instrument in amendment of this Agreement.
11. GENERAL PROVISIONS.
11.1. Allocation of Costs and Expenses. Except as provided in this
Section, each party hereto shall pay its own fees and expenses, including
without limitation the fees and expenses of its own counsel and its own
accountants and tax advisers, incurred in connection with this Agreement and the
transactions contemplated thereby. For purposes of this Section, (i) the cost of
copying, binding, and delivering the proxy statement and other material to be
transmitted to shareholders of the Company shall be deemed to be incurred on
behalf of the Company, (ii) the cost of registering under federal and state
securities laws the stock of Zions Bancorp to be received by the shareholders of
the Company shall be deemed to be incurred on behalf of Zions Bancorp, and (iii)
the 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.
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
informa tion for any other purpose, including, without limitation, the
competitive detriment of any other
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<PAGE>
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 informa
tion to its respective affiliates, counsel, accountants, tax advisers, and
consultants. The confi dentiality 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) Except in connection with the matter set forth in Schedule
1.2 attached hereto, 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 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
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<PAGE>
furnished expressly for use therein. The indemnity agreement contained in this
Section 11.6(a) shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any of the other parties, and shall
survive the termination of this Agreement or the consummation of the
transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in Section 11.6(a) of
this Agreement is for any reason held by a court of competent jurisdiction to be
unenforceable as to any or every party, then the parties in such circumstances
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding or
any claims asserted) to which any party may be subject in such proportion as the
court of law determines based on the relative fault of the parties.
11.7. Standard of Materiality.
(a) For purposes of Sections 4, 6, and 7 of this Agreement,
the terms "material" and "materially," when used with reference to items
normally expressed in dollars, shall be deemed to refer to amounts individually
and in the aggregate in excess of 3 percent of the shareholders' equity of the
Company as of 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 3 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, Val Cor, and Vectra.
(a) From the date as of which this Agreement has been executed
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) From the date as of which this Agreement has been executed
to the Effective Date, each of Zions Bancorp, Val Cor, and Vectra shall employ
its best efforts to do or to cause to be done all things necessary, proper, or
advisable to cause and permit, at the Effective Date, none of its
representations and warranties to be inaccurate by reason of its acts or
omissions, none of its covenants and agreements to be breached by reason of its
acts or omissions, and no condition in this Agreement to remain unfulfilled by
reason of its actions or omissions.
(c) 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
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<PAGE>
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.
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 counter parts 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 two years following the Effective Date,
provided that if either party should breach a representation, warranty, or
covenant contained in this Agreement through fraud, deliberate
misrepresentation, or other intentional tortious conduct, or through gross
negligence, then the representation, warranty, or covenant so breached shall be
deemed to have survived for six years following the Effective Date. Each party
shall be deemed to have relied upon each and every representation and warranty
of the other parties regardless of any investigation heretofore or hereafter
made by or on behalf of such party.
11.14. 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
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<PAGE>
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 communi cations 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:
Citizens Banco, Inc.
3300 West 72nd Avenue
Westminster, Colorado 80030-5300
Attention: Mr. Donald K. Hogoboom
Chairman and President
With a required copy to:
Tennyson W. Grebenar, Esq.
Rothgerber, Johnson & Lyons LLP
One Tabor Center, Suite 3300
1200 Seventeenth Street
Denver, Colorado 80202-5839
All such notices shall be deemed to have been given on the date
delivered, transmitted, or mailed in the manner provided above.
11.16. Choice of Law and Venue. 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 to be the proper jurisdiction and venue
for any suit or action arising out of this Agreement. Each of the parties
consents to personal jurisdiction in such venue for such a proceeding and agrees
that it may be served with process in any action with respect to this Agreement
or the transactions
A-38
<PAGE>
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 uncon ditionally waives and agrees, to the
fullest extent permitted by law, not to plead any objection that it may now or
hereafter have to the laying of venue or the convenience of the forum of any
action or claim with respect to this Agreement or the transactions contemplated
thereby brought in the courts aforesaid.
11.17. Knowledge of a Party. References in this Agreement to the
knowledge of a party shall mean the knowledge possessed by any of such parties
or the present executive officers of such party including, without limitation,
information which is or has been in the books and records of such party.
11.18. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
<TABLE>
<CAPTION>
<S> <C>
ZIONS BANCORPORATION
Attest: By:
--------------------------------- -------------------------------------
Jennifer R. Jolley Dale M. Gibbons
Assistant Secretary Executive Vice President,
Chief Financial Officer and Secretary
VAL COR BANCORPORATION, INC.
Attest: By:
--------------------------------- -------------------------------------
Ray L. Nash Gary S. Judd
Chief Financial Officer and Secretary President and Chief Executive Officer
VECTRA BANK COLORADO, NATIONAL
ASSOCIATION
Attest: By:
--------------------------------- -------------------------------------
Ray L. Nash Gary S. Judd
Chief Financial Officer and Secretary President and Chief Executive Officer
</TABLE>
A-39
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CITIZENS BANCO, INC.
Attest: By:
--------------------------------- -------------------------------------
Thomas M. Jones Donald K. Hogoboom
Treasurer and Secretary Chairman and President
CITIZENS BANK
Attest: By:
--------------------------------- -------------------------------------
Thomas M. Jones
President
</TABLE>
A-40
<PAGE>
- -------------------------------------------------
)
State of Utah )
) ss.
County of Salt Lake )
- -------------------------------------------------
On this seventh day of August, 1998, before me personally appeared
Dale M. Gibbons, to me known to be the Executive Vice President, Chief Financial
Officer and Secretary 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
A-41
<PAGE>
- -------------------------------------------------
)
State of Colorada )
) ss.
County of Denver )
- -------------------------------------------------
On this tenth day of August, 1998, before me personally appeared Gary
S. Judd, to me known to be the President and Chief Executive Officer 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
A-42
<PAGE>
- -------------------------------------------------
)
State of Colorada )
) ss.
County of Adams )
- -------------------------------------------------
On this twelfth day of August, 1998, before me personally appeared
Donald K. Hogoboom, to me known to be the chairman and president of Citizens
Banco, Inc. and Thomas M. Jones, to me known to be the president of Citizens
Bank, and each 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
A-43
<PAGE>
The undersigned members of the Board of Directors of Citizens Banco,
Inc. (the "Company"), acknowledging that Zions Bancorporation ("Zions Bancorp")
has relied upon the action heretofore taken by the board of directors in
entering into the Agreement, and has required the same as a prerequisite to
Zions Bancorp's execution of the Agreement, do individually and as a group
agree, subject to 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 Citizens
Bank.
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
A-44
<PAGE>
SCHEDULE 1.2
------------
ANY CLAIM ON BEHALF OF PROFESSIONAL BANK CONSULTANTS, INC. OR ALAN W.
NOYES TO A FINDER'S FEE, BROKERAGE COMMISSION, OR COMPENSATION FOR
FINANCIAL OR ADVISORY SERVICES IN CONNECTION WITH THE SALE OR MERGER OF
CITIZENS BANCO, INC. OR ANY AFFILIATE TO OR WITH ZIONS BANCORPORATION
OR ANY AFFILIATE.
A-45
<PAGE>
SCHEDULE 1.8
------------
Donald K. Hogoboom
Joayne Hogoboom
Thomas M. Jones
Edward P. Tepper
J. J. Tepper
A-46
<PAGE>
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
(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
B-1
<PAGE>
(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;
(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.
B-2
<PAGE>
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 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).
B-3
<PAGE>
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 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.
B-4
<PAGE>
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
(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;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
B-5
<PAGE>
(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
(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
B-6
<PAGE>
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, 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
B-7
<PAGE>
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.
B-8
[LETTERHEAD OF CITIZENS BANCO, INC.]
October 26, 1998
Class A Shareholders of Citizens Banco, Inc.
Dear Class A Shareholder:
The Board of Directors of Citizens Banco, Inc. (the "Company") has
called a Special Meeting of the shareholders of the Company for 9:00 a.m.,
Colorado time, on November 24, 1998, at 3300 West 72nd Avenue, Westminster,
Colorado. The Board is furnishing the accompanying Proxy Statement/Prospectus to
all holders of the Company Class A Common Stock, par value $1.00 per share (the
"Company Class A Common Stock") and holders of the Company Class B Rights
exchangeable for the Company's Class B Common Stock.
At the Special Meeting, the holders of Company Class A Common Stock
will consider and vote upon a proposal to approve, ratify and adopt the exchange
of certain rights (the "Class B Rights") of the former holders of the Company's
Four Year Mandatory Convertible Debentures Due 1993, convertible into shares of
Company Class B Common Stock, no par value (the "Company Class B Common Stock"),
for shares of Company Class B Common Stock (the "Class B Exchange"). The holders
of Company Class A Common Stock and the holders of Company Class B Common Stock
(collectively, Company Class A Common Stock and Company Class B Common Stock are
referred to as the "Company Equity") will also consider and vote upon at the
Special Meeting a proposal to approve and adopt the Agreement and Plan of
Reorganization, dated as of August 12, 1998, (the "Plan of Reorganization")
among the Company, the Company's wholly-owned subsidiary, Citizens 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"). If the holders of the
Company Class A Common Stock and the Company Class B Common Stock, voting as
separate groups, 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").
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CLASS B EXCHANGE
AND THE PLAN OF REORGANIZATION AND DETERMINED THAT THE CLASS B EXCHANGE IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND 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 CLASS B EXCHANGE AND THE
PLAN OF REORGANIZATION. PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE.
<PAGE>
Class A Shareholders of Citizens Banco, Inc.
October 26, 1998
Page 2
If the Plan of Reorganization is approved and adopted and the
Reorganization is effected, the shares of Company Equity will be canceled at the
Effective Date (as defined) of the Reorganization and immediately converted into
the right for Company shareholders to receive approximately 2.17 shares of Zions
Common Stock in exchange for each share of Company Equity.
The accompanying Proxy Statement/Prospectus details the terms and
conditions of the Class B Exchange and the Plan of Reorganization and provides
information concerning the Company, the Bank, Zions, Val Cor and Vectra Bank as
well as the Class B Exchange and 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.
Any holder of Company Class A Common Stock may attend the Special
Meeting and vote in person if he or she desires, even if he or she has already
submitted a proxy.
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies, 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 fourth 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, Zions will send
you instructions on or shortly after the Effective Date of the Plan of
Reorganization describing the procedure for exchanging your Citizens Banco, Inc.
stock certificate(s) for the Reorganization consideration. Please do not send
your certificates to the Company prior to receiving these instructions.
You may contact me or Thomas Jones at the Company, (303) 428-7536, with
any questions concerning the contents of this package.
Sincerely,
/s/ Donald K. Hogoboom
---------------------------
Donald K. Hogoboom
Chairman and President
CITIZENS BANCO, INC.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Citizens Banco, Inc. (the
"Company") will be held at 9:00 a.m., Colorado time, on November 24, 1998, at
the Company's offices at 3300 West 72nd Avenue, Westminster, Colorado, for the
following purposes:
1. For the holders of Class A Company Stock, $1.00 par value, of the
Company (the "Company Class A Common Stock"), to consider and vote upon a
proposal to approve, ratify and adopt the exchange of certain rights (the "Class
B Rights") of the former holders of the Company's Four Year Mandatory
Convertible Debentures Due 1993, convertible into shares of Company Class B
Common Stock, no par value (the "Company Class B Common Stock"), for shares of
Company Class B Common Stock (the "Class B Exchange"), as more fully described
in the accompanying Proxy Statement/Prospectus;
2. For the holders of Company Class A Common Stock, voting as a
separate class from the holders of Company Class B Common Stock, to consider and
vote upon a proposal to approve and adopt an Agreement and Plan of
Reorganization dated as of August 12, 1998 among the Company, its wholly-owned
subsidiary Citizens 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, as more
fully described in the accompanying Proxy Statement/Prospectus; and
3. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors has set October 26, 1998, as the record date for
determining holders of Company Class A Common Stock entitled to notice of and to
vote at the Special Meeting.
Holders of Company Class A Common Stock are entitled to assert
dissenters' rights with respect to the Plan of Reorganization and to receive the
fair value of their shares in cash if they comply with certain provisions under
Colorado law. A copy of the applicable statute is attached to the Proxy
Statement/Prospectus. Shareholders desiring to exercise dissenters' rights must
comply strictly with the statutory provisions.
By order of the Board of Directors,
/s/ Donald K. Hogoboom
--------------------------------------
Donald K. Hogoboom
Chairman and President
Dated: October 26, 1998
Please mark, sign and return the enclosed proxy in the envelope provided.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF CITIZENS BANCO, INC.
November 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas Jones and Jerry Tepper, and
either of them, as proxies of the undersigned with full power of substitution to
vote as designated below all shares of Citizens Banco, Inc.'s Class A Common
Stock, par value $1.00 per share (the "Company Class A Common Stock") that the
undersigned held of record on October 26, 1998, at the special meeting of
shareholders of Citizens Banco, Inc. (the "Company") to be held on November 24,
1998, or at any postponement or adjournment thereof with respect to the
following:
1. A proposal to approve, ratify and adopt the exchange of certain
rights (the "Class B Rights") of the former holders of the Company's Four Year
Mandatory Convertible Debentures Due 1993, convertible into shares of Company
Class B Common Stock, for shares of Company Class B Common Stock (the "Class B
Exchange"). The terms and conditions of the Class B Exchange are set forth in
the accompanying Proxy Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. A proposal to approve and adopt the Agreement and Plan of
Reorganization dated August 12, 1998, among the Company, its wholly-owned
subsidiary Citizens 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 terms and
conditions of the Plan of Reorganization are set forth in the accompanying Proxy
Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Other matters. The Proxyholders, in their discretion, are authorized
to vote on such other business as may properly come before the Special Meeting
and any adjournments thereof.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE, BUT IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL, RATIFICATION AND
ADOPTION OF THE CLASS B EXCHANGE AND FOR APPROVAL AND ADOPTION OF THE PLAN OF
REORGANIZATION WITH RESPECT TO SHARES ELIGIBLE TO VOTE ON SUCH PROPOSALS.
Dated: , 1998
------------------ -----------------------------------
Signature
-----------------------------------
[label] Printed Name
Each person whose name is on the
certificate of Company Class A
Common Stock should sign above in
the same manner in which such
person's name appears. If signing
as a fiduciary, give title. A
corporation must sign its name by
the president or other authorized
officer. All co-owners must sign.
[LETTERHEAD OF CITIZENS BANCO, INC.]
October 26, 1998
Class B Shareholders of Citizens Banco, Inc.
Dear Class B Shareholder:
The Board of Directors of Citizens Banco, Inc. (the "Company") has
called a Special Meeting of the shareholders of the Company for 9:00 a.m.,
Colorado time, on November 24, 1998, at 3300 West 72nd Avenue, Westminster,
Colorado. The Board is furnishing the accompanying Proxy Statement/ Prospectus
to all holders of the Company's Class A Common Stock and holders of the Company
Class B Common Stock, no par value (the "Company Class B Common Stock").
At the Special Meeting, the holders of Company Class A Common Stock,
par value $1.00 per share (the "Company Class A Common Stock"), will consider
and vote upon a proposal to approve, ratify and adopt the exchange of certain
rights (the "Class B Rights") of the former holders of the Company's Four Year
Mandatory Convertible Debentures Due 1993, convertible into shares of Company
Class B Common Stock, for shares of Company Class B Common Stock (the "Class B
Exchange"). The holders of Company Class A Common Stock and the holders of
Company Class B Common Stock (collectively, Company Class A Common Stock and
Company Class B Common Stock are referred to as the "Company Equity") will also
consider and vote upon at the Special Meeting a proposal to approve and adopt
the Agreement and Plan of Reorganization, dated as of August 12, 1998, (the
"Plan of Reorganization") among the Company, the Company's wholly-owned
subsidiary, Citizens 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"). If the holders of the Company Class A Common Stock and the Company Class
B Common Stock, voting as separate groups, 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").
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. PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE.
<PAGE>
Class B Shareholders of Citizens Banco, Inc.
October 26, 1998
Page 2
If the Plan of Reorganization is approved and adopted and the
Reorganization is effected, the shares of Company Equity will be canceled at the
Effective Date (as defined) of the Reorganization and immediately converted into
the right for Company shareholders to receive approximately 2.17 shares of Zions
Common Stock in exchange for each share of Company Equity.
The accompanying Proxy Statement/Prospectus details the terms and
conditions of the Class B Exchange and the Plan of Reorganization and provides
information concerning the Company, the Bank, Zions, Val Cor and Vectra Bank as
well as the Class B Exchange and 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.
Any holder of Company Class B Common Stock may attend the Special
Meeting and vote in person if he or she desires, even if he or she has already
submitted a proxy.
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies, 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 fourth 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, Zions will send
you instructions on or shortly after the Effective Date of the Plan of
Reorganization describing the procedure for exchanging your Citizens Banco, Inc.
stock certificate(s) for the Reorganization consideration. Please do not send
your certificates to the Company prior to receiving these instructions.
You may contact me or Thomas Jones at the Company, (303) 428-7536, with
any questions concerning the contents of this package.
Sincerely,
/s/ Donald K. Hogoboom
----------------------------
Donald K. Hogoboom
Chairman and President
CITIZENS BANCO, INC.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Citizens Banco, Inc. (the
"Company") will be held at 9:00 a.m., Colorado time, on November 24, 1998, at
the Company's offices at 3300 West 72nd Avenue, Westminster, Colorado, for the
following purposes:
1. For the holders of Company Class B Common Stock, voting as a
separate class from the holders of Company Class A Common Stock, to consider and
vote upon a proposal to approve and adopt an Agreement and Plan of
Reorganization dated as of August 12, 1998 among the Company, its wholly-owned
subsidiary Citizens 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, as more
fully described in the accompanying Proxy Statement/Prospectus; and
2. To transact such other business as may properly come before the
Special Meeting.
Prior to the vote on the proposal to approve and adopt the Plan of
Reorganization, the holders of Company Class A Common Stock will consider and
vote upon a proposal to approve, ratify and adopt the Class B Exchange. The
Class B Exchange involves the exchange of certain rights (the Class B Rights) of
the former holders of the Company's Four Year Mandatory Convertible Debentures
Due 1993 for shares of Company Class B Common Stock. The Class B Exchange is
more fully described in the accompanying Proxy Statement/Prospectus.
The Board of Directors has set October 26, 1998, as the record date for
determining holders of Company Class B Common Stock entitled to notice of and to
vote at the Special Meeting.
Holders of Company Class B Common Stock are entitled to assert
dissenters' rights with respect to the Plan of Reorganization and to receive the
fair value of their shares in cash if they comply with certain provisions under
Colorado law. A copy of the applicable statute is attached to the Proxy
Statement/Prospectus. Shareholders desiring to exercise dissenters' rights must
comply strictly with the statutory provisions.
By order of the Board of Directors,
/s/ Donald K. Hogoboom
-----------------------------------------
Donald K. Hogoboom
Chairman and President
Dated: October 26, 1998
Please mark, sign and return the enclosed proxy in the envelope provided.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF CITIZENS BANCO, INC.
November 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas Jones and Jerry Tepper, and
either of them, as proxies of the undersigned with full power of substitution to
vote as designated below all shares of Citizens Banco, Inc.'s Class B Common
Stock, no par value (the "Company Class B Common Stock") that the undersigned
held of record on October 26, 1998, at the special meeting of shareholders of
Citizens Banco, Inc. (the "Company") to be held on November 24, 1998, or at any
postponement or adjournment thereof with respect to the following:
1. A proposal to approve and adopt the Agreement and Plan of
Reorganization dated August 12, 1998, among the Company, its wholly-owned
subsidiary Citizens 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 terms and
conditions of the Plan of Reorganization are set forth in the accompanying Proxy
Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Other matters. The Proxyholders, in their discretion, are authorized
to vote on such other business as may properly come before the Special Meeting
and any adjournments thereof.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE, BUT IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
PLAN OF REORGANIZATION WITH RESPECT TO SHARES ELIGIBLE TO VOTE ON SUCH
PROPOSALS.
Dated: , 1998
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Signature
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[label] Printed Name
Each person whose name is on the
certificate of Company Class B
Common Stock should sign above in
the same manner in which such
person's name appears. If signing
as a fiduciary, give title. A
corporation must sign its name by
the president or other authorized
officer. All co-owners must sign.
