424B2 1 h36810b2e424b2.htm ZIONS BANCORPORATION e424b2
Table of Contents

PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(2).
(To Prospectus Dated March 31, 2006) A filing fee of $75.12, calculated in accordance with Rule 457(r),
has been transmitted to the SEC in connection with the securities
offered from the registration statement (File No. 333-132868) by
means of this prospectus supplement.
 
93,610 Units
 
LOGO
ZIONS BANCORPORATION
 
Zions Bancorporation Employee Stock Option Appreciation Rights Securities,
Series 2006
 
We offered 93,610 units of our Zions Bancorporation Employee Stock Option Appreciation Rights Securities, Series 2006 (the “ESOARS,” and each unit thereof, an “ESOARS Unit”). ESOARS are securities that entitle holders to receive specified payments from us upon the exercise, if any, from time to time of stock options comprising a reference pool of stock options that we have granted to our employees. We call our stock options that comprise this reference pool our “reference options.” The ESOARS represent our payment obligation but do not represent any ownership interest in us or in any of the reference options.
 
We offered the ESOARS in part to provide a market basis which may be used to help us estimate the fair value of our reference options and determine our compensation expense with respect to the issuance of our reference options.
 
We will make periodic payments upon the exercise, if any, of reference options to the extent payments are then payable thereunder (as described in this prospectus supplement) on or before the 15th day of each month (or, if any such day is not a business day, then on the next business day) following the end of each calendar quarter. We expect that such periodic payments, if any, will commence on or about July 16, 2007. Each holder of ESOARS will be entitled to receive its pro rata share of 10% of the “net realized value,” as more particularly described herein, realized by employee optionees upon the exercise, if any, of reference options.
 
The public offering price of our ESOARS, as determined by an auction process, is $7.50 per ESOARS Unit, resulting in proceeds, before expenses, to us of $7.50 per ESOARS Unit, and total proceeds, before expenses, to us of $702,075. The minimum number of ESOARS Units for a bid in the auction was one. We will issue no fractional ESOARS Units. The price to the public and the allocation of our ESOARS was determined by the auction process through the www.esoars.com electronic bid submission system (“www.esoars.com”). The auction opened at 9:30 a.m., E.D.T., on June 28, 2006 and closed at 4:15 p.m., E.D.T., on June 29, 2006.
 
The timing and method for submitting bids and a description of this auction process are described in the section entitled “The Auction Process” beginning on page S-13 of this prospectus supplement. In general, once a bidder submitted and confirmed its bid, the bid was binding and could not thereafter be rescinded or revoked. As part of this auction process, we attempted to assess the market demand for our ESOARS and to set the price to the public of this offering to meet that demand. Investors should not expect to be able to sell their ESOARS for a profit after the conclusion of this offering and the allocation of our ESOARS.
 
We offered the ESOARS directly to investors. Zions Direct, Inc., the auction agent for this offering, is a wholly-owned subsidiary of Zions First National Bank, which is the issuing and paying agent with respect to the ESOARS. Zions First National Bank, in turn, is a wholly-owned subsidiary of Zions Bancorporation.
 
We expect to deliver the ESOARS through the facilities of The Depository Trust Company in book-entry form on or about July 5, 2006.
 
We will not list the ESOARS on any securities exchange. Currently there is no public market for the ESOARS. We cannot assure you that an active market for the ESOARS will develop.
 
 
Investing in our ESOARS involves risk. See “Risk Factors” beginning on page S-6 of this prospectus supplement.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying base prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
The date of this prospectus supplement is June 29, 2006.


 

 
TABLE OF CONTENTS
 
Prospectus Supplement
 
         
    Page
 
  iii
  iv
  iv
  S-1
  S-6
  S-10
  S-10
  S-13
  S-20
  S-24
  S-25
  S-41
  S-44
  S-47
  S-47
  S-48
  S-49
  S-49
       
  A-1
  B-1
  C-1


i


Table of Contents

Base Prospectus
 
         
    Page
 
  1
  1
  2
  3
  3
  22
  27
  28
  31
  34
  36
  39
  41
  52
  64
  68
  69
  74
       
  78
  80
  101
  104
  105
  105


ii


Table of Contents

 
ABOUT THIS PROSPECTUS SUPPLEMENT
 
This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering. The second part is the accompanying base prospectus, which gives more general information about us and our securities that we may offer, some of which information does not apply to this offering. Generally, when we refer to the “prospectus,” we are referring to both parts combined. If information varies between this prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus supplement.
 
You should carefully read this entire prospectus supplement, the accompanying base prospectus and the other information we have incorporated by reference, as described under the section entitled “Where You Can Find More Information” on page 1 of the accompanying base prospectus, to understand fully the terms of the ESOARS being offered hereby, as well as the tax and other considerations that you should consider before making your investment decision. You should pay special attention to the section entitled “Risk Factors” beginning on page S-6 of this prospectus supplement, on page 5 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2005, and on page 39 of our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006, to determine whether an investment in our ESOARS is appropriate for you. See “Where You Can Find More Information” on page 1 of the accompanying base prospectus.
 
The information in this prospectus supplement is accurate as of June 29, 2006. You should rely only on the information contained in this prospectus supplement, the accompanying base prospectus and the information we have incorporated by reference. We have not authorized anyone to provide you with different information. You should not assume that the information provided by this prospectus supplement, the accompanying base prospectus or the information we have incorporated by reference is accurate as of any date other than the date of the respective document or information, as applicable. If information in any of the documents we have incorporated by reference or in the accompanying base prospectus conflicts with information in this prospectus supplement, you should rely on the most recent information. If information in an incorporated document conflicts with information in another incorporated document, you should rely on the information in the most recent incorporated document. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
 
For purposes of this prospectus supplement, unless the context otherwise indicates:
 
  •  references to “Zions Bancorporation,” “we,” “our” and “us” are only to Zions Bancorporation, excluding its consolidated subsidiaries;
 
  •  references to “you” are to any investor who invests in our ESOARS being offered hereby, whether they are the holders or only indirect owners of those ESOARS;
 
  •  references to “ESOARS” are to the Zions Bancorporation Employee Stock Option Appreciation Rights Securities, Series 2006;
 
  •  references to “this offering” or “the offering” are to the initial offering of our ESOARS made in connection with their original issuance, and not to any subsequent resales of our ESOARS in market-making transactions; and
 
  •  references to “holders” are to those persons or entities that own any of our ESOARS, registered in their own names, on the books that we or our agent maintain for this purpose, and not those who own beneficial interests in our ESOARS registered in street name or in ESOARS Units issued in book-entry form through one or more depositaries.


iii


Table of Contents

 
WHERE YOU CAN FIND MORE INFORMATION
 
You may request a copy of any of the documents or information we have incorporated by reference in this prospectus supplement, as described in the section entitled “Where You Can Find More Information” on page 1 of the accompanying base prospectus, at no cost to you by writing or telephoning us at:
 
Investor Relations
Zions Bancorporation
One South Main Street, Suite 1134
Salt Lake City, Utah 84111
(801) 524-4787
 
In addition, you may also access further information about us by visiting our website at www.zionsbancorporation.com. Please note that the information and materials found on our website, except for our SEC filings incorporated by reference in this prospectus supplement, are not part of this prospectus supplement and are not incorporated by reference into this prospectus supplement.
 
For additional information concerning this offering; the ESOARS being offered hereby; the website www.esoars.com; or the registration and auction process, you may contact Zions Direct:
 
  •  by telephone at (800) 554-1688 (ask for ESOARS support);
 
  •  by facsimile at (801) 524-0824; or
 
  •  by e-mail at info@esoars.com.
 
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus supplement, including information incorporated by reference, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements provide current expectations or forecasts of future events and include, among others:
 
  •  statements with respect to our beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance, and
 
  •  statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.
 
These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing our management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this prospectus supplement, including the information incorporated by reference. You should carefully consider those risks and uncertainties in reading this prospectus supplement. Factors that might cause such differences include, but are not limited to:
 
  •  our ability to successfully execute our business plans, manage our risks and achieve our objectives;
 
  •  changes in political and economic conditions, including the economic effects of terrorist attacks against the United States and related events;
 
  •  changes in financial market conditions, either nationally or locally in areas in which we conduct our operations, including without limitation, reduced rates of business formation and growth, commercial real estate development and real estate prices;
 
  •  fluctuations in the equity and fixed-income markets;
 
  •  changes in interest rates, the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows and competition;
 
  •  acquisitions and integrations of acquired businesses, including Amegy Corporation;


iv


Table of Contents

 
  •  increases in the levels of losses, customer bankruptcies, claims and assessments;
 
  •  changes in fiscal, monetary, regulatory, trade and tax policies and laws, including policies of the U.S. Treasury and the Federal Reserve Board;
 
  •  continuing consolidation in the financial services industry;
 
  •  new litigation or changes in existing litigation;
 
  •  success in gaining regulatory approvals, when required;
 
  •  changes in consumer spending and saving habits;
 
  •  increased competitive challenges and expanding product and pricing pressures among financial institutions;
 
  •  demand for financial services in our market areas;
 
  •  inflation and deflation;
 
  •  technological changes and our implementation of new technologies;
 
  •  our ability to develop and maintain secure and reliable information technology systems;
 
  •  legislation or regulatory changes which adversely affect our operations or business;
 
  •  our ability to comply with applicable laws and regulations; and
 
  •  changes in accounting policies or procedures as may be required by the FASB or regulatory agencies.
 
You should not put undue reliance on any forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements.
 
See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2005 and in Item 2 of our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006, which are incorporated by reference in this prospectus supplement, for a more detailed description of these and other factors that may affect any forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors described under the section entitled “Risk Factors” beginning on page S-6 of this prospectus supplement, on page 5 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2005 and on page 39 of our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006. We will not update any forward-looking statements unless the securities laws require us to do so.


v


Table of Contents

 
SUMMARY
 
Zions Bancorporation
 
Zions Bancorporation is a financial holding company organized under the laws of the State of Utah in 1955, and is registered under the Bank Holding Company Act of 1956, as amended. Zions Bancorporation, together with its consolidated subsidiaries, owns and operates eight commercial banks, with a total of 475 offices at year-end 2005. We provide a full range of banking and related services through our banking and other subsidiaries, primarily in Utah, California, Texas, Arizona, Nevada, Colorado, Idaho, Washington, and Oregon.
 
We focus on maintaining community-minded banking services by continuously strengthening our core business lines of retail banking, small and medium-sized business lending, residential mortgage and investment activities. We operate eight different banks in ten Western states, with each bank operating under a different name and each having its own chief executive officer and management team. The banks provide a wide variety of commercial and retail banking and mortgage lending products and services.
 
We provide commercial loans, lease financing, cash management, electronic check clearing, lockbox, customized draft processing and other special financial services for business and other commercial banking customers. We also provide a wide range of personal banking services to individuals, including home mortgages, bankcard, student and other installment loans, home equity lines of credit, checking accounts, savings accounts, time certificates of various types and maturities, trust services, safe deposit facilities, direct deposit and 24-hour ATM access. In addition, some of our banking subsidiaries provide services to key market segments through their Women’s Financial, Private Client Services, and Executive Banking Groups. We also offer wealth management services through a registered investment adviser subsidiary, Contango Capital Advisors, Inc.
 
In addition to these core businesses, we have built specialized lines of business in capital markets and public finance. We are also a leader in U.S. Small Business Administration lending. Through our eight banking subsidiaries, we provide Small Business Administration (“SBA”) 7(a) loans to small businesses throughout the United States and are also one of the largest providers of SBA 504 financing in the nation. We own an equity interest in the Federal Agricultural Mortgage Corporation (“Farmer Mac”) and are the nation’s top originator of secondary market agricultural real estate mortgage loans through Farmer Mac. We are a leader in municipal finance advisory and underwriting services. We also control four venture capital companies that provide early-stage capital, primarily for start-up companies located in the Western United States.
 
 
Our executive offices are located at One South Main, Suite 1134, Salt Lake City, Utah 84111 and our telephone number is (801) 524-4787.


S-1


Table of Contents

Issuer Zions Bancorporation.
 
Securities Offered Zions Bancorporation Employee Stock Option Appreciation Rights Securities, Series 2006 (the “ESOARS,” and each unit thereof, an “ESOARS Unit”). ESOARS are securities that entitle holders to receive specified payments from us upon the exercise, if any, from time to time of stock options comprising a reference pool of stock options that we have granted to our employees. We call our stock options that comprise this reference pool our “reference options.” See “Description of Our ESOARS.”
 
CUSIP Number 989701 20 6.
 
Number of ESOARS Units We Are Offering 93,610.
 
Offering Price $7.50 per ESOARS Unit, as determined through the auction process conducted by our auction agent. See “The Auction Process.”
 
Maximum Bid Amount In order to ensure a broad participation in this offering, we or our auction agent assigned each bidder a maximum bid amount. A bidder’s maximum bid amount in no event exceeded $350,000. We reserved the right in our sole discretion to set a lower maximum bid amount for any bidder. A bidder was not able to place a bid that exceeded that bidder’s maximum bid amount.
 
Allocation of ESOARS Units Determined through our auction process. We or our auction agent made suitability determinations with respect to all prospective investors. In no event was a bidder allowed to purchase more than that bidder’s maximum bid amount. See “The Auction Process.”
 
Deposit We and our auction agent waived all deposit requirements.
 
Purpose We offered our ESOARS in part to provide a market basis which may be used to help us estimate the fair value of our reference options and determine our compensation expense with respect to the issuance of our reference options, as required under Statement of Financial Accounting Standards No. 123R, Share Based Payment, issued by the Financial Accounting Standards Board, or FASB. See “Description of Our ESOARS — Purpose of the Offering.”
 
Auction Agent; Issuing and Paying Agent Our auction agent was Zions Direct, Inc., a wholly-owned subsidiary of Zions First National Bank, which is our issuing and paying agent. Zions First National Bank, in turn, is a wholly-owned subsidiary of us.
 
Reference Options Upon the exercise, if any, by our employees of our reference options from time to time, holders will be entitled to the payments described in “Description of Our ESOARS — Payments; Reports and Notices.” Some characteristics of our reference options are described in “Description of Reference Options.”
 
Use of Proceeds We estimate that we will receive approximately $340,075 from the sale of the ESOARS Units offered hereby, after deducting offering expenses. We intend to use the net cash proceeds from this offering for general corporate purposes. See “Use of Proceeds.”


S-2


Table of Contents

Listing The ESOARS will not be listed on any national securities exchange.
 
Periodic Payments We will from time to time deposit with Zions First National Bank, as our paying agent, an aggregate amount equal to 10% of the “net realized value” upon the exercise of any reference options. We will make each deposit on or before the fifth business day of the month following the end of each calendar quarter, commencing on or about July 6, 2007. Zions First National Bank will then make pro rata payments to each holder of our ESOARS on or before the 15th day of that month (or, if any such day is not a business day, then on the next business day). We expect that such periodic payments will commence on or about July 16, 2007.
 
Each date that the paying agent makes a payment with respect to the ESOARS is referred to in this prospectus supplement as a “payment date.”
 
See “Description of Our ESOARS — Payments; Reports and Notices.”
 
Calculation of Payments Payments from time to time will be equal to an aggregate of 10% of the “net realized value” upon the exercise of any reference options from the period (any such period, a “payment period”):
 
          • beginning on the first day of each calendar quarter (or in the case of the first payment period, beginning on April 1, 2007), and
 
          • ending on and including the last day of such calendar quarter.
 
The “net realized value” for a particular payment period means the amount, if any, by which:
 
          • the trading price per share of our common stock on The Nasdaq National Market (or other national stock exchange on which our common stock is then traded) at the applicable time of exercise of a reference option, exceeds
 
          • the exercise price of that reference option,
 
  multiplied by:
 
          • the number of shares of our common stock as to which the applicable reference option was exercised.
 
Each holder will be entitled to receive its pro rata share of 10% of the net realized value, based upon such holder’s ownership share of all ESOARS sold hereunder. See “Description of Our ESOARS — Payments; Reports and Notices.” The ESOARS represent our payment obligation but do not represent any ownership interest in us or in any of the reference options.


S-3


Table of Contents

Record Date The record date to determine holders eligible to receive payments on a given payment date will be the last business day of the calendar quarter preceding that payment date.
 
Modification of Reference Options If one or more reference options is modified in a manner that would be treated as an exchange pursuant to paragraph 51 of FASB Statement No. 123R, Share-Based Payment, or in other specified circumstances, we will pay to holders an aggregate amount equal to 10% of the cancellation value of the modified reference option(s). This cancellation value will be determined by an independent valuation of agent appointed by us. See “Description of Our ESOARS — Modification of Reference Options.”
 
Book-Entry Form We will issue the ESOARS pursuant to, and the ESOARS will be evidenced by, a fully-registered global certificate, a form of which is attached hereto as Annex A. The global certificate will be deposited with, or on behalf of, The Depository Trust Company (“DTC”), and will be registered in the name of Cede & Co., a nominee of DTC.
 
Cede & Co. will be the only registered holder of the ESOARS. Your beneficial interest in the ESOARS will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in DTC.
 
In this prospectus supplement, all references to payments or notices to “you” or to a “holder” or “holders” mean payments or notices to DTC or its nominee, in either case as the registered holder of our ESOARS, and not those persons or entities that hold beneficial interests in our ESOARS. For more information regarding DTC and book-entry securities, see “Legal Ownership and Book-Entry Issuance.”
 
Federal Income Tax Considerations The proper U.S. federal income tax characterization of our ESOARS is unclear. In the absence of clear authority, we intend to file information returns with the Internal Revenue Service reporting income with respect to our ESOARS under a method analogous to the method applicable to income with respect to cash-settled call options. However, it is unclear whether this method of reporting income on our ESOARS is proper. Prospective investors should carefully consider the discussion in the section below entitled “Material United States Federal Income Tax Consequences” with their own tax advisors.


S-4


Table of Contents

Certain ERISA Matters No ESOARS may be purchased by or transferred to:
 
          • any “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (whether or not subject to ERISA, and including, without limitation, foreign or government plans);
 
          • any “plan” described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended; or
 
          • any entity whose underlying assets include plan assets of any of the foregoing by reason of an employee benefit plan’s or plan’s investment in such entity.
 
Any purported purchase or transfer of the ESOARS in violation of the foregoing restrictions will be null and void ab initio. Each bidder who purchases the ESOARS will be deemed to have represented, warranted and acknowledged to us that its purchase or transfer is not in violation of the restrictions set forth above.
 
Governing Law State of New York.


S-5


Table of Contents

 
RISK FACTORS
 
You should consider carefully the risk factors discussed below and the risk factors discussed within the section entitled “Risk Factors” beginning on page 5 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2005 and on page 39 of our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006, which are incorporated by reference in this prospectus supplement, for a discussion of particular factors you should consider before determining whether an investment in our ESOARS is appropriate for you. Investing in our ESOARS is speculative and involves risk.
 
Any of the risks described in this prospectus supplement, in our Annual Report on Form 10-K for our fiscal year ended December 31, 2005 or in our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006 could materially and adversely impair our business, financial condition and operating results. In such case, the trading price, if any, of our ESOARS could decline or you could lose all or part of your investment. Because the investment return, if any, realized by a holder of ESOARS will depend on the behavior of our employee optionees and other factors beyond our control, you may lose some or all of your investment even if our business, financial condition and operating results were not materially and adversely impaired.
 
Risks Related To an Investment in Our ESOARS
 
You May Lose Some or All of Your Investment
 
Any investment return realized by a holder of ESOARS will be affected by many factors that are out of our and your control. Some of these factors include:
 
  •  the amounts and timing of exercises, if any, of the reference options by our employee optionees;
 
  •  the vesting schedule of the reference options;
 
  •  the exercise price(s) of the reference options and other terms of the reference options;
 
  •  the modification of the exercise price(s) or other terms of the reference options;
 
  •  the trading price per share of our common stock in the public markets at the time of exercise, if any, of the reference options;
 
  •  the termination of an employee optionee’s employment with us, whether that termination is at our election for cause or at the election of the employee, since the reference options are generally cancelled when an employee’s employment with us ceases; and
 
  •  the death or disability of an employee optionee.
 
For example, if our common stock price in the public markets were below the exercise price(s) of the reference options in any period in which an employee optionee is eligible to and willing to exercise a reference option, the optionee would be unlikely to exercise the reference option because that would result in a purchase of our common stock at a price per share that is higher than the price that is available in the open market. In addition, if the option exercise period were to expire or the optionee were no longer eligible to exercise the reference option due to termination of employment, death, disability or other factors, the reference option would expire unexercised. In each such case, the reference option would not yield any net realized value and no payments would be made to any ESOARS holder with respect to that reference option.
 
Summary information regarding the reference options are set forth in the section entitled “Description of Reference Options” on page S-25 of this prospectus supplement. Information regarding our business and financial results may be found in our Annual Report on Form 10-K for our fiscal year ended December 31, 2005, our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2006 and our other filings that we have made with the SEC. As a result of the interaction between the above-described and other factors, the actual return, if any, on our ESOARS may vary substantially over the life of the reference options. As a consequence, you may lose some or all of your investment.


S-6


Table of Contents

You Will Not Receive Any Payments With Respect To the ESOARS Until July 2007, If At All
 
The reference options are subject to a three-year vesting schedule, which will prevent any employee from exercising any reference options until May 1, 2007. Absent special circumstances such as an unforeseen modification of reference options, holders of ESOARS will not receive any payments with respect to their ESOARS until the payment date in July 2007 at the earliest. The reference options will not fully vest until May 1, 2009, so the number of reference options that may be exercised prior to that date is restricted by the vesting schedule. We cannot assure you that you will ever receive payments as an ESOARS holder even with respect to vested reference options, since payments on the ESOARS will ordinarily be generated only as a result of actual exercises of the reference options by our employees.
 
The ESOARS Will Not Be Listed; There is No Secondary Market for Our ESOARS
 
Our ESOARS will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the ESOARS. If a secondary market does develop, there is no assurance that it will be sustained. Even if there is a secondary market, it may not provide enough liquidity to allow you to easily trade or sell the ESOARS. We do not expect that market makers will participate significantly in a secondary market, if any, for the ESOARS.
 
Nature of the Reference Options
 
Some articles and research reports have been written on rates of return for employee stock options similar to the reference options, and we have provided specified historical information regarding exercises of our stock options in the section entitled “Historical Stock Option Exercise Data” beginning on page S-26 of this prospectus supplement. Nonetheless, the ESOARS are a novel financial instrument for which, to our knowledge, there is no source for relevant data or standardized method of measuring the anticipated return with regard to the ESOARS or the reference options. Furthermore, the past performance of our stock options is not necessarily indicative of their future performance. Because the characteristics and behaviors of the employees comprising each pool of employees varies, you should not rely on the historical information thereof in this prospectus supplement as an indicator of the behavior of the employees who have been granted the reference options. You should be aware that our ESOARS are a new and novel type of financial product with no performance history. You should therefore consider and determine for yourself the likely amount and timing of returns on our ESOARS during the life of the reference options.
 
You Will Have No Stockholder Rights
 
Investing in our ESOARS is not equivalent to investing in us. The ESOARS represent our payment obligation but do not represent any ownership interest in us or in any of the reference options. As an investor in our ESOARS, you will not have voting rights, rights to receive dividends or other distributions, or any other rights generally understood to be incidental to ownership of our equity securities, except as expressly set forth in this prospectus supplement with respect to our ESOARS.
 
The U.S. Federal Tax Characterization of Our ESOARS is Uncertain
 
There are no cases, Treasury regulations, revenue rulings or other binding authorities that directly address the U.S. federal income tax characterization of our ESOARS or of securities with terms substantially the same as those of our ESOARS. Therefore, the proper U.S. federal tax characterization of, and method of reporting income and loss with respect to, our ESOARS is uncertain. In the absence of guidance, we intend to file information returns with the Internal Revenue Service reporting income with respect to our ESOARS under a method analogous to the method applicable to income with respect to cash-settled call options. However, other U.S. federal income tax characterizations of, and methods of reporting payments on, our ESOARS are possible. If these other characterizations or methods applied, they could materially adversely affect the amount, timing and character of income or loss that is properly reportable with respect to our ESOARS, as compared to the method reported by us. In addition, we intend to take the position that payments on our ESOARS that are made to non-U.S. investors are subject to a 30 percent U.S. withholding tax, unless the non-U.S. investor establishes an exemption. Therefore, our ESOARS may not be an appropriate investment for non-U.S. investors. Because of the uncertainty of treatment of income and loss with respect to our ESOARS, we urge prospective


S-7


Table of Contents

investors to consult their own tax advisers as to the proper classification and reporting of income and loss with respect to our ESOARS for U.S. federal income tax purposes. See “Material United States Federal Income Tax Consequences” beginning on page S-45 of this prospectus supplement.
 
Conflicts of Interest
 
We or one or more of our affiliates may engage in trading activities, including securities offerings of shares of our common stock, or other activities, including business restructurings, that involve termination of service of one or more of our employees who are holders of reference options, or involve repricings or modifications of the reference options. These activities may not necessarily be in your best interests. Any of these activities may negatively affect the value of, and returns on, our ESOARS. We do not have, and we specifically disclaim, any duty or obligation to act in the best interests of holders.
 
Risks Related to the Auction Process
 
Once You Submit a Bid, You May Generally Not Revoke It
 
Once you have submitted and confirmed a bid, you may not subsequently lower your bid price or lower the number of ESOARS Units bid for in that bid. Therefore, even if circumstances arise after you have placed and confirmed a bid that make you want to decrease your original bid price or the number of ESOARS originally bid for, you will nonetheless be bound by that bid.
 
We Reserve the Right to Reject Any Bid
 
We reserve the right in our sole discretion to reject any bid that we deem to be manipulative, mistaken or made due to a misunderstanding of our ESOARS on the part of the bidder. We reserve this right in order to preserve the integrity of the auction process. Other conditions for valid bids, including eligibility and account funding requirements of participating dealers and individuals, may vary. As a result of these varying requirements, we may reject a bidder’s bid, even while we accept another bidder’s identical bid. See the section entitled “The Auction Process — Allocation” beginning on page S-19 of this prospectus supplement.
 
You Will Not Be Able to Withdraw Your Deposit in Specified Circumstances
 
Some prospective investors may be required to post a deposit. The deposit is meant to protect the integrity of the valuation of our ESOARS obtained through the auction. It helps to ensure that bids will not be counted towards valuation of our ESOARS without payment. Once you have placed a bid and, in any event, once the auction has begun, your deposit will be irrevocable, pending the closing of the auction and the allocation of our ESOARS.
 
You May Receive a Full Allocation of Our ESOARS Units That You Bid For if Your Bid Is Successful; Therefore, You Should Not Bid For More ESOARS Than You Are Prepared To Purchase
 
Successful bidders may be allocated all or nearly all of the ESOARS Units that they bid for in the auction. See “The Auction Process — Allocation.” Therefore, we caution investors against submitting a bid that does not accurately represent the number of ESOARS Units that they are willing and prepared to purchase.
 
Even If You Submit a Bid That Equals or Exceeds the Market-Clearing Price, You May Not Be Allocated the Full Number of ESOARS Units That You Bid For
 
We will determine the initial public offering price for our ESOARS sold in this offering through an auction conducted by Zions Direct, our auction agent. The auction process will reveal a market-clearing, or “stop,” price for our ESOARS offered in this offering. The market-clearing, or “stop,” price is the highest price at which all of the ESOARS Units offered hereby will be sold to bidders. For an explanation of the meaning of the market-clearing, or “stop,” price, see “The Auction Process — Market-Clearing Price” beginning on page S-18 of this prospectus supplement. If your bid price equals the market-clearing, or “stop,” price, you will be allocated ESOARS Units only to the extent that ESOARS have not been allocated to bidders with higher bid prices. If there are two or more bids with bid prices that equal the market-clearing, or “stop,” price,


S-8


Table of Contents

then the ESOARS Units that have not been allocated to bidders with higher bid prices will be allocated on a pro rata basis to those bidders.
 
You Should Not Expect To Sell Your ESOARS Units After the Conclusion of This Offering And the Allocation of Our ESOARS
 
As we mentioned above, the auction process will reveal a market-clearing, or “stop,” price for our ESOARS offered in this offering. However, this clearing price may bear little or no relationship to market demand for our ESOARS following this offering, or the price at which the ESOARS may be sold. If there is little or no market demand for our ESOARS following the closing of the auction, the price of our ESOARS may decline. If your objective is to make a short-term profit by selling your ESOARS after the conclusion of the auction, you should not submit a bid in the auction. See the risk factor above entitled “— The ESOARS Will Not Be Listed; There is No Secondary Market for Our ESOARS.”


S-9


Table of Contents

 
USE OF PROCEEDS
 
We estimate that we will receive approximately $340,075 from the sale of the ESOARS Units offered hereby, after deducting offering expenses. We intend to use the net cash proceeds from this offering for general corporate purposes.
 
DESCRIPTION OF OUR ESOARS
 
In this prospectus supplement, all references to payments or notices to “you” or to a “holder” or “holders” mean payments or notices to DTC or its nominee, in either case as the registered holder of the ESOARS, and not those persons or entities that held beneficial interests in the ESOARS. For more information regarding DTC and book-entry securities, see the section entitled “Legal Ownership and Book-Entry Issuance” beginning on page S-49 of this prospectus supplement. You will own a “beneficial interest” in our ESOARS if you hold ESOARS through direct or indirect participants in DTC. Owners of beneficial interests in our ESOARS should read the section entitled “Legal Ownership and Book-Entry Issuance” beginning on page S-49 of this prospectus supplement.
 
General
 
We will issue the Zions Bancorporation Employee Stock Option Appreciation Rights Securities, Series 2006, directly to investors. The ESOARS are securities that entitle holders to receive specified payments from us upon the exercise, if any, from time to time of stock options comprising a reference pool of stock options that we have granted to our employees. We call our stock options that comprise this reference pool our “reference options.” Some characteristics of the reference options are described in the section entitled “Description of Reference Options.”
 
The ESOARS will be issued only in fully-registered book-entry form.
 
Upon the exercise, if any, from time to time by our employees of our reference options, holders of our ESOARS will be entitled to receive payments as described below in “— Payments; Reports and Notices.”
 
The ESOARS represent our payment obligation but do not represent any ownership interest in us or in any of the reference options.
 
Purpose of the Offering
 
We are offering our ESOARS in part to provide a market basis which may be used to help us estimate the fair value of our reference options and determine our compensation expense with respect to the issuance of the reference options, as required under Statement of Financial Accounting Standards No. 123R, Share Based Payment, issued by the FASB.
 
Determination of Offering Price; Allocation
 
The price and allocation of our ESOARS was determined through an auction process in which prospective investors bid for our ESOARS. The public offering price of our ESOARS, as determined by the auction, is $7.50 per ESOARS Unit. See the section entitled “The Auction Process” beginning on page S-13 of this prospectus supplement.
 
Payments; Reports and Notices
 
We will from time to time deposit with Zions First National Bank, as our paying agent, an aggregate amount equal to 10% of the net realized value upon the exercise, if any, of reference options. We will make each deposit on or before the fifth business day of the month following the end of each calendar quarter, commencing on or about July 6, 2007. Zions First National Bank will then make pro rata payments to each holder of our ESOARS on or before the 15th day of that month (or, if any such day is not a business day, then on the next business day). We expect that such periodic payments will commence on or about July 16, 2007. However, we will also make payments as described below in “— Modification of Reference Options.”
 
Each date that the paying agent makes a payment with respect to the ESOARS is referred to in this prospectus supplement as a “payment date.”


S-10


Table of Contents

Payments from time to time will be equal to an aggregate of 10% of the net realized value upon the exercise, if any, of reference options from the period (any such period, a “payment period”):
 
  •  beginning on the first day of each calendar quarter (or in the case of the first payment period, beginning on April 1, 2007, and
 
  •  ending on and including the last day of such calendar quarter.
 
The “net realized value” for a particular payment period means the amount, if any, by which:
 
  •  the trading price per share of our common stock on The Nasdaq National Market (or other national stock exchange on which our common stock is then traded) at the applicable time of exercise of the reference option, exceeds
 
  •  the exercise price of the applicable reference option,
 
multiplied by:
 
  •  the number of shares of our common stock as to which such reference options were exercised.
 
Each holder will be entitled to receive on each payment date its pro rata share of 10% of the net realized value for the related payment date, based upon such holder’s ownership share of all ESOARS sold hereunder.
 
No later than 15 days after a given payment date, we will deliver to each holder a report relating to payments made on the applicable payment date. The report will set forth, with respect to the applicable payment period, information such as:
 
  •  the number of reference options exercised during the preceding quarter;
 
  •  the exercise price(s) at which the reference options were exercised;
 
  •  the number of reference options forfeited, if any, upon the termination of any optionee’s employment with us; and
 
  •  the calculation of the payment with respect to each ESOARS Unit.
 
Mergers and Similar Transactions Permitted; No Control Rights
 
We are permitted to merge or consolidate with, or sell all or substantially all of our assets to, another corporation or other entity, or engage in any other transactions. If at any time we merge or consolidate with, or sell all or substantially all of our assets to another corporation or other entity, the successor entity may assume our obligations with respect to the ESOARS. We will then be relieved of any further obligation with respect to the ESOARS. In addition, subject to applicable law and the terms of our stock option plans and any stock option agreements covering the reference options, we and an acquirer of us or all or substantially all of our assets may determine to terminate or modify the reference options. In such case, we will appoint an independent valuation agent to determine the cancellation value of the modified or terminated reference options. We will then pay or cause to be paid 10% of the cancellation value to holders of the ESOARS.
 
Holders will not have any control or other rights with respect to our employees who were granted reference options, including any control as to whether or not such employee optionees exercise any reference options.
 
Modification of Reference Options
 
If one or more reference options is modified in a manner that would be treated as an exchange pursuant to paragraph 51 of FASB Statement No. 123R, Share-Based Payment, then we will pay to holders an aggregate amount equal to 10% of the cancellation value of the modified reference option(s). We expect that we will make a deposit on or before the fifth business day of the month following the end of each calendar quarter in which a qualifying modification occurs, for the appropriate amount payable to holders. We further expect that payment will occur on or before the 15th day of the month (or, if any such day is not a business day, then on the next business day) following the end of the calendar quarter in which such cancellation occurred. The cancellation value will be determined by an independent valuation agent appointed by us. In general,


S-11


Table of Contents

paragraph 51 of FASB Statement No. 123R provides that a modification of the terms and conditions of a stock option will be treated as an exchange of the original option for a new option.
 
The reference options will also be considered to be modified and we will follow the procedures contained in the immediately preceding paragraph with respect to determination and payment of cancellation value, upon the occurrence of specified events, including without limitation:
 
  •  the cancellation of any or all of the reference options pursuant to Section 2.5 of our 2005 Stock Option and Incentive Plan;
 
  •  a liquidation, dissolution or winding up of us;
 
  •  any consolidation or merger of us with or into any other corporation or other entity, or any other corporate reorganization in which our stockholders immediately prior to such consolidation, merger or reorganization own less than 50% of the surviving entity’s voting power immediately after such consolidation, merger or reorganization; and
 
  •  a sale or other disposition to a third party of all or substantially all of our assets.
 
Amendment
 
The ESOARS may be amended or supplemented, and any existing default or non-compliance with any provision of the ESOARS may be waived, with the consent of persons holding at least a majority of the ESOARS then outstanding. Subject to the terms and conditions contained herein, our rights and obligations under the ESOARS may be transferred or assigned by us at our option.
 
Governing Law
 
The ESOARS will be governed by the laws of the State of New York.


S-12


Table of Contents

 
THE AUCTION PROCESS
 
The method of distribution that we used in this offering was an auction, which was conducted by Zions Direct, Inc., our auction agent. The public offering price for our ESOARS and the allocation thereof were determined by the auction process. The auction was modeled after that used by the United States Treasury Department, with some notable differences, some of which are described below. The auction was held on the website www.esoars.com, which also contained the rules that governed the auction. The following describes how our auction agent conducted the auction.
 
Date, Time and Location of Auction
 
The auction opened at 9:30 a.m., E.D.T., on June 28, 2006 and closed at 4:15 p.m., E.D.T., on June 29, 2006. The auction was hosted on the internet website www.esoars.com.
 
Early qualified bidders were allowed to place bids prior to the opening of the auction as described below in “— Early Bids.”
 
Qualification of Bidders; Suitability
 
Our objective was to conduct an auction in which bidders submitted informed bids. Before bidders could submit a bid, they had to be approved by our auction agent or us.
 
Institutions that wanted to bid for our ESOARS may have been required to submit certain financial statements. Our auction agent established proposed payment arrangements with each institution. Individuals who wanted to bid for our ESOARS had to:
 
  •  have or open a brokerage account with Zions Direct;
 
  •  make a deposit for the full amount that they intended to bid; or
 
  •  receive a waiver of the brokerage account and deposit requirements.
 
See “— Deposit” below.
 
Our auction agent or we made a suitability determination with respect to each prospective bidder. If a bidder had an account with Zions Direct, we encouraged that bidder to discuss with Zions Direct any questions that that bidder may have had regarding its eligibility criteria and requirements, because this could have affected that bidder’s ability to submit a bid.
 
We cautioned bidders that our ESOARS may not be a suitable investment for them even if they qualified to participate in the auction. Moreover, even if bidders qualified to participate in the auction and placed a bid, bidders may not have received an allocation of ESOARS in our offering for a number of reasons described below.
 
No employees of Zions Direct, our auction agent, were allowed to participate in the auction. Additionally, specified employees of us and some of our other affiliates were not allowed to participate in the auction. Some of these employees included specified executive officers, our stock option plan administrators, anyone involved in the creation and structuring of our ESOARS, and employees involved in the auction process.
 
Registration
 
A prospective ESOARS bidder had to register electronically at www.esoars.com no later than 5:00 p.m., E.D.T., on June 26, 2006. A prospective bidder registered by:
 
  •  providing all of the information required by the Bidder Registration Form found at www.esoars.com, and
 
  •  submitting that fully-completed form to our auction agent through www.esoars.com by 5:00 p.m., E.D.T., on June 26, 2006.
 
During the registration process, each prospective bidder obtained a bidder ID and password. However, the prospective bidder was still required to be approved by our auction agent or us to bid for our ESOARS.


S-13


Table of Contents

Prospective bidders that were approved to participate in the auction used this bidder ID and password to access the bid page on www.esoars.com and to submit bids in the auction. Prospective bidders that were not approved to participate in the auction received an error message if they attempted to access the bid page on www.esoars.com.
 
Late Registration
 
Bidders were allowed to submit a Bidder Registration Form after 5:00 p.m., E.D.T., on June 26, 2006, and prior to 9:30 a.m., E.D.T., on June 28, 2006, but we could not assure bidders that we or our auction agent could or would process any of these late registrations, notify late prospective bidders of our acceptance or rejection of their registrations, or allow such late prospective bidders to bid in the auction. If bidders wanted to be sure that we considered them for bidding in this auction, they had to register before 5:00 p.m., E.D.T., on June 26, 2006.
 
Qualification
 
As stated above, registration on the www.esoars.com site did not by itself qualify a prospective bidder to bid in the auction. Individuals and institutions registered at www.esoars.com were still required to be approved by our auction agent or us as to suitability. Registered prospective bidders were notified soon after registration of their status as either “approved” or “declined.” Approved bidders were assigned a maximum bid amount, as described in “— Maximum Bid Amount” below.
 
A prospective bidder was not obligated to submit a bid in the auction simply because that bidder had registered to bid in the auction. By registering to bid in the auction, a prospective bidder represented and warranted to us that such bidder’s bid was to be submitted for and on behalf of such prospective bidder by himself, herself or itself, as applicable, or by an officer or agent who would be duly authorized to bind the prospective bidder to a legal, valid and enforceable contract with respect to the bid for, and purchase of, our ESOARS.
 
Maximum Bid Amount
 
Individuals and institutions registered at www.esoars.com and approved by our auction agent or us as to suitability were able to participate in the auction. As part of our suitability determinations, our auction agent or we established a maximum bid amount for each bidder.
 
In order to ensure a broad participation in this offering, we or our auction agent assigned to each bidder a maximum amount that bidder was able to place with respect to each individual bid placed. We call this amount the “maximum bid amount.” A bidder’s maximum bid amount in no event exceeded $350,000. We reserved the right in our sole discretion to set a lower maximum bid amount for any bidder. A bidder was not allowed to place a bid that exceeded that bidder’s maximum bid amount.
 
Each of our, or any of our affiliates’, permitted directors, officers or employees who were eligible and who elected to participate in the auction were assigned a maximum bid amount of not more than $10,000 in this offering.
 
Institutional bidders may have been required to submit specified financial information in order to establish maximum bid amounts and suitability. After an institutional bidder had registered to participate in the auction, our auction agent or we contacted that institutional bidder to request any other pertinent information that our auction agent or we required to establish the maximum bid amount and suitability of such bidder.
 
Deposit
 
We and our auction agent waived all deposit requirements.


S-14


Table of Contents

Confirmation of Bidder Registration
 
We confirmed by e-mail a prospective bidder’s eligibility to bid in the auction, no later than 5:00 p.m., E.D.T., on June 27, 2006, if such prospective bidder had timely registered to participate in the auction. See “— Registration.” We did not consider a prospective bidder for approval to bid until:
 
  •  our auction agent had received that prospective bidder’s fully-completed Bidder Registration Form;
 
  •  the fully-completed Bidder Registration Form was acceptable to our auction agent; and
 
  •  the prospective bidder had delivered the required credit information or deposit as described above in “— Deposit.”
 
Our auction agent notified timely prospective bidders by e-mail of their eligibility to participate in the auction no later 5:00 p.m., E.D.T., on June 27, 2006. A prospective bidder that had questions about its registration status or that did not receive any notification by e-mail was able to contact our auction agent by telephone at (800) 554-1688.
 
Each approved prospective bidder was able to access the auction beginning at 9:30 a.m., E.D.T., on June 28, 2006, using the bidder ID and password obtained at registration. Prospective bidders that did not qualify to participate in the auction received an error message if they attempted to access the auction through www.esoars.com.
 
Each qualified prospective bidder was solely responsible for making necessary arrangements to access www.esoars.com for purposes of submitting its bid in a timely manner and in compliance with the requirements described in this prospectus supplement.
 
Bidding Auction Process; Irrevocability of Bids
 
The auction opened at 9:30 a.m., E.D.T., on June 28, 2006 and closed at 4:15 p.m., E.D.T. on June 29, 2006. Bids had to be submitted electronically at www.esoars.com, except as described below in “— Early Bids.” Each prospective bidder was solely responsible for registering to bid at www.esoars.com as described above.
 
Bidders were not able to bid in the auction unless they had:
 
  •  registered on www.esoars.com, and
 
  •  received approval from our auction agent or us.
 
The minimum size of a bid was one whole ESOARS Unit. Bidders were not allowed to bid for fractional units. We reserved the right in our sole discretion to reject any bid that we deemed to be manipulative, mistaken or made due to a misunderstanding of our ESOARS on the part of the bidder. We reserved this right in order to preserve the integrity of the auction process.
 
A bidder’s bid was generally binding on that bidder once that bidder submitted and confirmed that bid. Unless a bidder changed a bid to increase the resulting net value of that bidder’s bid as described below, that bidder was not thereafter able to retract or cancel that bid. Once a bidder had posted and confirmed a bid, that bidder could not then lower the bid price or lower the number of ESOARS Units bid for. A bidder was able to only:
 
  •  increase the number of ESOARS Units that bidder was interested in purchasing;
 
  •  increase the bid price per ESOARS Unit that that bidder was willing to pay; or
 
  •  both.
 
Each bidder could have placed up to five separate, concurrent bids, each independent of the other. Each bid could have been made for different numbers of ESOARS Units and for different bid prices. A bidder was not able to place an individual bid that exceeded that bidder’s maximum bid amount. That means that a bidder who had one active bid was able to bid up to his maximum bid amount in that one bid. However, a bidder who had, for example, three active bids was able to bid up to his maximum bid amount for each individual


S-15


Table of Contents

bid. However, the bid of a bidder who had placed multiple bids was deemed to be “in the money” only to the extent that the aggregate value of the multiple bids was less than or equal to that bidder’s maximum bid amount. In short, while a bidder could have placed multiple bids, each up to that bidder’s maximum bid amount, the most ESOARS Units that an “in the money” bidder could have been allocated was that number of ESOARS Units that that bidder’s maximum bid amount would purchase.
 
The highest “maximum bid amount” that we allowed any bidder to bid in a single bid was $350,000, although we reserved the right in our sole discretion to set a maximum bid amount for any bidder at any lesser amount.
 
Each separate bid could have been modified as described above in order to increase the number of ESOARS Units bid for or to increase the bid price, or both. There was no limit to the number of times that a bidder could have improved an individual bid. A modification of one bid did not modify any other bid. Because each bid was independent of any other bid, each bid may have resulted in an allocation of ESOARS Units; consequently, the sum of a bidder’s bid sizes were no more than the total number of ESOARS Units the bidder was willing to purchase.
 
Once the auction began, all prospective investors that had qualified to bid could submit bids only through www.esoars.com.
 
In connection with submitting a bid, each bidder was required to log on to www.esoars.com and submit the following information:
 
  •  state the number of ESOARS Units that bidder was interested in purchasing;
 
  •  state the purchase price per ESOARS Unit that bidder was willing to pay;
 
  •  review the bid to ensure accuracy, then confirm that bid; and
 
  •  provide any additional information to enable our auction agent and us to identify that bidder, confirm eligibility and suitability for participating in our offering and, if that bidder submitted a successful bid, consummate the sale of our ESOARS Units allocated to that bidder.
 
We urged prospective investors to consider all the information in this prospectus supplement and the accompanying base prospectus in determining whether to submit a bid; the number of ESOARS Units they were interested in purchasing; and the price per ESOARS Unit that they were willing to pay.
 
Once a bidder:
 
  •  placed a bid on www.esoars.com, and
 
  •  confirmed that bid on www.esoars.com,
 
that bid constituted an irrevocable offer to purchase our ESOARS Units (except as set forth immediately above in this subsection), on the terms provided for in the bid.
 
For purposes of the electronic bidding process at www.esoars.com, the time as maintained on www.esoars.com constituted the official time of a bid. Bidders were able to monitor the status of their bid as described more fully below. Bids submitted on www.esoars.com had to be received by us before 4:15 p.m., E.D.T., on June 29, 2006, which was when the auction ended.
 
While the auction platform had been subjected to stress testing to confirm its functionality and ability to handle numerous bidders, it was impossible for us to predict the response of the investing public to this offering. Bidders were made aware that if enough bidders tried to access the platform and submit bids simultaneously, there might be a delay in receiving and/or processing their bids. Bidders were made aware that auction website capacity limits might prevent last-minute bids from being received by the auction website and should plan their bidding strategy accordingly. We made no guarantee that any submitted bid would be received, processed and accepted during the auction process.
 
The auction was modeled after that used by the United States Treasury, with some notable differences. The auction was an “open” auction, with bidders being updated on the status of their bids relative to other


S-16


Table of Contents

bidders, as described in this paragraph. At no point, however, did bidders have access to other bidders’ actual bids or other bidders’ identities. After submission and confirmation of bid quantity and price, the www.esoars.com web page indicated whether that bid was at that time in a winning position, or “in the money.” If a bid was “in the money” at a particular time during the auction, that meant that, if the auction ended at that particular time, the “in the money” portion of that bidder’s bid would have been accepted. In order for a bid to be accepted, a bid must have been “in the money” at the close of the auction. In order to monitor the progress of the auction, bidders may have needed to manually refresh the bid page to see whether their status had changed. This process continued until the end of the auction, at which point our auction agent and we reviewed the submitted bids and determined the auction winners and allocations. See “Risk Factors — Risks Related to the Auction Process” beginning on page S-8 of this prospectus supplement.
 
Neither we nor our auction agent had any duty or obligation to undertake such registration to bid for any prospective bidder or to provide or assure such access to any qualified prospective bidder, and neither we nor our auction agent were responsible for a bidder’s failure to register to bid or for proper operation of www.esoars.com, or had any liability for any delays or interruptions of, or any damages caused by, www.esoars.com.
 
Early Bids
 
As a convenience to bidders, we accepted early bids from qualified bidders, within the registration and bidding parameters described herein. We accepted early bids that we received prior to 8:00 a.m., E.D.T., on June 28, 2006. Bidders could have submitted an early bid by facsimile, e-mail or mail as follows:
 
  •  facsimile at (801) 524-0824;
 
  •  e-mail sent to info@esoars.com; or
 
  •  mail sent to Zions Direct, Attention: ESOARS, One South Main, 17th Floor, Salt Lake City, Utah 84111.
 
Each bid submitted as provided in the preceding sentence must have either been written on an Early Bid Submission Form, which bidders could have either downloaded from www.esoars.com or which bidders could have requested that we send by facsimile or e-mail, and must have included:
 
  •  the bidder’s bidder ID and password;
 
  •  the number of ESOARS Units bid for;
 
  •  the proposed purchase price of each ESOARS Unit bid for; and
 
  •  the bid total purchase price of the ESOARS Units bid for.
 
All of the terms and conditions of the auction described in this prospectus supplement applied to eligible bidders who submitted early bids. In particular, if a bidder submitted an early bid, it was deemed submitted and confirmed at the time that a bidder actually submitted the early bid, notwithstanding that a bidder may have, for example, wanted to revoke its early bid before the opening of the auction. Bidders were able to amend their early bid only as permitted above in “— Bidding Auction Process; Irrevocability of Bids.”
 
If a bidder submitted an early bid before that bidder was qualified to participate in the auction, that bidder’s bid may not have been processed. We entered early bids on behalf of early bidders as soon as practicable after the opening of the auction. We did not assume any responsibility or liability from the failure of any facsimile, e-mail or mail transmission (whether such failure arose from equipment failure, communications failure or otherwise). We did not assume any responsibility for or liability from our or our auction agent’s failure to accurately submit an early bid in the auction on behalf of early bidders. To ensure that an early bidder’s bid was accurately placed, that early bidder was urged to submit its bid on www.esoars.com during the auction.
 
Market-Clearing Price
 
The market-clearing, or “stop,” price for our ESOARS was the highest price at which all of the ESOARS Units offered hereunder were sold. We determined this price by moving down the list of accepted bids in


S-17


Table of Contents

descending order of bid price until the total quantity of ESOARS Units bid for was greater than or equal to the 93,610 ESOARS Units being offered hereunder.
 
For example, assume that 100,000 ESOARS Units were being offered and that the following bidders bid as follows:
 
             
Bidder     ESOARS Units Represented by Bid     Bid Price
A     50,000     $100.00
B     50,000     $75.00
C     50,000     $50.00
             
 
In this example, $100.00 is not the market-clearing, or “stop,” price because only 50,000 of the ESOARS Units offered could be sold at that price. Furthermore, $50.00 is not the market-clearing, or “stop,” price because, although all of the ESOARS Units being offered are sold for prices over $50.00, this is not the highest price at which all of the ESOARS Units offered could be sold. Instead, all of the ESOARS Units being offered in this example will be sold at the higher price of $75.00. Therefore, $75.00 is the market-clearing, or “stop,” price in this example.
 
All of ESOARS Units were sold at the market-clearing, or “stop,” price (similar to the United States Treasury auction). Therefore, in the example above, all of the ESOARS Units sold, even those that were bid for at $100.00, would have been sold for $75.00. We cautioned investors that the market-clearing, or “stop,” price may have little or no relationship to the price that would be established using other indicators of value. The scenario above is an example only and should not be considered indicative of an appropriate or likely market-clearing, or “stop,” price of our ESOARS.
 
Allocation
 
Once the market-clearing, or “stop,” price of our ESOARS was determined, our auction agent began the allocation process. Bidders bidding above the market-clearing price were allocated the entire quantity of “in-the-money” ESOARS Units for which they bid; however, in no event was a bidder allowed to purchase more than that bidder’s maximum bid amount. In the event that multiple bidders bid at the market-clearing, or “stop,” price and the total quantity of ESOARS for which they bid exceeded the number of available ESOARS Units not allocated to higher bidders, the auction agent would have determined the pro rata percentage of the remaining ESOARS Units to be allocated to such bidders by dividing:
 
  •  the number of ESOARS Units not previously allocated to higher bidders, by
 
  •  the total number of ESOARS Units bid for at the market-clearing, or “stop,” price.
 
The auction agent would have then allocated to each such bidder a number of the remaining ESOARS Units equal to:
 
  •  the pro rata percentage, multiplied by
 
  •  the number of ESOARS Units bid for by each such bidder at the market-clearing, or “stop,” price,
 
rounded up to the nearest whole number of ESOARS Units.
 
For example, assume again that 100,000 ESOARS Units were being offered, and that the following bidders again bid as follows:
 
             
Bidder     ESOARS Units Represented by Bid     Bid Price
A     50,000     $100.00
B     50,000     $75.00
C     50,000     $75.00
             
 
In this example, $75.00 is the market-clearing, or “stop,” price because it is the highest price at which all of the ESOARS Units offered could be sold. Therefore, Bidder A is allocated all 50,000 ESOARS Units bid


S-18


Table of Contents

for. This leaves 50,000 ESOARS Units to be allocated to the bidders that bid at the market-clearing, or “stop,” price. However, Bidder B and Bidder C bid for an aggregate of 100,000 ESOARS Units. Therefore, the remaining 50,000 ESOARS Units are allocated on a pro rata basis to Bidder B and Bidder C. In this example, because Bidder B and Bidder C bid identically, each is allocated 25,000 ESOARS Units. This scenario is an example only and should not be considered indicative of an appropriate or likely market-clearing, or “stop,” price of our ESOARS.
 
In the event that a single bidder bid at the market-clearing price but the available quantity was less than that for which the bidder bid, the bidder received the available quantity. If an allocation of our ESOARS Units to a bidder would have resulted in the issuance of a fractional ESOARS Unit to that bidder, then we rounded up to a whole ESOARS Unit.
 
We reserved the right to alter the method of allocation of the ESOARS Units in exceptional circumstances as we deemed necessary to ensure a fair and orderly distribution.
 
Results of Auction and Bid Acceptance
 
Bidders were allowed to view the results of the auction on www.esoars.com. The auction agent has accepted successful bids by sending an electronic notice of acceptance to successful bidders. Bidders were previously informed that bidders who submit successful bids are obligated to purchase the ESOARS Units allocated to them, regardless of whether they are aware that the electronic notice of acceptance has been sent.
 
Settlement
 
We expect that settlement will take place three business days following the conclusion of the auction and the allocation of our ESOARS. Institutional investors will submit payments to our auction agent by wire transfer. Zions Direct account holders may pay through their Zions Direct account at Pershing LLC. Individual investors who were not Zions Direct account holders will submit payments to our auction agent via a payment method previously agreed to by each investor and our auction agent prior to the auction.


S-19


Table of Contents

 
ZIONS BANCORPORATION 2005 STOCK OPTION AND INCENTIVE PLAN
 
We issued each of the reference options pursuant to our 2005 Stock Option and Incentive Plan dated effective as of May 6, 2005 (the “Incentive Plan”). We filed a copy of our Incentive Plan as Exhibit 4.7 to our Registration Statement on Form S-8, which we filed with the SEC on May 6, 2005. We have attached a copy of our Incentive Plan as Annex B of this prospectus supplement. We also filed a copy of our Standard Stock Option Award Agreement (the “Standard Option Agreement”) as Exhibit 10.5 to our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2005, which we filed with the SEC on May 6, 2005. We have attached a copy of our Standard Option Agreement as Annex C of this prospectus supplement. We issued substantially all of our reference options pursuant to the terms and conditions contained in the Standard Option Agreement.
 
The following description is only a summary of the material relevant provisions of our 2005 Stock Option and Incentive Plan. It does not restate the Incentive Plan in its entirety. This summary, as well as any other discussion of our Incentive Plan and our reference options grants in this prospectus supplement, is qualified by reference to the text of the Incentive Plan and the Standard Option Agreement. We urge you to read the Incentive Plan and the Standard Option Agreement, because they, and not this description or any other discussion in this prospectus supplement, define the terms under which an employee optionee may exercise a reference option.
 
Summary of Our 2005 Stock Option And Incentive Plan
 
Purpose.  The purpose of the Incentive Plan is to promote our long-term success by providing an incentive for the officers, employees and directors of, and consultants and advisors to, us and our affiliates to acquire a proprietary interest in our success; to remain in our service or the service of our affiliates; and to render superior performance during such service.
 
Administration.  The Incentive Plan is administered by the executive compensation committee of our board of directors or a subcommittee thereof (the “Committee”). The Committee has the authority to:
 
  •  construe, interpret and implement the Incentive Plan;
 
  •  prescribe, amend and rescind rules and regulations relating to the Incentive Plan;
 
  •  make all determinations necessary or advisable in administering the Incentive Plan;
 
  •  correct any defect, supply any omission and reconcile any inconsistency in the Incentive Plan;
 
  •  amend the Incentive Plan to reflect changes in applicable law;
 
  •  determine whether awards may be settled in shares of our common stock, cash or other property;
 
  •  determine whether amounts payable under an award should be deferred; and
 
  •  make other determinations and take other actions relative to the Incentive Plan.
 
The determination of the Committee on all matters relating to the Incentive Plan or any award agreement is final and binding.
 
Eligibility.  Acting and prospective directors, officers and employees of, and consultants and advisors to, us and our affiliates, as selected by the Committee in its discretion, are eligible to participate in the Incentive Plan.
 
Approximately 8,000 of our directors, officers, and employees are eligible to participate; however, because the Incentive Plan provides for broad discretion in selecting grantees and in making awards, we cannot determine the total number of persons who may participate and the respective benefits to be accorded to them.
 
Shares of Common Stock Available for Issuance Through the Incentive Plan.  Up to 8,900,000 shares of our common stock are authorized for issuance through the Incentive Plan, all of which are available for issuance pursuant to incentive stock options. Only 936,024 shares of our common stock are subject to


S-20


Table of Contents

reference options. Shares of our common stock may be issued under the Incentive Plan from authorized but unissued shares of our common stock or authorized and issued shares of our common stock held in our treasury or otherwise acquired for the purposes of the Incentive Plan.
 
Provisions in our Incentive Plan permit the reuse or reissuance of shares of our common stock underlying forfeited, terminated or canceled awards of stock-based compensation. If awards or underlying shares of our common stock are tendered or withheld as payment for the exercise price of an award, then we may not reuse or issue, or otherwise treat as available under our Incentive Plan, the shares of our common stock. Any shares of our common stock delivered by us, any shares of common stock with respect to which awards under the Incentive Plan are made by us and any shares of common stock with respect to which we become obligated to make awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired entity, are not counted against the shares available for awards under the Incentive Plan.
 
The Committee has the authority to adjust the terms of any outstanding awards and the number of shares of our common stock issuable under our Incentive Plan for any increase or decrease in the number of issued shares of common stock resulting from a stock split, reverse stock split, stock dividend, recapitalization, rights offering, combination or reclassification of the common shares, or other events affecting our capitalization.
 
Stock Options.  The Committee has discretion to award to eligible employees:
 
  •  incentive stock options (“ISOs”), which are intended to comply with Section 422 of the Code, or
 
  •  nonqualified stock options, which are not intended to comply with Section 422 of the Code.
 
The Committee determines the number of shares of our common stock covered by the applicable option and the exercise period and exercise price of such option. However, the exercise period may not exceed 10 years and the exercise price may not be less than the fair market value of a share of our common stock on the date the option is granted. The Committee has discretion to set such additional limitations, conditions and provisions on or relating to option grants as it deems appropriate.
 
Upon the exercise of an option granted under our Incentive Plan, the exercise price is payable in full to us either:
 
  •  in cash or its equivalent;
 
  •  by delivery of shares of our common stock having a fair market value at the time of exercise equal to all or a part of exercise price (provided such shares have been held for at least six months prior to their tender); or
 
  •  any other method approved by the Committee in its discretion.
 
Grantees of an option award generally will not have any of the rights of our shareholders with respect to shares subject to their award until the issuance of the shares.
 
Performance Goals.  The Committee may grant awards under the Incentive Plan subject to the attainment of specified performance goals. The performance goals applicable to an award may provide for a targeted or measured level or levels of achievement or change using one or more of the following measures:
 
  •  revenue;
 
  •  earnings per share;
 
  •  net income;
 
  •  return on assets;
 
  •  return on equity;
 
  •  stock price;
 
  •  economic profit or shareholder value added; and
 
  •  total shareholder return.


S-21


Table of Contents

 
Termination of Employment and Change in Control.  The Incentive Plan determines the extent to which a grantee will have the right to exercise or obtain the benefits of an award or underlying shares following termination of the grantee’s employment or service by or for us or the service or our affiliates or upon a change in control of us, unless modified by the Committee with respect to an award.
 
The Incentive Plan provides that, unless the Committee determines otherwise at the time of an award, upon a change in control of us, the exercisability of, and the lapse of restrictions with respect to, the award will be accelerated, the exercise period, if any, of the award will be extended and, if so determined by the Committee, the award may be cashed out. The termination and change in control provisions need not be uniform among all grantees and may reflect distinctions based on the reasons for termination of employment or service by or for us or the service or our affiliates.
 
Adjustments and Amendments.  The Incentive Plan provides for appropriate adjustments in the number and nature of shares of our common stock subject to awards and available for future awards and in the exercise price of options in the event of changes in our issued and outstanding common stock by reason of a merger, stock split or other specified events.
 
The Committee may amend the Incentive Plan at any time and for any purpose that the Committee deems appropriate. However, no amendment may adversely affect any outstanding awards in a material way without the affected holder’s consent, except in specified circumstances.
 
No Repricing or Reloads.  Options issued under our Incentive Plan may not be repriced without the approval of our shareholders. The plan does not allow reload options to be issued upon exercise of outstanding options.
 
Nontransferability.  Unless the Committee determines otherwise in specified circumstances, no award (including options) granted pursuant to, and no right to payment under, our Incentive Plan will be assignable or transferable by a grantee except by will or by the laws of descent and distribution, and any option or similar right will be exercisable during a grantee’s lifetime only by the grantee or by the grantee’s legal representative.
 
Duration of the Incentive Plan.  Unless earlier terminated by our board of directors, our Incentive Plan will terminate on the tenth anniversary of adoption of the plan by our board of directors; provided, however, that the terms of our Incentive Plan will continue to govern until all then-outstanding options granted thereunder have been satisfied or terminated pursuant to the terms of the Incentive Plan, and all restricted periods and performance periods have lapsed.
 
Federal Income Tax Consequences to Employees With Respect to Stock Options
 
Incentive Stock Options.  A grantee will not be subject to tax upon the grant of an ISO, or upon the exercise of an ISO. However, the excess of the fair market value of the shares of our common stock on the date of exercise over the exercise price paid will be included in the grantee’s alternative minimum taxable income. Whether a grantee is subject to the alternative minimum tax will depend on his or her particular circumstances. Following exercise of an ISO, if a grantee disposes of the shares of our common stock acquired upon exercise of an option on or after the later of:
 
  •  the second anniversary of the date of grant of the ISO, and
 
  •  the first anniversary of the date of exercise of the ISO (the “statutory holding period”),
 
then the grantee will recognize a capital gain or loss in an amount equal to the difference between the amount realized on such disposition and the grantee’s basis in the shares. If the grantee disposes of those shares before the end of the statutory holding period, he or she will have engaged in a “disqualifying disposition.” As a result, the disposition will be subject to tax:
 
  •  on the excess of the fair market value of the shares on the date of exercise (or the amount realized on the disqualifying disposition, if less) over the exercise price paid, as ordinary income, and


S-22


Table of Contents

 
  •  on the excess, if any, of the amount realized on such disqualifying disposition over the fair market value of the shares on the date of exercise, as capital gain.
 
If the amount a grantee realizes from a disqualifying disposition is less than the exercise price paid and the loss sustained upon such disposition would otherwise be recognized, the grantee will not recognize any ordinary income from such disqualifying disposition and instead will recognize a capital loss. In the event of a disqualifying disposition, the amount recognized by the grantee as ordinary income is generally deductible by us. We are currently not obligated to withhold income or other employment taxes upon a disqualifying disposition of an ISO.
 
Nonstatutory Stock Options.  A grantee will not be subject to tax upon the grant of an option which is not intended to be (or does not qualify as) an ISO (a “nonstatutory stock option”). Upon exercise of a nonstatutory stock option, an amount equal to the excess of the fair market value of the shares acquired on the date of exercise over the exercise price paid is taxable to the grantee as ordinary income, and such amount is generally deductible by us. This amount of income will be subject to income tax and employment tax withholding.


S-23


Table of Contents

 
DESCRIPTION OF REFERENCE OPTIONS
 
Our board of directors approved the reference options on May 1, 2006. The board approved the granting of 960,000 options, of which 936,024 were granted. The exercise price of $81.15 per share was set at the market closing price on May 1, 2006. One-third of the reference options vest on the grant date anniversary in each of the first three years. There are no other vesting conditions. The vesting conditions are identical for all reference options. The reference options expire seven years after the grant date, on April 30, 2013.
 
Some of the granted options will be classified as incentive stock options, with the remainder classified as non-qualified options. In general, incentive and non-qualified differ as to their tax consequences for the option grantee. Other than the classification of our reference options as incentive or non-qualified options, the reference options are identical. There are no differences in terms, including vesting, termination or cancellation.
 
The Standard Option Agreement, under which we issued substantially all of the reference options, generally provides that the reference options will terminate immediately upon:
 
  •  the employee’s termination of his or her employment with us for any reason, or
 
  •  our termination of that employee’s employment for cause.
 
The following table shows the allocation of the reference options among employee groups. “Executives” refers primarily to our Chief Executive Officer, Chief Financial Officer, Chief Executive Officers of our affiliate banks and Executive Vice Presidents. “Upper-level Managers” primarily refers to non-executive managers having a change in control provision in their employment contract. “Mid-level Managers & Other Top Performers” includes all other employees receiving options.
 
                     
      Number of
    Number of
      Employees     Reference Options Granted
Executives
      43         648,191  
Upper-level Managers
      48         199,495  
Mid-level Managers & Other Top Performers
      30         88,338  
Total
      121         936,024  
                     


S-24


Table of Contents

 
HISTORICAL STOCK OPTION EXERCISE DATA
 
The tables, charts and graphs shown on the following pages are select summaries of our past large option grants and the exercise behavior of our employee recipients of those options. The data from which these select summaries are derived is available at www.esoars.com. The information and materials found on that website are not part of this prospectus supplement and are not incorporated by reference into this prospectus supplement. While we have attempted to summarize this data in a useful way, you should determine its usefulness for yourself. Also, you may determine that alternative analyses of the data are more useful.
 
Our option grants and incentive option plans have varied in material ways over time. The composition of the group of employees in terms of specific individuals and rank and/or title of individuals has also varied over time. For example, prior to 2005, we granted a larger number of stock options, to more varied groups of employees. To illustrate, we have granted:
 
  •  1,473,270 stock options in 2001;
 
  •  1,577,550 stock options in 2002;
 
  •  1,463,450 stock options in 2003; and
 
  •  1,699,750 stock options in 2004.
 
However, we granted only:
 
  •  741,941 stock options in 2005, and
 
  •  936,024 stock options in 2006.
 
The number of individuals to whom we have issued stock options has also recently declined. The following shows the number of persons to whom we have granted stock options grants for the past three years:
 
  •  for 2004, 879 individuals;
 
  •  for 2005, 102 individuals, all members of senior management; and
 
  •  for 2006, 121 individuals, all members of senior management.
 
Also in 2005, we granted shares of restricted stock to 615 employees, mostly in middle management. In 2006, we granted shares of restricted stock to 888 employees, mostly in middle management.
 
The pattern of exercise of the reference options may differ significantly from that of options granted in years 2004 and earlier, as the composition of the employee group receiving options changed significantly.
 
The ratio of incentive stock options and non-qualified stock options has also varied over time. Additionally, the terms of our option plans have varied over time with respect to, among other things, vesting, expiration date and employment termination conditions. Because of these and other differences between our previous options grants and the May 1, 2006 grant of the reference options, you should consider this past exercise behavior as general background information only. You should not consider that it is necessarily indicative of future exercise behavior, nor should you necessarily rely on it for precise analysis.
 
The option grants summarized below represent summaries of the large options grants that we have made annually to select employees. From time to time throughout each year, we have also made additional, smaller options grants largely to newly-hired employees. We do not reflect these additional, smaller options grants in the tables, charts and graphs below. In 2000, we made two sizeable options grants, summaries for each of which we have provided below.
 
The summary for each grant contains brief information about the key vesting conditions and the length of time until expiration. You can find additional details regarding the option terms by reading our previous form option award agreements and stock option plans under which we have granted the options described in this section, which we have filed with the SEC. See “Where You Can Find More Information” on page iv of this prospectus supplement.


S-25


Table of Contents

Grant Summary Table.  The “Grant Summary” table for each year (or, in the case of 2004, for the applicable grant date) contains summary information regarding the grant date, grant type, number of options granted, grant price, the number of options exercised and the number of options canceled. The “Grant Date” is the date on which our board of directors approved the granting of the options. The table shows that there are typically two grant types, namely “incentive” and “non-qualified.” (In general, the types of options differ in their tax consequences to the option grantee.)
 
The “Grant Price” is the exercise, or “strike,” price of the options granted and is equal to the closing market price of our common stock on the date of the option grant. The number of options exercised is equal to the number of the granted options exercised, and in the case of option grants that have not expired, it is the number exercised through April 20, 2006. “Canceled” options represent options that were not exercised (in the case of grants that have expired) or options that will not be exercised (in the case of options that have not expired). Typically, canceled options result upon termination of employment. Holders of ESOARS will not receive any payments with respect to any reference options that are cancelled as a result of the termination of an employee’s employment with us.
 
Exercise by Year Table.  The “Exercise by Year” table for each year (or, in the case of 2004, for the applicable grant date) contains year-by-year summary information regarding the number of options exercised, the weighted average price at which they were exercised, the dollar value realized from the exercises and the cumulative percentage of options exercised. The number of options exercised represents the options exercised during the calendar year. Note that due to vesting provisions and the expiration of the options on the option grant date anniversary, exercises will not occur throughout the entirety of the calendar year in the initial and final calendar year of the period during which the reference options may be exercised. We computed the figures in the “Weighted Average Market Value at Exercise” column by:
 
  •  multiplying each option exercised in a given year by the price at which it was exercised;
 
  •  summing all such products for all of the exercises in the calendar year; and
 
dividing that sum by:
 
  •  the number of options exercised during said calendar year.
 
We obtained the figures in the “Dollar Value Realized” column by multiplying, for each option exercise:
 
  •  the number of options exercised
 
by the difference between:
 
  •  the price at which they were exercised, and
 
  •  the grant price (also known as the exercise or strike price).
 
We arrived at the figures in the “Cumulative % Exercised” column for a given year by taking:
 
  •  the sum of all options exercised in that year and prior years,
 
divided by:
 
  •  the total number of options that we granted.
 
Cumulative Exercise Graph.  The “Cumulative Exercise” graph for each year (or, in the case of 2004, for the applicable grant date) contains the cumulative options exercised over time, as well as the cumulative dollar value realized over time. The graphs start with the first anniversary of the grant date, which is the first date at which options may be exercised, and end with the expiration of the option period. We created the graph for the cumulative percentage of stock options exercised by plotting the numbers derived by dividing:
 
  •  the cumulative options exercised for each day covered by the graph, and
 
dividing by:
 
  •  the total number of options granted.


S-26


Table of Contents

 
We created the graph for cumulative dollar value realized by plotting the cumulative dollar value realized for each day covered by the graph. We obtained the amount of dollar value realized by multiplying for each option exercise:
 
  •  the number of options exercised,
 
by the difference between:
 
  •  the price at which those options were exercised, and
 
  •  the grant price (also known as the exercise, or “strike,” price).
 
The cumulative dollar value realized is the sum of the dollar value realized starting with the first anniversary of the option grant up to the day represented by each point in the graph. For grants that have not yet expired, the scale for cumulative dollar value realized is chosen to scale the graph approximately in line with the cumulative percent exercised and should not be interpreted as indicative of the final cumulative value that will be realized. The final cumulative value that will be realized with respect to unexpired grants is unknowable and uncertain.


S-27


Table of Contents

Zions Bancorporation March 18, 1994 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
3/18/1994     Incentive     397,000     $9.94     364,996     32,004
Plan Totals           397,000           364,996     32,004
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
1995     17,988     $14.36     $79,523     4.5%
1996     43,696     $20.30     $452,702     15.5%
1997     85,430     $32.78     $1,950,829     37.1%
1998     101,213     $50.32     $4,086,678     62.6%
1999     79,273     $63.46     $4,242,491     82.5%
2000     37,396     $48.03     $1,424,380     91.9%
Total     364,996           $12,236,602      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-28


Table of Contents

Zions Bancorporation April 28, 1995 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/28/1995     Incentive     276,863     $10.66     260,083     16,780
4/28/1995     Non-Qualified     837     $10.66     837     0
Plan Totals           277,700           260,920     16,780
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
1996     14,792     $19.96     $137,621     5.3%
1997     33,128     $33.57     $758,957     17.3%
1998     55,300     $50.58     $2,207,844     37.2%
1999     76,464     $63.04     $4,005,034     64.7%
2000     38,932     $44.73     $1,326,378     78.7%
2001     42,304     $53.20     $1,799,401     94.0%
Total     260,920           $10,235,235      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-29


Table of Contents

Zions Bancorporation March 8, 1996 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
3/8/1996     Incentive     330,286     $18.13     297,522     32,764
3/8/1996     Non-Qualified     18,414     $18.13     18,414     0
Plan Totals           348,700           315,936     32,764
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
1997     20,732     $35.05     $350,763     5.9%
1998     52,405     $50.78     $1,710,853     21.0%
1999     60,741     $63.08     $2,730,358     38.4%
2000     45,367     $47.67     $1,340,075     51.4%
2001     54,893     $53.23     $1,926,983     67.1%
2002     81,798     $51.69     $2,744,823     90.6%
Total     315,936           $10,803,854      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-30


Table of Contents

Zions Bancorporation March 21, 1997 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
3/21/1997     Incentive     359,451     $31.00     308,435     51,016
3/21/1997     Non-Qualified     96,649     $31.00     96,649     0
Plan Totals           456,100           405,084     51,016
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
1998     29,811     $51.81     $620,475     6.5%
1999     50,801     $63.63     $1,657,426     17.7%
2000     26,501     $49.76     $497,257     23.5%
2001     76,100     $55.11     $1,834,524     40.2%
2002     73,722     $50.92     $1,468,443     56.3%
2003     148,149     $41.72     $1,588,215     88.8%
Total     405,084           $7,666,340      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-31


Table of Contents

Zions Bancorporation March 24, 1998 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/24/1998     Incentive     440,369     $48.50     299,373     140,996
4/24/1998     Non-Qualified     184,356     $48.50     162,009     22,347
Plan Totals           624,725           461,382     163,343
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
1999     19,148     $63.14     $280,383     3.1%
2000     5,311     $55.64     $37,907     3.9%
2001     57,644     $56.77     $476,595     13.1%
2002     35,598     $55.07     $234,027     18.8%
2003     127,250     $58.18     $1,231,706     39.2%
2004     216,431     $57.73     $1,998,545     73.9%
Total     461,382           $4,259,163      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-32


Table of Contents

Zions Bancorporation April 23, 1999 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest 25% after each of first four years
 Term
    Expire after 6 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/23/1999     Incentive     489,508     $69.13     25,362     464,146
4/23/1999     Non-Qualified     257,242     $69.13     3,388     253,854
Plan Totals           746,750           28,750     718,000
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2000     0     n/a     $0     0.0%
2001     0     n/a     $0     0.0%
2002     0     n/a     $0     0.0%
2003     0     n/a     $0     0.0%
2004     0     n/a     $0     0.0%
2005     28,750     $69.99     $24,817     3.9%
Total     28,750           $24,817      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-33


Table of Contents

Zions Bancorporation March 31, 2000 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
3/31/2000     Incentive     541,902     $41.63     388,379     98,951
3/31/2000     Non-Qualified     405,598     $41.63     283,759     55,525
Plan Totals           947,500           672,138     154,476
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2001     49,144     $55.72     $692,907     5.2%
2002     81,606     $55.74     $1,151,915     13.8%
2003     219,646     $56.57     $3,281,856     37.0%
2004     161,142     $61.62     $3,222,213     54.0%
2005     138,234     $71.65     $4,149,930     68.6%
2006     22,366     $79.28     $842,233     70.9%
2007                        
Total     672,138           $13,341,053      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-34


Table of Contents

Zions Bancorporation May 26, 2000 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
5/26/2000     Incentive     235,800     $44.94     153,760     48,666
5/26/2000     Non-Qualified     116,450     $44.94     72,579     13,456
Plan Totals           352,250           226,339     62,122
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2001     13,339     $56.72     $157,129     3.8%
2002     28,386     $54.89     $282,633     11.8%
2003     83,642     $56.81     $993,150     35.6%
2004     63,565     $61.41     $1,047,166     53.6%
2005     31,682     $70.19     $800,086     62.6%
2006     5,725     $80.01     $200,765     64.3%
2007                        
Total     226,339           $3,480,929      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-35


Table of Contents

Zions Bancorporation April 20, 2001 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/20/2001     Incentive     867,180     $54.35     490,872     201,953
4/20/2001     Non-Qualified     606,090     $54.35     284,043     111,383
Plan Totals           1,473,270           774,915     313,336
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2002     2,648     $55.88     $4,039     0.2%
2003     90,827     $59.72     $487,349     6.3%
2004     348,693     $62.91     $2,986,146     30.0%
2005     245,027     $70.57     $3,973,886     46.6%
2006     87,720     $79.96     $2,246,742     52.6%
2007                        
2008                        
Total     774,915           $9,698,162      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-36


Table of Contents

Zions Bancorporation April 26, 2002 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/26/2002     Incentive     909,896     $53.72     479,598     171,756
4/26/2002     Non-Qualified     667,654     $53.72     297,368     47,105
Plan Totals           1,577,550           776,966     218,861
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2003     64,510     $60.43     $432,709     4.1%
2004     258,272     $62.71     $2,322,646     20.5%
2005     370,094     $70.90     $6,356,924     43.9%
2006     84,090     $80.24     $2,230,252     49.3%
2007                        
2008                        
2009                        
Total     776,966           $11,342,531      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-37


Table of Contents

Zions Bancorporation January 22, 2003 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
1/22/2003     Incentive     919,416     $42.00     454,751     145,411
1/22/2003     Non-Qualified     544,034     $42.00     234,409     27,496
Plan Totals           1,463,450           689,160     172,907
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2004     220,278     $61.11     $4,209,737     15.1%
2005     294,362     $69.59     $8,121,154     35.2%
2006     174,520     $79.94     $6,622,028     47.1%
2007                        
2008                        
2009                        
2010                        
Total     689,160           $18,952,918      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-38


Table of Contents

Zions Bancorporation April 30, 2004 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
4/30/2004     Incentive     949,029     $56.59     121,160     89,857
4/30/2004     Non-Qualified     750,721     $56.59     118,591     24,189
Plan Totals           1,699,750           239,751     114,046
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2005     192,083     $71.57     $2,878,023     11.3%
2006     47,668     $80.22     $1,126,604     14.1%
2007                        
2008                        
2009                        
2010                        
2011                        
Total     239,751           $4,004,627      
                         
 
Cumulative % Exercised and $ Value Realized
 
GRAPH


S-39


Table of Contents

Zions Bancorporation May 6, 2005 Option Grant
 
Grant Terms
 
       
 Vesting
    Vest one-third after each of first three years
 Term
    Expire after 7 years
       
 
Grant Summary
 
                               
Grant Date     Grant Type     Granted     Grant Price     Exercised     Canceled
5/6/2005     Incentive     153,712     $70.79     0     5,806
5/6/2005     Non-Qualified     588,229     $70.79     0     542
Plan Totals           741,941           0     6,348
                               
 
Exercise by Year
 
                         
            Weighted Average
           
            Market Value at
          Cumulative %
Year     Number Exercised     Exercise     $ Value Realized     Exercised
2006                        
2007                        
2008                        
2009                        
2010                        
2011                        
2012                        
Total     0           $0      
                         


S-40


Table of Contents

 
VALUATION OF RECENT STOCK OPTION GRANTS
 
Historically, we have accounted for our share-based compensation, including our stock options, under Accounting Principles Board Opinion No. 25 (“APB 25”), Accounting for Stock Issued to Employees. Under APB 25, we have not recorded any compensation expense with respect to stock options granted prior to 2006, as the exercise price of the options was equal to the quoted market price of our common stock on the date of grant.
 
In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. Under SFAS No. 123R, we are required to recognize compensation expense associated with our employee stock option grants for all employee stock options granted on or after January 1, 2006.
 
SFAS No. 123R generally recognizes three approaches to stock option valuation:
 
  •  a closed-form model such as the Black-Scholes option-pricing formula;
 
  •  the binomial (lattice) method; and
 
  •  market-based valuation.
 
We expect to value our reference options principally on the basis of the Black-Scholes method. We believe that the Black-Scholes method is currently the most widely-used method of stock option valuation, and we have determined that it is the most appropriate method for our financial reporting purposes, pending the development of an acceptable market-based approach. Our ESOARS are designed to provide a basis for market-based valuation of stock options. We believe a market-based approach, such as that intended to be demonstrated by this offering of ESOARS, may ultimately provide a viable, if not superior, alternative to the Black-Scholes and binomial methods for valuing stock options.
 
Under SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, we are required to calculate and report in the footnotes to our financial statements the impact on our net income that would have occurred if we had applied the provisions of SFAS No. 123 to share-based payments in the past three years. In making these determinations, we have estimated the fair value of our option grants using the Black-Scholes option-pricing model.
 
The Black-Scholes model estimates the value of a stock option using various assumptions. The more significant assumptions used to apply this model include:
 
  •  a weighted average risk-free interest rate;
 
  •  a weighted average expected life;
 
  •  an expected dividend yield; and
 
  •  an expected volatility.
 
Use of these assumptions is subjective and requires judgment. Using the Black-Scholes model, we have reported in the footnotes to our financial statements that the pro forma share-based compensation expense of our stock options granted in the years listed below, for all stock options awarded during those years, net of related tax effects, is as follows:
 
       
Year of Stock Options Grant     Pro Forma Share-Based Compensation Expense
2003
    $15,395,000
2004
    $12,503,000
2005
    $9,793,000
       


S-41


Table of Contents

The following table summarizes the weighted average of fair value and the assumptions used in applying the Black-Scholes option-pricing model to compute the fair value of share-based compensation expense for our stock options granted in the years indicated:
 
                   
      2005     2004     2003
Weighted average of fair value for options granted     $15.33     $11.85     $$9.05
Weighted average assumption used:
                 
Expected dividend yield
    2.0%     2.0%     1.9%
Expected volatility
    25.0%     26.8%     28.0%
Risk-free interest rate
    3.95%     3.11%     2.38%
Expected life (in years)
    4.1     3.8     3.8
                   
 
Presented under the section “Historical Stock Option Exercise Data” in this prospectus supplement is information regarding specified historical option grants. In particular, grant and exercise information regarding only some of our large annual grants is presented in that section. In contrast, the information presented above in this section and reported in our financial statements pertains to all stock options granted during each year represented.
 
The following table is included for reference only and contains the weighted average grant price (or strike or exercise price) for all stock options granted in the respective years:
 
             
Year     Total Options Granted     Weighted Average Grant Price
2003     1,640,550     $42.76
2004
    1,766,250     $56.92
2005
    863,041     $71.45
             
 
It is important to note that under SFAS No. 123R, option-based compensation expense is computed by adjusting the option valuation for the expected number of options that will be forfeited prior to vesting. Investors in ESOARS should consider both the valuation of the reference options granted as well as the number of options that will be exercised by our employees, because payments, if any, to holders of ESOARS are determined not only by our stock price movements, which the option valuation attempts to capture, but also by the actual exercise of the reference options by employees. The Black-Scholes fair values shown above do not factor in the possibility that not all granted options will be exercised due to forfeiture, cancellation, termination, failure to exercise, etc.
 
Under SFAS No. 123R, we are also required to estimate the pre-vesting forfeiture rate of our granted options in order to estimate our share-based compensation expense. The pre-vesting forfeiture rate is used to adjust the option value for the fact that some options will not be exercised when an employee’s employment is terminated and the options are cancelled as a result. We then adjust this estimate over the vesting period to reconcile the original estimate to our actual experience. While this adjustment will be reflected in the amount of compensation expense we record, it will not affect ESOARS payments directly. ESOARS payments, if any, will be affected directly, however, by employee terminations and resulting option forfeitures. Our estimated pre-vesting forfeiture rates for the reference options are presented in the following table.
 
       
Grant Type     Estimated Pre-vesting Forfeiture rate
Incentive     18.5%
Non-qualified
    11.0%
       


S-42


Table of Contents

For additional information regarding the calculation of our share-based compensation expense using the Black-Scholes method, see the section entitled “Share-Based Compensation” on pages 36 and 37 of the Annual Report on Form 10-K for our fiscal year ended December 31, 2005, and Note 1 of the Notes to Consolidated Financial Statements also included in that Annual Report on Form 10-K.
 
There are many approaches to valuing stock options recognized by financial analysts in addition to those described above. Each method has its perceived strengths and weaknesses, and most rely on subjective judgments and the application of various assumptions that may or may not reflect the actual performance of stock options and relevant markets. Prospective investors are urged to make their own judgments and determinations as to the future performance of the reference options and the ESOARS in deciding whether to bid for the ESOARS and, if so, at what price.


S-43


Table of Contents

 
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
 
The following is a summary of the material United States federal income tax consequences as of the date hereof expected to be applicable to the purchase, ownership and disposition of our ESOARS by U.S. Holders (as defined below), other than those in special situations or subject to special U.S. federal income tax rules. Except to the extent specified herein, any discussion herein of matters of U.S. federal income tax law or legal conclusions under U.S. federal income tax law constitutes the opinion of our counsel, Mayer, Brown, Rowe & Maw LLP.
 
Except where noted herein, this discussion addresses only ESOARS held as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). Under section 1221 of the Code, a capital asset is, generally speaking, property that you hold for investment purposes. In addition, as noted above, this discussion does not address consequences that may apply to an investment in our ESOARS by investors in special situations or that are subject to special U.S. federal income tax rules. In particular, special U.S. federal income tax considerations may apply to an investment in our ESOARS by investors that are dealers or traders in securities, banks, tax-exempt investors, insurance companies, partnerships and other pass-through entities, non-resident alien individuals, non-U.S. corporations, other non-U.S. investors, and investors that have a functional currency other than the U.S. dollar. In addition, this summary does not describe any U.S. tax consequences of the purchase, ownership or disposition of our ESOARS arising under the laws of any state, locality or taxing jurisdiction other than the United States federal government. In general, this summary assumes that a holder acquires our ESOARS at original issuance and does not hold our ESOARS as part of a hedge, straddle or conversion transaction within the meaning of section 1258 of the Code, or other integrated investment constituting of one or more ESOARS Units and one or more other positions.
 
This summary is based on the United States tax laws, regulations, rulings, judicial and administrative decisions, and other authorities in effect or available on the date of this Prospectus Supplement. All of the foregoing are subject to change, which change may apply retroactively and could affect the continued validity of this summary.
 
Prospective purchasers of our ESOARS are urged to consult their own tax advisors as to U.S. federal income tax consequences in light of their particular situations of the purchase, ownership and disposition of our ESOARS, including the possible application of state, local, non-U.S. or other tax laws.
 
As used herein, the term “U.S. Holder” means a beneficial owner of our ESOARS who is, or is treated for U.S. federal income tax purposes as, a citizen or resident of the United States, a corporation or other entity created in or organized under the laws of the United States, or an estate or trust (other than a “foreign estate” or a “foreign trust,” each as defined in the Code). If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ESOARS, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships considering the purchase of our ESOARS are urged to consult their own tax advisors regarding the potential consequences to their partners of an investment in our ESOARS.
 
U.S. Federal Income Tax Characterization of Our ESOARS
 
There are no cases, Treasury regulations, revenue rulings or other binding authorities that directly address the U.S. federal income tax characterization of our ESOARS or of securities with terms substantially the same as those of our ESOARS. Accordingly, our counsel, Mayer, Brown, Rowe & Maw LLP, is unable to render an opinion as to that characterization or as to the proper method of reporting income and loss with respect to our ESOARS. In the absence of guidance, we intend to file information returns with the Internal Revenue Service reporting income with respect to our ESOARS under a method analogous to the method applicable to income with respect to cash-settled call options. However, the proper U.S. tax characterization of our ESOARS is uncertain, and therefore it is uncertain whether such method of reporting payments on our ESOARS would be proper. Other federal income tax characterizations of and methods of reporting payments on our ESOARS are possible, which if they applied could materially adversely affect the amount, timing and character of income or loss that is properly reportable with respect to our ESOARS as compared to the method reported by us. In


S-44


Table of Contents

general, a U.S. taxpayer may rely only on formal written opinions meeting specific regulatory requirements in order to avoid imposition of U.S. federal tax penalties. This summary does not meet those requirements. Therefore, if an alternative treatment of our ESOARS applied, a U.S. Holder could be subject to U.S. federal tax penalties unless the holder obtained appropriate opinions from its own tax advisor and/or met certain other requirements.
 
Because of the uncertainty of treatment of income and loss in respect our ESOARS, prospective investors in our ESOARS are urged to consult their own tax advisers as to the proper classification and reporting of income and loss with respect to our ESOARS for U.S. federal income tax purposes.
 
Tax Treatment of U.S. Holders Under Cash-Settled Option Method
 
Payments
 
Under the method of reporting income that we will adopt for our ESOARS that is analogous to the method applicable to payments with respect to cash-settled call options, a U.S. Holder of our ESOARS would treat our ESOARS as a series of cash-settled call options exercisable by the holder for a portion of the number of shares of our common stock as relate to the reference options, but which call options are each exercisable for a particular share only upon the exercise by the relevant employee of the related stock option. Thus, each cash-settled call option embedded in an ESOARS Unit would be treated in a manner similar to a “European” style option that is exercisable only at a specific time.
 
Under this method, a U.S. Holder should be required to allocate the amount paid for our ESOARS as option premium paid with respect to each stock option represented by our ESOARS. Because all of the reference options have the same exercise price and term, if we are required to take a position as to the appropriate allocation of a U.S. Holder’s purchase price, we intend to take the position that the holder’s purchase price should be allocated ratably to each reference option represented by the holder’s ESOARS on the basis of the number of shares of our common stock represented by such reference option. Under this method, on receipt of a payment of cash with respect to our ESOARS, a U.S. Holder should recognize gain equal to the amount of the payment less the portion of the purchase price paid for our ESOARS that was allocated to the related stock option that was deemed to have been exercised. In addition, the U.S. Holder generally should recognize a loss at the termination of the U.S. Holder’s ESOARS in the amount of any remaining purchase price attributable to stock options represented by our ESOARS that were not deemed exercised during the term of the ESOARS.
 
Although the character of gain recognized with respect to a cash-settled call option on stock would normally be treated as capital gain, we expect it is more appropriate and intend to file information returns with the Internal Revenue Service reporting income and loss realized by a U.S. Holder with respect to our ESOARS as ordinary income and loss.
 
Sale, Exchange or Other Disposition of Our ESOARS
 
Under the method of reporting payments on our ESOARS analogous to the method applicable to payments with respect to cash-settled call options, a U.S. Holder would recognize gain or loss on the sale, exchange or other taxable disposition of our ESOARS in an amount equal to the difference between the amount realized on the disposition and the U.S. Holder’s remaining tax basis in the ESOARS at the time of disposition (i.e., the portion of the U.S. Holder’s initial tax basis that was allocable to the stock options that remain unexercised at the time of the disposition). Such gain or loss should be capital gain or capital loss (and should be long-term capital gain or capital loss if the ESOARS were held for more than one year at the time of the disposition).
 
Alternative U.S. Federal Tax Characterizations of ESOARS
 
As stated above, our ESOARS may be properly characterized, and income and loss with respect to ESOARS may be properly reported, for U.S. federal income tax purposes under a different method. For example, income and loss with respect to our ESOARS may be properly reported under a method analogous to the method applicable to income and loss with respect to cash-settled forward contracts. Under such a method, the tax consequences for a U.S. Holder should generally be similar to the treatment of our ESOARS under the


S-45


Table of Contents

cash-settled call option method described above, although neither the proper recovery of the amount paid for our ESOARS nor the character of income or loss under this characterization is clear.
 
Although an argument could be made that our ESOARS should be treated as debt for U.S. federal tax purposes, we do not believe that ESOARS should be so treated because amounts to be paid with respect to our ESOARS are entirely contingent.
 
Similarly, we do not believe that our ESOARS should be treated as notional principal contracts (i.e., swaps) because they do not provide for periodic payments based on an index and a single notional amount. However, the Internal Revenue Service could assert that position.
 
Finally, in light of the absence of relevant authorities, it may be appropriate to report income and deductions with respect to our ESOARS under general rules for financial instruments for which applicable Treasury regulations do not prescribe specific rules. If so treated, a U.S. Holder may be entitled to use a “wait-and-see” approach to recognition of income. That is, the U.S. Holder should report income when payments are made on our ESOARS, and probably only after the payments exceed the amount paid for our ESOARS.
 
Other potential characterizations of our ESOARS and methods of reporting income and loss with respect to our ESOARS are possible. U.S. Holders are urged to consult their tax advisors regarding the potential application of these and other alternative methods of reporting income and loss with respect to our ESOARS.
 
United States Taxation of Non-U.S. Holders
 
As used herein, a “Non-U.S. Holder” is a beneficial owner of ESOARS that is neither a U.S. Holder nor a partnership, an entity treated for U.S. federal tax purposes as a partnership, or an entity organized in or under the laws of the United States, any State thereof or the District of Columbia.
 
It is not clear whether income or any payments with respect to ESOARS would be treated as fixed or determinable, annual or periodical gains, profits or income of the kind that is subject to U.S. withholding tax. In the absence of clear authority, we intend to withhold U.S. tax at a 30 percent rate from payments made on our ESOARS to a Non-U.S. Holder, unless
 
  •  the Non-U.S. Holder is eligible for benefits of an income tax treaty providing for an exemption from U.S. tax on such income and delivers to us or our paying agent a properly completed Internal Revenue Service Form W-8BEN establishing such exemption, or
 
  •  the income with respect to ESOARS is effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Holder and the Non-U.S. Holder delivers to us or our paying agent a properly completed Internal Revenue Service Form W-8ECI certifying to such treatment.
 
Information Reporting and Backup Withholding
 
Generally, payments made on our ESOARS to a U.S. Holder, and the proceeds of a sale or other disposition of our ESOARS by a U.S. Holder, will be subject to information reporting requirements unless the U.S. Holder is a corporation or other “exempt recipient.” In addition, payments to U.S. Holders may be subject to backup withholding (currently at a rate of 28%) unless the U.S. Holder provides to us or our paying agent an Internal Revenue Service Form W-9 or otherwise establishes an exemption.
 
Information reporting requirements and backup withholding generally will not apply to payments made to a Non-U.S. Holder, provided that the Non-U.S. Holder certifies to its non-U.S. status (generally by providing to us or our paying agent a properly completed Internal Revenue Service Form W-8BEN) or otherwise establishes an exemption.
 
We strongly urge you to consult your own tax advisor with respect to all aspects of the United States federal, state, local and foreign tax treatment of the purchase, ownership and disposition of our ESOARS.


S-46


Table of Contents

 
CERTAIN ERISA CONSIDERATIONS
 
No ESOARS Unit may be purchased by or transferred to any “employee benefit plan” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA, and including, without limitation, foreign or government plans) or by any “plan” described in Section 4975(e)(1) of the Code, or any entity whose underlying assets include plan assets of any of the foregoing (each, a “Benefit Plan Investor”). Any purported purchase or transfer of our ESOARS in violation of the foregoing restrictions shall be null and void ab initio.  Each bidder who purchases the ESOARS will be deemed to have represented, warranted and acknowledged to us to such effect. No ESOARS Units may be transferred to a Benefit Plan Investor or an entity using Benefit Plan Investor assets. Each investor in an ESOARS Unit will be deemed to represent, warrant and covenant that it will not sell, pledge or otherwise transfer such security in violation of the foregoing.
 
LEGAL INVESTMENT CONSIDERATIONS
 
Institutions whose investment activities are subject to legal investment laws and regulations or to review by certain regulatory authorities may be subject to restrictions on investments in our ESOARS. Any such institution should consult its legal advisors in determining whether and to what extent there may be restrictions on its ability to invest in our ESOARS. Without limiting the foregoing, any financial institution that is subject to the jurisdiction of the Comptroller of Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, any state insurance commission, or any other federal or state agencies with similar authority should review any applicable rules, guidelines and regulations prior to purchasing our ESOARS.
 
We do not make any representation as to the proper characterization of the ESOARS for legal investment or other purposes, or as to the ability of particular investors to purchase our ESOARS for legal investment or other purposes, or as to the ability of particular investors to purchase our ESOARS under applicable investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of our ESOARS) may affect the liquidity of our ESOARS. Accordingly, all institutions whose activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult their own legal advisors in determining whether and to what extent our ESOARS are subject to investment, capital or other restrictions.


S-47


Table of Contents

 
LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
 
We will issue the ESOARS in book-entry form only. This means that ESOARS will be represented by one or more fully-registered global certificates representing the entire issuance of ESOARS. The ESOARS will be deposited with, or on behalf of, The Depository Trust Company, which we refer to as “DTC” or the “depositary,” and will be registered in the name of Cede & Co., a nominee of DTC. Cede & Co. will be the only registered holder of the ESOARS.
 
Cede & Co. will be the only registered holder of the ESOARS. Consequently, because the ESOARS will be issued only in global form, we will recognize only DTC as the holder of the ESOARS and we will make all payments on the ESOARS to DTC. DTC will pass along the payments it receives to its participants, which in turn will pass the payments along to their customers who are the beneficial owners. DTC and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the ESOARS. You will not own ESOARS directly. Instead, you will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in DTC’s book-entry system or holds an interest through a participant.
 
A global security will not be transferred to or registered in the name of anyone other than DTC or its nominee, unless special termination situations arise. We describe those situations below under “— Special Situations When a Global Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all ESOARS, and holders will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that does. Thus, you will not be a holder of the security, but only an indirect owner of a beneficial interest in the global security. In the event that termination of the global security occurs, we may issue the ESOARS through another book-entry clearing system or decide that the ESOARS may no longer be held through any book-entry clearing system.
 
Special Considerations for Global Securities
 
As an indirect owner, a holder’s rights relating to a global security will be governed by the account rules of the depositary, those of the investor’s financial institution (e.g., Euroclear and Clearstream), as well as general laws relating to securities transfers. We do not recognize this type of investor or any intermediary as a holder of securities and instead deal only with the depositary that holds the global security.
 
You should be aware of the following:
 
  •  you cannot cause the ESOARS to be registered in your own name, and cannot obtain non-global certificates for your interest in the ESOARS, except in the special situations we describe below;
 
  •  you will be an indirect holder and must look to your own bank or broker for payments on the ESOARS and protection of your legal rights relating to the ESOARS, as we describe above in this section;
 
  •  you may not be able to sell interests in the ESOARS to some insurance companies and other institutions that are required by law to own their securities in non-book-entry form;
 
  •  you may not be able to pledge your interest in a global security in circumstances where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective;
 
  •  the depositary’s policies and those of any participant in the depositary’s system or other intermediary (e.g., Euroclear or Clearstream) through which that institution holds security interests, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to your interest in a global security. We will have no responsibility for any aspect of the depositary’s policies or actions or records of ownership interests in a global security. We also do not supervise the depositary in any way;


S-48


Table of Contents

 
  •  the depositary will require that those who purchase and sell interests in a global security within its book-entry system use immediately-available funds, and your broker or bank may require you to do so as well; and
 
  •  financial institutions that participate in DTC’s book-entry system and through which you hold your interest in a global security (including Euroclear and Clearstream) may also have their own policies affecting payments, notices and other matters relating to securities. For example, if you hold an interest in a global security through Euroclear or Clearstream, Euroclear or Clearstream, as applicable, will require those who purchase and sell interests in that security through them to use immediately-available funds and comply with other policies and procedures, including deadlines for giving instructions as to transactions that are to be effected on a particular day. There may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor, and are not responsible for, the policies or actions of any of those intermediaries.
 
Special Situations When a Global Security Will Be Terminated
 
In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-global form representing ESOARS Units. After that exchange, the choice of whether to hold your ESOARS directly or in street name will be up to you. You must consult your own bank or broker to find out how to have your interests in a global security transferred on termination to your own name, so that you will be a holder.
 
The special situations for termination of a global security are as follows:
 
  •  DTC notifies us in writing that it is unwilling or unable to continue acting as the depositary, or DTC has ceased to be a clearing agency registered under the Exchange Act, and in either case we fail to appoint a successor depositary within 60 days after the date of such notice from DTC;
 
  •  we determine that such global security should be exchanged for securities in definitive registered form representing ESOARS Units, and we deliver written notice to that effect to DTC; or
 
  •  there has occurred and is continuing an event of default and our paying agent has received a written request from DTC to issue securities in definitive registered form representing ESOARS Units.
 
If a global security is terminated, only DTC, and not we, will be responsible for deciding the names of the institutions in whose names the securities represented by the global security will be registered and, therefore, who will be the holders of those securities.
 
LEGAL MATTERS
 
The validity of the ESOARS offered by this prospectus supplement and certain other matters will be passed upon for us by Mayer, Brown, Rowe & Maw LLP, Los Angeles, California. Mayer, Brown, Rowe & Maw LLP will rely upon the opinion of Callister Nebeker & McCullough, a Professional Corporation, Salt Lake City, Utah, as to matters of Utah law and Callister Nebeker & McCullough will rely upon the opinion of Mayer, Brown, Rowe & Maw LLP as to matters of New York law.
 
EXPERTS
 
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005 and management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005, as set forth in their reports, which are incorporated in this prospectus supplement by reference. Our consolidated financial statements and management’s assessment are incorporated by reference in reliance on Ernst & Young LLP’s reports given on their authority as experts in accounting and auditing.


S-49


Table of Contents

 
ANNEX A

FORM OF GLOBAL CERTIFICATE


Table of Contents

 
CUSIP 989701 20 6
 
93,610 UNITS
 
GLOBAL CERTIFICATE
 
ZIONS BANCORPORATION
EMPLOYEE STOCK OPTION APPRECIATION RIGHTS SECURITIES, SERIES 2006
 
evidencing the right to receive certain payments from Zions Bancorporation, a Utah corporation, upon the exercise from time to time of stock options comprising a reference pool of stock options to purchase common stock of the Company issued by the Company to certain of its employees (the options comprising this reference pool, the “Reference Options”). The Reference Options are listed and described in Exhibit A hereto.
 
     
Issue Date: July 5, 2006
   
     
First Payment Date:
  Final Payment Date:
July 15, 2007
  July 15, 2013
     
Issuing Agent, Paying Agent and Registrar:
   
Zions First National Bank
   
     
Certificate No. 1
   
    ZIONS BANCORPORATION
[SEAL]
   
     
   
    Name:
    Title:
     
    ZIONS FIRST NATIONAL BANK
     
   
    Name:
    Title:


Annex A - Page 1


Table of Contents

ZIONS BANCORPORATION
EMPLOYEE STOCK OPTION APPRECIATION RIGHTS SECURITIES, SERIES 2006
 
THIS GLOBAL CERTIFICATE DOES NOT REPRESENT AN INTEREST IN ZIONS BANCORPORATION, ANY OF ITS AFFILIATES OR ANY OF THE REFERENCE OPTIONS. NEITHER THIS CERTIFICATE NOR ANY PAYMENTS HEREUNDER ARE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR ANY OTHER PERSON.
 
THIS GLOBAL CERTIFICATE IS HELD BY THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT: (I) AS A WHOLE BY DTC TO A NOMINEE OF DTC; (II) BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC; OR (III) BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY, ALL WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
 
UNLESS THIS GLOBAL CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
 
This certifies that Cede & Co. is the registered owner of 93,610 units of Zions Bancorporation Employee Stock Option Appreciation Rights Securities, Series 2006 (the “ESOARS,” and each unit thereof, an “ESOARS Unit”), evidenced by this Global Certificate (this “Certificate”).
 
Section 1.  Definitions. Unless otherwise defined herein, capitalized terms shall have the respective meanings set forth in this Section 1.
 
(a) “Business Day” means any day other than (i) a Saturday or Sunday, or (ii) a day on which commercial banks in each of New York, New York and, if applicable, the city in which the principal office of the Paying Agent is located are authorized or obligated by law or executive order to be closed.
 
(b) “Certificate” is defined in the introductory paragraph immediately above this Section 1.
 
(c) “Company” means Zions Bancorporation, a Utah corporation.
 
(d) “Company Common Stock” means the common stock of the Company, no par value per share.
 
(e) “DTC” means The Depository Trust Company.
 
(f) “Event of Default” means either of the following events:
 
(i) the failure to make any payment as set forth in Section 3 or Section 4 below when the same becomes due and payable, and such failure continues for a period of 30 days; or
 
(ii) the failure to comply with any other covenant contained herein, which failure continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Holders of at least a majority of the ESOARS Units then outstanding.
 
(g) “ESOARS” and “ESOARS Units” are defined in the introductory paragraph immediately above this Section 1.
 
(h) “Holder” means any person or entity in whose name any ESOARS are registered, as determined as of the close of business on the applicable Record Date.


Annex A - Page 2


Table of Contents

(i) “Independent Valuation Agent” means any independent valuation agent designated by the Company.
 
(j) “Liquidation Event” is defined in Section 5.
 
(k) “Net Realized Value” means, for a particular Payment Period, (i) the amount, if any, by which (x) the trading price per share of Company Common Stock on The Nasdaq National Market (or other national stock exchange on which the Company Common Stock is then traded) at the time of exercise of a Reference Option, exceeds (y) the exercise price of such Reference Option, multiplied by (ii) the number of shares of Company Common Stock as to which such Reference Option was exercised on that date. If at the time of exercise, the Company Common Stock is not listed on The Nasdaq National Market or any other national stock exchange, the over-the-counter market or any other national securities exchange, the “trading price per share of Company Common Stock” referred to in the immediately preceding sentence shall be replaced with a fair market value per share of Company Common Stock as determined in good faith by the Company’s board of directors or an Independent Valuation Agent.
 
(l) “Paying Agent” means Zions First National Bank, as Issuing Agent, Paying Agent and Registrar for the ESOARS.
 
(m) “Payment Amount” means, with respect a particular Payment Period, an amount equal to 10% of the applicable Net Realized Value for such Payment Period.
 
(n) “Payment Date” means the 15th day of the month (or, if such 15th day is not a business day, the business day immediately following) following the end of a calendar quarter, beginning on or about July 15, 2007 and terminating on or about July 15, 2013; provided, however, that in the event of any payment due to be made pursuant to Section 4 below, the term “Payment Date” means the 15th day of the month (or, if such 15th day is not a business day, the business day immediately following) following the end of the applicable calendar quarter in which a qualifying modification of Reference Options occurs.
 
(o) “Payment Period” means the period (i) beginning on the first day of each calendar quarter (or in the case of the initial Payment Date, beginning on April 1, 2007), and (ii) ending on and including the last day of such calendar quarter.
 
(p) “Percentage Interest” means, as to a particular Holder at any time, the percentage obtained by dividing (i) the number of ESOARS Units owned of record by such Holder, by (ii) the total number of ESOARS Units then outstanding.
 
(q) “Physical Securities” is defined in Section 8(a).
 
(r) “Record Date” means the last calendar day of the calendar quarter preceding the applicable Payment Date (or, if such day is not a Business Day, then on the next Business Day).
 
(s) “Reference Options” means the stock options of the Company comprising the reference pool of stock options to purchase Company Common Stock, which stock options have been issued by the Company to certain of its employees, as set forth on Exhibit A attached hereto.
 
(t) “SFAS No. 123R” is defined in Section 4.
 
Section 2.  Issuing Agent, Paying Agent and Registrar. Initially, Zions First National Bank shall act as Issuing Agent, Paying Agent and Registrar. The Paying Agent shall keep a register of this Certificate and of its transfer and exchange. The Paying Agent shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and address of all Holders. The Company may change the Paying Agent without notice to any Holder. Any subsidiaries of the Company may act as Paying Agent or Registrar.
 
Section 3.  Payments.
 
(a) The Company shall deposit with the Paying Agent the applicable Payment Amount, if any, on or before the fifth Business Day of each month following the end of each calendar quarter, commencing July 6, 2007, for payment to Holders pursuant to Section 3(b) below.


Annex A - Page 3


Table of Contents

(b) Commencing on the First Payment Date specified above, and provided that (i) distributions are then payable and (ii) the Company has funded or caused to be funded adequate funds for and with respect to a particular Payment Date for payment to the Holders pursuant to Section 3(a) above, the Paying Agent shall, on or before the Payment Date, pay to each Holder, from funds deposited with the Paying Agent by the Company pursuant to Section 3(a) above, such Holder’s Percentage Interest of 10% of the Net Realized Value upon the exercise, if any, of Reference Options within the preceding Payment Period.
 
(c) All payments by the Paying Agent hereunder shall be by wire transfer in immediately-available funds to the account of the Holder entitled thereto at a bank or other entity having appropriate facilities therefor, if such Holder shall have provided the Paying Agent with wiring instructions no fewer than five Business Days prior to the Record Date for such payment (or, in the case of the payment on the First Payment Date, no later than July 1, 2007), or otherwise by check mailed to the address of such Holder appearing in the certificate register maintained by the Paying Agent.
 
(d) Except as set forth in Section 4 below, the ESOARS are limited in right of payment to the extent of exercises, if any, of Reference Options that create Net Realized Value. Any payment to a Holder hereunder is binding on such Holder and all future Holders and holders of any certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such payment is made upon this Certificate.
 
Section 4.  Modification of Reference Options.
 
(a) If one or more Reference Options is canceled or is modified in a manner that would be treated as an exchange pursuant to paragraph 51 of FASB Statement No. 123R, Share-Based Payment (“SFAS No. 123R”), the Company shall notify the Independent Valuation Agent within five (5) Business Days of such modification. Within 10 Business Days following receipt of such written notification, the Independent Valuation Agent shall determine the cancellation value of the modified Reference Option(s) in accordance with SFAS No. 123R, and shall notify the Company and the Paying Agent in writing of the cancellation value thereof. The Independent Valuation Agent’s determination of the cancellation value of the such Reference Option(s) shall be final and binding on all parties, absent manifest error. In the event that the Company determines that the Independent Valuation Agent’s determination of the cancellation value is due to manifest error, then the Company and the Independent Valuation Agent shall attempt to resolve the issue as soon as commercially practicable, and shall promptly communicate to the Paying Agent any such resolution.
 
(b) Subsequent to determination (or final determination, as applicable) of the cancellation value of the applicable Reference Options(s) and written notice thereof pursuant to Section 4(a) above, the Company shall deposit with the Paying Agent an amount equal to 10% of the cancellation value of such modified Reference Option(s) as determined (or as finally determined, as applicable) in accordance with Section 4(a) above, on or before the fifth Business Day of the month following the end of the calendar quarter in which a qualifying modification of Reference Option(s) occurs, for payment to the Holders. The Paying Agent shall thereafter, on or before the 15th day of such month, pay to each Holder its Percentage Interest of 10% of the cancellation value of the modified Reference Option(s).
 
Section 5.  Liquidation Events. Upon the occurrence of any of the following events (each such event, a “Liquidation Event”), the Reference Options shall be considered to be modified as described in Section 4(a) above, and the procedures contained in such Section 4(a) with respect to determination and payment of the applicable cancellation value shall be followed:
 
(a) a liquidation, dissolution or winding up of the Company;
 
(b) any consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the surviving entity’s voting power immediately after such consolidation, merger or reorganization; or
 
(c) a sale or other disposition of all or substantially all of the assets of the Company to a third party.


Annex A - Page 4


Table of Contents

Section 6.  Reports to Holders. No later than 15 days after each Payment Date, the Company shall deliver or cause to be delivered to each Holder a written report, as set forth in clauses (a) and (b) of this Section 6, relating to payments made on the applicable Payment Date.
 
(a) With respect to payments made pursuant to Section 3 above, the report shall set forth, with respect to the applicable Payment Period, information such as (i) the number of Reference Options exercised during the preceding quarter; (ii) the stock price at which the Reference Options were exercised; (iii) the number of Reference Options forfeited, if any, upon the termination of any optionee employee’s employment with the Company; and (iv) the calculation of the distribution with respect to each ESOARS Unit.
 
(b) With respect to payments made pursuant to Section 4 above, the report shall set forth, with respect to the applicable Payment Period, information such as (i) the number of Reference Options deemed canceled or modified and qualifying as exchanged pursuant to paragraph 51 of SFAS No. 123R during the preceding quarter; (ii) the cancellation value thereof, as determined pursuant to Section 4(a); and (iii) the calculation of the distribution with respect to each ESOARS Unit.
 
Section 7.  Transfer and Exchange of Beneficial Interests in the Certificate; Transfer Taxes. The transfer and exchange of beneficial interests in this Certificate shall be effected through DTC in accordance with its rules and procedures that apply to such transfer or exchange. No service charge will be imposed to a holder of any beneficial interest in this Certificate or to a Holder of this Certificate for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge that may be imposed in connection therewith.
 
Section 8.  Issuance of Physical Securities; Transfer and Exchange of Certificate.
 
(a) Securities in definitive registered form representing ESOARS Units (“Physical Securities”) shall be transferred to all beneficial owners in exchange for their beneficial interests in this Certificate upon the occurrence of the following events:
 
(i) DTC delivers written notice to the Company that it is unwilling or unable to continue acting as the depositary, or DTC has ceased to be a clearing agency registered under the Securities Exchange Act of 1934, and in either case the Company fails to appoint a successor depositary within 60 days after the date of such notice from DTC; or
 
(ii) the Company in its sole discretion determines that that Certificate (in whole but not in part) should be exchanged for Physical Securities, and delivers written notice to that effect to DTC; or
 
(iii) there has occurred and is continuing an Event of Default and the Paying Agent has received a written request from DTC to issue Physical Securities.
 
(b) In connection with any transfer or exchange of a portion of the beneficial interest in the Certificate to beneficial owners pursuant to Section 8(a) above, such Certificate shall be deemed to be surrendered to the Paying Agent for cancellation and Physical Securities shall be issued to and in the names of such beneficial owners identified by DTC in writing to the Paying Agent and the Company, in exchange for its beneficial interest in the Certificate.
 
Section 9.  Persons Deemed Owners. The registered Holder of this Certificate may be treated as its owner for all purposes.
 
Section 10.  CUSIP Number. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused a CUSIP number to be printed on this Certificate. No representation is made as to the accuracy of such number either as printed on this Certificate or as contained in any notice.
 
Section 11.  Amendment, Supplement and Waiver. This Certificate may be amended or supplemented with the written consent of Holders of at least a majority of the ESOARS Units then outstanding, and any existing default or compliance with any provision hereof may be waived with the written consent of Holders of at least a majority of the ESOARS Units then outstanding.


Annex A - Page 5


Table of Contents

Section 12.  Assignment by Company. The rights and obligations of the Company under this Certificate may be transferred or assigned by the Company in its sole discretion without the consent of any Holder.
 
Section 13.  Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given upon delivery if delivered by hand (against receipt), or as of the date of delivery as shown on the receipt if mailed at a post office in the United States by registered or certified mail, postage prepaid, return receipt requested, or as of the date of acknowledgment if transmitted by facsimile transmission or other telecommunication equipment, in any case addressed (A) if to the Company, to Zions Bancorporation, One South Main Street, Salt Lake City, UT 84111, attention Corporate Secretary, (B) if to the Holder, to the address of the Holder shown on the Certificate Register, (C) if to the Paying Agent, to such address as provided by the Paying Agent to the Company and the Holders in writing, or to such other address(es) as the Company, the Holders and the Paying Agent shall have designated each other in writing.
 
Section 14.  Governing LawThis Certificate shall be construed in accordance with the internal laws of the State of New York (including Section 5-1401 of the General Obligations Laws of New York, but otherwise without regard to conflicts of law principles), and the obligations, rights and remedies of the Holder hereof shall be determined in accordance with such laws.


Annex A - Page 6


Table of Contents

EXHIBIT A
 
DESCRIPTION OF REFERENCE OPTIONS
 
[on file with Zions Bancorporation]


Annex A - Page 7


Table of Contents

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL CERTIFICATE
 
The following exchanges of a part of this Global Certificate for an interest in another Global Certificate or for a Definitive Security, or exchanges of a part of another Global Certificate or Definitive Security for an interest in this Global Certificate, have been made:
 
 
                 
            Number of
   
    Amount of
  Amount of
  ESOARS under
   
    Decrease in
  Increase in
  this
   
    Number of
  Number of
  Global Certificate
   
    ESOARS under
  ESOARS under
  following such
  Signature of
    this Global
  this Global
  decrease
  authorized officer
Date of Exchange   Certificate   Certificate   (or increase)   of Paying Agent
 
.
               
                 
                 
                 
                 
                 
                 
                 


Annex A - Page 8


Table of Contents

ASSIGNMENT FORM
 
For value received _ _
does hereby sell, assign and transfer unto
 
Please insert Social Security Number or
other identifying number of assignee
 
Please print or type name and address,
including zip code, of assignee:
 
the within Global Certificate and does hereby irrevocably constitute and appoint _ _Attorney to transfer the Global Certificate on the books of the Company with full power of substitution in the premises.
 
     
Date: _ _   Your Signature: _ _
    (The signature to this assignment must
correspond with the name as written upon the
face of the within Global Certificate in every
particular, without alteration or enlargement or
any change whatsoever)


Annex A - Page 9


Table of Contents

 
ANNEX B
 
ZIONS BANCORPORATION 2005 STOCK PLAN OPTION AND INCENTIVE PLAN


Table of Contents

ZIONS BANCORPORATION
 
2005 STOCK OPTION AND INCENTIVE PLAN
 
ARTICLE I
 
GENERAL
 
1.1  Purpose
 
The purpose of the Zions Bancorporation 2005 Stock Option and Incentive Plan (the “Plan”) is to promote the long-term success of Zions Bancorporation (the “Company”) by providing an incentive for officers, employees and directors of, and consultants and advisors to, the Company and its Related Entities to acquire a proprietary interest in the success of the Company, to remain in the service of the Company and/or Related Entities, and to render superior performance during such service.
 
1.2  Definitions of Certain Terms
 
(a) “Award” means an award under the Plan as described in Section 1.5 and Article II.
 
(b) “Award Agreement” means a written agreement entered into between the Company and a Grantee in connection with an Award.
 
(c) “Board” means the Board of Directors of the Company.
 
(d) “Cause” Termination of Employment by the Company for “Cause” means, with respect to a Grantee and an Award, (i) except as provided otherwise in the applicable Award Agreement or as provided in clause (ii) below, Termination of Employment of the Grantee by the Company (A) upon Grantee’s failure to substantially perform Grantee’s duties with the Company or a Related Entity (other than any such failure resulting from death or Disability), (B) upon Grantee’s failure to substantially follow and comply with the specific and lawful directives of the Board or any officer of the Company or a Related Entity to whom Grantee directly or indirectly reports, (C) upon Grantee’s commission of an act of fraud or dishonesty resulting in actual or potential economic, financial or reputational injury to the Company or a Related Entity, (D) upon Grantee’s engagement in illegal conduct, gross misconduct or an act of moral turpitude, (E) upon Grantee’s violation of any written policy, guideline, code, handbook or similar document governing the conduct of directors, officers or employees of the Company or its Related Entities, or (F) upon Grantee’s engagement in any other similar conduct or act determined by the Committee in its discretion to constitute “cause”; or (ii) in the case of directors, officers or employees who at the time of the Termination of Employment are entitled to the benefits of a change in control, employment or similar agreement entered into by the Company or a Related Entity that defines or addresses termination for cause, termination for cause as defined and/or determined pursuant to such agreement. In the event that there is more than one such agreement, the Executive Compensation Committee shall determine which agreement shall govern.
 
(e) “Code” means the Internal Revenue Code of 1986, as amended.
 
(f) “Committee” means the Executive Compensation Committee (including any successor thereto) of the Board and shall consist of not less than two directors. However, if (i) a member of the Executive Compensation Committee is not an “outside director” within the meaning of Section 162(m) of the Code, is not a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, or is not an “independent director” within the meaning of Nasdaq Market Rule 4350 (c), or (ii) the Executive Compensation Committee otherwise in its discretion determines, then the Executive Compensation Committee may from time to time delegate some or all of its functions under the Plan to a subcommittee composed of members of the Executive Compensation Committee that, if relevant, meet the necessary requirements. The term “Committee” includes the Executive Compensation Committee or any such subcommittee, to the extent of the Executive Compensation Committee’s delegation.
 
(g) “Common Stock” means the common stock of the Company.


Annex B - Page 1


Table of Contents

(h) “Disability” means, with respect to a Grantee and an Award, (i) except as provided in the applicable Award Agreement or as provided in clause (ii) below, “disability” as defined in the Company’s long-term disability plan in which Grantee is participating; or (ii) in the case of directors, officers or employees who at the time of the Termination of Employment are entitled to the benefits of a change in control, employment or similar agreement entered into by the Company or a Related Entity that defines or addresses termination because of disability, “disability” as defined in such agreement. In the event that there is more than one such agreement, the Committee shall determine which agreement shall govern. Notwithstanding the foregoing, (A) in the case of an Incentive Stock Option, the term “Disability” for purposes of the preceding sentence shall have the meaning given to it by Section 422 (c)(6) of the Code and (B) to the extent an Award is subject to the provisions of Section 409A of the Code and in order for compensation provided under any Award to avoid the imposition of taxes under Section 409A of the Code, then a Grantee shall be determined to have suffered a Disability only if such Grantee is “disabled” within the meaning of Section 409A of the Code.
 
(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(j) The “Fair Market Value” of a share of Common Stock on any date shall be (i) the closing sale price per share of Common Stock during normal trading hours on the national securities exchange, association or other market on which the Common Stock is principally traded for such date or the last preceding date on which there was a sale of such Common Stock on such exchange, association or market, or (ii) if the shares of Common Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock during normal trading hours in such over-the-counter market for such date or the last preceding date on which there was a sale of such Common Stock in such market, or (iii) if the shares of Common Stock are not then listed on a national securities exchange, association or other market or traded in an over-the-counter market, such value as the Committee, in its discretion shall determine.
 
(k) “Grantee” means a person who receives an Award.
 
(l) “Incentive Stock Option” means, subject to Section 2.3 (f), a stock option that is intended to qualify for special federal income tax treatment pursuant to Sections 421 and 422 of the Code (or a successor provision thereof) and which is so designated in the applicable Award Agreement. Under no circumstances shall any stock option that is not specifically designated as an Incentive Stock Option be considered an Incentive Stock Option.
 
(m) “Key Persons” means then acting or prospective directors, officers and employees of the Company or of a Related Entity, and then acting or prospective consultants and advisors to the Company or a Related Entity.
 
(n) “Non-Employee Director” has the meaning given to it in Section 2.13(a).
 
(o) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee in its discretion to be applicable to a Grantee with respect to an Award. As determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted or measured level or levels of achievement or change using one or more of the following measures: (i) revenue, (ii) earnings per share, (iii) net income, (iv) return on assets, (v) return on equity, (vi) stock price, (vii) economic profit or shareholder value added, and (viii) total shareholder return. Such measures may be defined and calculated in such manner and detail as the Committee in its discretion may determine, including whether such measures shall be calculated before or after income taxes or other items, the degree or manner in which various items shall be included or excluded from such measures, whether total assets or certain categories of assets shall be used, whether such measures shall be applied to the Company on a consolidated basis or to certain Related Parties of the Company or to certain divisions, operating units or business lines of the Company or a Related Entity, the weighting that shall be given to various measures if combined goals are used, and the periods and dates during or on which such measures shall be calculated. The Performance Goals may differ from Grantee to Grantee and from Award to Award.
 
(p) “Person”, whether or not capitalized, means any natural person, any corporation, partnership, limited liability company, trust or legal or contractual entity or joint undertaking and any governmental authority.


Annex B - Page 2


Table of Contents

(q) “Related Entity” means any corporation, partnership, limited liability company or other entity that is an “affiliate” of the Company within the meaning of Rule 12b-2 under the Exchange Act.
 
(r) “Retirement” means, with respect to a Grantee and an Award, (i) except as otherwise provided in the applicable Award Agreement or as provided in clause (ii) below, the Grantee’s Termination of Employment with the Company or a Related Entity for a reason other than for Cause and that at the time of the Termination of Employment the Grantee has reached the following age with the corresponding number of years of service with the Company and/or Related Entities:
 
         
     Age   Years of Service
 
55
    10  
56
    9  
57
    8  
58
    7  
59
    6  
60 and older
    5  
 
or (ii) with respect to a Non-Employee Director, the Grantee’s Termination of Employment with the Company at the end of his or her term of office for any reason other than Cause.
 
(s) “Rule 16b-3” means Rule 16b-3 under the Exchange Act.
 
(t) Unless otherwise determined by the Committee and subject to the following sentence, a Grantee shall be deemed to have a “Termination of Employment” upon ceasing employment with the Company or any Related Entity (or, in the case of a Grantee who is not an employee, upon ceasing association with the Company or any Related Entity as a director, consultant, advisor or otherwise). Unless the Committee in its discretion determines otherwise, it shall not be considered a Termination of Employment of a Grantee if the Grantee ceases employment or association with the Company or a Related Entity but continues or immediately commences employment or association with a majority-owned Related Entity or the Company. The Committee in its discretion may determine (i) that a given termination of employment with the Company or any particular Related Entity does not constitute a Termination of Employment (including circumstances in which employment continues with another Related Entity or the Company), (ii) whether any leave of absence constitutes a Termination of Employment for purposes of the Plan, (iii) the impact, if any, of any such leave of absence on Awards theretofore made under the Plan, and (iv) when a change in a Grantee’s association with the Company or any Related Entity constitutes a Termination of Employment for purposes of the Plan. The Committee may also determine in its discretion whether a Grantee’s Termination of Employment is for Cause and the date of termination in such case. The Committee may make any such determination at anytime, whether before or after the Grantee’s Termination of Employment.
 
1.3  Administration
 
(a) The Committee. The Plan shall be administered by the Committee, which shall consist of not less than two directors.
 
(b) Authority. The Committee shall have the authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and any Award Agreements, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (iv) to make all determinations necessary or advisable in administering the Plan (including defining and calculating Performance Goals and certifying that such Performance Goals have been met), (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan, (vi) to amend the Plan to reflect changes in applicable law or regulations, (vii) to determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, canceled, forfeited or suspended (including, but not limited to, canceling an Award in exchange for a cash payment (or securities with an equivalent value) equal to the difference between the Fair Market Value of a share of Common Stock on the date of grant and the Fair Market Value of a share of Common


Annex B - Page 3


Table of Contents

Stock on the date of cancellation, and, if no such difference exists, canceling an Award without a payment in cash or securities), and (viii) to determine whether, to what extent and under what circumstances cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee.
 
(c) Voting. Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting.
 
(d) Binding determinations. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be final, binding and conclusive.
 
(e) Exculpation. No member of the Board or the Committee or any officer, employee or agent of the Company or any of its Related Entities (each such person a “Covered Person”) shall have any liability to any person (including, without limitation, any Grantee) for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award. Each Covered Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan and against and from any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person; provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Articles of Incorporation or Bylaws, in each case as amended from time to time, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.
 
(f) Experts. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board may obtain and may rely upon the advice of experts, including professional and financial advisors and consultants to the Committee or the Company. No director, officer, employee or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith reliance on such advice.
 
(g) Board. Notwithstanding anything to the contrary contained herein (i) until the Board shall appoint the members of the Committee, the Plan shall be administered by the Board, and (ii) the Board may, in its sole discretion, at any time and from time to time, grant Awards or resolve to administer the Plan. In either of the foregoing events, the Board shall have all of the authority and responsibility granted to the Committee herein.
 
1.4  Persons Eligible for Awards
 
Awards under the Plan may be made to such Key Persons as the Committee shall select in its discretion.
 
1.5  Types of Awards under the Plan
 
Awards may be made under the Plan in the form of stock options, including Incentive Stock Options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units, dividend equivalent units, deferred stock units and other stock-based Awards, as set forth in Article II.


Annex B - Page 4


Table of Contents

1.6  Shares Available for or Subject to Awards
 
(a) Total shares available. The total number of shares of Common Stock that may be transferred pursuant to Awards granted under the Plan shall not exceed 8,900,000 shares. All of such shares shall be authorized for issuance pursuant to incentive stock options under Section 2.3 or for other Awards under Article II. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan. If any Award is forfeited or otherwise terminates or is canceled without the delivery of shares of Common Stock, then the shares covered by such forfeited, terminated or canceled Award shall again become available for transfer pursuant to Awards granted or to be granted under this Plan. However, if any Award or shares of Common Stock issued or issuable under Awards are tendered or withheld as payment for the exercise price of an Award, the shares of Common Stock may not be reused or reissued or otherwise be treated as being available for Awards or issuance pursuant to the Plan. With respect to a stock appreciation right, both shares of Common Stock issued pursuant to the Award and shares of Common Stock representing the exercise price of the Award shall be treated as being unavailable for other Awards or other issuances pursuant to the Plan unless the stock appreciation right is forfeited, terminated or cancelled without the delivery of shares of Common Stock. Any shares of Common Stock delivered by the Company, any shares of Common Stock with respect to which Awards are made by the Company and any shares of Common Stock with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired entity, shall not be counted against the shares available for Awards under this Plan.
 
(b) Treatment of Certain Awards. Any shares of Common Stock subject to Awards shall be counted against the numerical limits of this Section 1.6 as one share for every share subject thereto, except that any shares of Common Stock subject to Awards with a per share or unit purchase price lower than 100% of Fair Market Value of a share of Common Stock on the date of grant shall be counted against the numerical limits of this Section 1.6 as 3 shares for every one share subject thereto.
 
(c) Adjustments. The number of shares of Common Stock covered by each outstanding Award, the number or amount of shares or units available for Awards under Section 1.6 (a) or otherwise, the number or amount of shares or units that may be subject to Awards to any one Grantee under Section 1.7 (b) or otherwise, the price per share of Common Stock or units covered by each such outstanding Award and any other calculation relating to shares of Common Stock available for Awards or under outstanding Awards (including Awards under Section 2.13) may be proportionately adjusted, as the Committee may determine in its discretion to be appropriate, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, for (i) any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Common Stock or similar transaction, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company or to reflect any distributions to holders of Common Stock (including rights offerings) other than regular cash dividends or (ii) any other unusual or nonrecurring event affecting the Company or its financial statements or any change in applicable law, regulation or accounting principles; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award. After any adjustment made pursuant to this paragraph, the number of shares subject to each outstanding Award shall be rounded to the nearest whole number.
 
(d) Grants exceeding allotted shares. If the shares of Common Stock covered by an Award exceeds, as of the date of grant, the number of shares of Common Stock which may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess shares of Common


Annex B - Page 5


Table of Contents

Stock unless shareholder approval of an amendment sufficiently increasing the number of shares of Common Stock subject to the Plan is timely obtained in accordance with the Plan.
 
1.7  Regulatory Considerations
 
(a) General. To the extent that the Committee determines it desirable for any Award to be given any particular tax, accounting, legal or regulatory treatment, the Award may be made by a Committee consisting of qualifying directors, subject to any necessary restrictions, conditions or other terms or otherwise in such manner as is necessary to obtain the desired treatment.
 
(b) Code Section 162(m) provisions. Unless and until the Committee determines that an Award to a Grantee shall not be designed to qualify as “performance-based compensation” under Section 162(m) of the Code, the following rules shall apply to Awards granted to Grantees:
 
(i) No Grantee shall be granted, in any fiscal year, stock options or stock appreciation rights to purchase (or obtain the benefits of the equivalent of) more than 500,000 shares of Common Stock;
 
(ii) No Grantee shall be granted, in any fiscal year, more than 166,666 shares of restricted stock, unrestricted stock, restricted stock units or performance shares;
 
(iii) No Grantee shall receive performance units, in any fiscal year, having a value greater than $5 million, provided that if any units are awarded with respect to multiple years of service, such limit shall be multiplied by such number of years (not to exceed five years).
 
(iv) No Grantee shall be granted, in any fiscal year, dividend equivalent rights with respect to more shares than the aggregate number of shares and units granted to such Grantee in such year; and
 
(v) For purposes of qualifying grants of Awards as “performance-based compensation” under Section 162(m) of the Code, the Committee in its discretion may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Awards to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting share Awards which are intended to qualify under Section 162(m) of the Code, the Committee shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
 
1.8  No Repricing
 
Without consent of the Company’s shareholders, the exercise price (or equivalent) for an Award may not be reduced. This shall include, without limitation, a repricing of the Award as well as an Award exchange program whereby the Grantee agrees to cancel an existing Award in exchange for a new Award.
 
ARTICLE II
 
AWARDS UNDER THE PLAN
 
2.1  Awards and Award Agreements
 
Each Award granted under the Plan shall be evidenced by an Award Agreement which shall contain such provisions as the Committee in its discretion deems necessary or desirable. Such provisions may include restrictions on the Grantee’s right to transfer the shares of Common Stock issuable pursuant to the Award, a requirement that the Grantee become a party to an agreement restricting transfer or allowing repurchase of any shares of Common Stock acquired pursuant to the Award, a requirement that the Grantee acknowledge that such shares are acquired for investment purposes only, and a right of first refusal exercisable by the Company in the event that the Grantee wishes to transfer any such shares. The Committee may grant Awards in tandem or in connection with or independently of or in substitution for any other Award or Awards granted under this Plan or any award granted under any other plan of the Company. Payments or transfers to be made by the Company upon the grant, exercise or payment of an Award may be made in such form as the Committee shall determine, including cash, shares of Common Stock or other securities (or proceeds from the sale thereof),


Annex B - Page 6


Table of Contents

other Awards (by surrender or cancellation thereof or otherwise) or other property and may be made in a single payment or transfer, in installments or on a deferred basis. The Committee may determine that a Grantee shall have no rights with respect to an Award unless such Grantee accepts the Award within such period as the Committee shall specify by executing an Award Agreement in such form as the Committee shall determine and, if the Committee shall so require, makes payment to the Company in such amount as the Committee may determine. The Committee shall determine if loans (whether or not secured by shares of Common Stock) may be extended, guaranteed or arranged by the Company with respect to any Awards; provided, however, that loans to executive officers of the Company may not be extended, guaranteed or arranged by the Company in violation of Section 402 of the Sarbanes-Oxley Act of 2002, Regulation O of the Board of Governors of the Federal Reserve System or any other applicable law or regulation. Subject to the terms of the Plan, the Committee at any time, whether before or after the grant, expiration, exercise, vesting or maturity of an Award or the Termination of Employment of a Grantee, may determine in its discretion to waive or amend any term or condition of an Award, including transfer restrictions, vesting, maturity and expiration dates, and conditions for vesting, maturity or exercise.
 
2.2  No Rights as a Shareholder
 
No Grantee of an Award (or other person having rights pursuant to such Award) shall have any of the rights of a shareholder of the Company with respect to shares subject to such Award until the transfer of such shares to such person. Except as otherwise provided in Section 1.6(c), no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such shares are issued.
 
2.3  Grant of Stock Options, Stock Appreciation Rights and Additional Options
 
(a) Grant of stock options. The Committee may grant stock options, including Incentive Stock Options and nonqualified stock options, to purchase shares of Common Stock from the Company, to such Key Persons, in such amounts and subject to such terms and conditions (including the attainment of Performance Goals), as the Committee shall determine in its discretion, subject to the provisions of the Plan.
 
(b) Grant of stock appreciation rights. The Committee may grant stock appreciation rights to such Key Persons, in such amounts and subject to such terms and conditions (including the attainment of Performance Goals), as the Committee shall determine in its discretion, subject to the provisions of the Plan. Stock appreciation rights may be granted in connection with all or any part of, or independently of, any stock option granted under the Plan. A stock appreciation right may be granted at or after the time of grant of such option.
 
(c) Stock appreciation rights. The Grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable Award Agreement, to receive from the Company an amount equal to (i) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over (ii) the exercise price of such right as set forth in the Award Agreement (if the stock appreciation right is granted in connection with a stock option, then the exercise price of the option), multiplied by (iii) the number of shares with respect to which the stock appreciation right is exercised. Payment to the Grantee upon exercise of a stock appreciation right shall be made in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or both, as the Committee shall determine in its discretion. Upon the exercise of a stock appreciation right granted in connection with a stock option, the number of shares subject to the option shall be correspondingly reduced by the number of shares with respect to which the stock appreciation right is exercised. Upon the exercise of a stock option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be reduced correspondingly by the number of shares with respect to which the option is exercised.
 
(d) Exercise price. Each Award Agreement with respect to a stock option or stock appreciation right shall set forth the exercise price, which shall be determined by the Committee in its discretion; provided, however, that the exercise price shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the Award is granted (except as permitted in connection with the assumption or issuance of options or stock appreciation rights in a transaction to which Section 424 (a) of the Code applies).


Annex B - Page 7


Table of Contents

(e) Exercise periods. Each Award Agreement with respect to a stock option or stock appreciation right shall set forth the periods during which the Award evidenced thereby shall be exercisable, and, if applicable, the conditions which must be satisfied (including the attainment of Performance Goals) in order for the Award evidenced thereby to be exercisable, whether in whole or in part. Such periods and conditions shall be determined by the Committee in its discretion; provided, however, that no stock option or stock appreciation right shall be exercisable more than ten (10) years after the date the Award is issued.
 
(f) Incentive stock options. Notwithstanding Section 2.3(d) and (e), with respect to any Incentive Stock Option or stock appreciation right granted in connection with an Incentive Stock Option (i) the exercise price shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the option is granted (except as permitted in connection with the assumption or issuance of options in a transaction to which Section 424(a) of the Code applies) and (ii) the exercise period shall not be for longer than ten (10) years after the date of the grant. To the extent that the aggregate Fair Market Value (determined as of the time the option is granted) of the shares of Common Stock with respect to which Incentive Stock Options and stock appreciation rights granted in connection with Incentive Stock Options granted under this Plan and all other plans of the Company are first exercisable by any Grantee during any calendar year shall exceed the maximum limit (currently, $100,000), if any, imposed from time to time under Section 422 of the Code, such options and rights shall be treated as nonqualified stock options. For purposes of this Section 2.3(f), Incentive Stock Options shall be taken into account in the order in which they were granted.
 
(g) Ten percent owners. Notwithstanding the provisions of Sections 2.3(d), (e) and (f), to the extent required under Section 422 of the Code, an Incentive Stock Option may not be granted under the Plan to an individual who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of his or her employer corporation or of its parent or subsidiary corporations (as such ownership may be determined for purposes of Section 422(b)(6) of the Code) unless (i) at the time such Incentive Stock Option is granted the exercise price is at least 110% of the Fair Market Value of the shares subject thereto, and (ii) the Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the date granted.
 
2.4  Exercise of Stock Options and Stock Appreciation Rights
 
Each stock option or stock appreciation right granted under the Plan shall be exercisable as follows:
 
(a) Exercise period. A stock option or stock appreciation right shall become and cease to be exercisable at such time or times as determined by the Committee.
 
(b) Manner of exercise. Unless the applicable Award Agreement otherwise provides, a stock option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such Award is then exercisable (but, in any event, only for whole shares). A stock appreciation right granted in connection with an option may be exercised at any time when, and to the same extent that, the related option may be exercised. A stock option or stock appreciation right shall be exercised by written notice to the Company, on such form and in such manner as the Committee shall prescribe.
 
(c) Payment of exercise price. Any written notice of exercise of a stock option shall be accompanied by payment of the exercise price for the shares being purchased. Such payment shall be made (i) in cash (by certified check or as otherwise permitted by the Committee), or (ii) to the extent specified in the Award Agreement or otherwise permitted by the Committee in its discretion (A) by delivery of shares of Common Stock (which, if acquired pursuant to the exercise of a stock option or under an Award made under this Plan or any other compensatory plan of the Company, were acquired at least six (6) months prior to the option exercise date) having a Fair Market Value (determined as of the exercise date) equal to all or part of the exercise price and cash for any remaining portion of the exercise price, (B) to the extent permitted by law, by such other method as the Committee may from time to time prescribe, including a cashless exercise procedure through a broker-dealer.
 
(d) Delivery of shares. Promptly after receiving payment of the full exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment by the Company will be made partly or entirely in shares of Common Stock, the Company shall, subject to the provisions of Section 3.3 (relating to


Annex B - Page 8


Table of Contents

certain restrictions), transfer to the Grantee or to such other person as may then have the right to exercise the Award, the shares of Common Stock for which the Award has been exercised and to which the Grantee is entitled. If the method of payment employed upon option exercise so requires, and if applicable law permits, a Grantee may direct the Company to deliver the shares to the Grantee’s broker-dealer.
 
2.5  Cancellation and Termination of Stock Options and Stock Appreciation Rights
 
The Committee may, at any time prior to the occurrence of a change of control and in its discretion, determine that any outstanding stock options and stock appreciation rights granted under the Plan, whether or not exercisable, will be canceled and terminated and that in connection with such cancellation and termination the holder of such options (and stock appreciation rights not granted in connection with an option) may receive for each share of Common Stock subject to such Award a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the amount determined by the Committee to be the Fair Market Value of the shares of Common Stock and the applicable exercise price per share multiplied by the number of shares of Common Stock subject to such Award; provided that, if such product is zero or less or to the extent that the Award is not then exercisable, the stock options and stock appreciation rights will be canceled and terminated without payment therefore.
 
2.6  Termination of Employment
 
(a) Termination of Employment by Grantee for any Reason or By the Company for Cause. Except to the extent otherwise provided in paragraphs (b), (c), (d) and (e) below or in the applicable Award Agreement, all stock options and stock appreciation rights whether or not vested and to the extent not theretofore exercised shall terminate immediately upon (i) the Grantee’s Termination of Employment at Grantee’s election for any reason or (ii) Grantee’s Termination of Employment by the Company for Cause.
 
(b) At election of Company or a Related Entity. Except to the extent otherwise provided in the applicable Award Agreement, upon the Termination of Employment of a Grantee at the election of the Company or a Related Entity (other than in circumstances governed by paragraph (a) above or paragraphs (c), (d) or (e) below) the Grantee may exercise any outstanding stock option or stock appreciation right on the following terms and conditions: (i) exercise may be made only to the extent that the Grantee was entitled to exercise the Award on the date of the Termination of Employment; and (ii) exercise must occur within three (3) months after the Termination of Employment but in no event after the expiration date of the Award as set forth in the Award Agreement.
 
(c) Retirement. Except to the extent otherwise provided in the applicable Award Agreement, upon the Termination of Employment of a Grantee by reason of the Grantee’s Retirement, the Grantee may exercise any outstanding stock option or stock appreciation right on the following terms and conditions: (i) exercise may be made only to the extent that the Grantee was entitled to exercise the Award on the date of Retirement; (ii) exercise must occur within three (3) years after Retirement but in no event after the expiration date of the Award as set forth in the Award Agreement; and (iii) notwithstanding clause (ii) above, the option or right shall terminate on the date Grantee begins or agrees to begin employment with another company that is in the financial services industry unless such employment is specifically approved by the Committee.
 
(d) Disability. Except to the extent otherwise provided in the applicable Award Agreement, upon the termination of Employment of a Grantee by reason of Disability the Grantee may exercise any outstanding stock option or stock appreciation right on the following terms and conditions: (i) exercise may be made only to the extent that the Grantee was entitled to exercise the Award on the date of Termination of Employment; and (ii) exercise must occur six (6) months after the Termination of Employment but in no event after the expiration date of the Award as set forth in the Award Agreement.
 
(e) Death. Except to the extent otherwise provided in the applicable Award Agreement, if a Grantee dies during the period in which the Grantee’s stock options or stock appreciation rights are exercisable, whether pursuant to their terms or pursuant to paragraph (b), (c) or (d) above, any outstanding stock option or stock appreciation right shall be exercisable on the following terms and conditions: (i) exercise may be made only to the extent that the Grantee was entitled to exercise the Award on the date of death; and (ii) exercise must


Annex B - Page 9


Table of Contents

occur six (6) months after the date of the Grantee’s death. Any such exercise of an Award following a Grantee’s death shall be made only by the Grantee’s executor or administrator, unless the Grantee’s will specifically disposes of such Award, in which case such exercise shall be made only by the recipient of such specific disposition. If a Grantee’s executor (or administrator) or the recipient of a specific disposition under the Grantee’s will shall be entitled to exercise any Award pursuant to the preceding sentence, such executor (or administrator) or recipient shall be bound by all the terms and conditions of the Plan and the applicable Award Agreement which would have applied to the Grantee.
 
2.7  Grant of Restricted Stock and Unrestricted Stock
 
(a) Grant of restricted stock. The Committee may grant restricted shares of Common Stock to such Key Persons, in such amounts and subject to such terms and conditions (including the attainment of Performance Goals), as the Committee shall determine in its discretion, subject to the provisions of the Plan.
 
(b) Grant of unrestricted stock. The Committee may grant unrestricted shares of Common Stock to such Key Persons, in such amounts and subject to such terms and conditions as the Committee shall determine in its discretion, subject to the provisions of the Plan.
 
(c) Rights as shareholder. The Company may issue in the Grantee’s name shares of Common Stock covered by an Award of restricted stock or unrestricted stock. Upon the issuance of such shares, the Grantee shall have the rights of a shareholder with respect to the restricted stock or unrestricted stock, subject to the transfer restrictions and the Company’s repurchase rights described in paragraphs (d) and (e) below and to such other restrictions and conditions as the Committee in its discretion may include in the applicable Award Agreement.
 
(d) Company to hold certificates. Unless the Committee shall otherwise determine, any certificate issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the Plan or the applicable Award Agreement.
 
(e) Nontransferable. Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided in this Plan or the applicable Award Agreement. The Committee at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of Performance Goals) and other conditions on which the non-transferability of the restricted stock shall lapse. Unless the applicable Award Agreement provides otherwise, additional shares of Common Stock or other property distributed to the Grantee in respect of shares of restricted stock, as dividends or otherwise, shall be subject to the same restrictions applicable to such restricted stock. The Committee at any time may waive or amend the transfer restrictions or other condition of an Award of restricted stock.
 
(f) Termination of employment. Except to the extent otherwise provided in the applicable Award Agreement or unless otherwise determined by the Committee, in the event of the Grantee’s Termination of Employment for any reason, shares of restricted stock that remain subject to transfer restrictions as of the date of such termination shall be forfeited and canceled.
 
2.8  Grant of Restricted Stock Units
 
(a) Grant of restricted stock units. The Committee may grant Awards of restricted stock units to such Key Persons, in such amounts and subject to such terms and conditions (including the attainment of Performance Goals), as the Committee shall determine in its discretion, subject to the provisions of the Plan.
 
(b) Vesting. The Committee, at the time of grant, shall specify the date or dates on which the restricted stock units shall become vested and other conditions to vesting (including the attainment of Performance Goals).
 
(c) Maturity dates. At the time of grant, the Committee shall specify the maturity date or dates applicable to each grant of restricted stock units, which may be determined at the election of the Grantee if the Committee so determines. Such date may be on or later than, but may not be earlier than, the vesting date or dates of the Award. On the relevant maturity date(s), the Company shall transfer to the Grantee one


Annex B - Page 10


Table of Contents

unrestricted, fully transferable share of Common Stock for each vested restricted stock unit scheduled to be paid out on such date and as to which all other conditions to the transfer have been fully satisfied. The Committee shall specify the purchase price, if any, to be paid by the Grantee to the Company for such shares of Common Stock.
 
(d) Termination of Employment. Except to the extent otherwise provided in the applicable Award Agreement or unless otherwise determined by the Committee, in the event of the Grantee’s Termination of Employment for any reason, restricted stock units that have not vested or matured shall be forfeited and canceled.
 
2.9  Grant of Performance Shares and Performance Units
 
(a) Grant of performance shares and units. The Committee may grant performance shares in the form of actual shares of Common Stock or share units over an identical number of shares of Common Stock, to such Key Persons, in such amounts (which may depend on the extent to which Performance Goals are attained), subject to the attainment of such Performance Goals and satisfaction of such other terms and conditions (which may include the occurrence of specified dates), as the Committee shall determine in its discretion, subject to the provisions of the Plan. The Performance Goals and the length of the performance period applicable to any Award of performance shares or performance units shall be determined by the Committee. The Committee shall determine in its discretion whether performance shares granted in the form of share units shall be paid in cash, Common Stock, or a combination of cash and Common Stock.
 
(b) Company to hold certificates. Unless the Committee shall otherwise determine, any certificate issued evidencing performance shares shall remain in the possession of the Company until such performance shares are earned and are free of any restrictions specified in the Plan or the applicable Award Agreement.
 
(c) Nontransferable. Performance shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided in this Plan or the applicable Award Agreement. The Committee at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of Performance Goals) and other conditions on which the non-transferability of the performance shares shall lapse. Unless the applicable Award Agreement provides otherwise, additional shares of Common Stock or other property distributed to the Grantee in respect of performance shares, as dividends or otherwise, shall be subject to the same restrictions applicable to such performance shares. The Committee at any time may waive or amend the transfer restrictions or other condition of an Award of performance shares.
 
(d) Termination of Employment. Except to the extent otherwise provided in the applicable Award Agreement or unless otherwise determined by the Committee, in the event of the Grantee’s Termination of Employment for any reason, performance shares and performance share units that remain subject to transfer restrictions as of the date of such termination shall be forfeited and canceled.
 
2.10  Grant of Dividend Equivalent Rights
 
The Committee may in its discretion include in the Award Agreement with respect to any Award a dividend equivalent right entitling the Grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such Award is outstanding and unexercised, on the shares of Common Stock covered by such Award if such shares were then outstanding. In the event such a provision is included in an Award Agreement, the Committee shall determine whether such payments shall be made in cash, in shares of Common Stock or in another form, whether they shall be conditioned upon the exercise or vesting of, or the attainment or satisfaction of terms and conditions applicable to, the Award to which they relate, the time or times at which they shall be made, and such other terms and conditions as the Committee shall deem appropriate.
 
2.11  Deferred Stock Units
 
(a) Description. Deferred stock units shall consist of a restricted stock, restricted stock unit, performance share or performance unit Award that the Committee in its discretion permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Committee. Deferred stock units shall remain subject to the claims of the Company’s general creditors until distributed to the Grantee.


Annex B - Page 11


Table of Contents

(b) 162(m) limits. Deferred stock units shall be subject to the annual Section 162(m) limits applicable to the underlying restricted stock, restricted stock unit, performance share or performance unit Award as forth in Section 1.7(b).
 
2.12  Other Stock-Based Awards
 
The Committee may grant other types of stock-based Awards to such Key Persons, in such amounts and subject to such terms and conditions, as the Committee shall in its discretion determine, subject to the provisions of the Plan. Such Awards may entail the transfer of actual shares of Common Stock, or payment in cash or otherwise of amounts based on the value of shares of Common Stock.
 
2.13  Director Stock Options
 
(a) Eligibility. Until and unless the Committee in its discretion determines otherwise (i) all voting directors of the Company who are not employees of the Company (“Non-Employee Directors”) shall automatically receive stock options pursuant to this Section 2.13.
 
(b) Grant of director stock options. Until and unless the Committee in its discretion determines otherwise, (i) each Non-Employee Director shall automatically be granted stock options to purchase four thousand (4,000) shares of Common Stock pursuant to this Section 2.12 on the first business day after the date the Plan is approved by the Company’s shareholders and (ii) thereafter, each Non-Employee Director shall automatically be granted stock options to purchase four thousand (4,000) shares of Common Stock each year on the first business day following the annual meeting of the shareholders of the Company. If the number of shares then remaining available for the grant of stock options under the Plan is not sufficient for each Non-Employee Director to be granted a stock option for four thousand (4,000) shares, then each Non-Employee Director shall be granted a stock option for a whole number of shares equal to the number of shares then remaining available divided by the number of Non-Employee Directors, disregarding any fractional shares.
 
(c) Exercise Price. Notwithstanding Section 2.3(d), until and unless the Committee in its discretion determines otherwise, the per share exercise price for each stock option granted under this Section 2.13 shall be 100% of the Fair Market Value of a share of Common Stock on the date the stock option is granted.
 
(d) Exercise Period. Notwithstanding Section 2.3(e), until and unless the Committee in its discretion determines otherwise, each stock option granted under this Section 2.13 shall vest and become exercisable in four equal installments of one thousand (1,000) shares beginning on the date six months from the date of the grant and on each anniversary of the first vesting date. Notwithstanding Section 2.3(e), and subject to Sections 2.6 and 3.7 and other applicable provisions of the Plan, until and unless the Committee in its discretion determines otherwise, each stock option granted under this Section 2.13 shall be exercisable for ten (10) years from the date of grant and shall expire thereafter.
 
(e) Non-statutory options. Stock options granted under this Section 2.13 will constitute nonqualified stock options.
 
(f) Other stock option terms applicable. Except as set forth in this Section 2.13, all stock options granted under this Section 2.13 will be subject to and benefited by the terms and conditions (including Section 3.7) of the Plan applicable to other stock options granted under the Plan.
 
ARTICLE III
 
MISCELLANEOUS
 
3.1  Amendment of the Plan; Modification of Awards
 
(a) Board authority to amend Plan. The Board in its discretion may at any time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that any such amendment (other than an amendment pursuant to paragraphs (d), (e) or (f) of this Section 3.1 or an amendment to effect an assumption or other action consistent with Section 3.7) that materially impairs the rights or materially increases the obligations of a Grantee under an outstanding Award shall be effective with respect to such Grantee and


Annex B - Page 12


Table of Contents

Award only with the consent of the Grantee (or, upon the Grantee’s death, the Grantee’s executor (or administrator) or the recipient of a specific disposition under the Grantee’s will). For purposes of the Plan, any action of the Board that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Grantee.
 
(b) Shareholder approval. Shareholder approval of any amendment shall be obtained to the extent necessary to comply with Section 422 of the Code (relating to Incentive Stock Options) or any other applicable law, regulation or rule (including the rules of self-regulatory organizations).
 
(c) Committee authority to amend Awards. The Committee in its discretion may at any time, whether before or after the grant, expiration, exercise, vesting or maturity of or lapse of restriction on an Award or the Termination of Employment of a Grantee, amend any outstanding Award or Award Agreement, including an amendment which would accelerate or extend the time or times at which the Award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Award Agreement. However, any such amendment (other than an amendment pursuant to paragraphs (d), (e) or (f) of this Section 3.1 or an amendment to effect an action consistent with Section 3.7) that materially impairs the rights or materially increases the obligations of a Grantee under an outstanding Award shall be made only with the consent of the Grantee (or, upon the Grantee’s death, the Grantee’s executor (or administrator) or the recipient of a specific disposition under the Grantee’s will). For purposes of the Plan, any action of the Committee that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Grantee.
 
(d) Regulatory changes generally. Notwithstanding anything to the contrary in this Section 3 3.1 or the Plan, the Board or the Committee shall have full discretion to amend the Plan or an outstanding Award or Award Agreement to the extent necessary to preserve any tax, accounting, legal or regulatory treatment with respect to any Award and any outstanding Award Agreement shall be deemed to be so amended to the same extent, without obtaining the consent of any Grantee (or, after the Grantee’s death, the Grantee’s executor (or administrator) or the recipient of a specific disposition under the Grantee’s will), without regard to whether such amendment adversely affects a Grantee’s rights under the Plan or such Award and Award Agreement.
 
(e) Section 409A changes. Notwithstanding anything to the contrary in this Section 3.1 or the Plan, the Board or the Committee shall have full discretion to amend the Plan or any outstanding Award or Award Agreement to the extent necessary to avoid the imposition of any tax under Section 409A of the Code. Any such amendments to the Plan, an Award or an Award Agreement may be adopted without obtaining the consent of any Grantee (or, after the Grantee’s death, the Grantee’s executor (or administrator) or the recipient of a specific disposition under the Grantee’s will), regardless of whether such amendment adversely affects a Grantee’s rights under the Plan or such Award or Award Agreement.
 
(f) Other tax changes. In the event that changes are made to Section 83(b), 162(m), 422 or other applicable provision of the Code the Board or the Committee may, subject to Sections 3.1 (a), (b) and (c), make any adjustments it determines in its discretion to be appropriate with respect to the Plan or any Award or Award Agreement.
 
3.2  Tax Withholding
 
(a) Tax withholdings. As a condition to the receipt of any shares of Common Stock pursuant to any Award or the lifting of restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, FICA tax), the Company shall be entitled to require that the Grantee remit to the Company an amount sufficient in the opinion of the Company to satisfy such withholding obligation.
 
(b) Withholding shares. If the event giving rise to the withholding obligation is a transfer of shares of Common Stock, then, unless otherwise provided in the applicable Award Agreement, the Grantee may satisfy only the minimum statutory withholding obligation imposed under paragraph (a) by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld. For this purpose, Fair Market Value shall be determined as of the date on which the amount of tax to be withheld is determined (and any fractional share amount shall be settled in cash).


Annex B - Page 13


Table of Contents

3.3  Restrictions
 
(a) Required consents. If the Committee shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any Award, the issuance or purchase of shares of Common Stock or other rights thereunder, or the taking of any other action thereunder (a “Plan Action”), then no such Plan Action shall be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Committee.
 
(b) Definition. The term “consent” as used herein with respect to any action referred to in paragraph (a) means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii) any and all written agreements and representations by the Grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made, (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies, and (iv) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or otherwise required by the Committee. Nothing herein shall require the Company to list, register or qualify the shares of Common Stock on any securities exchange.
 
3.4  Nonassignability
 
(a) Nonassignability. No Award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such Awards and rights shall be exercisable during the life of the Grantee only by the Grantee or the Grantee’s legal representative and any such attempted assignment, transfer or exercise in contravention of this Section 3.4 shall be void. Notwithstanding the foregoing, the Committee may in its discretion permit the donative transfer of any Award under the Plan (other than an Incentive Stock Option) by the Grantee (including to a trust or similar instrument), subject to such terms and conditions as may be established by the Committee.
 
(b) Cashless exercises permitted. The restrictions on exercise and transfer in paragraph (a) above shall not be deemed to prohibit the authorization by the Committee of “cashless exercise” procedures with parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of Awards consistent with applicable legal restrictions and Rule 16b-3.
 
3.5  Requirement of Notification of Election Under Section 83(b) of the Code
 
If a Grantee, in connection with the acquisition of shares of Common Stock under the Plan, is permitted under the terms of the Award Agreement to make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code notwithstanding the continuing transfer restrictions) and the Grantee makes such an election, the Grantee shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code.
 
3.6  Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code
 
If any Grantee shall make any disposition of shares of Common Stock issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.
 
3.7  Change in Control
 
(a) Definition. A “Change in Control” means the occurrence of any one of the following events:
 
(i) any Person (as defined in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then


Annex B - Page 14


Table of Contents

outstanding securities (“Company Voting Securities”); provided, however, that the event described in this clause (i) shall not be deemed a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation controlled by the Company, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in clause (iii) below), (E) pursuant to any acquisition by Grantee or any group of persons including Grantee (or any entity controlled by Grantee or any group of persons including Grantee), (F) a transaction (other than one described in clause (iii) below) in which outstanding Company Voting Securities are acquired from the Company, if a majority of the Continuing Directors (as defined in clause (ii) below) approve a resolution providing expressly that the acquisition pursuant to this subclause (F) does not constitute a Change in Control under this clause (F), or (G) any acquisition by a person of 20% of the outstanding Company Voting Securities as a result of an acquisition of common stock of the Company by the Company which, by reducing the number of shares of common stock of the Company outstanding, increases the proportionate number of shares beneficially owned by such person to 20% or more of the outstanding Company Voting Securities, provided, however, that if a person shall become the beneficial owner of 20% or more of the outstanding Company Voting Securities by reason of a share acquisition by the Company as described above and shall, after such share acquisition by the Company, become the beneficial owner of any additional shares of common stock of the Company, then such acquisition shall constitute a Change in Control;
 
(ii) individuals who, on March 1, 2005, constitute the Board (“Continuing Directors”), cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination for election was approved by a vote of at least a majority of the Continuing Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be a Continuing Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be a Continuing Director;
 
(iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination are Continuing Directors (any Business Combination which satisfies all of the criteria specified in subclauses (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); provided, however, that if Continuing Directors constitute a majority of the Board immediately following the occurrence of a Business Combination, then a majority of Continuing Directors in office prior to the Consummation of the Business Combination may approve a resolution providing expressly that such


Annex B - Page 15


Table of Contents

Business Combination does not constitute a Change in Control under this clause (iii) for any and all purposes of the Plan.
 
(iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company; or
 
(v) the consummation of an agreement (or agreements) providing for the sale or disposition by the Company of all or substantially all of the Company’s assets other than a sale or disposition which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent 50% or more of the combined voting power of the Company or such surviving entity outstanding immediately after such sale or disposition.
 
(b) Effect of Change in Control. Upon the occurrence of a Change in Control specified in paragraph (a)(i) or (a)(ii) above and immediately prior to the occurrence of a Change in Control specified in paragraph (a)(iii), (a)(iv) or (a)(v) above, Awards shall Fully Vest (as defined in paragraph (c) below). If, within two (2) years after the occurrence of a Change in Control a Termination of Employment occurs with respect to any Grantee for any reason other than Cause, Disability, death or Retirement, Grantee shall be entitled to exercise Awards at any time thereafter until the earlier of (i) the date forty-two (42) months after the date of Termination of Employment and (ii) the expiration date in the applicable Award Agreement.
 
(c) Fully Vest. The following shall occur if Awards “Fully Vest”: (i) any stock options and stock appreciation rights granted under the Plan shall become fully vested and immediately exercisable, (ii) any restricted stock, restricted stock units, performance shares, performance units and other stock-based Awards granted under the Plan will become fully vested and matured, any restrictions applicable to such Awards shall lapse and such Awards denominated in stock will be immediately paid out, and (iii) any Performance Goals applicable to Awards will be deemed to be fully satisfied; provided that (A) any Performance Goals whose performance period has not yet lapsed shall be calculated based on the higher of (x) the target value of the Awards as established by the Committee and (y) the value of the Awards calculated under the terms of the Awards based on the average performance through the end of the fiscal quarter immediately prior to the effective date of the Change of Control (continued pro forma through the end of the performance period if necessary for purposes of determining whether the Performance Goal would have been met), and (B) if the Award has a performance period greater than one (1) year, the amount of the Award payable to the Grantee will be pro rated, based on a fraction, the numerator of which is the number of fiscal quarters completed from the beginning of the performance period until the effective date of the Change of Control and the denominator is the total number of fiscal quarters in the performance period.
 
(d) Section 409A. To the extent it is necessary for the term “change of control” to be defined as provided in Section 409A of the Code in order for compensation provided under any Award to avoid the imposition of taxes under Section 409A of the Code, then the term “change in control”, only insofar as it applies to any such Award, shall be defined as provided in Section 409A of the Code, rather than as provided in Section 3.7 (a), and the terms of Sections 3.7(b) through (c) shall be applied and interpreted with respect to such Section 409A definition in such manner as the Committee in its discretion determines to be equitable and reflect the intention of Sections 3.7(a) through (c).
 
3.8  No Right to Employment
 
Nothing in the Plan or in any Award Agreement shall confer upon any Grantee the right to continue in the employ of or association with the Company or any Related Entity or affect any right which the Company or Related Entity may have to terminate such employment or association at any time (with or without cause).
 
3.9  Nature of Payments
 
Unless the Committee determines at any time in its discretion, any and all grants of Awards and issuances of shares of Common Stock under the Plan shall constitute a special incentive payment to the Grantee and shall not be taken into account in computing the amount of salary or compensation of the Grantee for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or


Annex B - Page 16


Table of Contents

other benefit plan of the Company or under any agreement with the Grantee, unless such plan or agreement specifically provides otherwise.
 
3.10  Non-Uniform Determinations
 
The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to the persons to receive Awards under the Plan, and the terms and provisions of Awards under the Plan.
 
3.11  Other Payments or Awards
 
Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
 
3.12  Interpretation
 
The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections. As used in the Plan, “include,” “includes,” and “including” are deemed to be followed by “without limitation” whether or not they are followed by such words or words of like import; except as the context requires, the singular includes the plural and visa versa; and references to any agreement or other document are references to such agreement or document as amended or supplemented from time to time. Any determination, interpretation or similar act to be made by the Committee shall be made in the discretion of the Committee, whether or not the applicable provisions of the Plan specifically refer to the Committee’s discretion.
 
3.13  Effective Date and Term of Plan
 
Unless sooner terminated by the Board, the Plan, including the provisions respecting the grant of Incentive Stock Options, shall terminate on the tenth anniversary of the adoption of the Plan by the Board; provided that the Plan shall continue to govern outstanding Awards until such Awards have been satisfied or terminated. All Awards made under the Plan prior to its termination shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.
 
3.14  Governing Law
 
All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of Utah, without giving effect to principles of conflict of laws.
 
3.15  Severability; Entire Agreement
 
If any of the provisions of this Plan or any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby; provided, that if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral, with respect to the subject matter thereof.
 
3.16  No Third Party Beneficiaries
 
Except as expressly provided therein, neither the Plan nor any Award Agreement shall confer on any person other than the Company and the grantee of any Award any rights or remedies thereunder.


Annex B - Page 17


Table of Contents

3.17  Successors and Assigns
 
The terms of this Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns.
 
3.18  Waiver of Claims
 
Each Grantee of an Award recognizes and agrees that prior to being selected by the Committee to receive an Award he or she has no right to any benefits hereunder. Accordingly, in consideration of the Grantee’s receipt of any Award hereunder, he or she expressly waives any right to contest the amount of any Award, the terms of any Award Agreement, any determination, action or omission hereunder or under any Award Agreement by the Committee, the Company or the Board, or any amendment to the Plan or any Award Agreement (other than an amendment to this Plan or an Award Agreement to which his or her consent is expressly required by the express terms of the Plan or an Award Agreement).
 
3.19  Relation to Key Employee Plan, You’re the Owner Plan and Directors Plan
 
Notwithstanding any other provisions to the contrary in the Company’s Key Employee Incentive Stock Option Plan, Amended and Restated 1998 Non-Qualified Stock Option and Incentive Plan or Amended and Restated 1996 Non-Employee Directors Stock Option Plan (“Directors Plan”), upon shareholder approval of this Plan and filing and effectiveness of a Form S-8 registration statement with the Securities and Exchange Commission for this Plan, no new awards of shares of Common Stock will be granted under the Company’s Key Employee Incentive Stock Option Plan, Amended and Restated 1998 Non-Qualified Stock Option and Incentive Plan or Directors Plan. Notwithstanding anything to the contrary in the Directors Plan or Section 2.13, only one grant of stock options shall be made to Non-Employee Directors in 2005 pursuant to the Directors Plan and/or Section 2.13.


Annex B - Page 18


Table of Contents

 
ANNEX C
 
ZIONS BANCORPORATION STANDARD STOCK OPTION AWARD AGREEMENT
 


Table of Contents

ZIONS BANCORPORATION
 
2005 STOCK OPTION AND INCENTIVE PLAN
 
STANDARD STOCK OPTION AWARD AGREEMENT
 
This Stock Option Award Agreement (this “Agreement”) is made and entered into as of the date set forth on Exhibit A (the “Grant Date”) by and between Zions Bancorporation, a Utah corporation (the “Company”), and the person named on Exhibit A (the “Grantee”) pursuant to the Company’s 2005 Stock Option and Incentive Plan (the “Plan”). Capitalized terms not defined in this Agreement have the meanings ascribed to them in the Plan.
 
1. Grant of Stock Option. Pursuant and subject to the Plan and this Agreement, the Company hereby grants to the Grantee the right and option (an “Option”) to purchase all or any part of the aggregate number of shares of the Company’s Common Stock (the “Common Stock”) set forth on Exhibit A at the purchase price per share set forth on Exhibit A (the “Option Exercise Price”).
 
2. Term of Option. This Option shall expire on the date set forth on Exhibit A (the “Expiration Date”) and must be exercised, if at all, on or before the earlier of the Expiration Date or the date on which this Option is earlier terminated in accordance with the provisions of the Plan or Section 4 of this Agreement.
 
3. Vesting. Except as otherwise provided herein, this Option shall vest as set forth on Exhibit A and shall be exercisable only to the extent that it has vested. This Option shall cease to vest upon Grantee’s Termination of Employment and may be exercised after Grantee’s date of termination only as set forth in the Plan or in Section 4 of this Agreement.
 
4. Termination of Employment.
 
4.1  Termination of Employment by Grantee for any Reason or By the Company for Cause. Except to the extent otherwise provided in Sections 4.2 through 4.5 below, this Option, whether or not vested and to the extent not therefore exercised, shall terminate immediately upon (i) the Grantee’s Termination of Employment at Grantee’s election for any reason or (ii) Grantee’s Termination of Employment by the Company for Cause.
 
4.2  At election of Company or a Related Entity. Upon the Termination of Employment of a Grantee at the election of the Company or a Related Entity (other than in circumstances governed by Section 4.1 above or Section 4.3 through 4.5 Grantee below) the Grantee may exercise this Option on the following terms and conditions: (i) exercise may be made only to the extent that the Grantee was entitled to exercise this Option on the date of the Termination of Employment; and (ii) exercise must occur within three (3) months after the Termination of Employment but in no event after the Expiration Date.
 
4.3  Retirement. Upon the Termination of Employment of Grantee by reason of the Grantee’s Retirement, Grantee may exercise this Option on the following terms and conditions: (i) exercise may be made only to the extent that Grantee was entitled to exercise this Option on the date of Retirement; (ii) exercise must occur within three (3) years after Retirement but in no event after the Expiration Date; and (iii) notwithstanding clause (ii) above, the option or right shall terminate on the date Grantee begins or agrees to begin employment with another company that is in the financial services industry unless such employment is specifically approved by the Committee.
 
4.4  Disability. Upon the Termination of Employment of Grantee by reason of Disability, Grantee may exercise this Option on the following terms and conditions: (i) exercise may be made only to the extent that Grantee was entitled to exercise this Option on the date of Termination of Employment; and (ii) exercise must occur within six (6) months after the Termination of Employment but in no event after the Expiration Date.
 
4.5  Death. If Grantee dies during the period in which this Option is exercisable, whether pursuant to its terms or pursuant to Section 4.2 through 4.4 above, this Option shall be exercisable on the following terms and conditions: (i) exercise may be made only to the extent that Grantee was entitled to exercise this Option on the date of death; and (ii) exercise must occur within six (6) months after the date of the Grantee’s death. Any such exercise of this Option following Grantee’s death shall be made only by Grantee’s executor (or administrator) or only by the recipient of such specific disposition. If Grantee’s executor (or administrator) or


Annex C - Page 1


Table of Contents

the recipient of a specific disposition under Grantee’s will shall be entitled to exercise this Option pursuant to the preceding sentence, such executor (or administrator) or recipient shall be bound by all the terms and conditions of the Plan and this Agreement which would have applied to the Grantee.
 
5. Manner of Exercise.
 
5.1  Stock Option Exercise Agreement. To exercise this Option, Grantee (or in the case of exercise after Grantee’s death, Grantee’s executor, administrator or recipient of a specific disposition) must deliver to the Company an executed stock option exercise agreement in such form as may be required by the Company from time to time (the “Exercise Agreement”), which shall set forth, among other things, Grantee’s election to exercise this Option, the number of shares being purchased, any restrictions imposed on the shares of Common Stock and any representations, warranties and agreements regarding Grantee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Grantee exercises this Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise this Option.
 
5.2  Payment. The Exercise Agreement shall be accompanied by full payment for the shares of Common Stock being purchased (the “Exercise Price”). Such payment shall be made (i) in cash (by check), (ii) by delivery of shares of Common Stock (which, if acquired pursuant to the exercise of a stock option or under an Award made under the Plan or any other compensatory plan of the Company, were acquired at least six (6) months prior to the option exercise date) having a Fair Market Value (determined as of the exercise date) equal to all or part of the exercise price and cash for any remaining portion of the exercise price or (iii) to the extent permitted by law, by such other method as the Committee may from time to time prescribe, including a cashless exercise procedure through a broker-dealer. Any shares of Common stock delivered in payment of the Exercise Price shall be fully paid and free and clear of all liens, claims, encumbrances and security interests.
 
5.3  Tax Withholding. Prior to the issuance of the shares of Common Stock upon exercise of this Option, Grantee must pay, or otherwise provide for to the satisfaction of the Company, any applicable federal or state withholding obligations of the Company.
 
5.4  Limitations on Exercise. This Option may not be exercised unless such exercise is in compliance, to the reasonable satisfaction of the Committee, with all applicable federal and state securities laws, as they are in effect on the date of exercise. This Option may not be exercised as to fewer than 100 shares of Common Stock unless it is exercised as to all shares as to which this Option is then exercisable.
 
5.5  Other Conditions. The Committee may require that Grantee comply with such other procedures relating to the exercise of this Option and delivery of shares pursuant to such exercise as the Committee may determine, including the use of specified broker-dealers and the manner in which Grantee shall satisfy tax withholding obligations with respect to such shares.
 
5.6  Issuance of Shares. As promptly as is practicable after the receipt of the Exercise Agreement, in form and substance satisfactory to the Company, payment of the Exercise Price and satisfaction of Sections 5.3 through 5.5 above, the Company shall issue the shares of Common Stock registered in the name of Grantee, Grantee’s authorized assignee or Grantee’s legal representative. The Company may postpone such delivery until it receives satisfactory proof that the issuance of such shares will not violate any of the provisions of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, any rules or regulations of the Securities and Exchange Commission (the “SEC”) promulgated thereunder, or the requirements of applicable state law relating to authorization, issuance or sale of securities, or until there has been compliance with the provisions of such acts or rules. Grantee understands that the Company is under no obligation to register or qualify the shares of Common Stock with the SEC, any state securities commission or any stock exchange to effect such compliance.
 
6. Right of Offset. The Company shall have the right to offset against the obligation to deliver shares of Common Stock in respect of any exercise of this Option, any outstanding amounts then owed by Grantee to the Company.


Annex C - Page 2


Table of Contents

7. Nontransferability of Option. This Option shall not be assignable or transferable by Grantee other than by will or by the laws of descent and distribution, and shall be exercisable during the life of the Grantee only by the Grantee or the Grantee’s legal representative and any such attempted assignment, transfer or exercise in contravention of this Section 7 shall be void.
 
8. Privileges of Stock Ownership. Grantee shall not have any of the rights of a stockholder of the Company with respect to any shares of Common Stock subject to the issuance of such shares to Grantee. Except as otherwise provided in Section 1.6(c) of the Plan, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such shares are issued.
 
9. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Grantee any right to continue in the employ of, or other relationship with, the Company or any Related Entity, or limit in any way the right of the Company or any Related Entity to terminate Grantee’s employment or other relationship at any time, with or without Cause.
 
10. Non-Qualified Options; Incentive Stock Options. It is intended that this Option shall be treated as an incentive stock option to the maximum extent permitted by the Plan (including Sections 2.3 (f) and (g) thereof) and the Code, and that the remainder of this Option, if any, shall be treated as a non-qualified option.
 
11. Change in Control. Subject to the terms of the Plan, Grantee shall be entitled to the benefits of Section 3.7 of the Plan with respect to this Option.
 
12. Entire Agreement. This Option is granted pursuant to the Plan and this Option and Agreement are subject to the terms and conditions of the Plan. The Plan is incorporated herein by reference. This Agreement, the Plan and such other documents as may be executed in connection with the exercise of this Option constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter. Any action taken or decision made by the Committee arising out of or in connection with the construction, administration, interpretation or effect of this Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Grantee and all persons claiming under or through the Grantee.
 
13. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Grantee shall be in writing and addressed to Grantee at the address indicated below or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile.
 
14. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement and the Plan shall be binding upon Grantee and Grantee’s heirs, executors, administrators, legal representatives, successors and assigns.
 
15. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Utah without regard to that body of law pertaining to choice of law or conflict of laws.


Annex C - Page 3


Table of Contents

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date noted above.
 
ZIONS BANCORPORATION
 
  By: 
    


Annex C - Page 4


Table of Contents

Exhibit A
 
Grant Date:  _ _
 
Name of Grantee:  _ _
 
Number of Option Shares:  _ _
 
Option Exercise Price:  _ _
 
Expiration Date:  _ _
 
Vesting Schedule:  The right of Grantee to purchase the aggregate number of shares of Common Stock covered by the Option shall vest as follows:


Annex C - Page 5


Table of Contents

ZIONS BANCORPORATION
2005 STOCK OPTION EXERCISE AGREEMENT
 
If you are exercising your option through a broker-dealer you do not need to fill out this form but must complete forms provided by the broker-dealer and acceptable to the Company in its sole discretion.
 
I hereby elect to purchase the number of shares of Common Stock of Zions Bancorporation (the “Company”) as set forth below:
 
 
     
     
Grantee:  _ _
  Number of Shares To Be Purchased:  _ _
     
Social Security Number:  _ _
  Purchase Price per Share:  _ _
     
Share Delivery Instructions:  _ _
  Aggregate Purchase Price:  _ _
     
  Date of Grant:  _ _
     
  Phone Number:  _ _
     
Type of Option:  o Incentive Stock Option
  o Nonqualified Stock Option
 
 
Please issue the new stock certificate(s) representing the option shares in my name and                 (co-owner, if desired) as [          ] joint tenants or [          ] tenants in common (initial one).
 
Delivery of Purchase Price.  Grantee hereby delivers to the Company the Exercise Price, to the extent permitted in the Stock Option Award Agreement between the Company and Grantee as follows (check as applicable and complete):
 
  o  Cash Exercise: by check* in the amount of $     ;
 
  o  Stock Swap: by delivery of            fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Grantee for at least six (6) months prior to the date hereof and a check* in the amount of $      to cover the fractional share amount due.
 
Payment of Withholding Tax (Non-Qualified options only).
 
  o  Grantee hereby delivers to the Company a check* in the amount of $      necessary to satisfy any withholding tax obligations of the Company.
     
     
 Date: _ _
  Signature of Grantee: _ _ 
 
* Checks should be made payable to Zions Bancorporation
 
[FOR COMPANY USE ONLY]
 
Received on          .  The closing Price for the stock on this day was $      per share.
 
Return form to Jennifer Jolley, interoffice:  UT KC11-0669, mail: One South Main Street, Suite 1134, Salt Lake City, UT 84111
 
24579442.22  05170389


Annex C - Page 6


Table of Contents

 
 
Zions Bancorporation
 
Debt Securities
Warrants or Other Rights
Stock Purchase Contracts
Units
Common Stock
Preferred Stock
Depositary Shares
 
Zions Capital Trust C
Zions Capital Trust D
 
Capital Securities
As fully and unconditionally
guaranteed as described herein by Zions Bancorporation
 
Zions Bancorporation and the Issuer Trusts from time to time may offer to sell the securities listed above. The debt securities, warrants, rights, purchase contracts and preferred stock may be convertible into or exercisable or exchangeable for common or preferred stock or other securities of the Company or debt or equity securities of one or more other entities. The common stock of the Company is quoted on the Nasdaq National Market under the symbol “ZION.”
 
Zions Bancorporation and the Issuer Trusts may offer and sell these securities to or through one or more underwriters, dealers and/or agents on a continuous or delayed basis.
 
This prospectus describes some of the general terms that may apply to these securities and the general manner in which they may be offered. The specific terms of any securities to be offered, and the specific manner in which they may be offered, will be described in a supplement to this prospectus.
 
These securities will not be savings accounts, deposits or other obligations of any bank or non-bank subsidiary of ours and are not insured by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System or any other governmental agency.
 
 
 
 
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
 
 
 
This prospectus is dated March 31, 2006.


 

 
TABLE OF CONTENTS
 
     
  1
  1
  2
  3
  3
  22
  27
  28
  31
  34
  36
  39
  41
  52
  64
  68
  69
  74
  78
  80
  101
  104
  105
  105


Table of Contents

 
ABOUT THIS PROSPECTUS
 
This document is called a “prospectus,” and it provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement containing specific information about the terms of the securities being offered. That prospectus supplement may include a discussion of any risk factors or other special considerations that apply to those securities. The prospectus supplement may also add, update or change the information in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplements, you should rely on the information in that prospectus supplement. You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”
 
Zions Bancorporation, a Utah corporation, also referred to in this document as Zions, and Zions Capital Trust C and Zions Capital Trust D, each a statutory trust created under the laws of the State of Delaware (each trust is also referred to as an Issuer Trust and together as the Issuer Trusts) have filed a registration statement with the Securities and Exchange Commission, or the SEC, using a shelf registration or continuous offering process. Under this shelf process, Zions and the Issuer Trusts may offer and sell any combination of the securities described in this prospectus, in one or more offerings.
 
Our SEC registration statement containing this prospectus, including exhibits, provides additional information about us and the securities offered under this prospectus. The registration statement can be read at the SEC’s web site or at the SEC’s offices. The SEC’s web site and street addresses are provided under the heading “Where You Can Find More Information.”
 
When acquiring securities, you should rely only on the information provided in this prospectus and in the related prospectus supplement, including any information incorporated by reference. No one is authorized to provide you with different information. We are not offering the securities in any state where the offer is prohibited. You should not assume that the information in this prospectus, any prospectus supplement or any document incorporated by reference is truthful or complete for any date other than the date indicated on the cover page of these documents.
 
After the securities are issued, one or more of our subsidiaries, including Zions Direct, Inc., may buy and sell any of the securities as part of their business as a broker-dealer. Those subsidiaries may use this prospectus and the related prospectus supplement in those transactions. Any sale by a subsidiary will be made at the prevailing market price at the time of sale.
 
Unless otherwise mentioned or unless the context requires otherwise, all references in this prospectus to “Zions,” “we,” “us,” “our” or similar references mean Zions Bancorporation and its subsidiaries.
 
Unless otherwise stated, currency amounts in this prospectus and any prospectus supplement are stated in United States dollars.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference room in Washington, D.C. at 100 F Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. In addition, our SEC filings are available to the public at the SEC’s web site at http://www.sec.gov. However, information on this website does not constitute a part of this prospectus. You can also inspect reports, proxy statements and other information about us at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006-1500.
 
The SEC allows us to “incorporate by reference” into this prospectus the information in documents we file with it. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. When we update the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this prospectus


1


Table of Contents

is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.
 
We incorporate by reference the documents listed below and any documents we file with the SEC in the future under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our offering is completed:
 
  •  Annual Report on Form 10-K for the year ended December 31, 2005.
 
  •  Current Reports on Form 8-K filed on January 24, 2006, February 2, 2006, February 14, 2006, February 15, 2006 and March 31, 2006 (except, in each case, information “furnished” on Form 8-K and any related exhibits).
 
  •  The description of our common stock and rights set forth in our registration statement on Form 10 and Form 8-A filed pursuant to Section 12 of the Exchange Act, including any amendment or report filed with the SEC for the purpose of updating such descriptions.
 
You may request a copy of these filings, other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing, at no cost, by writing to or telephoning us at the following address:
 
Investor Relations
Zions Bancorporation
One South Main Street, Suite 1134
Salt Lake City, Utah 84111
(801) 524-4787
 
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus, including information incorporated by reference, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements provide current expectations or forecasts of future events and include, among others:
 
  •  Statements with respect to our beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance; and
 
  •  Statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.
 
These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this prospectus, including the information incorporated by reference.