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

 

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

 

Base Prospectus

 

 

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:

 

 

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:

 

 

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:

 

 

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:

 

 

 

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.

 

SUMMARY

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.”

 

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:

 

 

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.

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

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,

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.”

 

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.

 

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.”

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”):

 

 

The “net realized value” for a particular payment period means the amount, if any, by which:

 

 

multiplied by:

 

 

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:

 

 

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,

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:

 

 

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.

 

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:

 

 

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:

 

 

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.

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.

 

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:

 

 

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

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:

 

 

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:

 

 

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:

 

 

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:

 

 

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:

 

 

 

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.

 

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 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.

 

 

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:

 

 

However, we granted only:

 

 

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:

 

 

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.

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:

 

 

dividing that sum by:

 

 

We obtained the figures in the “Dollar Value Realized” column by multiplying, for each option exercise:

 

 

by the difference between:

 

 

We arrived at the figures in the “Cumulative % Exercised” column for a given year by taking:

 

 

divided by:

 

 

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:

 

 

dividing by:

 

 

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:

 

 

by the difference between:

 

 

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.

Zions Bancorporation March 18, 1994 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation April 28, 1995 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation March 8, 1996 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation March 21, 1997 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation March 24, 1998 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation April 23, 1999 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation March 31, 2000 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation May 26, 2000 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation April 20, 2001 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation April 26, 2002 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation January 22, 2003 Option Grant

 

 

 

 

Cumulative % Exercised and $ Value Realized

 

Zions Bancorporation April 30, 2004 Option Grant