Zions Banc Senior Managament Value Sharing Plan, Award Period 2002-2005



 
EXHIBIT 10.7 
 
Zions
Bancorporation 
Senior Management Value Sharing Plan 
Award Period: 2002 – 2005 
 
Objective:  
 
To provide an ongoing multi-year incentive for the senior managers of Zions Bancorporation and its subsidiaries which: 
 
A. Focuses managers’ attention on the creation of
long-term shareholder value; 
 
B. Creates an
incentive that promotes teamwork across departments and subsidiaries, and which encourages managers to balance profit center accountability with Company-wide goals; and, 
 
C. Complements annual bonuses which reflect the achievement of annual objectives and the Company’s
short-term profitability. 
 
Eligibility: 
 
Participants
in the Plan will consist of specified members of the senior management group (and certain other key managers) of the Company and its major subsidiaries. Participants for each Award Period shall be specifically identified by the Company’s Board
of Directors (the “Board”) or its Executive Compensation Committee (the “Committee”). 
 
Allocation of Awards: 
 
It is anticipated that during the first quarter of each year in which the Plan operates, the Board of Directors shall approve the
establishment of a pool of Award Funds to be generated during the Award Period, according to the general formula outlined below. Participants shall be designated by the Board or the Committee. Claims against the pool of Award Funds for each Award
Period shall be represented by Participation Units (“Units”), and each participant shall be allocated a specific number of Units by the Committee. The Units shall represent a pro-rata claim, in proportion to the total Units designated for
that Award Period, on any Award Funds generated by the Plan during the Award Period. 







Term: 
 
Each Award Period shall consist of a continuous four-calendar-year period. The Plan is intended to constitute
a “moving four-year-average” incentive plan, with the anticipation that a new Award Period would be designated each year, with multiple Award Periods overlapping one another. Nevertheless, the establishment of a new Award Period each year
is subject to the Board’s discretion. 
 
Determination of Award Funds: 
 
The amount of Award Funds in the pool for each Award Period shall be a function of the Aggregate Cash Earnings Per Share (“ACEPS”) during the Award Period, together with the mathematical Average Tangible Return On
Shareholders’ Equity (“TROE”) for each of the four years in the Award Period, 
 
Aggregate Cash Earnings Per Share (“ACEPS”) shall be defined as the aggregate, over the four year Award Period, of each year’s Net Cash Income divided by average diluted shares
outstanding. Net Cash Income shall be defined as net income before the cumulative effect of changes in accounting principles, plus the after-tax cost of amortized goodwill and core deposit (and similar) intangible assets, plus the after-tax cost of
merger charges realized during the period. 
 
Tangible Return on Shareholders’ Equity (“TROE”) shall be defined as the average, for each of the four years in the Award Period, of the Company’s Net Cash Income divided by the average Tangible Equity. Tangible
Equity shall mean total common shareholders’ equity, less goodwill and core deposit (and similar) intangible assets. 
 
Each year, the Committee shall establish minimum targets for TROE and ACEPS for the Award Period. These minimum targets are both be
required to be reached in order for any Award Funds to be earned. Additionally, the Committee may designate Award Fund allocation amounts based upon the achievement of higher levels of TROE, with upward adjustments possible if higher levels of ACEPS
are achieved. The Committee may also designate other conditions and adjustment factors to ensure the Plan’s integrity and consistency with shareholder and depositor interests. 
 
The 2002-2005 Award Period formula for the determination of the value of Units is as indicated in the
Appendix. 







 
For the
2002-2005 Award Period, the following parameters shall be established, and adjustments made to the Company’s earnings calculations, for purposes of determining Award Funds available under the Plan: 
 
1). The Plan is intended to create an incentive for increasing
shareholder value. However, this is not to be accomplished by reducing capital levels or assuming extraordinary or unwarranted risks. Accordingly, it is expected that total risk-based capital levels shall be maintained at a level at least 125% of
“well-capitalized” regulatory requirements, and average Tangible Equity shall be maintained at a level of not less than 6.0% of average tangible assets. For purposes of determining ACEPS and TROE, pro-forma charges to income in amounts
sufficient to reflect any deficit in these capital ratios shall be made in the event these capital levels are not maintained. 
 
2). The Company’s reserve levels are to be conservatively maintained. To the extent that the consolidated Allowance for Loan and
Lease Losses is less than 100% of the peer group level, as expressed in terms of reserves/non-current loans as reported in the most current Uniform Bank Performance Report available at December 31, 2005, an appropriate adjustment shall be made to
after-tax earnings (for purposes of calculating Award Funds only) to compensate for any deficit relative to the 100% minimum target level. Actual reserve levels are, of course, subject to Board and/or regulatory decisions. No upward adjustments
shall be made in “pro forma” earnings in the event actual reserve levels exceed 100% of the peer group target. 
 
3). With respect to any business combinations completed by Zions involving the exchange of Zions’ shares in pooling-of-interests
transactions (prior to January 1, 2002), financial results prior to the acquisition dates shall, for the purpose of calculating ACEPS and TROE during the Award Period, be determined using Zions’ un-restated numbers. 
 
Other Terms and Conditions:

 
The Plan is to be governed and interpreted by
the Committee, whose decisions shall be final. The terms of the Plan are subject to change or termination at their sole discretion. 
 
The Company shall retain the right to withold payment of Award Funds to participants in the event of a significant deterioration in the
Company’s financial condition, or if so required by regulatory authorities, or for any other reason considered valid by the Board in its sole discretion. 







 
Participants
shall not vest in any benefits available under the Plan until the conclusion of each Award Period. Nevertheless, upon death, permanent disability, or normal or early retirement (unless upon early retirement the participant becomes employed by an
entity which competes with Zions Bancorporation), participants (or their estates) shall be eligible to receive a proportionate share of Award Funds based upon the number of Units granted, and the number of full calendar quarters the participant was
engaged as an officer of the Company or its subsidiaries prior to death, disability, or retirement. 
 
The Units shall not be transferable without the express approval of the Committee, except to a spouse or immediate family members for the
purposes of estate planning. 
 
In the event of a
change in control of the Company (as defined in the Company’s Change in Control Plan), the Plan will be terminated and payments shall be made in accordance with the provisions of section 3 (b) of the Change in Control Plan. 
 
The Board may, at its sole discretion, alter the terms of the
Plan at any time during an Award Period. 
 
This
document is intended to provide a guideline for the creation and distribution of incentive compensation. Nothing herein creates a contractual obligation binding on the Board, and no Participant shall have any legal rights with respect to an Award
until such Award is distributed. 
 
Earnings per
share calculations shall be adjusted to reflect any stock splits, stock dividends, or other such changes in capitalization, at the discretion of the Committee. 
 
The award of Units to any participant shall not confer any right with respect to continuance of employment by the Company or its
subsidiaries, nor limit in any way the right of the Company to terminate his or her employment at any time, with or without cause. 







 
APPENDIX 
 
ZIONS BANCORPORATION
VALUE – SHARING PLAN: 2002 – 2005 
 
Calculation of Participation Unit Value 
 
Aggregate Cash Earnings Per Share (“ACEPS”) 
 
If the ACEPS is: 
 

	 Over –

	    	 But not over –

	  	 The basic value of a Participation Unit is –


	 $16.56
	    	 $16.97
	  	 $.3793 plus $.0190
	  	 per each cent of the amount over $16.56

	 $16.97
	    	 $17.38
	  	 $1.1530 plus $.0285
	  	 per each cent of the amount over $16.97

	 $17.38
	    	 $17.81
	  	 $2.3362 plus $.0379
	  	 per each cent of the amount over $17.38

	 $17.81
	    	 $18.24
	  	 $3.9446 plus $.0474
	  	 per each cent of the amount over $17.81

	 $18.24
	    	 $18.68
	  	 $5.9940 plus $.0569
	  	 per each cent of the amount over $18.24

	 $18.68
	    	 $19.13
	  	 $8.5009 plus $.0664
	  	 per each cent of the amount over $18.68

	 $19.13
	    	 $19.59
	  	 $11.4817 plus $.0759
	  	 per each cent of the amount over $19.13

	 $19.59
	    	 $20.05
	  	 $14.9534 plus $.0854
	  	 per each cent of the amount over $19.59

	 $20.05
	    	 $20.53
	  	 $18.9333 plus $.0948
	  	 per each cent of the amount over $20.05

	 $20.53
	    	 $21.01
	  	 $23.4391 plus $.1043
	  	 per each cent of the amount over $20.53

	 $21.01
	    	 $21.51
	  	 $28.4888 plus $.1138
	  	 per each cent of the amount over $21.01

	 $21.51
	    	 $22.01
	  	 $34.1006 plus $.1137
	  	 per each cent of the amount over $21.51

	 $22.01
	    	 $22.52
	  	 $39.8109 plus $.1137
	  	 per each cent of the amount over $22.01

	 $22.52
	    	 $23.04
	  	 $45.6270 plus $.1137
	  	 per each cent of the amount over $22.52

	 $23.04
	    	 $23.57
	  	 $51.5504 plus $.1024
	  	 per each cent of the amount over $23.04

	 $23.57
	    	 $24.11
	  	 $56.9848 plus $.1024
	  	 per each cent of the amount over $23.57

	 $24.11
	    	 $24.66
	  	 $62.5184 plus $.0819
	  	 per each cent of the amount over $24.11


 
 

5 








 

	 $24.66
	  	 $
	 25.22
	  	 $67.0257 plus $.0614
	  	 per each cent of the amount over $24.66

	 $25.22
	  	 $
	 25.79
	  	 $70.4673 plus $.0410
	  	 per each cent of the amount over $25.22

	 $25.79
	  	 	 	  	 $72.8030
	  	 

 
Tangible Return on Shareholders’ Equity (“TROE”) Modifier: 
 
The basic Participation Unit value determined above shall be adjusted as follows: 
 

	•	 	If TROE for 2002 – 2005 is less than 15.00%, the Participation Units shall have no value. 

 

	•	 	If TROE is equal to or greater than 15.00% but less than 19.00%, the basic value of a Participation Unit shall be multiplied by a factor of 1.00.


 

	•	 	If TROE is equal to or greater than 19.00% but less than 26.00%, the basic value of a Participation Unit shall be multiplied by the following factor: 1+(TROE –
..19)5.7143. 

 
If TROE is 26.00% or more, the basic
value of a Participation Unit shall be multiplied by 1.40. 
 
****************************** 
 
Example: If ACEPS
is $20.60 and TROE is 23.70%, each Participation Unit would be worth $30.66. 
 
[$23.4391+100($20.60 – $20.53)$.1043]    x    [1+(.2370 – .19)5.7143] = $30.66