ZIONS BANCORPORATION /UT/ (Form: 10-Q, Received: 08/08/2018 06:04:54)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 001-12307

ZIONS BANCORPORATION

(Exact name of registrant as specified in its charter)



UTAH	87-0227400
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One South Main, 15 ^th Floor Salt Lake City, Utah	84133
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (801) 844-7637

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Common Stock, without par value, outstanding at July 31, 2018	194,402,811 shares

ZIONS BANCORPORATION AND SUBSIDIARIES

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	36

	Consolidated Balance Sheets	36
	Consolidated Statements of Income	37
	Consolidated Statements of Comprehensive Income	38
	Consolidated Statements of Changes in Shareholders’ Equity	38
	Consolidated Statements of Cash Flows	39
	Notes to Consolidated Financial Statements	40

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75

Item 4.	Controls and Procedures	75

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	76

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

Item 6.	Exhibits	77

Signatures		78

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PART I.	FINANCIAL INFORMATION


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements in this Quarterly Report on Form 10-Q that are based on other than historical data are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others:


•	statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation (“the Parent”) and its subsidiaries (collectively “the Company,” “Zions,” “we,” “our,” “us”); and


•	statements preceded by, followed by, or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” and the negative thereof and similar words and 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 by their nature address matters that are, to different degrees, uncertain, such as statements about future financial and operating results, the potential timing or consummation of the proposed merger of Zions Bancorporation with and into its wholly-owned bank subsidiary, ZB, National Association, (“ZB, N.A.” or the “Bank”) (the “restructuring”), receipt of the final report from the Financial Stability Oversight Council (“FSOC”), actions to be taken by Zions or receipt of any required approvals, or the anticipated benefits thereof, including without limitation, future financial and operating results. Actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Management’s Discussion and Analysis. Important risk factors that may cause such material differences include, but are not limited to:


•	the Company’s ability to successfully execute its business plans, manage its risks, and achieve its objectives, including its operating leverage goals and its capital plan;


•	risks and uncertainties related to the ability to obtain shareholder and regulatory approvals, or the possibility that such approvals may be delayed;


•	the ability of Zions Bancorporation to achieve anticipated benefits from the restructuring and from regulatory approvals;


•	legislative, regulatory and economic developments that may diminish or eliminate the anticipated benefits of the restructuring;

•

changes in local, national and international political and economic conditions, including without limitation the political and economic effects of the economic and fiscal imbalance in the United States (“U.S.”) and other countries, potential or actual downgrades in ratings of sovereign debt issued by the United States and other countries, and other major developments, including wars, military actions, and terrorist attacks;


•	changes in financial and commodity market prices and conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including without limitation rates of business formation and growth, commercial and residential real estate development, real estate prices, and oil and gas-related commodity prices;


•	changes in markets for equity, fixed income, commercial paper and other securities, commodities, including availability, market liquidity levels, and pricing;


•	any impairment of our goodwill or other intangibles, or any adjustment of valuation allowances on our deferred tax assets due to adverse changes in the economic environment, declining operations of the reporting unit, or a

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change to the corporate statutory tax rate or other similar changes if and as implemented by local and national governments, or other factors;


•	changes in interest rates, the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows and competition;


•	the impact of acquisitions, dispositions, and corporate restructurings;


•	increases in the levels of losses, customer bankruptcies, bank failures, claims, and assessments;

•

changes in fiscal, monetary, regulatory, trade and tax policies and laws, and regulatory assessments and fees, including policies of the United States Department of Treasury, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”), the Securities and Exchange Commission, and the Consumer Financial Protection Bureau (“CFPB”);


•	the impact of executive compensation rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and banking regulations, which may impact the ability of the Company and other American financial institutions to retain and recruit executives and other personnel necessary for their businesses and competitiveness;

•

the impact of the Dodd-Frank Act and Basel III, and rules and regulations thereunder, on our required regulatory capital and liquidity levels, governmental assessments on us (including, but not limited to, the Federal Reserve reviews of our annual capital plan), the scope of business activities in which we may engage, the manner in which we engage in such activities, the fees we may charge for certain products and services, and other matters affected by the Dodd-Frank Act and these international standards;


•	continuing consolidation in the financial services industry;


•	new legal claims against the Company, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies, or changes in existing legal matters;


•	success in gaining regulatory approvals, when required;


•	changes in consumer spending and savings habits;


•	increased competitive challenges and expanding product and pricing pressures among financial institutions;


•	inflation and deflation;


•	technological changes and the Company’s implementation of new technologies;


•	the Company’s ability to develop and maintain secure and reliable information technology systems;


•	legislation or regulatory changes which adversely affect the Company’s operations or business;


•	the Company’s ability to comply with applicable laws and regulations;


•	changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies; and


•	costs of deposit insurance and changes with respect to FDIC insurance coverage levels.

Except to the extent required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

GLOSSARY OF ACRONYMS



ACL	Allowance for Credit Losses	BHC	Bank Holding Company
AFS	Available-for-Sale	bps	basis points
ALCO	Asset/Liability Committee	CB&T	California Bank & Trust, a division of ZB, N.A.
ALLL	Allowance for Loan and Lease Losses	CCAR	Comprehensive Capital Analysis and Review
Amegy	Amegy Bank, a division of ZB, N.A.	CFPB	Consumer Financial Protection Bureau
AOCI	Accumulated Other Comprehensive Income	CLTV	Combined Loan-to-Value Ratio
ASC	Accounting Standards Codification	CRE	Commercial Real Estate
ASU	Accounting Standards Update	DFAST	Dodd-Frank Act Stress Test
ATM	Automated Teller Machine	Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act

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DTA	Deferred Tax Asset	OCI	Other Comprehensive Income
EaR	Earnings at Risk	OREO	Other Real Estate Owned
ERM	Enterprise Risk Management	OTTI	Other-Than-Temporary Impairment
EVE	Economic Value of Equity at Risk	PAGA	Private Attorney General Act
FAMC	Federal Agricultural Mortgage Corporation, or “Farmer Mac”	Parent	Zions Bancorporation
FDIC	Federal Deposit Insurance Corporation	PEI	Private Equity Investment
FTP	Funds Transfer Pricing	PPNR	Pre-provision Net Revenue
FHLB	Federal Home Loan Bank	ROC	Risk Oversight Committee
FRB	Federal Reserve Board	RULC	Reserve for Unfunded Lending Commitments
GAAP	Generally Accepted Accounting Principles	S&P	Standard and Poor's
HECL	Home Equity Credit Line	SBA	Small Business Administration
HTM	Held-to-Maturity	SBIC	Small Business Investment Company
IMG	International Manufacturing Group	TCBW	The Commerce Bank of Washington, a division of ZB, N.A.
LCR	Liquidity Coverage Ratio	TDR	Troubled Debt Restructuring
LIBOR	London Interbank Offered Rate	Tier 1	Common Equity Tier 1 (Basel III)
Municipalities	State and Local Governments	Topic 606	ASC Topic 606, “Revenue from Contracts with Customers”
NBAZ	National Bank of Arizona, a division of ZB, N.A.	U.S.	United States
NIM	Net Interest Margin	Vectra	Vectra Bank Colorado, a division of ZB, N.A.
NM	Not Meaningful	ZB, N.A.	ZB, National Association
NSB	Nevada State Bank, a division of ZB, N.A.	Zions Bank	Zions Bank, a division of ZB, N.A.
OCC	Office of the Comptroller of the Currency

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

The Company has made no significant changes in its critical accounting policies and significant estimates from those disclosed in its 2017 Annual Report on Form 10-K.

GAAP to NON-GAAP RECONCILIATIONS

This Form 10-Q presents non-GAAP financial measures, in addition to generally accepted accounting principles (“GAAP”) financial measures, to provide investors with additional information. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. The Company considers these adjustments to be relevant to ongoing operating results and provide a meaningful base for period-to-period and company-to-company comparisons. These non-GAAP financial measures are used by management to assess the performance and financial position of the Company and for presentations of Company performance to investors. The Company further believes that presenting these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management.

Non-GAAP financial measures have inherent limitations, and are not required to be uniformly applied by individual entities. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

The following are non-GAAP financial measures presented in this Form 10-Q and a discussion of why management uses these non-GAAP measures:

Return on Average Tangible Common Equity – this schedule also includes “net earnings applicable to common shareholders, excluding the effects of the adjustment, net of tax” and “average tangible common equity.” Return on average tangible common equity is a non-GAAP financial measure that management believes provides useful information about the Company’s use of shareholders’ equity. Management believes the use of ratios that

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ZIONS BANCORPORATION AND SUBSIDIARIES

utilize tangible equity provides additional useful information because they present measures of those assets that can generate income.

Tangible Equity Ratio, Tangible Common Equity Ratio, and Tangible Book Value per Common Share – this schedule also includes “tangible equity,” “tangible common equity,” and “tangible assets.” Tangible equity ratio, tangible common equity ratio, and tangible book value per common share are non-GAAP financial measures that management believes provides additional useful information about the levels of tangible assets and tangible equity between each other and in relation to outstanding shares of common stock. Management believes the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income.

Efficiency Ratio – this schedule also includes “adjusted noninterest expense,” “taxable-equivalent net interest income,” “adjusted taxable-equivalent revenue,” and “adjusted pre-provision net revenue (“PPNR”).” The methodology of determining the efficiency ratio may differ among companies. Management makes adjustments to exclude certain items as identified in the subsequent schedule which it believes allows for more consistent comparability among periods. Management believes the efficiency ratio provides useful information regarding the cost of generating revenue. Adjusted noninterest expense provides a measure as to how well the Company is managing its expenses, and adjusted PPNR enables management and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. Taxable-equivalent net interest income allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources.

RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)



		Three Months Ended
(Dollar amounts in millions)		June 30, 2018			March 31, 2018			December 31, 2017			June 30, 2017

Net earnings applicable to common shareholders (GAAP)		$	187		$	231		$	114		$	154
Adjustment, net of tax:
Amortization of core deposit and other intangibles		—			—			1			1
Net earnings applicable to common shareholders, excluding the effects of the adjustment, net of tax (non-GAAP)	(a)	$	187		$	231		$	115		$	155
Average common equity (GAAP)		$	7,072		$	7,061		$	7,220		$	7,143
Average goodwill and intangibles		(1,016		)	(1,016		)	(1,017		)	(1,020		)
Average tangible common equity (non-GAAP)	(b)	$	6,056		$	6,045		$	6,203		$	6,123
Number of days in quarter	(c)	91			90			92			91
Number of days in year	(d)	365			365			365			365
Return on average tangible common equity (non-GAAP)	(a/b/c)*d	12.4		%	15.5		%	7.4		%	10.2		%

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ZIONS BANCORPORATION AND SUBSIDIARIES

TANGIBLE EQUITY (NON-GAAP) AND TANGIBLE COMMON EQUITY (NON-GAAP)



(Dollar amounts in millions, except per share amounts)		June 30, 2018			March 31, 2018			December 31, 2017			June 30, 2017

Total shareholders’ equity (GAAP)		$	7,621		$	7,644		$	7,679		$	7,749
Goodwill and intangible		(1,015		)	(1,016		)	(1,016		)	(1,019		)
Tangible equity (non-GAAP)	(a)	6,606			6,628			6,663			6,730
Preferred stock		(566		)	(566		)	(566		)	(566		)
Tangible common equity (non-GAAP)	(b)	$	6,040		$	6,062		$	6,097		$	6,164
Total assets (GAAP)		$	66,457		$	66,481		$	66,288		$	65,446
Goodwill and intangible		(1,015		)	(1,016		)	(1,016		)	(1,019		)
Tangible assets (non-GAAP)	(c)	$	65,442		$	65,465		$	65,272		$	64,427
Common shares outstanding (thousands)	(d)	195,392			197,050			197,532			202,131
Tangible equity ratio (non-GAAP)	(a/c)	10.09		%	10.12		%	10.21		%	10.45		%
Tangible common equity ratio (non-GAAP)	(b/c)	9.23		%	9.26		%	9.34		%	9.57		%
Tangible book value per common share (non-GAAP)	(b/d)	$	30.91		$	30.76		$	30.87		$	30.50

EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)



(Dollar amounts in millions)		Three Months Ended									Six Months Ended						Year Ended
(Dollar amounts in millions)		June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017			December 31, 2017

Noninterest expense (GAAP)	(a)	$	428		$	412		$	405		$	840		$	819		$	1,649
Adjustments:
Severance costs		1			—			—			(1		)	5			7
Other real estate expense, net		—			—			—			1			—			(1		)
Provision for unfunded lending commitments		7			(7		)	3			—			(2		)	(7		)
Amortization of core deposit and other intangibles		—			—			2			1			3			6
Restructuring costs		—			—			1			—			2			4
Total adjustments	(b)	8			(7		)	6			1			8			9
Adjusted noninterest expense (non-GAAP)	(a-b)= (c)	$	420		$	419		$	399		$	839		$	811		$	1,640
Net interest income (GAAP)	(d)	$	548		$	542		$	528		$	1,090		$	1,017		$	2,065
Fully taxable-equivalent adjustments		5			5			9			10			17			35
Taxable-equivalent net interest income (non-GAAP) ¹	(d+e)=f	553			547			537			1,100			1,034			2,100
Noninterest income (GAAP)	g	138			138			132			276			264			544
Combined income (non-GAAP)	(f+g)= (h)	691			685			669			1,376			1,298			2,644
Adjustments:
Fair value and nonhedge derivative income (loss)		—			1			—			2			(1		)	(2		)
Securities gains, net		1			—			2			1			7			14
Total adjustments	(i)	1			1			2			3			6			12
Adjusted taxable-equivalent revenue (non-GAAP)	(h-i)= (j)	$	690		$	684		$	667		$	1,373		$	1,292		$	2,632
Pre-provision net revenue	(h)-(a)	$	263		$	273		$	264		$	536		$	479		$	995
Adjusted PPNR (non-GAAP)	(j-c)	270			265			268			534			481			992
Efficiency ratio (non-GAAP)	(c/j)	60.9		%	61.3		%	59.8		%	61.1		%	62.8		%	62.3		%

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RESULTS OF OPERATIONS

Executive Summary

The Company reported net earnings applicable to common shareholders of $187 million , or $0.89 per diluted common share for the second quarter of 2018 , compared with net earnings applicable to common shareholders of $154 million , or $0.73 per diluted common share for the second quarter of 2017 , and $231 million , or $1.09 per diluted common share for the first quarter of 2018 . The financial performance in the second quarter of 2018 reflects strong net interest income, customer-related fee income growth, progress on key initiatives and continued strong credit quality; the effect of these factors was tempered by modest linked-quarter loan growth.

Net income in the second quarter of 2018 increased from the second quarter of 2017 primarily due to a $20 million increase in net interest income and a $24 million decrease in income taxes, partially offset by a $23 million increase in noninterest expense. Net income also increased due to moderate noninterest income growth. Net income in the second quarter of 2018 decreased from the first quarter of 2018 primarily due to a negative provision for loan losses of $40 million in the first quarter and a $16 million increase in noninterest expense.

Net interest income increased from the second quarter of 2017 to the second quarter of 2018 due to increases in short-term interest rates that positively impacted loan yields and growth in our lending portfolio, partially offset by an increase in interest expense. When comparing the second quarter of 2018 to the second quarter of 2017, customer-related fees increased by 3% . During this same period comparison, salaries and employee benefits increased by $26 million due to increased incentive compensation resulting from stronger financial performance and increased salaries from higher headcount and annual merit increases.

Highlights from the Second Quarter of 2018

Net interest income, which is more than three-quarters of our revenue, improved by $20 million from $528 million in the second quarter of 2017, and by $6 million from $542 million in the first quarter of 2018 , to $548 million in the second quarter of 2018. The increase from both prior periods was due to increases in short-term interest rates that positively impacted loan yields and growth in consumer and commercial loans, partially offset by an increase in interest expense. Net Interest Margin (“NIM”) was 3.56% in both the second and first quarters of 2018 compared with 3.52% in the second quarter of 2017. For more discussion on the changes in net interest income and NIM, including the positive impact of interest income recoveries, see “Net Interest Income” and “Net Interest Margin and Interest Rate Spreads.”

Adjusted PPNR of $270 million for the second quarter of 2018 was up $2 million, or 1%, from the second quarter of 2017. The prior year period included $16 million of interest income recoveries of at least $1 million per loan, while the current period included only $1 million of such recoveries. Adjusted for these interest income recoveries, the increase in adjusted PPNR would be 7%. The increase in PPNR reflects operating leverage improvement resulting from moderate loan growth and increases in short-term interest rates, partially offset by increased interest expense and noninterest expense from increased salaries and employee benefits. See “Noninterest Expense” for a discussion regarding the increased salary and employee benefits expense. The Company’s efficiency ratio was 60.9% in the second quarter of 2018 compared with 59.8% in the second quarter of 2017 and 61.3% in the first quarter of 2018. See “GAAP to Non-GAAP Reconciliations” on page 5 for more information regarding the calculation of adjusted PPNR.

Our average loan portfolio increased $2.0 billion , or 5% , since the second quarter of 2017. We have seen widespread growth across most products and geographies, with particular strength in municipal, 1-4 family residential and owner-occupied lending. We saw a decline in our commercial real estate (“CRE”) term portfolio, primarily due to payoffs and a decline in originations.

Asset quality has continued to improve during the past several quarters. Credit quality in the oil and gas-related portfolio continues to strengthen and it has remained strong in the rest of the lending portfolio. Overall, from the second quarter of 2017 to the second quarter of 2018, criticized, classified, and nonaccrual loans declined by $488 million, $370 million, and $144 million, respectively.

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We continue to increase the return on- and of- capital. Return on average tangible common equity was 12.4% for the second quarter of 2018, up 220 basis points (“bps”) from the same prior year period. Regarding the return of capital, during the second quarter of 2018, the Company repurchased 2.1 million shares of common stock for $120 million, and has repurchased a total of 9.2 million shares of common stock for $465 million over the last 12 months. Dividends per common share were $0.24 in the second quarter of 2018, compared with $0.08 for the second quarter of 2017. In July 2018, the Company announced that its board of directors declared a regular quarterly dividend of $0.30 per common share, payable August 23, 2018 to shareholders of record on August 16, 2018. This represents an increase of 150% from the dividend paid in the year ago period, and a 25% increase over the dividend paid in the second quarter of 2018. Additionally, the Board approved a plan to repurchase $185 million of common shares during the third quarter of 2018. See “Capital Management” on page 33 for more information regarding the Company’s capital plan.

On July 18, 2018, the Company issued a press release announcing that it has been notified of the proposed decision by FSOC to grant its appeal for relief from the designation of Zions or its successor as a systemically important financial institution under the Dodd-Frank Act. Also, it announced that the Company has received approval from the OCC and FDIC to merge its holding company with and into its bank, ZB, N.A. The merger is expected to result in the elimination of duplicative regulatory efforts, leaving the OCC as the Company’s primary federal banking regulator. See “Capital Management” on page 33 for more information regarding the merger.

Areas of focus for 2018

In 2018, we are focused on ongoing initiatives related to Company profitability, including returns on equity. Both our profitability and returns on equity have improved in the second quarter of 2018 when compared with the second quarter of 2017, but declined slightly when compared with the first quarter of 2018. The decline was primarily a result a of the Company recording a negative $47 million provision for credit losses in the first quarter of 2018, compared with a $12 million provision in the second quarter of 2018. We continue to implement technology upgrades and process simplification to ensure current and future performance. See “Areas of focus for 2018” in our 2017 Annual Report on Form 10-K for a discussion of the major areas of emphasis in 2018.

Net Interest Income

Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income increased to $548 million in the second quarter of 2018 from $528 million in the second quarter of 2017 . The $20 million , or 4% , increase in net interest income was primarily due to a $45 million increase in interest and fees on loans resulting from increases in short-term interest rates and loan growth in consumer and commercial loans, partially offset by an increase to interest expense. Interest income in the second quarter of 2018 was positively impacted by $1 million of interest income recoveries of at least $1 million per loan compared with $16 million of such recoveries in the second quarter of 2017. Adjusting for these interest income recoveries, net interest income would have increased by $35 million, or 7%.

Interest expense increased $28 million from the second quarter of 2017 to the second quarter of 2018 due to a $15 million increase in interest on deposits due to higher rates paid and a $13 million increase in interest on short-term borrowings. We have remained disciplined in our deposit pricing, as over the past twelve months the Federal Reserve has increased the overnight benchmark Federal Funds rate by 75 bps, while the rate paid on the Company’s interest-bearing deposits increased 19 bps and the rate paid on total deposits increased 11 bps.

Net Interest Margin and Interest Rate Spreads

The NIM was 3.56% and 3.52% for the second quarters of 2018 and 2017 , respectively, and 3.56% for the first quarter of 2018. Excluding the effect of the previously mentioned interest income recoveries and adjusting for the effect of the change to the corporate tax rate on fully taxable equivalent yields, the yield on interest-earning assets would have increased 34 bps from the same prior year period. Adjusting for the same items and $11 million of similar interest income recoveries in the first quarter of 2018 the NIM would have been 3.55% for the second quarter of 2018 compared with 3.39% for the second quarter of 2017 and 3.49% for the first quarter of 2018. The NIM for the second quarter of 2018, compared with the same prior year period, benefited from the recent increases

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in short-term interest rates and deposit pricing discipline. Average interest-earning assets increased $1.2 billion from the second quarter of 2017 to the second quarter of 2018, with average rates improving 21 bps. Additionally, the NIM was negatively impacted 3 bps by the decrease in the corporate tax rate from 35% to 21%.

Average interest-bearing liabilities increased $1.4 billion in the second quarter of 2018 compared with the second quarter of 2017 as a result of increased interest-bearing deposits and wholesale borrowings to fund some of the balance sheet growth. The average rate on interest-bearing liabilities increased 31 bps during this same period due to rising interest rates and increased rates paid on deposits.

The average loan portfolio increased $2.0 billion , or 5% , between the second quarter of 2017 and the second quarter of 2018. Most of this growth was in municipal, 1-4 family residential, commercial and industrial, and owner-occupied loans. The average loan yield increased 19 bps over the same period, with increases in the average rates for commercial, CRE, and consumer loans of 24 bps, 20 bps, and 15 bps, respectively. Benchmark interest rates have increased several times beginning in the fourth quarter of 2015, which has had a positive impact on NIM and spreads, as our earning assets generally reprice quicker than our funding sources. A portion of our variable-rate loans were not affected by these changes primarily due to having longer reset frequencies, or because a substantial portion of our earning assets are tied to longer-term rate indices. The longer-term rates were impacted by a relatively flat yield curve during the last several quarters. We expect overall loan growth to be moderate.

Average available-for-sale (“AFS”) securities balances decreased $0.6 billion from the second quarter of 2017 to the second quarter of 2018. Yields on average AFS securities increased slightly by 3 bps over the same period, despite an increase in prepayments on Small Business Administration (“SBA”) loan-backed securities purchased at a premium. The increased yield was a result of rising market interest rates on variable-rate and recently purchased fixed-rate agency mortgage-backed securities.

Average noninterest-bearing demand deposits provided us with low cost funding and comprised approximately 45% of average total deposits for both the second quarters of 2017 and 2018. Average total deposits were $52.9 billion for the second quarter of 2018 compared with $52.3 billion for the second quarter of 2017 . Average interest-bearing deposits were $ 29.3 billion in the second quarter of 2018 , compared with $28.5 billion for the same prior year period, and the average rate paid increased 19 bps. We have been selectively increasing deposit pricing, but we have not generally experienced significant pressure to increase all deposit rates. Although we consider a wide variety of sources when determining our funding needs, we benefit from access to deposits from a significant number of small to mid-sized business customers, particularly noninterest-bearing deposits, that provide us with a low cost of funds and have a positive impact on our NIM. Further information regarding deposit assumptions is discussed in “Interest Rate and Market Risk Management” on page 26 .

As mentioned previously, the Company has used short-term Federal Home Loan Bank (“FHLB”) borrowings to fund some of its balance sheet growth. Average short-term borrowings increased $0.6 billion compared with the same prior year period and the average interest rate paid increased by 98 bps as a result of rising short-term interest rates.

The rate paid on total deposits and interest-bearing liabilities increased 19 bps from 0.21% for the second quarter of 2017 to 0.40% for the second quarter of 2018 , primarily due to an increase in both the amount of wholesale funding and the rate paid on wholesale funding and deposits. The total cost of deposits for the second quarter of 2018 was 0.22% , compared with 0.11% for the second quarter of 2017 .

The NIM was 3.56% and 3.45% for the first six months of 2018 and 2017 , respectively. The increase in the year-to-date NIM was also due to the recent increases in short-term interest rates and deposit pricing discipline.

The spread on average interest-bearing funds was 3.26% and 3.36% for the second quarters of 2018 and 2017 , respectively, and 3.29% and 3.30% for the first six months of 2018 and 2017, respectively. The spread on average interest-bearing funds for these periods was affected by the same factors that had an impact on the NIM. Although the spread on interest-bearing funds decreased from the second quarter of 2017 to the second quarters of 2018 , the

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NIM still increased over the same period. This is because as interest rates continue to increase, the value of the noninterest-bearing deposits on the NIM also increases.

We expect the mix of interest-earning assets to continue to change over the next several quarters primarily due to growth in commercial loans, including municipal loans, in addition to growth in both CRE and non-oil and gas-related commercial and industrial loans. We anticipate this growth will be partially offset by continued modest reduction in the National Real Estate portfolio.

Interest rate spreads and margin are impacted by the mix of assets we hold, the composition of our loan and securities portfolios and the type of funding used. Assuming no additional increases in the Federal Funds rate or prepayment speeds of securities purchased at a premium, we expect the yield on the securities portfolio to increase slightly, as the cash flow from the portfolio is redeployed into securities with yields that are slightly accretive to the overall portfolio.

Our estimates of the Company’s interest rate risk position are highly dependent upon a number of assumptions regarding the repricing behavior of various deposit and loan types in response to changes in both short-term and long-term interest rates, balance sheet composition, and other modeling assumptions, as well as the actions of competitors and customers in response to those changes. Further detail on interest rate risk is discussed in “Interest Rate and Market Risk Management” on page 26 .

The following schedule summarizes the average balances, the amount of interest earned or incurred, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities that generate taxable-equivalent net interest income.

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CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)



	Three Months Ended June 30, 2018							Three Months Ended June 30, 2017
(Dollar amounts in millions)	Average balance			Amount of interest ¹		Average yield/rate		Average balance			Amount of interest ¹		Average yield/rate
ASSETS
Money market investments	$	1,317		$	7	2.02	%	$	1,572		$	5	1.20	%
Securities:
Held-to-maturity	780			7		3.60		788			8		3.97
Available-for-sale	14,745			78		2.14		15,386			81		2.11
Trading account	179			2		4.06		79			—		3.43
Total securities ²	15,704			87		2.23		16,253			89		2.20
Loans held for sale	72			1		4.18		100			1		3.24
Loans and leases ³
Commercial	23,275			272		4.68		21,885			242		4.44
Commercial real estate	11,075			136		4.94		11,236			133		4.74
Consumer	10,892			108		3.98		10,122			97		3.83
Total loans and leases	45,242			516		4.57		43,243			472		4.38
Total interest-earning assets	62,335			611		3.93		61,168			567		3.72
Cash and due from banks	546							795
Allowance for loan losses	(480		)					(546		)
Goodwill and intangibles	1,016							1,020
Other assets	3,088							2,974
Total assets	$	66,505						$	65,411
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market	$	25,479		17		0.26	%	$	25,467		9		0.14	%
Time	3,807			12		1.27		3,048			5		0.66
Total interest-bearing deposits	29,286			29		0.39		28,515			14		0.20
Borrowed funds:
Federal funds purchased and other short-term borrowings	4,927			24		1.92		4,302			10		0.94
Long-term debt	383			5		5.77		383			6		5.77
Total borrowed funds	5,310			29		2.19		4,685			16		1.34
Total interest-bearing liabilities	34,596			58		0.67		33,200			30		0.36
Noninterest-bearing deposits	23,610							23,819
Total deposits and interest-bearing liabilities	58,206			58		0.40		57,019			30		0.21
Other liabilities	661							565
Total liabilities	58,867							57,584
Shareholders’ equity:
Preferred equity	566							684
Common equity	7,072							7,143
Total shareholders’ equity	7,638							7,827
Total liabilities and shareholders’ equity	$	66,505						$	65,411
Spread on average interest-bearing funds						3.26	%						3.36	%
Taxable-equivalent net interest income and net yield on interest-earning assets				$	553	3.56	%				$	537	3.52	%


¹	Rates are calculated using amounts in thousands and taxable-equivalent rates used where applicable. The taxable-equivalent rates used are the rates that were applicable at the time of each respective reporting period.


²	Quarter-to-date interest on total securities includes $36 million and $35 million of premium amortization, as of June 30, 2018 and June 30, 2017 , respectively.


³	Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

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	Six Months Ended June 30, 2018							Six Months Ended June 30, 2017
(Dollar amounts in millions)	Average balance			Amount of interest ¹		Average yield/rate		Average balance			Amount of interest ¹		Average yield/rate
ASSETS
Money market investments	$	1,406		$	13	1.85	%	$	1,777		$	9	1.05	%
Securities:
Held-to-maturity	784			14		3.57		817			16		3.93
Available-for-sale	14,846			159		2.16		14,709			155		2.12
Trading account	141			3		4.03		70			1		3.57
Total securities ²	15,771			176		2.24		15,596			172		2.22
Loans held for sale	62			1		4.08		116			2		3.23
Loans and leases ³
Commercial	23,158			538		4.69		21,747			467		4.33
Commercial real estate	11,070			264		4.81		11,238			251		4.50
Consumer	10,826			212		3.96		9,921			189		3.83
Total loans and leases	45,054			1,014		4.54		42,906			907		4.26
Total interest-earning assets	62,293			1,204		3.90		60,395			1,090		3.64
Cash and due from banks	569							884
Allowance for loan losses	(501		)					(556		)
Goodwill and intangibles	1,016							1,021
Other assets	3,059							2,963
Total assets	$	66,436						$	64,707
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market	$	25,388		28		0.22	%	$	25,680		19		0.14	%
Time	3,545			20		1.15		2,953			9		0.63
Total interest-bearing deposits	28,933			48		0.34		28,633			28		0.19
Borrowed funds:
Federal funds purchased and other short-term borrowings	5,315			45		1.71		3,617			15		0.85
Long-term debt	383			11		5.80		451			13		5.85
Total borrowed funds	5,698			56		1.99		4,068			28		1.40
Total interest-bearing liabilities	34,631			104		0.61		32,701			56		0.34
Noninterest-bearing deposits	23,514							23,641
Total deposits and interest-bearing liabilities	58,145			104		0.36		56,342			56		0.19
Other liabilities	658							598
Total liabilities	58,803							56,940
Shareholders’ equity:
Preferred equity	566							697
Common equity	7,067							7,070
Total shareholders’ equity	7,633							7,767
Total liabilities and shareholders’ equity	$	66,436						$	64,707
Spread on average interest-bearing funds						3.29	%						3.30	%
Taxable-equivalent net interest income and net yield on interest-earning assets				$	1,100	3.56	%				$	1,034	3.45	%


¹	Rates are calculated using amounts in thousands and taxable-equivalent rates used where applicable. The taxable-equivalent rates used are the rates that were applicable at the time of each respective reporting period.


²	Quarter-to-date interest on total securities includes $68 million and $66 million of premium amortization, as of June 30, 2018 and June 30, 2017 , respectively.


³	Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

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Provision for Credit Losses

The provision for credit losses is the combination of both the provision for loan losses and the provision for unfunded lending commitments. Note 6 of our 2017 Annual Report on Form 10-K and “Credit Risk Management” on page 20 contains information on how we determine the appropriate level for the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”).

The provision for loan losses was $5 million in the second quarter of 2018, compared with $7 million in the same prior year period, and a negative provision of $ 40 million in the first quarter of 2018. The $5 million provision primarily reflects qualitative adjustments related to enhancements to our internal risk-grading system, increased economic uncertainty related to potential trade disruptions, and the potential credit impacts of rising interest rates, offset by net recoveries and improved credit quality metrics in the entire loan portfolio. During the first quarter of 2018, the provision for loan losses was negative as a result of improving credit quality, particularly in the oil and gas-related portfolio, and minimal incurred losses-to-date from Hurricane Harvey. Asset quality during the second quarter of 2018 continued to improve for the entire loan portfolio when compared with the second quarter of 2017, primarily due to improvements in the oil and gas-related portfolio and decreases in overall classified and nonperforming assets. Classified and nonaccrual loans in the total portfolio declined by $370 million and $144 million, respectively, from the second quarter of 2017. During the second quarter of 2018, there were net recoveries of $12 million, compared with net charge-offs of $7 million during the second quarter of 2017.

The provision for loan losses was a negative $35 million during the first six months of 2018, compared with $30 million during the first six months of 2017. This decrease was primarily as a result of the previously mentioned improving credit quality, particularly in the oil and gas-related portfolio, and minimal incurred losses-to-date from Hurricane Harvey during the first six months of 2018, as well as charge-offs related to an isolated event with a single, non-oil and gas-related borrower during the first six months of 2017. We have since had a partial recovery on the charge-off related to the isolated event from 2017.

During the second quarter of 2018, we recorded a $7 million provision for unfunded lending commitments, compared with a $3 million provision in the second quarter of 2017. This increase was due to increased unfunded lending commitments and a change in the mix of the portfolio. From quarter to quarter, the provision for unfunded lending commitments may be subject to sizable fluctuations due to changes in the timing and volume of loan commitments, originations, fundings, and changes in credit quality.

The allowance for credit losses (“ACL”), which is the combination of both the ALLL and the RULC, decreased $59 million, when compared with the second quarter of 2017. This was mainly due to improved credit quality metrics and decreased net charge-offs in the total loan portfolio.

Noninterest Income

Noninterest income represents revenues we earn for products and services that have no associated interest rate or yield. For the second quarter of 2018 , noninterest income increased $6 million , or 5% , compared with the second quarter of 2017 . We believe a subtotal of customer-related fees provides a better view of income over which we have more direct control. It excludes items such as dividends, insurance-related income, mark-to-market adjustments on certain derivatives, and securities gains and losses. The following schedule presents a comparison of the major components of noninterest income.

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NONINTEREST INCOME



	Three Months Ended June 30,					Amount change			Percent change		Six Months Ended June 30,					Amount change			Percent change
(Dollar amounts in millions)	2018		2017			Amount change			Percent change		2018		2017			Amount change			Percent change

Service charges and fees on deposit accounts	$	42	$	43		$	(1	)	(2	)%	$	84	$	85		$	(1	)	(1	)%
Other service charges, commissions and fees	55		56			(1		)	(2	)	110		105			5			5
Wealth management and trust income	14		10			4			40		25		20			5			25
Loan sales and servicing income	7		6			1			17		13		13			—			—
Capital markets and foreign exchange	7		6			1			17		15		13			2			15
Customer-related fees	125		121			4			3		247		236			11			5
Dividends and other investment income	11		10			1			10		22		22			—			—
Securities gains, net	1		2			(1		)	(50	)	1		7			(6		)	(86	)
Other	1		(1		)	2			NM		6		(1		)	7			NM
Total noninterest income	$	138	$	132		$	6		5		$	276	$	264		$	12		5

Customer-related fees increased $4 million , or 3% , from the second quarter of 2017 to the second quarter of 2018 primarily due to increased wealth management and trust income, loan syndication fees, and investment service fees. Wealth management and trust income increased by $4 million , or 40% , due to both increased corporate and personal trust income. Improvements in platform and product simplifications contributed to this increase. We have experienced a decrease in mortgage fees due to higher interest rates resulting in less originations and mortgage-related activity.

Customer-related fees increased $11 million , or 5% from the first six months of 2017 to the first six months of 2018. This increase was a result of the same factors as the increase from the second quarter of 2017 to the second quarter of 2018. Other noninterest income increased by $ 7 million from the first six months of 2017 to the first six months of 2018, primarily due to favorable credit valuations on client-related derivatives and net gains on sales of assets. Relative to second quarter results, we expect moderate growth in customer-related fees over the next twelve months.

Noninterest Expense

Noninterest expense increased by $23 million , or 6% , from the second quarter of 2017 to the second quarter of 2018. The Company remains focused on expense control efforts, while continuing to invest in technology and simplification initiatives; however, due to a lower-than-normal incentive compensation expense accrual in the same prior year period, as well as a higher than expected accrual in the current period due in part to stronger than expected credit quality performance, revenue growth, and overall profitability, the increase in noninterest expense was above our targeted growth rate of low single-digit percentage range relative to the prior year.

The following schedule presents a comparison of the major components of noninterest expense.

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NONINTEREST EXPENSE



	Three Months Ended June 30,				Amount change			Percent change		Six Months Ended June 30,					Amount change			Percent change
(Dollar amounts in millions)	2018		2017		Amount change			Percent change		2018		2017			Amount change			Percent change

Salaries and employee benefits	$	266	$	240	$	26		11	%	$	535	$	502		$	33		7	%
Occupancy, net	32		32		—			—		63		66			(3		)	(5	)
Furniture, equipment and software, net	32		32		—			—		65		64			1			2
Other real estate expense, net	—		—		—			NM		1		—			1			NM
Credit-related expense	7		8		(1		)	(13	)	13		15			(2		)	(13	)
Provision for unfunded lending commitments	7		3		4			(133	)	—		(2		)	2			100
Professional and legal services	14		14		—			—		26		28			(2		)	(7	)
Advertising	7		6		1			17		13		11			2			18
FDIC premiums	14		13		1			8		26		25			1			4
Other	49		57		(8		)	(14	)	98		110			(12		)	(11	)
Total noninterest expense	$	428	$	405	$	23		6		$	840	$	819		$	21		3
Adjusted noninterest expense ¹	$	420	$	399	$	21		5		$	839	$	811		$	28		3

¹ For information on non-GAAP financial measures see “GAAP to Non-GAAP Reconciliations” on page 5

Salary and employee benefits expense was up $26 million in the second quarter of 2018 compared with the second quarter of 2017 primarily due to an $11 million increase in incentive compensation due to stronger financial performance relative to 2017, an $8 million increase in base salaries due to increased headcount and annual merit increases, and $3 million increases in base salaries and bonuses to be paid to certain employees as a result of the recent tax reform. The provision for unfunded lending commitments increased by $4 million , primarily due to increased unfunded lending commitments and a change in the mix of the portfolio. For further information see “Provision for Credit Losses” on page 14 . Other noninterest expense decreased by $8 million , primarily due to reduced revenue sharing with the FDIC for certain loans purchased in 2009 as the agreement with the FDIC ended in the first quarter of 2018 .

Net occupancy decreased by $3 million from the first six months of 2017 to the first six months of 2018 as additional rental income was received on a newly constructed building in Houston. Both credit-related fees and professional and legal services decreased by $2 million over the same year-to-date period as a result of lower fees related to repossessions and a decrease in consulting fees, respectively. Other changes between the first six months of 2018 and 2017 are due to the same factors as for the changes between the second quarters of 2018 and 2017.

Adjusted noninterest expense for the second quarter of 2018 increased $21 million , or 5%, to $420 million , compared with $399 million for the same prior year period. To arrive at adjusted noninterest expense, GAAP noninterest expense is adjusted to exclude certain expense items, which are the same as those items excluded in arriving at the efficiency ratio (see “GAAP to Non-GAAP Reconciliations” on page 5 for more information regarding the calculation of the efficiency ratio). The main variance between noninterest expense and adjusted noninterest expense for the second quarters of 2018 and 2017 is the provision for unfunded lending commitments, which were $7 million and $3 million , respectively. We still expect adjusted noninterest expense for 2018 to experience an increase in the low single-digit percentage range relative to the prior year.

Income Taxes

Income tax expense for the second quarter of 2018 was $56 million , compared with $80 million for the same prior year period. The effective tax rates were 22.1% and 32.3% for the second quarters of 2018 and 2017, respectively. Income tax expense for the first six months of 2018 was $ 126 million compared with $124 million for the first six months of 2017. The effective tax rates for these year-to-date periods were 22.5% and 28.7%, respectively. The tax rates for 2018 and 2017 were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance. The income tax rate for 2018 was positively impacted by the decrease in the corporate federal income tax rate to 21% from 35% due to the Tax Cuts and Jobs Act, which was effective January 1, 2018. This rate benefit was partially reduced by the non-deductibility of FDIC premiums and certain fringe benefits as

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enacted by the new tax law. The tax rate for 2017 was also driven by a one-time $14 million benefit to tax expense related to state tax adjustments and a one-time $4 million benefit due to changes in the carrying value of various state deferred tax items.

We had a net deferred tax asset (“DTA”) balance of $149 million at June 30, 2018, compared with $93 million at December 31, 2017. The increase in the net DTA resulted primarily from the increase of accrued compensation, unrealized losses in other comprehensive income (“OCI”) related to securities, the decrease in deferred tax liabilities related to premises and equipment, and the deferred gain on a prior period debt exchange. Net charge-offs exceeding the provision for loan losses offset some of the overall increase in DTA.

Preferred Dividends

Preferred dividends of $10 million during the second quarter of 2018 decreased $2 million when compared with the second quarter of 2017 . This decrease was a result of our redemption of all outstanding shares of our 7.9% Series F preferred stock during the second quarter of 2017. The total one-time reduction to net earnings applicable to common shareholders associated with the preferred stock redemption was $2 million . The preferred stock redemption was also the reason for preferred dividends decreasing by $6 million from the first six months of 2017 to the first six months of 2018. Preferred dividends are expected to be $34 million for all of 2018.

BALANCE SHEET ANALYSIS

Interest-Earning Assets

Interest-earning assets are those assets that have interest rates or yields associated with them. One of our goals is to maintain a high level of interest-earning assets relative to total assets while keeping nonearning assets at a minimum. Interest-earning assets consist of money market investments, securities, loans, and leases.

Another goal is to maintain a higher-yielding mix of interest-earning assets, such as loans, relative to lower-yielding assets, while maintaining adequate levels of highly liquid assets. As a result of this goal we redeployed funds from lower-yielding money market investments, in addition to using wholesale borrowings, to purchase agency securities.

For information regarding the average balances of our interest-earning assets, the amount of revenue generated by them, and their respective yields, see the average balance sheet on page 12 .

Average interest-earning assets were $62.3 billion for the first six months of 2018 , compared with $60.4 billion for the first six months of 2017 . Average interest-earning assets as a percentage of total average assets for the first six months of 2018 and 2017 were 94% and 93% , respectively.

Average loans were $45.1 billion and $42.9 billion for the first six months of 2018 and 2017 , respectively. Average loans as a percentage of total average assets for the first six months of 2018 were 68% , compared with 66% in the same prior year period.

Average money market investments, consisting of interest-bearing deposits, federal funds sold, and security resell agreements, decreased by 21% to $1.4 billion for the first six months of 2018 , compared with $1.8 billion for the first six months of 2017 . Average securities increased by 1% for the first six months of 2018 , compared with the first six months of 2017 .

Investment Securities Portfolio

We invest in securities to actively manage liquidity and interest rate risk, in addition to generating revenue for the Company. Refer to the “Liquidity Risk Management” section on page 29 for additional information on management of liquidity and funding and compliance with Basel III and Liquidity Coverage Ratio (“LCR”) requirements. The following schedule presents a profile of our investment securities portfolio. The amortized cost amounts represent the original cost of the investments, adjusted for related accumulated amortization or accretion of any yield adjustments, and for impairment losses, including credit-related impairment. The estimated fair value measurement levels and methodology are discussed in Note 3 of our 2017 Annual Report on Form 10-K.

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INVESTMENT SECURITIES PORTFOLIO



	June 30, 2018						December 31, 2017
(In millions)	Par value		Amortized cost		Estimated fair value		Par value		Amortized cost		Estimated fair value
Held-to-maturity
Municipal securities	$	878	$	878	$	866	$	771	$	770	$	762
Available-for-sale
U.S. Treasury securities	25		25		25		25		25		25
U.S. Government agencies and corporations:
Agency securities	1,683		1,683		1,657		1,830		1,830		1,818
Agency guaranteed mortgage-backed securities	9,667		9,831		9,538		9,605		9,798		9,666
Small Business Administration loan-backed securities	1,919		2,115		2,071		2,007		2,227		2,222
Municipal securities	1,197		1,333		1,312		1,193		1,336		1,334
Other debt securities	25		25		24		25		25		24
Total available-for-sale debt securities	14,516		15,012		14,627		14,685		15,241		15,089
Money market mutual funds and other	—		—		—		72		72		72
Total available-for-sale	14,516		15,012		14,627		14,757		15,313		15,161
Total	$	15,394	$	15,890	$	15,493	$	15,528	$	16,083	$	15,923

The amortized cost of investment securities at June 30, 2018 decreased by 1% from the balances at December 31, 2017 .

The investment securities portfolio includes $496 million of net premium that is distributed across various asset classes as illustrated in the preceding schedule. The purchase premiums and discounts for both held-to-maturity (“HTM”) and AFS securities are amortized and accreted at a constant effective yield to the contractual maturity date and no assumption is made concerning prepayments. As principal prepayments occur, the portion of the unamortized premium or discount associated with the principal reduction is recognized as interest income in the period the principal is reduced. For the six months ended June 30, 2018 , premium amortization reduced the yield on securities by 93 bps compared with a 91 bps impact for the same period in 2017 .

As of June 30, 2018 , under the GAAP fair value accounting hierarchy, 0.2% of the $14.6 billion fair value of the AFS securities portfolio was valued at Level 1, 99.8% was valued at Level 2, and there were no Level 3 AFS securities. At December 31, 2017 , 1% of the $15.2 billion fair value of AFS securities portfolio was valued at Level 1, 99% was valued at Level 2, and there were no Level 3 AFS securities. See Note 3 of our 2017 Annual Report on Form 10-K for further discussion of fair value accounting.

Exposure to State and Local Governments

We provide multiple products and services to state and local governments (referred to collectively as “municipalities”), including deposit services, loans, and investment banking services, and we invest in securities issued by the municipalities.

The following schedule summarizes our exposure to state and local municipalities:

MUNICIPALITIES



(In millions)	June 30, 2018		December 31, 2017

Loans and leases	$	1,388	$	1,271
Held-to-maturity – municipal securities	878		770
Available-for-sale – municipal securities	1,312		1,334
Trading account – municipal securities	108		146
Unfunded lending commitments	153		152
Total direct exposure to municipalities	$	3,839	$	3,673

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At June 30, 2018 , one municipal loan with a balance of $1 million was on nonaccrual. A significant amount of the municipal loan and lease portfolio is secured by real estate and equipment, and 79% of the outstanding loans and leases were originated by California Bank & Trust (“CB&T”), Zions Bank, and Vectra Bank Colorado (“Vectra”). See Note 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans.

Foreign Exposure and Operations

Our credit exposure to foreign sovereign risks and total foreign credit exposure is not significant. We also do not have significant foreign exposure to derivative counterparties. We had no foreign deposits at June 30, 2018 and December 31, 2017 .

Loan Portfolio

For the first six months of 2018 and 2017 , average loans accounted for 68% and 66% , respectively, of total average assets. As presented in the following schedule, the largest category was commercial and industrial loans, which constituted 31% of our loan portfolio at June 30, 2018 .

LOAN PORTFOLIO



	June 30, 2018				December 31, 2017
(Dollar amounts in millions)	Amount		% of total loans		Amount		% of total loans
Commercial:
Commercial and industrial	$	14,134	31	%	$	14,003	31	%
Leasing	358		1		364		1
Owner-occupied	7,365		16		7,288		16
Municipal	1,388		3		1,271		3
Total commercial	23,245		51		22,926		51
Commercial real estate:
Construction and land development	2,202		5		2,021		5
Term	8,771		20		9,103		20
Total commercial real estate	10,973		25		11,124		25
Consumer:
Home equity credit line	2,825		6		2,777		6
1-4 family residential	6,861		15		6,662		15
Construction and other consumer real estate	661		2		597		1
Bankcard and other revolving plans	490		1		509		1
Other	175		—		185		1
Total consumer	11,012		24		10,730		24
Total net loans	$	45,230	100	%	$	44,780	100	%

Loan portfolio growth during the first six months of 2018 was widespread across loan products and geographies with particular strength in municipal, 1-4 family residential, commercial and industrial, and owner-occupied loans. The impact of these increases was partially offset by a decrease in the CRE term portfolio.

Commercial owner-occupied loans also increased during the first six months of 2018 ; however, we experienced continued runoff and attrition of the National Real Estate portfolio. The National Real Estate business is a wholesale business that depends on loan referrals from other community banking institutions. Due to generally soft loan demand nationally, many community banking institutions are retaining, rather than selling, their loan production.

Other Noninterest-Bearing Investments

During the first six months of 2018 , the Company increased its short-term borrowings with the FHLB by $50 million. This increase required a further investment in FHLB activity stock, which consequently increased by $31

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million during the year. Aside from this increase, other noninterest-bearing investments remained relatively stable as set forth in the following schedule.

OTHER NONINTEREST-BEARING INVESTMENTS



(In millions)	June 30, 2018		December 31, 2017

Bank-owned life insurance	$	513	$	506
Federal Home Loan Bank stock	185		154
Federal Reserve stock	156		184
Farmer Mac stock	50		43
SBIC investments	136		127
Non-SBIC investment funds	11		12
Other	3		3
Total other noninterest-bearing investments	$	1,054	$	1,029

Premises, Equipment and Software

Net premises, equipment and software increased $5 million , or 0.5% , during the first six months of 2018 . The Company continues to capitalize certain costs related to its technology initiatives, but associated depreciation has also increased following the successful implementation, in 2017, of the first phase of our core lending and deposit systems replacement project.

Deposits

Deposits, both interest-bearing and noninterest-bearing, are a primary source of funding for the Company. Average total deposits for the first six months of 2018 increased by 0.3% , compared with the first six months of 2017 , with average interest-bearing deposits increasing by 1.0% and average noninterest-bearing deposits decreasing by 0.5% . The average interest rate paid for interest-bearing deposits was 15 bps higher during the first six months of 2018 , compared with the first six months of 2017 .

Demand and savings and money market deposits were 93% and 94% of total deposits at June 30, 2018 and December 31, 2017 , respectively. At June 30, 2018 and December 31, 2017 , total deposits included $2.3 billion and $1.6 billion, respectively, of brokered deposits.

See “Liquidity Risk Management” on page 29 for additional information on funding and borrowed funds.

RISK ELEMENTS

Since risk is inherent in substantially all of the Company’s operations, management of risk is an integral part of its operations and is also a key determinant of its overall performance. The Board of Directors has appointed a Risk Oversight Committee (“ROC”) that consists of appointed Board members who oversee the Company’s risk management processes. The ROC meets on a regular basis to monitor and review Enterprise Risk Management (“ERM”) activities. As required by its charter, the ROC performs oversight for various ERM activities and approves ERM policies and activities as detailed in the ROC charter.

Management applies various strategies to reduce the risks to which the Company’s operations are exposed, including credit, interest rate and market, liquidity, and operational risks. These risks are overseen by the various management committees of which the Enterprise Risk Management Committee is the focal point for the monitoring and review of enterprise risk.

Credit Risk Management

Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risk arises primarily from our lending activities, as well as from off-balance sheet credit instruments. For a more comprehensive discussion of credit risk management, see “Credit Risk Management” in our 2017 Annual Report on Form 10-K.

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Government Agency Guaranteed Loans

We participate in various guaranteed lending programs sponsored by U.S. government agencies, such as the SBA, Federal Housing Authority, Veterans’ Administration, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. As of June 30, 2018 , the principal balance of these loans was $570 million , and the guaranteed portion of these loans was $433 million . Most of these loans were guaranteed by the SBA.

The following schedule presents the composition of government agency guaranteed loans.

GOVERNMENT GUARANTEES



(Dollar amounts in millions)	June 30, 2018		Percent guaranteed		December 31, 2017		Percent guaranteed

Commercial	$	547	76	%	$	507	75	%
Commercial real estate	14		79		14		75
Consumer	9		100		16		92
Total loans	$	570	76		$	537	76

Commercial Lending

The following schedule provides selected information regarding lending concentrations to certain industries in our commercial lending portfolio.

COMMERCIAL LENDING BY INDUSTRY GROUP



	June 30, 2018				December 31, 2017
(Dollar amounts in millions)	Amount		Percent		Amount		Percent

Real estate, rental and leasing	$	2,637	11	%	$	2,807	12	%
Retail trade ¹	2,376		10		2,257		10
Manufacturing	2,217		9		2,116		9
Finance and insurance	1,848		8		2,026		9
Wholesale trade	1,630		7		1,543		7
Healthcare and social assistance	1,581		7		1,556		7
Transportation and warehousing	1,308		6		1,343		6
Construction	1,201		5		1,094		5
Mining, quarrying, and oil and gas extraction	1,105		5		1,010		4
Hospitality and food services	947		4		932		4
Utilities ²	938		4		905		4
Professional, scientific, and technical services	882		4		879		4
Other Services (except Public Administration)	881		4		896		4
Other ³	3,694		16		3,562		15
Total	$	23,245	100	%	$	22,926	100	%


¹	At June 30, 2018 , 83% of retail trade consist of motor vehicle and parts dealers, gas stations, grocery stores, building material suppliers, and direct-to-consumer retailers.


²	Includes primarily utilities, power, and renewable energy.


³	No other industry group exceeds 3.5%.

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Commercial Real Estate Loans

Selected information indicative of credit quality regarding our CRE loan portfolio is presented in the following schedule.

COMMERCIAL REAL ESTATE PORTFOLIO BY LOAN TYPE AND COLLATERAL LOCATION



(Dollar amounts in millions)		Collateral Location
Loan type	As of date	Arizona			California			Colorado			Nevada			Texas			Utah/ Idaho			Wash-ington			Other ¹			Total			% of total CRE
Commercial term
Balance outstanding	6/30/2018	$	1,072		$	2,811		$	508		$	542		$	1,483		$	1,388		$	444		$	523		$	8,771		79.9	%
% of loan type		12.2		%	32.0		%	5.8		%	6.2		%	16.9		%	15.8		%	5.1		%	6.0		%	100.0		%
Delinquency rates ² :
30-89 days	6/30/2018	2.4		%	0.1		%	0.2		%	—		%	0.1		%	0.1		%	0.2		%	0.4		%	0.4		%
	12/31/2017	0.2		%	0.1		%	0.1		%	0.2		%	—		%	0.2		%	—		%	0.8		%	0.1		%
≥ 90 days	6/30/2018	—		%	0.1		%	—		%	—		%	0.2		%	0.1		%	—		%	0.2		%	0.1		%
	12/31/2017	0.2		%	0.1		%	0.1		%	—		%	—		%	0.1		%	—		%	0.7		%	0.1		%
Accruing loans past due 90 days or more	6/30/2018	$	—		$	1		$	—		$	—		$	—		$	—		$	—		$	—		$	1
	12/31/2017	1			1			—			—			—			—			—			—			2
Nonaccrual loans	6/30/2018	$	3		$	10		$	—		$	—		$	18		$	2		$	—		$	20		$	53
	12/31/2017	4			7			1			2			17			1			4			—			36
Residential construction and land development
Balance outstanding	6/30/2018	$	44		$	293		$	54		$	3		$	200		$	34		$	2		$	7		$	637		5.8	%
% of loan type		6.9		%	46.0		%	8.5		%	0.5		%	31.4		%	5.3		%	0.3		%	1.1		%	100.0		%
Delinquency rates ² :
30-89 days	6/30/2018	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%
	12/31/2017	—		%	—		%	0.2		%	—		%	0.7		%	—		%	—		%	—		%	0.2		%
≥ 90 days	6/30/2018	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%
	12/31/2017	—		%	—		%	—		%	—		%	0.1		%	—		%	—		%	—		%	—		%
Accruing loans past due 90 days or more	6/30/2018	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
	12/31/2017	—			—			—			—			—			—			—			—			—
Nonaccrual loans	6/30/2018	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
	12/31/2017	—			—			—			—			—			—			—			—			—
Commercial construction and land development
Balance outstanding	6/30/2018	$	176		$	324		$	46		$	89		$	427		$	336		$	121		$	46		$	1,565		14.3	%
% of loan type		11.3		%	20.7		%	2.9		%	5.7		%	27.3		%	21.5		%	7.7		%	2.9		%	100.0		%
Delinquency rates ² :
30-89 days	6/30/2018	—		%	—		%	—		%	—		%	0.2		%	—		%	—		%	—		%	0.1		%
	12/31/2017	0.1		%	0.2		%	—		%	—		%	0.2		%	0.1		%	—		%	—		%	0.1		%
≥ 90 days	6/30/2018	—		%	—		%	—		%	—		%	0.2		%	1.2		%	—		%	—		%	0.3		%
	12/31/2017	—		%	—		%	—		%	—		%	—		%	1.3		%	—		%	—		%	0.3		%
Accruing loans past due 90 days or more	6/30/2018	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
	12/31/2017	—			—			—			—			—			—			—			—			—
Nonaccrual loans	6/30/2018	$	—		$	—		$	—		$	—		$	1		$	4		$	—		$	—		$	5
	12/31/2017	—			—			—			—			—			4			—			—			4
Total construction and land development	6/30/2018	$	220		$	617		$	100		$	92		$	627		$	370		$	123		$	53		$	2,202
Total commercial real estate	6/30/2018	$	1,292		$	3,428		$	608		$	634		$	2,110		$	1,758		$	567		$	576		$	10,973		100.0	%


¹	No other geography exceeds $90 million for all three loan types.


²	Delinquency rates include nonaccrual loans.

Approximately 17% of the CRE term loans consist of mini-perm loans as of June 30, 2018 . For such loans, construction has been completed and the project has stabilized to a level that supports the granting of a mini-perm loan in accordance with our underwriting standards. Mini-perm loans generally have initial maturities of three to

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seven years. The remaining 83% of CRE loans are term loans with initial maturities generally of 5 to 20 years. The stabilization criteria for a project to qualify for a term loan differ by product type and include criteria related to the cash flow generated by the project, loan-to-value ratio, and occupancy rates.

Approximately $169 million , or 11% , of the commercial construction and land development portfolio at June 30, 2018 consists of acquisition and development loans. Most of these acquisition and development loans are secured by specific retail, apartment, office, or other projects.

For a more comprehensive discussion of commercial real estate loans, see the “Commercial Real Estate Loans” section in our 2017 Annual Report on Form 10-K.

Consumer Loans

We have mainly been an originator of first and second mortgages, generally considered to be of prime quality. We generally hold variable-rate loans in our portfolio and sell “conforming” fixed-rate loans to third parties, including Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, for which we make representations and warranties that the loans meet certain underwriting and collateral documentation standards.

We are engaged in Home Equity Credit Line (“HECL”) lending. At both June 30, 2018 and December 31, 2017 , our HECL portfolio totaled $2.8 billion . The following schedule describes the composition of our HECL portfolio by lien status.

HECL PORTFOLIO BY LIEN STATUS



(In millions)	June 30, 2018		December 31, 2017

Secured by first deeds of trust	$	1,429	$	1,406
Secured by second (or junior) liens	1,396		1,371
Total	$	2,825	$	2,777

At June 30, 2018 , loans representing less than 1% of the outstanding balance in the HECL portfolio were estimated to have combined loan-to-value ratios (“CLTV”) above 100%. An estimated CLTV ratio is the ratio of our loan plus any prior lien amounts divided by the estimated current collateral value. At origination, underwriting standards for the HECL portfolio generally include a maximum 80% CLTV with high credit scores at origination.

Approximately 92% of our HECL portfolio is still in the draw period, and approximately 25% of those loans are scheduled to begin amortizing within the next five years. We regularly analyze the risk of borrower default in the event of a loan becoming fully amortizing and the risk of higher interest rates. The analysis indicates that the risk of loss from this factor is minimal in the current economic environment. The ratio of net charge-offs to average balances for the first six months of 2018 and 2017 for the HECL portfolio was 0.16% and (0.02)% , respectively. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of this portfolio.

Nonperforming Assets

Nonperforming assets as a percentage of loans and leases and other real estate owned (“OREO”) decreased to 0.77% at June 30, 2018 , compared with 0.93% at December 31, 2017 .

Total nonaccrual loans at June 30, 2018 decreased $72 million from December 31, 2017 , primarily in the commercial and industrial loan portfolio. However, nonaccrual loans slightly increased in the commercial real estate term loan portfolios. The largest total decrease in nonaccrual loans occurred at Amegy Bank (“Amegy”).

The balance of nonaccrual loans can decrease due to paydowns, charge-offs, and the return of loans to accrual status under certain conditions. If a nonaccrual loan is refinanced or restructured, the new note is immediately placed on nonaccrual. If a restructured loan performs under the new terms for at least a period of six months, the loan can be considered for return to accrual status. See “Restructured Loans” following for more information. Company policy

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does not allow for the conversion of nonaccrual construction and land development loans to CRE term loans. See Note 6 of the Notes to Consolidated Financial Statements for more information on nonaccrual loans.

The following schedule sets forth our nonperforming assets:

NONPERFORMING ASSETS



(Dollar amounts in millions)	June 30, 2018			December 31, 2017

Nonaccrual loans ¹	$	342		$	414
Other real estate owned	5			4
Total nonperforming assets	$	347		$	418
Ratio of nonperforming assets to net loans and leases ¹ and other real estate owned	0.77		%	0.93		%
Accruing loans past due 90 days or more	$	5		$	22
Ratio of accruing loans past due 90 days or more to loans and leases ¹	0.01		%	0.05		%
Nonaccrual loans and accruing loans past due 90 days or more	$	347		$	436
Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans and leases ¹	0.77		%	0.97		%
Accruing loans past due 30-89 days	$	119		$	120
Nonaccrual loans ¹ current as to principal and interest payments	63.8		%	65.9		%

¹ Includes loans held for sale.

Restructured Loans

Troubled debt restructurings (“TDRs”) are loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for whom we have granted a concession that we would not otherwise consider. TDRs decreased $45 million , or 20% , during the first six months of 2018 . Commercial loans may be modified to provide the borrower more time to complete the project, to achieve a higher lease-up percentage, to sell the property, or for other reasons. Consumer loan TDRs represent loan modifications in which a concession has been granted to the borrower who is unable to refinance the loan with another lender, or who is experiencing economic hardship. Such consumer loan TDRs may include first-lien residential mortgage loans and home equity loans.

If the restructured loan performs for at least six months according to the modified terms, and an analysis of the customer’s financial condition indicates that we are reasonably assured of repayment of the modified principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the restructuring is taken into account to determine whether a loan should be returned to accrual status.

ACCRUING AND NONACCRUING TROUBLED DEBT RESTRUCTURED LOANS



(In millions)	June 30, 2018		December 31, 2017

Restructured loans – accruing	$	104	$	139
Restructured loans – nonaccruing	77		87
Total	$	181	$	226

In the periods following the calendar year in which a loan was restructured, a loan may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the modification or restructure). See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding TDRs.

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TROUBLED DEBT RESTRUCTURED LOANS ROLLFORWARD



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017

Balance at beginning of period	$	229		$	298		$	226		$	251
New identified TDRs and principal increases	18			70			69			156
Payments and payoffs	(54		)	(49		)	(88		)	(72		)
Charge-offs	(2		)	(10		)	(3		)	(13		)
No longer reported as TDRs	(7		)	(3		)	(18		)	(4		)
Sales and other	(3		)	(2		)	(5		)	(14		)
Balance at end of period	$	181		$	304		$	181		$	304

Allowance for Credit Losses

In analyzing the adequacy of the ALLL, we utilize a comprehensive loan grading system to determine the risk potential in the portfolio and also consider the results of independent internal credit reviews. To determine the adequacy of the allowance, our loan and lease portfolio is broken into segments based on loan type.

The following schedule shows the changes in the allowance for loan losses and a summary of loan loss experience:

SUMMARY OF LOAN LOSS EXPERIENCE



(Dollar amounts in millions)	Six Months Ended June 30, 2018			Twelve Months Ended December 31, 2017			Six Months Ended June 30, 2017

Loans and leases outstanding (net of unearned income)	$	45,230		$	44,780		$	43,683
Average loans and leases outstanding (net of unearned income)	$	45,054		$	43,501		$	42,906
Allowance for loan losses:
Balance at beginning of period	$	518		$	567		$	567
Provision for loan losses	(35		)	24			30
Charge-offs:
Commercial	30			118			82
Commercial real estate	—			9			2
Consumer	9			17			7
Total	39			144			91
Recoveries:
Commercial	38			46			23
Commercial real estate	5			14			11
Consumer	3			11			4
Total	46			71			38
Net loan and lease charge-offs (recoveries)	(7		)	73			53
Balance at end of period	$	490		$	518		$	544
Ratio of annualized net charge-offs to average loans and leases	(0.03		)%	0.17		%	0.25		%
Ratio of allowance for loan losses to net loans and leases, at period end	1.08		%	1.16		%	1.25		%
Ratio of allowance for loan losses to nonaccrual loans, at period end	143		%	129		%	115		%
Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more, at period end	141		%	122		%	110		%

The total ALLL decreased during the first six months of 2018 by $28 million as a result of credit quality improvements in the total loan portfolio.

The RULC represents a reserve for potential losses associated with off-balance sheet commitments and standby letters of credit. The reserve is separately shown in the balance sheet and any related increases or decreases in the

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reserve are shown separately in the statement of income. At June 30, 2018 , the reserve remained the same as at December 31, 2017 , and decreased by $5 million from June 30, 2017 .

See Note 6 of the Notes to Consolidated Financial Statements for additional information related to the ACL and credit trends experienced in each portfolio segment.

Interest Rate and Market Risk Management

Interest rate and market risk are managed centrally. Interest rate risk is the potential for reduced net interest income and other rate sensitive income resulting from adverse changes in the level of interest rates. Market risk is the potential for loss arising from adverse changes in the fair value of fixed income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. As a financial institution that engages in transactions involving an array of financial products, we are exposed to both interest rate risk and market risk.

The Company’s Board of Directors is responsible for approving the overall policies relating to the management of the financial risk of the Company, including interest rate and market risk management. The Board has established the Asset/Liability Committee (“ALCO”) consisting of members of management, to which it has delegated the responsibility of managing interest rate and market risk for the Company. ALCO establishes and periodically revises policy limits and reviews with the ROC the limits and limit exceptions reported by management.

Interest Rate Risk

Interest rate risk is one of the most significant risks to which we are regularly exposed. In general, our goal in managing interest rate risk is to manage balance sheet sensitivity to reduce net income volatility due to changes in interest rates.

Over the course of the last several years, we have actively reduced the level of asset-sensitivity through the purchase of short-to-medium duration agency pass-through securities and funding these purchases by reducing money market investments and increasing short-term borrowings. This repositioning of the investment portfolio has increased current net interest income while dampening the impact of higher rates on net interest income growth. We continue to anticipate moderately higher net interest income in a rising rate environment as our assets reprice more quickly than our liabilities.

Interest Rate Risk Measurement

We monitor interest rate risk through the use of two complementary measurement methods: net interest income simulation, or Earnings at Risk (“EaR”), and Economic Value of Equity at Risk (“EVE”). EaR analyzes the expected change in near term (one year) net interest income in response to changes in interest rates. In the EVE method, we measure the expected changes in the fair value of equity in response to changes in interest rates.

EaR is an estimate of the change in total net interest income that would be recognized under different rate environments over a one-year period. EaR is measured simulating net interest income under several different scenarios including parallel and nonparallel interest rate shifts across the yield curve, taking into account deposit repricing assumptions and estimates of the possible exercise of embedded options within the portfolio (e.g., a borrower’s ability to refinance a loan under a lower-rate environment). Our policy contains a trigger for a 10% decline in rate sensitive income as well as a risk capacity of a 13% decline if rates were to immediately rise or fall in parallel by 200 bps.

EVE is calculated as the fair value of all assets minus the fair value of liabilities. We measure changes in the dollar amount of EVE for parallel shifts in interest rates. Due to embedded optionality and asymmetric rate risk, changes in EVE can be useful in quantifying risks not apparent for small rate changes. Examples of such risks may include out-of-the-money interest rate caps (or limits) on loans, which have little effect under small rate movements but may become important if large rate changes were to occur, or substantial prepayment deceleration for low-rate mortgages in a higher-rate environment. Our policy contains a trigger for an 8% decline in EVE as well as a risk capacity of a

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10% decline if rates were to immediately rise or fall in parallel by 200 bps. Exceptions to the EVE limits are subject to notification and approval by the ROC.

Estimating the impact on net interest income and EVE requires that we assess a number of variables and make various assumptions in managing our exposure to changes in interest rates. The assessments address deposit withdrawals and deposit product migration (e.g., customers moving money from checking accounts to certificates of deposit), competitive pricing (e.g., existing loans and deposits are assumed to roll into new loans and deposits at similar spreads relative to benchmark interest rates), loan and security prepayments, and the effects of other similar embedded options. As a result of uncertainty about the maturity and repricing characteristics of both deposits and loans, we also calculate the sensitivity of EaR and EVE results to key assumptions. As most of our liabilities are comprised of indeterminate maturity and managed rate deposits, the modeled results are highly sensitive to the assumptions used for these deposits, such as checking, savings and money market accounts, and also to prepayment assumptions used for loans with prepayment options. We use historical regression analysis as a guide for setting such assumptions; however, due to the current low interest rate environment, which has little historical precedent, estimated deposit behavior may not reflect actual future results. Additionally, competition for funding in the marketplace has and may again result in changes to deposit pricing on interest-bearing accounts that are greater or less than changes in benchmark interest rates such as the London Interbank Offered Rate (“LIBOR”) or the federal funds rate.

Under most rising interest rate environments, we would expect some customers to move balances from demand deposits to interest-bearing accounts such as money market, savings, or certificates of deposit. The models are particularly sensitive to the assumption about the rate of such migration.

In addition, we assume certain correlation rates, often referred to as a “deposit beta,” of interest-bearing deposits, wherein the rates paid to customers change at a different pace when compared with changes in benchmark interest rates. Generally, certificates of deposit are assumed to have a high correlation rate, while interest-on-checking accounts are assumed to have a lower correlation rate. Actual results may differ materially due to factors including competitive pricing, money supply, credit worthiness of the Company, and so forth; however, we use our historical experience as well as industry data to inform our assumptions.

The aforementioned migration and correlation assumptions result in deposit durations presented in the following schedule.

DEPOSIT ASSUMPTIONS



	June 30, 2018
Product	Effective duration (unchanged)		Effective duration (+200 bps)

Demand deposits	3.0	%	3.0	%
Money market	1.4	%	1.2	%
Savings and interest-on-checking	2.6	%	2.3	%

As of the dates indicated and incorporating the assumptions previously described, the following schedule shows EaR, or percentage change in net interest income, based on a static balance sheet size, in the first year after the interest rate change if interest rates were to sustain immediate parallel changes ranging from -100 bps to +300 bps.

INCOME SIMULATION – CHANGE IN NET INTEREST INCOME



	June 30, 2018
	Parallel shift in rates (in bps) ¹
Repricing scenario	-100		0		+100		+200		+300

Earnings at Risk	(3.2	)%	—	%	3.0	%	5.8	%	8.6	%


¹	Assumes rates cannot go below zero in the negative rate shift.

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For non-maturity interest-bearing deposits, the weighted average modeled beta is 36%. If the weighted average deposit beta increased to 46% it would decrease the EaR in the +200bps shock from 5.8% to 3.4%.

The EaR analysis focuses on parallel rate shocks across the term structure of rates. The yield curve typically does not move in a parallel manner. During the past year, an increase in short-term rates has led to a flatter yield curve as longer-term rates have not increased at the same pace as short-term rates. If we consider a flattening rate shock where the short-term rate moves +200bps but the ten-year rate only moves +30bps, the increase in earnings is 43% lower over 12 months compared with the parallel +200bps rate shock.

For comparative purposes, the December 31, 2017 measures are presented in the following schedule.



	December 31, 2017
	Parallel shift in rates (in bps) ¹
Repricing scenario	-100		0		+100		+200		+300

Earnings at Risk	(2.7	)%	—	%	2.8	%	5.4	%	7.8	%


¹	Assumes rates cannot go below zero in the negative rate shift.

The asset-sensitivity as measured by EaR increased slightly quarter-over-quarter due to changes in the deposit composition.

CHANGES IN ECONOMIC VALUE OF EQUITY

As of the dates indicated, the following schedule shows our estimated percentage change in EVE under parallel interest rate changes ranging from -100 bps to +300 bps. For non-maturity interest-bearing deposits, the weighted average modeled beta is 36%. If the weighted average deposit beta increased to 46% it would decrease the EVE in the +200bps shock from -3.9% to -6.0%.



	June 30, 2018
	Parallel shift in rates (in bps) ¹
Repricing scenario	-100		0		+100		+200		+300

Economic Value of Equity	0.8	%	—	%	(2.2	)%	(3.9	)%	(5.5	)%


¹	Assumes rates cannot go below zero in the negative rate shift.

For comparative purposes, the December 31, 2017 measures are presented in the following schedule. The changes in EVE measures are driven by a slight increase in the runoff assumption for noninterest-bearing deposits.



	December 31, 2017
	Parallel shift in rates (in bps) ¹
Repricing scenario	-100 bps		0 bps		+100 bps		+200 bps		+300 bps

Economic Value of Equity	0.2	%	—	%	0.5	%	0.3	%	0.2	%


¹	Assumes rates cannot go below zero in the negative rate shift.

Our focus on business banking also plays a significant role in determining the nature of the Company’s asset-liability management posture. At June 30, 2018 , $20 billion of the Company’s commercial lending and CRE loan balances were scheduled to reprice in the next six months. Of these variable-rate loans approximately 93% are tied to either the prime rate or LIBOR. For these variable-rate loans we have executed $1.0 billion of cash flow hedges by receiving fixed rates on interest rate swaps. Additionally, asset-sensitivity is reduced due to $87 million of variable-rate loans being priced at floored rates at June 30, 2018 , which were above the “index plus spread” rate by an average of 50 bps. At June 30, 2018 , we also had $3.3 billion of variable-rate consumer loans scheduled to reprice in the next six months. Of these variable-rate consumer loans approximately $19 million were priced at floored rates, which were above the “index plus spread” rate by an average of 74 bps.

See Notes 3 and 7 of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.

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Market Risk – Fixed Income

We engage in the underwriting and trading of municipal securities. This trading activity exposes us to a risk of loss arising from adverse changes in the prices of these fixed income securities.

At June 30, 2018 , we had a relatively small amount, $207 million , of trading assets and $44 million of securities sold, not yet purchased, compared with $148 million and $95 million , respectively, at December 31, 2017 .

We are exposed to market risk through changes in fair value. We are also exposed to market risk for interest rate swaps used to hedge interest rate risk. Changes in the fair value of AFS securities and in interest rate swaps that qualify as cash flow hedges are included in accumulated other comprehensive income (“AOCI”) for each financial reporting period. During the second quarter of 2018 , the after-tax change in AOCI attributable to AFS securities decreased by $50 million, due largely to changes in the interest rate environment, compared with a $61 million increase in the same prior year period.

Market Risk – Equity Investments

Through our equity investment activities, we own equity securities that are publicly-traded. In addition, we own equity securities in companies and governmental entities, e.g., the Federal Reserve Bank and an FHLB, that are not publicly-traded. The accounting for equity investments may use the cost, fair value, equity, or full consolidation methods of accounting, depending on our ownership position and degree of involvement in influencing the investees’ affairs. Regardless of the accounting method, the value of our investment is subject to fluctuation. Because the fair value of these securities may fall below our investment costs, we are exposed to the possibility of loss. Equity investments in private and public companies are approved, monitored and evaluated by the Company’s Equity Investment Committee consisting of members of management.

We hold both direct and indirect investments in predominantly pre-public companies, primarily through various Small Business Investment Company (“SBIC”) venture capital funds. Our equity exposure to these investments was approximately $136 million and $127 million at June 30, 2018 and December 31, 2017 , respectively. On occasion, some of the companies within our SBIC investments may issue an initial public offering. In this case, the fund is generally subject to a lockout period before liquidating the investment, which can introduce additional market risk.

Additionally, Amegy has an alternative investments portfolio. These investments are primarily directed towards equity buyout and mezzanine funds with a key strategy of deriving ancillary commercial banking business from the portfolio companies. Early stage venture capital funds are generally not a part of the strategy because the underlying companies are typically not creditworthy. The carrying value of Amegy ’ s equity investments was $11 million and $12 million at June 30, 2018 and December 31, 2017 , respectively.

These private equity investments (“PEIs”) are subject to the provisions of the Dodd-Frank Act. The Volcker Rule of the Dodd-Frank Act prohibits banks and bank holding companies from holding PEIs, except for SBIC funds and certain other permitted exclusions, beyond a required deadline. The Federal Reserve Board (“FRB”) announced in December 2016 that it would allow banks to apply for an additional five-year extension beyond the July 21, 2017 deadline to comply with the Dodd-Frank Act requirement for these investments. The Company applied for and was granted an extension for its eligible PEIs. All positions in the remaining portfolio of PEIs are subject to the extended deadline or other applicable exclusions.

As of June 30, 2018 , such prohibited PEIs amounted to $3 million , with an additional $3 million of unfunded commitments (see Note 5 of the Notes to Consolidated Financial Statements for more information). We currently do not believe that this divestiture requirement will ultimately have a material impact on our financial statements.

Liquidity Risk Management

Overview

Liquidity risk is the possibility that our cash flows may not be adequate to fund our ongoing operations and meet our commitments in a timely and cost-effective manner. Since liquidity risk is closely linked to both credit risk and market risk, many of the previously discussed risk control mechanisms also apply to the monitoring and

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management of liquidity risk. The management of liquidity and funding is performed centrally for the Parent and jointly by the Parent and bank management for its subsidiary bank.

Liquidity Regulation

Upon passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Company is no longer subject to the Enhanced Prudential Standards for liquidity management (Reg. YY). However, the Company continues to perform liquidity stress tests and assess its portfolio of highly liquid assets (sufficient to cover 30-day funding needs under the stress scenarios).

Liquidity Management Actions

Consolidated cash, interest-bearing deposits held as investments, and security resell agreements at the Parent and its subsidiaries was $1.5 billion at June 30, 2018 , compared with $1.6 billion at December 31, 2017 and $2.0 billion at June 30, 2017. During the first six months of 2018 , sources of cash were primarily from (1) a net increase in deposits, (2) net cash provided by operating activities, and (3) a net decrease in investment securities. The primary uses of cash during the same period were (1) repayment of short-term debt, (2) loan originations, (3) repurchases of our common stock, and (4) dividends on common and preferred stock.

Parent Company Liquidity

The Parent’s cash requirements consist primarily of debt service, investments in and advances to subsidiaries, operating expenses, income taxes, and dividends to preferred and common shareholders. The Parent’s cash needs are usually met through dividends from its subsidiaries, interest and investment income, subsidiaries’ proportionate shares of current income taxes, and long-term debt and equity issuances.

Cash and interest-bearing deposits held as investments at the Parent was $322 million at June 30, 2018 , compared with $332 million at December 31, 2017 and $351 million at June 30, 2017. The primary uses of cash during the first six months of 2018 were repurchases of our common stock and dividends on our common and preferred stock. The primary sources of cash during the same period were from common dividends and return of common equity and preferred dividends received by the parent from its subsidiary bank.

During the first six months of 2018 and 2017, the Parent received common dividends and return of common equity totaling $325 million and $247 million, respectively, and preferred dividends totaling $26 million for both periods. At June 30, 2018 , ZB, N.A had approximately $344 million available for the payment of dividends to the Parent under current capital regulations. The dividends that ZB, N.A. can pay are restricted by current and historical earning levels, retained earnings, and risk-based and other regulatory capital requirements and limitations.

General financial market and economic conditions impact our access to, and cost of, external financing. Access to funding markets for the Parent and its subsidiary bank is also directly affected by the credit ratings received from various rating agencies. The ratings not only influence the costs associated with the borrowings, but can also influence the sources of the borrowings. On March 29, 2018, Kroll upgraded the Company’s senior unsecured debt rating to BBB+ from BBB, the Company’s subordinated debt rating to BBB from BBB-, and ZB, N.A.’s senior unsecured debt rating to A- from BBB+; after the upgrade, Kroll revised its outlook for both the Company and ZB, N.A. to stable from positive. On April 25, 2018, Standard and Poor’s (“S&P”) upgraded the Company’s senior unsecured debt rating to BBB from BBB-, the Company’s subordinated debt rating to BBB- from BB+, and ZB, N.A.’s senior unsecured debt rating to BBB+ from BBB; after the upgrade, S&P revised its outlook for both the Company and ZB, N.A. to stable from positive. All the credit rating agencies rate the Company’s and ZB, N.A.’s senior unsecured debt and subordinated debt at an investment-grade level.

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The following schedule presents the Company’s and ZB, N.A.’s credit ratings as of July 31, 2018.

CREDIT RATINGS



	Company	ZB, N.A.	Company	ZB, N.A.	Company	ZB, N.A.
Rating agency	Outlook		Long-term issuer/senior debt rating		Subordinated debt rating	Short-term debt rating

S&P	Stable	Stable	BBB	BBB+	BBB-	A-2
Moody’s	Stable	Stable	Baa3	Baa3		P-2
Kroll	Stable	Stable	BBB+	A-	BBB	K2

The following schedule presents the Parent’s balance sheets as of June 30, 2018 , December 31, 2017 , and June 30, 2017 .

PARENT ONLY CONDENSED BALANCE SHEETS

(In millions)	June 30, 2018			December 31, 2017			June 30, 2017
ASSETS
Cash and due from banks	$	—		$	—		$	—
Interest-bearing deposits	322			332			351
Investment securities:
Available-for-sale, at fair value	28			30			37
Other noninterest-bearing investments	42			36			34
Investments in subsidiaries:
Commercial bank	7,551			7,620			7,688
Other subsidiaries	41			41			6
Other assets	50			32			73
Total assets	$	8,034		$	8,091		$	8,189
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other liabilities	$	30		$	30		$	58
Long-term debt:
Due to others	383			382			382
Total liabilities	413			412			440
Shareholders’ equity:
Preferred stock	566			566			566
Common stock	4,231			4,445			4,660
Retained earnings	3,139			2,807			2,572
Accumulated other comprehensive income (loss)	(315		)	(139		)	(49		)
Total shareholders’ equity	7,621			7,679			7,749
Total liabilities and shareholders’ equity	$	8,034		$	8,091		$	8,189

The Parent’s cash payments for interest, reflected in operating expenses, decreased to $11 million during the first six months of 2018 from $15 million during the first six months of 2017 due to the maturity of long-term debt during 2017 . Additionally, the Parent paid approximately $104 million of total dividends on preferred stock and common stock for the first six months of 2018 compared with $55 million for the first six months of 2017 . Dividends paid per common share have increased gradually from $0.08 in the second quarter of 2017 to $0.24 in the second quarter of 2018 . In July 2018, the Board approved an increase of the quarterly common dividend to $0.30 per share.

At June 30, 2018 , maturities of our long-term senior and subordinated debt ranged from June 2023 to September 2028.

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Subsidiary Bank Liquidity

ZB, N.A.’s primary source of funding is its core deposits, consisting of noninterest-bearing demand deposits, savings and money market deposits, and time deposits under $250,000. On a consolidated basis, the Company’s loan to total deposit ratio has remained consistent, and was 84% at June 30, 2018 compared with 85% at December 31, 2017, and 83% at June 30, 2017.

Total deposits increased by $1.0 billion to $53.6 billion at June 30, 2018 , compared with $52.6 billion at December 31, 2017 . This increase was a result of a $896 million and $121 million increase in time deposits and noninterest-bearing demand deposits, respectively, partially offset by a $58 million decrease in savings and money market deposits.

The FHLB system and Federal Reserve Banks have been and are a source of back-up liquidity, and from time to time, have been a significant source of funding. ZB, N.A. is a member of the FHLB of Des Moines. The FHLB allows member banks to borrow against their eligible loans and securities to satisfy liquidity and funding requirements. The Bank is required to invest in FHLB and Federal Reserve stock to maintain their borrowing capacity.

At June 30, 2018 , the amount available for additional FHLB and Federal Reserve borrowings was approximately $13.9 billion, compared with $14.7 billion at December 31, 2017 . Loans with a carrying value of approximately $24.4 billion at June 30, 2018 have been pledged at the FHLB of Des Moines and the Federal Reserve as collateral for current and potential borrowings compared with $25.6 billion at December 31, 2017 . At June 30, 2018, we had $3.7 billion of short-term FHLB borrowings outstanding and no long-term FHLB or Federal Reserve borrowings outstanding, compared with $3.6 billion of short-term FHLB borrowings and no long-term FHLB or Federal Reserve borrowings outstanding at December 31, 2017. At June 30, 2018 , our total investment in FHLB and Federal Reserve stock was $185 million and $156 million, respectively, compared with $154 million and $184 million at December 31, 2017 .

Our investment activities can provide or use cash, depending on the asset-liability management posture taken. During the first six months of 2018 , HTM and AFS investment securities’ activities resulted in a net decrease in investment securities and a net $120 million increase in cash, compared with a net $2.2 billion decrease in cash for the first six months of 2017 .

Maturing balances in ZB, N.A.’s loan portfolios also provide additional flexibility in managing cash flows. Lending activity for the first six months of 2018 resulted in a net cash outflow of $431 million compared with a net cash outflow of $1.0 billion for the first six months of 2017 .

A more comprehensive discussion of liquidity risk management, including liquidity risk oversight, liquidity regulation, and certain contractual obligations, is contained in our 2017 Annual Report on Form 10-K.

Operational Risk Management

Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or systems, human errors or misconduct, or adverse external events. In our ongoing efforts to identify and manage operational risk, we have an ERM department whose responsibility is to help employees, management and the Board of Directors to assess, understand, measure, manage, and monitor risk in accordance with our Risk Appetite Framework. We have documented both controls and the Control Self-Assessment related to financial reporting under the 2013 framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and the Federal Deposit Insurance Corporation Improvement Act.

Periodic reviews, which include aspects of operational risk, are conducted by the Company’s Compliance Risk Management, Internal Audit and Credit Examination departments on a regular basis, and the Data Governance department also provide key data integrity and availability oversight. We are continually improving our oversight of operational risk, including enhancement of risk identification, risk and control self-assessments, and antifraud measures, which are reported on a regular basis to enterprise management committees. As part of this process, and as a result of the number and sophistication of attempts to disrupt or penetrate our critical systems, we have

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designated cyber risk a level one risk in our risk taxonomy, which places it at the highest level of oversight with our other top risks. For a more comprehensive discussion of operational risk management see our 2017 Annual Report on Form 10-K.

CAPITAL MANAGEMENT

We believe that a strong capital position is vital to continued profitability and to promoting depositor and investor confidence.

Stress Testing

As a bank holding company (“BHC”) with assets greater than $50 billion, prior to the enactment of the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (described in the next paragraph), we were required by the Dodd-Frank Act to participate in annual stress tests known as the Dodd-Frank Act Stress Test (“DFAST”). In addition, we were required to participate in the Federal Reserve Board’s annual horizontal capital review/comprehensive capital analysis and review (“CCAR”) for large and non-complex firms (generally, BHCs, with assets between $50 billion and $250 billion). In our capital plan, we were required to forecast, under a variety of economic scenarios, our estimated regulatory capital ratios and our GAAP tangible common equity ratio. Under the implementing regulations for CCAR, BHCs may generally raise and redeem capital, pay dividends, and repurchase stock and take similar capital-related actions only under a capital plan as to which the FRB has not objected. We timely submitted our stress test results and 2018 capital plan (which spans the timeframe of July 2018 to June 2019) to the FRB on April 5, 2018. A detailed discussion of CCAR/DFAST requirements is contained on page 11 of the “Capital Planning and Stress Testing” section under Part 1, Item 1 in our 2017 Annual report on Form 10-K.

On June 21, 2018, the Company issued a press release stating that in accordance with the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018, which was signed into law on May 24, 2018, Zions Bancorporation and other bank holding companies with assets of less than $100 billion are at this point in time no longer subject to the Federal Reserve's DFAST protocols. The Federal Reserve determined, accordingly, that it will not publicly release the results of its stress test for Zions Bancorporation, but authorized Zions to publish the Federal Reserve's results as communicated to the Company. The results of both stress tests reflect DFAST capital actions as defined in relevant regulations. The results of the Company’s stress tests demonstrate that the Company believes it has sufficient capital to withstand a severe hypothetical economic downturn, demonstrate the Company’s ample capital position, and are supportive of the Company’s ability to increase its total capital payout. Detailed disclosure of the stress test results can be found on the Company’s website. We expect to continue to utilize stress testing as the primary mechanism to inform our decisions on the appropriate level of capital, based upon actual and potentially adverse economic conditions.

On April 5, 2018, as part of an internal corporate restructuring to streamline and simplify its corporate structure, Zions Bancorporation and its wholly-owned bank subsidiary, ZB, N.A., entered into an Agreement and Plan of Merger, as amended and restated on July 10, 2018, pursuant to which the Company will be merged with and into the Bank, with the Bank continuing as the surviving entity. Following the restructuring, the Bank will be renamed “Zions Bancorporation, N.A.” Before the restructuring can be completed, holders of the Company’s common stock must approve the plan of merger. A special meeting of the holders of the Company’s common stock will be held on September 14, 2018, for that purpose.

Assuming the merger is approved by the Company’s shareholders and the restructuring is completed, the resulting banking organization would no longer be subject to duplicative examinations and other overlapping regulatory requirements, or the enhanced prudential standards established by the Board of Governors of the Federal Reserve System under Section 165 of the Dodd-Frank Act. The Company’s primary federal banking regulator would be the OCC. The Company would continue to be subject to examinations by the CFPB with respect to consumer financial regulations.

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Capital Management Actions

During the second quarter of 2018, the Company repurchased 2.1 million shares of common stock for $120 million, and has repurchased a total of 9.2 million shares of common stock for $465 million over the last 12 months at an average price of $50.81 per share. In July 2018, the Company announced that the Board approved a plan to repurchase $185 million of common stock during the third quarter of 2018 and began the repurchases. However, the timing and amount of additional common share repurchases will be subject to various factors, including the Company's financial performance, business needs, and prevailing economic conditions. Shares may be purchased occasionally in the open market, through privately negotiated transactions, utilizing Rule 10b5-1 plans or otherwise.

As planned, our quarterly dividend on common stock increased to $0.24 per share during the second quarter of 2018. We paid $87 million in dividends on common stock during the first six months of 2018 compared with $32 million during the first six months of 2017 . In July 2018, the Board of Directors declared a quarterly dividend of $0.30 per common share payable on August 23, 2018 to shareholders of record on August 16, 2018. We paid dividends on preferred stock of $17 million for the first six months of 2018 compared with $23 million during the first six months of 2017. The Company’s recently announced capital actions were reflected in the results of both the Company’s internal stress test results as well as the results communicated to the Company by the FRB with respect to the Federal Reserve’s stress test of Zions’ financial and capital strength. See Note 8 for additional detail about capital management transactions during the first six months of 2018 .

Total shareholders’ equity remained consistent and was $7.6 billion at June 30, 2018 compared with $7.7 billion at both December 31, 2017 and June 30, 2017. Total shareholders’ equity decreased from December 31, 2017 by (1) $235 million from repurchases of Company common stock, (2) $176 million from a decrease in the fair value of our AFS securities due largely to changes in the interest rate environment, and (3) $104 million from common and preferred dividends. These decreases were offset by net income of $435 million.

Despite the previously mentioned share repurchases, the weighted average diluted shares increased by 1.1 million compared with the second quarter of 2017 , primarily due to the dilutive impact of warrants that have been outstanding since 2008 (“TARP” warrants - NASDAQ: ZIONZ) and 2010 (NASDAQ: ZIONW) and employee equity grants. During 2017 and the first six months of 2018, the market price of our common stock was higher than the exercise price of common stock warrants on our common stock and had a dilutive effect upon earnings per share. During the first six months of 2018, 1.1 million shares of common stock were issued from the cashless exercise of 3.3 million common stock warrants which would have expired on November 14, 2018. As of June 30, 2018 , the Company had 2.5 million and 29.3 million warrants outstanding of ZIONZ (TARP) and ZIONW warrants, respectively. The ZIONZ warrants expire on November 14, 2018 and the ZIONW warrants expire on May 22, 2020.

The following schedule presents the diluted shares from the remaining common stock warrants at various Zions Bancorporation common stock market prices as of July 31, 2018, excluding the effect of changes in exercise cost and warrant share multiplier from the future payment of common stock dividends.

IMPACT OF COMMON STOCK WARRANTS



Assumed Zions Bancorporation Common Stock Market Price		Diluted Shares (000s)

$	35.00	0
40.00		4,900
45.00		8,014
50.00		10,506
55.00		12,545
60.00		14,244
65.00		15,682

See Note 8 of the Notes to Consolidated Financial Statements for more information on our common stock warrants.

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Basel III

In 2013, the FRB, FDIC, and OCC published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implemented the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III capital rules became effective for the Company on January 1, 2015 and were subject to phase-in periods for certain of their components. In November 2017, the FRB, FDIC and OCC published a final rule for non-advanced approaches banks that extends the regulatory capital treatment applicable during 2017 under the regulatory capital rules for certain items.

A detailed discussion of Basel III requirements, including implications for the Company, is contained on page 9 in “Capital Standards – Basel Framework” under Part 1, Item 1 in our 2017 Annual Report on Form 10-K.

We met all capital adequacy requirements under the Basel III Capital Rules based upon phase-in rules as of June 30, 2018, and believe that we would meet all capital adequacy requirements on a fully phased-in basis if such requirements were currently effective.

Capital Ratios

Banking organizations are required by capital regulations to maintain adequate levels of capital as measured by several regulatory capital ratios. The following schedule shows the Company’s capital and performance ratios as of June 30, 2018 , December 31, 2017 , and June 30, 2017 .

CAPITAL RATIOS



	June 30, 2018		December 31, 2017		June 30, 2017

Tangible common equity ratio ¹	9.2	%	9.3	%	9.6	%
Tangible equity ratio ¹	10.1	%	10.2	%	10.4	%
Average equity to average assets (three months ended)	11.5	%	11.9	%	12.0	%
Basel III risk-based capital ratios ² :
Common equity tier 1 capital	12.2	%	12.1	%	12.3	%
Tier 1 leverage	10.5	%	10.5	%	10.5	%
Tier 1 risk-based	13.3	%	13.2	%	13.4	%
Total risk-based	14.8	%	14.8	%	15.1	%
Return on average common equity (three months ended)	10.6	%	6.3	%	8.6	%
Return on average tangible common equity (three months ended) ¹	12.4	%	7.4	%	10.2	%


¹	See “GAAP to Non-GAAP Reconciliations” on page 5 for more information regarding these ratios.


²	Based on the applicable phase-in periods.

At June 30, 2018, Basel III regulatory tier 1 risk-based capital and total risk-based capital was $6.9 billion and $7.7 billion, respectively, compared with $6.8 billion and $7.6 billion, respectively, at December 31, 2017. A more comprehensive discussion of our capital management is contained in our 2017 Annual Report on Form 10-K.

Consistent with its previous public statements on the matter, and subject to results of ongoing internal stress testing, we intend to reduce our capital ratios to levels similar to or slightly stronger than the median levels of our peer group. Assuming economic conditions remain generally stable, we intend to accomplish the reduction of our capital ratios in an orderly fashion over the next six to eight quarters. We expect to continue to utilize stress testing as the primary mechanism to inform our decisions on the appropriate level of capital, based upon actual and potentially adverse economic conditions.

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ITEM 1.	FINANCIAL STATEMENTS (Unaudited)

ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(In millions, shares in thousands)	June 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
Cash and due from banks	$	468		$	548
Money market investments:
Interest-bearing deposits	698			782
Federal funds sold and security resell agreements	558			514
Investment securities:
Held-to-maturity, at amortized cost (approximate fair value $866 and $762)	878			770
Available-for-sale, at fair value	14,627			15,161
Trading account, at fair value	207			148
Total investment securities	15,712			16,079
Loans held for sale	84			44
Loans and leases, net of unearned income and fees	45,230			44,780
Less allowance for loan losses	490			518
Loans held for investment, net of allowance	44,740			44,262
Other noninterest-bearing investments	1,054			1,029
Premises, equipment and software, net	1,099			1,094
Goodwill and intangibles	1,015			1,016
Other real estate owned	5			4
Other assets	1,024			916
Total Assets	$	66,457		$	66,288
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	24,007		$	23,886
Interest-bearing:
Savings and money market	25,562			25,620
Time	4,011			3,115
Total deposits	53,580			52,621
Federal funds purchased and other short-term borrowings	4,158			4,976
Long-term debt	383			383
Reserve for unfunded lending commitments	58			58
Other liabilities	657			571
Total liabilities	58,836			58,609
Shareholders’ equity:
Preferred stock, without par value; authorized 4,400 shares	566			566
Common stock, without par value; authorized 350,000 shares; issued and outstanding 195,392 and 197,532 shares	4,231			4,445
Retained earnings	3,139			2,807
Accumulated other comprehensive income (loss)	(315		)	(139		)
Total shareholders’ equity	7,621			7,679
Total liabilities and shareholders’ equity	$	66,457		$	66,288

See accompanying notes to consolidated financial statements.

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ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In millions, except shares and per share amounts)	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest income:
Interest and fees on loans	$	514		$	469		$	1,011		$	902
Interest on money market investments	7			5			13			9
Interest on securities	85			84			170			162
Total interest income	606			558			1,194			1,073
Interest expense:
Interest on deposits	29			14			48			28
Interest on short- and long-term borrowings	29			16			56			28
Total interest expense	58			30			104			56
Net interest income	548			528			1,090			1,017
Provision for loan losses	5			7			(35		)	30
Net interest income after provision for loan losses	543			521			1,125			987
Noninterest income:
Service charges and fees on deposit accounts	42			43			84			85
Other service charges, commissions and fees	55			56			110			105
Wealth management and trust income	14			10			25			20
Loan sales and servicing income	7			6			13			13
Capital markets and foreign exchange	7			6			15			13
Customer-related fees	125			121			247			236
Dividends and other investment income	11			10			22			22
Securities gains, net	1			2			1			7
Other	1			(1		)	6			(1		)
Total noninterest income	138			132			276			264
Noninterest expense:
Salaries and employee benefits	266			240			535			502
Occupancy, net	32			32			63			66
Furniture, equipment and software, net	32			32			65			64
Other real estate expense, net	—			—			1			—
Credit-related expense	7			8			13			15
Provision for unfunded lending commitments	7			3			—			(2		)
Professional and legal services	14			14			26			28
Advertising	7			6			13			11
FDIC premiums	14			13			26			25
Other	49			57			98			110
Total noninterest expense	428			405			840			819
Income before income taxes	253			248			561			432
Income taxes	56			80			126			124
Net income	197			168			435			308
Preferred stock dividends	(10		)	(12		)	(17		)	(23		)
Preferred stock redemption	—			(2		)	—			(2		)
Net earnings applicable to common shareholders	$	187		$	154		$	418		$	283
Weighted average common shares outstanding during the period:
Basic shares (in thousands)	195,583			201,822			196,149			202,083
Diluted shares (in thousands)	209,247			208,183			209,859			209,353
Net earnings per common share:
Basic	$	0.95		$	0.76		$	2.11		$	1.39
Diluted	0.89			0.73			1.97			1.34

See accompanying notes to consolidated financial statements.

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ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017

Net income for the period	$	197		$	168		$	435		$	308
Other comprehensive income (loss), net of tax:
Net unrealized holding gains (losses) on investment securities	(50		)	61			(175		)	73
Net unrealized gains on other noninterest-bearing investments	2			1			3			2
Net unrealized holding gains (losses) on derivative instruments	—			1			(3		)	—
Reclassification adjustment for increase in interest income recognized in earnings on derivative instruments	(1		)	(1		)	(1		)	(2		)
Other comprehensive income (loss)	(49		)	62			(176		)	73
Comprehensive income	$	148		$	230		$	259		$	381

See accompanying notes to consolidated financial statements.

ZIONS BANCORPORATION AND SUBSIDIARIES CONSO LIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(In millions, except shares and per share amounts)	Preferred stock			Common stock					Retained earnings			Accumulated other comprehensive income (loss)				Total shareholders’ equity
(In millions, except shares and per share amounts)	Preferred stock			Shares (in thousands)		Amount			Retained earnings			Accumulated other comprehensive income (loss)				Total shareholders’ equity

Balance at December 31, 2017	$	566		197,532		$	4,445		$	2,807			$	(139	)	$	7,679
Net income for the period									435							435
Other comprehensive loss, net of tax													(176		)	(176		)
Cumulative effect adjustment, adoption of ASU 2014-09, Revenue from Contracts with Customers									1							1
Company common stock repurchased				(4,301	)	(235		)								(235		)
Net shares issued from stock warrant exercises				1,095												—
Net activity under employee plans and related tax benefits				1,066		21										21
Dividends on preferred stock									(17		)					(17		)
Dividends on common stock, $0.44 per share									(87		)					(87		)
Balance at June 30, 2018	$	566		195,392		$	4,231		$	3,139			$	(315	)	$	7,621

Balance at December 31, 2016	$	710		203,085		$	4,725		$	2,321			$	(122	)	$	7,634
Net income for the period									308							308
Other comprehensive income, net of tax													73			73
Preferred stock redemption	(144		)			2			(2		)					(144		)
Company common stock repurchased				(2,158	)	(90		)								(90		)
Net activity under employee plans and related tax benefits				1,204		23										23
Dividends on preferred stock									(23		)					(23		)
Dividends on common stock, $0.16 per share									(32		)					(32		)
Balance at June 30, 2017	$	566		202,131		$	4,660		$	2,572			$	(49	)	$	7,749

See accompanying notes to consolidated financial statements.

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ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period	$	197		$	168		$	435		$	308
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	12			10			(35		)	28
Depreciation and amortization	49			47			92			84
Share-based compensation	5			5			18			17
Deferred income tax expense (benefit)	(11		)	(5		)	2			8
Net decrease (increase) in trading securities	(63		)	(22		)	(59		)	54
Net decrease (increase) in loans held for sale	(1		)	53			(34		)	89
Change in other liabilities	81			(63		)	85			(21		)
Change in other assets	(100		)	12			(52		)	33
Other, net	(6		)	(10		)	(14		)	(24		)
Net cash provided by operating activities	163			195			438			576
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in money market investments	157			530			40			385
Proceeds from maturities and paydowns of investment securities held-to-maturity	55			75			114			166
Purchases of investment securities held-to-maturity	(165		)	(66		)	(222		)	(73		)
Proceeds from sales, maturities, and paydowns of investment securities available-for-sale	735			630			1,404			1,160
Purchases of investment securities available-for-sale	(564		)	(353		)	(1,176		)	(3,466		)
Net change in loans and leases	(120		)	(919		)	(431		)	(1,036		)
Net change in other noninterest-bearing investments	27			(29		)	(4		)	(103		)
Purchases of premises and equipment	(26		)	(44		)	(54		)	(94		)
Other, net	1			3			—			8
Net cash provided by (used in) investing activities	100			(173		)	(329		)	(3,053		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	618			(1,099		)	965			(858		)
Net change in short-term funds borrowed	(709		)	205			1,181			2,015
Proceeds from debt over 90 days and up to one year	—			1,250			—			1,750
Repayments of debt over 90 days and up to one year	—			(250		)	(2,000		)	(250		)
Cash paid for preferred stock redemption	—			(144		)	—			(144		)
Repayment of long-term debt	—			—			—			(153		)
Proceeds from the issuance of common stock	7			9			17			18
Dividends paid on common and preferred stock	(55		)	(26		)	(104		)	(55		)
Company common stock repurchased	(126		)	(52		)	(248		)	(102		)
Net cash provided by (used in) financing activities	(265		)	(107		)	(189		)	2,221
Net decrease in cash and due from banks	(2		)	(85		)	(80		)	(256		)
Cash and due from banks at beginning of period	470			566			548			737
Cash and due from banks at end of period	$	468		$	481		$	468		$	481
Cash paid for interest	$	55		$	30		$	100		$	52
Net cash paid for income taxes	90			128			91			122
Noncash activities are summarized as follows:
Loans held for investment transferred to other real estate owned	3			2			6			4
Loans held for investment reclassified to loans held for sale, net	24			(12		)	39			11

See accompanying notes to consolidated financial statements.

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ZIONS BANCORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2018


1.	BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Zions Bancorporation (“the Parent”) and its majority-owned subsidiaries (collectively “the Company,” “Zions,” “we,” “our,” “us”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. References to GAAP, including standards promulgated by the Financial Accounting Standards Board, are made according to sections of the Accounting Standards Codification (“ASC”). Changes to the ASC are made with Accounting Standards Updates (“ASU”) that include consensus issues of the Emerging Issues Task Force. In certain cases, ASUs are issued jointly with International Financial Reporting Standards.

Operating results for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results that may be expected in future periods. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated balance sheet at December 31, 2017 is from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s 2017 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform with the current period presentation. These reclassifications did not affect net income or shareholders’ equity.

Zions Bancorporation is a financial holding company headquartered in Salt Lake City, Utah, which owns and operates a commercial bank. The Parent and its subsidiaries (collectively “the Company”) provide a full range of banking and related services in 11 Western and Southwestern states through 7 separately managed and branded units as follows: Zions Bank, in Utah, Idaho and Wyoming; Amegy Bank (“Amegy”), in Texas; California Bank & Trust (“CB&T”); National Bank of Arizona (“NBAZ”); Nevada State Bank (“NSB”); Vectra Bank Colorado (“Vectra”), in Colorado and New Mexico; and The Commerce Bank of Washington (“TCBW”) which operates under that name in Washington and under the name The Commerce Bank of Oregon in Oregon. The Parent also owns and operates certain nonbank subsidiaries that engage in financial services.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS



Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards not yet adopted by the Company

ASU 2016-02, Leases (Topic 842) and subsequent related ASUs	The standard requires that a lessee recognize assets and liabilities for leases on the balance sheet. For leases with a term of 12 months or less, however, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. The standard also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.	January 1, 2019	Upon adoption of the standard, we currently estimate the right-of-use asset to be between $200-$250 million. This estimate may change depending on the Company’s lease activity. The implementation team is working on gathering all key lease data elements to meet the requirements of the new guidance. Additionally, we are implementing new lease software that will accommodate the new accounting requirements.

ASU 2017-08, Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities	The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. The standard requires the premium to be amortized to the earliest call date. The update does not change the accounting for securities held at a discount.	January 1, 2019	Our analysis suggests this guidance will not have a material impact on the Company’s financial statements, but we will continue to monitor its impact as we move closer to implementation.

ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaces today’s “incurred loss” approach with an “expected loss” model for instruments such as loans and held-to-maturity (“HTM”) securities that are measured at amortized cost. The standard requires credit losses relating to available-for-sale (“AFS”) debt securities to be recorded through an allowance for credit loss (“ACL”) rather than a reduction of the carrying amount. It also changes the accounting for purchased credit-impaired debt securities and loans. The standard retains many of the current disclosure requirements in US GAAP and expands certain disclosure requirements. Early adoption of the guidance is permitted as of January 1, 2019.	January 1, 2020	We have formed an implementation team led jointly by Credit, Treasury, and the Corporate Controller’s group, that also includes other lines of business and functions within the Company. The implementation team is developing models that can meet the requirements of the new guidance. While this standard may potentially have a material impact on the Company’s financial statements, we are still in process of conducting our evaluation.

ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	The standard eliminates the requirement to calculate the implied fair value of goodwill (i.e. Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current guidance). The standard does not change the guidance on completing Step 1 of the goodwill impairment test. The standard also continues to allow entities to perform the optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The standard is effective for the Company as of January 1, 2020. Early adoption is allowed for any goodwill impairment test performed after January 1, 2017.	January 1, 2020	We do not currently expect this guidance will have a material impact on the Company’s financial statements since the fair values of our reporting units were not lower than their respective carrying amounts at the time of our goodwill impairment analysis for 2017.

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Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards adopted by the Company

ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent related ASUs	The core principle of the new guidance is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The banking industry does not expect significant changes because major sources of revenue are from financial instruments that have been excluded from the scope of the new standard, (including loans, derivatives, debt and equity securities, etc.). However, these new standards affect other fees charged by banks, such as asset management fees, credit card interchange fees, deposit account fees, etc. Adoption may be made on a full retrospective basis with practical expedients, or on a modified retrospective basis with a cumulative effect adjustment. Additionally, the new guidance significantly increases the disclosures related to revenue recognition practices.	January 1, 2018	We adopted this guidance using the modified retrospective transition method. There was no material impact at adoption to the Company’s consolidated financial statements. New disclosures are found in Footnote 10.

ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	The standard provides revised accounting guidance related to the accounting for and reporting of financial instruments. Some of the main provisions include: – Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income. – Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income (“OCI”). – Elimination of the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost. However, it will require the use of exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes.	January 1, 2018	The transition adjustment upon adoption of this guidance was not material. We refined our valuation models to better account for an exit price, which does not impact our financial statements, but does have an impact on our disclosures, as provided in Footnote 3.

ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	The purpose of this standard is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The standard is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The standard requires a modified retrospective transition method that requires recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption.	January 1, 2018	We early adopted this guidance in the first quarter. The adoption of this guidance did not have a material impact on our consolidated financial statements at transition.


3.	FAIR VALUE

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For a discussion of the Company’s valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 3 of our 2017 Annual Report on Form 10-K.

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Quantitative Disclosure by Fair Value Hierarchy

Assets and liabilities measured at fair value by class on a recurring basis are summarized as follows:



(In millions)	June 30, 2018
	Level 1		Level 2		Level 3		Total
ASSETS
Investment securities:
Available-for-sale: ¹
U.S. Treasury, agencies and corporations	$	25	$	13,266	$	—	$	13,291
Municipal securities			1,312				1,312
Other debt securities			24				24
Total Available-for-sale	25		14,602		—		14,627
Trading account	89		118				207
Other noninterest-bearing investments:
Bank-owned life insurance			513				513
Private equity investments					102		102
Other assets:
Agriculture loan servicing and interest-only strips					18		18
Deferred compensation plan assets	108						108
Derivatives:
Interest rate swaps and forwards			1				1
Interest rate swaps for customers			22				22
Foreign currency exchange contracts	6						6
Total Assets	$	228	$	15,256	$	120	$	15,604
LIABILITIES
Securities sold, not yet purchased	$	44	$	—	$	—	$	44
Other liabilities:
Deferred compensation plan obligations	108						108
Derivatives:
Interest rate swaps for customers			65				65
Foreign currency exchange contracts	5						5
Total Liabilities	$	157	$	65	$	—	$	222

¹ We used a third-party pricing service to measure fair value for approximately 95% of our AFS Level 2 securities.

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(In millions)	December 31, 2017
	Level 1		Level 2		Level 3		Total
ASSETS
Investment securities:
Available-for-sale: ¹
U.S. Treasury, agencies and corporations	$	25	$	13,706	$	—	$	13,731
Municipal securities			1,334				1,334
Other debt securities			24				24
Money market mutual funds and other	71		1				72
Total Available-for-sale	96		15,065		—		15,161
Trading account			148				148
Other noninterest-bearing investments:
Bank-owned life insurance			507				507
Private equity investments					95		95
Other assets:
Agriculture loan servicing and interest-only strips					18		18
Deferred compensation plan assets	102						102
Derivatives:
Interest rate swaps and forwards			1				1
Interest rate swaps for customers			28				28
Foreign currency exchange contracts	9						9
Total Assets	$	207	$	15,749	$	113	$	16,069
LIABILITIES
Securities sold, not yet purchased	$	95	$	—	$	—	$	95
Other liabilities:
Deferred compensation plan obligations	102						102
Derivatives:
Interest rate swaps for customers			33				33
Foreign currency exchange contracts	7						7
Total Liabilities	$	204	$	33	$	—	$	237

¹ We used a third-party pricing service to measure fair value for approximately 92% of our AFS Level 2 securities.

Level 3 Valuations

Private Equity Investments

Private equity investments (“PEIs”) are generally measured under Level 3. Certain investments that have converted to being publicly-traded are measured under Level 1. The majority of these PEIs are held in Zions’ Small Business Investment Company (“SBIC”) and are early-stage venture investments. The fair value measurements of these investments are updated at least on a quarterly basis, including whenever a new round of financing occurs. Certain of these investments are measured using multiples of operating performance. The fair value measurements of PEIs are reviewed on a quarterly basis by the Securities Valuation Committee. The Equity Investments Committee, consisting of executives familiar with the investments, reviews periodic financial information, including audited financial statements when available.

Certain valuation analytics may be employed that include current and projected financial performance, recent financing activities, economic and market conditions, market comparables, market liquidity, sales restrictions, and other factors. A significant change in the expected performance of the individual investment would result in a change in the fair value measurement of the investment. The amount of unfunded commitments to invest is disclosed in Note 5 . Certain restrictions apply for the redemption of these investments and certain investments are prohibited by the Volcker Rule. See discussions in Note 5 .

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Agriculture Loan Servicing

This asset results from our servicing of agriculture loans approved and funded by Federal Agricultural Mortgage Corporation (“FAMC”). We provide this servicing under an agreement with FAMC for loans they own. The asset’s fair value represents our projection of the present value of future cash flows measured under Level 3 using discounted cash flow methodologies.

Interest-Only Strips

Interest-only strips are created as a by-product of the securitization process. When the guaranteed portions of Small Business Administration (“SBA”) 7(a) loans are pooled, interest-only strips may be created in the pooling process. The asset’s fair value represents our projection of the present value of future cash flows measured under Level 3 using discounted cash flow methodologies.

Reconciliation of Level 3 Fair Value Measurements

The following reconciles the beginning and ending balances of assets and liabilities that are measured at fair value by class on a recurring basis using Level 3 inputs:



	Level 3 Instruments
	Three Months Ended										Six Months Ended
	June 30, 2018				June 30, 2017						June 30, 2018				June 30, 2017
(In millions)	Private equity investments		Ag loan svcg and int-only strips		Private equity investments			Ag loan svcg and int-only strips			Private equity investments		Ag loan svcg and int-only strips		Private equity investments			Ag loan svcg and int-only strips

Balance at beginning of period	$	100	$	18	$	78		$	20		$	95	$	18	$	73		$	20
Securities gains (losses), net	1		—		(1		)	—			1		—		2			—
Other noninterest income	—		—		—			(1		)	—		—		—			(1		)
Purchases	1		—		5			—			6		—		12			—
Redemptions and paydowns	—		—		—			—			—		—		(5		)	—
Balance at end of period	$	102	$	18	$	82		$	19		$	102	$	18	$	82		$	19

No transfers of assets or liabilities occurred among Levels 1, 2 or 3 for the three and six months ended June 30, 2018 and 2017 .

The reconciliation of Level 3 instruments includes the following realized gains and losses in the statement of income:



(In millions)	Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018			2017

Securities gains (losses), net	$	—	$	—	$	(3	)	$	3

Nonrecurring Fair Value Measurements

Included in the balance sheet amounts are the following amounts of assets that had fair value changes measured on a nonrecurring basis.



(In millions)	Fair value at June 30, 2018								Fair value at December 31, 2017
(In millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS
Private equity investments	$	—	$	—	$	—	$	—	$	—	$	—	$	1	$	1
Impaired loans	—		24		—		24		—		9		—		9
Other real estate owned	—		1		—		1		—		—		—		—
Total	$	—	$	25	$	—	$	25	$	—	$	9	$	1	$	10

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The previous fair values may not be current as of the dates indicated, but rather as of the date the fair value change occurred, such as a charge for impairment. Accordingly, carrying values may not equal current fair value.



	Gains (losses) from fair value changes
(In millions)	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017
ASSETS
Private equity investments	$	—		$	—		$	—		$	(1	)
Impaired loans	(1		)	(6		)	(5		)	(7		)
Other real estate owned	—			—			(1		)	—
Total	$	(1	)	$	(6	)	$	(6	)	$	(8	)

During the three months ended June 30 , we recognized an insignificant amount of net gains in 2018 and 2017 from the sale of other real estate owned (“OREO”) properties. During the six months ended June 30 , we recognized approximately $1 million of net gains in 2018 and an insignificant amount in 2017 from the sale of OREO properties that had a carrying value at the time of sale of approximately $2 million and $3 million during the six months ended June 30, 2018 and 2017 , respectively. Previous to their sale in these periods, we recognized impairment on these properties of an insignificant amount in 2018 and 2017 .

Private equity investments carried at cost were measured at fair value for impairment purposes according to the methodology previously discussed for these investments. Amounts of PEIs carried at cost were $10 million at both June 30, 2018 and December 31, 2017 . Amounts of other noninterest-bearing investments carried at cost were $341 million at June 30, 2018 and $338 million at December 31, 2017 , which were comprised of Federal Reserve and Federal Home Loan Bank (“FHLB”) stock. Private equity investments accounted for using the equity method were $38 million at June 30, 2018 and $36 million at December 31, 2017 .

Impaired (or nonperforming) loans that are collateral-dependent were measured at fair value based on the fair value of the collateral. OREO was measured initially at fair value based on collateral appraisals at the time of transfer and subsequently at the lower of cost or fair value. For additional information regarding the measurement of fair value for impaired loans, collateral-dependent loans, and OREO, see Note 3 of our 2017 Annual Report on Form 10-K.

Fair Value of Certain Financial Instruments

Following is a summary of the carrying values and estimated fair values of certain financial instruments:



	June 30, 2018					December 31, 2017
(In millions)	Carrying value		Estimated fair value		Level	Carrying value		Estimated fair value		Level
Financial assets:
HTM investment securities	$	878	$	866	2	$	770	$	762	2
Loans and leases (including loans held for sale), net of allowance	44,824		43,715		3	44,306		44,226		3
Financial liabilities:
Time deposits	4,011		3,985		2	3,115		3,099		2
Other short-term borrowings	3,650		3,650		2	3,600		3,600		2
Long-term debt	383		390		2	383		402		2

This summary excludes financial assets and liabilities for which carrying value approximates fair value and financial instruments that are recorded at fair value on a recurring basis. With the adoption of ASU 2016-01, we have updated our process for estimating the fair value for our loans and leases, net of allowance. Our updated process identifies an exit price using current origination rates, making certain adjustments based on credit and utilizing publicly available rates and indices. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3 of our 2017 Annual Report on Form 10-K.

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4.	OFFSETTING ASSETS AND LIABILITIES

Gross and net information for selected financial instruments in the balance sheet is as follows:



	June 30, 2018
(In millions)								Gross amounts not offset in the balance sheet
Description	Gross amounts recognized		Gross amounts offset in the balance sheet			Net amounts presented in the balance sheet		Financial instruments			Cash collateral received/pledged			Net amount
Assets:
Federal funds sold and security resell agreements	$	607	$	(49	)	$	558	$	—		$	—		$	558
Derivatives (included in other assets)	29		—			29		(4		)	(9		)	16
Total assets	$	636	$	(49	)	$	587	$	(4	)	$	(9	)	$	574
Liabilities:
Federal funds and other short-term borrowings	$	4,207	$	(49	)	$	4,158	$	—		$	—		$	4,158
Derivatives (included in other liabilities)	70		—			70		(4		)	(1		)	65
Total Liabilities	$	4,277	$	(49	)	$	4,228	$	(4	)	$	(1	)	$	4,223



	December 31, 2017
(In millions)								Gross amounts not offset in the balance sheet
Description	Gross amounts recognized		Gross amounts offset in the balance sheet			Net amounts presented in the balance sheet		Financial instruments			Cash collateral received/pledged			Net amount
Assets:
Federal funds sold and security resell agreements	$	809	$	(295	)	$	514	$	—		$	—		$	514
Derivatives (included in other assets)	38		—			38		(9		)	(1		)	28
Total assets	$	847	$	(295	)	$	552	$	(9	)	$	(1	)	$	542
Liabilities:
Federal funds and other short-term borrowings	$	5,271	$	(295	)	$	4,976	$	—		$	—		$	4,976
Derivatives (included in other liabilities)	40		—			40		(9		)	(6		)	25
Total Liabilities	$	5,311	$	(295	)	$	5,016	$	(9	)	$	(6	)	$	5,001

Security repurchase and reverse repurchase (“resell”) agreements are offset, when applicable, in the balance sheet according to master netting agreements. Security repurchase agreements are included with “Federal funds and other short-term borrowings.” Derivative instruments may be offset under their master netting agreements; however, for accounting purposes, we present these items on a gross basis in the Company’s balance sheet. See Note 7 for further information regarding derivative instruments.


5.	INVESTMENTS

Investment Securities

Securities are classified as HTM, AFS or trading. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. AFS securities are carried at fair value and unrealized gains and losses are reported as net increases or decreases to accumulated other comprehensive income (“AOCI”). Realized gains and losses on AFS securities are determined by using the cost basis of each individual security. Trading securities are carried at fair value with gains and losses recognized in current period earnings. The purchase premiums and discounts for both HTM and AFS securities are amortized and accreted at a constant effective yield to the contractual maturity date and no assumption is made concerning prepayments. As principal prepayments occur, the portion of the unamortized premium or discount associated with the principal reduction is recognized in interest

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income in the period the principal is reduced. Note 3 of our 2017 Annual Report on Form 10-K discusses the process to estimate fair value for investment securities.



	June 30, 2018
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	878	$	4	$	16	$	866
Available-for-sale
U.S. Treasury securities	25		—		—		25
U.S. Government agencies and corporations:
Agency securities	1,683		—		26		1,657
Agency guaranteed mortgage-backed securities	9,831		8		301		9,538
Small Business Administration loan-backed securities	2,115		1		45		2,071
Municipal securities	1,333		2		23		1,312
Other debt securities	25		—		1		24
Total available-for-sale	15,012		11		396		14,627
Total investment securities	$	15,890	$	15	$	412	$	15,493



	December 31, 2017
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	770	$	5	$	13	$	762
Available-for-sale
U.S. Treasury securities	25		—		—		25
U.S. Government agencies and corporations:
Agency securities	1,830		1		13		1,818
Agency guaranteed mortgage-backed securities	9,798		9		141		9,666
Small Business Administration loan-backed securities	2,227		10		15		2,222
Municipal securities	1,336		9		11		1,334
Other debt securities	25		—		1		24
Total available-for-sale debt securities	15,241		29		181		15,089
Money market mutual funds and other	72		—		—		72
Total available-for-sale	15,313		29		181		15,161
Total investment securities	$	16,083	$	34	$	194	$	15,923

Maturities

The amortized cost and estimated fair value of investment debt securities are shown subsequently as of June 30, 2018 , by expected timing of principal payments. Actual principal payments may differ from contractual or expected principal payments because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	June 30, 2018
	Held-to-maturity				Available-for-sale
(In millions)	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value

Due in one year or less	$	295	$	294	$	1,773	$	1,738
Due after one year through five years	380		376		4,444		4,330
Due after five years through ten years	147		143		4,565		4,445
Due after ten years	56		53		4,230		4,114
Total	$	878	$	866	$	15,012	$	14,627

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The following is a summary of the amount of gross unrealized losses for debt securities and the estimated fair value by length of time the securities have been in an unrealized loss position:



	June 30, 2018
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	4	$	259	$	12	$	306	$	16	$	565
Available-for-sale
U.S. Government agencies and corporations:
Agency securities	16		899		10		655		26		1,554
Agency guaranteed mortgage-backed securities	118		4,531		183		4,175		301		8,706
Small Business Administration loan-backed securities	21		1,427		24		585		45		2,012
Municipal securities	14		860		9		216		23		1,076
Other	—		—		1		13		1		13
Total available-for-sale	169		7,717		227		5,644		396		13,361
Total	$	173	$	7,976	$	239	$	5,950	$	412	$	13,926



	December 31, 2017
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	3	$	263	$	10	$	292	$	13	$	555
Available-for-sale
U.S. Government agencies and corporations:
Agency securities	6		808		7		808		13		1,616
Agency guaranteed mortgage-backed securities	29		3,609		112		4,721		141		8,330
Small Business Administration loan-backed securities	3		408		12		649		15		1,057
Municipal securities	6		554		5		230		11		784
Other	—		—		1		14		1		14
Total available-for-sale	44		5,379		137		6,422		181		11,801
Total	$	47	$	5,642	$	147	$	6,714	$	194	$	12,356

At June 30, 2018 and December 31, 2017 , respectively, 653 and 667 HTM and 4,317 and 2,262 AFS investment securities were in an unrealized loss position.

Other-Than-Temporary Impairment

The Company did not recognize any other-than-temporary impairment (“OTTI”) on its investment securities portfolio during the first six months of 2018 . We review investment securities on a quarterly basis for the presence of OTTI. Unrealized losses relate to changes in interest rates subsequent to purchase and are not attributable to credit. At June 30, 2018 , we did not have an intent to sell identified securities with unrealized losses or initiate such sales, and we believe it is not more likely than not we would be required to sell such securities before recovery of their amortized cost basis. For additional information on our policy and evaluation process relating to OTTI, see Note 5 of our 2017 Annual Report on Form 10-K.

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The following summarizes gains and losses that were recognized in the statement of income:



	Three Months Ended June 30,								Six Months Ended June 30,
	2018				2017				2018				2017
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses
Investment securities:
Other noninterest-bearing investments	$	4	$	3	$	4	$	2	$	6	$	5	$	14	$	7
Net gains ¹			$	1			$	2			$	1			$	7

¹ Net gains were recognized in securities gains, net in the statement of income.

Interest income by security type is as follows:



	Three Months Ended June 30,
(In millions)	2018						2017
	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	3	$	3	$	6	$	2	$	3	$	5
Available-for-sale	70		7		77		71		7		78
Trading	2		—		2		1		—		1
Total	$	75	$	10	$	85	$	74	$	10	$	84



	Six Months Ended June 30,
(In millions)	2018						2017
	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	5	$	7	$	12	$	5	$	7	$	12
Available-for-sale	142		13		155		137		12		149
Trading	3		—		3		1		—		1
Total	$	150	$	20	$	170	$	143	$	19	$	162

Investment securities with a carrying value of $2.1 billion at both June 30, 2018 and December 31, 2017 were pledged to secure public and trust deposits, advances, and for other purposes as required by law. Securities are also pledged as collateral for security repurchase agreements.

Private Equity Investments

Effect of Volcker Rule

The Company’s PEIs are subject to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The Volcker Rule of the Dodd-Frank Act prohibits banks and bank holding companies from holding PEIs, except for SBIC funds and certain other permitted exclusions, beyond a required deadline. The Federal Reserve Board (“FRB”) announced in December 2016 that it would allow banks to apply for an additional five-year extension beyond the July 21, 2017 deadline to comply with the Dodd-Frank Act requirement for these investments. The Company applied for and was granted an extension for its eligible PEIs. All positions in the remaining portfolio of PEIs are subject to the extended deadline or other applicable exclusions.

Of the recorded PEIs of $151 million at June 30, 2018 , approximately $3 million remain prohibited by the Volcker Rule. At June 30, 2018 , we have $32 million of unfunded commitments for PEIs, of which approximately $3 million relate to prohibited PEIs. We currently do not believe that this divestiture requirement will ultimately have a material impact on our financial statements. See other discussions related to private equity investments in Note 3 .

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6.	LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans and Loans Held for Sale

Loans are summarized as follows according to major portfolio segment and specific loan class:



(In millions)	June 30, 2018		December 31, 2017

Loans held for sale	$	84	$	44
Commercial:
Commercial and industrial	$	14,134	$	14,003
Leasing	358		364
Owner-occupied	7,365		7,288
Municipal	1,388		1,271
Total commercial	23,245		22,926
Commercial real estate:
Construction and land development	2,202		2,021
Term	8,771		9,103
Total commercial real estate	10,973		11,124
Consumer:
Home equity credit line	2,825		2,777
1-4 family residential	6,861		6,662
Construction and other consumer real estate	661		597
Bankcard and other revolving plans	490		509
Other	175		185
Total consumer	11,012		10,730
Total loans	$	45,230	$	44,780

Loan balances are presented net of unearned income and fees, which amounted to $62 million at June 30, 2018 and $65 million at December 31, 2017 .

Owner-occupied and commercial real estate loans include unamortized premiums of approximately $15 million at June 30, 2018 and $16 million December 31, 2017 .

Municipal loans generally include loans to state and local governments (“municipalities”) with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.

Land development loans included in the construction and land development loan class were $243 million at June 30, 2018 and $220 million at December 31, 2017 .

Loans with a carrying value of approximately $24.4 billion at June 30, 2018 and $25.6 billion at December 31, 2017 have been pledged at the Federal Reserve or the FHLB of Des Moines as collateral for current and potential borrowings.

We sold loans totaling $206 million and $312 million for the three and six months ended June 30, 2018 and $234 million and $550 million for the three and six months ended June 30, 2017 , respectively, that were classified as loans held for sale. The sold loans were derecognized from the balance sheet. Loans classified as loans held for sale primarily consist of conforming residential mortgages and the guaranteed portion of SBA loans. The loans are mainly sold to U.S. government agencies or participated to third parties. At times, we have continuing involvement in the transferred loans in the form of servicing rights or a guarantee from the respective issuer. Amounts added to loans held for sale during these same periods was $235 million and $400 million for the three and six months ended June 30, 2018 and $176 million and $479 million for the three and six months ended June 30, 2017 , respectively. See Note 5 for further information regarding guaranteed securities.

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The principal balance of sold loans for which we retain servicing was approximately $2.2 billion at both June 30, 2018 and December 31, 2017 . Income from loans sold, excluding servicing, was $4 million and $7 million for the three and six months ended June 30, 2018 , and $4 million and $8 million for the three and six months ended June 30, 2017 , respectively.

Allowance for Credit Losses

The allowance for credit losses (“ACL”) consists of the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents our estimate of probable and estimable losses inherent in the loan and lease portfolio as of the balance sheet date. We also estimate a reserve for potential losses associated with off-balance sheet commitments, including standby letters of credit. We determine the RULC using the same procedures and methodologies that we use for the ALLL.

For additional information regarding our policies and methodologies used to estimate the ACL, see Note 6 of our 2017 Annual Report on Form 10-K.

Changes in the allowance for credit losses are summarized as follows:

	Three Months Ended June 30, 2018
(In millions)	Commercial			Commercial real estate			Consumer		Total
Allowance for loan losses
Balance at beginning of period	$	329		$	104		$	40	$	473
Provision for loan losses	(18		)	15			8		5
Gross loan and lease charge-offs	10			—			3		13
Recoveries	20			3			2		25
Net loan and lease charge-offs (recoveries)	(10		)	(3		)	1		(12		)
Balance at end of period	$	321		$	122		$	47	$	490
Reserve for unfunded lending commitments
Balance at beginning of period	$	40		$	11		$	—	$	51
Provision for unfunded lending commitments	3			4			—		7
Balance at end of period	$	43		$	15		$	—	$	58
Total allowance for credit losses at end of period
Allowance for loan losses	$	321		$	122		$	47	$	490
Reserve for unfunded lending commitments	43			15			—		58
Total allowance for credit losses	$	364		$	137		$	47	$	548

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	Six Months Ended June 30, 2018
(In millions)	Commercial			Commercial real estate			Consumer		Total
Allowance for loan losses
Balance at beginning of period	$	371		$	103		$	44	$	518
Provision for loan losses	(58		)	14			9		(35		)
Gross loan and lease charge-offs	30			—			9		39
Recoveries	38			5			3		46
Net loan and lease charge-offs (recoveries)	(8		)	(5		)	6		(7		)
Balance at end of period	$	321		$	122		$	47	$	490
Reserve for unfunded lending commitments
Balance at beginning of period	$	48		$	10		$	—	$	58
Provision for unfunded lending commitments	(5		)	5			—		—
Balance at end of period	$	43		$	15		$	—	$	58
Total allowance for credit losses at end of period
Allowance for loan losses	$	321		$	122		$	47	$	490
Reserve for unfunded lending commitments	43			15			—		58
Total allowance for credit losses	$	364		$	137		$	47	$	548



	Three Months Ended June 30, 2017
(In millions)	Commercial		Commercial real estate			Consumer		Total
Allowance for loan losses
Balance at beginning of period	$	397	$	114		$	33	$	544
Provision for loan losses	9		(5		)	3		7
Gross loan and lease charge-offs	31		1			3		35
Recoveries	18		8			2		28
Net loan and lease charge-offs (recoveries)	13		(7		)	1		7
Balance at end of period	$	393	$	116		$	35	$	544
Reserve for unfunded lending commitments
Balance at beginning of period	$	51	$	9		$	—	$	60
Provision for unfunded lending commitments	3		—			—		3
Balance at end of period	$	54	$	9		$	—	$	63
Total allowance for credit losses at end of period
Allowance for loan losses	$	393	$	116		$	35	$	544
Reserve for unfunded lending commitments	54		9			—		63
Total allowance for credit losses	$	447	$	125		$	35	$	607

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	Six Months Ended June 30, 2017
(In millions)	Commercial		Commercial real estate			Consumer		Total
Allowance for loan losses
Balance at beginning of period	$	420	$	116		$	31	$	567
Provision for loan losses	32		(9		)	7		30
Gross loan and lease charge-offs	82		2			8		92
Recoveries	23		11			5		39
Net loan and lease charge-offs (recoveries)	59		(9		)	3		53
Balance at end of period	$	393	$	116		$	35	$	544
Reserve for unfunded lending commitments
Balance at beginning of period	$	54	$	11		$	—	$	65
Provision for unfunded lending commitments	—		(2		)	—		(2		)
Balance at end of period	$	54	$	9		$	—	$	63
Total allowance for credit losses at end of period
Allowance for loan losses	$	393	$	116		$	35	$	544
Reserve for unfunded lending commitments	54		9			—		63
Total allowance for credit losses	$	447	$	125		$	35	$	607

The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:

	June 30, 2018
(In millions)	Commercial		Commercial real estate		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	9	$	5	$	3	$	17
Collectively evaluated for impairment	312		117		44		473
Purchased loans with evidence of credit deterioration	—		—		—		—
Total	$	321	$	122	$	47	$	490
Outstanding loan balances:
Individually evaluated for impairment	$	217	$	77	$	76	$	370
Collectively evaluated for impairment	23,028		10,896		10,936		44,860
Purchased loans with evidence of credit deterioration	—		—		—		—
Total	$	23,245	$	10,973	$	11,012	$	45,230



	December 31, 2017
(In millions)	Commercial		Commercial real estate		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	26	$	1	$	4	$	31
Collectively evaluated for impairment	345		102		40		487
Purchased loans with evidence of credit deterioration	—		—		—		—
Total	$	371	$	103	$	44	$	518
Outstanding loan balances:
Individually evaluated for impairment	$	314	$	69	$	76	$	459
Collectively evaluated for impairment	22,598		11,048		10,648		44,294
Purchased loans with evidence of credit deterioration	14		7		6		27
Total	$	22,926	$	11,124	$	10,730	$	44,780

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Nonaccrual and Past Due Loans

Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection. For further discussion of our policies and processes regarding nonaccrual and past due loans, see Note 6 of our 2017 Annual Report on Form 10-K.

Nonaccrual loans are summarized as follows:

(In millions)	June 30, 2018		December 31, 2017

Loans held for sale	$	—	$	12
Commercial:
Commercial and industrial	$	142	$	195
Leasing	7		8
Owner-occupied	63		90
Municipal	1		1
Total commercial	213		294
Commercial real estate:
Construction and land development	5		4
Term	53		36
Total commercial real estate	58		40
Consumer:
Home equity credit line	14		13
1-4 family residential	56		55
Construction and other consumer real estate	1		—
Bankcard and other revolving plans	—		—
Other	—		—
Total consumer loans	71		68
Total	$	342	$	402

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Past due loans (accruing and nonaccruing) are summarized as follows:

	June 30, 2018
(In millions)	Current		30-89 days past due		90+ days past due		Total past due		Total loans		Accruing loans 90+ days past due		Nonaccrual loans that are current ¹

Loans held for sale	$	84	$	—	$	—	$	—	$	84	$	—	$	—
Commercial:
Commercial and industrial	$	14,030	$	59	$	45	$	104	$	14,134	$	3	$	93
Leasing	356		1		1		2		358		—		7
Owner-occupied	7,324		19		22		41		7,365		—		36
Municipal	1,388		—		—		—		1,388		—		1
Total commercial	23,098		79		68		147		23,245		3		137
Commercial real estate:
Construction and land development	2,196		1		5		6		2,202		—		—
Term	8,726		36		9		45		8,771		1		43
Total commercial real estate	10,922		37		14		51		10,973		1		43
Consumer:
Home equity credit line	2,814		4		7		11		2,825		—		5
1-4 family residential	6,830		11		20		31		6,861		—		32
Construction and other consumer real estate	657		4		—		4		661		—		1
Bankcard and other revolving plans	486		3		1		4		490		1		—
Other	174		1		—		1		175		—		—
Total consumer loans	10,961		23		28		51		11,012		1		38
Total	$	44,981	$	139	$	110	$	249	$	45,230	$	5	$	218



	December 31, 2017
(In millions)	Current		30-89 days past due		90+ days past due		Total past due		Total loans		Accruing loans 90+ days past due		Nonaccrual loans that are current ¹

Loans held for sale	$	44	$	—	$	—	$	—	$	44	$	—	$	12
Commercial:
Commercial and industrial	$	13,887	$	60	$	56	$	116	$	14,003	$	13	$	146
Leasing	363		1		—		1		364		—		8
Owner-occupied	7,219		29		40		69		7,288		4		49
Municipal	1,271		—		—		—		1,271		—		1
Total commercial	22,740		90		96		186		22,926		17		204
Commercial real estate:
Construction and land development	2,014		3		4		7		2,021		—		—
Term	9,079		13		11		24		9,103		2		25
Total commercial real estate	11,093		16		15		31		11,124		2		25
Consumer:
Home equity credit line	2,763		9		5		14		2,777		—		5
1-4 family residential	6,621		16		25		41		6,662		1		27
Construction and other consumer real estate	590		6		1		7		597		1		—
Bankcard and other revolving plans	506		2		1		3		509		1		—
Other	184		1		—		1		185		—		—
Total consumer loans	10,664		34		32		66		10,730		3		32
Total	$	44,497	$	140	$	143	$	283	$	44,780	$	22	$	261


¹	Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.

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Credit Quality Indicators

In addition to the past due and nonaccrual criteria, we also analyze loans using loan risk-grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definitions of Pass, Special Mention, Sub-standard, and Doubtful, which are consistent with published definitions of regulatory risk classifications. For further discussion of our policies and processes regarding credit quality indicators and internal loan risk-grading, see Note 6 of our 2017 Annual Report on Form 10-K.

Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality classifications are summarized as follows:



	June 30, 2018
(In millions)	Pass		Special Mention		Sub- standard		Doubtful		Total loans		Total allowance
Commercial:
Commercial and industrial	$	13,361	$	288	$	484	$	1	$	14,134
Leasing	339		5		14		—		358
Owner-occupied	7,077		59		229		—		7,365
Municipal	1,367		2		19		—		1,388
Total commercial	22,144		354		746		1		23,245		$	321
Commercial real estate:
Construction and land development	2,190		7		5		—		2,202
Term	8,551		110		110		—		8,771
Total commercial real estate	10,741		117		115		—		10,973		122
Consumer:
Home equity credit line	2,807		—		18		—		2,825
1-4 family residential	6,799		—		62		—		6,861
Construction and other consumer real estate	659		—		2		—		661
Bankcard and other revolving plans	488		—		2		—		490
Other	174		—		1		—		175
Total consumer loans	10,927		—		85		—		11,012		47
Total	$	43,812	$	471	$	946	$	1	$	45,230	$	490



	December 31, 2017
(In millions)	Pass		Special Mention		Sub- standard		Doubtful		Total loans		Total allowance
Commercial:
Commercial and industrial	$	13,001	$	395	$	606	$	1	$	14,003
Leasing	342		6		16		—		364
Owner-occupied	6,920		93		275		—		7,288
Municipal	1,257		13		1		—		1,271
Total commercial	21,520		507		898		1		22,926		$	371
Commercial real estate:
Construction and land development	2,002		15		4		—		2,021
Term	8,816		138		149		—		9,103
Total commercial real estate	10,818		153		153		—		11,124		103
Consumer:
Home equity credit line	2,759		—		18		—		2,777
1-4 family residential	6,602		—		60		—		6,662
Construction and other consumer real estate	596		—		1		—		597
Bankcard and other revolving plans	507		—		2		—		509
Other	185		—		—		—		185
Total consumer loans	10,649		—		81		—		10,730		44
Total	$	42,987	$	660	$	1,132	$	1	$	44,780	$	518

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Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. The amount of interest income recognized on a cash basis during the time the loans were impaired within the three months ended June 30, 2018 and 2017 was not significant. For additional information regarding our policies and methodologies used to evaluate impaired loans, see Note 6 of our 2017 Annual Report on Form 10-K.

Information on impaired loans individually evaluated is summarized as follows, including the average recorded investment and interest income recognized for the three and six months ended June 30, 2018 and 2017 :



	June 30, 2018
(In millions)	Unpaid principal balance		Recorded investment				Total recorded investment		Related allowance
			with no allowance		with allowance
Commercial:
Commercial and industrial	$	189	$	84	$	53	$	137	$	8
Owner-occupied	64		39		18		57		1
Municipal	1		1		—		1		—
Total commercial	254		124		71		195		9
Commercial real estate:
Construction and land development	7		4		1		5		—
Term	63		33		24		57		4
Total commercial real estate	70		37		25		62		4
Consumer:
Home equity credit line	18		13		2		15		—
1-4 family residential	70		27		32		59		3
Construction and other consumer real estate	2		1		1		2		—
Other	—		—		—		—		—
Total consumer loans	90		41		35		76		3
Total	$	414	$	202	$	131	$	333	$	16



	December 31, 2017
(In millions)	Unpaid principal balance		Recorded investment				Total recorded investment		Related allowance
			with no allowance		with allowance
Commercial:
Commercial and industrial	$	293	$	80	$	142	$	222	$	24
Owner-occupied	120		79		23		102		2
Municipal	1		1		—		1		—
Total commercial	414		160		165		325		26
Commercial real estate:
Construction and land development	8		4		2		6		—
Term	56		36		12		48		—
Total commercial real estate	64		40		14		54		—
Consumer:
Home equity credit line	25		13		9		22		—
1-4 family residential	67		28		29		57		4
Construction and other consumer real estate	2		1		1		2		—
Other	1		1		—		1		—
Total consumer loans	95		43		39		82		4
Total	$	573	$	243	$	218	$	461	$	30

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	Three Months Ended June 30, 2018				Six Months Ended June 30, 2018
(In millions)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Commercial:
Commercial and industrial	$	138	$	—	$	126	$	—
Owner-occupied	54		—		55		8
Municipal	1		—		1		—
Total commercial	193		—		182		8
Commercial real estate:
Construction and land development	5		—		5		—
Term	58		—		53		—
Total commercial real estate	63		—		58		—
Consumer:
Home equity credit line	15		—		14		—
1-4 family residential	57		—		55		—
Construction and other consumer real estate	2		—		1		—
Other	—		—		—		—
Total consumer loans	74		—		70		—
Total	$	330	$	—	$	310	$	8



	Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
(In millions)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Commercial:
Commercial and industrial	$	398	$	4	$	356	$	4
Owner-occupied	109		1		102		4
Municipal	1		—		1		—
Total commercial	508		5		459		8
Commercial real estate:
Construction and land development	11		—		11		—
Term	59		7		60		9
Total commercial real estate	70		7		71		9
Consumer:
Home equity credit line	21		—		21		—
1-4 family residential	58		1		56		1
Construction and other consumer real estate	2		—		3		—
Other	1		—		1		—
Total consumer loans	82		1		81		1
Total	$	660	$	13	$	611	$	18

Modified and Restructured Loans

Loans may be modified in the normal course of business for competitive reasons or to strengthen the Company’s position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. Loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for which the Company has granted a concession that it would not otherwise consider, are considered troubled debt restructurings (“TDRs”). For further discussion of our policies and processes regarding TDRs, see Note 6 of our 2017 Annual Report on Form 10-K.

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Selected information on TDRs that includes the recorded investment on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules:



	June 30, 2018
	Recorded investment resulting from the following modification types:
(In millions)	Interest rate below market		Maturity or term extension		Principal forgiveness		Payment deferral		Other ¹		Multiple modification types ²		Total
Accruing
Commercial:
Commercial and industrial	$	—	$	4	$	—	$	—	$	4	$	6	$	14
Owner-occupied	2		—		—		—		10		9		21
Municipal	—		—		—		—		—		2		2
Total commercial	2		4		—		—		14		17		37
Commercial real estate:
Construction and land development	—		—		—		—		—		1		1
Term	4		2		—		1		—		6		13
Total commercial real estate	4		2		—		1		—		7		14
Consumer:
Home equity credit line	—		2		7		—		—		3		12
1-4 family residential	1		—		7		—		1		30		39
Construction and other consumer real estate	—		1		—		—		—		1		2
Total consumer loans	1		3		14		—		1		34		53
Total accruing	7		9		14		1		15		58		104
Nonaccruing
Commercial:
Commercial and industrial	—		6		1		1		10		29		47
Owner-occupied	1		2		—		1		1		5		10
Municipal	—		1		—		—		—		—		1
Total commercial	1		9		1		2		11		34		58
Commercial real estate:
Term	3		—		—		—		—		3		6
Total commercial real estate	3		—		—		—		—		3		6
Consumer:
Home equity credit line	—		—		2		—		—		—		2
1-4 family residential	—		—		1		—		2		8		11
Total consumer loans	—		—		3		—		2		8		13
Total nonaccruing	4		9		4		2		13		45		77
Total	$	11	$	18	$	18	$	3	$	28	$	103	$	181

¹ Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.


²	Includes TDRs that resulted from a combination of any of the previous modification types.

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	December 31, 2017
	Recorded investment resulting from the following modification types:
(In millions)	Interest rate below market		Maturity or term extension		Principal forgiveness		Payment deferral		Other ¹		Multiple modification types ²		Total
Accruing
Commercial:
Commercial and industrial	$	—	$	2	$	—	$	—	$	12	$	33	$	47
Owner-occupied	1		1		—		—		7		14		23
Total commercial	1		3		—		—		19		47		70
Commercial real estate:
Construction and land development	—		—		—		—		—		2		2
Term	6		—		—		1		—		7		14
Total commercial real estate	6		—		—		1		—		9		16
Consumer:
Home equity credit line	—		2		9		—		1		3		15
1-4 family residential	1		—		6		1		2		26		36
Construction and other consumer real estate	—		1		—		—		—		1		2
Total consumer loans	1		3		15		1		3		30		53
Total accruing	8		6		15		2		22		86		139
Nonaccruing
Commercial:
Commercial and industrial	—		3		5		2		28		24		62
Owner-occupied	1		2		—		1		1		5		10
Municipal	—		1		—		—		—		—		1
Total commercial	1		6		5		3		29		29		73
Commercial real estate:
Term	2		—		—		—		—		3		5
Total commercial real estate	2		—		—		—		—		3		5
Consumer:
Home equity credit line	—		—		1		—		—		—		1
1-4 family residential	—		—		2		—		1		5		8
Total consumer loans	—		—		3		—		1		5		9
Total nonaccruing	3		6		8		3		30		37		87
Total	$	11	$	12	$	23	$	5	$	52	$	123	$	226


¹	Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.


²	Includes TDRs that resulted from a combination of any of the previous modification types.

Unfunded lending commitments on TDRs amounted to approximately $27 million at June 30, 2018 and $22 million at December 31, 2017 .

The total recorded investment of all TDRs in which interest rates were modified below market was $93 million at June 30, 2018 and $120 million at December 31, 2017 . These loans are included in the previous schedule in the columns for interest rate below market and multiple modification types.

The net financial impact on interest income due to interest rate modifications below market for accruing TDRs for the three and six months ended June 30, 2018 and 2017 was not significant.

On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.

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The recorded investment of accruing and nonaccruing TDRs that had a payment default during the period listed below (and are still in default at period end) and are within 12 months or less of being modified as TDRs is as follows:



	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
(In millions)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing			Total
Commercial:
Commercial and industrial	$	—	$	5	$	5	$	—	$	5	1,291	$	5
Owner-occupied	—		—		—		—		1		5,405	1
Total commercial	—		5		5		—		6			6
Commercial real estate:
Term	—		2		2		—		2			2
Total commercial real estate	—		2		2		—		2			2
Consumer:
1-4 family residential	—		1		1		—		1			1
Total consumer loans	—		1		1		—		1			1
Total	$	—	$	8	$	8	$	—	$	9		$	9



	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
(In millions)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing			Total
Commercial:
Commercial and industrial	$	—	$	—	$	—	$	—	$	—	1,291	$	—
Owner-occupied	—		3		3		—		3		5,405	3
Total commercial	—		3		3		—		3			3
Total	$	—	$	3	$	3	$	—	$	3		$	3

Note: Total loans modified as TDRs during the 12 months previous to June 30, 2018 and 2017 were $73 million and $123 million , respectively.

At June 30, 2018 and December 31, 2017 , the amount of foreclosed residential real estate property held by the Company was approximately $2 million and less than $1 million , and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was approximately $9 million and $10 million , respectively.

Concentrations of Credit Risk

Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. We perform an ongoing analysis of our loan portfolio to evaluate whether there is any significant exposure to any concentrations of credit risk. See Note 6 of our 2017 Annual Report on Form 10-K for further discussion of our evaluation of credit risk concentrations. See also Note 7 of our 2017 Annual Report on Form 10-K for a discussion of counterparty risk associated with the Company’s derivative transactions.


7.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Accounting

Our objectives in using derivatives are to add stability to interest income or expense, to modify the duration of specific assets or liabilities as we consider advisable, to manage exposure to interest rate movements or other identified risks, and/or to directly offset derivatives sold to our customers. For a detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our 2017 Annual Report on Form 10-K.

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Collateral and Credit Risk

Exposure to credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For a more detailed discussion of collateral and credit risk related to our derivative contracts, see Note 7 of our 2017 Annual Report on Form 10-K.

Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit-risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit-risk-related feature were triggered, such as a downgrade of our credit rating. However, in past situations, not all counterparties have demanded that additional collateral be pledged when provided for under their contracts. At June 30, 2018 , the fair value of our derivative liabilities was $70 million , for which we were required to pledge cash collateral of approximately $47 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s or Moody’s at June 30, 2018 , there would likely be no additional collateral required to be pledged. As a result of the Dodd-Frank Act, all newly eligible derivatives entered into are cleared through a central clearinghouse. Derivatives that are centrally cleared do not have credit-risk-related features that require additional collateral if our credit rating were downgraded.

Derivative Amounts

Selected information with respect to notional amounts and recorded gross fair values at June 30, 2018 and December 31, 2017 , and the related gain (loss) of derivative instruments for the three and six months ended June 30, 2018 and 2017 is summarized as follows:



	June 30, 2018						December 31, 2017
	Notional amount		Fair value				Notional amount		Fair value
(In millions)	Notional amount		Other assets		Other liabilities		Notional amount		Other assets		Other liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	1,038	$	—	$	—	$	1,138	$	—	$	—
Total derivatives designated as hedging instruments	1,038		—		—		1,138		—		—
Derivatives not designated as hedging instruments:
Interest rate swaps and forwards	243		1		—		223		1		—
Interest rate swaps for customers ¹	5,302		22		65		4,550		28		33
Foreign exchange	354		6		5		913		9		7
Total derivatives not designated as hedging instruments	5,899		29		70		5,686		38		40
Total derivatives	$	6,937	$	29	$	70	$	6,824	$	38	$	40

¹ Notional amounts include both the customer swaps and the offsetting derivative contracts.



	Amount of derivative gain (loss) recognized/reclassified
	Three Months Ended June 30, 2018										Six Months Ended June 30, 2018
(In millions)	OCI			Reclassified from AOCI to interest income			Noninterest income (expense)		Offset to interest expense		OCI			Reclassified from AOCI to interest income			Noninterest income (expense)		Offset to interest expense
Derivatives designated as hedging instruments:
Cash flow hedges ¹ :
Interest rate swaps	$	(2	)	$	(1	)					$	(7	)	$	(2	)
Derivatives not designated as hedging instruments:
Interest rate swaps for customers							$	4									$	9
Foreign exchange							5										10
Total derivatives	$	(2	)	$	(1	)	$	9	$	—	$	(7	)	$	(2	)	$	19	$	—

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	Amount of derivative gain (loss) recognized/reclassified
	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
(In millions)	OCI		Reclassified from AOCI to interest income		Noninterest income (expense)		Offset to interest expense		OCI		Reclassified from AOCI to interest income		Noninterest income (expense)		Offset to interest expense
Derivatives designated as hedging instruments:
Cash flow hedges ¹ :
Interest rate swaps	$	2	$	1					$	—	$	3
Derivatives not designated as hedging instruments:
Interest rate swaps for customers					$	3							$	4
Foreign exchange					4								7
Total derivatives	$	2	$	1	$	7	$	—	$	—	$	3	$	11	$	—

Note: These schedules are not intended to present at any given time the Company’s long/short position with respect to its derivative contracts.


¹	Amounts recognized in OCI and reclassified from AOCI represent the effective portion of the derivative gain (loss). For the 12 months following June 30, 2018 , we estimate that $(7) million will be reclassified from AOCI into interest income.

The fair value of derivative assets was reduced by a net credit valuation adjustment of $1 million and $2 million at June 30 , 2018 and 2017 , respectively. The adjustment for derivative liabilities was a decrease of $2 million and $1 million at June 30 , 2018 and 2017 , respectively. These adjustments are required to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.


8.	LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY

Long-term debt is summarized as follows:



(In millions)	June 30, 2018		December 31, 2017

Subordinated notes	$	247	$	247
Senior notes	135		135
Capital lease obligations	1		1
Total	$	383	$	383

The preceding carrying values represent the par value of the debt adjusted for any unamortized premium or discount or unamortized debt issuance costs.

Repurchases of Company Common Stock

During the second quarter of 2018 , we continued our common stock buyback program and repurchased 2.1 million shares of common stock outstanding with a fair value of $120 million at an average price of $55.82 per share. During the first six months of 2018, we repurchased 4.3 million common shares outstanding with a fair value of $235 million at an average price of $54.64 per share. As of June 30, 2018, we had repurchased $465 million of our common stock at an average price of $50.81 per share, which was the total planned common stock repurchases in our 2017 capital plan (which spans the timeframe of July 2017 to June 2018). During the first six months of 2017 , we repurchased 2.2 million shares of common stock outstanding with a fair value of $90 million , at an average price of $41.70 per share. In July 2018, the Company announced that the Board approved a plan to repurchase $185 million of common stock during the third quarter of 2018 and began the repurchases.

Common Stock Warrants

During the first six months of 2018, 1.1 million shares of common stock were issued from the cashless exercise of 3.3 million common stock ZIONZ warrants. As of June 30, 2018, 2.5 million common stock ZIONZ warrants with an exercise price of $36.27 per share, were outstanding. These warrants expire on November 14, 2018 and were associated with the preferred stock issued under the Troubled Asset Relief Program, which was redeemed in 2012.

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Additionally, as of June 30, 2018, 29.3 million common stock ZIONW warrants, with an exercise price of $35.22 , were outstanding. These warrants expire on May 22, 2020.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income (loss) was $(315) million at June 30, 2018 compared with $(139) million at December 31, 2017 . Changes in AOCI by component are as follows:



(In millions)	Net unrealized gains (losses) on investment securities			Net unrealized gains (losses) on derivatives and other			Pension and post-retirement			Total
Six Months Ended June 30, 2018
Balance at December 31, 2017	$	(114	)	$	(2	)	$	(23	)	$	(139	)
OCI (loss) before reclassifications, net of tax	(175		)	—			—			(175		)
Amounts reclassified from AOCI, net of tax	—			(1		)	—			(1		)
OCI (loss)	(175		)	(1		)	—			(176		)
Balance at June 30, 2018	$	(289	)	$	(3	)	$	(23	)	$	(315	)
Income tax benefit included in OCI (loss)	$	(58	)	$	—		$	—		$	(58	)
Six Months Ended June 30, 2017
Balance at December 31, 2016	$	(93	)	$	2		$	(31	)	$	(122	)
OCI before reclassifications, net of tax	73			2			—			75
Amounts reclassified from AOCI, net of tax	—			(2		)	—			(2		)
OCI	73			—			—			73
Balance at June 30, 2017	$	(20	)	$	2		$	(31	)	$	(49	)
Income tax expense included in OCI	$	45		$	—		$	—		$	45



	Amounts reclassified from AOCI ¹				Amounts reclassified from AOCI ¹				Statement of income (SI) Balance sheet (BS)
(In millions)	Three Months Ended June 30,				Six Months Ended June 30,
Details about AOCI components	2018		2017		2018		2017			Affected line item

Net unrealized gains on derivative instruments	$	1	$	1	$	2	$	3	SI	Interest and fees on loans
Income tax expense	—		—		1		1
Amounts Reclassified from AOCI	$	1	$	1	$	1	$	2


¹	Positive reclassification amounts indicate increases to earnings in the statement of income and decreases to balance sheet assets.


9.	COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES

Commitments and Guarantees

Contractual amounts of off-balance sheet financial instruments used to meet the financing needs of our customers are as follows:



(In millions)	June 30, 2018		December 31, 2017

Net unfunded commitments to extend credit ¹	$	20,312	$	19,583
Standby letters of credit:
Financial	699		721
Performance	183		196
Commercial letters of credit	15		31
Total unfunded lending commitments	$	21,209	$	20,531


¹	Net of participations

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The Company’s 2017 Annual Report on Form 10-K contains further information about these commitments and guarantees including their terms and collateral requirements. At June 30, 2018 , the Company had recorded approximately $5 million as a liability for the guarantees associated with the standby letters of credit, which consisted of $1 million attributable to the RULC and $4 million of deferred commitment fees.

At June 30, 2018 , we had unfunded commitments for PEIs of approximately $32 million . These obligations have no stated maturity. PEIs related to these commitments that are prohibited by the Volcker Rule were $3 million at June 30, 2018 . See related discussions about these investments in Note 5 .

Legal Matters

We are subject to litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies. Litigation may relate to lending, deposit and other customer relationships, vendor and contractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. While most matters relate to individual claims, we are also subject to putative class action claims and similar broader claims. Proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies may relate to our banking, investment advisory, trust, securities, and other products and services; our customers’ involvement in money laundering, fraud, securities violations and other illicit activities or our policies and practices relating to such customer activities; and our compliance with the broad range of banking, securities and other laws and regulations applicable to us. At any given time, we may be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters.

As of June 30, 2018 , we were subject to the following material litigation or governmental inquiries:

•

a civil suit, Shou-En Wang v. CB&T, brought against us in the Superior Court for Los Angeles County, Central District in April 2016. The case relates to our depositor relationships with customers who were promoters of an investment program that allegedly misappropriated investors’ funds. This case is in an early phase, with initial motion practice having been completed and discovery being underway.

•

a civil suit, McFarland as Trustee for International Manufacturing Group v. CB&T, et. al. , brought against us in the United States Bankruptcy Court for the Eastern District of California in May 2016. The Trustee seeks to recover loan payments previously repaid to us by our customer, International Manufacturing Group (“IMG”), alleging that IMG, along with its principal, obtained loans and made loan repayments in furtherance of an alleged Ponzi scheme. Initial motion practice has been completed and discovery is underway.

•

a civil suit, JTS Communities, Inc. et. al v. CB&T, Jun Enkoji and Dawn Satow , brought against us in the Superior Court for Sacramento County, California in June 2017. In this case four investors in IMG seek to hold us liable for losses arising from their investments in that company, alleging that we conspired with and knowingly assisted IMG and its principal in furtherance of an alleged Ponzi scheme. This case is in an early phase with initial motion practice having been completed but discovery not having been commenced.

•

a civil class action lawsuit, Evans v. CB&T , brought against us in the United States District Court for the Eastern District of California in May 2017. This case was filed on behalf of a class of up to 50 investors in IMG and seeks to hold us liable for losses of class members arising from their investments in IMG, alleging that we conspired with and knowingly assisted IMG and its principal in furtherance of an alleged Ponzi scheme. In December 2017, the District Court dismissed all claims against the Company. In January 2018, the plaintiff filed an appeal with the Court of Appeals for the Ninth Circuit. The appellate briefing process is underway and is scheduled to be completed in the third quarter of 2018.

•

a Private Attorney General Act (“PAGA”) claim under California law, Lawson v. CB&T , brought against us in the Superior Court for the County of San Diego, California, in February 2016. In this case, the plaintiff alleges, on behalf of herself and other current or former employees of the Company who worked in California on a non-exempt basis, violations by the Company of California wage and hour laws. The case remains in the early stages of motion practice, to date mainly involving questions of venue and scope of employees covered by the PAGA

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claims. In March 2018, the Supreme Court of California granted review of an appeal from the intermediate appellate court decision requiring all aspects of the case to be heard in state court, rather than in arbitration.

•

a civil case, Lifescan Inc. and Johnson & Johnson Health Care Services v. Jeffrey Smith, et al. , brought against us in the United States District Court for the District of New Jersey in December 2017. In this case, certain manufacturers and distributors of medical products seek to hold us liable for allegedly fraudulent practices of a borrower of the Company which filed for bankruptcy protection in 2017. The case is in early phase, with initial motion practice underway.

At least quarterly, we review outstanding and new legal matters, utilizing then available information. In accordance with applicable accounting guidance, if we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. In the absence of such a determination, no accrual is made. Once established, accruals are adjusted to reflect developments relating to the matters.

In our review, we also assess whether we can determine the range of reasonably possible losses for significant matters in which we are unable to determine that the likelihood of a loss is remote. Because of the difficulty of predicting the outcome of legal matters, discussed subsequently, we are able to meaningfully estimate such a range only for a limited number of matters. Based on information available as of June 30, 2018 , we estimated that the aggregate range of reasonably possible losses for those matters to be from $0 million to roughly $15 million in excess of amounts accrued. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which a meaningful estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.

Based on our current knowledge, we believe that our current estimated liability for litigation and other legal actions and claims, reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate and that liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions and claims for which an estimate as previously described is possible, will not have a material impact on our financial condition, results of operations, or cash flows. However, in light of the significant uncertainties involved in these matters, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our financial condition, results of operations, or cash flows for any given reporting period.

Any estimate or determination relating to the future resolution of litigation, arbitration, governmental or self-regulatory examinations, investigations or actions or similar matters is inherently uncertain and involves significant judgment. This is particularly true in the early stages of a legal matter, when legal issues and facts have not been well articulated, reviewed, analyzed, and vetted through discovery, preparation for trial or hearings, substantive and productive mediation or settlement discussions, or other actions. It is also particularly true with respect to class action and similar claims involving multiple defendants, matters with complex procedural requirements or substantive issues or novel legal theories, and examinations, investigations and other actions conducted or brought by governmental and self-regulatory agencies, in which the normal adjudicative process is not applicable. Accordingly, we usually are unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely, or probable, or to estimate the amount or range of a probable or reasonably likely loss, until relatively late in the course of a legal matter, sometimes not until a number of years have elapsed. Accordingly, our judgments and estimates relating to claims will change from time to time in light of developments and actual outcomes will differ from our estimates. These differences may be material.

10. REVENUE RECOGNITION

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

On January 1, 2018, we adopted the accounting guidance in ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) using the modified retrospective method applied to those contracts with customers which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance

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with our historic accounting under Topic 605, “Revenue Recognition.” Upon adoption, the Company has elected to use the following optional exemptions that are permitted under the Topic 606, which have been applied consistently to all contracts within all reporting periods presented:


•	The Company recognizes the incremental cost of obtaining a contract as an expense, when incurred, if the amortization period of the asset that the Company would have recognized is one year or less.


•	For performance obligations satisfied over time, if the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date, the Company will generally recognize revenue in the amount to which the Company has a right to invoice.


•	The Company does not generally disclose information about its remaining performance obligations for those performance obligations that have an original expected duration of one year or less, or where the Company recognizes revenue in the amount to which the Company has a right to invoice.

The cumulative effect of adopting Topic 606 did not have a material impact to retained earnings as of January 1, 2018. The adoption of Topic 606 resulted in changes to our accounting policies, business processes, and internal controls to support the recognition, measurement and disclosure requirements under Topic 606.

Revenue Recognition

We derive our revenue primarily from Interest Income on Loans and Securities, which was more than three-quarters of our revenue in the second quarter of 2018. Only noninterest income is considered to be revenue from contracts with customers in scope of ASC 606. Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. In addition, U.S. GAAP requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The following is a description of revenue from contracts with customers:

Service charges and fees on deposit accounts

Service charges and fees on deposit accounts typically consist of fees charged for providing customers with deposit services. These fees are primarily comprised of account analysis fees, insufficient funds fees, and other various fees on deposit accounts. Service charges on deposit accounts include fees earned in lieu of compensating balances, and fees earned for performing cash management services and other deposit account services. Service charges on deposit accounts in this revenue category are recognized over the period in which the related service is provided. Treasury Management fees are billed monthly based on services rendered for the month.

Other Service charges, commissions, and fees

Other service charges, commissions, and fees primarily consist of credit and debit card interchange fees, automated teller machine (“ATM”) services, and various account services such as wires, safe deposit box, check issuance and cashing services. Revenue is recognized as the services are rendered or upon completion of services.

Zions card fee income includes interchange income from credit and debit cards and net fees earned from processing card transactions for merchants. Card income is recognized as earned. Reward program costs are recorded when the rewards are earned by the customer and presented as a reduction to interchange income.

The following schedule provides the major income categories within “Other Service charges, commissions and fees” that are in scope of ASC 606 for the three months ended June 30, 2018 :



	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2018		2017		2018		2017

Card Fee Income	$	34	$	33	$	67	$	67
ATM Fees	3		3		5		5
Other service charges	4		4		7		7
Other Commissions and fees	5		4		10		7
Ending balance	$	46	$	44	$	89	$	86

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Wealth management and trust income

Wealth management and trust income is comprised of a variety of products, including but not limited to: corporate and personal trust income, wealth management commissions, portfolio services, and advisory services. Revenue is recognized as the services are rendered or upon completion of services. Financial planning and estate services typically have performance obligations that are greater than 12 months, although the amount of future performance obligations are not significant.

Capital markets and foreign exchange

Capital markets and foreign exchange fees primarily consist of mutual fund distribution fees, municipal advisory services, and foreign exchange services provided to customers. Revenue is recognized as the services are rendered or upon completion of services.

Other noninterest income from contracts with customers

Other noninterest income from customers primarily consists of trust operations outsourcing and other various income streams. Revenue is recognized as the services are rendered or upon completion of services.

Disaggregation of Revenue

We provide services across different geographical areas, primarily in 11 Western U.S. States, under banking operations that have their own individual brand names, including Zions Bank, Amegy Bank, California Bank & Trust, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington. The operating segment listed as “Other” includes the Parent, Zions Management Services Company, certain nonbank financial services subsidiaries, centralized back-office functions, and eliminations of transactions between the segments.

The following schedule sets forth the noninterest income and net revenue by operating segments for the three months ended June 30, 2018 and 2017 :



	Zions Bank					Amegy						CB&T
(In millions)	2018		2017			2018			2017			2018		2017

Service charges and fees on deposit accounts	$	15	$	16		$	11		$	11		$	7	$	7
Other service charges, commissions, and fees	18		18			9			9			6		6
Wealth management and trust income	4		4			3			2			1		1
Capital markets and foreign exchange	1		1			(1		)	(1		)	1		1
Total noninterest income from contracts with customers (ASC 606)	38		39			22			21			15		15
Other noninterest income (Non-ASC 606 customer related)	—		(1		)	9			10			4		5
Total customer-related fees	38		38			31			31			19		20
Other noninterest income (non-customer related)	—		—			—			—			—		—
Total non-interest income	38		38			31			31			19		20
Net interest income	170		165			126			122			129		122
Total income less interest expense	$	208	$	203		$	157		$	153		$	148	$	142

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	NBAZ				NSB				Vectra
(In millions)	2018		2017		2018		2017		2018		2017

Service charges and fees on deposit accounts	$	3	$	3	$	4	$	4	$	2	$	2
Other service charges, commissions, and fees	3		3		3		3		2		2
Wealth management and trust income	—		—		1		1		—		—
Capital markets and foreign exchange	—		—		—		—		—		—
Total noninterest income from contracts with customers (ASC 606)	6		6		8		8		4		4
Other noninterest income (Non-ASC 606 customer related)	3		4		2		3		2		3
Total customer-related fees	9		10		10		11		6		7
Other noninterest income (non-customer related)	—		—		—		—		—		—
Total non-interest income	9		10		10		11		6		7
Net interest income	57		50		38		33		34		31
Total income less interest expense	$	66	$	60	$	48	$	44	$	40	$	38



	TCBW				Other						Consolidated Company
(In millions)	2018		2017		2018			2017			2018		2017

Service charges and fees on deposit accounts	$	—	$	—	$	—		$	—		$	42	$	43
Other service charges, commissions, and fees	1		1		4			2			46		44
Wealth management and trust income	—		—		4			2			13		10
Capital markets and foreign exchange	—		—		2			1			3		2
Total noninterest income from contracts with customers (ASC 606)	1		1		10			5			104		99
Other noninterest income (Non-ASC 606 customer related)	—		—		1			(2		)	21		22
Total customer-related fees	1		1		11			3			125		121
Other noninterest income (non-customer related)	—		—		13			11			13		11
Total non-interest income	1		1		24			14			138		132
Net interest income	13		11		(19		)	(6		)	548		528
Total income less interest expense	$	14	$	12	$	5		$	8		$	686	$	660

The following schedule sets forth the noninterest income and net revenue by operating segments for the six months ended June 30, 2018 and 2017 :



	Zions Bank						Amegy						CB&T
(In millions)	2018			2017			2018			2017			2018		2017

Service charges and fees on deposit accounts	$	29		$	30		$	22		$	22		$	14	$	14
Other service charges, commissions, and fees	35			34			18			19			12		12
Wealth management and trust income	7			7			5			4			2		1
Capital markets and foreign exchange	3			2			(3		)	(3		)	2		2
Other non-interest income from contracts with customers	—			—			—			—			—		—
Total noninterest income from contracts with customers (ASC 606)	74			73			42			42			30		29
Other noninterest income (Non-ASC 606 customer related)	(2		)	(2		)	21			17			9		7
Total customer-related fees	72			71			63			59			39		36
Other noninterest income (non-customer related)	—			—			—			—			1		1
Total non-interest income	72			71			63			59			40		37
Other real estate owned income	—			—			—			—			—		—
Net interest income	337			318			253			235			260		231
Total income less interest expense	$	409		$	389		$	316		$	294		$	300	$	268

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	NBAZ				NSB				Vectra
(In millions)	2018		2017		2018		2017		2018		2017

Service charges and fees on deposit accounts	$	6	$	6	$	7	$	7	$	4	$	4
Other service charges, commissions, and fees	6		6		6		6		3		3
Wealth management and trust income	1		1		2		1		1		1
Capital markets and foreign exchange	—		—		—		—		—		—
Other non-interest income from contracts with customers	—		—		—		—		—		—
Total noninterest income from contracts with customers (ASC 606)	13		13		15		14		8		8
Other noninterest income (Non-ASC 606 customer related)	6		6		4		5		3		4
Total customer-related fees	19		19		19		19		11		12
Other noninterest income (non-customer related)	—		—		—		—		—		—
Total non-interest income	19		19		19		19		11		12
Other real estate owned income	—		—		—		—		—		—
Net interest income	111		100		74		64		66		61
Total income less interest expense	$	130	$	119	$	93	$	83	$	77	$	73



	TCBW				Other						Consolidated Company
(In millions)	2018		2017		2018			2017			2018			2017

Service charges and fees on deposit accounts	$	1	$	1	$	1		$	1		$	84		$	85
Other service charges, commissions, and fees	1		1		8			5			89			86
Wealth management and trust income	—		—		6			4			24			19
Capital markets and foreign exchange	—		—		3			3			5			4
Other non-interest income from contracts with customers	—		—		—			1			—			1
Total noninterest income from contracts with customers (ASC 606)	2		2		18			14			202			195
Other noninterest income (Non-ASC 606 customer related)	1		—		3			4			45			41
Total customer-related fees	3		2		21			18			247			236
Other noninterest income (non-customer related)	—		—		28			27			29			28
Total non-interest income	3		2		49			45			276			264
Other real estate owned income	—		—		(1		)	—			(1		)	—
Net interest income	25		22		(36		)	(14		)	1,090			1,017
Total income less interest expense	$	28	$	24	$	12		$	31		$	1,365		$	1,281

Revenue from contracts with customers did not generate significant contract assets and liabilities. Contract receivables are included in Other Assets. Payment terms vary by services offered, and the timing between completion of performance obligations and payment is typically not significant.


11.	RETIREMENT PLANS

The following discloses the net periodic benefit cost (credit) and its components for the Company’s pension and other retirement plans:



(In millions)	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017

Interest cost	$	1		$	2		$	3		$	4
Expected return on plan assets	(3		)	(3		)	(6		)	(6		)
Partial settlement loss	—			1			1			1
Amortization of net actuarial loss	1			1			1			2
Net periodic benefit cost (benefit)	$	(1	)	$	1		$	(1	)	$	1

As disclosed in our 2017 Annual Report on Form 10-K, the Company has frozen its participation and benefit accruals for the pension plan and its contributions for individual benefit payments in the postretirement benefit plan.

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12.	INCOME TAXES

The effective income tax rate of 22.1% for the second quarter of 2018 was lower than the 2017 second quarter rate of 32.3% . The effective tax rates for the first six months of 2018 and 2017 were 22.5% and 28.7% , respectively. The tax rates for 2018 and 2017 were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance. The income tax rate for 2018 was positively impacted by the decrease in the corporate federal income tax rate to 21% from 35% due to the Tax Cuts and Jobs Act, which was effective January 1, 2018. This rate benefit was partially reduced by the non-deductibility of Federal Deposit Insurance Corporation (“FDIC”) premiums and certain fringe benefits as enacted by the new tax law. The tax rate for 2017 was also impacted by a one-time $14 million benefit to tax expense related to state tax adjustments and a one-time $4 million benefit due to changes in the carrying value of various state deferred tax items.

We had a net deferred tax asset (“DTA”) balance of $149 million at June 30, 2018 , compared with $93 million at December 31, 2017 . The increase in the net DTA resulted primarily from the increase of accrued compensation and unrealized losses in OCI related to securities, and the decrease in deferred tax liabilities related to premises and equipment and the deferred gain on a prior period debt exchange. Net charge-offs exceeding the provision for loan losses offset some of the overall increase in DTA.


13.	NET EARNINGS PER COMMON SHARE

Basic and diluted net earnings per common share based on the weighted average outstanding shares are summarized as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except shares and per share amounts)	2018		2017		2018		2017

Basic:
Net income	$	197	$	168	$	435	$	308
Less common and preferred dividends	57		30		104		57
Undistributed earnings	140		138		331		251
Less undistributed earnings applicable to nonvested shares	1		1		3		3
Undistributed earnings applicable to common shares	139		137		328		248
Distributed earnings applicable to common shares	47		16		86		32
Total earnings applicable to common shares	$	186	$	153	$	414	$	280
Weighted average common shares outstanding (in thousands)	195,583		201,822		196,149		202,083
Net earnings per common share	$	0.95	$	0.76	$	2.11	$	1.39
Diluted:
Total earnings applicable to common shares	$	186	$	153	$	414	$	280
Weighted average common shares outstanding (in thousands)	195,583		201,822		196,149		202,083
Dilutive effect of common stock warrants (in thousands)	12,640		5,351		12,627		6,159
Dilutive effect of stock options (in thousands)	1,024		1,010		1,083		1,111
Weighted average diluted common shares outstanding (in thousands)	209,247		208,183		209,859		209,353
Net earnings per common share	$	0.89	$	0.73	$	1.97	$	1.34

The following schedule presents the weighted average shares of stock awards that were anti-dilutive and not included in the calculation of diluted earnings per share.



	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2018	2017	2018	2017

Restricted stock and restricted stock units	1,709	2,094	1,733	2,108

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14.	OPERATING SEGMENT INFORMATION

We manage our operations and prepare management reports and other information with a primary focus on geographical area. Our banking operations are managed under their own individual brand names, including Zions Bank, Amegy Bank, California Bank & Trust, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington. Performance assessment and resource allocation are based upon this geographical structure. We use an internal funds transfer pricing (“FTP”) allocation system to report results of operations for business segments. This process continues to be refined. Prior period amounts have been reclassified to reflect these changes. Total average loans and deposits presented for the banking segments do not include intercompany amounts between banking segments, but may include deposits with the Other segment.

As of June 30, 2018 , our banking business is conducted through 7 locally managed and branded segments in distinct geographical areas. Zions Bank operates 97 branches in Utah, 23 branches in Idaho, and one branch in Wyoming. Amegy operates 73 branches in Texas. CB&T operates 91 branches in California. NBAZ operates 58 branches in Arizona. NSB operates 50 branches in Nevada. Vectra operates 36 branches in Colorado and one branch in New Mexico. TCBW operates one branch in Washington and one branch in Oregon.

The operating segment identified as “Other” includes the Parent, certain nonbank financial service subsidiaries, centralized back-office functions, and eliminations of transactions between segments. The major components of net interest income at the Bank’s back-office include the revenue associated with the investments securities portfolio and the offset of the FTP costs and benefits provided to the business segments.

The following schedule does not present total assets or income tax expense for each operating segment, but instead presents average loans, average deposits and income before income taxes because these are the metrics that management uses when evaluating performance and making decisions pertaining to the operating segments. The Parent’s net interest income includes interest expense on borrowed funds. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the Other segment.

The accounting policies of the individual operating segments are the same as those of the Company. Transactions between operating segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations.

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The following schedule presents selected operating segment information for the three months ended June 30, 2018 and 2017 :



(In millions)	Zions Bank					Amegy					CB&T						NBAZ					NSB
	2018		2017			2018			2017		2018			2017			2018		2017			2018		2017
SELECTED INCOME STATEMENT DATA
Net interest income	$	170	$	165		$	126		$	122	$	129		$	122		$	57	$	50		$	38	$	33
Provision for loan losses	4		(2		)	(11		)	7		2			(1		)	7		(1		)	—		—
Net interest income after provision for loan losses	166		167			137			115		127			123			50		51			38		33
Noninterest income	38		37			31			30		19			19			10		10			10		10
Noninterest expense	118		109			91			89		77			76			38		36			36		35
Income (loss) before income taxes	$	86	$	95		$	77		$	56	$	69		$	66		$	22	$	25		$	12	$	8
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	12,633	$	12,483		$	11,387		$	10,856	$	9,908		$	9,476		$	4,640	$	4,246		$	2,349	$	2,372
Total average deposits	15,983		15,982			11,060			11,218		11,181			10,917			4,942		4,762			4,314		4,233
(In millions)	Vectra					TCBW					Other						Consolidated Company
	2018		2017			2018			2017		2018			2017			2018		2017
SELECTED INCOME STATEMENT DATA
Net interest income	$	34	$	31		$	13		$	11	$	(19	)	$	(6	)	$	548	$	528
Provision for loan losses	2		3			1			—		—			1			5		7
Net interest income after provision for loan losses	32		28			12			11		(19		)	(7		)	543		521
Noninterest income	6		7			1			1		23			18			138		132
Noninterest expense	26		25			5			5		37			30			428		405
Income (loss) before income taxes	$	12	$	10		$	8		$	7	$	(33	)	$	(19	)	$	253	$	248
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	2,881	$	2,603		$	1,117		$	911	$	363		$	296		$	45,278	$	43,243
Total average deposits	2,784		2,728			1,048			1,094		1,584			1,400			52,896		52,334

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ZIONS BANCORPORATION AND SUBSIDIARIES

The following schedule presents selected operating segment information for the six months ended June 30, 2018 and 2017 :



(In millions)	Zions Bank				Amegy						CB&T						NBAZ					NSB
	2018		2017		2018			2017			2018			2017			2018			2017		2018		2017
SELECTED INCOME STATEMENT DATA
Net interest income	$	337	$	318	$	253		$	235		$	260		$	231		$	111		$	100	$	74	$	64
Provision for loan losses	2		33		(56		)	8			4			(6		)	9			1		—		(5		)
Net interest income after provision for loan losses	335		285		309			227			256			237			102			99		74		69
Noninterest income	73		72		64			59			40			36			19			20		20		20
Noninterest expense	232		221		170			173			154			151			76			73		73		70
Income (loss) before income taxes	$	176	$	136	$	203		$	113		$	142		$	122		$	45		$	46	$	21	$	19
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	12,543	$	12,486	$	11,379		$	10,747		$	9,919		$	9,391		$	4,591		$	4,254	$	2,349	$	2,355
Total average deposits	15,848		16,117		10,938			11,268			11,150			10,919			4,863			4,712		4,269		4,222
(In millions)	Vectra				TCBW						Other						Consolidated Company
	2018		2017		2018			2017			2018			2017			2018			2017
SELECTED INCOME STATEMENT DATA
Net interest income	$	66	$	61	$	25		$	22		$	(36	)	$	(14	)	$	1,090		$	1,017
Provision for loan losses	5		—		2			(1		)	(1		)	—			(35		)	30
Net interest income after provision for loan losses	61		61		23			23			(35		)	(14		)	1,125			987
Noninterest income	12		12		3			2			45			43			276			264
Noninterest expense	53		50		11			10			71			71			840			819
Income (loss) before income taxes	$	20	$	23	$	15		$	15		$	(61	)	$	(42	)	$	561		$	432
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	2,837	$	2,569	$	1,101		$	894		$	370		$	210		$	45,089		$	42,906
Total average deposits	2,748		2,759		1,060			1,097			1,571			1,180			52,447			52,274


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate and market risks are among the most significant risks regularly undertaken by us, and they are closely monitored as previously discussed. A discussion regarding our management of interest rate and market risk is included in the section entitled “Interest Rate and Market Risk Management” in this Form 10-Q.


ITEM 4.	CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2018 . Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2018 . There were no changes in the Company’s internal control over financial reporting during the second quarter of 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The information contained in Note 9 of the Notes to Consolidated Financial Statements is incorporated by reference herein.

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ZIONS BANCORPORATION AND SUBSIDIARIES


ITEM 1A.	RISK FACTORS

We believe there have been no material changes in the risk factors included in Zions Bancorporation’s 2017 Annual Report on Form 10-K.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following schedule summarizes the Company’s share repurchases for the second quarter of 2018:

SHARE REPURCHASES



Period	Total number of shares repurchased ¹		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the plan

April		224,844	$	55.47		216,093		$	108,000,798
May		2,029,125	55.92			1,933,714		811
June		10,976	56.49			—		811
Second quarter		2,264,945	55.88			2,149,807

Represents common shares acquired from employees in connection with our stock compensation plan in addition to shares acquired under previously reported share repurchase plans. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the vesting of restricted stock and restricted stock units, and the exercise of stock options, under provisions of an employee share-based compensation plan.

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ZIONS BANCORPORATION AND SUBSIDIARIES


ITEM 6.	EXHIBITS

a) Exhibits



Exhibit Number	Description

3.1	Restated Articles of Incorporation of Zions Bancorporation dated July 8, 2014, incorporated by reference to Exhibit 3.1 of Form 8-K/A filed on July 18, 2014.	*

3.2	Restated Bylaws of Zions Bancorporation dated February 27, 2015, incorporated by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2015.	*

10.1	Zions Bancorporation 2018-2020 Value Sharing Plan (filed herewith).

10.2	Zions Bancorporation Restated Pension Plan effective January 1, 2009, including amendments adopted through December 31, 2013 (filed herewith).

10.3	Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, Restated and Amended effective January 31, 2007 (filed herewith).

31.1	Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

31.2	Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

32	Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith).

101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, (ii) the Consolidated Statements of Income for the three months ended June 30, 2018 and June 30, 2017 and the six months ended June 30, 2018 and June 30, 2017, (iii) the Consolidated Statements of Comprehensive Income for the three months ended June 30, 2018 and June 30, 2017 and the six months ended June 30, 2018 and June 30, 2017, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2018 and June 30, 2017, (v) the Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and June 30, 2017 and the six months ended June 30, 2018 and June 30, 2017 and (vi) the Notes to Consolidated Financial Statements (filed herewith).

* Incorporated by reference

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ZIONS BANCORPORATION AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ZIONS BANCORPORATION

/s/ Harris H. Simmons

Harris H. Simmons, Chairman and

Chief Executive Officer

/s/ Paul E. Burdiss

Paul E. Burdiss, Executive Vice President and Chief Financial Officer

Date: August 7, 2018

EXHIBIT 10.1

Zions Bancorporation

2018 - 2020 Value Sharing Plan

Objective: The purpose of the 2018 – 2020 Zions Bancorporation Value Sharing Plan (the “Plan”) is to provide a three-year cash incentive plan for selected members of the senior management team and other key employees of Zions Bancorporation (the “Company”). It is designed to create long-term shareholder value by focusing the Participant’s attention on achieving superior results relative to financial objectives, credit quality and other important initiatives over a three-year period.

Eligibility: Selected key members of the senior management group and other key managers of the Company (“Participants”) as determined by the Zions Bancorporation Board of Directors (the “Board”) or its Compensation Committee (the “Committee”), or by the Company’s CEO, under authority delegated by the Committee.

Effective Date: January 1, 2018 through December 31, 2020 (the “Award Period”) with performance measured over the time period from January 1, 2018 to December 31, 2020 (the “Performance Period”)

Payment of Awards: Subject to limitations enumerated in the “Other Administrative Provisions” section of the Plan, the incentive awards, if any, earned under this Plan will be paid within ninety days after the end of the Award Period.

Plan Administrator: The Plan is to be governed and interpreted by the Committee.

How the Plan Works:


1)	Establishment of Award Fund

An Award Fund will be established, the size of which will be determined by the Committee.

The Committee will evaluate the Company’s overall performance by measuring performance relative to its peer banking institutions, established Board-approved budgets (the “Plan”) and a qualitative assessment.

The four performance categories are:


1.)	Zions Bancorporation’s Adjusted Pre-tax Pre-Provision Net Revenue (“PPNR”) compared to Plan;


2.)	Zions Bancorporation’s Return on Tangible Assets (relative to Zions Bancorporation peer companies); and,


3.)	Zions Bancorporation’s Earnings Per Share growth (relative to Zions Bancorporation peer companies);


4.)	Compensation Committee Discretion based on qualitative assessment of performance.

The Committee will determine a per unit award value each year of the Performance Period based on these performance categories (see above) and their weights, as more fully defined in Section 5 and Appendix I. The final award will be computed by taking the simple average of the annual award values for 2018, 2019 and 2020.


2)	Participation Units

Page 1

2018 – 2020 Value Sharing Plan

Page 2

Each Participant designated by the Committee shall be awarded a specific number of Participation Units (“Units”), representing a pro-rata claim, in proportion to the total number of authorized Units, on any Award Fund established under this Plan during the Award Period.


3)	Value Determination:

Shortly following the conclusion of the 36-month performance period, the final per-unit value will be multiplied by the total number of units awarded to each Participant to determine their individual final award value.


4)	Final Cash Settlement of Value:

The final award value amount, if any, will be settled in cash during the first quarter of 2021.


5)	Definitions of Factors:

A) Adjusted Pre-tax Pre-provision Net Revenue (PPNR) (40% Weight): Zions Bancorporation efficiency ratio revenues less efficiency ratio expenses, as communicated in public filings, less net charge-offs; measured each year of the Performance Period against the Profit Plan for the applicable year.

Plus or (minus),

Equitable adjustments, as follows:


•	any adjustment deemed necessary by the Committee as a result of unusual and extraordinary changes in internal cost or income allocations during the Performance Period resulting from reclassifications or changes in allocation methodologies which produce material changes in costs or income which are not offset by a corresponding change in income or costs within the Company;


•	any other adjustments, which, in the sole discretion of the Committee, are required to equitably reflect operating performance during the Performance Period.

B) Return on Tangible Assets (20% Weight): Zions Bancorporation Return on Tangible Assets during the performance period measured relative to the same metric for Zions Bancorporation peer companies during the same time period. May include adjustments deemed appropriate by the Compensation Committee to accommodate anomalies in liquidity management or other unique events.

C) Earnings Per Share Growth (20% Weight): Zions Bancorporation Earnings Per Share Growth defined as year over year growth in reported Earnings per Share during the performance period measured relative to the same metric for Zions Bancorporation peer companies during the same time period

D) Compensation Committee discretion (20% Weight): The Committee may use this award component to better align final payout values with performance particularly, if not

2018 – 2020 Value Sharing Plan

Page 3

exclusively, in circumstances where highly unusual events have an excessive positive or negative impact on payouts.


6)	Other Administrative Provisions


1.	This is a discretionary Plan governed and interpreted by the Committee, whose decisions shall be final . The intent of the Plan is to fairly reward Participants for increasing shareholder value. If any adjustments need to be made to allow this Plan to accomplish its purpose, the Committee in its sole discretion can make those adjustments.


2.	The Committee may, at its sole discretion, alter the terms of the Plan at any time during an Award Period.


3.	Participants will not vest in any benefits available under the Plan until any payments hereunder are made after the conclusion of the Award Period.


4.	A Participant must be employed by the Company or one of its affiliates at the time payment is made in order to receive a payout of Participant’s Unit award and if Participant ceases to be so employed at any time Participant’s Unit award shall automatically be forfeited and cancelled without consideration and without further action by Participant; provided, however, that

(i)

In the event of Participant’s termination by the Company or an affiliate or normal or early retirement, management or, if Participant is a member of the Executive Management Committee (or “EMC”), the Committee shall have the discretion to make a “Pro Rata Adjustment” to Participant’s Unit award, provided further that notwithstanding the foregoing any such adjusted Unit award shall automatically be forfeited and cancelled without consideration and without further action by Participant immediately upon (x) Participant’s commencement of, or agreement to commence, employment with or provision of services (whether as a director, consultant or otherwise) to another company that is in the financial services industry unless such employment or provision of services is specifically approved by management or the Committee, as the case may be, (y) Participant making any derogatory or damaging statements (verbally, in writing or otherwise) about the Company or any of its affiliates, the management or the board of directors of the Company or any affiliate, the products, services or business condition of the Company or any affiliate in any public way to anyone who could make those statements public or to customers of, vendors to or counterparties of the Company or any affiliate, or (z) Participant violating any duty of confidentiality owed to the Company or its affiliates under the policies or procedures of the Company and its affiliates, including the Company’s employee handbook, code of conduct and similar materials, or under federal or state law, or Participant misappropriating or misusing any proprietary information or assets of the Company and its affiliates, including intellectual property rights; and


(ii)	In the event of Participant’s “Termination of Employment” by reason of Participant’s death or “Disability”, a Pro Rata Adjustment shall be made to Participant’s unit award.

2018 – 2020 Value Sharing Plan

Page 4

In the event a Participant’s Unit award is subjected to a “Pro Rata Adjustment”, Participant (or his/her estate) shall be entitled to receive a pro-rata incentive payout of his or her Unit award at the conclusion of the Award Period. This award will be based upon the Participant’s calculated award for the full Award Period as approved by the Committee and will be prorated for the number of full calendar quarters within the Award Period the Participant was engaged as an officer of the Company or its affiliates prior to Termination of Employment in the circumstances described above. For purposes of this Plan, the terms “Termination of Employment,” “Retirement” and “Disability” shall have the meanings assigned to them in the form of Standard Restricted Stock Unit Award Agreement used by the Company in making annual equity awards to employees.

The Company shall retain the right to withhold payment of incentives otherwise earned under this Plan to any individual Participant or to all Participants as a group in the event of a significant deterioration in the Company’s or the Bank’s financial condition, if so required by regulatory authorities, or for any other reason considered valid by the Board in its sole discretion including but not limited to those set out in the Company’s Incentive Compensation Clawback Policy as in effect at any time during or subsequent to the Award Period.


6.	The terms of this plan are subject to and limited by applicable law, including, without limitation, the Sarbanes Oxley Act of 2002, the Dodd-Frank Act, and regulations or guidance issued by the Board of Governors of the Federal Reserve System or other regulatory agencies.


7.	Designation as a Participant in the Plan does not create a contract of employment for any specified time, nor shall such act to alter or amend the Company’s “at-will” policy of employment.

In the event a Participant transfers within Zions Bancorporation during the Award Period, management or, if Participant is a member of the EMC, the Committee shall have the discretion to maintain such Participant’s full Unit award under this plan, to divide and allocate such full award between Zions entities with which Participant has been employed during the Award Period or to transfer and allocate such award to a single other Zions entity with which Participant has been employed during the Award Period (and to make corresponding adjustments to Award Funds).

In the event of a change in control of the Company (as defined in the Company’s Change in Control Agreements), the Plan will be terminated and payments shall be made in accordance with the provisions of section 3 (b) of the Change in Control Agreements, provided that the reference in Section 3(b) to “average annual growth in Earnings per Share and the average Tangible Return on Equity” shall be deemed to refer to the award determination methodology set forth in this plan.


10.	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 or the Committee, and no Participant shall have any legal rights with respect to an Award until such Award is distributed.

2018 – 2020 Value Sharing Plan

Page 5

APPENDIX I

The VSP Scorecard detailed below will be used to determine per unit values for 2018, 2019 and 2020. The final award value will be the simple average of the per unit award values for 2018, 2019 and 2020.



Adjusted Return on Tangible Assets		Metric Weight
Rank v. Peers	Payouts ($/unit)	20%
Max - 100th %ile	$1.20
80th %ile	$0.96
60th %ile	$0.73
50th %ile	$0.60
40th %ile	$0.375
30th %ile	$0.15
Below Threshold	$0.00



EPS Growth		Metric Weight
Rank v. Peers	Payouts ($/unit)	20%
Max - 100th %ile	$1.20
80th %ile	$0.96
60th %ile	$0.73
50th %ile	$0.60
40th %ile	$0.375
30th %ile	$0.15
Below Threshold	$0.00



Adjusted PPNR		Metric Weight
Rank v. Peers	Payouts ($/unit)	40%
Max - 100th %ile	$1.20
80th %ile	$0.96
60th %ile	$0.73
50th %ile	$0.60
40th %ile	$0.48
30th %ile	$0.24
Below Threshold	$0.00



Adjusted Return on Tangible Assets		Metric Weight
Rating	Payouts ($/unit)	20%
Max + Adjustment	$1.20

"Par" / Expected	$0.60

Max Neg Adjusted	$0.00

Note: For ranking and results falling between the performance and reward breakpoints, payout values will be interpolated.

EXHIBIT 10.2

ZIONS BANCORPORATION PENSION PLAN

Restated Effective January 1, 2009

Including Amendments Adopted Through December 31, 2013

December 31, 2013 Edition

ARTICLE I 3

DEFINITIONS 3


1.1	"Accrued Benefit" 3


1.2	"Accrued Benefit Attributable to the Old Plan Account" 3


1.3	"Accrued Benefit Attributable to Company Contributions" 3


1.4	"Actuarial Equivalence" 3


1.5	"Affiliate" or "Subsidiary Affiliate" or "Subsidiary" 3


1.6	"Authorized Period of Absence" 4


1.7	Beneficiary 4


1.8	"Break in Service" 5


1.9	"Cash Balance Account" 5


1.10	"Code" 5


1.11	"Commerce Participant" 5


1.12	"Commerce Plan" 5


1.13	"Committee or Retirement Committee" 5


1.14	"Company 5


1.15	"Compensation" 5


1.16	"Disability Retirement Date" 6


1.17	"Early Retirement Date" 6


1.18	Earnings 6


1.20	"Eligible Spouse" 8


1.21	"Eligibility Computation Period" 9


1.22	"Employee" 9


1.23	"Employer" 9


1.24	"Employment Date" 9


1.25	"ERISA 9


1.26	"Grossmont Participant" 9


1.27	"Grossmont Plan" 9


1.28	"Hour of Service" 9


1.29	"Investment Manager" 11


1.30	"Late Retirement Date 11


1.31	"Nonvested Former Participant" 11


1.32	"Normal Retirement Age" 11


1.33	"Normal Retirement Date" 11


1.34	"Old Plan Account" 11


1.35	"Participant" 11


1.36	"Participation Date" 12

1.37 "Plan" 12


1.38	"Plan Year" 12


1.39	"Qualified Domestic Relations Order" 12


1.40	"Qualified Service" 12


1.41	"Retirement Date" 12


1.42	"Single Life Annuity" 13


1.43	"Sumitomo Participant" 13


1.44	"Sumitomo Plan" 13


1.45	"Termination of Employment" 13


1.46	"Trust Agreement" 13


1.47	"Trust Fund" 13


1.48	"Trustee" 13


1.49	"Year of Vesting Service" 13


1.50	"Zions" 15

ARTICLE II 16

PARTICIPATION 16


2.1	Participation Date 16


2.2	Reinstatement of Active Participation 17

ARTICLE lll 18

ESTABLISHMENT AND MAINTENANCE OF CASH BALANCE ACCOUNT 18


3.1	Initial Establishment of Cash Balance 18


3.2	Earnings Credits 19


3.3	Interest Credits. 21


3.4	Maintenance of Account after Termination of Employment until Benefit Commencement 22

3.5 Establishment of New Account if Re-employed After Benefit Commencement........ 22

3.6 Market Rate of Interest.................................................................................................. 23

ARTICLE IV 24

ACCRUED BENEFIT 24


4.1	Accrued Benefit 24


4.2	Cash Balance Accrued Benefit 24


4.3	Minimum Accrued Benefit 24


4.4	Grandfathered Minimum Accrued Benefit 25


4.5	Accrued Benefit Attributable to the Old Plan Account 25


4.6	Accrued Benefit Attributable to Company Contributions 25


4.7	Old Plan Account 25

ARTICLE V 27

AMOUNT OF RETIREMENT INCOME 27


5.1	Monthly Retirement Income 27


5.2	Normal Retirement Income 27


5.3	Early Retirement Income 27


5.4	Late Retirement Income. 28


5.5	Disability Retirement Income is described in Section 7.4 28


5.6	Application for Retirement Income 28


5.7	Forms of Retirement Income 30


5.8	Payment of Small Benefits 34


5.9	Eligible Rollover Distribution. 34


5.10	Re-employment After Retirement 35


5.11	Commencement of Benefits. 35


5.12	Delay of Payment Due to Administrative Error. 36


5.13	Suspension of Benefits for Active Participants at Normal Retirement Date . 37


5.14	Benefits Under a Qualified Domestic Relations Order (QDRO) 38


5.15	Death or Disability While Performing Qualified Military Service 38


5.16	Non-spouse Beneficiary Rollover 39

ARTICLE VI 40

TERMINATION AND VESTING 40


6.1	Vesting. 40


6.2	Termination Benefit 40


6.3	Re-employment After Termination of Employment. 41


6.4	Termination Benefits and Re-employment for Commerce Participants. 41


6.5	Special Termination Benefit for Sumitomo Participants 42

ARTICLE VII 43

DISABILITY BENEFITS 43


7.1	Determination of Disability 43


7.2	Eligibility for Disability Benefits 43


7.3	Disability Retirement Date 43


7.4	Disability Retirement Income 43

ARTICLE VIII 44

DEATH BENEFITS 44


8.1	Death after Commencement of Benefits 44


8.2	Death Prior to Commencement of Benefits 44


8.3	Effect of Old Plan Account 45


8.4	Return of Old Plan Account 45

ARTICLE IX 46

FINANCING THE PLAN 46


9.1	Company Contributions 46


9.2	Return of Company Contributions 46

ARTICLE X 47

TERMINATION OF THE PLAN 47


10.1	Termination of Plan 47


10.2	Procedures Upon Termination of Plan 47

ARTICLE XI 48

INTERNAL REVENUE CODE LIMITATIONS ON BENEFITS 48


11.1	Earnings Limitation under Code Section 401(a)(17) 48


11.2	Maximum Retirement Benefit under Code Section 415 48


11.3	Additional Benefit Limits for Highly Compensated Employees. 54


11.4	Top-Heavy Provisions. 56


11.5	Benefit Restrictions Due to Application of Code §436 59


11.6	Limitations Applicable to the Plan 64

ARTICLE XII 71

ADMINISTRATION OF THE PLAN 71


12.1	Administration 71


12.2	Records 71


12.3	Payment of Expenses 72


12.4	Delegation of Authority 72


12.5	Information Available 72


12.6	Claims and Appeals Procedure. 72


12.7	Fiduciary Capacity 73


12.8	Committee Liability 73


12.9	Limitations of Actions on Claims 73

ARTICLE XIII 74

GENERAL PROVISIONS 74


13.1	Amendment of Plan 74


13.2	Employment Status 74


13.3	Mergers or Consolidations 74


13.4	Provision Against Anticipation 74


13.5	Facility of Payment 74


13.6	Construction 75


13.7	Legal Actions 75

INTRODUCTION

The Zions Bancorporation Pension Plan became effective on January 1, 1968. The Plan has been amended and restated from time to time.

Prior to this restatement the most recent restatement of the Plan was effective January 1, 2001. That restatement is referred to herein as the "Prior Plan." All provisions of the Prior Plan were effective as of January 1, 2001, except that (1) provisions pertaining to the establishment and maintenance of Cash Balance Accounts were effective April 1, 1997; (2) provisions pertaining to Grossmont Participants and former participants of the Grossmont Plan were effective January 1, 1998; (3) provisions pertaining to Sumitomo Participants and former participants of the Sumitomo Plan were effective October 1, 1998; and (4) provisions pertaining to Commerce Participants and former participants of the Commerce Plan were effective January 1, 1999.

The Prior Plan restated the Plan document that was effective as of April 1, 1997. That document included the terms and conditions of a cash balance account feature, which was established as of January 1, 1997, for Active and Disabled Participants in the Plan as of March 31, 1997.

The Prior Plan restatement incorporated the terms of Amendments 1 through 4 to the April 1, 1997 restatement and other modifications approved by Zions Bancorporation through January 31, 2002. The Prior Plan restatement furthermore incorporated modifications resulting from changes in the Internal Revenue Code (the "Code") and other provisions of federal law that were enacted or became effective on various dates from 1994 through 2000 (sometimes referred to collectively as "GUST" changes in law). Moreover, effective January 1,2002, the Prior Plan restatement incorporated less restrictive legal limitations on pension benefits, as authorized by the Economic Growth and Tax Reduction Reconciliation Act of 200 1 ("EGTRRA").

Effective at the close of business December 31, 1997, the Grossmont Bank Restated Defined Benefit Pension Plan and Trust (the "Grossmont Plan"), restated effective January 1, 1996, was merged into this Plan. Nothing in this Plan shall be construed to provide a benefit to a Participant under this Plan for a period of service for which he or she has received a benefit under the Grossmont Plan. The eligibility for and the amount of benefit of a former employee who terminated or retired under the Grossmont Bank Restated Defined Benefit Pension Plan and Trust prior to January 1, 1998, and who does not participate in this Plan on or after January 1, 1998, shall be determined exclusively by the provisions of the Grossmont Plan that were in effect as of the earlier of the former employee's date of termination or retirement, except as specifically stated otherwise in the Grossmont Plan. With respect to the merger of the Plans, this Plan shall be interpreted and administered to comply with ERISA Section 204(g) and Code Sections 411(d)(6) and 414(1).

Effective at the close of business October 31, 1998, the Sumitomo Bank of California Pension Plan ("Sumitomo Plan"), restated effective January 1, 1989, was merged into this Plan. Nothing in this Plan shall be construed to provide a benefit under this Plan for a period of service for which he or she has received a benefit under the Sumitomo Plan. The eligibility for and the amount of benefit of a former employee who terminated under the Sumitomo Plan prior to October 1, 1998, and who does not actively participate in this Plan on or after October 1, 1998, shall be determined exclusively by the provisions of that plan. With respect to the merger of the Plans, this Plan shall be interpreted and administered to comply with ERISA Section 204(g) and Code Sections 411(d)(6) and 414(1).

Effective at the close of business December 31, 1998, the Commerce Bancorporation Defined Benefit Pension Plan ("Commerce Plan"), restated effective July 21, 1994, was merged into this Plan. Nothing in this Plan shall be construed to provide a benefit under this Plan for a period of service for which he or she has received a benefit under the Commerce Plan. The eligibility for and the amount of benefit of a former employee who terminated under the Commerce Plan before January 1, 1999 and who does not actively participate in this Plan on or after January 1, 1999, shall be determined exclusively by the provisions of that plan. With respect to the merger of the Plans, this Plan shall be interpreted and administered to comply with ERISA Section 204(g) and Code Sections 411(d)(6) and 414(1).

The Plan and Trust thereunder are created and maintained for the primary purpose of providing retirement benefits for eligible employees of Zions Bancorporation and its affiliates. It is intended that the Plan and Trust qualify under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended, and that they meet the requirements of the Employee Retirement Income Security Act of 1974, as amended.

Except for other dates provided herein for certain Plan provisions, this Plan is effective as of January 1, 2009. This Plan includes amendments adopted to reflect certain provisions of EGTRRA, which were intended as good faith compliance with the requirements of EGTRRA. They are to be construed in accordance with EGTRRA and guidance issued thereunder. Unless otherwise pro vided, amendments included in this Plan in compliance with EGTRRA are effective as of the first day of the first plan year beginning after December 31, 2001. Provisions included in this Plan as amendments conforming to EGTRRA supersede all other provisions of the Plan to the extent that those provisions are inconsistent with such amendments. This Plan also incorporates the amend ment adopted effective July 1, 2013, to freeze future earnings credits for certain cash balance accounts. Moreover, this Plan has been amended to comply with all legislation and applicable guidance enacted and issued subsequent to EGTRRA, including the Pension Protection Act of 2006. This Plan shall be interpreted at all times so as to comply with the requirements of the Code and of ERISA as so amended.

Except as specifically provided in the Plan, the rights and benefits of any Participant who terminates, dies or retires prior to the effective date of this restatement or any other amendment to the Plan will be determined pursuant to the provisions of the Plan in effect on the earlier of his or her date of retirement, death or termination.

ARTICLE I DEFINITIONS


1.1	"Accrued Benefit" means the monthly amount of benefit credited to a Participant in accordance with Article 4 on the basis of an annuity payable for life beginning on his or her Normal Retirement Date, or the current date, if later.


1.2	"Accrued Benefit Attributable to the Old Plan Account" is defined in Section 4.5.


1.3	"Accrued Benefit Attributable to Company Contributions" is defined in Section 4.6.


1.4	"Actuarial Equivalence" or "Actuarial Equivalent" means equality in value of the aggregate amounts expected to be received under different forms of payment computed on the following bases:

(a)

For purposes of determining (i) the monthly annuity benefits under Sections 4.2, 4.5, 5.3(b) and 8.2, and (ii) the value of lump sum payments under Sections 5.7(d), 5.8 and 5.12(b), Actuarial Equivalence will be calculated in accordance with Appendix II. Unless specifically provided otherwise in this Plan, the value of a benefit payable in any other non-annuity form shall be determined by applying the Actuarial Equivalence factors specified for lump sums in (ii) above.


(b)	For purposes of determining the maximum retirement benefit in Section 11.2, Actuarial Equivalence will be calculated using the following bases:


(1)	The mortality assumption is the "Applicable Mortality Table" as defined in sub section (a) of Appendix II.


(2)	Except as otherwise specified in Section 11.2, effective on or after January 1, 1995, for a benefit in the form of an annuity, the interest assumption (to adjust for age and for the form of the benefit) shall be 5%.

Notwithstanding any provision of Section 11.2 to the contrary, for a benefit payment after May 31, 1995 that is in a form that is subject to Code Section 417(e) (for example, a lump sum), the interest assumption to adjust for age will be the "Applicable Interest Rate" specified in subsection (b) of Appendix II, and the interest assumption to adjust for the form of the benefit shall be 5%.


(c)	For the purposes of determining the maximum retirement benefit in Section 11.2 for a Grossmont Participant who retires between January 1, 1998 and December 31, 1998, Actuarial Equivalence will never be less than the amount the Grossmont Participant would have received under the Grossmont Plan.


(d)	Except as otherwise specified in the Plan, for all other purposes actuarial equivalency will be calculated using the following basis:


(1)	The mortality assumption will be the 1984 Unisex Pensioners Mortality Table.


(2)	The interest assumption will be 6%.

1.5

"Affiliate" or "Subsidiary Affiliate" or "Subsidiary" means Zions Bancorporation and each member of a controlled group of corporations (as defined in Code Section 1563(a), deter mined without regard to Code Sections 1563(a)(4) and (e)(3)(C)), a group of trades or businesses (whether incorporated or not) that are under common control within the meaning of Code Section 414(c), or an affiliated service group (as defined in Code Sections 414(m) or 414(0)), of which Zions Bancorporation is a part. With respect to the Maximum Retirement Benefit defined in Section 11.2, in determining whether a corporation is a member of a controlled group of corporations the phrase "more than 50%" will be substituted for the phrase "at least 80%" each place it appears in Code Section 1563(a)(l ).


1.6	"Authorized Period of Absence" means an absence authorized by the Company for one or more of the following reasons:


(a)	Approved leave of absence;


(b)	Pregnancy;


(c)	Jury duty;


(d)	Qualified Military Service; or


(e)	Illness or injury, including disability, and including a period of absence legally authorized to be taken, under the facts and circumstances applicable to the Participant, in accordance with the terms of the Family and Medical Leave Act.

Any discretion of the Company under the provisions of this definition will be exercised without discrimination and in accordance with definitely established rules uniformly applicable to Employees or Participants whose approved periods of absence were occasioned by similar circumstances.


1.7	Beneficiary

(a)

Beneficiary of Retirement Income of a Married Participant For purposes of a post retirement survivor benefit for a Participant who is married to an Eligible Spouse on the date of commencing his or her Retirement income, the Beneficiary shall be the Eligible Spouse, except to the extent that either: (a) the benefit is payable pursuant to the mandatory lump sum provisions of Section 5.8 (in which case there shall be no Beneficiary), (b) the Participant, with the written and notarized consent of the Eligible Spouse, elects to receive a benefit in the form of a Single Life Annuity (with or without a Level Income Option) or a lump sum (in which case there shall be no Beneficiary), or (c) is eligible for and elects a form of benefit under subsection (e)(I), (e)(2) or (f)(l) of Section 5.7 with a designated Beneficiary other than the Eligible Spouse (in which case the Beneficiary shall be the person (or persons, under Section 5.7(e)(l) or (e)(2) designated by the Participant with the consent of the Eligible Spouse at the time of commencing the Retirement Income).

(b)

Beneficiary of Retirement Income of an Unmarried Participant For purposes of a Retirement Income benefit for a Participant who has no Eligible Spouse on the date of commencing his or her Retirement Income, the Beneficiary means either (a) the living person designated by the Participant at the time of commencing his or her Retirement Income, if the Participant is eligible for and elects a form of benefit pursuant to Section 5.7(e)(l), (e)(2) or (f)(l) (in which case the Beneficiary shall be the person (or persons, under Section 5.7 (e)(l) or (e)(2) designated by the Participant, or (b) there shall be no Beneficiary if either the benefit is payable pursuant to the mandatory lump-sum provisions of Section 5.8 or the Participant elects to receive a benefit in the form of a Single Life Annuity or lump sum.

(c)

Beneficiary of a Pre-Retirement Survivor's Death Benefit For purposes of any pre retirement death benefit that may be payable under Section 8.2 of the Plan, Beneficiary means the Eligible Spouse (if any, as of the date of the Participant's death prior to receiving Retirement Income under this Plan), or, if no Eligible Spouse survives the Participant, then the benefit under Section 8.2 shall be paid in a lump sum to the Participant's estate.

(d)

Beneficiary of Unpaid Balance of Old Plan Account In the case of any death benefit that may be applicable under the terms of Section 8.4, Beneficiary means the person or persons designated by a Participant for such purpose, or, if no Beneficiary is designated (or if any and all designated Beneficiaries fail to survive the Participant and the Eligible Spouse, if any), any death benefit payable under Section 8.4 shall be payable to the estate of the last to die of the Participant or Eligible Spouse (if any).

1.8

"Break in Service" means an interruption in service due to a person's failure to complete at least 501 Hours of Service during a calendar year or during an Eligibility Computation Period. A Break in Service will not occur during an Authorized Period of Absence unless the Employee fails to return to work for at least 30 days with the Company or any member of the Employer after the expiration of the Authorized Period of Absence (or, in the case of an absence due to Qualified Military Service, unless the Employee fails to return to work within the applicable period of time allowed pursuant to Code Section 414(u)).


1.9	"Cash Balance Account" means the separate bookkeeping account established and maintained for each Participant as provided in Article 3.


1.10	"Code" means the Internal Revenue Code of 1986, as amended.

1.11

"Commerce Participant" means a Participant in the Commerce Plan who became a Participant in this Plan on January 1, 1999 as the result of the December 31, 1998 merger of the Commerce Plan into this Plan. Based upon his or her status in the Commerce Plan on December 31, 1998, and based upon whether or not he or she became an Eligible Employee on January 1, 1999, a Commerce Participant described in this Section shall be deemed an Active Participant, an Inactive Participant, a Terminated Vested Participant, a Disabled Participant or a Retired Participant in this Plan, as defined in Section 1.36, on January 1, 1999.


1.12	"Commerce Plan" means the Commerce Bancorporation Defined Benefit Plan as in effect immediately prior to January 1, 1999.


1.13	"Committee or Retirement Committee" means the Committee that will administer the plan as described in Article 12.


1.14	"Company" means Zions Bancorporation and any Affiliate or Subsidiary that adopts this Plan with the consent of the Board of Directors of Zions Bancorporation. The Affiliates and Subsidiaries listed on Appendix V, as it may be revised from time to time, have adopted this Plan and are, as of the date or dates stated on Appendix V, a participating Company in the Plan.

1.15

"Compensation" for any tax year has the meaning set forth in Treasury Regulations Section 1.415-2(d) (Treasury Regulations Section 1.415(c)-2, for Plan Years commencing after July 1, 2007). Effective January 1, 1998, Compensation shall also include any elective deferrals as defined in Code Section 402(g)(3) made by the Participant during a Plan Year and any pre-tax Employee contributions made by the Employer on behalf of the Employee for the Plan Year, pursuant to Code Section 125 and/or Code Section 132(f)(4).

For Plan Years prior to January 1, 1997, in determining the Compensation of a Participant for purposes of determining whether he or she is a Highly Compensated Employee (as defined in Section 11.3(a)(3)), the family aggregation rules of former Code Section 414(q)(6) shall apply, except that in applying such rules, the term "family" shall include only the Eligible Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year.


1.16	"Disability Retirement Date" is defined in Section 7.3.


1.17	"Early Retirement Date" shall have the meaning stated in subsections (a) through (d) below, whichever is applicable to a particular Participant. "Earliest Retirement Date" means the earliest date that would satisfy all of the conditions of the definition of Early Retirement Date that is applicable to the Participant.


(a)	Except as otherwise provided in subsections (b), (c) and (d), a Participant may retire prior to his or her Normal Retirement Date on an Early Retirement Date which, subject to his or her election, may be the first day of any month coincident with or following the latest of:


(1)	the Participant's 55th birthday,


(2)	the date on which the Participant completes 10 Years of Vesting Service, or


(3)	the date of the Participant's Termination of Employment.


(b)	A Grossmont Participant may retire prior to his or her Normal Retirement Date on an Early Retirement Date that, subject to his or her election, may be the first day of any month coincident with or following the date of his or her Termination of Employment on or after reaching age 55 and completing three Years of Vesting Service.


(c)	A Sumitomo Participant may retire prior to his or her Normal Retirement Date on an Early Retirement Date which, subject to his or her election, may be the first day of any month coincident with or following the date of his or her Termination of Employment on or after reaching age 55 and completing five Years of Vesting Service.


(d)	A Commerce Participant may retire prior to his or her Normal Retirement Date and receive his or her entire Accrued Benefit on an Early Retirement Date which, subject to his or her election, may be the first day of any month coincident with or following the date of his or her Termination of Employment on or after reaching age 55 and completing three Years of Vesting Service.


1.18	Earnings


(a)	Earnings for a Participant for a Plan Year includes the sum of:

(1)

the Participant's wages, salaries, fees for professional service and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Company to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on insurance premiums, tips, and bonuses);


(2)	the Participant's "elective deferrals" (as defined in Code Section 402(g)) to a plan with a Code Section 401 (k) cash or deferral arrangement maintained by an Affiliate or Subsidiary;


(3)	the Participant's pre-tax contributions to any health or welfare benefit program under Code Section 125 or any qualified public transit and parking program under Code Section 132(f)(4);

(4)

effective on and after January 1, 2001, compensation that the Participant elects to defer to a nonqualified deferred compensation plan maintained by an Affiliate or Subsidiary, but under no circumstances shall the amount of Earnings that is recognized under this paragraph (a)(4) cause the Participant's overall Earnings for the Plan Year to increase by more than 15% of the amount of Earnings determined without reference to this paragraph (a)(4), nor shall it cause overall Earnings to exceed the applicable limitation under subsection (c) below; and

(5)

for each month in which a Participant is entitled to credit for Qualified Military Service, the Participant will be considered, for purposes of determining the Accrued Benefit under this Plan, to have Earnings equal to the Participant's average monthly Earnings during the 12 months (or, if less, the number of months of prior employment with the Employer) immediately preceding his or her period of Qualified Military Service.


(b)	The term "Earnings" does not include the types of remuneration described in the following paragraphs.


(1)	except to the extent included in Earnings under clause (a)(2) or (a)(4) above,

{A) Company contributions to a plan of deferred compensation to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includible in the gross income of the Participant for the taxable year in which contributed; and

(B) any distributions from a plan of deferred compensation regardless of whether such amounts are includible in the gross income of the Participant when distributed.


(2)	amounts realized from the exercise of a nonqualified stock option, or income realized when restricted stock (or property) held by the Participant either be comes freely transferable or is no longer subject to a substantial risk of forfeiture;


(3)	amounts realized by the Participant from the sale, exchange or other disposition of stock acquired under a qualified stock option;


(4)	except to the extent included in Earnings pursuant to Code Section 125 or 132(f){4) in accordance with clause (a)(3) above,


(A)	other amounts that receive special tax benefits, such as premiums for group term life insurance (without regard to whether the premiums are includible in the gross income of the Participant); and


(B)	reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, welfare benefits, and any lump sum amounts paid at Termination of Employment (on account of such Termination), such as severance pay, vacation and sick leave cash-outs; and


(5)	fees for service as a member of a board of directors, if any, paid to "Highly Compensated Employees" (as defined in Section 1 1.3 (a)(3)).

(c)

Limitations on Earnings under Code Section 401 (a)(17). For each Plan Year, the amount of annual Earnings that shall be taken into account for purposes of determining benefit accruals under the Plan shall not exceed the limit that is in effect for that Plan Year under Code Section 401 (a)(17), after taking into account any amendment of that Code Section that is enacted into law and any adjustment to that limit that is authorized by the Secretary of the Treasury for the calendar year that coincides with that Plan Year (for example, the limit shall be $170,000 for Plan Year 2001 and $200,000 for Plan Year 2002).

If a period over which Earnings is determined under the Plan (determination period) is less than 12 months, the otherwise applicable dollar limit under Code Section 401(a)(17) for that calendar year will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12, determined in a manner consistent with Treas. Reg. Section 1.401 (a)(17)-1 (b)(3).


1.19	"Eligible Employee." Subject to the exclusions stated in the following paragraph, Eligible Employee means an Employee of the Company.

"Eligible Employee" does not include:


(a)	an Employee of an Affiliate or Subsidiary that is not a Company that has adopted the Plan and is participating in the Plan;


(b)	an Employee who is covered under a collective bargaining agreement where retirement benefits were the subject of good faith bargaining that does not provide for retirement benefits under this Plan;


(c)	a person who performs services for a Company but is compensated for such services by means of the payroll of a third party employee leasing organization;


(d)	any "leased employee" within the meaning of Code Section 414(n)(2), or


(e)	a person who is not treated by the Participating Company as an employee for payroll tax purposes, whether or not such person is subsequently determined by a government agency, by the conclusion or settlement of threatened or pending litigation, or otherwise to be (or to have been) a common law employee of the Company.

"Leased employee" shall mean, effective January 1, 1997, any person who, pursuant to an agreement between the Company and any other person or organization (leasing organization), has performed services for the Company (or for any Affiliate or Subsidiary of the Company) and such services are performed under the primary direction or control of the Company, Affiliate or Subsidiary.

In the event of any determination by any court, governmental agency or other party that a person excluded under clause "(c)," "(d)" or "(e)" should be treated as a common-law employee of the Company for payroll tax purposes, the individual shall not be treated as an Eligible Employee unless and until the date on which the individual is first recharacterized as an Employee for payroll tax purposes on the payroll system of the Company, and not as of any retroactive effective date of such recharacterization.

1.20

"Eligible Spouse" means the legal spouse of the Participant at the time the Participant commences his or her Retirement Income under the Plan (or the Participant's date of death, if earlier), or, if applicable, a former spouse who is designated as the alternate payee with the right to be treated as the spouse Beneficiary of a Participant according to the terms of a Qualified Domestic Relations Order.

1.21

"Eligibility Computation Period" for purposes of determining under Section 2.l(b) whether an Employee has accrued 1,000 Hours of Service during such a period in order to become eligible to participate in the Plan, means the period of 12 consecutive months commencing on the Employment Date and ending on the first anniversary of such date, or, if 1,000 Hours of Service are not accrued during that 12-month period, the Eligibility Computation Period shall be the 12-month period commencing on the first day of each Plan Year that occurs after the Employment Date.

1.22

"Employee" means any person who is employed as a common law employee by any Affiliate or Subsidiary, and any "leased employee" within the meaning of Code Section 414(n)(2); provided, however, if leased employees constitute 20% or less of the Employer's non-highly compensated work force, the term "Employee" shall not include a leased employee who is covered by a plan maintained by the leasing organization which meets the requirements of Code Section 414(n)(5).


1.23	"Employer" means, collectively, any and all companies that satisfy the definition of an "Affiliate or Subsidiary" (as defined in Section 1.5). All Employees of the Employer will be treated as employed by a single employing company for purposes of applying the requirements for qualification of the Plan under Code Section 401(a).


1.24	"Employment Date" means the date on which an Employee first performs an Hour of Service for any member of the Employer.


1.25	"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


1.26	"Grossmont Participant" means a participant in the Grossmont Plan who became a Participant in this Plan effective January 1, 1998 as a result of the merger of the Grossmont Plan into this Plan.

Based upon his or her status in the Grossmont Plan on December 31, 1997, and based on whether or not the Grossmont Participant becomes an Eligible Employee on January 1, 1998, a Grossmont Participant shall, as of January 1, 1998, be either an Active Participant, an Inactive Participant, a Terminated Vested Participant, a Disabled Participant or a Retired Participant in this Plan (as those terms are defined in Section 1.36).


1.27	"Grossmont Plan" means the Grossmont Bank Restated Defined Benefit Pension Plan and Trust, restated effective January 1, 1996, according to the terms and conditions of that plan which existed as of the close of business on December 31, 1997 when assets and benefits for Grossmont Participants were transferred to and merged into this Plan.


1.28	"Hour of Service" means:


(a)	each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Company;

(b)

each hour for which an Employee is paid, or entitled to payment, by the Company on account of a period of time during which no duties are performed (whether or not the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; provided, however, that an Employee will not be credited with more than 501 Hours of Service under this sentence for any continuous period during which he or she performs no duties for the Company. Notwithstanding the preceding provisions of this paragraph, no credit will be given:

(1)

for an Hour of Service for which the individual is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are per formed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation or disability insurance laws (except as specifically provided for in Article 7); or


(2)	for an Hour of Service for which a payment is made which solely reimburses the individual for medical or medically related expenses incurred;


(c)	each hour not otherwise credited under the Plan for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company.

(d)

Effective December 12, 1994, Qualified Military Service shall be credited for purposes of eligibility under Section 2. (b) and for Years of Vesting Service. For a Participant returning from Qualified Military Service on or after January 1, 2001, for purposes of satisfying the 1,000 Hours of Service requirement of Section 2. (b) during an Eligibility Computation Period, and for purposes of determining Years of Vesting Service, a Participant will receive 190 Hours of Service for each full or partial month during which the Participant is engaged in Qualified Military Service.


(e)	Hours of Service will be credited for employment as an Employee of any Affiliate or Subsidiary.


(f)	Solely for purposes of determining whether a Break in Service has occurred, an individual who is absent from work will receive credit for the Hours of Service which would have been credited to the individual but for such absence if the absence is (1) because of the pregnancy of the individual, (2) because of the birth of a child of the individual,

(3) because of the placement of a child with the individual in connection with the adoption of such child by such individual, (4) for purposes of caring for such child for a period beginning immediately following such birth or placement, or (5) for family or medical leave required to be provided under the Family and Medical Leave Act of 1993. Where such hours cannot be determined, eight Hours of Service per day of such absence will be used. The Hours of Service credited under this paragraph will be credited in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period. ill all other cases, such hours will be credited in the following computation period.


(g)	The foregoing notwithstanding, Participants whose pay is solely on a commission basis will be credited with Hours of Service as follows:


(1)	If the Participant's Earnings for a Plan Year are at least 750 multiplied by the lowest hourly rate of compensation payable to employees in the same job classification as the Participant, then the Participant will be credited with 1,000 Hours of Service for that Plan Year.


(2)	If the Participant's Earnings for a Plan Year are less than 750 multiplied by the lowest hourly rate of compensation payable to employees in the same job classification as the Participant, then the Participant will not be credited with any Hours of Service for that Plan Year.


(h)	The crediting of Hours of Service under this Plan will be performed in accordance with applicable provisions of the Department of Labor Regulations 2530.200b-2 and 2530.200b-3 (including, by way of example, the equivalency rules which may be applied in the event that a Participant's actual Hours of Service cannot be deter mined), and such regulations are incorporated by reference herein.


1.29	"Investment Manager" shall have the meaning stated in Section 3(38) of ERISA.

1.30

"Late Retirement Date" - If a Participant continues in the service of the Company or any Affiliate or Subsidiary beyond his or her Normal Retirement Date, then his or her Late Retirement Date will be the first day of any month coincident with or following the date of the Participant's Termination of Employment. A Participant's Late Retirement Date will not be later than the required beginning date described in Section 5.l (c) even if his or her employment continues after such date.


1.31	"Nonvested Former Participant" means a prior Participant who has incurred a Termination of Employment and who does not have a vested interest in his or her Accrued Benefit in accordance with Section 6 .1.

Nonvested Former Participant also means a prior participant in the Grossmont Plan who has incurred a Termination of Employment under that plan and who did not have a vested interest in that plan on December 31, 1997.

Nonvested Former Participant also means a prior participant in the Sumitomo Plan who has incurred a Termination of Employment under that plan and who did not have a vested interest in that plan on September 30, 1998.

Nonvested Former Participant also means a prior participant in the Commerce Plan who has incurred a Termination of Employment under that plan and who did not have a vested interest in that plan on December 31, 1998.


1.32	"Normal Retirement Age" -If the Participant's Participation Date is on or after July 1, 1994, his or her "Normal Retirement Age" is the later of:


(a)	his or her 65th birthday, or


(b)	the earlier of :


(1)	the date the Participant completes five Years of Vesting Service, or


(2)	the fifth anniversary of his or her Participation Date provided the Participant is an Employee on or after the later of such date or his or her 65th birthday and earns at least one Year of Vesting Service after any Break in Service. If the Participant first participated in the Plan before July 1, 1994, the Participant's Normal Retirement Age is 65.

Notwithstanding the foregoing, the Normal Retirement Age for a Commerce Participant is his or her 65th birthday.


1.33	"Normal Retirement Date" - A Participant's Normal Retirement Date will be the first day of the month coincident with or next following the date of attaining his or her Normal Retirement Age.


1.34	"Old Plan Account" is defined in Section 4.7.


1.35	"Participant" means an Active Participant, Inactive Participant, Terminated Vested Participant, Disabled Participant, or Retired Participant, as defined below:


(a)	"Active Participant" means an Eligible Employee who has met the requirements for participation described in Article 2.


(b)	"Inactive Participant" means a prior Active Participant who is on an Authorized Period of Absence, or who is employed by an Affiliate or Subsidiary other than a Company that is then a participating Company in the Plan, or who is employed by the Company but is not an Eligible Employee.


(c)	"Terminated Vested Participant" means a former Eligible Employee who has incurred a Termination of Employment, who retains a vested interest in accordance with Section 6.1, and who is not currently receiving benefit payments under the Plan.


(d)	"Disabled Participant" means a former Active Participant who has a total and permanent disability as determined under Article 7.


(e)	"Retired Participant" means a former Eligible Employee who is receiving benefit payments under the Plan.


1.36	"Participation Date" means the date as of which an Eligible Employee becomes a Participant in the Plan, in accordance with the terms stated in Article 2.


1.37	"Plan" means the Zions Bancorporation Pension Plan.


1.38	"Plan Year" means a calendar year.

1.39

"Qualified Domestic Relations Order" or "QDRO" means a judgment, decree or order of a court with authority under state law for domestic relations matters, which is issued for the benefit of a named "alternate payee" in connection with divorce, marital property rights or alimony, and which complies with all requirements of Code Section 414(P). As further described in Section 5.13, a QDRO may expressly provide either for (a) a division of a Participant's Accrued Benefit between the Participant and an alternate payee, (b) a distribution to an alternate payee, (c) the right of an alternate payee to elect to receive one or more distributions on or after a specified date or occurrence of a specified event, or (d) the designation of an alternate payee as beneficiary for some or all of the Participant's benefit upon the Participant's death. A QDRO shall identify (i) the name and last known mailing address of the Participant and of each alternate payee (who shall be either a Participant's spouse, former spouse, child or other dependent); (ii) the amount or percentage of the Participant's benefit to be paid by the Plan to each alternate payee, or the manner in which such percentage is to be determined; (iii) the number of payments or period to which such order applies; and (iv) the name of each benefit plan of the Employer to which it applies. A domestic relations order shall not be treated as an enforceable QDRO under this Plan unless and until the Administrative Committee (or a person or administrator designated by that Committee) has determined that the domestic relations order conforms to the requirements of Code Section 414(P), describes benefits that are consistent with the terms of this Plan, and satisfies the requirements of any QDRO guidelines maintained by the Administrative Committee or its designee.

1.40

"Qualified Service" shall have the meaning stated in Code Section 414(u)(S), and shall refer to an individual's service in the uniformed services of the United States to the extent the individual, on or after December 12, 1994, is entitled to re-employment rights (sometimes referred to as "USERRA" rights) and returns to employment in a timely manner following such service according to chapter 43 of title 38 of the United Stated Code.

1.41

"Retirement Date" means the date the Participant's benefits commence. Benefits may begin at the Participant's Early, Normal, Late or Disability Retirement Date. Whenever restrictions on benefits are imposed under Section 11.5, the Participant has a Termination of Employment prior to the date on which benefit restrictions are imposed and the Participant has elected a benefit payable in a form other than as an annuity, the Retirement Date shall be the date the Participant would have received his or her benefit had the Participant elected distribution in the form of an annuity, regardless of when actually paid.


1.42	"Single Life Annuity" means an annuity providing level monthly payments over the life of the annuitant.


1.43	"Sumitomo Participant" means :


(a)	A Participant in the Sumitomo Plan who became a Participant in this Plan on October 1, 1998 in connection with the October 31, 1998 merger of the Sumitomo Plan into this Plan, or


(b)	(b) An employee of Sumitomo Bank of California on September 30, 1998 who be- comes eligible to participate in this Plan on or before December 31, 1999.

Based upon his or her status in the Sumitomo Plan on September 30, 1998, and based upon whether or not he or she became an Eligible Employee on October 1, 1998, a Sumitomo Participant described in subsection (a) shall be deemed an Active Participant, an Inactive Participant, a Terminated Vested Participant, a Disabled Participant or a Retired Participant in this Plan, as defined in Section 1.36, on October 1, 1998.


1.44	"Sumitomo Plan" means the Sumitomo Bank of California Pension Plan as in effect immediately prior to November 1, 1998.


1.45	"Termination of Employment" means cessation of employment with the Company or any member of the Employer due to:


(a)	voluntary or involuntary termination or separation of employment, or


(b)	failure to return to work for at least 30 days upon the expiration of any Authorized Period of Absence from the Company or any member of the Employer, in which event cessation of active work will be deemed to have occurred at the time such Authorized Period of Absence expired.

Transfer of employment, without interruption, between members of the Employer will not be deemed a Termination of Employment.


1.46	"Trust Agreement" means the agreement between the Company and the Trustee.


1.47	"Trust Fund" means all money or property held by the Trustee pursuant to the Trust Agreement.


1.48	"Trustee" means the trustee appointed by the Board of Directors of the Company and named as such in the Trust Agreement.


1.49	"Year of Vesting Service" means a calendar year after December 31, 1988 during which an Employee completes 1,000 or more Hours of Service except as follows:

(a)

For Plan Years from December 31,1994 to December 31, 1997, an Employee shall be credited with a partial Year of Vesting Service (measured in calendar months) in a Plan Year in which the Employee completes less than 1,000 Hours of Service but in which the Employee has a Benefit Service Date or in which the Employee retires, dies, or incurs a Termination of Employment if the Employee completes 83.33 Hours of Service multiplied by the number of calendar months during such Plan Year in which the Employee completes at least one Hour of Service. The Employee will be credited with months of Service equal to the number of calendar months during the Plan Year in which the Employee completes at least one Hour of Service. Twelve months of Service will equal a Year of Vesting Service.


(b)	Year of Vesting Service also include Years of Vesting Service earned before January 1, 1989 under the terms of the Plan in effect as of December 31, 1988.


(c)	A Participant shall be credited in the 1989 calendar year with 190 Hours of Service for each month in which the Participant earned at least one Hour of Service in his or her partial Year of Vesting Service (if any) ending on December 31, 1988.


(d)	The foregoing notwithstanding, a Participant must be at least age 18 before he or she can earn a Year of Vesting Service.


(e)	The foregoing notwithstanding, if a Participant who has no vested interest in the Plan incurs a Break in Service, Years of Vesting Service will not include:


(1)	service prior to a Break in Service which is not followed by a Year of Vesting Service, and


(2)	service prior to five or more consecutive one year Breaks in Service if the number of consecutive one year Breaks in Service equals or exceeds the number of prior Years of Vesting Service.

This subsection (e) shall not apply to a Sumitomo Participant who failed to earn 501 hours of service under the Sumitomo Plan in any Plan Year ending prior to November 1, 1998, or to a nonvested former participant in the Sumitomo Plan who incurred a Termination of Employment under that plan on or before September 30, 1998.


(f)	Years of Vesting Service earned by Grossmont Participants prior to December 31, 1997 shall be calculated as defined under the provisions of the Grossmont Plan.


(g)	Special Rules Applicable to Sumitomo Participants:


(1)	Years of Vesting Service earned by a Sumitomo Participant prior to November 1, 1998 shall be calculated as defined under the provisions of the Sumitomo Plan.


(2)	A Sumitomo Participant who earns 1,000 or more Hours of Service in the Plan Year beginning on January 1, 1998 and ending on December 31, 1998 shall be credited with one Year of Vesting Service.


(3)	After December 31, 1998, a Sumitomo Participant shall be credited with one Year of Vesting Service for each calendar year in which he or she completes 1,000 or more Hours of Service.


(4)	In no event will a Sumitomo Participant's Years of Vesting Service be less than what the Sumitomo Participant would have earned under the Sumitomo Plan through his or her anniversary year ending in the calendar year ending on December 31, 2000.


(h)	Years of Vesting Service earned by Commerce Participants prior to January 1, 1999 shall be credited as determined under the provisions of the Commerce Plan.

(i)

Effective April 1, 1997, for a former employee of an acquired company listed on Appendix IV who becomes an Eligible Employee as of the Acquisition Effective Date listed in that Appendix, the Eligible Employee's prior service as an employee of the acquired company (or of any affiliate or subsidiary of the acquired company) shall be credited for purposes of determining Years of Vesting Service under this Plan.


(j)	Effective January 1, 1997, any individual who was a leased employee (as defined in Section 1.19) and who subsequently becomes an Eligible Employee shall be credited with all years of service as a leased employee for purposes of determining Years of Vesting Service.


1.50	"Zions" means Zions Bancorporation, which is the sponsor of this Plan and the ultimate parent corporation of the Employer.

ARTICLE II

PARTICIPATION


2.1	Participation Date means the date a Participant first becomes an Active Participant, provided that the Participation Date of a Nonvested Former Participant who is reinstated under Section 2.2 after five or more consecutive one year Breaks in Service shall be the date of reinstatement.


(a)	An Eligible Employee who was an Active Participant in the Plan on March 31, 1997 will continue to be an Active Participant on April 1, 1997.


(b)	Except as provided in subsections (c) through (f) below, any other Eligible Employee will become an Active Participant in the Plan on the January 1 or July 1 coinciding with or next following the later of (1) the date on which the Employee completes an Eligibility Computation Period during which he or she completes at least 1,000 Hours of Service, or (2) the Employee's 21st birthday.

(c)

Effective April 1, 1997, in the case of an Employee who has a period of employment as an Employee or leased employee (as defined in Section 1.19) of an Affiliate or Subsidiary during which he or she is not an Eligible Employee (either because of the individual's employment status or because the employing company is not a participating Company), which is followed (without a Break in Service) by a transition to Eligible Employee status (either because of a change of individual employment status or because the employing company has become a participating Company in this Plan), then the Employee's Hours of Service prior to becoming an Eligible Employee shall be credited toward meeting the eligibility service requirement of 2.1(b) above, and the Eligible Employee will become an Active Participant on the first day of the month coinciding with or next following the later of the dates referred to in clause (1) and (2) of subsection (b) above.


(d)	An Eligible Employee who was an active participant in the Grossmont Plan on December 31, 1997 shall become a Participant in this Plan on January 1, 1998 (or, if later, the date (if any) on which he or she becomes an Eligible Employee).

(e)

An Eligible Employee who was an Active Participant in the Sumitomo Plan on September 30, 1998, shall become a Participant in this Plan effective October 1, 1998. Effective on or before December 31, 1999, any other employee of Sumitomo Bank of California on September 30, 1998 shall become a Participant in this Plan on the first of the month coinciding with or next following the later of (1) the date on which the Employee completes an Eligibility Computation Period during which he or she completes at least 1,000 Hours of Service, or (2) the Employee's 21st birthday.


(f)	An Eligible Employee who was an Active Participant in the Commerce Plan on December 31, 1998, shall become a Participant in this Plan effective January 1, 1999.

(g) Effective April 1, 1997, for a former employee of an acquired company listed on Appendix IV who becomes an Eligible Employee as of the Acquisition Effective Date listed in that Appendix, the Eligible Employee's prior service as an employee of the acquired company (or of any affiliate or subsidiary of the acquired company) shall be credited for purposes of eligibility to become an Active Participant in the Plan. If such Eligible Employee had accrued at least 1,000 hours of service (according to the re cords maintained by the acquired company) in the 12-month period ending on the Acquisition Effective Date (and had attained age 21 on or before such date), the Eligible Employee shall become an Active Participant in this Plan as of the first day of the calendar month coinciding with or first following the Acquisition Effective Date. Otherwise, the Participation Date shall be the first day of the calendar month coinciding with or first following the date on which the sum of the pre-acquisition service and post-acquisition Hours of Service satisfy the Eligibility Computation Period requirements of subsection (b) above (and the Eligible Employee has attained at least age 21).


(h)	From and after December 31, 2002, no Employee (whether or not an Eligible Employee) who is not already a Participant in the Plan as of December 31, 2002, shall become a Participant in the Plan or be eligible to commence participation in the Plan.


2.2	Reinstatement of Active Participation . A Terminated Vested Participant, a Retired Participant, an Inactive Participant, or a Nonvested Former Participant who again becomes an Eligible Employee or who returns from an Authorized Period of Absence will be reinstated as an Active Participant on the day he or she is reinstated as an Eligible Employee or returns from such Authorized Period of Absence.

ARTICLE III

ESTABLISHMENT AND MAINTENANCE OF CASH BALANCE ACCOUNT

Except as otherwise stated, this Article shall be effective as of April 1, 1997.


3.1	Initial Establishment of Cash Balance Account .

(a)

A Cash Balance Account will be established for each Participant on the date he or she first becomes a Participant. The initial balance in the Cash Balance Account will be zero. With respect to each person who is an Active Participant or a Disabled Participant on March 31, 1997, a Cash Balance Account will be established as of January 1, 1997. The initial balance in the Participant's Cash Balance Account will equal the present value of the Active or Disabled Participant's accrued benefit under the Plan as of December 31, 1996, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate and the Participant's age on December 31, 1996, and the Applicable Mortality Table described in Section 1.4(b)(1) that is in effect as of such date.

(b)

With respect to each Inactive Participant and Terminated Vested Participant on March 31, 1997 who becomes an Active Participant on or after April 1, 1997 and each Nonvested Former Participant on March 31, 1997 who becomes an Active Participant and does not lose his or her prior vested interest in accordance with Section 1.50(e), a Cash Balance Account will be established on the date he or she again becomes an Active Participant. The initial balance in the Participant's Cash Balance Account will equal the present value of the Participant's accrued benefit under the Plan as of December 31, 1996, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate, the Participant's age on the date he or she again becomes an Active Participant, and the Applicable Mortality Table described in Section 1.4(b)(1) that is in effect as of such date.

(c)

A Cash Balance Account will be established for each Grossmont Participant who be comes an Active Participant in this Plan on January 1, 1998. The initial balance in the Grossmont Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Grossmont Plan as of December 31, 1997, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate, the Participant's age on December 31, 1997 and the Applicable Mortality Table described in Section 1.4(b)(1) that is in effect as of such date.

(d)

With respect to each Inactive Participant and Terminated Vested Participant (as defined in Sections 1.26 and 1.35 of this Plan) in the Grossmont Plan on December 31, 1997 who becomes an Active Participant in this Plan or after January 1, 1998 and each Nonvested Former Participant in the Grossmont Plan on December 31, 1997 who becomes an Active Participant in this Plan and does not lose his or her prior vested interest in accordance with Section 1.49, a Cash Balance Account will be established on the date he or she becomes an Active Participant in this Plan. The initial balance in the Grossmont Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Grossmont Plan as of December 31, 1997, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate, the Grossmont Participant's age on the date he or she again becomes a Participant, and the Applicable Mortality Table de scribed in Section 1.4(b)(1) that is in effect as of such date.

(e)

A Cash Balance Account will be established for each Sumitomo Participant who becomes an Active Participant in this Plan on October 1, 1998. The initial balance in the Sumitomo Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Sumitomo Plan as of September 30, 1998, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate and the Participant's age on September 30, 1998 and the Applicable Mortality Table described in Section 1.4(b)(l ) that is in effect as of such date.

(f)

With respect to each inactive participant and terminated vested participant in the Sumitomo Plan on September 30, 1998 who becomes an Active Participant in this Plan after October 1, 1998, and each nonvested former participant in the Sumitomo Plan who becomes an Active Participant in this Plan after October 1, 1998, a Cash Balance Account will be established on the date such Employee becomes an Active Participant in this Plan. The initial balance in the Sumitomo Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Sumitomo Plan as of September 30, 1998, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate, the Sumitomo Participant's age on the date he or she again becomes an Active Participant, and the Applicable Mortality Table described in Section 1.4(b)(l) that is in effect as of such date.

Notwithstanding the foregoing, the initial balance in the Cash Balance Account of a Sumitomo Participant who receives a distribution of the actuarial equivalent of his or her full accrued benefit from the Sumitomo Plan on or before October 31, 1998 shall be zero.

(g)

A Cash Balance Account will be established for each Commerce Participant who be comes an Active Participant in this Plan on January 1, 1999. The initial balance in the Commerce Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Commerce Plan as of December 31, 1998, expressed in the form of a Single Life Annuity. The present value will be determined using the Participant's age on December 31, 1998, and the interest and mortality basis specified in the Commerce Bancorporation Defined Benefit Plan (as that plan was in effect on December 31, 1998) for terminations occurring during the 1999 plan year.

(h)

With respect to each inactive participant and terminated vested participant in the Commerce Plan on December 31, 1998 who becomes an Active Participant in this Plan after January 1, 1999, and each nonvested former participant in the Commerce Plan who becomes an Active Participant in this Plan after January 1, 1999, a Cash Balance Account will be established on the date such Employee becomes an Active Participant in this Plan. The initial balance in the Commerce Participant's Cash Balance Account will equal the present value of his or her accrued benefit under the Commerce Plan as of December 31, 1998, expressed in the form of a Single Life Annuity. The present value will be determined using a 7% interest rate, the Commerce Participant's age on the date he or she again becomes an Active Participant, and the Applicable Mortality Table described in Section l.4(b) { ) that is in effect as of such date.

Notwithstanding the foregoing, the initial balance in the Cash Balance Account of a Commerce Participant who receives a distribution of the actuarial equivalent of his or her full accrued benefit from the Commerce Plan on or before December 31, 1998 shall be zero.


3.2	Earnings Credits .

(a)

General Rule for Earnings Credits. As of the last day of each Plan Year the Cash Balance Account of each Participant who is employed on that date and who has completed at least 1,000 Hours of Service during the Plan Year will be credited with an amount equal to the product obtained by multiplying the Participant's Earnings for the Plan Year by a percentage from the following table, which percentage is based upon the Participant's age as of the last day of the Plan Year:

Attained Age

Fewer than 30 years

At least 30 years, but fewer than 40 Years At least 40 years, but fewer than 50 years At least 50 years, but fewer than 55 years At least 55 years, but fewer than 60 years 60 or more years

Percentage

2.25%

3.00%

4.00%

5.25%

7.00%

9 . 25%


(b)	Acquisitions and Reinstatements in a Year of At Least 1,000 Hours. Notwithstanding the foregoing, in the Plan Year containing a Participant's Participation Date (or date of reinstatement as an Active Participant), where the Participation Date (or reinstatement date) is later than January 1 of the Plan Year, but where the Participant accrues 1,000 Hours of Service for the Plan Year, then:

(1)

If the Participant received Earnings as an Employee for the period from January 1 of such Plan Year to the Participation Date (or reinstatement date), the Earnings Credit for that Plan Year shall be the product of the amount determined under Section 3.2(a) times a fraction, the numerator of which is the number of completed months of Plan participation as an Active Participant during the Plan Year, and the denominator of which is 12 (or, if less, the number of months from January 1 to the date of the Participant's Termination of Employment; and

(2)

If the Participant did not receive Earnings as an Employee prior to his or her Participation Date (for example, if a Participant has a right to an immediate Participation Date upon an Acquisition Date as described in Section 3.2(c), or a right to an immediate reinstatement of Participation following a Break in Service or Period of Authorized Absence as described in Section 2.2), then the Earnings Credit shall be determined as described in 3.2(a) taking into account the Earnings from the Participation Date through December 31 (or, if earlier, the date of the Participant's Termination of Employment, as described in Section 3.2(c)).

(c)

Acquisitions in a Year of Fewer Than 1,000 Hours. This subsection shall apply to a Participant who becomes a Participant in this Plan as the result of an acquisition with an "Acquisition Effective Date" (as stated in Appendix N) other than January 1 of a Plan Year, and who fails to complete 1,000 Hours of Service in the Plan Year containing the Acquisition Effective Date. Such a Participant shall be entitled to an Earnings Credit for such Plan Year, if such Participant's Hours of Service earned following the Acquisition Effective Date, when annualized, equal or exceed 1,000. The annualized hours shall be the product of the Participant's actual Hours of Service times a fraction, the numerator of which is 12 and the denominator of which is the number of completed months as an Active Participant during the said Plan Year. The Earnings Credit for such Plan Year shall be as stated in Section 3.2(b)(2). For this purpose, Earnings will not include amounts earned prior to the Acquisition Effective Date.

Earnings Credit If Employment Terminates Prior to Year End. Subject to the terms of subsection (e), the Cash Balance Account of a Participant who is not an Employee on the last day of the Plan Year but who has completed at least 1,000 Hours of Service during the Plan Year will be credited as of the last day of the Plan Year or, if earlier, as of the date on which the Participant's benefit is paid or commences to be paid, with an amount calculated in the manner described in the applicable subsection of this Section 3.2, but based upon the Participant's Earnings for the Plan Year and the age of the Participant as of the date on which he or she incurs a Termination of Employment.

(e)

Terminations of Employment in Plan Year 2000. Effective January 1, 2000, in the case of a Participant who had a Termination of Service for any reason between January 1, 2000 and December 31, 2000, the Participant shall be entitled to an Earnings Credit for the 2000 Plan Year if the Hours of Service he or she accrued prior to the Termination of Employment, when annualized, equal or exceed 1,000. The annualized hours shall be the product of the Participant's actual Hours of Service times a fraction, the numerator of which is 12 and the denominator of which is the number of completed months as an Employee during the said Plan Year.


(f)	Unless otherwise provided by further amendment, from and after December 31, 2002, no Cash Balance Account of any Participant shall accrue any further contribution or earnings credit under this Section 3.2.

(g)

Earnings Credits for Grandfather Participants. As of the last day of each Plan Year the Cash Balance Account of each Grandfather Participant (as defined in Section 4.8(b)) who is employed on that date and who has completed at least 1,000 Hours of Service during the Plan Year will be credited with an amount equal to the product obtained by multiplying the Grandfather Participant's Earnings for the Plan Year by a percentage from the following table, which percentage is based upon the Grandfather Participant's age as of the last day of the Plan Year:

Attained Age Percentage


At least 55 years, but fewer than 60 years	4.00%

60 or more years 6.25%


(h)	From and after June 30, 2013, no Cash Balance Account of any Grandfather or Great Grandfather Participant shall accrue any further contribution or Earnings Credit under this Section 3.2. This subsection shall supercede any provision of Article IV that might otherwise be deemed to provide continuing accrual of benefits to any Grandfather or GreatGrandfather Participant under Section 3.2.


3.3	Interest Credits .

(a)

General Rule for Quarterly Interest Crediting. For calendar quarters commencing on and after April 1, 1997, as of the last day of each calendar quarter, the Cash Balance Account of each Participant who has a Cash Balance Account on that date will be credited with interest on the balance in the account as of the first day of the Plan Year. Interest will be credited at the rate of 25% of the annual rate of interest on 30 year Treasury securities for November of the previous Plan Year. If a Participant's benefit commences prior to the end of a calendar quarter, no interest will be credited for the quarter. Notwithstanding the provisions of Section 3.2(f), Interest Credits shall continue to accrue as provided in Section 3.3 for each Participant who has a Cash Balance Account in the Plan as of January 1, 2003.

(b)

If An Account Balance Is Established During a Plan Year. Notwithstanding the prior paragraph, the terms of this subsection shall apply to a Participant who, on a date subsequent to April 1, 1997, has a right to have a Cash Balance Account established during the course of a Plan Year with an opening balance greater than zero, either in the case of a reinstatement of Active Participant status as described in Section 3.1(b) or 3.5(a), or in the case of an initial Participation Date of a former employee of an acquired company described in Section 3.1 (d), 3.1(e), 3.1(f) or 3.1(h). In such a case, the Participant's Cash Balance Account shall be credited with interest during the remainder of such a Plan Year (subject to the terms of Section 3.4, if applicable), as follows.

(1)

As of the last day of the calendar quarter in which the Cash Balance Account is established, the interest for such initial calendar quarter shall be the product of the opening balance of the Cash Balance Account, times 25% of the annual rate of interest (as stated in 3.3(a) above), times a fraction, the numerator of which is the number of complete calendar months from the effective date of the establishment of the Cash Balance Account to the end of the calendar quarter, and the denominator of which is three.


(2)	In any subsequent calendar quarter during the same Plan Year, interest shall be credited as stated in Section 3. (a), except that the principal amount shall be the opening balance of the Cash Balance Account rather than the balance as of January 1 of the Plan Year.


3.4	Maintenance of Account after Termination of Employment until Benefit Commencement .


(a)	After Termination of Employment. After Termination of Employment, a Participant's Cash Balance Account will continue to be maintained and credited with interest pursuant to Section 3.3, until the Participant's benefit commences to be paid or is deemed to be paid under Section 6.3(b).

(b)

If Re-Employed with an Existing Cash Balance Account Prior to Benefit Commencement. This subsection shall apply to a Terminated Vested Participant who (i) is reemployed as an Eligible Employee of the Company, (ii) is reinstated to Active Participant status as of such re-employment date according to Section 2.2, and (iii) has an existing Cash Balance Account. In such a case, on and after the date of reinstatement of Active Participant status, the Cash Balance Account will continue to be credited with interest on a quarterly basis, and the Active Participant shall have a right to receive Earnings Credits to the extent provided in Section 3.2(b).


3.5	Establishment of New Account if Re-employed After Benefit Commencement .

(a)

If a Nonvested Former Participant's Cash Balance Account has ceased to be maintained due to the deemed zero-dollar "cash-out" distribution (under Section 6.3(b)) of his or her entire interest under the Plan, he or she becomes an Active Participant prior to incurring five consecutive Breaks in Service, and he or she completes a Year of Vesting Service following the date of re-employment, then, as of the date of becoming an Active Participant (but contingent upon satisfying the said Year of Service requirement), the Participant's Cash Balance Account will be restored to the balance in the Cash Balance Account as of the previous Termination of Employment date, increased for interest in accordance with Section 3.3 for the period from the Termination of Employment date to the date the Participant again became an Active Participant.

(b)

If a Retired Participant is re-employed by the Company and again becomes an Active Participant in the Plan after his or her Cash Balance Account has ceased to be maintained pursuant to Section 3.4, a new Cash Balance Account, with an initial balance of zero, will be established as of the last day of the Plan Year in which he or she again becomes an Active Participant. The Cash Balance Account will be credited with earnings and interest as provided in Sections 3.2 and 3.3. Any Retirement Income which is being paid as a monthly benefit to the Retired Participant as of the date of his or her re-employment shall not be suspended and shall be unaffected by the resumption of employment. The benefit accrued by the Participant from the date of re-employment to the subsequent Termination of Employment shall be subject to an election by the Participant with respect to the form and timing of the benefit which is separate and independent from the election that was applicable to the benefit that commenced on the prior Retirement Date. Moreover, to the extent that a spousal consent is applicable to the benefit that accrued subsequent to the re-employment date, the person with the right to consent shall be the Eligible Spouse (if any) to whom the Participant is legally married at the time of the commencement of the benefit that accrued subsequent to the re-employment date, and not the Eligible Spouse as of the first Retirement Date.

3.6

Market Rate of Interest . With respect to any distribution made from a Participant's Cash Balance Account after August 17, 2006, the interest rate used for accumulating a Participant's Cash Balance Account shall not exceed a market rate of return. Regardless of the rate specified in the Plan an interest credit (or equivalent amount) of less than zero shall in no event result in the Cash Balance Account or similar amount being less than the aggregate amount of contributions credited to the Cash Balance Account. Notwithstanding the foregoing, upon termination of the Plan:


(a)	If the interest credit rate (or an equivalent amount) under the Plan is a variable rate, then the rate of interest used to determine a Participant's Cash Balance Accrued Benefit under the Plan shall be equal to the average of the rates of interest used under the Plan during the five-year period ending on the termination date; and

(b)

The interest rate and mortality table used to determine the amount of any Cash Balance Accrued Benefit under the Plan payable in the form of an annuity at normal retirement age shall be the rate and table specified under the Plan for such purpose as of the termination date, except that if the interest rate is a variable rate, the interest rate shall be determined under the rules of subsection (a) above.

ARTICLE IV

ACCRUED BENEFIT


4.1	Accrued Benefit . A Participant's Accrued Benefit is equal to the largest of the benefits described in Sections 4.2, 4.3, or 4.4. Notwithstanding anything to the contrary herein, in no event will the benefit payable to a Participant be less than the following:


(a)	The Accrued Benefit of a Participant who was a Participant in the Plan on March 31, 1997, shall not be less than the benefit accrued by such Participant under the Plan on March 31, 1997.


(b)	The Accrued Benefit of a Grossmont Participant shall not be less than the benefit accrued by such Grossmont Participant under the Grossmont Plan on December 31, 1997.


(c)	The Accrued Benefit of a Sumitomo Participant shall not be less than the benefit accrued by such Sumitomo Participant under the terms of the Sumitomo Plan (as in effect on September 30, 1998) with benefit accruals based on the earlier of the Participant's Termination of Employment or December 31, 1999.


(d)	The Accrued Benefit of a Commerce Participant shall not be less than the benefit accrued by such Commerce Participant calculated as of December 31, 1998 under the terms of the Commerce Plan.

(e)

Notwithstanding the provisions of Section 3.2(f), the account balance of a Participant who was a Participant in the Plan on December 31, 2002, and which is used to calculate the Cash Balance Account shall never be smaller than the account balance as of December 31, 2002. If greater than the foregoing, the Accrued Benefit calculated under Section 2.3 of Appendix III for a Participant who is a Great Grandfather Participant (as defined in Section 4.4) shall never be less than the Accrued Benefit deter mined under that Section for the Participant on December 31, 2002.

4.2

Cash Balance Accrued Benefit . A Participant's cash balance accrued benefit is a monthly benefit in the form of a Single Life Annuity commencing on his or her Normal Retirement Date, or the current date, if later, which is the Actuarial Equivalent of the balance in the Participant's Cash Balance. Account as of his or her Normal Retirement Date, or the current date, if later. For purposes of determining a Participant's cash balance accrued benefit:

(a)

The balance in the Participant's Cash Balance Account as of the Participant's Normal Retirement Date, if the Participant has not yet reached that date, will be determined by projecting the balance in the Participant's Cash Balance Account at the determination date to the Participant's Normal Retirement Date. The projection will be accomplished by applying the interest credits specified in Section 3.3 from the determination date (the date on which benefits are being determined) to the Participant's benefit commencement date (the date on which benefits commence) and by applying the interest credit in Section 3.3 during the year of benefit commencement for each year from the benefit commencement date to the Participant's Normal Retirement Date.


(b)	The monthly benefit in the form of a Single Life Annuity will be determined by using the assumptions for Actuarial Equivalence described in Section 1.4(a) and the age of the Participant as of his or her Normal Retirement Date, or the current date, if later.


4.3	Minimum Accrued Benefit . A Participant's minimum accrued benefit is the monthly benefit accrued by such Participant under the Plan on March 31, 1997, as defined in Section 2.2 of Appendix III.

4.4

Grandfathered Minimum Accrued Benefit . Any Active Participant or Disabled Participant on March 31, 1997 who, as of December 31, 1997, has attained 55 years of age and has completed 10 Years of Vesting Service is eligible to receive a grandfathered minimum accrued benefit described in Section 2.3 of Appendix III. An Active Participant who satisfies the requirements of the first sentence of this Section 4.4 on December 31, 2002, (a "Great Grandfather Participant") shall, effective January 1, 2003, continue to accrue all benefits that were available to such Great Grandfather Participant under this Plan as of December 31, 2002, and the provisions of Section 3.2(f) shall not apply to such Great Grandfather Participant.

4.5

Accrued Benefit Attributable to the Old Plan Account . The Accrued Benefit Attributable to the Old Plan Account as of the Participant's Normal Retirement Date, or current date if later, will be equal to the Participant's Old Plan Account expressed as a monthly benefit under a Single Life Annuity commencing on his or her Normal Retirement Date, or current date if later, using Actuarial Equivalence as provided in Section 1.4(a).

The Accrued Benefit Attributable to the Old Plan Account as of the Participant's Early Retirement Date will be equal to the monthly benefit determined under the foregoing paragraph and, reduced by 5/9 of 1% for each of the first 60 months by which the Early Retirement Date precedes his or her Normal Retirement Date and by 5/18 of 1% for each of the next 60 such months.


4.6	Accrued Benefit Attributable to Company Contributions . The Accrued Benefit Attributable to Company Contributions will be equal to the excess, if any, of the Accrued Benefit over the Accrued Benefit Attributable to the Old Plan Account.

4.7

Old Plan Account . A Participant's Old Plan Account is his or her individual account balance under this Plan which resulted from the transfer of funds from a terminated plan formerly sponsored by the Company. The Old Plan Account shall include interest from the transfer date to the earlier of the Participant's Retirement Date or the date on which the Participant's Old Plan Account is otherwise payable pursuant to the provisions of this Plan (the determination date) as follows: The rate of interest shall be compounded annually. For Plan Years beginning before January 1, 1988 and continuing to the determination date, the interest rate shall be 5%. For each Plan Year beginning on or after January 1, 1988 and continuing to the determination date, the interest rate shall be 120% of the federal mid-term rate (as defined in Code Section 1274) in effect on the first day of such Plan Year. For purposes of determining the Accrued Benefit Attributable to the Old Plan Account, the Old Plan Account shall also include interest, compounded annually, at the Actuarial Equivalent interest rate (Section 1.4(a)) applicable to the determination date year, for each Plan Year from the determination date to the Participant's Normal Retirement Date. In no event can a Participant's Old Plan Account be withdrawn prior to Termination of Employment, death or retirement. This section is effective January 1, 1995.


4.8	Continuing Accrual of Benefits for Grandfather Participants .

(a)

Notwithstanding the provisions of Section 3.2(f), a Participant who was an Active Participant in the Plan on December 31, 2002, and who satisfies the definition of "Grandfather Participant" in 4.8(b) on that date shall continue to accrue all benefits available to such Grandfather Participant under this Plan as of December 31, 2002, except that Earnings Credits for the Grandfather Participant's Cash Balance Account after December 31, 2002, shall accrue and be determined by reference to Section 3.2(g) and not Section 3.2(a).


(b)	"Grandfather Participant" shall mean for purposes of Section 4.8(a) an Active Participant on December 31, 2002, who:


(1)	had attained at least age 55, and


(2)	was credited with at least 10 Years of Vesting Service.

ARTICLE V

AMOUNT OF RETIREMENT INCOME


5.1	Monthly Retirement Income . A Participant's monthly retirement income commencing on his or her Normal Retirement Date, Early Retirement Date, Late Retirement Date, or Disability Retirement Date will be equal to his or her benefit described in Section 5.2, 5.3, 5.4, or 5.5.

5.2

Normal Retirement Income . The monthly amount of retirement income payable to a participant retiring on his or her Normal Retirement Date will be equal to the Accrued Benefit earned to his or her Normal Retirement Date. This amount is reduced by the Accrued Benefit Attributable to the Old Plan Account if the Participant has previously taken a lump sum payment of the Old Plan Account under Section 5.7(d). This Retirement Income will be subject to adjustment depending on the Form of Retirement Income elected in accordance with Section 5.7.


5.3	Early Retirement Income .


(a)	The Early Retirement Income amounts described in this Section 5.3 will be subject to adjustment depending on the Form of Payment elected in accordance with Section 5.7.


(b)	The monthly amount of retirement income payable to a Participant retiring on an Early Retirement Date is the greater of:


(1)	The Actuarial Equivalent value of the Participant's Cash Balance Account as of the Early Retirement Date using the assumptions for Actuarial Equivalence described in Section 1.4(a) and the age of the Participant as of the Early Retirement Date.


(2)	The Minimum Early Retirement Benefit as described in Article 3 of Appendix III.

The above amount is reduced by the Accrued Benefit Attributable to the Old Plan Account as of the Participant's Early Retirement Date, as determined under Section 4.5 if the Participant has taken a lump sum payment of the Old Plan Account under Section 5.7(d).


(c)	A Grossmont Participant's minimum early retirement benefit shall be at least equal to the Actuarial Equivalent of his or her Accrued Benefit determined as of December 31, 1997. Actuarial Equivalent shall be calculated using:


(1)	Interest at a rate of 7% per annum, compounded annually, and


(2)	Mortality determined in accordance with the Unisex Pension 1984 Mortality Table, set back three years for both males and females.


(d)	A Sumitomo Participant's minimum early retirement benefit payable on an Early Retirement Date shall be equal to the Sumitomo Participant's Accrued Benefit de scribed in Section 4.1(c) multiplied by an early retirement factor from the table below :

Participant's Age

At Commencement Factor



55	.4912
56	.5236
57	.5572
58	.5956
59	.6364
60	.6820
61	.7336
62	.7888
63	.8524
64	.9220
65	1.000

Interpolation shall be used to determine the Factor applicable to the minimum benefit calculation of a Participant who retires in any month other than his or her month of birth.

(e)

A Commerce Participant's early retirement benefit shall be at least equal to the Actuarial Equivalent of his or her Accrued Benefit determined as of December 31, 1998 under the terms of the Commerce Plan. For the purpose of this subsection (e) Actuarial Equivalent for a Commerce Participant shall be calculated using the 1984 Uniform Pensioners Mortality Table and an interest rate equal to the lesser of 100% of the Pension Benefit Guaranty Corporation's immediate interest rate in effect on the first day of the Plan Year in which the Commerce Participant retires or 4%.


5.4	Late Retirement Income .

(a)

The monthly amount of Retirement Income payable to a Participant retiring on a Late Retirement Date will be equal to the Participant's Accrued Benefit earned to the Late Retirement Date. The amount determined according to the previous sentence is reduced by the Accrued Benefit Attributable to the Old Plan Account if the Participant has previously taken a lump sum payment of the Old Plan Account under Section 5.7(d). This Retirement Income will be subject to adjustment depending on the Form of Retirement Income elected in accordance with Section 5.7.


(b)	The minimum late retirement benefit of a Grossmont Participant shall be at least equal to the Actuarial Equivalent of his or her Accrued Benefit determined as of December 31, 1997, and taking into account his or her years of benefit service and final average monthly earnings, as defined in the Grossmont Plan, as of December 31, 1997. Actuarial Equivalent shall be calculated using:


(1)	Interest at a rate of 7% per annum, compounded annually, and


(2)	Mortality determined in accordance with the 1984 Unisex Pensioners Mortality Table, set back three years for both males and females.


(c)	The minimum late retirement benefit of a Sumitomo Participant shall never be less than his or her Accrued Benefit determined under Section 4.1(c).


5.5	Disability Retirement Income is described in Section 7.4 .

5.6

Application for Retirement Income . Each Participant must notify the Committee in writing of his or her intent to retire. Upon receipt of such notification, each Participant will receive a written explanation of the terms and conditions of the various Forms of Retirement Income and the financial effect of electing each Form of Retirement Income. A Participant will have the right to elect or revise a previously elected Form of Retirement Income at any time during his or her Election Period.

A Participant's Election Period is the 90 day period ending on the date his or her Retirement Income is to begin. The Committee will make Election Information available to a Participant within a reasonable period of time prior to the date Retirement Income is to begin. In no event will a Participant's Election Period end prior to the 30th day next following the day on which Election Information and the information provided in accordance with the first para graph of this Section 5.6 are first made available to him.

For purposes of this Section, Election Information will include:


(a)	a written explanation of each form of Retirement Income and the relative financial effect of the payment of Monthly Retirement Income in that form;


(b)	a statement of the right to consider the benefit election for at least 30 days; and


(c)	a notification that Retirement Income payments will be made in the 50% Spouse Option form (or the Life Annuity Form if the Participant is not married) unless he or she elects otherwise during the Election Period and his or her spouse consents to such election.

The Participant must elect a form of payment in writing. An election of a form of payment other than a Spouse Option will not be valid without the written consent of the Participant's spouse. The spouse's consent must acknowledge the effect of the election and must be witnessed by a plan representative or notary publ i c. The Participant may change his or her election at any time, and any number of times, during the 90 day period ending on the date his or her Retirement Income is to begin. The Participant may not change the form of payment without further spousal consent unless the spouse expressly permits such changes. The requirement for spouse's consent will be waived if the participant establishes to the satisfaction of the Committee that such consent cannot be obtained because there is no spouse, the spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe.

The election by the Participant and the consent of the spouse must be obtained no more than 90 days prior to the annuity starting date (as defined in the previous paragraph).

If the spouse of a Participant who has elected a Spouse Option dies before Retirement Income payments begin, the Retirement Income will be paid to the Participant in the form of the Single Life Annuity.

For any Election Period and any distribution notice issued or Election Information relative thereto provided under this Section or any other Plan Section in Plan Years beginning after December 31, 2006, any reference to a 90-day maximum notice or election period shall be changed to 180 days. Notices and Election Information given to Participants pursuant to Code §411(a)(l ) in Plan Years beginning after December 31, 2006, shall include a description of how much larger benefits will be if the commencement of distributions is deferred. Notices to Participants shall include the relative values of the various optional forms of benefit, if any, under the Plan as provided in Treas. Reg. §1.417(a)-3. This provision is effective for qualified pre-retirement survivor annuity explanations first provided on or after July 1, 2004; for qualified joint and survivor annuity explanations with respect to any distribution with a Retirement Date on or after February 1, 2006; and on or after October 2, 2004, with respect to any optional form of benefit subject to the requirements of Code §417(e)(3), if the actuarial present value of that optional form is less than the actuarial present value as determined under Code §417(e)(3).


5.7	Forms of Retirement Income . A Participant retiring on his or her Normal, Early, Late, or Disability Retirement Date may elect one of the following Forms of Retirement Income payment:

(a)

A Spouse Option provides for a monthly payment during the Participant's life. After the Participant's death, a percentage of the Participant's Retirement Income will be paid for life to the Participant's Eligible Spouse. The percentage to be paid to the Participant's Eligible Spouse will be 50%, 66%% (for Plan Years after December 31, 2007, 75%) or 100% as elected by the Participant. The monthly payment under the Spouse Option will be equal to the Actuarial Equivalent of the amount payable under the Life Annuity form using the factors from Appendix I.


(b)	The Life Annuity form provides for a monthly payment during the Participant's life, with the last payment being made for the month in which the Participant's death occurs.

(c)

Lump Sum Payment Option provides for a single payment equal to the greater of the balance in the Participant's Cash Balance Account as of the Participant's Retirement Date or the Lump Sum value of his or her Accrued Benefit using the Actuarial Equivalent basis for lump sums provided under Section 1.4(a). If a Participant took a lump sum payment of his or her Old Plan Account before retirement, the Lump Sum Payment Option shall be based on the Accrued Benefit Attributable to Company Contributions as described in Section 4.6. If a Participant maintains an Old Plan Account on his or her Retirement date, the lump sum shall not be less than the sum of the Old Plan Account on the Retirement Date and the Lump Sum Payment Option amount using the Accrued Benefit Attributable to Company Contributions as described in Section 4.6.

(d)

Lump Sum Payment of Old Plan Account Option provides for a lump sum payment of the Participant's Old Plan Account. The Participant's Accrued Benefit Attributable to Company Contributions is paid in a Life Annuity, Spouse Option, or Lump Sum Payment Option form as elected by the Participant. This form of payment is available to a Participant only one time, at the earlier of his or her retirement or Termination of Employment.


(e)	Options Available Only to Grossmont Participants. In addition to the forms described in subsections (a) through (d) above, the following additional forms of benefit are available only to Grossmont Participants:

(1)

Ten Year Certain and Life Thereafter Option. The Ten Year Certain and Life Thereafter Option provides a reduced monthly Retirement Income commencing on the Grossmont Participant's Retirement Date and ceasing with the payment for the month in which the Grossmont Participant's death occurs. The Ten Year Certain and Life Thereafter Option shall be the Actuarial Equivalent of a Single Life Annuity Option. If a Grossmont Participant's death should occur before 120 monthly payments have been made, such payment shall continue to his or her Beneficiary(ies) until the earlier of (a) the Beneficiary(ies') death(s), or (b) a total of 120 monthly Retirement Income payments to the Grossmont Participant and his or her Beneficiary(ies) have been made.

If a Grossmont Participant designates joint Beneficiaries, upon the Grossmont Participant's death prior to the payment of 120 monthly payments, any surviving Beneficiaries shall share equally.

In the event that the (or all) Beneficiary(ies) and the Grossmont Participant die prior to the payment of a total of 120 monthly Retirement Income payments to the Grossmont Participant and/or his or her Beneficiary(ies); the balance of such 120 monthly payments shall be payable to the estate of the last survivor.

In the event the Grossmont Participant and his or her Beneficiary(ies) die prior to the date the Grossmont Participant's benefits are scheduled to commence, the rights of all persons shall be the same as if the option had not been elected.


(2)	The Ten Year Certain Option provides a monthly Retirement Income commencing on the Grossmont Participant's Retirement Date and ceasing after 120 monthly payments have been made. The Ten Year Certain Option shall be the Actuarial Equivalent of a Single Life Annuity Option.

If a Grossmont Participant's death should occur before 120 monthly payments have been made, such payment shall continue to his or her Beneficiary(ies) until the earlier of (a) the Beneficiary(ies') death(s), or (b) a total of 120 monthly Retirement Income payments to the Grossmont Participant and/or his or her Beneficiary(ies) have been made.

If a Grossmont Participant designates joint Beneficiaries, upon the Grossmont Participant's death prior to the payment of 120 monthly payments, any surviving Beneficiaries shall share equally.

In the event that the (or all) Beneficiary(ies) and the Grossmont Participant die prior to the payment of a total of 120 monthly Retirement Income payments to the Grossmont Participant and/or his or her Beneficiary(ies), the balance of such 120 monthly payments shall be payable to the estate of the last survivor.


(3)	For the purpose of this subsection (e), Actuarial Equivalent shall be calculated using:


(A)	Interest at a rate of 7% per annum, compounded annually, and


(B)	Mortality determined in accordance with the 1984 Unisex Pensioners Mortality Table, set back three years for both males and females.


(4)	This subsection (e) shall only apply to the portion of a Grossmont Participant's Accrued Benefit earned prior to January 1, 1998. The portion of a Grossmont Participant's Accrued Benefit earned on or after December 31, 1997 shall be paid in one of the forms described in 5.7(a) through (d).


(5)	A Grossmont Participant's Accrued Benefit payable under any form described in this Section 5.7(e) shall never be less than his or her Accrued Benefit calculated as of December 31, 1997 under the terms of the Grossmont Plan.


(f)	Options Available to Sumitomo Participants: In addition to the forms described in subsections (a) through (d), the following additional forms of benefit are available only to Sumitomo Participants:

(1)

Joint and Survivor Annuity. A Sumitomo Participant may elect to have a fraction, either 50% or 100%, of his or her Life Annuity continue after his or her death to the Sumitomo Participant's Beneficiary for life, if the Beneficiary survives the Sumitomo Participant. A Joint and Survivor Annuity payable to a Sumitomo Participant who receives a benefit under Section 4.l(c) shall be the Actuarial Equivalent of the benefit otherwise payable as a Single Life Annuity (taking into account whichever 50% or 100% option is elected), and using the following Actuarial assumptions: (A) 4% interest, and (B) the 1984 Unisex Pension mortality table with a four-year setback for the age of the Participant and no set-back for the age of the Beneficiary, and (C) the respective ages (in completed months as of the benefit commencement date) of the Participant and Beneficiary. The Beneficiary must be irrevocably designated before benefits commence.

(2)

Level Income Option. A Sumitomo Participant who retires prior to his or her Normal Retirement Date and whose benefit is paid in the form of a Life Annuity may elect to receive his or her benefits in a greater amount during the period before Social Security benefits could first be paid and a correspondingly reduced amount after such benefits first become payable, such that the total income (including the adjusted benefit payable under the Plan and the Social Security benefit to which the Sumitomo Participant is entitled) shall be as nearly uniform as possible both before and after commencement of Social Security benefits. The amount of the adjustment to the Sumitomo Participant's benefit shall be calculated using the factors in Appendix III of the Sumitomo Plan, provided that in no event shall value of the benefit payable under this sub-section ever be less than that determined by applying the Actuarial Equivalence factors for lumps sum payments described in Section 1.4(a)(ii).


(3)	This subsection (f) shall only apply to the portion of the Sumitomo Participant's Accrued Benefit attributable to Section 4.l(c). The portion of a Sumitomo Participant's Accrued Benefit not attributable to Section 4.1(c) shall be paid in one of the forms described in subsections (a) through (d) of this Section 5.7.


(4)	A Sumitomo Participant's Accrued Benefit payable in any form under this Section 5.7 shall never be less than his or her Accrued Benefit calculated as of December 31, 1999 under the terms of the Sumitomo Plan.


(g)	Options Available to Commerce Participants. In addition to the forms described in subsections (a) through (d), the following additional forms of benefit are available only to Commerce Participants:

(1)

The Post-retirement 75% Spouse Option provides a monthly payment during the Commerce Participant's life. After the Commerce Participant's death 75% of the Commerce Participant's Retirement Income will be paid for life to the Commerce Participant's Eligible Spouse. The initial monthly payment under the 75% Spouse Option will be equal to the Actuarial Equivalent of the amount payable under the Life Annuity form. For the purpose of this paragraph (1), Actuarial Equivalent shall be calculated using the 1984 Uniform Pensioners Mortality Table and an interest rate equal to the greater of 100% of the Pension Benefit Guaranty Corporation immediate interest rate in effect on the first day of the Plan Year in which the Commerce Participant retires or 6.5%.

This paragraph (1) shall only apply to the portion of the Commerce Participant's Accrued Benefit earned prior to January 1, 1999 under the terms of the Commerce Plan. The portion of a Commerce Participant's Accrued Benefit earned on or after January 1, 1999 shall be paid in one of the forms described in subsections (a) through (d) of this Section 5.7.

(2)

The Pre-retirement Spouse Options provide a "monthly payment during the Commerce Participant's life starting on the first of any month following his or her Termination of Employment, which date shall be considered the Annuity Starting Date for the purpose of this form of benefit, and prior to his or her Early Retirement Date as described in Section 1.17. After the Commerce Participant's death 50%, 75% or 100% of the Commerce Participant's Retirement Income will be paid for life to the Commerce Participant's Eligible Spouse. The initial monthly payment under the Preretirement Spouse Option will be equal to the Actuarial Equivalent of the amount payable under the Life Annuity form. For the purpose of this paragraph, Actuarial Equivalent shall be calculated using the 1984 Uniform Pensioners Mortality Table and an interest rate equal to the greater of 100% of the Pension Benefit Guaranty Corporation immediate interest rate in effect on the first day of the Plan Year in which the Commerce Participant's Annuity Starting Date occurs or 6.5%.

This paragraph (2) shall only apply to the portion of the Commerce Participant's Accrued Benefit earned prior to January 1, 1999 under the terms of the Commerce Plan. The portion of a Commerce Participant's Accrued Benefit earned on or after January 1, 1999 shall be paid in one of the forms described in subsections (a) through (d) of this Section 5.7.

(3)

Commerce Lump Sum Option. A Commerce Participant may elect to receive the Actuarial Equivalent of his or her Accrued Benefit earned before January 1, 1999 in the form of a single payment effective on the first of any month following Termination of Employment, which date shall be considered the Annuity Starting Date for the purpose of this form of benefit. For the purpose of this paragraph (3) Actuarial Equivalent shall be calculated using the 1984 Uniform Pensioners Mortality Table and an interest rate equal to 100% of the Pension Benefit Guaranty Corporation's (PBGC) interest rates in effect on the first day of the Plan Year in which the Commerce Participant's Annuity Starting Date occurs. If the lump sum value using this basis exceeds $25,000 then Actuarial Equivalent shall be calculated using the 1984 Uniform Pensioners Mortality Table and an interest rate equal to 120% of the PBGC rates. For the period of time prior to the Commerce Participant's Normal Retirement Date, pre-retirement mortality shall not be used.

The portion of a Commerce Participant's Accrued Benefit earned on or after January 1, 1999 shall be paid on the retirement date elected by the Commerce Participant in one of the forms described in subsections (a) through (d) of this Section 5.7.


(4)	A Commerce Participant's Accrued Benefit payable under any of the forms de scribed in this Section 5.7(g) shall never be less than his or her Accrued Benefit calculated as of December 31, 1998 under the terms of the Commerce Plan.

(h)

In the event the benefit restrictions of Section 11.5 apply at the time the Participant would otherwise be eligible to elect a lump sum and prevent such an election, then any election period for the lump sum payment shall be suspended and shall commence or recommence on the earliest possible date following the date the benefit restrictions no longer prevent the Participant from electing a lump sum distribution.

5.8

Payment of Small Benefits . Effective for payments to Participants first commencing after September 18, 1998, if a Participant has a Termination of Employment or dies and the Actuarial Equivalent value of the benefit payable under the Plan to such Participant or his or her Beneficiary does not exceed $5,000 ($3,500, for payments commencing prior to September 18, 1998), the Committee will pay the Actuarial Equivalent value of such benefit to the Participant or Beneficiary in a lump sum. If a lump sum payment is made, no other benefit under the Plan will be due to the Participant or Beneficiary. However, if the Participant receives less than the Actuarial Equivalent of his or her full Accrued Benefit, such Accrued Benefit and related service shall be reinstated if the Participant repays the distributed lump sum with interest at 120% of the Federal midterm rate as in effect for the first month of the Plan Year. Such repayment must be made prior to the earlier of (1) the fifth anniversary of the Participant's re-employment date, or (2) the date the Participant incurs a five-year Break in Service.

If the Participant's Vested Percentage is zero, the Participant will be deemed to have received a distribution of the Vested Percentage of his or her Accrued Benefit and to have forfeited the nonvested percentage of his or her Accrued Benefit.

If the Actuarial Equivalent value of the Participant's benefit at the time of a distribution exceeds $5,000 (or $3,500, whichever is applicable), then such value at any subsequent time will be deemed to exceed $5,000 (or $3,500, whichever is applicable). For any distribution subject to this Section 5.8 commencing on or after March 28, 2005, which is greater than $1,000, if the Participant does not elect to have the distribution paid in a direct rollover to an "eligible retirement plan" (as defined in Section 5.9(b)(2)) specified by the Participant or to receive the distribution directly in a lump sum cash payment, then the Committee shall cause the Plan to pay the distribution in a direct rollover to an individual retirement plan designated by the Committee.


5.9	Eligible Rollover Distribution .

(a)

This Section 5.9 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the plan to the contrary that would otherwise limit a distributee's election under this Section 5.9, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.


(b)	Definitions.

(1)

Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the amount payable by the Plan to a distributee, except that an eligible rollover distribution does not include: (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period often years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); or (C) the portion of any distribution that is not includible in gross income.

(2)

Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401 (a) that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution prior to January 1, 2002, that is payable to the surviving Eligible Spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

Effective for distributions occurring on or after January 1, 2002, an "eligible retirement plan" for any distributee (including a surviving Eligible Spouse) shall include, in addition to the plans and programs mentioned in the first sentence of the previous paragraph, any tax-deferred annuity program under Code Section 403(b) and any deferred compensation plan of a governmental entity under Code Section 457.

For distributions made after December 31, 2007, an eligible retirement plan shall also mean a Roth IRA described in Code Section 408A(b).


(3)	Distributee: A distributee includes a Participant or an Eligible Spouse.


(4)	Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee.

5.10

Re-employment After Retirement . In order to retire, a Participant must have a Termination of Employment. Effective January 1, 1992, if a Retired Participant is rehired by the Company, his or her Retirement Income, if being paid in a Life Annuity form, will not be suspended. The Retired Participant may earn additional benefits as provided in Article 3. The benefit attributable to service during the Participant's re-employment that is not yet in payment status will be paid, or commence to be paid upon the earlier of the Participant's subsequent retirement or the Participant's required beginning date described in Section 5.11(c). Such benefit may be paid in any form elected by the Participant, which form may be different from the form in which benefits are currently being paid.

If the Participant dies during such period of re-employment, any death benefits attributable to service during the Participant's re-employment will be determined in accordance with Article 8. Any death benefit attributable to service before the Retired Participant's re employment will be determined in accordance with the provisions of the applicable Form of Retirement Income elected at his or her original retirement.


5.11	Commencement of Benefits .


(a)	Retirement Income payments will begin on the later of the Retirement Date elected by the Participant or the first day of the month following the date on which the Participant applies for a retirement benefit.


(b)	Unless a Participant elects otherwise, Retirement Income payments will begin not later than the 60th day after the end of the Plan Year in which:


(1)	the Participant's Normal Retirement Age, or


(2)	the Participant's Termination of Employment occurs, whichever is later.


(c)	The required beginning date described in this Section 5.11{c) will apply regardless of any election made by the Participant.

(1)

Except as provided by subparagraphs (2), (3) and (4) below, Retirement Income payments will begin not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70½ whether or not such Participant's employment has terminated. Effective for Plan Years commencing on or after January 1, 1999, for a Participant who is not a 5% owner and who attains age 70 ½ on or after January 1, 1999, Retirement Income payments will begin not later than April 1 following the calendar year in which the Participant attains age 70½ or, if later, April 1 following the calendar year in which the Participant incurs a Termination of Employment.


(2)	A Participant who attained age 70 in 1988, who is not a 5% owner, and who has not retired by January 1, 1989, will be treated as having retired on January 1, 1989. Retirement Income payments will begin not later than April 1, 1990 for such Participants.


(3)	Retirement Income payments for a Participant who attained age 70 before January 1, 1988, and who is not a 5% owner will begin not later than April of the calendar year following the later of (A) the calendar year in which the Participant attained age 70 ½ or (8) the calendar year in which the Participant retires.

(4)

Retirement Income payments for a Participant who attained age 70 before January 1, 1988, and who is a 5% owner will begin not later than April 1 of the calendar year following the later of (A) the calendar year in which the Participant attained age 70 ½, or (B) the earlier of (i) the calendar year within which ends the Plan Year in which the Participant becomes a 5% owner, or (ii) the calendar year in which the Participant retires.

(5)

A Participant is treated as a 5% owner for purposes of this paragraph (c), if such Participant is a 5% owner as defined in Code Section 416(i) at any time during the Plan Year ending within the calendar year in which such owner attains age 66 or any subsequent Plan Year. Once a Participant is described in this subparagraph, distributions will continue to such Participant even if such Participant ceases to own more than 5% of the Company in a subsequent year. Effective January 1, 1999, a Participant is treated as a 5% owner if the Participant is a "5 percent owner" (as defined in Code Section 416(i)(1)(B)(i)) at any time during the calendar year in which the Participant attains age 70 ½.

(6)

If a Participant receives payments under this paragraph (c), such payments will be determined as if the Participant's Late Retirement Date were the date by which Retirement Income payments must be made under this paragraph (c). If the Participant continues to earn additional Accrued Benefits after this date, his or her Monthly Retirement Income will be redetermined on each January 1 following the date benefit payments commence. This re-determined benefit will be payable under the Form of Retirement Income elected as of the Late Retirement Date in accordance with Section 5.7.

(7)

Effective January 1, 1999, for a Participant whose continued active employment results in the deferral of Retirement Income to a date later than April 1 following the calendar year the Participant attains age 70-1/2 (the "Base Date"), the Accrued Benefit for such a Participant shall be Actuarially adjusted to reflect the deferral period from the Base Date to the date the Participant commences payment of Retirement Income. The Actuarial adjustment shall be based on the factors stated in Section 1.4(d).


5.12	Delay of Payment Due to Administrative Error .

(a)

Delay in Commencing Annuity Payments. In the event Retirement Income payments to a Participant are delayed for more than 60 days beyond his or her Retirement Date due to an administrative error, or such other event designated by the Committee, the affected Participant shall be entitled to Retirement Income payments retroactive to his or her Retirement Date, plus interest at a rate of 6% per year on the portion of the delayed payment which is more than 60 days late.

(b)

Delay in Payment of Lump-Sum. Effective on and after November 1, 1998, the provisions of this paragraph shall apply if a Participant or Beneficiary becomes entitled to receive a lump-sum Retirement Income payment pursuant to Section 5.7 or 5.8, and if the payment of such lump-sum is delayed due to an administrative error for more than 60 days. In such a case, if the Participant or Beneficiary has a right to receive a lump-sum based on the balance of his or her Cash Balance Account (or other ac count balance under the Plan which is expressed as a single sum), then the amount payable on the delayed date shall be the balance of such account after crediting of interest applicable to the account through the end of month immediately preceding the delayed payment date. However, if the Participant or Beneficiary has a right to receive a lump-sum based on the Actuarial present value of an Accrued Benefit ex pressed in the form of an annuity, the lump-sum which shall be payable to the Participant or Beneficiary as soon as administratively practical after the administrative error has been detected shall be an amount that is equal to the greater of:


(1)	the sum of: (A) the Actuarial present value of the Accrued Benefit based on the age, mortality and interest rate factors in effect as of the 60th day following the earliest date on which the benefit could have been paid in accordance with the terms of the Plan, plus (B) interest at 6% per annum for the whole and/or partial years from the said 60th day to the payment date; or


(2)	a lump-sum based on the Accrued Benefit on the date of Termination (or death, if applicable), but with the Actuarial present value based on the age, mortality and interest rate factors in effect as of the actual payment date.


5.13	Suspension of Benefits for Active Participants at Normal Retirement Date .

(a)

Permissible Suspension. For a Participant who has not previously commenced receiving monthly benefits and who continues in active service as an Employee after attaining his or her Normal Retirement Date, the right to receive payment of benefits shall be suspended so long as such employment continues, but not later than any required beginning date applicable to the Participant under Section 5.11(c), at which time the benefit shall commence. For any period of suspension between the Normal Retirement Date and April 1 following the year the Participant attains age 70112 there shall be no Actuarial adjustment to the Participant's benefit attributable to the suspension of the benefit. For any period of suspension that continues past such date, the terms of Section 5.11(c)(7) shall apply.

Any such suspension shall not apply to a Participant who has attained age 65 and performs no more than 40 Hours of Service per month. The benefit for such a Participant shall commence on the later of the Normal Retirement Date or the first day of the month following the date the Participant performs 40 or fewer Hours of Service per month.

(b)

Notice of Suspension of Benefits. A Participant whose benefit payment rights are suspended as described in the previous paragraph shall be notified in writing of such suspension as soon as administratively practical following the date as of which such payments are withheld. Such notice shall, among other things, advise the Participant of his or her right to request a review of the suspension, in accordance with the procedures in Section 12.6.


(c)	Participant's Duty to Notify Plan Administrator. Each such Participant shall have the duty to notify the Plan Administrator if and when the Participant modifies his or her regular work schedule to fewer than 40 Hours of Service per month, in which case the suspension shall cease, subject to verification by the Committee.

(d)

Benefits Paid in Error May Offset Future Benefits. In the event that benefits are mistakenly paid to a Participant during a period for which benefit payments should have been suspended under this Section, the amount mistakenly paid may be offset against benefits which become properly payable in the future, provided that such offset shall not exceed 25% of the benefit payable in each subsequent month.


5.14	Benefits Under a Qualified Domestic Relations Order (QDRO) . A domestic relations order, if (but only if) it is determined by the Committee (or the Committee's designated QDRO administrator) to be a Qualified Domestic Relations Order, may provide, as of a stated date (or upon the occurrence of a stated event pertaining to the Participant), either:


(a)	the division of a Participant's Accrued Benefit between the Participant and a named alternate payee, in portions or amounts stated in the QDRO;


(b)	the distribution to a named alternate payee of a stated portion (or dollar amount) of the Participant's benefit, in an amount not greater than the value of the Participant's Accrued Benefit that is vested at such time; or


(c)	a right for a named alternate payee to be treated as Beneficiary for all or a stated portion of a Participant's death benefit.

Notwithstanding any other provision of this Section, a QDRO may not (1) require a form of benefit distribution not provided under the terms of this Plan, (2) cause any unvested benefit to be vested, (3) cause a Participant's Accrued Benefit to have a value greater than the value determined under the terms of this Plan, (4) provide for a distribution to commence from an alternate payee's benefit at a time later than the latest date or age as of which a benefit distribution may commence under this Plan, or (5) otherwise state terms that are inconsistent with the terms of this Plan.

The Committee (or QDRO administrator) shall determine whether a domestic relations order meets the requirements of this Section within a reasonable period after it is received by the Committee (or QDRO administrator). The Committee (or QDRO administrator) shall notify the Participant and any alternate payee that a domestic relations order has been received. Any amounts due the alternate payee under the domestic relations order which, in its absence, would be paid to the Participant or a beneficiary, shall be held during the period while the domestic relations order's qualified status is being determined. If a domestic relations order is not affirmatively determined to be a QDRO, then such restriction shall lapse on the earlier of the (a) the date the order is determined not to be a QDRO and appeal rights under Section 12.6(c) or (d) (whichever is applicable) have expired or been exhausted, or (b) 18 months after such restriction is imposed.

5.15

Death or Disability While Performing Qualified Military Service . The Plan treats a Participant who, on or after January 1, 2007, dies or becomes disabled (as defined under the terms of the Plan) while performing qualified military service (as defined in Code §414(u)) with respect to the Employer as if the Participant had resumed employment in accordance with the Participant's re-employment rights under USERRA, on the day preceding death or disability (as the case may be) and terminated employment on the actual date of death or disability.

5.16

Non-spouse Beneficiary Rollover . For distributions first commencing after December 31, 2009, a non-spouse beneficiary who is a "designated beneficiary" under Code §401(a)(9)(E) and the regulations thereunder may roll over by a direct trustee-to-trustee transfer ("direct rollover"), all or any portion of his or her distribution to an Individual Retirement Account (IRA) the beneficiary establishes for purposes of receiving the distribution. In order to be able to roll over the distribution, the distribution must otherwise satisfy the definition of an "eligible rollover distribution" under Code §401(a)(31) and the provisions of Section 5.9 and this Section.


(a)	If a non-spouse beneficiary receives a distribution from the Plan, the distribution will not be eligible for a 60-day (non-direct) rollover.


(b)	If the Participant's named beneficiary is a trust, the Plan may make a direct rollover to an IRA on behalf of the trust, provided the trust satisfies the requirements to be a designated beneficiary within the meaning of Code §401(a)(9)(E).

(c)

A non-spouse beneficiary may not roll over an amount that is a required minimum distribution, as determined under applicable Regulations and other guidance. If the Participant dies before his or her required beginning date and the non-spouse beneficiary rolls over to an IRA the maximum amount eligible for rollover, the beneficiary may elect to use either the five-year rule or the life expectancy rule, pursuant to Treas. Reg. §1.401(a)(9)-3, Q&A-4(c), in determining the required minimum distributions from the IRA that receives the non-spouse beneficiary's distribution.

ARTICLE VI

TERMINATION AND VESTING


6.1	Vesting .


(a)	Except as described in subsection (b), a Participant's vested Accrued Benefit will be equal to the sum of (1) and (2) below :


(1)	The Participant's Accrued Benefit Attributable to the Old Plan Account deter mined in accordance with Section 4.5.


(2)	Effective January 1, 1989, the Participant's Accrued Benefit Attributable to Company Contributions (determined in accordance with Section 4.6) multiplied by the vested percentage shown in the following table:

Years of Vesting Service Vested Percentage

Fewer than 5

5 or more

100%


(b)	A Grossmont Participant's, and a Commerce Participant's, Accrued Benefit will be equal to his or her Accrued Benefit Attributable to Company Contributions (determined in accordance with Section 4.1) multiplied by the vested percentage shown in the following table:

Years of Vesting Service Vested Percentage

Fewer than 3 years

3 years but fewer than 4


4	years but fewer than 5 5 or more years

20%

40%

100%


(c)	In addition, a Participant's Accrued Benefit will be 100% vested if and when the Participant attains his or her Normal Retirement Age while an active Employee.


(d)	Effective December 12, 1994, a Participant will receive vesting credit for any and all years and partial years of Qualified Military Service.


(e)	The vested percentage of Cash Balance Accrued Benefit for each Participant who has at least one Hour of Service after December 31, 2007, shall be determined according to the following table:

Years of Vesting Service Vested Percentage

Fewer than 3

3 or more

100%


6.2	Termination Benefit .


(a)	A Terminated Vested Participant will have the option of :


(1)	withdrawing his or her Old Plan Account, in which event the Participant would be entitled to his or her vested Accrued Benefit Attributable to Company Contributions commencing on his or her Normal or Early Retirement Date, or


(2)	leaving his or her Old Plan Account in the Plan, in which event the Participant would be entitled to his or her vested Accrued Benefit commencing on his or her Normal or Early Retirement Date.

(b)

The monthly amount of Retirement Income payable to a Terminated Vested Participant who commences his or her benefit on the Normal Retirement Date will be equal to the vested Accrued Benefit (or, if the Old Plan Account has been withdrawn, the vested Accrued Benefit Attributable to Company Contributions) earned to the date of Termination of Employment. This Retirement Income will be subject to adjustment depending on the Form of Retirement Income elected in accordance with Section 5.7.


(c)	The monthly amount of Retirement Income payable to a Terminated Vested Participant who commences his or her benefit on an Early Retirement Date is equal to the Early Retirement Income described in Section 5.3.

(d)

Except as provided in Section 5.8, the Old Plan Account of a Participant will not be distributed pursuant to this Section unless the Participant elects such distribution and the Eligible Spouse of the Participant consents to the distribution not more than 90 days prior to the date of such distribution. The Eligible Spouse's consent must ac knowledge the effect of the election and must be witnessed by a plan representative or notary public. The requirement for consent of the Eligible Spouse will be waived if the Participant establishes to the satisfaction of the Committee that such consent cannot be obtained because there is no Eligible Spouse, the Eligible Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe.


6.3	Re-employment After Termination of Employment .

(a)

If a Terminated Vested Participant is subsequently reinstated as an Active Participant, his or her Retirement Income subsequent to his or her eventual Termination of Employment following the second period of employment will be based on the Participant's Accrued Benefit under the provisions of the Plan in effect as of such subsequent Termination of Employment, except that it may not be less than the Participant's Accrued Benefit as of the date of any prior Termination of Employment.

(b)

If a Participant's employment with the Company terminates prior to the Participant's becoming partially or fully vested in his or her Accrued Benefit, the Participant will be deemed to have received a distribution of his or her entire vested interest under the Plan. The Participant's unvested Accrued Benefit will be forfeited on the date of his or her Termination of Employment. A Participant whose benefit has been so forfeited will be deemed "cashed out" from the Plan. If the former Participant is re-employed before incurring five consecutive Breaks in Service and after completing a Year of Vesting Service, his or her Cash Balance Account and Accrued Benefit will be restored in accordance with Sections 3.5(a) and 4.1 respectively.


6.4	Termination Benefits and Re-employment for Commerce Participants .

(a)

A Commerce Participant may elect to receive the portion of his or her Accrued Benefit earned prior to January 1, 1999 on the first day of any month coincident with or following his or her Termination of Employment ("Termination Benefit"). The Termination Benefit is the Actuarial Equivalent of the Accrued Benefit earned prior to January 1, 1999. For early retirement reduction, Actuarial Equivalent shall be calculated as described in Section 5.3(e). For benefit form adjustment, Actuarial Equivalent shall be calculated as described in Sections 5.7(g)(2) and 5.7(g)(3). Upon meeting the requirements of Section 1.17(d), a Commerce Participant may receive the remainder of his or her Accrued Benefit earned on or after January 1, 1999.

(b)

In the event a vested Commerce Participant who terminated after December 31, 1998 and before his or her Early Retirement Date, received a distribution upon Termination of Employment, and becomes re-employed, which means he or she has at least 40 Hours of Service with the Employer during any calendar month, his or her Termination Benefit or Retirement Income shall be determined and paid as described below :


(1)	In the event a Commerce Participant has commenced annuity payments and is subsequently re-employed, such annuity payments shall continue upon re employment;


(2)	In the event a Commerce Participant received a lump sum distribution under Section 5.7(g)(3) upon Termination of Employment and becomes re-employed prior to incurring five consecutive one-year Breaks-In-Service, he or she may repay such benefit with interest, at 120% of the Federal mid-term rate as in effect for the first month of the Plan Year, to the Plan within five years after reemployment.

The Accrued Benefit of a Commerce Participant who makes such repayment shall be determined as if no prior distribution occurred.


(3)	The additional benefit earned during re-employment may be paid in any form elected by the Participant pursuant to Sections 5.7(a) to (d).

6.5

Special Termination Benefit for Sumitomo Participants . This Section applies to a Sumitomo Participant who (a) had a Termination of Employment for any reason between October 1, 1998 and September 30, 1999, (b) was not a Highly Compensated Employee (as defined in this Plan) for the Plan Year in which the Termination of Employment occurred, and (c) elected to receive severance benefits in connection with his or her separation from the Company under either the Sumitomo Severance Benefit Program, the Executive Retention and Severance Benefit Agreement and/or the Key Contributor Retention and Severance Agreement (which are plans and programs that are not part of this Plan and are not funded by the Trust Fund). In the case of each Sumitomo Participant who met all of the conditions of the previous sentence, the minimum benefit under Section 4.1(c) of this Plan as of his or her Termination of Employment shall be increased by 6.5%.

ARTICLE VII

DISABILITY BENEFITS


7.1	Determination of Disability . A Participant has a "total and permanent disability" if, while employed by the Company, the Participant ceases to perform the duties assigned to him or her by the Company due to a disability that meets the following eligibility criteria:


(a)	the Participant is entitled to disability retirement income payments under Title II of the Federal Social Security Act; provided, however, that this criterion in this clause "(a)" shall cease to be applicable to the definition of "total and permanent disability" on or after March 1, 2002, and


(b)	the Participant is eligible for disability benefits under the Company's long term disability plan.

It will be the responsibility of the Participant to submit proof of disability, as described in clause (a) and (b) above, satisfactory to the Committee.


7.2	Eligibility for Disability Benefits . A Disabled Participant or former Disabled Participant may retire on a Disability Retirement Date if the Participant has completed five Years of Vesting Service as of the date first disabled under Section 7.1.

7.3

Disability Retirement Date . If the Participant's total and permanent disability continues until the Participant's Normal Retirement Date, the Participant's Disability Retirement Date shall be the Normal Retirement Date (or the first day of the month following Termination of Service, if later). If a Disabled Participant's total and permanent disability ends before the Normal Retirement Date, the Participant may retire on an Early or Normal Retirement Date, whichever applies, and such date will be his or her Disability Retirement Date.

7.4

Disability Retirement Income . A Disabled Participant will be entitled to a monthly Disability Retirement Income beginning on his or her Disability Retirement Date. The amount will be equal to the retirement income from Section 5.2,5.3, or 5.4 on the Disability Retirement Date. While a Participant's total and permanent disability continues, until the earliest of the Participant's attaining his or her Normal Retirement Date, death, or the Participant's Disability Retirement Date, Earnings will be credited (in accordance with Section 3.2, as though the Participant were continuing to accrue 1,000 or more Hours of Service per year) in the amount equal to Earnings in the most recent year prior to the year of initial disability in which 1,000 Hours of Service were worked. Disability Retirement Income will be subject to adjustment depending on the Form of Retirement Income elected in accordance with Section 5.7.

ARTICLE VIII

DEATH BENEFITS


8.1	Death after Commencement of Benefits . Death Benefits for a Retired Participant will be determined in accordance with the provisions of the applicable Form of Retirement Income elected.


8.2	Death Prior to Commencement of Benefits . This Section 8.2 shall be effective April 1, 1997, except as otherwise stated below.

(a)

If a Participant, whose vested Accrued Benefit is calculated under Section 4.2, dies before his or her Retirement Date, the Participant's Eligible Spouse, if any, will receive a benefit commencing on the first day of the month following the Participant's death. The Eligible Spouse may elect to defer payment until the first day of any month on or before the Participant's Normal Retirement Date. The Eligible Spouse will receive a monthly benefit equal to the Actuarial Equivalent amount, as of the date the benefit commences, of the Participant's Cash Balance Account, based upon the Eligible Spouse's age as of the date the benefit commences. This benefit will continue to the death of the Eligible Spouse. Instead of receiving the benefit in the form of a Life Annuity, the Eligible Spouse may elect to receive the benefit in the Lump Sum Payment Option, described in Section 5.7(c). If the Participant does not have an Eligible Spouse who survives him or her, the Cash Balance Account as of the Participant's death will be paid on the first of the month following death to the Participant's estate.

For a Participant who is survived by an Eligible Spouse, the amount of the monthly benefit payable to the Eligible Spouse, as described in this subsection (a) (the "Cash Balance Annuity"), shall in no event be less than any of the following minimum benefits (assuming a benefit commencement date that is the same as the actual benefit commencement date under the prior paragraph) to the extent that any of the following minimum benefit rules is applicable to the deceased Participant:


(1)	For Participant with a Minimum Accrued Benefit as defined in Section 4.3 or a Grandfathered Minimum Accrued Benefit as defined in Section 4.4, the Cash Balance Annuity shall not be less than the Minimum Death Benefit that would be payable to the Eligible Spouse as described in Article 4 of Appendix ill.

(2)

Effective January 1, 1998, for a Grossmont Participant who has a minimum benefit described in Section 4.1 (b), the Cash Balance Annuity shall not be less than the monthly amount that would be payable as a 50% pre-retirement survivor annuity to the Eligible Spouse with respect to that minimum benefit, in accordance with the actuarial factors and other terms of the Grossmont Plan that were in effect on December 31, 1997.

(3)

Effective October 1, 1998, for a Sumitomo Participant who has a minimum benefit described in Section 4.1(c), the Cash Balance Annuity shall not be less than the monthly amount that would be payable as a 50% pre-retirement survivor annuity to his or her Eligible Spouse with respect to that minimum benefit, in accordance with the actuarial factors and other terms of the Sumitomo Plan that were in effect on September 30, 1998.

(4)

Effective January 1, 1999, for a Commerce Participant who has a minimum benefit described in Section 4.1(d), the Cash Balance Annuity shall not be less than the monthly amount that would be payable as a 50% pre-retirement survivor annuity to the Eligible Spouse with respect to that minimum benefit, in accordance with the actuarial factors and other terms of the Commerce Plan that were in effect on December 31, 1998.


(b)	If a Participant, whose vested Accrued Benefit is calculated under Plan provisions in effect prior to April 1, 1997, dies before his or her Retirement Date, the Participant's Eligible Spouse, if any, will receive a death benefit in accordance with the prior provisions.

8.3

Effect of Old Plan Account . The Eligible Spouse of a Participant who has an Old Plan Account at death may elect to receive it in a lump sum immediately following death. If the Eligible Spouse elects to receive monthly payments in addition to this lump sum in accordance with Section 8.2(a), the monthly amount payable will equal the monthly amount before consideration of the Old Plan Account reduced by the Accrued Benefit Attributable to the Old Plan Account, as described in Section 4.5. For Participants who die with 10 or more Years of Vesting Service, the Accrued Benefit Attributable to the Old Plan Account commencing prior to the first of the month following what would have been the Participant's earliest Early Retirement Date is the Actuarial Equivalent of the Accrued Benefit Attributable to the Old Plan Account at that earliest Early Retirement Date.


8.4	Return of Old Plan Account . Upon the death of the Participant or, if later, the death of the Eligible Spouse entitled to payments under Section 8.1 or 8.2, the Participant's remaining Old Plan Account, if any, will be paid to the Participant's Beneficiary. For purposes of this Section 8.4, the Participant's remaining Old Plan Account will be equal to the excess, if any, of:


(a)	the Participant's Old Plan Account as of his or her date of death or, if earlier, Retirement Date over


(b)	the sum of all amounts previously paid from the Trust Fund on such Participant's behalf.

ARTICLE IX

FINANCING THE PLAN


9.1	Company Contributions .


(a)	The Company expects to make the contributions necessary to provide the benefits of the Plan. Such contributions will not be less than the amount necessary to meet the minimum funding standards of ERISA.


(b)	All contributions will be deposited in the Trust Fund and will be disbursed in accordance with the provisions of the Plan and the Trust Agreement. All benefit payments under the Plan will be paid from the Trust Fund. No person will have any interest in, or right to, any part of the assets of the Plan except as expressly provided in the Plan.


(c)	Gains arising from experience under the Plan will not serve to increase the benefits otherwise due any Participant, but will be used to reduce future Company contributions.


9.2	Return of Company Contributions .


(a)	Except as provided below and in Section 10.2, the assets of the Plan will never inure to the benefit of the Company and will be held for the exclusive purposes of providing benefits to Participants of the Plan and their Beneficiaries and defraying reasonable expenses of administering the Plan.


(b)	If a contribution is made by the Company by a mistake of fact, such contribution will be returned to the Company provided this is done within one year after the payment of such contribution. Earnings attributable to the excess contribution may not be returned, but losses attributable thereto shall reduce the amount to be returned.


(c)	Contributions are conditioned upon their current deductibility under Code Section 404. If a contribution deduction is disallowed, to the extent the deduction is disallowed, such contribution will be returned to the Company within one year after the disallowance.


9.3	Employee Contributions . The Company pays the entire cost of the Plan. No employee contributions or rollovers are required or permitted.

ARTICLE X

TERMINATION OF THE PLAN


10.1	Termination of Plan . The Company expects to continue the Plan indefinitely but reserves the right to terminate the Plan in whole or in part.


10.2	Procedures Upon Termination of Plan . Upon termination of the Plan, the following provisions will apply:


(a)	Upon complete termination of the Plan, the Accrued Benefit of each Active or fuactive Participant will become fully vested and nonforfeitable (to the extent funded). No additional Employees will become Participants.

Upon partial termination of the Plan, the Accrued Benefit of each Active or fuactive Participant who is affected by such partial termination will become fully vested and nonforfeitable (to the extent funded).


(b)	The assets of the Plan available to provide benefits will be allocated among Participants and their Beneficiaries in the manner and order prescribed by ERISA Section 4044.

If any assets of the Plan remain after all liabilities of the Plan to Participants and their Beneficiaries have been satisfied or provided for, any residual assets will be paid to the Company, provided such payment does not contravene any provision of law.


(c)	Upon termination of the Plan, benefits of missing Participants shall be treated in accordance with ERISA Section 4050.

ARTICLE XI

INTERNAL REVENUE CODE LIMITATIONS ON BENEFITS


11.1	Earnings Limitation under Code Section 401(a)(17) . A Member's "Earnings," for purposes of determining his or her Accrued Benefit under this Plan, shall be subject to the limitations of Code Section 401(a)(17), as stated in Section 1.18(c) of this Plan.


11.2	Maximum Retirement Benefit under Code Section 415 .


(a)	For purposes of this Section 11.2 only, the following definitions will apply:

(1)

"Annual Benefit" means a retirement benefit payable annually in the form of a straight life annuity. A benefit payable in a form other than a straight life annuity will be adjusted to be the Actuarial Equivalent of a straight life annuity before applying the limitations of this Section 11.2. However, no Actuarial adjustment will be made for the value of a qualified joint and survivor annuity or the value of benefits that are not directly related to retirement benefits.


(2)	"Annual Benefit Dollar Limit" means the dollar limit for the applicable Plan Year, as stated in paragraph (b)(l) of this Section 11.2, after taking account of any annual adjustment to that limit as stated in that paragraph.


(3)	"Compensation" has the meaning stated in Section 1.15, except that effective for Limitation Years commencing on or after January 1, 2008, the following additional rules shall apply.


(A)	The term "Compensation" shall include payments of Post-Severance Compensation made to a Participant by the latest of (i) 2-1/2 months from the date of Termination of Employment, (ii) the end of the Limitation Year for which the Employer is required to furnish the Participants a written statement under Code §§6041(d), 6051(a)(3) and 6052 or (iii) the last day of the Plan Year.


(B)	The term "Compensation" shall not include any payment to a Participant by the Employer after the Participant's Termination of Employment that is not Post-Severance Compensation as defined in (C) below, even if payment of the amount is made within the time period specified in 11.2(a)(3)(A)(i) above.


(C)	"Post-Severance Compensation" shall mean any amount received as regular pay after Termination of Employment if:


(i)	the payment is regular remuneration for services during the Participant's regular working hours, or remuneration for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and


(ii)	the payment would have been paid to the Participant prior to a Termination of Employment if the Participant had continued in employment with the Employer.


(D)	For Limitation Years beginning after December 31, 2008, Compensation shall not include any differential wage payment, as defined in Code §3401(h)(2).


(4)	"Limitation Year" means a Plan Year, which coincides with the calendar year.


(5)	"Social Security Retirement Age" means the age used as the retirement age for a Participant under Section 216(1) of the Social Security Act except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(1)(2) of such Act were 62.


(b)	The Annual Benefit of a Participant who commences his or her benefit on a date within a Limitation Year may not at any time within a Limitation Year exceed the lesser of (1) or (2) below :

(1)

The dollar limit set forth in Code Section 415(b)(I)(A), as that limit may be modified for the applicable Limitation Year either by amendment of Code Section 415(b)(1) or as a result of an adjustment approved by the Secretary of the Treasury pursuant to Section 415(d) (for example, the limit shall be $140,000 in Plan Year 2001 and $160,000 in Plan Year 2002). Effective each January 1, this limitation will be automatically adjusted to the new dollar limitation prescribed by the Secretary of the Treasury for that calendar year.


(2)	100% of the annual average of the Participant's Compensation from the Employer for the three consecutive Limitation Years (or all Limitation Years, if fewer than three), during which he or she participated in the Plan and which give the highest average.


(c)	If the Annual Benefit payable to a Participant under this Plan and all other defined benefit plans of the Company does not exceed $10,000 and the Employer has not maintained a defined contribution plan in which the Participant participated, the maxi mum otherwise imposed by this Section 11.2 will not apply.


(d)	Service or participation less than ten years


(1)	If a Participant has completed less than ten years of participation in the Plan, the Annual Benefit Dollar Limit will be multiplied by the ratio of the Participant's years (or part thereof) of participation in the Plan to ten. This ratio will not be fewer than one-tenth.


(2)	If a Participant has completed fewer than 10 Years of Vesting Service, the limits otherwise imposed by Sections 11.2(b)(2) and 11.2(c) will be multiplied by the ratio of the Participant's Years of Vesting Service (or part thereof) to ten. This ratio will not be less than one-tenth.


(3)	To the extent required by regulations under Code Section 415, this Section 11.2(d) will be applied separately with respect to each change in the benefit structure of the Plan.


(e)	The provisions of this subsection (e) shall apply to Participants whose benefit commencement date occurs in any Plan Year beginning prior to January 1, 2002.


(1)	If the Participant's benefit payments are to commence at or after age 62 and the Participant's Social Security Retirement Age is 65, the Annual Benefit Dollar Limit will be reduced by five-ninths of one percent for each month by which benefits commence before the month in which the Participant attains age 65 or,

(2)

If the Participant's benefit payments are to commence at or after age 62 and the Participant's Social Security Retirement Age is greater than 65, the Annual Benefit Dollar Limit will be reduced by five-ninths of one percent for each of the first 36 months and five-twelfths of one percent for each of the additional months (up to 24) by which benefits commence before the month in which the Participant attains Social Security Retirement Age.

(3)

If the Participant's benefit payments are to commence prior to the month in which the Participant attains age 62, the Annual Benefit Dollar Limit shall be reduced for each month by which benefits commence prior to the date of attaining age 62, as follows. First, the limit at age 62 (the "Age 62 Limit") shall be determined pursuant to paragraph (1) or (2) above (whichever is applicable to the Participant). Second, the Age 62 Limit shall be reduced to the lesser of:


(A)	the product of (i) the Age 62 Limit, times (ii) the "implied early retirement factor" (as hereafter defined), or


(B)	the Actuarial Equivalent of the Age 62 Limit, based upon a 5% interest rate and the Applicable Mortality Table.

The "implied early retirement factor" shall mean the ratio of: (1) the early retirement reduction factor determined under Section 5.3 as applied to the Participant's age on his or her actual benefit commencement date, to (2) the early retirement reduction factor determined under Section 5.3 which would apply if the Participant elected to defer the commencement of his or her benefit to age 62.


(4)	If a Participant's benefit payments are to commence after the Participant's Social Security Retirement Age, the Annual Benefit Dollar Limit will be increased to the Actuarial Equivalent of the limit as of the Participant's Social Security Retirement Age, but the mortality factor of the Actuarial Equivalence calculation shall be ignored.


(f)	The provisions of this subsection (f) shall apply to Participants whose benefit commencement date occurs in any Plan Year beginning on or after January 1, 2002.


(1)	If the Participant's benefit commences prior to age 62, the Annual Benefit Dollar Limit shall be reduced to the lower of the following two amounts:


(A)	the Actuarially Equivalent dollar amount that reflects the number of months by which the benefit commencement date precedes the date of attaining age 62, based on an interest rate equal to 5%; or


(B)	the dollar amount that reflects the applicable reduction factor that would apply under the terms of the Plan.


(2)	If a Participant's benefit commencement date occurs between the date of attaining age 62 and 65, the Annual Benefit Dollar Limit shall not be adjusted on account of early commencement.

(3)

If the Participant's benefit commencement date occurs after attaining age 65 under circumstances resulting in a right to receive an Actuarial adjustment in the benefit payable under the Plan, the Annual Benefit Dollar Limit shall be increased by means of an Actuarial adjustment based on either (A) an interest rate of 5% (applied solely to the period that is subject to Actuarial adjustment under the Plan), or (B) the Actuarial adjustment factor that is applicable to the Participant's benefit under the Plan, whichever produces the lower limitation amount. When calculating the adjustment of the Annual Benefit Dollar Limit according to this paragraph, mortality shall be ignored.

(g)

If the Accrued Benefit of any Participant as of the close of the last Limitation Year beginning before January 1, 1987 exceeds the benefit limitations under Code Section 415(b) then, for purposes of Code Section 415(b) (and 415(e) for periods prior to January 1,2000) such Participant's defined benefit dollar limitation under Code Section 415(b)(l) will be equal to his or her Accrued Benefit, determined as of such date as if the Participant had separated from service on that date. For purposes of this para graph, any changes in the terms and conditions of the Plan or cost of living adjustments occurring after May 5, 1986 will be disregarded.


(h)	All defined benefit plans of the Employer, terminated or not, will be considered as one plan for purposes of the limitations specified under this Section 11.2, and all Affiliates and Subsidiaries of the Employer will be considered as one employing company.


(i)	The terms of this subsection shall not apply to any benefit which commences on or after January 1, 2000. In any case in which a person is a Participant in both a defined benefit plan and a defined contribution plan maintained by any Affiliate or Subsidiary of the Company, the sum of (1) and (2) below for any Limitation Year may not exceed 1.0:


(1)	The defined benefit plan fraction for such Limitation Year is equal to the quotient of (A) divided by (B) below :


(A)	The Annual Benefit of the Participant under the Plan and all other defined benefit plans (determined as of the close of such Limitation Year).


(B)	The lesser of 125% of the Annual Benefit Dollar Limit and 140% of the amount described in Section 11.2(b)(2).

If the Employee was a participant in one or more defined benefit plans maintained by any Affiliate or Subsidiary, which were in existence on May 5, 1986, the amount calculated in (B) will not be less than 125% of the Employee's accrued benefit under such defined benefit plans as of December 31, 1986, determined without regard to any change in the terms or conditions of the plan made after May 5, 1986, and with out regard to any cost of living adjustment occurring after May 5, 1986. The preceding sentence only applies if the defined benefit plans individually and in the aggregate satisfied the requirement of Code Section 415 as in effect on December 31, 1986.


(2)	The defined contribution plan fraction for such Limitation Year is equal to the quotient of (A) divided by (B) below:


(A)	The aggregate of the annual additions to the Participant's account under said defined contribution plan as of the close of such Limitation Year.


(B)	The lesser of 125% of the maximum annual additions to such account for all Years of Vesting Service with the Employer, or 1.4 multiplied by 25% of the Participant's Compensation for all Years of Vesting Service with the Employer.

If the Plan satisfied the applicable requirements of Code Section 415 as in effect for the last Plan Year beginning before January 1, 1987, an amount will be subtracted from the amount calculated in (A) (but not reducing the amount in (A) to less than zero) so that the sum of the defined benefit fraction and defined contribution fraction computed under Code Section 415(e)(1) does not exceed 1.0 for such Plan Year (determined as if the changes to Code Section 415 made by the Tax Reform Act of 1986 and any technical corrections to such act were in effect for such Plan Year).


(3)	If the sum of (1) and (2) exceeds 1.0, the Annual Benefit under this Plan will be limited to such amount as will reduce such sum to 1.0.


(j)	Adjustments for Distribution Other than as a Straight Life Annuity .

(1)

Effective for Limitation Years commencing after June 30, 2007, a retirement benefit that is payable in any form other than a straight life annuity and that is not subject to Code §417(e)(3) must be adjusted to an actuarially equivalent straight life annuity that equals the greater of the annual amount of the straight life annuity (if any) payable under the Plan at the same Annuity Starting Date, and the annual amount of a straight life annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant's form of benefit computed using an interest rate of 5% and the Applicable Mortality Table.

(2)

For Limitation Years commencing before July 1, 2007, a retirement benefit that is payable in any form other than a straight life annuity and that is not subject to Code §417(e)(3) must be adjusted to an actuarially equivalent straight life annuity that equals the annual amount of a straight life annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant's form of benefit computed using whichever of the following produces the greater annual amount: (i) the interest rate and mortality table or other tabular factor specified in the Plan for adjusting benefits in the same form; and

(ii) a 5% interest rate assumption and the Applicable Mortality Table.


(3)	A retirement benefit that is payable in any form other than a straight life annuity and that is subject to Code §417(e)(3) must be adjusted so as to equal the actuarially equivalent straight life annuity, determined according to the Annuity Starting Date, as provided in the following rules.

(A)

If the Annuity Starting Date is in a Plan Year beginning after 2005, the annual amount of the straight life annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant's form of benefit using whichever of the following produces the greatest annual amount: (i) the interest rate and the mortality table or other tabular factor specified in the Plan for adjusting benefits in the same form; (ii) a 5.5% interest rate assumption and the Applicable Mortality Table; and (iii) the applicable interest rate under Code §417(e)(3) and the Applicable Mortality Table, divided by 1.05.

(B)

If the Annuity Starting Date is in a Plan Year beginning in 2004 or 2005, the annual amount of the straight life annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant's form of benefit using whichever of the following produces the greater annual amount: (i) the interest rate and the mortality table or other tabular factor specified in the Plan for adjusting benefits in the same form; and (ii) a 5.5% interest rate assumption and the Applicable Mortality Table.

(C)

If the Annuity Starting Date is on or after the first day of the first Plan Year beginning in 2004 and before December 31, 2004, and the Plan applies the transition rule in section 101(d)(3) of PFEA '04 in lieu of the rule in (B) above, the annual amount of the straight life annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant's form of benefit determined in accordance with Notice 2004-78.


(k)	Adjustments for Distributions Commencing Before Age 62:

(1)

if the benefit commences prior to the Participant's attainment of age 62 and if the Annuity Starting Date is in a Limitation Year beginning before July 1, 2007, the annual amount of the benefit payable in the form of a straight life annuity commencing at the Participant's Annuity Starting Date that is the actuarial equivalent of the dollar limitation under Code §415(b)(1)(A) (as adjusted under Code §415(d)), with actuarial equivalence computed using which ever of the following produces the smaller annual amount:


(A)	the interest rate and the mortality table or other tabular factor specified in the Plan for determining actuarial equivalence for early retirement purposes; or


(B)	a 5% interest rate assumption and the Applicable Mortality Table.

(2)

if the benefit commences prior to the Participant's attainment of age 62 and if the Annuity Starting Date is in a Limitation Year beginning on or after July 1, 2007, and the Plan does not have an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the annual amount of a benefit payable in the form of a straight life annuity commencing at the Participant's Annuity Starting Date that is the actuarial equivalent of the dollar limitation under Code §415(b)(1)(A) (as adjusted under Code §415(d)), with actuarial equivalence computed using a 5% interest rate assumption and the Applicable Mortality Table and expressing the Participant's age based on completed calendar months as of the annuity starting date.


(3)	if the benefit commences prior to the Participant's attainment of age 62 and if the Annuity Starting Date is in a Limitation Year beginning on or after July 1, 2007, and the Plan has an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the lesser of


(A)	the adjusted dollar limitation determined according to (2) above; and

(B)

the product of the dollar limitation under Code §415(b)(1)(A) (as adjusted under Code §415(d)) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan at the Participant's Annuity Starting Date to the annual amount of the immediately commencing straight life annuity under the Plan at age 62, both determined without applying the limitations of Code §415.


(I)	Adjustment When Benefit Commences After the Social Security Retirement Age.

(1)

if the benefit commences after the Participant's attainment of age 65 and if the Annuity Starting Date is in a Limitation Year beginning before July 1, 2007, the annual amount of the benefit payable in the form of a straight life annuity commencing at the Participant's Annuity Starting Date that is the actuarial equivalent of the dollar limitation under Code §415(b)(1)(A) (as adjusted under Code §415(d)), with actuarial equivalence computed using which ever of the following produces the smaller annual amount:


(A)	the interest rate and the mortality table or other tabular factor specified in the Plan for determining actuarial equivalence for delayed retirement purposes; or


(B)	a 5% interest rate assumption and the Applicable Mortality Table.

(2)

if the benefit commences after the Participant's attainment of age 65 and if the Annuity Starting Date is in a Limitation Year beginning on or after July 1, 2007, and the Plan does not have an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the annual amount of a benefit payable in the form of a straight life annuity commencing at the Participant's Annuity Starting Date that is the actuarial equivalent of the dollar limitation under Code §415(b)(l)(A) (as adjusted under Code §415(d)), with actuarial equivalence computed using a 5% interest rate assumption and the Applicable Mortality Table and expressing the Participant's age based on completed calendar months as of the annuity starting date.


(3)	if the benefit commences after the Participant's attainment of age 65 and if the Annuity Starting Date is in a Limitation Year beginning on or after July 1, 2007, and the Plan has an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the lesser of


(A)	the adjusted dollar limitation determined according to (2) above; and

(B)

the product of the dollar limitation under Code §415(b)(l)(A) (as adjusted under Code §415(d)) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan at the Participant's Annuity Starting Date to the annual amount of the immediately commencing straight life annuity under the Plan at age 65, both deter mined without applying the limitations of §415.


(m)	For purposes of the foregoing subsections (j), (k) and (I) the following definitions apply :


(1)	"Applicable Mortality Table" means the table described in Revenue Ruling 2001- 62, or such other table applicable under Code §417(e) as may be published from time to time by the Internal Revenue Service.


(2)	"Annuity Starting Date" means the first day of the month for which an amount is payable as an annuity. In the case of a benefit not payable in the form of an annuity, the Annuity Starting Date shall be the date on which the benefit is actually paid or begins to be paid.


11.3	Additional Benefit Limits for Highly Compensated Employees .


(a)	For purposes of this Section 11.3 only, the following definitions will apply :


(1)	"Benefit" means benefits under the Plan and includes any annual periodic in come, any withdrawal values payable to a living Employee and any death bene fits not provided by insurance on the Employee's life.


(2)	"Current Liabilities" is defined in Code Section 412(1)(7) provided that the Company may elect to use the value of current liabilities as reported on Schedule B of the Plan ' s most recent timely filed Form 5500 or Form 5500 CIR. Alternatively, the Company may determine current liabilities as of a later date.


(3)	Effective January 1, 1997, "Highly Compensated Employee" means:

(A)

Any Employee who performs services for an Affiliate or Subsidiary of the Employer during the determination year and who received Compensation in excess of the dollar amount stated in Code Section 414(q)(l)(B)(i) (as adjusted by the Secretary or the Treasury) during the look-back year (for example, the said adjusted amount shall be $85,000 for the 2001 look back year and $90,000 for the 2002 look-back year). Provided, however, that, for Plan Years 1998 and thereafter, such an Employee shall not be considered a Highly Compensated Employee unless he or she has Compensation from the Employer during the look-back year that causes him or her to be among the highest paid 20% of the Employees of the Employer for a year in which the 20% limitation is in effect under the defined contribution plans maintained by the Employer.


(B)	Any Employee who is a 5% owner (as defined in code Section 416(i)(I)(B)(i)) of the Employer at any time during the look-back year or the determination year.


(C)	For purposes of this Section, the following definitions apply. The determination year is the Plan Year. The look-back year is the 12-month period immediately preceding the determination year.


(4)	"Highly Compensated Former Employee" means any former Employee who was a Highly Compensated Employee for a separation year (as defined in Treasury Regulation Section 1.414(q)-1T) or for any determination year ending on or after the Employee attains age 55, as provided by Code Section 414(q)(9) and the regulations thereunder.


(5)	"Restricted Amount" is the excess of the accumulated amount of distributions to a Restricted Employee over the accumulated amount of the payments that would have been paid under:


(A)	a straight life annuity that is the actuarial equivalent of the Restricted Employee's Benefit (other than a social security supplement), plus


(B)	the amount of the payments that the Restricted Employee is entitled to receive under a social security supplement.

For this purpose, an "accumulated amount" is the amount of a payment in creased by a reasonable amount of interest from the date the payment was made (or would have been made) until the date for the determination of the Restricted Amount.


(6)	"Restricted Employee" for any Plan Year means one of the 25 Highly Compensated Employees or Highly Compensated Former Employees with the greatest compensation.


(b)	In the event the Plan is terminated, the Benefit payable to any Highly Compensated Employee and any Highly Compensated Former Employee will be limited to a benefit which is nondiscriminatory under Code Section 401 (a)(4).

(c)

Prior to Plan termination, the annual payment to a Restricted Employee under the Plan will be limited to an amount equal to the annual payment that would have been paid under a straight life annuity that is the actuarial equivalent to the Restricted Em ployee's Benefit (not including any social security supplement) plus the amount of any social security supplement payments the Restricted Employee is entitled to receive.


(d)	Subsection (c) above will not apply if:


(1)	payment of all Benefits to the Restricted Employee, the value of Plan assets is 110% or more of the value of Current Liabilities,


(2)	the value of Benefits payable to the Restricted Employee is less than 1% of the value of Current Liabilities, or


(3)	the present value of the Benefits payable to the Restricted Employee is $5,000 or less, or


(4)	upon receipt of a distribution from the Plan, the Restricted Employee deposits in escrow property having a fair market value equal to at least 125% of the Restricted Amount or, alternatively, posts a bond or letter of credit in an amount equal to at least 100% of the Restricted Amount.


11.4	Top-Heavy Provisions .


(a)	Top-Heavy Plan. Notwithstanding any other provision of this Plan to the contrary, this Section will apply if the Plan is a Top-Heavy Plan for any Plan Year after December 31, 2001. For Plan Years prior to that date the provisions of the Prior Plan will apply.

The Plan will be a Top-Heavy Plan if, as of the Determination Date, the present value of the cumulative accrued benefits of Key Employees exceeds 60% of the present value of the cumulative accrued benefits under the Plan of all Participants and Beneficiaries (but excluding the value of the accrued benefits of former Key Employees and individuals who have not performed any services for the Company during the one year period ending on the Determination Date). This percentage will be computed in accordance with Code §416(g).

In determining whether this Plan is a Top-Heavy Plan, all employers that are aggregated under Code §§414(b), (c) and (m) will be treated as a single employer. In addition, all plans that are part of the Aggregation Group will be treated as a single plan. In determining present values, mortality will be based on the 1984 Unisex Pension Mortality Table and the interest rate utilized will be 5%.


(b)	Definition of Terms. For purposes of this Section 11.4 only, the following terms will have the following meanings:


(1)	"Aggregation Group" means the Required Aggregation Group or, at the election of the Company, the Permissive Aggregation Group.

(2)

"Average Compensation" means the Participant's Compensation averaged over the five consecutive Plan Years in which the Participant earned a Year of Vesting Service (if such Year of Vesting Service is not disregarded pursuant to subsection (d) below) and in which the Participant's aggregate Compensation was the greatest. If the Participant received Compensation in fewer than five such Plan Years, his or her Compensation will be averaged over such lesser number of Plan Years.


(3)	"Compensation" shall be as defined in Section 1.15, subject to the limitations imposed by Code §401(a)(17), as amended by law and as adjusted by the Secretary of the Treasury.


(4)	"Determination Date" means the last day of the preceding Plan Year. This date will also be the valuation date for determining present values.


(5)	"Key Employee" means an Employee or former Employee (and, in the case of a deceased former Employee, his or her Beneficiary under the Plan) where the Employee or former Employee, during the Plan Year containing the Determination Date, is either:


(A)	an officer of the Employer whose annual Compensation from the Employer exceeds $130,000 (adjusted in the manner stated in Code §416(i), pro vided that no more than 50 Employees shall be considered officers;


(B)	a five-percent owner of the Employer (as defined above); or


(C)	a one-percent owner of the Employer (as defined above) whose annual Compensation from the Employer exceeds $150,000.

For purposes of paragraphs (B) and (C) above, an Employee will be deemed to own stock held for his or her benefit by a partnership, estate, trust or corporation to the extent provided under Code §318(a)(2), but subparagraph (C) of that Code Section shall be applied by substituting 5% instead of 50%.


(6)	"Non-key Employee" means an Employee (and any Beneficiary of an Employee) who is not a Key Employee.


(7)	"Permissive Aggregation Group" means the Required Aggregation Group of plans plus any other plan or plans of the Company which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code §§401(a)(4) and 410.


(8)	"Required Aggregation Group" means:


(A)	Each stock bonus, pension, or profit sharing plan of the Employer in which a Key Employee participates in the Plan Year containing the Determination Date which is intended to qualify under Code §401(a); and


(B)	Each other such stock bonus, pension or profit sharing plan of an employer which enables any plan in which a Key Employee participates to meet the requirements of Code §§401(a)(4) or 410.


(9)	"Top-Heavy Group" means the Aggregation Group if the sum of (A) and (B) below exceeds 60% of a similar sum determined for all Employees (excluding former Key Employees and individuals who have not performed any services for the Employer during the one year period ending on the Determination Date):


(A)	The present value of the cumulative accrued benefit for Key Employees under all defined benefit plans included in such group.


(B)	The aggregate of the accounts of Key Employees under all defined contribution plans included in such group.

In a Top-Heavy Group, all plans in the Required Aggregation Group are Top Heavy regardless of whether or not the individual plans are Top-Heavy.


(c)	Modification of Vesting Schedule. If the Plan is a Top-Heavy Plan in a Plan Year, a Participant who is credited with an Hour of Service in such Plan Year will have his or her Vested Percentage for Accrued Benefit Attributable to Company Contributions determined in accordance with the following schedule if it produces a higher Vested Percentage than the schedule in Section 6.1.

Years of Vesting Service Vested Percentage

Less than 2

6 or more

20%

40%

60%

80%

100%

Effective for Plan Years commencing after December 31, 2007, the vesting schedule in Section 6.1(e) shall always apply.

A Participant's vested Accrued Benefit Attributable to Company Contributions will not be less than that determined as of the last day of the last Plan Year in which the Plan was a Top-Heavy Plan.

If the Plan ceases to be Top-Heavy, each Participant with three or more Years of Vesting Service (determined as of the first day of the Plan Year in which the Plan ceases to be Top-Heavy) will continue to have his or her Vested Percentage for Accrued Benefit Attributable to Company Contributions determined in accordance with this subsection (c).

(d)

Minimum Benefit. If the Plan is Top-Heavy in a Plan Year, the Accrued Benefit as of the last day of such Plan Year for any Participant who is not a Key Employee, but who is employed or on an Authorized Period of Absence in such Plan Year, will not be less than the Actuarial Equivalent of an annual benefit payable in the form of a straight life annuity beginning on the Participant's Normal Retirement Date equal to the lesser of (i) 2% of the Participant's Average Compensation multiplied by Years of Vesting Service or (ii) 20% of the Participant's Average Compensation. For purposes of this subsection (d), any Years of Vesting Service will be disregarded if:


(1)	the Plan was not a Top-Heavy Plan for any Plan Year ending during such Years of Vesting Service, or


(2)	such Year of Vesting Service ended in a Plan Year beginning before January 1, 1984.

A Participant's Accrued Benefit as of any subsequent date will not be less than that determined as of the last day of the Plan Year in which the Plan was a Top Heavy Plan.

(3)

Collective Bargaining Agreements The provisions of subsections (c) and (d) shall not apply to any Employee included in a group of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, including the Employer, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer(s).


11.5	Benefit Restrictions Due to Application of Code §436 . Effective for Plan Years commencing after December 31, 2007, this Section shall take precedence over any contrary Plan provisions.

Application. This Section shall apply so long as the Plan is not a multi-employer plan within the meaning of Code §414(f) and is not maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers. For purposes of this subsection, the term Plan shall include any predecessor plan. To the extent required the provisions of Code §436 and all regulations thereunder are incorporated herein by reference. If the Plan has a valuation date other than the first day of the Plan Year, the provisions of Code §436 and this Section will applied in accordance with regulations.

3382191.1


(a)	Funding-Based Limitation on Shutdown Benefits and Other Unpredictable Contingent Event Benefits.


(1)	In general. If a Participant is entitled to an "unpredictable contingent event benefit" payable with respect to any event occurring during any Plan Year, then the benefit may not be provided if the "adjusted funding target attainment percentage" for the Plan Year


(A)	is less than 60% or


(B)	would be less than 60% taking into account the occurrence .


(2)	Exemption. Paragraph (1) shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year, upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code Section 430) equal to:


(A)	in the case of (b)(l)(A) above, the amount of the increase in the funding target of the Plan (under Code §430) for the Plan Year attributable to the occurrence referred to in paragraph (1), and


(B)	in the case of (b)(l)(B) above, the amount sufficient to result in an "adjusted funding target attainment percentage" of 60%.


(3)	Unpredictable contingent event benefit. For purposes of this subsection, the term "unpredictable contingent event benefit" means any benefit payable solely by reason of:


(A)	a plant shutdown (or similar event, as determined by the Secretary of the Treasury), or


(B)	an event other than the attainment of any age, performance of any service, receipt or derivation of any compensation, or occurrence of death or disability.


(b)	Limitations on Plan Amendments Increasing Liability for Benefits .


(1)	In general. No amendment that has the effect of increasing liabilities of the Plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any Plan Year if the adjusted funding target attainment percentage for the Plan Year is:


(A)	less than 80% or

(B) would be less than 80% taking into account the amendment .


(2)	Exemption. Paragraph (c)(1) shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year (or if later, the effective date of the amendment), upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code §430) equal to:

3382191.1


(A)	in the case of paragraph (c)(1)(A) above, the amount of the increase in the funding target of the Plan (under Code §430) for the Plan Year attributable to the amendment, and


(B)	in the case of paragraph (c)(1)(B) above, the amount sufficient to result in an adjusted funding target attainment percentage of 80%.


(3)	Exception for certain benefit increases. Paragraph (c)(1) shall not apply to any amendment that provides for an increase in benefits under a formula that is not based on a Participant's Compensation, but only if the rate of such increase is not in excess of the contemporaneous rate of increase in average wages of Participants covered by the amendment.


(c)	Limitations on Accelerated Benefit Distributions.


(1)	Funding percentage less than 60%. If the Plan's adjusted funding target attainment percentage for a Plan Year is less than 60%, then the Plan may not pay any "prohibited payment" after the valuation date for the Plan Year.


(2)	Bankruptcy. During any period in which the Employer is a debtor in a case under Title 11 of the United States Code, or similar federal or state law, the Plan may not pay any "prohibited payment." The preceding sentence shall not apply on or after the date on which the enrolled actuary of the Plan certifies that the adjusted funding target attainment percentage of the Plan is not less than 100%.


(3)	Limited payment if percentage at least 60% but less than 80% .


(A)	In general. If the Plan's adjusted funding target attainment percentage for a Plan Year is 60% or greater but less than 80%, then the Plan may not pay any "prohibited payment" after the valuation date for the Plan Year to the extent the amount of the payment exceeds the lesser of:


(i)	fifty percent (50%) of the amount of the payment that could be made without regard to this subsection, or


(ii)	the present value (determined under guidance prescribed by the Pension Benefit Guaranty Corporation, using the interest and mortality assumptions under Code §417(e)) of the maximum guarantee with respect to the participant under ERISA §4022.


(B)	One-time application.


(i)	In general. Only one "prohibited payment" meeting the requirements of subparagraph (A) may be made with respect to any Participant during any period of consecutive Plan Years to which the limitations under either paragraph (1) or (2) or this paragraph applies.


(ii)	Treatment of beneficiaries. For purposes of this subparagraph, a Participant and any Beneficiary (including an alternate payee, as defined

3382191.1

in Code §414(p)(8)) shall be treated as one Participant. If the Accrued Benefit of a Participant is allocated to an alternate payee and one or more other persons, the amount under subparagraph (A) shall be allocated among those persons in the same manner as the Accrued Benefit is allocated unless the qualified domestic relations order (as defined in Code §414(p)(1)(A)) provides other wise.


(4)	Exception. This subsection shall not apply for any Plan Year if the terms of the Plan (as in effect for the period beginning on September 1, 2005 and ending with such Plan Year) provide for no benefit accruals with respect to any Participant during such period.


(5)	"Prohibited payment." For purposes of this subsection, the term "prohibited payment" means:


(A)	any payment in excess of the monthly amount paid under a single life annuity (plus any Social Security supplements described in the last sentence of Code §411(a)(9)) to a Participant or Beneficiary whose Annuity Starting Date occurs during any period a limitation under paragraph (d)(1) or (2) is in effect,


(B)	any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and

"Prohibited payment" shall not include the payment of a benefit that under Code §411(a)(11) may be immediately distributed without the consent of the Participant.


(d)	Limitation on Benefit Accruals for Plans with Severe Funding Shortfalls.


(1)	In general. If the Plan's adjusted funding target attainment percentage for a Plan Year is less than 60%, benefit accruals under the Plan shall cease as of the valuation date for the Plan Year.

(2) Exemption. Paragraph (e)(1) shall cease to apply with respect to any Plan Year, effective as of the first day of the Plan Year, upon payment by the Employer of a contribution (in addition to any minimum required contribution under Code §430) equal to the amount sufficient to result in an adjusted funding target attainment percentage of 60%.

(3)

Temporary modification of limitation. In the case of the first Plan Year beginning during the period beginning on October 1, 2008, and ending on September 30, 2009, the provisions of (e)(1) above shall be applied by substituting the Plan's adjusted funding target attainment percentage for the preceding Plan Year for the percentage for the Plan Year, but only if the adjusted funding target attainment percentage for the preceding year is greater.


(e)	Rules Relating to Contributions Required to Avoid Benefit Limitations.

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(1)	Security may be provided:


(A)	In general. For purposes of this section, the adjusted funding target attainment percentage shall be determined by treating as an asset of the Plan any security provided by the Employer in a form meeting the requirements of subparagraph (B).


(B)	Form of security. The security required under subparagraph (A) shall consist of:


(i)	a bond issued by a corporate surety company that is an acceptable surety for purposes of ERISA §412,


(ii)	cash or United States obligations that mature in three years or fewer, held in escrow by a bank or similar financial institution, or


(iii)	such other form of security as is satisfactory to the Secretary and the parties involved.


(C)	Enforcement. Any security provided under subparagraph (A) may be perfected and enforced at any time after the earlier of:


(i)	the date on which the Plan terminates;


(ii)	if there is a failure to make a payment of the minimum required contribution for any Plan Year beginning after the security is pro vided, the due date for the payment under Code §430(j); or


(iii)	if the adjusted funding target attainment percentage is less than 60% for seven consecutive years, the valuation date for the last year in the period.

(D) Release of security. The security shall be released (and any amounts thereunder shall be refunded together with any interest accrued thereon) at such time as the Secretary may prescribe in Regulations, including Regulations for partial releases of the security by reason of increases in the adjusted funding target attainment percentage.


(2)	Pre-funding balance or funding standard carryover balance may not be used. No pre-funding balance or funding standard carryover balance under Code §430(f) may be used under subsection (b), (c), or (e) to satisfy any payment an Employer may make under any such subsection to avoid or terminate the application of any limitation under such subsection.


(3)	Deemed reduction of funding balances:

(A) In general. Subject to subparagraph ( B), in any case in which a benefit limitation under subsection (b), (c), (d), or (e) would (but for this sub paragraph and determined without regard to subsection (b)(2), (c)(2), or (e)(2)) apply to the Plan for the Plan Year, the Employer shall be treated for purposes of this Section 19.5 as having made an election under Code §430(f) to reduce the pre-

3382191.1

funding balance or funding standard carryover balance by the amount necessary for the benefit limitation not to apply to the Plan for the Plan Year.


(B)	Exception for insufficient funding balances. Subparagraph (A) shall not apply with respect to a benefit limitation for any Plan Year if the application of subparagraph (A) would not result in the benefit limitation not applying for such Plan Year.


(f)	Presumed Underfunding for Purposes of Benefit Limitations.

(1)

Presumption of continued underfunding. In any case in which a benefit limitation under subsection (b), (c), (d), or (e) has been applied to a Plan with respect to the Plan Year preceding the current Plan Year, the adjusted funding target attainment percentage of the Plan for the current Plan Year shall be presumed to be equal to the adjusted funding target attainment percentage of the Plan for the preceding Plan Year until the enrolled actuary of the Plan certifies the actual adjusted funding target attainment percentage of the Plan for the current Plan Year.

(2)

Presumption of underfunding after 10th month. In any case in which no certification of the adjusted funding target attainment percentage for the current Plan Year is made with respect to the Plan before the first day of the 10th month of such year, for purposes of subsections (b), (c), (d), and (e), such first day shall be deemed, for purposes of such subsection, to be the valuation date of the Plan for the current Plan Year and the Plan's adjusted funding target attainment percentage shall be conclusively presumed to be less than 60% as of the first day.


(3)	Presumption of underfunding after 4th month for nearly underfunded plans. In any case in which:

(A)

a benefit limitation under subsection (b), (c), (d), or (e) did not apply to a Plan with respect to the Plan Year preceding the current Plan Year, but the adjusted funding target attainment percentage of the Plan for the preceding Plan Year was not more than 10 percentage points greater than the percentage that would have caused the subsection to apply to the Plan with respect to the preceding Plan Year, and

(B) as of the first day of the 4th month of the current Plan Year, the enrolled actuary of the Plan has not certified the actual adjusted funding target attainment percentage of the Plan for the current Plan Year, until the enrolled actuary so certifies, the first day shall be deemed, for purposes of the subsection, to be the valuation date of the Plan for the current Plan Year and the adjusted funding target attainment percentage of the Plan as of such first day shall, for purposes of the subsection, be presumed to be equal to 10 percentage points less than the adjusted funding target attainment percentage of the Plan for the preceding Plan Year.


(g)	Treatment of Plan as of Close of Prohibited or Cessation Period. Payments and accruals will resume effective as of the day following the close of the period for which any limitation of payment or accrual of benefits under subsection (d) or (e) applies. Nothing in this

3382191.1

subsection shall be construed as affecting the Plan's treatment of benefits that would have been paid or accrued but for this Section 19.5.


(h)	Definitions.


(1)	"Funding target attainment percentage" shall have the same meaning given that term by Code §430(d)(2), except as otherwise provided herein. However, in the case of Plan Years beginning in 2008, the funding target attainment percentage for the preceding Plan Year may be determined using such methods of estimation as the Secretary may provide.


(2)	"Adjusted funding target attainment percentage" means the funding target attainment percentage that is determined under paragraph (1) by increasing each of the amounts under subparagraphs (A) and (B) of Code §430(d)(2) by the aggregate amount of purchases of annuities for employees other than Highly Compensated Employees that were made by the Plan during the preceding two Plan Years.


(3)	Application to plans that are fully funded without regard to reductions for funding balances.


(A)	In general. If in any Plan Year the funding target attainment percentage is 100% or more (determined and without regard to the reduction in the value of assets under Code §430(f)(4)), the funding target attainment percentage for purposes of paragraphs (1) and (2) shall be determined without regard to the reduction.


(B)	Transition rule. Subparagraph (A) shall be applied to Plan Years beginning after 2007 and before 2011 by substituting for 100% the applicable percentage determined in accordance with the following table:

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In the case of Plan Year	The applicable percentage is:
2008	92%
2009	94%
2010	96%

(C)

Subparagraph (B) shall not apply with respect to any Plan Year beginning after 2008 unless the funding target attainment percentage (determined without regard to the reduction in the value of assets under Code §430(f)(4)) of the Plan for each preceding Plan Year beginning after 2007 was not less than the applicable percentage with respect to such preceding Plan Year determined under subparagraph (B).


11.6	Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent or If the Plan Sponsor Is In Bankruptcy.

Application. The provisions of this section supplement (or as applicable, supercede) the provisions of Section 11.5. They are effective for Plan Years commencing on and after January 1, 2008.

(a)

Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent, But Not Less Than 60 Percent. Notwithstanding any other provisions of the plan, if the plan's adjusted funding target attainment percentage for a plan year is less than 80 percent (or would be less than 80 percent to the extent described in Section 1(b) below) but is not less than 60 percent, then the limitations set forth in this Section apply.

(1)

50 Percent Limitation on Single Sum Payments, Other Accelerated Forms of Distribution, and Other Prohibited Payments. A participant or beneficiary is not permitted to elect, and the plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, unless the present value of the portion of the benefit that is being paid in a prohibited payment does not exceed the lesser of:


(A)	50 percent of the present value of the benefit payable in the optional form of benefit that includes the prohibited payment; or


(B)	100 percent of the PBGC maximum benefit guarantee amount (as defined in

§ 1.4361(d)(3)(iii)(C) of the Treasury Regulations).

The limitation set forth in this Section (a)(l) does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the participant. If an optional form of benefit that is otherwise available under the terms of the plan is not available to a participant or beneficiary as of the annuity starting date because of the application of the requirements of this Section

3382191.1

1(a), the participant or beneficiary is permitted to elect to bifurcate the benefit into unrestricted and restricted portions (as described in § 1.4361(d)(3)(iii)(D) of the Treasury Regulations). The participant or beneficiary may also elect any other optional form of benefit otherwise available under the plan at that annuity starting date that would satisfy the 50 percent/PBGC maximum benefit guarantee amount limitation described in this Section 1(a), or may elect to defer the benefit in accordance with any general right to defer commencement of benefits under the plan.

(2)

Plan Amendments Increasing Liability for Benefits. No amendment to the plan that has the effect of increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable shall take effect in a plan year if the adjusted funding target attainment percentage for the plan year is:


(A)	Less than 80 percent; or


(B)	80 percent or more, but would be less than 80 percent if the benefits attributable to the amendment were taken into account in determining the adjusted funding target attainment percentage.

The limitation set forth in this Section (a)(2) does not apply to any amendment to the plan that provides a benefit increase under a plan formula that is not based on compensation, provided that the rate of such increase does not exceed the contemporaneous rate of increase in the average wages of participants covered by the amendment.


(b)	Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 60 Percent. Notwithstanding any other provisions of the plan, if the plan's adjusted funding target attainment percentage for a plan year is less than 60 percent (or would be less than 60 percent to the extent described in Section (b)(2) below), then the limitations in this Section (b) apply.

(1)

Single Sums, Other Accelerated Forms of Distribution, and Other Prohibited Payments Not Permitted. A participant or beneficiary is not permitted to elect, and the plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or tra n sfer that is a prohibited payment. The limitation set forth in this Section (b)(l) does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the participant.


(2)	Shutdown Benefits and Other Unpredictable Contingent Event Benefits Not Permitted to Be Paid. An unpredictable contingent event benefit with respect to an unpredictable contingent event occurring during a plan year shall not be paid if the adjusted funding target attainment percentage for the plan year is:


(A)	Less than 60 percent; or

3382191.1


(B)	60 percent or more, but would be less than 60 percent if the adjusted funding target attainment percentage were redetermined applying an actuarial assumption that the likelihood of occurrence of the unpredictable contingent event during the plan year is 100 percent.


(3)	Benefit Accruals Frozen. Benefit accruals under the plan shall cease as of the applicable section 436 measurement date. In addition, if the plan is required to cease benefit accruals under this Section (b)(3), then the plan is not permitted to be amended in a manner that would increase the liabilities of the plan by reason of an increase in benefits or establishment of new benefits.

(c)

Limitations Applicable If the Plan Sponsor Is In Bankruptcy. Notwithstanding any other provisions of the plan, a participant or beneficiary is not permitted to elect, and the plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date that occurs during any period in which the plan sponsor is a debtor in a case under title 11, United States Code, or similar Federal or State law, except for payments made within a plan year with an annuity starting date that occurs on or after the date on which the plan's enrolled actuary certifies that the plan's adjusted funding target attainment percent age for that plan year is not less than 100 percent. In addition, during such period in which the plan sponsor is a debtor, the plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, except for payments that occur on a date within a plan year that is on or after the date on which the plan's enrolled actuary certifies that the plan's adjusted funding target attainment percentage for that plan year is not less than 100 percent. The limitation set forth in this Section (c) does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the participant.


(d)	Provisions Applicable After Limitations Cease to Apply.

(1)

Resumption of Prohibited Payments. If a limitation on prohibited payments under Section (a)(l), Section (b)(l), or Section (c) applied to the plan as of a section 436 measurement date, but that limit no longer applies to the plan as of a later section 436 measurement date, then that limitation does not apply to benefits with annuity starting dates that are on or after that later section 436 measurement date.

(2)

Resumption of Benefit Accruals. If a limitation on benefit accruals under Section (b)(3) applied to the plan as of a section 436 measurement date, but that limitation no longer applies to the plan as of a later section 436 measurement date, then benefit accruals shall resume prospectively and that limitation does not apply to benefit accruals that are based on service on or after that later section 436 measurement date, except as otherwise provided under the plan. The plan shall comply with the rules relating to partial years of participation and the prohibition on double proration under Department of Labor regulation 29 CFR § 2530.2042(c) and (d).

(3)

Shutdown and Other Unpredictable Contingent Event Benefits. If an unpredictable contingent event benefit with respect to an unpredictable contingent event that occurs during the plan year is not permitted to be paid after the occurrence of the event because of the limitation of Section (b)(2), but is permitted to be paid later in the same plan year (as a result of additional contributions or pursuant to the enrolled actuary's certification of the adjusted funding target attainment percentage for the

3382191.1

plan year that meets the requirements of §1.436 (g)(S)(ii)(B) of the Treasury Regulations), then that unpredictable contingent event benefit shall be paid, retroactive to the period that benefit would have been payable under the terms of the plan (determined without regard to Section (b) (2 )). If the unpredictable contingent event benefit does not become payable during the plan year in accordance with the preceding sentence, then the plan is treated as if it does not provide for that benefit.

(d)

Treatment of Plan Amendments That Do Not Take Effect. If a plan amendment does not take effect as of the effective date of the amendment because of the limitation of Section (a)(2) or Section (b)(3), but is permitted to take effect later in the same plan year (as a result of additional contributions or pursuant to the enrolled actuary's certification of the adjusted funding target attainment percentage for the plan year that meets the requirements of § 1.436 (g)(S)(ii)(C) of the Treasury Regulations), then the plan amendment must automatically take effect as of the first day of the plan year (or, if later, the original effective date of the amendment). If the plan amendment cannot take effect during the same plan year, then it shall be treated as if it were never adopted, unless the plan amendment provides otherwise.


(e)	Notice Requirement. See section 101(j) of ERISA for rules requiring the plan administrator of a single employer defined benefit pension plan to provide a written notice to participants and beneficiaries within 30 days after certain specified dates if the plan has become subject to a limitation described in Section (a)(l), Section (b), or Section (c).


(f)	Methods to Avoid or Terminate Benefit Limitations. See § 436(b)(2), (c)(2), (e)(2), and

(f) of the Internal Revenue Code and § 1.436l(f) of the Treasury Regulations for rules relating to employer contributions and other methods to avoid or terminate the application of the limitations set forth in Sections (a) through ( c) for a plan year. In general, the methods a plan sponsor may use to avoid or terminate one or more of the benefit limitations under Sections (a) through (c) for a plan year include employer contributions and elections to increase the amount of plan assets which are taken into account in determining the adjusted funding target attainment percentage, making an employer contribution that is specifically designated as a current year contribution that is made to avoid or terminate application of certain of the benefit limitations, or providing security to the plan.


(g)	Special Rules.


(1)	Rules of Operation for Periods Prior to and After Certification of Plan's Adjusted Funding Target Attainment Percentage.

(A)

In General. Section 436(h) of the Internal Revenue Code and § 1.436(h ) of the Treasury Regulations set forth a series of presumptions that apply before the plan's enrolled actuary issues a certification of the plan's adjusted funding target attainment percentage for the plan year and (ii) if the plan's enrolled actuary does not issue a certification of the plan's adjusted funding target attainment percentage for the plan year before the first day of the 10th month of the plan year (or if the plan's enrolled actuary issues a range certification for the plan year pursuant to §1.436l(h)(4)(ii) of the Treasury Regulations but does not issue a certification of the specific adjusted funding target attainment percentage for the plan by the last day of the plan year). For any period during which a presumption under §436(h) of the Internal Revenue Code and §1.436 (h) of the

3382191.1

Treasury Regulations applies to the plan, the limitations under Sections (a) through (c) are applied to the plan as if the adjusted funding target attainment percentage for the plan year were the presumed adjusted funding target attainment percentage determined under the rules of §436(h) of the Internal Revenue Code and §1.436l(h)(l), (2), or (3) of the Treasury Regulations. These presumptions are set forth in Section (g)(l)(B) though (D).

(B)

Presumption of Continued Underfunding Beginning First Day of Plan Year. If a limitation under Section (a), (b), or (c) applied to the plan on the last day of the preceding plan year, then, commencing on the first day of the current plan year and continuing until the plan's enrolled actuary issues a certification of the adjusted funding target attainment percentage for the plan for the current plan year, or, if earlier, the date Section (g)(l)(C) or Section (g)(l)(D) applies to the plan:


(i)	The adjusted funding target attainment percentage of the plan for the current plan year is presumed to be the adjusted funding target attainment percentage in effect on the last day of the preceding plan year; and


(ii)	The first day of the current plan year is a section 436 measurement date.

(C)

Presumption of Underfunding Beginning First Day of 4th Month. If the plan's enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the plan year before the first day of the 4th month of the plan year and the plan's adjusted funding target attainment percentage for the preceding plan year was either at least 60 percent but less than 70 percent or at least 80 percent but less than 90 percent, or is described in §1.436(h)(2)(ii) of the Treasury Regulations, then, commencing on the first day of the 4th month of the current plan year and continuing until the plan's enrolled actuary issues a certification of the adjusted funding target attainment percentage for the plan for the current plan year, or, if earlier, the date Section (g)(l)(D) applies to the plan:


(i)	The adjusted funding target attainment percentage of the plan for the current plan year is presumed to be the plan's adjusted funding target attainment percentage for the preceding plan year reduced by 10 percentage points; and


(ii)	The first day of the 4th month of the current plan year is a section 436 measurement date.

(D)

Presumption of Underfunding On and After First Day of 10th Month. If the plan's enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the plan year before the first day of the 10th month of the plan year (or if the plan's enrolled actuary has issued a range certification for the plan year pursuant to §1.4361(h)(4)(ii) of the Treasury Regulations but has not issued a certification of the specific adjusted funding target attainment percentage for the plan by the last day of the plan year), then, commencing on the first day of the 10th month of the current plan year and continuing through the end of the plan year:

3382191.1


(i)	The adjusted funding target attainment percentage of the plan for the current plan year is presumed to be less than 60 percent; and


(ii)	The first day of the 10th month of the current plan year is a section 436 measurement date.


(2)	New Plans, Plan Termination, Certain Frozen Plans, and Other Special Rules.


(A)	First 5 Plan Years. The limitations in Section (a)(2), Section (b)(2), and Section (b)(3) do not apply to a new plan for the first 5 plan years of the plan, determined under the rules of § 436(i) of the Internal Revenue Code and

§1.4361(a)(3)(i) of the Treasury Regulations.


(B)	Plan Termination. The limitations on prohibited payments in Section (a)(1), Section (b)(1), and Section (c) do not apply to prohibited payments that are made to carry out the termination of the plan in accordance with applicable law. Any other limitations under this section of the plan do not cease to apply as a result of termination of the plan.

(C)

Exception to Limitations on Prohibited Payments Under Certain Frozen Plans. The limitations on prohibited payments set forth in Sections (a)(1), (b)(1), and (c) do not apply for a plan year if the terms of the plan, as in effect for the period beginning on September 1, 2005, and continuing through the end of the plan year, provide for no benefit accruals with respect to any participants. This Section (g)(2)(C) shall cease to apply as of the date any benefits accrue under the plan or the date on which a plan amendment that increases benefits takes effect.

(D)

Special Rules Relating to Unpredictable Contingent Event Benefits and Plan Amendments Increasing Benefit Liability. During any period in which none of the presumptions under Section (a)(1) apply to the plan and the plan's enrolled actuary has not yet issued a certification of the plan's adjusted funding target attainment percentage for the plan year, the limitations under Section (a)(2) and Section (b)(2) shall be based on the inclusive presumed adjusted funding target attainment percentage for the plan, calculated in accordance with the rules of §1.4361(g)(2)(iii) of the Treasury Regulations.


(3)	Special Rules Under PRA 2010.

(A)

Payments Under Social Security Leveling Options. For purposes of deter mining whether the limitations under Section (a)(l) or (b)(l) apply to payments under a social security leveling option, within the meaning of §436(j)(3)(C)(i) of the Internal Revenue Code, the adjusted funding target attainment percentage for a plan year shall be determined in accordance with the "Special Rule for Certain Years" under §436(j)(3) of the Internal Revenue Code and any Treasury Regulations or other published guidance thereunder issued by the Internal Revenue Service.


(B)	Limitation on Benefit Accruals. For purposes of determining whether the accrual limitation under Section (b)(3) applies to the plan, the adjusted funding

3382191.1

target attainment percentage for a plan year shall be determined in accordance with the "Special Rule for Certain Years" under §436(j)(3) of the Internal Revenue Code (except as provided under section 203(b) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, if applicable) .


(4)	Interpretation of Provisions. The limitations imposed by this section of the plan shall be interpreted and administered in accordance with §436 of the Internal Revenue Code and §1.4361 of the Treasury Regulations.

(h)

Definitions. The definitions in the following Treasury Regulations apply for purposes of Sections (a) through g): §1.436l(j)(l) defining adjusted funding target attainment percentage; §1.436(j)(2) defining annuity starting date; §1.436(j)(6) defining prohibited payment; §1.436l(j)(S) defining section 436 measurement date; and §1.436l(j)(9) defining an unpredictable contingent event and an unpredictable contingent event benefit.

ARTICLE XII

ADMINISTRATION OF THE PLAN


12.1	Administration .

(a)

The Retirement Committee ("Committee") will consist of three or more individuals who will be appointed by the Board of Directors of Zions. The Committee will serve as Plan "administrator" (as that term is defined by ERISA). The Committee will have complete control of the administration of the Plan, subject to the provisions hereof, with all powers necessary to enable it to carry out its duties properly in that respect. Not in limitation, but in amplification of the foregoing, it will have the power to interpret the Plan and to determine all questions that may arise hereunder, including all questions relating to the eligibility of Employees to participate in the Plan and the amount of benefit to which any Participant or Beneficiary may become entitled. Its decisions upon all matters within the scope of its authority will be final.


(b)	The Committee will establish rules and procedures to be followed by Participants and Beneficiaries in filing applications for benefits, in furnishing and verifying proofs necessary to determine age or marital status, and in any other matters required to administer the Plan.


(c)	The Committee will receive all applications for benefits and will determine all facts necessary to establish the right of the applicant to benefits under the provisions of the Plan and the amount thereof.

(d)

The Committee will maintain accounts showing the fiscal transactions of the Plan, and will keep data required for the valuation of the assets and liabilities of the Plan. The Committee will also prepare an annual report showing in reasonable detail the assets and liabilities of the Plan and giving a brief account of the operation of the Plan for each year. The Committee will make the annual report available to each Participant as required by law.

(e)

The Committee will appoint an enrolled actuary to make actuarial valuations of the liabilities of the Plan, to recommend the amount of contributions to be made by the Company and to perform such other services as the Committee will deem necessary or desirable in connection with the administration of the Plan. The Committee may also appoint such accountants, counsel, consultants and other persons the Committee deems necessary or desirable in connection with the administration of the Plan.


(f)	The Committee will have the power to appoint or remove any Investment Manager or Managers and to manage (including the power to acquire and dispose of) assets of the Plan.


(g)	The Committee will have the power to appoint or remove the Trustee.


(h)	The Committee will be entitled to rely upon all tables, valuations, certificates and reports furnished by the accountant, consultant, administrator or actuary appointed by the Committee and upon all opinions given by any counsel selected or approved by it.


12.2	Records . All acts and determinations of the Committee and the Company regarding this Plan will be duly recorded and all such records, together with such other documents as may be necessary for the administration of the Plan, will be preserved in the custody of the Committee (or a designee appointed by the Committee).

12.3

Payment of Expenses . All expenses that arise in connection with the administration of the Plan, including, but not limited to, the compensation of any enrolled actuary, accountant, legal counsel, consultant or other person who will be employed by the Committee in connection with the administration thereof, may, to the extent that it is lawful to do so under ERISA, be paid from the assets of the Plan.


12.4	Delegation of Authority . The administrative duties and responsibilities set forth in Section 12.1 may be delegated by the Committee in whatever manner and extent it chooses to such person or persons as it selects. It will notify Zions and the Trustee of the authority conferred upon such person or persons.

12.5

Information Available . Any Participant in the Plan or any Beneficiary receiving benefits under the Plan may examine copies of the summary plan description, latest annual report, any bargaining agreement, the Plan document, the Trust Agreement or any other governing instruments under which the Plan is operated. The Committee will maintain all of these items in its office, or in such other place or places as it may designate from time to time for examination during reasonable business hours. Upon the written request of a Participant or Beneficiary receiving benefits under the Plan, the Committee will furnish a copy of any item listed in this Section. The Committee may make a reasonable charge to the requesting person for the copy furnished.


12.6	Claims and Appeals Procedure .


(a)	The Committee will adopt procedures for the resolving of claims for benefits and for the appeal and review of the denial of such claims by the Committee. Detailed information regarding such procedures may be obtained by writing to the Retirement Committee.

(b)

Each claim for benefits will be decided by one or more persons, a committee or other claims administrator designated by the Committee (such designated party is referred to in this Section as the "Claims Administrator"). The Claims Administrator will give the claimant written notice of the disposition of a claim within 90 days after the claim has been filed, unless special circumstances require an extension of time for processing, in which case such notice of disposition shall be given within 180 days after the application has been filed. If a claim is denied in whole or in part, the Claims Administrator shall give the claimant a written explanation of the reasons for the denial.

(c)

A claimant wishing a review of a denied claim may submit an appeal in writing in a manner acceptable to the "Appeals Administrator," which shall be the Committee or a person, committee or other administrator designated by the Committee. The dead line for submitting any such appeal to the Appeals Administrator shall be 60 days after receipt of the written notification of the denial of the claim, as described above.

(d)

Within 60 days following the receipt of the notice of appeal, the Appeals Administrator will give the claimant either (i) a written notice of the decision of the Appeals Administrator, or (ii) if special circumstances require an extension of time for review, a notice of a 60-day extension of the review period. In the latter case, the notice of the decision of the Appeals Administrator shall be delivered to the claimant within 120 days after the appeal has been delivered by the claimant. Effective January 1,2002, the one or more individuals who act as Appeals Administrator and who decide the appeal shall not include any person who decided the initial claim, but a person who decided the initial claim may participate in the discussion of the appeal


(e)	The Plan hereby delegates full and complete discretion to the Claims Administrator and the Appeals Administrator:


(1)	to make findings of fact pertaining to a claim or appeal;


(2)	to interpret the Plan as applied to the facts; and


(3)	to decide all aspects of the claim or appeal.


(f)	The decision of the Appeals Administrator upon such a review of a denied claim, (or, If the claimant fails to submit a timely appeal to the Appeals Administrator, the decision of the Claims Administrator) will be final, subject to any remedies which may be provided by law.


12.7	Fiduciary Capacity . Any person may serve in more than one fiduciary capacity with respect to this Plan.

12.8

Committee Liability . The members of the Committee will use ordinary care and diligence in the performance of their duties, but no member will be personally liable by virtue of any contract, agreement, or other instrument made or executed as a member of the Committee, nor for any mistake of judgment made by him or her or by any other member, nor for any loss unless resulting from willful misconduct or failure to exercise good faith. No member of the Committee will be liable for the neglect, omission, or wrongdoing of any other member or of the agents or counsel of the Committee. Zions will indemnify (or cause one or more of the participating Companies to indemnify) each member of the Committee against, and hold him or her harmless from any and all expenses and liabilities arising out of any act or omission to act as a member of the Committee, except such liabilities and expenses as are due to willful misconduct or failure to exercise good faith.

12.9

Limitations of Actions on Claims . The delivery to the claimant of the final decision of the Plan Administrator with respect to a claim for benefits under Section 12.6 that has been reviewed and considered under the appeal procedures of that section shall commence the period during which the claimant may bring legal action under ERISA for judicial review of the Appeals Administrator's decision. No civil action with respect to the claim for benefits or the subject matter thereof may be commenced by the claimant, whether such action is pursued through litigation, arbitration or otherwise, prior to the completion of the claims and claims review process set forth in Section 12.6, nor following the expiration of two years from the date of delivery of the final decision of the Appeals Administrator to the claimant.

ARTICLE XIII

GENERAL PROVISIONS


13.1	Amendment of Plan .

(a)

Zions may amend the Plan at any time. In addition to the authority to amend the Plan in other respects, Zions shall furthermore have the authority to adopt any remedial retroactive changes to comply with the requirements of any law or regulation issued by any governmental agency to which the Plan is subject. No amendment will diminish or adversely affect any accrued interest or benefit of Participants or their Beneficiaries, except as may be required to comply with the requirements of any law or regulation issued by any governmental agency to which the Company is subject.

(b)

If any amendment to the Plan changes the vesting schedule, each Participant who is an Employee with at least three Years of Vesting Service may elect to remain under the vesting schedule of the Plan prior to such amendment. If the Participant does not make the election within a reasonable time (as may be determined pursuant to governmental regulations from time to time), such Participant will be subject to the vesting schedule under the Plan as amended. In no event will the vesting percentage of the Participant's Accrued Benefit be reduced below the percentage attained by the Participant prior to such amendment.

(c)

In no event will a Participant who terminates or retires on or after the date any amendment to the Plan is effective receive less than his or her vested percentage multiplied by the Accrued Benefit prior to such date. This amount will be adjusted for the date of retirement and form of payment on the basis in effect prior to such amendment. This paragraph (c) shall not apply to the amendment to the basis for determining the Actuarial Equivalent value for purposes of Section 5.8 effective June 1, 1995.


(d)	If any amendment to the Plan eliminates an optional form of payment, a Participant may continue to elect such form of payment with respect to any Accrued Benefit earned prior to the effective date of such amendment.


13.2	Employment Status . Nothing contained in the Plan will be deemed to give any Employee the right to be retained in the employ of the Employer or to interfere with the rights of the Employer to discharge any Employee at any time.

13.3

Mergers or Consolidations . If this Plan merges or consolidates with, or transfers its assets or liabilities to any other qualified plan of deferred compensation, no Participant will, as a result of such merger, consolidation or transfer, be entitled to a benefit on the day following such event which is less than the benefit to which he or she is entitled on the day preceding such event. For purposes of this Section, the benefit to which a Participant is entitled will be calculated based upon the assumption that a Plan termination and distribution of assets occurred on the day as of which the Participant's entitlement is being determined.


13.4	Provision Against Anticipation . No benefit under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge or other legal process, and any attempt to do so will be void. The preceding sentence will not apply to a Qualified Domestic Relations Order pursuant to Code Section 414(P).

13.5

Facility of Payment . If any Participant or Beneficiary is physically or mentally incapable of giving a valid receipt for any payment due him and no legal representative has been appointed for such Participant or Beneficiary, the Committee may direct the Trustee to make such payment to any person or institution maintaining such Participant or Beneficiary and the release of such person or institution will be a valid and complete discharge for such payment. Any final payment or distribution to any Participant, the legal representative of the Participant, or to any Beneficiaries of such Participant in accordance with the provisions herein will be in full satisfaction of all claims against the Plan, the Committee, the Trustee and the Company arising under or by virtue of the Plan.

13.6

Construction . The validity of the Plan or any of its provisions will be determined under and will be construed according to federal law and, to the extent permissible, according to the laws of the State of Utah. If any provision of the Plan is held illegal or invalid for any reason, such determination will not affect the remaining provisions of the Plan and the Plan will be construed and enforced as if said illegal or invalid provision had never been included.

13.7

Legal Actions . The Committee will be the necessary party to any action or proceeding involving the assets held with respect to the Plan or the administration thereof. No Employee, Participant, former Participant or their Beneficiaries, or any other person having or claiming to have an interest in the Plan will be entitled to any notice or process. Any final judgment that may be entered in any such action or proceeding will be binding and conclusive on all persons having or claiming to have any interest in the Plan.

SIGNATURE PAGE

This Zions Bancorporation Pension Plan, as restated effective January 1, 2009, is hereby approved this 11th day of July , 2017, at Salt Lake City, Utah.

ZIONS BANCORPORATION

By: /s/ Diana M. Anderson

Name: Diana M. Anderson Title: Executive VP & Director of Corporate Benefits; Member of Benefits Committee

APPENDIX I:

FACTORS FOR SPOUSE OPTION UNDER SECTION 5.7(A)

A Participant retiring at any age with a benefit in the form of a Spouse Option (as described in Section 5.7(a) will have the following factors applied to his or her Accrued Benefit.



	Joint & Survivor Option
	50%	75%	100%
Spouse same age as Employee	.880	.835	.790
For each year the Spouse is younger than the Employee sub- tract	.005	.0065	.008
For each year the Spouse is older than the Employee add	.005	.0065	.008

The Maximum adjustment for age differential is limited to 20 years

APPENDEX II:

ACTUARIAL EQUIVALENCE FOR MONTHLY BENEFITS AND LUMP SUMS

For the purpose of computing the annuity value of a Participant's cash balance account, the annuity value of a Participant's Old Plan Account, and lump sums:


(a)	The mortality assumption is the "Applicable Mortality Table" (as defined below) which is prescribed from time to time by the Secretary of the Treasury under Code Section 417(e)(3).


(I)	For benefit commencement dates on and after June 1, 1995 and prior to December 31, 2002, the "Applicable Mortality Table" shall mean the applicable mortality table prescribed by the Secretary of the Treasury in Rev. Rul. 95-6, which is the 1983 Group Annuity Mortality Table, weighted 50% male and 50% female (commonly referred to as "GAM 83").


(2)	For benefit commencement dates on and after December 31, 2002, the "Applicable Mortality Table" shall mean the applicable mortality table prescribed by the Secretary of the Treasury in Rev. Rul. 2001-62.


(b)	The interest assumption shall be the "Applicable Interest Rate," which shall be the average annual yield on 30-year U.S. Treasury constant maturities, as shown in the Federal Reserve Statistical Release H.15 for the reference month. The reference month shall be the month of November of the calendar year prior to the Plan Year in which the lump sum is paid or the monthly benefit commences.


(c)	In no event shall such lump sum be less than the present value as of December 31, 1985 of a Participant's Accrued Benefit as of December 31, 1985 on the basis of the following actuarial factors used prior to December 31, 1985 for purposes of valuing a deferred annuity of $1 per year commencing at age 65 and payable in monthly installments:



Age	Factor	Age	Factor
32	0.6404	49	2.4180
33	0.6920	so	2.6182
34	0.7479	51	2.8357
35	0.8082	52	3.0721
36	0.8735	53	3.3292
37	0.9441	54	3.6090
38	1.0205	55	3.9138
39	1.1031	56	4.2458
40	1.1925	57	4.6080
41	1.2892	58	5.0034
42	1.3939	59	5.4356
43	1.5073	60	5.9088



44	1.6301	61	6.4279
45	1.7632	62	6.9983
46	1.9075	63	7.6261
47	2.0639	64	8.3184
48	2.2337	65	9.0836


(d)	The minimum value of a lump sum distribution to a Grossmont Participant who retires between January 1, 1998 and December 31, 1998 shall be determined under subsections (a) and (1) above, except that the annual rate of interest on 30- year Treasury securities described in subsection (1) shall be determined as of December 1997.

REVISED ACTUARIAL EQUIVALENCE PROVISIONS RESULTING FROM

THE PENSION FUNDING EQUITY ACT AND SUBSEQUENT LEGISLATION


2.1	General Rules.

(a)

Effective date . These revised provisions reflect certain provisions of the Pension Funding Equity Act of 2004 (PFEA), as modified by the Pension Protection Act of 2006 and the Worker, Retiree and Employer Recovery Act of 2008. Unless otherwise pro vided herein, all required determinations of actuarial equivalence for forms of benefit other than a straight life annuity shall be made in accordance with these revised provisions effective for distributions in Plan Years beginning after December 31, 2003. Nevertheless, these provisions do not supersede any prior election to apply the transition rule of section 101(d)(3) of PFEA as described in Notice 2004-78.


(b)	"Applicable Mortality Table" for purposes of these revised provisions shall mean the applicable mortality table within the meaning of Code §417(e)(3)(B).


2.2	Benefit Forms Not Subject to the Present Value Rules of Code §417(e)(3) .


(a)	Form of benefit . The straight life annuity that is actuarially equivalent to the Participant's form of benefit shall be determined under this Section 2.2 if the form of the Participant's benefit is either:


(1)	A non-decreasing annuity (other than a straight life annuity) payable for a period of not less than the life of the Participant (or, in the case of a qualified pre-retirement survivor annuity, the life of the surviving spouse), or


(2)	An annuity that decreases during the life of the Participant merely because of:


(A)	The death of the survivor annuitant (but only if the reduction is not below 50% of the benefit payable before the death of the survivor annuitant), or


(B)	The cessation or reduction of Social Security supplements or qualified disability payments (as defined in Code §401(a)(11)).

(b)

Limitation Years beginning before July l, 2007 . For Limitation Years beginning before July 1, 2007, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit computed using whichever of the following produces the greater annual amount:


(1)	the interest rate and the mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form; and


(2)	a 5% interest rate assumption and the "applicable mortality table" defined in the Plan for that annuity starting date.


(c)	Limitation Years beginning on or after July 1, 2007 . For Limitation Years beginning on or after July 1, 2007, the actuarially equivalent straight life annuity is equal to the greater of:


(1)	The annual amount of the straight life annuity (if any) payable to the Participant under the Plan commencing at the same annuity starting date as the Participant's form of benefit; and


(2)	The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using a 5% interest rate assumption and the applicable mortality table defined in the Plan for that annuity starting date.


2.3	Benefit Forms Subject to the Present Value Rules of Code Section 417(e)(3).


(a)	Form of benefit . The straight life annuity that is actuarially equivalent to the Participant's form of benefit shall be determined as indicated under this Section 2.3 if the form of the Participant's benefit is other than a benefit form described in Section 2.2(a).


(b)	Annuity Starting Date in Plan Years Beginning After 2005 . If the annuity starting date of the Participant's form of benefit is in a Plan Year beginning after December 31, 2005, the actuarially equivalent straight life annuity is equal to the greatest of:


(1)	The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using the interest rate and the mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form;

(2)

The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using a 5.5% interest rate assumption and the applicable mortality table for the distribution under Treasury Regulations Section 1.417(e)l(d)(2) (determined in accordance with Article XIV for Plan Years after the effective date of that Article); and

(3)

The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed for the distribution under Treasury Regulations Section 1.417(e)- (d)(3) (but determined according to the assumptions in Section 2.4 after the effective date thereof) and the applicable mortality table for the distribution under Treasury Regulations Section 1.41 7(e)-(d)(2) (determined ac cording to the assumptions in Section 2.4 after the effective date thereof), divided by 1.05.

(c)

Annuity Starting Date in Plan Years Beginning in 2004 or 2005 . If the annuity starting date of the Participant's form of benefit is in a Plan Year beginning in 2004 or 2005, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using whichever of the following produces the greater annual amount:


(1)	The interest rate and the mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form; and


(2)	A 5.5% interest rate assumption and the applicable mortality table for the distribution under Treasury Regulations Section 1.417(e)- (d)(2).

However, the foregoing does not supersede any prior election to apply the transition rule of PFEA §101(d)(3) as described in Notice 2004-78.


2.4	Revised Assumptions Effective d ate. The assumptions in this Section 2.4 shall apply in determining the amount payable to a Participant having an annuity starting date in a Plan Year beginning on or after January 1, 2008, unless otherwise provided by the Pension Benefit Guaranty Corporation (PBGC) and IRS.

(a)

Applicable interest rate . For purposes of the Plan's provisions relating to the calculation of the present value of a benefit payment that is subject to Code §417(e), any provision prescribing the use of the annual rate of interest on 30-year U.S. Treasury securities shall be implemented by instead using the rate of interest determined by the applicable interest rate described by Code §417(e) after its amendment by the Pension Protection Act. Specifically, the applicable interest rate shall be the adjusted first, second, and third segment rates applied under the rules similar to the rules of Code §430(h)(2)(C) for the second calendar month (look-back month) before the first day of the Plan Year in which the annuity starting state occurs (stability period). For this purpose, the first, second, and third segment rates are the first, second, and third segment rates which would be determined under Code §430(h)(2)(C) if:


(1)	Code §430(h)(2)(D) were applied by substituting the average yields for the month described in the preceding paragraph for the average yields for the 24- month period described in such section, and


(2)	Code §430(h)(2)(G)(i)(II) were applied by substituting "§417(e)(3)(A)(ii)(II) for "§412(b)(5)(B)(ii)(II)," and


(3)	The applicable percentage under Code §430(h)(2)(G) is treated as being 20% in 2008, 40% in 2009, 60% in 2010, and 80% in 2011.

(b)

Applicable mortality assumption . For purposes of the Plan's provisions relating to the calculation of the present value of a benefit payment that is subject to Code §417(e), any provision directly or indirectly prescribing the use of the mortality table described in Revenue Ruling 2001-62 shall be amended to prescribe the use of the applicable annual mortality table within the meaning of Code §417(e)(3)(B), as initially described in Revenue Ruling 2007-67.

APPENDIX II:

MINIMUM ACCRUED BENEFIT

Article 1

Definitions

Whenever used in this Appendix ill, the following terms will have the meanings set forth below, unless a different meaning is clearly required by the context. Any capitalized terms that are used in this Appendix ill, but that are not defined below, will have the meaning set forth in Article 1 of the Plan, unless a different meaning is clearly required by the context. References in this Appendix to "Article" and "Section, " unless indicated otherwise, mean Articles and Sections appearing in this Appendix Ill.


1.1	Covered Compensation. Covered Compensation for a Plan Year means the average of the Social Security Taxable Wage Bases for each year in the 35-year period ending with the last day of the year in which the Participant attains (or will attain) Social Security Retirement Age as determined under the exact tables provided by the Commiss i oner of Internal Revenue.

Covered Compensation for any Plan Year after 1991 will be equal to 1991 Covered Compensation. Social Security Taxable Wage Base means the contribution and benefit base in effect under Section 230 of the Social Security Act for the specified calendar year.

For purposes of this Section 1.1, a Participant's Social Security Retirement Age is deter mined based on the following table:



	Year of Birth	Social Security Ret i rement Age
Before 1938		65
1983 to 1954		66
1955 and after		67


1.2	Credited Service .

Credited Service means service used to determine a Participant's Accrued Benefit and is determined as follows:

(a)

Credited Service shall be measured in calendar years and months. Each month shall be equal to one - twelfth of a year of Credited Service. Except as otherwise stated in this Section 1.2, Credited Service for Plan Years beginning after December 31, 1988 means the sum of an Employee's calendar years and months (or parts thereof) as an Eligible Employee during the period beginning on his or her Benefit Service Date. For purposes of this section, Benefit Service Date means the later of:


(1)	the Participant's employment date,


(2)	the first day of the month following the Participant's 21st birthday, or


(3)	in the case of an Employee who is not credited with at least 1,000 Hours of Service in his or her first Eligibility Computation Period, the first day of the first Plan Year in which the Employee is credited with at least 1,000 Hours of Service.


(b)	No Credited Service will be earned during a Plan Year beginning after December 31, 1988 unless the Employee completes at least 1,000 Hours of Service during that Plan

Article 2 Accrued Benefits


2.1	Prior Plan Benefit Formula .

A Participant's monthly retirement income is equal to one twelfth of the greater of:


(a)	the sum of:


(1)	the sum of the following (determined by applying the Code Section 401 (a)(l7) limitations, as adjusted, that were in effect in the respective year in which Earnings were received, and not the $150,000 limitation which became effective thereafter) :


(A)	1.65% of Final Average Earnings determined as of December 31, 1991 multiplied by Credited Service earned as of December 31, 1991, and


(B)	1.65% of Earnings for each Plan Year beginning after December 31, 1991 and before January 1, 1994 in which the Participant earns a full or partial year of Credited Service.


(2)	1.65% of Earnings (determined by applying the Code Section 401 (a)(I 7) limitations, as adjusted, that were in effect in the respective year in which Earnings were received) for each Plan Year after December 31, 1993 in which the Participant earns a full or partial year of Credited Service.


(b)	the sum of the following (determined by applying the Code Section 401(a)(17) limitations, as adjusted, that were in effect in the respective year in which Earnings were received, and not the $150,000 limitation which became effective thereafter) :


(1)	1.15% of Final Average Earnings up to Covered Compensation multiplied by Credited Service up to 35 years.


(2)	1.65% of Final Average Earnings in excess of Covered Compensation multiplied by Credited Service up to 35 years.


(3)	1.0% of Final Average Earnings multiplied by Credited Service in excess of 35 years.


(c)	the annual accrued benefit on December 31, 1988 under the terms of the Plan as then in effect determined without regard to the $200,000 or $150,000 limitations under Section 1.18(c) of the Plan.

A Participant will receive an Accrued Benefit for any full or partial years of Qualified Military Service.

As of June 30, 2013, no Participant shall earn any further credited service for purposes of benefit accrual under the Minimum Accrued Benefit as otherwise defined in this Appendix III.


2.2	Minimum Accrued Benefit.

The minimum accrued benefit is the amount determined under Section 2.1 of this Appendix, for Credited Service before January 1, 1998, except Earnings for 1997 will be Earnings during the period from January 1, 1997 to March 31, 1997.

2.3

Grandfathered Minimum Accrued Benefit. The minimum grandfathered accrued benefit is the amount determined under Section 2.1 of this Appendix; provided, however, that the minimum grandfathered accrued benefit shall take into account any Credited Service and Earning s which may be accrued or earned by an Active Participant until the earlier of the Participant's Termination of Employment or the date of any termination of, or cessation of accruals under, the Plan.

Article 3

Minimum Early Retirement Benefits

The minimum early retirement benefit equals the greater of the amount in Section 2.2 and 2.3 of this Appendix, reduced by 113 of 1% for each month by which the Early Retirement Date pre cedes the Normal Retirement Date.

Article 4 Minimum Death Benefit


4.1	Death After Eligibility for Retirement.

If a Participant (other than a Retired Participant) dies on or after the earliest date on which he or she could retire in accordance under the Plan, his or her Eligible Spouse, if any, will receive a monthly benefit equal to the amount the Eligible Spouse would have been entitled to under Article 2 of this Appendix if the Participant had elected the 50% Spouse Option and retired on the first day of the month coinciding with or following the date of death. This benefit will be payable monthly to the Eligible Spouse beginning on the first day of the month coinciding with or next following the Participant's death and will continue until the death of the Eligible Spouse.


4.2	Death Before Eligibility for Retirement.

If a Participant who has a vested interest in his or her Accrued Benefit dies prior to the earliest date on which the Participant could retire under the Plan, his or her Eligible Spouse, if any, will receive a monthly benefit equal to the amount the Eligible Spouse would have been entitled to under Article 2 of this Appendix if the Participant had:


(a)	terminated employment on his or her date of death (if the Participant was an Employee on the date of death),


(b)	survived to the earliest date on which he or she could retire in accordance with Article 3 of this Appendix (the "Earliest Retirement Date"),


(c)	elected the 50% Spouse Option and retired on such Earliest Retirement Date, and


(d)	died immediately after retiring.

This benefit will be payable monthly to the Eligible Spouse beginning on the Participant's Earliest Retirement Date and will continue until the death of the Eligible Spouse.


4.3	Alternate Death Benefit For Old Plan Accounts.

In lieu of the benefit described in Sections 4.1 or 4.2 of this Appendix, the Eligible Spouse of a Participant who has an Old Plan Account may elect to receive payment of the Old Plan Account as a lump sum payment as soon as practicable after the Participant's death. The Participant's Accrued Benefit Attributable to Company Contributions will be paid in accordance with (a) or (b) of Section 4.4 of this Appendix below, whichever applies.


4.4	Other.

3382191.1

(a)

Benefits under this Article will be paid as soon as practicable after the Participant's death except that the Eligible Spouse may elect to defer commencement of the benefit described in Sections 4.1, 4.2, or 4.3 of this Appendix until any date which is before the Participant's Normal Retirement Date. An Eligible Spouse who makes an election under Section 4.3 of this Appendix may not defer receipt of the Old Plan Account.


(b)	The benefit under Sections 4.1 or 4.2 of this Appendix will apply to Terminated Vested Participants even if their Termination of Employment occurred prior to the effective date of these paragraphs.

3382191.1

APPENDIX IV:

ACQUISITION EFFECTIVE DATES

"Acquisition Effective Date" means the date described below:

Acquisition Effective Date

Southern Arizona Bancorp, Inc. Farm Investment Division Howerth

Aspen Bancshares, Inc. Pitkin County Bank Centennial Savings Bank Valley National Bank

Kelling, Northcross, & Nobriga, Inc. Tri-State Bank

Wells Fargo Bank (branches) Sun-State Bank

Grossmont Bank

Vectra Banking Corporation

Sky Valley Bank Corporation Tri-State Financial Corporation FP Bancorp, Inc.

SBT Bankshares, Inc.

Routt County National Bank Corporation Kersey Bancorp

Eagle Bank

Commerce Bancorporation Sumitomo Bank of California Mountain Financial Holding Co. Citizens Banco, Inc.

Barlow Insurance, Inc. TradeWave

Regency Bancorp Pioneer Bancorporation County Bank

Draper Bancorp

Eldorado Bancshares, Inc. Antelope Valley Bank

Pacific Century Financial Corporation icormXpress

thinkXML

E-Lock Technologies Leifer Capital

(Branches of) Washington Federal, Inc. Minnequa Bancorp, Inc.

May 31, 1996

January 3, 1997

January 17, 1997

May 16, 1997

May 19, 1997

July 7, 1997

July 11, 1997

July 19, 1997

October 17, 1997

January 1, 1998

January 6, 1998

January 23, 1998

February 27, 1998

May 26, 1998

June 1, 1998

August 31, 1998

January 1, 1999

October 1, 1998

October 30, 1998

December 1, 1998

January 14, 1999

May 6, 1999

October 6, 1999

October 18, 1999

July 28, 2000

January 26, 2001

March 30, 2001

April 2, 2001

July 19, 2001

September 4, 2001

October 25, 2001

November 9, 2001

3382191.1

APPENDIX V: DEFINITION OF "COMPANY"

As stated in Section 1.14 of the Plan, the term "Company" means each of the following corporations or partnerships, each of which has adopted this Plan, and is, as of January 1, 2002, a participating Company in the Plan:

California Bank and Trust

Commerce Bank of Washington National Association

Digital Signature Trust Co.

Lexign Inc.

National Bank of Arizona

Nevada State Bank

Phaos Technology

Corporation Vectra Bank of Colorado National Association

Zions Bancorporation

Zions First National Bank

Zions Credit Corporation

Zions Insurance Agency, Inc.

Zions Investment Securities, Inc.

Zions Management Services Company

3382191.1

EXHIBIT 10.3

ZIONS BANCORPORATION

PAYSHELTER 401(k) AND EMPLOYEE

STOCK OWNERSHIP PLAN

RESTATED AND AMENDED EFFECTIVE JANUARY 1, 2007

Prepared for

ZIONS BANCORPORATION

DURHAM JONES & PINEGAR

TABLE OF CONTENTS

ARTICLE 1 1

ESTABLISHMENT AND RESTATEMENT ..…………………………………………………………………………………………………..1


1.1.	Establishment and Restatement 1


1.2.	History 1


1.3.	Intent 1


1.4.	Transferee Plan 2


1.5.	Limitation on Applicability 2

ARTICLE 2 3

DEFINITIONS OF TERMS 1


2.1.	“Account” 3


2.2.	“Accrued Benefit” 4


2.3.	“Administratively Feasible” 4


2.4.	“Administrator” or “Plan Administrator” 5


2.5.	“Affiliated Group” 5


2.6.	“Age” 5


2.7.	“Anniversary Date” 5


2.8.	“Beneficiary” 5


2.9.	“Board of Directors” 5


2.10.	“Code” 5


2.11.	“Compensation” or “Annual Compensation” 5


2.12.	“Contingent Beneficiary” 6


2.13.	“Disability” 7


2.14.	“Disqualified Person” 7


2.15.	“Distribution Date” 7


2.16.	“Effective Date” 7


2.17.	“Elective Deferral” 7


2.18.	“Eligible Employee” 7


2.19.	“Employee” 7


2.20.	“Employer” or “Zions Employer” 7


2.21.	“Employer Contribution” 7


2.22.	“Employer Securities” 7


2.23.	“Entry Date” 8


2.24.	“ERISA” 8


2.25.	“Excluded Employee” 8


2.26.	“Exempt Loan” 9


2.27.	“Fiduciary” 9


2.28.	“Highly Compensated Employee” 9


2.29.	“Inactive Participant” 10


2.30.	“Investment Fund” 10


2.31.	“Investment Manager” 10


2.32.	“K-Test Average Contribution Percentage” 10


2.33.	“K-Test Contribution Percentage” 10


2.34.	“K-Test Contributions” 10


2.35.	“Leased Employee” 11


2.36.	“Leveraged Employer Securities” 11


2.37.	“Limitation Year” 11


2.38.	“M-Test Average Contribution Percentage” 11


2.39.	“M-Test Contribution Percentage” 11


2.40.	“M-Test Contributions” 11


2.41.	“Matching Contribution” 12


2.42.	“Named Fiduciary” 12


2.43.	“Net Profit” 12


2.44.	“Non-Highly Compensated Employee” 12


2.45.	“Normal Retirement Age” 12


2.46.	“Normal Retirement Date” 12


2.47.	“Participant” 12


2.48.	“Paysop” 12


2.49.	“Plan” 12


2.50.	“Plan Sponsor” 12


2.51.	“Plan Year” 12


2.52.	“Predecessor Plan” 13


2.53.	“Prior Plan” 13


2.54.	“Qualified Matching Contribution” 13


2.55.	“Qualified Non-Elective Contribution” 13


2.56.	“Transferred Benefits” 13


2.57.	“Trust” 13


2.58.	“Trust Fund” 13


2.59.	“Trustee” 13


2.60.	“Valuation Date” 13


2.61.	“Vested Interest” or “Vested Accrued Benefit” 13


2.62.	“Voluntary Contributions” 14

ARTICLE 3 15

SERVICE DEFINITIONS AND RULES 15


3.1.	“Eligibility Computation Period” 15


3.2.	“Eligibility Service” 15


3.3.	“Employment Commencement Date” 15


3.4.	“Hour of Service” 15


3.5.	“One Year Break in Service” 17


3.6.	“Re-employment Commencement Date” 17


3.7.	“Termination of Employment” 17


3.8.	“Vesting Computation Period” 17


3.9.	“Year of Service” 18


3.10.	“Year of Vesting Service” 18


3.11.	Special Rules for Crediting Service 18


3.12.	Qualified Military Service Rules 19


3.13.	Elapsed Time Method for Determining Years of Vesting Service 21

ARTICLE 4 23

ELIGIBILITY AND PARTICIPATION 23


4.1.	Age and Service Requirements 23


4.2.	Eligibility Information 23


4.3.	Information to be Provided by Employee 23


4.4.	Reclassification of an Eligible Employee or Excluded Employee 23


4.5.	Re-employment and Commencement of Participation 24


4.6.	No Waiver of Participation 24


4.7.	Effect of Participation 24

ARTICLE 5 25

PARTICIPANT AND EMPLOYER CONTRIBUTIONS 25


5.1.	Elective Deferrals 25


5.2.	Payment to Trustee 26


5.3.	Suspension of Deferrals 26


5.4.	After-tax Contributions by Participants 26


5.4A	Roth Elective Deferrals 26


5.5.	Rollover Contributions by Participants 28


5.6.	Safe Harbor Employer Matching Contributions 29


5.7.	Employer Non-Elective Contributions 30


5.8.	Time and Method of Payment 30


5.9.	Employer Contribution Accounts 31


5.10.	Limitations on Contributions 31


5.11.	Excess Contributions 32


5.12.	Correction of Excess Contributions 32

ARTICLE 6 35

ALLOCATIONS TO ACCOUNTS 35


6.1.	Revaluation of Assets 35


6.2.	Allocation of Contributions and Forfeitures 35


6.3.	Adjustment of Accounts and Dividends on Employer Securities 36


6.4.	Eligibility for Allocation of Employer Matching and Non-Elective Contributions 39


6.5.	Restriction on Certain Allocations 39


6.6.	Participant Diversification of Investments 40

ARTICLE 7 43

LIMITATIONS ON ALLOCATIONS 43


7.1.	Special Definitions 43


7.2.	Coordination With Other Plans 46


7.3.	Limitations on Allocations and Order of Limitations 47


7.4.	Aggregation of Plans 47

ARTICLE 8 49

IN-SERVICE AND HARDSHIP WITHDRAWALS 49


8.1.	In-Service Withdrawals, Withdrawals of Rollover Contributions and Withdrawals Due to Attainment of Age 59½, Disability or Hardship 49


8.2.	Financial Hardship Distribution Rules 50


8.3.	Determination of Immediate and Heavy Financial Need 50


8.4.	In Service Withdrawals of Voluntary Contributions 51


8.5.	Determination of Available Withdrawal Amount 52


8.6.	Withdrawal of Rollover Contributions 52


8.7.	Determination of Five Plan Year Period 52

ARTICLE 9 54

RETIREMENT BENEFITS 54


9.1.	Normal or Late Retirement 54


9.2.	Disability Retirement 54


9.3.	Method of Payment 54


9.4.	Time of Payment 55


9.5.	Minimum Distribution Requirements 55


9.6.	No Annuity Benefits 58


9.7.	Distribution of Employer Securities and Cash 58


9.8.	Special Distribution Rules 59


9.9.	Distribution of Transferred Benefits 59

ARTICLE 10 60

DEATH BENEFITS 60


10.1.	Death Benefits Payable 60


10.2.	Designation of Beneficiary 60


10.3.	Death Benefit Payment Procedure 60


10.4.	Required Distributions Upon Death 61

ARTICLE 11 65

BENEFITS UPON OTHER TERMINATION OF EMPLOYMENT 65


11.1.	Vested Amounts 65


11.2.	Distribution of Vested Interest 66


11.3.	Distribution of Small Amounts 67


11.4.	Eligible Rollover Distributions 67


11.5.	Breaks in Service and Vesting 68


11.6.	No Increase in Pre-break Vesting 69


11.7.	Occurrence and Disposition of Forfeitures 69


11.8.	Distribution to Participants Who Are Less Than 100% Vested in Their Entire Account 70


11.9.	Repayment of Distribution 71


11.10.	Restoration of Accounts 71


11.11.	Amendments to the Vesting Schedule 71

ARTICLE 12 73

FIDUCIARY DUTIES 73


12.1.	General Fiduciary Duty 73


12.2.	Allocation of Responsibilities 73


12.3.	Delegation of Responsibilities 73


12.4.	Liability for Allocation or Delegation of Responsibilities 73


12.5.	Liability for Co-Fiduciaries 73


12.6.	Same Person May Serve in More than One Capacity 74


12.7.	Indemnification 74

ARTICLE 13 75

THE PLAN ADMINISTRATOR 75


13.1.	Appointment of Plan Administrator 75


13.2.	Acceptance by Plan Administrator 75


13.3.	Signature of Plan Administrator 75


13.4.	Appointment of an Investment Manager 75


13.5.	Duties of the Plan Administrator 75


13.6.	Claims Procedure 76


13.7.	Claims Review Procedure 76


13.8.	Limitations of Actions on Claims 77


13.9.	Compensation and Expenses of Plan Administrator 77


13.10.	Removal or Resignation 77


13.11.	Records of Plan Administrator 77


13.12.	Other Responsibilities 77

ARTICLE 14 78

THE TRUSTEE 78


14.1.	Appointment of Trustee 78


14.2.	Acceptance by Trustee 78


14.3.	Provisions of Trust Agreement 78


14.4.	Participant Voting Rights 79


14.5.	Investment Committee 80


14.6.	Liability for Plan Expenses 80


14.7.	Payment From the Trust Fund 80

ARTICLE 15 81

THE EMPLOYER 81


15.1.	Notification 81


15.2.	Record Keeping 81


15.3.	Bonding 81


15.4.	Signature of Employer 81


15.5.	Plan Counsel and Expenses 81


15.6.	Other Responsibilities 81


15.7.	Affiliated Groups 81


15.8.	Employer Contributions 82

ARTICLE 16 83

PLAN AMENDMENT OR MERGER 83


16.1.	Power to Amend 83


16.2.	Limitations on Amendments 83


16.3.	Method of Amendment 83


16.4.	Notice of Amendment 83


16.5.	Merger or Consolidation 84

ARTICLE 17 85

TERMINATION OR DISCONTINUANCE OF CONTRIBUTIONS 85


17.1.	Right to Terminate 85


17.2.	Effect of Termination 85


17.3.	Manner of Distribution 85


17.4.	No Reversion 86


17.5.	Termination of an Employer 86


17.6.	Partial Termination 86


17.7.	Effect of Partial Termination 86

ARTICLE 18 87

FUNDING POLICY FOR PLAN BENEFITS 87


18.1.	Funding Method 87


18.2.	Investment Policy 87


18.3.	No Purchase of Life Insurance Contracts 88


18.4.	General Investments and Dividend Accounts 88


18.5.	Non-transferability of Annuity Contracts 88


18.6.	Establishment of Separate Funds 88

ARTICLE 19 91

TOP-HEAVY PROVISIONS 91


19.1.	Application 91


19.2.	Special Definitions 91


19.3.	Top Heavy Status 94


19.4.	Top-Heavy Minimum Required Allocation 94


19.5.	Non-forfeitability of Minimum Top Heavy Allocation 96


19.6.	Minimum Vesting Provision 96


19.7.	Participant Elective Deferrals 96

ARTICLE 20 97

PROVISIONS AFFECTING BENEFITS 97


20.1.	Availability of Loans 97


20.2.	Loan Administration 97


20.3.	Amount of Loan 97


20.4.	Collateral Requirements 98


20.5.	Loan Terms 98


20.6.	Accounting for Loans 98


20.7.	Effect of Termination of Employment or Plan 98


20.8.	No Spousal Consent 98


20.9.	Anti-Alienation 98


20.10.	Qualified Domestic Relations Orders 99


20.11.	QDRO Definitions 99

ARTICLE 21 101

MULTIPLE EMPLOYER PROVISIONS 101


21.1.	Adoption by Other Zions Employers 101


21.2.	Requirements of Participating Zions Employers 101


21.3.	Designation of Agent 101


21.4.	Employee Transfers 101


21.5.	Amendment 102


21.6.	Discontinuance of Participation 102


21.7.	Administrator's Authority 102


21.8.	Participating Employer Contributions 102

ARTICLE 22 103

PURCHASE OF EMPLOYER SECURITIES 103


22.1.	No Put option 103


22.2.	Purchase Price For Employer Securities 103

ARTICLE 23 104

MISCELLANEOUS 104


23.1.	Participant's Rights 104


23.2.	Actions Consistent with Terms of Plan 104


23.3.	Performance of Duties 104


23.4.	Validity of Plan 104


23.5.	Legal Action 104


23.6.	Gender and Number 104


23.7.	Uniformity 104


23.8.	Headings 104


23.9.	Receipt and Release for Payments 104


23.10.	Payments to Minors, Incompetents 105


23.11.	Missing Persons 105


23.12.	Prohibition Against Diversion of Funds 105


23.13.	Applicability of Plan 106


23.14.	Misstatement of Age 106


23.15.	Return of Contributions to the Employer 106


23.16.	Correction of Incorrect Benefit Payments 106


23.17.	Counterparts 107

ARTICLE 1

ESTABLISHMENT AND RESTATEMENT

1.1. Establishment and Restatement : This Plan is an amendment and restatement in full of the Zions Bancorporation Payshelter 401(k) Plan. This Plan is signed and executed on the day set forth at the end of this Plan, effective for all purposes (except as specifically set forth hereafter) as of January 1, 2007. This Plan is maintained by Zions Bancorporation, a corporation organized and existing under the laws of the state of Utah, with principal offices located at Salt Lake City, Utah, hereinafter referred to as the “Plan Sponsor,” for the benefit of its Employees and the Employees of those affiliated entities who also participate herein. With the consent of Zions Bancorporation this Plan may be adopted by other Employers affiliated with it.

1.2. History: Effective as of July 1, 1984, Zions Utah Bancorporation, as the sponsoring employer, established the Zions Utah Bancorporation Salary Reduction Arrangement Plan and executed a funding arrangement with Zions First National Bank as Trustee to provide retirement benefits for eligible Employees. The name of the Plan was changed, effective July 17, 1987, to the Zions Bancorporation Salary Reduction Arrangement Plan. Effective December 29, 1988, Zions Bancorporation amended the Zions Bancorporation Payroll Stock Ownership Plan and merged that plan into the Zions Bancorporation Salary Reduction Arrangement Plan. Effective January 1, 1989, Zions Bancorporation further amended and restated the Plan and renamed the Plan the Zions Bancorporation Employee Investment Savings Plan. Effective September 18, 1998, Zions Bancorporation terminated the Zions Bancorporation Profit Sharing Plan and on July 22, 1999, that plan was merged into this Plan. Effective December 31, 2001, Zions Bancorporation merged the Zions Bancorporation Employee Stock Savings Plan into the Zions Bancorporation Employee Investment Savings Plan, which merger further served to restate and amend both the Zions Bancorporation Employee Stock Savings Plan and the Zions Bancorporation Employee Investment Savings Plan to comply with and satisfy GUST. With the merger and amendment, Zions Bancorporation also changed the name of the Plan, effective January 1, 2002, to the Zions Bancorporation Payshelter 401(k) Plan (the “GUST Plan”). Effective as of January 1, 2003, Zions Bancorporation amended and restated the Plan to be known as the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan. The Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan as merged and combined was subsequently amended and restated effective January 1, 2002 (the “EGTRRA Plan”) and is referred to herein as the “Prior Plan.”

1.3. Intent: Zions Bancorporation intends by this Plan to restate in full the Prior Plan [DELETE: “, as it previously existed following the merger that was effective December 31, 2001,”] and continue in part the retirement benefit program it has previously established for the benefit of its Employees who shall meet the eligibility requirements hereinafter set forth and for the benefit of the beneficiaries of such Employees, respectively, as hereinafter provided. Zions Bancorporation has designed this Plan to permit Employee Deferrals and Employer Matching Contributions that satisfy the “safe harbor” requirements of Code §§401(k)(12) and 401(m)(11). Zions Bancorporation also intends that this Plan shall be an employee stock ownership plan within the meaning of Code §4975(e)(7) and shall meet all other applicable requirements of the Internal Revenue Code of 1986 (“Code”) and the Employee Retirement Income Security Act of 1974 (“ERISA”), including all regulations issued to date and applicable to the Plan. The Plan shall be interpreted, wherever possible, to comply with the terms of the Code and ERISA and all formal regulations and rulings issued thereunder.

1.4. Transferee Plan: This Plan may include assets transferred from one or more other Plans (“Predecessor Plan” or “Plans”) sponsored by Zions Bancorporation or by a member of an Affiliated Group with Zions Bancorporation. In that event certain provisions of this Plan shall apply for purposes of insuring that the Predecessor Plan has complied and continues to comply with all requirements of recent legislation, known collectively as “GUST.”

1.5. Limitation on Applicability: The provisions of this Plan shall apply to all persons, whether or not employed by Zions Bancorporation or a member of an Affiliated Group on the Effective Date, who have an account in the Plan on or after the Effective Date. Prior to the Effective Date the terms of the Prior Plan shall govern.

ARTICLE 2

DEFINITIONS OF TERMS

As used in this Plan the following words and phrases shall have the meanings indicated, unless the context clearly requires another meaning.

2.1. “Account” shall mean the Account established and maintained by the Plan Administrator for a Participant with respect to the Participant's interest in the Investment Fund. Each Participant's Account shall be credited or charged with contributions, distributions, expenses, earnings and losses as provided herein. The following separate sub-accounts shall be established for each Participant, as applicable, and in the aggregate they shall constitute the Participant's Account:


(a)	“Participant Elective Deferral Account” shall mean the sub-account that is attributable to the contributions made by the Employer pursuant to an election by the Participant under Section 5.1.


(b)	“Participant Rollover Account” shall mean the sub-account that is attributable to contributions received pursuant to Section 5.5. Effective June 1, 2007, any amount in the Participant Rollover Account that is attributable to a rollover from another plan of Roth elective deferrals pursuant to Section 5.4A(e) shall be accounted for separately.


(c)	“Employer Matching Contribution Account” shall mean the sub-account that is attributable to matching contributions made by the Employer pursuant to Section 5.6.


(d)	“Employer Non-Elective Contribution Account” shall mean the sub-account that is attributable to the Non-Elective Contributions made by the Employer pursuant to Section 5.7.


(e)	“Participant Voluntary Contribution Account” shall mean the sub-account that is attributable to Voluntary Contributions made by the Employee prior to the Effective Date. This sub-account shall also reflect the Participant's Voluntary Contributions used previously to acquire Company Stock.


(f)	“Paysop Account” shall mean the sub-account that is attributable to all amounts transferred to this Plan from the Paysop pursuant to that certain trust to trust transfer agreement effective December 29, 1988.

(g)

“Employer Securities Account” shall mean the sub-account maintained for each Participant to hold the Participant's share of Employer Securities (including fractional shares) held by the Plan, regardless of origin to the Plan or contribution source, including, without limitation, Employer Securities purchased and paid for by the Trust or contributed in kind by the Employer to the Trust, forfeitures of Employer Securities and stock dividends on Employer Securities. To the extent it holds Employer Securities the Dividend Account shall also be treated as part of the Employer Securities Account for all Plan purposes, including diversification under Section 6.6, but excepting vesting under Section 11.1.

(h)

“General Investments Account” shall mean the sub-account that is attributable to all contributions made to the Plan for the benefit of the Participant that are not comprised of Employer Securities or used to purchase Employer Securities, together with all forfeitures, earnings and accruals thereon. This sub-account shall hold all non-Employer Securities investments, regardless of origin to the Plan or contribution source.

(i)

“Dividend Account” shall mean the sub-account that is maintained for the purpose of receiving and holding cash dividends paid by the Plan Sponsor on Employer Securities held by the Plan until distributed or invested in Employer Securities. Upon investment in Employer Securities, the Dividend Account shall be deemed a part of and treated in the same manner as the Employer Securities Account for all Plan purposes, including diversification under Section 6.6, but excepting vesting under Section 11.1.


(j)	“Segregated Investment Account” shall mean the sub-account that is maintained for the benefit of a Participant pursuant to Section 6.6. Effective January 1, 2004, this Account shall be the same as the Participant’s General Investments Account as described in subsection (h).


(k)	“Predecessor Plan Account” shall mean the sub-account that is attributable to assets transferred from a Predecessor Plan (“Transferred Benefits”).


(l)	“Roth Elective Deferral Account” shall mean the sub-account that is attributable to contributions to the Plan made pursuant to an election by the Participant under Section 5.4A.


(m)	“In-plan Roth Rollover Account” shall mean the sub-account that is attributable to an in- plan Roth rollover which is made pursuant to the requirements of Section 5.4A(e).

Certain sub-accounts may include or incorporate assets from other sub-accounts. The maintenance of separate sub-accounts is for Plan accounting purposes only and segregation of the assets of the Plan shall not be required.

2.2. “Accrued Benefit” shall mean, as of any date, the sum of the values in a Participant's Account as of the most recent preceding Valuation Date, plus any contributions to and minus any distributions from the Account since the Valuation Date.

2.3. “Administratively Feasible” shall mean, when determining the date by which a Participant may receive a distribution of his or her Accrued Benefit from the Plan, a date that reasonably follows the final determination by the Plan Administrator of all factors that affect the value or amount of the balance in the Participant’s Account. Such factors shall include the valuation of the assets attributable to the Account and the determination of all costs and expenses associated with the Account and the assets attributable thereto that must be paid before or in connection with the distribution. The Plan Administrator shall not make any distribution before the Plan Administrator shall have determined, within its sole and reasonable discretion, that a correct and complete valuation of the Account has been accomplished and that all attributable costs and expenses have been determined and applied, or in the alternative, provision for their application has been made. In regard to providing for application of costs and expenses, whenever any attributable cost or expense has not or cannot be determined within a reasonable time following a request for distribution, the Plan Administrator may establish a reasonable maximum percentage that can be distributed from the Participant’s Account until such time as the Plan Administrator has determined (and applied, as appropriate) all additional costs applicable to the Participant’s Account. If so elected by the Participant, he or she shall receive distribution of that percentage portion of his or her Account that the Plan Administrator has confirmed as distributable. The remainder shall be distributed once the Plan Administrator has determined and applied all additional costs deductible from the Participant’s Account. The Plan Administrator shall provide any required notice to the Participant and comply with all applicable laws and regulations when determining and setting the maximum distribution percentage.

With respect to any distribution to a Participant that the Plan may or would be entitled to offset by application of ERISA §206(d)(4), no such distribution shall be Administratively Feasible before the date on which a final order or judgment is entered or could be entered, or a settlement agreement is executed, with respect to the circumstances giving rise to the possible application of that Section.

2.4. “Administrator” or “Plan Administrator” shall mean the person, persons, or corporation administering this Plan, as provided in Article XIII hereof, and any successor or successors thereto.

2.5. “Affiliated Group” shall mean a group of corporations, trades or businesses that constitutes a controlled group of corporations, trades or businesses as defined in Code §§414(b) and (c) and shall also include a group of corporations, partnerships or other organizations that constitutes an affiliated service group as defined in Code §414(m) or is treated as a single employer under Code §414(o) and the regulations thereunder.

2.6. “Age” shall mean a person's attained age in completed years and months as of the date determined.

2.7. “Anniversary Date” shall be the first day of each Plan Year.

2.8. “Beneficiary” shall mean any person, persons, or trust designated by a Participant on a form as the Plan Administrator may prescribe to receive any death benefit that may be payable hereunder if such person or persons survive the Participant. This designation may be revoked at any time in similar manner and form. In the event of the death of the designated Beneficiary before the death of the Participant, the Contingent Beneficiary shall be entitled to receive any death benefit.

2.9. “Board of Directors” shall mean:


(a)	in the case of a corporation, its Board of Directors; or


(b)	in the case of a partnership or joint venture, its controlling partners.

2.10. “Code” shall mean the Internal Revenue Code of 1986, as amended.

2.11. “Compensation” or “Annual Compensation” shall mean the Participant's wages, salaries, fees for professional service and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Company to the extent that the amounts are includable in gross income (including, but not limited to, commission paid salesmen, compensation for services on insurance premiums, tips, and bonuses). Compensation will also include Participant contributions to any insurance program and elective contributions made by the Company on behalf of its Participants that are not includable in gross income under Code Sections 125, 402(e)(3), 402(h) or 403(b).

The term “Compensation” does not include:

(a)

Company contributions to a plan of deferred compensation (other than elective contributions described above) to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includible in the gross income of the Participant for the taxable year in which contributed. Additionally, any distributions from a plan of deferred compensation are not considered as Compensation regardless of whether such amounts are includible in the gross income of the Participant when distributed. However, any amounts received by a Participant pursuant to an unfunded nonqualified plan may be considered as Compensation in the year such amounts are includible in the gross income of the Participant;


(b)	Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;


(c)	Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option;


(d)	Other amounts that receive special tax benefits, such as premiums for group term life insurance (without regard to whether the premiums are includible in the gross income of the Participant);


(e)	Reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, parking or public transportation payments not includable in gross income by reason of Code §132(f)(4), welfare benefits, and any lump sum amounts paid at termination of employment (on account of such termination), such as severance pay, vacation and sick leave cash-outs; and


(f)	Directors fees, if any, paid to Highly Compensated Employees.

Effective for Plan Years commencing on and after January 1, 2002, Annual Compensation of each Participant taken into account in determining allocations for any Plan Year shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code §401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to Annual Compensation for the Plan Year that begins with or within the calendar year.

For any short Plan Year the Annual Compensation limit shall be an amount equal to the Annual Compensation limit for the calendar year in which the Plan Year begins, multiplied by the ratio obtained by dividing the number of full months in the short Plan Year by 12.

2.12. “Contingent Beneficiary” shall mean the person, persons, or trust duly designated by the Participant to receive any death benefit from the Plan in the event the designated Beneficiary does not survive the Participant.

2.13. “Disability” shall mean when applied to any Participant who has not yet attained Normal Retirement Age, an impairment occurring due to sickness or injury that prevents the Participant from performing his or her material and substantial duties as an Employee and that can be expected (a) to last for a long-continued, indefinite period and (b) result in the Participant being unable to perform the duties of any gainful occupation for which he or she is reasonably fitted by education, training or experience. The Plan Administrator shall determine the existence of Disability under this Section by applying of foregoing standard in a manner consistent with the determination of disability under the long term disability plan sponsored by the Plan Sponsor. Eligibility to receive Social Security disability payments shall not automatically deem the Participant to be disabled without further determination by the Plan Administrator.

2.14. “Disqualified Person” [Reserved].

2.15. “Distribution Date” shall mean the first day of the first month for which an amount is payable, or the date on which a benefit is actually paid or begins to be paid.

2.16. “Effective Date” shall mean generally January 1, 2007, the effective date of this restated Plan. All provisions of this Plan shall be effective as of that date unless an alternative date is specifically provided. The Prior Plan was restated effective as of January 1, 2002. This document replaces and supersedes the Prior Plan retroactive to January 1, 2007.

2.17. “Elective Deferral” shall mean a contribution to the Plan under a cash or deferred arrangement as defined in Code §401(k) to the extent not includable in gross income, which is made pursuant to an election and authorization by a Participant through a Salary Deferral Agreement consistent with the provisions of Section 5.1. Effective June 1, 2007, an Elective Deferral may also be referred to in this Plan as a “pre-tax Elective Deferral,” in order to distinguish it from a Roth Elective Deferral that is permitted under Section 5.4A. Unless specifically referred to as a Roth Elective Deferral, any reference to an Elective Deferral under this Plan shall mean Elective Deferral as defined in the first sentence of this Section.

2.18. “Eligible Employee” shall mean any Employee who is not an Excluded Employee.

2.19. “Employee” shall mean any individual who performs personal services directly for and with the consent and supervision of a Zions Employer in a capacity other than solely as a director. The term “Employee” shall also include a Leased Employee.

2.20. “Employer” or “Zions Employer” shall mean the Plan Sponsor and any other entity who, with the authorization of the Plan Sponsor, may adopt this Plan. Solely for purposes of determining Eligibility Service, Years of Vesting Service and One Year Breaks in Service, any entity not adopting this Plan that, together with the Plan Sponsor, is a member of an Affiliated Group shall also be treated as an Employer for the period of time during which the entity was a part of the Affiliated Group. Each Zions Employer participating in this Plan shall be identified on a list attached as an addendum to this Plan or through separate participation agreements reflecting adoption of this Plan by the Zions Employer.

2.21. “Employer Contribution” shall mean any Employer contribution made to this Plan on behalf of an Employee.

2.22. “Employer Securities” shall mean common stock issued by the Plan Sponsor (or by a corporation that is a member of the controlled group of corporations of which the Plan Sponsor is a member) that is readily tradeable on an established securities market. Noncallable preferred stock shall be deemed to be “Employer Securities” if such stock is convertible at any time into stock that constitutes “Employer Securities” hereunder and if such conversion is at a conversion price that (as of the date of the acquisition by the Plan) is reasonable. Preferred stock shall be treated as noncallable if after the call there will be a reasonable opportunity for a conversion that meets the above requirement.

Effective for Plan Years commencing on or after January 1, 2012, for purposes of the foregoing a security is “readily tradeable on an established securities market” if:


(a)	the security is traded on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or


(b)	the security is traded on a foreign national securities exchange that is officially recognized, sanctioned, or supervised by a governmental authority and the security is deemed by the SEC as having a “ready market” under SEC Rule 15c3-1 (17 CFR 240.15c3-1).

2.23. “Entry Date” shall mean, solely for purposes of participation under Article IV, the date an Employee became or becomes a Participant in the Plan. Under the GUST Plan Entry Dates occurred on January 1 April 1, July 1 and October 1 of each Plan Year. Effective January 1, 2002, the GUST Plan was amended to provide that Entry Dates occur on each day of the Plan Year. The Effective Date shall also be an Entry Date for this Plan.

2.24. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations issued thereunder.

2.25. “Excluded Employee” shall mean a member of that class of Employees who are not eligible to participate in the Plan or accrue any benefit under the Plan, regardless of the number of hours worked. The class of such Employees includes:


(a)	Employees whose employment is governed by the terms of a collective bargaining agreement between Employee representatives and the Employer under which retirement benefits were the subject of good faith bargaining between the Employee representatives and the Employer.


(b)	Employees who are non-resident aliens and who receive no earned income (within the meaning of Code §911(b)) from an Employer that constitutes income from sources within the United States.


(c)	Employees whose services for the Employer are performed outside of the United States or whose principal base of operations is outside of the United States.


(d)	Employees who are designated by the Employer to be in either of the following classifications:


(1)	independent contractor, or


(2)	temporary employee or Leased Employee,

It is expressly intended that an individual identified by the Employer to be in one of the above classifications shall be ineligible to participate in the Plan without regard to whether a court or administrative agency subsequently determines that the individual was not or is not in fact in that classification.


(e)	Employees who are employed by an entity that is part of a Affiliated Group with a Zions Employer, but which entity has not adopted and does not participate in this Plan.

2.26. “Exempt Loan” shall mean a loan to this Plan that satisfies the Exempt Loan transaction provisions of Section 14.3.

2.27. “Fiduciary” shall mean and include the Trustee, Plan Administrator, Plan Sponsor, Investment Manager, and any other person or corporation who:


(a)	exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets;


(b)	renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of the Plan, or has any authority or responsibility to do so;


(c)	has any discretionary authority or discretionary responsibility in the administration of the Plan; or


(d)	is described as a “fiduciary” in Sections 3(14) or (21) of ERISA or is designated to carry out fiduciary responsibilities pursuant to this agreement to the extent permitted by Section 405(c)(1)(B) of ERISA.

2.28. “Highly Compensated Employee” shall mean, for any Plan Year, an Employee, other than a non-resident alien receiving no earned income from the Employer from sources within the United States, who:


(a)	was at any time during the Plan Year or the Look-back Year a Five Percent Owner (as defined in Section 19.2(b)); or


(b)	received Compensation from the Employer in the Look-back Year in excess of $85,000 and was in the Top Paid Group for the Look-back Year.

“Look-back Year” means the Plan Year immediately preceding the Plan Year for which the determination is being made. An Employee is in the “Top Paid Group” if the Employee is in the group consisting of the top 20% of Employees when ranked on the basis of Compensation paid during the Look Back Year. When calculating the number of Employees in the Top Paid Group the following Employees shall be excluded: (i) Employees who have not completed six months of service; (ii) Employees who normally work fewer than 17½ hours per week; (iii) Employees who normally work not more than 6 months during any year; (iv) Employees who have not attained age 21; and (v) Employees who are Excluded Employees by reason of Section 2.25(a). If permitted by IRS regulations or rulings, the Employer may use shorter periods and hours and a lower age when calculating the Top Paid Group. The ($85,000) amount in (b) above shall be adjusted for cost of living as provided under Code §415(d), except that the base period shall be the calendar quarter ending September 30, 1996.

A former Employee who was a Highly Compensated Employee upon Termination of Employment or at any time after attaining age 55 shall be treated as a Highly Compensated Employee. For any Plan Year, including the Look-back Year, no family aggregation rules shall apply when determining who is a Highly Compensated Employee and no Employee who is a family member of any Highly Compensated Employee shall be required or considered to be a single Employee with the Highly Compensated Employee.

For purposes of this Section, Compensation is defined as in Section 7.1(b) of this Plan, but shall include contributions made by the Employer to a plan of deferred compensation otherwise excluded in Section 7.1(b).

2.29. “Inactive Participant” shall mean a Participant who retains and is entitled to receive an Accrued Benefit under the Plan, but who is not currently eligible to make Elective Deferral Contributions or receive an allocation of Employer Contributions or forfeitures because the Participant has incurred a Termination of Employment.

2.30. “Investment Fund” shall mean all assets of the Trust Fund.

2.31. “Investment Manager” shall mean any Fiduciary (other than a Trustee or Named Fiduciary) who:


(a)	has the power to manage, acquire or dispose of any asset of the Plan;


(b)	is (1) registered as an investment advisor under the Investment Advisors Act of 1940; (2) a bank as defined in that Act; or (3) is an insurance company qualified to perform services described in subsection (a) above under the laws of more than one state; and


(c)	has acknowledged in writing that he is a Fiduciary with respect to the Plan.

2.32. “K-Test Average Contribution Percentage” shall mean the average (expressed as a percentage) of the K-Test Contribution Percentages of the Participants in a group.

2.33. “K-Test Contribution Percentage” shall mean the ratio (expressed as a percentage) of a Participant's K-Test Contributions for a Plan Year to the Participant's Compensation for the Plan Year. The K-Test Contribution Percentage for a Participant who is a Highly Compensated Employee shall be determined by combining all cash or deferred arrangements under which the Highly Compensated Employee is eligible to participate (other than those that may not be permissively aggregated) with this Plan as though they were a single arrangement. For this purpose, Compensation is defined as in Section 7.1(b) of the Plan. The K-Test Contribution Percentage for a Participant who has made no Elective Deferral contributions and who is not credited with any K-Test Contributions for the Plan Year shall be zero.

2.34. “K-Test Contributions” shall mean, for any Plan Year, a Participant's Elective Deferrals, plus, if so elected by the Employer, part or all of the Qualified Non-Elective Contributions and Qualified Matching Contributions allocated to the Participant for such year, provided that, any Qualified Non-Elective Contributions included as K-Test Contributions shall not increase the difference between the K-Test Average Contribution Percentage for Highly Compensated Employees and the K-Test Average Contribution Percentage for Non-Highly Compensated Employees; and, further provided that, no Qualified Non-Elective Contributions or Qualified Matching Contributions included as K-Test Contributions shall be included as M-Test Contributions. In determining the amount of a Participant's Elective Deferrals under this Section the Plan Administrator shall take into account elective deferrals made by the Participant under any other plan that is aggregated with this Plan for purposes of Code §401(a)(4) or Code §410(b) (other than Code §410(b)(2)(A)(ii)) and any other plan satisfying Code §401(k)(3) and Reg. §1.401(k)-1(b)(3) that the Employer elects to permissively aggregate with this Plan, by treating all such plans and this Plan as a single plan.

2.35. “Leased Employee” shall mean any person who, pursuant to an agreement between the Zions Employer and the Plan Sponsor or any other person or organization (leasing organization), has performed services for the Zions Employer (or for the Zions Employer and related persons determined in accordance with Code §414(n)(6)) and such services are performed under the primary direction or control of the Zions Employer.

2.36. “Leveraged Employer Securities” shall mean Employer Securities acquired by the Trust with the proceeds of an Exempt Loan.

2.37. “Limitation Year” shall mean the Plan Year, unless the Employer elects a different 12 month period.

2.38. “M-Test Average Contribution Percentage” shall mean the average (expressed as a percentage) of the M-Test Contribution Percentages of the Participants in a group.

2.39. “M-Test Contribution Percentage” shall mean the ratio (expressed as a percentage) of a Participant's M-Test Contributions for a Plan Year to the Participant's Compensation for the Plan Year. The M-Test Contribution Percentage for a Participant who is a Highly Compensated Employee shall be determined by combining all plans subject to Code §401(m) under which the Highly Compensated Employee is eligible to participate (other than those that may not be permissively aggregated) with this Plan as though they were a single plan. For this purpose, Compensation is defined as in Section 7.1(b) of the Plan. The M-Test Contribution Percentage for a Participant who has made no Elective Deferral contributions and who is not credited with any M-Test Contributions for the Plan Year shall be zero.

2.40. “M-Test Contributions” shall mean for any Plan Year Matching Contributions made pursuant to Section 5.6 less any of the Participant's Qualified Matching Contributions included as K- Test Contributions. If so elected by the Employer, part or all of the Qualified Non-Elective Contributions allocated to the Participant for such year shall be included as an M-Test Contribution, provided that any Qualified Non-Elective Contributions included as M-Test Contributions shall not increase the difference between the M-Test Average Contribution Percentage for Highly Compensated Employees and the M-Test Average Contribution Percentage for Non-Highly Compensated Employees; and, further provided that, no Qualified Non-Elective Contributions included as M-Test Contributions shall be included as K-Test Contributions. In determining the amount of M-Test Contributions under this Section the Plan Administrator shall take into account all employee voluntary contributions made by the Participant and all matching contributions made by the Employer under any other plan that is aggregated with this Plan for purposes of Code §401(a)(4) or Code §410(b) (other than Code §410(b)(2)(A)(ii)) and any other plan satisfying Code §401(k)(3) and Reg. §1.401(k)-1(b)(3) which the Employer elects to permissively aggregate with this Plan, by treating all such plans and this Plan as a single plan.

2.41. “Matching Contribution” shall mean any Employer contribution made to the Plan on behalf of an Employee on account of an Employee's Elective Deferral, but excluding, for Plan Years beginning after December 31, 1988, any contribution used to meet the minimum required allocation under Section 19.3. For Plan Years commencing after December 31, 2001, Matching Contributions may be used to satisfy the minimum required contribution requirements of Section 19.3 to the extent provided in Section 19.9, if the Employer fails to or elects not to provide benefits to Participants under this Plan on a safe harbor basis, as defined herein.

2.42. “Named Fiduciary” shall mean the Plan Administrator and any Committee appointed and so designated by the Plan Administrator.

2.43. “Net Profit” for any year shall mean the current and accumulated earnings of the Employer as reflected by its books of account for the particular fiscal year before the provision for federal and state income tax, without increase or decrease due to corrections or adjustments subsequently made, but excluding the cost of contributions made under this Plan or any other qualified plan.

2.44. “Non-Highly Compensated Employee” shall mean an Employee who is not a Highly Compensated Employee.

2.45. “Normal Retirement Age” shall mean age 65.

2.46. “Normal Retirement Date” shall mean the first day of the calendar month coinciding with or next following a Participant's Normal Retirement Age.

2.47. “Participant” shall mean any Eligible Employee who has satisfied all of the age and service requirements of Section 4.1. Such an Eligible Employee shall be deemed to be a Participant in the Plan for purposes of any applicable non-discrimination test, including the K-Test and M-Test defined in this Plan, without regard to whether he has executed a Salary Reduction Agreement and agreed to have contributions made to this Plan through Elective Deferrals. A Participant may nevertheless be considered “active” or “inactive” depending on whether he is eligible to make Elective Deferral Contributions or receive an allocation of Employer Contributions. A Participant who has an Account in the Plan but is an Inactive Participant because he or she has incurred a Termination of Employment shall not be treated as a Participant in the Plan for purposes of any applicable non-discrimination test, including the K-Test and M-Test defined in this Plan in any Plan Year following the Plan Year in which the Participant’s Termination of Employment has occurred.

2.48. “Paysop” shall mean the Zions Bancorporation Payroll Stock Ownership Plan, a tax-credit employee stock ownership plan within the meaning of Code §409(a), which was merged into this Plan pursuant to that certain trust to trust transfer agreement effective December 29, 1988.

2.49. “Plan” shall mean the Plan as stated herein and as may be amended from time to time, denominated the “Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan.” The Employer intends the Plan to satisfy the requirements of Code Section 401(k) and to be an employee stock ownership plan within the meaning of Code §4975(e)(7), for all purposes of the Code.

2.50. “Plan Sponsor” shall mean Zions Bancorporation.

2.51. “Plan Year” shall mean the one year period commencing each January 1 and ending the following December 31.

2.52. “Predecessor Plan” shall mean any Plan that has been previously amended or restated for GUST and whose assets have been transferred to this Plan pursuant to a merger or trust to trust transfer. The benefits that are funded by the transferred assets shall be protected benefits within the meaning of Code §411(d)(6) and the regulations thereunder and before their transfer to this Plan shall be subject to all provisions of the Predecessor Plan, including any transitional rules required by prior legislation such as GUST and applicable IRS regulations.

2.53. “Prior Plan” shall mean the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, as it existed immediately before the Effective Date.

2.54. “Qualified Matching Contribution” shall mean a Matching Contribution with respect to which the requirements of Reg. §1.401(k)-1(b)(5) and Code §§401(k)(2)(B) and (C) are met.

2.55. “Qualified Non-Elective Contribution” shall mean any Employer contribution to the Plan other than a Matching Contribution with respect to which the Employee may not elect to have the contribution paid to the Employee in cash instead of being contributed to the Plan and (if treated as K- test Contributions) the requirements of Reg. §1.401(k)-1(b)(5) and Code §§401(k)(2)(B) and (C) are met or (if treated as M-Test Contributions) the requirements of Reg. §1.401(m)-1(b)(5) are met.

2.56. “Transferred Benefits” shall mean those benefits funded by assets transferred to the Plan from a Predecessor Plan. Transferred Benefits shall include all optional forms of benefits available under the Predecessor Plan(s) from which the Transferred Benefits were received, unless otherwise provided in this Plan.

2.57. “Trust” shall mean the Trust originally created in conjunction with the Plan, previously named effective January 1, 2002, the Zions Bancorporation Payshelter 401(k) Plan Trust. As of the Effective Date the Trust is designated as the “Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust.”

2.58. “Trust Fund” shall mean all cash, Employer Securities, securities, annuity contracts, real estate and any other property held by the Trustee pursuant to the terms of the Trust and this Plan, together with investment earnings or losses thereon, less any applicable expenses of the Plan and Trust.

2.59. “Trustee” shall mean the bank, trust company or other corporation possessing trust powers under applicable state or federal law, or one or more individuals, or any combination thereof named as Trustee or Trustees under the Trust.

2.60. “Valuation Date” shall mean the date on which the Trust Fund and Accounts are valued, as provided in this Plan. The following shall be Valuation Dates:


(a)	the last day of each Plan Year (the “Annual Valuation Date”), and


(b)	every other business day during the Plan Year on which trading activity occurs or could occur with respect to the Employer Securities held by the Plan. The Plan Administrator shall interpret this Section as it deems necessary or advisable to provide for the orderly and equitable administration of the Plan.

2.61. “Vested Interest” or “Vested Accrued Benefit” shall mean the portion of a Participant's Accrued Benefit that is non-forfeitable.

2.62. “Voluntary Contributions” shall mean after-tax contributions previously made by a Participant under a Salary Reduction Agreement with the Employer. As of the Effective Date Voluntary Contributions are no longer permitted to be made to the Plan.

2.63.

ARTICLE 3

SERVICE DEFINITIONS AND RULES

3.1. “Eligibility Computation Period” shall mean the period used to measure Eligibility Service and Breaks in Service for purposes of eligibility to begin and maintain participation in the Plan. As of January 1, 2002, the Plan does not apply any minimum Eligibility Computation Period.

3.2. “Eligibility Service” shall mean service for any period during which an Employee receives credit for Hours of Service for a Zions Employer.

3.3. “Employment Commencement Date” shall mean the date on which the Employee first performs an Hour of Service for a Zions Employer.

3.4. “Hour of Service” shall mean and be determined as follows:


(a)	Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours shall be credited to the Employee for the year or years in which the duties are performed.


(b)	Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or Leave of Absence. Notwithstanding the preceding sentence:


(1)	No more than 501 Hours of Service are required to be credited under this paragraph during which the Employee performs no duties (whether or not such period occurs in a single computation period);


(2)	An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker's compensation or unemployment compensation or disability insurance laws; and


(3)	Hours of Service are not required to be credited for a payment that solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

For purposes of this paragraph (b), a payment shall be deemed to be made by or due from an Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund or insurer to which Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate. Hours under this paragraph (b) shall be calculated and credited pursuant to DOL Reg. §2530.200b-2, paragraphs (b) and (c), which are incorporated herein by this reference.

(c)

Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours shall be credited to the Employee for the year or years to which the award or agreement pertains rather than the year in which the award, agreement or payment is made.


(d)	Hours of Service shall be determined on the basis of actual hours for which an Employee is paid, entitled to payment or for which back pay is awarded or agreed to.


(e)	In the case of an Employee who is absent from work for any period:


(1)	by reason of the pregnancy of the Employee;


(2)	by reason of the birth of a child of the Employee;


(3)	by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee; or


(4)	for purposes of caring for such child for a period beginning immediately following such birth or placement;

Hours of Service shall include the Hours of Service that otherwise would normally have been credited to such Employee but for such absence; or in any case in which the Plan is unable to determine the Hours of Service to be credited, eight Hours of Service for each regularly scheduled work day of such absence. The total number of hours treated as Hours of Service under this Section by reason of any pregnancy or placement shall not exceed 501 hours less the number of Hours of Service credited to an Employee pursuant to subsections (a) through (e) above, for an absence described in this subsection (f). The hours described in this subsection (f) shall be treated as Hours of Service only in the computation period in which the absence from work begins, if an Employee would be prevented from incurring a One-Year Break in Service in such computation period solely because the period of absence is treated as Hours of Service as provided herein; or in any other case, in the immediately following computation period. Notwithstanding the foregoing, no credit will be given pursuant to this subsection (f) unless the Employee furnishes to the Plan Administrator such timely information as the Plan Administrator may reason ably require to establish that the absence from work is for reasons referred to herein, and the number of days for which there was such an absence.


(f)	Hours of Service shall be aggregated for service with all Zions Employers, however, in no event shall duplicate credit be given for the same Hours of Service.


(g)	The Plan Administrator may use any records to determine Hours of Service that it considers an accurate reflection of the facts.

(h)

When crediting Hours of Service for Employees who are paid on an hourly basis the Plan Administrator shall use the “actual” method. For purposes of the Plan, “actual” method shall mean the determination of Hours of Service from records of hours worked and hours for which the Employer makes payment or for which payment is due from the Employer. When crediting Hours of Service for Employees who are not paid on an hourly basis, the Plan Administrator shall use the “salaried earnings” method. With respect to an Employee whose Compensation consists primarily of periodic salary payments, “salaried earnings” method shall mean the determination of Hours of Service from records showing payments made to the Employee or payments due to the Employee from the Employer. In applying the “salaried earnings” method, an Employee who has at least 435 hours or 870 hours shall be credited with 500 Hours of Service and 1,000 Hours of Service, respectively.

3.5. “One Year Break in Service” shall mean a 12 consecutive month period during which an Employee has not completed more than 500 Hours of Service, regardless of whether the Employee has incurred a Termination of Employment. For purposes of vesting, such 12 consecutive month periods shall be measured on the same basis as Years of Vesting Service. Effective January 1, 2006, except as otherwise provided in Section 3.13, the provisions of this Section shall no longer apply for purposes of determining Years of Vesting Service. For purposes of eligibility to participate, the Plan shall not apply any break in service rule. The following types of absence shall not constitute a One-Year Break in Service:


(a)	extended vacation, provided that persons under similar circumstances shall be treated alike;


(b)	Absence due to illness or accident while regular remuneration is paid;

(c)

Absence for military service or significant civilian service for the United States, provided that with respect to civilian service, the absent Employee returns to service with the Employer within 30 days of his release from the civilian service or any longer period during which his right to re-employment is protected by law and with respect to military service, the absent Employee returns to service within the period described in Section 3.12, or any longer period during which his right to re-employment is protected by law.

3.6. “Re-employment Commencement Date” shall mean the date on which an Employee, who has both incurred a Termination of Employment from the Employer and has had a One Year Break in Service as a result of that termination, first performs an Hour of Service for the Employer following such Break in Service.

3.7. “Termination of Employment” with respect to any Employee or Participant shall occur upon the separation from service (effective January 1, 2002, severance from employment) of the Employee or Participant due to the resignation, discharge, death, retirement, failure to return to active work at the end of an authorized leave of absence or the authorized extension(s) thereof, failure to return to active work when duly called following a temporary layoff, or upon the happening of any other event or circumstance that, under the then current policy of the Zions Employer results in the termination of the employer-employee relationship. Termination of Employment shall not be deemed to occur merely because of a transfer between Zions Employers.

3.8. “Vesting Computation Period” shall mean the 12 consecutive month period used to measure Years of Vesting Service and Breaks in Service for purposes of vesting. The 12 consecutive month period used for the Vesting Computation Period shall be the Plan Year. Effective January 1, 2006, except as otherwise provided in Section 3.13, the provisions of this Section shall no longer apply for purposes of determining Vesting Service.

3.9. “Year of Service” shall mean a 12 consecutive month period during which an Employee has completed at least 1,000 Hours of Service.

3.10. “Year of Vesting Service” shall mean:

(a)

for Plan Years commencing prior to January 1, 2002, a Vesting Computation Period during which an Employee has completed at least one Hour of Service. For Plan Years commencing on or after January 1, 2002, “Year of Vesting Service” shall mean a Vesting Computation Period during which an Employee has completed at least 1,000 Hours of Service. Subject to Section 11.5 a Participant's Years of Vesting Service shall be determined based on all Vesting Computation Periods containing or beginning after his Employment Commencement Date or Re-employment Commencement Date, provided that service prior to the date an Employee has attained age 18 shall not be taken into account. Any individual who was a Leased Employee and who subsequently becomes an Eligible Employee shall be credited with all Years of Service as a Leased Employee for purposes of determining Years of Vesting Service. Effective January 1, 2006, except as otherwise provided in Section 3.13, the provisions of this subsection (a) shall no longer apply for purposes of determining Years of Vesting Service.

(b)

with respect to a Merged Employee for Plan Years commencing prior to the Merger Date, a calendar year during which the Merged Employee has completed at least one hour of service for the Merged Employer. For Plan Years commencing on or after the Merger Date, “Year of Vesting Service” shall mean a Vesting Computation Period during which the Merged Employee completes at least 1,000 Hours of Service. Effective January 1, 2006, except as otherwise provided in Section 3.13, the preceding sentence shall no longer apply and “Years of Vesting Service” after the Merger Date shall be credited to a Merged Employee as provided in Section 3.13. All creditable Years of Vesting Service determined under the above rules for a Merged Employee shall be credited under this Plan as of the Merged Employee’s Employment Commencement Date. For purposes of this Section 3.10(b):


(1)	“Merged Employee” shall mean an Employee who immediately prior to his Employment Commencement Date, was employed by a Merged Employer.


(2)	“Merged Employer” shall mean an entity that was acquired by (whether as a stock or asset acquisition) or merged into the Plan Sponsor or another Employer who has adopted this Plan.


(3)	“Merger Date” shall mean the date designated in any agreement or contract of merger, sale or acquisition as the date on which the acquisition of the Merged Employer by the Plan Sponsor or Employer is considered complete.

3.11. Special Rules for Crediting Service. In crediting Service under the Plan for any Employee who is or was employed by a Participating Employer the rules for crediting Service as set forth in each respective Participation Agreement or as set forth in this Section shall apply. When crediting service under the Plan for Employees who are employed by certain members of an Affiliated Group or who are former employees of entities acquired by the Employer, the following special rules for crediting service shall apply:

(a)

Discount Corporation of New York: Each Employee of Discount Corporation of New York (“Discount”) who, as of August 10, 1993, satisfied the Plan's minimum age and service requirements shall be eligible to participate in the Plan on August 11, 1993 (which shall be deemed a “Plan Entry Date” for this purpose) or on any subsequent Plan Entry Date if employed by the Employer or any member of the Affiliated Group who participate in the Plan on that date. All service of the Employee with Discount and any member of the affiliated Group shall be credited for purposes of the above participation rule. For purposes of benefit accrual, no prior service with Discount shall be taken into account.

3.12. Qualified Military Service Rules: The following rules shall apply to an Employee who has Qualified Military Service while employed by the Employer.


(a)	“Qualified Military Service” shall mean service by an Employee in the uniformed services of the United States (as defined in chapter 43 title 38 of the United States Code), provided:


(1)	the employee provides advance notice of the service to the Zions Employer, when such notice is practical;


(2)	the employee is not dishonorably discharged;


(3)	the employee is re-employed by the Zions Employer within 30 days following the completion of the service or any longer period during which his or her or her right to re-employment is protected by law; and


(4)	the cumulative length of the Employee’s absence from employment due to the service does not exceed five years.


(b)	An Employee’s Qualified Military Service shall be treated as service for the Employer for all purposes under the Plan. An Employee’s imputed Hours of Service during Qualified Military Service shall be:


(1)	the Hours of Service the Employee would have worked but for his or her or her Qualified Military Service; and

(2)

if the Hours of Service cannot reasonably be determined, the Hours of Service the Employee would have worked had he or she worked during his or her or her Qualified Military Service at his or her or her average rate during the 12 month period immediately preceding his or her or her Qualified Military Service or, if shorter, his or her or her entire period of employment preceding the Qualified Military Service.

For vesting purposes under Section 11.01 the Employee shall also be credited with Hours of Service (without regard to whether the Employee has returned to service with the Employer) if the Employee incurs a Disability while performing the Qualified Military Service on or after January 1, 2007, and cannot return to service with the Employer as a consequence of the Disability.


(c)	Compensation (as defined in Section 2.11) shall include imputed compensation during an Employee’s Qualified Military Service. Imputed compensation shall be:


(1)	the compensation the Employee would have received but for his or her or her Qualified Military Service; or

(2)

if the compensation is not reasonably certain, the compensation the Employee would have received had he or she received compensation during his or her qualified Military Leave at his or her or her average rate during the 12 month period immediately preceding his or her or her Qualified Military Service, or, if shorter, his or her or her entire period of employment preceding his or her or her Qualified Military Service.

(d)

A Participant who returns to employment after any Qualified Military Service shall be entitled to make additional Elective Deferrals to the Plan up to the maximum amount of the Elective Deferrals the Participant would have been permitted to make based upon his or her or her imputed compensation during the Qualified Military Service, taking into account any other Elective Deferrals made by the Participant during the Qualified Military Service. The period during which the additional Elective Deferrals may be made shall commence on the date the Participant returns to employment and shall extend until the expiration of the lesser of (i) the period which is three times the length of the Participant’s Qualified Military Service or (ii) five years. Payment of Matching Contributions attributable to Elective Deferrals of imputed compensation during Qualified Military Service shall be made at the same time as other Matching Contributions, based on the time the Elective Deferrals are actually paid to the Plan. The Matching Contributions need not include earnings that would have accrued had the Participant continued performing his or her or her duties for the Employer during Qualified Military Service.

(e)

Elective Deferrals of a Participant’s imputed compensation during his or her or her Qualified Military Service shall be treated as Elective Deferrals and as K-Test Contributions with respect to the Plan Year to which the imputed compensation relates, if this Plan Year is not the same Plan Year in which the Elective Deferrals are received by the Plan. Any Matching Contributions based on Elective Deferrals of a Participant’s imputed compensation during his or her or her Qualified Military Service shall be treated as M-Test Contributions with respect to the Plan Year to which the Elective Deferrals relate, if this Plan Year is not the same Plan Year in which the Elective Deferrals are received by the Plan.

(f)

Repayment of any Participant loan from the Plan shall be suspended during Qualified Military Service and the loan repayment period shall be extended by the length of the Qualified Military Service. Interest shall continue to accrue on the loan during the suspension period at a rate equal to the lesser of the current rate on the loan or the maximum rate allowed by applicable law. Upon recommencing loan payments the additional accrued interest shall be taken into account in determining the total amount remaining and due on the loan.

(g)

Effective June 1, 2007, a Participant who is eligible under this Section 3.12 to make an Elective Deferral to the Plan upon return from Qualified Military Service may designate any portion thereof as a Roth Elective Deferral and may designate the Plan Year for which the Roth Elective Deferral is to be credited, which may include a Plan Year that is before the Plan Year in which the Roth Elective Deferral is actually made. In that event the Plan shall treat the Roth Elective Deferral as having been made in the Plan Year of Qualified Military Service to which the contribution relates (but not earlier than January 1, 2006), as designated by the Participant. A Participant may also identify the Plan Year of Qualified Military Service for which a Roth Elective Deferral is deemed made for other purposes as well, such as for entitlement to an Employer Matching Contribution, and the determination of the five-taxable-year period of participation rule. In the absence of any designation, for purposes of determining the first year of the five years of participation rule under Code §402A(d)(2)(B), the Roth Elective Deferral shall be treated as relating to the first year of Qualified Military Service for which the Participant could have made a Roth Elective Deferral under the Plan, but not earlier than January 1, 2006. Notwithstanding the foregoing, each Participant who may make an Elective Deferral to the Plan under this Section 3.12 and who makes an Elective Deferral shall be deemed to have made a Roth Elective Deferral to the Plan from his or her Elective Deferral contributions in the sum of $1.00, unless the Participant has specifically elected a larger Roth Elective Deferral contribution amount. The Roth Elective Deferral shall be deemed made to the Plan for the earliest possible Plan Year, according to the rules of this subsection.

(h)

If is determined at the time the Employee commences Qualified Military Service that the length of the service will be either (i) more than 179 days in duration or (ii) of indefinite duration and if the Employee is called to such Qualified Military Service because the Employee is a member of a military reserve unit ordered to active duty after September 11, 2001, then notwithstanding the provisions of Section 8.01, the Employee may elect to withdraw any amount in the Employee's Elective Deferral and Matching Contribution Accounts. Any such withdrawal must be made after the date of the order or call to active duty and prior to the end or close of the active duty period. The withdrawal shall also be deemed to be an Eligible Rollover Distribution under Section 11.04, except that it shall not be subject to any income tax withholding requirement that may otherwise apply under Code §72(t).

(i)

Effective for Plan Years commencing after December 31, 2008, an Employee who commences Qualified Military Service which will exceed 30 days in length may be deemed, if so elected by the Employee solely for the purpose of receiving a distribution from the Plan, to have incurred a Termination of Employment. If an Employee returns to employment after receiving a distribution from the Plan on account of an election made pursuant to this subsection, but the Employee has not satisfied the requirements of subsection (h) above, then the Employee may not make Elective Deferrals or Roth Elective Deferrals to the Plan until the expiration of 6 months from the date of the last distribution from the Plan made on account of this subsection.

3.13. Elapsed Time Method for Determining Years of Vesting Service . Effective January 1, 2006, the Plan adopts the Elapsed Time method for determining Years of Vesting Service. This method of counting Service does not track actual Hours of Service worked by an Employee, but instead measures the length of time an individual is an Employee of a Zions Employer.


(a)	In determining Years of Vesting Service for an Employee, the following shall apply:


(1)	An Employee’s Service taken into account for purposes of vesting shall be the time period beginning with the Employee’s Employment Commencement Date and ending on the date the Employee incurs a Termination of Employment.

(2)

An Employee who incurs a Termination of Employment by reason of resignation, discharge or retirement and who then performs an Hour of Service within 12 months of that date will be credited with Service for the period in which he was not employed. An Employee who is absent for any other reason and then resigns, is dis charged or retires and who performs an Hour of Service within 12 months of his initial absence will be credited with Service for the period in which he was not employed, provided the service is not counted under the first sentence of this subsection. An Employee who is absent from Service with the Employer for over 12 months shall receive no credit for any absence following the date the Employee incurs the Termination of Employment.

(b)

In determining an Employee’s Years of Vesting Service fractional years will be rounded to the nearest one twelfth of a year. Periods of Service will be based on full calendar months, crediting an Employee with a full month if the Employee works at least one Hour of Service during the month. An Employee with more than one period of Service will have all such periods aggregated and the Employee’s total Service will be used for purposes of determining Years of Vesting Service.


(c)	For the Plan Year commencing January 1, 2006 only, the Plan shall credit Vesting Service according to the following rules:

(1)

For each Employee of a Zions Employer who was employed by the Zions Employer on December 31, 2005, and continued to be employed on January 1, 2006, the Plan shall either apply the rules of this Section 3.13, treating January 1, 2006 as the Employment Commencement Date, or apply the previous vesting credit rules of this Plan without regard to this Section 3.13, crediting the Employee with Vesting Service credit according to the method that provides the greater credit.


(2)	For each Employee of a Zions Employer whose Employment Commencement Date was after January 1, 2006, but prior to July 24, 2006, the Plan shall either apply the rules of this Section 3.13, or apply the previous vesting credit rules of this Plan without regard to this Section 3.13, crediting the Employee with Vesting Service credit according to the method that provides the greater credit.


(3)	For each Employee of a Zions Employer whose Employment Commencement Date is after July 23, 2006, the Plan shall apply the rules of this Section 3.13 only.

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1. Age and Service Requirements: From and after the Effective Date an Eligible Employee shall be eligible initially to participate in this Plan on the first Entry Date coincident with or next following the date on which he satisfies the following requirements:


(a)	attains age 21, and


(b)	is employed on the Entry Date.

An Eligible Employee who has satisfied the requirements above shall commence participation in the Plan on the applicable Entry Date. An Eligible Employee who has attained age 21 and is employed on the Effective Date shall participate in this Plan on the Effective Date, without regard to the other requirements of this Section. Prior to the Effective Date Eligible Employees shall participate as provided in the Prior Plan.

An Eligible Employee who becomes a Participant and who also executes a Salary Deferral Agreement in the manner set forth in procedures issued by the Plan Administrator (which may include use of electronic technologies) shall be considered to be an active Participant. An Eligible Employee shall not be required to execute a Salary Deferral Agreement in order to be considered a Participant in the Plan, however, as a condition to participation in Salary Deferral Contributions the Eligible Employee shall first execute a written Salary Deferral Agreement in the manner set forth in procedures issued by the Plan Administrator. An Employee who is a Participant in a Predecessor Plan on the day before the effective date of the merger of the Predecessor Plan into this Plan shall continue as a Participant in this Plan on the effective date of merger.

4.2. Eligibility Information: As soon as practicable after the date each Employee's Employment Commencement Date, the Plan Administrator shall verify the Entry Date when the Employee shall first become eligible to participate in the Plan and shall notify each Employee of his/her eligibility, and of any application or other requirements for participation.

4.3. Information to be Provided by Employee: At the request of the Plan Administrator, each Eligible Employee shall furnish such information as is not available from the Employer. As a condition to participation in making Elective Deferrals to the Plan, the Employee shall first complete, execute and deliver a written Salary Deferral Agreement as reasonably required by the Plan Administrator.

4.4. Reclassification of an Eligible Employee or Excluded Employee: Any Eligible Employee, whether or not he has previously participated in the Plan, who was previously classified as an Excluded Employee and is reclassified as an Eligible Employee shall be eligible to enter the Plan as an active Participant on the later of the date of his reclassification or the Entry Date he would otherwise join if he had not been classified as an Excluded Employee, provided he has otherwise satisfied the requirements of Section 4.1.

Any Participant who is reclassified as an Excluded Employee shall be treated as an Excluded Employee on the date of reclassification for purposes of determining his eligibility for any Employer Contributions in the Plan Year of reclassification. If, prior to the date of reclassification, the Participant had executed a Salary Deferral Agreement and is deferring Compensation in the Plan Year in which the reclassification occurs, the Participant's Salary Deferral Agreement and all Elective Deferrals thereunder shall automatically terminate as of the last day of the payroll period that commenced immediately prior to the date the Participant is reclassified as an Excluded Employee.

4.5. Re-employment and Commencement of Participation: An Eligible Employee who had met the requirements of Section 4.1(a) and (b) but terminated employment prior to his Entry Date shall be eligible to become a Participant on the date he is re-employed by the Employer, but in no event earlier than the Entry Date he would have joined had he not ceased employment. An Eligible Employee who was a Participant shall again become a Participant on the date he is re-employed by the Employer.

4.6. No Waiver of Participation: An Eligible Employee who has satisfied all criteria for participation in this Plan shall be deemed a Participant and may not waive or reject participation.

4.7. Effect of Participation: A Participant who has satisfied all eligibility criteria and commenced active participation in this Plan shall be conclusively deemed to have assented to this Plan and to any subsequent amendments, and shall be bound thereby with the same force and effect as if he had formally executed this Plan.

ARTICLE 5

PARTICIPANT AND EMPLOYER CONTRIBUTIONS

5.1. Elective Deferrals :

(a)

Each Participant may elect to defer any percentage of the Participant's Compensation described in subsection (1) below, subject to a minimum of 1% of the Participant's Compensation per pay period. The maximum percentage amount shall be 50% of the Participant’s Compensation. Effective for Plan Years commencing on or after July 24, 2006, the maximum percentage amount shall be 80% of the Participant’s Compensation. The amount of the deferral shall be contingent on the Participant electing and authorizing the Elective Deferral amount through a Salary Deferral Agreement. The Salary Deferral Agreement and the Participant's authorization thereunder may be evidenced by a document executed by the Participant and filed with the Administrator in the manner prescribed for this purpose, which may include a Salary Deferral Agreement completed and executed by the Participant through any approved electronic means. The Salary Deferral Agreement shall be subject to the following rules:

(1)

The Salary Deferral Agreement shall apply to each payroll period during which it is in effect and has not been rescinded. The Salary Deferral Agreement shall be applicable to all forms of the Participant’s Annual Compensation, regardless of how paid or characterized, and effective June 1, 2007, shall designate Elective Deferrals as pre-tax Elective Deferrals, Roth Elective Deferrals or both, in the percentage specified. An Elective Deferral contribution to the Plan shall be treated as a Roth Elective Deferral only when so specifically designated by the Participant in advance of the date the Roth Elective Deferral is first made to the Plan.

(2)

The amount by which the Participant's Annual Compensation is reduced under the Salary Deferral Agreement may be changed (increased, decreased or ceased and effective June 1, 2007, change between pre-tax and Roth Elective Deferrals) by a Participant at any time during the Plan Year. A change shall be evidenced by a written document, by oral instructions directly from the Participant with written confirmation in accordance with rules and procedures established by the Administrator or through any electronic means or method approved by the Plan Administrator.


(3)	A Salary Deferral Agreement and or an amendment to a Salary Deferral Agreement shall be effective as soon as Administratively Feasible after the Salary Deferral Agreement or the amendment is executed, orally authorized or electronically completed by the Participant and received and confirmed by the Administrator.


(4)	The Administrator may amend or revoke a Salary Reduction Agreement with any Participant at any time if the Administrator determines that a revocation or amendment is necessary to ensure that the Participant's Elective Deferral for any Plan Year will not exceed any Plan limitations.


(5)	The Administrator may revoke its Salary Reduction Agreements with all Participants or amend its Salary Reduction Agreements with all Participants on a uniform basis if it determines that such action is necessary in order to comply with the terms of the Plan or any applicable law or regulation.

(b)

The Elective Deferral amounts designated by the Participant in the Salary Deferral Agreement shall be withheld and contributed to the Plan by the Employer without regard to Net Profits to the Participant's Elective Deferral Account. Unless otherwise approved by the Plan Administrator, Elective Deferrals made through payroll deductions shall be pursuant to the Salary Deferral Agreement executed by the Participant or orally authorized by the Participant and confirmed by the Plan Administrator or authorized by any other electronic means or method approved by the Plan Administrator.

(c)

Commencing January 1, 2002, and for all Plan Years thereafter an Employee who is eligible to make Elective Deferrals under this Plan and who attains age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Code §414(v). Catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code §§402(g) and 415. The Plan Administrator shall not treat catch up contributions as failing to satisfy any provisions of the Plan implementing the requirements of Code §§401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable. Effective June 1, 2007, Catch-up contributions may consist of either pre-tax or Roth Elective Deferrals.

5.2. Payment to Trustee: The Employer shall transmit to the Trustee the amounts withheld by it pursuant to Section 5.1 above as soon as Administratively Feasible, but in no event later than the fifteenth (15th) business day of the month following the month in which the amounts are withheld or received by the Employer. However, the Employer shall not transmit to the Trustee any amounts withheld by it during the Plan Year pursuant to a deferral election under Section 5.1, which in the Plan Administrator's opinion would cause the Plan to fail to meet the limitations described in Section 5.10 for that Plan Year. Such amounts withheld and not transmitted to the Trustee shall be returned by the Employer to the respective Participants.

5.3. Suspension of Deferrals: A Participant may notify the Plan Administrator electronically, orally (with written confirmation) or in writing of his intention to suspend his election to have a portion of his Annual Compensation deferred. The suspension shall be effective as soon as Administratively Feasible after the date the notice of suspension is received shall apply to each payroll period thereafter, until a new Salary Deferral Agreement is entered into by the Participant. The Participant shall be considered a Participant hereunder for all other purposes if his employment continues, however, he shall not be considered to be an active Participant.

5.4. After-tax Contributions by Participants: From and after the Effective Date no Participant shall be permitted or required to make after-tax or Voluntary Contributions to the Plan.

5.4A Roth Elective Deferrals: Effective June 1, 2007, and for each Plan Year thereafter, the Plan will accept Roth Elective Deferrals made on behalf of Participants. A Participant’s Roth Elective Deferrals will be allocated to a separate account maintained for such deferrals as described in this Section 5.4A. Unless specifically stated otherwise, Roth Elective Deferrals will be treated as Elective Deferrals for all purposes under the Plan, including the determination and allocation of Employer Matching Contributions. Notwithstanding any other provision of the Plan to the contrary, all issues involving contribution and allocation of Roth Elective Deferrals and earnings thereon and distribution of Roth Elective Deferrals shall be determined according to the provisions of this Section 5.4A, unless specifically provided otherwise in this Section.

(a)

Contributions and withdrawals of Roth Elective Deferrals will be credited and debited solely to the Roth Elective Deferral Account maintained for each Participant. The Plan will maintain a record of the amount of Roth Elective Deferrals in each Participant’s Account. The Plan shall employ the same procedures set forth in Section 5.1 in determining when and how a Participant may elect to make or change an election of Roth Elective Deferrals, and may provide for designation by the Employee of pre-tax and Roth Elective Deferrals in the same Salary Deferral Agreement. For purposes of implementing this provision the term “Elective Deferrals” in Section 5.1 shall be interpreted to mean both pre-tax and Roth Elective Deferrals, as appropriate.


(b)	Gains, losses, and other credits or charges must be separately allocated on a reasonable and consistent basis to each Participant’s Roth Elective Deferral Account and to the Participant’s other Accounts under the Plan. For this purpose the Plan may apply the Account adjustment provisions of Section 6.3 to the Roth Elective Deferral Account.


(c)	No contributions other than Roth Elective Deferrals and properly attributable earnings shall be credited to each Participant’s Roth Elective Deferral Account.


(d)	Notwithstanding Section 11.4, a direct rollover of a distribution from the Roth Elective Deferral Account will only be made to another Roth elective deferral account under an applicable retirement plan described in Code §402A(e)(1) or to a Roth IRA described in Code §408A, and only to the extent the rollover is permitted under the rules of Code §402(c).

(e)

Notwithstanding Section 5.5, the Plan will accept a rollover contribution to the Roth Elective Deferral Account only if it is a direct rollover from another Roth elective deferral account under an applicable retirement plan described in Code §402A(e)(1) and only to the extent the rollover is permitted under the rules of Code §402(c). Effective for any distribution from the Plan first commenced after September 27, 2010, the Plan will also accept a rollover contribution to the In-plan Roth Rollover Account, provided that it is a direct rollover of amounts previously held in the Participant’s Account in the Plan (excluding amounts held in the Participant’s Roth Elective Deferral Account). The Plan will accept the rollover only if it is on account of a distribution that complies with all Plan distribution rules and is an Eligible Rollover Distribution within the meaning of Section 11.4. The Participant’s election to make an In-Plan Roth Rollover shall be irrevocable, once it has been accepted and so accounted for by the Plan.

(f)

The Plan will not provide for a direct rollover for distributions from a Participant’s Roth Elective Deferral Account if the amount of the distributions that are eligible rollover distributions are reasonably expected to total less than $200 during a year. In addition, any distribution from a Participant’s Roth Elective Deferral Account shall not be taken into account in determining whether distributions from a Participant’s other Accounts are reasonably expected to total less than $200 during a year. However, eligible rollover distributions from a Participant’s Roth Elective Deferral Account shall be taken into account in determining whether the total amount of the Participant’s Account balances under the Plan exceeds $1,000 for purposes of mandatory distributions from the Plan. Any provision of the Plan that allows a Participant to elect a direct rollover of only a portion of an eligible rollover distribution but only if the amount rolled over is at least $500 shall be applied by treating any amount distributed from the Participant’s Roth Elective Deferral Account as a separate distribution from any amount distributed from the Participant’s other Accounts in the Plan, even if the amounts are distributed at the same time.

(g)

In the case of any distribution of excess contributions under Section 5.12, a Highly Compensated Employee shall be permitted to designate the extent to which the excess amount is composed of pre-tax Elective Deferrals and Roth Elective Deferrals but only to the extent such types of deferrals were made for the year. If the Highly Compensated Employee does not designate which type of Elective Deferrals are to be distributed, the Plan will distribute pre-tax Elective Deferrals first.

(h)

In the case of any distribution to a Participant under Articles IX or XI that is other than a lump sum distribution, the Participant shall be permitted to designate the extent to which the distribution is composed of Roth Elective Deferrals and other contributions, but only to the extent the Participant’s Account includes Roth Elective Deferrals. If the Participant does not designate the composition of Roth Elective Deferrals in a distribution, the Plan will distribute Roth Elective Deferrals until the Participant’s Roth Elective Deferral Account is exhausted prior to distributing any other contributions.


(i)	For purposes of this Section 5.4A, a Roth Elective Deferral is an Elective Deferral that is:


(1)	Designated irrevocably by the Participant at the time of the cash or deferred election as a Roth Elective Deferral that is being made in lieu of all or a portion of any pre-tax Elective Deferrals the Participant is otherwise eligible to make under the Plan; and


(2)	Treated by the Employer as includible in the Participant's income at the time the Participant would have received that amount in cash if the Participant had not made a cash or deferred election.

5.5. Rollover Contributions by Participants: A Participant (or an Employee who is expected to become a Participant) may make a rollover contribution directly to this Plan of an “eligible rollover distribution,” as that term is defined under Code §401(a)(31)). The Plan will accept participant rollover contributions and/or direct rollovers of distributions made after December 31, 2001, from any qualified plan described in Code §401(a) or Code §403(a), an annuity contract described in Code §403(b) or an eligible plan under Code §457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The Plan will also accept a participant rollover contribution of the portion of a distribution from an individual retirement account or annuity described in Code §408(a) or (b) that is eligible to be rolled over and would otherwise be includable in gross income. The Plan will not accept rollovers that include after-tax employee contributions. The rollover amount shall be credited to his Participant Rollover Contribution Account, provided:


(a)	The Participant provides adequate evidence to the Plan Administrator that the amount satisfies the requirements of Code §402(c) regarding amounts that may be rolled over;


(b)	If the amount is rolled over indirectly to this Plan through an individual retirement account, annuity, or bond, the amount does not include life insurance policies, amounts contributed (or deemed to have been contributed) by the Participant or amounts distributed from a Plan not described above; and


(c)	It is received by this Plan as a direct transfer pursuant to Code §402(e)(6) or rolled over after distribution to the Participant within 60 days following its distribution.

5.6. Safe Harbor Employer Matching Contributions: For each Plan Year the Employer may contribute to the Plan an amount, determined without regard to Net Profits, which will be sufficient to credit the Employer Matching Contribution Account of each Participant who is a Non-Highly Compensated Employee and who satisfies the requirements of Section 6.4, with amounts that satisfy the Employer's Matching Contribution percentage as determined by the Employer on a discretionary basis for the Plan Year. In no event however, shall the Employer Matching Contribution for any Participant who is a Non-Highly Compensated Employee in a Plan Year, when determined as a percentage of the Participant's Compensation for the Plan Year, ever be less than the percentage amounts shown in the following table:



Participant's Elective Deferral percentage: 0% 1% 2% 3% 4% 5%	Percentage of Employer Matching Contribution: 0.0% 1.0% 2.0% 3.0% 3.5% 4.0%

The Employer may also contribute to the Plan an amount, determined without regard to Net Profits, that will be sufficient to credit the Employer Matching Contribution Account of each Participant who is a Highly Compensated Employee and who satisfies the requirements of Section 6.4, with amounts that satisfy the Employer's Matching Contribution percentage as determined by the Employer on a discretionary basis for the Plan Year. In no event however, shall the rate of Matching Contributions with respect to Elective Deferrals made by any Highly Compensated Employee exceed the rate of Matching Contributions with respect to Elective Deferrals made by any Participant who is a Non- Highly Compensated Employee. Excess Matching Contributions for Employees of the Sponsoring Employer or a Participating Zions Employer shall be determined each Plan Year by the Sponsoring Employer and each Participating Zions Employer respectively, or shall be as set forth in the Supple mental Participation Agreement executed by the Participating Zions Employer. If the Employer or Participating Zions Employer makes a Matching Contribution in excess of that set forth in the table in this Section, in no event shall the rate of Matching Contributions increase as the rate of the Participant's Elective Deferrals increase.

The Employer Matching Contribution amount shall be determined solely by reference to the ratio percentage of the Participant’s Elective Deferral (and effective June 1, 2007, the aggregate of the Participant’s pre-tax Elective Deferrals and Roth Elective Deferrals) compared to the aggregate of the forms of the Participant’s Compensation that are subject to the Salary Deferral Agreement as specified in Section 5.1. If the Employer makes a Matching Contribution to the Plan at any time during the Plan Year (such as on a calendar quarter basis), any limit on the amount of Employer Matching Contribution shall not be determined by reference to Annual Compensation for the Plan Year, but by reference to Compensation paid only during the period to which the Matching Contribution relates. Notwithstanding the previous sentence, no contribution in excess of the maximum amount that would constitute an allowable deduction for federal income tax purposes under the applicable provisions of the Code, as now in force or hereafter amended, shall be required to be made by the Employer under this Section. Effective January 1, 2006, and for all Plan Years thereafter the Employer Matching Contribution amount shall be based on the total Elective Deferral (and effective June 1, 2007, the aggregate of the Participant’s pre-tax Elective Deferrals and Roth Elective Deferrals) and the total Compensation of the Participant for the Plan Year without regard to when during the Plan Year the Participant’s pre-tax Elective Deferrals and Roth Elective Deferrals have been made. Notwithstanding the previous sentence, no contribution in excess of the maximum amount that would constitute an allowable deduction for federal income tax purposes under the applicable provisions of the Code, as now in force or hereafter amended, shall be required to be made by the Employer under this Section.

The Employer Matching Contribution may be made in cash or in kind, provided however, that if the Matching Contribution is made in cash the Plan shall immediately acquire Employer Securities with the entire amount of the contribution and if the Matching Contribution is made in kind, it shall be made in the form of Employer Securities only.

5.7. Employer Non-Elective Contributions: The Employer may contribute, without regard to Net Profits, an amount determined by its Board of Directors as an Employer Non-Elective Contribution. The Employer may make the Non-Elective Contribution in cash or in kind, provided however, that if the Non-Elective Contribution is made in cash the Plan shall immediately acquire Employer Securities with the entire amount of the contribution and if the Non-Elective Contribution is made in kind, it shall be made in the form of Employer Securities only. The Employer reserves the right to increase or decrease the amount from year to year of the Non-Elective Contribution, as determined by the Board of Directors. Notwithstanding the previous sentence, no contribution in excess of the maximum amount that would constitute an allowable deduction for federal income tax purposes under the applicable provisions of the Code, as now in force or hereafter amended, shall be required to be made by the Employer under this Section.

The amount of the contribution to be credited to the Employer Non-Elective Contribution Accounts of the Participants may be stated in terms of a gross contribution, in which case the amount shall be reduced by any non-vested forfeitures from Employer Non-Elective Contribution Accounts of the Participants to be allocated during the Plan Year pursuant to Section 11.5; or the amount may be stated in terms of a net contribution, in which case the amount shall be in addition to any such non- vested forfeitures. In the absence of a direction as to whether the amount of the contribution is in terms of a gross contribution or a net contribution, it shall be deemed to be a gross contribution.

5.8. Time and Method of Payment: All payments of Employer Matching and Non-Elective Contributions shall be made directly to the Trustee and shall be paid no later than the time prescribed by law (including any extensions) for filing the Employer's federal income tax return for the Plan Year for which they are made. The Employer may in its sole discretion, at any time during the Plan Year, make one or more partial payments to the Trustee on an estimated basis. Any amount so paid in advance shall be applied against the amount thereafter determined to be payable by the Employer and shall be credited by the Plan Administrator to the Participants' Employer Contribution Accounts as of the end of the calendar quarter for which the payment is made.

5.9. Employer Contribution Accounts: The Plan Administrator shall establish and maintain an Employer Matching Contribution Account, as defined in Section 2.1(c) and an Employer Non- Elective Contribution Account as defined in Section 2.1(d) for each Participant eligible to receive an Employer Matching Contribution and an Employer Non-Elective Contribution. The establishment of the accounts is for record keeping purposes only, and a physical segregation of assets shall not be required.

5.10. Limitations on Contributions: All Elective Deferral Contributions to this Plan shall be subject to the limitations in subsection (a). Notwithstanding any other provisions of this Plan, if for any Plan Year the Elective Deferral and Matching Contributions to the Plan do not satisfy the requirements of Code §§401(k)(12) and 401(m)(11), then the Elective Deferral and Matching Contributions to this Plan shall be subject to the further limitations in subsections (b) and (c) below.

(a)

The total amount of a Participant's Elective Deferrals during any calendar year shall not exceed $11,000 which amount shall be adjusted annually, consistent with the provisions of Code §402(g) and thereafter indexed at the same time and in the same manner as the dollar limitation for defined benefit plans in Code §415(b)(1)(A). For this purpose a Participant's Elective Deferrals to this Plan plus the Participant's elective deferrals pursuant to any other Code §401(k) arrangement, elective deferrals under a simplified employee pension plan and salary reduction contributions to a tax-sheltered annuity, irrespective of whether the Employer or any member of an Affiliated Group to which the Employer belongs maintains the arrangement, plan or annuity, shall be aggregated.


(b)	The K-Test Average Contribution Percentage of Participants who are Highly Compensated Employees shall not exceed in any Plan Year the greater of:


(1)	The K-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees multiplied by 1.25; or


(2)	The lesser of the K-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees multiplied by two (2) or the K-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees plus two.


(c)	The M-Test Average Contribution Percentage for Participants who are Highly Compensated Employees shall not exceed in any Plan Year the greater of:


(1)	The M-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees multiplied by 1.25; or


(2)	The lesser of the M-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees multiplied by two (2) or the M-Test Average Contribution Percentage for the prior Plan Year of Participants who are Non-Highly Compensated Employees plus two.

For purposes of applying the tests in (b) and (c) above in any Plan Year, the K-Test Average Contribution Percentage and the M-Test Average Contribution Percentage for Participants who are Non-Highly Compensated Employees shall be based on the prior Plan Year. The Employer may not aggregate this Plan with any other plan when applying the tests in (b) and (c) above.

5.11. Excess Contributions: In accordance with the limitations on contributions described in Section 5.10, the following amounts shall be treated as excess contributions under this Plan:

(a)

Excess Deferrals: with respect to any calendar year, amounts identified as Excess Deferrals, whether determined by the Administrator or designated by a Participant in writing no later than March 1 following the end of the calendar year, in accordance with such procedures as the Plan Administrator shall specify, less any Excess K-Test Contributions previously distributed or recharacterized for the Plan Year beginning in the calendar year in which the Excess Deferral is made, pursuant to Section 5.12(b).

(b)

Excess K-Test Contributions: with respect to any Plan Year, the excess of the aggregate amount of K-Test Contributions actually made on behalf of Highly Compensated Employees for such Plan Year over the maximum amount of such contributions permitted under Section 5.10(b). The Excess K-Test Contributions of an individual Highly Compensated Employee shall be determined (i) by calculating the total dollar amount resulting from a reduction of the K-Test Contributions made on behalf of Highly Compensated Employees in order of the K-Test Contribution Percentages, beginning with the highest percentage, until the limitations of Section 5.10(b) are met, and (ii) by reducing the K-Test Contributions made on behalf of Highly Compensated Employees in order of the dollar amount of K-Test Contributions for each Highly Compensated Employee, beginning with the highest dollar amount, and subtracting such amounts from the total dollar amount determined in (i) above until the total dollar amount is exhausted. The Excess K-Test Contributions allocated to a Participant shall be reduced by any Excess Deferrals previously distributed for the calendar year ending with or within the Plan Year in which the Excess K-Test Contributions arose, pursuant to Section 5.12(a).

(c)

Excess M-Test Contributions: with respect to any Plan Year, the excess of the aggregate amount of M-Test Contributions actually made on behalf of Highly Compensated Employees for such Plan Year over the maximum amount of such contributions permitted under Section 5.10(c). Effective January 1, 1997, the Excess M-Test Contributions of an individual Highly Compensated Employee shall be determined (i) by calculating the total dollar amount resulting from a reduction of the M-Test Contributions made on behalf of Highly Compensated Employees in order of the M-Test Contribution Percentages, beginning with the highest percentage, until the limitations of Section 5.10(c) are met, and (ii) by reducing the M-Test Contributions made on behalf of Highly Compensated Employees in order of the dollar amount of M-Test Contributions for each Highly Compensated Employee, beginning with the highest dollar amount, and subtracting such amounts from the total dollar amount determined in (i) above until the total dollar amount is exhausted.

5.12. Correction of Excess Contributions: The Plan provides the following methods for correcting excess contributions as described in Section 5.11:

(a)

Excess Deferrals : The Plan Administrator shall direct the Trustee to distribute to a Participant from his Participant Elective Deferral Account an amount equal to the Participant's Excess Deferral plus income, if any, allocable thereto. Such distribution shall be designated by the Plan Administrator as a distribution of an Excess Deferral and shall be made not earlier than the date on which the Trustee receives the Excess Deferral and not later than the first April 15 following the end of the calendar year in which the Excess Deferral is made.

(b)

Excess K-Test Contributions : The Plan Administrator shall direct the Trustee to distribute to a Participant his Excess K-Test Contribution plus income, if any, allocable thereto. The distribution shall be designated by the Plan Administrator as a distribution of an excess contribution and shall be made any time during or after the Plan Year in which the excess contribution arose, but within 12 months after the end of the Plan Year.

If the Employer has made a Matching Contribution attributable to any portion of the Participant's Excess K-Test Contribution distributed to the Participant pursuant to the above, the Plan Administrator shall treat the Matching Contribution as a forfeiture. The forfeited amount shall be used to reduce the Employer's Matching Contribution otherwise required for the Plan Year or for any subsequent Plan Year.


(c)	Excess M-Test Contributions : The Plan Administrator shall direct the Trustee to hold the excess M-Test Contribution Amount and shall use this Amount to reduce any future Matching Contribution obligation of the Employer to the Plan.

For purposes of the above, income shall include realized and unrealized gains and losses for the Plan Year and for the period from the end of the Plan Year to the date of distribution (the “gap period”) and shall be allocated to excess contributions in accordance with all appropriate Code and Regulations provisions issued by the Secretary. Distributions of excess contributions pursuant to the above shall be made without regard to any consent by the Participant or Spouse otherwise required under this Plan. With the exception of distributions attributable to excess K-Test Contributions for the Plan Years commencing in 2006 and 2007, the Plan specifically elects not to include income for the period from the end of the Plan Year to the date of distribution (the “Gap Period”) when making any distribution under this Section. Distributions attributable to excess K-Test Contributions for the Plan Years commencing in 2006 and 2007 shall be adjusted for income (gain or loss), including an adjustment for income during the Gap Period. The Plan Administrator may, in its discretion, use any reasonable method for computing the income allocable to excess K-Test Contributions, provided that the method does not violate Code §401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participant’s Accounts. The Plan need not allocate income to excess K-Test Contributions that is accrued within seven days before the date of distribution.

In lieu of the reasonable method provided above, the Plan Administrator may use the safe harbor method to determine income on excess K-Test Contributions for the Gap Period. Under the safe harbor method, income on excess K-Test Contributions for the Gap Period is equal to 10% of the income allocable to excess K-Test Contributions for the Plan Year, multiplied by the number of calendar months that have elapsed since the end of the Plan Year. Income allocable to K-Test Contributions shall be determined by multiplying the income for the Plan Year allocable to the Elective Deferrals and other amounts taken into account under the K-Test described in Section 5.10 (including contributions made for the Plan Year), by a fraction, the numerator of which is the excess K-Test Contributions for the Participant for the Plan Year, and the denominator of which is the sum of the:


(d)	account balance attributable to Elective Deferrals and other amounts taken into account under the K-Test as of the beginning of the Plan Year, and


(e)	any additional amount of such contributions made for the Plan Year.

For purposes of calculating the number of calendar months that have elapsed under the safe harbor method, a corrective distribution that is made on or before the 15th day of a month is treated as made on the last day of the preceding month and a distribution made after the 15th day of a month is treated as made on the last day of the month.

ARTICLE 6

ALLOCATIONS TO ACCOUNTS

6.1. Revaluation of Assets: Not less frequently than as of the Annual Valuation Date each year, the Plan Administrator shall re-value the net assets of all Participants’ General Investments Accounts and Employer Securities Accounts in the Investment Fund. The valuation shall determine the current fair market value. At the Plan Administrator's discretion, applied on a consistent basis, the Plan Administrator may similarly re-value the Investment Fund at the end of a semi-annual, quarterly, monthly or more frequent period, which may be as frequent as the close of each business day. The last day of each valuation period shall be referred to as an Interim Valuation Date. The net investment income or loss on the Investment Fund since the previous Annual or Interim Valuation Date shall then be determined. An independent appraiser meeting requirements similar to those prescribed by Treasury regulations under Code §170(a)(1) must perform all valuations of Employer Securities that are not readily tradeable on an established securities market. The valuation requirement of the immediately preceding sentence applies to all Employer Securities acquired by the Plan.

6.2. Allocation of Contributions and Forfeitures: Contributions and forfeitures for any period shall be credited to the Accounts of Participants in the following manner:


(a)	With respect to Elective Deferral contributions made pursuant to Section 5.1, an amount equal to the Participant's Elective Deferral since the previous Annual or Interim Valuation Date shall be allocated and credited to his Elective Deferral Account.

(b)

Matching Contributions made pursuant to Section 5.6, if any, shall be allocated on each Annual Valuation Date (or if the Employer makes Matching Contributions on a calendar quarter or other periodic basis, on the last day of each calendar quarter or other period) to each Participant's Account who satisfies the requirements of Section 6.4(a), in an amount equal to the Employer Matching Contribution percentage determined by the Employer for the Plan Year, but in no event less than the percentage required under Section 5.6. If the Employer makes a Matching Contribution to the Plan at any time during the Plan Year, any limit on the percentage amount shall not be determined by reference to Annual Compensation for the Plan Year, but by reference to Compensation paid only during the period to which the Matching Contribution relates. Effective January 1, 2006, and for all Plan Years thereafter the Employer Matching Contribution shall be allocated according to the total Elective Deferrals (and effective June 1, 2007, the aggregate of the Participant’s pre- tax Elective Deferrals and Roth Elective Deferrals) and the total Compensation of the Participant for the Plan Year without regard to when during the Plan Year the Participant’s Elective Deferral or the Employer’s Matching Contribution is made.

(c)

Employer Non-Elective Contributions made pursuant to Section 5.7 shall be allocated on each Annual Valuation Date to each Participant's Account who satisfies the requirements of Section 6.4(b). The Employer's Non-Elective Contribution shall be credited to the Accounts of eligible Participants in an amount equal to that percentage of each annual Employer Non-Elective Contribution to this Plan that is in the same proportion that each Participant's Annual Compensation for the Plan Year for which the Employer makes the Non-Elective Contribution bears to the total Annual Compensation of all Participants for the Plan Year. For purposes of this Section 6.2(c) only Compensation paid to the Employee from and after the date applicable to the Participant as provided in subsection 6.4(c) during the portion of the Plan Year during which the Employee is a Participant in the Plan shall be taken into account. At the time the Employer makes its Non-Elective Contribution the Employer shall designate to the Administrator the Plan Year for which the Non- Elective Contribution shall be deemed to have been made (which may be the current Plan Year or the immediately prior Plan Year, as the Employer deems appropriate). If the Employer makes no designation, the Employer's Non-Elective Contribution shall be deemed to have been made for the Plan Year that begins concurrent with or within the taxable year of the Employer for which the Employer claims a deduction under Code §404.

(d)

Forfeitures that the Employer elects to use to reduce or as the Employer’s Non-Elective Contribution for the Plan Year pursuant to Section 11.6 shall be allocated as of each Annual Valuation Date to the Account of each Participant who satisfies the requirements of Section 6.4(b). Subject to Section 5.7 such allocated amounts shall be credited to the Non-Elective Contribution Accounts of such Participants in the same manner provided for allocation of Employer Non-Elective Contributions in Section 6.2(c) above.


(e)	With respect to Rollover Contributions made pursuant to Section 5.5, an amount equal to the Participant's rollover contributions since the previous Annual or Interim Valuation Date shall be credited to the Participant's Rollover Contribution Account.


(f)	Contributions by the Employer of Employer Securities or of cash that is immediately used to purchase Employer Securities shall be allocated solely to the Employer Securities Account. All other contributions, whether by the Employer or any Participant, shall be allocated solely to the General Investments Account.

6.3. Adjustment of Accounts and Dividends on Employer Securities: As of each Annual or Interim Valuation Date all Participants' and Former Participants' Accounts shall be adjusted to reflect contributions, income and dividends received, profits and losses, distributions from and expenses of the Trust Fund since the previous Annual or Interim Valuation Date. The adjustments shall be made in the following manner and order:


(a)	Each Account shall be charged with all forfeitures, withdrawals and distributions from the Account since the previous Annual or Interim Valuation Date. In making a forfeiture reduction under this Section 6.3(a) the Plan Administrator, to the extent possible, first must forfeit from a Participant's General Investments Account before making a forfeiture from his Employer Securities Account.


(b)	Each Account shall be charged with any administrative costs or expenses incurred and paid by the Plan that are allocable to the Account since the previous Annual or Interim Valuation Date. All administrative costs and expenses, to the extent possible, shall be paid from a Participant’s General Investments Account before being paid from his Employer Securities Account

(c)

Each Participant's General Investments Account that has a non-zero balance after the application of (a) and (b) above, shall be credited (or charged) with its proportionate share of the net investment income (or loss) and expenses since the previous Annual or Interim Valuation Date. The amount to be credited or charged to each Account shall be determined based on the ratio that: (i) the balance in the Account on the previous Annual or Interim Valuation Date less any forfeitures, withdrawals or distributions from the Account since that date bears to (ii) the total of such amounts determined for all Accounts. Notwithstanding the previous sentence, in the sole discretion of the Plan Administrator, the method of allocating the net investment income (or loss) of the General Investment Account may be adjusted to reflect the effect of cash flows into and out of such Accounts (such as contributions, payments on Participant loans, distributions, etc.) based on the length of time between the date of such cash flow and the current Annual or Interim Valuation Date. Any such adjustment pursuant to the previous sentence shall be made in a uniform and non-discriminatory manner among Participants and/or the types of Accounts.


(d)	Each Account shall be credited with the contributions allocated to it since the previous Annual or Interim Valuation Date, subject to the following rules:

(1)

The Employer Securities Account maintained for each Participant shall be credited with the Participant's allocable share of Employer Securities (including fractional shares) purchased and paid for by the Trust or contributed in kind to the Trust, with any forfeitures of Employer Securities and with any stock dividends on Employer Securities allocated to his Employer Securities Account. Employer Securities acquired with an Exempt Loan under Section 14.3 shall be allocated in accordance with that Section, subject however, to the provisions of this Section 6.3. Except as otherwise specifically provided in Section 14.3, the Plan Administrator will base allocations to the Participant's Employer Securities Account on dollar values ex pressed as shares of Employer Securities or on the basis of actual shares, assuming there is only a single class of Employer Securities.


(2)	The General Investments Account maintained for each Participant shall be credited with the Participant's allocable share of Elective Deferrals and any Employer Contribution not attributable to Employer Securities, according to the provisions of Section 6.2.

(e)

Cash dividends the Employer pays with respect to Employer Securities held by the Plan shall be allocated pro-rata to the Dividend Account of each Participant according to the number of Employer Securities in the Participant's Employer Securities Account as of the dividend date of record, less any Employer Securities allocated to or acquired for the Participant’s Employer Securities Account on or after the immediately preceding ex- dividend date. The Plan Administrator will not allocate to a Dividend Account any cash dividends the Employer directs the Trustee to apply to the payment of an Exempt Loan nor any cash dividends the Employer directs the Trustee to distribute directly to a Participant in accordance with Section 9.7.

Each Participant who is entitled to receive an allocation of a cash dividend to his Dividend Account shall have the option to invest all or any portion of the cash dividend in Employer Securities or withdraw from the Plan the portion of the cash dividend not so invested. The Participant’s election shall be subject to the following rules:


(1)	The Participant shall have the right to elect, no less often than annually, to invest the allocable share of dividends in Employer Securities or withdraw as cash.

(2)

The initial period during which a Participant may exercise the annual election shall extend from April 15, 2003, to May 15, 2003, for all individuals who are Participants in the Plan on April 15, 2003. Commencing January 1, 2004, and until July 24, 2006 the annual election period shall extend from January 1 to January 31 for all individuals who are Participants in the Plan on January 1. For an Employee who becomes a Participant in the Plan on any day after April 15, 2003, during the 2003 Plan Year or after January 1 in any subsequent Plan Year until July 24, 2006 the annual election period shall commence on the Participant’s Entry Date and end on the one month anniversary thereof. Beginning July 24, 2006, Participants shall have the right to make a standing election whether to invest such Participant’s allocable share of dividends in Employer Securities or withdraw as cash.


(3)	If the Participant fails to make an election to withdraw his allocable share of dividends in cash, his share shall be invested automatically in Employer Securities.


(4)	The Participant may elect and revoke any prior election without limitation at any time and in accordance with procedures established by the Committee. The Participant shall indicate his election by any means acceptable to the Plan Sponsor, which may include electronic notice or written notification delivered or, if mailed, post- marked no later than the last day of the election period.


(5)	Dividends to be invested in Employer Securities shall be so invested as soon as Administratively Feasible following their receipt by the Plan. Withdrawal of any cash dividends must occur no later than 90 days after the close of the Plan Year in which the dividends were paid.


(6)	Until invested in Employer Securities or distributed in cash, dividends in a Dividend Account shall be held and invested as provided in Section 18.4.

If the Employer directs the Trustee to apply cash dividends on Employer Securities to the payment of an Exempt Loan, the Plan Administrator will first allocate the released Employer Securities to the Participants' Employer Securities Accounts in the same ratio, determined on the dividend declaration date, that Employer Securities allocated to a Participant's Employer Securities Account bear to the Employer Securities allocated to all Employer Securities Accounts. This first allocation of released Employer Securities must equal the greater of: (1) the shares of released Employer Securities equal to the fair market value of the cash dividends attributable to the allocated Employer Securities; or (2) the number of shares of all released Employer Securities attributable to the cash dividends on allocated Employer Securities. If any released Employer Securities remain unallocated after the first allocation, the Plan Administrator will allocate these remaining released Employer Securities as if the Employer has made an Employer Contribution equal to the amount of the cash dividend attributable to the unallocated Employer Securities.

6.4. Eligibility for Allocation of Employer Matching and Non-Elective Contributions: The eligibility of Participants to receive allocations of Employer Matching and Non-Elective Contributions for each Plan Year shall be determined in the following manner:

(a)

The Administrator shall determine allocations of Matching Contributions on the basis of the Plan Year, unless the Employer makes its Matching Contributions during the Plan Year on a periodic basis, such as monthly or according to payroll periods, in which case the Matching Contribution shall be allocated during the Plan year on the same periodic basis as made. That is, in allocating Matching Contributions to a Participant's Account, the Administrator shall take into account only the Compensation paid the Participant during the specific period during the Plan Year to which the allocation applies and a valid, executed Salary Reduction Agreement is in effect and on file with the Administrator for the period, subject, however, to the maximum amount of Annual Compensation that may be taken into account under Code §401(a)(17). Matching Contributions, whether or not made on a periodic basis during the Plan Year, shall be allocated to Accounts of Participants without regard to any minimum Service or specific day employment requirement.

(b)

Except as otherwise provided in this Section 6.4, the Administrator shall determine allocations of Employer Non-Elective Contributions on the basis of the Plan Year. In allocating Employer Non-Elective Contributions to a Participant's Account, the Administrator shall take into account only Compensation paid the Employee from and after the date applicable to the Participant as provided in subsection (c) below. For any Plan Year Employer Non- Elective Contributions shall be allocated only to Accounts of Participants who complete at least 1,000 Hours of Service during the Plan Year and who are employed by the Employer on the last day of the Plan Year. The rules set forth in subsection (c) below shall also apply in determining when the Participant is eligible to receive an Employer Non- elective Contribution.

(c)

If an Employee becomes a Participant in the Plan prior to the first anniversary of his Employment Commencement Date, he shall not receive an allocation of Employer Non- Elective Contributions (regardless of the number of his Hours of Service or the amount of his Elective Deferrals) for any period prior to the earlier of January 1 or July 1 following the first anniversary of his Employment Commencement Date. From and after the applicable date the Participant shall be entitled to an allocation of Employer Non-Elective Contributions for the Plan Year, without regard to whether the Participant has been continuously employed from his Employment Commencement Date, provided the Participant first satisfies the Hours of Service and employment requirements of subsection (b) above.

6.5. Restriction on Certain Allocations: To the extent a shareholder sells Employer Securities to the Trust and is eligible for and elects (with the consent of the Employer) non-recognition of gain under Code §1042, the Plan Administrator will not, either directly or indirectly, allocate under the Plan at any time any portion of the purchased Employer Securities to:


(a)	the selling shareholder,


(b)	the selling shareholder's spouse, brothers or sisters (whether by the whole or half blood), ancestors or lineal descendants; or


(c)	any shareholder owning (as determined under Code §318(a)) more than 25% of any class or the value of any class of Employer Securities.

For purposes of this Section 6.5 the term “shareholder” includes the shareholder's executor and the term “purchased Employer Securities” includes any dividends or other income attributable to the purchased Employer Securities. A shareholder of Employer Securities of a Zions Employer shall not be eligible to elect non-recognition of gain under Code §1042 as long as the Employer Securities are readily tradeable on an established securities market.

6.6. Participant Diversification of Investments: Except as specifically provided in Section 6.3(e) and in this Section 6.6 and in Section 18.6, the Plan does not permit individual direction of investment by Participants of their Employer Securities Accounts. Effective January 1, 2007, individual direction of investment by Participants of their Employer Securities Account is permitted as provided in this Section and in Sections 18.2 and 18.6.

(a)

Each Qualified Participant may direct the investment into a Segregated Investment Account of up to 25% of the value of the Participant's Eligible Account within 90 days after the Valuation Date of each Plan Year (to the extent a direction amount exceeds the amount to which a prior direction under this Section 6.6 applies) during the Participant's Qualified Election Period. For the last Plan Year in the Participant's Qualified Election Period, “50%” shall be substituted for “25%” in the immediately preceding sentence. The Qualified Participant must make his direction in writing or in another form acceptable to the Plan Administrator, which may include any approved electronic means. The direction may be effective no later than 180 days after the close of the Plan Year to which the direction applies, and the direction must specify which, if any, of the investment options in the Segregated Investment Account the Participant selects. Effective January 1, 2004, a Qualified Participant may direct the investment of his or her Eligible Account as provided in this subsection at any time during the Plan Year. When given, the direction shall be effective immediately.


(b)	A Qualified Participant may choose one of the following alternative investment options:

(1)

The distribution of the portion of his Eligible Account covered by the election. The Administrator will direct the distribution within 90 days after the last day of the period during which the Qualified Participant may make the election. The provisions of this Plan applicable to a distribution of Employer Securities, including any applicable put option requirements of Article XXII, apply to this investment option. Effective January 1, 2004, this option shall no longer be available.

(2)

The liquidation and transfer of the portion of his Eligible Account covered by the election to the General Investment Account in the Plan. The Trustee will make the transfer no later than 90 days after the last day of the period during which the Qualified Participant may make the election. Effective January 1, 2004, the Trustee shall carry out all such investment directions and make all transfers as soon as Administratively Feasible.


(c)	The Participant's Segregated Investment Account shall alone receive all income it earns and bear all expense or loss it incurs.


(d)	For purposes of this Section 6.6 the following definitions apply:


(1)	“Eligible Account” shall mean that portion of the Participant's total Account that consists of the Employer Securities Account.

(2)

“Qualified Participant” means a Participant who has attained age 55 and who has completed at least 10 years of participation in the Plan (without regard to the Participant’s years of participation in a Predecessor Plan, but taking into account the Participant’s years of participation in the Prior Plan). A “year of participation” means a Plan Year in which the Participant was eligible for an allocation of Employer contributions, irrespective of whether the Employer actually contributed to the Plan for that Plan Year.


(3)	“Qualified Election Period” means the six-Plan-Year period beginning with the Plan Year in which the Participant first becomes a Qualified Participant.


(e)	Effective January 1, 2004, the following additional rules shall apply in determining a Participant’s right to diversify the Employer Securities Account.

(1)

A Participant who has completed at least five Years of Vesting Service, regardless of age or the number of years of participation in the Plan, may direct diversification into the Segregated Investment Account of up to 100% of the Participant’s Employer Matching Contribution Account, except that portion in the Employer Securities Account attributable to Employer Non-Elective Contributions and dividends thereon. Effective January 1, 2007, the five Years of Vesting Service requirement shall no longer apply. A Participant who has completed three years of participation in the Plan, regardless of age, may direct diversification into the Segregated Investment Account of up to 100% of the Participant’s Employer Securities Account attributable to Employer Non-Elective Contributions and dividends thereon.

(2)

The Participant must make his direction in writing or in another form acceptable to the Plan Administrator, which may include any approved electronic means. The direction must specify which, if any, of the investment options in the Segregated Investment Account the Participant selects. The Participant may make his investment direction at any time during the Plan Year and when given, the direction shall be effective immediately.


(3)	The Trustee shall carry out all investment directions and make all transfers as soon as Administratively Feasible.


(4)	Amounts in the Participant’s Employer Matching Contribution Account that are diversified into the Participant’s Segregated Investment Account pursuant to this subsection (e) shall not be applied to reduce the amount available for diversification in the Eligible Account by a Qualified Participant under subsection (a).


(f)	The following rules shall apply to former Participants in the Amegy Bank 401(k) Savings Plan (“Amegy Participant”).

(1)

With respect to that portion of an Amegy Participant’s Employer Securities Account that consists of Employer Securities and dividends from such Employer Securities that were allocated to the Amegy Participant’s Employer Securities Account not later than as of December 31, 2005, such Amegy Participant may direct up to 100% of that portion of his/her Employer Securities Account into the General Investments Account.


(2)	That portion of an Amegy Participant’s Employer Securities Account that consists of Employer Securities and dividends from such Employer Securities that were allocated to the Amegy Participant’s Employer Securities Account as of January 1, 2006 or later, shall be subject to same rules as other participants as set forth in this Section 6.6.

ARTICLE 7

LIMITATIONS ON ALLOCATIONS

7.1. Special Definitions: The following terms shall be defined as follows:


(a)	“Annual Additions” shall mean the sum of the following amounts allocated on behalf of a Participant for a Limitation Year:


(1)	Employer contributions; and


(2)	Employee contributions; and


(3)	Forfeitures available for reallocation, if applicable; and


(4)	Allocations under any simplified employee pension plans.

Participant Elective Deferrals shall be considered to be Employer contributions. Amounts reapplied to reduce Employer contributions and amounts reapplied from a suspense account (if any) under Section 7.2 as well as contributions allocated to any Individual Medical Benefit Account that is part of a defined benefit plan shall also be included as Annual Additions.

For purposes of this Article, an Annual Addition is credited to the Account of a Participant for a particular Limitation Year if it is allocated to the Participant's Account as of any day within such Limitation Year. Employer contributions will not be deemed credited to a Participant unless the contributions are actually made to the Plan no later than the end of the period described in Code §404(a)(6) applicable to the taxable year with or within which the particular Limitation Year ends.

“Annual Additions” do not include any Employer Contributions applied by the Plan Administrator (not later than the due date, including extensions, for filing the Employer's federal income tax return for the Plan Year) to pay interest (charged to a Participant's Account) on an Exempt Loan, and any Leveraged Employer Securities the Plan Administrator allocates as forfeitures; provided however, the provisions of this sentence do not apply in a Limitation Year for which the Plan Administrator allocates more than one-third of the Employer Contributions applied to pay principal and interest on an Exempt Loan to Highly Compensated Employee-Participants.


(b)	“Compensation” for purposes of this Article VII (compliance with Code §415) and for purposes of compliance with any applicable non-discrimination test, including the determination of an Employee's status as a Highly Compensated Employee and the K-Test and M- Test procedures described in Section 5.10, shall mean and be determined as follows:


(1)	The term “Compensation” shall include:

(A)

The Participant's wages, salaries, fees for professional service and other amounts received (whether or not paid in cash) for personal services actually rendered in the course of employment with an Employer maintaining the plan (including, but not limited to, commissions paid to salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements and expense allowances).


(B)	In the case of a Participant who is an employee within the meaning of Code §401(c)(1), the Participant's earned income as described in Code §401(c)(2).


(C)	Any amounts contributed by the Employer or received by the Participant pursuant to an unfunded, non-qualified plan of deferred compensation to the extent such amounts are includable in the gross income of the Participant for the Limitation Year.


(D)	Any amount contributed or deferred by the Employer at the election of the Participant and that is not includable in the gross income of the Participant by reason of Code §§125, 401(k), 403(b) or 457.


(E)	Elective amounts that are not includable in the gross income of the Employee by reason of Code §132(f)(4).


(F)	Payments of Post-Severance Compensation made to a Participant by the later of (i) 2~ months from the date of Termination of Employment, or (ii) the end of the Limitation Year for which the Employer is required to furnish the Participants a written statement under Code §§6041(d), 6051(a)(3) and 6052 or the last day of the Plan Year.


(2)	The term “Compensation” does not include items such as:

(A)

Except as provided in subparagraph (1)(D) above, any Employer contributions to a qualified retirement plan and any Employer contributions to any other retirement plan that receive special tax benefits to the extent the contributions are not includable in the gross income of the Participant for the taxable year in which made; and any distributions from any qualified retirement plan, regard less of whether the distributions are includable in the gross income of the Participant.


(B)	Employer contributions made on behalf of a Participant to a simplified employee pension described in Code §408(k) to the extent such contributions are deductible by the Employer under Code §219(b)(7).


(C)	Except as provided in subparagraph (1)(D) above, other forms of compensation that receive special tax benefits, such as premiums for group health insurance and group term life insurance (but only to the extent that the compensation is not includable in the gross income of the Participant).


(D)	Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture (see Code §83 and the regulations thereunder).


(E)	Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option.


(F)	Compensation in excess of $200,000, or such greater amount as adjusted by the Secretary of the Treasury for increases in the cost of living in accordance with Code §401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to determine the Compensation limit for the Limitation Year that begins with or within such calendar year.


(G)	Any payment to a Participant by the Employer after the Participant’s Termination of Employment that is not Post-Severance Compensation as defined herein, even if payment of the amount is made within the time period specified in 7.1(b)(1)(F) above.


(H)	For Limitation Years beginning after December 31, 2008, any differential wage payment, as defined in Code §3401(h)(2).


(3)	Compensation actually paid or made available to a Participant within the Limitation Year shall be the Compensation used for the purposes of applying the limitations of this Article and Code §415. In the case of a group of Employers that constitutes an Affiliated Group, all Employers shall apply this same rule.


(c)	“Defined Contribution Dollar Limitation” shall mean the lesser of:


(1)	$40,000, as adjusted for increases in the cost-of-living under Code §415(d), or

(2)

one hundred percent (100%) of the Participant's Compensation, as defined in this Section 7.1, for the Limitation Year. The Compensation limit referred to in this subsection 7.1(c)(2) shall not apply to any contribution for medical benefits after separation from service (effective January 1, 2002, severance from employment) (within the meaning of Code §401(h) or Code §419A(f)(2)) that is otherwise treated as an Annual Addition.


(d)	“Employer” shall mean the Employer that adopts this Plan and, in the case of a group of employers that constitutes an Affiliated Group, all such employers shall be considered a single Employer for purposes of applying the limitations of this Article.


(e)	“Excess Amount” shall mean the excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount for such Limitation Year.


(f)	“Individual Medical Benefit Account” shall mean any separate account that is established for a Participant under a defined benefit plan and from which benefits described in Code §401(h) are payable solely to such Participant, his spouse or his dependents.


(g)	“Limitation Year” shall mean the 12 consecutive month period specified in Article II.

The Limitation Year may be changed by amending the election previously made by the Employer. Any change in the Limitation Year must be a change to a 12 month period commencing with any day within the current Limitation Year. The limitations of this Article (and Code §415) are to be separately applied to a limitation period that begins with the first day of the current Limitation Year and that ends on the day before the first day of the first Limitation Year for which the change is effective.

The dollar limitation on Annual Additions with respect to this limitation period is determined by multiplying the applicable dollar limitation for the calendar year in which the limitation period ends by a fraction, the numerator of which is the number of months (computed to the nearest whole month) in the limitation period and the denominator of which is 12.

The Limitation Year for all years prior to the effective date of Code §415 shall, as applied to this Plan, be the 12 consecutive month period selected as the Limitation Year for the first Limitation Year after the effective date of Code §415.

(h)

“Maximum Permissible Amount” shall mean, for a given Limitation Year, the Defined Contribution Dollar Limitation. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different 12 consecutive month period, the Maxi mum Permissible Amount for such short Limitation Year shall not exceed the amount in (1) above multiplied by a fraction, the numerator of which is the number of months in the short Limitation Year (computed to the nearest whole month) and the denominator of which is 12.


(i)	“Post-Severance Compensation” shall mean any amount received as regular pay after Termination of Employment if:


(1)	The payment is regular remuneration for services during the Participant's regular working hours, or remuneration for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and


(2)	The payment would have been paid to the Participant prior to a Termination of Employment if the Participant had continued in employment with the Employer.

7.2. Coordination With Other Plans :

(a)

If the Employer maintains any other qualified cash or deferred arrangement (“401(k) Plan”) covering Participants in this Plan and if the Annual Additions to a Participant's Account in this Plan and the annual additions to the Participant's account in the 401(k) Plan would result in the allocation on an allocation date of this Plan that coincides with an allocation date of the 401(k) Plan of an Excess Amount, the Excess Amount attributed to this Plan shall be determined by the Plan Administrator on a uniform and non-discriminatory basis, considering the amount of elective deferrals and Employer contributions made to each Participant's account in the 401(k) Plan, and the anticipated allocation of the Employer Contribution to this Plan. The Plan Administrator shall coordinate its actions with those of the plan administrator of the 401(k) Plan to provide for the maximum possible allocation to all Participants in both plans, taking into account the provisions of the 401(k) Plan allowing for distribution of elective deferrals to reduce an Excess Amount. In this regard, the Plan Administrator, whenever possible, shall allow for the allocation and distribution of elective deferrals from the 401(k) Plan so as to eliminate or reduce the possibility of creating a suspense account under this Plan or under the 401(k) Plan. If, after distributing all amounts that may be distributed from the 401(k) Plan, there still remains an Excess Amount, the Plan Administrator will attribute the total Excess Amount to the 401(k) Plan.

(b)

If the Employer maintains another qualified defined contribution plan during any Limitation Year that covers Participants in this Plan and as a consequence of the requirements of Section 7.4 an Excess Amount is allocated to a Participant's Account in this Plan on an allocation date that coincides with an allocation date in the other plan, the total Excess Amount shall be deemed allocated to the other plan.

7.3. Limitations on Allocations and Order of Limitations: Effective for any Limitation Year commencing on or after July 1, 2007, no Employer Contributions shall be made to this Plan for any Limitation Year that will result in an Annual Addition to a Participant’s Account that is an Excess Amount. If, pursuant to this Article, it is necessary to limit or reduce the amount of Contributions credited to a Participant under this Plan during a Limitation Year, the limitation or reduction shall be made:


(a)	First, from the Participant's General Investment Account, in the following order:


(1)	Unmatched Participant Elective Deferrals;


(2)	Employer Matching Contributions (if any have been allocated to the General Investments Account);


(3)	Matched Participant Elective Deferrals;


(4)	Employer Non-Elective Contributions.


(b)	Second, from Employer Non-Elective Contributions to the Participant's Employer Securities Account.

7.4. Aggregation of Plans: For purposes of applying the limitations of this Article applicable to a Participant for a particular Limitation Year, all qualified defined contribution plans ever maintained by the Employer shall be treated as one defined contribution plan and any Employee contributions to a defined benefit plan shall be treated as a defined contribution plan.

ARTICLE 8

IN-SERVICE AND HARDSHIP WITHDRAWALS

8.1. In-Service Withdrawals, Withdrawals of Rollover Contributions and Withdrawals Due to Attainment of Age 59½, Disability or Hardship: Subject to the provisions of Article XXII and except as otherwise provided in this Section 8.1 and Section 8.4, no amounts may be withdrawn by a Participant from any Account held for his benefit prior to termination of employment with the Employer.


(a)	A Participant may make in-service withdrawals from his Voluntary Contribution Account to the extent permitted in Section 8.4.

(b)

A Participant who has attained age 59½ may withdraw all or any portion of his Account, except any amount attributable to the Roth Elective Deferral Account or any amount in the Rollover Account that is attributable to Roth elective deferrals to another plan. A Participant who has attained age 59½ and has surpassed the five Plan Year period that includes the first Plan Year in which the Participant made Roth Elective Deferrals to the Plan (the “59 ½ and Five Year Rule”) may withdraw all or any portion of his Account attributable to the Roth Elective Deferral Account. A Participant may withdraw any amount in the Rollover Account that is attributable to Roth elective deferrals to another plan if the Participant has satisfied the 59 ½ and Five-Year Rule with respect to the other plan.


(c)	A Participant who suffers a Disability as defined in Section 2.13 may withdraw all or any portion of his Account without regard to the Participant's age or whether he has incurred a Termination of Employment.

(d)

A Participant may elect to withdraw an amount credited to his Elective Deferral Account without regard to the Participant's age (except any amount attributable to the Roth Elective Deferral Account or any amount in the Rollover Account that is attributable to Roth elective deferrals to another plan) but only if he obtains prior approval from the Plan Administrator, which approval shall be granted only upon a determination of Financial Hardship. However, notwithstanding the foregoing, if: (i) a Participant obtains prior approval from the Plan Administrator, granted only upon a determination of Financial Hardship and (ii) such Participant has satisfied the 59 ½ Year Rule with respect to this Plan; then such Participant may withdraw an amount from his Roth Elective Deferral Account; or (regardless of whether such Participant has satisfied the 59 ½ Year Rule with respect to this Plan) from a Rollover Account that is attributable to Roth elective deferrals to another plan if the Participant has satisfied the 59 ½ Year Rule with respect to the other plan. Any distribution pursuant to this subsection (d) shall be limited to an amount (aggregating all sources for the Financial Hardship distribution) not to exceed the amount determined by the Plan Administrator to satisfy the Financial Hardship distribution rules under Section 8.2 and 8.3. Such Participant who is eligible for the Financial Hardship distribution, may direct the amount that comes from each source that is eligible for distribution in accordance with this Section. In the case of a withdrawal due to Financial Hardship, the amount of the withdrawal shall be limited to the total amount in the Participant's Elective Deferral Account, including income allocable thereto as of December 31, 1988. A Participant shall be entitled to a withdrawal from his Participant Elective Deferral Account under this Plan only after receiving as a hardship withdrawal all amounts available first, from his Rollover Account and second, from his Voluntary Contribution Account. Upon granting approval, the Plan Administrator shall direct the Trustee to distribute the indicated portion of the Participant's Elective Deferral Account to the Participant.

(e)

In the event a Participant has previously made any Rollover Contribution to the Plan, the Participant shall, upon written notice to the Plan Administrator, be entitled to withdraw at any time, without regard to the Participant's age, any amount up to the balance of the Rollover Contributions held in his Rollover Contribution Account. Withdrawals shall have no effect upon any benefits provided under any other provisions of this Plan.

(f)

Whenever a withdrawal is permitted from more than one sub-account under this Section 8.1 the withdrawal shall be made (to the extent permitted under Code §72) in the following order: first, from the Participant Voluntary Contribution Account and second, from the Participant Elective Deferral Account. Withdrawals shall also be made from a Participant’s General Investments Account before being taken from his Employer Securities Account whenever possible.

8.2. Financial Hardship Distribution Rules: The Plan adopts the deemed hardship distribution standards set forth in Reg. §1.401(k)-1(d)(3)(iv) and as modified below in connection with the passage of the Pension Protection Act of 2006. As a consequence, the Plan Administrator shall not approve any distribution on account of Financial Hardship unless the distribution is determined by the Administrator to be necessary to meet an immediate and heavy financial need of the Participant, and effective February 15, 2007, his/her spouse; dependent or a beneficiary as designated under this Plan. The distribution will be deemed necessary if:


(a)	The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant, including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution; and


(b)	Other resources of the Participant are not reasonably available to meet this need.

The condition in (b) above is deemed to be met if the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer, provided however, if in the judgment of the Plan Administrator the issuance of a loan from the Plan to the Participant will result in further financial hardship to the Participant, all loans currently available from the Plan shall be deemed to have been made. A participant who has received or who receives a distribution on account of Financial Hardship shall be prohibited from making Elective Deferrals under this and all other plans of the Employer (as set forth above) until (6) months after receipt of the distribution.

8.3. Determination of Immediate and Heavy Financial Need: For purposes of Section 8.2, a distribution shall be deemed to be on account of an immediate and heavy financial need if the distribution is for:


(a)	Expenses for medical care described in Code §213(d) incurred by the Participant, the Participant's spouse or any dependent of the Participant or expenses necessary for these persons to obtain such medical care;


(b)	Payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, the Participant's spouse or any dependent of the Participant;


(c)	Costs directly related to purchase (excluding mortgage payments) a principal residence for the Participant; or


(d)	Payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure of the mortgage on that residence.

Effective January 1, 2011, a distribution shall also be deemed to be on account of an immediate and heavy financial need if the distribution is on account of either of the following additional circumstances:


(e)	Payments for burial or funeral expenses for the Participant's deceased parent, spouse, children or dependents (as defined in Code §152, without regard to Code §152(d)(1)(B)); or


(f)	Expenses for the repair of damage to the Participant's principal residence that would qualify for the casualty deduction under Code §165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).

8.4. In Service Withdrawals of Voluntary Contributions: Notwithstanding any other provisions of this Article VIII a Participant may withdraw in the manner and at the times provided in this Section 8.4 all or any part of his Accrued Benefit attributable to Voluntary Contributions that were made to the Plan before October 1, 1992, together with earnings accrued thereon after December 31, 1986. To effect a withdrawal under this Section 8.4 the Participant shall notify the Plan Administrator in writing of his request at least 15 days before any Entry Date. The Plan Administrator shall notify the Trustee to make distribution as soon as Administratively Feasible after those dates. A Participant may not exercise his withdrawal right under this Section 8.4 more than once during any Plan Year. The determination of the amount available for withdrawal shall be made in accordance with the requirements of Section 8.5.

If the Participant's Accrued Benefit is not more than $5,000, without regard to whether the amount in the Participant's Account has ever exceeded that amount at the time of any prior distribution, the withdrawal shall be permitted without regard to any Participant consent requirement or the requirements of Section 9.6. For purposes of the foregoing sentence the amount of the Accrued Benefit in the Participant's Account shall be determined without regard to that portion of the Account that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Code §§402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).

For those Participants with contributions designated in the Amegy 401(k) Savings Plan (that was merged into the Plan on July 24, 2006) as Employer Match and Non-Elective contributions allocated and funded through the Southwest Bank of Texas 401(k) Saving Plan prior to June 1, 2003, such contributions will be subject to the 24-month and 60-month in-service withdrawal rights.

For those Participants with contributions designated in the Amegy 401(k) Savings Plan (which was merged into the Plan on July 24, 2006) as Employer Match and Non-Elective contributions allocated and funded through the Lone Star Bank Profit Sharing and Salary Deferral Plan and Trust prior to April 1, 2004, such contributions will be subject to the 24-month and 60-month in-service withdrawal rights.

8.5. Determination of Available Withdrawal Amount: The amount that a Participant may withdraw under Section 8.4 shall be the total of the Participant's Voluntary Contributions to the Plan as of December 31, 1986, including earnings thereon, plus the Participant's Voluntary Contributions to the Plan after that date but prior to October 1, 1992, together with earnings thereon. No Voluntary Contributions after September 30, 1992 or earnings thereon shall be available for in-service withdrawal or included in any calculation of amount available for withdrawal. Upon any withdrawal pursuant to Section 8.4 the Plan shall first charge the amount (to the extent possible) to the balance of Voluntary Contributions determined as of December 31, 1986, which shall be considered a return of Voluntary Contributions under the “grandfather rule” of Notice 87-13, Q&A-13. All Voluntary Contributions to the Plan after December 31, 1986 and prior to October 1, 1992 together with earnings thereon, shall be considered by the Plan to be a “separate contract” within the meaning of Code §72(d). Allocations between investment in the contract and earnings with respect to any withdrawal including amounts attributable to the “separate contract” shall be made in accordance with Code §72(e)(8) and Notice 87- 13. The Plan Administrator shall maintain such records of a Participant's Voluntary Contributions as may be necessary to ensure compliance with this Section 8.5.

8.6. Withdrawal of Rollover Contributions: If a Participant has a Rollover Contribution Account in the Plan, and if the Participant's Accrued Benefit is not more than $5,000, without regard to whether the amount in the Participant's Account has ever exceeded that amount at the time of any prior distribution, the withdrawal shall be permitted without regard to any Participant consent requirement or the requirements of Section 9.6 (except with respect to any amount in the Rollover Account that is attributable to Roth elective deferrals to another plan). A Participant may withdraw any amount in the Rollover Account that is attributable to Roth elective deferrals to another plan if the Participant has attained age 59½ and has surpassed the five Plan Year period (as defined in Section 8.7) that includes the first Plan Year in which the Participant made Roth Elective Deferrals to the other plan. Withdrawals from the Rollover Contribution Account on account of hardship shall have no effect upon any benefits provided under any other provisions of this Plan. All hardship distributions from the Rollover Contribution Account shall be administered in a uniform and non-discriminatory manner.

The amount withdrawn shall be distributed to the Participant in the manner and form provided in Section 11.2 as if the amount were distributed on account of the Participant's Termination of Employment or, if the Participant is eligible for Normal Retirement, in the manner and form provided in Article IX as if the amount were distributed on account of the Participant's Retirement. If the spousal consent rules of Section 9.6 apply to any amount in the Participant's Account, then no amount shall be withdrawn unless prior to the withdrawal the Participant's spouse, if any, consents to the withdrawal.

8.7. Determination of Five Plan Year Period: For purposes of calculating the Five Plan Year Period when determining whether a withdrawal or distribution is a Qualified Roth Distribution, the following rules shall apply.

(a)

The Five Plan Year Period commences as of the first day of the Plan Year that includes the first day of the first taxable year of the Employee in which the Employee makes a Roth Elective Deferral to the Roth Elective Deferral Account under the Plan and ends as of the last day of the Plan Year in which five consecutive taxable years have been completed. For this purpose, the first taxable year in which an Employee makes a Roth Elective Deferral is the year in which the amount is includible in the employee's gross income.


(b)	A Roth Elective Deferral that is returned to the Employee as an Excess Deferral or an Excess K-Test Contribution under the provisions of Section 5.11 does not begin the consecutive taxable year period and does not result in commencement of the Five Plan Year Period.


(c)	A Roth Elective Deferral returned to an Employee as a permissible withdrawal under Section 5.13 does not begin the consecutive taxable year period and does not result in commencement of the Five Plan Year Period.


(d)	The Five Plan Year Period shall be determined separately for each Plan of the Employer in which the Employee participates.

(e)

If a direct rollover contribution of a distribution from a designated Roth account under another plan is made by the Employee to the Plan, the consecutive taxable year period and the commencement of the Five Plan Year Period begins on the first day of the Employee's taxable year in which the Employee first made a Roth contribution to the designated Roth account in the other plan, if earlier than the first taxable year in which a Roth Elective Deferral is made by the Employee to the Plan.


(f)	The beginning of the consecutive taxable year period and commencement of the Five Plan Year Period is not redetermined for any portion of an Employee's Roth Account in the Plan, even if the entire Roth Account is distributed during the Five Plan Year Period and the Employee subsequently makes additional Roth Elective Deferrals or rollovers of Roth deferrals from another plan to the Plan.

(g)

The rule in subsection (f) above applies if the Employee dies or the Roth Account is divided pursuant to a qualified domestic relations order. In either event, if a portion of the Roth Account is not payable to the Employee, but is payable to the Employee's Beneficiary or to an Alternate Payee, the age, death or disability of the Employee is used to determine whether the distribution is a Qualified Roth Distribution. However, if the Employee makes a rollover to this Plan of a Roth deferral from another plan that the Employee has received as an alternate payee or a spousal beneficiary, the Employee’s own age, disability or death shall be used to determine whether a subsequent withdrawal or distribution from the Plan is a Qualified Roth Distribution.

ARTICLE 9

RETIREMENT BENEFITS

9.1. Normal or Late Retirement: A Participant shall be eligible for Normal Retirement on reaching his Normal Retirement Date. A Participant who has not become an Excluded Employee may continue in the service of the Employer as a Participant hereunder beyond his Normal Retirement Date. In the event such a Participant continues in the service of the Employer, he shall continue to be treated in all respects as a Participant until his actual retirement. When any Participant has a Termination of Employment following his Normal Retirement Date he shall be considered a retired Participant and he shall be entitled to receive the entire amount of his Accrued Benefit, distributed as set forth below.

9.2. Disability Retirement: Upon any Participant incurring a Disability, he shall be considered a disabled Participant and entitled to begin receiving his Vested Accrued Benefit, without regard to whether he has also incurred a Termination of Employment. Such amount shall be distributed as provided in Section 9.3, or deferred until such later date as elected by the disabled Participant and then distributed as provided in Section 9.3.

9.3. Method of Payment: Subject to the rules of Section 9.7, upon receipt of a claim for benefits a retired or disabled Participant's Vested Accrued Benefit shall be payable, as elected in writing or other appropriate electronic means by the Participant, in one or a combination of the following forms:


(a)	A single lump sum payment. The amount of the lump sum payment shall be equal to the entire Vested Interest of the Participant in his Account on the date payment is made.

(b)

Substantially equal monthly, quarterly or annual installments over any period not exceeding the life expectancy of the Participant or the Participant and his or her spouse, if longer, until the Participant's Vested Accrued Benefit has been fully distributed. Fractional share installment amounts of Employer Securities shall be withheld and accumulated until a whole share of Employer Securities can be distributed. Any fractional share remaining upon payment of the final installment shall be paid in cash.

Not fewer than 30 days nor more than 90 days (effective January 1, 2007, 180 days) before the Distribution Date, the Plan Administrator shall notify the Participant of the terms, conditions and forms of payment available from the Plan, including a description of the election procedures under this Section and a general explanation of the financial effect on a Participant's Accrued Benefit of the election. The minimum 30-day waiting period after the notification is provided until the Distribution Date may be disregarded if the Plan Administrator informs the Participant of his or her right to the full minimum 30-day waiting period, and the Participant elects in writing (or by other means acceptable to the Plan Administrator) to waive the minimum 30-day waiting period.

If a Participant fails to elect a form of payment, payment of the Participant's benefits shall be paid in the form of a lump sum. Except as permitted in Section 9.4, no payment shall be made to a Participant prior to his Normal Retirement Age unless the Participant consents in writing (or by other means acceptable to the Plan Administrator) to the payment not more than 90 days prior to his Distribution Date.

If the lump sum amount that would be payable to a Participant (whether disabled or retired) is not more than $5,000, without regard to whether the amount in the Participant's Account has ever exceeded that amount at the time of any prior distribution, the benefit shall be paid as a single lump sum payment as soon as Administratively Feasible following the end of the month in which his Termination of Employment occurs without any requirement of participant consent. However, a single lump sum payment shall not be made to a Participant after his Distribution Date unless the Participant consents in writing to the payment. If the Participant dies prior to the complete distribution of the Participant's Accrued Benefit to him, then the Plan Administrator, upon notice of the Participant's death, shall direct the Trustee to make payment in accordance with the provisions of Article X.

For all distributions commencing on or after March 28, 2005, the $5,000 threshold amount in this Section shall be reduced to $1,000.

9.4. Time of Payment: Payment of the retired or disabled Participant's Vested Accrued Benefit shall commence as soon as Administratively Feasible following the Participant's Termination of Employment on account of retirement or disability, or if later, as soon as Administratively Feasible following the date a claim for benefits is submitted by the Participant to the Plan Administrator. Unless a Participant elects otherwise (and failure to submit a claim for benefits shall be deemed such an election) payment of benefits under this Plan will commence not later than 60 days after the close of the Plan Year in which the latest of the following events occurs:


(a)	the attainment by the Participant of age 65; or


(b)	the 10th anniversary of the Participant's Entry Date; or


(c)	the date the Participant has a Termination of Employment from the Employer.

If the amount of the payment required to commence on the date determined above cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Plan Administrator has been unable to locate the Participant after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained or the date the Participant is located, whichever is applicable.

9.5. Minimum Distribution Requirements: This Section 9.5 and Section 10.4 shall take precedence over any inconsistent provisions of this Plan. All distributions required to be made under this Section 9.5 (life distributions) or under Section 10.4 (death distributions) will be determined and made in accordance with the Treasury regulations under Code §401(a)(9).

(a)

Effective Date . This Section and Section 10.4 will apply for purposes of determining required minimum distributions for all calendar years beginning with the Effective Date. Required minimum distributions for the 2002 calendar year under this Section and Section 10.4 will be determined as follows. If the total amount of 2002 required minimum distributions under the Plan made to a Participant or Beneficiary prior to the effective date of this Section equals or exceeds the required minimum distributions determined under this Section, then no additional distributions will be required to be made for the 2002 calendar year on or after such date to the Participant or Beneficiary. If the total amount of the 2002 calendar year required minimum distributions under the Plan made to the Participant or Beneficiary prior to the effective date of this Section is less than the amount determined under this Section, then required minimum distributions for the 2002 calendar year on and after such date will be determined so that the total amount of required minimum distributions for the 2002 calendar year made to the Participant or Beneficiary will be the amount determined under this Section.


(b)	Time and Manner of Distribution .


(1)	Required Beginning Date . The Participant's entire Vested Accrued Benefit will be distributed, or begin to be distributed, to the Participant no later than the participant's Required Beginning Date.


(2)	Death of Participant Before Distributions Begin . If the Participant dies before distributions begin, the Participant's entire Vested Accrued Benefit will be distributed, or begin to be distributed, as provided in Section 10.4.


(3)	Forms of Distribution . Unless the participant's interest has been distributed in the form of a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with Section 9.5(c).


(c)	Required Minimum Distributions During Participant's Lifetime .


(1)	Amount of Required Minimum Distribution For Each Distribution Calendar Year . During the participant's lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:


(A)	the quotient obtained by dividing the Participant's Account Balance by the distribution period in the Uniform Lifetime Table set forth in Treas. Reg. Section 1.401(a)(9)-9, using the Participant's age as of the Participant's birth day in the Distribution Calendar Year; or

(B)

if the Participant's sole Designated Beneficiary for the Distribution Calendar Year is the Participant's spouse, the quotient obtained by dividing the Participant's Account Balance by the number in the Joint and Last Survivor Table set forth in Treas. Reg. Section 1.401(a)(9)-9, using the Participant's and spouse's attained ages as of the participant's and spouse's birthdays in the Distribution Calendar Year.


(2)	Lifetime Required Minimum Distributions Continue Through Year of Participant's Death . Required minimum distributions will be determined under this Section 9.5(c) beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant's date of death.


(d)	Definitions . For purposes of this Section 9.5 and Section 10.4 the following definitions shall apply.


(1)	“Designated Beneficiary” shall mean the individual who is designated as the Beneficiary under Section 10.2 of the Plan and is the Designated Beneficiary under Code §1.401(a)(9)-4.

(2)

“Distribution Calendar Year” shall mean a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant's Required Beginning Date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section 10.4. The required minimum distribution for the Participant's first Distribution Calendar Year will be made on or before the Participant's Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant's Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.


(3)	“Life Expectancy” shall mean Life Expectancy as computed by use of the Single Life Table in Treas. Reg.§1.401(a)(9)-9.

(4)

“Participant's Account Balance” shall mean the balance in the Participant’s Account as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

(5)

“Required Beginning Date” shall mean, if a Participant is a more than five percent (5%) owner in the Plan Year ending in or with the calendar year in which the Participant attains age 70½, April 1st following that calendar year. For any other Participant the Required Beginning Date is April 1st following the close of the calendar year in which the Participant attains age 70½, or, if later, April 1st following the close of the calendar year in which the Participant has a Termination of Employment.


(6)	“Five percent owner” shall have the meaning set forth in Reg. §1.401(a)(9)-1, Q&A-2(c).


(e)	Form of Benefit Payment . If payment of the Participant's Accrued Benefit commences under this Section 9.5, it shall be distributed to the Participant (consistent with the Participant's election and the requirements of Section 9.3):


(1)	in the form of a cash lump sum payment of the Participant’s entire Accrued Benefit; or


(2)	in the form of minimum annual cash installment payments over a period not extending beyond the life expectancy of the Participant, or the joint life expectancy of the Participant and his Beneficiary.

(f)

Redetermination of Life Expectancy . For purposes of determining the amount of any minimum annual cash installment payments the life expectancy of the Participant and his spouse, but not of his non-spouse Beneficiary, shall be redetermined annually, unless otherwise elected by the Participant. Notwithstanding the above, any distribution required under the incidental death benefit requirements of Code §401(a) shall be treated as a required distribution.

(g)

Temporary Suspension of Required Minimum Distributions . A Participant may elect not to receive the required minimum distribution (or any portion thereof) attributable to the 2009 Distribution Calendar Year. The Participant election shall be made by notifying the Plan in writing (or by other acceptable electronic means) at any time prior to the latest possible date that the minimum required distribution would otherwise be made. Any required minimum distribution (or portion thereof) attributable to the 2009 Distribution Calendar Year which is made to a Participant shall be treated by the Plan as an Eligible Rollover Distribution, except that it shall not be subject to any income tax withholding requirement that may otherwise apply under Code §72(t).

9.6. No Annuity Benefits: Accrued Benefits payable from this Plan shall not be paid in any form of annuity.

9.7. Distribution of Employer Securities and Cash :

(a)

If so elected by the Participant, distributions of benefits from the Plan may be made entirely in Employer Securities, valued at fair market value at the time of distribution, or, effective March 1, 2003, entirely in cash. If the Participant elects a distribution that is part cash and part Employer Securities, the distribution shall be consist only of the Employer Securities in the Employer Securities Account and the cash value of the General Investments Account at the time the payment is made. A Participant who elects a distribution method other than a lump sum may designate prior to payment of the first installment the amount of the first and each subsequent installment that will be Employer Securities and that will be cash. Any fractional security share to which a Participant or his Beneficiary is entitled shall be paid in cash. If the Participant makes no election, then the Participant’s Account shall be distributed in cash and in Employer Securities, according to the ratio of investment in the Participant’s Account in the General Investments and Employer Securities Accounts, respectively.

(b)

Notwithstanding the provisions of Section 9.7(a), if a Participant has elected under Section 6.3(e) to withdraw (rather than reinvest) the cash dividends on Employer Securities allocated or allocable to his Account, the Plan Administrator shall direct the Trustee to pay to the Participant in cash the cash dividends on Employer Securities so allocated or allocable to the Participant’s Employer Securities Account, irrespective of whether the Participant is fully vested in his Employer Securities Account. The Plan Administrator's direction must state whether the Trustee is to pay the cash dividend distributions currently, or within the 90-day period following the close of the Plan Year in which the Employer pays the dividends to the Trust. The Plan Administrator may also request the Employer to pay cash dividends on Employer Securities directly to Participants.

9.8. Special Distribution Rules: Unless the Participant elects in writing other distribution provisions of the Plan or unless other distribution provisions of the Plan require earlier distribution of the Participant's Accrued Benefit, the Participant shall commence receiving his Accrued Benefit at the time prescribed by this Section 9.8, irrespective of any other provision of the Plan. The distribution provisions of this Section 9.8 are subject to the consent and form of distribution requirements of Section 9.3.


(a)	If the Participant incurs a Termination of Employment after attainment of Normal Retirement Age (age 65) or by reason of death or disability, distribution of his Accrued Benefit shall commence during but not later than the last day of the Plan Year in which the applicable event occurs.

(b)

If the Participant incurs a Termination of Employment for any reason not specified in (a), distribution of his Accrued Benefit shall commence as soon as Administratively Feasible during but not later than the last day of the Plan Year after the close of the 5th Plan Year following the Plan Year in which the Participant incurred the Termination of Employment. If the Participant resumes employment with the Employer on or before the last day of the 5th Plan Year following the Plan Year of his/her separation from Service (effective January 1, 2002, severance from employment), the mandatory distribution provisions of this paragraph (b) do not apply.

For purposes of this Section 9.8(b), a distribution to a Participant of his Accrued Benefit shall not include any Employer Securities acquired with the proceeds of an Exempt Loan until the close of the Plan Year in which the Exempt Loan is paid in full.

The distributions required under this Section 9.8 shall be made in equal annual installments over a period not exceeding five years unless the Participant is permitted and otherwise elects a longer period under the other distribution provisions of the Plan. If a Participant's Accrued Benefit exceeds $800,000, the payment period, subject to the longer period elected by the Participant, shall be five years plus one additional year (but no more than five additional years) for each $160,000 (or fraction of $160,000) by which his Accrued Benefit exceeds $800,000. The $800,000 and $160,000 amounts set forth in this Section shall be adjusted at the same time and in the same manner as the factor prescribed by the Secretary of the Treasury under Code §415(d). In no event will the distribution period exceed the period permitted under Section 9.5 of the Plan.

9.9. Distribution of Transferred Benefits: To the extent not already provided under the terms of this Plan, and notwithstanding any other provisions to the contrary, this Plan guarantees to each Participant whose Account includes Transferred Benefits (and to each Beneficiary thereof) the right to receive all Transferred Benefits in any optional form of benefit (including time, manner and method of distribution) protected under Code §411(d)(6). The extent and nature of the optional forms of benefits so protected shall be determined by reference to the Predecessor Plan(s).

ARTICLE 10

DEATH BENEFITS

10.1. Death Benefits Payable: If a Participant who has not received a distribution of his entire Vested Interest dies, whether before or after his Distribution Date, the death benefit payable to the Beneficiary, Contingent Beneficiary or estate (as the case may be) of the Participant shall be all amounts credited (or to be credited) to his Accounts then held by the Trustee for the Participant's benefit, without regard to the Participant's Vested Percentage and that have yet to be distributed. If an Inactive Participant who has not received a distribution of his entire Vested Interest dies, whether before or after his Distribution Date, the death benefit payable to the Beneficiary, Contingent Beneficiary or estate (as the case may be) of the Inactive Participant shall only be the remaining Vested Interest in the Inactive Participant’s Accounts then held by the Trustee for the Inactive Participant's benefit.

10.2. Designation of Beneficiary: Each Participant or Inactive Participant may designate a Beneficiary and Contingent Beneficiary who shall be entitled to receive the death benefit payable under Section 10.1. From time to time the Participant or Inactive Participant may file with the Plan Administrator a new or revised designation, provided that his or her spouse shall be his or her Beneficiary unless his or her spouse has consented in writing to the designation of a Beneficiary other than his or her spouse or it is established to the satisfaction of the Plan Administrator that the consent of the spouse may not be obtained because there is no spouse, the spouse cannot be located or because of such other circumstances as may be set forth in Regulations issued pursuant to Code §417(a)(2)(B). The change in marital status of a Participant from married to unmarried or vice versa shall void any outstanding beneficiary designation and require the completion and execution of a new beneficiary designation consistent with the provisions of this Section. Beneficiary designations shall be completed in the manner approved by the Plan Administrator or set forth in writing on a form provided by the Plan Administrator.

If upon the Participant's death his designated Beneficiary does not survive him, the Contingent Beneficiary shall become the Beneficiary and any death benefit payable under Section 10.1 shall be paid to him or her. If a deceased Participant is not survived by a designated Beneficiary or Contingent Beneficiary, or if no Beneficiary was designated, the benefits shall be paid to the person (or in equal shares to the persons) in the first of the following classes of successive preference beneficiaries then surviving: the Participant's (a) widow or widower, (b) children per stirpes, (c) parents, (d) brothers and sisters, (e) executor or administrator of his estate. For purposes of determining the right of a Beneficiary, Contingent Beneficiary, surviving spouse or other survivor to receive a benefit on account of the death of a Participant, he or she shall not be deemed to have survived the Participant unless he or she shall survive the Participant by at least 30 days.

If the Beneficiary, Contingent Beneficiary or surviving spouse survives the Participant and is entitled to receive benefits under this Section 10.2, but dies prior to receiving the entire death benefit payable to him or her, the remaining portion of the death benefit shall be paid to the person's named beneficiary or, if none, to the person's estate subject to the right of commutation.

10.3. Death Benefit Payment Procedure: Upon receipt of a claim for benefits, the Participant's death benefit shall be paid by the Trustee to the Beneficiary designated by the Participant pursuant to Section 10.2. The Beneficiary of a Participant may elect to receive death benefits payable hereunder in any form of payment provided in Section 9.3, subject to the right to receive the distribution in cash or in Employer Securities as provided in Section 9.7. The Beneficiary's election to receive distribution shall be made in the same manner provided under Articles IX and XI for distribution to Participants. If the Beneficiary fails to elect a form of payment, then subject to the small benefit distribution rules in the next paragraph of this Section 10.3 and except as provided in Section 10.4(g), the Plan shall distribute the death benefit in annual installments over the life expectancy of the Beneficiary, consistent with the rules in Section 10.4. Installments shall commence no later than December 31 of the Plan Year following the Plan Year of the Participant’s death, with each subsequent installment payment to be made no later than each December 31, thereafter.

If the lump sum benefit otherwise payable to the Beneficiary is not more than $5,000 and payment of benefits to the deceased Participant has not previously commenced, the benefit shall be paid as a single lump sum payment, subject to the distribution rules of Section 9.7. Payment of any death benefits under this paragraph shall commence as soon as Administratively Feasible following the Participant's date of death. However, if the amount of the benefit required to be paid on the date determined above cannot be ascertained by that date, or if it is not possible to make the payment on that date because the Plan Administrator has been unable to ascertain or locate the Beneficiary after making reasonable efforts to do so, a payment retroactive to such date may be made as soon as Administratively Feasible after the earliest date on which the Beneficiary or amount of the payment can be ascertained or the date the Beneficiary is located, whichever is applicable.

10.4. Required Distributions Upon Death: Notwithstanding any other provisions of this Plan, payment of death benefits shall be subject to the following rules:


(a)	Death of Participant Before Distributions Begin . If the Participant dies before distributions begin, the Participant's entire Vested Accrued Benefit will be distributed, or begin to be distributed no later than as follows:


(1)	If the Participant's surviving spouse is the Participant's sole Designated Beneficiary, then unless otherwise provided herein, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70½, if later.


(2)	If the Participant's surviving spouse is not the Participant's sole Designated Beneficiary, then except as otherwise provided herein, distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.


(3)	If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, the Participant's entire Vested Accrued Benefit will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.


(4)	If the Participant's surviving spouse is the Participant's sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 10.4(a), other than subsection (a)(i), will apply as if the surviving spouse were the Participant.

For purposes of this Section 10.4(a) and Sections 10.4(e) and (f), unless Section 10.4(a)(4) applies, distributions are considered to begin on the participant's Required Beginning Date. If Section 10.4(a)(4) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 10.4(a)(i).


(b)	Forms of Distribution . Unless the participant's interest has been distributed in the form of a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with Sections 10.4(e) and (f).

(c)

Beneficiaries’ Election of Five Year Rule . Beneficiaries may elect on an individual basis whether the Five Year Rule or the Life Expectancy rule in Sections 10.4(a) and (f) applies to distributions after the death of a Participant who has a Designated Beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under Section 10.4(a) or by September 30 of the calendar year that contains the fifth anniversary of the Participant's (or, if applicable, surviving spouse's) death. If neither the Participant nor Beneficiary makes an election under this subsection, distributions will be made in accordance with Sections 10.4(a) and (f).

(d)

Transition Rule for Designated Beneficiary Receiving Distributions Under Five Year Rule to Elect Life Expectancy Distributions . A Designated Beneficiary who is receiving payments under the Five Year Rule may make a new election to receive payments under the Life Expectancy rule until December 31, 2003, provided that all amounts that would have been required to be distributed under the Life Expectancy rule for all Distribution Calendar Years before 2004 are distributed by the earlier of December 31, 2003, or the end of the five year period.


(e)	Death On or After Date Distributions Begin .

(1)

Participant Survived by Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant's Designated Beneficiary, determined as follows:


(A)	The Participant's remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(B)

If the Participant's surviving spouse is the Participant's sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant's death using the surviving spouse's age as of the spouse's birthday in that year. For Distribution Calendar Years after the year of the surviving spouse's death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse's birthday in the calendar year of the spouse's death, reduced by one for each subsequent calendar year.


(C)	If the Participant's surviving spouse is not the Participant's sole Designated Beneficiary, the Designated Beneficiary's remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant's death, reduced by one for each subsequent year.

(2)

No Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant's death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the Participant's remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.


(f)	Death Before Date Distributions Begin .

(1)

Participant Survived by Designated Beneficiary . If the Participant dies before the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the remaining Life Expectancy of the Participant's Designated Beneficiary, determined as provided in Section 10.4(e).


(2)	No Designated Beneficiary . If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death.

(3)

Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin . If the Participant dies before the date distributions begin, the Participant's surviving spouse is the Participant's sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 10.4(a)(i), this Section 10.4(f) will apply as if the surviving spouse were the Participant.


(g)	Rollover of Death Benefit for Non-spouse Beneficiary after December 31, 2009.

(1)

If the Participant dies before his or her required beginning date, the required mini mum distribution for purposes of determining the amount eligible for rollover with respect to a non-spouse beneficiary shall be determined under the 5-year rule described in Code §401(a)(9)(B)(ii). Under this rule, no amount shall be a required minimum distribution for the year in which the Participant dies. The rule in Q&A-7(b) of Reg. §1.402(c)-2 (relating to distributions before an employee has attained age 70½) shall not apply to a non-spouse beneficiary.


(2)	Under the five-year rule as adopted by the Plan, no amount is required to be distributed to a non-spouse beneficiary until the fifth calendar year following the year of the Participant’s death. In that year, if no prior distribution has been made, the entire amount to which the beneficiary is entitled under the Plan must be distributed.

(3)

If the non-spouse beneficiary so elects, the Plan shall permit the non-spouse beneficiary to directly roll over the beneficiary's entire benefit until the end of the fourth calendar year following the year of death. On or after January 1 of the fifth year following the calendar year in which the Participant died, no amount payable to the non-spouse beneficiary under the Plan shall be eligible for rollover.

(4)

If a Participant dies on or after his or her required beginning date, within the meaning of Code §401(a)(9)(C), then for the year of the Participant’s death, the required minimum distribution not eligible for rollover shall be the same as the amount that would have applied if the Participant were still alive and had elected the direct rollover. The amount not eligible for rollover shall include all undistributed required minimum distributions for the year in which the direct rollover occurs and any prior year, including years before the Participant’s death.

(h)

Temporary Suspension of Beneficiary Distributions . A Beneficiary receiving distributions from the Plan under an election made pursuant to subsection (c) may elect not to receive the distribution amount (or any portion thereof) that would otherwise be attributable to the 2009 Distribution Calendar Year. The Beneficiary's election shall be made by notifying the Plan in writing (or by other acceptable electronic means) at any time prior to the latest possible date that the distribution would otherwise be made. If a distribution (or portion thereof) otherwise attributable to the 2009 Distribution Calendar Year is suspended, then the five year period for payout of the Accrued Benefit to the Beneficiary shall be extended an additional year to take into account the suspension of payment.

ARTICLE 11

BENEFITS UPON OTHER TERMINATION OF EMPLOYMENT

11.1. Vested Amounts: A Participant shall become 100% vested in his Accrued Benefit on attainment of Normal Retirement Age while employed by a Zions Employer. Prior to his Normal Retirement Age a Participant shall have a Vested Interest in those sub-accounts not otherwise excepted below that make up his Accrued Benefit equal to the sum of the following:


(a)	One hundred percent (100%) of the balance in his Participant Elective Deferral Account and in his Employer Matching Contribution Account, as adjusted for any contributions or distributions since the preceding Valuation Date; and


(b)	One hundred percent (100%) of the balance in his Participant Rollover Contribution Account and in his Voluntary Contribution Account, if any, as adjusted for any contributions or distributions since the preceding Valuation Date; and


(c)	One hundred percent (100%) of the balance in his Dividend Account if any (whether cash or Employer Securities), as adjusted for any contributions or distributions since the preceding Valuation Date; and

(d)

His vested percentage of the balance in his Employer Non-Elective Contribution Account, as adjusted for any contributions or distributions since the preceding Valuation Date, according to the Participant's Years of Vesting Service, except as provided in subsection (e) below and for Employer Non-Elective Contributions made for Plan Years beginning before January 1, 2007 and consistent with the following schedule:

Percent of Vested

Years of Vesting Service Accrued Benefit

Fewer than five years none

At least five years 100%

For Employer Non-Elective Contributions made for Plan Years beginning after December 31, 2006 and consistent with the following schedule:

Percent of Vested Service

Years of Vesting Service Accrued Benefit

Less than two years none

Two years 20%

Three years 40%

Four years 60%

Five or more years 100%


(e)	A Participant's Predecessor Plan Account (if any) shall be vested pursuant to the vesting rules set forth in the Predecessor Plan Account.

The percentage of the Participant's Accrued Benefit attributable to various sub-accounts in which he is not vested shall be forfeited by him as provided in Section 11.7.

11.2. Distribution of Vested Interest: Subject to the rules of Section 9.7, a Participant who incurs a Termination of Employment for any reason other than retirement, death or disability may elect in writing or other appropriate electronic means one or a combination of the following forms of distribution of his Vested Interest:


(a)	A single lump sum payment. The amount of the lump sum payment shall be equal to the Participant's Vested Interest in his or her Account on the date payment is made.

(b)

Distribution shall commence no later than the time specified in Section 9.8 unless the Participant fails to elect a form or time of payment or elects a deferred payment, then payment of the Participant's Accrued Benefit shall be deferred to the subsequent date elected by the Participant, that may be no later than the latest date permitted under Section 9.5, and then distributed in accordance with the provisions of Section 9.3. If the Participant elects later payment of the Participant's Vested Accrued Benefit, distribution shall commence as soon as Administratively Feasible following the date a claim for benefits is submitted by the Participant to the Plan Administrator, which may be no later than the earlier of the date permitted under Sections 9.4 and 9.5. If at that time the Participant has attained Normal Retirement Age or incurred a disability, or if the Participant dies before his Normal Retirement Age or if earlier, before his Distribution Date, the Plan Administrator, upon notice of the attainment of Retirement Age or of death, shall direct the Trustee to make payment of the Participant's Vested Interest to him (or to his Beneficiary if the Participant is deceased) in accordance with the provisions of Article X in the case of death, or Section 9.3 in the case of disability or attainment of Normal Retirement Age.

If the Participant elects immediate distribution following Termination of Employment, whether as a single lump sum payment or term certain payments, payment shall be made as soon as Administratively Feasible following Termination of Employment. However, if a Participant terminates employment in a month that is the end of a quarter of the calendar year (i.e., March, June, September, December), then the distribution of the Participant's Account shall be made on the 25th day of the second month following the Participant's Termination of Employment. If the Former Participant dies or incurs a Disability before his Normal Retirement Date, the Plan Administrator, upon notice of the death or Disability, shall direct the Trustee to make payment of the Participant's Vested Interest to him (or to his Beneficiary if the Participant is deceased) in accordance with the provisions of Article X in the case of death, or Section 9.2 in the case of Disability.

Notwithstanding the above, if a terminated Participant is re-employed by the Employer prior to distribution of his Vested Interest, distribution shall not be made until his employment is again terminated or until the occurrence of another event permitting distribution under the terms of the Plan.

11.3. Distribution of Small Amounts: Notwithstanding the provisions of Section 11.2 if a Participant incurs a Termination of Employment for any reason other than retirement, death or disability and if the Vested Accrued Benefit that would be payable to a Participant is not more than $5,000, without regard to whether the amount in the Participant's Account has ever exceeded that amount at the time of any prior distribution, then the Plan shall make distribution to the Participant in a single lump sum cash payment pursuant to the provisions of Sections 9.7 and 9.8 without first obtaining the Participant's written consent.

For all distributions commencing on or after March 28, 2005, the $5,000 threshold amount in this Section shall be reduced to $1,000.

11.4. Eligible Rollover Distributions: Notwithstanding any provision of this Plan to the contrary, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. For purposes of this Section 11.4 the following definitions shall apply:

(a)

“Eligible Rollover Distribution” shall mean any distribution of all or any portion of the balance to the credit in the Account of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code §401(a)(9), and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Any amount that is distributed on account of hardship (without regard to whether the hardship withdrawal is attributable to Elective Deferrals) shall not be an Eligible Rollover Distribution and the Distributee may not elect to have any portion of such a distribution paid directly to an eligible retirement plan.

Effective for distributions first commencing on or after January 1, 2007, an “Eligible Rollover Distribution” does not include the portion of the distribution that is payable on behalf of a non-spouse beneficiary and that is a required distribution under Code §401(a)(9) because the distribution first commences after the close of the calendar year in which the death of the Participant occurs, nor does it include any portion of the distribution to a non-spouse beneficiary who has elected the Five Year Rule under Section 10.4(c) and the distribution does not commence prior to the close of the fourth calendar year following the calendar year in which the Participant’s death occurred.

Effective for distributions first commencing after September 27, 2010, an “Eligible Roll over Distribution” also includes any distribution from this Plan that otherwise satisfies the Plan’s distribution rules and the requirements of Code §402(c)(4) and which is directly rolled over to the In-plan Roth Rollover Account.

(b)

“Eligible Retirement Plan” shall mean an individual retirement account described in Code §408(a), an individual retirement annuity described in Code §408(b) (jointly or separately, an “IRA”), an annuity plan described in Code §403(a), a qualified trust described in Code §401(a), that accepts the Distributee's Eligible Rollover Distribution, an annuity contract described in Code §403(b) and an eligible plan under Code §457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and that agrees to separately account for amounts transferred into such plan from this Plan. This definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Code §414(p). However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an IRA.

Effective for distributions first commencing on or after January 1, 2007, on behalf of a non-spouse beneficiary, an “Eligible Retirement Plan” shall only include an IRA established on behalf of the non-spouse beneficiary that will be treated as an inherited IRA pursuant to Code §402(c)(11) and that satisfies the requirements of Notice 2007-7, Q&A- 13.

For distributions made after December 31, 2007, an Eligible Retirement Plan shall also mean a Roth IRA described in Code Section 408A(b).

For distributions made after September 27, 2010 which are rolled over to the In-plan Roth Rollover Account, an Eligible Retirement Plan shall also mean this Plan.

(c)

“Distributee” shall mean an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code §414(p), are Distributees with regard to the interest of the spouse or former spouse. Effective for distributions first commencing on or after January 1, 2007, a “Distributee” shall also include any non-spouse beneficiary who is a designated beneficiary under the provisions of Section 10.2.


(d)	“Direct Rollover” shall mean a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

11.5. Breaks in Service and Vesting: If a Participant has a One Year Break in Service, the Participant's Years of Vesting Service before the One Year Break in Service shall not be included in computing Years of Vesting Service until the Participant shall have completed one Year of Vesting Service after the One Year Break in Service. If an Employee terminated employment prior to becoming a Participant and incurred a One Year Break in Service, or if a Participant did not have any Vested Interest derived from Employer contributions prior to a One Year Break in Service, Years of Vesting Service before a One Year Break in Service shall not be included in Years of Vesting Service calculated after the Participant's One Year Break in Service if the number of consecutive One Year Breaks in Service equals or exceeds the greater of five or the aggregate number of such Years of Vesting Service before the One Year Break in Service.

Solely for the purpose of determining the vested percentage of a Participant's Accrued Benefit derived from Employer contributions that accrued prior to a five consecutive one-year Break in Service period, the Plan shall disregard any Year of Service subsequent to such five consecutive one-year Breaks in Service period.

If a Participant has a One Year Break in Service, and the break does not arise on account of Termination of Employment, the Participant shall not be credited with a Year of Vesting Service for that Plan Year. However, no amounts in the Participant's Accounts shall be forfeited.

11.6. No Increase in Pre-break Vesting: For purposes of Section 11.1, Years of Vesting Service after a Termination of Employment that resulted in five consecutive One Year Breaks in Service shall not increase the vested percentage of a Participant's Account that was earned before such five consecutive One Year Breaks in Service.

11.7. Occurrence and Disposition of Forfeitures :


(a)	Forfeiture of the Participant’s non-vested interest in his or her Employer Non-Elective Contribution Account shall occur:


(1)	In the case of a Participant who receives a lump sum distribution of his or her Vested Interest on account of Termination of Employment, on the day the Participant receives the distribution.


(2)	In the case of a Participant who has a Vested Interest derived from Employer Contributions (which for this purpose shall include Elective Deferral Contributions) and does not receive a total distribution of such Vested Interest, on the last day of the Plan Year in which the Participant incurs five consecutive One Year Breaks in Service.


(3)	In the case of a Participant who has no Vested Interest derived from Employer Contributions (which for this purpose shall include Elective Deferral Contributions), regardless of the sub-account to which the Employer Contributions have been allocated, on the day the Participant incurs the Termination of Employment.

Non-vested interests of terminated Participants shall be held by the Trustee in the respective Accounts of the Participant until the date determined above and shall then be forfeited by the Participant and used or allocated in accordance with this Section.

(b)

Amounts forfeited by terminated Participants from their Employer Non-Elective Contribution Accounts, if not used first to restore Accounts under Sections 11.10 and 23.11, shall be used to reduce the amount of the Employer’s Non-Elective Contribution otherwise made pursuant to Section 5.7 for the Plan Year. In the event the Employer does not make a Non-Elective Contribution for the Plan Year, then the amounts forfeited shall be used at the Employer's election:


(1)	to offset costs and expenses of Plan administration (to the extent and in the manner permitted under Section 14.6),


(2)	as the sole Employer Non-Elective Contribution for the Plan Year and allocated in accordance with Section 6.2(c),


(3)	to reduce the amount of the Employer’s Matching Contribution for the Plan year, or


(4)	any combination of the foregoing.


(c)	To the extent possible, the Plan Administrator must forfeit from a Participant’s General Investments Account before making a forfeiture from his or her Employer Securities Account.

11.8. Distribution to Participants Who Are Less Than 100% Vested in Their Entire Account: In the event a Participant who is less than 100% vested hereunder incurs a Termination of Employment and returns to the employ of the Employer before a forfeiture of his non-vested interest shall have occurred, and prior to his re-employment was paid a portion of his Vested Interest, a separate account for the Participant's remaining interest in the Plan as of the time of the distribution shall be maintained. At any relevant time, the Participant's vested portion of the separate account shall be an amount “X” determined by the following formula:

X = P (AB+(RxD)) - (RxD)

For purposes of applying the formula:

P is the vested percentage at the relevant time;

AB is the account balance at the relevant time;

D is the amount of the distribution;

R is the ratio of the account balance at the relevant time to the account balance after distribution.

In the event a Participant who is less than 100% vested hereunder incurs a Termination of Employment and returns to the employ of the Employer after a forfeiture of his non-vested interest but prior to incurring five consecutive One Year Breaks in Service, and prior to his re-employment was paid his Vested Interest, the non-vested portion of his Accrued Benefit that was forfeited by the Participant shall be disregarded in computing his Accrued Benefit after re-entry into the Plan, unless the Participant repays, pursuant to Section 11.8, the amounts distributed from his Account from which an amount was forfeited. If a Participant does repay the distribution, the balance in such Account shall be restored as provided in Section 11.9.

In the event a Participant who had no Vested Interest in his Employer Regular Contribution Account separated from service and returns to the employ of the Employer after a forfeiture of his non-vested interest but prior to incurring five consecutive One Year Breaks in Service, any non-vested amounts forfeited by the Participant shall be restored, as provided in Section 11.9, to the Account from which an amount was forfeited.

11.9. Repayment of Distribution: A Participant described in the second paragraph of Section 11.7 who received a lump sum distribution of less than 100% of his Accrued Benefit shall be entitled to repay the amount so distributed from the Employer Contribution Account in which he was less than 100% vested. The repayment must be for the full amount distributed from the Account and must be made not later than the earlier of:


(a)	the date on which the Participant incurs five consecutive One Year Breaks in Service after the date of distribution; or


(b)	the end of the five year period beginning with the date the Participant is re-employed by the Employer.

Any repayment shall not be included in applying the limitations of Article V or Article VIII hereunder.

11.10. Restoration of Accounts: Any amount repaid pursuant to Section 11.8 shall be credited to the Participant's Accounts for which it is repaid, with credit to be made as of the date of repayment. The Account shall also be credited with the amount previously forfeited from the Account, with credit to be made as of the last day of the Plan Year in which repayment is made.

In the case of a Participant to whom the third paragraph of Section 11.7 applies, the Participant's Accounts from which amounts were previously forfeited shall be credited with the amount so forfeited, with credit to be made as of the last day of the Plan Year in which the Participant resumes participation in the Plan.

Any previously forfeited amounts that are credited to Participants' Accounts pursuant to this Section shall be derived from the following sources in the following order of priority:


(a)	First, the amount, if any, to be credited to such types of Accounts for the Plan Year pursuant to Section 11.5;


(b)	Second, Employer contributions for the Plan Year, if any, that are not required to be credited to such types of Accounts for other Participants; and


(c)	Third, an additional Employer contribution for the Plan Year, regardless of whether the Employer has any Net Profits for the year.

If for any Plan Year, the Accounts of more than one Participant are required to be restored, then restorations shall be derived from the above sources in the same proportion that the amount to be restored to each Participant bears to the total amount to be restored to all such Participants for the Plan Year. Any such amounts credited to a Participant's Accounts shall not be included in applying the limitations of Article V or Article VIII hereunder.

11.11. Amendments to the Vesting Schedule: No amendment to the vesting schedule or provisions of Section 11.1, or to this Plan that directly or indirectly affects the computation of a Participant's Accrued Benefit, shall deprive a Participant of a vested right to the benefits accrued to the effective date of the amendment. Furthermore, if the vesting schedule or provisions of Section 11.1 are amended, each Participant with at least three (3) Years of Vesting Service (determined as of the later of the date the amendment is adopted or the date the amendment is effective) may elect to have his vesting percentage computed under the Plan without regard to the amendment. The period during which the election may be made shall commence with the date the amendment is adopted and shall end on the latest of:


(a)	60 days after the amendment is adopted;


(b)	60 days after the amendment becomes effective; or


(c)	60 days after the Participant is issued written notice of the amendment by the Employer or Plan Administrator.

In the absence of any written notice under (c) above, any Participant who has at least three (3) Years of Vesting Service (as determined above) shall at all times receive a Vested Interest under whichever vesting schedule provides the greatest Vested Interest.

ARTICLE 12

FIDUCIARY DUTIES

12.1. General Fiduciary Duty: A Fiduciary, whether or not a Named Fiduciary, shall discharge his duties solely in the interest of the Participants and their Beneficiaries hereunder. All assets of this Plan shall be devoted to the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying the reasonable expenses of administering the Plan. Each Fiduciary, whether or not a Named Fiduciary, shall discharge his duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Each Fiduciary shall also discharge his duties in a manner consistent with the documents and instruments governing the Plan to the extent such documents and instruments are consistent with law. No Fiduciary, whether or not a Named Fiduciary, shall engage in any prohibited transactions with a Disqualified Person or party-in-interest as those terms and transactions are defined herein and by ERISA.

12.2. Allocation of Responsibilities: Each Named Fiduciary shall have only those duties and responsibilities expressly allocated under the terms of this Plan. No other duties or responsibilities shall be implied.

12.3. Delegation of Responsibilities: Each Named Fiduciary may delegate the fiduciary responsibilities other than Trustee responsibilities allocated to such Fiduciary under this Plan to any person other than a Named Fiduciary. If any duties or responsibilities are delegated under this section, the person to whom the duties or responsibilities are delegated shall acknowledge the fact in writing and shall specify in writing the duties and responsibilities so delegated. All other duties and responsibilities shall be deemed not to have been delegated.

12.4. Liability for Allocation or Delegation of Responsibilities: A Named Fiduciary shall not be liable for the acts or omissions of a person to whom responsibilities or duties are allocated or delegated in accordance with Section 12.2 or Section 12.3 except to the extent such Named Fiduciary breaches his obligation under Section 12.1:


(a)	with respect to the allocation or delegation;


(b)	with respect to establishing or implementing a procedure for allocation or delegation; or


(c)	by continuing the allocation or delegation.

Nothing in this section shall relieve a Fiduciary from liability incurred under Section 12.5.

12.5. Liability for Co-Fiduciaries: In addition to the liability a Fiduciary may incur for the breach of his duty under Section 12.1 or 12.4, a Fiduciary shall be liable for a breach of Fiduciary duty committed by another Fiduciary in the following circumstances:


(a)	if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other Fiduciary knowing such act or omission is a breach;


(b)	if, by his failure to comply with Section 12.1 he has enabled such other Fiduciary to commit a breach;


(c)	if he has knowledge of a breach by such other Fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.

12.6. Same Person May Serve in More than One Capacity: Nothing herein shall prevent any person from serving in more than one Fiduciary capacity.

12.7. Indemnification: The Plan Sponsor shall hold harmless and indemnify to the fullest extent permitted by ERISA each non-Trustee Fiduciary of the Plan with respect to the consequences of all actions or failures to act of the Fiduciary while carrying out his or her responsibilities under the Plan. The Plan Sponsor shall further hold harmless and indemnify each Fiduciary who is subjected to any claim or action or who is made a party in any threatened, pending or completed proceeding, including, without limitation, any proceeding brought by or in the name of the Plan or by any participant thereof or by any governmental agency. The Employer’s indemnification shall include any and all expenses (including attorney’s and/or consultant’s fees), costs, damages, judgments, fines, interest, penalties (including any that may be imposed under ERISA §502(l)) and/or amounts paid in settlement and that are actually and reasonably incurred by a Fiduciary in connection with the investigation, defense, settlement, preparation for trial, trial, or appeal of any proceeding, claim or action. Notwithstanding the foregoing, the Employer shall not be obligated to hold harmless or indemnify a Fiduciary of the Plan if indemnification is inconsistent with applicable law or if the act(s) or omission(s) of the Fiduciary to be indemnified are determined to have involved intentional misconduct, gross negligence or a knowing violation of ERISA or other applicable law by the Fiduciary.

To the extent a Fiduciary is a named insured under any policy of liability insurance maintained by the Plan or the Employer, the policy and the payment obligations of the insurance company under the policy shall be deemed primary and in lieu of the Employer’s obligations under this Section 12.7, but only to the extent of the coverage provided in the policy. No insurer under any policy shall claim any right to reimbursement or refund from the Employer and no obligation of the Employer hereunder shall be deemed to inure to the benefit of any third party.

ARTICLE 13

THE PLAN ADMINISTRATOR

13.1. Appointment of Plan Administrator: The Board of Directors of the Plan Sponsor shall appoint the Plan Administrator, which may be the Plan Sponsor. If the Plan Sponsor is appointed as Plan Administrator, the Plan Sponsor may appoint one or more Committees to carry out the duties of the Plan Administrator under this Plan. In that event all references in the Plan to the Plan Administrator shall be deemed to refer to the appointed Committee. The duties of the Committees shall be divided as the Plan Administrator deems appropriate and may be designated by separate instrument. The Committees shall act by majority vote except that they shall act by unanimous vote at any time when there are only two members comprising the Committee.

13.2. Acceptance by Plan Administrator: The Plan Administrator shall accept its appointment by joining with the Employer in the execution of this Agreement.

13.3. Signature of Plan Administrator: All persons dealing with the Plan Administrator may rely on any document executed by the Plan Administrator; or, in the event of appointment of a Committee or Committees, such persons may rely on any document executed by at least one member of the appropriate Committee as being the act of the Plan Administrator.

13.4. Appointment of an Investment Manager: The Plan Administrator may appoint an Investment Manager or Managers to manage, acquire and dispose of any assets of the Plan. In the event responsibility for appointment of Investment Managers is delegated by the Plan Administrator to a named Committee, that delegation shall carry with it the authority of the Committee to act as a Named Fiduciary for purposes of ERISA in appointing an Investment Manager. The Investment Manager shall accept his appointment by written agreement executed by the Plan Administrator and Investment Manager. This written agreement shall specify the Plan assets for which the Investment Manager is responsible and such written instrument shall be kept with the other documents governing the operation of the Plan. The Trustee shall be entitled to rely on written instructions from the Investment Manager and shall be under no obligation to invest or otherwise manage any asset of the Plan subject to the management of the Investment Manager.

13.5. Duties of the Plan Administrator: The Plan Administrator shall be responsible for the general administration of the Plan including, but not limited to, the following:


(a)	to prepare an annual report, summary plan description and modifications thereto, and summary annual report;


(b)	to complete and file the various reports and tax forms with the appropriate government agencies as required by law;


(c)	to distribute to Plan Participants and/or their Beneficiaries the summary plan description and reports sufficient to inform such Participants or Beneficiaries of their Accrued Benefit and their Vested Accrued Benefit as required by law;


(d)	to determine annually, or more frequently if necessary, which Employees are eligible to participate in the Plan;


(e)	to determine the benefits to which Participants and their Beneficiaries are entitled and to approve or deny claims for benefits;


(f)	to provide Plan Participants with a written explanation of the effect of electing an optional form of benefit payment;

(g)

to retain copies of all documents or instruments under which the Plan operates in its own office, the principal place of business of the Plan Sponsor and such other place as the Secretary of Labor or his delegate may by regulation prescribe; to make all such documents and instruments governing the operation of the Plan available for inspection by Plan Participants and/or their Beneficiaries; and to furnish copies of such documents or instruments to Plan Participants and/or their Beneficiaries on request, charging only the cost thereof as prescribed by regulation of the Secretary of Labor or his delegate;


(h)	to interpret Plan provisions as needed and in this regard to have complete and total discretion in the interpretation of the Plan; and


(i)	to act as the Plan's agent for the service of legal process, unless another agent is designated by the Plan Sponsor and to act on behalf of the Plan in all matters in which the Plan is or may be a party.

13.6. Claims Procedure: A claim for benefits under the Plan may be filed with the Plan by any Participant or Beneficiary on a form supplied by the Plan Sponsor for that purpose or through any other communication medium approved by the Plan Administrator. Written notice of the disposition of a claim shall be furnished to the claimant within 90 days after the application thereof is filed. In the event the claim is denied, the reasons for the denial shall be specifically set forth in the notice in language calculated to be understood by the claimant, pertinent provisions of the Plan shall be cited, and, where appropriate, an explanation as to how the claimant may perfect the claim shall be provided. In addition, the claimant shall be furnished with an explanation of the Plan's claim review procedure.

13.7. Claims Review Procedure: Any Participant or Beneficiary whose benefit claim submitted pursuant to Section 13.6 has been denied (whether in full or in part) shall be entitled to request further consideration to his claim by filing an appeal with the Plan Administrator, which may be in the form of a request for reconsideration. The request, together with a written statement of the reasons why the claimant believes his appeal should be allowed, shall be filed with the Plan Administrator no later than 60 days after receipt of the written notification provided for in Section 13.6. The Plan Administrator shall conduct the review of the appeal. The Plan Administrator, in its sole discretion, may order a hearing at which the claimant may be represented by an attorney or any other representative of his choosing and at which the claimant shall have an opportunity to submit written and oral evidence and arguments in support of his claim. During the appeal review period or at the hearing (upon five business days prior written notice to the Plan Administrator) the claimant or his representative shall have an opportunity to review all documents in the possession of the Plan that are pertinent to the claim at issue and its disallowance. A final decision on the claim shall be made by the Plan Administrator within 60 days of receipt of the appeal unless (i) because of special circumstances there has been an extension of 60 days that has been communicated in writing to the claimant, or (ii) a hearing is held, in which event the final decision shall be made within 120 days of receipt of the appeal. The communication containing the Plan Administrator’s decision shall be in writing and shall be written in a manner calculated to be understood by the claimant. The communication shall include specific reasons for the Plan Administrator’s decision and specific references to the pertinent Plan provisions on which the decision is based. The communication shall also inform the claimant of the limitation on any further action by the claimant set forth in Section 13.8.

13.8. Limitations of Actions on Claims: The delivery to the claimant of the final decision of the Plan Administrator with respect to a claim for benefits under Section 13.6 that has been reviewed and considered under the appeal procedures of Section 13.7 shall commence the period during which the claimant may bring legal action under ERISA for judicial review of the Plan Administrator’s decision. No civil action with respect to the claim for benefits or the subject matter thereof may be commenced by the claimant, whether such action is pursued through litigation, arbitration or otherwise, prior to the completion of the claims and claims review process set forth in Sections 13.6 and 13.7, nor following the expiration of two (2) years from the date of delivery of the final decision of the Plan Administrator to the claimant under Section 13.7.

13.9. Compensation and Expenses of Plan Administrator: The Plan Administrator may engage the services of any person, including counsel, whose services, in the opinion of the Plan Administrator, are necessary to assist it in carrying out its responsibilities under the Plan. The Employer may direct the Trustee to pay any expenses properly and actually incurred for such services from the Trust Fund, including such reasonable compensation for services provided by the Plan Administrator as shall have been agreed upon between them, or, alternatively, the Employer may pay such expenses or compensation directly; provided, however, that no individual acting as Plan Administrator shall receive any compensation if he already receives full-time pay from the Employer.

13.10. Removal or Resignation: A Plan Administrator may be removed by the Board of Directors of the Plan Sponsor upon 30 days written notice, and may resign upon 30 days written notice to the Board of Directors. Upon such removal or resignation, or the inability of the Plan Administrator for any other reason to act as Plan Administrator, the Board of Directors shall appoint a successor Plan Administrator. The successor Plan Administrator, upon written acceptance, shall have all the duties and responsibilities of a Plan Administrator herein. The former Plan Administrator shall deliver to the successor Plan Administrator all records and documents that it holds relating to the Plan upon removal or resignation.

13.11. Records of Plan Administrator: The Plan Sponsor shall have access, upon request, to all the records of the Plan Administrator that relate to the Plan.

13.12. Other Responsibilities: Nothing in this Article shall be construed to limit the responsibilities and duties allocated to the Plan Administrator in other Articles of this Plan.

ARTICLE 14

THE TRUSTEE

14.1. Appointment of Trustee: The Board of Directors of the Plan Sponsor shall appoint the Trustee. Nothing in this Plan shall prevent the Plan Sponsor from appointing multiple Trustees or creating multiple Trust Funds, each with separate Trustees. If more than one person is appointed as Trustee of a single Trust Fund, they shall act by majority vote; provided, however, that they shall act by unanimous vote at any time when there are only two Trustees. In the event there is more than one Trustee, the reference to Trustee shall be deemed to refer to all the Trustees.

14.2. Acceptance by Trustee: The Trustee shall accept its appointment by executing a separate trust agreement in a form acceptable to the Trustee and Employer. Subject to Section 14.3, the provisions of the separate Trust Agreement shall control over those in this Plan, to the extent such provisions define the duties of the Trustee with respect to the Trust Fund.

14.3. Provisions of Trust Agreement: The separate Trust Agreement shall authorize and empower the Trustee to invest up to 100% of the Trust Fund in Employer Securities. The Trust Agreement shall also authorize and empower the Trustee to engage in Exempt Loan transactions on behalf of the Plan. An Exempt Loan transaction is a loan to the Trust that is primarily for the benefit of the Participants and their Beneficiaries and further satisfies the following terms and conditions:

(a)

The Trustee will use the proceeds of the loan, within a reasonable time after receipt, only for any or all of the following purposes: (i) to acquire Employer Securities, (ii) to repay such loan, or (iii) to repay a prior Exempt Loan. Except as provided under Article XXII, no Employer Security acquired with the proceeds of an Exempt Loan may be subject to a put, call or other option, or buy-sell or similar arrangement while held by and when distributed from this Plan, whether or not this Plan is then an employee stock ownership plan.


(b)	At the time the Exempt Loan is made the interest rate for the Exempt Loan must be reasonable and in combination, the rate of interest for the Exempt Loan and the price of the Employer Securities to be acquired with the Exempt Loan proceeds shall not be such that Plan assets may be drained off.


(c)	Any collateral the Trustee pledges to the creditor must consist only of the assets purchased by the borrowed funds and those assets the Trust used as collateral on the prior Exempt Loan repaid with the proceeds of the current Exempt Loan.

(d)

The creditor may have no recourse against the Trust under the Exempt Loan except with respect to such collateral given for the Exempt Loan, contributions (other than contributions of Employer Securities) that the Employer makes to the Trust to meet its obligations under the Exempt Loan, and earnings attributable to such collateral and the investment of such contributions. The payment made with respect to an Exempt Loan by the Plan during a Plan Year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less such payments in prior years. The Advisory Committee and the Trustee must account separately for such contributions and earnings in the books of account of the Plan until the Trust repays the Exempt Loan.


(e)	The Exempt Loan must provide for transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan.

(f)

The Trustee must add and maintain all assets acquired with the proceeds of an Exempt Loan in a Suspense Account. In withdrawing assets from the Suspense Account, the Trustee will apply the provisions of Treas. Reg. §§54.4975-7(b)(8) and (15) as if all securities in the Suspense Account were encumbered. Upon the payment of any portion of the loan, the Trustee will effect the release of assets in the Suspense Account from encumbrances. For each Plan Year during the duration of the Exempt Loan, the number of Employer Securities released must equal the number of encumbered Employer Securities held immediately before release for the current Plan Year multiplied by a fraction. The numerator of the fraction is the amount of principal and interest paid for the Plan Year. The denominator of the fraction is the sum of the numerator plus the principal and interest to be paid for all future Plan Years. The number of future Plan Years under the loan must be definitely ascertainable and must be determined without taking into account any possible extension or renewal periods. If the interest rate under the Exempt Loan is variable, the interest to be paid in future Plan Years must be computed by using the interest rate applicable as of the end of the Plan Year. If collateral includes more than one class of Employer Securities, the number of Employer Securities of each class to be released for a Plan Year must be determined by applying the same fraction to each such class. The Plan Administrator will allocate assets withdrawn from the Suspense Account to the Accounts of Participants who otherwise share in the allocation of the Employer's Contribution for the Plan Year for which the Trustee has paid the portion of the Exempt Loan resulting in the release of the assets. The Plan Administrator will make this allocation consistently as of each Valuation Date on the basis of non-monetary units, taking into account the relative Compensation of all such Participants for such Plan Year.


(g)	The loan must be for a specific term and may not be payable at the demand of any person except in the case of default.

(h)

Notwithstanding the fact this Plan ceases to be an employee stock ownership plan, Employer Securities acquired with the proceeds of an Exempt Loan will continue after the Trustee repays the loan to be subject to the provisions of Treas. Reg. §§54.4975-7(b)(4), (10), (11) and (12) relating to put, call or other options and to buy-sell or similar arrangements, except to the extent these regulations are inconsistent with Code §409(h).

14.4. Participant Voting Rights: The separate Trust Agreement shall provide for voting Employer Securities by Participants in the following manner.

(a)

With respect to the voting of Employer Securities that are not part of a registration-type class of securities (as defined in Code §409(e)(4)), a Participant (or Beneficiary) has the right to direct the Trustee regarding the voting of such Employer Securities allocated to his Employer Securities Account with respect to any corporate matter that involves the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Treasury may prescribe in regulations.

(b)

With respect to Employer Securities allocated to the Participant's Employer Securities Account that are part of a registration type class of securities, a Participant's right to direct the Trustee to vote such Employer Securities shall extend to all corporate matters requiring a vote of stockholders. The Plan Administrator shall cause to be prepared and delivered to each Participant a notice of the stockholders' meeting with a descriptive statement of the items upon which the Participant may exercise his right to direct the Trustee's vote. Each Participant shall be given notice that if he fails to exercise his voting rights, the Trustee may elect to vote the Employer Securities allocated to the Participant's Account.

The Trustee may vote any Employer Securities described in subsection (b) as to which a Participant (or Beneficiary) fails to direct a vote as authorized by this Section 14.4. The Trustee shall not vote any Employer Securities described in subsection (a) as to which a Participant is entitled to direct the Trustee to vote and the Trustee receives no direction from the Participant.

14.5. Investment Committee: In the event of appointment of an Investment Committee by the Plan Administrator, then except to the extent responsibility for certain Plan assets has been allocated to an Investment Manager as provided in Section 13.4, the Investment Committee is authorized and empowered to direct investment of the Trust Fund, consistent with the terms of the separate Trust Agreement. The Investment Committee shall direct investment and reinvestment of the Trust Fund to keep the Trust Fund invested without distinction between principal and income and in such securities or property, real or personal, wherever situated, as the Committee shall deem advisable consistent with the investment policy of the Plan established under Article XVIII. The Committee shall give due regard to any limitations imposed by the Code or ERISA so that at all times this Plan may qualify as a qualified Plan and Trust.

14.6. Liability for Plan Expenses: The Plan specifically permits the payment of Plan administration and operation expenses from the Plan’s Trust Fund. Moreover, the Plan also permits the allocation of certain administration expenses to an individual Participant’s Account whenever an expense can be specifically determined and the Participant’s Account identified that gives rise to the expense. Expenses not attributable to particular Participant Accounts but nevertheless payable from the Trust Fund may be allocated among all Participant Accounts pro rata, or by any other appropriate method. The Plan Sponsor shall determine in its sole discretion the extent to which Plan administration and operation expenses shall be paid from the Trust Fund or from individual Participant Accounts, provided that all such payments and charges shall comply with ERISA and all regulations and other guidance issued by the Department of Labor. The Plan Sponsor shall be entitled to reimbursement from the Plan for payment of all Plan expenses advanced by the Plan Sponsor (whether charged to an individual Participant’s Account or the Trust Fund as a whole) that are reasonably subject to reimbursement pursuant to ERISA and DOL regulations and other guidance, provided that no reimbursement to the Plan Sponsor shall be made with respect to any charge applicable to an individual Participant’s Account unless the Participant has been previously informed through a summary plan description or similar document that his or her Account may be subject to such charges.

14.7. Payment From the Trust Fund: At the direction of the Plan Administrator, the Trustee shall, from time to time, in accordance with the terms of the Plan, make payments out of the Trust Fund. The Trustee shall not be responsible in any way for the application of such payments.

ARTICLE 15

THE EMPLOYER

15.1. Notification: The Plan Sponsor shall notify the Plan Administrator and the Trustee in writing if a new Plan Administrator or Trustee has been appointed hereunder.

15.2. Record Keeping: Each participating Zions Employer shall maintain records with respect to each Employee sufficient to enable the Plan Administrator and Trustee to fulfill their duties and responsibilities under the Plan.

15.3. Bonding: The Plan Administrator shall procure bonding to insure the Plan against risk of loss. The persons to be bonded and the amount necessary shall be determined in accordance with ERISA and regulations thereunder. No bonding shall be required pursuant to state law.

15.4. Signature of Employer: All persons dealing with the Plan may rely on any document executed in the name of the Plan Sponsor by its corporate President, Vice-President, or other duly authorized corporate officer, or by any other individual duly authorized by its Board of Directors, whether retroactive or prospective.

15.5. Plan Counsel and Expenses: The Plan Sponsor may engage the service of any person or organization, including counsel, whose services, in the opinion of the Plan Sponsor are necessary for the establishment or maintenance of this Plan. The expenses incurred or charged by a person or organization engaged by the Plan Sponsor pursuant to the previous sentence shall be paid by the Plan Sponsor, or alternatively, the Plan Sponsor may direct the Trustee to pay such expenses from the Trust Fund.

15.6. Other Responsibilities: Nothing in this Article shall be construed to limit the responsibilities or duties allocated to the Plan Sponsor and Zions Employers in other Articles of the Plan.

15.7. Affiliated Groups :

(a)

For purposes of crediting Hours of Service, all employees of all corporations or entities that are members of an Affiliated Group and all employees of any other entity required to be aggregated with the Employer pursuant to regulations under Code §414(o) shall be treated as employed by a single Employer for purposes of Article III (Service), Article IV (Eligibility), Article V (Contributions) and Article XI, (Vesting). Except as provided in Section 7.1, all employees of all corporations or entities that are members of an Affiliated Group and all employees of any other entity required to be aggregated with the Employer pursuant to regulations under Code §414(o) shall be treated as employed by a single Employer.

(b)

If the Employer is a member of an Affiliated Group and if such group maintains more than one qualified retirement plan that is integrated with Social Security, only a single integration level shall be applicable to each Participant who is a Participant in one or more integrated plans. The integration level for each Participant shall be prorated in each integrated plan in the ratio that the Annual Compensation received by the Participant from the member of the group maintaining the integrated plan bears to the Annual Compensation received by the Participant from all members of the group maintaining all such integrated plans.


(c)	If more than one Employer has adopted this Plan and if all such Employers are members of the same Affiliated Group:


(1)	The provisions of Articles XVI and XVII shall be applicable to each adopting Employer as an individual Employer;


(2)	The provisions of Section 15.7(a) through (c) shall not be applicable to such adopting Employers; and


(3)	The “effective date” for any adopting Employer who adopts this Plan on other than the Effective Date shall be the first day of the Plan Year in which such adopting Employer shall first elect to be covered by this Plan.

15.8. Employer Contributions: Each participating Zions Employer shall contribute to the Plan that Employer's share of Employer Contributions, as determined by the Plan Administrator.

ARTICLE 16

PLAN AMENDMENT OR MERGER

16.1. Power to Amend: The Plan Sponsor and the Plan Administrator shall each have the power to amend, alter, or wholly revise the Plan, prospectively or retrospectively, at any time, and the interest of every Participant is subject to the power so reserved. The Plan Administrator shall not exercise its power to amend without consent of the Plan Sponsor unless the Plan Sponsor has ceased to operate as a viable business entity or has filed or is subject to a petition under Chapter 7 of the U.S. Bankruptcy Code.

16.2. Limitations on Amendments: Upon execution of any amendment, the Employer, Plan Administrator, Trustees, Participants and their Beneficiaries shall be bound thereby; provided, however, that no amendment:


(a)	shall enlarge the duties or responsibilities of the Plan Administrator or Trustee without its consent; or


(b)	shall cause any part of the assets contributed to the Plan to be diverted to any use or purpose other than for the exclusive benefit of the Participants and their Beneficiaries (including the reasonable cost of administering the Plan) prior to the satisfaction of all liabilities (fixed and contingent) under the Plan to Participants and their Beneficiaries; or


(c)	shall reduce the vesting percentage of any Participant, Former Participant, or Beneficiary; or


(d)	shall reduce or restrict the Account Balance of any Participant, Former Participant or Beneficiary; or


(e)	shall eliminate an optional form of benefit, with respect to benefits attributable to service before the amendment.

Notwithstanding the above, any amendment may be made that may be or become necessary in order that the Plan will conform to the requirements of Code §401(a), or of any generally similar successor provision, or in order that all of the provisions of the Plan will conform to all valid requirements of applicable federal and state laws.

16.3. Method of Amendment: If the Plan is amended by the Plan Sponsor, the amendment shall be stated in an instrument in writing signed in the name of the Plan Sponsor by a duly authorized corporate officer, or by any other individual duly authorized by the Plan Sponsor, whether retroactive or prospective. If the Plan is amended by the Plan Administrator, the amendment shall be stated in an instrument in writing signed in the name of the Plan Administrator by the individual duly authorized by the Plan Administrator for that purpose, whether retroactive or prospective.

16.4. Notice of Amendment: Written notice of each amendment shall be given promptly by the Plan Sponsor to any other Employers, the Plan Administrator and the Trustee.

16.5. Merger or Consolidation: This Plan and Trust may be merged or consolidated with, or its assets or liabilities may be transferred to, any other plan only if the benefits that would be received by each Participant of this Plan, in the event of a termination of the Plan immediately after such merger, consolidation or transfer, are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the merger, consolidation or transfer. The Trustee possesses the specific authority to enter into merger agreements or direct transfer of assets agreements with the Trustees of other retirement plans described in Code §401(a) and to accept the direct transfer of Plan assets, or to transfer Plan assets, as a party to any such agreement. Notwithstanding the foregoing, this Plan shall not enter into any merger or transfer agreement to transfer assets to this Plan from a plan that is subject to the provisions of Code §417.

The Trustee may accept a direct transfer of Plan assets on behalf of an Employee prior to the date the Employee satisfies the Plan's eligibility condition(s). If the Trustee accepts such a direct transfer of Plan assets, the Advisory Committee and Trustee shall treat the Employee as a Participant for all purposes of the Plan except the Employee shall not make Elective Deferral contributions under Article V nor shall the Employee share in Employer contributions or Participant forfeitures under Article VI until he actually becomes a Participant in the Plan.

The Trustee shall hold, administer and distribute the transferred assets as a part of the Trust Fund and the Trustee shall maintain a separate Predecessor Plan Account for the benefit of the Employee on whose behalf the Trustee accepted the transfer in order to reflect the value of the transferred assets.

ARTICLE 17

TERMINATION OR DISCONTINUANCE OF CONTRIBUTIONS

17.1. Right to Terminate: The Plan Sponsor may terminate the Plan at any time by a written resolution by the Board of Directors specifying the termination date. The Plan Sponsor shall promptly notify the Plan Administrator, Trustee and any other Employers of such action. Further, the Plan Sponsor shall notify all Participants and Former Participants of such action, and shall file all required reports with federal agencies, in accordance with applicable regulations.

17.2. Effect of Termination: In the event of a Plan termination or a complete discontinuance of Employer Contributions, the rights of all affected Participants to their Accrued Benefits as of the date of such termination shall be fully vested and shall not thereafter be subject to forfeiture, except to the extent that law or regulation may preclude such vesting in order to prohibit discrimination in favor of officers, shareholders, or highly compensated Employees. For purposes of the preceding sentence, a Participant who has terminated employment with the Employer and incurred five consecutive One Year Breaks in Service as of the termination date shall not be considered to be affected by such Plan termination, and shall be vested in his Accrued Benefit only to the extent provided in the other applicable Articles of this Plan. All rights of Participants in this Plan affecting Employer Securities held in trust for the benefit of Participants shall continue notwithstanding any Plan termination, or any other event or circumstance that would cause the Plan to cease being an employee stock ownership plan under Code §4975(e)(7).

17.3. Manner of Distribution : In the event of a Plan termination without establishment or maintenance of another defined contribution plan (other than an ESOP, a SEP, a SIMPLE IRA plan, a §403(b) plan or a §457 plan), the Plan Administrator shall direct the Trustee to distribute the Accrued Benefits of all Participants, Former Participants, and Beneficiaries in accordance with Article IX or Article XI.

Notwithstanding the above, no payment shall be made to a Participant from his Participant Elective Deferral Account (or any other Account the contributions to which have been included in the Deferral Account for the Participant) unless or until such time as the Participant:


(a)	is eligible for Retirement Benefits as provided in Article IX;


(b)	dies;


(c)	has a severance from employment;


(d)	attains the age of 59½;


(e)	incurs a Disability; or


(f)	incurs a Financial Hardship.

All Elective Deferral Accounts shall be maintained by the Trustee and distributed at such time and in such manner as previously provided herein. Alternatively, the balance in such Accounts may be transferred to another plan maintained or established by the Employer that qualifies under Code §401(a) as provided above, but only if such other plan contains the same restrictions on the distribution of such transferred amounts as described in the preceding paragraph.

17.4. No Reversion: No termination or amendment of this Plan and Trust and no other action shall divert any part of the funds to any purpose other than the exclusive benefit of Participants, Former Participants or their Beneficiaries except, and notwithstanding any other provision of this Plan to the contrary, any amount held in an unallocated suspense account that cannot be allocated to any Participant due to the limitations of Article VIII may be returned to the Employer upon termination of the Plan.

17.5. Termination of an Employer: An Employer, other than the Plan Sponsor, may terminate its participation in the Plan at any time by a written resolution by the Board of Directors specifying the termination date. The Employer shall promptly notify the Plan Sponsor, Plan Administrator and Trustee of any such action or direction. The participation of an Employer in the Plan shall also terminate in the event of a complete discontinuance of contributions by such Employer.

17.6. Partial Termination: A partial termination of the Plan may be deemed to have occurred if a significant percentage of Participants are excluded from coverage by reason of amendment of the Plan, severance by an Employer or termination of an Employer, or if the Plan is amended to adversely affect the rights of employees to vest in benefits under the Plan or to reduce or eliminate future benefit accruals under the Plan. The determination of whether a partial termination has occurred shall be made on the basis of the facts and circumstances in a particular case.

17.7. Effect of Partial Termination: In the event of a partial termination of the Plan, the provisions of Section 17.2 shall apply to those Participants affected by the partial termination.

ARTICLE 18

FUNDING POLICY FOR PLAN BENEFITS

18.1. Funding Method: The benefits provided by this Plan shall be funded by contributions of the Employer. Employer Non-Elective contributions and Employer Matching Contributions shall consist entirely of Employer Securities. The Employer may make its Non-Elective Contribution or its Matching Contribution in cash or in kind, provided however, that if the Non-Elective Contribution or the Matching Contribution is made in cash, the Plan shall immediately acquire Employer Securities with the entire amount of the Non-Elective Contribution and Matching Contribution and if the Non-Elective Contribution or the Matching Contribution is made in kind, it shall be made in the form of Employer Securities only. Elective Deferral Contributions shall be made in cash only. All Employer Contribution amounts shall be determined as provided in this Plan.

18.2. Investment Policy: This Plan has been established for the sole purpose of providing benefits to the Participants and their Beneficiaries. In determining investment directions hereunder, the Investment Committee shall take account the investment policy rules and limitations provided in the Plan, the advice provided by the Plan Administrator as to funding policy, and the short and long-range needs of the Plan based on the evident and probable requirements of the Plan as to the time benefits shall be payable and the requirements therefor. Benefits may be provided through any combination of investment media designed to provide the requisite liquidity, growth and security appropriate to this Plan.

The following rules shall apply as of the Effective Date with respect to the investment of contributions to the Plan (regardless of source) and existing Accounts in the Plan.


(a)	Subject to Section 18.6(e), no Participant shall direct investment into or out of Employer Securities in any Account. Effective January 1, 2007, this restriction shall apply only with respect to Employer Securities in the Employer Non-Elective Contribution Account.


(b)	Contributions to the Participant Elective Deferral Account shall be invested exclusively in the General Investments Account. Amounts in a Participant Elective Deferral Account as of the Effective Date, including earnings and dividends thereon, may not be transferred between the General Investments Account and Employer Securities Account.


(c)	Contributions to the Employer Matching Contribution Account shall be invested exclusively in the Employer Securities Account.


(d)	Contributions to the Participant Voluntary Contribution Account shall be invested exclusively in the Employer Securities Account.


(e)	Contributions to the Participant Rollover Account shall be invested exclusively in the General Investments Account. Amounts in the Participant Rollover Account as of the Effective Date, including earnings and dividends thereon, may not be transferred between the General Investments Account and Employer Securities Account.


(f)	Amounts in the Paysop Account as of the Effective Date, including earnings and dividends thereon, shall remain in the Employer Securities Account and may not be transferred between the General Investments Account and Employer Securities Account.


(g)	Contributions to the Employer Non-Elective Contribution Account shall be invested exclusively in the Employer Securities Account.


(h)	All restrictions in the foregoing subsections to investment direction into or out of Employer Securities or transfer of Employer Securities to or from the Employer Securities Account shall be subject to the dividend investment rules of Section 6.3(e) and the diversification provisions of Section 6.6.

18.3. No Purchase of Life Insurance Contracts: Unless authorized by the Plan Sponsor pursuant to amendment to this Article XVIII, no insurance contracts shall be purchased by the Trustee on the life of any Participant.

18.4. General Investments and Dividend Accounts: Benefits for Participants, to the extent not funded through Employer Securities, shall be funded through the General Investments and Dividend Accounts. The General Investments Account may consist of any investment media offered by the Trustee or through the purchase of shares in any regulated investment company as defined in Code §851(a), or through any investment proper and appropriate to be made by the Trustee in accordance with Article XIV, or through any combination of such investments other than Employer Securities. Rules and procedures for the operation of the General Investments Account and Participant direction of investment therein are set forth in Section 18.6.

All cash dividends received and held in a Participant’s Dividend Account shall be invested in the stable asset fund described in section 18.6(b) until invested in Employer Securities or distributed in cash pursuant to the Participant’s election under Section 6.3(e). Effective July 24, 2006, all dividends attributable to Employer Securities shall be subject to the same Participant investment direction rights as the Employer Securities that were the source of the dividend.

18.5. Non-transferability of Annuity Contracts: In the event the assets of the Trust Fund include allocated annuity contracts, all incidents of ownership in such contracts may be exercised by the Trustee, as directed by the Plan Administrator, except to the extent any death benefits payable thereunder may be paid to the Beneficiary designated by the Participant. All such contracts shall provide that the owner may not change the ownership of the contract, nor may it be sold, assigned or pledged as collateral for a loan, as security for the performance of an obligation, or for any other purpose to anyone. No annuity contract may be delivered to a Participant as a distribution from the Plan.

18.6. Establishment of Separate Funds: There is hereby reserved to the Plan Administrator (or the Committee designated by the Plan Administrator for this purpose) the right to direct the Trustee to establish separate investment funds within the General Investments Account. The Plan Administrator (or Committee) may follow different investment policies with respect to each investment fund so established. In the sole discretion of the Sponsoring Employer a Participant, Inactive Participant, Beneficiary or Alternate Payee shall be allowed to direct the Trustee to invest the amounts in his or her General Investments Account, consistent with the rules in this Section 18.6, in any or all of the investment Funds. The following administrative rules shall apply if such Funds are established:


(a)	Income, gains and losses from each investments Fund will be reinvested in the same Fund and credited only to the General Investments Accounts of those Participants who have a balance in such Fund, in a manner consistent with Section 6.3.

(b)

At least one Fund shall be a stable asset fund that invests in cash equivalent securities and contracts. For this purpose “cash equivalent securities and contracts” shall mean short term U. S. Government obligations, prime commercial paper, certificates of deposit, savings accounts in banks or savings and loan associations, guaranteed interest contracts and pooled funds that invest exclusively in some or all of the foregoing.

(c)

Each Participant shall be entitled to direct the portion of the contributions made to his/her General Investments Account that are to be invested in each of the investment funds available. Upon the occurrence of any event or decision of the Plan Administrator that results in the deletion of any of the investment funds, that replaces any such fund with another fund, or that adds a new investment fund, the Plan Administrator shall designate a default investment fund or funds into which contributions on behalf of a Participant shall be invested in the event no specific direction for investment is made by the Participant. The Plan Administrator shall designate a default investment fund for any Participant or Beneficiary (including any Beneficiary by virtue of a Qualified Domestic Relations Order) who does not provide for investment instructions with respect to his/her General Investments Account into any investment fund under this Section 18.6. Effective January 1, 2008, or as soon thereafter as the Plan Administrator shall have selected a “Qualified Default Investment Alternative,” as defined in DOL Reg. §2550.404c-5(e)) (“QDIA”), and for all Plan Years commencing after that date, the default investment fund shall be the designated QDIA. Upon selection of the QDIA the Plan Administrator shall notify each Employee in the Plan of the default investment option if an Employee fails to provide the Plan Administrator with investment instructions for his/her Account. The Notice shall be written in a manner calculated to be understood by the average Plan Participant and shall be provided to the Participant at least 30 days (or if alter, as soon as possible following the Employment Commencement Date) prior to the beginning of each Plan Year. The Notice shall include an explanation of:


(1)	the circumstances under which the Participant’s Account will be invested in a QDIA in the absence of any other investment election by the Employee,


(2)	the right of Participants and Beneficiaries to direct the investment of assets in their individual accounts, including a description of:


(A)	the QDIA and its investment objectives, risk and return characteristics (if applicable), and attendant fees and expenses;


(B)	the right of Participants and Beneficiaries on whose behalf assets are invested in a QDIA to direct the investment of those assets to any other investment alternative under the Plan, including a description of any applicable restrictions, fees or expenses in connection with a transfer; and


(C)	where Participants and Beneficiaries can obtain investment information concerning the other investment alternatives available under the Plan.

(d)

Each Participant shall have the right to change the portion of succeeding contributions to be invested in each Fund and the right to direct that the asset balance or any portion thereof in any Funds in his General Investments Account be liquidated and the proceeds thereof transferred to any other Fund. Changes in Fund investments pursuant to Participant direction shall be made effective as provided under procedures negotiated between the Plan and the Trustee (or custodian, if appointed by the Plan Administrator or Trustee), which procedures may include daily movement of General Investment Account moneys between Funds, provided valuation of the Funds is also conducted daily.

(e)

A Participant may not direct (except as provided in Section 6.3(e)) any investment into the Employer Securities Account or (except as provided in Section 6.6) the liquidation or sale of any Employer Securities in that Account. Effective January 1, 2007, a Participant may direct investment into the Employer Securities Account from any other sub-account in the Plan, with the exception of the Dividend Account, which shall continue to be subject to the rules in Section 18.4.


(f)	The Plan Administrator may establish reasonable rules regarding:


(1)	The number and types of Funds that shall be available to the General Investments Account.


(2)	The maximum number of Funds that may be utilized by an individual Participant or by the General Investments Account.


(3)	The minimum, maximum and incremental percentages of contributions that may be invested in a particular Fund.


(4)	The minimum, maximum and incremental percentages of the current balance in the General Investments Account in any Fund that may be transferred to another Fund.

These rules shall be in writing and shall be administered in a uniform and non- discriminatory manner.

ARTICLE 19

TOP-HEAVY PROVISIONS

19.1. Application: The provisions of this Article XIX shall apply and shall supersede any conflicting provisions contained in any other Article of this Plan for purposes of determining whether the Plan is a top-heavy plan under Code §416(g) for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Code §416(c) for such years. For Plan Years prior to January 1, 2002, the provisions of the Prior Plan shall apply.

19.2. Special Definitions: For purposes of this Article and related Plan provisions, the following terms shall have the following meanings unless a different meaning is plainly required by the context:


(a)	“Determination Date” shall mean, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan the Determination Date shall mean the last day of that Plan Year.


(b)	“Five Percent Owner” shall mean:


(1)	if the Employer is a corporation, any person who owns (or is considered as owning within the meaning of Code §318) more than 5% of the outstanding stock of the corporation or stock possessing more than 5% of the total combined voting power of all stock of the corporation; or


(2)	if the Employer is not a corporation, any person who owns more than 5% of the capital or profits interest in the Employer.


(c)	“Key Employee” shall mean any Employee or former Employee (and any Beneficiary of the Employee) who at any time during the Plan Year that includes the Determination Date was:


(1)	an officer of the Employer having Top Heavy Compensation greater than $130,000 (as adjusted under Code §416(i)(1) for Plan Years beginning after December 31, 2002),


(2)	a Five Percent Owner of the Employer, or


(3)	a One Percent Owner of the Employer having annual compensation of more than $150,000.

For purposes of subparagraph (1), no more than 50 Employees (or, if lesser, the greater of 3% or 10% of the number of Employees) shall be treated as officers.

For purposes of determining who is a Five-Percent or a One-Percent Owner in subparagraphs (2) and (3) above, the rules of subsections (b), (c) and (m) of Code §414 do not apply. Beneficiaries of an Employee acquire the character of the Employee who per formed service for the Employer. Inherited benefits will retain the character of the benefits of the Employee who performed services for the Employer.


(d)	“Non-Key Employee” shall mean any Employee or Inactive Employee (and any Beneficiary of such Employee) who is not a Key Employee. Non-Key Employees include Employees who are Inactive Key Employees.


(e)	“One Percent Owner” shall mean:


(1)	if the Employer is a corporation, any person who owns (or is considered as owning within the meaning of Code §318) more than 1% of the outstanding stock of the corporation or stock possessing more than 1% of the total combined voting power of all stock of the corporation; or


(2)	if the Employer is not a corporation, any person who owns more than 1% of the capital or profits interest in the Employer.


(f)	“Permissive Aggregation Group” shall mean the Required Aggregation Group of plans plus any other plan or plans of the Employer that, when selected and considered by the Employer as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code §§401(a)(4) and 410.


(g)	“Present Value” shall mean the actuarial present value of an amount or series of amounts determined based on the Top-Heavy determination provisions of a defined benefit plan that is part of a Required Aggregation Group or Permissive Aggregation Group with this Plan.


(h)	“Required Aggregation Group” shall mean:


(1)	each qualified plan of the Employer in which at least one Key Employee participates in the Plan Year containing the Determination Date or any of the four preceding plan years (regardless of whether the plan has terminated; and


(2)	any other qualified plan of the Employer that enables a plan described in subpara-graph (1) to meet the requirements of Code §§401(a)(4) or 410.

(i)

“Top Heavy Average Monthly Compensation” shall mean 1/12th of the average of a Participant’s Top-Heavy Compensation during the five consecutive Plan Years (or the total number of such years of the Participant’s employment, if fewer than five) that produces the highest average, but taking into account only Top-Heavy Compensation for years that this Plan was Top-Heavy and any years preceding a year that this Plan was Top- Heavy.


(j)	“Top-Heavy Compensation” shall have the same meaning as the term ‘Compensation’ defined in Section 7.1(b). Top Heavy Compensation includes all Compensation paid for the Limitation Year without regard to when the Participant commenced participation in the Plan.


(k)	“Top-Heavy Ratio” shall mean and be determined as follows:

(1)

If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had Accrued benefits, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the 1-year period ending on the Determination Date(s)) (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 1-year period ending on the Determination Date(s)) (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002), both computed in accordance with §416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under §416 of the Code and the regulations thereunder.

(2)

If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with (1) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all Participants, determined in accordance with (1) above, and the present value of accrued benefits under the defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with §416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 1-year period ending on the Determination Date (5-year period ending on the Determination Date in the case of a distribution made for a reason other than severance from employment, death or disability and in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002).

(3)

For purposes of (1) and (2) above the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in §416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant (1) who is not a Key Employee but who was a Key Employee in a prior year, or (2) who has not been credited with at least one Hour of Service with any Employer maintaining the Plan at any time during the 1-year period (5-year period in determining whether the Plan is Top-Heavy for Plan Years beginning before January 1, 2002) ending on the Determination Date will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with §416 of the Code and the regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.

The Accrued Benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of §411(b)(1)(C) of the Code.

(l)

“Top-Heavy Valuation Date” shall mean the date as of which the Present Value of accrued benefits under a defined benefit plan or account balances under a defined contribution plan, that is part of a Permissive Aggregation Group or Required Aggregation Group, is determined for calculating the Top-Heavy Ratio. For a defined benefit plan, the date shall be the same as the actuarial valuation date used for computing plan costs under Code §412, regardless of whether an actuarial valuation is performed that year. For a defined contribution plan, the date shall be the last day of the plan year.

19.3. Top Heavy Status: This Plan is Top-Heavy if any of the following conditions apply:


(a)	if the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans;


(b)	if this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%; or


(c)	if this Plan is a part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

19.4. Top-Heavy Minimum Required Allocation: For any Plan Year in which the Plan is Top-Heavy:


(a)	Except as otherwise provided below, the Employer contributions and forfeitures allocated on behalf of any Participant who is a Non-Key Employee shall not be less than the lesser of:


(1)	three percent of the Participant’s Top-Heavy Compensation; or

(2)

in the case where the Employer has no defined benefit plan that designates this Plan to satisfy Code §§401 and 416(c), the largest percentage of Employer contributions and forfeitures, as a percentage of the first $200,000 (or such larger amount as may be prescribed by the Secretary of the Treasury or his delegate), of the Key Employee’s Top-Heavy Compensation, allocated on behalf of any Key Employee for that year. In calculating this percentage all amounts contributed by the Employer to the Key Employee’s Elective Deferral Account pursuant to a Salary Reduction Agreement shall be treated as Employer contributions. The $200,000 amount shall be adjusted each Plan Year as provided in Code §401(a)(17)(B). For any period during which the Plan Year is not or was not coincident with the calendar year, the dollar adjustment in the Annual Compensation limit for the Plan Year shall be based on the amount in effect as of January 1st for the Plan Year beginning within that calendar year.


(b)	The minimum allocation shall be determined without regard to any Social Security contribution by the Employer. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the Plan Year because of:


(1)	the Participant’s failure to complete 1,000 Hours of Service (or any equivalent provided in the Plan);


(2)	the Participant’s failure to make mandatory employee contributions to the Plan;


(3)	Compensation less than a stated amount;


(4)	the Employer having no Net Profits; or


(5)	in the case of a plan qualified under Code §401(k), the Participant’s failure to make elective contributions to such plan.

If a Participant is required to receive a minimum allocation under this Section and the amount exceeds the amount that the Participant would receive under other Plan provisions, the Employer shall make an additional contribution for that Participant. The additional contribution shall be allocated to the Employer Contribution Account of the Participant in the same manner as regular Employer contributions, pursuant to Article VII.


(c)	The provisions in subsections (a) and (b) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year.


(d)	The minimum benefit requirement of this Section shall be met through contributions to this Plan regardless of whether the Employer maintains any other plan (including another plan that may consist solely of a cash or deferred arrangement that meets the requirements of Code §401(k)(12) and matching contributions with respect to which the requirements of Code §401(m)(11) are met).

(e)

Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code §416(c)(2) and this Section. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of determining M-Test Contributions under the Plan and the actual contribution percentage test and other requirements of Code §401(m).

19.5. Non-forfeitability of Minimum Top Heavy Allocation: The minimum allocation of Employer contributions or forfeitures required under Section 19.4 (to the extent required to be non- forfeitable under Code §416(b)) shall not be forfeited in the case of a suspension of benefits under Code §411(a)(3)(B) or a withdrawal of mandatory employee contributions under Code §411(a)(3)(D).

19.6. Minimum Vesting Provision: For any Plan Year in which this Plan is Top-Heavy, the following vesting schedule shall automatically apply to each Participant in the Plan, unless under Section 11.1 the Participant would be entitled to a larger vested benefit, in which case the benefit as provided in Section 11.1 shall apply to the Participant:



Years of Vesting Service Less than 3 3 or more	Vesting Percentage 0% 100%

This vesting schedule applies to all accrued benefits within the meaning of Code §411(a)(7), except those attributable to employee contributions, including benefits accrued before the effective date of Code §416 and benefits accrued before the Plan became Top-Heavy. No reduction in vested percentage may occur in the event the Plan’s status as Top-Heavy changes for any Plan Year. Any change in the Plan’s vesting schedule due to a change in Top-Heavy status shall be subject to the provision of Section 11.10. However, this Section does not apply to the Accrued Benefit of any Employee who does not have an Hour of Service after the Plan has initially become Top Heavy; such Employee’s Vested Interest attributable to Employer contributions and forfeitures shall be determined without regard to this Section.

19.7. Participant Elective Deferrals: Elective Deferrals shall not be taken into account in determining under Section 19.4 the amount of Employer contributions to be allocated to a Participant who is a Non-key Employee.

ARTICLE 20

PROVISIONS AFFECTING BENEFITS

20.1. Availability of Loans: Upon acceptance of an application by a Participant who is an active Employee, the Plan Administrator shall direct the Trustee to make a loan to the Participant from his Plan Accounts (including any Rollover Accounts, but excluding his Employer Securities Account and his Dividend Account), subject to the provisions of this Article. In considering a Participant's application for a loan, the Plan Administrator shall base its decision whether to grant a loan on a uniform and non-discriminatory policy, without regard to the race, color, religion, sex, age or national origin of the applicant.

20.2. Loan Administration: The Employer shall prepare and adopt a written Participant Loan Administration Policy Statement, whose provisions shall be made part of this Plan. The Policy Statement shall set forth:


(a)	the identity of the person or persons authorized to administer the loan program;


(b)	the procedure for applying for a loan;


(c)	the basis on which loans will be approved or denied;


(d)	limitations, if any, on the types and amounts of loans offered;


(e)	the procedure for determining a reasonable rate of interest;


(f)	the types of collateral that may secure a loan; and


(g)	the events constituting default and the steps to be taken to preserve plan assets in the event of a default.

20.3. Amount of Loan: The amount of any loan to a Participant shall not be less than $1,000. When added to the outstanding balance of any previous loans made to a Participant pursuant to this Article or under any other qualified plan maintained by the Employer, the amount of any loan shall not exceed the lesser of:


(a)	Fifty percent of the Vested Interest in his Plan Accounts (including any Rollover Accounts, but excluding his Employer Securities Account, effective January 1, 2007, excluding only his Employer Non-Elective Contribution Account and his Dividend Account); or


(b)	$50,000, reduced by the excess (if any) of:


(1)	the highest outstanding balance of loans from the plan during the one-year period ending on the day before the date on which such loan was made, over


(2)	the outstanding balance of loans from the plan on the date on which such loan was made.

20.4. Collateral Requirements: Any loan to a Participant shall be secured solely by the balance in his Plan Account (including any Rollover Accounts, but excluding his Employer Securities Account). In the event of default on the loan, however, foreclosure and attachment of the security shall not occur until a distributable event occurs under the Plan.

20.5. Loan Terms: Any loan made to a Participant by the Trustee shall be evidenced by a promissory note of the Participant drawn in favor of the Trust. The note shall bear a reasonable rate of interest and shall be amortized in level installments payable at least quarterly within a specified period of time not to exceed five years, unless the loan is used to acquire a dwelling unit that, within a reasonable period of time (determined at the time the loan is made), will be used as the principal residence of the Participant, in which case the specified period of time shall not exceed 10 years. Effective January 1, 2002, repayment of a loan to a Participant who is on a leave of absence may be suspended for the shorter of (i) one year or (ii) the term of the leave of absence, provided that upon commencement of repayments, the loan shall continue to satisfy all requirements of the Plan and all applicable laws and regulations. Suspension of loan repayments shall also be governed by the rules in Section 3.13(f) with respect to any Qualified Military Service.

20.6. Accounting for Loans: Any loan to a Participant pursuant to this Article shall be treated as a directed investment of his Participant Accounts (excluding his Employer Security Account). For purposes of allocating income in the General Investments Account of the Trust Fund pursuant to Section 6.3(c), the balance in his General Investments Account shall be treated as equal to the actual balance in the Account minus the outstanding balance of any loans. Furthermore, for purposes of Section 6.3, repayments of principal and interest on the loan shall be treated as deposits to the adjusted balance (determined pursuant to the preceding sentence) of his General Investments Account.

20.7. Effect of Termination of Employment or Plan: If a Participant terminates employment with the Employer for any reason, the outstanding balance of any loans made to him shall become fully payable no later than the last day of the calendar quarter following the calendar quarter in which his Termination of Employment occurs, or, if earlier, on his Distribution Date. In the event of a termination of the Plan, any outstanding loans shall be due and fully payable within 90 days of the effective date of such termination, or the date the Participant or Beneficiary is notified of such termination. If the Participant or Beneficiary has not fully repaid any loan as of the date full payment is due, any unpaid balance shall be deducted from his Vested Accrued Benefit prior to determining the amount of any immediate or deferred benefit payable to the Participant or Beneficiary, his spouse or his Beneficiary and applied toward repayment of the loan. The deduction shall be applied only against the Participant’s General Investments Account.

20.8. No Spousal Consent: No spousal consent shall be required for any loan from any Account in the Plan.

20.9. Anti-Alienation: Except as specifically provided in Section 20.10 no benefit that shall be payable out of the Trust Fund to any person (including a Participant, Former Participant or Beneficiary) shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No benefit shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person, nor shall it be subject to attachment or legal process for or against person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law.

20.10. Qualified Domestic Relations Orders: Section 20.9 shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant, Former Participant or Beneficiary pursuant to a Domestic Relations Order, unless such Domestic Relations Order is determined to be a Qualified Domestic Relations Order (“QDRO”). In the event the Plan, the Trustee, or the Plan Administrator receives a Domestic Relations Order, the Plan Administrator shall promptly notify the Participant, Former Participant or Beneficiary whose benefit is the subject of such order and provide him with a copy of the Plan's written procedures for administering QDROs. Administration expenses incurred by the Plan with respect to the QDRO (including costs associated with review and determination of the order as a valid QDRO) shall be chargeable to the individual Participant’s Account. Unless and until the order is set aside, the following provisions shall apply:

(a)

The Plan Administrator shall establish reasonable procedures to determine whether an order received by it or the Trustee is a QDRO and to administer distributions pursuant to said order. The procedures shall set forth all rules to be applied by the Plan for notice to affected parties, suspension of Account activity, including distributions, investment direction and participant loans, and payment of benefits based upon the QDRO or the failure of the Domestic Relations Order to be a QDRO.


(b)	The Plan Administrator shall within a reasonable time determine whether the order is a QDRO and shall notify the Participant, Former Participant or Beneficiary whose benefit is the subject of the order, of its determination. The Plan Administrator may designate a representative to carry out its duties under this Section 20.10.

(c)

Nothing in this Section 20.10 shall be deemed to allow payment under a QDRO to an Alternate Payee of any benefit prior to the first day of the month following the date the Participant or Former Participant whose benefits are subject to the QDRO terminates employment or attains age 50, unless (i) earlier distribution is specifically provided under the terms of the QDRO and (ii) if the value of the Alternate Payee's benefit exceeds $5,000, the Alternate Payee consents to any distribution occurring prior to the Participant's attainment of earliest retirement age.

20.11. QDRO Definitions: For purposes of Section 20.10 the following definitions and rules shall apply:


(a)	“Alternate Payee” shall mean any spouse, former spouse, child or other dependent of a Participant or Former Participant who is recognized by a QDRO as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to the Participant or Former Participant.


(b)	“Domestic Relations Order” shall mean any judgment, decree, or order (including approval of a property settlement agreement) that:


(1)	relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a Participant or Former Participant and


(2)	is made pursuant to a state domestic relations law (including a community property law).


(c)	“Qualified Domestic Relations Order” shall mean any Domestic Relations Order that satisfies the criteria set forth in the QDRO procedures established by the Plan Administrator.

ARTICLE 21

MULTIPLE EMPLOYER PROVISIONS

21.1. Adoption by Other Zions Employers: With the consent of the Sponsoring Employer and by a properly executed document evidencing the intent and will of the adopting Zions Employer, any other Zions Employer may adopt this Plan and all of the provisions hereof and participate herein and be known as a Participating Employer.

21.2. Requirements of Participating Zions Employers :


(a)	Each Participating Zions Employer shall be required to use the Trustee determined by the Plan Sponsor or Plan Administrator.


(b)	The Trustee may, but shall not be required to, commingle, hold and invest as one Trust Fund all contributions made by Participating Zions Employers, as well as all increments thereof. The assets of the Plan shall, on an ongoing basis, be available to pay benefits to all Participants and Beneficiaries under the Plan without regard to the Participating Zions Employer who contributed such assets.


(c)	the transfer of any Participant from or to Zions Employer participating in this Plan, whether he is an Employee of the Sponsoring Employer or a Participating Zions Employer, shall not affect the Participant's rights under the Plan, and the Participant's Accounts, as well as all accumulated service with the transferor or predecessor, shall continue to his credit.


(d)	Any expenses of the Trust and Plan that are to be paid by the Employer or borne by the Trust Fund, including funding of benefits, shall be paid by each Participating Zions Employer in the same proportion that the total amount of the Accounts standing to the credit of all Participants employed by such Zions Employer bears to the total of the Accounts standing to the credit of all Participants.

21.3. Designation of Agent: Each Participating Zions Employer shall be deemed to be a part of this Plan. With respect to all of its relations with the Trustee and Plan Administrator for the purpose of this Plan, each Participating Zions Employer shall be deemed to have designated irrevocably the Sponsoring Employer as its agent. Unless the context of the Plan clearly indicates the contrary, the word “Employer” shall be deemed to include each Participating Zions Employer as related to its adoption of the Plan.

21.4. Employee Transfers: It is anticipated that an Employee may be transferred between Participating Zions Employers, and in the event of any transfer, the Employee involved shall carry with him all of his accumulated service and eligibility. No transfer shall effect a termination of employment hereunder, and the Participating Zions Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such Employee in the same manner as was the Participating Zions Employer from whom the Employee was transferred.

21.5. Amendment: The Sponsoring Employer may amend this Plan at any time without regard to whether there are Participating Zions Employers hereunder. No written action of a Participating Zions Employer shall be required to validate an amendment.

21.6. Discontinuance of Participation: A Participating Zions Employer shall be permitted to discontinue or revoke its participation in the Plan. At the time of any discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Trustee. If so directed by the Plan Administrator, the Trustee shall transfer, deliver and assign Contracts and other Fund assets allocable to the Participants of such Participating Zions Employer to the new Trustee as shall have been designated by the Participating Zions Employer, in the event that it has established a separate pension plan for its Employees. No such transfer shall be made if the result is the elimination or reduction of any Code §411(d)(6) protected benefits. If no successor is designated, the Trustee shall retain the assets for the Employees of the Participating Zions Employer pursuant to the provisions of the Plan. In no event shall any part of the corpus or income of the Trust as it relates to the Participating Zions Employer be used for or diverted for purposes other than for the exclusive benefit of the Employees of the Participating Zions Employer.

21.7. Administrator's Authority: The Plan Administrator shall have authority to make any and all necessary rules or regulations, binding upon all Participating Zions Employers and all Participants, to effectuate the purposes of this Article.

21.8. Participating Employer Contributions: All contributions made by a Participating Zions Employer, as provided for in this Plan, shall be determined separately for each Participating Zions Employer, and shall be allocated only among Participants eligible to share who are Employees of the Participating Zions Employer making the contribution. The Administrator shall keep separate books and records concerning the affairs of each Participating Zions Employer hereunder and as to the accounts and credits of the Employees of each Participating Zions Employer. The Trustee may, but need not, register Contracts so as to evidence that a particular Participating Zions Employer is the interested Employer hereunder. In the event of an Employee transfer from one Participating Zions Employer to another, the employing Employer shall immediately notify the Administrator.

ARTICLE 22

PURCHASE OF EMPLOYER SECURITIES

22.1. No Put option: The Plan may not obligate itself to acquire Employer Securities from a particular holder thereof at any indefinite time determined upon the happening of an event such as the death of the holder. So long as all Employer Securities held by the Plan are tradable on an established market, the Plan may not obligate itself to acquire Employer Securities under a put option binding upon the Plan.

22.2. Purchase Price For Employer Securities: All purchases of Employer Securities shall be made at a price that, in the judgment of the Plan Administrator, does not exceed the fair market value thereof. All sales of Employer Securities shall be made at a price that, in the judgment of the Plan Administrator, is not less than the fair market value thereof.

ARTICLE 23

MISCELLANEOUS

23.1. Participant's Rights: This plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant or Employee at any time regardless of the effect that such discharge shall have upon him as a Participant of this Plan.

23.2. Actions Consistent with Terms of Plan: All actions taken by the Employer, Plan Administrator or Trustee with respect to Trust assets shall be in accordance with the terms of the Plan and Trust.

23.3. Performance of Duties: All parties to this Plan and Trust, or those claiming any interest hereunder, agree to perform any and all acts and execute any and all documents and papers that are necessary or desirable for carrying out this Plan and Trust or any of its provisions.

23.4. Validity of Plan: This Plan shall be construed in a way that is consistent with ERISA and regulations thereunder, the Internal Revenue Code and regulations thereunder, and, to the extent state law has not been preempted by federal law, the laws of the state in which the Plan Sponsor has its principal office. In case any provision of this Plan shall be held illegal or invalid for any reason, such determination shall not affect the remaining provisions of the Plan; but the Plan shall be construed and enforced as if such provision had never been included therein.

23.5. Legal Action: In the event any claim, suit, or proceeding is brought regarding the Trust and/or Plan established hereunder to which the Trustee or the Plan Administrator may be a party, and such claim, suit, or proceeding is resolved in favor of the Trustee or Plan Administrator, they shall be entitled to be reimbursed from the Trust Fund for any and all costs, attorney's fees, and other expenses pertaining thereto incurred by them for which they shall have become liable.

23.6. Gender and Number: Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.

23.7. Uniformity: All provisions of this Plan shall be interpreted and applied in a uniform, nondiscriminatory manner.

23.8. Headings: The headings and subheadings of this Agreement have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

23.9. Receipt and Release for Payments: Any payment to any Participant, his legal representative, Beneficiary, or to any guardian or committee appointed for such Participant or Beneficiary in accordance with the provisions of the Plan, shall, to the extent thereof, be in full satisfaction of all claims against the Trustee and the Employer, either of whom may require such Participant, legal representative, Beneficiary, guardian or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Trustee or Employer.

23.10. Payments to Minors, Incompetents: In the event the Plan Administrator must direct a payment from the Plan to or for the benefit of any minor or incompetent Participant or Beneficiary, the Plan Administrator, in its sole and absolute discretion may, but need not, order the Trustee to make distribution to any of the following: a legal or natural guardian of the minor or other relative or adult with whom the minor temporarily or permanently resides, a court-appointed conservator of any incompetent, a relative or adult with whom the incompetent temporarily or permanently resides, a residential care facility, rest home, sanitarium or similar entity with which the incompetent temporarily or permanently resides, a person or entity that has applied for and been designated by the United States Government as the recipient or custodian for Social Security benefits for the minor or incompetent. The Plan Administrator may also make payment as directed by the attorney-in-fact of an incompetent Participant when such direction is pursuant to an unrevoked and valid durable power of attorney. Any guardian, conservator, relative, attorney-in-fact, other person or entity shall have full authority and discretion to expend the distribution for the use and benefit of the minor or incompetent. The receipt of the distribution by the guardian, conservator, relative, attorney-in-fact, other person or entity shall be a complete discharge to the Plan, Plan Administrator and Trustee, without any responsibility on the part of the Trustee or the Plan Administrator to see to the application thereof. A Participant shall be deemed incompetent if he or she is incapable of properly using, expending, investing, or otherwise disposing of the distribution, and a court order or the written opinion of a qualified physician, psychiatrist or psychologist setting forth facts consistent with the standards outlined in this Section is presented to the Plan Administrator.

23.11. Missing Persons: Notwithstanding any provision in this Plan and Trust to the contrary, if the Plan Administrator is unable to locate any Inactive Participant who has incurred a Termination of Employment and is entitled to benefits under this Plan within three (3) years of the date he becomes entitled to a distribution from the Trust Fund, any amounts being held for his behalf shall be forfeited as of the last day of the Plan Year that contains the third anniversary of the date of his distribution entitlement. The forfeited amounts shall be applied as provided in Section 11.7(b). The Plan Administrator shall proceed with due diligence in attempting to locate any Former Participant. In the Plan Administrator's sole discretion, due diligence may include any or all of the following actions:


(a)	inquiry of any Beneficiary or Alternate Payee of the Inactive Participant whose names and addresses are known to the Plan Administrator; or


(b)	use of a commercial locator service.

In no event shall a forfeiture occur until the Plan Administrator has mailed the Inactive Participant a notice of the benefits and the provisions of this section to his last known address, via U.S. Mail postage prepaid, return receipt requested.

If the Inactive Participant is located subsequent to such forfeiture, the forfeited amount shall be reinstated and the Inactive Participant shall receive a distribution of his Vested Interest in accordance with the provisions of the Plan.

23.12. Prohibition Against Diversion of Funds: It shall be impossible by operation of the Plan or of the Trust, by termination of either, by power of revocation or amendment, by the happening of any contingency, by collateral arrangement or by any other means, for any part of the corpus or income of any trust fund maintained pursuant to the Plan or any funds contributed thereto to be used for, or diverted to, purposes other than the exclusive benefit of Participants, Former Participants or their Beneficiaries, except as provided in Sections 17.4 and 23.17.

23.13. Applicability of Plan: The provisions of this Plan shall apply only to persons who are or who become Participants in this Plan on or after the Effective Date or with respect to Plan provisions with alternate effective dates, such alternate dates. Except as specifically provided in this Plan, the provisions of the Prior Plan will continue to apply to persons who are Former Participants or who are not employed by a Zions Employer on the Effective Date or as applicable, alternate effective dates, unless and until such time as such persons may again become Participants in this Plan.

23.14. Misstatement of Age: If a Participant or Beneficiary misstates or misrepresents his age, date of birth or any other material information to the Employer, Plan Administrator or Trustee, the amount, terms and conditions of any benefits payable from the Plan that are attributable to periods prior to the discovery of such misstatement or misrepresentation shall be limited to the lesser (or more restrictive) of: the amount, terms and conditions determined based on the misstated information; or the amount, terms and conditions determined based on the correct information. The Plan Administrator shall have sole and absolute authority for applying the preceding sentence.

23.15. Return of Contributions to the Employer: Notwithstanding any provision of this Plan to the contrary, if any contribution (or portion thereof) by the Employer to the Trust is made as a result of a mistake of fact, or if any contribution (or part thereof) by the Employer to the Trust Fund that is conditioned upon the deductibility of the contribution by the Employer under the Code is disallowed, whether by agreement within the Internal Revenue Service or by final decision of a court of competent jurisdiction, the Employer may demand repayment of the mistaken or disallowed amount. The Trustee shall return the mistaken or disallowed contribution within one year following the time the mistaken contribution was made or the disallowed contribution was disallowed. Investment earnings attributable to the mistaken or disallowed amount shall not be returned, but any investment losses attributable thereto shall reduce the amount so returned.

23.16. Correction of Incorrect Benefit Payments: This Section controls over all other Plan provisions. In the event of a misstatement, computational error or other error in Plan records or administration, including a failure by the Plan to value correctly a Participant’s Account or any assets therein (including any Employer Securities) or to calculate or determine correctly costs or expenses attributable to a Participant’s Account, or in the event costs or expenses attributable to a Participant’s Account or assets therein are not incurred by the Plan prior to the date distribution of the Participant’s Account occurs, and as a result a Participant or Beneficiary is underpaid or overpaid, the Plan shall not be liable to the Participant or Beneficiary for any more than the correct benefit amount under the Plan.

Underpayment amounts may be corrected by the Plan by adding to future payments or by making a single one-time lump sum payment. Overpayment amounts may be deducted by the Plan from any future payments due from the Plan to the Participant or Beneficiary. In lieu of receiving reduced future payments a Participant or Beneficiary may make a lump sum payment to the Plan of any overpayment. The right of the Plan to establish the propriety of distributions from the Plan and/or obtain recovery or collect repayment from the Participant or Beneficiary of an overpayment amount shall constitute an equitable remedy enforceable in the form of an equitable lien by agreement, applicable to any and all distributions made by the Plan which are in excess of the correct amount owed. Thus, the equitable right of the Plan shall extend to all amounts distributed from the Plan, without regard to when the distribution occurs or may have previously occurred, and any distribution from the Plan to a Participant or Beneficiary, regardless of when paid, shall be subject to the right of the Plan to enforce its equitable lien rights and obtain recovery of overpaid amounts as provided herein.

23.17. Counterparts: This Plan and Trust may be executed in any number of counterparts, each of which shall be deemed to be an original, and the counterparts shall constitute one and the same instrument.

IN WITNESS WHEREOF , the Plan Sponsor has caused this Plan to be executed by its duly authorized representative and the Plan Administrator has accepted the Plan this 2nd day of __ October ________________, 20_ 17 _.



PLAN SPONSOR:	PLAN ADMINISTRATOR:
Zions Bancorporation	Zions Bancorporation

By: /s/ Diana M. Andersen___________	By: /s/ Diana M. Andersen___________
Name: Diana M. Andersen ______________	Name: Diana M. Andersen ______________
Title: Executive VP & Corporate Benefits Director______________________________	Title: Executive VP & Corporate Benefits Director ______________________________

SLC_3445878.1

EXHIBIT 31.1

CERTIFICATION

Principal Executive Officer

I, Harris H. Simmons, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Zions Bancorporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2018



	/s/ Harris H. Simmons
	Harris H. Simmons, Chairman and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

Principal Financial Officer

I, Paul E. Burdiss, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Zions Bancorporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2018



	/s/ Paul E. Burdiss
	Paul E. Burdiss, Executive Vice President and Chief Financial Officer

EXHIBIT 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1350, the undersigned officers of Zions Bancorporation (the “Company”) hereby certify that, to the best of their knowledge, the Company’s Quarterly Report for the three months ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2018



	/s/ Harris H. Simmons
	Name:	Harris H. Simmons
	Title:	Chairman and Chief Executive Officer

	/s/ Paul E. Burdiss
	Name:	Paul E. Burdiss
	Title:	Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.