EXHIBIT 10.1

FEDERAL HOME LOAN BANK OF SEATTLE

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Bank Incentive Compensation Plan (BICP) - Long-Term Incentive Plan

As of May 1, 2007

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FEDERAL HOME LOAN BANK OF SEATTLE

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Executive Long-Term Incentive Plan

TABLE OF CONTENTS

 

          Page 1.0    Plan Objectives    1 2.0    Definitions    1 3.0   
Eligibility    3 4.0    Base Award Opportunity    3 5.0    Performance Measures
   4 6.0    Final Award Determination    4 7.0    Administrative Control    5
8.0    Miscellaneous Conditions    6 Appendix A: 2007 – 2009 Performance Period
   9    Performance Period    10    Base Award Opportunity    10    Value of
Performance Unit    10    Value of Performance Unit at Interim & End of
Performance Period    10    Goals & Performance Measures    11

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FEDERAL HOME LOAN BANK OF SEATTLE

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Executive Long-Term Incentive Plan

PLAN DOCUMENT

 

1.0 Plan Objectives

 

  1.1 The purpose of the Federal Home Loan Bank of Seattle Executive Long-Term
Incentive Plan is to achieve five objectives:

 

  1.1.1 Promote the achievement of the Bank's business goals;

 

  1.1.2 Link executive compensation to specific long-term performance measures;

 

  1.1.3 Provide a competitive reward structure for senior officers and other key
employees;

 

  1.1.4 Provide a vehicle for closer Board involvement and communication with
management regarding the Bank’s long-term strategic plans; and

 

  1.1.5 Retention of officers and other key employees.

 

  1.2 The Plan is a cash-based, long-term incentive plan that establishes
individual Base Award Opportunities related to achievement of Bank performance
over certain three-year Performance Periods.

 

  1.3 The Base Award Opportunity, Performance Measures, value of a Performance
Unit at the beginning and end of a Performance Period, and other relevant
information are set forth in the attached Appendices.

 

2.0 Definitions

 

  2.1 When used in this Plan, the words and phrases below shall have the
following meanings:

 

  2.1.1 Bank means the Federal Home Loan Bank of Seattle.

 

  2.1.2 Base Award Opportunity means the award that may be earned during a
Performance Period for achieving target performance levels under each
Performance Measure.

 

  2.1.3 Base Salary is defined as the Participant’s normal rate of pay before
any other add-ons (ie. Bonuses, incentive pay, etc.).

 

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  2.1.4 Board means the Bank's Board of Directors.

 

  2.1.5 Committee means the Governance, Budget and Compensation Committee of the
Board.

 

  2.1.6 Disabled means the Participant is receiving benefits under the Federal
Home Loan Bank of Seattle’s Long Term Disability Plan.

 

  2.1.7 Extraordinary Occurrences means those events that, in the opinion and
discretion of the Board, are outside the significant influence of the
Participants or the Bank and are likely to have a significant unanticipated
effect, whether positive or negative, on the Bank’s operating and/or financial
results, including, without limit changes in financial strategies or policies,
or significant change in Bank membership.

 

  2.1.8 Final Award means the amount ultimately paid to a Participant under the
Plan for a Performance Period.

 

  2.1.9 Interim Performance Period means a single 12 month calendar year period
of which three make up a Performance Period (see Section 2.1.13).

 

  2.1.10 Performance Measure means each performance factor that is taken into
consideration under the Plan in determining the value of the Final Award.

 

  2.1.11 Participant means an employee who participates in the Plan pursuant to
Section 3.1.

 

  2.1.12 Periodic Plan Award means an amount that is provisionally determined at
the end of the Interim Performance Period.

 

  2.1.13 Performance Period means a certain three-year period over which Bank
performance is measured.

 

  2.1.14 Performance Unit means a unit, the value of which shall be determined
in accordance with the Appendix – Initial Value of Performance Unit.

 

  2.1.15 Plan means this Executive Long-Term Incentive Plan.

 

  2.1.16 Plan Award means an amount that is provisionally determined at the end
of the Performance Period subject to adjustment as provided in Section 6.

 

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  2.1.17 President means the President of the Bank.

 

  2.1.18 Termination for cause means the participants malfeasance, including the
commission of any fraud or felony, or the Participant’s material breach of his
or her employment obligations, as determined by the Board.

 

3.0 Eligibility

 

  3.1 A Bank employee who is a grade 19 or above during the Performance Period
shall participate in the Plan.

 

  3.2 Eligibility shall generally be limited to officers (i) whose functional
responsibilities encompass the establishment of strategic direction and tactical
action plans for the Bank, and (ii) who have received at least “meets all goals”
rankings on annual performance reviews over a Performance Period.

 

  3.3 Due to its unique role for the Bank and reporting relationship to the
Board, the Director of Internal Audit (and any qualified auditor staff) will not
be included as an eligible position under the Plan, but will be eligible for a
similar plan administered by the Audit Committee of the Board.

 

4.0 Base Award Opportunity

 

  4.1 At the beginning of each Performance Period, the Bank will provide a Base
Award Opportunity to Participants. The Base Award Opportunity is equal to a
percentage of each Participant's annual base salary at the beginning of the
Performance Period as described in Appendix A. Certain executive positions have
a greater and more direct impact than others on the annual success of the Bank;
therefore, these differences are recognized by varying award opportunities for
each Participant level.

 

  4.2 Each Participant in a Performance Period shall be granted a number of
Performance Units for that Performance Period determined by dividing the Base
Award Opportunity by the value of a Performance Unit at the beginning of a
Performance Period as described in the applicable Appendix.

 

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  4.3 There will be four levels of award opportunities:

 

Level I:    President/CEO and Senior Executive Officers* Level II:    Grades 22
Level III:    Grades 20-21 Level IV:    Grade 19

* Senior Executive Officers include Chief Financial Officer, Chief Risk Officer,
Chief Business Officer, and Chief Administrative Officer

 

5.0 Performance Measures

 

  5.1 Three achievement levels will be established for each Performance Measure:

 

Threshold    The minimum achievement level accepted for the Performance Measure.
Target    The planned achievement level for the Performance Measure. Maximum   
The achievement level for the Performance Measure that substantially exceeds the
planned level of achievement.

 

  5.2 At the beginning of each Performance Period, Performance Measures for the
Performance Period, Performance Units, and the Performance Unit initial values
will be established by the Committee with Board approval.

 

6.0 Award Determination

 

  6.1 Using a linear approach, interpolated Periodic Plan Award determinations
will be performed annually (Interim Performance Period) during the three-year
Performance Period cycle and will be based on Bankwide performance at or between
threshold and target, or target and maximum. However, if the Bank fails to
achieve the Threshold level for a Performance Measure, no award will be made for
that Interim Performance Period of the three-year Performance Period.

Final Plan Awards will be determined after the end of the three-year Performance
Period and will equal the sum of the Periodic Plan Awards for each Interim
Perfomance Period of the three-year Performance Period.

 

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  6.2 A Participant’s Periodic Plan Award for an Interim Performance Period
equals one third of the number of his or her Performance Units for the
three-year Performance Period multiplied by the value of a Performance Unit at
the end of the Performance Period as determined in accordance with Table
1 -Appendix A.

 

  6.3 If a Federal Housing Finance Board (FHFB) (or successor entity)
examination identifies an unsafe or unsound practice or condition in a
Participant’s area of responsibility, the Participant will not be eligible for
an award under the Plan for the Performance Period in which the unsafe and
unsound condition existed unless the practice or condition took place prior to
start of employment, comes to the attention of said Participant and is not
continued. However, the Participant may receive an award under the Plan in the
Board’s sole discretion provided that the finding of an unsafe or unsound
practice or condition is subsequently resolved within the Performance Period in
favor of the Bank by the FHFB. The Board, in its sole discretion may take into
consideration mitigating factors to approve the award as noted in Section 8.12
(Miscellaneous Conditions).

 

  6.4 Any Participant receiving a written warning for performance or misconduct
at any time during the Performance Period will not receive an award unless
approved by the President.

 

  6.5 After a Performance Period, Plan Awards for the Performance Period shall
be determined by the Board in its sole discretion based upon the Plan Award
under Section 6.1.

 

  6.6 A Participant’s Final Award will consist of his or her Plan Award as
determined by the Board in its sole discretion promptly after the Performance
Period. The Board in its sole discretion may consider Extraordinary Occurrences
when assessing performance results and determining Final Awards and may adjust
the Performance Measures to ensure that the purpose of the Plan is served.

 

7.0 Administrative Control

 

  7.1 The Bank's Human Resources Department will administer the Plan, and the
Board will have ultimate authority over the structure and goals of the plan, and
any incentive payouts from the Plan.

 

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  7.2 In addition to the authority expressly provided in the Plan, the Board
shall have such authority in its sole discretion to control and manage the
operation of the Plan and shall have all authority necessary to accomplish these
purposes, including, but not limited to, the authority to interpret the terms of
the Plan, and to decide questions regarding the Plan and the eligibility of any
person to participate in the Plan and to receive benefits under the Plan. The
Board’s determinations and interpretations regarding the Plan shall be final,
binding, and conclusive.

 

8.0 Miscellaneous Conditions

 

  8.1 Except as provided in Section 8.4, a Participant will not become vested in
an award under this Plan unless the Participant is employed by the Bank on the
date the Board determines and authorizes the payment of the Participant’s Final
Award, and such payment will be no later than 2  1/2 months after the three-year
Performance Period ends, except as provided under Section 8.4 below.

 

  8.2 If a Participant voluntarily or involuntarily terminates employment prior
to the date the Board determines and authorizes the payment of the Participants
final award, no award will be made to the Participant, except as provided in
Section 8.4 below.

 

  8.3 Employees of the Bank who are hired, transferred, or promoted into an
eligible position during a Performance Period may (i) be nominated for
participation in the Plan in accordance with Section 3.1, and (ii) be eligible
to receive a prorated Base Award Opportunity upon vesting in accordance with
Section 8.1 or 8.4.

 

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  8.4 A Participant who retires on or after age 65 or achieving Rule of 70, dies
or becomes Disabled while still employed by the bank, or is involuntarily
terminated without cause during the Performance Period may receive a prorated
Plan Award (paid in cash, lump-sum), but only if the President nominates and the
Board approves such action at the end of the Interim Performance Period during
which such event occurs. If the President does not make such a recommendation or
the Board does not approve such action, the Participant will not be entitled to
an award. If a Participant becomes entitled to receive a prorated award under
this section, the prorated Final Award will be paid to the Participant no later
than 2 1/2 months following the end of the calendar year in which such event
occurred (see also Section 8.1). If a Participant terminates service with the
Bank for any reason other than retirement on or after age 65 or achieving Rule
of 70, death or Disability while still employed by the bank, or involuntary
termination without cause during the Performance Period, the Participant will
not be eligible to receive an award under the Plan.

 

  8.5 The amount of any prorated award will be determined by dividing the number
of months that an employee was a Participant in the Plan during the Performance
Period by thirty-six and multiplying such quotient by the Plan Award.

 

  8.6 Notwithstanding any Plan provision to the contrary, mere participation in
the Plan will not entitle a Participant to an award.

 

  8.7 The designation of an employee as a Participant in the Plan does not
guarantee employment. Nothing in this Plan shall be deemed (i) to give any
employee or Participant any legal or equitable rights against the Bank, except
as expressly provided herein or provided by law; or (ii) to create a contract of
employment with any employee or Participant, to obligate the Bank to continue
the service of any employee or Participant, or to affect or modify any
employee's or Participant's term of employment in any way.

 

  8.8 The right of the Bank to discipline or discharge a Participant shall not
be affected by any provision of this Plan.

 

  8.9 All Final Awards will be paid out in a lump sum in cash through regular
payroll and will be subject to applicable payroll tax withholdings and other
appropriate deductions.

 

  8.10 No Final Award received by a Participant shall be considered as
compensation under any employee benefit plan of the Bank, except as otherwise
determined by the Bank.

 

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  8.11 Final Awards will be made as soon as practical following the end of the
Performance Period, but no later than 2 1/2 months following the calendar year
that the Participant became entitled to the Final Award pursuant to Section 8.1,
except as otherwise provided in Section 8.4.

 

  8.12 The Board has the right to revise, modify, or terminate the Plan in whole
or in part at any time or for any reason, and the right to modify any
recommended award amount (including the determination of a lesser award or no
award), for any reason, without the consent of any Participant.

 

  8.13 Since no employee has a guaranteed right to any award under this Plan,
any attempt by an employee to sell, transfer, assign, pledge, or otherwise
encumber any anticipated award shall be void, and the Bank shall not be liable
in any manner for or subject to the debts, contracts, liabilities, engagements
or torts of any person who might anticipate an award under this program.

 

  8.14 This Plan shall at all times be entirely unfunded and no provision shall
at any time be made with respect to segregating assets of the Bank for payment
of any award under this program.

 

  8.15 The Plan shall be construed, regulated, and administered in accordance
with the laws of the state of Washington, unless otherwise preempted by the laws
of the United States.

 

  8.16 If any provision of the Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provision of the Plan,
and the Plan shall be construed and enforced as if such provision had not been
included herein.

 

  8.17 If a Participant dies before receiving his or her award, any amounts
determined to be paid under this Plan shall be paid to the Participant’s
surviving spouse, if any, or if none, to the Participant’s estate. The Bank's
determination as to the identity of the proper payee of any amount under this
Plan shall be binding and conclusive and payment in accordance with such
determination shall constitute a complete discharge of all obligations on
account of such amount.

 

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  8.18 Claims and Appeals Procedures. A Participant (such Participant being
referred to below as a “Claimant”) may deliver to the Committee a written claim
for a determination with respect to any claim as to which the Committee has
jurisdiction under this Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within sixty days after
such notice was received by the Claimant. The claim must state with
particularity the determination desired by the Claimant.

The Committee shall consider a Claimant's claim within a reasonable time, but no
later than ninety days after receiving the claim. If the Committee determines
that special circumstances require an extension of time for processing the
claim, written notice of the extension shall be furnished to the Claimant prior
to the termination of the initial ninety-day period. Upon reaching its decision,
the Committee shall notify the Claimant in writing.

On or before sixty days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimant's duly
authorized representative) may file with the Committee a written request for a
review of the denial of the claim. The Committee shall render its decision on
review promptly, in writing, and deliver it to the Claimant no later than sixty
days after it receives the Claimant’s written request for a review of the denial
of the claim.

 

  8.19 Any agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter of this Plan which are not contained herein
will have no effect or enforceability.

 

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FEDERAL HOME LOAN BANK OF SEATTLE

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Executive Long-Term Incentive Plan

APPENDIX A

2007 – 2009 Performance Period

 

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Performance Period

The Performance Period described in this Appendix shall be May 1, 2007 through
December 31, 2009.

Base Award Opportunity

The Base Award Opportunity for Levels I, II, III, and IV are:

 

      Bank Performance Level    No Award    Threshold    Target    Maximum

I – President/CEO and Sr. Executive Officers

   0%        15%    30%        45%

II – Grades 22

   0%    12.5%    25%    37.5%

III – Grades 20-21

   0%        10%    20%        30%

IV – Grade 19

   0%      7.5%    15%    22.5%

Value of Performance Unit

The value of a Performance Unit at the beginning of this Performance Period
equals $100.

Value of Performance Unit at the Interim and End of Performance Period

 

  1. After each Interim Performance Period ends, evaluate the actual Bank
performance against the Bank Performance Measure stated below.

 

  2. The value of the Performance Unit at the end of the Interim Performance
Period equals the dollar value determined by the Profitability goal based on the
threshold, target, and maximum awards according to the following table:

Table 1 – Bank Performance Measure and Performance Unit Values

 

Bank Performance

Measure

    No Award     Threshold     Target     Maximum

Profitability

          0%  

            As     determined

        by the

    Committee

 

            As

    determined

        by the

    Committee

 

            As

    determined

        by the

    Committee

Dollar Value at Hurdles

          $0           $50           $100           $150

Total Value

          $0           $50           $100           $150

 

  3. At the end of the Performance Period determine the Final Award by summing
the Periodic Plan Awards for each Interim Perfomance Period.

 

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Goals & Performance Measures

The Bank Performance Measure for each Interim Performance Period of the overall
Performance Period will mirror the Annual BICP Bank Performance Measure.

For the 2007 Interim Performance Period, the achievement level for the Bankwide
performance measure shall be a Profitability goal based on a linear approach
against Bankwide measures at or between threshold and target, or target and
maximum according to specific measurements as adopted by the Board of Directors.

 

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