EX-4.1






CAPITAL PLAN

of the

FEDERAL HOME LOAN BANK of TOPEKA




TABLE OF CONTENTS



	 	 	 
	Topic

	 	Section






	 	 	 	 	 	 	 	 	 
	Authority 
	 	 	1	 	 	 	 	 
	Definitions 
	 	 	2	 	 	 	 	 
	Objectives 
	 	 	3	 	 	 	 	 
	Capitalization 
	 	 	4	 	 	 	 	 
	Capital Requirements and Ratios 
	 	 	5	 	 	 	 	 
	Statutory and Regulatory Requirements 
	 	 	5.a	 	 	 	 	 
	Capital Ratios 
	 	 	5.b	 	 	 	 	 
	Capital Structure 
	 	 	6	 	 	 	 	 
	Class A Common Stock 
	 	 	6.a	 	 	 	 	 
	Class B Common Stock 
	 	 	6.b	 	 	 	 	 
	Minimum Stock Purchase Requirement 
	 	 	7	 	 	 	 	 
	Asset-Based Stock Purchase Requirement 
	 	 	7.a	 	 	 	 	 
	Specified Percentage 
	 	 	7.a.1	 	 	 	 	 
	Minimum Dollar Amount 
	 	 	7.a.2	 	 	 	 	 
	Maximum Dollar Amount 
	 	 	7.a.3	 	 	 	 	 
	Asset-Based Stock Purchase Requirement Determination 
	 	 	7.a.4	 	 	 	 	 
	New Members 
	 	 	7.a.5	 	 	 	 	 
	Activity-Based Stock Purchase Requirement 
	 	 	7.b	 	 	 	 	 
	Advances 
	 	 	7.b.1	 	 	 	 	 
	Acquired Member Assets (AMA) 
	 	 	7.b.2	 	 	 	 	 
	Letters of Credit 
	 	 	7.b.3	 	 	 	 	 
	Exchange Agreements 
	 	 	7.b.4	 	 	 	 	 
	Continuing Monitoring Requirement; Change in Stock
Requirements 
	 	 	7.c	 	 	 	 	 
	Dividends 
	 	 	8	 	 	 	 	 
	No Dividend Preference 
	 	 	8.a	 	 	 	 	 
	Dividend Parity Threshold; Notice to Stockholders 
	 	 	8.b	 	 	 	 	 
	Calculation of Stock Dividend 
	 	 	8.c	 	 	 	 	 
	Compliance with Regulatory Capital Requirements 
	 	 	8.d	 	 	 	 	 
	Liquidation 
	 	 	9	 	 	 	 	 
	Voting Rights 
	 	 	10	 	 	 	 	 
	Ownership of Retained Earnings 
	 	 	11	 	 	 	 	 
	Other Provisions Governing Stock 
	 	 	12	 	 	 	 	 
	Issuance 
	 	 	12.a	 	 	 	 	 
	Transfer 
	 	 	12.b	 	 	 	 	 
	Repurchase at Bank’s Initiative 
	 	 	12.c	 	 	 	 	 
	Repurchase or Exchange of Class A Common Stock 
	 	 	12.d	 	 	 	 	 
	Repurchase or Exchange of Class B Common Stock 
	 	 	12.e	 	 	 	 	 
	Bank’s Election to Exchange Class B Common Stock for Class A
Common Stock 
	 	 	12.f	 	 	 	 	 
	Regular Exchange Program 
	 	 	12.g	 	 	 	 	 
	Cash in Lieu of Class A Common Stock 
	 	 	12.h	 	 	 	 	 
	Withdrawal from Membership; Stock Redemption Requests 
	 	 	13	 	 	 	 	 
	Voluntary Withdrawal 
	 	 	13.a	 	 	 	 	 
	Cancellation of Withdrawal Notice 
	 	 	13.b	 	 	 	 	 
	Stock Redemption Request 
	 	 	13.c	 	 	 	 	 
	Redemption, Repurchase and Exchange Limitations 
	 	 	13.d	 	 	 	 	 
	Redemption Request Prior to Exchange 
	 	 	13.e	 	 	 	 	 
	Cancellation of Stock Redemption Request or Request to Withdraw
From Membership 
	 	 	13.f	 	 	 	 	 
	Involuntary Withdrawal 
	 	 	13.g	 	 	 	 	 
	Termination of Membership Resulting From Merger or Consolidation
	 	 	 	 	 	 	13.h	 
	Other Provisions Governing Involuntary Termination of Membership
	 	 	 	 	 	 	13.i	 
	Implementation of Plan 
	 	 	14	 	 	 	 	 
	Conversion Date 
	 	 	14.a	 	 	 	 	 
	Conversion of Shares 
	 	 	14.b	 	 	 	 	 
	Cancellation of Shares 
	 	 	14.c	 	 	 	 	 
	Opt Out 
	 	 	14.d	 	 	 	 	 
	Members in the Process of Withdrawing from Membership 
	 	 	14.e	 	 	 	 	 
	Orderly Liquidation 
	 	 	14.f	 	 	 	 	 
	Failure to Opt Out 
	 	 	14.g	 	 	 	 	 
	Amendment of Plan 
	 	 	15	 	 	 	 	 
	Basis for Implementation 
	 	 	16	 	 	 	 	 
	Independent Accountant 
	 	 	17	 	 	 	 	 
	Rating Agency 
	 	 	18	 	 	 	 	 






Adopted by Board of Directors: May 26, 2010


Approved by Federal Housing Finance Agency: September 1, 2010



Federal Home Loan Bank of Topeka


Capital Plan




	1)	 	Authority. This Capital Plan is established pursuant to the Federal Home Loan Bank
Act (12 U.S.C. 1421 et seq.) and Title 12 of the Code of Federal Regulations (C.F.R.)
promulgated by the Federal Housing Finance Agency and sets forth a plan for the establishment
and implementation of a new capital structure for the Federal Home Loan Bank of Topeka.






	2)	 	Definitions. For purposes of this Plan, all capitalized terms used but not defined
elsewhere have the following meanings:






Activity-Based Stock Purchase Requirement means the Stock purchase requirement under
which a Member must acquire and hold a specific amount of Class B Common Stock as a condition
of transacting business with the Bank, the aggregate amount of which is a function of the
volume of particular products or services provided to that Member by the Bank.




Acquired Member Assets (AMA) means those assets acquired from Members by the Bank in
accordance with 12 C.F.R. Part 955.




Advance has the same meaning as set forth in 12 C.F.R. 900.2.




Asset-Based Stock Purchase Requirement means the Stock purchase requirement under which
a Member must acquire and hold a specific amount of Class A Common Stock based on that Member’s
total assets.



Bank means the Federal Home Loan Bank of Topeka.




Board means the board of directors of the Bank.




Business Day means any day on which the Bank is open to conduct business.




Class A Common Stock means Stock issued by the Bank that has a par value of one hundred
dollars ($100) per share and is redeemable at par for cash on six (6) months’ written notice to
the Bank, consistent with Finance Agency regulations.




Class B Common Stock means Stock issued by the Bank that has a par value of one hundred
dollars ($100) per share and is redeemable at par for cash on five (5) years’ written notice to
the Bank, consistent with Finance Agency regulations.




Conversion Date means the date upon which the Bank’s current stock is converted into
Stock as provided under this Plan.




Dividend Parity Threshold means a dividend rate expressed as a percentage per annum up
to which the dividends paid per share on Class A Common Stock and Class B Common Stock must be
equal.




Excess Class B Common Stock means the amount of Class B Common Stock owned by each
Member in excess of its Activity-Based Stock Purchase Requirement.




Excess Stock means the Stock held by a given Member that is in excess of that Member’s
then current Minimum Stock Purchase Requirement.




Exchange means the simultaneous repurchase by the Bank of excess shares of one class of
Stock and the purchase of an equivalent number of shares of another class of Stock on behalf of
a Member.




FHLBank Act means the Federal Home Loan Bank Act, as amended from time to time, and
codified at 12 U.S.C. 1421 et seq.




FHLBanks means the twelve Federal Home Loan Banks created by the FHLBank Act.




Finance Agency means the Federal Housing Finance Agency, the regulator of the Bank, and
any successor regulator of the Bank.




GAAP means generally accepted accounting principles in the United States of America.




Leverage Capital Ratio means the percentage value obtained by dividing weighted Total
Capital by the Bank’s total assets. For purposes of this calculation, weighted Total Capital
shall be computed by multiplying Permanent Capital by 1.5 and adding to this product all other
components of Total Capital.




Member means an institution that has been approved for Membership and has satisfied its
Minimum Stock Purchase Requirement and all other conditions of Membership, as set forth herein
or as may otherwise be applicable.




Membership means all of the rights, privileges and obligations associated with being a
Member.




Minimum Stock Purchase Requirement means the total amount of Stock that must be
purchased by a Member as set forth in Section 7 hereof, which requirement is based both on a
Member’s asset size and activity with the Bank.




Permanent Capital means the amount of retained earnings of the Bank, determined in
accordance with GAAP, plus the amounts paid in for Class B Common Stock.




Plan means this Capital Plan, as amended, supplemented or modified from time to time.




Redemption means the acquisition by the Bank of outstanding shares of Stock from a
Member at par value in cash, based on a written request from that Member, following the
expiration of the statutory Redemption notification period for the Stock.




Redemption Cancellation Fee means the fee imposed by the Bank upon a Member that has
given the Bank notice of the Member’s intent to redeem Stock or its request to withdraw from
Membership, and such Redemption request or request to withdraw from Membership is subsequently
cancelled, revoked or withdrawn.




Regulatory Capital Requirements means the amount of Total Capital and Permanent Capital
that the Bank is required to hold to comply with the Total Capital and Risk-Based Capital
requirements, respectively, set forth in the FHLBank Act and 12 C.F.R. Part 932.




Repurchase means the acquisition by the Bank of shares of Excess Stock at par value in
cash and at the Bank’s discretion prior to the expiration of the required Redemption
notification period applicable to such Excess Stock.




Risk-Based Capital means the Permanent Capital carried to mitigate the impact of credit
risk, market risk, and operations risk on the Bank.




Risk Management Policy means a policy approved by the Board in accordance with the
provisions of 12 C.F.R. Part 917 that addresses the Bank’s management of its exposure to credit
risk, market risk, liquidity risk, business risk, and operations risk.




Stock means Class A Common Stock and/or Class B Common Stock.




Total Capital of the Bank means the aggregate sum of the Bank’s Permanent Capital plus
the amounts paid-in for Class A Common Stock, and any general allowance for losses and any
other amounts from sources available to the Bank to absorb losses incurred by the Bank that the
Finance Agency determines to be appropriate.




Total Capital Ratio means the percentage value obtained by dividing unweighted Total
Capital by the Bank’s total assets.




	3)	 	Objectives. The objectives of the Plan are to:






	 	a)	 	Establish and maintain a capital structure that will provide for the safe and sound
operation of the Bank while promoting the long-term financial viability of the Bank and
the Bank’s ability to support the business activities of its Members within applicable
statutory and regulatory authorities and at the same time preserving the cooperative
nature of the FHLBanks.






	 	b)	 	Set forth provisions governing Stock in compliance with 12 C.F.R. Part 931.






	 	c)	 	Provide sufficient Total Capital and Permanent Capital to comply with the Bank’s
Regulatory Capital Requirements.






	 	d)	 	Implement a flexible capital structure that is expected to facilitate the long-term
growth and profitability of the Bank and allow the Bank to provide greater value to its
members. The capital structure authorized in this Plan provides for the Bank as well to
repurchase shares and for Members to request Redemption of their shares of Stock subject
to compliance with the provisions of this Plan and applicable rules and regulations
promulgated by the Finance Agency.






	4)	 	Capitalization. Adequate capitalization is required in order to: (a) provide for the
safe and sound operation of the Bank; (b) permit prudent leveraging into products and services
of benefit to Members; (c) provide appropriate risk-adjusted Member dividend returns; (d)
protect the Bank’s creditors against potential loss; (e) generate earnings sufficient to meet
the Bank’s various community support and public purpose obligations; and (f) comply with the
Bank’s Regulatory Capital Requirements. The need for capital is a function of the volumes of
and risks inherent in the products and services provided by the Bank to its Members.






	5)	 	Capital Requirements and Ratios.






	 	a)	 	Statutory and Regulatory Requirements. The Finance Agency interprets and
implements statutory requirements established for the FHLBanks by the U.S. Congress. As
required by the FHLBank Act, the Finance Agency has adopted regulations prescribing
various minimum levels of capital that must be held by FHLBanks. The capital regulations
require the Bank to maintain a Total Capital Ratio at least equal to four percent (4.0%),
a Leverage Capital Ratio at least equal to five percent (5.0%) and Permanent Capital in an
amount at least sufficient to cover its Risk-Based Capital requirement.






The Finance Agency has adopted capital requirements that incorporate factors weighing the
relative risk incurred by each FHLBank. The Bank’s Risk-Based Capital requirement is equal
to the sum of its capital requirements for credit risk, market risk and operations risk,
each as defined by the Finance Agency. The Bank must calculate its Risk-Based Capital
requirement and provide such calculations to the Finance Agency monthly.




	 	b)	 	Capital Ratios. In order to ensure continuing capital adequacy, and
compliance with minimum regulatory Total Capital requirements and minimum Risk-Based
Capital requirements, management and the Board shall review the Bank’s capital position on
an ongoing basis. The Total Capital Ratio, Leverage Capital Ratio and Risk-Based Capital
requirement shall be presented at each scheduled business meeting of the Board.






	6)	 	Capital Structure. Under this Plan, the Bank’s capital structure shall consist of
two classes of Stock (Class A Common Stock and Class B Common Stock) which may be purchased
and held only by Members. Class A Common Stock and Class B Common Stock shall only be issued,
redeemed and repurchased at a par value of one hundred dollars ($100) per share.
Establishment of two classes of Stock and the distinctions between them are made in the Plan
to facilitate efficient monitoring and management of the Bank’s capital structure on an
ongoing basis.






	 	a)	 	Class A Common Stock. Class A Common Stock must be held to satisfy a
Member’s Asset-Based Stock Purchase Requirement. Each Member will be required to purchase
and maintain a defined minimum amount of Class A Common Stock for as long as it is a
Member. Dividends on shares of Class A Common Stock are non-cumulative and may be paid
either in cash or as a Stock dividend in the form of shares of Class B Common Stock.






	 	b)	 	Class B Common Stock. Shares of Class B Common Stock must be held to satisfy
the Activity-Based Stock Purchase Requirement. Dividends on shares of Class B Common
Stock are non-cumulative and may be paid either in cash or as a Stock dividend in the form
of shares of Class B Common Stock.






	7)	 	Minimum Stock Purchase Requirement. A Member’s Minimum Stock Purchase Requirement
shall consist of Stock ownership of Class A Common Stock based on the Member’s asset size
(Asset-Based Stock Purchase Requirement). In addition, there will be an Activity-Based Stock
Purchase Requirement. The Bank will not issue fractional shares of Stock. Minimum purchase
requirements for Class A Common Stock and Class B Common Stock will be rounded up to the
nearest one hundred dollars ($100).






	 	a)	 	Asset-Based Stock Purchase Requirement. Each Member shall purchase and
maintain, as a condition of Membership for as long as it is a Member, an amount of Class
A Common Stock having a cumulative par value equal to a specified percentage of the
Member’s total assets as of December 31 of the preceding calendar year. The Asset-Based
Stock Purchase Requirement shall be subject to minimum and maximum dollar amounts. The
Board will establish the specified percentage and the maximum Asset-Based Stock Purchase
Requirement from time to time and changes thereto do not require Finance Agency approval,
provided they fall within the parameters set forth below.






	 	1)	 	Specified Percentage. The initial specified percentage of the
Member’s total assets established in this Plan by the Board for the Asset-Based Stock
Purchase Requirement shall be two-tenths of one percent (0.2%). Under this Plan the
Asset-Based Stock Purchase Requirement may permissibly fall within a range of not less
than one-tenth of one percent (0.1%) and not greater than four-tenths of one percent
(0.4%) of the Member’s total assets.






	 	2)	 	Minimum Dollar Amount. The minimum Asset-Based Stock Purchase
Requirement shall be one thousand dollars ($1,000).






	 	3)	 	Maximum Dollar Amount. The initial maximum dollar amount established
in this Plan by the Board for the Asset-Based Stock Purchase Requirement shall be one
million dollars ($1,000,000). The maximum Asset-Based Stock Purchase Requirement may
permissibly fall within a range of not less than five hundred thousand dollars
($500,000) and not greater than two and one-half million dollars ($2,500,000).






	 	4)	 	Asset-Based Stock Purchase Requirement Determination. The Bank shall
determine the Asset-Based Stock Purchase Requirement based on the most recent
end-of-year regulatory reports filed by a Member with its primary regulator and notify
each Member no later than April 20 of every year of the required amount of Class A
Common Stock the Member is required to purchase and hold. If a Member needs to hold
additional Class A Common Stock to meet its Asset-Based Stock Purchase Requirement,
the Bank will purchase such Stock at par on behalf of the Member by debiting the
Member’s demand deposit account on April 30 or the preceding Business Day if April 30
is not a Business Day in an amount equal to the par value of such Stock.






In addition, the Bank shall recalculate the Asset-Based Stock Purchase
Requirement for any Member that is involved in, or the subject of, any merger or
acquisition as of the date of the completion of the merger or acquisition.




If a Member is merged into an institution that is not a Member, or if a Member sells
all of its assets and liabilities to a non-Member and ceases to operate its business,
the Bank may, in its discretion, upon completion of the merger or sale recalculate that
Member’s Asset-Based Stock Purchase Requirement, which may be zero dollars ($0) since
the former Member’s charter may have no remaining assets upon which to base any
Asset-Based Stock Purchase Requirement. If the former Member would not be in
compliance with its Activity-Based Stock Purchase Requirement after recalculation of
the former Member’s Asset-Based Stock Purchase Requirement, the Bank may, in its
discretion, Exchange the former Member’s Excess Class A Common Stock for Class B Common
Stock to the extent necessary for the former Member to comply with its Activity-Based
Stock Purchase Requirement. If, as a result of such recalculation and/or Exchange,
Excess Class A Common Stock is found to exist, such Excess Stock may be repurchased
immediately by the Bank, provided that the Bank will be in compliance after such
Repurchase with its Regulatory Capital Requirements. In such circumstances, Class B
Common Stock owned by the former Member to meet its Activity-Based Stock Purchase
Requirements will become Excess Stock when such Stock is not required to fulfill an
Activity-Based Stock Purchase Requirement and may be repurchased at that time, provided
the Bank will be in compliance after such Repurchase with its Regulatory Capital
Requirements.




	 	5)	 	New Members. Upon approval of an application for Membership, the Bank
shall notify the applicant of its Asset-Based Stock Purchase Requirement based on the
applicant’s most recent annual regulatory report filed with its primary regulator.
For new de novo Members that have not yet filed an annual regulatory report with their
primary regulators, the initial Asset-Based Stock Purchase Requirement shall be one
thousand dollars ($1,000). The applicant shall meet its Asset-Based Stock Purchase
Requirement no later than sixty (60) calendar days following notification by the Bank
of the approval of its Membership application and Membership shall commence at the
time the applicant purchases sufficient Class A Common Stock to meet its Asset-Based
Stock Purchase Requirement. All initial Stock purchases by new Members must be
initiated by authorized Member personnel in writing and will be transacted by debiting
the new Member’s demand deposit account for the par value of the Class A Common Stock
sufficient to meet its Asset-Based Stock Purchase Requirement.






	 	b)	 	Activity-Based Stock Purchase Requirement. Each Member shall purchase and
maintain, as a condition of doing business with the Bank, an amount of Class B Common
Stock having a cumulative par value equal to the sum of the amounts set forth below in
Section 7(b)(1) through (4), less the Member’s Asset-Based Stock Requirement determined
pursuant to Subsection 7(a). A Member shall meet this Activity-Based Stock Purchase
Requirement for as long as the activity with the Bank requiring imposition of such
Activity-Based Stock Purchase Requirement remains outstanding. The Board will establish
the percentage for each Activity-Based Stock Purchase Requirement from time to time and
changes thereto do not require Finance Agency approval provided each is within the
percentages set forth below in Subsections 7(b)(1) through 7(b)(4). The Board may apply
any such revised Activity-Based Stock Purchase Requirement to all activity then
outstanding or only to activity which arises after the effective date of the change. At
the time a Member enters into a transaction that requires the purchase of Class B Common
Stock under this provision of the Plan, the Bank will purchase such Stock on behalf of
the Member in the following two ways:






	 	•	 	exchanging Excess Class A Common Stock held by the Member into a like
number of shares of Class B Common Stock sufficient to enable the Member to meet its
Activity-Based Stock Purchase Requirement; if this is insufficient to enable the
Member to meet its Activity-Based Stock Purchase Requirement, then






	 	•	 	by debiting the Member’s demand deposit account for the remaining amount
of its Activity-Based Stock Purchase Requirement.






	 	1)	 	Advances. The initial requirement established by the Board for
Advances is an amount equal to five percent (5.0%) of the principal amount of Advances
outstanding to the Member. The amount of Stock required to support Advance activity
shall be determined each time the Member is issued a new Advance and must be satisfied
when the Advance is made. Under this Plan, the amount of a Member’s Activity-Based
Stock Purchase Requirement based on that Member’s Advance activity may permissibly
fall within a range of not less than four percent (4.0%) and not greater than six
percent (6.0%) of the principal amount of Advances outstanding to the Member.






	 	2)	 	Acquired Member Assets (AMA). The initial requirement established by
the Board for AMA, including loans from the Mortgage Partnership Finance® Program, is
an amount equal to two percent (2.0%) of the current outstanding principal balance of
AMA originated by or through the Member and acquired by the Bank subject to a maximum
AMA requirement of one and one-half percent (1.5%) of the Member’s total assets as of
December 31 of the preceding calendar year.. The amount of Stock required to support
AMA activity shall be determined when the AMA activity is funded by the Bank or
purchased from the Member. Under this Plan the amount of a Member’s Activity-Based
Stock Purchase Requirement based on that Member’s AMA activity may permissibly fall
within a range from zero percent (0.0%) to not greater than six percent (6.0%) of the
current outstanding principal balance of AMA originated by or through that Member and
acquired by the Bank and the maximum AMA requirement may permissibly fall within a
range from one percent (1.0%) to three percent (3.0%) of the Member’s total assets as
of December 31 of the preceding year.






	 	3)	 	Letters of Credit. The initial requirement established by the Board
for letters of credit is an amount equal to zero percent (0.0%) of the principal
amount of letters of credit outstanding at the request of the Member. The amount of
Stock required to support letter of credit activity shall be calculated each time a
new letter of credit is issued on behalf of the Member and must be satisfied when the
letter of credit is issued. Under this Plan the amount of a Member’s Activity-Based
Stock Purchase Requirement based on letters of credit issued on behalf of that Member
may permissibly fall within a range from zero percent (0.0%) to not greater than one
percent (1.0%) of the principal amount of letters of credit outstanding at the request
of that Member.






	 	4)	 	Exchange Agreements. The initial requirement established by the
Board for exchange agreements (including but not limited to interest rate swaps,
currency swaps, caps, collars, floors and equity options) is an amount equal to zero
percent (0.0%) of the notional principal of the outstanding exchange agreements with
the Member. The amount of Stock required to support exchange agreement activity shall
be calculated each time the Member enters into a new exchange agreement or transaction
and must be satisfied when the new exchange agreement or transaction is effective.
Under this Plan the amount of a Member’s Activity-Based Stock Purchase Requirement
based on exchange agreements (as defined above) may permissibly fall within a range
from zero percent (0.0%) to not greater than two percent (2.0%) of the notional
principal of the outstanding exchange agreements with that Member.






	 	c)	 	Continuing Monitoring Requirement; Change in Stock Requirements. To maintain
prudent and ongoing compliance with Finance Agency regulations, the Board shall review the
Plan at least annually to determine whether adjustments are required with respect to one
or more of the following: 1) specific Stock purchase requirements and/or the types of
activities to which these shall apply; 2) the exercise by the Bank of its discretion to
repurchase Excess Stock and the methodology employed to effect such Repurchases; 3) any
increases or decreases in Redemption Cancellation Fees; and 4) the introduction of any new
subclasses of Stock.






As part of this continuing obligation to monitor the Plan, the Board shall review and, as
necessary, adjust the Asset-Based Stock Purchase Requirement and the Activity-Based Stock
Purchase Requirement to ensure that the Stock required to be purchased and maintained by
Members, along with other allowable sources of capital including Retained Earnings
determined in accordance with GAAP, is sufficient to allow the Bank to comply with its
Regulatory Capital Requirements. Upon notification of a change in the Asset-Based Stock
Purchase Requirement or the Activity-Based Stock Purchase Requirement, a Member shall have
sixty (60) calendar days from the notification date to comply with the new Minimum Stock
Purchase Requirement. During said sixty (60)-day period, however, a Member will be
ineligible to engage in any new activity with the Bank unless the Member is then in
compliance with the new Minimum Stock Purchase Requirement. A Member may elect to reduce
its outstanding business with the Bank as a means of complying with the adjusted
Activity-Based Stock Purchase Requirement. For each Member that is not in compliance with
the new Minimum Stock Purchase Requirement at the end of the sixty (60)-day period, the
Bank will:




	 	•	 	exchange Excess Class A Common Stock or Excess Class B Common Stock held
by each Member into a like number of shares of Class B Common Stock or Class A Common
Stock sufficient to enable the Member to meet its new Minimum Stock Purchase
Requirement; if this is insufficient to enable the Member to meet its new Minimum
Stock Purchase Requirement, then






	 	•	 	purchase such amount of Class A Common Stock and/or Class B Common Stock
necessary to bring the Member into compliance with the new Minimum Stock Purchase
Requirement on behalf of the Member by debiting the Member’s demand deposit account.






	8)	 	Dividends. The Board, in conformance with the FHLBank Act and applicable Finance
Agency regulations, may declare dividends, expressed as a percentage rate per annum based upon
the par value of Stock, from time to time on the shares of Class A Common Stock outstanding
and the shares of Class B Common Stock outstanding as provided below, provided the Bank will
continue to meet its Regulatory Capital Requirements after such dividend payment.






	 	a)	 	Dividend Parity Threshold; Notice to Stockholders. The Board shall establish
and notify Members of the initial Dividend Parity Threshold on or before the Conversion
Date. The Dividend Parity Threshold will be expressed as a negative or positive spread
relative to a published interest rate index or an internally calculated reference interest
rate based upon any of the Bank’s assets or liabilities. The Dividend Parity Threshold
may be changed from time to time at the discretion of the Board. The Bank shall notify
Members of any change to the Dividend Parity Threshold at least ninety (90) calendar days
prior to a dividend payment.






	 	b)	 	No Dividend Preference. The dividend rate per annum for Class A Common Stock
and Class B Common Stock will be equal up to the Dividend Parity Threshold. Dividend
rates in excess of the Dividend Parity Threshold may be paid on Class A Common Stock or
Class B Common Stock at the discretion of the Board; provided, however, that the dividend
rate per annum paid on the Class B Common Stock shall equal or exceed the dividend rate
per annum paid on the Class A Common Stock. For purposes of the establishment of dividend
rates, the Bank may project for the dividend period the reference interest rate used in
the Dividend Parity Threshold calculation, in the Bank’s absolute discretion, and may
declare and pay dividends at rates per annum based on such projection without regard to
the actual reference interest rate subsequently published or calculated for the dividend
period.






	 	c)	 	Calculation of Stock Dividend. In determining the number of shares to be
issued when Stock dividends are declared, the number of shares will be rounded down to the
nearest one hundred dollars ($100) of par value and any fractional shares shall be
distributed in the form of a cash dividend.






	 	d)	 	Compliance with Regulatory Capital Requirements. The Bank shall not declare
or pay a dividend if it is not, or if after paying the dividend it would not be, in
compliance with its Regulatory Capital Requirements.






	9)	 	Liquidation. The claims of holders of Class A Common Stock and the claims of holders
of Class B Common Stock shall be pari passu with respect to the assets of the Bank in any
liquidation proceeding. Any cash and property remaining after the satisfaction of all valid
obligations of the Bank shall be divided between the Class A Common Stockholders and the Class
B Common Stockholders in proportion to the number of shares of each class of Stock
outstanding. Any rights set forth in this section can be modified, restricted or eliminated
by any rules, regulations or orders prescribed by the Finance Agency.






	10)	 	Voting Rights. A Member shall have the right to vote its Class A Common Stock and
Class B Common Stock in elections of members of the Board. For each directorship that is to
be filled in an election, each Member located in the state to be represented by the
directorship, or each Member of the Bank, depending on the type of directorship, is entitled
to cast one vote for each share of Stock the Member was required to hold under this Plan as of
December 31 of the calendar year immediately preceding the election year. No Member, however,
may cast for any one directorship a number of votes representing that Member’s shares of a
class of Stock that exceeds the average number of shares of that class of Stock that all
Members located in that state were required to hold as of December 31 of the calendar year
immediately preceding the election year. This limitation shall be calculated separately for
holdings of Class A Common Stock and Class B Common Stock.






	11)	 	Ownership of Retained Earnings. The owners of Class B Common Stock shall have an
ownership interest in the retained earnings, surplus, undivided profits and equity reserves,
if any, of the Bank, but shall have no right to receive any portion of those items, except
through declaration of a dividend or capital distribution approved by the Board or through the
liquidation of the Bank and provided such ownership interest shall not preclude the Bank from
paying dividends to Class A Common Stockholders from retained earnings or adversely impact the
right of Class A Common Stockholders to receive liquidating distributions as otherwise
described in this Plan.






	12)	 	Other Provisions Governing Stock.






	 	a)	 	Issuance. Stock shall not be issued by the Bank other than in accordance
with 12 C.F.R. 931.2 and may only be issued to Members.






	 	b)	 	Transfer. Stock may be traded only between the Bank and its Members. A
Member may not transfer any Stock to any other person or entity, including another Member;
provided, however, that in the event of a merger or consolidation of two or more Members
the Stock of the disappearing Member or Members shall be transferred by the Bank to the
surviving or consolidated Member. In the event of a merger or consolidation of one or
more Members into a non-Member institution, the Bank will redeem the Stock owned by the
merged or acquired Member in accordance with the provisions of Section 13(h) hereof.






	 	c)	 	Repurchase at Bank’s Initiative. The Bank, in its discretion, may develop a
Repurchase program as to Excess Stock held by Members. Any such Excess Stock Repurchase
program adopted by the Bank shall be implemented based on an objective formula
consistently applied to all Members. If, in applying such formula, the Bank would fail to
meet its Regulatory Capital Requirements, then the Bank may repurchase Excess Stock only
up to an amount that would permit the Bank to continue to meet its Regulatory Capital
Requirements. In such an event, the Bank shall repurchase such Excess Stock from affected
Members on a consistent basis. Prior to repurchasing Excess Stock on its own initiative,
the Bank shall provide a Member not less than five (5) Business Days’ written notice of
such Repurchase.






	 	d)	 	Repurchase or Exchange of Class A Common Stock. At the request of a Member
through a written Redemption request submitted to the Bank, the Bank may, in its
discretion, repurchase from that Member shares of Class A Common Stock which exceed the
Member’s Asset-Based Stock Purchase Requirement, provided that the Bank will continue to
meet its Regulatory Capital Requirements after the Repurchase. Refer to Section 13(c)
hereof for a discussion of written Redemption requests made of the Bank not in connection
with a notice of withdrawal.






Likewise, at the request of a Member through a written Exchange request submitted to the
Bank, the Bank may, in its discretion, Exchange for shares of Class B Common Stock shares
of Class A Common Stock which exceed the Member’s Asset-Based Stock Purchase Requirement,
provided that the Bank will continue to meet its Regulatory Capital Requirements after the
Exchange. The Bank will notify the Member within five (5) Business Days of the receipt of
the written Exchange request if the Bank intends to deny the request. Any such Exchange
request that is denied by the Bank becomes null and void, with the Bank under no obligation
to warehouse such requests in the event that it should decide to accept and process
Exchange requests at some time in the future. Absent Bank notification of its intent to
deny the member’s written Exchange request within five (5) Business Days of the receipt of
the written Exchange request, the Bank will exchange such stock subject to the written
Exchange request.




	 	e)	 	Repurchase or Exchange of Class B Common Stock. At the request of a Member
through a written Redemption request submitted to the Bank, the Bank may, in its
discretion, repurchase from that Member shares of Class B Common Stock which exceed the
Member’s Activity-Based Stock Purchase Requirement, provided that the Bank will continue
to meet its Regulatory Capital Requirements after the Repurchase. Refer to Section 13(c)
hereof for a discussion of written Redemption requests made of the Bank not in connection
with a notice of withdrawal.






Likewise, at the request of a Member through a written Exchange request submitted to the
Bank, the Bank may, in its discretion, Exchange for shares of Class A Common Stock shares
of Class B Common Stock which exceed the Member’s Activity-Based Stock Purchase
Requirement, provided that the Bank will continue to meet its Regulatory Capital
Requirements after the Exchange. The Bank will notify the Member within five (5) Business
Days of the receipt of the written Exchange request if the Bank intends to deny the
request. Any such Exchange request that is denied by the Bank becomes null and void, with
the Bank under no obligation to warehouse such requests in the event that it should decide
to accept and process Exchange requests at some time in the future. Absent Bank
notification of its intent to deny the member’s written Exchange request within five (5)
Business Days of the receipt of the written Exchange request, the Bank will exchange such
stock subject to the written Exchange request.




	 	f)	 	Bank’s Election to Exchange Class B Common Stock for Class A Common Stock.
If the Bank will continue to meet its Regulatory Capital Requirements after such Exchange,
the Bank may, in its discretion, elect to exchange all or a portion of the Excess Class B
Common Stock held by Members for Class A Common Stock at any time the Bank determines that
Members hold Excess Class B Common Stock. Any such Exchange adopted by the Bank shall be
implemented based on an objective formula consistently applied to all Members. If, in
applying such formula, the Bank would fail to meet its Regulatory Capital Requirements,
then the Bank may Exchange Excess Class B Common Stock only up to an amount that would
permit the Bank to continue to meet its Regulatory Capital Requirements.  In such an
event, the Bank shall reduce the amount of such Excess Class B Common Stock exchanged from
each Member on a consistent basis. The Bank shall give Members not less than five (5)
Business Days’ notice of the Exchange.






	 	g)	 	Regular Exchange Program. The Bank, in its discretion, may elect to
establish a regular Exchange program under subsection (f). If the Bank elects to
implement a regular Exchange program, then not less than thirty (30) calendar days prior
to the first Exchange, the Bank shall notify all Members: (1) that the Bank will exchange
all or a portion of the Excess Class B Common Stock for Class A Common Stock at regular
intervals; (2) the date on which the Bank will conduct the first Exchange; and (3) the
regular interval at which subsequent Exchanges will occur. If a regular exchange program
is established, the Bank shall provide all Members not less than five (5) Business Days’
advance notice if the Bank is: (1) changing the regular interval for such Exchanges; or
(2) terminating such regular Exchange program.






	 	h)	 	Cash in Lieu of Class A Common Stock. A Member may direct the Bank to pay
cash to the Member in lieu of Class A Common Stock in any Exchange described in
subsections 12(f) and 12(g) by notifying the Bank in writing. This directive will be
effective for all Exchanges occurring thirty (30) calendar days after such writing is
received by the Bank. Upon written request from the Member to terminate the directive to
pay cash, the Bank may, in its discretion, allow such directive to be terminated.






	13)	 	Withdrawal from Membership; Stock Redemption Requests.






	 	a)	 	Voluntary Withdrawal. A Member may withdraw from Membership by providing the
Bank with written notice of the Member’s intent to withdraw from Membership consistent
with 12 C.F.R. 1263.26. The applicable Stock Redemption period for Class A Common Stock
and Class B Common Stock shall be deemed to begin upon the Bank’s receipt of such written
notice. The effective date of the withdrawal will be the date on which the applicable
Stock Redemption period ends relative to that Member’s Class A Common Stock, unless the
Member has cancelled its notice of withdrawal prior to that date. The Member shall
continue to retain sufficient Class A Common Stock to meet its Asset-Based Stock Purchase
Requirement until the six-month Redemption period has passed, at which time the Bank may,
in its discretion, Exchange such Class A Common Stock for Class B Common Stock in an
amount sufficient to meet the former Member’s Activity-Based Stock Purchase Requirement
with Class B Common Stock and/or, to the extent such Class A Common stock is Excess Stock
and not necessary to meet the former Member’s Activity-Based Stock Purchase Requirement,
redeem such Class A Common Stock at par and for cash by crediting the former Member’s
demand deposit account, in accordance with Finance Agency regulations. Such withdrawing
Member shall continue to retain sufficient Class A Common Stock or Class B Common Stock to
meet its Activity-Based Stock Purchase Requirement for as long as any activity creating an
Activity-Based Stock Purchase Requirement remains outstanding. The Activity-Based Stock
Purchase Requirement for a former Member shall always be the Activity-Based Stock Purchase
Requirement in effect on the effective date of a former Member’s withdrawal from
Membership in accordance with the applicable provisions of this Plan. When such activity
has been completed, the Bank will, if the applicable Redemption period has expired, redeem
such former Member’s Excess Stock at par and for cash by crediting the former Member’s
demand deposit account, in accordance with this Plan and Finance Agency regulations,
provided that the Bank will continue to meet its Regulatory Capital Requirements after the
Redemption. If the applicable Redemption period has not expired, the Bank may allow the
Redemption period to proceed or, in its discretion, Repurchase such former Member’s
outstanding Excess Stock at par and for cash by crediting the former Member’s demand
deposit account, in accordance with this Plan and Finance Agency regulations, provided
that the Bank will continue to meet its Regulatory Capital Requirements after the
Repurchase.






	 	b)	 	Cancellation of Withdrawal Notice. A Member may cancel its notice of
withdrawal at any time prior to the effective date of the withdrawal by providing the Bank
written notice of such cancellation.






	 	c)	 	Stock Redemption Request. A Member that desires to redeem a part of its
Class A Common Stock or all or part of its Class B Common Stock shall provide the Bank a
written request for Redemption stating the number and class of shares to be redeemed;
provided, however, that a Member may not have more than one Redemption request outstanding
at one time with respect to the same share of Stock.






The Bank’s receipt of a written Redemption request shall commence the six-month and
five-year Stock Redemption periods for the Class A Common Stock and Class B Common Stock,
respectively, subject to the Redemption request.




On each written Redemption request, the Bank will notify the Member within five (5)
Business Days of the Bank’s receipt of the written Redemption request if the Bank does not
intend to Repurchase or cannot Repurchase the Class A Common Stock and/or Class B Common
Stock that is the subject of the Redemption request. The date of such notification by the
Bank will not affect the commencement of the Redemption periods, which begin on the date
the written Redemption request is received by the Bank.




As to a written Redemption request made of the Bank not in connection with a notice of
withdrawal, and for which the Bank has provided the above notification, the Bank reserves
the right to repurchase any or all of the Excess Class A Common and/or Excess Class B
Common Stock that is the subject of a Member’s Redemption request at any time prior to the
expiration of the applicable Redemption period, provided that the Bank furnishes one (1)
Business Day’s notice prior to Repurchase and, both prior to and immediately following such
a Repurchase, continues to meet its Regulatory Capital Requirements.




	 	d)	 	Redemption, Repurchase and Exchange Limitations.






	 	1)	 	The Bank will not redeem or repurchase any Stock if doing so would cause the
Bank to fail to comply with its Regulatory Capital Requirements, or would cause the
Member involved in such transaction to fail to meet its Minimum Stock Purchase
Requirement. As to additional provisions regarding Redemption of Stock, refer to
Section 13(f) of this Plan.






	 	2)	 	On any day that the sum of all requested Redemptions maturing on that day
equals or exceeds an amount that would cause the Bank to fall below the minimum
Regulatory Capital Requirements, Redemptions will be suspended until either those
requests can be honored in full or the Board establishes pro rata Redemption
procedures.






	 	3)	 	If the Board reasonably believes that continued Redemptions would cause the
Bank to fail to meet its Regulatory Capital Requirements, would prevent the Bank from
maintaining adequate capital against a potential risk that may not be adequately
reflected in its Regulatory Capital Requirements or would otherwise prevent the Bank
from operating in a safe and sound manner, it may suspend any and all Redemptions.
During such period of suspended Redemptions, written permission of the Finance Agency
shall be obtained prior to any Repurchase or Exchange. Within two (2) Business Days
of such suspension, the Bank shall notify the Finance Agency of the reasons for the
suspension and the Bank’s strategies for addressing the situation. The Finance Agency
has the right to order the Bank to re-institute Redemptions of Stock.






	 	4)	 	Written approval from the Finance Agency shall be required prior to
Redemption, Repurchase or Exchange if there has been a determination by the Board or
the Finance Agency that the Bank has incurred, or is likely to incur, losses that
result in, or are likely to result in, charges against the capital of the Bank as
defined in the applicable rules and regulations. This requirement shall apply even if
the Bank is in compliance with its Regulatory Capital Requirements, and shall remain
in effect as long as the Bank continues to incur such charges, or until the Finance
Agency determines that such charges are no longer expected to continue.






	 	e)	 	Redemption Request Prior to Exchange.






	 	1)	 	If at any time a Member has pending a Redemption request for Class B Common
Stock and that Class B Common Stock is exchanged for Class A Common Stock by the Bank
under Subsections 7(a), 12(f) or 12(g), the Redemption request for the amount of Class
B Common Stock exchanged is automatically cancelled. In such event, the Bank shall
not impose a Redemption Cancellation Fee. A new written Redemption request must be
submitted by the Member for the newly issued Class A Common Stock if the Member wants
to redeem that Class A Common Stock. If such an Exchange comprises only a portion of
a Member’s existing Redemption request for Class B Common Stock, the Redemption period
for that portion of the Member’s Class B Common Stock that is not exchanged is
determined by and continues to run from the initial date the Redemption request was
received by the Bank.






	 	2)	 	If a Member has pending a Redemption request for Class A Common Stock and
that Class A Common Stock is exchanged for Class B Common Stock by the Bank to meet
the Member’s Activity-Based Stock Purchase Requirement under Subsection 7(b), the
Redemption request is automatically cancelled for the amount of Class A Common Stock
exchanged. In such event, the Bank shall not impose a Redemption Cancellation Fee.
If such an Exchange comprises only a portion of a Member’s existing Redemption request
for Class A Common Stock, the Redemption period for that portion of the Member’s Class
A Common Stock that is not exchanged is determined by and continues to run from the
initial date the Redemption request was received by the Bank.






	 	f)	 	Cancellation of Stock Redemption Request or Request to Withdraw from
Membership. A Member may cancel all or a part of its request to redeem Class A Common
Stock or Class B Common Stock. A Member may also cancel its request to withdraw from
Membership. The cancellation of a Member’s request to withdraw from Membership shall
automatically constitute a cancellation of the Stock Redemption request for all of the
Member’s Class A Common Stock and Class B Common Stock. In the event of the cancellation
of all or a part of a Stock Redemption request, either through cancellation of a request
to redeem or through the cancellation of a Member’s request to withdraw from Membership,
unless otherwise waived under the provisions of this plan, the Member shall pay a
Redemption Cancellation Fee to the Bank with respect to those shares of Stock subject to
the Redemption cancellation in the following amount: one percent (1.0%) of the par value
of Class A Common Stock plus an amount of the par value of Class B Common Stock equal to,
depending on when the Redemption request is cancelled, one percent (1.0%) in the first
year after the Redemption request is received by the Bank, two percent (2.0%) in the
second year, three percent (3.0%) in the third year, four percent (4.0%) in the fourth
year and five percent (5.0%) in the fifth year. A Member’s Stock Redemption request shall
automatically be cancelled if, within five (5) Business Days from the end of the
applicable Redemption period, the Bank continues to be precluded from redeeming the
Member’s Stock because if the Redemption were to proceed the Member would fail to meet its
Minimum Stock Purchase Requirement after the Redemption. Such automatic cancellation of a
Redemption request shall have the same effect as a voluntary cancellation by the Member
and the applicable Redemption Cancellation Fee shall be imposed on the Member.






	 	g)	 	Involuntary Withdrawal. The Board may terminate the Membership of any Member
if, subject to regulations adopted by the Finance Agency, it determines that the Member
has:






	 	1)	 	failed to comply with any provision of the FHLBank Act, any regulation
promulgated under that Act, or this Plan; or






	 	2)	 	been determined to be insolvent or otherwise subject to the appointment of a
conservator, receiver or other legal custodian, by a Federal or State authority with
regulatory and supervisory responsibility for the Member; or






	 	3)	 	acted in a manner that jeopardizes the safety and soundness of the operation
of the Bank.






Notwithstanding any other provision of this Plan, in the event that (i) the Board has made
a determination under Subsection 13(g)(2) above with respect to a Member, (ii) the Board
has terminated such Member’s Membership, and (iii) such terminated Member has no
outstanding indebtedness or other obligation to the Bank, contingent or otherwise, then
such terminated Member’s Asset-Based Stock Purchase Requirement shall be zero and the Bank
may, in its discretion, repurchase any or all of the resulting excess Class A Common Stock
of such terminated Member at any time, notwithstanding any redemption period that would
apply to such Class A Common Stock, if the Bank will continue to meet its Regulatory
Capital Requirements after such repurchase.




h) Termination of Membership Resulting from Merger or Consolidation.




	 	1)	 	Upon merger or consolidation of two or more Members into one institution
operating under the charter of one of the merging or consolidating institutions, the
Membership of the surviving institution shall continue and the Membership of each
disappearing institution shall terminate on the cancellation of its charter.






	 	2)	 	Upon the merger or consolidation of two or more institutions, at least two of
which are Members of different FHLBanks, into one institution operating under the
charter of one of the merging or consolidating institutions, the Membership of the
surviving institution shall continue and the Membership of the disappearing
institution shall terminate on the cancellation of its charter, provided, however,
that if more than eighty percent (80.0%) of the assets of the merged or consolidated
institution are derived from the assets of the disappearing institution, then the
merged or consolidated institution shall continue to be a Member of the FHLBank of
which the disappearing institution was a Member prior to the merger or consolidation,
and the Membership of the other institutions shall terminate upon the effective date
of the merger or consolidation.






	 	3)	 	In the case of an institution the Membership of which has been terminated as
a result of a merger or other consolidation into a non-Member or into a Member of
another FHLBank, the applicable redemption periods for Class A Common Stock and Class
B Common Stock that is not subject to a pending Redemption request shall be deemed to
commence on the date on which the charter of the former Member is cancelled.






	 	i)	 	Other Provisions Governing Involuntary Termination of Membership.
Involuntary termination of Membership shall constitute a Redemption request for all of the
former Member’s Stock not otherwise subject to a prior Redemption request, and the
applicable redemption period for the former Member’s Stock shall begin to run from the
date the Board terminates the institution’s Membership. The former Member shall continue
to receive any dividends declared during the applicable redemption period, but shall not
be entitled to any other rights or privileges accorded to Members after the date of the
termination of Membership. The Bank will not redeem any of such former Member’s Class A
Common Stock or Class B Common Stock, consistent with the provisions of Section 13(a),
until such Stock is not required to fulfill the former Member’s Activity-Based Stock
Purchase Requirement.






	14)	 	Implementation of Plan.






	 	a)	 	Conversion Date. After Finance Agency approval of the Plan, the Board shall
establish a Conversion Date for the Plan. The Conversion Date shall be not later than
December 31, 2004. The Board shall establish such Conversion Date within ninety (90)
calendar days after Finance Agency approval of the Plan as amended, and the Bank shall
notify all Members of the Conversion Date within ten (10) Business Days after it has been
established by the Board.






	 	b)	 	Conversion of Shares. At the close of business on the Conversion Date, the
Bank shall immediately convert all shares of existing stock into shares of Class A Common
Stock or Class B Common Stock as provided in this paragraph. Each Member shall receive
one (1) share of Class A Common Stock or one (1) share of Class B Common Stock for each
share of existing stock held on the Conversion Date. The Bank first shall convert each
share of existing stock held by each Member into Class A Common Stock up to an amount
equal to the Member’s Asset-Based Stock Purchase Requirement. All additional shares of
existing stock, if any, held by the Member on the Conversion Date shall be converted into
Class B Common Stock. The Bank will reflect this conversion by appropriate book entries
and will notify each Member of its Minimum Stock Purchase Requirement. To the extent a
Member needs to purchase additional shares of Stock to comply with the Asset-Based Stock
Purchase Requirement and/or the Activity-Based Stock Purchase Requirement at the time of
conversion, the Member shall have ninety (90) calendar days to purchase the additional
Stock provided it had been a Member of the Bank on November 12, 1999 (Pre-1999 Member).
Any Member wishing to avail itself of this option must notify the Bank in writing at least
thirty (30) calendar days prior to the Conversion Date. All Members that became Members
after November 12, 1999 (Post-1999 Member), and any Member failing to properly exercise
the foregoing ninety (90) calendar day option if available to it, must purchase all
required Stock on the Conversion Date, and the Bank will purchase all such required Stock
on behalf of such Members by debiting each such Member’s demand deposit account on the
Conversion Date in amount equal to the par value of the Stock necessary to bring the
Member into compliance with the provisions of this Plan. On the next Business Day after
the Conversion Date, the Bank will notify each Member and former Member of its Minimum
Stock Purchase Requirement, including the amount of any shortfall in its current Stock
ownership that was purchased (in the case of Post-1999 Members), or is required to be
purchased (in the case of Pre-1999 Members), and the amount of Excess Stock, if any.
Notwithstanding the above, in the event a Pre-1999 Member at any time has a shortfall in
its Stock ownership below its Minimum Stock Purchase Requirement, the Member must, prior
to engaging in any activity with the Bank that has an Activity-Based Stock Purchase
Requirement under Subsection 7(b), purchase sufficient Stock to meet its Minimum Stock
Purchase Requirement.






	 	c)	 	Cancellation of Shares. After such conversion, the Bank shall cancel all
            shares of existing stock outstanding prior to the Conversion Date.






	 	d)	 	Opt Out. Any Member of the Bank may, in lieu of maintaining its Membership
pursuant to the terms of this Plan, notify the Finance Agency, with a copy to the Bank, in
writing at least thirty (30) calendar days prior to the Conversion Date of its desire to
withdraw from Membership. Provided such notice is given, the Bank shall, on the
Conversion Date, or prior thereto if the requisite notice period has expired prior to the
Conversion Date, terminate the Membership of any Member that provides such written notice
of withdrawal. In addition, any withdrawal from Membership shall be subject to applicable
laws, Finance Agency regulations, and other provisions of this Plan.






	 	e)	 	Members in the Process of Withdrawing from Membership. Any Member that files
its written notice to withdraw with the Finance Agency less than thirty (30) calendar
days prior to the Conversion Date, shall have its existing stock converted into Stock in
accordance with the Plan, and the effective date of withdrawal shall be established
pursuant to 12 C.F.R. 1263.26; provided, however, that the applicable Stock Redemption
periods calculated under such regulation shall commence on the date the Member first
submitted its written notice to withdraw to the Finance Agency.






	 	f)	 	Orderly Liquidation. Any former Member that has withdrawn from Membership on
or before the Conversion Date, but continues to hold stock to support Advances the Bank
has agreed to liquidate after the termination of Membership, shall have its shares of
existing stock converted into Class B Common Stock on the Conversion Date as described
above in Section 14(b), but thereafter need only comply with the Activity-Based Stock
Purchase Requirement for Advances. Any such former Member shall hold Class B Common Stock
sufficient to comply with the Activity-Based Stock Purchase Requirement during the period
of liquidation.






	 	g)	 	Failure to Opt Out. Any Member that fails to opt out by adhering to the
provisions of Section 14(d) above will automatically have its existing stock converted
into Class A Common Stock and/or Class B Common Stock as described above in Section 14(b).






	15)	 	Amendment of Plan. Any modifications to this Plan shall require an amendment to the
Plan by the Board and approval from the Finance Agency.






	16)	 	Basis for Implementation. The Bank has made a good faith determination that it will
be able to implement the Plan as submitted and that it will be in compliance with its
Regulatory Capital Requirements when the Plan is implemented. The Bank bases this
determination on the fact that it presented the basic provisions of this Plan to its Members
at ”Customer Appreciation Events” during the Summer and Fall of 2003 to which all Members were
invited to attend. In addition, the provisions of the Plan were presented in various private
discussions with the Bank’s five largest Members (in terms of product usage) during the Summer
and Fall of 2003. At none of these discussions or meetings has any Member raised any serious
objection to any provision of the Plan, nor has any Member indicated that adoption of the Plan
would result in that Member withdrawing from Membership in the Bank after the Plan is formally
adopted and put into effect.






	17)	 	Independent Accountant. Based on the review of PricewaterhouseCoopers, an
independent accounting firm, the Bank believes that the Plan ensures to the extent possible
that implementation of the Plan will not result in any write-down of the redeemable stock
owned by its Members. A copy of the review conducted by PricewaterhouseCoopers is attached to
this Plan and made a part hereof.






	18)	 	Rating Agency. Based on the review of Standard & Poor’s, an independent nationally
recognized statistical rating organization, the Bank believes that the Plan ensures to the
extent possible that implementation of the Plan will not have a material effect on its credit
rating. A copy of the Standard & Poor’s determination is attached to this Plan and made a
part hereof.