Document:

Exhibit 10.1

Exhibit 10.1

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 5, 2010, is entered into by and among
BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the “Trust”), BRANDYWINE
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Partnership”), and BAT
PARTNERS, L.P., a Delaware limited partnership (the “Investor”).

RECITALS

WHEREAS, on the date hereof, the Investor has acquired units of limited partnership interest
(“Units”) in the Partnership, designated as “Class F (2010) Units,” and having the rights,
privileges and preferences, and subject to the limitations, specified in the Partnership Agreement
(as defined below) as amended on the date hereof by the Sixteenth Amendment (as defined below).

WHEREAS, the Units are redeemable for cash or common shares of beneficial interest, par value
$.01 per share, of the Trust (the “Common Shares”) upon the terms and subject to the
conditions contained in the Partnership Agreement, as amended on the date hereof by the Sixteenth
Amendment.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained,
and for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1. Definitions. In addition to the definitions set forth above, the following terms,
as used herein, have the following meanings:

“Agreement” means this Registration Rights Agreement, as it may be amended,
supplemented or restated from time to time.

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized by law to close.

“Commission” means the United States Securities and Exchange Commission.

“Common Shares” has the meaning assigned to it in the Recitals.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of November 18, 1997, as previously amended and as amended
on the date hereof by the Sixteenth Amendment, and as the same may hereafter be amended, modified
or restated from time to time.

“Person” means an individual or a corporation, partnership, limited liability company,
association, trust, or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

“Registrable Securities” means Common Shares issued or issuable upon redemption of
Units that are held by Investor immediately following the redemption; provided that such Common
Shares shall cease to constitute Registrable Securities upon the earlier of (i) such date that
Investor no longer holds or beneficially owns at least 700,000 Common Shares or (ii) after December
31, 2012, when the holding period in Rule 144 for such Common Shares has elapsed and such Common
Shares may be sold pursuant
to Rule 144 without regard to the volume limitation in Rule 144. Any Common Shares
transferred by the Investor shall no longer constitute Registrable Securities when transferred to a
Person who is not an affiliate (as defined in Rule 144) of Investor other than an underwriter in a
underwritten offering.

Registration Rights Agreement

 

 

 

“Registration Expenses” means all expenses incident to the Trust’s performance of or
compliance with Article 2, including, without limitation, all registration and filing fees, all
listing fees, all fees and expenses of complying with securities or blue sky laws, and printing
expenses, and the fees and disbursements of counsel for the Trust and of the Trust’s independent
public accountants, but excluding any brokerage commissions or discounts, underwriting commissions
or similar fees payable in connection with an offer or sale of Registrable Securities.

“Rule 144” means Rule 144 under the Securities Act, as amended from time to time (or
any successor statute).

“Securities Act” means the Securities Act of 1933, as amended.

“Sixteenth Amendment” means the Sixteenth Amendment to the Partnership Agreement dated
as of the date hereof.

“Units” has the meaning assigned to it in the Recitals.

2. Registration Rights.

2.1. Registration Undertaking.

2.1.1. Registration of Registrable Securities. Subject to Section 2.1.2 and 2.1.4,
the Trust shall prepare and file with the Commission a “shelf” registration statement under the
Securities Act covering the offer and sale of the Registrable Securities by the Investor in an
offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act, provided
that the Trust shall not be required to file a “shelf” registration statement pursuant to this
Section 2.1.1 prior to the 270th day after the date hereof.

2.1.2. Registration Covering Issuance of Registrable Securities. Subject to Section
2.1.4, within the time frame prior to the first anniversary of the date hereof during which a
registration statement under the Securities Act covering the issuance of Registrable Securities in
redemption of Units may be filed in compliance with the Securities Act, the Trust shall prepare and
file with the Commission a “shelf” registration statement under the Securities Act relating to the
issuance to Investor of Registrable Shares upon the redemption of Units in an offering to be made
on a continuous basis pursuant to Rule 415 under the Securities Act (the “Issuance Registration
Statement”). If the Trust is unable to obtain the effectiveness of the Issuance Registration
Statement or to keep such Issuance Registration Statement effective until the date on which
Investor has redeemed or exchanged such Investor’s Units for Registrable Securities, then Investor
shall have the rights set forth in 2.1.1.

2.1.3. Underwritten Offering. During the period that commences on the first
anniversary of the date hereof and that ends on December 31, 2012, the Investor may deliver up to
two written notices (each, an “Underwriting Notice”) to the Trust indicating that the
Investor desires to distribute its Registrable Securities by means of an underwritten offering, in
which case the following terms and conditions (as well as Section 2.1.4) shall apply:

 

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2.1.3.1. Only Registrable Securities that have not been transferred by the Investor may be
included in the underwritten offering and, for the avoidance of doubt, the Investor shall not be
entitled to assign its right to distribute Registrable Securities in an underwritten offering to
any Person.

2.1.3.2. The Investor shall have the right to select the managing underwriter(s) for the
underwritten offering, which selection must be reasonably acceptable to the Trust.

2.1.3.3. The Investor shall not have the right to require the Trust to participate in more
than two underwritten distributions of Registrable Securities and the Investor shall not have the
right to require the Trust to participate in any such underwritten distribution after December 31,
2012.

2.1.3.4. If at the time of delivery of an Underwriting Notice or during the ensuing period
prior to the completion of the underwriting, the Trust is engaged or plans to engage in a
registered public offering or a material proposed acquisition, disposition, financing,
reorganization, recapitalization or similar transaction that, in the good faith determination of
the Trust’s Board of Trustees, would be adversely affected by the request, then the Trust may at
its option delay the offering for up to 60 days.

2.1.3.5. In connection with an underwritten offering, the Trust and Investor shall enter into
an underwriting agreement upon customary terms (including as to representations, warranties,
indemnification and contribution) with the underwriter or underwriters managing the offering and
the Trust and Investor will use commercially reasonable efforts to cause their legal counsel to
render customary opinions to the underwriters with respect to the offering and the Trust will use
commercially reasonable efforts to cause its independent public accounting firm to issue customary
“cold comfort letters” to the underwriters with respect to the Registration Statement. For the
avoidance of doubt, the Investor shall not be required, without its approval, to enter into any
underwriting agreement that does not contain terms acceptable to it in its discretion. In
connection with an underwritten offering, the Trust shall provide reasonable cooperation such as
arranging for appropriate officers of the Trust to participate in “road shows” or investor
presentations (taking into account the needs of the Trust’s business and the responsibilities of
such officers with respect thereto).

2.1.3.6. In connection with an underwritten offering, the Trust shall (and shall use
commercially reasonable efforts to cause its executive officers and trustees to) agree to a lock-up
provision in an underwriting agreement or lock-up agreement, as applicable, not to exceed 45 days,
and limited to common shares of beneficial interest, in customary form and substance and with
exceptions that are customary for an underwritten offering.

2.1.4. Registration Statement on Form S-3. A registration under this Section 2.1
shall only be required to be made on Form S-3, or any successor form. In the event the Trust is
not eligible to use Form S-3 to register the Registrable Securities, it may delay the filing of the
applicable registration statement until that date on which the Trust is again eligible to file a
Form S-3. The Trust hereby represents and warrants to the Investor that, as of the date hereof,
the Trust is eligible to register the Registrable Securities on Form S-3 and that it shall take all
actions necessary to continue to be eligible for use of Form S-3.

2.1.5. Expenses. The Trust shall pay the Registration Expenses in connection with
this Agreement up to an aggregate of $75,000 and the Investor shall pay (or promptly reimburse the
Trust for the payment of) any Registration Expenses in excess of $75,000. In all circumstances,
the Investor shall be solely responsible to pay any brokerage commissions or discounts,
underwriting commissions or similar fees payable in connection with an offer or sale of Registrable
Securities.

 

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2.2. Registration Procedures.

2.2.1. In connection with the registration effected pursuant to this Agreement, the Trust
shall:

(i) use commercially reasonable efforts to cause the registration statement to be declared
effective by the SEC for all Common Shares covered thereby on, or as soon as practicable following,
the first anniversary of the date hereof;

(ii) use commercially reasonable efforts to file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement continuously effective and to comply with provisions
of the Securities Act with respect to the disposition of all Registrable Securities covered by such
registration statement until the Common Shares issued or issuable upon redemption of Units have
ceased to constitute Registrable Securities as provided in the proviso to the definition of the
term “Registrable Securities”, or, in the case of the Issuance Registration Statement, until the
date on which Investor has redeemed or exchanged such Investor’s Units for Registrable Securities;

(iii) furnish to the Investor without charge such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act,
and such number of copies of such other documents as the Investor may reasonably request;

(iv) use commercially reasonable efforts (x) to register or qualify all Registrable Securities
under such other securities or Blue Sky laws of such States of the United States of America where
an exemption is not available and as the Investor shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such registration statement remains in
effect, and (z) to take any other action which may reasonably be necessary or advisable to enable
the Investor to consummate the disposition in such jurisdictions of the Registrable Securities to
be sold by the Investor, except that the Trust shall not for any such purpose be required to
qualify generally to do business as a foreign trust in any jurisdiction wherein it would not, but
for the requirements of this paragraph (iv), be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;

(v) notify the Investor upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in the registration statement filed pursuant to this agreement, as
then in effect, includes an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not misleading, in the
light of the circumstances under which they were made, and promptly prepare and furnish to the
Investor such number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;

(vi) use commercially reasonable efforts to list and thereafter to maintain the listing of all
Registrable Securities covered by such registration statement on any national securities exchange
on which the Trust’s common shares of beneficial interest, par value $.01 per share, are then
listed;

 

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(vii) use commercially reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of the registration statement or any part thereof as promptly as possible;

(viii) deliver promptly to Investor’s counsel copies of all correspondence between the SEC and
the Trust and the Partnership, its counsel or auditors and all memoranda relating to discussions
with the SEC or its staff with respect to the Registration Statement.

The Investor agrees that upon receipt of any notice from the Trust of the happening of an
event of the kind described in Section 2.2.1(v), the Investor shall forthwith discontinue its
disposition of Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2.2.1(v).

2.3. Holdback Agreements; Information Blackout.

2.3.1. Holdback Agreements. In connection with an underwritten public offering of
securities of the Trust, the Investor agrees that, if required by the underwriter or underwriters,
they will not effect any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Registrable Securities, during the period commencing 10 days prior to
the expected commencement of the offering and ending 30 days after the closing of such offering.

2.3.2. Information Blackout. At any time when a registration statement effected
pursuant to this Section 2 relating to Registrable Securities is effective, upon written notice
from the Trust to the Investor that the Trust has determined in good faith that sale of Registrable
Securities pursuant to the registration statement would require disclosure by the Trust of
non-public material information not otherwise required, in the judgment of the Trust, to be
disclosed under applicable law, the Investor shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of (a) 45 days after the Trust makes such good
faith determination and (b) such time as the Trust notifies the Investor that such material
information has been disclosed to the public or has ceased to be material or that sales pursuant to
such registration statement may otherwise be resumed.

2.4. Preparation; Investor Cooperation. In connection with the registration of
Registrable Securities under the Securities Act as provided in this Agreement, the Trust shall give
the Investor not less than 15 days prior written notice of the filing of the registration statement
or any amendment or supplement thereto and give the Investor and its counsel and accountants the
opportunity to review and comment on, at the Investor’s expense, the registration statement and any
amendment or supplement thereto. The Investor will furnish to the Trust such information as the
Trust may reasonably request in connection with the registration and related proceedings under this
Agreement.

2.5. Indemnification.

2.5.1. Indemnification by the Trust. With regard to the registration of Registrable
Securities under the Securities Act in which the Investor is a selling shareholder, the Trust
shall, and hereby does, indemnify and hold harmless the Investor from and against any losses,
claims, damages or liabilities, insofar as losses, claims, damages, or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of any material fact contained or incorporated
by reference in the registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or

 

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necessary to make the statements therein not misleading, or (b) any violation by the Trust,
its trustees, officers, employees or agents of this Agreement or any law applicable to and in
connection with such registration, and the Trust shall reimburse the Investor on demand for any
legal or any other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding described in clauses (a) or (b);
provided, however, that the Trust shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with information furnished
in writing to the Trust by the Investor for incorporation therein. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of the Investor and
shall survive the transfer of such securities by the Investor.

2.5.2. Indemnification by the Investor. With regard to the registration of
Registrable Securities under the Securities Act, the Investor shall indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 2.5.1 above) the Trust and each
trustee, officer and employee of the Trust and each Person who controls the Trust within the
meaning of the Securities Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and in conformity with
information furnished in writing to the Trust by the Investor for incorporation therein.

2.5.3. Notice of Claims, Etc. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim referred to in the
preceding paragraphs of this Section 2.5, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, immediately give written notice to the latter
of the commencement of such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its obligations under
the preceding paragraphs of this Section 2.5, except to the extent that the indemnifying party is
materially prejudiced by such failure. In case any such action is brought against an indemnified
party, unless in such indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that the indemnifying parties may agree, with
counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than reasonable out of pocket
costs related to the indemnified party’s cooperation with the indemnifying party, unless in such
indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the defense thereof.
No indemnifying party shall be liable for any settlement of any action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Consent of the indemnified party shall be required for the entry of any judgment or
to enter into a settlement only when such judgment or settlement does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.

 

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2.5.4. Contribution. If the indemnification provided for in this Section 2.5 shall
for any reason be held by a court to be unavailable to an indemnified party under Section 2.5.1 or
2.5.2 hereof in respect of any loss, claim, damage or liability, or any action in respect thereof,
then, in lieu of the amount paid or payable under Sections 2.5.1 or 2.5.2 hereof, the indemnified
party and the
indemnifying party under Sections 2.5.1 or 2.5.2 hereof shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Trust and the Investor or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is appropriate to
reflect the relative fault of the Trust and the Investor that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant equitable considerations.
No Person guilty of fraudulent misrepresentation (within the meaning of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute hereunder any amounts
in payment for any settlement of any action or claim, effected without such Person’s written
consent, which consent shall not be unreasonably withheld.

3. Decisions; Modification; Waivers. All decisions by, and notices from, the Investor
hereunder shall be made by the holders of not less than a majority of the Registrable Securities
outstanding held by the Investor and the Investor shall be bound by any such decision. This
Agreement may be modified or amended only with the written consent the Trust, the Partnership and
the Investor holding not less than a majority of the Registrable Securities. No party shall be
released from its obligations hereunder without the written consent of the other party. The
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party entitled to enforce such term, but
any such waiver shall be effective only if in a writing signed by the party against which such
waiver is to be asserted. Except as otherwise specifically provided herein, no delay on the part
of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.

4. Entire Agreement. This Agreement represents the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and supersedes all other prior
and contemporaneous agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof. The rights of the Investor under this Agreement shall inure
to the benefit of any successor to all or substantially all of the Investor’s business.

5. Severability. If any provision of this Agreement, or the application of such
provision to any party or circumstance, shall be held invalid, the remainder of this Agreement or
the application of such provision to other parties or circumstances, to the extent permitted by
law, shall not be affected thereby; provided, that the parties shall negotiate in good faith with
respect to an equitable modification of the provision or application thereof held to be invalid.

6. Notices. All notices, requests and other communications required or permitted to
be given under this Agreement shall be in writing and shall be delivered (i) in person, (ii) by
certified mail, return receipt requested, (iii) by recognized overnight delivery service providing
positive tracking of items (for example, Federal Express), or (iv) by electronic mail (with
acknowledgment of a receipt of delivery), in each case addressed as follows:

 

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If to the Trust or the Partnership, addressed to:

Brandywine Operating Partnership, L.P.

c/o Brandywine Realty Trust

555 East Lancaster Avenue

Radnor, PA 19087

Attention: Gerard H. Sweeney, President and Chief Executive Officer

E-mail: jerry.sweeney@bdnreit.com

with a copy in each instance to:

Brandywine Operating Partnership, L.P.

c/o Brandywine Realty Trust

555 East Lancaster Avenue

Radnor, PA 19087

Attention: Brad A. Molotsky, Executive Vice President

E-mail: brad.molotsky@bdnreit.com

With an additional copy to:

Pepper Hamilton LLP

3000 Two Logan Square

18th and Arch Streets

Philadelphia, PA 19103

Attention: Michael Friedman

E-mail: friedmanm@pepperlaw.com

If to the Investor, addressed to:

BAT PARTNERS, L.P.

c/o The Blackstone Group

345 Park Avenue

New York, NY 10154

Attention: David Z. Hirsh

Email: Hirshd@blackstone.com

Attention: William Stein

Email: Steinw@blackstone.com

with a copy in each instance to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Telephone: (212) 859-8000

Facsimile: (212) 859-4000

Attention: Lee Parks

or to such other address or addresses and to the attention of such other person or persons as any
of the parties may notify the other in accordance with the provisions of this Agreement. All such
notices, requests and other communications shall be deemed to have been sufficiently given for all
purposes hereof only if given pursuant to the foregoing requirements as to both manner and address,
and only upon receipt (or refusal to accept delivery) by the party to whom such notice is sent. Notices by the
parties may be given on their behalf by their respective attorneys.

 

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7. Counterparts. This Agreement may be executed in counterparts, each of which for
all purposes shall be deemed to be an original and all of which together shall constitute the same
agreement.

8. Headings. The Section headings in this Agreement are for convenience of reference
only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions
hereof.

9. Construction. This Agreement shall be governed, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to its principles of
conflict of laws.

10. Recapitalizations, etc. In the event that any shares of beneficial interest or
other securities are issued in respect of, in exchange for, or in substitution of, any Registrable
Securities by reason of any reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, share dividend, split-up, sale of assets,
distribution to shareholders or combination of the Registrable Securities or any other similar
change in the Trust’s capital structure, appropriate adjustments shall be made in this Agreement so
as to fairly and equitably preserve, as far as practicable, the original rights and obligations of
the parties hereto under this Agreement.

11. Term. This Agreement shall continue in full force and effect until the date on
which the Common Shares issued or issuable upon redemption of Units have ceased to constitute
Registrable Securities as provided in the definition of the term “Registrable Securities.”

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first
above written and delivered by their respective duly authorized officers.

	 	 	 	 	 
	 	BRANDYWINE REALTY TRUST

 	 
	 	By:  	 	 
	 	 	Name:  	Gerard H. Sweeney 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	BRANDYWINE OPERATING PARTNERSHIP, L.P.

By: BRANDYWINE REALTY TRUST, its sole 
       general
partner

 	 
	 	By:  	 	 
	 	 	Name:  	Gerard H. Sweeney 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	INVESTOR:

BAT PARTNERS, L.P.,

a Delaware limited partnership

By: BRE/ARCH STREET L.L.C.,

       its general partner

 	 
	 	By:  	 	 
	 	 	Name:  	David Hirsch 	 
	 	 	Title:  	Managing Director and Vice President 	 
	 

 

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Exhibit 4.1.1

CAPITAL PLAN

of the

Federal Home Loan Bank of Pittsburgh

	 	 	 

	 
	 	 
	 

	 	As amended following approval of the Board of Directors
on April 28, 2010, and Federal Housing Finance Agency
approval on May 12, 2010
	 
	 	 
	 

	 	Effective Date of the Amended Capital Plan: July 1, 2010

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 

	I.	 	Purpose 
	 	 	2	 
	 
	 	      A.	 	General 

	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	II.	 	Stock Investment 
	 	 	5	 
	 
	 	      A.	 	General 
	 	 	5	 
	 
	 	      B.	 	Minimum
Amount 
	 	 	6	 
	 
	 	      C.	 	Adjustments to Minimum
Amount 
	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	III.	 	Par Value, Rights,
Terms, and Preferences of Capital Stock 
	 	 	11	 
	 
	 	      A.	 	Par
Value 
	 	 	11	 
	 
	 	      B.	 	Ownership 
	 	 	11	 
	 
	 	      C.	 	Limitations 
	 	 	11	 
	 
	 	      D.	 	Dividends 
	 	 	11	 
	 
	 	      E.	 	Redemption 
	 	 	11	 
	 
	 	      F.	 	Cancellation of
Redemption 
	 	 	11	 
	 
	 	      G.	 	Limited
Transferability 
	 	 	12	 
	 
	 	      H.	 	Termination of
Membership 
	 	 	12	 
	 
	 	      I.	 	Voting
Rights 
	 	 	14	 
	 
	 	      J.	 	Rights in Bank
Merger 
	 	 	14	 
	 
	 	      K.	 	Rights in Bank
Liquidation 
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	IV.	 	Process for Amending
this
Plan 
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	V.	 	Definitions 
	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	Schedule A
	 	 	 	 
	Appendix A
	 	 	 	 

1

 

	I.	 	Purpose

	 	A.	 	General. This Capital Plan, as amended, is implemented to meet the requirements of
the Capital Regulation. All capitalized terms used but not defined elsewhere in the
Capital Plan shall have the meaning ascribed to such terms in Section V.

	 	1.	 	Effective Date. The date that this Capital Plan, as
amended, becomes effective after approval by the Finance Agency and following a
Notice to Members from the Bank.
	 
	 	2.	 	Transition Period. For any Member whose Membership
Asset Value Stock Purchase Requirement on the Effective Date of the Plan
exceeds the sum of: (i) its actual Unused Borrowing Capacity Stock Purchase
Requirement (as the term is defined in the Bank’s Original Capital Plan
implemented on December 16, 2002) calculated as of close of business on the
Business Day immediately preceding the Effective Date plus (ii) the amount of
its Excess Stock as of close of business on the Business Day immediately
preceding the Effective Date, then, such Member shall have until no later than
April 10, 2011 (referred to as the “Transition Period”) to fully comply with
the terms of this Plan with respect to its Membership Asset Value Stock
Purchase Requirement. Each such Member’s Membership Stock Purchase Requirement
shall be equal to its Membership Asset Value Stock Purchase Requirement;
provided that, such Members shall be permitted to fully transition to the
requirement as set forth below. During the Transition Period the following
shall apply to each such Member (referred to as a “Transitioning Member”):

	 	a)	 	Membership Asset Value Stock Purchase
Requirement on the Effective Date. The Initial Membership Asset
Value Stock Purchase Percentage (referred to as the “Transition
Percentage”) shall equal the ratio of (i) to (ii) where (i) is the sum
of the Transitioning Member’s Unused Borrowing Capacity Stock Purchase
Requirement plus its Excess Stock each determined as of the close of
business on the Business Day immediately preceding the Effective Date
and (ii) is its Membership Asset Value. Each Transitioning Member’s
Membership Asset Value Stock Purchase Requirement shall be calculated
using the Transition Percentage and multiplying it by the Transitioning
Member’s Membership Asset Value. At any point in time, the applicable
Transition Percentage shall be the highest value calculated in
accordance with this Section I.A.2.a, as such value may be subsequently
adjusted under Section I.A.2.b.
	 
	 	b)	 	Treatment of Excess Stock Arising from Loan
Repayments. From time to time as a Transitioning Member’s Loans
are reduced and such reductions generate a reduction of the
Transitioning Member’s associated Member Loan Stock Purchase
Requirement, then, such resulting Excess Stock shall automatically be
applied

2

 

	 	 	 	against the Transitioning Member’s Membership Asset Value Stock
Purchase Requirement, calculated in accordance with this Plan.
Notwithstanding the foregoing, in the event that a Transitioning
Member obtains a Renewal of a Loan (on the same business day as a
Loan repayment), then, the Excess Stock generated from the Loan
repayment shall be applied first against the Member Loan Stock
Purchase Requirement for such Renewal with the balance of such Excess
Stock (if any) applied against the Membership Asset Value Stock
Purchase Requirement. Following each such calculation, this amount
shall become the Member’s new Membership Stock Purchase Requirement
and the Transition Percentage shall be re-calculated to reflect the
change in the Membership Stock Purchase Requirement.
	 
	 	c)	 	Completion of Transition Prior to April 10,
2011. In the event that, prior to April 10, 2011, the Bank: (i)
makes payment of a dividend and Repurchases Excess Stock on a pro rata
basis for all members in the same quarter, or (ii) makes payment of a
dividend in an amount exceeding one percent (1%) annualized, then, in
either case, each Transitioning Member shall be required to comply
promptly with the Membership Asset Value Stock Purchase Requirement
upon fifteen (15) calendar days’ notice from the Bank.
	 
	 	d)	 	Finance Agency Classification of the Bank
Under the Prompt Corrective Action Regulation – Adjustment to
Membership Stock Purchase Requirement. In the event that during
the Transition Period (i) the Finance Agency classifies the Bank as
other than “adequately capitalized” under the PCA Regulation, and (ii)
the Bank is required to increase the Membership Stock Purchase
Requirement within the ranges and terms set forth in the amended
Capital Plan, then, the Transition Period shall end and each
Transitioning Member will be required to comply promptly with the
Membership Asset Value Stock Purchase Requirement upon fifteen (15)
calendar days’ notice from the Bank.

	 	 	 	All other terms and conditions of the Plan shall apply to such Transitioning
Members.

3

 

The following examples illustrate the calculations of the Membership Stock Purchase
Requirement for Transitioning Members as described above:

Capital Plan Transition Examples

Assumptions (unless otherwise noted):

Member’s Advances Outstanding = $25,000,000

UBC = $25,000,000

UBC Requirement = 0.75%

Loan (Advances) Capital Stock Requirement = 4.75%

	 	 	 	 	 

	UBC Capital Stock =
	 	$	187,500	 
	Loan (Advances) Capital Stock =
	 	$	1,187,500	 
	Total Capital Stock Held =
	 	$	1,375,000	 

Member’s
MAV =     $100,000,000

MAV Capital Stock Requirement = 0.35%

MAV Capital Stock Required = $350,000

Loan (Advances) Capital Stock Requirement = 4.60%

	 	 	 	 	 	 	 

	Total Capital Stock Held =
	        	$	1,375,000	 	 	 
	Loan (Advances) Capital Stock Required
	 	($	1,150,000	)	 	 
	 	 	 	 	 
	Capital Stock Available for MAV
	 	$	225,000	 	 	 
	Transition Percentage
	 	 	0.225	%	 
	MAV Deficit =
	 	($	125,000	)	 	 

Example
#1 (Illustrates: I.A.2.b – Loan Repayment; Excess Stock Created)

Member initially transitions at an MAV Transition Percentage of .225%. Member has a $5,000,000
two-year advance mature.

	 	 	 	 	 	 	 

	Excess Capital Stock created =
	 	$	230,000	 	 	 
	 
	 
	Total Capital Stock Held =
	 	$	1,375,000	 	 	 
	- Loan (Advances) Capital Stock Required
	 	($  920,000	)	 	 
	 
	 	 	 	 
	Capital Stock Available for MAV Requirement
	 	$	455,000	 	 	 
	MAV Capital Stock Requirement @ 0.35%
	 	($  350,000	)	 	 
	Transition Percentage (MAV Requirement Met) at
	 	 	0.35	%	 	 
	Fully-Transitioned
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Additional Excess Capital Stock =
	 	$	105,000	 	 	 

4

 

Example #2 (Illustrates: I.A.2.b – Loan Repayment/Different Loan Product; Excess Stock Created)

Member initially transitions at an MAV Transition Percentage of .225%. Member has a $5,000,000
two-year advance mature and rolls it into an overnight advance.

	 	 	 	 	 

	Excess Capital Stock created =
	 	 $	230,000	 
	 
	 	 	 	 
	MAV Capital Stock
	 	$	225,000	 
	MAV Requirement @ 0.35%
	 	($  350,000	)
	MAV Capital Stock Deficit
	 	($  125,000	)
	Portion of Excess Capital Stock 

used to meet MAV Deficit (adjustment to Transition Percentage)
	 	$	125,000	 
	Transition Percentage (MAV Requirement Met) at
	 	 	0.35	%
	Fully-Transitioned
	 	 	 	 
	 
	 	 	 	 
	Remaining Excess Capital Stock
	 	$	105,000	 
	to meet the Loan (Advances) Requirement
	 	 	 	 
	 
	 	 	 	 
	Loan (Advances) Capital Stock Required =
	 	($1,150,000	)
	Loan (Advances) Capital Stock Held =
	 	$	920,000	 
	Additional Excess Capital Stock =
	 	$	105,000	 
	 
	 	 	 
	Capital Stock Purchase Required =
	 	$	125,000	 

Example #3 (Illustrates: I.A.2.b – Loan Renewal; No Excess Stock Created)

Member initially transitions at an MAV Transition Percentage of .225%. Member has a $5,000,000
three-month advance maturing and renews the entire amount into another $5,000,000 three-month
advance. No Excess Capital Stock is created.

	 	 	 	 	 	 

	Total Capital Stock Held =
	 	 $	1,375,000	 
	- Loan (Advances) Capital Stock Required
	 	($1,150,000	)
	 
	 	 
	Capital Stock Available for MAV
	 	$	225,000	 
	MAV Capital Stock Requirement
	 	($   350,000	)
	MAV Deficit =
	 	$	125,000	 
	Transition Percentage (MAV Requirement) =
	 	 	0.225	%
	Still Not Fully-Transitioned
	 	 	 	 

	II.	 	Stock Investment

	 	A.	 	General. Adequate capitalization is required to: (a) provide for the safe and sound
operation of the Bank; (b) permit prudent leveraging into products and services of
benefit to Members and Housing Associates; (c) provide appropriate risk-adjusted Member
dividend returns; (d) protect creditors of the Bank and the Bank System against loss;
(e) generate earnings sufficient to meet the Bank’s various community support and
public purpose obligations; and (f) comply with prevailing Minimum Regulatory Capital
Requirements. Towards these 

5

 

	 	 	 	objectives, this Capital Plan requires Members to make
certain Minimum Member Stock Investments in the Bank.

	 	B.	 	Minimum Amount

	 	1.	 	General. The need for capital is in great part a
function of the volumes of and risks inherent in the products and services
provided by the Bank to its Members, including the potential for Members to
borrow from the Bank. Therefore, the Capital Stock of the Bank should be
contributed in general proportion to the distribution of such products and
services to its Members, including their potential borrowing activities. Each
Member must purchase and maintain a minimum investment in the Capital Stock of
the Bank in an amount determined in accordance with the requirements of this
Capital Plan.
	 
	 	2.	 	Minimum Member Stock Investment. Each Member is
required to maintain a Minimum Member Stock Investment, both as a condition to
becoming and remaining a Member and as a condition to obtaining Loans and
Letters of Credit from the Bank, access to the Bank’s credit products through
its Membership Asset Value, and to support Acquired Member Assets with the
Bank. The total amount of the required minimum investment of all Members shall
be sufficient to ensure that the Bank stays in compliance with the Minimum
Regulatory Capital Requirements under the Capital Regulation. The Board of
Directors will monitor and, as necessary, adjust the minimum investment to
provide for Capital Stock purchases and maintenance by all Members sufficient
to allow the Bank to remain in compliance with its Minimum Regulatory Capital
Requirements.

	 	a)	 	Member Loan Stock Purchase Requirement.
Each Member is required to purchase and hold Capital Stock in an
amount equal to the Bank’s Member Loan Stock Purchase Percentage
multiplied by all the Loans extended from the Bank to that Member. The
Member Loan Stock Purchase Requirement will be calculated at the time
each Loan is Transacted. The current Member Loan Stock Purchase
Percentage is set forth on Schedule A. From time to time, upon
approval by the Board of Directors, the Member Loan Stock Purchase
Percentage may be adjusted to as high as six percent (6.0%) or to as
low as three percent (3.0%). Changes outside this range would
constitute an amendment to this Capital Plan that would require Finance
Agency approval. An adjustment in the Member Loan Stock Purchase
Percentage may be applied in either of the following manners:

	 	(1)	 	A change in the Member Loan Stock
Purchase Percentage may be applied prospectively, affecting only
Loans Transacted subsequent to the change in the Member Loan
Stock Purchase Percentage, or
	 
	 	(2)	 	A change in the Member Loan Stock
Purchase Percentage may be applied retrospectively, in which
case the new

6

 

	 	 	 	Member Loan Stock Purchase Percentage would be
applied both to the Member Loans outstanding at the time of such
change and to any Loans Transacted and issued subsequent
to such change. If a change in the Member Loan Stock
Purchase Requirement is made retrospectively, the Board of
Directors may choose to either:

	 	(i)	 	apply the new Member Loan Stock Purchase
Percentage to all Member Loans outstanding at
the time of such change, or
	 
	 	(ii)	 	apply the new Member Loan Stock Purchase
Percentage only to Member Loans which do not
include a Principal Prepayment Fee.

	 	b)	 	Letter of Credit Stock Purchase Requirement. Each Member is
required to purchase and hold Capital Stock in an amount equal to the
Bank’s Letter of Credit Stock Purchase Percentage multiplied by all the
Letters of Credit issued and outstanding from the Bank to that Member
as account party. The Letter of Credit Stock Purchase Requirement will
be calculated at the time each Letter of Credit is Transacted. The
current Letter of Credit Stock Purchase Percentage is set forth on
Schedule A. From time to time, upon approval by the Board of
Directors, the Letter of Credit Stock Purchase Percentage may be
adjusted to as high as three percent (3.0%) or to as low as zero
percent (0.0%). Changes outside this range would constitute an
amendment to this Capital Plan that would require Finance Agency
approval. The initial implementation of the Letter of Credit Stock
Purchase Requirement will be applied on a prospective basis only,
affecting only Letters of Credit issued or renewed on and after the
Effective Date. Any subsequent adjustment in the Letter of Credit
Stock Purchase Percentage may be applied in either of the following
manners:

	 	(1)	 	A change in the Letter of Credit
Stock Purchase Percentage may be applied prospectively,
affecting only Letters of Credit Transacted subsequent to the
change in the Letter of Credit Stock Purchase Percentage, or
	 
	 	(2)	 	A change in the Letter of Credit
Stock Purchase Percentage may be applied retrospectively, in
which case the new Letter of Credit Stock Purchase Percentage
would be applied both to the Letters of Credit outstanding at
the time of such change and to any Letter of Credit subsequent
to the change.

	 	c)	 	Acquired Member Asset Purchase
Requirement. Each Member is required to purchase and hold Capital
Stock in an amount equal to the Bank’s Acquired Member Asset Purchase
Percentage multiplied by the amount of Acquired Member Assets delivered
by that Member and held by the Bank at the time the transaction 

7

 

	 	 	 	occurs
(in the Bank’s discretion, it may recalculate the Member’s Acquired
Member Asset Purchase Requirement from time to time to capture any
reductions in the amount of Acquired Member Assets then being held by
the Bank). The Acquired Member Asset
Purchase Percentage is set forth on Schedule A. From time to time,
upon approval by the Board of Directors, the Acquired Member Asset
Purchase Percentage may be adjusted to as high as six percent (6.0%)
or to as low as zero percent (0.0%). Changes outside this range
would constitute an amendment to this Capital Plan that would require
Finance Agency approval. Adjustments made to the Bank’s Acquired
Member Asset Purchase Percentage, if any, shall be applied in
accordance with the following:

	 	(1)	 	Any increase in the Acquired
Member Asset Purchase Percentage shall be applied only on a
prospective basis, i.e., affecting only master commitments
entered into between a Member and the Bank subsequent to such
increase in the Acquired Member Asset Purchase Percentage.

	 	(a)	 	Any Acquired Member Assets delivered to the Bank
under a master commitment made prior to an increase in
Acquired Member Asset Purchase Percentage shall be
subject to the lower Acquired Member Asset Purchase
Percentage, if any, that had been in effect at the time
that master commitment was originally accepted by the
Bank.

	 	(2)	 	Any decrease in the Acquired Member Asset Purchase
Percentage may, in the sole discretion of the Bank, be applied
either retrospectively, affecting all Acquired Member Assets
previously delivered and held by the Bank or to be delivered
under existing master commitments, or prospectively, affecting
only master commitments entered into subsequent to such decrease
in the Acquired Member Asset Purchase Percentage.

	 	d)	 	Membership Asset Value Stock Purchase
Requirement. Each Member is required to purchase and hold Capital
Stock in an amount equal to the Membership Asset Value Percentage
multiplied by the principal amount of its Membership Asset Value, with
each Member’s Membership Asset Value Stock Purchase Requirement subject
to any dollar cap set by the Bank’s Board from time to time within the
range of $5 to $100 million inclusive. The amount of the Membership
Asset Value Stock Purchase Requirement shall be calculated and
recalculated annually (no later than April 10 of each year) using
financial data from the prior calendar year-end; provided that the
initial calculation shall be completed on the later of April 30, 2010
or the Effective Date. In its discretion, the Bank may recalculate any
Member’s Membership Asset Value Stock Purchase Requirement more
frequently for a bona fide business purpose, using the most recently
available financial data. The Bank shall also

8

 

	 	 	 	recalculate each
Member’s Membership Asset Value Stock Purchase Requirement for any
adjustment to the Membership Asset Value Percentage within the
authorized ranges described below. The current Membership Asset Value
Percentage is set forth on Schedule A. From time to time, upon
approval by the Board of Directors, the
Membership Asset Value Percentage may be adjusted to as high as one
percent (1.00%) or to as low as one twentieth percent (.05%). Changes
outside this range would constitute an amendment to this Capital Plan,
which would require Finance Agency approval. An adjustment in the
Membership Asset Value Percentage will be applied to the principal
amount of the Member’s Membership Asset Value for all future
calculations.

	 	3.	 	Excess Stock Investment. A Member may hold Excess
Stock to the extent it has the legal authority under applicable statutes and
regulations, subject to the following:

	 	a)	 	Repurchase. With Notice to Members of
at least one (1) Business Day, the Bank, in its sole discretion, may
elect to Repurchase Excess Stock shares at any time. The Bank will
Repurchase Excess Stock from all Members on a pro rata basis (provided,
however, in the event a Member has given Written Notice of its intent
to redeem Excess Stock, the Bank may, in its sole discretion,
Repurchase the Excess Stock of that Member as set forth below). The
effect of Repurchasing Capital Stock by the Bank is to retire such
shares.
	 
	 	b)	 	Redemption. A Member may, at its
discretion, request a Redemption of Capital Stock by providing Written
Notice. A Member may request a Redemption of some or all of its
Capital Stock in accordance with the Redemption terms of this Capital
Plan. The five- (5) year Redemption period commences upon the receipt
of the Written Notice that specifies the number of shares to be
redeemed or, if applicable, when the Redemption period is deemed to
commence pursuant to Section III.H.1.c below. Following Written Notice
of a Member’s intent to redeem shares, but prior to actual Redemption,
the Bank may, in its sole discretion, elect to Repurchase those Excess
Stock shares for which it has already received a Redemption request.
In the event that multiple Redemption requests are pending, the Bank
may, in its sole discretion, elect to Repurchase Excess Stock on a pro
rata basis or according to the order in which the Redemption requests
were received by the Bank, or according to another allocation method as
necessary to maintain ongoing compliance with the Capital Regulation.
The effect of Redeeming Excess Stock shares by the Bank is to retire
such shares. A request by a Member (whose Membership has not been
terminated) to redeem Capital Stock shall automatically be cancelled if
the Bank is prevented from redeeming the Member’s Capital Stock because
such redemption would cause the Member to fail to meet its Minimum
Member Stock Investment. The effective date of the automatic

9

 

	 	 	 	cancellation shall be five (5) business days after the expiration of
the applicable Redemption notice period.
	 
	 	 	 	If at any time more than one Member has outstanding one or more
Redemption requests for which the respective request periods have
expired, and if the Redemption by the Bank of all shares of Capital
Stock subject to such Redemption requests would cause the Bank to
fail to be in compliance with the Capital Regulation or the Bank is
subject to the limitations referenced in subsection 3.c. below, then,
the Bank shall fulfill such Redemption requests as the Bank is able
to do so from time to time beginning with such Redemption requests as
to which the Redemption period expired on the earliest date and
fulfilling such Redemption requests relating to that date on a pro
rata basis until fully satisfied, and then, fulfilling such
Redemption requests as to which the Redemption request period has
expired on the next earliest date in the same pro rata manner, and
continuing in that order until all such Redemption requests as to
which the Redemption request period has expired have been fulfilled.
	 
	 	c)	 	Limitation on Repurchase and
Redemption. The Repurchase and Redemption of Capital Stock will be
subject to the applicable restrictions set forth in 12 C.F.R. sections
931.7, 931.8 and 12 C.F.R. Part 1229. The Bank’s discretion to
Repurchase Excess Stock and a Member’s right to the Redemption of its
Excess Stock may be impaired by these regulatory requirements.

	 	C.	 	Adjustments to Minimum Amount

	 	1.	 	Member Acceptance. Each Member is required to comply
with any changes adopted in the Bank’s Capital Plan, including any adjustments
made by the Board of Directors that may lead to an increase in a Member’s
Minimum Member Stock Investment. In order to effectuate the sale of additional
Capital Stock required due to such changes in terms, the Bank is authorized to
issue Capital Stock in the name of a Member and to withdraw appropriate payment
from the Member’s Demand Deposit Account.
	 
	 	2.	 	Prior Notice. The Bank shall provide at least fifteen
(15) days’ Notice to Members prior to implementing any adjustment to the Member
Loan Stock Purchase Percentage, Letter of Credit Stock Purchase Percentage,
Membership Asset Value Percentage, or Acquired Member Asset Purchase Percentage
if doing so affects the total Minimum Member Stock Investment of the Member.
The Bank shall implement the adjustments on the date stated in the Notice to
Members.

10

 

	III.	 	Par Value, Rights, Terms, and Preferences of Capital Stock

	 	A.	 	Par Value. The par value of Capital Stock shall be $100. The Capital Stock shall
be issued, redeemed and repurchased at par value.
	 
	 	B.	 	Ownership. The retained earnings, surplus, undivided profits and equity
reserves, if any, of the Bank are owned by the holders of Capital Stock proportionate
to their ownership of all outstanding shares of Capital Stock. The holders of Capital
Stock shall have no right to receive any portion of these items, however, except
through the declaration of a dividend or capital distribution approved by the Board of
Directors or through liquidation of the Bank.
	 
	 	C.	 	Limitations. The Bank may only issue Capital Stock in accordance with this
Capital Plan and the Capital Regulation. The Bank may only issue Capital Stock to
Members and only Members, former Members that are required to hold Capital Stock after
their membership has terminated in order to support outstanding Loans from the Bank and
other transactions with the Bank, and entities that acquire Members such as through
mergers or consolidations, but which themselves are not Members, may hold Capital
Stock.
	 
	 	D.	 	Dividends. Dividends are to be declared and paid on Capital Stock from time to
time as determined by the Bank’s Board of Directors, and are non-cumulative with
respect to payment obligation and are not to exceed the sum of current net earnings
plus net earnings previously retained by the Bank. The Board of Directors may declare
and pay dividends on Capital Stock provided the Bank’s capital position is not below
its Minimum Regulatory Capital Requirement nor will it be below its Minimum Regulatory
Capital Requirement subsequent to the payment of the dividend and provided that such
payment is not subject to restriction or prohibition pursuant to 12 C.F.R. 932 and 12
C.F.R. Part 1229.
	 
	 	E.	 	Redemption. Capital Stock shares are redeemable for cash at par value
following five (5) years’ prior Written Notice; however, a Member may not have pending
at any one time more than one Redemption request for the same share of Capital Stock.
	 
	 	F.	 	Cancellation of Redemption. In the event a Member, having previously notified
the Bank in writing of its intent to redeem some or all of its Capital Stock, wishes to
cancel its Redemption request before the completion of the five- (5) year notification
period, it may elect to do so by providing Written Notice to the Bank of its intent to
cancel its Redemption request. The Bank will impose a Redemption Cancellation Fee on
the Member that either voluntarily or involuntarily cancels its Redemption request;
provided, however, the Bank may waive the fee for a bona fide business purpose
consistent with section 7(j) of the Bank Act. The Redemption Cancellation Fee is the
fee in effect at the time the Member provides Written Notice of cancellation. The
Member has ten (10) business days from the date the Bank sends the Notice to Member of
the amount of the Cancellation Fee to provide Written Notice of its intent to revoke
the cancellation and to proceed with the Redemption of the Capital Stock it previously
sought to redeem according to the original Redemption timetable, thereby avoiding the
Redemption Cancellation Fee. The Redemption

11

 

	 	 	 	Cancellation Fee is calculated by taking the percentage set forth on Schedule A and
multiplying it against the par value of the Capital Stock subject to the notice of
Redemption. The Redemption Cancellation Fee percentage may be adjusted at the
discretion of the Board of Directors to as high as five percent (5.0%) and to as low
as zero percent (0.0%).
	 
	 	G.	 	Limited Transferability. A Member may only transfer any Excess Stock of the
Bank it holds to another Member of the Bank or to an institution that has been approved
for Membership in the Bank and that has satisfied all conditions for becoming a Member,
other than the purchase of the minimum amount of Capital Stock that it is required to
hold as a condition of Membership. Any such Capital Stock transfers shall be at par
value and shall be effective upon being recorded on the appropriate books and records
of the Bank. Capital Stock may only be traded between the Bank and its Members.
	 
	 	H.	 	Termination of Membership. The following terms pertain to the termination of a
Member’s Membership in the Bank.

	 	1.	 	Voluntary Withdrawal.

	 	a)	 	A Member may withdraw from Membership by
providing the Bank Written Notice of its intent to withdraw. A Member
may cancel its notice of withdrawal at any time prior to its effective
date by providing the Bank Written Notice of such cancellation. The
Bank will impose a fee on a Member that cancels a notice of withdrawal;
provided, however, the Bank may waive the fee for a bona fide business
purpose consistent with section 7(j) of the Bank Act. The Membership
Withdrawal Cancellation Fee is the fee in effect at the time the Member
provides Written Notice of cancellation. The Member has ten (10)
business days from the date the Bank sends the Notice to Member of the
amount of the Membership Withdrawal Cancellation Fee to provide Written
Notice of its intent to revoke the cancellation, thereby avoiding the
Membership Withdrawal Cancellation Fee. The Membership Withdrawal
Cancellation Fee is calculated by taking the percentage set forth on
Schedule A and multiplying it against the par value of the Capital
Stock held by the Member. The Membership Withdrawal Cancellation Fee
percentage may be adjusted at the discretion of the Board of Directors
to as high as five percent (5.0%) and to as low as zero percent (0.0%).
	 
	 	b)	 	The Membership of a Member that has submitted a
Written Notice of withdrawal shall terminate as of the date on which
the last of the applicable Capital Stock Redemption periods ends for
the Capital Stock comprising the Member’s Membership Stock Purchase
Requirement, as of the date the Written Notice of withdrawal is
submitted, unless the Member has cancelled its notice of withdrawal
prior to that date.
	 
	 	c)	 	The receipt by the Bank of Written Notice of
withdrawal shall commence the five- (5) year Redemption period for the
Capital

12

 

	 	 	 	Stock held by the Member that is not already subject to a pending
request for Redemption. With respect to any additional shares of
Capital Stock that such Member is required to purchase to meet its
Membership Stock Purchase Requirement (the Membership Asset Value
Stock Purchase Requirement) during the five- (5) year withdrawal
period, the Redemption period for such additional shares of Capital
Stock shall be deemed to commence on the date of each such purchase
of additional shares, as to the specific shares so purchased. This
provision shall apply retrospectively and prospectively. In the case
of a Member whose Membership has been terminated as a result of a
merger or other consolidation into a non-member or a member of
another Federal Home Loan Bank, the Redemption period for any Capital
Stock that is not already subject to a pending request for Redemption
shall be deemed to commence on the date on which the charter of the
former Member is cancelled.
	 
	 	d)	 	No Member may withdraw from Membership unless,
on the date the Membership is terminated, there is in effect a
certification from the Finance Agency that the withdrawal of a Member
will not cause the Bank System to fail to satisfy its REFCORP
Obligations.

	 	2.	 	Involuntary Terminations. The Board of Directors of
the Bank has the right to terminate the Membership of any Member that: 1) fails
to comply with any requirement of the Bank Act, Finance Agency Regulations, or
the Capital Plan; 2) becomes insolvent or otherwise subject to the appointment
of a conservator, receiver, or other legal custodian under federal or state law
or 3) would jeopardize the safety and soundness of the Bank if it were to
remain a Member.

	 	a)	 	The five- (5) year Redemption period for all
the Capital Stock owned by the Member and not already subject to a
pending request for Redemption shall commence on the date the Bank
terminates the Member’s Membership.
	 
	 	b)	 	Notwithstanding any other provision of this
Capital Plan, in the event that (1) a conservator or a receiver has
been appointed for a Member, and (2) the Bank has terminated the
Member’s Membership, then that Member’s Membership Asset Value Stock
Purchase Requirement shall be zero.

	 	3.	 	Liquidation of Capital Stock. If an institution ceases
to be a Member of the Bank for any reason, the Bank shall require the
institution to continue to hold the Capital Stock necessary to support the
Loans outstanding, Letters of Credit outstanding and/or Acquired Member Assets
under the terms of the Capital Plan in effect at that time. Upon the repayment
of outstanding indebtedness to the Bank, including, without limitation, any
Principal Prepayment Fees and settlement of the Member’s risk sharing
obligations under any Acquired Member Asset program, the Capital Stock that was
necessary to support the Loans, Letters of Credit and/or Acquired Member Asset
program shall become Excess Stock subject to Repurchase

13

 

	 	 	 	by the Bank in its discretion and the five- (5) year Redemption period for
such shares shall be deemed to commence on that date as well.
	 
	 	4.	 	Liquidation of Indebtedness. The Bank will liquidate
the indebtedness of any institution that ceases to be a Member in an orderly
manner according to a schedule established by the Bank in its sole discretion.
The Bank may require the immediate repayment of all indebtedness, in which case
the Member shall be subject to any applicable Principal Prepayment Fees. In
the alternative, and in the Bank’s sole discretion, the Bank may allow the
institution to continue to hold on to any indebtedness for any length of period
up to and including maturity.

	 	I.	 	Voting Rights. The voting rights associated with Capital Stock are defined
herein. The voting rights associated with the election of directors are governed by
Part 1261 of the Finance Agency Regulations. There shall be no voting preferences for
any share of Capital Stock.
	 
	 	J.	 	Rights in Bank Merger. In the event the Bank merges with or consolidates into
another Home Loan Bank, the Member will be entitled to the rights and benefits set
forth in the agreement of merger approved by the Board of Directors of each Home Loan
Bank and the Finance Agency.
	 
	 	K.	 	Rights in Bank Liquidation. In the event the Bank is liquidated, the Member
will be entitled to the rights and benefits granted to it by the Finance Agency and/or
the United States Congress.

	IV.	 	Process for Amending this Plan

	 	1.	 	General. In order to safeguard the ability to serve its Members and
protect their capital investment, accommodate changes in the Bank’s product or
business mix and maintain compliance with the Capital Regulation, from time to
time this Plan may be amended. Capital Plan amendments may be made as follows:

	 	a)	 	Board of Directors. Upon a simple
majority vote of all of the individual members of the Board of
Directors, not just a simple majority vote of a quorum, a request to
amend this Capital Plan may be submitted to the Finance Agency. The
effective date(s) for any proposed change(s) to the terms of this
Capital Plan shall be contained in any amendment request as submitted
to the Finance Agency.
	 
	 	b)	 	Shareholder Notification. The Bank
will provide Notice to Members of any request submitted to the Finance
Agency to amend this Capital Plan at least thirty (30) days prior to
the effective date of any such requested amendment.
	 
	 	c)	 	Finance Agency. To become effective,
any amendment to this Capital Plan must be approved by the Finance
Agency.

14

 

	V.	 	Definitions

	 	 	Certain terms used within this Capital Plan are defined as follows:

Acquired Member Asset means the outstanding principal balance of assets
purchased or funded by the Bank from a Member or Housing Associate pursuant to Part
955 of the Rules and Regulations of the Finance Agency.

Acquired Member Asset Purchase Percentage means the percentage set by the
Board of Directors from time to time that determines how much Capital Stock a Member
must purchase in relationship to the outstanding principal balance of Acquired
Member Assets delivered by a Member and held by the Bank.

Acquired Member Asset Purchase Requirement means the Activity-Based Stock
Purchase Requirement based upon Acquired Member Assets as specified in this Plan.

Activity-Based Member Stock Purchase Requirement means a stock purchase
requirement under which a Member must acquire a specific amount of Capital Stock as
a function of the volume of a particular product or service provided to that Member
by the Bank.

Bank means the Federal Home Loan Bank of Pittsburgh.

Bank Act means the Federal Home Loan Bank Act, as amended, 12 U.S.C. 1421
through 1449.

Bank System means the 12 Federal Home Loan Banks and the Federal Home Loan
Banks Office of Finance.

Board of Directors means the Board of Directors of the Bank.

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

Capital Plan means the amended Capital Plan adopted by the Board of
Directors on August 27, 2009 and approved by the Finance Agency pursuant to the
Capital Regulation.

Capital Regulation means Subchapter E of Chapter IX of Title 12 of the Code
of Federal Regulations.

Capital Stock means “Class B Stock” as defined by the Bank Act and Capital
Regulation.

Excess Stock means that amount of Capital Stock held by a Member in excess
of its Minimum Member Stock Investment as required by this Capital Plan.

15

 

Federal Home Loan Bank means one of the 12 Federal Home Loan Banks other
than the Bank.

Finance Agency means the Federal Housing Finance Agency as successor to the
Federal Housing Finance Board, or any successor agency to the Finance Agency.

Finance Agency Regulations mean Chapter IX and Chapter XII of Title 12 of
the Code of Federal Regulations, as may be amended from time to time which may also
be referred to as the Rules and Regulations of the Federal Housing Finance Agency
and includes the Rules and Regulations of the Federal Housing Finance Board, the
predecessor agency to the Finance Agency.

Housing Associate means an entity that has been approved as a nonmember
mortgagee pursuant to Part B of Part 950 of the Code of Federal Regulations.

Letter of Credit means the outstanding amount of a Member’s standby letters
of credit with the Bank as defined in Section 960.1 of the Finance Agency
Regulations.

Letter of Credit Stock Purchase Percentage means the percentage set by the
Board of Directors from time to time that determines how much Capital Stock a Member
must purchase in relationship to the Member’s Letters of Credit from the Bank.

Letter of Credit Stock Purchase Requirement means the Activity-Based Capital
Stock Purchase Requirement based upon Letters of Credit as defined in this Plan.

Loan means the outstanding principal balance of an advance, as defined in
Section 900.2 of the Finance Agency Regulations.

Member means an institution that has been approved for Membership in the
Bank and that has satisfied its Minimum Member Stock Investment requirement.

Member Demand Deposit Account means one or more demand deposit accounts
maintained with the Bank and which are subject to the terms and conditions of the
Bank’s Demand Deposit Account Agreement.

Member Loan Stock Purchase Percentage means the percentage set by the Board
of Directors from time to time that determines how much Capital Stock a Member must
purchase in relationship to its outstanding Loans from the Bank.

Member Loan Stock Purchase Requirement means the Activity-Based Capital
Stock Purchase Requirement based upon Loans as specified in this Plan.

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

Membership Assets means all of the assets of the Member (other than Capital
Stock) of a type that may qualify as collateral security for the Member under the
Bank Act or the Finance Agency Regulations. (Assets deemed to be Membership Assets
for purposes of calculating a Member’s Membership Asset Stock Purchase

16

 

Requirement may or may not be accepted by the Bank as collateral security for any
particular transaction.)

Membership Asset Factor means the percentage, from zero to one hundred, that
the Bank has assigned to a category or type of asset that may constitute a
Membership Asset of any Member. The Membership Asset Factor assigned to each
category of Membership Assets is set forth in Appendix A.

Membership Asset Value means the sum of the amounts of each category of the
Member’s Membership Assets, as determined by the Bank from the Member’s relevant
regulatory reports and also in the case of affiliate pledge or other additional
specific pledge agreements between the Bank and a Member, the assets pledged as
collateral under any such agreement (to the extent not otherwise included in the
Member’s regulatory or financial reports) multiplied in each case by the Membership
Asset Factor applicable to each such asset category.

Membership Asset Value Percentage means the percentage set by the Board of
Directors from time to time in accordance with Section II.B.2.d.

Membership Asset Value Stock Purchase Requirement serves as the Membership
Stock Purchase Requirement based on the Member’s Membership Asset Value as specified
in this Plan.

Membership Stock Purchase Requirement means the Capital Stock purchase
requirement under which a Member must acquire a specific amount of Capital Stock as
a condition of Membership.

Membership Withdrawal Cancellation Fee means the fee the Bank may impose
upon a Member, which having given notice of its intent to withdraw from Membership,
subsequently revokes that withdrawal notice.

Minimum Member Stock Investment means the minimum amount of Capital Stock
that a Member is required to purchase and hold in order to be a Member and in order
to obtain Loans from the Bank and to engage in other business activities with the
Bank in accordance with this Plan. The Minimum Member Stock Investment shall be the
sum of (a) the Member’s Member Loan Stock Purchase Requirement, plus (b) the Letter
of Credit Stock Purchase Requirement, plus (c) the Acquired Member Asset Purchase
Requirement, plus (d) the Membership Asset Value Stock Purchase Requirement;
provided, however, that in the event that the Member has no outstanding Loans,
Letters of Credit or Acquired Member Assets held by the Bank and the calculation of
the Member’s Membership Asset Value Stock Purchase Requirement is less than $10,000,
then, the Member’s Membership Stock Purchase Requirement shall be deemed to be
$10,000.

Minimum Regulatory Capital Requirement means the minimum regulatory capital
requirement established for the Bank under the Capital Regulation, the Prompt
Corrective Action Regulation or by order of the Finance Agency.

Notice to Members means any written notice from the Bank to the Members
regarding any element of the Capital Plan, and also includes any electronic

17

 

writing related to the Capital Plan, including electronic mail and posting on the
Bank’s public or private Web site.

Plan means the Capital Plan.

Principal Prepayment Fee means the fee charged by the Bank under the
Advances, Collateral Pledge and Security Agreement when a Member pays off a Loan
before maturity.

Prompt Corrective Action or PCA Regulation means Subpart A of Part 1229 of
Chapter XII of Title 12 of the Code of Federal Regulations.

Redemption Cancellation Fee means the fee the Bank may impose upon a Member
who, having given Written Notice of its intent to redeem Capital Stock shares,
subsequently revokes that Redemption request.

Redemption means the acquisition by the Bank of outstanding Capital Stock
from a Member at par value following the expiration of the statutory Redemption
request period.

REFCORP Obligations means the obligations under 12 U.S.C. 1441b(f)(2)(C) to
contribute interest payments owed on obligations issued by the Resolution Funding
Corporation.

Renewal means the extension of a Loan to a Member on the same Business Day
that a Member repays a Loan in full where the new Loan is in the same amount, has
the same term to maturity, same interest rate type, and other features (with the
exclusion of the actual interest rate) as the repaid Loan.

Repurchase means the acquisition by the Bank of Excess Stock of a Member by
the Bank exercising its discretion to repurchase on the Bank’s own initiative from
time to time or prior to the expiration of the statutory Redemption period all as
set forth in II.B.3.

Transacted means the origination, repayment, termination, or renewal of a
Loan or Letter of Credit.

Written Notice means a letter or other business writing, signed by an
officer of the Member, sent by certified mail, return receipt requested, to the
Bank’s Corporate Secretary at the Bank’s home office, currently 601 Grant Street,
Pittsburgh, Pennsylvania, 15219.

18

 

SCHEDULE A

In Effect As Of July 1, 2010

	 	 	 

	Member Loan Stock Purchase Percentage
	 	4.60%
	Letter of Credit Stock Purchase Percentage
	 	1.60%
	Membership Asset Value Percentage
	 	.35%
	Acquired Member Asset Stock Purchase Percentage
	 	4%
	Cap on Membership Asset Value Stock Purchase Requirement
	 	$45 million
	Redemption Cancellation Fee
	 	2%
	Membership Withdrawal Cancellation Fee
	 	2%

19

 

APPENDIX A

Membership Asset Value Factors

	 	 	 
	Membership Assets
	 	Factors

	US Treasury Securities
	 	97%
	US Agency Securities
	 	97%
	US Agency MBS
	 	95%
	Non-Agency MBS
	 	75%
	1-4 Family Residential First Mortgage Loans
	 	75%
	Multi-family Mortgage Loans
	 	60%
	1-4 Family Residential Second Mortgage Loans
	 	50%
	Home Equity Lines of Credit
	 	50%
	Commercial Real Estate Loans
	 	50%
	Farmland Loans
	 	50%
	1-4 Family Residential Construction Loans
	 	40%
	Other (nonresidential) Construction Loans
	 	35%
	Small Business Loans
	 	40%
	Small Farm Loans
	 	40%
	Small Agribusiness Loans
	 	40%

20

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