Document:

exv10w1

 

Exhibit 10.1

Federal Home Loan Banks P&I Funding and Contingency Plan Agreement

This Federal Home Loan Banks P&I Funding and Contingency Plan Agreement (“Agreement”) is
entered into as of this 20th day of July, 2006 (the “Effective Date”) by and
among the Office of Finance (the “OF”) and each of the Federal Home Loan Banks
(“Banks”). The OF and the Banks are sometimes referred to herein individually as a “party”
and collectively as the “parties.” All references in this Agreement to any of the parties to this
Agreement include such party or any successor entity.

WHEREAS, the Banks are jointly and severally liable for the payment of consolidated obligations
issued pursuant to Section 11 of the Federal Home Loan Bank Act, as amended (12 U.S.C. §1431)
(“COs”);

WHEREAS, the OF has the authority under 12 CFR § 985.6(a) to issue and service (including making
timely payments on principal and interest due, subject to 12 CFR §§ 966.8 and 966.9) consolidated
obligations issued on behalf of the Banks pursuant to, and in accordance with, the policies and
procedures established by the OF Board of Directors; and

WHEREAS, the Federal Reserve Board has announced a change in its Policy Statement on Payments
System Risk (as the same may be amended, modified or supplemented, the “PSR Policy”) that
will cause the PSR Policy to be applied to the FHLBanks beginning July 20, 2006; and

WHEREAS, the OF and a task force of the Debt Management Sub-Committee of the Financial Officers’
Conference of the Banks have developed P&I Funding and Contingency Plan Procedures (as the same may
be amended, modified, or supplemented, the “Procedures”) to deal with the possibility that
a Bank may not make a payment of debt service on COs to the OF on a timely basis following the
application of the PSR Policy to the Banks; and

WHEREAS, the OF Board of Directors has approved the Procedures and determined that the OF should
obtain the written agreement of the Banks on several matters relating to the Procedures, which
matters are included in this Agreement; and

WHEREAS, the Federal Housing Finance Board (the “Finance Board”) has supported the adoption
of the Procedures by issuing the waiver attached hereto as Exhibit A (as the same may be
amended, modified or supplemented, the “Waiver”) of its prohibition of the direct placement
of COs with FHLBanks contained in 12 CFR § 966.8(c), to accommodate the implementation of the
Procedures, based in part on its view that timely payment of all principal and interest to
investors in COs is essential to maintain the confidence of investors and potential investors in
COs; and

WHEREAS, the Waiver provides that the interest rate paid by the Bank that has not remitted all the
funds to the OF by the agreed upon deadline on the CO issued pursuant to the Waiver shall be at
least 500 basis points above the federal funds rate.

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NOW THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable
consideration, the receipt and sufficiency of which the parties acknowledge, the parties hereby
agree as follows:

     1. Authorization of Issuance of COs

Each Bank agrees that if it is a “Delinquent Bank” (as defined below), the OF may cause one or more
overnight “Plan COs” (as defined below) to be issued on behalf of the Delinquent Bank for the
benefit of one or more “Contingency Banks” (as defined below), each such Plan CO to be issued to a
Contingency Bank in the principal amount equal to the amount of funds provided by that Contingency
Bank on behalf of that Delinquent Bank, to mature on the following Business Day (as defined below),
and to bear interest on such principal amount from the date of issuance to but not including that
maturity date, due and payable on that maturity date, at the rate per annum (the “Base
Cost”) equal to (a) the overnight fed funds quote obtained by the OF from a recognized funds
broker to be paid for any available funds delivered to the OF by a Contingency Bank or withheld
from its “positive net position” as described in Section 2 of this Agreement or (b) the actual cost
if funds are purchased by that Contingency Bank in the open market and delivered to the OF. All
such interest shall be calculated on an actual/360 basis based on the number of days the Plan CO is
outstanding, including non-Business Days. The Delinquent Bank shall also be obligated to pay
“Additional Interest” as set forth in Section 3 of this Agreement, all or a portion of which will
satisfy the obligation of the Delinquent Bank under the Waiver to pay an interest rate on the Plan
CO that is at least 500 basis points above the federal funds rate.

The OF shall issue a Plan CO in physical form under those circumstances and apply the proceeds
therefrom on behalf of that Delinquent Bank as provided for in the Procedures. Each Bank hereby
authorizes the OF, and the OF hereby agrees, to hold any Plan COs issued as agent for each such
Bank when it acts as a Contingency Bank.

For purposes of this Agreement,

a “Delinquent Bank” means a Bank that misses any funding time specified in the
Procedures, including a funding time for the repayment of Plan COs; and

a “Plan CO” means a CO issued on behalf of a Delinquent Bank to one or more
Contingency Banks. For the avoidance of doubt, although a Delinquent Bank is primarily
responsible for repayment of a Plan CO issued on its behalf, each Plan CO is the joint and
several obligation of all 12 Banks; and

a “Contingency Bank” means any Bank that provides funds for a Delinquent Bank under
the Procedures; and

“Business Day” means any day other than (i) a Saturday, (ii) a Sunday or (iii) any
day on which banking institutions in New York City are authorized or required by law or
executive order to close.

2

 

     2. Use of Proceeds to Purchase COs

Each Bank shall be obligated to provide and authorizes the OF to apply any “positive net position”
(i.e., the amount by which end-of-day proceeds received by a Bank from sale of COs on one day
exceed payments by that Bank on COs on the same day) of that Bank to the purchase of a Plan CO
issued on behalf of a Delinquent Bank, thereby causing such Bank to become a Contingency Bank,
based on the priority established in the matrix attached hereto as Exhibit B
(“Contingency Funding Matrix”) and otherwise in accordance with the Procedures.

     3. Additional Interest

Each Bank agrees that if it is a Delinquent Bank, then it will pay an amount (“Additional
Interest”) in accordance with the following schedule in addition to interest equal to the Base
Cost:

	 	 	 
	1st offense

	 	- 500 basis points per annum of the delinquent amount
	2nd offense

	 	- 750 basis points per annum of the delinquent amount
	3rd and
subsequent offense

	 	- 1,000 basis points per annum of the delinquent amount

The Additional Interest will be calculated on an actual/360 basis based on the actual number of
days the related Plan CO is outstanding, including non-Business Days, from the date of issuance to
but excluding the stated maturity date. For purposes of this calculation, Additional Interest
attributable to a delinquent amount that is not related to the principal amount of a Plan CO (i.e.,
because the Delinquent Bank pays all or a portion of its delinquent amount after a deadline but
before a Contingency Bank is entitled to have a Plan CO issued for its benefit on behalf of the
Delinquent Bank with respect to such amount) will be assessed on that delinquent amount assuming
that a Plan CO was issued with a principal amount equal to that delinquent amount and that the Plan
CO would mature on the next Business Day.

For purposes of calculating Additional Interest, each different time deadline established under the
Procedures will accrue its own separate count of the number of offenses, so that a Delinquent Bank
will pay a separate amount for each such time deadline missed, and the step-up in Additional
Interest for the occurrence of a particular offense will only be measured with regard to offenses
that have occurred within the 36-month period ending on the date of that particular offense (the
“Delinquency Measurement Period”). For example, if a Delinquent Bank twice misses a
morning deadline and once misses an afternoon deadline, all as established under the Procedures,
within a Delinquency Measurement Period, then the Delinquent Bank shall have been subject to
Additional Interest of 500 basis points with respect to the first morning deadline missed,
Additional Interest of 750 basis points with respect to the second morning deadline missed, and
Additional Interest of 500 basis points with respect to the afternoon deadline missed.

Each Bank agrees that (i) for each Plan CO issued, the first 100 basis points of the Additional
Interest shall be assessed against the Delinquent Bank for the benefit of the Contingency Bank that
purchased the Plan CO as provided in Section 1 of this

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Agreement, and the balance of the Additional Interest assessed against the Delinquent Bank (i.e.,
400 basis points, 650 basis points, or 900 basis points) will be divided equally among the Banks
(including the Contingency Banks) that are not Delinquent Banks with respect to the same funding
time specified in the Procedures and (ii) for Additional Interest attributable to a delinquent
amount that is not related to a Plan CO, the Additional Interest will be divided equally among the
Banks that are not Delinquent Banks with respect to the same funding time specified in the
Procedures. Each of the Banks and the OF agree that any Additional Interest will be allocated and
paid through the monthly assessment from the OF, and that the Additional Interest is not the joint
and several obligation of the Banks.

Notwithstanding anything in this Section 3 or Section 7(a) or (b) of this Agreement to the
contrary, and subject to Sections 5(a) and (d) below, each Bank agrees that assessment of the
Additional Interest shall be subject to the appellate process contained in the Procedures and that
the OF shall have the authority to waive all or any portion of the Additional Interest or excuse
the occurrence of any offense as provided for in the Procedures. To the extent permitted under the
Waiver, the assessment of Additional Interest shall be suspended pending completion of the
appellate process.

     4. Reallocation of COs

Each Bank agrees that if a Bank is a Delinquent Bank, with respect to each Plan CO issued to a
Contingency Bank on behalf of a Delinquent Bank, each Bank that is a “Reallocation Bank” (as
defined below) shall immediately have the obligation to purchase that Reallocation Bank’s “Pro Rata
Share” (as defined below) of such Plan CO from that Contingency Bank, with such obligation to
purchase being effective immediately upon the issuance of the Plan CO , subject to the proviso in
the following paragraph.

Each Bank agrees that if it is a Reallocation Bank, it will wire to the Contingency Bank that
holds a Plan CO an amount equal to (i) its Pro Rata Share of the principal amount of that Plan CO,
plus (ii) accrued interest thereon from the date of issue of the Plan CO until its stated maturity
date equal to the Base Cost, not later than 1:00 p.m., Eastern Time, on the second Business Day
following the date of issuance of that Plan CO; provided, however, that such Reallocation
Bank shall not be required to wire funds to the extent that it determines in good faith such
purchase will violate any rule, regulation or binding policy of the Finance Board, and under those
circumstances such Reallocation Bank shall be excused from its obligation to make such payment to
the Contingency Bank, but not from its joint and several obligation, with respect to such Plan CO.
The wire shall be sent to the account identified by the Contingency Bank for that purpose, and time
is of the essence with respect to the wire. In the event there are multiple Plan COs issued on a
particular date, Reallocation Banks shall not favor any Contingency Bank over any other Contingency
Bank, and shall purchase its Pro Rata Shares of such Plan COs on a proportional basis. To the
extent that a Plan CO is repaid prior to the settlement of a Reallocation Bank’s obligations to
purchase its Pro Rata Share, that Pro Rata Share shall be reduced proportionally by the amount so
repaid.

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Each Contingency Bank shall promptly notify the OF of its receipt of payment of the Pro Rata Share
amounts from the Reallocation Banks. Promptly following receipt of that notice and confirmation of
the payment from the Reallocation Banks, the OF shall cancel such original outstanding physical
Plan CO and shall reissue replacement physical Plan COs with the principal amounts representing the
respective Pro Rata Shares of the Reallocation Banks that have paid for their purchase of the Plan
CO, along with a Plan CO representing the balance of the principal amount of the original Plan CO
that is retained by the Contingency Bank. Each such reissued Plan CO remains a “Plan CO” for
purposes of this Agreement and the Procedures, but a Reallocation Bank will not be treated as the
Contingency Bank with respect thereto. Each Bank hereby authorizes the OF, and the OF hereby
agrees, to hold any such reissued Plan COs payable to such Bank as agent for such Bank’s benefit,
and to pay debt service on such CO to the record owner of such Plan CO as reflected on the OF’s
books following reissuance.

For purposes of this Section,

          a “Reallocation Bank” with respect to a Plan CO means each Bank other than (i) any
Delinquent Bank on behalf of which that Plan CO or any other Plan CO was originally issued on the
same date, and (ii) the Contingency Bank that owns that Plan CO;

          “Pro Rata Share” of a Reallocation Bank means a fraction, the numerator of which is
the total amount of outstanding COs for which the Reallocation Bank is primary obligor as of the
Most Recent Measurement Date, and the denominator of which is the total amount of outstanding COs
for which all Reallocation Banks and the Contingency Bank are primary obligor as of the Most Recent
Measurement Date; and

          “Most Recent Measurement Date” means the most recent month-end data calculated by the
OF and available on the OF’s Debt Servicing System, which amount is not adjusted for inter-bank
ownership of COs.

The Banks agree that the provisions of this Section 4 shall not affect the allocation of Additional
Interest pursuant to the fourth paragraph of Section 3 of this Agreement, including without
limitation the allocation of the first 100 basis points of Additional Interest pursuant to such
paragraph to a Contingency Bank that acquired the Plan CO at original issuance.

One or more Contingency Banks and Reallocation Banks may agree among themselves to net their
payments to each other that are due as a result of multiple Plan COs having been issued and subject
to reallocation on the same date.

Each Bank agrees that the formula for determining the Pro Rata Shares has been agreed to by the
Banks solely for the purpose of this Agreement and is not intended to represent an agreed upon
allocation of risk or responsibility for any other purpose.

The provisions of this Section 4 shall survive any termination of this Agreement with respect to
any Plan CO issued prior to such termination.

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     5. Acknowledgements

Each Bank acknowledges and agrees that:

	 	(a)	 	the Base Cost plus the Additional Interest assessed against a Delinquent Bank
may not be lower than the amount required to be paid by the Delinquent Bank under the
Waiver;
	 
	 	(b)	 	the OF shall be required to provide any notice of issuance of a Plan CO
hereunder to the Office of Supervision of the Finance Board, which notice is presently
required by the Waiver to be provided no later than 5:00 P.M. eastern time on the date
of the issuance of the Plan CO;
	 
	 	(c)	 	its agreement in Section 1 of this Agreement with respect to any Plan CO
issued on its behalf as a Delinquent Bank satisfies the regulatory requirement
contained in 12 CFR § 966.8(b) that provides that COs may be offered for sale only in
the event Banks are committed to take the proceeds;
	 
	 	(d)	 	the appellate process referred to in the last paragraph of Section 3 of this
Agreement will be subject to the terms of the Waiver;
	 
	 	(e)	 	no Bank will be entitled to a Plan CO in the amount of any positive net
position except to the extent its end-of-day positive net position is used to purchase
a Plan CO; and
	 
	 	(f)	 	the Additional Interest will be calculated based on the principal amount of
a Plan CO, as well as any other delinquent amount paid late to the OF by the
Delinquent Bank.

     6. Representations and Warranties of the Parties

As of the date of its execution and delivery of this Agreement, each party represents and warrants
to the other parties that:

          (a) This Agreement is within such party’s powers and has been duly authorized by all necessary
corporate action.

          (b) This Agreement has been duly executed and delivered by such party and constitutes a legal,
valid and binding obligation of such party enforceable in accordance with its terms.

     7. Termination and Amendments

          (a) This Agreement will be deemed to be effective as of the Effective Date and will continue
in full force until such time as (i) at least two-thirds (2/3) of the Banks agree to its
termination, (ii) the Finance Board rescinds the Waiver or (iii) the Finance Board takes any
action, including without limitation modification of the Waiver, that

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makes compliance by the OF or the Banks with this Agreement not commercially reasonable.

          (b) This Agreement may be amended only in a signed writing executed and delivered by all of
the Banks and the OF. Any such amendment shall be effective as of the effective date set forth in
the amendment.

          (c) This Agreement shall also be subject to termination at 11:59 p.m. on December 31, 2008,
and at 11:59 p.m. on each third December 31 thereafter (e.g. December 31, 2011, December 31, 2014,
etc.) (“Expiration Time”) if at least one-third
(1/
3) of the Banks provide notice of their
respective election to terminate to each other Bank and the OF at least one year prior to the
Expiration Time. Such notice shall identify with reasonable specificity the reason or reasons such
Bank wishes to terminate the Agreement at the next Expiration Time. The Banks and the OF agree to
negotiate in good faith toward the resolution of the issues raised in the notices of termination
with a view of reaching agreement on a new agreement at or prior to the Expiration Time.

     8. Successors and Assigns

This Agreement shall be binding upon and inure to the benefit of the successors and permitted and
authorized assigns of each Bank and the OF.

     9. Governing Law; Severability

This Agreement shall be governed by the statutory and common law of the United States and, to the
extent federal law incorporates or defers to state law, the laws (exclusive of the choice of law
provisions) of the State of New York. Any term or provision of this Agreement that is determined
to be invalid or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms and provisions of
this Agreement.

     10. Notice

Except for any notices of payment delivered pursuant to Section 4 of this Agreement, which shall be
delivered promptly either telephonically or electronically, any notice required or permitted to be
given or made under this Agreement, including a notice to effect a change in a party’s address for
notice, must be in writing and addressed to the other parties at the addresses of such parties set
forth beneath their signatures below, and will be deemed to be properly given or made on the
earliest of (i) actual delivery, (ii) two (2) Business Days after being sent, with delivery charges
paid by the sending party, by a nationally recognized commercial courier service for delivery on
the next Business Day, and (iii) three (3) Business Days after being sent through the United States
Postal Service, certified mail, return receipt requested, postage prepaid.

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     11. Counterparts

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

     12. Entire Agreement; Conflicts

This Agreement constitutes the entire agreement of the parties and supersedes all prior
understandings or agreements, oral or written, among the parties on the subjects addressed in this
Agreement. Nothing in this Agreement, including without limitation the right of Banks to terminate
it or the right of Banks to withhold approval of an amendment, shall be construed to (i) conflict
with or limit the authority of the OF to carry out its duties pursuant to law, including without
limitation Federal Housing Finance Board regulations; or (ii) alter the Banks’ joint and several
liability on COs, including the Plan COs issued hereunder. This Agreement does not constitute “an
agreement to obtain financial assistance to meet a Bank’s current obligations... due during this
quarter”, a “consolidated obligation payment plan,” an “inter-Bank assistance agreement” or “a
payment on any [CO] on behalf of another Bank” as these terms are used in 12 CFR § 966.9. If any
applicable provision contained in the Procedures irreconcilably conflicts with any express
provision of this Agreement, then such express provision of this Agreement shall control.

     13. No Third Party Rights Created

Nothing in this Agreement shall create or be deemed to create any rights in any third party.

     14. Suspension of Obligations

If the Finance Board issues any order or enters into or amends any written agreement, including
without limitation a written agreement within the meaning of 12 USC § 1422b(a)(5), that prohibits
or prevents a party to this Agreement from either being a party to this Agreement, or from
performing its obligations under this Agreement, after the Effective Date, then that party’s duty
to perform its obligations under this Agreement shall be suspended while such order by or agreement
with the Finance Board is in effect.

[Signature Page to Follow]

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IN WITNESS WHEREOF, this Agreement has been executed, on the date(s) set forth below, as of the day
and year first above written.

	 	 	 	 	 	 	 	 	 
	Federal Home Loan Bank of Atlanta	 	 	 	Federal Home Loan Bank of Boston
	 
	By:

	 	     /s/ W. Wesley McMullan
	 	 	 	President:
	 	/s/ Michael A. Jessee
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	     Name: W. Wesley McMullan	 	 	 	Date: May 23, 2006
	 	 	     Title: Executive Vice President	 	 	 	 
	 	 	 	 	 	 	Address for notice:
	By:	 	     /s/ D. Haddon Foster, II	 	 	 	        111
Huntington Avenue

        Boston, MA 02199
	 

	 	 	 	 	 	 	 	 
	 	 	     Name: D. Haddon Foster, II	 	 	 	 
	 

	 	     Title: First Vice President	 	 	 	 	 	 
	 
	Date: May 23, 2006	 	 	 	 	 	 
	 
	Address for notice:	 	 	 	 	 	 
	1475 Peachtree Street, NE	 	 	 	 	 	 
	Atlanta, GA 30309	 	 	 	 	 	 
	Attention: Director, Financial Management	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	Federal Home Loan Bank of Chicago	 	 	 	Federal Home Loan Bank of Cincinnati
	 
	President:

	 	      /s/ Mike Thomas
	 	 	 	President:
	 	/s/ David H. Hehman
	 

	 	 
	 	 	 	 	 	 
	 
	Date: June 16, 2006	 	 	 	Date: June 16, 2006
	 
	Address for notice:	 	 	 	Address for notice:
	Federal Home Loan Bank of Chicago	 	 	 	Federal Home Loan Bank of Cincinnati
	111 East Wacker Drive	 	 	 	221 East Fourth Street, Suite 1000
	Chicago, Illinois 60601	 	 	 	Cincinnati, OH 45202
	Attention: General Counsel	 	 	 	SVP/Treasurer: 	 	  /s/ Carole L. Cossé
	 	 	 	 	 	 	 	 	 
	Federal Home Loan Bank of Dallas	 	 	 	Federal Home Loan Bank of Des Moines
	 
	President:

	 	     /s/ Terry Smith
	 	 	 	President:
	 	      /s/ Neil N. Fruechte
	 

	 	 	 	 	 	 	 	 
	 
	Date: May 10, 2006	 	 	 	Date: May 11, 2006
	 
	Address for notice:	 	 	 	Address for notice:
	     8500 Freeport Parkway South	 	 	 	     907 Walnut
	     Suite 100	 	 	 	     Des Moines, IA 50309
	     Irving, Texas 75063	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Federal Home Loan Bank of Indianapolis	 	 	 	Federal Home Loan Bank of New York
	 
	President:

	 	     /s/ Martin L. Heger
	 	 	 	President:
	 	      /s/ Alfred A. DelliBovi
	 

	 	 
	 	 	 	 	 	 
	 
	Date: June 1, 2006	 	 	 	Date: May 22, 2006
	 
	Address for notice:	 	 	 	Address for notice:
	     8250 Woodfield Crossing Blvd.	 	 	 	101 Park Avenue, Floor 5
	     Indianapolis, IN 46240	 	 	 	New York, NY
	     Attention: Milton
Miller, CFO	 	 	 	10178-0599

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	Federal Home Loan Bank of Pittsburgh	 	 	 	Federal Home Loan Bank of San Francisco
	 
	President:

	 	     /s/ John R. Price
	 	 	 	President:
	 	     /s/ Dean Schultz
	 

	 	 
	 	 	 	 	 	 
	 
	Date: May 24, 2006	 	 	 	Date: April 27, 2006
	 
	Address for notice:	 	 	 	Address for notice:
	     601 Grant Street	 	 	 	600 California Street, 4th Floor
	     Attn: Capital Markets	 	 	 	San Francisco, California 94108
	     Pittsburgh, PA 15219

	 	 	 	 	 	 	 	 	 
	Federal Home Loan Bank of Seattle	 	 	 	Federal Home Loan Bank of Topeka
	 
	President:

	 	     /s/ James E. Gilleran
	 	 	 	President:
	 	     /s/ Andrew J. Jetter
	 

	 	 
	 	 	 	 	 	 
	 
	Date: May 17, 2006	 	 	 	Date: May 12, 2006
	 
	Address for notice:	 	 	 	Address for notice:
	     1501 Fourth Ave., Ste. 1800	 	 	 	Federal Home Loan Bank of Topeka
	     Seattle, WA 98101-1693	 	 	 	One Security Benefit Place, Suite 100
	 	 	 	 	 	 	Topeka, KS 66606-2444
	 	 	 	 	 	 	Attn: General Counsel

	 	 	 	 	 	 	 	 	 
	Office of Finance	 	 	 	 	 	 
	 
	Managing Director:     /s/ John K. Darr
 	 	 	 	 	 	 
	 

	 	 
	 	 	 
	 
	Date: May 22, 2006	 	 	 	 	 	 
	 
	Address for notice:	 	 	 	 	 	 
	     Two Fountain Square	 	 	 	 	 	 
	     11921 Freedom Drive Suite 1000	 	 	 	 	 	 
	     Reston, VA 20190	 	 	 	 	 	 

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EXHIBIT A

WAIVER

A-1

 

	 	 	 	 	 
	

	 	Number:

Date:
	 	2005-22

December 14, 2005

Federal Housing Finance Board

Waiver Concerning the Direct Placement of Consolidated Obligations

WHEREAS, section 2A of the Federal Home Loan Bank Act (12 U.S.C. § 1422a(a)(3)) requires the
Federal Housing Finance Board (Finance Board) to ensure that the Federal Home Loan Banks (Banks)
remain adequately capitalized and able to raise funds in the capital markets to the extent
consistent with ensuring the safe and sound operation of the Banks;

WHEREAS, timely payment of all principal and interest to investors in consolidated obligations
(COs) is essential to maintain the confidence of investors and potential investors in COs;

WHEREAS, the Federal Reserve Bank of New York will implement procedures that will prevent a Bank or
any other government sponsored enterprise from incurring an overdraft in the accounts at the
Federal Reserve Bank of New York used to pay the principal and interest due on securities;

WHEREAS, the Banks Office of Finance (OF) serves as agent for each Bank in remitting to the Federal
Reserve Bank of New York all funds due for principal and interest payments on COs;

WHEREAS, under 12 C.F.R. §§ 907.2 and 907.6, any party may request a waiver of a provision,
restriction, or requirement of the Finance Board regulations not otherwise required by law if such
waiver is not inconsistent with the law, does not adversely affect any substantial existing rights
and the Finance Board finds that application of the restriction would adversely effect achievement
of the purposes of the Bank Act, or upon a showing of good cause;

WHEREAS, on October 18, 2005, the OF submitted to the Finance Board a request to waive the
prohibition on direct placement of COs in 12 C.F.R. § 966.8(c) when a Bank has not provided to the
OF by the agreed upon deadline all funds for principal and interest payments due that day on COs,
or portions of COs, for which that Bank is the primary obligor; and

WHEREAS, Finance Board staff has reviewed the waiver request and determined that it is consistent
with the Bank Act, for good cause, and raises no legal or safety and soundness concerns if the
waiver is granted pursuant to the terms of this resolution.

NOW, THEREFORE, IT IS RESOLVED that effective July 1, 2006, the Board of Directors hereby waives 12
C.F.R. § 966.8(c) when direct placement of COs is necessary to assure that the Federal Reserve Bank
of New York has sufficient funds to timely pay all principal and interest due that day on COs or
portions of COs;

A-2

 

Resolution Number 2005-22

Page 2 of 2

IT IS FURTHER RESOLVED that the OF must notify the Office of Supervision no later than 5:00 pm,
eastern time, on any day it directly places a CO pursuant to this waiver; and

IT IS FURTHER RESOLVED that the interest rate paid by the Bank that has not remitted all the funds
to the OF by the agreed upon deadline on the CO issued pursuant to this waiver shall be at least
500 basis points above the federal funds rate.

By the Board of Directors

of the Federal Housing Finance Board

/s/ Ronald A. Rosenfeld

                                                                                

Ronald A. Rosenfeld

Chairman

A-3

 

EXHIBIT B

Contingency Funding Matrix

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Priority
	 	 	1	 	2	 	3	 	4	 	5	 	6	 	7	 	8	 	9	 	10	 	11	 	12
	Jan

	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	Feb

	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	Mar

	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	Apr

	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	May

	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	Jun

	 	INDP
	 	CHIC
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	 	DALL
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	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	Jul

	 	CHIC
	 	DSMN
	 	DALL
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	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	Aug

	 	DSMN
	 	DALL
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	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
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	 	CHIC
	Sep

	 	DALL
	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
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	 	CHIC
	 	DSMN
	Oct

	 	TPKA
	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	Nov

	 	SNFR
	 	STTL
	 	BOST
	 	NWYK
	 	PITT
	 	ATLA
	 	CINC
	 	INDP
	 	CHIC
	 	DSMN
	 	DALL
	 	TPKA
	Dec

	 	STTL
	 	BOST
	 	NWYK
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	 	CHIC
	 	DSMN
	 	DALL
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	 	SNFR

B-1exv10w8

 

Exhibit 10.8

THE PRINTRONIX, INC.

2005 STOCK OPTION PLAN

	1	 	PURPOSE
	 
	 	 	This 2005 Stock Option Plan (the “Plan”), is intended to encourage stock ownership
by employees of Printronix, Inc. (the “Corporation”), its divisions and Subsidiary
Corporations, so that they may acquire or increase their proprietary interest in the
Corporation, and to attract persons of training, experience and ability and to encourage
such employees to remain in the employ of the Corporation, its divisions and Subsidiary
Corporations, and to put forth maximum efforts for the success of the business. The Plan
is also intended to encourage directors of the Corporation who are not employees or
officers of the Corporation or its Subsidiary Corporations (“Eligible Directors”) to
acquire or increase a proprietary interest in the Corporation, to further promote and
strengthen the interest of such Eligible Directors in the development and financial
success of the Corporation, and to assist the Corporation in attracting and retaining
highly qualified directors by providing such directors options to purchase shares of
Common Stock. It is further intended that no Option granted pursuant to this Plan shall
constitute an incentive stock option (“Incentive Stock Option”) within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), and all Options
so granted shall constitute nonqualified stock options (“Nonqualified Stock Options”).
	 
	2	 	DEFINITIONS
	 
	 	 	As used in this Plan, the following words and phrases shall have the meanings
indicated:

	 	(a)	 	“CAUSE” used in connection with the termination of employment
or service of a Grantee, shall mean a termination of employment or service of
the Grantee by the Corporation or a division or Subsidiary Corporation due to
(i) the Grantee’s failure to render services in accordance with the terms of
such Grantee’s employment or service, which failure amounts to a material
neglect of such Grantee’s duties, (ii) the commission by the Grantee of an act
of fraud, misappropriation (including the unauthorized disclosure of
confidential or proprietary information) or embezzlement, or (iii) a
conviction of or guilty plea or confession to any felony.
	 
	 	(b)	 	“COMMON STOCK” shall mean shares of the Corporation’s Common
Stock, par value $.01 per share.

 

 

	 	(c)	 	“DISABILITY” shall mean a Grantee’s inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or that
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
	 
	 	(d)	 	“FAIR MARKET VALUE” per share as of a particular date shall
mean (i) the closing sales price per share of Common Stock as reported on the
NASDAQ market system (or if the shares of Common Stock are not then traded on
such system, on the principal national securities exchange on which they are
then traded) for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are not
then traded on a national securities exchange but are traded on an
over-the-counter market, the average of the closing bid and asked prices for
the shares of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in such market,
or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as the
Committee in its discretion may determine.
	 
	 	(e)	 	“GRANTEE” shall mean a person to whom an Option or Restricted
Stock Award has been granted.
	 
	 	(f)	 	“OPTION” shall mean the right, granted to a Grantee pursuant
to Section 3, to purchase a specified number of shares of Common Stock, on the
terms and subject to the restrictions set forth in this Plan and by the
Committee upon the grant of the Option to the Grantee.
	 
	 	(g)	 	“RESTRICTED SHARE” shall mean a share of Common Stock,
awarded to a Grantee pursuant to Section 3, that is subject to the terms and
restrictions set forth in this Plan and by the Committee upon the award of the
Restricted Share to the Grantee.
	 
	 	(h)	 	“RETIREMENT” shall have such meaning as the Committee shall
determine from time to time.
	 
	 	(i)	 	“SUBSIDIARY CORPORATION” shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option or Restricted Stock
Award, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

 

	3	 	ADMINISTRATION
	 
	 	 	The Plan shall be administered by the Compensation/Stock Option Committee (the
“Committee”) of the Board of Directors of the Corporation (the “Board”). The Committee
shall consist of two or more members of the Board, each of whom shall be both an
“outside director” within the meaning of Section 162(m) of the Code and a “nonemployee
director” within the meaning of Rule 16b-3, as from time to time amended (“Rule 16b-3”),
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).
	 
	 	 	The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and to
exercise all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options and make awards of Restricted Shares
(“Restricted Stock Awards” and sometimes collectively with the grant of Options,
“Grants”); to determine the purchase price of the shares of Common Stock covered by each
Option (the “Option Price”); to determine the persons to whom, and the time or times at
which, Options and Restricted Stock Awards shall be granted; to determine the number of
shares to be covered by each Option, and to determine the number of Restricted Shares to
be covered by each Restricted Stock Award; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the agreements (which need not be identical) entered into in connection
with grants of Options (“Option Agreements”) and Restricted Stock Awards (“Restricted
Award Agreements”); and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
	 
	 	 	The determinations of the Committee shall be binding and conclusive on all parties. The
Committee may delegate to one or more of its members or to one or more agents such
administrative duties as it may deem advisable, and the Committee or any person to whom
it has delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under the Plan.
The Committee shall have the authority in its discretion to delegate to specified
officers of the Corporation the power to make Grants, including to determine the terms
of such Grants, and the power to extend the exercisability of Options pursuant to
Section 6(f) or 6(g) hereof, in each case consistent with the terms of this Plan and
subject to such restrictions, if any, as the Committee may specify when making such
delegation; provided that the delegates shall not have authority to make Grants to, or
extend the exercisability of Options held by, such delegates or any Executive Officer
(as defined below in this Section 3).
	 
	 	 	The Board shall fill all vacancies, however caused, in the Committee. The Board may from
time to time appoint additional members to the Committee, and may at any time remove one
or more Committee members and substitute others. One member of the Committee shall be
selected by the Board as chairman. The Committee shall hold its meetings at

 

 

	 	 	such times and places as it shall deem advisable. All determinations of the Committee
shall be made by a majority of its members either present in person or participating by
conference telephone at any meeting or by written consent, except that, with respect to
Grantees who are executive officers of the Corporation within the meaning of Rule 3b-7
promulgated under Section 3 of the Exchange Act (“Executive Officers”), all action of
the Committee shall be taken solely by those members of the Committee who are “outside
directors” and “nonemployee directors” as defined above, even if less than a majority of
the Committee. The Committee may appoint a secretary and make such rules and regulations
for the conduct of its business as it shall deem advisable, and shall keep minutes of
its meetings.
	 
	 	 	No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Grant made hereunder.
	 
	4	 	ELIGIBILITY
	 
	 	 	Options and Restricted Stock Awards may be granted to employees (including, without
limitation, officers who are employees) of the Corporation or its present or future
divisions and Subsidiary Corporations, and to directors (whether or not employees) of
the Corporation or its present or future divisions and Subsidiary Corporations. In
determining the persons to whom Options and Restricted Stock Awards shall be granted and
the number of shares to be covered by each Option, and the number of Restricted Shares
to be covered by each Restricted Stock Award, the Committee shall take into account the
duties of the respective persons, their present and potential contributions to the
success of the Corporation and such other factors as the Committee shall deem relevant
in connection with accomplishing the purpose of the Plan. A person to whom an Option has
been granted hereunder is sometimes referred to herein as an “Optionee”.
	 
	 	 	A Grantee shall be eligible to receive more than one Grant during the term of the Plan,
but only on the terms and subject to the restrictions hereinafter set forth.
	 
	5	 	STOCK
	 
	 	 	The shares of Common Stock subject to Options and Restricted Stock Awards hereunder
shall be shares of the Corporation that are authorized but unissued. The aggregate
number of shares of Common Stock as to which Grants may be made from time to time under
this Plan shall not exceed 600,000; provided, however, the number of Restricted Shares
shall not exceed 50% of the authorized number of shares set forth in this sentence.
	 
	 	 	If any shares subject to an Option Grant or Restricted Stock Award are forfeited,
canceled, exchanged or surrendered or if a Grant otherwise terminates or expires without
a distribution of shares to the Grantee, the shares of Common Stock with respect to such
Grant shall, to the extent of any such forfeiture, cancellation, exchange, surrender,
termination or expiration, again be available for Grants under the Plan.

 

 

	6	 	TERMS AND CONDITIONS OF OPTIONS
	 
	 	 	Each Option granted pursuant to the Plan shall be evidenced by a written Option
Agreement between the Corporation and the Optionee, which agreement shall comply with
and be subject to the following terms and conditions (and with such other terms and
conditions not inconsistent with the terms of this Plan as the Committee, in its
discretion, shall establish):

	 	(a)	 	NUMBER OF SHARES. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
	 
	 	(b)	 	Each Option Agreement shall specifically state that no
portion of the Option constitutes an Incentive Stock Option and the entire
Option constitutes a Nonqualified Stock Option.
	 
	 	(c)	 	OPTION PRICE. Each Option Agreement shall state the Option
Price, which shall be not less than one hundred percent (100%) of the Fair
Market Value of the shares of Common Stock of the Corporation on the date of
grant of the Option. The Option Price shall be subject to adjustment as
provided in Section 6(i) hereof. The date on which the Committee adopts a
resolution expressly granting an Option shall be considered the day on which
such Option is granted, unless such resolution expressly provides for a
specific later date.
	 
	 	(d)	 	MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in
full, at the time of exercise, (i) in cash, (ii) in shares of Common Stock
having a Fair Market Value equal to such Option Price provided that such
shares have been held by the Grantee for at least six (6) months prior to such
exercise, (iii) by promissory note adequately secured in the discretion of the
Committee, or (iv) in a combination of the foregoing, or (v) in the sole
discretion of the Committee, through a cashless exercise procedure involving a
broker; provided, however, that such method and time for payment shall be
permitted by and be in compliance with applicable law.
	 
	 	(e)	 	TERM AND EXERCISE OF OPTIONS. Except as provided in Section
6(i) hereof or unless otherwise determined by the Committee, the shares
covered by an Option shall become exercisable over such period, in cumulative
installments or otherwise, or upon the satisfaction of such performance goals
or other conditions, as the Committee shall determine; provided, however, that
the Committee shall have the authority to accelerate the exercisability of all
or any portion of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate, and provided
further, however, that such exercise period shall not exceed ten (10) years
from the date of grant of such Option. The exercise period shall be subject to
earlier termination as provided in Sections 6(f) and 6(g) hereof. An Option
may be exercised, as to any or all full shares of Common Stock as to which
the Option has become exercisable, by giving written notice of such exercise
to the Committee; provided, however, that an

 

 

Option may not be exercised at any one time as to fewer than 100 shares (or such
number of shares as to which the Option is then exercisable if such number of
shares is less than 100).

	 	(f)	 	Except as provided in this Section 6(f) and in Section 6(g)
hereof, an Option may not be exercised unless the Optionee is then in the
employ or service of the Corporation or one of its divisions or Subsidiary
Corporations, and unless the Optionee has remained continuously so employed or
in service since the date of grant of the Option. In the event that the
employment or service of an Optionee shall terminate or cease other than by
reason of death, Disability or Retirement, all Options theretofore granted to
such Optionee shall, to the extent not theretofore exercised or canceled,
terminate three months after such separation of employment or cessation of
service, as applicable, but in any event not beyond the date on which the
Option would otherwise expire pursuant to Section 6(e) hereof; provided,
however, that the Committee may in its discretion at the time of the grant of
an Option reduce the period for exercise of Options that were exercisable at
the time of separation of employment or cessation of service to the date of
such separation or cessation date. Nothing in the Plan or in any Option
granted pursuant hereto shall confer upon an individual any right to continue
in the employ or service of the Corporation or any of its divisions or
Subsidiary Corporations or interfere in any way with the right of the
Corporation or any such division or Subsidiary Corporation to terminate such
employment. Notwithstanding anything in the Plan to the contrary, in the event
that the employment or service of an Optionee shall terminate or cease for
Cause, all Options theretofore granted to such Optionee shall, to the extent
not theretofore exercised or canceled, terminate immediately.
	 
	 	(g)	 	DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee
shall die while employed by or in service to the Corporation or a Subsidiary
Corporation, or if the Optionee’s employment or service shall terminate or
cease by reason of Disability or Retirement, all Options theretofore granted
to such Optionee, to the extent exercisable on the date of death or
separation, may be exercised by the Optionee or by the Optionee’s estate or by
a person who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death or Disability of the Optionee,
at any time within three (3) months (in the case of Retirement), twelve (12)
months (in the case of Disability), or two (2) years (in the case of death)
after the date of death or termination by reason of Disability or Retirement,
or at such later time as the Committee may in its discretion determine, but in
any event not beyond the date on which the Option would otherwise expire
pursuant to Section 6(e) hereof.

 

 

	 	(h)	 	NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan
shall not be transferable except (i) by will or the laws of descent and
distribution, or (ii) as specifically provided below in this Section (6)(h).
Any Optionee may transfer Non-statutory Stock Options to members of his or her
Immediate Family (as defined below) if (x) the option agreement pursuant to
which the Option was granted so provides, (y) such agreement was approved by
the Board or the Committee, and (z) the Optionee does not receive any
consideration for the transfer. “Immediate Family” means children,
grandchildren, and spouse of the Optionee or one or more trusts for the
benefit of such family members or partnerships in which such family members
are the only partners. Any Nonstatutory Stock Option agreement may be amended
to provided for the transferability feature as outlined above, provided that
such amendment is approved by the Board or the Committee. Any Option not
granted pursuant to an option agreement expressly permitting its transfer
shall not be transferable. During the lifetime of the Optionee, Options may be
exercised only by the Optionee, the guardian or legal representative of the
Optionee, or the transferee as permitted under this Section 6(h).
	 
	 	(i)	 	EFFECT OF CERTAIN CHANGES. (1) If there is any change in the
shares of Common Stock through the declaration of stock dividends,
distributions made with respect to shares of Common Stock, recapitalizations,
restructurings, stock splits, or combinations or exchanges of such shares, or
the like, then the number of shares of Common Stock or other securities
available for Options, the kind and amount of shares and other securities
covered by outstanding Options, and/or the Option Price, as appropriate, shall
be adjusted as necessary to reflect equitably such change in the shares of
Common Stock; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. (2) In the event of dissolution or
liquidation of the Corporation, or any merger, consolidation, acquisition of
property or stock, separation or reorganization in which the Corporation is
not the surviving entity, each outstanding Option shall terminate, unless the
surviving entity assumes the outstanding Options or replaces them with new
options of comparable value in accordance with the provisions of Section 424(a)
of the Code; provided, however, that should the surviving entity not assume or
replace the outstanding Options under the Plan, each Optionee shall have the
right, immediately prior to such dissolution, liquidation, merger,
consolidation, acquisition of property or stock, separation or reorganization,
to exercise his or her outstanding Option in full, without regard to any
installment exercise provisions, to the extent it shall not have been
exercised. (3) In the event of a change in the Common Stock of the Corporation
as presently constituted which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall be
deemed to be the Common Stock within the meaning of the Plan. (4) The
foregoing adjustments shall be made by the Committee, whose determination in
that respect shall be final, binding and conclusive. (5) Except as
hereinbefore expressly provided in this Section 6(i), the

 

 

	 	 	 	Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger, or consolidation or spin-off of assets
or stock of another corporation; and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the Option. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structures or to merge or to consolidate
or to dissolve, liquidate or sell, or transfer all or part of its business or
assets.
	 	 	 	 
	 	(j)	 	RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an
Option shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate
for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution
of other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 6(i) hereof.
	 
	 	(k)	 	OTHER PROVISIONS. The Option Agreements authorized under the
Plan may contain such other provisions, including without limitation the
imposition of (1) restrictions upon the exercise of an Option and (2)
provisions that will result in the forfeiture of an Option and/or the shares
acquired thereunder in the event the Optionee breaches covenants relating to
non-competition, confidentiality and non-solicitation of employees and
customers, as the Committee shall deem advisable.
	 
	 	(l)	 	NO REPRICING OF OPTIONS. After the grant of an option the
exercise price may not be reduced, no action may be taken by the Committee
that would be treated as repricing under generally accepted accounting
principles and there shall be no cancellation of an option when the exercise
price exceeds fair market value in exchange for another option, restricted
stock or other equity, unless in connection with a merger, acquisition,
spinoff or other similar transaction.

 

 

	7	 	TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
	 
	 	 	Each Restricted Stock Award granted under the Plan shall be evidenced by a written
Restricted Award Agreement between the Corporation and the Grantee, which agreement
shall comply with, and be subject to, the following terms and conditions (and with such
other terms and conditions not inconsistent with the terms of this Plan as the
Committee, in its discretion, shall establish):

	 	(a)	 	NUMBER OF SHARES AND UNITS. The Committee shall determine the
number of Restricted Shares to be awarded to a Grantee pursuant to the
Restricted Stock Award.
	 
	 	(b)	 	NONTRANSFERABILITY. Except as set forth in subsections (f)
and (g) of this Section 7, a Grantee may not sell, assign, transfer, pledge,
hypothecate or otherwise dispose of any Restricted Shares awarded to said
Grantee under this Plan, or any interest therein, except by will or the laws
of descent and distribution, until the Restricted Period (as defined below)
shall have elapsed. The Committee may also in its discretion impose such other
restrictions and conditions on Restricted Shares awarded as it deems
appropriate including without limitation, the imposition of provisions that
will result in the forfeiture of Restricted Shares in the event the Grantee
breaches covenants relating to non-competition, confidentiality and
non-solicitation of employees and customers. In determining the Restricted
Period of an award, the Committee may provide that the restrictions shall
lapse with respect to specified percentages of the awarded shares on
successive anniversaries of the date of such award or upon the satisfaction of
such other conditions as the Committee may impose. In no event shall the
Restricted Period end with respect to a Restricted Stock Award prior to the
satisfaction by the Grantee of any liability arising under Section 8 hereof.
Any attempt to dispose of any Restricted Shares in contravention of any such
restrictions shall be null and void and without effect. The period during
which such restrictions on transfer, and such other restrictions as the
Committee may impose, are in effect is referred to as the “Restricted Period”.
	 
	 	(c)	 	CERTIFICATES REPRESENTING RESTRICTED SHARES. The Corporation
shall not be required to issue stock certificates representing Restricted
Shares awarded to a Grantee until the Restricted Period related to such shares
has lapsed. If any stock certificates representing Restricted Shares awarded
pursuant to a Restricted Stock Award are issued prior to the lapse of the
Restricted Period, such stock certificate shall bear an appropriate legend
referring to such restrictions. Such certificates may be retained by the
Corporation during the Restricted Period.

 

 

	 	(d)	 	TERMINATION. If the Grantee’s continuous employment or
service with the Corporation or any of its divisions or Subsidiary
Corporations shall terminate for any reason prior to the expiration of the
Restricted Period applicable to any Restricted Shares granted to such Grantee,
or prior to the satisfaction of any other conditions established by the
Committee applicable to such Grant, any such Restricted Shares then remaining
subject to restrictions (after taking into account the provisions of
subsections (f) and (g) of this Section 7) shall thereupon be forfeited by the
Grantee and any such Restricted Shares shall be transferred to, and reacquired
by, the Corporation or its Subsidiary Corporation at no cost to the
Corporation or the Subsidiary Corporation. In such event, the Grantee, or in
the event of his death, his personal representative, shall, with respect to
any such shares, forthwith deliver to the Secretary of the Corporation any
stock certificates in the possession of the Grantee or the Grantee’s
representative representing the Restricted Shares remaining subject to such
restrictions, accompanied by such instruments of transfer, if any, as may
reasonably be required by the Secretary of the Corporation.
	 
	 	(e)	 	RIGHTS AS A STOCKHOLDER. Upon receipt by a Grantee of a
Restricted Stock Award, the Grantee shall possess all incidents of ownership
of the Restricted Shares (subject to subsection (b) of this Section 7),
including the right to receive or reinvest dividends with respect to
such shares and to vote such shares.
	 
	 	(f)	 	EFFECT OF CERTAIN CHANGES. The number of Restricted Shares
subject to a Grant shall be appropriately adjusted by the Committee in the
event of any change in the shares of Common Stock set forth in Section
6(i)(1). Upon the occurrence of an Acceleration Event, as defined in Section
6(i)(2), all restrictions then outstanding with respect to a Restricted Stock
Award shall automatically expire and be of no further force and effect.
	 
	 	(g)	 	OTHER PROVISIONS. The Committee shall have the authority (and
the Restricted Award Agreement may so provide) to cancel all or any portion of
any outstanding restrictions and conditions prior to the expiration of the
Restricted Period with respect to all or part of a Restricted Stock Award on
such terms and conditions as the Committee may deem appropriate. The
Restricted Award Agreements authorized under this Plan shall contain such
other provisions not inconsistent with the terms hereof as the Committee shall
deem advisable.

 

 

	8	 	WITHHOLDING TAXES
	 
	 	 	When a Grantee or other person becomes entitled to receive shares of Common Stock
pursuant to the exercise of an Option or upon the lapse of restrictions relating to a
Restricted Stock Award the Corporation shall have the right to require the Grantee or
such other person to remit to the Corporation an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto. Unless otherwise
prohibited by the Committee or by applicable law, satisfaction of the withholding tax
obligation may be accomplished by any of the following methods or by a combination of
such methods: (a) tendering a cash payment, (b) authorizing the Company to withhold from
the shares of Common Stock or cash otherwise payable (1) one or more of such shares
having an aggregate Fair Market Value, determined as of the date the withholding tax
obligation arises, less than or equal to the amount of the total withholding tax
obligation or (2) cash in an amount less than or equal to the amount of the total
withholding tax obligation and (c) delivering to the Company shares of Common Stock
(provided that such shares shall have been held for at least six (6) months) having an
aggregate Fair Market Value, determined as of the date the withholding tax obligation
arises, less than or equal to the amount of the total withholding tax obligation.
	 
	9	 	TERM OF PLAN
	 
	 	 	Unless terminated earlier by the Board, the term of this Plan shall be ten (10)
years from the date the Plan was adopted. No Option or Restricted Stock Award shall be
granted pursuant to this Plan later than August 16, 2015, but Options and Restricted
Stock and Unit Awards theretofore granted may extend beyond that date in accordance with
their terms.
	 
	10	 	AMENDMENT AND TERMINATION OF THE PLAN
	 
	 	 	The Board may, at any time and from time to time, suspend, terminate, modify or
amend the Plan. Except as provided in Section 6 hereof, no suspension, termination,
modification or amendment of the Plan may adversely affect any Grant previously made,
unless the written consent of the Grantee is obtained.
	 
	11	 	EFFECTIVE DATE
	 
	 	 	The Plan shall take effect on August 16, 2005, the date of its adoption by the
Board of Directors.

 

 

	12	 	MISCELLANEOUS

	 	(a)	 	Effect of Headings. The section and subsection headings contained herein
are for convenience only and shall not affect the construction hereof.
	 
	 	(b)	 	Compliance with Legal Requirements. The Plan and the other
obligations of the Corporation under the Plan and any agreement shall be
subject to all applicable federal and state laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may be required.
The Corporation, in its discretion, may postpone the issuance or delivery of
Common Stock under any Grant as the Corporation may consider appropriate, and
may require any Grantee to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules and
regulations.
	 
	 	(c)	 	No Right To Continued Employment. Nothing in the Plan or in
any agreement entered into pursuant hereto shall confer upon any Grantee the
right to continue in the employ or service of the Corporation or any of its
divisions or Subsidiary Corporations, to be entitled to any remuneration or
benefits not set forth in the Plan or such agreement or to interfere with or
limit in any way the right of the Corporation or such division or Subsidiary
Corporation to terminate such Grantee’s employment.
	 
	 	(d)	 	No Grantee shall have any claim to be made any Grant under
the Plan, and there is no obligation for uniformity of treatment for Grantees.
Except as provided specifically herein, a Grantee or a transferee of a Grant
shall have no rights as a stockholder with respect to any shares covered by
any Grant until the date of the issuance of a stock certificate for such
shares.
	 
	 	(e)	 	Beneficiary. A Grantee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Grantee, the executor or administrator of
the Grantee’s estate shall be deemed to be the Grantee’s beneficiary.

	13	 	GOVERNING LAW
	 
	 	 	The Plan shall be construed and administered in accordance with the laws of the
State of Delaware without regard to its principles of conflicts of law.

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