Document:

VALLEY FINANCIAL CORPORATION 2005 KEY EMPLOYEE EQUITY AWARD PLAN

 Exhibit 4.2 
  

VALLEY FINANCIAL CORPORATION 
 2005
KEY EMPLOYEE EQUITY AWARD PLAN 
  
 ARTICLE I 

Establishment, Purpose and Duration 
  
 1.1 Establishment of the Plan. Valley Financial Corporation, a Virginia corporation (the “Company”), hereby establishes an incentive
compensation plan for the Company to be known as the “2005 Key Employee Equity Award Plan” (the “Plan”), as set forth in this document. Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in
Section 2.1 herein. The Plan permits the grant of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, and Stock Units. 
  
 The Plan was adopted by the Board of Directors of the Company on February 24, 2005, and shall become effective on the date
immediately following the approval by vote of shareholders of the Company in accordance with applicable laws (the “Effective Date”). 
  
 1.2 Purpose of the Plan. The purpose of the Plan is to promote the success of the Company by providing incentives to Key Employees that will
promote the identification of their personal interest with the long-term financial success of the Company and with growth in shareholder value. The Plan is designed to provide flexibility to the Company in its ability to motivate, attract and retain
the services of Key Employees upon whose judgment, interest and special effort the successful conduct of its operation is largely dependent. 
  
 1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as described in Section 1.1 herein and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant to Article XII herein, until the 10th anniversary of the Effective Date, at which time it shall terminate except with respect to Awards made prior to and
outstanding on that date which shall remain valid in accordance with their terms. 
  
 ARTICLE II 
 Definitions 
  
 2.1 Definitions. Except as otherwise defined in the Plan, the following terms shall have the meanings set forth
below: 
  
 (a) “Affiliate” shall have
the meaning ascribed to it in Rule 12b-2 under the Exchange Act. 

 (b) “Agreement” means a written agreement implementing the grant of each Award
signed by an authorized officer of the Company and by the Participant. An Agreement may be a Stock Option Agreement, SAR Agreement, Restricted Stock Agreement or Stock Unit Agreement depending on its subject matter. 
  
 (c) “Award” means, individually or collectively, a
grant under this Plan of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock or Stock Units. 
  
 (d) “Award Date” or “Grant Date” means the date on which an Award is made by the Committee under this Plan.

  
 (e) “Beneficial Owner” shall have
the meaning ascribed to such term in Rule 13d-3 under the Exchange Act. 
  
 (f) “Board” or “Board of Directors” means the Board of Directors of the Company, unless otherwise indicated. 
  
 (g) “Change in Control” shall be deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied: 
  
 (i) any Person (other than the Company, a trustee or other fiduciary holding securities under any employee benefit plan of the Company), who or which, together with all Affiliates and Associates of such Person, is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; or 
  
 (ii) if, at any time after the Effective Date, the composition of the Board of Directors of the Company
shall change such that a majority of the Board of the Company shall no longer consist of Continuing Directors; or 
  
 (iii) if at any time, (1) the Company shall consolidate with, or merge with, any other Person and the Company shall not be the continuing
or surviving corporation, (2) any Person shall consolidate with or merge with the Company and the Company shall be the continuing or surviving corporation and, in connection therewith, all or part of the outstanding 

  

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Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (3) the Company shall be a party to
a statutory share exchange with any other Person after which the Company is a subsidiary of any other Person, or (4) the Company shall sell or otherwise transfer 50% or more of the assets or earning power of the Company to any Person or Persons.

  
 (h) “Code” means the Internal
Revenue Code of 1986, as amended from time to time. 
  
 (i) “Committee” means the committee of the Board of Directors of the Company appointed by the Company to administer the Plan pursuant to Article III herein, all of the members of which shall be “disinterested persons” as
defined in Rule 16b-3, as amended, under the Exchange Act or any similar or successor rule. Unless otherwise determined by the Board of Directors of the Company, the members of the committee responsible for executive compensation who are not
employees of the Company shall constitute the Committee. 
  
 (j) “Continuing Director” means an individual who was a member of the Board of Directors on the Effective Date or whose subsequent nomination for election or re-election to the Board of Directors was
recommended or approved by the affirmative vote of two-thirds of the Continuing Directors then in office. 
  
 (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (l) “Fair Market Value” of a Share means the fair
market value as quoted on a recognized stock quotation system, exchange or bulletin board or, in the alternative, as determined pursuant to a reasonable method adopted by the Committee in good faith for such purpose. 
  
 (m) “Incentive Stock Option” or “ISO”
means an option to purchase Stock, granted under Article VI herein, which is designated as an incentive stock option and is intended to meet the requirements of Section 422(a) of the Code. 
  
 (n) “Key Employee” means an officer or other key
employee of the Company or of a Parent, Subsidiary or an Affiliate, who, in the opinion of the Committee, can contribute significantly to the growth and profitability of, or perform services of major importance to the Company. 
  

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 (o) “Non-Qualified Stock Option” or “NQSO” means an option to
purchase Stock, granted under Article VI herein, which is not intended to be an Incentive Stock Option. 
  
 (p) “Option” means an Incentive Stock Option or a Non-Qualified Stock Option. 
  
 (q) “Option Price” shall have the meaning given
thereto in 6.3 hereof. 
  
 (r) “Parent”
means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations, other than the Company, owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains the status of Parent on a date after Effective Date shall be considered a Parent commencing on that later date. 
  
 (s) “Participant” means a Key Employee who is
granted an Award under the Plan. 
  
 (t)
“Period of Restriction” means the period during which the transfer of Shares of Restricted Stock is restricted, pursuant to Article VIII herein. 
  
 (u) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a “group” as defined in Section 13(d). 
  
 (v) “Plan” means the Valley Financial Corporation 2005 Key Employee Equity Plan, as described and as hereafter from time to time amended. 
  
 (w) “Related Option” means an Option with respect to which a Stock Appreciation Right has been
granted. 
  
 (x) “Restricted Stock”
means an Award of Stock granted to a Participant pursuant to Article VIII herein. 
  
 (y) “Stock” or “Shares” means the common stock of the Company. 
  
 (z) “Stock Appreciation Right” or “SAR”
means an Award, designated as a stock appreciation right, granted to a Participant pursuant to Article VII herein. 
  

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 (aa) “Stock Unit” means a bookkeeping entry representing the economic
equivalent of one Share, as awarded under Article IX the Plan. 
  
 (bb) “Subsidiary” shall mean a corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations, other than the last corporation, in the
unbroken chain owns stock possession at least 50% of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a subsidiary on a date after the Effective Date
shall be considered a Subsidiary commencing on that later date. 
  
 ARTICLE III 
 Administration 
  

3.1 The Committee. The Plan shall be administered by the Committee which shall have all powers necessary or desirable for such administration.
The express grant in this Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. In addition to any other powers and, subject to the provisions of the Plan, the Committee shall have
the following specific powers: (i) to determine the terms and conditions upon which the Awards may be made and exercised; (ii) to determine all terms and provisions of each Agreement, which need not be identical; (iii) to construe and interpret the
Agreements and the Plan; (iv) to establish, amend or waive rules or regulations for the Plan’s administration; (v) to accelerate the exercisability of any Award or the termination of any Period of Restriction; and (vi) to make all other
determinations and take all other actions necessary or advisable for the administration of the Plan. 
  
 3.2 Selection of Participants. The Committee shall have the authority to grant Awards under the Plan, from time to time, to such Key Employees as
may be selected by it. Each Award shall be evidenced by an Agreement. 
  
 3.3 Decisions Binding. All determinations and decisions made by the Board or the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding. 
  
 3.4 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan, the Board or the Committee may impose
such conditions on any Award and amend the Plan in any such respects, as may be required to satisfy the requirements of Rule 16b-3, as amended (or any successor or similar rule), under the Exchange Act. 
  
 3.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee, the 

  

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members of the Committee shall have the indemnity rights and the Company shall have the indemnity obligations provided in the Company’s Articles of
Incorporation and Bylaws with respect to the conduct of the Committee. In carrying out its responsibilities, the Committee shall also have the right to consult lawyers, experts and other consultants of its choosing at the Company’s expense.

  
 ARTICLE IV 
 Stock Subject to the Plan 
  
 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 herein, the maximum aggregate number of Shares that may be issued pursuant
to Awards made under the Plan shall not exceed 250,000. Except as provided in Sections 4.2 herein, the issuance of Shares in connection with the exercise of, or as other payment for Awards under the Plan shall reduce the number of Shares available
for future Awards under the Plan. 
  
 4.2 Lapsed Awards or
Forfeited Shares. If any Award granted under this Plan (for which no material benefits of ownership have been received, including dividends) terminates, expires, or lapses for any reason other than by virtue of exercise of the Award, or if
Shares issued pursuant to Awards (for which no material benefits of ownership have been received, including dividends) are forfeited, any Stock subject to such Award again shall be available for the grant of an Award under the Plan, subject to
Section 7.2. 
  
 4.3 Adjustments. In the event of a
subdivision of the outstanding Shares, a declaration of a dividend payable in Shares or a combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, corresponding adjustments shall
automatically be made in each of the following: 
  

	 	(a)	the number of Options, SARs, Restricted Shares, and Stock units for future Awards; 

  

	 	(b)	the limitations set forth in Sections 7.2, 8.5 or 9.4; 

  

	 	(c)	the number of Shares covered by each outstanding Option and SAR; 

  

	 	(d)	the Exercise Price and each outstanding Option and SAR; or 

  

	 	(e)	the number of Stock Units included in any prior Award that has not been settled. 

  
 In the event of a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a
material effect on the price of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee may make such 

  

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adjustments as it, in its sole discretion, deems appropriate in one or more of the foregoing. Except as provided in this Article, a Participant shall have no
rights by reason of any issuance by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of any shares of stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 
  
 4.4 Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs, and Stock Units
shall terminate immediately prior to the dissolution or liquidation of the Company. 
  
 4.5 Reorganization. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Subject to the rights of the
Committee under Article X, such agreement shall provide for: (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; (b) the assumption of the outstanding Awards by the surviving corporation or its
parent or subsidiary; or (c) the substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards. 
  
 ARTICLE V 
 Eligibility

  
 Persons eligible to participate in the Plan include all
employees of the Company and its Parent, Subsidiaries and Affiliates who, in the opinion of the Committee, are Key Employees. Key Employees may not include directors of the Company who are not employees of the Company. 
  
 ARTICLE VI 
 Stock Options 
  
 6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Key Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of Shares subject to Options granted to each Participant, provided, however, that the aggregate Fair Market Value (determined at the time the Award is made) of Shares with respect to which any
Participant may first exercise ISOs granted under the Plan during any calendar year may not exceed $100,000 or such amount as shall be specified in Section 422(a) of the Code and rules and regulation thereunder. 
  
 6.2 Option Agreement. Each Option grant shall be evidenced by an
Option Agreement that shall specify the type of Option granted, the Option Price (as hereinafter 

  

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defined), the duration of the Option, the number of Shares to which the Option pertains, any conditions imposed upon the exercisability of Options in the
event of retirement, death, disability or other termination of employment and such other provisions as the Committee shall determine. The Option Agreement may have additional provisions as the Committee shall determine, not inconsistent with this
Plan. The provisions of Option Agreements need not be identical. The Option Agreement shall specify whether the Option is intended to be an Incentive Stock Option within the meaning of Section 422(a) of the Code, or Non-Qualified Stock Option not
intended to be within the provisions of Section 422(a) of the Code. The provisions of such Option Agreements under the Plan need not be identical. 
  
 6.3 Option Price. The exercise price per share of Stock covered by an Option (“Option Price”) shall be determined by the Committee
subject to the following limitations. The Option Price of an ISO shall not be less than 100% of the Fair Market Value of such Stock on the Grant Date. An ISO granted to an employee who, at the time of grant, owns (within the meaning of Section
425(d) of the Code) Stock possessing more than 10% of the total combined voting power of all classes of Stock of the Company, shall have an Option Price which is at least equal to 110% of the Fair Market Value of the Stock. 
  
 6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no ISO shall be exercisable later than the tenth (10th) anniversary date of its Award Date. 
  
 6.5 Exercisability. Options granted under the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall determine, which need not be the same for all Participants. No Option, however, shall be exercisable until the expiration of at least six months after the Award Date, except that such limitation
shall not apply in the case of death or disability of the Participant. 
  
 6.6 Method of Exercise. Options shall be exercised by the delivery of a written notice to the Company in the form prescribed by the Committee setting forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price shall be payable to the Company in full either in cash, by delivery of Shares of Stock valued at Fair Market Value at the time of exercise, delivery of a promissory note (in the
Committee’s sole discretion) or by a combination of the foregoing. As soon as practicable, after receipt of written notice and payment, the Company shall deliver to the Participant, stock certificates in an appropriate amount based upon the
number of Options exercised, issued in the Participant’s name. No Participant who is awarded Options shall have rights as a shareholder in connection with the Shares subject to such Options until the date of exercise of the Options. 

 

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 6.7 Restrictions on Stock Transferability. The Committee may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under the applicable Federal securities law, under the requirements of the National Association of Securities
Dealers, Inc. or any stock exchange upon which such Shares are then listed and under any blue sky or state securities laws applicable to such Shares. 
  
 6.8 Nontransferability of Options. No Option granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative.

  
 ARTICLE VII 
 Stock Appreciation Rights 
  
 7.1 Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, Stock Appreciation Rights may be granted to Participants,
at the discretion of the Committee. If such Stock Appreciation Rights are granted in connection with the grant, and exercisable in lieu, of Options, they are “Tandem SARs”. Each Award of SARs shall be evidenced by a SAR Agreement with the
Company, subject to all applicable terms of the Plan and any other terms and conditions set by the Committee not inconsistent with the Plan. The provisions of such SAR Agreements need not be identical. 
  
 7.2 Number of Shares. Each SAR Agreement shall specify the number of
Shares subject to the SAR. SARs granted to any one Key Employee in a single calendar year shall in no event pertain to more than 500 Shares, except that SARs granted to a new Key Employee in the fiscal year in which his service with the Company
first commences shall not pertain to more than 2,000 Shares. 
  
 7.3 Exercise of SARs. SARs may be exercised with respect to all or part of the Shares to which they relate in accordance with the terms of the SAR Agreement. Each SAR Agreement shall specify the Exercise Price, which may vary in
accordance with a predetermined formula while the SAR is outstanding. A SAR may be included in an ISO only at the time of the Award but included in an NQSO at any time. The exercise of Tandem SARs shall cause a reduction in the number of Shares
subject to the Related Option equal to the number of Shares with respect to which the Tandem SAR is exercised. Conversely, the exercise, in whole or in part, of a Related Option, shall cause a reduction in the number of Shares subject to the Related
Option equal to the number of Shares with respect to which the Related Option is exercised. Shares with respect to which the SAR shall have been exercised may not be subject again to an Award under the Plan. 
  

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 Notwithstanding any other provision of the Plan to the contrary, a Tandem SAR shall expire no later than
the expiration of the Related Option, shall be transferable only when and under the same conditions as the Related Option and shall be exercisable only when the Related Option is eligible to be exercised. In addition, if the Related Option is an
ISO, a Tandem SAR shall be exercised for no more than 100% of the difference between the Option Price of the Related Option and the Fair Market Value of Shares subject to the Related Option at the time the Tandem SAR is exercised. 
  
 7.4 Other Conditions Applicable to SARs. No SAR granted under the Plan
shall be exercisable until the expiration of at least six months after the Grant Date, except that such limitation shall not apply in the case of the death or disability of the Participant. In no event shall the term of any SAR granted under the
Plan exceed ten (10) years from the Grant Date. A Tandem SAR may be exercised only when the Fair Market Value of a Share exceeds the Option Price of the Related Option. If, on the date when a SAR expires, the Exercise Price or, in the case of a
Tandem SAR the Option Price of the Relation Option, is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with
respect to such portion. A Tandem SAR shall be exercised by delivery to the Committee of a notice of exercise in the form prescribed by the Committee. 
  
 7.5 Payment Upon Exercise of SARs. Subject to the provisions of the SAR Agreement, upon the exercise of a SAR, the Participant is entitled to
receive, without any payment to the Company (other than required tax withholding amounts), an amount equal to the product of multiplying (i) the number of Shares with respect to which the SAR is exercised by (ii) an amount equal to the excess of (A)
the Fair Market Value per Share on the date of exercise of the SAR over (B) the Option Price of the Related Option, in the case of a Tandem SAR or the Exercise Price of the SAR in the case of SARs that are not Tandem SARs. 
  
 Payment to the Participant shall be made in Shares, valued at the Fair Market
Value of the date of exercise, in cash if the Participant has so elected in his written notice of exercise and the Committee has consented thereto, or a combination thereof. To the extent required to satisfy the conditions of Rule 16b-3(e) under the
Exchange Act, or any successor or similar rule, or as otherwise provided in the SAR Agreement, the Committee shall have the sole discretion to consent to or disapprove the election of any Participant to receive cash in full or partial settlement of
a SAR. In cases where an election of settlement in cash must be consented to by the Committee, the Committee may consent to, or disapprove, such election at any time after such election, or within such period for 

  

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taking action as is specified in the election and failure to give consent shall be disapproval. Consent may be given in whole or as to a portion of the SAR
surrendered by the Participant. If the election to receive cash is disapproved in whole or in part, the SAR shall be deemed to have been exercised for Shares, or, if so specified in the notice of exercise and election, not to have been exercised to
the extent the election to receive cash is disapproved. 
  
 7.6
Nontransferability of SARs. No SAR granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all SARs granted to a
Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative. 
  
 ARTICLE VIII 
 Restricted Stock

  
 8.1 Grant of Restricted Stock. Subject to the terms
and provisions of the Plan, the Committee, at any time and from time to time, may grant shares of Restricted Stock under the Plan to such Participants and in such amounts as it shall determine. Participants receiving Restricted Stock Awards are not
required to the pay the Company therefor (except for applicable tax withholding) other than the rendering of services. 
  
 8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, the number of Restricted Stock Shares granted and such additional provisions as the Committee shall determine, not inconsistent with the Plan. The provisions of such a Restricted Stock Agreement under the Plan need not be identical.

  
 8.3 Transferability. Except as provided in this Article
VIII and subject to the limitation in the next sentence, the Shares of Restricted Stock granted hereunder may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the termination of the applicable Period of
Restriction or upon earlier satisfaction of other conditions as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. No shares of Restricted Stock shall be sold until the expiration of at least six
months after the Award Date, except that such limitation shall not apply in the case of death or disability of the Participant. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative. 
  
 8.4 Other Restrictions and Conditions. The Committee shall impose such other restrictions or conditions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, restrictions under applicable 

  

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Federal or state securities laws and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. Without
limiting the generality of the foregoing, the Committee may include conditions based on the performance of the Company or a business unit of the Company for a specified period of one or more years or exceed a target determined in advance by the
Committee. The Company’s independent auditors shall determine such performance. The Committee shall identify such performance-based conditions/targets not later than 90 days after the beginning of the period to which they relate. In no event
shall the number of Restricted Shares which are subject to performance-based vesting conditions and which are granted to any one Participant in a single calendar year exceed 5,000. 
  
 8.5 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.4 herein, each
certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: 
  
 The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain
restrictions on transfer set forth in the 2005 Valley Financial Corporation Key Employee Equity Plan, in the rules and administrative procedures adopted pursuant to such Plan and in an Agreement dated
                                . A copy of the Plan, such rules and procedures
and such Restricted Stock Agreement may be obtained from the Secretary of Valley Financial Corporation. 
  
 8.6 Removal of Restrictions. Except as otherwise provided in this Article, Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 8.5
herein removed from his Stock certificate. 
  
 8.7 Voting
Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. 
  
 8.8 Dividends and Other Distributions. During the Period of Restriction, Participants holding shares of Restricted
Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Shares of Restricted Stock with respect to which they were distributed. 
  
 8.9 Termination of Employment Due to Retirement. Unless otherwise provided in the Restricted Stock Agreement, in the event that a Participant
terminates his 

  

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employment with the Company or one of its Subsidiaries because of normal retirement (as defined in the rules of the Company in effect at the time), any
remaining Period of Restriction applicable to the Restricted Stock Shares pursuant to 8.3 herein shall automatically terminate and, except as otherwise provided in Section 8.4 herein the Shares of Restricted Stock shall thereby be free of
restrictions and freely transferable. Unless otherwise provided in the Restricted Stock Agreement, in the event that a Participant terminates his employment with the Company because of early retirement (as defined in the rules of the Company in
effect at the time), the Committee, in its sole discretion, may waive the restrictions remaining on any or all Shares of Restricted Stock pursuant to Section 8.3 herein and add such new restrictions to those Shares of Restricted Stock as it deems
appropriate. 
  
 8.10 Termination of Employment Due to Death or
Disability. In the event a Participant’s employment is terminated because of death or disability during the Period of Restriction, any remaining Period of Restriction applicable to the Restricted Stock pursuant to Section 8.3 herein shall
automatically terminate and, except as otherwise provided in Section 8.4 herein the shares of Restricted Stock shall thereby be free of restrictions and fully transferable. 
  
 8.11 Termination of Employment for Other Reasons. Unless otherwise provided in the Restricted Stock Agreement, in the
event that a Participant terminates his employment with the Company for any reason other than for death, disability or retirement, as set forth in Sections 8.9 and 8.10 herein, during the Period of Restriction, then any shares of Restricted Stock
still subject to restrictions as of the date of such termination shall automatically be forfeited and returned to the Company. 
  
 ARTICLE IX 
 Stock Units

  
 9.1 Grant of Stock Unit. Subject to the
terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Stock Units under the Plan to such Participants and in such amounts as it shall determine. Stock Units may be granted in consideration of a reduction in
the Participant’s other compensation. 
  
 9.2 Stock Unit
Agreement. Each grant of Stock Units shall be evidenced by a Stock Unit Agreement that shall specify the number of Stock Units granted, and such additional provisions as the Committee shall determine, not inconsistent with the Plan. The
provisions of such Stock Unit Agreements under the Plan need not be identical. 
  
 9.3 Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients. 
  

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 9.4 Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting, as the
Committee may determine. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Agreement. The Committee may include among such conditions the requirement that the performance of the Company or a
business unit of the Company for a specified period of one or more years equal or exceed a target determined in advance by the Committee. The Company’s independent auditors shall determine such performance. The Committee shall determine the
condition/target not later than 90 days after the commencement of the period to which it relates. In no event shall the number of Stock Units which are subject to performance-based vesting conditions and which are granted to any Participant in a
single calendar year exceed 5,000. 
  
 9.5 Voting and Dividend
Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, in the Committee’s discretion, carry with it right to dividend equivalents. Such right entitles
the holder to be credited with an amount per Stock Unit equal to the cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units if the Committee so agrees. Settlement of
dividend equivalents will be made at the time the Stock Units to which they relate are settled and are subject to the same conditions and restrictions as such Stock Units. Settlement of dividend equivalents may be made in the form of cash, Shares or
in a combination of both as the Committee may determine. 
  
 9.6
Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash; (b) Shares; or (c) a combination of both, as determined by the Committee. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. As the Committee may determine: (i) methods of converting Stock Units to cash may include, without limitation, a method
based on the average Fair Market Value of Shares over a series of trading days; (ii) vested Stock Units may be settled in a lump sum or in installments; (iii) the distribution may occur or commence when all vesting conditions applicable to the Stock
Units have been satisfied or lapsed or it may be deferred to a later date; (iv) the amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. 
  
 9.7 Termination of Employment. In the event a Participant’s employment is terminated prior to vesting of any
Stock Units, all unvested Stock Units shall be automatically forfeited. Vested Stock Units shall be settled with and payable to the Participant or, in the case of the Participant’s death, the Participant’s beneficiary or beneficiaries.
Each Participant who receives an Award of Stock Units shall designate one or more beneficiaries for this purpose by filing with the Company the prescribed form. A beneficiary designation may be changed by filing with the Company the prescribed form

  

 14 

 
at any time before death. If no beneficiary is designated or no designated beneficiary survives the Participant, the Stock Unit Awards may be settled with
and paid to the Participant’s estate after his death. 
  
 9.8
Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the
applicable Agreement. 
  
 ARTICLE X 
 Change in Control 
  
 The Committee, as constituted before a Change in Control, in its sole discretion may, as to any outstanding Award, either at the time the Award is made or
any time thereafter, take any one or more of the following actions in respect to a Change in Control of the Company: (i) provide for the acceleration of any time periods relating to the exercise or realization of any such Award so that such Award
may be exercised or realized in full on or before a date initially fixed by the Committee; (ii) provide for the purchase or settlement of any such Award by the Company, upon a Participant’s request, for an amount of cash equal to the amount
which could have been obtained upon the exercise of such Award or realization of such Participant’s rights had such Award been currently exercisable or payable; or (iii) make such adjustment to any such Award then outstanding as the Committee
deems appropriate to reflect such Change in Control. 
  
 ARTICLE
XI 
 Modification, Extension and Renewals of Awards 
  
 Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify, extend or renew
outstanding Awards, or, if authorized by the Board, accept the surrender of outstanding Awards (to the extent not yet exercised) granted under the Plan and authorize the granting of new Awards pursuant to the Plan in substitution therefor and the
substituted Awards may specify a lower exercise price than the surrendered Awards, a longer term than the surrendered Awards or may contain any other provisions that are authorized by the Plan. The Committee may also modify the terms of any
outstanding Agreement. Notwithstanding the foregoing, however, no modification of an Award, shall, without the consent of the Participant, adversely affect the rights or obligations of the Participant. 
  

 15 

 ARTICLE XII 
 Amendment, Modification and Termination of the Plan 
  
 12.1 Amendment, Modification and Termination. At any time and from time to time, the Board may terminate, amend or modify the Plan. Such amendment or modification may be without shareholder approval except to
the extent that such approval is required by the Code, pursuant to the rules under Section 16 of the Exchange Act, by any national securities exchange or system on which the Stock is then listed or reported, by any regulatory body having
jurisdiction with respect thereto or under any other applicable laws, rules or regulations. 
  
 12.2 Awards Previously Granted. No termination, amendment or modification of the Plan other than pursuant to Section 4.4 herein shall in any manner adversely affect any Award theretofore granted under the Plan,
without the written consent of the Participant. 
  
 ARTICLE XIII

 Withholding 
  
 13.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, State and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any grant, exercise or payment made under or as a result of this Plan. 
  
 13.2 Stock Withholding. With respect to withholding required upon the
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on Restricted Stock, or the vesting of Stock Units, or upon the occurrence of any other similar taxable event with respect to any Award, Participants may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares of Stock having a Fair Market Value equal to the amount required to be withheld. The value of the Shares to be withheld
shall be based on Fair Market Value of the Shares on the date that the amount of tax to be withheld is to be determined. All elections shall be irrevocable and be made in writing, signed by the Participant on forms approved by the Committee in
advance of the day that the transaction becomes taxable. 
  
 ARTICLE XIV 
 Successors 
  
 All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company. 
  

 16 

 ARTICLE XV 
 Awards under Other Plans 
  
 The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under this Plan. 
  
 ARTICLE XVI 
 Deferral of Awards 
  
 The Committee (in its sole discretion) may permit or require a Participant to: 
  

	 	(a)	Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account
established for such Participant by the Committee as an entry on the Company’s books; 

  

	 	(b)	Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or

  

	 	(c)	Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to
a deferred compensation account established for such Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been
delivered to such Participant. 

  
 A deferred
compensation account established under this Articles may be credited with interest or other forms of investment returns, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a
general credit or of the Company. Such account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between the Participant and the Company. If the deferral
or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures, and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts
established under this Article. 
  

 17 

 ARTICLE XVII 
 Limitation on Payments 
  
 17.1 Scope of Limitation. This Article shall apply to an Award only if: 
  
 (a) The independent auditors most recently selected by the Board (the “Auditors”) determine that the after-tax value of such Award to the Participant, taking into account the effect of all federal, state and
local income taxes, employment taxes and excise taxes applicable to the Participant (including the excise tax under section 4999 of the Code), will be greater after the application of this Article XVII than it was before the application of this
Article XVII; or 
  
 (b) The Committee, at the
time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall be subject to this Article XVII (regardless of the after-tax value of such Award to the Participant). 
  
 If this Article applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan. 
  
 17.2 Basic Rule. In the event that the Auditors determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of
this Article XVII, the “Reduced Amount” shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of section 280G
of the Code. 
  
 17.3 Reduction of Payments. If the
Auditors determine that any Payment would be nondeductible by the Company because of section 280G of the Code, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced
Amount) and shall advise the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant within such 10-day period, then the Company may elect which and how much of the Payments shall
be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Article XVII, present value shall be
determined in accordance with section 280G(d)(4) of the Code. All determinations made by the Auditors under this Article XVII shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes
payable or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and
shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan. 
  

 18 

 17.4 Overpayments and Underpayments. As a result of uncertainty in the application of section 280G
of the Code at the time of an initial determination by the Auditors hereunder, it is possible that Payments will have been made by the Company which should not have been made (an “Overpayment”) or that additional Payments which will not
have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Auditors, based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Participant that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Participant that he
or she shall repay to the Company, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent that such
payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or
for the benefit of the Participant, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. 
  
 17.5 Related Corporations. For purposes of this Article XVII, the term “Company” shall include affiliated corporations to the extent
determined by the Auditors in accordance with section 280G(d)(5) of the Code. 
  
 ARTICLE XVIII 
 General 
  
 18.1 Requirements of Law. The granting of Awards and the issuance of Shares of Stock under this Plan shall be subject
to all applicable laws, rules and regulations and to such approvals by any governmental agencies as may be required. 
  
 18.2 Effect of Plan. The establishment of the Plan shall not confer upon any Key Employee any legal or equitable right against the Company or the
Committee, except as expressly provided in the Plan. 
  
 18.3
Creditors. The interests of any Participant under the Plan or any Agreement are not subject to the claims of creditors and may not, in any way, be assigned, alienated or encumbered. 
  

 19 

 18.4 Governing Law. The Plan and all Agreements hereunder shall be governed, construed and
administered in accordance with and governed by the laws of the Commonwealth of Virginia and the intention of the Company is that ISOs granted under the Plan qualify as such under Section 422(a) of the Code. 
  
 18.5 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 
  
 18.6 Retention Rights. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain an employee. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, at any time, with or without cause, subject to
applicable laws, the Company’s certificate of incorporation and bylaws and a written employment agreement (if any). 
  
 18.7 Stockholders’ Rights. Except as expressly provided in or permitted by the Plan, a Participant shall have no dividend rights, voting
rights or other rights as a stockholder with respect to any Shares covered by his or her Award prior to the time when a stock certificate for such Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Shares by
filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan. 
  
 18.8 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in
whole or in part, the delivery of Common Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption from
registration, qualification or listing. 
  

 20Capital Plan of the Federal Home Loan Bank of Seattle

 EXHIBIT 4.1 
  

 
  
 CAPITAL PLAN 

 
 of the 
  
 Federal Home Loan Bank of Seattle 
  
 Adopted March 5, 2002, as amended on November 22, 2002, 
 December 8, 2004, March 9, 2005, and June 8, 2005 

 TABLE OF CONTENTS 
  

					
	Section I. Definitions	  	1
		
	Section II. Stock Investment	  	3
			
	A.	 	General	  	3
			
	B.	 	Required Amount	  	4
			
	C.	 	Additional Offerings	  	7
			
	D.	 	Periodic Review	  	7
			
	E.	 	Amendments to the Capital Plan	  	8
			
	F.	 	Member Compliance.	  	8
		
	Section III. Transition	  	9
			
	A.	 	Plan of Recapitalization; Manner of Conversion/Exchange	  	9
			
	B.	 	Timetable for Transition and Full Capital Compliance	  	11
		
	Section IV. Classes of Stock	  	11
			
	A.	 	General	  	11
			
	B.	 	Rights, Terms and Preferences.	  	11
			
	C.	 	Exchange of Ownership	  	17
		
	Section V. Bank Review of Plan	  	19
			
	A.	 	Review by Independent CPA.	  	19
			
	B.	 	Review by NRSRO	  	19
			
	C.	 	Good Faith Effort Determination	  	19

  
  
  
  

 i 

 Section I. Definitions. 
  
 As used herein, the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa): 
  

	1.	“3-Month LIBOR” means BBA LIBOR (USD) on Telerate Page 3750 or on any successor page or service that publishes “BBA LIBOR (USD)”. 

  

	2.	“Activity-Based Member Stock Purchase Requirement” means Stock that a Member must acquire and hold as a condition of transacting business with the Bank, the aggregate
amount of which is a function of the volume of the particular products or services provided to that Member by the Bank. 

  

	3.	“Advance” has the same meaning as set forth in 12 C.F.R. 950.1. 

  

	4.	“Bank” means the Federal Home Loan Bank of Seattle. 

  

	5.	“Bank Act” means the Federal Home Loan Bank Act (12 U.S.C 1421, et seq.), as amended from time to time. 

  

	6.	“Board of Directors” means the Board of Directors of the Bank. 

  

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

  

	8.	“Capital Plan” means this capital plan, as amended, supplemented, or modified from time to time. 

  

	9.	“Class B(1) Stock” means Stock held by a Member that satisfies the Total Stock Purchase Requirement, plus all Excess Stock, plus Surplus Stock. 

 

	10.	“Class B(2) Stock” means Stock held by a Member that exceeds the Excess Stock limit set forth in Section II(B)(2)(c) hereof, but does not include Surplus Stock.

  

	11.	“Conversion Date” means the date upon which current stock is converted into the new Stock. 

  

	12.	“Excess Stock” means the Stock held by a given Member that is in excess of that Member’s current Total Stock Purchase Requirement, but does not exceed the Excess
Stock limit set forth in Section II(B)(2)(c). 

  

	13.	“Finance Board” means the Federal Housing Finance Board, the regulator of the Bank and the Federal Home Loan Bank System. 

  

			
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	14.	“GAAP” means Generally Accepted Accounting Principles in the United States. 

  

	15.	“Home Mortgage Loan” means: 

  

	 	a.	A loan, whether or not fully amortizing, or an interest in such a loan, which is secured by a mortgage, a deed of trust, or other security agreement that creates a lien on one of
the following interests in property: 

  

	 	i.	One-to-four family property or multi-family property, in fee simple; 

  

	 	ii.	A leasehold on one-to-four family property or multi-family property under a lease of not less than 99 years that is renewable, or under a lease having a period of not less than 50
years to run from the date the mortgage was executed; or 

  

	 	b.	A mortgage pass-through security that represents an undivided ownership interest in: 

  

	 	i.	Long-term loans, provided that at the time of issuance of the security, all of the loans satisfy the requirements set forth in Section I(14)(a) hereof; or 

 

	 	ii.	A security that represents an undivided ownership interest in long-term loans, provided that, at the time of issuance of the security, all of the loans satisfy the requirements set
forth in Section I(14)(a) hereof. 

  

	16.	“Member” means an institution that has been approved for Membership in the Bank and that has purchased Stock in the Bank, satisfied its Membership Stock Purchase
Requirement and all other conditions of Membership, as set forth herein or as may be otherwise applicable. 

  

	17.	“Member Advance Stock Purchase Requirement” means, with respect to a Member, a specific Activity-Based Member Stock Purchase Requirement where the activity is the
outstanding principal balance of one or more Advances made by the Bank to the Member. 

  

	18.	“Member MPP Stock Purchase Requirement” means, with respect to a Member, a specific Activity-Based Member Stock Purchase Requirement where the activity is the outstanding
principal balance of one or more loans sold to the Bank by the Member pursuant to the Bank’s Mortgage Purchase Program. 

  

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

  

			
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	20.	“Membership Stock Purchase Requirement” means Stock that must be purchased by a Member as a condition of Bank Membership, as set forth in Section II (B)(1)(c) hereof.

  

	21.	“Mortgage Purchase Program” or “MPP” means the program established by the Bank pursuant to 12 C.F.R. 955 for the purchase of loans from its Members.

  

	22.	“Redemption Cancellation Fee” means the fee imposed by the Bank upon a Member that has given the Bank notice of its intent to redeem Stock and that subsequently revokes or
cancels such redemption request. 

  

	23.	“Regulations” means the regulations of the Finance Board found at 12 C.F.R. Chapter IX – Federal Housing Finance Board, as amended from time to time

  

	24.	“Stock” means Class B stock as defined in the Federal Home Loan Bank Act, as such Act was amended by the Gramm-Leach-Bliley Act, and as further defined by Finance Board
regulations. 

  

	25.	“Surplus Stock” means Stock held by a Member that is in excess of the limitation set forth in Section II(B)(2)(c) hereof and that is subject to conversion to Class B(2)
Stock. 

  

	26.	“Total Stock Purchase Requirement” means the amount of Class B(1) Stock that a Member is required to hold pursuant to Section II (B)(1)(d) hereof.

  
 Section II. Stock Investment 
  

	A.	General. Adequate capitalization is required in order to: (a) provide for the safe and sound operation of the Bank; (b) permit prudent leveraging into
products and services of benefit to Members; (c) provide appropriate risk-adjusted Member dividend returns; (d) protect the Bank’s creditors against potential loss; (e) generate earnings sufficient to meet the Bank’s various community
support and public purpose obligations; and; (f) comply with statutory and regulatory capital requirements as established by federal law and the Finance Board. The need for capital is a function of the volumes of and risks inherent in the products
and services provided by the Bank to its Members. Therefore, the capital stock of the Bank should be contributed by its members in general proportion to the distribution of such products and services to its Members. Accordingly, this Capital Plan
requires Members to establish and maintain certain capital stock investments in the Bank. 

  

			
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	B.	Required Amount 

  

	 	1.	Stock Purchase Requirements: 

  

	 	a.	Member Advance Stock Purchase Requirement. Each Member is required to hold Class B(1) Stock with a par value equal to three and one-half percent (3.5%) of the outstanding
principal balance of Advances extended from the Bank to that Member. If authorized by the Board of Directors, and subject to the provisions of Section II(B)(e)(ii), the Member Advance Stock Purchase Requirement may be reduced by the amount of the
Membership Stock Purchase Requirement, but in no event shall the Member Advance Stock Purchase requirement be less than zero dollars ($0); provided, however, that the amount of the Membership Stock Purchase Requirement that is used by a Member to
satisfy its Member MPP Stock Purchase Requirement shall not also be used to satisfy the Member Advance Stock Purchase Requirement. The Board of Directors may change the above percentage within a range of not less than two point five percent (2.5%)
or not greater than four point five percent (4.5%). Any such change in the Member Advance Stock Purchase Requirement will be applied from the implementation date of the change in the requirement to all new and renewed Advances. This sub-paragraph
shall apply on a continuous basis such that a member that is allowed to reduce its Member Advance Stock Purchase Requirement in accordance with II(B)(1)(a) may not hold any Excess Stock or B(2) Stock. 

  

	 	b.	Member MPP Stock Purchase Requirement. Each Member is required to hold Class B(1) Stock with a par value equal to five percent (5.0%) of the outstanding principal balance of
loans sold by the Member to the Bank pursuant to the Bank’s Mortgage Purchase Program, minus the Membership Stock Purchase Requirement, but in no event shall a Member’s Member MPP Stock Purchase requirement be less than zero dollars ($0) ;
provided, however, that the amount of the Membership Stock Purchase Requirement that is used by a Member to satisfy its Member Advance Stock Purchase Requirement shall not also be used to satisfy the Member MPP Stock Purchase Requirement. The Board
of Directors may change the above percentage within a range of not less than zero percent (0.0%) or not greater than six percent (6%). Any such change in the Member MPP Stock Purchase Requirement will be applied from the implementation date of the
change to all new loans purchased by the Bank under its Mortgage Purchase Program. 

  

			
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	 	c.	Membership Stock Purchase Requirement. As a condition of Membership, each Member of the Bank is required to hold Class B(1) Stock in an amount the par value of which is equal
to the greater of five hundred dollars ($500), or zero point seven five percent (0.75%) of the Member’s Home Mortgage Loans, as of the most recent calendar year-end. The Bank will calculate the Membership Stock Purchase Requirement
annually by April 30 of each year based on Member’s Home Mortgage Loans as of the most recent calendar year-end. Provided however, that the Bank may, for a bona fide business purpose, recalculate a Member’s Membership Stock Purchase
Requirement between annual calculations, based on the Member’s most current Home Mortgage Loans. The Board of Directors may change the above percentage within a range of not less than zero point five percent (0.5%) or not greater than one
percent (1%). Any such increase or decrease in the Membership Stock Purchase Requirement will be applied at the implementation date of the change to all Home Mortgage Loan balances of each Member. 

  

	 	d.	Total Stock Purchase Requirement. The amount of Class B(1) Stock that each Member is required to hold shall at all times equal the sum of: 

  

	 	i.	The Member Advance Stock Purchase Requirement, if any; and 

  

	 	ii.	The Member MPP Stock Purchase Requirement, if any; and 

  

	 	iii.	The Membership Stock Purchase Requirement. 

  

	 	e.	Recalculation of Stock Purchase Requirements. The Member Advance Stock Purchase Requirement and the Member MPP Stock Purchase Requirement for a Member will be recalculated
periodically and implemented, as follows: 

  

	 	i.	in connection with each Advance or Mortgage Purchase Program transaction between the Bank and the Member, and the Member may be required to purchase additional Stock, as necessary,
to satisfy the requirements of II(B)(1)(a) or II(B)(1)(b), as the case may be. Prior to requiring a Member to purchase additional Class B(1) Stock, the Bank will apply a Member’s Excess Stock and automatically convert Class B(2) Stock to Class
B(1) as necessary to satisfy an increase in the Member’s Total Stock Purchase Requirement; and 

  

	 	ii.	in connection with a reduction of the Member Advance Stock 

  

			
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	 	  	Purchase Requirement by the amount of the Membership Stock Purchase Requirement in accordance with II(B)(1)(a), prior to any such reduction a Member shall be required to first apply
all of the Member’s Excess Stock and all of the Member’s Class B(2) Stock towards satisfaction of the Member Advance Stock Purchase Requirement. 

  

	 	f.	Notice of Change in Stock Purchase Requirements. In the event the Board of Directors increases or decreases the Member Advance Stock Purchase Requirement, the Member MPP
Stock Purchase Requirement, or the Membership Stock Purchase Requirement, in accordance with the provisions set forth above, the Bank shall provide its Members with prior written notice of any such change. 

  

	 	2.	Excess Stock. 

  

	 	a.	Subject to the limitation imposed by Section II(B)(2)(c) hereof, and the right of the Bank to repurchase Stock pursuant to Sections IV(B)(6) and IV(B)(7) hereof, a Member may hold
Class B(1) Stock in excess of its Total Stock Purchase Requirement. 

  

	 	b.	Following the payment of any dividend, the Bank will recalculate the maximum amount of Excess Stock for each Member as of the close of business at each quarter end. The maximum
amount of Excess Stock that a Member shall be permitted to hold shall be calculated as set forth in Section II(B)(2)(c). The Board of Directors may decrease the amount of Excess Stock permitted to be held by a Member pursuant to Section II(B)(2)(c)
without amending the Capital Plan or obtaining Finance Board approval. 

  

	 	c.	The maximum amount of Excess Stock that each Member shall be permitted to hold is limited to the lesser of: (i) fifty million dollars ($50,000,000) or (ii) the amount resulting from
the following formula: 

  

	 	I.	The average daily balance of Advances outstanding from the Bank to the Member during the most recent quarter multiplied by the applicable percentage set forth in Section
II(B)(1)(a); plus 

  

	 	II.	The greater of: 

  

	 	A.	The outstanding principal balance of loans sold to the Bank by the Member pursuant to the Bank’s Mortgage Purchase Program as of the most recent quarter end multiplied by the
applicable percentage set forth in Section II(B)(1)(b) hereof; or 

  

			
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	 	B.	The Member’s Home Mortgage Loans as of the most recent calculation pursuant to Section II(B)(1)(c) hereof, multiplied by the applicable percentage set forth in Section
II(B)(1)(c) hereof. 

  

	 	d.	In conjunction with the calculation of the maximum Excess Stock done in accordance with Section II(B)(2)(c), each Member shall be notified of the amount, if any, of its Surplus
Stock within two (2) Business Days following a quarter end, and such Surplus Stock shall automatically convert to Class B(2) Stock after five (5) Business Days following such notice to the Member. Appropriate book entries shall be made by the Bank
reflecting that conversion. The resulting Class B(2) Stock will thereafter be subject to repurchase by the Bank or redemption at the request of the Member holding such Class B(2) Stock in accordance with the provisions of Section IV(B)(6) and
Section IV(B)(7) hereof, respectively. 

  

	 	e.	Conversion of Class B(2) Stock. In the event that the calculation of the limit set forth in Section II(B)(2)(c) results in an increase in the amount of Excess Stock that may
be held by a Member, the Member, by giving prior notice to the Bank, may choose to convert a corresponding amount of Class B(2) Stock then held by it into Class B(1) Stock. 

  

	C.	Additional Offerings. The Bank is authorized to issue additional Class B(1)Stock, at par value, to Members from time to time. Participation in
such offerings shall be voluntary on the part of Members, on terms and conditions to be determined by the Board of Directors, but such offerings shall not discriminate in favor or against any one member. 

  

	D.	Periodic Review. To maintain prudent capitalization and ongoing compliance with Finance Board regulations, the Board of Directors shall review the Bank’s
Capital Plan at least annually to determine whether adjustments are required with respect to one or more of the following: 

  

	 	1.	The specific Stock purchase requirement percentages, and/or the types of loans and activities, to which such requirements shall apply. 

  

	 	2.	The exercise by the Bank of its discretion to repurchase Excess Stock and/or Class B(2) Stock and formulae for calculating the limitations on Excess Stock. 

 

	 	3.	Any increases or decreases to the Redemption Cancellation Fees. 

  

	 	4.	The introduction of any new class or subclass of capital stock. 

  

			
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	E.	Amendments to the Capital Plan. 

  
 Any modifications to the Capital Plan shall require an amendment to the Capital Plan by the Board of Directors and approval from the Finance Board.

  

	F.	Member Compliance. 

  
 Each Member is required to comply with any changes in, or adjustments or amendments to the Bank’s Capital Plan, including without limitation any
change, adjustment or amendment that may increase a Member’s Total Stock Purchase Requirement, within 10 Business Days after notice of such adjustment, change or amendment has been mailed by the Bank to such Member. In order to effectuate the
purchase of additional Stock by a Member that may be required due to any such change, adjustment or amendment, the Bank may at any time following 10 Business Days after the mailing of the notice of the purchase requirement by the Bank to such
Member, issue Stock in the name of such Member and withdraw appropriate payment from the Member’s demand deposit account held with the Bank. In addition, in the event any Member fails to comply with any requirement of this Plan, the
Member’s access to products and services of the Bank shall be suspended until such requirement is met, and such failure to comply may lead to involuntary termination of the Member’s Membership. 
  

			
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 Section III. Transition 
  

	A.	Plan of Recapitalization; Manner of Conversion/Exchange. The following steps, which constitute the Bank’s Plan of Recapitalization as defined in
Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, shall be taken in order to implement the Bank’s Capital Plan: 

  

	 	1.	Establish Dates. Following Finance Board approvals of the Capital Plan, the Bank’s Internal Market Risk Model, and the Bank’s Risk Assessment, Procedures and
Controls, the Bank will establish the Conversion Date, and notify all Members of that date. If the last of the Finance Board approvals is received more than eighty (80) days prior to the next quarter end, the Conversion Date will be the next quarter
end. If the last of the Finance Board approvals is received with eighty (80) days or less remaining until the next quarter end, the Conversion Date will be on the second quarter end following such Finance Board approval. 

  

	 	2.	Calculation of Total Stock Purchase Requirement. On the Conversion Date, the Bank will calculate the Total Stock Purchase Requirement of each Member by applying the
Bank’s Stock Purchase Requirements set forth in Section II(B)(1) hereof. 

  

	 	3.	Conversion of shares to the new Stock. On the Conversion Date, all of the outstanding stock of the Bank shall automatically be converted to Class B(1) Stock of equal par
value without any action on the part of the Members. The Bank will reflect that conversion by appropriate book entries and will notify each Member of its Total Stock Purchase Requirement, and any Excess Stock, Surplus Stock, or shortfall with
respect to the Member’s Total Stock Purchase Requirement. 

  

	 	4.	Surplus Stock. Following the conversion of the Members’ existing stock in the Bank to Class B(1) Stock pursuant to Section III(A)(3) hereof, each Member, for a period of
ninety (90) calendar days following the Conversion Date, shall have the right to convert its Surplus Stock, if any, into Class B(2) Stock of equal par value. If written notification of the Member’s election to convert its Surplus Stock into
Class B(2) shares has not been received by the Bank within said ninety (90) day time period, all such Surplus Stock will be repurchased by the Bank, subject to the restrictions set forth in Section IV(B)(6), for cash and at par value within five (5)
Business Days following the end of such ninety (90) day time period. 

  

	 	5.	Shortfall. In the event the Member has a shortfall of Class B(1) Stock, the Member must, within ninety (90) days following the Conversion Date, 

  

					
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 purchase Class B(1) Stock sufficient to meet the Total Stock Purchase Requirement; provided, however, any
institution that became or becomes a Member after November 12, 1999 must fully comply with the Total Stock Purchase Requirement applicable to such Member on the Conversion Date. Notwithstanding the above, in the event a Member has a shortfall of
Class B(1) Stock, the Member must, prior to engaging in any new Advance or MPP transactions with the Bank, purchase Class B(1) Stock sufficient to meet the Total Stock Purchase Requirement. 
  

	 	6.	Right to Opt Out of Capital Plan. Any Member may opt-out of the conversion of its existing stock in the Bank into Stock in accordance with the Capital Plan by filing written
notice to the Finance Board, with a copy to the Bank, of its intent to withdraw its Membership from the Bank; provided that any such notice and copy to the Bank shall be made not less than thirty (30) calendar days prior to the Conversion Date. The
Bank shall, on the Conversion Date, terminate the Membership of any Member that provides such written notice of withdrawal and shall cancel each share of Bank stock of such Member that is outstanding as of the Conversion Date; provided, however,
that any such notice of withdrawal shall be effective only if the Bank, after the proposed cancellation of stock, would remain in compliance with all applicable regulatory capital requirements. Any Member whose notice of withdrawal is ineffective
shall be deemed to have remained a Member and to have consented to the conversion of its stock into Stock in accordance with this Capital Plan, and the Bank shall so notify the Member. In addition, any withdrawal of Membership shall be subject to
applicable laws and Finance Board regulations. 

  

	 	7.	Members in the Process of Withdrawing from Membership. Any Member that files its written notice to withdraw with the Finance Board less than 30 calendar days prior to the
Conversion Date, shall have its existing stock converted to Stock in accordance with the Capital Plan, and the effective date of withdrawal shall be established pursuant to 12 C.F.R. 925.26; provided, however, that the applicable stock redemption
periods calculated under such regulation shall commence on the date the Member first submitted its written notice to withdraw to the Finance Board. 

  

	 	8.	Orderly Liquidation. Any institution that has withdrawn from Membership on or before the Conversion Date of the Capital Plan, but continues to hold stock to support Advances
that the Bank has agreed to liquidate after the termination of Membership, shall have such stock converted to Class B(1) Stock on the Conversion Date. Any such institution shall hold Class B(1) Stock equal to 3.50% of the outstanding Advances during
the period of liquidation. 

  

			
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	B.	Timetable for Transition and Full Capital Compliance 

  

	 	1.	Conversion Date. The Bank will complete the conversion of the Member’s existing shares of stock into new Stock on the Conversion Date. Members shall be notified by the
Bank of the Conversion Date no later than 60 days prior to the Conversion Date. The Finance Board, pending its review of the capital plans of all the Federal Home Loan Banks, reserves the right to set forth a common conversion date or to otherwise
adjust the conversion date for each Federal Home Loan Bank, including the Bank. 

  

	 	2.	Capital Compliance. On the Conversion Date, the Bank will be in full capital compliance. 

  
 Section IV. Classes of Stock 
  

	A.	General. The Bank shall issue Stock with a par value of $100 per share. Stock shall be redeemable in cash at par value five (5) years following
submission by a Member of a written notice of its intent to redeem such shares. Submission shall be deemed to occur upon the Bank’s receipt of such notice. Stock shall be issued only to and may be held only by Members, and is tradable only
between the Bank and its Members. Stock may not be issued by the Bank other than in accordance with 12 C.F.R. 931.2 of the Finance Board regulations. 

  

	B.	Rights, Terms and Preferences. 

  
 Terms and Preferences. The terms and preferential rights of stockholders are as follows: 
  

	 	1.	Ownership. The retained earnings, undivided profits, and equity reserves, if any, of the Bank are owned by the holders of Stock proportionate to the total par value of any
outstanding shares of Stock; provided, however, that Members have no right to receive any portion of these items except through the declaration of a dividend by the Board of Directors or through liquidation of the Bank. 

  

	 	2.	Dividends. At the discretion of the Board of Directors and subject to the terms and conditions set forth herein and in the Bank Act or the Regulations, dividends may from
time to time (quarterly or otherwise) be declared and paid on Class B(1) Stock and Class B(2). Stock Dividends are non-cumulative with respect to payment obligation. Any dividend shall be paid equally on Class (B)(1) Stock and Class B(2) Stock until
the limitation on dividends payable on Class B(2) Stock under IV(B)(3)(b) has been reached; thereafter, dividends shall be paid solely on Class B(1) Stock. 

  

			
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 Dividends shall be paid to a Member based on the average number of shares of Stock actually owned by the
Member during the period for which the dividend has been declared. In no event will the Board of Directors declare or pay any dividend on its Class B(1) Stock or Class B(2) Stock if after doing so it would fail to meet any of its minimum capital
requirements, nor shall the Board of Directors declare dividends if the Bank is not in compliance with its minimum capital requirements or if the Bank determines in its discretion that to do so would create a safety and soundness issue for the Bank.
No dividend shall be declared or paid except out of previously retained earnings or current net earnings, as determined in accordance with GAAP, and in accordance with the requirements set forth in the Bank Act or the Regulations. For purposes of
this Section IV(B)(2), net earnings shall equal net income under GAAP, plus or minus any adjustments as authorized or required by the Finance Board. 
  

	 	3.	Dividend Rate. 

  

	 	a.	The dividend rate for Class B(1) Stock, if any, shall be determined by the Board of Directors in its discretion at such time as a dividend is declared. The dividend rate on the
Class B(2) Stock shall be as set forth in Section IV(B)(3)(b) below. 

  

	 	b.	The dividend rate on Class B(2) Stock, if any, shall be the lesser of (i) the Class B(1) dividend declared for that dividend period or (ii) the product of seventy-three point four
seven per cent (73.47%) times (LIBOR minus 0.25%), where LIBOR is the daily average of 3-month LIBOR over the dividend period, as determined by the Bank. 

  

	 	4.	Form of Payment. 

  

	 	a.	Holders of Class B(1) Stock shall receive dividend payments in the form of cash, or Class B(1) Stock shares, or a combination thereof. The Board of Directors shall determine the
form of payment of dividends on Class B(1) Stock. 

  

	 	b.	Holders of Class B(2) Stock shall receive dividend payments in the form of cash, or Class B(2) Stock shares, or a combination thereof. The Board of Directors shall determine the
form of payment of dividends on Class B(2) Stock. 

  

	 	5.	Rights of Members in the Event of Liquidation, Merger or Consolidation of the Bank. Subject to applicable law and regulations, which could modify, restrict or
eliminate any rights set forth in this Section, in the event of liquidation, merger or other consolidation of the Bank, the holders of Stock 

  

			
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 shall be entitled to receive the par value of their Stock, undistributed retained earnings, if any, plus
any declared but unpaid dividends, provided that payment obligations to the Bank’s creditors have been fully satisfied. 
  

	 	6.	Repurchase in Discretion of Bank. 

  

	 	a.	Subject to the provisions of 12 C.F.R. 931.8(a), the Bank may elect to repurchase at any time and at par, Excess Stock and/or Class B(2) Stock of a Member; provided, however, that
the Bank must give the Member five (5) Business Days prior written notice of any such repurchase by the Bank. In no event will the Bank make any such repurchase if such repurchase would cause the Bank to fail any minimum capital requirement set
forth in applicable law or regulation of the Finance Board or cause the Member to fail to satisfy its Total Stock Purchase Requirement. 

  

	 	b.	A Member who receives written notice from the Bank of the Bank’s intention to repurchase the Member’s shares of Excess Stock or Class B(2) Stock shall be permitted to
specify by written notice to the Bank, delivered at least one (1) Business Day prior to the date on which the repurchase is to be finalized, the particular shares that are subject of the repurchase. Such notice shall identify the particular shares
that are subject to repurchase by reference to the number and class of Stock subject to the repurchase, and specifying the date and manner in which such shares were acquired (i.e. whether by purchase at par value or as a stock distribution from the
Bank). If a Member fails to timely deliver written notice to the Bank identifying the shares to be repurchased, the shares of the Member’s Stock subject to repurchase within a particular class shall be determined using a first-acquired, first
repurchased method of identification. 

  

	 	7.	Redemption at Member Request. 

  

	 	a.	Subject to the restrictions set forth below and in 12 CFR 931.8(a), Class B(1) Stock shares and Class B(2) Stock shares are redeemable for cash at par value at the request of the
Member following five (5) years prior written notice to the Bank of such redemption request; provided, however, that a Member shall not have more than one notice of redemption outstanding at one time with respect to the same shares of Stock. In
accordance with Section IV(B)(6) and prior to the expiration of the five (5) year redemption period, the Bank has the right in its sole discretion, but not the obligation, upon five (5) Business Days prior written notice to the Member, to repurchase
at par, any or all of the shares of Excess Stock, Surplus Stock or Class B(2) Stock for which a Member has provided a redemption 

  

			
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	 	  	notification unless a shorter notice period is agreed to in writing by the affected Member. The Bank may suspend redemption of Stock by a Member if the Bank reasonably believes that
the continued redemption of Stock would cause the Bank to fail to meet its minimum capital requirements as set forth in applicable law or regulation of the Finance Board, would prevent the Bank from maintaining adequate capital against a potential
risk that may not be adequately reflected in its minimum capital requirements, or would otherwise prevent the Bank from operating in a safe and sound manner. In the event the Bank suspends a redemption of Stock, the following provisions shall apply:

  

	 	i.	The Bank will notify the Finance Board in writing within two (2) Business Days of the date of the decision to suspend the redemption of Stock, informing the Finance Board of the
reasons for the suspension and of the strategies and time frames for addressing the conditions that led to the suspension. 

  

	 	ii.	The Finance Board may require the Bank to re-institute the redemption of a Member’s Stock. 

  

	 	iii.	The Bank will not repurchase any Stock without the written permission of the Finance Board during any period in which the Bank has suspended redemption of Stock under this Section.

  

	 	iv.	The Bank will not charge a Redemption Cancellation Fee if Stock is not redeemed due to the suspension of Stock redemptions under this Section. 

  

	 	b.	A Member who provides written notice to the Bank of its intention to redeem Class B(1) Stock or Class B(2) Stock pursuant to this section shall identify in that written notice the
particular shares that are the subject of that redemption request by reference to the class of Stock, the number of shares in that class, the date acquired, and the manner in which the shares subject to notice were acquired (i.e. whether by purchase
at par value or as a stock distribution by the Bank). If a Member fails to identify the shares to be redeemed, the shares of the Member’s Stock subject to redemption within a particular class shall be determined using a first-acquired, first
redeemed method of identification. In the event that shares that have been identified for redemption by a Member are subsequently converted from Class B(1) to Class B(2), or vice versa, the Member’s redemption rights with respect to such shares
shall remain the same. 

  

			
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	 	c.	Class B(1) Stock of a Member will not be redeemed if such redemption would cause the Member to fail to satisfy its Total Stock Purchase Requirement. In the event that a redemption
would cause a Member to fail to satisfy its Total Stock Purchase Requirement on the redemption date, such request will be cancelled by the Bank five (5) Business Days following the expiration of such redemption period, and the Redemption
Cancellation Fee will apply. 

  

	 	d.	A Member that has previously notified the Bank in writing of its intent to redeem some or all of its Class B(1) Stock or some or all of its Class B(2) Stock, and that subsequently
decides to cancel its redemption request before the completion of the five (5) year notification period, shall do so by providing written notice to the Bank of its intent to cancel its redemption. If a Member cancels a redemption request, the Bank
shall impose a Redemption Cancellation Fee equal to the applicable amount shown in the following table; provided, however, that the Board of Directors may waive the imposition of such fee if it has a bona fide business purpose for doing so and the
waiver is consistent with Section 7(j) of the Bank Act. If a Redemption Cancellation Fee is imposed by the Bank, the Bank shall notify the Member of the amount of the fee that will be imposed. 

  

			
	 Cancellation of Redemption Request
 Occurs During:

	 	 Maximum Cancellation Fee

	Year 1	 	 20% of dividends received during the
 time the request
was outstanding

		
	Year 2	 	 Year 1 fee plus 40% of the dividends
 received during
the second year the
 request was outstanding

		
	Year 3	 	 Year 2 fee plus 60% of the dividends
 received during
the third year the
 request was outstanding

		
	Year 4	 	 Year 3 fee plus 80% of the dividends
 received during
the fourth year the
 request was outstanding

		
	Year 5	 	 Year 4 fee plus 100% of the dividends
 received during
the fifth year the
 request was outstanding

  

	 	e.	In the event the Bank does impose such a Redemption Cancellation Fee, the Member may, within ten (10) business days from the date of 

  

			
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 mailing by the Bank to the Member of written notice that sets forth the amount of the fee, provide
written notice of its intent to revoke the cancellation and to proceed with the redemption of the Stock subject to the redemption request in accordance with the original redemption timetable, in which event no Redemption Cancellation Fee shall be
imposed. 
  

	 	f.	The Bank may retain the proceeds of redemption by a Member of Class B(1) Stock or Class B(2) Stock as additional collateral if the Bank reasonably determines that there is an
existing or anticipated collateral deficiency related to any obligations owed by the Member to the Bank and the Member has failed to deliver additional collateral to resolve the existing or anticipated collateral deficiency to the Bank’s
satisfaction, until all such obligations have been satisfied or the anticipated deficiency is resolved to the Bank’s satisfaction. 

  

	 	8.	Voting Rights. Members will have the right to vote their Class B Stock in elections of the Bank’s Board of Directors pursuant to applicable law and regulations of the
Finance Board. 

  

	 	9.	Transferability. 

  

	 	a.	Except as set forth herein, a member of the Bank may not transfer Stock to any other person or entity. 

  

	 	b.	A Member or a non-Member may transfer at par value the Excess Stock held by that Member or non-Member to a Member that is Affiliated with that Member or non-Member.

  

	 	c.	In the event of a merger or consolidation of two or more Members, the Stock of the disappearing Member or Members may be transferred at par value to the surviving or consolidated
Member. 

  

	 	d.	Notwithstanding any other provision of this Capital Plan, (i) in the event of a proposed merger of a Member into a non-Member in which the non-Member will be the successor
institution, a Member may, prior to such proposed merger and with the prior approval of the Bank, transfer its Activity-Based Member Stock Purchase Requirement, together with the rights and obligations associated with the related Advances and/or
Mortgage Purchase Program activities, to a Member that is Affiliated with either the merging Member or the merging non-Member, and (ii) in the event of a merger of a Member into a non-Member in which the non-Member will be the successor institution,
the successor non-Member may, following such proposed merger and with the prior approval of the Bank, transfer the Activity-Based Member Stock Purchase Requirement that it has assumed by virtue of the merger with the Member, together with the rights
and obligations associated with the related Advances and/or Mortgage Purchase Program activities, to a Member that is Affiliated with the successor non-Member. In addition, any such successor non-Member that holds Stock shall, if requested to do so
by the Bank in its discretion, transfer the Activity-Based 

  

			
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 Member Stock Purchase Requirement that it has assumed by virtue of the merger with the Member, together
with the rights and obligations associated with the related Advances and/or Mortgage Purchase Program activities, to a Member that is Affiliated with the successor non-Member, and said transfer must take place no later than 60 days following the
request from the Bank. Upon the transfer of Stock pursuant to the preceding d(ii) hereof, the stock redemption period that became applicable to any such Stock by virtue of the merger of the Member into the successor non-Member shall, as of the date
of the transfer of Stock to the successor non-Member pursuant to d(ii) hereof, be deemed to be cancelled and inapplicable, and the Bank may, in its discretion, impose a cancellation fee in accordance with the amounts set forth in Section
IV(B)(7)(d). The Activity-Based Member Stock Purchase Requirement of any Member or non-Member that has been transferred pursuant to this Section shall terminate with respect to the transferor as of the effective date of the transfer. 
  

	 	e.	For purposes of this Section IV(B)(9), the term “Affiliated” means to control, to be controlled by, or to be under common control with. 

  

	 	f.	The Bank shall be given 30 days prior notice of any transfer permitted by this section, unless this prior notice requirement is waived by the Bank. 

  

	 	g.	All transfers permitted by this Section shall: (1) be subject to applicable law and Finance Board regulations, and the prior approval of the Bank, (2) be subject to the terms,
limits and conditions set forth in the Capital Plan, including without limitation the applicable provisions of Section IV(C), and (3) be transferred at par value. 

  

	C.	Exchange of Ownership 

  

	 	1.	Consolidation of Members. Upon a merger or consolidation of two or more Bank Members, the Total Stock Purchase Requirement will be calculated for the surviving or
consolidated institution using data as of the effective date of the merger or consolidation. Excess Stock, if any, of the surviving or consolidated institution will be subject to the Excess Stock limitations and other terms and conditions set forth
herein. 

  

			
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	 	2.	Withdrawals and Terminations of Membership. 

  

	 	a.	Law and Regulations. All withdrawals and terminations of Membership shall be subject to applicable law and Finance Board regulations. 

  

	 	b.	Disposition of capital of a terminated Member. In the event that an institution withdraws from Membership or has had its Membership terminated and on the effective date of
such withdrawal or termination remains indebted to the Bank or has outstanding business transactions with the Bank, the Bank shall not redeem or repurchase any Stock that is required by any Activity Based Member Stock Purchase Requirement of such
Member, in accordance with the provisions hereof, until such indebtedness and business transactions have been extinguished or settled, including any fees relating to the prepayment of Advances. 

  

	 	c.	Stock redemption notices of a terminated Member. 

  

	 	i.	Voluntary withdrawal of Membership. The receipt by the Bank of a Member’s notice of withdrawal of Membership shall commence the redemption period of all Stock held by
that Member that is not already subject to a pending request for redemption. In the case of an institution the Membership of which has been terminated as a result of a merger or consolidation into a nonmember or into a Member of another Federal Home
Loan Bank, the applicable stock redemption period for any Stock that is not subject to a pending notice of redemption shall be deemed to commence on the date on which the charter of the Member is cancelled. 

  

	 	ii.	Involuntary termination of Membership. In the event of an involuntary termination of a Member’s Membership, the redemption period for all Stock owned by a Member and not
already subject to a pending request for redemption, shall commence on the date that the Bank terminates the institution’s Membership. 

  

			
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 Section V. Bank Review of Plan 
  

	A.	Review by Independent CPA. The accounting firm PricewaterhouseCoopers LLP has reviewed this plan to ensure, to the extent possible, that the
implementation of the plan would not result in any write-down of the redeemable stock owned by its Members. The report by PricewaterhouseCoopers LLP is included. 

  

	B.	Review by NRSRO. The firm Standard & Poors has reviewed this plan to ensure, to the extent possible, that the implementation of this plan will not
have a material effect on the credit rating of the Bank. The report by Standard & Poors is included. 

  

	C.	Good Faith Effort Determination. Management of the Bank has made a good faith determination that the Bank will be able to implement the plan and that the
Bank will be in compliance with its regulatory total capital requirement and its regulatory risk-based capital requirement after the plan is implemented. An analysis of the Bank’s projected capital position after implementation is included.

  

			
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