Document:

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CAPITAL PLAN

Amended and Revised

March 24, 2009

(Approved by the Federal Housing Finance Agency on March 6, 2009)

 

 

	1.0	 	Definitions
	 
	 	 	For purposes of this Capital Plan, all capitalized terms used but not defined elsewhere have
the following meanings:
	 
	 	 	Acquired Member Assets means assets sold to the Bank pursuant to 12 C.F.R. Part 955
and held on the Bank’s balance sheet.
	 
	 	 	Activity Based Stock means a subclass of Capital Stock that a Member is required to
purchase and hold in order to obtain an advance and to engage in other transactions with the
Bank.
	 
	 	 	Activity Based Stock Requirement means the level of Capital Stock that a Member must
purchase and hold in order to obtain advances and engage in other transactions with the
Bank.
	 
	 	 	Bank means the Federal Home Loan Bank of Des Moines.
	 
	 	 	Board of Directors means the Board of Directors of the Bank.
	 
	 	 	Calculation Date means the business day immediately preceding the Conversion Date,
on which each Member’s Minimum Investment will be determined.
	 
	 	 	Cancellation Fee means the fee the Bank will impose upon a Member that cancels or
revokes a Notice of Redemption or Notice of Withdrawal.
	 
	 	 	Capital Plan means the Bank’s plan for a new capital structure as required by 12
U.S.C. 1426(b), as approved by the Finance Board.
	 
	 	 	Capital Stock means the Class B stock authorized under this Capital Plan.
	 
	 	 	Commitment means any legally binding agreement that requires the Bank to make an
advance, acquire Member assets, or otherwise transact business with a Member at or by a
specified date and at a specified price.
	 
	 	 	Contingent Obligation means any obligation of the Bank that depends on the
occurrence of a future and uncertain event. Contingent Liabilities include, but are not
limited to, stand-by letters of credit.
	 
	 	 	Conversion Date means the date upon which stock issued by the Bank prior to the
implementation of this Capital Plan is converted into Capital Stock.
	 
	 	 	Excess Shares or Excess Stock means the amount or shares of each subclass of
the Bank’s Capital Stock held by a Member which exceeds that Member’s Minimum Investment.
	 
	 	 	Finance Board means the Federal Housing Finance Board, the regulator of the Federal
Home Loan Bank System, or any successor thereto.
	 
	 	 	Member means any institution that has been approved for membership in the Bank and
has purchased the required amount of Membership Stock.
	 
	 	 	Membership Stock means a subclass of Capital Stock that a Member is required to
purchase and hold as a condition of membership in the Bank

 

 

	 	 	Membership Stock Requirement means the level of Capital Stock, based on a percentage
of Total Assets, that a Member must purchase and maintain as a condition of membership.
	 
	 	 	Minimum Investment means the amount of Membership Stock necessary for a Member to
satisfy its Membership Stock Requirement and the minimum amount of Activity Based Stock
necessary for a Member to satisfy its Activity Based Stock Requirement.
	 
	 	 	Notice of Redemption means any written request by a Member to the Bank to redeem
Capital Stock.
	 
	 	 	Notice of Withdrawal means the written notice by a Member to the Bank of that
Member’s intention to withdraw from membership in the Bank.
	 
	 	 	Opt-out Date means the date 30 calendar days prior to the Conversion Date.
	 
	 	 	Total Assets means a Member’s total assets as reported to the Member’s primary
regulator or on its audited financial statement.

 

 

	2.0	 	Capital Structure
	 
	2.1	 	Authorized Capital Stock
	 
	 	 	The Bank issues Capital Stock only in accordance with 12 C.F.R. Section 931.2 and in
accordance with this Capital Plan.
	 
	 	 	Capital Stock is composed of the following subclasses:

	 	•	 	Membership Stock; and
	 
	 	•	 	Activity Based Stock

	2.2	 	Stock Issuance and Retirement Procedures
	 
	 	 	The Bank acts as its own transfer agent and issues all stock in book-entry form.
	 
	 	 	The Bank does not issue fractional shares of Capital Stock. A Member’s Minimum Investment
shall be rounded up to the next $100. Any dividend declared in the form of Capital Stock
shall be rounded down to the next $100 and any fractional shares shall be distributed in the
form of a cash dividend.
	 
	 	 	Capital Stock may be purchased and held only by Members, former Members that are required to
hold Capital Stock after their membership has terminated in order to support outstanding
advances and other transactions with the Bank, and entities that acquire Members, such as
through mergers or consolidations, but which themselves are not Members.
	 
	 	 	The Bank issues Capital Stock in a Member’s name, credits the Member’s Membership Stock or
Activity Based Stock balance, as appropriate, and debits the Member’s demand deposit account
for any payment due.
	 
	 	 	Upon redemption or repurchase of Capital Stock, the Bank retires the stock, debits the
Member’s Membership Stock or Activity Based Stock balance, as appropriate, and credits the
Member’s demand deposit account with any proceeds.
	 
	2.3	 	Minimum Investment Requirements
	 
	 	 	The Board of Directors has a continuing obligation to review and adjust the Minimum
Investment as necessary to ensure that the Bank remains in compliance with its capital
requirements. The Bank shall provide notice to each stockholder of any adjustment to the
Minimum Investment and the effective date of any such adjustment at least 15 days prior to
the effective date of any such adjustment. Upon the effective date of any such adjustment,
the Bank shall, as applicable, issue any Capital Stock in accordance with section 2.2 or
repurchase any Capital Stock in accordance with section 4.
	 
	 	 	A Member must comply promptly with any adjustments the Board of Directors makes to the
Minimum Investment.

 

 

	2.4	 	Membership Stock Requirements
	 
	 	 	The Board of Directors has established a Membership Stock Requirement identified in Appendix
I. The Board of Directors may adjust the Membership Stock Requirement within the ranges
specified in Appendix I. Each Member is required to purchase and maintain Membership Stock
in an amount equal to its Membership Stock Requirement, as calculated by the Bank.
	 
	 	 	At least annually, the Bank calculates each Member’s Membership Stock Requirement as a
percentage of Total Assets as of the preceding December 31st. The Bank will
notify each Member of its Membership Stock Requirement at least 15 days prior to the
effective date of any adjustments that the Bank shall make to the Member’s Membership Stock
balance as a result of such annual calculation. If a Member’s Membership Stock Requirement
has increased since the last time the Bank calculated the Member’s Membership Stock
Requirement, the Bank shall issue Membership Stock in accordance with section 2.2.
	 
	 	 	The Bank, in its discretion, may recalculate any member’s Membership Stock Requirements more
often than annually if the Bank deems it appropriate. The Bank may recalculate a Member’s
Membership Stock Requirement if requested by the Member. In each of these cases, the Bank
will calculate the Membership Stock Requirement based on the Member’s Total Assets as of the
end of the most recent calendar quarter for which financial information is available.
	 
	 	 	Notwithstanding any other provision of this Capital Plan, in the event that (a) a member
becomes insolvent or otherwise subject to the appointment of a conservator, receiver or
other legal custodian under federal or state law, and (b) the Bank has terminated the
Member’s membership, then that Member’s Membership Stock Requirement shall be zero.
	 
	2.5	 	Activity Based Stock Requirements
	 
	 	 	The Board of Directors has established an Activity Based Stock Requirement identified in
Appendix I. The Board of Directors may adjust the Activity Based Stock Requirement within
the ranges specified in Appendix I. The Board of Directors may apply changes in the Activity
Based Stock Requirement only to new advances and other transactions, or to new and existing
advances and other transactions.
	 
	 	 	Each Member is required to purchase and maintain Activity Based Stock in an amount equal to
its Activity Based Stock Requirement, as calculated by the Bank, as long as the advance or
other transaction remains recorded on the Bank’s books and records. Acquired Member Assets
held by the Bank on the Conversion Date shall be subject only to capital requirements
specified in contracts in effect at the time the assets were acquired by the Bank prior to
the Conversion Date.
	 
	 	 	The Bank calculates each Member’s Activity Based Stock Requirement daily. The Bank shall
notify each Member of any increase in its Activity Based Stock Requirement and issue
Activity Based Stock to the Member in accordance with section 2.2.

 

 

	3.0	 	Rights and Preferences
	 
	3.1	 	Par Value
	 
	 	 	Capital Stock shall be issued, transferred, redeemed, and repurchased at a par value of
$100.
	 
	3.2	 	Ownership of Retained Earnings
	 
	 	 	The retained earnings, paid-in surplus, undivided profits and equity reserves, if any, of
the Bank are owned by the stockholders of Capital Stock in an amount proportional to the
stockholder’s share of the total shares of issued and outstanding Capital Stock.
Stockholders have no right to receive any portion of these items except through the
declaration of a dividend or capital distribution approved by the Board of Directors or upon
liquidation of the Bank.
	 
	3.3	 	Voting Rights
	 
	 	 	The voting rights associated with Capital Stock are defined in and governed by the Finance
Board’s regulations. No share of Capital Stock shall have any voting preference.
	 
	3.4	 	Dividends
	 
	 	 	Except as otherwise provided herein or by regulation or statute, the Board of Directors has
sole discretion to determine the amount, form, frequency and timing of dividend payments for
each subclass of Capital Stock. The Board of Directors may periodically declare dividends
for each subclass of Capital Stock. Dividend payments may be made in the form of cash,
additional shares of Capital Stock, or a combination thereof as determined by the Board of
Directors. Unless the Board of Directors declares otherwise, dividends are non-cumulative.
	 
	 	 	Dividends may only be paid from current earnings or previously retained earnings. The Board
of Directors may not declare or pay any dividends if the Bank is not in compliance with its
capital requirements or, if after paying the dividend, the Bank would not be in compliance
with its capital requirements.
	 
	 	 	Each Member will be entitled to receive dividends on Capital Stock held during the
applicable dividend period for the period of time the Member owned the Capital Stock. The
Bank pays dividends on Capital Stock as long as it is issued and outstanding, regardless of
whether a Member has provided a Notice of Redemption or Notice of Withdrawal or a
stockholder has terminated membership for any reason.
	 
	3.5	 	Liquidation
	 
	 	 	If the Bank is liquidated, after payment in full to the Bank’s creditors, the Bank’s
stockholders shall be entitled to receive the par value of their Capital Stock, as well as
any retained earnings, in an amount proportional to the stockholder’s share of the total
shares of Capital Stock.

 

 

	3.6	 	Merger or Consolidation
	 
	 	 	The Board of Directors shall determine the rights and preferences of the Bank’s stockholders
in connection with any merger or consolidation, subject to any terms and conditions imposed
by the Finance Board.

 

 

	4.0	 	Redemption, Repurchase and Transfer
	 
	4.1	 	Capital Stock Redemption
	 
	 	 	Capital Stock is redeemable on five years written notice to the Bank. The Bank shall not be
obligated to redeem a Member’s Capital Stock other than in accordance with the Capital Plan,
and is not permitted to redeem Capital Stock if such redemption would cause the Member to
fail to meet its Minimum Investment.

	 	4.1.1	 	Notice of Redemption
	 
	 	 	 	A Member may redeem Capital Stock by providing a Notice of Redemption to the Bank
specifying the sub-class and the number of shares of Capital Stock to be redeemed.
A Member shall not have more than one Notice of Redemption outstanding at any one
time for the same shares of Capital Stock.
	 
	 	 	 	The redemption period commences upon the Bank’s receipt of the Notice of Redemption.
The Bank honors Notices of Redemption in the order in which the Bank receives them.
	 
	 	 	 	The Bank shall redeem the Capital Stock identified in a Notice of Redemption
following the expiration of the redemption period and pay the stated par value of
that Capital Stock to the Member in cash in accordance with section 2.2 and subject
to the limitations set forth in section 4.3, unless the Bank exercises its
discretionary authority to repurchase Excess Stock in accordance with section 4.2
prior to that time.
	 
	 	4.1.2	 	Cancellation of Notice of Redemption
	 
	 	 	 	A Member may cancel a Notice of Redemption prior to the end of the redemption period
by providing written notice to the Bank of its intent to cancel its Notice of
Redemption. The Bank will charge the Member a Cancellation Fee equal to the
following:

	 	•	 	one percent of the par value of the shares of Capital Stock subject to the
Notice of Redemption if the Bank receives the cancellation of Notice of
Redemption within one year of the day the Bank received the Notice of
Redemption;
	 
	 	•	 	two percent of the par value of the shares of Capital Stock subject to the
Notice of Redemption if the Bank receives the cancellation of Notice of
Redemption within two years of the day the Bank received the Notice of
Redemption;
	 
	 	•	 	three percent of the par value of the shares of Capital Stock subject to the
Notice of Redemption if the Bank receives the cancellation of Notice of
Redemption within three years of the day the Bank received the Notice of
Redemption;

 

 

	 	•	 	four percent of the par value of the shares of Capital Stock subject to the
Notice of Redemption if the Bank receives the cancellation of Notice of
Redemption within four years of the day the Bank received the Notice of
Redemption;
	 
	 	•	 	five percent of the par value of the shares of Capital Stock subject to the
Notice of Redemption if the Bank receives the cancellation of Notice of
Redemption within five years of the day the Bank received the Notice of
Redemption.

	 	 	 	The Board of Directors may reduce the Cancellation Fee to any percentage of the par
value of the shares of Capital Stock subject to the cancelled Notice of Redemption
that is not less than 0.0 percent and not more than the percentages specified in the
preceding paragraph. If the Board of Directors reduces the Cancellation Fee, the
Board of Directors will also determine whether the reduced Cancellation Fee will
apply to the cancellation of any previously submitted Notice of Redemption as well
as those submitted in the future. Otherwise, the Cancellation Fee in effect at the
time the Bank received the Notice of Redemption will apply to the cancellation of
that Notice or Redemption. The Bank will notify Members in writing at least 15 days
in advance of any changes in the Cancellation Fee.
	 
	 	 	 	A Notice of Redemption by a Member (whose membership has not been terminated) shall
be automatically cancelled if, within five business days after the end of the
applicable redemption notice period, the Bank is prevented from redeeming the
Member’s Capital Stock because the Member would fail to maintain its Minimum
Investment after such redemption. The automatic cancellation shall have the same
effect as a voluntary cancellation and the Bank shall impose the Cancellation Fee
described in the preceding paragraph.
	 
	 	4.1.3	 	Notice of Withdrawal
	 
	 	 	 	The Bank’s receipt of a Notice of Withdrawal commences the five-year redemption
period for all Capital Stock held by that Member that is not already subject to a
pending Notice of Redemption. The redemption period for Membership Stock purchased
subsequent to the Bank’s receipt of a Member’s Notice of Withdrawal shall be deemed
to have commenced when the Bank issued such Membership Stock. Following the
expiration of the redemption period, the Bank shall pay the stated par value of the
Capital Stock to the Member in cash, in accordance with section 2.2 and subject to
the limitations set forth in sections 4.3 and 5.3.

 

 

	 	4.1.4	 	Cancellation of Notice of Withdrawal
	 
	 	 	 	A Member may cancel a Notice of Withdrawal prior to the end of the redemption period
by providing written notice to the Bank of its intent to cancel its Notice of
Withdrawal. The Bank will charge the Member a Cancellation Fee on the par value of
the Member’s Capital Stock balance as described in section 4.1.2.
	 
	 	4.1.5	 	Termination of Membership
	 
	 	 	 	If an institution’s membership 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 redemption period for any Capital 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
former member is terminated.
	 
	 	 	 	If an institution’s membership is involuntarily terminated, the redemption period
for all Capital Stock owned by the former member and not already subject to a
pending Notice of Redemption shall commence on the date that the Board of Directors
terminates the institution’s membership.

	4.2	 	Capital Stock Repurchases
	 
	 	 	The Bank, in its discretion, may repurchase any Excess Shares without regard to any
redemption period.

	 	4.2.1	 	Membership Stock
	 
	 	 	 	Upon 15 days written notice to Members, the Bank may, in its sole discretion,
repurchase Membership Stock which the Bank determines is Excess Stock without regard
to the five-year redemption notice period. The Bank shall repurchase any such
Excess Stock in accordance with section 2.2 and subject to the limitations set forth
in section 4.3.
	 
	 	 	 	Any repurchase of Membership Stock automatically reduces the amount of Membership
Stock that is the subject of any outstanding Notice of Redemption by the amount of
Membership Stock repurchased. If a Member has Membership Stock that is subject to
more than one Notice of Redemption, the Bank will automatically reduce the amount of
Membership Stock that is subject to such outstanding Notices of Redemption in the
same order in which the Bank received such Notices of Redemption.
	 
	 	 	 	A Member’s submission of a Notice of Withdrawal in accordance with section 5.1, or
its termination of membership in any other manner, will not, in and of itself, cause
any Membership Stock to be deemed Excess Stock for purposes of this section.
	 
	 	4.2.2	 	Activity Based Stock
	 
	 	 	 	Each Member may hold Excess Shares of Activity Based Stock up to the operational
threshold established in Appendix I. The Board of Directors may, from time to time,
increase or decrease the operational threshold within ranges

 

 

	 	 	 	specified in Appendix I. The Bank will notify each Member of a change in the
operational threshold at least 30 days prior to implementing the change.
	 
	 	 	 	The Bank repurchases any Excess Shares of Activity Based Stock that exceed the
operational threshold established in Appendix I, on at least a scheduled, monthly
basis in accordance with section 2.2 and subject to the limitations set forth in
section 4.3. The Bank will notify Members at least 15 days in advance of the
scheduled date(s) for repurchasing Activity Based Stock and prior to implementing
any changes in the scheduled date(s) for repurchasing Activity Based Stock.

	4.3	 	Limitations on Capital Stock Redemption or Repurchase
	 
	 	 	The Bank will not redeem or repurchase Capital Stock:

	 	•	 	without the prior written approval of the Finance Board, if the Finance Board or the
Board of Directors has determined that the Bank has incurred, or is likely to incur,
losses that result in or are likely to result in charges against the capital of the
Bank. This prohibition shall apply even if the Bank is in compliance with its capital
requirements, and shall remain in effect for however long the Bank continues to incur
such charges or until the Finance Board determines that such charges are not expected
to continue; or
	 
	 	•	 	if the redemption or repurchase would cause the Bank to be out of compliance with
its capital requirements; or
	 
	 	•	 	if the redemption or repurchase would cause a Member to be out of compliance with
its Minimum Investment; or
	 
	 	•	 	if the sum of all requested Capital Stock redemptions that the Bank is scheduled to
make on any date equals or exceeds the amount that would cause the Bank to fall below
its capital requirements, in which case the Bank will process redemptions in the order
in which notification was received, but in no case will the Bank redeem Capital Stock
to the point that it would fail to meet its capital requirements.

	 	 	The Bank, upon the approval of its Board of Directors, or of a subcommittee thereof, may
suspend redemption of Capital Stock if the Bank reasonably believes that continued
redemption of Capital Stock would cause the Bank to fail to meet its capital requirements,
would prevent the Bank from maintaining adequate capital against a potential risk that may
not be adequately reflected in its capital requirements, or would otherwise prevent the Bank
from operating in a safe and sound manner. The Bank will notify the Finance Board in writing
within two business days of the date of the decision to suspend the redemption of Capital
Stock, informing the Finance Board of the reasons for the suspension and of the Bank’s
strategies and time frames for addressing the conditions that led to the suspension. The
Finance Board may require the Bank to re-institute the redemption of Capital Stock. The Bank
will not repurchase any Capital Stock without the written permission of the Finance Board
during any period in which the Bank has suspended redemption of Capital Stock under this
paragraph.

 

 

	4.4	 	Transfer of Excess Stock
	 
	 	 	The Bank shall not permit a Member to transfer any Excess Shares of Capital Stock between
sub-classes of Capital Stock.
	 
	 	 	With the prior approval of the Bank, a Member may transfer Excess Stock to another Member
that controls, is controlled by, or is under common control with the Member.
	 
	 	 	If a Member that has filed a Notice of Redemption transfers Excess Stock to another Member,
the transfer shall be deemed to be a cancellation of the Notice of Redemption upon the
effective date of the transfer and the transferring Member shall be responsible for paying
any applicable Cancellation Fees in accordance with section 4.1.2.
	 
	 	 	If a Member that has filed a Notice of Withdrawal transfers Excess Stock to another Member,
the transfer shall be deemed to be a cancellation of the five-year redemption period on the
Excess Stock transferred and the transferring Member shall be responsible for paying any
applicable Cancellation Fees in accordance with section 4.1.2.
	 
	 	 	The Bank shall transfer Capital Stock only in accordance with 12 C.F.R. Section 931.6. The
Bank will not approve a Capital Stock transfer if the transfer would result in the
transferring Member being out of compliance with its Minimum Investment. Capital Stock may
be traded only between the Bank and its members. All Capital Stock transfers are to be at
par value and are effective upon being recorded on the appropriate books and records of the
Bank.

 

 

	5.0	 	Termination of Membership
	 
	 	 	A Member’s submission of a Notice of Withdrawal, or its termination of membership in any
other manner, shall not, in and of itself, cause any Capital Stock to be deemed Excess
Stock.
	 
	 	 	If a former member’s membership has been withdrawn, terminated involuntarily, or terminated
as a result of a merger or consolidation, the Bank shall redeem such former member’s Capital
Stock in accordance with section 4.1 and subject to the limitations in sections 4.3 and 5.3.
	 
	5.1	 	Voluntary Withdrawal from Membership
	 
	 	 	Any institution may withdraw from membership by providing a Notice of Withdrawal.
	 
	 	 	A Member that has submitted its Notice of Withdrawal continues to have access to the
benefits of membership until the effective date of its withdrawal, but the Bank does not
have to provide any further services, including advances, that would mature or otherwise
terminate subsequent to the effective date of the withdrawal.
	 
	 	 	The membership of an institution that has submitted a Notice of Withdrawal shall terminate
five years from the date of the Bank’s receipt of the Member’s Notice of Withdrawal, unless
the institution has cancelled its Notice of Withdrawal prior to that date.
	 
	5.2	 	Involuntary Termination of Membership
	 
	 	 	The Board of Directors may terminate a Member’s membership pursuant to the Finance Board’s
regulations. A Member whose membership is terminated involuntarily shall cease being a
Member as of the date on which the Board of Directors acts to terminate the membership, and
the institution shall have no right to obtain any of the benefits of membership after that
date, but shall be entitled to receive any dividends declared on its Capital Stock until the
Capital Stock is redeemed or repurchased by the Bank.
	 
	5.3	 	Liquidation of Claims
	 
	 	 	If an institution withdraws from membership or has its membership terminated, the Bank will
determine an orderly manner for:

	 	•	 	liquidating all outstanding indebtedness (including prepayment fees) owed by that
Member to the Bank, and
	 
	 	•	 	settling all other claims against the Member.

	 	 	If an institution that withdraws from membership or has its membership terminated remains
indebted to the Bank or has outstanding any transactions with the Bank after the effective
date of its termination of membership, the Bank shall not redeem or repurchase any Activity
Based Stock if such redemption would cause the institution to fail to meet its Activity
Based Stock Requirement. The Bank shall repurchase any Activity Based Stock in accordance
with section 2.2 and subject to the limitations set forth in section 4.3.

 

 

	6.0	 	Conversion
	 
	 	 	The Bank will convert to the capital structure established by this Capital Plan within 18
months following Finance Board approval of the Capital Plan.
	 
	 	 	The Bank will notify each Member of the Conversion Date within 180 days after the Finance
Board’s approval of the Capital Plan.
	 
	 	 	The Bank will provide each Member with a disclosure document that complies with 12 C.F.R
Section 933.5 at least 45 days, but not more than 60 days prior to, the Opt-out Date.
	 
	 	 	The Bank intends to be in full compliance with its capital requirements at the close of
business on the Conversion Date.
	 
	6.1	 	Member Opt-Out
	 
	 	 	A Member that does not wish to continue membership under the Capital Plan must provide the
Finance Board and the Bank with a Notice of Withdrawal no later than the Opt-out Date. The
membership of an institution that files a Notice of Withdrawal with the Finance Board on or
before the Opt-out Date shall terminate on the earlier of the Conversion Date or the date
six months from the date the Notice of Withdrawal was filed with the Finance Board. The
Member shall not be subject to a Membership Stock Requirement on the Conversion Date but
shall be subject to the Activity Based Stock Requirement so long as any advance or other
transaction remains recorded on the Bank’s books and records, provided, however, that the
Activity Based Stock Requirement for a Member that has submitted a Notice of Withdrawal on
or before the Opt-Out Date shall be the lesser of the requirement in effect prior to the
Conversion Date or the requirement under this Capital Plan. The Bank’s receipt of the
Notice of Withdrawal commences the five-year redemption period for all Activity Based Stock
held by that Member.
	 
	 	 	Any Member filing a Notice of Withdrawal with the Finance Board after the Opt-out Date and
before the Conversion Date shall have its existing stock converted into Capital Stock on the
Conversion Date as required by the Capital Plan. The effective date of withdrawal for such
Member shall be five years from the receipt of the Notice of Withdrawal and the five-year
redemption period shall commence on receipt of the Notice of Withdrawal.
	 
	6.2	 	Member Transition Period
	 
	 	 	Any Member on November 12, 1999 has the option to purchase any additional Capital Stock
required on the Conversion Date in three equal installments over a period not to exceed two
calendar quarters after the Conversion Date. A Member that wants to purchase any additional
Capital Stock in installments must advise the Bank in writing at least 15 days before the
Conversion Date. Any Member that elects to purchase any additional Capital Stock required
on the Conversion Date in installments is required to comply with the Activity Based Stock
Requirements in order to obtain an advance and to engage in other transactions with the Bank
after the Conversion Date.

 

 

	 	 	Any institution that became a Member after November 12, 1999 must comply with the terms of
the Capital Plan on the Conversion Date.
	 
	 	 	Any institution that becomes a Member after the Conversion Date must comply with the Minimum
Investment upon becoming a Member.
	 
	6.3	 	Preliminary Estimate of Minimum Investment
	 
	 	 	At least 30 days prior to the Conversion Date, the Bank will calculate each Member’s Minimum
Investment as the sum of:

	 	•	 	the Membership Stock Requirement based on the Total Assets as of the immediately
preceding December 31st; and
	 
	 	•	 	the Activity Based Stock Requirement based on the Member’s outstanding advances and
other transactions at the close of business on that date, provided, however, that any
Acquired Member Assets held by the Bank on the Conversion Date shall be subject to
capital requirements specified in contracts in effect at the time the assets were
purchased in lieu of the Activity Based Stock Requirement.

	 	 	The Bank will notify each Member of the preliminary estimate of the Member’s Minimum
Investment and Excess Stock, if any.
	 
	 	 	A Member must notify the Bank at least 15 days prior to the Conversion Date that the Member
wants the Bank to redeem any shares of stock that exceed that Member’s Minimum Investment on
the Conversion Date. If the Bank receives such notice at least 15 days prior to the
Conversion Date, the Bank shall repurchase all such shares on the Conversion Date in
accordance with section 2.2 and subject to the limitations set forth in section 4.3. If
the Bank does not receive such a notice from a Member at least 15 days prior to the
Conversion Date, the Bank shall convert all shares of stock that exceed that Member’s
Minimum Investment on the Conversion Date into Excess Shares of Membership Stock.
	 
	6.4	 	Conversion Date
	 
	 	 	At the opening of business on the Conversion Date, the Bank will take the following actions
in the order specified for each Member:

	 	a.	 	Calculate a Member’s Minimum Investment at the opening of business on the
Conversion Date as the sum of:

	 	•	 	the Membership Stock Requirement based on the Total Assets as of the
immediately preceding December 31st; and
	 
	 	•	 	the Activity Based Stock Requirement based on the Member’s outstanding
advances and other transactions at the close of business on the Calculation
Date, provided, however, that any Acquired Member Assets held by the Bank on
the Conversion Date shall be subject to capital requirements specified in
contracts in effect at the time the assets were purchased in lieu of the
Activity Based Stock Requirement.

 

 

	 	b.	 	Convert the Member’s existing shares of stock into an identical number of
shares of Capital Stock by:

	 	•	 	Crediting the Member’s Membership Stock balance with the lesser of the total
number of shares converted or the number of shares required to meet the
Member’s Membership Stock Requirement;
	 
	 	•	 	Crediting the Member’s Activity Based Stock balance with the lesser of the
remaining number of shares converted or the number of shares required to meet
the Member’s Activity Based Stock Requirement; and
	 
	 	•	 	Crediting any remaining Capital Stock to the Member’s Membership Stock
balance unless the member has elected to redeem any Excess Stock on the
Conversion Date.

	 	c.	 	If the Member does not own sufficient Capital Stock to satisfy its Minimum
Investment following the conversion, issue Capital Stock and credit the Member’s
Capital Stock accounts with the number and sub-class of shares that the Member is
required to own on the Conversion Date to meet its Minimum Investment and make a
corresponding debit to the Member’s demand deposit account at the Bank.
	 
	 	 	 	If the Member was eligible to elect to purchase any additional Capital Stock in
installments and properly notified the Bank in advance of such election, then the
Bank shall issue Capital Stock and credit the Member’s Capital Stock account with
one-third of the number and sub-class of shares necessary to bring the Member into
compliance with its Minimum Investment and shall make a corresponding debit to the
Member’s demand deposit account at the Bank;
	 
	 	d.	 	If the Member has elected to redeem Excess Stock on the Conversion Date, and
subject to the limitations of sections 4.3, repurchase any Excess Stock and make a
corresponding debit to the Member’s Capital Stock balance, and make a corresponding a
credit to the Member’s demand deposit account at the Bank; and
	 
	 	e.	 	Advise the Member of its Minimum Investment, its Membership Stock balance, its
Activity Based Stock balance, and the amount of any funds credited or debited to the
Member’s demand deposit account at the Bank.

	6.5	 	Installment Purchases following the Conversion Date
	 
	 	 	On the last business day of each of the next two calendar quarters following the Conversion
Date, if a Member was eligible to elect to purchase any additional Capital Stock in
installments and properly notified the Bank in advance of such election, then the Bank shall
credit the Member’s Capital Stock account with one-third of the number and sub-class of
shares necessary to bring the Member into compliance with its Minimum Investment and shall
make a corresponding debit to the Member’s demand deposit account at the Bank

 

 

	 	 	A Member that was eligible to elect to purchase any additional Capital Stock in installments
and properly notified the Bank in advance of such election may notify the Bank at any time
prior to the end of the second calendar quarter following the Conversion Date to credit the
Member’s Capital Stock account with the number and sub-class of shares necessary to bring
the Member into compliance with its Minimum Investment and to make a corresponding debit to
the Member’s demand deposit account at the Bank.

 

 

Appendix I

Membership Stock Requirement

Each Member is required to purchase and maintain Membership Stock equal to the following:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Membership Stock	 	Minimum Investment Range1
	 	 	Requirement2	 	Minimum	 	Maximum
	% of Total Assets
	 	 	0.12	%	 	 	0.10	%	 	 	0.25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Membership Stock Cap
	 	$10 million	 	$10 million	 	$30 million
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Membership Stock Floor
	 	$	10,000	 	 	$	10,000	 	 	$	30,000	 

Activity Based Stock Requirement

Each Member is required to purchase and maintain Activity Based Stock equal to the percentage of
the book value on the Bank’s books and records of the following transactions as shown in the table
below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Activity Based	 	Minimum Investment Range1
	Transaction	 	Stock Requirement2	 	Minimum	 	Maximum
	Outstanding Advances
	 	 	4.45	%	 	 	3.0	%	 	 	5	%
	 
	Outstanding Acquired Member Assets3
	 	 	4.45	%	 	 	3.0	%	 	 	5	%
	 
	Standby Letters of Credit
	 	 	0.15	%	 	 	0	%	 	 	0.175	%
	 
	Other Contingent Obligation < 1 yr
	 	 	0.04	%	 	 	0	%	 	 	0.045	%
	 
	Other Contingent Obligation > 1 yr
	 	 	0.15	%	 	 	0	%	 	 	0.175	%
	 
	Advance Commitments
	 	Based on term	 	 	0	%	 	 	0.35	%
	 
	Acquired Member Asset Commitments
	 	Based on rating	 	 	0	%	 	 	0.60	%

Operational Threshold

Each Member is permitted to retain Excess Shares of Activity Based Stock in an amount not to exceed
the following operational threshold, designed to minimize the number of repurchase transactions for
the Bank and its Members.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current Operational	 	Operational Threshold Range1
	 	 	Threshold	 	Minimum	 	Maximum
	Operational Threshold
	 	$	50,000	 	 	$	0	 	 	$	250,000	 

 

			
	1	 	Changes to the Minimum Investment and operational thresholds ranges constitute
amendments to the Capital Plan and requires approval by the Finance Board.
	 
	2	 	The Board of Directors reviews and adjusts the Membership Stock Requirement,
Activity Based Stock Requirement and the Current Operational Threshold within the
established ranges, subject to the Member notification requirements in section 2.3.
Initial requirements and thresholds that will be applied on the Conversion Date will be
disclosed to Members consistent with 12 C.F.R. Section 933.5.
	 
	3	 	Any Acquired Member Assets held by the Bank on the Conversion Date shall be subject to
capital requirements specified in contracts in effect at the time the assets were purchased in
lieu of the initial Activity Based Stock Requirement.exv10w9

Exhibit 10.9

AMENDMENT

TO THE

REDDING BANK OF COMMERCE

DIRECTORS DEFERRED COMPENSATION AGREEMENT

DATED APRIL 1, 2009

FOR

 

          THIS SECOND AMENDMENT is adopted this 1ST day of April  , 2009, by and between REDDING BANK OF
COMMERCE, a state-chartered commercial bank located in Redding, California (the “Bank”), and
                                                             (the “Director”).

          The Bank and the Director executed the Directors Deferred Compensation Agreement effective as
January 1, 2007 (the “Agreement”).

          The undersigned hereby amend the Agreement for the purpose of (1) changing the interest rate,
(2) limiting deferrals in this Agreement to Five Hundred Thousand Dollars ($500,000) and (3) adding
an Unforeseeable Emergency provision. Therefore, the following changes shall be made:

          The following Section 1.5 shall be added to the Agreement immediately following Section 1.4:

	1.5	 	“Unforeseeable Emergency” means a severe financial hardship to the Director resulting from an
illness or accident of the Director, the Director’s spouse, the Director Beneficiary, or the
Director’s dependent (as defined in Code Section 152 without regard to subsections (b)(1),
(b)(2) or (d)(1)(B) thereof), loss of the Director’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Director.

          Section 2.1 of the Agreement shall be deleted in its entirety and replaced by the following:

 

 

	2.1	 	Election to Defer. Prior to December 31, each Director shall have the right to elect
to defer the payment of all or any part of the compensation to which such Director would
otherwise be entitled from the Bank for the following year. The total amount of deferrals
permitted to the Director under the Agreement shall not exceed Five Hundred Thousand Dollars
($500,000) in deferred compensation plus interest accruals. Interest will continue to accrue
over the life of the account. For the year 2009, each Director’s deferral election under the
deferred compensation plan in effect before this amendment shall be the amount of the 2008
deferral, but any amount deferred after April 1, 2009 will be subject to the terms of this
Agreement. In the case of a newly elected Director, such election must be made within thirty
(30) days of being elected to be a Director. The Director may make a new election each year,
but if no election is received for any year, the amount of compensation deferred shall be in
the same percentage as the last effective election to defer.

          Section 2.3 of the Agreement shall be deleted in its entirety and replaced by the following:

	2.3	 	Deferral Account. The Bank shall keep an account evidencing the Director’s deferred
compensation and any interest that accrues on the deferred compensation pursuant to this
Agreement (the “Deferral Account”). Prior to Termination of Service, the Deferral Account
shall accrue interest at the Wall Street Journal prime rate on the first business day
of January and July plus three percent (3%) per annum. Notwithstanding the foregoing
sentence, the Bank may prospectively change the rate at which interest shall accrue hereunder
by giving notice of such change to the Director. Immediately prior to Termination of Service,
the Director may elect, by written notice to the Bank, to fix the interest rate hereunder at
ten percent (10%) per annum. If no such election is made, the interest rate shall continue at
the rate set by the Bank as provided above. The Deferral Account shall be maintained
separately from other Bank assets only on the books and records of the Bank and shall be
subject to the claims of general creditors of the Bank.

          Section 3.3 of the Agreement shall be added to the Agreement immediately following Section
3.2:

	3.3	 	Unforeseeable Emergency Distribution. If an Unforeseeable Emergency occurs, the
Director may petition the board of directors to receive a distribution from the Agreement.
The board of directors in its sole discretion may grant such petition. If granted, the
Director shall receive, within sixty (60) days, a distribution from the Agreement only to the
extent deemed necessary by the board of directors to remedy the Unforeseeable Emergency, plus
an amount necessary to pay taxes reasonably anticipated as a result of the distribution. In
any event, the maximum amount which may be paid out pursuant to this Section 3.3 is the
Deferral Account balance as of the day that the Director petitioned the board of directors to
receive an Unforeseeable Emergency Distribution under this Section.

          IN WITNESS OF THE ABOVE, the Bank and the Director hereby consent to this Amendment.

	 	 	 	 	 	 	 	 	 
	Director:	 	 	 	REDDING BANK OF COMMERCE	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By	 	 	 	 
	 

	 	 	 	Title

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