Exhibit 4.1
CAPITAL PLAN
of the
FEDERAL HOME LOAN BANK of
TOPEKA
TABLE OF CONTENTS
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Capital
Requirements and Ratios
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Statutory and
Regulatory Requirments
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Minimum Stock
Purchase Requirement
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Asset-Based
Stock Purchase Requirement
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Asset-Based
Stock Purchase Requirement Determination
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Activity-Based
Stock Purchase Requirement
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Acquired Member
Assets (AMA)
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Continuing
Monitoring Requirement; Change in Stock Requirements
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Dividend Parity
Threshold; Notice to Stockholders
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Calculation of
Stock Dividend
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Compliance with
Regulatory Capital Requirements
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Ownership of
Retained Earnings
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Other Provision
Governing Stock
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Repurchase at
Bank’s Initiative
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Repurchase or
Exchange of Class A Common Stock
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Repurchase of
Exchange of Class B Common Stock
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Bank’s
Election to Exchange Class B Common Stock for Class A Common
Stock
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Cash in Lieu of
Class A Common Stock
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Withdrawal from
Membership; Stock Redemption Requests
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Cancellation of
Withdrawal Notice
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Redemption,
Repurchase and Exchange Limitations
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Redemption
Request Prior to Exchange
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Cancellation of
Stock Redemption Request of Request to Withdraw From
Membership
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Termination of
Membership Resulting From Merger of Consolidation
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Other
Provisions Governing Involuntary Termination of
Membership
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Members in the
Process of Withdrawing from Membership
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Adopted by Board of Directors: July
22, 2008
Approved by Federal Housing Finance
Agency: March 6, 2009
Federal Home Loan Bank of
Topeka
Capital Plan
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Authority . This Capital Plan is established
pursuant to the Federal Home Loan Bank Act (12 U.S.C. 1421 et
seq. ) and Title 12 of the Code of Federal Regulations (C.F.R.)
promulgated by the Federal Housing Finance Board and sets forth a
plan for the establishment and implementation of a new capital
structure for the Federal Home Loan Bank of Topeka.
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Definitions . For purposes of this Plan, all capitalized
terms used but not defined elsewhere have the following
meanings:
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Activity-Based Stock Purchase
Requirement means the
Stock purchase requirement under which a Member must acquire and
hold a specific amount of Class B Common Stock as a condition of
transacting business with the Bank, the aggregate amount of which
is a function of the volume of particular products or services
provided to that Member by the Bank.
Acquired
Member Assets (AMA) means
those assets acquired from Members by the Bank in accordance with
12 C.F.R. Part 955.
Advance has the same meaning as set forth in 12 C.F.R.
900.2.
Asset-Based
Stock Purchase Requirement means the Stock purchase requirement under which
a Member must acquire and hold a specific amount of Class A Common
Stock based on that Member’s total assets.
Bank means the Federal Home Loan Bank of
Topeka.
Board means the board of directors of the
Bank.
Business
Day means any day on
which the Bank is open to conduct business.
Class A
Common Stock means Stock
issued by the Bank that has a par value of one hundred dollars
($100) per share and is redeemable at par for cash on six (6)
months’ written notice to the Bank, consistent with Finance
Board regulations.
Class B
Common Stock means Stock
issued by the Bank that has a par value of one hundred dollars
($100) per share and is redeemable at par for cash on five (5)
years’ written notice to the Bank, consistent with Finance
Board regulations.
Conversion
Date means the date upon
which the Bank’s current stock is converted into Stock as
provided under this Plan.
Dividend
Parity Threshold means a
dividend rate expressed as a percentage per annum up to which the
dividends paid per share on Class A Common Stock and Class B Common
Stock must be equal.
Excess Class
B Common Stock means the
amount of Class B Common Stock owned by each Member in excess of
its Activity-Based Stock Purchase Requirement.
Excess
Stock means the Stock
held by a given Member that is in excess of that Member’s
then current Minimum Stock Purchase Requirement.
Exchange means the simultaneous repurchase by the Bank of
excess shares of one class of Stock and the purchase of an
equivalent number of shares of another class of Stock on behalf of
a Member.
FHLBank
Act means the Federal
Home Loan Bank Act, as amended from time to time, and codified at
12 U.S.C. 1421 et seq.
FHLBanks means the twelve Federal Home Loan Banks created
by the FHLBank Act.
Finance
Board means the Federal
Housing Finance Board, the regulator of the Bank, and any successor
regulator of the Bank.
GAAP means generally accepted accounting principles
in the United States of America.
Leverage
Capital Ratio means the
percentage value obtained by dividing weighted Total Capital by the
Bank’s total assets. For purposes of this
calculation, weighted Total Capital shall be computed by
multiplying Permanent Capital by 1.5 and adding to this product all
other components of Total Capital.
Member means an institution that has been approved for
Membership and has satisfied its Minimum Stock Purchase Requirement
and all other conditions of Membership, as set forth herein or as
may otherwise be applicable.
Membership means all of the rights, privileges and
obligations associated with being a Member.
Minimum
Stock Purchase Requirement means the total amount of Stock that must be
purchased by a Member as set forth in Section 7 hereof, which
requirement is based both on a Member’s asset size and
activity with the Bank.
Permanent
Capital means the amount
of retained earnings of the Bank, determined in accordance with
GAAP, plus the amounts paid in for Class B Common Stock.
Plan means this Capital Plan, as amended,
supplemented or modified from time to time.
Redemption means the acquisition by the Bank of outstanding
shares of Stock from a Member at par value in cash, based on a
written request from that Member, following the expiration of the
statutory Redemption notification period for the Stock.
Redemption
Cancellation Fee means
the fee imposed by the Bank upon a Member that has given the Bank
notice of the Member’s intent to redeem Stock or its request
to withdraw from Membership, and such Redemption request or request
to withdraw from Membership is subsequently cancelled, revoked or
withdrawn.
Regulatory
Capital Requirements means the amount of Total Capital and Permanent
Capital that the Bank is required to hold to comply with the Total
Capital and Risk-Based Capital requirements, respectively, set
forth in the FHLBank Act and 12 C.F.R. Part 932.
Repurchase means the acquisition by the Bank of shares of
Excess Stock at par value in cash and at the Bank’s
discretion prior to the expiration of the required Redemption
notification period applicable to such Excess Stock.
Risk-Based
Capital means the
Permanent Capital carried to mitigate the impact of credit risk,
market risk, and operations risk on the Bank.
Risk
Management Policy means a
policy approved by the Board in accordance with the provisions of
12 C.F.R. Part 917 that addresses the Bank’s management of
its exposure to credit risk, market risk, liquidity risk, business
risk, and operations risk.
Stock means Class A Common Stock and/or Class B Common
Stock.
Total
Capital of the Bank means
the aggregate sum of the Bank’s Permanent Capital plus the
amounts paid-in for Class A Common Stock, and any general allowance
for losses and any other amounts from sources available to the Bank
to absorb losses incurred by the Bank that the Finance Board
determines to be appropriate.
Total
Capital Ratio means the
percentage value obtained by dividing unweighted Total Capital by
the Bank’s total assets.
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Objectives . The objectives of the Plan are
to:
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Establish and
maintain a capital structure that will provide for the safe and
sound operation of the Bank while promoting the long-term financial
viability of the Bank and the Bank’s ability to support the
business activities of its Members within applicable statutory and
regulatory authorities and at the same time preserving the
cooperative nature of the FHLBanks.
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Set forth
provisions governing Stock in compliance with 12 C.F.R. Part
931.
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Provide
sufficient Total Capital and Permanent Capital to comply with the
Bank’s Regulatory Capital Requirements.
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Implement a
flexible capital structure that is expected to facilitate the
long-term growth and profitability of the Bank and allow the Bank
to provide greater value to its members. The capital
structure authorized in this Plan provides for the Bank as well to
repurchase shares and for Members to request Redemption of their
shares of Stock subject to compliance with the provisions of this
Plan and applicable rules and regulations promulgated by the
Finance Board.
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Capitalization . Adequate capitalization is required in order
to: (a) provide for the safe and sound operation of the Bank; (b)
permit prudent leveraging into products and services of benefit to
Members; (c) provide appropriate risk-adjusted Member dividend
returns; (d) protect the Bank’s creditors against potential
loss; (e) generate earnings sufficient to meet the Bank’s
various community support and public purpose obligations; and (f)
comply with the Bank’s Regulatory Capital
Requirements. The need for capital is a function of the
volumes of and risks inherent in the products and services provided
by the Bank to its Members.
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Capital
Requirements and Ratios .
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Statutory
and Regulatory Requirements . The Finance Board interprets and
implements statutory requirements established for the FHLBanks by
the U.S. Congress. As required by the FHLBank Act, the
Finance Board has adopted regulations prescribing various minimum
levels of capital that must be held by FHLBanks. The
capital regulations require the Bank to maintain a Total Capital
Ratio at least equal to four percent (4.0%), a Leverage Capital
Ratio at least equal to five percent (5.0%) and Permanent Capital
in an amount at least sufficient to cover its Risk-Based Capital
requirement.
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The Finance
Board has adopted capital requirements that incorporate factors
weighing the relative risk incurred by each FHLBank. The
Bank’s Risk-Based Capital requirement is equal to the sum of
its capital requirements for credit risk, market risk and
operations risk, each as defined by the Finance
Board. The Bank must calculate its Risk-Based Capital
requirement and provide such calculations to the Finance Board
monthly.
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Capital
Ratios . In order to ensure continuing
capital adequacy, and compliance with minimum regulatory Total
Capital requirements and minimum Risk-Based Capital requirements,
management and the Board shall review the Bank’s capital
position on an ongoing basis. The Total Capital Ratio,
Leverage Capital Ratio and Risk-Based Capital requirement shall be
presented at each scheduled business meeting of the
Board.
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Capital
Structure . Under this Plan, the Bank’s
capital structure shall consist of two classes of Stock (Class A
Common Stock and Class B Common Stock) which may be purchased and
held only by Members. Class A Common Stock and Class B
Common Stock shall only be issued, redeemed and repurchased at a
par value of one hundred dollars ($100) per
share. Establishment of two classes of Stock and the
distinctions between them are made in the Plan to facilitate
efficient monitoring and management of the Bank’s capital
structure on an ongoing basis.
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Class A Common Stock
. Class A Common Stock must be
held to satisfy a Member’s Asset-Based Stock Purchase
Requirement. Each Member will be required to purchase
and maintain a defined minimum amount of Class A Common Stock for
as long as it is a Member. Dividends on shares of Class
A Common Stock are non-cumulative and may be paid either in cash or
as a Stock dividend in the form of shares of Class B Common
Stock.
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Class B Common Stock
. Shares of Class B Common
Stock must be held to satisfy the Activity-Based Stock Purchase
Requirement. Dividends on shares of Class B Common Stock
are non-cumulative and may be paid either in cash or as a Stock
dividend in the form of shares of Class B Common Stock.
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Minimum
Stock Purchase Requirement . A Member’s Minimum Stock
Purchase Requirement shall consist of Stock ownership of Class A
Common Stock based on the Member’s asset size (Asset-Based
Stock Purchase Requirement). In addition, there will be
an Activity-Based Stock Purchase Requirement. The Bank
will not issue fractional shares of Stock. Minimum
purchase requirements for Class A Common Stock and Class B Common
Stock will be rounded up to the nearest one hundred dollars
($100).
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Asset-Based Stock Purchase
Requirement . Each Member shall purchase and
maintain, as a condition of Membership for as long as it is a
Member, an amount of Class A Common Stock having a cumulative par
value equal to a specified percentage of the Member’s total
assets as of December 31 of the preceding calendar
year. The Asset-Based Stock Purchase Requirement shall
be subject to minimum and maximum dollar amounts. The
Board will establish the specified percentage and the maximum
Asset-Based Stock Purchase Requirement from time to time and
changes thereto do not require Finance Board approval, provided
they fall within the parameters set forth below.
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1)
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Specified
Percentage . The initial specified percentage of
the Member’s total assets established in this Plan by the
Board for the Asset-Based Stock Purchase Requirement shall be
two-tenths of one percent (0.2%). Under this Plan the
Asset-Based Stock Purchase Requirement may permissibly fall within
a range of not less than one-tenth of one percent (0.1%) and not
greater than four-tenths of one percent (0.4%) of the
Member’s total assets.
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Minimum
Dollar Amount . The minimum Asset-Based Stock
Purchase Requirement shall be one thousand dollars
($1,000).
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Maximum
Dollar Amount . The initial maximum dollar amount
established in this Plan by the Board for the Asset-Based Stock
Purchase Requirement shall be one million dollars
($1,000,000). The maximum Asset-Based Stock Purchase
Requirement may permissibly fall within a range of not less than
five hundred thousand dollars ($500,000) and not greater than two
and one-half million dollars ($2,500,000).
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Asset-Based Stock Purchase Requirement
Determination . The Bank shall determine the
Asset-Based Stock Purchase Requirement based on the most recent
end-of-year regulatory reports filed by a Member with its primary
regulator and notify each Member no later than April 20 of every
year of the required amount of Class A Common Stock the Member is
required to purchase and hold. If a Member needs to hold
additional Class A Common Stock to meet its Asset-Based Stock
Purchase Requirement, the Bank will purchase such Stock at par on
behalf of the Member by debiting the Member’s demand deposit
account on April 30 or the preceding Business Day if April 30 is
not a Business Day in an amount equal to the par value of such
Stock.
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In addition,
the Bank shall recalculate the Asset-Based Stock Purchase
Requirement for any Member that is involved in, or
the subject of, any merger or acquisition as of the date of the
completion of the merger or acquisition.
If a Member is
merged into an institution that is not a Member, or if a Member
sells all of its assets and liabilities to a non-Member and ceases
to operate its business, the Bank may, in its discretion, upon
completion of the merger or sale recalculate that Member’s
Asset-Based Stock Purchase Requirement, which may be zero dollars
($0) since the former Member’s charter may have no remaining
assets upon which to base any Asset-Based Stock Purchase
Requirement. If the former Member would not be in
compliance with its Activity-Based Stock Purchase Requirement after
recalculation of the former Member’s Asset-Based Stock
Purchase Requirement, the Bank may, in its discretion, Exchange the
former Member’s Excess Class A Common Stock for Class B
Common Stock to the extent necessary for the former Member to
comply with its Activity-Based Stock Purchase
Requirement. If, as a result of such recalculation
and/or Exchange, Excess Class A Common Stock is found to exist,
such Excess Stock may be repurchased immediately by the Bank,
provided that the Bank will be in compliance after such Repurchase
with its Regulatory Capital Requirements. In such
circumstances, Class B Common Stock owned by the former Member to
meet its Activity-Based Stock Purchase Requirements will become
Excess Stock when such Stock is not required to fulfill an
Activity-Based Stock Purchase Requirement and may be repurchased at
that time, provided the Bank will be in compliance after such
Repurchase with its Regulatory Capital Requirements.
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New
Members . Upon
approval of an application for Membership, the Bank shall notify
the applicant of its Asset-Based Stock Purchase Requirement based
on the applicant’s most recent annual regulatory report filed
with its primary regulator. For new de novo Members that
have not yet filed an annual regulatory report with their primary
regulators, the initial Asset-Based Stock Purchase Requirement
shall be one thousand dollars ($1,000). The applicant
shall meet its Asset-Based Stock Purchase Requirement no later than
sixty (60) calendar days following notification by the Bank of the
approval of its Membership application and Membership shall
commence at the time the applicant purchases sufficient Class A
Common Stock to meet its Asset-Based Stock Purchase
Requirement. All initial Stock purchases by new Members
must be initiated by authorized Member personnel in writing and
will be transacted by debiting the new Member’s demand
deposit account for the par value of the Class A Common Stock
sufficient to meet its Asset-Based Stock Purchase
Requirement.
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Activity-Based Stock Purchase
Requirement . Each Member shall purchase and
maintain, as a condition of doing business with the Bank, an amount
of Class B Common Stock having a cumulative par value equal to the
sum of the amounts set forth below in Section 7(b)(1) through (4),
less the Member’s Asset-Based Stock Requirement determined
pursuant to Subsection 7(a). A Member shall meet this
Activity-Based Stock Purchase Requirement for as long as the
activity with the Bank requiring imposition of such Activity-Based
Stock Purchase Requirement remains outstanding. The
Board will establish the percentage for each Activity-Based Stock
Purchase Requirement from time to time and changes thereto do not
require Finance Board approval provided each is within the
percentages set forth below in Subsections 7(b)(1) through
7(b)(4). The Board may apply any such revised
Activity-Based Stock Purchase Requirement to all activity then
outstanding or only to activity which arises after the effective
date of the change. At the time a Member enters into a
transaction that requires the purchase of Class B Common Stock
under this provision of the Plan, the Bank will purchase such Stock
on behalf of the Member in the following two ways:
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exchanging
Excess Class A Common Stock held by the Member into a like number
of shares of Class B Common Stock sufficient to enable the Member
to meet its Activity-Based Stock Purchase Requirement; if this is
insufficient to enable the Member to meet its Activity-Based Stock
Purchase Requirement, then
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by debiting the
Member’s demand deposit account for the remaining amount of
its Activity-Based Stock Purchase Requirement.
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Advances . The initial requirement established
by the Board for Advances is an amount equal to five percent (5.0%)
of the principal amount of Advances outstanding to the
Member. The amount of Stock required to support Advance
activity shall be determined each time the Member is issued a new
Advance and must be satisfied when the Advance is
made. Under this Plan, the amount of a Member’s
Activity-Based Stock Purchase Requirement based on that
Member’s Advance activity may permissibly fall within a range
of not less than four percent (4.0%) and not greater than six
percent (6.0%) of the principal amount of Advances outstanding to
the Member.
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Acquired
Member Assets (AMA) . The initial requirement established
by the Board for AMA, including loans from the Mortgage Partnership
Finance ®
Program, is an amount equal to two
percent (2.0%) of the current outstanding principal balance of AMA
originated by or through the Member and acquired by the Bank
subject to a maximum AMA requirement of one and one-half percent
(1.5%) of the Member’s total assets as of December 31 of the
preceding calendar year.. The amount of Stock required
to support AMA activity shall be determined when the AMA activity
is funded by the Bank or purchased from the
Member. Under this Plan the amount of a Member’s
Activity-Based Stock Purchase Requirement based on that
Member’s AMA activity may permissibly fall within a range
from zero percent (0.0%) to not greater than six percent (6.0%) of
the current outstanding principal balance of AMA originated by or
through that Member and acquired by the Bank and the maximum AMA
requirement may permissibly fall within a range from one percent
(1.0%) to three percent (3.0%) of the Member’s total assets
as of December 31 of the preceding year.
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Letters
of Credit . The initial requirement established
by the Board for letters of credit is an amount equal to zero
percent (0.0%) of the principal amount of letters of credit
outstanding at the request of the Member. The amount of
Stock required to support letter of credit activity shall be
calculated each time a new letter of credit is issued on behalf of
the Member and must be satisfied when the letter of credit is
issued. Under this Plan the amount of a Member’s
Activity-Based Stock Purchase Requirement based on letters of
credit issued on behalf of that Member may permissibly fall within
a range from zero percent (0.0%) to not greater than one percent
(1.0%) of the principal amount of letters of credit outstanding at
the request of that Member.
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Exchange
Agreements . The initial requirement established
by the Board for exchange agreements (including but not limited to
interest rate swaps, currency swaps, caps, collars, floors and
equity options) is an amount equal to zero percent (0.0%) of the
notional principal of the outstanding exchange agreements with the
Member. The amount of Stock required to support exchange
agreement activity shall be calculated each time the Member enters
into a new exchange agreement or transaction and must be satisfied
when the new exchange agreement or transaction is
effective. Under this Plan the amount of a
Member’s Activity-Based Stock Purchase Requirement based on
exchange agreements (as defined above) may per
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