[Federal Register Volume 59, Number 94 (Tuesday, May 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11907]
[[Page Unknown]]
[Federal Register: May 17, 1994]
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FARM CREDIT ADMINISTRATION
Market Access Agreement
AGENCY: Farm Credit Administration.
ACTION: Notice of market access agreement; request for comments.
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SUMMARY: The Farm Credit Administration (FCA) is publishing for comment
a Market Access Agreement (Agreement) to be entered into by all of the
banks of the Farm Credit System (System) and the Federal Farm Credit
Banks Funding Corporation (Funding Corporation). The Agreement is
designed to set forth the understanding of the parties and to represent
the legal obligation of each of the parties regarding their respective
rights and responsibilities when the financial condition of a bank
falls below specified levels. The Agreement is designed to establish an
orderly process for addressing such situations and to minimize the
possibility of market disruption or further risk to the other parties
to the Agreement. The FCA is seeking comments from the public on the
Agreement and will take into consideration those comments prior to
granting final approval to the Agreement.
DATES: Written comments must be received on or before June 16, 1994.
ADDRESSES: Comments should be submitted in writing, in triplicate, to
Jean Noonan, General Counsel, Office of General Counsel, Farm Credit
Administration, McLean, Virginia 22102-5090. Copies of all
communications received will be available for examination by interested
parties in the Office of General Counsel, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT:
Jean Noonan, General Counsel, Office of General Counsel, Farm Credit
Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-
4444, or
Gary L. Norton, Assistant General Counsel, Regulatory Operations
Division, Office of General Counsel, Farm Credit Administration,
McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: The Agreement sets forth the understanding
of the parties and will legally bind the signatories to the contract by
establishing each party's respective rights and responsibilities in the
event of the decline in the financial condition of one of the banks
beyond the levels specified in the Agreement. This Agreement is to be
entered into among each of the banks of the System and the Funding
Corporation. The Agreement provides that it will not be implemented
until it is approved by the FCA and the Farm Credit System Insurance
Corporation (FCSIC) expresses its support for the Agreement. Prior to
granting final approval to the Agreement, the FCA is publishing the
Agreement for comment by any interested member of the public. The FCA
will take these comments into consideration prior to approving the
Agreement.
The Agreement states that the parties propose to enter into the
Agreement based on their recognition of the joint and several liability
of the banks on Systemwide debt securities and because of their
ultimate responsibility and that of their affiliated associations to
make additional premium payments into the Farm Credit System Insurance
Fund if monies in the fund are used to pay the principal or interest on
Systemwide debt securities or assist financially troubled banks. In
light of that, each bank has a significant interest in controlling the
risk associated with the level of borrowing by any bank facing
financial difficulty. The banks further recognized that there is a need
to provide some flexibility for dealing with the specific facts and
circumstances that may face a bank that is in financial difficulty. The
parties also recognize that under the Farm Credit Act of 1971, as
amended, (Act) the Funding Corporation has the responsibility to
determine, subject to the approval of the FCA, the conditions of
participation by each of the several banks in each issue of Systemwide
debt securities and that the Funding Corporation has adopted a market
access and risk alert program to fulfill its understanding of its
responsibilities under the Act.
In addition, the parties recognize the authority of the FCA under
section 5.17(a)(10) of the Act to exercise its enforcement authorities
to ensure the safety and soundness of System institutions and the FCA's
authorities under sections 4.2 and 4.9 of the Act to approve the
issuance of Systemwide debt securities. The parties also recognize the
authority of the FCSIC under section 5.61 of the Act to assist
institutions experiencing financial difficulties.
In summary, the Agreement establishes certain financial thresholds
at which conditions are placed on the activities of a bank or the
bank's access to participation in Systemwide obligations is either
restricted or curtailed. The Agreement establishes three categories,
which are based on each bank's collateral position, permanent capital
position, and scores under the Contractual Inter-bank Performance
Agreement (CIPA).
As a bank's financial condition declines, it moves into Category I
then Category II and finally Category III. When a bank reaches Category
I, it is required to provide certain information to a committee of bank
and Funding Corporation representatives established under the
Agreement, the Monitoring and Advisory Committee, including information
as to how it is going to improve its financial condition. When a bank
reaches Category II, in addition to being required to provide
additional information, the bank's access to the markets is limited to
only those amounts necessary for the bank to be able to roll over its
debt. When the bank reaches Category III, the bank is precluded from
joining in the issuance of Systemwide obligations.
The Agreement includes provisions that enable a bank in Category II
or III to request the opportunity to continue its access to the market.
The Agreement also provides that the FCA may override a decision to
impose Category III prohibitions on access to the market for a period
of 60 days, which may be renewed for an additional 60-day period.
In February 1993 the boards of directors of the banks and the
Funding Corporation approved a draft Agreement and submitted the
Agreement to the FCA and the FCSIC for approval. On September 9, 1993
the FCA Board granted preliminary approval to the Agreement subject to
certain conditions. The conditions in the preliminary approval required
the Agreement to be modified as follows:
1. Provide for the periodic review of the Agreement by the parties.
2. Include at least one of the independent directors of the Funding
Corporation on the Monitoring and Advisory Committee and as part of the
decision group.
3. Provide that a decision to deny market access because of a
Category III trigger is effective only if the FCA does not veto the
decision within 30 days from the end of the forbearance process and
that the FCA and the FCSIC have been so notified.
4. Provide that no bank could challenge a conservatorship or
receivership on the grounds that market access had been restricted or
denied pursuant to the Agreement.
5. Clarify that the Agreement does not apply to a bank in
conservatorship or receivership, thereby ensuring that the FCSIC, when
acting as receiver or conservator, would be able to access the market
to the same extent as if the Agreement were not in place.
6. Preclude the banks from gaining access to information involving
communications with the FCA or the FCSIC without the consent of the
affected agency.
7. Require that all information provided pursuant to the Agreement
and the minutes of the Monitoring and Advisory Committee be retained by
the Funding Corporation to facilitate their review by the FCA or the
FCSIC.
8. Make clear that the FCA's approval of the agreement in no way
restricts the statutory rights of the FCA or the FCSIC.
9. Delete the FCA and the FCSIC as parties to the Agreement.
In addition, the FCA provided that the Agreement would be published
in the Federal Register for public comment before final approval.
Following the FCA's conditional preliminary approval, the System
banks and the Funding Corporation modified the Agreement to bring the
Agreement into conformance with the FCA's conditions. The FCA reviewed
the Agreement as revised, and agrees that it complies with the FCA's
conditions. Thereafter, the boards of directors of each of the banks
and of the Funding Corporation adopted a resolution whereby each party
agrees to enter into the Agreement in the form submitted to the FCA,
subject to the FCA's approval. The resolution of each party provides
that if the FCA requires modifications to the Agreement in response to
public comments, the resolutions shall be ineffective and each Board
shall consider what further action to take.
Based on the foregoing, the FCA is now seeking public comment on
the Agreement as set forth below:
MARKET ACCESS AGREEMENT
AMONG
AGRIBANK, FCB,
FARM CREDIT BANK OF BALTIMORE,
FARM CREDIT BANK OF COLUMBIA,
FARM CREDIT BANK OF OMAHA,
FARM CREDIT BANK OF SPOKANE,
FARM CREDIT BANK OF SPRINGFIELD,
FARM CREDIT BANK OF TEXAS,
FARM CREDIT BANK OF WICHITA,
NATIONAL BANK FOR COOPERATIVES (COBANK),
ST. PAUL BANK FOR COOPERATIVES,
SPRINGFIELD BANK FOR COOPERATIVES,
WESTERN FARM CREDIT BANK
AND
FEDERAL FARM CREDIT BANKS FUNDING CORPORATION
This MARKET ACCESS AGREEMENT is entered into among Agribank, FCB,
the Farm Credit Bank of Baltimore, the Farm Credit Bank of Columbia,
the Farm Credit Bank of Omaha, the Farm Credit Bank of Spokane, the
Farm Credit Bank of Springfield, the Farm Credit Bank of Texas, the
Farm Credit Bank of Wichita, the National Bank for Cooperatives
(CoBank), the St. Paul Bank for Cooperatives, the Springfield Bank for
Cooperatives, the Western Farm Credit Bank and the Federal Farm Credit
Banks Funding Corporation.
Whereas, the Banks concur that, because of their joint and several
liability on Systemwide Debt Securities, and because of their ultimate
responsibility, and that of their constituent Associations, to make
additional premium payments into the Insurance Fund if monies in the
Insurance Fund are used to pay principal or interest on Systemwide Debt
Securities or assist financially troubled Banks, each Bank has a
significant stake in the financial strength of the others and a
significant interest in controlling the risks associated with the level
of borrowing by Banks facing financial difficulty; and
Whereas, the Parties also recognize that it is important to take
account of the unique facts and circumstances in each actual instance
of a Bank's facing financial difficulty; and
Whereas, Section 4.9(b)(2) of the Act provides that, subject to the
approval of FCA, the Funding Corporation, acting for the Banks, ``shall
determine the * * * conditions of participation by the several banks in
each issue'' of Systemwide Debt Securities; and
Whereas, certain Parties have taken differing positions on whether
Section 4.9(b)(2) of the Act authorizes, and whether it requires, the
Funding Corporation to put in place a program for restricting or
prohibiting Banks under certain circumstances from participating in
issues of Systemwide Debt Securities; and
Whereas, the Funding Corporation has adopted and maintained in
place a Market Access and Risk Alert Program designed to fulfill what
it has understood to be its responsibilities under Section 4.9(b)(2) of
the Act with respect to determining conditions of participation; and
Whereas, the Banks and the Funding Corporation have been desirous
of arriving at an agreement regarding market access that would render
it unnecessary to resolve the aforementioned differing views of Section
4.9(b)(2) of the Act; and
Whereas, an Ad Hoc Committee consisting of a director and an
executive officer of each Bank met on December 4, 1992 and adopted
guidelines for such an agreement and appointed a Work Group (the ``Work
Group'') to prepare a draft agreement; and
Whereas, the Work Group deliberated during December 1992 and
January 1993, and presented a draft agreement to the Presidents'
Planning Committee on January 15, 1993; and
Whereas, the Presidents' Planning Committee suggested certain
revisions to that draft agreement, and the Work Group revised the draft
agreement and submitted it to the Ad Hoc Committee; and
Whereas, the Ad Hoc Committee met on January 23, 1993 and approved
the revised draft agreement for presentation to the Banks and the
Funding Corporation; and
Whereas, the boards of directors of the Banks and of the Funding
Corporation approved the revised draft agreement in principle at
meetings in February 1993; and
Whereas, thereafter, the revised draft agreement was considered by
FCA and the Insurance Corporation; and
Whereas, on September 9, 1993, FCA granted preliminary approval to
the revised draft agreement subject to certain conditions, and on
September 16, 1993, the Insurance Corporation expressed its support for
FCA's action; and
Whereas, the Work Group proposed certain further revisions to the
revised draft agreement to address the concerns reflected in FCA's
conditions; and
Whereas, FCA has stated that it intends to publish the Agreement in
the Federal Register and seek comments thereon; and
Whereas, the Parties are mindful of FCA's independent authority
under Section 5.17(a)(10) of the Act to ensure the safety and soundness
of Banks, FCA's independent authority under Sections 4.2 and 4.9 of the
Act to approve the terms of specific issuances of Systemwide Debt
Securities, the Insurance Corporation's independent authority under
Section 5.61 of the Act to assist troubled Banks, and the Banks'
independent obligations under Section 4.3(c) of the Act to maintain
necessary collateral levels for Systemwide Debt Securities; and
Whereas, the Banks are entering into this Agreement pursuant to,
inter alia, Section 4.2(d) of the Act; and
Whereas, the Funding Corporation believes the execution and
implementation of this Agreement will materially accomplish the
objectives which it has concluded are appropriate for a market access
program under Section 4.9(b)(2) of the Act; and
Whereas, subject to the approval of FCA as described in Section
7.01(f) and the conditions set forth in Section 7.03(f), the Funding
Corporation is prepared (i) to adopt as the ``conditions of
participation'' that it understands to be required by Section 4.9(b)(2)
of the Act each Bank's compliance with this Agreement, (ii) to become a
party to this Agreement, and (iii) on the date this Agreement becomes
effective, to discontinue the Market Access and Risk Alert Program as
described in Section 7.03(f); and
Whereas, the Funding Corporation is entering into this Agreement
pursuant to, inter alia, Section 4.9(b)(2) of the Act,
Now Therefore, in consideration of the foregoing, the mutual
promises and agreements herein contained, and other good and valuable
consideration, receipt of which is hereby acknowledged, the Parties,
intending to be legally bound hereby, agree as follows:
Article I--Categories
Section 1.01. Scorekeeper. The Scorekeeper, for purposes of this
Agreement, shall be the same as the Scorekeeper under Section 4.1 of
CIPA, as amended from time to time, or any successor thereto.
Section 1.02. CIPA Oversight Body. The CIPA Oversight Body, for
purposes of this Agreement, shall be the same as the Oversight Body
under Section 6.1 of CIPA, as amended from time to time, or any
successor thereto.
Section 1.03. CIPA Scores. Net Composite Scores and Average Net
Composite Scores, for purposes of this Agreement, shall be the same as
those determined under Article II of CIPA, the Model referred to
therein, and Section 1.2(f)(i) of CIPA, as in effect on January 1,
1994, and as amended under CIPA or replaced by successor provisions
under CIPA in the future, to the extent such future amendments or
replacements are by agreement of all the Banks.
Section 1.04. Collateral and Permanent Capital Figures. Each Bank
shall report to the Scorekeeper within fifteen days after the end of
each month its Collateral Figure as of the last day of that month. Each
Bank shall report to the Scorekeeper within fifteen days after the end
of each quarter its Permanent Capital Figure as of the last day of that
quarter, except that any Bank that is in Category I, II or III, as
indicated in the most recent notice from the Scorekeeper, shall report
to the Scorekeeper within fifteen days after the end of each month its
Permanent Capital Figure as of the last day of that month. Should any
Bank later correct or revise, or be required to correct or revise, any
past financial data in a way that would cause any Collateral or
Permanent Capital Figure previously reported hereunder to have been
different, the Bank shall promptly report a revised Figure to the
Scorekeeper. Should the Scorekeeper consider it necessary to verify any
Collateral or Permanent Capital Figure, it shall so report to the
Committee, or, if the Committee is not in existence, to the CIPA
Oversight Body, and the Committee or the CIPA Oversight Body, as the
case may be, may verify the Figures as it deems appropriate, through
reviews of Bank records by its designees (including experts or
consultants retained by it) or otherwise. The reporting Bank shall
cooperate in any such verification, and the other Banks shall provide
such assistance in conducting any such verification as the Committee or
the CIPA Oversight Body, as the case may be, may reasonably request.
Section 1.05. Category I. A Bank shall be in Category I if it: (a)
Has an Average Net Composite Score of 35.0 or more, but less than 45.0,
for the most recent calendar quarter for which an Average Net Composite
Score is available, (b) has a Net Composite Score of 30.0 or more, but
less than 40.0, for the most recent calendar quarter for which a Net
Composite Score is available, (c) has both a Collateral Figure of
102.00 percent or more, but less than 103.00 percent, for the last day
of the most recent month, and an Average Net Composite Score of less
than 55.0 for the most recent calendar quarter for which an Average Net
Composite Score is available, or (d) has a Permanent Capital Figure of
5.50 percent or more, but less than 8.00 percent, for the period ending
on the last day of the most recent month. Clause (c) of the preceding
sentence shall not apply if a Bank (i) has the unconditional legal
right, not terminable without the Bank's consent, to require its
constituent Associations to make additional investments in the Bank,
and provides to the Scorekeeper an opinion of counsel confirming that
it has such right, and (ii) the capital available to the Bank through
this means would, if called upon, be sufficient to cause the Bank to
have a Collateral Figure of 103.00 percent or more.
Section 1.06. Category II. A Bank shall be in Category II if it:
(a) Has an Average Net Composite Score of 25.0 or more, but less than
35.0, for the most recent calendar quarter for which an Average Net
Composite Score is available, (b) has a Net Composite Score of 20.0 or
more, but less than 30.0, for the most recent calendar quarter for
which a Net Composite Score is available, (c) would come within the
provisions of Section 1.07(a) or (b) if the parenthetical phrases were
omitted therefrom, (d) has a Collateral Figure of 101.00 percent, or
more, but less than 102.00 percent, for the last day of the most recent
month, (e) has a Permanent Capital Figure of 3.50 percent or more, but
less than 5.50 percent, for the period ending on the last day of the
most recent month, or (f) is in Category I and has failed to provide
information to the Committee as required by Article III within two
Business Days after written notice from the Committee of such failure.
Section 1.07. Category III. A Bank shall be in Category III if it:
(a) Has an Average Net Composite Score (computed without making any
Liquidity Deficiency Deduction) of less than 25.0 for the most recent
calendar quarter for which an Average Net Composite Score is available,
(b) has a Net Composite Score (computed without making any Liquidity
Deficiency Deduction) of less than 20.0 for the most recent calendar
quarter for which a Net Composite Score is available, (c) has an Excess
Collateral Figure of less than 101.00 percent for the last day of the
most recent month, (d) has a Permanent Capital Figure of less than 3.50
percent for the period ending on the last day of the most recent month,
or (e) is in Category II and has failed to provide information to the
Committee as required by Article III within two Business Days after
written notice from the Committee of such failure.
Section 1.08. Highest Category. If a Bank would come within more
than one Category by reason of the various provisions of Sections 1.05
through 1.07, it shall be considered to be in the highest-numbered
Category for which it qualifies (e.g., Category III rather than
Category II).
Section 1.09. Notice by Scorekeeper. Within twenty days of the end
of each month, after receiving the reports due under Section 1.04
within fifteen days of the end of the prior month, the Scorekeeper
shall provide to all Banks, FCA, the Insurance Corporation, the Funding
Corporation if it is not the Scorekeeper, and either the CIPA Oversight
Body or, if it is in existence, the Committee a notice identifying the
Banks, if any, that are in Categories I, II and III, or stating that no
Banks are in such Categories.
Article II--The Committee
Section 2.01. Formation. A Monitoring and Advisory Committee,
referred to herein as ``the Committee,'' shall be formed at the
instance of the CIPA Oversight Body within seven days of the date that
it receives a notice from the Scorekeeper under Section 1.09 that any
Bank is in Category I, II or III (unless such a Committee is already in
existence). The Committee shall remain in existence thereafter for so
long as the most recent notice from the Scorekeeper under Section 1.09
indicates that any Bank is in Category I, II or III. If not already in
existence, the Committee may also be formed: (a) At the instance of the
CIPA Oversight Body at any other time, in order to consider a Continued
Access Request that has been submitted or is expected to be submitted,
(b) for purposes of preparing the reports described in Section 7.05,
and (c) as provided for in Section 8.04(b).
Section 2.02. Composition. The Committee shall be made up of two
representatives of each Bank and two representatives of the Funding
Corporation. One of the representatives of each Bank shall be that
Bank's representative on the CIPA Oversight Body. The other
representative of each Bank shall be an individual designated by the
Bank's board of directors, who may be a member of the Bank's board of
directors or a senior officer of the Bank, in the discretion of the
board. One of the representatives of the Funding Corporation shall be
an outside director of the Funding Corporation designated by the
Funding Corporation board of directors. The other representative of the
Funding Corporation shall be designated by the board of directors of
the Funding Corporation from among the members of its board and/or its
senior officers. The removal and replacement of the Committee members
designated directly by Bank boards of directors and by the Funding
Corporation shall be in the sole discretion of each Bank board and of
the Funding Corporation, respectively. A replacement for a member of
the CIPA Oversight Body shall automatically replace such member on the
Committee.
Section 2.03. Authority and Responsibilities. The Committee shall
have the authority and responsibilities specified in Article II, in
Sections 1.04, 3.01, 3.02, 3.05, 3.06, 4.02, 7.05, 8.04 and 8.08, and
in Article VI, and such incidental powers as are necessary and
appropriate to effectuating such authority and responsibilities.
Section 2.04. Meetings. The initial meeting of the Committee shall
be held at the call of the Chairman of the CIPA Oversight Body or a
majority of the Parties entitled to vote on Committee business (with
each Party acting through at least one of its representatives).
Thereafter, the Committee shall meet at the call of the Chairman of the
Committee or a majority of the Parties entitled to vote on Committee
business (with each Party acting through at least one of its
representatives). Written notice of each meeting shall be given to each
member by the Chairman or his or her designee not less than 48 hours
prior to the time of the meeting. A meeting may be held without such
notice upon the signing of a waiver of notice by all of the Parties
entitled to vote on Committee business (with each Party acting through
at least one of its representatives). A majority of the Parties
entitled to vote on Committee business (with each Party acting through
at least one of its representatives) shall constitute a quorum for the
conduct of business, provided, however, that if a quorum cannot be
raised after seven days of efforts, the Parties that attend a meeting
upon proper notice thereafter shall constitute a quorum. A meeting may
be held by a telephone conference arrangement allowing each speaker to
be heard by all others in attendance.
Section 2.05. Action Without a Meeting. Action may be taken by the
Committee without a meeting if each Bank and the Funding Corporation
(with each Party acting through at least one of its representatives)
consents in writing to consideration of a matter without a meeting and
a majority of the Parties entitled to vote on Committee business (with
each Party acting through at least one of its representatives) approves
the action in writing, which writings shall be kept with the minutes of
the Committee.
Section 2.06. Voting. Each Bank and the Funding Corporation shall
have one vote on Committee business. Voting on Committee business
(including recommendations on Continued Access Decisions, but not the
ultimate vote on Continued Access Decisions, which is addressed in
Article VI) shall be by a simple majority of the Parties entitled to
vote on Committee business that are present (physically or by
telephone) through at least one representative. If a Bank or the
Funding Corporation has two representatives present, they shall agree
in casting the vote of the Bank or the Funding Corporation, and if they
cannot agree on a particular matter, that Bank or the Funding
Corporation shall not cast a vote on that matter, and, in determining
the necessary majority (but not in determining a quorum), shall not be
counted as a Party entitled to vote on that matter.
Section 2.07. Officers. The Committee shall elect from among its
members a Chairman, a Vice Chairman, a Secretary and such other
officers as it shall from time to time deem appropriate. The Chairman
shall chair the meetings of the Committee and have such other duties as
the Committee may delegate to him or her. The Vice Chairman shall
perform such duties of the Chairman as the Chairman is unable to
perform, and shall have such other duties as the Committee may delegate
to him or her. The Secretary shall keep the minutes and maintain the
minute book of the Committee. Other officers shall have such duties as
the Committee may delegate to them.
Section 2.08. Retention of Staff, Consultants and Experts. The
Committee shall be authorized to retain staff, consultants and experts
as it deems necessary and appropriate to carry out its functions.
Section 2.09. Expenses. Any compensation of each member of the
Committee for time spent on Committee business and for his or her out-
of-pocket expenses, such as travel, shall be paid by the Party that
designated that member to the Committee or to the CIPA Oversight Body.
All other expenses incurred by the Committee shall be borne by the
Banks in such shares as the Committee shall from time to time
determine.
Section 2.10. Custody of Records. All information received by the
Committee pursuant to this Agreement, and all Committee minutes, shall
be lodged, while not in active use by the Committee, at the Funding
Corporation, and shall be deemed records of the Funding Corporation for
purposes of FCA examination. The Parties agree that documents in active
use by the Committee may also be examined by FCA.
Article III--Provision of Information
Section 3.01. Information To Be Provided By All Banks in Categories
I, II and III. If a Bank is in Category I, II or III, as indicated in
the most recent notice from the Scorekeeper under Section 1.09, and if
the prior monthly notice by the Scorekeeper did not indicate that the
Bank was in any Category, then the Bank shall within thirty days
provide to the Committee: (a) a detailed explanation of the causes of
its being in that Category, (b) an action plan to improve its financial
situation so that it is no longer in any of the three Categories, (c) a
timetable for achieving that result, and (d) such other pertinent
materials and information as the Committee shall, within seven days of
receiving notice from the Scorekeeper, request in writing from the
Bank. Such Bank shall summarize, aggregate or analyze data, as well as
provide raw data, in such manner as the Committee may request. Such
information shall be promptly updated (without any need for a request
by the Committee) whenever the facts significantly change, and shall
also be updated or supplemented as the Committee so requests in writing
of the Bank by such deadlines as the Committee may reasonably specify.
Section 3.02. Additional Information To Be Provided By Banks in
Categories II and III. If a Bank is in Category II or III, as indicated
in the most recent notice from the Scorekeeper under Section 1.09, and
if the prior monthly notice by the Scorekeeper did not indicate that
the Bank was in Category II or III, then the Bank shall within thirty
days provide to the Committee, in addition to the information required
by Section 3.01, the following information: (a) copies of its complete
Business Plan, as revised to take account of the financial difficulties
the Bank is facing, (b) a report as to the status of any Bank
discussions with the Insurance Corporation concerning possible
assistance to the Bank or other steps to improve the Bank's financial
condition, and (c) a detailed list of all materials provided by the
Bank to the Insurance Corporation. Such information shall be promptly
updated (without any need for a request by the Committee) whenever the
facts significantly change, and shall also be updated or supplemented
as the Committee so requests in writing of the Bank by such deadlines
as the Committee may reasonably specify. Such Bank shall also allow
designees of the Committee (including experts or consultants retained
by the Committee) to conduct on-site inspections of credit and
financial files, examination reports (if inspection of such reports is
permitted by law), auditors' letters, and other Bank documents. The
Committee may draw upon the resources of the other Banks in conducting
such inspections.
Section 3.03. Documents or Information Relating to Communications
With FCA or the Insurance Corporation. Notwithstanding Sections 3.01
and 3.02, a Bank shall not disclose to the Committee any communications
between the Bank and FCA or the Insurance Corporation, or documents
describing such communications, except as consented to by, and subject
to such restrictive conditions as may be imposed by, whichever of FCA
or the Insurance Corporation was involved in the communication.
However, facts regarding the Bank's condition or plans that pre-existed
a communication with FCA or the Insurance Corporation and then were
included in such a communication are not barred from disclosure by this
section. Nothing in this section shall preclude a Bank from making
disclosures to the System Disclosure Agent necessary to allow the
System Disclosure Agent to comply with its obligations under the
securities laws or other applicable law or regulations with regard to
disclosure to investors.
Section 3.04. Sources of Information; Certification. Information
provided to the Committee under Sections 3.01 and 3.02 shall, to the
extent applicable, be data used in the preparation of financial
statements in accordance with generally accepted accounting principles,
or data used in the preparation of call reports submitted to FCA
pursuant to 12 CFR part 621, subpart B, as amended from time to time,
or any successor thereto. A Bank shall certify, through its chief
executive officer or, if there is no chief executive officer, a senior
executive officer, the completeness and accuracy of all information
provided to the Committee under Sections 3.01 and 3.02.
Section 3.05. Failure to Provide Information. If a Bank fails to
provide information to the Committee as and when required under
Sections 3.01 and 3.02, and does not correct such failure within two
Business Days of written notice by the Committee of the failure, then
the Committee shall so advise the Scorekeeper.
Section 3.06. Provision of Information to Banks. Any information
provided to the Committee under Sections 3.01 and 3.02 shall be
provided by the Committee to any Bank upon request. A Bank shall not
have the right under this Agreement to obtain information directly from
another Bank.
Section 3.07. Cessation of Obligations. A Bank's obligation to
provide information to the Committee under Section 3.01 shall cease as
soon as the Bank is no longer in Category I, II or III, as indicated in
the most recent notice from the Scorekeeper under Section 1.09. A
Bank's obligation to provide to the Committee information under Section
3.02 shall cease as soon as the Bank is no longer in Category II or
III, as indicated in the most recent notice from the Scorekeeper under
Section 1.09.
Article IV--Restrictions on Market Access
Section 4.01. Final Restrictions. As of the Effective Date, a Bank
in Category II, as indicated in the most recent notice from the
Scorekeeper under Section 1.09, (a) shall be permitted to participate
in issues of Systemwide Debt Securities only to the extent necessary to
roll over the principal (net of any original issue discount) of
maturing debt, and (b) shall comply with the Additional Restrictions.
Section 4.02. Category II Interim Restrictions. From the day that a
Bank receives a notice from the Scorekeeper that it is in Category II
until (a) 10 days thereafter, if the Bank does not by that day submit a
Continued Access Request to the Committee, or (b) if the Bank does by
that day submit a Continued Access Request to the Committee, the
seventh day following the day that notice is received that the Request
is granted or denied, the Bank (i) may participate in issues of
Systemwide Debt Securities only to the extent necessary to roll over
the principal (net of any original issue discount) of maturing debt
unless the Committee, taking into account the criteria in Section 6.03,
shall specifically authorize participation to a greater extent, and
(ii) shall comply with the Additional Restrictions. Notwithstanding the
foregoing, the Category II Interim Restrictions shall not go into
effect if a Continued Access Request has already been granted in
anticipation of the formal notice that the Bank is in Category II.
Section 4.03. FCA Action. The Final Restrictions and the Category
II Interim Restrictions shall go into effect without the need for case-
by-case approval by FCA.
Section 4.04. Cessation of Restrictions. The Final Restrictions and
the Category II Interim Restrictions shall cease as soon as the Bank is
no longer in Category II, as indicated in the most recent notice from
the Scorekeeper under Section 1.09. The Bank shall continue, however,
to be subject to such other obligations under this Agreement as may
apply to it by reason of its being in another Category.
Article V--Prohibition of Market Access
Section 5.01. Final Prohibition. As of the Effective Date, a Bank
in Category III, as indicated in the most recent notice from the
Scorekeeper under Section 1.09, (a) shall be prohibited from
participating in issues of Systemwide Debt Securities, and (b) shall
comply with the Additional Restrictions.
Section 5.02. Category III Interim Restrictions. From the day that
a Bank receives a notice from the Scorekeeper that it is in Category
III until (a) 25 days thereafter, if the Bank does not by that day
submit a Continued Access Request to the Committee, or (b) if the Bank
does by that day submit a Continued Access Request to the Committee,
the seventh day following the day that notice is received that the
Request is granted or denied, the Bank (i) may participate in issues of
Systemwide Debt Securities only to the extent necessary to roll over
the principal (net of any original issue discount) of maturing debt,
and (ii) shall comply with the Additional Restrictions. Notwithstanding
the foregoing, the Category III Interim Restrictions shall not go into
effect if a Continued Access Request has already been granted in
anticipation of the formal notice that the Bank is in Category III.
Section 5.03. FCA Action. The Category III Interim Restrictions
shall go into effect without the need for case-by-case approval by FCA.
The Parties agree that the Final Prohibition shall go into effect
without the need for approval by FCA; provided, however, that FCA may
override the Final Prohibition, for such time period up to 60 days as
FCA may specify (or, if FCA does not so specify, for 60 days), by so
ordering before the Effective Date, and may renew such an override once
only, for such time period up to 60 additional days as FCA may specify
(or, if FCA does not so specify, for 60 days), by so ordering before
the expiration of the initial override period. If the Final Prohibition
is overridden by FCA, the Category III Interim Restrictions shall
remain in effect.
Section 5.04. Cessation of Restrictions. The Final Prohibition and
the Category III Interim Restrictions shall cease as soon as the Bank
is no longer in Category III, as indicated in the most recent notice
from the Scorekeeper under Section 1.09. The Bank shall continue,
however, to be subject to such other obligations under this Agreement
as may apply to it by reason of its being in another Category.
Article VI--Continued Access Decisions
Section 6.01. Process. The process for action on Continued Access
Requests shall be as follows:
(a) Submission of Request. A Bank may submit a Continued Access
Request for consideration by the Committee at any time, including (i)
prior to formal notice from the Scorekeeper that it is in Category II
or III, if the Bank anticipates such notice, and (ii) subsequent to the
Effective Date of Final Restrictions or a Final Prohibition.
(b) Committee Recommendation. After a review of the Request, the
supporting information and any other pertinent information available to
the Committee, the Committee shall arrive at a recommendation regarding
the Request (including, if the recommendation is to grant the Request,
recommendations as to the expiration date of the Continued Access
Decision and as to any conditions to be imposed on the Decision). The
Funding Corporation, drawing upon its expertise and specialized
knowledge, shall provide to the Committee all pertinent information in
its possession (and the Banks authorize the Funding Corporation to
provide such information to the Committee for its use as provided
herein, and, to that limited extent only, waive their right to require
the Funding Corporation to maintain the confidentiality of such
information). The Committee shall send its recommendation and a
statement of the reasons therefor, including a description of any
considerations that were expressed for and against the recommendation
by members of the Committee during its deliberations, together with the
Request, the supporting information, a report of how the members of the
Committee voted on the recommendation, a report by the Funding
Corporation concerning its position on the recommendation, and any
other material information that was considered by the Committee, to all
Banks and the Funding Corporation by overnight delivery service within
fourteen days after receiving the Request. If the Committee fails to
act within such fourteen-day period, the Continued Access Request shall
be deemed forwarded to all Banks entitled to vote thereon for their
consideration. If the Committee has failed to act, the Funding
Corporation shall send to all Banks, within two days following the
deadline for Committee action, a report concerning the position of the
Funding Corporation on the Continued Access Request.
(c) Vote on the Request. The Banks entitled to vote on the Request
shall be all Banks other than those in Category II and III, as
indicated in the most recent notice from the Scorekeeper under Section
1.09, and other than the Bank requesting the Continued Access Decision.
Within ten days of receiving the Committee's recommendation and the
accompanying materials (or, if the Committee failed to act within
fourteen days, within ten days following the fourteenth day), the board
of directors of each Bank entitled to vote on the Request, or its
designee, after review of the recommendation, the accompanying
materials, the report of the Funding Corporation, and any other
pertinent information, shall vote to grant or deny the Request (as
modified or supplemented by any recommendations of the Committee as to
the expiration date of the Continued Access Decision and as to
conditions to be imposed on the Decision), and shall provide written
notice of its vote to the Committee. If the Committee has recommended
in favor of a Continued Access Decision, the vote of a Bank shall be
either to accept or reject the Committee's recommendation, including
the recommended expiration date and conditions; if the Committee has
recommended against a Continued Access Decision or has failed to act,
the vote of a Bank shall be either to grant the Continued Access
Request on the terms requested by the requesting Bank, or to deny it.
Failure to vote within the ten-day period shall be considered a ``no''
vote. A Continued Access Request shall be granted only upon a 75
percent Vote within the ten-day period, and shall be considered denied
if a 75 percent Vote is not forthcoming by that day.
(d) Notice. The Committee shall promptly provide written notice to
the Parties, FCA and the Insurance Corporation of the granting or
denial of the Request, and, if the Request was granted, of all the
particulars of the Continued Access Decision.
Section 6.02. Provision of Information to FCA and the Insurance
Corporation. FCA and the Insurance Corporation shall be advised by the
Committee of the submission of a Continued Access Request, shall be
provided by the Committee with appropriate materials relating to the
Request, and shall be advised by the Committee of the recommendation
made by the Committee concerning the Request.
Section 6.03. Criteria. The Committee, in arriving at its
recommendation on a Continued Access Request, and the voting Banks, in
voting on a Continued Access Request, shall consider (a) the present
financial strength of the Bank in issue, (b) the prospects for
financial recovery of the Bank in issue, (c) the probable costs of
particular courses of action to the Banks and the Insurance Fund, (d)
any intentions expressed by the Insurance Corporation with regard to
assisting or working with the Bank in issue, (e) any existing lending
commitments and any particular high-quality new lending opportunities
of the Bank, (f) seasonal variations in the borrowing needs of the
Bank, (g) whether the Bank's independent public accountants have
included a Going Concern Qualification in the most recent combined
financial statements of the Bank and its constituent Associations, and
(h) any other matters deemed pertinent.
Section 6.04. Expiration Date. A Continued Access Decision shall
have such expiration date as the Committee recommends and is approved
by a 75 percent Vote. If the Committee recommends against or fails to
act on a Continued Access Request, and it is subsequently approved by a
75 percent Vote, the expiration date of the Continued Access Decision
shall be the earlier of the date requested by the Bank or 180 days from
the date the Request is granted. A Continued Access Decision may be
terminated prior to that date, or renewed for an additional term, upon
a new recommendation by the Committee and 75 percent Vote. A Continued
Access Decision (including any conditions to which it may be subject)
will terminate automatically as soon as the Bank is no longer in the
same Category as it was when it requested the Decision, as indicated in
the most recent notice from the Scorekeeper under Section 1.09.
Section 6.05. Conditions. A Continued Access Decision shall be
subject to such conditions as the Committee recommends and are approved
by a 75 percent Vote. If specifically approved by a 75 percent Vote,
administration of the details of the conditions and ongoing refinement
of the conditions to take account of changing circumstances can be left
to the Committee or such subcommittee as it may establish for that
purpose. Among the conditions that may be imposed on a Continued Access
Decision are (a) a requirement of remedial action by the Bank, failing
which the Continued Access Decision will terminate, (b) a requirement
of other appropriate conduct on the part of the Bank (such as
compliance with the Additional Restrictions), failing which the
Continued Access Decision will terminate, and (c) specific restrictions
on continued borrowing by the Bank, such as a provision allowing a Bank
in Category II to borrow only for specified types of business in
addition to rolling over the principal of maturing debt, or allowing
such a Bank only to roll over interest on maturing debt in addition to
rolling over the principal of maturing debt, or a provision allowing a
Bank in Category III to roll over a portion of its maturing debt. The
Committee shall be responsible for monitoring and determining
compliance with conditions, and shall promptly advise the Parties of
any failure by a Bank to comply with conditions. The Committee's
determination with respect to compliance with conditions shall be
final, until and unless overturned or modified in arbitration pursuant
to Section 7.08.
Section 6.06. FCA Action. The Parties agree that a Continued Access
Decision shall go into effect without the need for approval by FCA, but
that FCA may override the Continued Access Decision, for such time
period as FCA may specify (or, if FCA does not so specify, until a new
Continued Access Decision is made pursuant to a recommendation of the
Committee and a 75 percent Vote, in which case it is again subject to
override by FCA), by so ordering at any time.
Section 6.07. Notice to FCA of Intent to File Continued Access
Request. A Bank that receives notice that it is in Category III shall
advise FCA, within ten days of receiving such notice, whether it
intends to file a Continued Access Request.
Article VII--Other
Section 7.01. Conditions Precedent. This Agreement shall go into
effect upon the execution by each Party of a certificate in
substantially the form of Attachment A hereto that all of the following
conditions precedent have been satisfied: (a) the delivery to the Banks
of an opinion of Covington & Burling in substantially the form of
Attachment B hereto [re authority, enforceability, compliance with
Section 4.9(b)(2) by the Funding Corporation], (b) the delivery to the
Funding Corporation of an opinion of Sutherland, Asbill & Brennan in
substantially the form of Attachment C hereto [re same], (c) adoption
by each of the Banks of a resolution in substantially the form of
Attachment D hereto; (d) adoption by the Funding Corporation of a
resolution substantially in the form of Attachment E hereto, (e) action
by the Insurance Corporation, through its board, expressing its support
for this Agreement, and (f) action by FCA, through its board, approving
this Agreement pursuant to Section 4.2(d) of the Act, and (without
necessarily expressing any view as to the proper interpretation of
Section 4.9(b)(2) of the Act) approving this Agreement pursuant to
Section 4.9(b)(2) of the Act insofar as such approval may be required,
which action shall (i) be taken after interested parties have been
given notice and afforded the opportunity to comment to FCA on whether
this Agreement should be approved, (ii) indicate that the entry into
and compliance with this Agreement by the Funding Corporation fully
satisfy such obligations as the Funding Corporation may have with
respect to establishing ``conditions of participation'' for market
access under Section 4.9(b)(2), and (iii) contain no reservations or
other conditions or qualifications except for those which may be
specifically agreed to by the Funding Corporation's board of directors
and the other Parties. Upon execution of its certificate, each Party
shall forward a copy to the Farm Credit Bank of Springfield, attn.
Allan Kantrowitz, General Counsel, which shall advise all other Parties
when a complete set of certificates is received.
Section 7.02. Representations and Warranties. Each Party represents
and warrants to the other Parties that (a) it has duly executed and
delivered this Agreement, (b) its performance of this Agreement in
accordance with its terms will not conflict with or result in the
breach of or violation of any of the terms or conditions of, or
constitute (or with notice or lapse of time or both constitute) a
default under any order, judgment or decree applicable to it, or any
instrument, contract or other agreement to which it is a party or by
which it is bound, (c) it is duly constituted and validly existing
under the laws of the United States, (d) it has the corporate and other
authority, and has obtained all necessary approvals, to enter into this
Agreement and perform all of its obligations hereunder, and (e) its
performance of this Agreement in accordance with its terms will not
conflict with or result in the breach of or violation of any of the
terms or conditions of, or constitute (or with notice or lapse of time
or both constitute) a default under its charter (with respect to the
Party Banks), or its bylaws.
Section 7.03. Additional Covenants.
(a) Each Bank agrees to notify the other Parties and the
Scorekeeper if, at any time, it anticipates that within the following
three months it will come to be in Category I, II or III, or will move
from one Category to another.
(b) Whenever a Bank is subject to Final Restrictions, a Final
Prohibition, Category II Interim Restrictions, Category III Interim
Restrictions, or a Continued Access Decision, the Committee shall
promptly so notify the Funding Corporation, and the Funding Corporation
shall take all necessary steps to ensure that the Bank participates in
issues of Systemwide Debt Securities only to the extent permitted
thereunder. The Funding Corporation may rely on the determination of
the Committee as to whether a Bank has complied with a condition to a
Continued Access Decision.
(c) Each Bank agrees that it will not at any time that it is in
Category I, II or III, as indicated in the most recent notice from the
Scorekeeper under Section 1.09, and will not without twelve months'
prior notice to all other Banks and the Funding Corporation at any
other time, either (i) withdraw, or (ii) modify, in a fashion that
would impede the issuance of Systemwide Debt Securities, the funding
resolution it has adopted pursuant to Section 4.4(b) of the Act. Should
a violation of this covenant be asserted, and should the Bank deny
same, the funding resolution shall be deemed still to be in full
effect, without modification, until arbitration of the matter is
completed, and each Bank, by entering into this Agreement, consents to
emergency injunctive relief to enforce this provision. Nothing in this
Agreement shall be construed to restrict any Party's ability to take
the position that a Bank's withdrawal or modification of its funding
resolution is not authorized by law.
(d) Each Bank agrees that it will not at any time that it is in
Category I, II or III, as indicated in the most recent notice from the
Scorekeeper under Section 1.09, and will not without twelve months'
prior notice to all other Banks and the System Disclosure Agent at any
other time, fail to report information to the System Disclosure Agent
pursuant to the Disclosure Program for the issuance of Systemwide Debt
Securities and for the System Disclosure Agent to have a reasonable
basis for making disclosures pursuant to the Disclosure Program. Should
the System Disclosure Agent assert a violation of this covenant, and
should the Bank deny same, the Bank shall furnish such information as
the System Disclosure Agent shall request until arbitration of the
matter is completed, and each Bank, by entering into this Agreement,
consents to emergency injunctive relief to enforce this provision.
Nothing in this Agreement shall be construed to restrict the ability of
the System Disclosure Agent to comply with its obligations under the
securities laws or other applicable law or regulations with regard to
disclosure to investors.
(e) Without implying that suit may be brought on any other matter,
each Bank and the Funding Corporation specifically agree not to bring
suit to challenge this Agreement or to challenge any Final Prohibition,
Final Restrictions, Category II Interim Restrictions, Category III
Interim Restrictions, Continued Access Decision, denial of a Continued
Access Request or recommendation of the Committee with respect to a
Continued Access Request arrived at in accordance with this Agreement.
This provision shall not be construed to preclude judicial actions
under the U.S. Arbitration Act, 9 U.S.C. 1-15, to enforce or vacate
arbitration decisions rendered pursuant to Section 7.08, or for an
order that arbitration proceed pursuant to Section 7.08.
(f) The Funding Corporation agrees that, promptly following the
date this Agreement becomes effective, it will discontinue the Market
Access and Risk Alert Program, and that it will thereafter adopt no
similar such program for so long as (i) this Agreement is in effect,
and (ii) Section 4.9(b)(2) of the Act is not amended in a manner which
would require, nor is there any other change in applicable law or
regulations which would require, the Funding Corporation to establish
``conditions of participation'' different from those contained in this
Agreement. Should the condition described in clause (ii) no longer
apply and the Funding Corporation adopt a market access program, this
Agreement shall be deemed terminated. All Banks reserve the right to
argue, if the conditions described in clauses (i) or (ii) of the
preceding sentence should no longer apply and the Funding Corporation
should adopt such a program, that any such program adopted by the
Funding Corporation is contrary to law, either because Section
4.9(b)(2) of the Act does not authorize such a program, or for any
other reason, and the entry by any Bank into this Agreement shall not
be construed as waiving such right.
(g) It is expressly agreed that this Agreement and FCA approval
hereof do not provide any grounds for challenging FCA or Insurance
Corporation actions with respect to the creation of or the conduct of
receiverships or conservatorships. Without limiting the preceding
statement, each Bank specifically and expressly agrees and acknowledges
that it cannot, and agrees that it shall not, attempt to challenge
FCA's appointment of a receiver or conservator for itself or any other
System institution or FCA's or the Insurance Corporation's actions in
the conduct of any receivership or conservatorship (i) on the basis of
this Agreement or FCA's approval of this Agreement; or (ii) on the
grounds that Category II Interim Restrictions, Final Restrictions,
Category III Interim Restrictions, or Final Prohibitions were or were
not imposed, whether by reason of FCA's or the Insurance Corporation's
action or inaction or otherwise. The Banks jointly and severally agree
that they shall indemnify and hold harmless FCA and the Insurance
Corporation against all costs, expenses, and damages, including without
limitation, attorneys' fees and litigation costs, resulting from any
such challenge by any Party.
Section 7.04. Termination. This Agreement shall terminate on
December 31, 2011, or at an earlier date if so agreed in writing by 75
percent of all the Banks. Commencing a year before December 31, 2011,
the Parties shall meet to consider its extension. It is understood that
the termination of this Agreement shall not affect any rights and
obligations of the Funding Corporation under Section 4.9(b)(2) of the
Act.
Section 7.05. Periodic Review. During the years 2000 and 2006, and
at such more frequent intervals as the Parties may agree, the Banks and
the Funding Corporation, through their boards of directors, shall
review this Agreement and consider whether any amendments to it are
appropriate. In connection with such review, the Committee shall report
to the boards on the operation of the Agreement and recommend any
amendments it considers appropriate.
Section 7.06. Confidentiality. The Parties may disclose this
Agreement and any amendments to it and any actions taken pursuant to
this Agreement to restrict or prohibit borrowing by a Bank. All other
information relating to this Agreement shall be kept confidential and
shall be used solely for purposes of this Agreement, except that, to
the extent permitted by applicable law and regulations, such
information may be disclosed by (a) the System Disclosure Agent under
the Disclosure Program, (b) a Bank, upon coordination of such
disclosure with the System Disclosure Agent, as the Bank deems
appropriate for purposes of the Bank's disclosures to borrowers or
shareholders; (c) a Bank as deemed appropriate for purposes of
disclosure to transacting parties (subject, to the extent the Bank
reasonably can obtain such agreement, to such a transacting party's
agreeing to keep the information confidential) of material information
relating to that Bank, or (d) any Party in order to comply with legal
or regulatory obligations. Notwithstanding the preceding sentence, the
Parties shall make every effort, to the extent consistent with legal
requirements, securities disclosure obligations and other business
necessities, to preserve the confidentiality of information provided to
the Committee by a Bank and designated as ``Proprietary and
Confidential.'' Any expert or consultant retained in connection with
this Agreement shall execute a written undertaking to preserve the
confidentiality of any information received in connection with this
Agreement. Notwithstanding the foregoing, nothing in this Agreement
shall prevent Parties from disclosing information to FCA or the
Insurance Corporation.
Section 7.07. Amendments. This Agreement may be amended only by the
written agreement of all the Parties.
Section 7.08. Dispute Resolution. All disputes between or among
Parties relating to this Agreement shall be submitted to final and
binding arbitration pursuant to the U.S. Arbitration Act, 9 U.S.C. 1-
15, provided, however, that any recommendation by the Committee
regarding a Continued Access Request (including, if the recommendation
is to grant the Request, recommendations as to the expiration date of
the Continued Access Decision and as to any conditions to be imposed on
the Decision), and any vote by a Bank on a Continued Access Request,
shall be final and not subject to arbitration. Arbitrations shall be
conducted under the Commercial Arbitration Rules of the American
Arbitration Association before a single arbitrator. An arbitrator shall
be selected within fourteen days of the initiation of arbitration by
any Party, and the arbitrator shall render a decision within thirty
days of his or her selection.
Section 7.09. Governing Law. This Agreement shall be governed by
and construed in accordance with the Federal law of the United States
of America to the extent applicable, and, to the extent that Federal
law is not applicable, in accordance with the law of the State of New
York.
Section 7.10. Notices. Notices under this Agreement shall be in
writing, shall be sent both by facsimile transmission and by overnight
delivery service, and shall be deemed received on the Business Day
after they are sent. Notices shall be addressed as follows unless such
address is changed by written notice hereunder:
To AgriBank, FCB:
AgriBank, FCB, 375 Jackson Street, St. Paul, MN 55101.
ATTENTION: ____________
Telecopier: 612-282-8666
To the Farm Credit Bank of Baltimore:
Farm Credit Bank of Baltimore, Farm Credit Building, 14114 York
Road, Sparks, MD 21152.
ATTENTION: ____________
Telecopier: 410-329-5705
To the Farm Credit Bank of Columbia:
Farm Credit Bank of Columbia, Farm Credit Bank Building, 1401
Hampton Street, Columbia, SC 29201.
ATTENTION: ____________
Telecopier: 803-254-1776
To the Farm Credit Bank of Omaha:
Farm Credit Bank of Omaha, Farm Credit Building, 206 South 19th
Street, Omaha, NB 68102-1755.
ATTENTION: ____________
Telecopier: 402-348-3699
To the Farm Credit Bank of Spokane:
Farm Credit Bank of Spokane, W. 601 First Avenue, Spokane, WA
99204.
ATTENTION: ____________
Telecopier: 509-838-9445
To the Farm Credit Bank of Springfield:
Farm Credit Bank of Springfield, 67 Hunt Street, Agawam, MA
01001.
ATTENTION: ____________
Telecopier: 413-789-0140
To the Farm Credit Bank of Texas:
Farm Credit Bank of Texas, La Costa Office Park, 6210 Highway
290 East, Austin, TX 78723.
ATTENTION: ____________
Telecopier: 512-465-0675
To the Farm Credit Bank of Wichita:
Farm Credit Bank of Wichita, 245 North Waco, Wichita, KS 67202.
ATTENTION: ____________
Telecopier: 316-266-5121
To National Bank for Cooperatives:
National Bank for Cooperatives, 5500 South Quebec Street,
Englewood, CO 80111.
ATTENTION: ____________
Telecopier: 303-740-4002
To St. Paul Bank for Cooperatives:
St. Paul Bank for Cooperatives, 375 Jackson Street, St. Paul, MN
55101.
ATTENTION: ____________
Telecopier: 612-282-8201
To Springfield Bank for Cooperatives:
Springfield Bank for Cooperatives, 67 Hunt Street, Agawam, MA
01001.
ATTENTION: ____________
Telecopier: 413-789-0140
To Western Farm Credit Bank:
Western Farm Credit Bank, 3636 American River Drive, Sacramento,
CA 95864-5996.
ATTENTION: ____________
Telecopier: 916-971-2837
To Federal Farm Credit Banks Funding Corporation:
Federal Farm Credit Banks Funding Corporation, Suite 1401, 10
Exchange Place, Jersey City, NJ 07302,
ATTENTION: ____________
Telecopier: 201-200-8109
To the Farm Credit System Insurance Corporation:
Farm Credit System Insurance Corporation, 1501 Farm Credit
Drive, McLean, Virginia 22102-0826,
ATTENTION: ____________
Telecopier: 703-734-5784
To the Farm Credit Administration:
Farm Credit Administration, 1501 Farm Credit Drive, McLean,
Virginia 22102-5090.
ATTENTION: ____________
Telecopier: 703-734-5784
To the CIPA Oversight Body:
At such address and telecopier number as shall be supplied to
the Parties from time to time by the Chairman of the CIPA Oversight
Body.
To the Committee:
At such address and telecopier number as shall be supplied by
the Committee, which the Committee shall promptly transmit to each
Party.
To a Scorekeeper other than the Funding Corporation:
At such address and telecopier number as shall be supplied by
such Scorekeeper, which such Scorekeeper shall promptly transmit to
each Party.
Section 7.11. Headings; Conjunctive/Disjunctive; Singular/Plural.
The headings of any article or section of this Agreement are for
convenience only and shall not be used to interpret any provision of
the Agreement. Uses of the conjunctive include the disjunctive, and
vice versa, unless the context clearly requires otherwise. Uses of the
singular include the plural, and vice versa, unless the context clearly
requires otherwise.
Section 7.12. Successors and Assigns. Except as provided in the
definitions of ``Bank'' and ``Banks'' in Article IX, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of the Parties, including entities resulting from the merger or
consolidation of one or more Banks.
Section 7.13. Counterparts. This Agreement, and any document
provided for hereunder, may be executed in one or more counterparts.
Section 7.14. Waiver. Any provision of this Agreement may be
waived, but only if such waiver is in writing and is signed by all
Parties to this Agreement.
Section 7.15. Entire Agreement. Except as provisions of CIPA are
cited in this Agreement (which provisions are expressly incorporated
herein by reference), this Agreement sets forth the entire agreement of
the Parties and supersedes all prior understandings or agreements, oral
or written, among the Parties with respect to the subject matter
hereof.
Section 7.16. Relation to CIPA. This Agreement and CIPA are
separate agreements, and invalidation of one does not affect the other.
Should CIPA be invalidated or terminated, the Parties will take the
necessary steps to maintain those aspects of CIPA that are referred to
in Sections 1.01, 1.02 and 1.03, and to replace the CIPA Oversight Body
for purposes of continued administration of this Agreement.
Section 7.17. Third Parties. Except as provided in Sections 2.10,
3.03, 7.03(g), 7.21 and 7.22, this Agreement is for the benefit of the
Parties and their respective successors and assigns, and no rights are
intended to be, or are, created hereunder for the benefit of any third
party.
Section 7.18. Time Is Of The Essence. Time is of the essence in
interpreting and performing this Agreement.
Section 7.19. Statutory Collateral Requirement. Nothing in this
Agreement shall be construed to permit a Bank to participate in issues
of Systemwide Debt Securities or other obligations if it does not
satisfy the collateral requirements of Section 4.3(c) of the Act. For
purposes of this Section, ``Bank'' shall include any System bank in
conservatorship or receivership.
Section 7.20. Termination of System Status. Nothing in this
Agreement shall be construed to preclude a Bank from terminating its
status as a System institution pursuant to Section 7.10 of the Act, or
from at that time withdrawing, as from that time forward, the funding
resolution it has adopted pursuant to Section 4.4(b) of the Act. A Bank
that terminates its System status shall cease to have any rights or
obligations under this Agreement, except that it shall continue to be
subject to Article VIII with respect to claims accruing through the
date of such termination of System status.
Section 7.21. Restrictions Concerning Subsequent Litigation. It is
expressly agreed by the Banks that (a) characterization or
categorization of Banks, (b) information furnished to the Committee or
other Banks, and (c) discussions or decisions of the Banks or Committee
under this Agreement shall not be used in any subsequent litigation
challenging FCA's or the Insurance Corporation's action or inaction.
Section 7.22. Effect of this Agreement. Neither this Agreement nor
FCA approval hereof shall in any way restrict or qualify the authority
of FCA or the Insurance Corporation to exercise any of the powers,
rights, or duties granted by law to FCA or the Insurance Corporation.
Article VIII--Indemnification
Section 8.01. Definitions. As used in this Article VIII:
(a) Indemnified Party means any Bank, the Funding Corporation, the
Committee, the Scorekeeper, or any of the past, present or future
directors, officers, stockholders, employees or agents of the
foregoing.
(b) Damages means any and all losses, costs, liabilities, damages
and expenses, including, without limitation, court costs and reasonable
fees and expenses of attorneys expended in investigation, settlement
and defense (at the trial and appellate levels and otherwise), which
are incurred by an Indemnified Party as a result of or in connection
with a claim alleging liability to any non-Party for actions taken
pursuant to or in connection with this Agreement. Except to the extent
otherwise provided in this Article VIII, Damages shall be deemed to
have been incurred by reason of a final settlement or the dismissal
with prejudice of any such claim, or the issuance of a final
nonappealable order by a court of competent jurisdiction which
ultimately disposes of such a claim, whether favorably or unfavorably.
Section 8.02. Indemnity. To the extent consistent with governing
law, the Banks, jointly and severally, shall indemnify and hold
harmless each Indemnified Party against and in respect of Damages,
provided, however, that an Indemnified Party shall not be entitled to
indemnification under this Article VIII in connection with conduct of
such Indemnified Party constituting gross negligence, willful
misconduct, intentional tort or criminal act, or in connection with
civil money penalties imposed by FCA. In addition, the Banks, jointly
and severally, shall indemnify an Indemnified Party for all costs and
expenses (including, without limitation, fees and expenses of
attorneys) incurred reasonably and in good faith by an Indemnified
Party in connection with the successful enforcement of rights under any
provision of this Article VIII.
Section 8.03. Advancement of Expenses. The Banks, jointly and
severally, shall advance to an Indemnified Party, as and when incurred
by the Indemnified Party, all reasonable expenses, court costs and
attorneys' fees incurred by such Indemnified Party in defending any
proceeding involving a claim against such Indemnified Party based upon
or alleging any matter that constitutes, or if sustained would
constitute, a matter in respect of which indemnification is provided
for in Section 8.02, so long as the Indemnified Party provides the
Banks with a written undertaking to repay all amounts so advanced if it
is ultimately determined by a court in a final nonappealable order or
by agreement of the Banks and the Indemnified Party that the
Indemnified Party is not entitled to be indemnified under Section 8.02.
Section 8.04. Assertion of Claim.
(a) Promptly after the receipt by an Indemnified Party of notice of
the assertion of any claim or the commencement of any action against
him, her or it in respect of which indemnity may be sought against the
Banks hereunder (an ``Assertion''), such Indemnified Party shall
apprise the Banks, through a notice to each of them, of such Assertion.
The failure so to notify the Banks shall not relieve the Banks of
liability they may have to such Indemnified Party hereunder, except to
the extent that failure to give such notice results in material
prejudice to the Banks.
(b) Any Bank receiving a notice under paragraph (a) shall forward
it to the Committee (which, if not in existence, shall be formed at the
instance of such Bank to consider the matter). The Banks, through the
Committee, shall be entitled to participate in, and to the extent the
Banks, through the Committee, elect in writing on thirty days' notice,
to assume, the defense of an Assertion, at their own expense, with
counsel chosen by them and satisfactory to the Indemnified Party.
Notwithstanding that the Banks, through the Committee, shall have
elected by such written notice to assume the defense of any Assertion,
such Indemnified Party shall have the right to participate in the
investigation and defense thereof, with separate counsel chosen by such
Indemnified Party, but in such event the fees and expenses of such
separate counsel shall be paid by such Indemnified Party and shall not
be subject to indemnification by the Banks unless (i) the Banks,
through the Committee, shall have agreed to pay such fees and expenses,
(ii) the Banks shall have failed to assume the defense of such
Assertion and to employ counsel satisfactory to such Indemnified Party,
or (iii) in the reasonable judgment of such Indemnified Party, based
upon advice of his, her or its counsel, a conflict of interest may
exist between the Banks and such Indemnified Party with respect to such
Assertion, in which case, if such Indemnified Party notifies the Banks,
through the Committee, that such Indemnified Party elects to employ
separate counsel at the Banks' expense, the Banks shall not have the
right to assume the defense of such Assertion on behalf of such
Indemnified Party. Notwithstanding anything to the contrary in this
Article VIII, neither the Banks, through the Committee, nor the
Indemnified Party shall settle or compromise any action or consent to
the entering of any judgment (x) without the prior written consent of
the other, which consent shall not be unreasonably withheld, and (y)
without obtaining, as an unconditional term of such settlement,
compromise or consent, the delivery by the claimant or plaintiff to
such Indemnified Party of a duly executed written release of such
Indemnified Party from all liability in respect of such Assertion,
which release shall be satisfactory in form and substance to counsel to
such Indemnified Party. The Funding Corporation shall not be entitled
to vote on actions by the Committee under this paragraph (b) or Section
8.08.
Section 8.05. Remedies; Survival. The indemnification, rights and
remedies provided to an Indemnified Party under this Article VIII shall
be (i) in addition to and not in substitution for any other rights and
remedies to which any of the Indemnified Parties may be entitled, under
any other agreement with any other Person, or otherwise at law or in
equity, and (ii) provided prior to and without regard to any other
indemnification available to any Indemnified Party. This Article VIII
shall survive the termination of this Agreement.
Section 8.06. No Rights in Third Parties. This Agreement shall not
confer upon any Person other than the Indemnified Party any rights or
remedies of any nature or kind whatsoever under or by reason of the
indemnification provided for in this Article VIII.
Section 8.07. Subrogation; Insurance. Upon the payment by the Banks
to an Indemnified Party of any amounts for which an Indemnified Party
shall be entitled to indemnification under this Article VIII, if the
Indemnified Party shall also have the right to recover such amount
under any commercial insurance, the Banks shall be subrogated to such
rights to the extent of the indemnification actually paid. Where
coverage under such commercial insurance may exist, the Indemnified
Party shall promptly file and diligently pursue a claim under said
insurance. Any amounts paid pursuant to such claim shall be refunded to
the Banks to the extent the Banks have provided indemnification
payments under this Article VIII, provided, however, that recovery
under such insurance shall not be deemed a condition precedent to the
indemnification obligations of the Banks under this Article VIII.
Section 8.08. Sharing in Costs. The Banks shall share in the costs
of any indemnification payment hereunder as the Committee shall
determine.
Article IX--Definitions
The following definitions are used in this Agreement:
Act means the Farm Credit Act of 1971, 12 U.S.C. 2001, et seq., as
amended from time to time, or any successors thereto.
The Additional Restrictions are that a Bank (a) shall manage its
asset/liability mix so as not to increase, and, to the extent possible,
so as to reduce or eliminate, any Interest-Rate Sensitivity Deduction
in its Net Composite Score, and (b) shall not increase the dollar
amount of any liabilities, or take any action giving rise to a lien or
pledge on its assets, senior to its liability on Systemwide Debt
Securities other than (i) tax liabilities and secured liabilities
arising in the ordinary course of business through activities other
than borrowing, such as mechanic's liens or judgment liens, and (ii)
secured liabilities, or an action giving rise to such a lien or pledge,
incurred in the ordinary course of business as the result of issuing
secured debt or entering into repurchase agreements, provided, however,
that such debt issuances and agreements may be undertaken to the extent
that the proceeds therefrom are used to repay the principal of
outstanding Systemwide Debt Securities and the value of the collateral
securing the debt issuances or the agreements (computed in the same
manner as provided under Section 4.3(c) of the Act) does not exceed the
amount of principal so repaid.
Associations means agricultural credit associations, federal land
bank associations, federal land credit associations and production
credit associations.
Average Net Composite Score is defined in Section 1.03.
Bank means a bank of the Farm Credit System, other than (except
where noted) any bank in conservatorship or receivership.
Banks means the banks of the Farm Credit System, other than (except
where noted) any banks in conservatorship or receivership.
Business Day means any day other than a Saturday, Sunday or Federal
holiday.
Business Plan means the business plan required under 12 CFR
618.8440, as amended from time to time, or any successors thereto.
CIPA means that certain ``Contractual Interbank Performance
Agreement Among the Banks of the Farm Credit System, the Farm Credit
System Financial Assistance Corporation and the Federal Farm Credit
Banks Funding Corporation, the Scorekeeper, Dated as of January 1,
1992,'' as amended from time to time.
CIPA Oversight Body is defined in Section 1.02.
Category I is defined in Section 1.05.
Category II is defined in Section 1.06.
Category II Interim Restrictions means the requirements set forth
in Section 4.02.
Category III is defined in Section 1.07.
Category III Interim Restrictions means the requirements set forth
in Section 5.02.
Collateral is defined as in Section 4.3(c) of the Act and the
regulations thereunder, as amended from time to time, or any successors
thereto.
Collateral Figure means a Bank's Collateral, divided by its
Collateralized Obligations, times 100 percent.
Collateralized Obligations means obligations required by Section
4.3(c) of the Act to be backed by collateral as set forth therein.
The Committee is defined in Section 2.01.
Continued Access Decision means a decision, subject to the
procedures, terms and conditions described in Article VI, that Final
Restrictions or a Final Prohibition not go into effect, or be lifted.
Continued Access Request means a request for a Continued Access
Decision.
Days means calendar days, unless the term Business Days is used.
Disclosure Program means the program established, pursuant to
resolutions of the Banks and the Funding Corporation adopted in 1987
and revised in 1989, for disclosure at the Systemwide level of
financial and other information in connection with the issuance of
Systemwide Debt Securities, as amended from time to time, or any
successor thereto.
The Effective Date is (a) the tenth day after a Bank receives a
notification from the Scorekeeper that it is in Category II or the
twenty-fifth day after a Bank receives a notification from the
Scorekeeper that it is in Category III, in each case if the Bank does
not by that day submit a Continued Access Request to the Committee, or
(b) if the Bank does by that day submit a Continued Access Request to
the Committee, the seventh day following the day that notice is
received that the Request is denied.
FCA means the Farm Credit Administration.
Final Prohibition means the requirements set forth in Section 5.01.
Final Restrictions means the requirements set forth in Section
4.01.
Funding Corporation means the Federal Farm Credit Banks Funding
Corporation.
Going Concern Qualification means a qualification expressed
pursuant to Statement of Auditing Standards No. 59, ``The Auditor's
Consideration of an Entity's Ability to Continue As a Going Concern.''
Insurance Corporation means the Farm Credit System Insurance
Corporation.
Insurance Fund means the Farm Credit Insurance Fund maintained by
the Insurance Corporation pursuant to Section 5.60 of the Act.
Interest-Rate Sensitivity Deduction is defined as in Article II of
CIPA, and the Model referred to therein, as amended from time to time,
or any successor thereto.
Liquidity Deficiency Deduction is defined as in Article II of CIPA,
and the Model referred to therein, as amended from time to time, or any
successor thereto.
Net Composite Score is defined in Section 1.03.
Parties means the parties to this Agreement. A bank in
conservatorship or receivership is not a party to this Agreement.
Permanent Capital is defined as in Section 4.3A(a)(1) of the Act
and the regulations thereunder, as amended from time to time, or any
successors thereto.
Permanent Capital Figure means a Bank's Permanent Capital as a
percentage of its Risk-Adjusted Asset Base.
Person means any human being, partnership, association, joint
venture, corporation, legal representative or trust, or any other
entity.
Risk-Adjusted Asset Base is defined as in 12 CFR 615.5210(e), as
amended from time to time, or any successor thereto.
Scorekeeper is defined in Section 1.01.
Seventy-five (75) Percent Vote means an affirmative vote, through
each voting Bank's board of directors or its designee, of 75 percent of
those Banks that are entitled to vote on a matter.
System means the Farm Credit System.
System Disclosure Agent means the Funding Corporation or such other
disclosure agent as all Banks shall unanimously agree upon, to the
extent permitted by law or regulation. For purposes of this definition,
``Banks'' shall include any System bank in conservatorship or
receivership.
Systemwide Debt Securities means Systemwide obligations issued
through the Funding Corporation, within the meaning of Sections 4.2(d)
and 4.9 of the Act.
Dated: May 11, 1994.
Curtis M. Anderson,
Secretary, Farm Credit Administration Board.
[FR Doc. 94-11907 Filed 5-16-94; 8:45 am]
BILLING CODE 6705-01-P
