As filed
with the Securities and Exchange Commission on August 9, 2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended June 30, 2010
Commission
File Number 001-14951
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
(Exact
name of registrant as specified in its charter)
Federally
chartered instrumentality
of
the United States
|
|
52-1578738
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
employer identification
number)
|
1133
Twenty-First Street, N.W., Suite 600
Washington,
D.C.
|
|
20036
|
(Address
of principal executive offices)
|
|
(Zip
code)
|
(202)
872-7700
(Registrant’s
telephone number, including area code)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
¨
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
|
¨
|
Accelerated filer
¨
|
|
|
|
Non-accelerated filer
|
x
|
Smaller reporting company
¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
As of
August 2, 2010 the registrant had 1,030,780 shares of Class A Voting
Common Stock, 500,301 shares of Class B Voting Common Stock and
8,746,123 shares of Class C Non-Voting Common Stock
outstanding.
PART
I - FINANCIAL INFORMATION
Item
1.
|
Condensed Consolidated
Financial Statements
|
The following information concerning
Farmer Mac’s interim unaudited condensed consolidated financial statements is
included in this report beginning on the pages listed below:
Condensed
Consolidated Balance Sheets as of June 30, 2010 and December 31,
2009
|
3
|
Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009
|
4
|
Condensed
Consolidated Statements of Equity for the six months ended June 30, 2010
and 2009
|
5
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2010 and 2009
|
6
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited)
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
325,333
|
|
|
$
|
654,794
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
Available-for-sale,
at fair value
|
|
|
1,175,376
|
|
|
|
1,041,923
|
|
Trading,
at fair value
|
|
|
81,956
|
|
|
|
89,972
|
|
Total
investment securities
|
|
|
1,257,332
|
|
|
|
1,131,895
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
Available-for-sale,
at fair value
|
|
|
1,718,140
|
|
|
|
2,524,867
|
|
Trading,
at fair value
|
|
|
-
|
|
|
|
874,129
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
1,718,140
|
|
|
|
3,398,996
|
|
USDA
Guaranteed Securities:
|
|
|
|
|
|
|
|
|
Available-for-sale,
at fair value
|
|
|
880,424
|
|
|
|
-
|
|
Trading,
at fair value
|
|
|
386,496
|
|
|
|
-
|
|
Total
USDA Guaranteed Securities
|
|
|
1,266,920
|
|
|
|
-
|
|
Loans:
|
|
|
|
|
|
|
|
|
Loans
held for sale, at lower of cost or fair value
|
|
|
908,778
|
|
|
|
666,534
|
|
Loans
held for investment, at amortized cost
|
|
|
96,057
|
|
|
|
93,478
|
|
Loans
held for investment in consolidated trusts, at amortized
cost
|
|
|
1,332,624
|
|
|
|
-
|
|
Allowance
for loan losses
|
|
|
(9,495
|
)
|
|
|
(6,292
|
)
|
Total
loans, net of allowance
|
|
|
2,327,964
|
|
|
|
753,720
|
|
Real
estate owned, at lower of cost or fair value
|
|
|
4,023
|
|
|
|
739
|
|
Financial
derivatives, at fair value
|
|
|
37,121
|
|
|
|
15,040
|
|
Interest
receivable
|
|
|
72,616
|
|
|
|
67,178
|
|
Guarantee
and commitment fees receivable
|
|
|
36,579
|
|
|
|
55,016
|
|
Deferred
tax asset, net
|
|
|
10,405
|
|
|
|
24,146
|
|
Prepaid
expenses and other assets
|
|
|
43,057
|
|
|
|
37,289
|
|
Total
Assets
|
|
$
|
7,099,490
|
|
|
$
|
6,138,813
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
Mezzanine Equity and Equity:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Notes
payable:
|
|
|
|
|
|
|
|
|
Due
within one year
|
|
$
|
3,226,745
|
|
|
$
|
3,662,898
|
|
Due
after one year
|
|
|
2,269,421
|
|
|
|
1,908,713
|
|
Total
notes payable
|
|
|
5,496,166
|
|
|
|
5,571,611
|
|
Debt
securities of consolidated trusts held by third parties
|
|
|
882,629
|
|
|
|
-
|
|
Financial
derivatives, at fair value
|
|
|
132,675
|
|
|
|
107,367
|
|
Accrued
interest payable
|
|
|
52,913
|
|
|
|
39,562
|
|
Guarantee
and commitment obligation
|
|
|
32,762
|
|
|
|
48,526
|
|
Accounts
payable and accrued expenses
|
|
|
19,397
|
|
|
|
23,445
|
|
Reserve
for losses
|
|
|
9,470
|
|
|
|
7,895
|
|
Total
Liabilities
|
|
|
6,626,012
|
|
|
|
5,798,406
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
Equity:
|
|
|
|
|
|
|
|
|
Series
B redeemable preferred stock, par value $1,000 per share, 150,000 shares
authorized, issued and outstanding as of December 31, 2009 (redemption
value $150,000,000)
|
|
|
-
|
|
|
|
144,216
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
|
|
|
|
Series
C, par value $1,000 per share, 100,000 shares authorized, 57,578 issued
and outstanding
|
|
|
57,578
|
|
|
|
57,578
|
|
Common
stock:
|
|
|
|
|
|
|
|
|
Class
A Voting, $1 par value, no maximum authorization, 1,030,780 shares
outstanding
|
|
|
1,031
|
|
|
|
1,031
|
|
Class
B Voting, $1 par value, no maximum authorization, 500,301 shares
outstanding
|
|
|
500
|
|
|
|
500
|
|
Class
C Non-Voting, $1 par value, no maximum authorization, 8,745,269 shares
outstanding as of June 30, 2010 and 8,610,918 shares outstanding as of
December 31, 2009
|
|
|
8,745
|
|
|
|
8,611
|
|
Additional
paid-in capital
|
|
|
98,925
|
|
|
|
97,090
|
|
Accumulated
other comprehensive income
|
|
|
31,469
|
|
|
|
3,254
|
|
Retained
earnings
|
|
|
33,377
|
|
|
|
28,127
|
|
Total
Stockholders' Equity
|
|
|
231,625
|
|
|
|
196,191
|
|
Non-controlling
interest - preferred stock
|
|
|
241,853
|
|
|
|
-
|
|
Total
Equity
|
|
|
473,478
|
|
|
|
196,191
|
|
Total
Liabilities, Mezzanine Equity and Equity
|
|
$
|
7,099,490
|
|
|
$
|
6,138,813
|
|
See
accompanying notes to condensed consolidated financial
statements.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
(in
thousands, except per share amounts)
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
and cash equivalents
|
|
$
|
6,390
|
|
|
$
|
7,049
|
|
|
$
|
12,873
|
|
|
$
|
15,958
|
|
Farmer
Mac and USDA Guaranteed Securities
|
|
|
18,795
|
|
|
|
25,805
|
|
|
|
39,626
|
|
|
|
53,564
|
|
Loans
|
|
|
32,142
|
|
|
|
8,896
|
|
|
|
65,560
|
|
|
|
19,381
|
|
Total
interest income
|
|
|
57,327
|
|
|
|
41,750
|
|
|
|
118,059
|
|
|
|
88,903
|
|
Total
interest expense
|
|
|
35,719
|
|
|
|
21,849
|
|
|
|
72,834
|
|
|
|
45,562
|
|
Net
interest income
|
|
|
21,608
|
|
|
|
19,901
|
|
|
|
45,225
|
|
|
|
43,341
|
|
Recoveries/(provision)
for loan losses
|
|
|
1,870
|
|
|
|
5,693
|
|
|
|
(980
|
)
|
|
|
2,159
|
|
Net
interest income after recoveries/(provision) for loan
losses
|
|
|
23,478
|
|
|
|
25,594
|
|
|
|
44,245
|
|
|
|
45,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
(expense)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
and commitment fees
|
|
|
5,710
|
|
|
|
7,908
|
|
|
|
11,629
|
|
|
|
15,318
|
|
(Losses)/gains
on financial derivatives
|
|
|
(15,840
|
)
|
|
|
21,528
|
|
|
|
(21,644
|
)
|
|
|
23,239
|
|
Gains
on trading assets
|
|
|
5,058
|
|
|
|
35
|
|
|
|
8,425
|
|
|
|
31,660
|
|
Other-than-temporary
impairment losses
|
|
|
-
|
|
|
|
(2,292
|
)
|
|
|
-
|
|
|
|
(2,373
|
)
|
(Losses)/gains
on sale of available-for-sale investment securities
|
|
|
-
|
|
|
|
(300
|
)
|
|
|
240
|
|
|
|
2,850
|
|
Gains
on sale of loans and Farmer Mac Guaranteed Securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,581
|
|
Lower
of cost or fair value adjustment on loans held for sale
|
|
|
90
|
|
|
|
-
|
|
|
|
(2,184
|
)
|
|
|
-
|
|
Other
income
|
|
|
211
|
|
|
|
101
|
|
|
|
1,040
|
|
|
|
335
|
|
Non-interest
(expense)/income
|
|
|
(4,771
|
)
|
|
|
26,980
|
|
|
|
(2,494
|
)
|
|
|
72,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
|
3,907
|
|
|
|
3,572
|
|
|
|
7,418
|
|
|
|
7,597
|
|
General
and administrative
|
|
|
2,051
|
|
|
|
2,986
|
|
|
|
4,554
|
|
|
|
5,900
|
|
Regulatory
fees
|
|
|
562
|
|
|
|
512
|
|
|
|
1,125
|
|
|
|
1,025
|
|
Real
estate owned operating costs/(income), net
|
|
|
298
|
|
|
|
(16
|
)
|
|
|
308
|
|
|
|
5
|
|
Provision/(recoveries)
for losses
|
|
|
3,043
|
|
|
|
(529
|
)
|
|
|
1,575
|
|
|
|
1,990
|
|
Non-interest
expense
|
|
|
9,861
|
|
|
|
6,525
|
|
|
|
14,980
|
|
|
|
16,517
|
|
Income
before income taxes
|
|
|
8,846
|
|
|
|
46,049
|
|
|
|
26,771
|
|
|
|
101,593
|
|
Income
tax expense
|
|
|
756
|
|
|
|
16,534
|
|
|
|
5,092
|
|
|
|
34,624
|
|
Net
income
|
|
|
8,090
|
|
|
|
29,515
|
|
|
|
21,679
|
|
|
|
66,969
|
|
Less:
Net income attributable to non-controlling interest - preferred stock
dividends
|
|
|
(5,546
|
)
|
|
|
-
|
|
|
|
(9,614
|
)
|
|
|
-
|
|
Net
income attributable to Farmer Mac
|
|
|
2,544
|
|
|
|
29,515
|
|
|
|
12,065
|
|
|
|
66,969
|
|
Preferred
stock dividends
|
|
|
(720
|
)
|
|
|
(4,130
|
)
|
|
|
(2,690
|
)
|
|
|
(8,066
|
)
|
Loss
on retirement of preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,784
|
)
|
|
|
-
|
|
Net
income available to common stockholders
|
|
$
|
1,824
|
|
|
$
|
25,385
|
|
|
$
|
3,591
|
|
|
$
|
58,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share and dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
$
|
0.18
|
|
|
$
|
2.50
|
|
|
$
|
0.35
|
|
|
$
|
5.81
|
|
Diluted
earnings per common share
|
|
$
|
0.17
|
|
|
$
|
2.49
|
|
|
$
|
0.34
|
|
|
$
|
5.80
|
|
Common
stock dividends per common share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
See
accompanying notes to condensed consolidated financial
statements.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited
)
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
(in thousands)
|
|
Preferred
stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
58
|
|
|
$
|
57,578
|
|
|
|
9
|
|
|
$
|
9,200
|
|
Issuance
of Series C preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
30,800
|
|
Balance,
end of period
|
|
|
58
|
|
|
$
|
57,578
|
|
|
|
40
|
|
|
$
|
40,000
|
|
Common
stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
10,142
|
|
|
$
|
10,142
|
|
|
|
10,132
|
|
|
$
|
10,132
|
|
Issuance
of Class C common stock
|
|
|
121
|
|
|
|
121
|
|
|
|
6
|
|
|
|
6
|
|
Exercise
of stock options and SARs
|
|
|
13
|
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
Balance,
end of period
|
|
|
10,276
|
|
|
$
|
10,276
|
|
|
|
10,138
|
|
|
$
|
10,138
|
|
Additional
paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
|
|
|
$
|
97,090
|
|
|
|
|
|
|
$
|
95,572
|
|
Stock-based
compensation expense
|
|
|
|
|
|
|
1,507
|
|
|
|
|
|
|
|
1,543
|
|
Issuance
of Class C common stock
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
11
|
|
Excercise,
vesting and cancelation of stock options, SARs and restricted
stock
|
|
|
|
|
|
|
306
|
|
|
|
|
|
|
|
(1,165
|
)
|
Balance,
end of period
|
|
|
|
|
|
$
|
98,925
|
|
|
|
|
|
|
$
|
95,961
|
|
Retained
earnings/(accumulated deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
|
|
|
$
|
28,127
|
|
|
|
|
|
|
$
|
(52,144
|
)
|
Net
income attributable to Farmer Mac
|
|
|
|
|
|
|
12,065
|
|
|
|
|
|
|
|
66,969
|
|
Cash
dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, Series B ($8.33 per share)
|
|
|
|
|
|
|
(1,250
|
)
|
|
|
|
|
|
|
(7,476
|
)
|
Preferred
stock, Series C ($12.50 per share)
|
|
|
|
|
|
|
(1,440
|
)
|
|
|
|
|
|
|
(590
|
)
|
Common
stock ($0.05 per share)
|
|
|
|
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
(1,014
|
)
|
Loss
on retirement of preferred stock
|
|
|
|
|
|
|
(5,784
|
)
|
|
|
|
|
|
|
-
|
|
Cumulative
effect of adoption of new accounting standard, net of tax
|
|
|
|
|
|
|
2,679
|
|
|
|
|
|
|
|
-
|
|
Balance,
end of period
|
|
|
|
|
|
$
|
33,377
|
|
|
|
|
|
|
$
|
5,745
|
|
Accumulated
other comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
|
|
|
$
|
3,254
|
|
|
|
|
|
|
$
|
(47,412
|
)
|
Change
in unrealized gain on available-for-sale securities, net of tax and
reclassification adjustments
|
|
|
|
|
|
|
28,163
|
|
|
|
|
|
|
|
34,776
|
|
Change
in unrealized gain on financial derivatives, net of tax and
reclassification adjustments
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
90
|
|
Balance,
end of period
|
|
|
|
|
|
$
|
31,469
|
|
|
|
|
|
|
$
|
(12,546
|
)
|
Total
Stockholders' Equity
|
|
|
|
|
|
$
|
231,625
|
|
|
|
|
|
|
$
|
139,298
|
|
Non-controlling
interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Preferred
stock - Farmer Mac II LLC
|
|
|
|
|
|
|
241,853
|
|
|
|
|
|
|
|
-
|
|
Balance,
end of period
|
|
|
|
|
|
$
|
241,853
|
|
|
|
|
|
|
$
|
-
|
|
Total
Equity
|
|
|
|
|
|
$
|
473,478
|
|
|
|
|
|
|
$
|
139,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
$
|
21,679
|
|
|
|
|
|
|
$
|
66,969
|
|
Changes
in accumulated other comprehensive income, net of tax
|
|
|
|
|
|
|
28,215
|
|
|
|
|
|
|
|
34,866
|
|
Comprehensive
income
|
|
|
|
|
|
|
49,894
|
|
|
|
|
|
|
|
101,835
|
|
Less:
Comprehensive income attributable to non-controlling
interest
|
|
|
|
|
|
|
9,614
|
|
|
|
|
|
|
|
-
|
|
Total
comprehensive income
|
|
|
|
|
|
$
|
40,280
|
|
|
|
|
|
|
$
|
101,835
|
|
See
accompanying notes to condensed consolidated financial
statements.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
(in
thousands)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
21,679
|
|
|
$
|
66,969
|
|
Adjustments
to reconcile net income to net cash (used in)/provided by operating
activities:
|
|
|
|
|
|
|
|
|
Net
amortization of premiums and discounts on loans, investments, and
Farmer Mac and USDA Guaranteed Securities
|
|
|
6,150
|
|
|
|
2,207
|
|
Amortization
of debt premiums, discounts and issuance costs
|
|
|
3,033
|
|
|
|
8,116
|
|
Proceeds
from repayment and sale of trading investment securities
|
|
|
400
|
|
|
|
472
|
|
Purchases
of loans held for sale
|
|
|
(293,003
|
)
|
|
|
(53,045
|
)
|
Proceeds
from repayment of loans held for sale
|
|
|
46,835
|
|
|
|
16,117
|
|
Net
change in fair value of trading securities, financial derivatives and
loans held for sale
|
|
|
(5,288
|
)
|
|
|
(77,939
|
)
|
Amortization
of transition adjustment on financial derivatives
|
|
|
80
|
|
|
|
89
|
|
Other-than-temporary
impairment losses
|
|
|
-
|
|
|
|
2,373
|
|
Gains
on sale of loans and Farmer Mac Guaranteed Securities
|
|
|
-
|
|
|
|
(1,581
|
)
|
Gains
on the sale of available-for-sale investments securities
|
|
|
(240
|
)
|
|
|
(2,850
|
)
|
Total
provision/(recoveries) for losses
|
|
|
2,555
|
|
|
|
(169
|
)
|
Deferred
income taxes
|
|
|
(3,347
|
)
|
|
|
37,164
|
|
Stock-based
compensation expense
|
|
|
1,508
|
|
|
|
1,543
|
|
(Increase)/decrease
in interest receivable
|
|
|
(5,438
|
)
|
|
|
19,262
|
|
Decrease
in guarantee and commitment fees receivable
|
|
|
18,437
|
|
|
|
5,026
|
|
(Increase)/decrease
in other assets
|
|
|
(2,576
|
)
|
|
|
42,734
|
|
Increase/(decrease)
in accrued interest payable
|
|
|
13,351
|
|
|
|
(1,711
|
)
|
Decrease
in other liabilities
|
|
|
(19,294
|
)
|
|
|
(7,686
|
)
|
Net
cash (used in)/provided by operating activities
|
|
|
(215,158
|
)
|
|
|
57,091
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of available-for-sale investment securities
|
|
|
(306,239
|
)
|
|
|
-
|
|
Purchases
of Farmer Mac Guaranteed Securities
|
|
|
(216,302
|
)
|
|
|
(949,480
|
)
|
Purchases
of loans held for investment
|
|
|
(19,924
|
)
|
|
|
(14,670
|
)
|
Purchases
of defaulted loans
|
|
|
(3,403
|
)
|
|
|
(5,602
|
)
|
Proceeds
from repayment of available-for-sale investment securities
|
|
|
112,337
|
|
|
|
129,265
|
|
Proceeds
from repayment of Farmer Mac Guaranteed Securities
|
|
|
202,526
|
|
|
|
137,572
|
|
Proceeds
from repayment of loans held for investment
|
|
|
142,328
|
|
|
|
34,252
|
|
Proceeds
from sale of available-for-sale investment securities
|
|
|
69,175
|
|
|
|
153,100
|
|
Proceeds
from sale of trading securities - fair value option
|
|
|
5,013
|
|
|
|
-
|
|
Proceeds
from sale of Farmer Mac Guaranteed Securities
|
|
|
12,906
|
|
|
|
17,224
|
|
Proceeds
from sale of loans
|
|
|
-
|
|
|
|
358,953
|
|
Net
cash used in investing activities
|
|
|
(1,583
|
)
|
|
|
(139,386
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of discount notes
|
|
|
31,919,565
|
|
|
|
27,760,730
|
|
Proceeds
from issuance of medium-term notes
|
|
|
1,006,272
|
|
|
|
2,074,185
|
|
Payments
to redeem discount notes
|
|
|
(32,095,725
|
)
|
|
|
(27,974,911
|
)
|
Payments
to redeem medium-term notes
|
|
|
(908,590
|
)
|
|
|
(1,715,000
|
)
|
Tax
benefit from tax deduction in excess of compensation cost
recognized
|
|
|
747
|
|
|
|
-
|
|
Payments
to third parties on debt securities of consolidated trusts
|
|
|
(113,749
|
)
|
|
|
-
|
|
Proceeds
from common stock issuance
|
|
|
168
|
|
|
|
17
|
|
Issuance
costs on retirement of preferred stock
|
|
|
(5,784
|
)
|
|
|
-
|
|
Proceeds
from preferred stock issuance - Farmer Mac II LLC
|
|
|
241,853
|
|
|
|
-
|
|
Proceeds
from preferred stock issuance
|
|
|
-
|
|
|
|
30,800
|
|
Retirement
of Series B Preferred stock
|
|
|
(144,216
|
)
|
|
|
-
|
|
Dividends
paid - Non-controlling interest - preferred stock
|
|
|
(9,551
|
)
|
|
|
-
|
|
Dividends
paid on common and preferred stock
|
|
|
(3,710
|
)
|
|
|
(9,080
|
)
|
Net
cash (used in)/ provided by financing activities
|
|
|
(112,720
|
)
|
|
|
166,741
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
|
(329,461
|
)
|
|
|
84,446
|
|
Cash
and cash equivalents at beginning of period
|
|
|
654,794
|
|
|
|
278,412
|
|
Cash
and cash equivalents at end of period
|
|
$
|
325,333
|
|
|
$
|
362,858
|
|
See
accompanying notes to condensed consolidated financial
statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note
1.
|
Accounting
Policies
|
The
interim unaudited condensed consolidated financial statements of the Federal
Agricultural Mortgage Corporation (“Farmer Mac” or the “Corporation”) and
subsidiaries have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”). These interim
unaudited condensed consolidated financial statements reflect all normal and
recurring adjustments that are, in the opinion of management, necessary to
present a fair statement of the financial position and the results of operations
and cash flows of Farmer Mac for the interim periods
presented. Certain information and footnote disclosures normally
included in the annual consolidated financial statements have been condensed or
omitted as permitted by SEC rules and regulations. The December
31, 2009 condensed consolidated balance sheet presented in this report has been
derived from the Corporation’s audited 2009 consolidated financial
statements. Management believes that the disclosures are adequate to
present fairly the condensed consolidated financial statements as of the dates
and for the periods presented. These interim unaudited condensed
consolidated financial statements should be read in conjunction with the audited
2009 consolidated financial statements of Farmer Mac included in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009
filed with the SEC on March 16, 2010 (as updated by the Current Report on
Form 8-K filed with the SEC on August 4, 2010). Results for interim
periods are not necessarily indicative of those that may be expected for the
fiscal year. Below is a summary of Farmer Mac’s significant
accounting policies.
(a)
Cash and Cash Equivalents
and Statements of Cash Flows
Farmer
Mac considers highly liquid investment securities with maturities at the time of
purchase of three months or less to be cash equivalents. The carrying
value of cash and cash equivalents is a reasonable estimate of their fair
value. Changes in the balance of cash and cash equivalents are
reported in the condensed consolidated statements of cash flows. The
following table sets forth information regarding certain cash and non-cash
transactions for the six months ended June 30, 2010 and 2009.
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
(in thousands)
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
Interest
|
|
$
|
37,989
|
|
|
$
|
42,465
|
|
Income
taxes
|
|
|
12,000
|
|
|
|
10,000
|
|
Non-cash
activity:
|
|
|
|
|
|
|
|
|
Real
estate owned acquired through foreclosure
|
|
|
3,580
|
|
|
|
40,955
|
|
Loans
acquired and securitized as Farmer Mac Guaranteed
Securities
|
|
|
1,288
|
|
|
|
17,224
|
|
Consolidation
of Farmer Mac I Guaranteed Securities from off-balance sheet to loans held
for investment in consolidated trusts
|
|
|
1,401,659
|
|
|
|
-
|
|
Consolidation
of Farmer Mac I Guaranteed Securities from off-balance sheet to debt
securities of consolidated trusts held by third parties
|
|
|
1,401,659
|
|
|
|
-
|
|
Transfers
of available-for-sale Farmer Mac I Guaranteed Securities to loans held for
investment in consolidated trusts, upon the adoption of new consolidation
guidance
|
|
|
5,385
|
|
|
|
-
|
|
Transfers
of trading Farmer Mac Guaranteed Securities - Rural Utilities to loans
held for investment in consolidated trusts, upon the adoption of new
consolidation guidance
|
|
|
451,448
|
|
|
|
-
|
|
Deconsolidation
of loans held for investment in consolidated trusts - transferred to off-
balance sheet Farmer Mac I Guaranteed Securities
|
|
|
414,462
|
|
|
|
-
|
|
Deconsolidation
of debt securities of consolidated trusts held by third parties -
transferred to off- balance sheet Farmer Mac I Guaranteed
Securities
|
|
|
414,462
|
|
|
|
-
|
|
Transfers
of Farmer Mac I Guaranteed Securities to loans held for
sale
|
|
|
-
|
|
|
|
288,012
|
|
Transfers
of loans held for investment to loans held for sale
|
|
|
-
|
|
|
|
617,072
|
|
(b)
Allowance for
Losses
As of
June 30, 2010, Farmer Mac maintained an allowance for losses to cover estimated
probable losses on loans held and loans underlying LTSPCs, Farmer Mac I
Guaranteed Securities and Farmer Mac Guaranteed Securities – Rural
Utilities.
The
allowance for losses is increased through periodic provisions for loan losses
that are charged against net interest income and provisions for losses that are
charged to non-interest expense and is reduced by charge-offs for actual losses,
net of recoveries. Negative provisions, or releases of allowance for
losses, are recorded in the event that the estimate of probable losses as of the
end of a period is lower than the estimate at the beginning of the
period.
Farmer
Mac’s methodology for determining its allowance for losses incorporates the
Corporation’s automated loan classification system. That system
scores loans based on criteria such as historical repayment performance,
indicators of current financial condition, loan seasoning, loan size and
loan-to-value ratio. For the purposes of the loss allowance
methodology, the loans in Farmer Mac’s portfolio of loans and loans underlying
Farmer Mac I Guaranteed Securities and LTSPCs have been scored and classified
for each calendar quarter since first quarter 2000. The allowance
methodology captures the migration of loan scores across concurrent and
overlapping three-year time horizons and calculates loss rates separately within
each loan classification for (1) loans underlying LTSPCs and (2) loans
held and loans underlying Farmer Mac I Guaranteed
Securities. The calculated loss rates are applied to the current
classification distribution of unimpaired loans in Farmer Mac’s portfolio to
estimate inherent losses, on the assumption that the historical credit losses
and trends used to calculate loss rates will continue in the
future. Management evaluates this assumption by taking into
consideration factors, including:
|
·
|
geographic
and agricultural commodity/product concentrations in the
portfolio;
|
|
·
|
the
credit profile of the portfolio;
|
|
·
|
delinquency
trends of the portfolio;
|
|
·
|
historical
charge-off and recovery activities of the portfolio;
and
|
|
·
|
other
factors to capture current portfolio trends and characteristics that
differ from historical experience.
|
Management
believes that its use of this methodology produces a reliable estimate of
probable losses, as of the balance sheet date, for all loans held and loans
underlying Farmer Mac I Guaranteed Securities and LTSPCs, in accordance with the
standard on accounting for contingencies issued by the Financial Accounting
Standards Board (“FASB”).
Farmer
Mac separately evaluates the rural utilities loans it owns, as well as the
lender obligations and loans underlying or securing its Farmer Mac Guaranteed
Securities – Rural Utilities, to determine if there are probable losses inherent
in those assets.
Farmer
Mac also analyzes assets in its portfolio for impairment in accordance with the
FASB standard on measuring individual impairment of a loan. Farmer
Mac’s impaired assets include:
|
·
|
non-performing
assets (loans 90 days or more past due, in foreclosure, restructured,
in bankruptcy – including loans performing under either their original
loan terms or a court-approved bankruptcy plan – and real estate owned
(“REO”);
|
|
·
|
loans
for which Farmer Mac has adjusted the timing of borrowers’ payment
schedules, but still expects to collect all amounts due and has not made
economic concessions; and
|
|
·
|
additional
performing loans that have previously been delinquent or are secured by
real estate that produces agricultural commodities or products currently
under stress.
|
For loans
with an updated appraised value, other updated collateral valuation or
management’s estimate of discounted collateral value, this analysis includes the
measurement of the fair value of the underlying collateral for individual loans
relative to the total recorded investment, including principal, interest and
advances. In the event that the collateral value does not support the
total recorded investment, Farmer Mac provides a specific allowance for the
difference between the recorded investment and its fair value, less estimated
costs to liquidate the collateral. For the remaining impaired assets
without updated valuations, this analysis is performed in the aggregate in
consideration of the similar risk characteristics of the assets and historical
statistics.
The table
below summarizes the components of Farmer Mac’s allowance for losses as of June
30, 2010 and December 31, 2009:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Allowance
for loan losses
|
|
$
|
9,495
|
|
|
$
|
6,292
|
|
Reserve
for losses:
|
|
|
|
|
|
|
|
|
Off-balance
sheet Farmer Mac I Guaranteed Securities
|
|
|
560
|
|
|
|
2,033
|
|
LTSPCs
|
|
|
8,910
|
|
|
|
5,862
|
|
Total
allowance for losses
|
|
$
|
18,965
|
|
|
$
|
14,187
|
|
The
following table summarizes the changes in the components of Farmer Mac’s
allowance for losses for the three and six months ended June 30, 2010 and
2009:
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Allowance
|
|
|
|
|
|
Total
|
|
|
Allowance
|
|
|
|
|
|
Total
|
|
|
|
for Loan
|
|
|
Reserve
|
|
|
Allowance
|
|
|
for Loan
|
|
|
Reserve
|
|
|
Allowance
|
|
|
|
Losses
|
|
|
for Losses
|
|
|
for Losses
|
|
|
Losses
|
|
|
for Losses
|
|
|
for Losses
|
|
|
|
(in
thousands)
|
|
For
the Three Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
9,142
|
|
|
$
|
6,427
|
|
|
$
|
15,569
|
|
|
$
|
13,228
|
|
|
$
|
8,025
|
|
|
$
|
21,253
|
|
Provision/(recovery)
for losses
|
|
|
(1,870
|
)
|
|
|
3,043
|
|
|
|
1,173
|
|
|
|
(5,693
|
)
|
|
|
(529
|
)
|
|
|
(6,222
|
)
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,725
|
)
|
|
|
-
|
|
|
|
(5,725
|
)
|
Recoveries
|
|
|
2,223
|
|
|
|
-
|
|
|
|
2,223
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
9,495
|
|
|
$
|
9,470
|
|
|
$
|
18,965
|
|
|
$
|
1,810
|
|
|
$
|
7,496
|
|
|
$
|
9,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
6,292
|
|
|
$
|
7,895
|
|
|
$
|
14,187
|
|
|
$
|
10,929
|
|
|
$
|
5,506
|
|
|
$
|
16,435
|
|
Provision/(recovery)
for losses
|
|
|
980
|
|
|
|
1,575
|
|
|
|
2,555
|
|
|
|
(2,159
|
)
|
|
|
1,990
|
|
|
|
(169
|
)
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,725
|
)
|
|
|
-
|
|
|
|
(7,725
|
)
|
Recoveries
|
|
|
2,223
|
|
|
|
-
|
|
|
|
2,223
|
|
|
|
765
|
|
|
|
-
|
|
|
|
765
|
|
Ending
balance
|
|
$
|
9,495
|
|
|
$
|
9,470
|
|
|
$
|
18,965
|
|
|
$
|
1,810
|
|
|
$
|
7,496
|
|
|
$
|
9,306
|
|
Upon the
adoption of the new consolidation guidance on January 1, 2010, Farmer Mac
reclassified $2.0 million from the reserve for losses to the allowance for loan
losses as a result of Farmer Mac being determined the primary beneficiary of
certain VIEs with beneficial interests owned by third party
investors. In June 2010, Farmer Mac deconsolidated certain VIEs with
beneficial interests owned by third party investors because Farmer Mac was no
longer determined to be the primary beneficiary. This deconsolidation
did not result in a material reclassification from the allowance for loan losses
to the reserve for losses during second quarter 2010. Consolidated
interests in VIEs with beneficial interests owned by third party investors are
presented as “loans held for investment in consolidated trusts” on Farmer Mac’s
condensed consolidated balance sheets. Upon deconsolidation, Farmer
Mac classifies these interests as off-balance sheet Farmer Mac Guaranteed
Securities.
No
allowance for losses has been provided for AgVantage securities, securities
issued under the Farmer Mac II program (“Farmer Mac II Guaranteed Securities”),
or USDA Guaranteed Securities. Each AgVantage security is a general
obligation of an issuing institution approved by Farmer Mac and is
collateralized by eligible loans in an amount at least equal to the outstanding
principal amount of the security. Farmer Mac excludes the loans that
secure AgVantage securities from the credit risk metrics it discloses because of
the credit quality of the issuing institutions, the collateralization level for
the securities, and because delinquent loans are required to be removed from the
pool of pledged loans and replaced with current eligible loans. As of
June 30, 2010, there were no probable losses inherent in Farmer Mac’s
AgVantage securities due to the credit quality of the obligors, as well as the
underlying collateral. As of June 30, 2010, Farmer Mac had not
experienced any credit losses on any AgVantage securities. The
guaranteed portions (“USDA-guaranteed portions”) of certain agricultural, rural
development, business & industry and community facilities loans presented as
“USDA Guaranteed Securities,” as well as those USDA-guaranteed portions that
collateralize Farmer Mac II Guaranteed Securities, are guaranteed by the
United States Department of Agriculture (“USDA”). Each USDA guarantee
is an obligation backed by the full faith and credit of the United
States. As of June 30, 2010, neither Farmer Mac nor
Farmer Mac II LLC had experienced any credit losses on any USDA
Guaranteed Securities held or on any Farmer Mac II Guaranteed
Securities.
As of
June 30, 2010, Farmer Mac individually analyzed $49.2 million of its
$147.4 million of impaired assets for collateral shortfalls against updated
appraised values, other updated collateral valuations or discounted
values. Farmer Mac evaluated the remaining $98.2 million of
impaired assets for which updated valuations were not available in the aggregate
in consideration of their similar risk characteristics and historical
statistics. Farmer Mac’s specific allowance for under-collateralized
assets was $3.0 million as of June 30, 2010 and $0.6 million as of December
31, 2009. Farmer Mac’s non-specific or general allowances were
$16.0 million as of June 30, 2010 and $13.6 million as of December 31,
2009.
Farmer
Mac recognized interest income of approximately $0.4 million and $0.9 million on
impaired loans during the three and six months ended June 30, 2010,
respectively, compared to $0.6 million and $1.7 million, respectively, during
the same periods in 2009. During the three and six months ended June
30, 2010, Farmer Mac’s average investment in impaired loans was
$115.7 million and $124.3 million, respectively, compared to $142.4 million
and $136.2 million, respectively, for the same periods in 2009.
(c)
Financial
Derivatives
Farmer
Mac enters into transactions involving financial derivatives principally to
protect against risk from the effects of market price or interest rate movements
on the value of certain assets, future cash flows or debt issuance, not for
trading or speculative purposes. Farmer Mac enters into interest rate
swap contracts to adjust the characteristics of its short-term debt to match
more closely the cash flow and duration characteristics of its longer-term loans
and other assets, and also to adjust the characteristics of its long-term debt
to match more closely the cash flow and duration characteristics of its
short-term assets, thereby reducing interest rate risk and often times deriving
an overall lower effective cost of borrowing than would otherwise be available
to Farmer Mac in the conventional debt market. Farmer Mac also
recognizes certain contracts and commitments as derivatives when the
characteristics of those contracts and commitments meet the definition of a
derivative.
Farmer
Mac manages the interest rate risk related to loans it has committed to acquire,
but has not yet purchased and permanently funded, through the use of forward
sale contracts on the debt of other government-sponsored enterprises (“GSEs”),
futures contracts involving U.S. Treasury securities and interest rate swap
contracts. Farmer Mac uses forward sale contracts on GSE securities
to reduce its interest rate exposure to changes in both U.S. Treasury rates and
spreads on Farmer Mac debt. The notional amounts of these contracts
are determined based on a duration-matched hedge ratio between the hedged item
and the hedge instrument. Gains or losses generated by these hedge
transactions should offset changes in funding costs.
All
financial derivatives are recorded on the balance sheet at fair value as a
freestanding asset or liability. Farmer Mac does not designate its
financial derivatives as fair value hedges or cash flow hedges; therefore, the
changes in the fair values of financial derivatives are reported as gains or
losses on financial derivatives in the condensed consolidated statements of
operations without any corresponding changes in the fair values of the hedged
items.
The
following tables summarize information related to Farmer Mac’s financial
derivatives as of June 30, 2010 and December 31, 2009:
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Notional
|
|
|
Fair Value
|
|
|
Pay
|
|
|
Receive
|
|
|
Forward
|
|
|
Life
|
|
|
|
Amount
|
|
|
Asset
|
|
|
(Liability)
|
|
|
Rate
|
|
|
Rate
|
|
|
Price
|
|
|
(in years)
|
|
|
|
(dollars
in thousands)
|
|
Interest
rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay
fixed callable
|
|
$
|
45,121
|
|
|
$
|
-
|
|
|
$
|
(790
|
)
|
|
5.67%
|
|
|
0.46%
|
|
|
|
|
|
7.37
|
|
Pay
fixed non-callable
|
|
|
1,204,883
|
|
|
|
-
|
|
|
|
(127,543
|
)
|
|
4.95%
|
|
|
0.40%
|
|
|
|
|
|
4.10
|
|
Receive
fixed callable
|
|
|
345,000
|
|
|
|
36
|
|
|
|
(194
|
)
|
|
0.12%
|
|
|
0.24%
|
|
|
|
|
|
0.40
|
|
Receive
fixed non-callable
|
|
|
2,123,972
|
|
|
|
38,676
|
|
|
|
(234
|
)
|
|
0.56%
|
|
|
1.62%
|
|
|
|
|
|
1.92
|
|
Basis
swaps
|
|
|
221,012
|
|
|
|
-
|
|
|
|
(3,878
|
)
|
|
1.71%
|
|
|
0.28%
|
|
|
|
|
|
2.19
|
|
Credit
default swaps
|
|
|
30,000
|
|
|
|
342
|
|
|
|
-
|
|
|
1.00%
|
|
|
0.00%
|
|
|
|
|
|
1.56
|
|
Agency
forwards
|
|
|
87,976
|
|
|
|
-
|
|
|
|
(825
|
)
|
|
|
|
|
|
|
|
101.72
|
|
|
|
|
|
Treasury
futures
|
|
|
10,700
|
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
122.29
|
|
|
|
|
|
Credit
valuation adjustment
|
|
|
-
|
|
|
|
(1,933
|
)
|
|
|
817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
financial derivatives
|
|
$
|
4,068,664
|
|
|
$
|
37,121
|
|
|
$
|
(132,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Notional
|
|
|
Fair Value
|
|
|
Pay
|
|
|
Receive
|
|
|
Forward
|
|
|
Life
|
|
|
|
Amount
|
|
|
Asset
|
|
|
(Liability)
|
|
|
Rate
|
|
|
Rate
|
|
|
Price
|
|
|
(in years)
|
|
|
|
(dollars in thousands)
|
|
Interest
rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay
fixed callable
|
|
$
|
65,686
|
|
|
$
|
-
|
|
|
$
|
(1,725
|
)
|
|
5.70%
|
|
|
0.27%
|
|
|
|
|
|
7.78
|
|
Pay
fixed non-callable
|
|
|
1,236,156
|
|
|
|
5
|
|
|
|
(99,913
|
)
|
|
4.95%
|
|
|
0.26%
|
|
|
|
|
|
4.62
|
|
Receive
fixed callable
|
|
|
300,000
|
|
|
|
236
|
|
|
|
-
|
|
|
0.09%
|
|
|
0.54%
|
|
|
|
|
|
0.76
|
|
Receive
fixed non-callable
|
|
|
2,262,714
|
|
|
|
14,298
|
|
|
|
(2,815
|
)
|
|
0.41%
|
|
|
1.80%
|
|
|
|
|
|
2.25
|
|
Basis
swaps
|
|
|
262,177
|
|
|
|
294
|
|
|
|
(3,673
|
)
|
|
1.63%
|
|
|
0.61%
|
|
|
|
|
|
2.39
|
|
Credit
default swaps
|
|
|
30,000
|
|
|
|
-
|
|
|
|
(214
|
)
|
|
1.00%
|
|
|
0.00%
|
|
|
|
|
|
2.14
|
|
Agency
forwards
|
|
|
75,511
|
|
|
|
453
|
|
|
|
-
|
|
|
|
|
|
|
|
|
101.22
|
|
|
|
|
|
Treasury
futures
|
|
|
20,500
|
|
|
|
3
|
|
|
|
-
|
|
|
|
|
|
|
|
|
115.47
|
|
|
|
|
|
Credit
valuation adjustment
|
|
|
-
|
|
|
|
(249
|
)
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
financial derivatives
|
|
$
|
4,252,744
|
|
|
$
|
15,040
|
|
|
$
|
(107,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the
normal course of business, collateral requirements contained in Farmer Mac’s
derivative contracts are enforced by Farmer Mac and its
counterparties. Upon enforcement of the collateral requirements, the
amount of collateral posted is typically based on the net fair value of all
derivative contracts with the counterparty, i.e., derivative assets net of
derivative liabilities at the counterparty level. If Farmer Mac were
to be in violation of certain provisions of the derivative contracts, the
related counterparty could request payment or full collateralization on the
derivative contracts. As of June 30, 2010, the fair value of
Farmer Mac’s derivatives in a net liability position at the counterparty level,
which includes accrued interest but excludes any adjustment for nonperformance
risk, was $118.5 million. As of June 30, 2010, Farmer Mac posted
assets with a fair value of $37.1 million as collateral for its derivatives in
net liability positions. If Farmer Mac had breached certain
provisions of the derivative contracts as of June 30, 2010, it could
have been required to settle its obligations under the agreements or post
additional collateral of $81.4 million.
The
following table summarizes the effects of Farmer Mac’s financial derivatives on
the condensed consolidated statements of operations for the three and six months
ended June 30, 2010 and 2009:
|
|
(Losses)/Gains
on Financial Derivatives
|
|
|
|
For
the
Three
Months
Ended
|
|
|
For
the
Six
Months
Ended
|
|
|
|
June
30,
2010
|
|
|
June
30,
2009
|
|
|
June
30,
2010
|
|
|
June
30,
2009
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
$
|
(14,624
|
)
|
|
$
|
21,720
|
|
|
$
|
(19,390
|
)
|
|
$
|
24,380
|
|
Agency
forwards
|
|
|
(1,339
|
)
|
|
|
(199
|
)
|
|
|
(1,938
|
)
|
|
|
(1,078
|
)
|
Treasury
futures
|
|
|
(393
|
)
|
|
|
84
|
|
|
|
(641
|
)
|
|
|
75
|
|
Credit
default swaps
|
|
|
561
|
|
|
|
-
|
|
|
|
405
|
|
|
|
-
|
|
|
|
|
(15,795
|
)
|
|
|
21,605
|
|
|
|
(21,564
|
)
|
|
|
23,377
|
|
Amortization
of derivatives transition adjustment
|
|
|
(45
|
)
|
|
|
(77
|
)
|
|
|
(80
|
)
|
|
|
(138
|
)
|
Total
|
|
$
|
(15,840
|
)
|
|
$
|
21,528
|
|
|
$
|
(21,644
|
)
|
|
$
|
23,239
|
|
As of
June 30, 2010 and December 31, 2009, respectively, Farmer Mac had approximately
$6,000 of net after-tax unrealized gains and $0.1 million of net after-tax
unrealized losses on financial derivatives included in accumulated other
comprehensive income related to the financial derivatives transition
adjustment. These amounts will be reclassified into earnings in the
same period or periods during which the hedged forecasted transactions (either
the payment of interest or the issuance of discount notes) affect earnings or
immediately when it becomes probable that the original hedged forecasted
transaction will not occur within two months of the originally specified
date. Over the next 12 months, Farmer Mac estimates that $56,000
of unrealized losses currently reported in accumulated other comprehensive
income will be reclassified into earnings.
As of
June 30, 2010, Farmer Mac had outstanding basis swaps with Zions First National
Bank, a related party, with total notional amount of $96.0 million and a fair
value of $(3.7) million, compared to $105.2 million and
$(3.7) million, respectively, as of
December 31, 2009. Under the terms of those basis swaps,
Farmer Mac pays Constant Maturity Treasury-based rates and receives
LIBOR. Those swaps economically hedge most of the interest rate basis
risk related to loans Farmer Mac purchases that pay a Constant Maturity Treasury
based-rate and the discount notes Farmer Mac issues to fund the loan purchases
(the pricing of discount notes is closely correlated to LIBOR
rates). Farmer Mac recorded unrealized losses on those outstanding
basis swaps for three and six months ended June 30, 2010 of $0.1 million and
$25,000 respectively, compared to unrealized gains of $0.8 million and $0.3
million, respectively, for the same periods in 2009.
(d)
Earnings Per Common
Share
Basic
earnings per common share are based on the weighted-average number of shares of
common stock outstanding. Diluted earnings per common share are based
on the weighted-average number of shares of common stock outstanding adjusted to
include all potentially dilutive common stock options, stock appreciation rights
(“SARs”) and nonvested restricted stock awards. The following
schedule reconciles basic and diluted earnings per common share (“EPS”) for the
three and six months ended June 30, 2010 and 2009:
|
|
For the Three Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Net
|
|
|
|
|
|
$
per
|
|
|
Net
|
|
|
|
|
|
$
per
|
|
|
|
Income
|
|
|
Shares
|
|
|
Share
|
|
|
Income
|
|
|
Shares
|
|
|
Share
|
|
|
|
(in
thousands, except per share amounts)
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common stockholders
|
|
$
|
1,824
|
|
|
|
10,210
|
|
|
$
|
0.18
|
|
|
$
|
25,385
|
|
|
|
10,138
|
|
|
$
|
2.50
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options, SARs and restricted stock (1)
|
|
|
|
|
|
|
400
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
38
|
|
|
|
(0.01
|
)
|
Diluted
EPS
|
|
$
|
1,824
|
|
|
|
10,610
|
|
|
$
|
0.17
|
|
|
$
|
25,385
|
|
|
|
10,176
|
|
|
$
|
2.49
|
|
(1)
|
For
the three months ended June 30, 2010 and 2009, stock options, SARs and
nonvested restricted stock of 1,650,050 and 1,862,829, respectively, were
outstanding but not included in the computation of diluted earnings per
share of common stock because they were anti-dilutive. For the
three months ended June 30, 2010, 126,000 contingent shares of nonvested
restricted stock were outstanding but not included in the computation of
diluted earnings per share because the performance conditions were not
met.
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Net
|
|
|
|
|
|
$ per
|
|
|
Net
|
|
|
|
|
|
$ per
|
|
|
|
Income
|
|
|
Shares
|
|
|
Share
|
|
|
Income
|
|
|
Shares
|
|
|
Share
|
|
|
|
(in thousands, except per share amounts)
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available
to common stockholders
|
|
$
|
3,591
|
|
|
|
10,177
|
|
|
$
|
0.35
|
|
|
$
|
58,903
|
|
|
|
10,136
|
|
|
$
|
5.81
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options, SARs and restricted stock (1)
|
|
|
|
|
|
|
354
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
19
|
|
|
|
(0.01
|
)
|
Diluted
EPS
|
|
$
|
3,591
|
|
|
|
10,531
|
|
|
$
|
0.34
|
|
|
$
|
58,903
|
|
|
|
10,155
|
|
|
$
|
5.80
|
|
(1)
|
For
the six months ended June 30, 2010 and 2009, stock options, SARs and
nonvested restricted stock of 1,616,008 and 1,881,885, respectively, were
outstanding but not included in the computation of diluted earnings per
share of common stock because they were anti-dilutive. For the
six months ended June 30, 2010, 104,250 contingent shares of nonvested
restricted stock were outstanding but not included in the computation of
diluted earnings per share because the performance conditions were not
met.
|
(e)
Stock-Based
Compensation
During
2008, Farmer
Mac’s stockholders approved the 2008 Omnibus Incentive Compensation Plan that
authorizes the grants of restricted stock, stock options and SARs, among other
alternative forms of equity-based compensation, to directors, officers and other
employees. SARs awarded to officers and employees vest annually in
thirds and SARs awarded to directors vest fully after approximately one
year. If not exercised or terminated earlier due to the termination
of employment or service on the Board, SARs granted to officers or employees
expire after ten years and those granted to directors expire after seven
years. For all SARs granted, the exercise price is equal to the
closing price of the Class C Non-Voting Common Stock on the date of
grant. SARs granted during second quarter 2010 have exercise prices
of $12.20 per share. Restricted stock was awarded to directors
during second quarter 2010 and vests fully after approximately one
year. Restricted stock awarded to officers during second quarter 2010
vests after approximately three years and only vests if certain performance
conditions are met. Restricted stock awards granted to both directors
and officers are not issued until full vesting occurs.
For the three and six months ended June
30, 2010, Farmer Mac recognized $0.8 million and $1.5 million,
respectively, of compensation expense related to stock options, SARs and
restricted stock, compared to $0.9 million and $1.6 million, respectively,
for the same periods in 2009.
The
following tables summarize activity related to stock options, SARs and nonvested
restricted stock awards for the three and six months ended June 30, 2010
and 2009:
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Stock
|
|
|
Weighted-
|
|
|
Stock
|
|
|
Weighted-
|
|
|
|
Options
|
|
|
Average
|
|
|
Options
|
|
|
Average
|
|
|
|
and
|
|
|
Exercise
|
|
|
and
|
|
|
Exercise
|
|
|
|
SARs
|
|
|
Price
|
|
|
SARs
|
|
|
Price
|
|
For
the Three Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of period
|
|
|
1,799,465
|
|
|
$
|
22.68
|
|
|
|
1,697,829
|
|
|
$
|
24.66
|
|
Granted
|
|
|
247,000
|
|
|
|
12.20
|
|
|
|
165,000
|
|
|
|
5.93
|
|
Exercised
|
|
|
(21,331
|
)
|
|
|
13.15
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
(102,084
|
)
|
|
|
20.88
|
|
|
|
(106,864
|
)
|
|
|
22.12
|
|
Outstanding,
end of period
|
|
|
1,923,050
|
|
|
$
|
21.53
|
|
|
|
1,755,965
|
|
|
$
|
23.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of period
|
|
|
1,799,465
|
|
|
$
|
22.68
|
|
|
|
2,237,711
|
|
|
$
|
25.54
|
|
Granted
|
|
|
247,000
|
|
|
|
12.20
|
|
|
|
165,000
|
|
|
|
5.93
|
|
Exercised
|
|
|
(21,331
|
)
|
|
|
13.15
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
(102,084
|
)
|
|
|
20.88
|
|
|
|
(646,746
|
)
|
|
|
27.28
|
|
Outstanding,
end of period
|
|
|
1,923,050
|
|
|
$
|
21.53
|
|
|
|
1,755,965
|
|
|
$
|
23.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options and SARs exercisable at the end of the period
|
|
|
1,433,792
|
|
|
$
|
25.04
|
|
|
|
1,349,258
|
|
|
$
|
25.51
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
Nonvested
|
|
|
Average
|
|
|
Nonvested
|
|
|
Average
|
|
|
|
Restricted
|
|
|
Grant-date
|
|
|
Restricted
|
|
|
Grant-date
|
|
|
|
Stock
|
|
|
Fair
Value
|
|
|
Stock
|
|
|
Fair
Value
|
|
For
the Three Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of period
|
|
|
200,548
|
|
|
$
|
5.93
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
111,085
|
|
|
|
12.28
|
|
|
|
200,548
|
|
|
|
5.93
|
|
Canceled
|
|
|
(11,599
|
)
|
|
|
8.15
|
|
|
|
-
|
|
|
|
-
|
|
Vested
and issued
|
|
|
(118,048
|
)
|
|
|
5.93
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
end of period
|
|
|
181,986
|
|
|
$
|
9.66
|
|
|
|
200,548
|
|
|
$
|
5.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of period
|
|
|
200,548
|
|
|
$
|
5.93
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
111,085
|
|
|
|
12.28
|
|
|
|
200,548
|
|
|
|
5.93
|
|
Canceled
|
|
|
(11,599
|
)
|
|
|
8.15
|
|
|
|
-
|
|
|
|
-
|
|
Vested
and issued
|
|
|
(118,048
|
)
|
|
|
5.93
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
end of period
|
|
|
181,986
|
|
|
$
|
9.66
|
|
|
|
200,548
|
|
|
$
|
5.93
|
|
The
cancellations of stock options, SARs and nonvested restricted stock during the
first six months of 2010 were due to unvested SARs and nonvested restricted
stock terminating in accordance with the provisions of the applicable plans upon
directors’ or officers’ departures from Farmer Mac and vested options
terminating unexercised on their expiration date. The cancellations
of stock options and SARs during the first six months of 2009 were due to
unvested options or SARS terminating and the cancellation of a portion of vested
options upon employees’ and officers’ departures from Farmer
Mac.
For the
three and six months ended June 30, 2010, the additional paid-in capital
received from exercises of stock options and SARs and the vesting of restricted
stock was $0.3 million. The reduction of income taxes to be paid as a
result of the deduction for exercises of stock options and SARs and the vesting
or accelerated tax elections of restricted stock was $0.9 million for the three
and six months ended June 30, 2010. There were no exercises of stock
options or SARS during the comparable periods in 2009.
The
following tables summarize information regarding stock options, SARs and
nonvested restricted stock outstanding as of June 30, 2010:
|
|
Outstanding
|
|
Exercisable
|
|
|
Vested or Expected to Vest
|
|
|
|
|
Weighted-
|
|
|
|
|
Weighted-
|
|
|
|
|
Weighted-
|
|
|
Stock
|
|
Average
|
|
Stock
|
|
|
Average
|
|
|
Stock
|
|
Average
|
Range of
|
|
Options
|
|
Remaining
|
|
Options
|
|
|
Remaining
|
|
|
Options
|
|
Remaining
|
Exercise
|
|
and
|
|
Contractual
|
|
and
|
|
|
Contractual
|
|
|
and
|
|
Contractual
|
Prices
|
|
SARs
|
|
Life
|
|
SARs
|
|
|
Life
|
|
|
SARs
|
|
Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$5.00
- $ 9.99
|
|
|
273,000
|
|
8.8
years
|
|
|
68,000
|
|
|
8.7
years
|
|
|
|
231,500
|
|
8.8
years
|
10.00
- 14.99
|
|
|
247,000
|
|
9.8
years
|
|
|
-
|
|
|
-
|
|
|
|
222,300
|
|
9.8
years
|
15.00
- 19.99
|
|
|
81,722
|
|
3.7
years
|
|
|
81,722
|
|
|
3.7
years
|
|
|
|
81,722
|
|
3.7
years
|
20.00
- 24.99
|
|
|
486,457
|
|
4.2
years
|
|
|
486,457
|
|
|
4.2
years
|
|
|
|
486,457
|
|
4.2
years
|
25.00
- 29.99
|
|
|
621,203
|
|
4.3
years
|
|
|
591,944
|
|
|
4.1
years
|
|
|
|
617,742
|
|
4.3
years
|
30.00
- 34.99
|
|
|
213,668
|
|
1.6
years
|
|
|
205,669
|
|
|
1.4
years
|
|
|
|
211,268
|
|
1.6
years
|
|
|
|
1,923,050
|
|
|
|
|
1,433,792
|
|
|
|
|
|
|
|
1,850,989
|
|
|
|
|
Outstanding
|
|
Expected to Vest
|
|
|
|
|
Weighted-
|
|
|
|
Weighted-
|
Weighted-
|
|
|
|
Average
|
|
|
|
Average
|
Average
|
|
Nonvested
|
|
Remaining
|
|
Nonvested
|
|
Remaining
|
Grant-Date
|
|
Restricted
|
|
Contractual
|
|
Restricted
|
|
Contractual
|
Fair Value
|
|
Stock
|
|
Life
|
|
Stock
|
|
Life
|
|
|
|
|
|
|
|
|
|
$5.00
- $ 9.99
|
|
|
75,000
|
|
1.8
years
|
|
|
67,500
|
|
1.8
years
|
10.00
- 14.99
|
|
|
104,287
|
|
1.7
years
|
|
|
93,859
|
|
1.7
years
|
15.00
- 19.99
|
|
|
2,699
|
|
0.8
years
|
|
|
2,426
|
|
0.8
years
|
|
|
|
181,986
|
|
|
|
|
163,785
|
|
|
The
weighted-average grant date fair value of options and SARs granted during the
six months ended June 30, 2010 and 2009 were $8.31 and $4.12 per share,
respectively. The weighted-average grant date fair value of nonvested
shares granted during the six months ended June 30, 2010 and 2009 were $12.28
and $5.93 per share, respectively. The fair values for SARs and stock
options were estimated using the Black-Scholes option pricing model based on the
following assumptions:
|
|
2010
|
|
|
2009
|
|
Risk-free
interest rate
|
|
3.3%
|
|
|
1.5%
|
|
Expected
years until exercise
|
|
7
years
|
|
|
7
years
|
|
Expected
stock volatility
|
|
88.3%
|
|
|
104.3%
|
|
Dividend
yield
|
|
1.8%
|
|
|
3.4%
|
|
(f)
Fair Value
Measurement
Effective
January 1, 2008, Farmer Mac adopted new accounting guidance for fair value
measurements. The guidance defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and establishes
a fair value hierarchy that ranks the quality and reliability of the inputs to
valuation techniques used to measure fair value. The hierarchy gives
highest rank to unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest rank to unobservable inputs
(level 3 measurements).
Farmer
Mac’s assessment of the significance of the input to the fair value measurement
requires judgment, and considers factors specific to the financial
instrument. Both observable and unobservable inputs may be used to
determine the fair value of positions that Farmer Mac has classified within the
level 3 category. As a result, the unrealized gains and losses for
assets and liabilities within the level 3 category may include changes in fair
value that were attributable to both observable inputs (e.g., changes in market
interest rates) and unobservable inputs (e.g., changes in long-dated
volatilities).
See Note
7 for more information regarding fair value measurement.
(g)
Consolidation of Variable
Interest Entities
Farmer
Mac has interests in various entities that are considered to be variable
interest entities (“VIEs”). These interests include investments in
securities issued by VIEs, such as Farmer Mac agricultural mortgage-backed
securities created pursuant to Farmer Mac’s securitization transactions and
mortgage and asset-backed trusts that Farmer Mac did not create.
Effective
January 1, 2010, Farmer Mac adopted two new accounting standards that eliminated
the concept of qualifying special purpose entities (“QSPEs”) and amended the
accounting for transfers of financial assets and the consolidation model for
variable interest entities (“VIEs”). All formerly designated QSPEs
were evaluated for consolidation in accordance with the new consolidation model,
which changed the method of analyzing which party to a VIE should consolidate
the VIE. The new consolidation model uses a qualitative evaluation
that requires consolidation of an entity when the reporting enterprise both (1)
has the power to direct matters which significantly impact the activities and
success of the entity, and (2) has exposure to benefits and/or losses that could
potentially be significant to the entity. The reporting enterprise
that meets both these conditions is deemed the primary beneficiary of the
VIE.
The new
consolidation standard requires the incremental assets and liabilities
consolidated upon adoption to initially be reported at their carrying
amounts. Carrying amount refers to the amount at which the assets and
liabilities would have been carried in the consolidated financial statements if
the new guidance had been effective when Farmer Mac first met the conditions to
be the primary beneficiary of the VIE. If determining the carrying
amounts is not practicable, the assets and liabilities of the VIE shall be
measured at fair value at the date the new standards first apply. For
the outstanding trusts consolidated effective January 1, 2010, Farmer Mac
initially recorded the assets and liabilities on the consolidated balance sheet
at their carrying amounts, adjusted, where applicable, for fair value option
elections that had been made previously. Accrued interest and
allowance for losses have also been recognized as appropriate.
Although
these new accounting standards did not change the economic risk to Farmer Mac’s
business, specifically Farmer Mac’s liquidity, credit and interest rate risks,
the adoption of these new accounting standards has a significant impact on the
presentation of Farmer Mac’s consolidated financial statements beginning in
2010. On the consolidated balance sheet, there was an increase in
loans held for investment, interest receivable, debt and accrued interest
payable, and a decrease in available-for-sale and trading Farmer Mac Guaranteed
Securities, the reclassification of a portion of the reserve for losses to
allowance for loan losses, and the elimination of the guarantee and commitment
fees receivable and guarantee and commitment obligations related to the
consolidated trusts. On the income statement, there was an increase
in interest income and interest expense attributable to the assets and
liabilities of the consolidated trusts and a reclassification of a portion of
guarantee fee income to interest income.
The VIEs
in which Farmer Mac has a variable interest are limited to securitization
trusts. The major judgment in determining if Farmer Mac is the
primary beneficiary was whether Farmer Mac had the power to direct the
activities of the trust that potentially had the most significant impact on the
economic performance of the trust. Generally, the ability to make
decisions regarding default mitigation was evidence of that
power. Farmer Mac determined that it was the primary beneficiary for
the securitization trusts related to most Farmer Mac I and all Rural Utilities
securitization transactions because of its rights as guarantor under both
programs to control the default mitigation activities of the
trusts. For certain securitization trusts created when loans subject
to LTSPCs were converted to Farmer Mac I Guaranteed Securities, Farmer Mac
determined that it was not the primary beneficiary since the power to make
decisions regarding default mitigation was shared among unrelated
parties. For similar securitization transactions where the power to
make decisions regarding default mitigation was shared with a related party,
Farmer Mac determined that it was the primary beneficiary because the applicable
accounting guidance does not permit parties within a related party group to
conclude that the power is shared.
For those
trusts that Farmer Mac is the primary beneficiary, the assets and liabilities
are presented on the condensed consolidated balance sheet as “Loans held for
investment in consolidated trusts” and “Debt securities of consolidated trusts
held by third parties,” respectively. These assets can only be used
to satisfy the obligations of the trust.
For those
trusts where Farmer Mac has a variable interest but has not been determined to
be the primary beneficiary, Farmer Mac’s interests are recorded as either Farmer
Mac Guaranteed Securities or Investment Securities. Farmer Mac’s
involvement in on-balance sheet VIEs classified as Farmer Mac Guaranteed
Securities include securitization trusts under the Farmer Mac II program and
trusts related to the AgVantage program. In the case of Farmer Mac II
trusts, Farmer Mac was not determined to be the primary beneficiary because it
does not have the decision-making power over default mitigation
activities. For the AgVantage trusts, Farmer Mac currently does not
have the power to direct the activities that have the most significant economic
impact to the trust unless, as guarantor, there is a default by the issuer of
the trust securities. Should there be a default, Farmer Mac would
reassess whether it is primary beneficiary of those trusts. For VIEs
classified as Investment Securities, which include asset-backed securities and
GSE-guaranteed mortgage-backed securities, Farmer Mac was determined not to be
the primary beneficiary because of the lack of voting rights or other powers to
direct the activities of the trust. As of June 30, 2010, the Farmer
Mac Guaranteed Securities trusts and Investment Securities trusts have carrying
amounts on the condensed consolidated balance sheet totaling $74.7 million and
$434.4 million, respectively, which is Farmer Mac’s maximum exposure to
loss. In addition, Farmer Mac has a variable interest in off-balance
sheet VIEs, which include a guarantee of timely payment of principal and
interest, totaling $3.3 billion as of June 30, 2010.
(h)
New Accounting
Standards
Accounting
for Transfers of Financial Assets
On
December 23, 2009, the FASB issued an Accounting Standards Update (“ASU”), which
codifies recent accounting guidance related to transfers of financial
assets. The new guidance eliminates the concept of a QSPE, changes
the requirements for derecognizing financial assets and enhances information
reported to financial statement users by increasing the transparency or
disclosures about transfers of financial assets and an entity’s continuing
involvement with transferred financial assets. Farmer Mac adopted the
ASU on January 1, 2010 and the impact of adoption was not material to Farmer
Mac’s financial position, results of operations or cash flows.
Variable
Interest Entities
On
December 23, 2009, the FASB issued an ASU, which codifies recent accounting
guidance on consolidation of VIEs. The new guidance replaces the
quantitative-based risks-and-rewards calculation for determining which reporting
entity, if any, has a controlling financial interest in a VIE with an approach
focused on identifying which reporting entity has (1) the power to direct the
activities of a VIE that most significantly affect the entity’s economic
performance and (2) the obligation to absorb losses of, or the right to receive
benefits from, the entity. The ASU requires additional disclosures
about a reporting entity’s involvement with VIEs and about any significant
changes in risk exposure as a result of that involvement. Farmer Mac
adopted this ASU on January 1, 2010, which resulted in the consolidation of
assets and liabilities onto Farmer Mac’s balance sheet in connection with
trusts that previously qualified for the QSPE
exception. Additionally, interest income and interest expense related
to the consolidated assets and liabilities of the trusts will be reflected in
the statement of operations.
As of
December 31, 2009, Farmer Mac disclosed the impact of adopting the new
consolidation standard as an increase in consolidated assets of $292.8 million,
requiring incremental regulatory capital of $5.9 million, and an increase in
retained earnings of $2.6 million. Upon adoption, Farmer Mac
reassessed its securitization trusts created when loans subject to LTSPCs were
converted to Farmer Mac I Guaranteed Securities in consideration of the related
party relationship with certain counterparties to these transactions and
concluded that additional trusts required consolidation. The actual
impact upon adoption was an increase in consolidated assets of $1.5 billion,
which resulted in an incremental capital requirement of
$30.4 million. The transition adjustment upon adoption did not
change significantly from the reported amount, increasing retained earnings by
$2.7 million, which is presented in the Condensed Consolidated Statement of
Equity as “Cumulative effect of adoption of new accounting standard, net of
tax.”
Accounting
Standards Update on Fair Value Measurements and Disclosures
On
January 21, 2010, the FASB issued a new accounting standard, which amends FASB
guidance on fair value measurements and disclosures to add new requirements for
disclosures about transfers into and out of levels 1 and 2 and separate
disclosures about purchases, sales, issuance, and settlements relating to level
3 measurements. The new standard also clarifies existing fair value
disclosures about the level of disaggregation and about inputs and valuation
techniques used to measure fair value. The ASU is effective for first
quarter 2010 reporting except for the level 3 activity disclosures, which
are effective in first quarter 2011. Adoption of the new accounting
guidance did not have a significant impact on Farmer Mac’s fair value
disclosures.
Effect
of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as
a Single Asset
On April
29, 2010, the FASB issued ASU 2010-18,
Effect
of a Loan Modification When the Loan is Part of a Pool That Is Accounted for as
a Single Asset
, which established that modifications of loans that
are accounted for within a pool under the guidance for acquisitions of
credit-impaired loans do not result in the removal of those loans from the pool,
even if the modification of those loans would otherwise be considered a troubled
debt restructuring. Loans accounted for individually under the
guidance for acquisitions of credit-impaired loans continue to be subject to the
accounting provisions for troubled debt restructurings. The ASU is
effective for third quarter 2010 reporting. Adoption of ASU 2010-18
will not have a material effect on Farmer Mac’s financial position, results of
operations or cash flows.
Credit
Quality of Financing Receivables and the Allowance for Credit
Losses
On July
21, 2010, the FASB issued ASU 2010-20,
Disclosures about the Credit Quality
of Financing Receivables and the Allowance for Credit Losses,
which
requires more robust and disaggregated disclosures to assist financial statement
users in understanding more clearly an entity’s credit risk exposures to finance
receivables and the related allowance for credit losses. The new and
amended disclosure requirements focus on five areas: nonaccrual and
past due loans; allowance for credit losses; impaired loans; credit quality
information; and modifications. The disclosures that relate to
information as of the end of a reporting period will be effective for periods
ending on or after December 15, 2010 and information related to activity that
occurs during a reporting period will be effective for the first interim or
annual period beginning after December 15, 2010. Since ASU 2010-20
only requires additional disclosures, it will not have an impact on Farmer Mac’s
financial position, results of operations or cash flows.
(i)
Reclassifications
Certain
reclassifications of prior period information were made to conform to the
current period presentation.
Note
2.
|
Investment
Securities
|
The
following tables present the amortized cost and estimated fair values of Farmer
Mac’s investments as of June 30, 2010 and December 31, 2009.
|
|
June 30, 2010
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(in
thousands)
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
74,100
|
|
|
$
|
-
|
|
|
$
|
(10,756
|
)
|
|
$
|
63,344
|
|
Floating
rate asset-backed securities
|
|
|
19,271
|
|
|
|
4
|
|
|
|
(11
|
)
|
|
|
19,264
|
|
Floating
rate corporate debt securities
|
|
|
197,821
|
|
|
|
292
|
|
|
|
(2,197
|
)
|
|
|
195,916
|
|
Floating
rate Government/GSE guaranteed mortgage-backed securities
|
|
|
405,477
|
|
|
|
3,084
|
|
|
|
(270
|
)
|
|
|
408,291
|
|
Fixed
rate GSE guaranteed mortgage-backed securities
|
|
|
5,055
|
|
|
|
368
|
|
|
|
-
|
|
|
|
5,423
|
|
Floating
rate GSE subordinated debt
|
|
|
70,000
|
|
|
|
-
|
|
|
|
(14,855
|
)
|
|
|
55,145
|
|
Fixed
rate GSE preferred stock
|
|
|
80,160
|
|
|
|
6,926
|
|
|
|
-
|
|
|
|
87,086
|
|
Fixed
rate senior agency debt
|
|
|
5,490
|
|
|
|
2
|
|
|
|
-
|
|
|
|
5,492
|
|
Fixed
rate U.S. Treasuries
|
|
|
335,191
|
|
|
|
224
|
|
|
|
-
|
|
|
|
335,415
|
|
Total
available-for-sale
|
|
|
1,192,565
|
|
|
|
10,900
|
|
|
|
(28,089
|
)
|
|
|
1,175,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities
|
|
|
6,307
|
|
|
|
-
|
|
|
|
(4,895
|
)
|
|
|
1,412
|
|
Fixed
rate GSE preferred stock
|
|
|
84,202
|
|
|
|
-
|
|
|
|
(3,658
|
)
|
|
|
80,544
|
|
Total
trading
|
|
|
90,509
|
|
|
|
-
|
|
|
|
(8,553
|
)
|
|
|
81,956
|
|
Total
investment securities
|
|
$
|
1,283,074
|
|
|
$
|
10,900
|
|
|
$
|
(36,642
|
)
|
|
$
|
1,257,332
|
|
|
|
December 31, 2009
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(in
thousands)
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
74,100
|
|
|
$
|
-
|
|
|
$
|
(1,216
|
)
|
|
$
|
72,884
|
|
Floating
rate asset-backed securities
|
|
|
58,157
|
|
|
|
26
|
|
|
|
(40
|
)
|
|
|
58,143
|
|
Floating
rate corporate debt securities
|
|
|
246,758
|
|
|
|
267
|
|
|
|
(1,420
|
)
|
|
|
245,605
|
|
Floating
rate Government/GSE guaranteed mortgage-backed securities
|
|
|
404,452
|
|
|
|
1,188
|
|
|
|
(1,419
|
)
|
|
|
404,221
|
|
Fixed
rate GSE guaranteed mortgage-backed securities
|
|
|
6,248
|
|
|
|
289
|
|
|
|
-
|
|
|
|
6,537
|
|
Floating
rate GSE subordinated debt
|
|
|
70,000
|
|
|
|
-
|
|
|
|
(22,438
|
)
|
|
|
47,562
|
|
Fixed
rate GSE preferred stock
|
|
|
90,543
|
|
|
|
-
|
|
|
|
(1,332
|
)
|
|
|
89,211
|
|
Fixed
rate U.S. Treasuries
|
|
|
117,810
|
|
|
|
-
|
|
|
|
(50
|
)
|
|
|
117,760
|
|
Total
available-for-sale
|
|
|
1,068,068
|
|
|
|
1,770
|
|
|
|
(27,915
|
)
|
|
|
1,041,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities
|
|
|
6,708
|
|
|
|
-
|
|
|
|
(4,884
|
)
|
|
|
1,824
|
|
Fixed
rate GSE preferred stock
|
|
|
89,637
|
|
|
|
-
|
|
|
|
(1,489
|
)
|
|
|
88,148
|
|
Total
trading
|
|
|
96,345
|
|
|
|
-
|
|
|
|
(6,373
|
)
|
|
|
89,972
|
|
Total
investment securities
|
|
$
|
1,164,413
|
|
|
$
|
1,770
|
|
|
$
|
(34,288
|
)
|
|
$
|
1,131,895
|
|
During
the three and six months ended June 20, 2010, Farmer Mac did not recognize in
earnings any other-than-temporary impairment charges, compared to charges of
$1.0 million and $1.1 million for the same periods in 2009. The
other-than-temporary impairment charges in 2009 were related to investments in
CIT Group, Inc corporate debt securities and Fannie Mae floating rate preferred
stock.
During
the three months ended June 30, 2010, Farmer Mac did not receive any proceeds
from the sale of securities from its available-for-sale investment portfolio,
compared to proceeds of $8.6 million for the same period in 2009, resulting in
gross realized losses of $0.3 million. During the six months ended
June 30, 2010, Farmer Mac received proceeds of $69.2 million from the sale
of securities from its available-for-sale investment portfolio, resulting in
gross realized gains of $0.4 million and gross realized losses of $0.2 million,
compared to proceeds of $153.1 million for the same period in 2009, resulting in
gross realized gains of $3.2 million and gross realized losses of $0.3
million.
As of
June 30, 2010 and December 31, 2009, unrealized losses on available-for-sale
investment securities were as follows:
|
|
June 30, 2010
|
|
|
|
Available-for-Sale Securities
|
|
|
|
Unrealized loss position for
|
|
|
Unrealized loss position
|
|
|
|
less than 12 months
|
|
|
more than 12 months
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair
Value
|
|
|
Loss
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate corporate debt securities
|
|
$
|
38,543
|
|
|
$
|
(49
|
)
|
|
$
|
107,820
|
|
|
$
|
(2,148
|
)
|
Floating
rate asset-backed securities
|
|
|
5,249
|
|
|
|
(1
|
)
|
|
|
5,042
|
|
|
|
(10
|
)
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
63,344
|
|
|
|
(10,756
|
)
|
Floating
rate Government/GSE guaranteed mortgage-backed securities
|
|
|
73,596
|
|
|
|
(47
|
)
|
|
|
30,724
|
|
|
|
(223
|
)
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
55,145
|
|
|
|
(14,855
|
)
|
Fixed
rate senior agency debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fixed
rate U.S. Treasuries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
117,388
|
|
|
$
|
(97
|
)
|
|
$
|
262,075
|
|
|
$
|
(27,992
|
)
|
|
|
December 31, 2009
|
|
|
|
Available-for-Sale Securities
|
|
|
|
Unrealized loss position for
|
|
|
Unrealized loss position
|
|
|
|
less than 12 months
|
|
|
more than 12 months
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair
Value
|
|
|
Loss
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate corporate debt securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
182,745
|
|
|
$
|
(1,420
|
)
|
Floating
rate asset-backed securities
|
|
|
-
|
|
|
|
-
|
|
|
|
17,319
|
|
|
|
(40
|
)
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
72,884
|
|
|
|
(1,216
|
)
|
Floating
rate Government/GSE guaranteed mortgage-backed securities
|
|
|
116,754
|
|
|
|
(645
|
)
|
|
|
121,877
|
|
|
|
(774
|
)
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
47,562
|
|
|
|
(22,438
|
)
|
Fixed
rate GSE preferred stock
|
|
|
89,211
|
|
|
|
(1,332
|
)
|
|
|
-
|
|
|
|
-
|
|
Fixed
rate U.S. Treasuries
|
|
|
117,760
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
323,725
|
|
|
$
|
(2,027
|
)
|
|
$
|
442,387
|
|
|
$
|
(25,888
|
)
|
The
temporary unrealized losses presented above are principally due to a general
widening of credit spreads from the dates of acquisition to June 30, 2010 and
December 31, 2009, as applicable. The resulting decreases
in fair values reflect an increase in the perceived risk by the financial
markets related to those securities. As of June 30, 2010, all of the
investment securities in an unrealized loss position were rated at least “A” by
a nationally recognized statistical rating organization. As of
December 31, 2009, all of the investment securities in an unrealized loss
position were rated at least “A,” except one that was not rated. The
unrealized losses were on 51 and 86 individual investment securities
as of June 30, 2010 and December 31, 2009, respectively.
As of
June 30, 2010, 41 of the securities in loss positions had been in loss positions
for more than 12 months and had a total unrealized loss of $28.0
million. As of December 31, 2009, 73 of the securities
in loss positions had been in loss positions for more than 12 months and had a
total unrealized loss of $25.9 million. Securities in unrealized
loss positions 12 months or more have a fair value as of June 30, 2010 that is,
on average, approximately 90 percent of their amortized cost
basis. Farmer Mac believes that all these unrealized losses are
recoverable within a reasonable period of time through changes in credit spreads
or maturity and expects to recover the amortized cost basis of these
securities. Accordingly, Farmer Mac has concluded that none of the
unrealized losses on these available-for-sale investment securities represent
other-than-temporary impairment as of June 30, 2010. Farmer Mac does
not intend to sell these securities and it is not more likely than not that
Farmer Mac will be required to sell the securities before recovery of the
amortized cost basis.
Farmer
Mac did not own any held-to-maturity investments as of June 30, 2010 and
2009. As of June 30, 2010, Farmer Mac owned trading investments with
an amortized cost of $90.5 million, a fair value of $82.0 million, and a
weighted-average yield of 8.10 percent. The amortized cost, fair
value and weighted-average yield of investments by remaining contractual
maturity for available-for-sale investment securities as of June 30, 2010 are
set forth below. Asset-backed and mortgage-backed securities are
included based on their final maturities, although the actual maturities may
differ due to prepayments of the underlying assets or mortgages.
|
|
Investment Securities Available-for-Sale
|
|
|
|
as of June 30, 2010
|
|
|
|
Amortized
|
|
|
|
|
|
Weighted-
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Average
Yield
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Due
within one year
|
|
$
|
374,289
|
|
|
$
|
374,486
|
|
|
0.35%
|
|
Due
after one year through five years
|
|
|
176,535
|
|
|
|
174,617
|
|
|
0.62%
|
|
Due
after five years through ten years
|
|
|
99,355
|
|
|
|
100,120
|
|
|
2.74%
|
|
Due
after ten years
|
|
|
542,386
|
|
|
|
526,153
|
|
|
2.78%
|
|
Total
|
|
$
|
1,192,565
|
|
|
$
|
1,175,376
|
|
|
1.69%
|
|
Note
3.
|
Farmer
Mac Guaranteed Securities and USDA Guaranteed
Securities
|
The
following table sets forth information about on-balance sheet Farmer Mac
Guaranteed Securities and USDA Guaranteed Securities as of June 30, 2010 and
December 31, 2009.
|
|
June 30, 2010
|
|
|
|
Available-
|
|
|
|
|
|
|
|
|
|
for-Sale
|
|
|
Trading
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Farmer
Mac I
|
|
$
|
47,821
|
|
|
$
|
-
|
|
|
$
|
47,821
|
|
Farmer
Mac II
|
|
|
40,436
|
|
|
|
-
|
|
|
|
40,436
|
|
Rural
Utilities
|
|
|
1,629,883
|
|
|
|
-
|
|
|
|
1,629,883
|
|
Farmer
Mac Guaranteed Securities
|
|
|
1,718,140
|
|
|
|
-
|
|
|
|
1,718,140
|
|
USDA
Guaranteed Securities
|
|
|
880,424
|
|
|
|
386,496
|
|
|
|
1,266,920
|
|
Total
|
|
$
|
2,598,564
|
|
|
$
|
386,496
|
|
|
$
|
2,985,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
cost
|
|
$
|
2,543,878
|
|
|
$
|
382,357
|
|
|
$
|
2,926,235
|
|
Unrealized
gains
|
|
|
56,187
|
|
|
|
4,369
|
|
|
|
60,556
|
|
Unrealized
losses
|
|
|
(1,501
|
)
|
|
|
(230
|
)
|
|
|
(1,731
|
)
|
Fair
value
|
|
$
|
2,598,564
|
|
|
$
|
386,496
|
|
|
$
|
2,985,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Available-
|
|
|
|
|
|
|
|
|
|
|
|
for-Sale
|
|
|
Trading
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Farmer
Mac I
|
|
$
|
56,864
|
|
|
$
|
-
|
|
|
$
|
56,864
|
|
Farmer
Mac II
|
|
|
764,792
|
|
|
|
422,681
|
|
|
|
1,187,473
|
|
Rural
Utilities
|
|
|
1,703,211
|
|
|
|
451,448
|
|
|
|
2,154,659
|
|
Total
|
|
$
|
2,524,867
|
|
|
$
|
874,129
|
|
|
$
|
3,398,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
cost
|
|
$
|
2,493,644
|
|
|
$
|
817,631
|
|
|
$
|
3,311,275
|
|
Unrealized
gains
|
|
|
39,657
|
|
|
|
56,569
|
|
|
|
96,226
|
|
Unrealized
losses
|
|
|
(8,434
|
)
|
|
|
(71
|
)
|
|
|
(8,505
|
)
|
Fair
value
|
|
$
|
2,524,867
|
|
|
$
|
874,129
|
|
|
$
|
3,398,996
|
|
Upon the
adoption of the new consolidation guidance on January 1, 2010, Farmer Mac was
determined to be the primary beneficiary of certain VIEs where Farmer Mac held
beneficial interests in trusts used as vehicles for the securitization of
agricultural real estate mortgage loans or rural utilities
loans. Prior to 2010, Farmer Mac presented these beneficial interests
as “Farmer Mac Guaranteed Securities” on the condensed consolidated balance
sheets. Upon consolidation, Farmer Mac transferred these assets from
Farmer Mac Guaranteed Securities to loans held for investment in consolidated
trusts. The transferred assets on January 1, 2010 included Farmer Mac
Guaranteed Securities – Rural Utilities with an unpaid principal balance of
$412.9 million and a fair value of $455.6 million and Farmer Mac I Guaranteed
Securities with an unpaid principal balance of $5.3 million and a fair value of
$5.6 million.
On
January 25, 2010, Farmer Mac contributed substantially all of the assets, in
excess of $1.1 billion, comprising the Farmer Mac II program to Farmer
Mac’s subsidiary, Farmer Mac II LLC. The assets that
Farmer Mac contributed to Farmer Mac II LLC consisted primarily of
USDA-guaranteed portions that had not been securitized by Farmer Mac (i.e.,
transferred to a trust whereby Farmer Mac II Guaranteed Securities were issued)
but also included $35.0 million of Farmer Mac II Guaranteed
Securities. Farmer Mac did not guarantee the timely payment of
principal and interest on the $1.1 billion of contributed USDA-guaranteed
portions and will provide a guarantee in connection with the issuance of Farmer
Mac II Guaranteed Securities only to the extent that either Farmer Mac or Farmer
Mac II LLC is approached or referred by an investor. Farmer Mac will
not issue Farmer Mac II Guaranteed Securities to Farmer Mac II LLC in the
future. The contributed USDA-guaranteed portions had previously been
presented as Farmer Mac II Guaranteed Securities on the condensed
consolidated financial statements of Farmer Mac and are now presented as USDA
Guaranteed Securities on the condensed consolidated balance
sheets. The assets of Farmer Mac II LLC would be available to
creditors of Farmer Mac only after all obligations owed to creditors of and
equity holders in Farmer Mac II LLC had been satisfied.
The
temporary unrealized losses presented above are principally due to changes in
interest rates from the date of acquisition to June 30, 2010 and December 31,
2009, as applicable. As of June 30, 2010 and December 31, 2009, the
unrealized losses presented above are related to Farmer Mac II and USDA
Guaranteed Securities, which are backed by the full faith and credit of the
United States. Therefore, Farmer Mac has concluded that none of the
unrealized losses on its available-for-sale Farmer Mac Guaranteed Securities
represents an other-than-temporary impairment as of June 30, 2010 and
December 31, 2009. Farmer Mac does not intend to sell these
securities and it is not more likely than not that Farmer Mac will be required
to sell the securities before recovery of the amortized cost basis.
Farmer
Mac realized no gains or losses from the sale of Farmer Mac and USDA Guaranteed
Securities for the three and six months ended June 30, 2010 and
2009.
The table
below presents a sensitivity analysis for the Corporation’s on-balance sheet
Farmer Mac and USDA Guaranteed Securities as of June 30, 2010 and December 31,
2009.
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(dollars in thousands)
|
|
Fair
value of beneficial interests retained
in Farmer Mac and USDA
Guaranteed Securities
|
|
$
|
2,985,060
|
|
|
$
|
3,398,996
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
remaining life (in years)
|
|
|
3.2
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
prepayment speed (annual rate)
|
|
|
6.0
|
%
|
|
|
3.8
|
%
|
Effect
on fair value of a 10% adverse change
|
|
$
|
(1,188
|
)
|
|
$
|
(18
|
)
|
Effect
on fair value of a 20% adverse change
|
|
$
|
(2,295
|
)
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average
discount rate
|
|
|
2.7
|
%
|
|
|
2.8
|
%
|
Effect
on fair value of a 10% adverse change
|
|
$
|
(15,735
|
)
|
|
$
|
(22,081
|
)
|
Effect
on fair value of a 20% adverse change
|
|
$
|
(31,756
|
)
|
|
$
|
(44,531
|
)
|
These
sensitivities are hypothetical. Changes in fair value based on
10 percent or 20 percent variations in assumptions generally cannot be
extrapolated because the relationship of the change in assumptions to the change
in fair value may not be linear. Also, the effect of a variation in a
particular assumption on the fair value of the retained interest is calculated
without changing any other assumption. In fact, changes in one factor
may result in changes in another (for example, increases in market interest
rates may result in lower prepayments), which might amplify or counteract the
sensitivities.
The table
below presents the outstanding principal balances for Farmer Mac loans, LTSPCs
and Farmer Mac and USDA Guaranteed Securities as of June 30, 2010 and
December 31, 2009.
Outstanding
Balance of Farmer Mac Loans and Loans Underlying
|
|
Farmer Mac and USDA Guaranteed Securities and
LTSPCs
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
On-balance
sheet:
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
Loans
|
|
$
|
844,227
|
|
|
$
|
733,422
|
|
Loans
held in trusts:
|
|
|
|
|
|
|
|
|
Beneficial
interests owned by Farmer Mac
|
|
|
4,369
|
|
|
|
5,307
|
|
Beneficial
interests owned by third party investors
|
|
|
880,035
|
|
|
|
-
|
|
Farmer
Mac Guaranteed Securities - AgVantage
|
|
|
43,550
|
|
|
|
48,800
|
|
Farmer
Mac II:
|
|
|
|
|
|
|
|
|
USDA
Guaranteed Securities
|
|
|
1,218,329
|
|
|
|
-
|
|
Farmer
Mac Guaranteed Securities
|
|
|
41,756
|
|
|
|
1,164,996
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
Loans
|
|
|
165,388
|
|
|
|
28,644
|
|
Loans
held in trusts:
|
|
|
|
|
|
|
|
|
Beneficial
interests owned by Farmer Mac
|
|
|
406,679
|
|
|
|
412,948
|
|
Farmer
Mac Guaranteed Securities - AgVantage
|
|
|
1,587,200
|
|
|
|
1,675,000
|
|
Total
on-balance sheet
|
|
$
|
5,191,533
|
|
|
$
|
4,069,117
|
|
|
|
|
|
|
|
|
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
|
|
AgVantage
|
|
$
|
2,945,000
|
|
|
$
|
2,945,000
|
|
LTSPCs
|
|
|
1,739,979
|
|
|
|
2,165,706
|
|
Farmer
Mac Guaranteed Securities
|
|
|
826,910
|
|
|
|
1,492,239
|
|
Farmer
Mac II:
|
|
|
|
|
|
|
|
|
Farmer
Mac Guaranteed Securities
|
|
|
40,860
|
|
|
|
34,802
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
AgVantage
|
|
|
14,393
|
|
|
|
14,240
|
|
Total
off-balance sheet
|
|
$
|
5,567,142
|
|
|
$
|
6,651,987
|
|
Total
|
|
$
|
10,758,675
|
|
|
$
|
10,721,104
|
|
When
particular criteria are met, such as the default of the borrower, Farmer Mac
becomes entitled to purchase the defaulted loans underlying Farmer Mac
Guaranteed Securities (commonly referred to as “removal-of-account”
provisions). Farmer Mac records all such defaulted loans at their
unpaid principal balance during the period in which Farmer Mac becomes entitled
to purchase the loans and therefore regains effective control over the
transferred loans. Considering the low loan-to-value ratios in its
portfolio, Farmer Mac believes that it is probable at the acquisition of these
loans that it will be able to collect all contractually required payments
receivable. Subsequent to the purchase, such defaulted loans are
treated as nonaccrual loans and, therefore, interest is accounted for on the
cash basis. Any decreases in expected cash flows are recognized as
impairment. The following table presents information related to
Farmer Mac’s acquisition of defaulted loans for the three and six months ended
June 30, 2010 and 2009 and the outstanding balances and carrying amounts of all
such loans as of June 30, 2010 and December 31, 2009,
respectively.
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
principal balance at acquisition date
|
|
$
|
913
|
|
|
$
|
572
|
|
|
$
|
3,403
|
|
|
$
|
5,637
|
|
Contractually
required payments receivable
|
|
|
913
|
|
|
|
572
|
|
|
|
3,470
|
|
|
|
5,646
|
|
Impairment
recognized subsequent to acquisition
|
|
|
359
|
|
|
|
5,725
|
|
|
|
1,740
|
|
|
|
7,725
|
|
Recovery/release
of allowance for defaulted loans
|
|
|
2,924
|
|
|
|
-
|
|
|
|
2,924
|
|
|
|
-
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Outstanding
balance
|
|
$
|
34,813
|
|
|
$
|
50,409
|
|
Carrying
amount
|
|
|
30,656
|
|
|
|
29,994
|
|
Net
credit losses and 90-day delinquencies as of and for the periods indicated for
Farmer Mac Guaranteed Securities, loans and LTSPCs are presented in the table
below. Information is not presented for loans underlying AgVantage
securities, USDA Guaranteed Securities, Farmer Mac II Guaranteed Securities, or
rural utilities loans held or underlying Farmer Mac Guaranteed Securities –
Rural Utilities. Each AgVantage security is a general obligation of
an issuing institution approved by Farmer Mac and is secured by eligible loans
in an amount at least equal to the outstanding principal amount of the
security. Farmer Mac excludes the loans that secure AgVantage
securities from the credit risk metrics it discloses because of the credit
quality of the issuing institutions, the collateralization level for the
securities, and because delinquent loans are required to be removed from the
pool of pledged loans and replaced with current eligible loans. As of
June 30, 2010, there were no probable losses inherent in Farmer Mac’s AgVantage
securities due to the credit quality of the obligors, as well as the underlying
collateral. As of June 30, 2010, Farmer Mac had not experienced
any credit losses on any AgVantage securities. The USDA-guaranteed
portions presented as USDA Guaranteed Securities, as well as those that
collateralize Farmer Mac II Guaranteed Securities, are guaranteed by the United
States Department of Agriculture. Each USDA guarantee is an
obligation backed by the full faith and credit of the United
States. As of June 30, 2010, neither Farmer Mac nor Farmer Mac II LLC
had experienced any credit losses on any USDA Guaranteed Securities or Farmer
Mac II Guaranteed Securities. As of June 30, 2010, there were no
delinquencies and no probable losses inherent in Farmer Mac’s rural utilities
loans held or in any Farmer Mac Guaranteed Securities – Rural
Utilities. As of June 30, 2010, Farmer Mac had not experienced any
credit losses on any of those loans or securities.
|
|
90-Day
|
|
|
Net Credit
|
|
|
|
Delinquencies (1)
|
|
|
(Recoveries)/Losses (2)
|
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
On-balance
sheet assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
38,709
|
|
|
$
|
35,470
|
|
|
$
|
23,546
|
|
|
$
|
(1,926
|
)
|
|
$
|
6,960
|
|
Total
on-balance sheet
|
|
$
|
38,709
|
|
|
$
|
35,470
|
|
|
$
|
23,546
|
|
|
$
|
(1,926
|
)
|
|
$
|
6,960
|
|
Off-balance
sheet assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTSPCs
|
|
$
|
17,302
|
|
|
$
|
14,056
|
|
|
$
|
18,761
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Guaranteed
Securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
off-balance sheet
|
|
$
|
17,302
|
|
|
$
|
14,056
|
|
|
$
|
18,761
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
|
|
$
|
56,011
|
|
|
$
|
49,526
|
|
|
$
|
42,307
|
|
|
$
|
(1,926
|
)
|
|
$
|
6,960
|
|
(1)
|
Includes
loans and loans underlying Farmer Mac I Guaranteed Securities and LTSPCs
that are 90 days or more past due, in foreclosure, restructured after
delinquency, and in bankruptcy, excluding loans performing under either
their original loan terms or a court-approved bankruptcy
plan.
|
(2)
|
Includes
loans and loans underlying Farmer Mac I Guaranteed Securities, LTSPCs and
REO.
|
Note 4.
|
Comprehensive
Income
|
Comprehensive
income represents all changes in stockholders’ equity except those resulting
from investments by or distributions to stockholders, and is comprised primarily
of net income and unrealized gains and losses on securities available-for-sale,
net of related taxes. The following table sets forth Farmer Mac’s
comprehensive income for the three and six months ended June 30, 2010 and
2009:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
8,090
|
|
|
$
|
29,515
|
|
|
$
|
21,679
|
|
|
$
|
66,969
|
|
Available-for-sale
securities, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized holding gains
|
|
|
23,853
|
|
|
|
32,178
|
|
|
|
28,353
|
|
|
|
33,941
|
|
Reclassification
adjustment for realized losses/(gains)
|
|
|
-
|
|
|
|
835
|
|
|
|
(190
|
)
|
|
|
835
|
|
Net
change from available-for-sale securities (1)
|
|
|
23,853
|
|
|
|
33,013
|
|
|
|
28,163
|
|
|
|
34,776
|
|
Financial
derivatives, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
for amortization of financial derivatives transition adjustment
(2)
|
|
|
29
|
|
|
|
50
|
|
|
|
52
|
|
|
|
90
|
|
Other
comprehensive income, net of tax
|
|
|
23,882
|
|
|
|
33,063
|
|
|
|
28,215
|
|
|
|
34,866
|
|
Comprehensive
income
|
|
|
31,972
|
|
|
|
62,578
|
|
|
|
49,894
|
|
|
|
101,835
|
|
Less:
Comprehensive income attributable to non-controlling
interest
|
|
|
5,546
|
|
|
|
-
|
|
|
|
9,614
|
|
|
|
-
|
|
Total
comprehensive income
|
|
$
|
26,426
|
|
|
$
|
62,578
|
|
|
$
|
40,280
|
|
|
$
|
101,835
|
|
(1)
|
Unrealized
gains on available for sale securities is shown net of income tax expense
of $12.8 million and $17.8 million for the three months ended June 30,
2010 and 2009, respectively, and $15.3 million and $18.7 million for the
six months ended June 30, 2010 and 2009,
respectively.
|
(2)
|
Amortization
of financial derivatives transition adjustment is shown net of income tax
expense of $16,000 and $27,000 for the three months ended June 30, 2010
and 2009, respectively, and $28,000 and $48,000 for the six months ended
June 30, 2010 and 2009,
respectively.
|
The
following table presents Farmer Mac’s accumulated other comprehensive income as
of June 30, 2010 and December 31, 2009 and changes in the components of
accumulated other comprehensive income for the three months ended June 30, 2010
and the year ended December 31, 2009.
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
3,300
|
|
|
$
|
(47,214
|
)
|
Net
unrealized gains, net of tax
|
|
|
28,163
|
|
|
|
50,514
|
|
Ending
balance
|
|
$
|
31,463
|
|
|
$
|
3,300
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives:
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
(46
|
)
|
|
$
|
(198
|
)
|
Amortization
of financial derivatives transition adjustment, net of tax
|
|
|
52
|
|
|
|
152
|
|
Ending
balance
|
|
$
|
6
|
|
|
$
|
(46
|
)
|
Accumulated
other comprehensive income, net of tax
|
|
$
|
31,469
|
|
|
$
|
3,254
|
|
Note
5.
|
Off-Balance
Sheet Guarantees and Long Term Standby Purchase
Commitments
|
Farmer
Mac offers approved lenders two credit enhancement alternatives to increase
their liquidity or lending capacity while retaining the cash flow benefits of
their loans: (1) Farmer Mac Guaranteed Securities, which are
available through the Farmer Mac I program, the Farmer Mac II program or the
Rural Utilities program, and (2) Long Term Standby Purchase Commitments
(“LTSPCs”), which are available through the Farmer Mac I program or Rural
Utilities program. For securitization trusts where Farmer Mac is the
primary beneficiary, as described in Note 1(g), the trust assets and liabilities
are included on Farmer Mac’s condensed consolidated balance
sheet. Upon consolidation, Farmer Mac eliminates the portion of the
guarantee and commitment fees receivable and guarantee and commitment
obligations related to the consolidated trusts. For the remainder of
these transactions, or in the event of deconsolidation, both of these
alternatives result in the creation of off-balance sheet obligations for Farmer
Mac. Farmer Mac accounts for these transactions and other financial
guarantees in accordance with FASB guidance on accounting for
guarantees. Farmer Mac records, at the inception of a guarantee, a
liability for the fair value of its obligation to stand ready to perform under
the terms of each guarantee and an asset that is equal to the fair value of the
fees that will be received over the life of each guarantee. The fair
values of the guarantee obligation and asset at inception are based on the
present value of expected cash flows using management’s best estimate of certain
key assumptions, which include prepayment speeds, forward yield curves and
discount rates commensurate with the risks involved. Because the cash
flows of these instruments may be interest rate path dependent, these values and
projected discount rates are derived using a Monte Carlo simulation
model. The guarantee obligation and corresponding asset are
subsequently amortized into guarantee and commitment fee income in relation to
the decline in the unpaid principal balance on the underlying agricultural real
estate mortgage and rural utilities loans.
Off-Balance
Sheet Farmer Mac Guaranteed Securities
Eligible
loans and other eligible assets may be placed into trusts that are used as
vehicles for the securitization of the transferred assets and the Farmer
Mac-guaranteed beneficial interests in the trusts are sold to
investors. Proceeds from new securitizations during the six months
ended June 30, 2010 and 2009 were $12.9 million and $17.2 million,
respectively. The following table summarizes cash flows received from
and paid to trusts used for securitizations:
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
(in thousands)
|
|
Proceeds
from new securitizations
|
|
$
|
12,906
|
|
|
$
|
17,224
|
|
Guarantee
fees received
|
|
|
2,620
|
|
|
|
5,858
|
|
Purchases
of assets from the trusts
|
|
|
(2,323
|
)
|
|
|
-
|
|
Servicing
advances
|
|
|
(343
|
)
|
|
|
7
|
|
Repayments
of servicing advances
|
|
|
174
|
|
|
|
2
|
|
The
following table presents the maximum principal amount of potential undiscounted
future payments that Farmer Mac could be required to make under all off-balance
sheet Farmer Mac Guaranteed Securities as of June 30, 2010 and December 31,
2009, not including offsets provided by any recourse provisions, recoveries from
third parties or collateral for the underlying loans.
Outstanding Balance of Off-Balance Sheet
|
|
Farmer Mac Guaranteed Securities
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands)
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
AgVantage
|
|
$
|
2,945,000
|
|
|
$
|
2,945,000
|
|
Farmer
Mac Guaranteed Securities
|
|
|
826,910
|
|
|
|
1,492,239
|
|
Farmer
Mac II Guaranteed Securities
|
|
|
40,860
|
|
|
|
34,802
|
|
Rural
Utilities AgVantage
|
|
|
14,393
|
|
|
|
14,240
|
|
Total
off-balance sheet Farmer Mac Guaranteed Securities
|
|
$
|
3,827,163
|
|
|
$
|
4,486,281
|
|
For those securities issued or modified
on or after January 1, 2003, Farmer Mac has recorded a liability for its
obligation to stand ready under the guarantee in the guarantee and commitment
obligation on the condensed consolidated balance sheet. This
liability approximated $20.2 million as of June 30, 2010 and $33.9 million
as of December 31, 2009. Upon adoption of the new consolidation
guidance on January 1, 2010, Farmer Mac eliminated $15.5 million of the
guarantee and commitment obligation related to the consolidated
trusts. During second quarter 2010, Farmer Mac deconsolidated $414.5
million of certain securitization trusts created when loans subject to LTSPCs
were converted to Farmer Mac I Guaranteed Securities because Farmer Mac was no
longer determined to be the primary beneficiary when the counterparty to the
transaction ceased being a related party as a result of changes to the
membership of Farmer Mac’s board of directors. This deconsolidation
resulted in an increase to the guarantee and commitment obligation of $2.7
million as of June 30, 2010. See Note 1(g) for more
information. As of June 30, 2010, the weighted-average remaining
maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed
Securities, excluding AgVantage securities, was 14.1 years. For
information on Farmer Mac’s methodology for determining the reserve for losses
on off-balance sheet Farmer Mac Guaranteed Securities, see Note
1(b).
In the
future, Farmer Mac will provide a guarantee in connection with the issuance of
Farmer Mac II Guaranteed Securities only to the extent that Farmer Mac or Farmer
Mac II LLC is approached or referred by an investor. Farmer Mac will not issue
Farmer Mac II Guaranteed Securities to Farmer Mac II LLC in the
future.
LTSPCs
An LTSPC
is a commitment by Farmer Mac to purchase eligible loans from a segregated pool
of loans under enumerated circumstances, either for cash or in exchange for
Farmer Mac Guaranteed Securities, on one or more undetermined future
dates. As consideration for its assumption of the credit risk on
loans underlying an LTSPC, Farmer Mac receives a commitment fee payable monthly
in arrears in an amount approximating what would have been the guarantee fee if
the transaction were structured as Farmer Mac Guaranteed
Securities.
The
maximum principal amount of potential undiscounted future payments that Farmer
Mac could be requested to make under all LTSPCs, not including offsets provided
by any recourse provisions, recoveries from third parties or collateral for the
underlying loans, was $1.7 billion as of June 30, 2010 and $2.2 billion as
of December 31, 2009.
As of
June 30, 2010, the weighted-average remaining maturity of all loans underlying
LTSPCs was 14.4 years. For those LTSPCs issued or modified on or
after January 1, 2003, Farmer Mac has recorded a liability for its
obligation to stand ready under the commitment in the guarantee and commitment
obligation on the condensed consolidated balance sheet. This
liability approximated $12.5 million as of June 30, 2010 and $14.7 million as of
December 31, 2009.
Note
6.
|
Stockholders’
Equity and Mezzanine Equity
|
Common
Stock
Farmer Mac
has three classes of common stock outstanding:
|
·
|
Class
A Voting Common Stock, which may be held only by banks, insurance
companies and other financial institutions or similar entities that are
not institutions of the Farm Credit System. By federal statute,
no holder of Class A Voting Common Stock may directly or indirectly be a
beneficial owner of more than 33 percent of the outstanding shares of that
class of stock;
|
|
·
|
Class
B Voting Common Stock, which may be held only by institutions of the Farm
Credit System. There are no restrictions on the maximum
holdings of Class B Voting Common Stock;
and
|
|
·
|
Class
C Non-Voting Common Stock, which has no ownership
restrictions.
|
From
fourth quarter 2004 through fourth quarter 2008, Farmer Mac paid a quarterly
dividend of $0.10 per share on all classes of the Corporation’s common
stock. From first quarter 2009 through second quarter 2010, Farmer
Mac paid a quarterly dividend of $0.05 per share on all classes of the
Corporation’s common stock. On August 5, 2010, Farmer Mac’s
board of directors declared a quarterly dividend of $0.05 per share on the
Corporation’s common stock that is scheduled to be paid on September 30,
2010. Farmer Mac’s ability to declare and pay a dividend could be
restricted if it failed to comply with regulatory capital
requirements.
Preferred
Stock
During
2010 and 2009, Farmer Mac had two series of preferred stock
outstanding:
|
·
|
Series
B preferred stock, which was newly issued on September 30, 2008 and on
December 15, 2008, was temporary equity and is reported as Mezzanine
Equity on the condensed consolidated balance sheets because it contained
redemption features that, although remote, were not solely within the
control of Farmer Mac, was repurchased and retired on January 25, 2010
such that none was outstanding on June 30, 2010;
and
|
|
·
|
Series
C preferred stock, which was newly issued during fourth quarter 2008 and
during 2009, is a component of Stockholders’ Equity on the condensed
consolidated balance sheets.
|
The
Series C preferred stock was issued pursuant to an initiative under which any
participant who used Farmer Mac for a credit enhancement or purchase transaction
in excess of $20.0 million was required to purchase an equity interest in
Farmer Mac in the form of shares of Series C preferred stock, thereby enabling
Farmer Mac to raise additional capital to support its mission of providing
liquidity and lending capacity to agricultural and rural utilities
lenders. Farmer Mac sold the 57,578 shares of Series C preferred
stock without registration under the Securities Act of 1933, as amended, in
reliance upon the exemption provided by Section 3(a)(2), for an aggregate
purchase price of $57.6 million or $1,000 per share. There were
57,578 shares of Series C preferred stock outstanding as of June 30, 2010,
all held by the National Rural Utilities Cooperative Finance Corporation
(“National Rural”). This initiative that required participants to
purchase Series C preferred stock ended in fourth quarter 2009.
Farmer
Mac’s ability to declare and pay dividends on its outstanding preferred stock
could be restricted if it failed to comply with regulatory capital
requirements. All series of Farmer Mac’s preferred stock are included
as components of core capital for regulatory and statutory capital compliance
measurements.
Non-Controlling
Interest in Subsidiary
On
January 25, 2010, Farmer Mac completed a private offering of $250.0 million
aggregate face amount of securities issued by a newly formed Delaware statutory
trust. The trust securities represent undivided beneficial ownership
interests in 250,000 shares of non-cumulative perpetual preferred stock (the
“Company Preferred Stock”) of Farmer Mac’s subsidiary, Farmer Mac II LLC, a
Delaware limited liability company. The Company Preferred Stock has a
liquidation preference of $1,000 per share.
The
$250.0 million of proceeds from the offering were used by the trust to purchase
the Company Preferred Stock from Farmer Mac. Farmer Mac II LLC issued
its Company Preferred Stock and its common equity interest to Farmer Mac as
consideration for the contribution by Farmer Mac to Farmer Mac II LLC of
substantially all of the assets, in excess of $1.1 billion, comprising the
Farmer Mac II program business. Farmer Mac used the proceeds
from the sale of the Company Preferred Stock to the Trust to repurchase and
retire Farmer Mac’s outstanding Series B preferred stock, which had an aggregate
liquidation preference of $150.0 million, and for general corporate
purposes. The Company Preferred Stock is permanent equity of
Farmer Mac II LLC and presented as “Non-controlling interest – preferred
stock” within permanent equity on the consolidated balance sheets of Farmer
Mac.
Statutory
and Regulatory Capital Requirements
Farmer
Mac is subject to, and as of June 30, 2010 was in compliance with, its three
statutory and regulatory capital requirements:
|
·
|
Minimum
capital – Farmer Mac’s minimum capital level is equal to the sum of
2.75 percent of Farmer Mac’s aggregate on-balance sheet assets, as
calculated for regulatory purposes, plus 0.75 percent of the aggregate
off-balance sheet obligations of Farmer Mac, including Farmer Mac
Guaranteed Securities and
LTSPCs;
|
|
·
|
Critical
capital – Farmer Mac’s critical capital level is equal to 50 percent
of the minimum capital requirement at that time;
and
|
|
·
|
Risk-based
capital – the Farm Credit Administration (“FCA”) has established a
risk-based capital stress test for Farmer
Mac.
|
As of
June 30, 2010, Farmer Mac’s minimum and critical capital requirements were
$235.4 million and $117.7 million, respectively, and Farmer Mac’s core
capital level (common and preferred stock outstanding plus non-controlling
interest – preferred stock, additional paid-in-capital and retained earnings)
was $442.0 million, $206.6 million above the minimum capital requirement and
$324.3 million above the critical capital requirement. As of
December 31, 2009, Farmer Mac’s minimum and critical capital requirements
were $217.0 million and $108.5 million, respectively, and its actual core
capital level was $337.2 million, $120.2 million above the minimum capital
requirement and $228.7 million above the critical capital
requirement.
Based on
the risk-based capital stress test, Farmer Mac’s risk-based capital requirement
as of June 30, 2010 was $29.9 million and Farmer Mac’s regulatory capital (core
capital plus the allowance for losses) of $461.0 million exceeded that
requirement by approximately $431.1 million. See “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Regulatory Matters” for more information about proposed changes to
the risk-based capital stress test applicable to Farmer Mac.
Note 7.
|
Fair Value
Disclosure
|
Effective
January 1, 2008, Farmer Mac adopted FASB guidance on fair value measurements,
which defines fair value, establishes a hierarchy for ranking fair value
measurements, and expands disclosures about fair value
measurements. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (also referred
to as an exit price).
In
determining fair value, Farmer Mac uses various valuation approaches, including
market, income and/or cost approaches. The fair value hierarchy
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. When available, the
fair value of Farmer Mac’s financial instruments is based on quoted market
prices, valuation techniques that use observable market-based inputs or
unobservable inputs that are corroborated by market data. Pricing
information obtained from third parties is internally validated for
reasonableness prior to use in the consolidated financial
statements.
When
observable market prices are not readily available, Farmer Mac estimates fair
value using techniques that rely on alternate market data or
internally-developed models using significant inputs that are generally less
readily observable. Market data includes prices of financial
instruments with similar maturities and characteristics, interest rate yield
curves, measures of volatility and prepayment rates. If market data
needed to estimate fair value is not available, Farmer Mac estimates fair value
using internally-developed models that employ a discounted cash flow
approach. Even when market assumptions are not readily available,
Farmer Mac’s assumptions reflect those that market participants would likely use
in pricing the asset or liability at the measurement date.
The fair
value hierarchy ranks the quality and reliability of the information used to
determine fair values. The hierarchy gives highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The standard
describes the following three levels used to classify fair value
measurements:
|
Level
1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities.
|
|
Level
2
|
Quoted
prices in markets that are not active or financial instruments for which
all significant inputs are observable, either directly or
indirectly.
|
|
Level
3
|
Prices
or valuations that require unobservable inputs that are significant to the
fair value measurement.
|
Farmer
Mac performed a detailed analysis of the assets and liabilities carried at fair
value to determine the appropriate level based on the transparency of the inputs
used in the valuation techniques. In certain cases, the inputs used
to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an instrument’s level within the fair value
hierarchy is based on the lowest level of input that is significant to the fair
value measurement. Farmer Mac’s assessment of the significance of a
particular input to the fair value measurement of an instrument requires
judgment and consideration of factors specific to the
instrument. While Farmer Mac believes its valuation methods are
appropriate and consistent with those of other market participants, using
different methodologies or assumptions to determine fair value could result in a
materially different estimate of the fair value of some financial
instruments.
The
following is a description of the fair value techniques used for instruments
measured at fair value as well as the general classification of such instruments
pursuant to the valuation hierarchy described above. Fair value
measurements related to financial instruments that are reported at fair value in
the consolidated financial statements each period are referred to as recurring
fair value measurements. Fair value measurements related to financial
instruments that are not reported at fair value each period but are subject to
fair value adjustments in certain circumstances are referred to as non-recurring
fair value measurements.
Recurring
Fair Value Measurements and Classification
Available-for-Sale
and Trading Investment Securities
The fair
value of investments in U.S. Treasuries is based on unadjusted quoted prices in
active markets. Farmer Mac classifies these fair value measurements
as level 1.
For a
significant portion of Farmer Mac’s investment portfolio, including most
asset-backed securities, corporate debt securities, Government/GSE guaranteed
mortgage-backed securities and preferred stock issued by GSEs, fair value is
primarily determined using a reputable and nationally recognized third party
pricing service. The prices obtained are non-binding and generally
representative of recent market trades. The fair value of certain
asset-backed and Government guaranteed mortgage-backed securities are estimated
based on quotations from brokers or dealers. Farmer Mac corroborates
its primary valuation source by obtaining a secondary price from another
independent third party pricing service. Farmer Mac classifies these
fair value measurements as level 2.
For
investment securities that are thinly traded or not quoted, Farmer Mac estimates
fair value using internally-developed models that employ a discounted cash flow
approach. Farmer Mac maximizes the use of observable market data,
including prices of financial instruments with similar maturities and
characteristics, duration, interest rate yield curves, measures of volatility
and prepayment rates. Farmer Mac generally considers a market to be
thinly traded or not quoted if the following conditions exist: (1) there are few
transactions for the financial instruments; (2) the prices in the market
are not current; (3) the price quotes vary significantly either over time or
among independent pricing services or dealers; or (4) there is a limited
availability of public market information. Farmer Mac classifies
these fair value measurements as level 3.
During
first quarter 2010, Farmer Mac transferred its investments in the subordinated
debt and preferred stock of CoBank, ACB and its investment in the preferred
stock of AgFirst Farm Credit Bank, with par values of $70.0 million, $88.5
million and $88.0 million, respectively, as of December 31, 2009, from level 3
measurements to level 2 measurements. Taking into consideration its
own recently executed trades during first quarter 2010, along with an increase
in observable trading activity for these securities, Farmer Mac determined that
the best estimates of fair value for these securities as of March 31, 2010 and
June 30, 2010 were the fair values provided by an independent third party
pricing service. Farmer Mac transferred these securities out of level
3 based on their fair values as of the beginning of the first quarter
2010.
Available-for-Sale
and Trading Farmer Mac and USDA Guaranteed Securities
Farmer
Mac estimates the fair value of its Farmer Mac and USDA Guaranteed Securities by
discounting the projected cash flows of these instruments at projected interest
rates. The fair values are based on the present value of expected
cash flows using management’s best estimate of certain key assumptions, which
include prepayment speeds, forward yield curves and discount rates commensurate
with the risks involved. Farmer Mac classifies these measurements as
level 3 because there is limited market activity and therefore little or no
price transparency. On a sample basis, Farmer Mac corroborates the
fair value of it Farmer Mac and USDA Guaranteed Securities by obtaining a
secondary valuation from an independent third party service.
Upon the
adoption of the new consolidation guidance on January 1, 2010, Farmer Mac was
deemed to be the primary beneficiary of certain VIEs where Farmer Mac held
beneficial interests in trusts used as vehicles for the securitization of
agricultural real estate mortgage loans or rural utilities
loans. Prior to 2010, Farmer Mac presented these beneficial interests
as “Farmer Mac Guaranteed Securities” on the condensed consolidated balance
sheet and reported them at their fair value. Upon consolidation,
Farmer Mac transferred these assets from “Farmer Mac Guaranteed Securities” to
“Loans held for investment in consolidated trusts.” Going forward,
these loans will be reported at their amortized cost and will no longer be
included in recurring fair value measurements. Farmer Mac transferred
these securities out of level 3 based on their fair values as of the beginning
of the quarterly reporting period.
Financial
Derivatives
The fair
value of exchange-traded U.S. Treasury futures is based on unadjusted quoted
prices for identical financial instruments. Farmer Mac classifies
these fair value measurements as level 1.
Farmer
Mac’s derivatives portfolio consists primarily of interest rate swaps, credit
default swaps and forward sales contracts on the debt of other
GSEs. Farmer Mac estimates the fair value of these financial
instruments based upon the counterparty valuations. Farmer Mac
internally values its derivative portfolio using a discounted cash flow
valuation technique and obtains a secondary valuation for certain interest rate
swaps to corroborate the counterparty valuations. Farmer Mac also
regularly reviews the counterparty valuations as part of the collateral exchange
process. Farmer Mac classifies these fair value measurements as level
2.
Certain
basis swaps are nonstandard interest rate swap structures and are therefore
internally modeled using significant assumptions and unobservable inputs,
resulting in level 3 classification. Farmer Mac uses a discounted
cash flow valuation technique, using management’s best estimate of certain key
assumptions, which include prepayment speeds, forward yield curves and
discounted rates commensurate with the risks involved.
As of
June 30, 2010 and December 31, 2009, the consideration of credit risk related to
both Farmer Mac and the counterparties resulted in an adjustment to the
valuations of Farmer Mac’s derivative portfolio of $(1.1) million and $0.7
million, respectively. See Note 1(c) for further information
regarding Farmer Mac’s derivative portfolio.
Nonrecurring
Fair Value Measurements and Classification
Loans
Held for Sale
Loans
held for sale are reported at the lower of cost or fair value in the
consolidated balance sheets. Farmer Mac internally models the fair
value of loans by discounting the projected cash flows of these instruments at
projected interest rates. The fair values are based on the present
value of expected cash flows using management’s best estimate of certain key
assumptions, which include prepayment speeds, forward yield curves and discount
rates commensurate with the risks involved. The fair values of these
instruments are classified as level 3 measurements. As of June
30, 2010, Farmer Mac recorded an adjustment of $2.3 million to report loans held
for sale at the lower of cost or fair value. As of December 31, 2009,
Farmer Mac recorded an adjustment of $0.1 million to report loans held for sale
at the lower of cost or fair value.
Loans
Held for Investment
Certain
loans in Farmer Mac’s held for investment loan portfolio are measured at fair
value when they are determined to be impaired. Impaired loans are
reported at fair value less estimated cost to sell. The fair value of
the loan is generally based on the fair value of the underlying property, which
is determined by third-party appraisals when available. When
third-party appraisals are not available, fair value is estimated based on
factors such as prices for comparable properties in similar geographical areas
and/or assessment through observation of such properties. Farmer Mac
classifies these fair values as level 3 measurements.
Real
Estate Owned
Farmer
Mac initially records REO properties at fair value less costs to sell and
subsequently records them at the lower of carrying value or fair value less
costs to sell. The fair value of REO is determined by third-party
appraisals when available. When third-party appraisals are not
available, fair value is estimated based on factors such as prices for
comparable properties in similar geographical areas and/or assessment through
observation of such properties. Farmer Mac classifies the REO fair
values as level 3 measurements.
Fair
Value Classification and Transfers
As of
June 30, 2010, Farmer Mac’s assets and liabilities recorded at fair value
include financial instruments valued at $3.2 billion whose fair values were
estimated by management in the absence of readily determinable fair values
(i.e., level 3). These financial instruments measured as level 3
represented 45 percent of the total assets and 70 percent of financial
instruments measured at fair value as of June 30, 2010. As of
December 31, 2009, Farmer Mac’s asset and liabilities recorded at fair value
included financial instruments valued at $3.7 billion whose fair values were
estimated by management in the absence of readily determinable fair values
(i.e., level 3). These financial instruments measured as level 3
represented 61 percent of the total assets and 80 percent of financial
instruments measured at fair value as of
December 31, 2009.
The
following tables present information about Farmer Mac’s asset and liabilities
measured at fair value on a recurring and nonrecurring basis as of June 30, 2010
and December 31, 2009, respectively, and indicate the fair value
hierarchy of the valuation techniques used by Farmer Mac to determine such fair
value.
Assets
and Liabilities Measured at Fair Value as of June 30, 2010
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
63,344
|
|
|
$
|
63,344
|
|
Floating
rate asset-backed securities
|
|
|
-
|
|
|
|
19,264
|
|
|
|
-
|
|
|
|
19,264
|
|
Floating
rate corporate debt securities
|
|
|
-
|
|
|
|
195,916
|
|
|
|
-
|
|
|
|
195,916
|
|
Floating
rate Government/GSE guaranteed mortgage-backed securities
|
|
|
-
|
|
|
|
408,291
|
|
|
|
-
|
|
|
|
408,291
|
|
Fixed
rate GSE guaranteed mortgage-backed securities
|
|
|
-
|
|
|
|
5,423
|
|
|
|
-
|
|
|
|
5,423
|
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
55,145
|
|
|
|
-
|
|
|
|
55,145
|
|
Floating
rate GSE preferred stock
|
|
|
-
|
|
|
|
87,086
|
|
|
|
-
|
|
|
|
87,086
|
|
U.S.
Treasuries
|
|
|
335,415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
335,415
|
|
Senior
agency debt
|
|
|
-
|
|
|
|
5,492
|
|
|
|
-
|
|
|
|
5,492
|
|
Total
available-for-sale
|
|
|
335,415
|
|
|
|
776,617
|
|
|
|
63,344
|
|
|
|
1,175,376
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,412
|
|
|
|
1,412
|
|
Fixed
rate GSE preferred stock
|
|
|
-
|
|
|
|
80,544
|
|
|
|
-
|
|
|
|
80,544
|
|
Total
trading
|
|
|
-
|
|
|
|
80,544
|
|
|
|
1,412
|
|
|
|
81,956
|
|
Total
investment securities
|
|
|
335,415
|
|
|
|
857,161
|
|
|
|
64,756
|
|
|
|
1,257,332
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
-
|
|
|
|
-
|
|
|
|
47,821
|
|
|
|
47,821
|
|
Farmer
Mac II
|
|
|
-
|
|
|
|
-
|
|
|
|
40,436
|
|
|
|
40,436
|
|
Rural
Utilities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,629,883
|
|
|
|
1,629,883
|
|
Total
available-for-sale
|
|
|
-
|
|
|
|
-
|
|
|
|
1,718,140
|
|
|
|
1,718,140
|
|
Trading
- Farmer Mac II
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,718,140
|
|
|
|
1,718,140
|
|
USDA
Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
-
|
|
|
|
-
|
|
|
|
880,424
|
|
|
|
880,424
|
|
Trading
|
|
|
-
|
|
|
|
-
|
|
|
|
386,496
|
|
|
|
386,496
|
|
Total
USDA Guaranteed Securities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,266,920
|
|
|
|
1,266,920
|
|
Financial
derivatives
|
|
|
-
|
|
|
|
37,121
|
|
|
|
-
|
|
|
|
37,121
|
|
Total
Assets at fair value
|
|
$
|
335,415
|
|
|
$
|
894,282
|
|
|
$
|
3,049,816
|
|
|
$
|
4,279,513
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives
|
|
$
|
(28
|
)
|
|
$
|
(128,969
|
)
|
|
$
|
(3,678
|
)
|
|
$
|
(132,675
|
)
|
Total
Liabilities at fair value
|
|
$
|
(28
|
)
|
|
$
|
(128,969
|
)
|
|
$
|
(3,678
|
)
|
|
$
|
(132,675
|
)
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held for sale, at lower of cost or fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
163,065
|
|
|
$
|
163,065
|
|
Loans
held for investment, at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
4,256
|
|
|
|
4,256
|
|
Total
Assets at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
167,321
|
|
|
$
|
167,321
|
|
Assets
and Liabilities Measured at Fair Value as of December 31, 2009
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed
student loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
72,884
|
|
|
$
|
72,884
|
|
Floating
rate asset-backed securities
|
|
|
-
|
|
|
|
58,143
|
|
|
|
-
|
|
|
|
58,143
|
|
Floating
rate corporate debt securities
|
|
|
-
|
|
|
|
245,605
|
|
|
|
-
|
|
|
|
245,605
|
|
Floating
rate Government/GSE guaranteed mortgage-backed
securities
|
|
|
-
|
|
|
|
404,221
|
|
|
|
-
|
|
|
|
404,221
|
|
Fixed
rate GSE guaranteed mortgage-backed securities
|
|
|
-
|
|
|
|
6,537
|
|
|
|
-
|
|
|
|
6,537
|
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
47,562
|
|
|
|
47,562
|
|
Fixed
rate GSE preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
89,211
|
|
|
|
89,211
|
|
U.S.
Treasuries
|
|
|
117,760
|
|
|
|
-
|
|
|
|
-
|
|
|
|
117,760
|
|
Total
available-for-sale
|
|
|
117,760
|
|
|
|
714,506
|
|
|
|
209,657
|
|
|
|
1,041,923
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,824
|
|
|
|
1,824
|
|
Fixed
rate GSE preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
88,148
|
|
|
|
88,148
|
|
Total
trading
|
|
|
-
|
|
|
|
-
|
|
|
|
89,972
|
|
|
|
89,972
|
|
Total
investment securities
|
|
|
117,760
|
|
|
|
714,506
|
|
|
|
299,629
|
|
|
|
1,131,895
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
-
|
|
|
|
-
|
|
|
|
56,864
|
|
|
|
56,864
|
|
Farmer
Mac II
|
|
|
-
|
|
|
|
-
|
|
|
|
764,792
|
|
|
|
764,792
|
|
Rural
Utilities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,703,211
|
|
|
|
1,703,211
|
|
Total
available-for-sale
|
|
|
-
|
|
|
|
-
|
|
|
|
2,524,867
|
|
|
|
2,524,867
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac II
|
|
|
-
|
|
|
|
-
|
|
|
|
422,681
|
|
|
|
422,681
|
|
Rural
Utilities
|
|
|
-
|
|
|
|
-
|
|
|
|
451,448
|
|
|
|
451,448
|
|
Total
trading
|
|
|
-
|
|
|
|
-
|
|
|
|
874,129
|
|
|
|
874,129
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
-
|
|
|
|
-
|
|
|
|
3,398,996
|
|
|
|
3,398,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives
|
|
|
3
|
|
|
|
15,037
|
|
|
|
-
|
|
|
|
15,040
|
|
Total
Assets at fair value
|
|
$
|
117,763
|
|
|
$
|
729,543
|
|
|
$
|
3,698,625
|
|
|
$
|
4,545,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives
|
|
$
|
-
|
|
|
$
|
103,714
|
|
|
$
|
3,653
|
|
|
$
|
107,367
|
|
Total
Liabilities at fair value
|
|
$
|
-
|
|
|
$
|
103,714
|
|
|
$
|
3,653
|
|
|
$
|
107,367
|
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held for sale
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
28,505
|
|
|
$
|
28,505
|
|
Total
Assets at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
28,505
|
|
|
$
|
28,505
|
|
The
following tables present additional information about assets and liabilities
measured at fair value on a recurring and nonrecurring basis for which Farmer
Mac has used significant level 3 inputs to determine fair value. Net transfers
in and/or out of level 3 are based on the fair values of the assets and
liabilities as of the beginning of the quarterly reporting period.
Level 3
Assets and Liabilities Measured at Fair Value for the Three Months Ended June
30, 2010
|
|
Beginning
Balance
|
|
|
Purchases,
Sales,
Issuances and
Settlements,
net
|
|
|
Realized and
Unrealized
Gains/(Losses)
included in
Income
|
|
|
Unrealized
Gains/(Losses)
included in
Other
Comprehensive
Income
|
|
|
Net
Transfers
In
and/or
Out
|
|
|
Ending
Balance
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
62,256
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,088
|
|
|
$
|
-
|
|
|
$
|
63,344
|
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fixed
rate GSE preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
available-for-sale investment securities
|
|
|
62,256
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,088
|
|
|
|
-
|
|
|
|
63,344
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities(1)
|
|
|
1,452
|
|
|
|
(166
|
)
|
|
|
126
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,412
|
|
Fixed
rate GSE preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
trading investment securities
|
|
|
1,452
|
|
|
|
(166
|
)
|
|
|
126
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,412
|
|
Total
investment securities
|
|
|
63,708
|
|
|
|
(166
|
)
|
|
|
126
|
|
|
|
1,088
|
|
|
|
-
|
|
|
|
64,756
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
48,080
|
|
|
|
(1,508
|
)
|
|
|
-
|
|
|
|
1,249
|
|
|
|
-
|
|
|
|
47,821
|
|
Farmer
Mac II
|
|
|
39,692
|
|
|
|
502
|
|
|
|
-
|
|
|
|
242
|
|
|
|
-
|
|
|
|
40,436
|
|
Rural
Utilities
|
|
|
1,706,155
|
|
|
|
(87,799
|
)
|
|
|
-
|
|
|
|
11,527
|
|
|
|
-
|
|
|
|
1,629,883
|
|
Total
available-for-sale
|
|
|
1,793,927
|
|
|
|
(88,805
|
)
|
|
|
-
|
|
|
|
13,018
|
|
|
|
-
|
|
|
|
1,718,140
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac II
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Rural
Utilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
trading
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
1,793,927
|
|
|
|
(88,805
|
)
|
|
|
-
|
|
|
|
13,018
|
|
|
|
-
|
|
|
|
1,718,140
|
|
USDA
Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
781,823
|
|
|
|
84,682
|
|
|
|
-
|
|
|
|
13,919
|
|
|
|
-
|
|
|
|
880,424
|
|
Trading(2)
|
|
|
407,844
|
|
|
|
(26,931
|
)
|
|
|
5,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
386,496
|
|
Total
USDA Guaranteed Securities
|
|
|
1,189,667
|
|
|
|
57,751
|
|
|
|
5,583
|
|
|
|
13,919
|
|
|
|
-
|
|
|
|
1,266,920
|
|
Total
Assets at fair value
|
|
$
|
3,047,302
|
|
|
$
|
(31,220
|
)
|
|
$
|
5,709
|
|
|
$
|
28,025
|
|
|
$
|
-
|
|
|
$
|
3,049,816
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives(3)
|
|
$
|
(3,591
|
)
|
|
$
|
-
|
|
|
$
|
(87
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,678
|
)
|
Total
Liabilities at fair value
|
|
$
|
(3,591
|
)
|
|
$
|
-
|
|
|
$
|
(87
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,678
|
)
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held for sale, at lower of cost or fair value
|
|
$
|
85,248
|
|
|
$
|
-
|
|
|
$
|
90
|
|
|
$
|
-
|
|
|
$
|
77,727
|
|
|
$
|
163,065
|
|
Loans
held for investment, at fair value
|
|
|
10,522
|
|
|
|
-
|
|
|
|
(584
|
)
|
|
|
-
|
|
|
|
(5,682
|
)
|
|
|
4,256
|
|
Total
Assets at fair value
|
|
$
|
95,770
|
|
|
$
|
-
|
|
|
$
|
(494
|
)
|
|
$
|
-
|
|
|
$
|
72,045
|
|
|
$
|
167,321
|
|
(1)
Unrealized gains are attributable to assets still held as of June 30, 2010 and
are recorded in gains on trading assets.
(2)
Includes unrealized gains of $4.0 million attributable to assets still held as
of June 30, 2010 that are recorded in gains on trading assets.
(3)
Unrealized losses are attributable to liabilities still held as of June 30, 2010
and are recorded in (losses)/gains on financial derivatives.
Level 3
Assets and Liabilities Measured at Fair Value for the Three Months Ended June
30, 2009
|
|
Beginning
Balance
|
|
|
Purchases,
Sales,
Issuances
and
Settlements,
net
|
|
|
Realized and
Unrealized
Gains/(Losses)
included in
Income
|
|
|
Unrealized
Gains/(Losses)
included in Other
Comprehensive
Income
|
|
|
Net Transfers In
and/or Out
|
|
|
Ending
Balance
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
67,636
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,080
|
|
|
$
|
-
|
|
|
$
|
68,716
|
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,055
|
|
|
|
49,132
|
|
|
|
54,187
|
|
Total
available-for-sale
|
|
|
67,636
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,135
|
|
|
|
49,132
|
|
|
|
122,903
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities(1)
|
|
|
1,962
|
|
|
|
(205
|
)
|
|
|
180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,937
|
|
Fixed
rate GSE preferred stock(1)
|
|
|
176,790
|
|
|
|
(333
|
)
|
|
|
7,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
183,500
|
|
Total
trading
|
|
|
178,752
|
|
|
|
(538
|
)
|
|
|
7,223
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185,437
|
|
Total
investment securities
|
|
|
246,388
|
|
|
|
(538
|
)
|
|
|
7,223
|
|
|
|
6,135
|
|
|
|
49,132
|
|
|
|
308,340
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
63,216
|
|
|
|
(6,570
|
)
|
|
|
-
|
|
|
|
(1,014
|
)
|
|
|
-
|
|
|
|
55,632
|
|
Farmer
Mac II
|
|
|
588,996
|
|
|
|
56,760
|
|
|
|
-
|
|
|
|
(1,184
|
)
|
|
|
-
|
|
|
|
644,572
|
|
Rural
Utilities
|
|
|
912,695
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
11,382
|
|
|
|
-
|
|
|
|
1,424,077
|
|
Total
available-for-sale
|
|
|
1,564,907
|
|
|
|
550,190
|
|
|
|
-
|
|
|
|
9,184
|
|
|
|
-
|
|
|
|
2,124,281
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac II(2)
|
|
|
476,681
|
|
|
|
(23,428
|
)
|
|
|
(5,296
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
447,957
|
|
Rural
Utilities(1)
|
|
|
449,066
|
|
|
|
-
|
|
|
|
(1,892
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
447,174
|
|
Total
trading
|
|
|
925,747
|
|
|
|
(23,428
|
)
|
|
|
(7,188
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
895,131
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
2,490,654
|
|
|
|
526,762
|
|
|
|
(7,188
|
)
|
|
|
9,184
|
|
|
|
-
|
|
|
|
3,019,412
|
|
Total
Assets at fair value
|
|
$
|
2,737,042
|
|
|
$
|
526,224
|
|
|
$
|
35
|
|
|
$
|
15,319
|
|
|
$
|
49,132
|
|
|
$
|
3,327,752
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Derivatives(3)
|
|
$
|
(4,236
|
)
|
|
$
|
-
|
|
|
$
|
886
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,350
|
)
|
Total
Liabilities at fair value
|
|
$
|
(4,236
|
)
|
|
$
|
-
|
|
|
$
|
886
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,350
|
)
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REO
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,260
|
|
|
$
|
43,260
|
|
Total
Assets at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,260
|
|
|
$
|
43,260
|
|
(1)
Unrealized gains/(losses) are attributable to assets still held as of June 30,
2009 and are recorded in gains on trading assets.
(2)
Includes unrealized gains of approximately $4.9 million attributable to assets
still held as of June 30, 2009 that are recorded in gains on trading
assets.
(3)
Unrealized gains are attributable to liabilities still held as of June 30, 2009
and are recorded in (losses)/gains on financial derivatives.
Level 3
Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30,
2010
|
|
Beginning
Balance
|
|
|
Purchases,
Sales,
Issuances and
Settlements,
net
|
|
|
Realized and
Unrealized
Gains/(Losses)
included in
Income
|
|
|
Unrealized
Gains/(Losses)
included in Other
Comprehensive
Income
|
|
|
Net Transfers In
and/or Out
|
|
|
Ending Balance
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
72,884
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(9,540
|
)
|
|
$
|
-
|
|
|
$
|
63,344
|
|
Floating
rate GSE subordinated debt
|
|
|
47,562
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(47,562
|
)
|
|
|
-
|
|
Fixed
rate GSE preferred stock
|
|
|
89,211
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(89,211
|
)
|
|
|
-
|
|
Total
available-for-sale investment securities
|
|
|
209,657
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,540
|
)
|
|
|
(136,773
|
)
|
|
|
63,344
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities(1)
|
|
|
1,824
|
|
|
|
(402
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,412
|
|
Fixed
rate GSE preferred stock
|
|
|
88,148
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(88,148
|
)
|
|
|
-
|
|
Total
trading investment securities
|
|
|
89,972
|
|
|
|
(402
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(88,148
|
)
|
|
|
1,412
|
|
Total
investment securities
|
|
|
299,629
|
|
|
|
(402
|
)
|
|
|
(10
|
)
|
|
|
(9,540
|
)
|
|
|
(224,921
|
)
|
|
|
64,756
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
56,864
|
|
|
|
(5,265
|
)
|
|
|
-
|
|
|
|
1,607
|
|
|
|
(5,385
|
)
|
|
|
47,821
|
|
Farmer
Mac II
|
|
|
764,792
|
|
|
|
197
|
|
|
|
-
|
|
|
|
(1,369
|
)
|
|
|
(723,184
|
)
|
|
|
40,436
|
|
Rural
Utilities
|
|
|
1,703,211
|
|
|
|
(87,799
|
)
|
|
|
-
|
|
|
|
14,471
|
|
|
|
-
|
|
|
|
1,629,883
|
|
Total
available-for-sale
|
|
|
2,524,867
|
|
|
|
(92,867
|
)
|
|
|
-
|
|
|
|
14,709
|
|
|
|
(728,569
|
)
|
|
|
1,718,140
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac II
|
|
|
422,681
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(422,681
|
)
|
|
|
-
|
|
Rural
Utilities
|
|
|
451,448
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(451,448
|
)
|
|
|
-
|
|
Total
trading
|
|
|
874,129
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(874,129
|
)
|
|
|
-
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
3,398,996
|
|
|
|
(92,867
|
)
|
|
|
-
|
|
|
|
14,709
|
|
|
|
(1,602,698
|
)
|
|
|
1,718,140
|
|
USDA
Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
-
|
|
|
|
137,579
|
|
|
|
-
|
|
|
|
19,661
|
|
|
|
723,184
|
|
|
|
880,424
|
|
Trading(2)
|
|
|
-
|
|
|
|
(46,789
|
)
|
|
|
10,604
|
|
|
|
-
|
|
|
|
422,681
|
|
|
|
386,496
|
|
Total
USDA Guaranteed Securities
|
|
|
-
|
|
|
|
90,790
|
|
|
|
10,604
|
|
|
|
19,661
|
|
|
|
1,145,865
|
|
|
|
1,266,920
|
|
Total
Assets at fair value
|
|
$
|
3,698,625
|
|
|
$
|
(2,479
|
)
|
|
$
|
10,594
|
|
|
$
|
24,830
|
|
|
$
|
(681,754
|
)
|
|
$
|
3,049,816
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives(3)
|
|
$
|
(3,653
|
)
|
|
$
|
-
|
|
|
$
|
(25
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,678
|
)
|
Total
Liabilities at fair value
|
|
$
|
(3,653
|
)
|
|
$
|
-
|
|
|
$
|
(25
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,678
|
)
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
held for sale, at lower of cost or fair value
|
|
$
|
28,505
|
|
|
$
|
-
|
|
|
$
|
(2,184
|
)
|
|
$
|
-
|
|
|
$
|
136,744
|
|
|
$
|
163,065
|
|
Loans
held for investment, at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
(668
|
)
|
|
|
-
|
|
|
|
4,924
|
|
|
|
4,256
|
|
Total
Assets at fair value
|
|
$
|
28,505
|
|
|
$
|
-
|
|
|
$
|
(2,852
|
)
|
|
$
|
-
|
|
|
$
|
141,668
|
|
|
$
|
167,321
|
|
(1)
Unrealized losses are attributable to assets still held as of June 30, 2010 and
are recorded in gains on trading assets.
(2)
Includes unrealized gains of $8.0 million attributable to assets still held as
of June 30, 2010 that are recorded in gains on trading assets.
(3)
Unrealized losses are attributable to liabilities still held as of June 30, 2010
and are recorded in (losses)/gains on financial derivatives.
Level 3
Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30,
2009
|
|
Beginning
Balance
|
|
|
Purchases,
Sales,
Issuances
and
Settlements,
net
|
|
|
Realized
and
Unrealized
Gains/(Losses)
included
in
Income
|
|
|
Unrealized
Gains/(Losses)
included
in
Other
Comprehensive
Income
|
|
|
Net
Transfers
In
and/or
Out
|
|
|
Ending
Balance
|
|
|
|
(in
thousands)
|
|
Recurring:
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate auction-rate certificates backed by Government guaranteed student
loans
|
|
$
|
178,577
|
|
|
$
|
(119,850
|
)
|
|
$
|
-
|
|
|
$
|
9,989
|
|
|
$
|
-
|
|
|
$
|
68,716
|
|
Floating
rate GSE subordinated debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,055
|
|
|
|
49,132
|
|
|
|
54,187
|
|
Total
available-for-sale
|
|
|
178,577
|
|
|
|
(119,850
|
)
|
|
|
-
|
|
|
|
15,044
|
|
|
|
49,132
|
|
|
|
122,903
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rate asset-backed securities(1)
|
|
|
2,211
|
|
|
|
(473
|
)
|
|
|
199
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,937
|
|
Fixed
rate GSE preferred stock(1)
|
|
|
161,552
|
|
|
|
(681
|
)
|
|
|
22,629
|
|
|
|
-
|
|
|
|
-
|
|
|
|
183,500
|
|
Total
trading
|
|
|
163,763
|
|
|
|
(1,154
|
)
|
|
|
22,828
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185,437
|
|
Total
investment securities
|
|
|
342,340
|
|
|
|
(121,004
|
)
|
|
|
22,828
|
|
|
|
15,044
|
|
|
|
49,132
|
|
|
|
308,340
|
|
Farmer
Mac Guaranteed Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac I
|
|
|
349,292
|
|
|
|
(3,681
|
)
|
|
|
-
|
|
|
|
(1,967
|
)
|
|
|
(288,012
|
)
|
|
|
55,632
|
|
Farmer
Mac II
|
|
|
522,565
|
|
|
|
118,251
|
|
|
|
-
|
|
|
|
3,756
|
|
|
|
-
|
|
|
|
644,572
|
|
Rural
Utilities
|
|
|
639,837
|
|
|
|
770,000
|
|
|
|
-
|
|
|
|
14,240
|
|
|
|
-
|
|
|
|
1,424,077
|
|
Total
available-for-sale
|
|
|
1,511,694
|
|
|
|
884,570
|
|
|
|
-
|
|
|
|
16,029
|
|
|
|
(288,012
|
)
|
|
|
2,124,281
|
|
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmer
Mac II(2)
|
|
|
496,863
|
|
|
|
(47,342
|
)
|
|
|
(1,564
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
447,957
|
|
Rural
Utilities(1)
|
|
|
442,687
|
|
|
|
(5,909
|
)
|
|
|
10,396
|
|
|
|
-
|
|
|
|
-
|
|
|
|
447,174
|
|
Total
trading
|
|
|
939,550
|
|
|
|
(53,251
|
)
|
|
|
8,832
|
|
|
|
-
|
|
|
|
-
|
|
|
|
895,131
|
|
Total
Farmer Mac Guaranteed Securities
|
|
|
2,451,244
|
|
|
|
831,319
|
|
|
|
8,832
|
|
|
|
16,029
|
|
|
|
(288,012
|
)
|
|
|
3,019,412
|
|
Total
Assets at fair value
|
|
$
|
2,793,584
|
|
|
$
|
710,315
|
|
|
$
|
31,660
|
|
|
$
|
31,073
|
|
|
$
|
(238,880
|
)
|
|
$
|
3,327,752
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Derivatives(3)
|
|
$
|
(3,719
|
)
|
|
$
|
-
|
|
|
$
|
369
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,350
|
)
|
Total
Liabilities at fair value
|
|
$
|
(3,719
|
)
|
|
$
|
-
|
|
|
$
|
369
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,350
|
)
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REO
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,260
|
|
|
$
|
43,260
|
|
Total
Assets at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,260
|
|
|
$
|
43,260
|
|
(1)
Unrealized gains are attributable to assets still held as of June 30, 2009 and
are recorded in gains on trading assets.
(2)
Includes unrealized losses of approximately $0.9 million attributable to assets
still held as of June 30, 2009 that are recorded in gains on trading
assets.
(3)
Unrealized gains are attributable to liabilities still held as of June 30, 2009
and are recorded in (losses)/gains on financial derivatives.
Fair
Value Option
FASB
guidance on the fair value option for financial instruments permits entities to
make a one-time irrevocable election to report financial instruments at fair
value with changes in fair value recorded in earnings as the occur. One of the
FASB’s stated objectives of this guidance was to improve financial reporting by
providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions.
Farmer
Mac made no fair value option elections for the three and six months ended
June 30, 2010 and 2009. For the three and six months ended June 30,
2010, Farmer Mac recorded net gains on trading assets of $4.9 million and $8.4
million, respectively, for changes in fair values of assets selected for the
fair value option, compared to $(0.1) million and $31.5 million for the same
periods ended June 30, 2009. These gains are presented as “Gains on trading
assets” in the condensed consolidated statements of operations.
Disclosures
about Fair Value of Financial Instruments
The
following table sets forth the estimated fair values and the carrying amounts
for financial assets, liabilities and guarantees and commitments as of June 30,
2010 and December 31, 2009 in accordance with FASB guidance on
disclosures about fair value of financial instruments.
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
|
(in
thousands)
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
325,333
|
|
|
$
|
325,333
|
|
|
$
|
654,794
|
|
|
$
|
654,794
|
|
Investment
securities
|
|
|
1,257,332
|
|
|
|
1,257,332
|
|
|
|
1,131,895
|
|
|
|
1,131,895
|
|
Farmer
Mac Guaranteed Securities
|
|
|
1,718,140
|
|
|
|
1,718,140
|
|
|
|
3,398,996
|
|
|
|
3,398,996
|
|
USDA
Guaranteed Securities
|
|
|
1,266,920
|
|
|
|
1,266,920
|
|
|
|
-
|
|
|
|
-
|
|
Loans
|
|
|
2,472,261
|
|
|
|
2,327,964
|
|
|
|
779,185
|
|
|
|
753,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivatives
|
|
|
37,121
|
|
|
|
37,121
|
|
|
|
15,040
|
|
|
|
15,040
|
|
Interest
receivable
|
|
|
72,616
|
|
|
|
72,616
|
|
|
|
67,178
|
|
|
|
67,178
|
|
Guarantee
and commitment fees receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTSPCs
|
|
|
13,280
|
|
|
|
13,430
|
|
|
|
14,591
|
|
|
|
15,896
|
|
Farmer
Mac Guaranteed Securities
|
|
|
20,467
|
|
|
|
23,149
|
|
|
|
36,135
|
|
|
|
39,120
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
within one year
|
|
|
3,225,846
|
|
|
|
3,226,745
|
|
|
|
3,665,282
|
|
|
|
3,662,898
|
|
Due
after one year
|
|
|
2,382,859
|
|
|
|
2,269,421
|
|
|
|
1,964,526
|
|
|
|
1,908,713
|
|
Debt
securities of consolidated trusts held by third parties
|
|
|
957,761
|
|
|
|
882,629
|
|
|
|
-
|
|
|
|
-
|
|
Financial
derivatives
|
|
|
132,675
|
|
|
|
132,675
|
|
|
|
107,367
|
|
|
|
107,367
|
|
Accrued
interest payable
|
|
|
52,913
|
|
|
|
52,913
|
|
|
|
39,562
|
|
|
|
39,562
|
|
Guarantee
and commitment obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTSPCs
|
|
|
12,366
|
|
|
|
12,516
|
|
|
|
13,370
|
|
|
|
14,676
|
|
Farmer
Mac Guaranteed Securities
|
|
|
17,564
|
|
|
|
20,246
|
|
|
|
30,865
|
|
|
|
33,850
|
|
The
carrying amount of cash and cash equivalents, certain short-term investment
securities, interest receivable and accrued interest payable is a reasonable
estimate of their approximate fair value. Farmer Mac estimates the fair value of
its loans, guarantee and commitment fees receivable/obligation and notes payable
by discounting the projected cash flows of these instruments at projected
interest rates. The fair values are based on the present value of expected cash
flows using management’s best estimate of certain key assumptions, which include
prepayment speeds, forward yield curves and discount rates commensurate with the
risks involved. Because the cash flows of these instruments may be interest rate
path dependent, these values and projected discount rates are derived using a
Monte Carlo simulation model. Different market assumptions and estimation
methodologies could significantly affect estimated fair value
amounts.
Note
8.
|
Business
Segment Reporting
|
Farmer
Mac accomplishes its congressional mission of providing liquidity and lending
capacity to rural lenders through three programs – Farmer Mac I, Farmer Mac II
and Rural Utilities. Prior to first quarter 2010, Farmer Mac reported its
financial results as a single segment using GAAP-basis income. Beginning in
first quarter 2010, Farmer Mac revised its segment financial reporting, by using
core earnings, a non-GAAP financial measure, to reflect the manner in which
management has begun assessing the Corporation’s performance since the
contribution of substantially all of the Farmer Mac II program business to a
subsidiary, Farmer Mac II LLC. Farmer Mac uses core earnings to measure
corporate economic performance and develop financial plans because, in
management’s view, core earnings more accurately represents Farmer Mac’s
economic performance, transaction economics and business trends. Core earnings
differs from GAAP net income primarily by excluding unrealized gains or losses
on financial derivatives and trading assets, lower of cost or fair value
adjustments on loans held for sale and other items related to the retirement of
preferred stock and the amortization of premiums on assets consolidated at fair
value. This non-GAAP financial measure may not be similar to non-GAAP financial
measures disclosed by other companies.
The
financial information presented below reflects the accounts of Farmer Mac and
its subsidiaries on a consolidated basis. Accordingly, the core earnings for
Farmer Mac’s reportable operating segments will differ from the stand-alone
financial statements of Farmer Mac’s subsidiaries. These differences will be due
to various factors, including the reversal of unrealized gains and losses
related to fair value changes of trading assets and financial derivatives, as
well as the allocation of certain expenses such as dividends and interest
expense related to the issuance of capital and the incurrence of indebtedness
managed at the corporate level. The allocation of general and administrative
expenses that are not directly attributable to an operating segment may also
result in differences. The assets of Farmer Mac’s subsidiary Farmer Mac II LLC
would be available to creditors of Farmer Mac only after all obligations owed to
creditors of and equity holders in Farmer Mac II LLC had been satisfied. As of
June 30, 2010, Farmer Mac II LLC held assets with a fair value of $1.3 billion,
had debt outstanding of $46.0 million, had preferred stock outstanding with a
liquidation preference of $250.0 million, and had $1.0 billion of common
stock outstanding, all of which is held by Farmer Mac.
Management
has determined that the Corporation’s operations consist of three reportable
segments – Farmer Mac I, Farmer Mac II and Rural Utilities. Farmer Mac uses
these three segments to generate revenue and manage business risk, and each
segment is based on distinct products and distinct business activities. In
addition to these three program operating segments, a corporate segment is
presented. That segment represents activity in Farmer Mac’s non-program
investment portfolio and other corporate activities. The segment financial
results include directly attributable revenues and expenses. Corporate charges
for administrative expenses that are not directly attributable to an operating
segment are allocated based on headcount.
Each of
the program operating segments generates revenue through purchasing loans or
securities, committing to purchase loans, or guaranteeing securities backed by
eligible loans. Purchases of both program and non-program assets are funded
through debt issuance of various maturities. Management makes decisions about
pricing, funding, guarantee and commitment fee levels, based on inherent credit
risks, resource allocation and target returns on equity separately for each
segment.
Under the
Farmer Mac I program, Farmer Mac purchases or commits to purchase eligible
mortgage loans secured by first liens on agricultural real estate, including
through the issuance of LTSPCs. Farmer Mac also guarantees securities
representing interests in, or obligations secured by, pools of eligible
agricultural real estate mortgage loans, and may purchase those
securities.
Under the
Farmer Mac II program, Farmer Mac II LLC purchases USDA-guaranteed portions of
loans. Farmer Mac currently operates only that part of the Farmer Mac II
program that involves the guarantee of Farmer Mac II Guaranteed Securities,
and only to the extent that either Farmer Mac or Farmer Mac II LLC is approached
or referred by an investor. Farmer Mac will not issue Farmer Mac II
Guaranteed Securities to Farmer Mac II LLC in the future.
Under the
Rural Utilities program, Farmer Mac’s business activities include loan
purchases, guarantees and purchases of securities with respect to eligible rural
utilities loans. To date, all of the business under the Rural
Utilities program has been with one lender, National Rural.
The
following table presents core earnings for Farmer Mac’s reportable operating
segments and a reconciliation to GAAP net income for the three and six months
ended June 30, 2010 and 2009. Farmer Mac has presented the
financial information and disclosures for the prior periods to reflect the
segment disclosures as if they had been in effect for all periods
reported.
Core Earnings by Business
Segment
For the Three Months Ended June 30,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
|
Reconciling
|
|
|
GAAP
|
|
|
|
Farmer
Mac
I
|
|
|
Farmer
Mac
II
|
|
|
Rural
Utilities
|
|
|
Corporate
|
|
|
Earnings
|
|
|
Adjustments
|
|
|
Income
|
|
|
|
(in
thousands)
|
|
Interest
income (1)
|
|
$
|
27,081
|
|
|
$
|
13,825
|
|
|
$
|
13,987
|
|
|
$
|
6,390
|
|
|
$
|
61,283
|
|
|
$
|
(3,956
|
)
|
|
$
|
57,327
|
|
Interest
income related to consolidated
trusts
owned by third parties reclassed
to
guarantee fee income
|
|
|
(1,282
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,282
|
)
|
|
|
1,282
|
|
|
|
-
|
|
Interest
expense (2)
|
|
|
(18,210
|
)
|
|
|
(11,262
|
)
|
|
|
(11,342
|
)
|
|
|
(3,638
|
)
|
|
|
(44,452
|
)
|
|
|
8,733
|
|
|
|
(35,719
|
)
|
Net
effective spread
|
|
|
7,589
|
|
|
|
2,563
|
|
|
|
2,645
|
|
|
|
2,752
|
|
|
|
15,549
|
|
|
|
6,059
|
|
|
|
21,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
and commitment fees
|
|
|
5,450
|
|
|
|
50
|
|
|
|
1,492
|
|
|
|
-
|
|
|
|
6,992
|
|
|
|
(1,282
|
)
|
|
|
5,710
|
|
Other
income/(expense) (3)
|
|
|
411
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(784
|
)
|
|
|
(373
|
)
|
|
|
(10,108
|
)
|
|
|
(10,481
|
)
|
Non-interest
income/(loss)
|
|
|
5,861
|
|
|
|
50
|
|
|
|
1,492
|
|
|
|
(784
|
)
|
|
|
6,619
|
|
|
|
(11,390
|
)
|
|
|
(4,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
of loan losses
|
|
|
1,870
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,870
|
|
|
|
-
|
|
|
|
1,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for losses
|
|
|
(3,043
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,043
|
)
|
|
|
-
|
|
|
|
(3,043
|
)
|
Other
non-interest expense
|
|
|
(3,350
|
)
|
|
|
(721
|
)
|
|
|
(1,038
|
)
|
|
|
(1,709
|
)
|
|
|
(6,818
|
)
|
|
|
-
|
|
|
|
(6,818
|
)
|
Non-interest
expense (4)
|
|
|
(6,393
|
)
|
|
|
(721
|
)
|
|
|
(1,038
|
)
|
|
|
(1,709
|
)
|
|
|
(9,861
|
)
|
|
|
-
|
|
|
|
(9,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
8,927
|
|
|
|
1,892
|
|
|
|
3,099
|
|
|
|
259
|
|
|
|
14,177
|
|
|
|
(5,331
|
)
|
|
|
8,846
|
|
Income
tax (expense)/benefit
|
|
|
(3,124
|
)
|
|
|
(662
|
)
|
|
|
(1,085
|
)
|
|
|
2,249
|
|
|
|
(2,622
|
)
|
|
|
1,866
|
|
|
|
(756
|
)
|
Net
income before dividends
|
|
|
5,803
|
|
|
|
1,230
|
|
|
|
2,014
|
|
|
|
2,508
|
|
|
|
11,555
|
|
|
|
(3,465
|
)
|
|
|
8,090
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(720
|
)
|
|
|
(720
|
)
|
|
|
-
|
|
|
|
(720
|
)
|
Net
income
|
|
|
5,803
|
|
|
|
1,230
|
|
|
|
2,014
|
|
|
|
1,788
|
|
|
|
10,835
|
|
|
|
(3,465
|
)
|
|
|
7,370
|
|
Non-controlling
interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,546
|
)
|
|
|
(5,546
|
)
|
|
|
-
|
|
|
|
(5,546
|
)
|
Segment
core earnings
|
|
$
|
5,803
|
|
|
$
|
1,230
|
|
|
$
|
2,014
|
|
|
$
|
(3,758
|
)
|
|
$
|
5,289
|
|
|
$
|
(3,465
|
)
|
|
$
|
1,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at carrying value
|
|
$
|
1,836,374
|
|
|
$
|
1,324,674
|
|
|
$
|
2,262,314
|
|
|
$
|
1,676,128
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,099,490
|
|
Total
on- and off-balance sheet program
assets
at principal balance
|
|
|
7,288,389
|
|
|
|
1,300,944
|
|
|
|
2,173,660
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,762,993
|
|
Core
Earnings
by
Business
Segment
For
the
Three
Months
Ended
June
30,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
|
Reconciling
|
|
|
GAAP
|
|
|
|
Farmer
Mac
I
|
|
|
Farmer
Mac
II
|
|
|
Rural
Utilities
|
|
|
Corporate
|
|
|
Earnings
|
|
|
Adjustments
|
|
|
Income
|
|
|
|
(in
thousands)
|
|
Interest
income (1)
|
|
$
|
9,567
|
|
|
$
|
11,656
|
|
|
$
|
13,370
|
|
|
$
|
7,049
|
|
|
$
|
41,642
|
|
|
$
|
108
|
|
|
$
|
41,750
|
|
Interest
expense (2)
|
|
|
(5,430
|
)
|
|
|
(9,960
|
)
|
|
|
(12,300
|
)
|
|
|
(4,096
|
)
|
|
|
(31,786
|
)
|
|
|
9,937
|
|
|
|
(21,849
|
)
|
Net
effective spread
|
|
|
4,137
|
|
|
|
1,696
|
|
|
|
1,070
|
|
|
|
2,953
|
|
|
|
9,856
|
|
|
|
10,045
|
|
|
|
19,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
and commitment fees
|
|
|
5,871
|
|
|
|
691
|
|
|
|
1,346
|
|
|
|
-
|
|
|
|
7,908
|
|
|
|
-
|
|
|
|
7,908
|
|
Other
(expense)/income (3)
|
|
|
(93
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,591
|
)
|
|
|
(2,684
|
)
|
|
|
21,756
|
|
|
|
19,072
|
|
Non-interest
income/(loss)
|
|
|
5,778
|
|
|
|
691
|
|
|
|
1,346
|
|
|
|
(2,591
|
)
|
|
|
5,224
|
|
|
|
21,756
|
|
|
|
26,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
of loan losses
|
|
|
5,693
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,693
|
|
|
|
-
|
|
|
|
5,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
of losses
|
|
|
529
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
529
|
|
|
|
-
|
|
|
|
529
|
|
Other
non-interest expense
|
|
|
(3,224
|
)
|
|
|
(958
|
)
|
|
|
(810
|
)
|
|
|
(2,062
|
)
|
|
|
(7,054
|
)
|
|
|
-
|
|
|
|
(7,054
|
)
|
Non-interest
expense (4)
|
|
|
(2,695
|
)
|
|
|
(958
|
)
|
|
|
(810
|
)
|
|
|
(2,062
|
)
|
|
|
(6,525
|
)
|
|
|
-
|
|
|
|
(6,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
12,913
|
|
|
|
1,429
|
|
|
|
1,606
|
|
|
|
(1,700
|
)
|
|
|
14,248
|
|
|
|
31,801
|
|
|
|
46,049
|
|
Income
tax (expense)/benefit
|
|
|
(4,520
|
)
|
|
|
(500
|
)
|
|
|
(562
|
)
|
|
|
178
|
|
|
|
(5,404
|
)
|
|
|
(11,130
|
)
|
|
|
(16,534
|
)
|
Net
income before dividends
|
|
|
8,393
|
|
|
|
929
|
|
|
|
1,044
|
|
|
|
(1,522
|
)
|
|
|
8,844
|
|
|
|
20,671
|
|
|
|
29,515
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,130
|
)
|
|
|
(4,130
|
)
|
|
|
-
|
|
|
|
(4,130
|
)
|
Segment
core earnings
|
|
$
|
8,393
|
|
|
$
|
929
|
|
|
$
|
1,044
|
|
|
$
|
(5,652
|
)
|
|
$
|
4,714
|
|
|
$
|
20,671
|
|
|
$
|
25,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at carrying value
|
|
$
|
814,717
|
|
|
$
|
1,108,455
|
|
|
$
|
1,885,496
|
|
|
$
|
1,514,016
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,322,684
|
|
Total
on- and off-balance sheet program
assets
at principal balance
|
|
|
7,464,419
|
|
|
|
1,115,025
|
|
|
|
1,819,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,398,477
|
|
(1)
|
Includes reconciling adjustments
for yield maintenance income and amortization of premiums on assets
consolidated at fair value to reflect core earnings
amounts.
|
(2)
|
Based on effective funding cost
determined for each operating segment, including the expense related to
interest rate swaps, which is included in "other income" on the
GAAP financial
statements.
|
(3)
|
Includes reconciling adjustments
for the reclassification of yield maintenance and the expense related to
interest rate swaps and fair value adjustments on
loans held for sale and financial
derivatives.
|
(4)
|
Includes directly attributable
costs and an allocation of indirectly attributable costs based on
headcount.
|
Core Earnings by Business
Segment
For the Six Months Ended June 30,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
|
Reconciling
|
|
|
GAAP
|
|
|
|
Farmer Mac
I
|
|
|
Farmer Mac
II
|
|
|
Rural
Utilities
|
|
|
Corporate
|
|
|
Earnings
|
|
|
Adjustments
|
|
|
Income
|
|
|
|
(in
thousands)
|
|
Interest
income (1)
|
|
$
|
55,763
|
|
|
$
|
26,431
|
|
|
$
|
27,940
|
|
|
$
|
12,873
|
|
|
$
|
123,007
|
|
|
$
|
(4,948
|
)
|
|
$
|
118,059
|
|
Interest
income related to consolidated
trusts
owned by third parties reclassed
to
guarantee fee income
|
|
|
(2,749
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,749
|
)
|
|
|
2,749
|
|
|
|
-
|
|
Interest
expense (2)
|
|
|
(38,250
|
)
|
|
|
(21,721
|
)
|
|
|
(22,636
|
)
|
|
|
(7,295
|
)
|
|
|
(89,902
|
)
|
|
|
17,068
|
|
|
|
(72,834
|
)
|
Net
effective spread
|
|
|
14,764
|
|
|
|
4,710
|
|
|
|
5,304
|
|
|
|
5,578
|
|
|
|
30,356
|
|
|
|
14,869
|
|
|
|
45,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
and commitment fees
|
|
|
11,000
|
|
|
|
351
|
|
|
|
3,027
|
|
|
|
-
|
|
|
|
14,378
|
|
|
|
(2,749
|
)
|
|
|
11,629
|
|
Other
income/(expense) (3)
|
|
|
1,297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,233
|
)
|
|
|
64
|
|
|
|
(14,187
|
)
|
|
|
(14,123
|
)
|
Non-interest
income/(loss)
|
|
|
12,297
|
|
|
|
351
|
|
|
|
3,027
|
|
|
|
(1,233
|
)
|
|
|
14,442
|
|
|
|
(16,936
|
)
|
|
|
(2,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
(980
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(980
|
)
|
|
|
-
|
|
|
|
(980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for losses
|
|
|
(1,575
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,575
|
)
|
|
|
-
|
|
|
|
(1,575
|
)
|
Other
non-interest expense
|
|
|
(6,386
|
)
|
|
|
(1,548
|
)
|
|
|
(2,067
|
)
|
|
|
(3,404
|
)
|
|
|
(13,405
|
)
|
|
|
-
|
|
|
|
(13,405
|
)
|
Non-interest
expense (4)
|
|
|
(7,961
|
)
|
|
|
(1,548
|
)
|
|
|
(2,067
|
)
|
|
|
(3,404
|
)
|
|
|
(14,980
|
)
|
|
|
-
|
|
|
|
(14,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
18,120
|
|
|
|
3,513
|
|
|
|
6,264
|
|
|
|
941
|
|
|
|
28,838
|
|
|
|
(2,067
|
)
|
|
|
26,771
|
|
Income
tax (expense)/benefit
|
|
|
(6,342
|
)
|
|
|
(1,230
|
)
|
|
|
(2,192
|
)
|
|
|
3,949
|
|
|
|
(5,815
|
)
|
|
|
723
|
|
|
|
(5,092
|
)
|
Net
income before dividends
|
|
|
11,778
|
|
|
|
2,283
|
|
|
|
4,072
|
|
|
|
4,890
|
|
|
|
23,023
|
|
|
|
(1,344
|
)
|
|
|
21,679
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,690
|
)
|
|
|
(2,690
|
)
|
|
|
(5,784
|
)
|
|
|
(8,474
|
)
|
Net
income
|
|
|
11,778
|
|
|
|
2,283
|
|
|
|
4,072
|
|
|
|
2,200
|
|
|
|
20,333
|
|
|
|
(7,128
|
)
|
|
|
13,205
|
|
Non-controlling
interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,614
|
)
|
|
|
(9,614
|
)
|
|
|
-
|
|
|
|
(9,614
|
)
|
Segment
core earnings
|
|
$
|
11,778
|
|
|
$
|
2,283
|
|
|
$
|
4,072
|
|
|
$
|
(7,414
|
)
|
|
$
|
10,719
|
|
|
$
|
(7,128
|
)
|
|
$
|
3,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at carrying value
|
|
$
|
1,836,374
|
|
|
$
|
1,324,674
|
|
|
$
|
2,262,314
|
|
|
$
|
1,676,128
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,099,490
|
|
Total
on- and off-balance sheet program
assets
at principal balance
|
|
|
7,288,389
|
|
|
|
1,300,944
|
|
|
|
2,173,660
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,762,993
|
|
Core Earnings by Business
Segment
For the Six Months Ended June 30,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
|
Reconciling
|
|
|
GAAP
|
|
|
|
Farmer Mac
I
|
|
|
Farmer Mac
II
|
|
|
Rural
Utilities
|
|
|
Corporate
|
|
|
Earnings
|
|
|
Adjustments
|
|
|
Income
|
|
|
|
(in
thousands)
|
|
Interest
income (1)
|
|
$
|
24,589
|
|
|
$
|
23,101
|
|
|
$
|
24,883
|
|
|
$
|
15,958
|
|
|
$
|
88,531
|
|
|
$
|
372
|
|
|
$
|
88,903
|
|
Interest
expense (2)
|
|
|
(13,878
|
)
|
|
|
(20,241
|
)
|
|
|
(22,829
|
)
|
|
|
(9,139
|
)
|
|
|
(66,087
|
)
|
|
|
20,525
|
|
|
|
(45,562
|
)
|
Net
effective spread
|
|
|
10,711
|
|
|
|
2,860
|
|
|
|
2,054
|
|
|
|
6,819
|
|
|
|
22,444
|
|
|
|
20,897
|
|
|
|
43,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
and commitment fees
|
|
|
11,761
|
|
|
|
1,343
|
|
|
|
2,214
|
|
|
|
-
|
|
|
|
15,318
|
|
|
|
-
|
|
|
|
15,318
|
|
Other
income/(expense) (3)
|
|
|
2,287
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(92
|
)
|
|
|
2,195
|
|
|
|
55,097
|
|
|
|
57,292
|
|
Non-interest
income/(loss)
|
|
|
14,048
|
|
|
|
1,343
|
|
|
|
2,214
|
|
|
|
(92
|
)
|
|
|
17,513
|
|
|
|
55,097
|
|
|
|
72,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
of loan losses
|
|
|
2,159
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,159
|
|
|
|
-
|
|
|
|
2,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for losses
|
|
|
(1,990
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,990
|
)
|
|
|
-
|
|
|
|
(1,990
|
)
|
Other
non-interest expense
|
|
|
(6,661
|
)
|
|
|
(1,967
|
)
|
|
|
(1,664
|
)
|
|
|
(4,235
|
)
|
|
|
(14,527
|
)
|
|
|
-
|
|
|
|
(14,527
|
)
|
Non-interest
expense (4)
|
|
|
(8,651
|
)
|
|
|
(1,967
|
)
|
|
|
(1,664
|
)
|
|
|
(4,235
|
)
|
|
|
(16,517
|
)
|
|
|
-
|
|
|
|
(16,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
18,267
|
|
|
|
2,236
|
|
|
|
2,604
|
|
|
|
2,492
|
|
|
|
25,599
|
|
|
|
75,994
|
|
|
|
101,593
|
|
Income
tax (expense)/benefit
|
|
|
(6,393
|
)
|
|
|
(783
|
)
|
|
|
(911
|
)
|
|
|
61
|
|
|
|
(8,026
|
)
|
|
|
(26,598
|
)
|
|
|
(34,624
|
)
|
Net
income before dividends
|
|
|
11,874
|
|
|
|
1,453
|
|
|
|
1,693
|
|
|
|
2,553
|
|
|
|
17,573
|
|
|
|
49,396
|
|
|
|
66,969
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,066
|
)
|
|
|
(8,066
|
)
|
|
|
-
|
|
|
|
(8,066
|
)
|
Segment
core earnings
|
|
$
|
11,874
|
|
|
$
|
1,453
|
|
|
$
|
1,693
|
|
|
$
|
(5,513
|
)
|
|
$
|
9,507
|
|
|
$
|
49,396
|
|
|
$
|
58,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at carrying value
|
|
$
|
814,717
|
|
|
$
|
1,108,455
|
|
|
$
|
1,885,496
|
|
|
$
|
1,514,016
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,322,684
|
|
Total
on- and off-balance sheet program
assets
at principal balance
|
|
|
7,464,419
|
|
|
|
1,115,025
|
|
|
|
1,819,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,398,477
|
|
(1)
|
Includes reconciling adjustments
for yield maintenance income and amortization of premiums on assets
consolidated at fair value to reflect core earnings
amounts.
|
(2)
|
Based on effective funding cost
determined for each operating segment, including the expense related to
interest rate swaps, which is included in "other income" on the
GAAP financial
statements.
|
(3)
|
Includes reconciling adjustments
for the reclassification of yield maintenance and the expense related to
interest rate swaps and fair value adjustments on
loans held for sale and financial
derivatives.
|
(4)
|
Includes directly attributable
costs and an allocation of indirectly attributable costs based on
headcount.
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Financial
information is consolidated to include the accounts of Farmer Mac and its
subsidiaries, Farmer Mac Mortgage Securities Corporation and Farmer Mac II
LLC. Farmer Mac II LLC was formed as a Delaware limited
liability company in December 2009 to operate substantially all of the business
related to the Farmer Mac II program – primarily the acquisition of
USDA-guaranteed portions. The business operations of Farmer Mac II
LLC began in January 2010. In the future, Farmer Mac will operate
only that part of the Farmer Mac II program that involves the issuance of Farmer
Mac II Guaranteed Securities, and only to the extent that Farmer Mac is
approached or referred by an investor. Farmer Mac will not issue
Farmer Mac II Guaranteed Securities to Farmer Mac II LLC in the
future.
This
discussion and analysis of financial condition and results of operations should
be read together with: (1) the interim unaudited condensed
consolidated financial statements and the related notes that appear elsewhere in
this report; (2) Farmer Mac’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2009 filed with the SEC on March 16, 2010;
and (3) the Current Report on Form 8-K filed with the SEC on August 4, 2010,
which updated the aforementioned Form 10-K.
The
discussion below is not necessarily indicative of future
results.
Special Note Regarding
Forward-Looking Statements
Some
statements made in this report are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995 pertaining to
management’s current expectations as to Farmer Mac’s future financial results,
business prospects and business developments. Forward-looking
statements include, without limitation, any statement that may predict,
forecast, indicate or imply future results, performance or achievements, and
typically are accompanied by, and identified with, such terms as “anticipates,”
“believes,” “expects,” “intends,” “should” and similar phrases. The
following management’s discussion and analysis includes forward-looking
statements addressing Farmer Mac’s:
|
·
|
prospects
for earnings;
|
|
·
|
prospects
for growth in loan purchase, guarantee, securitization, and LTSPC
volume;
|
|
·
|
trends
in net interest income;
|
|
·
|
trends
in portfolio credit quality, delinquencies, and provisions for
losses;
|
|
·
|
trends
in non-program investments;
|
|
·
|
prospects
for asset impairments and allowance for
losses;
|
|
·
|
changes
in capital position; and
|
|
·
|
other
business and financial matters.
|
Management’s
expectations for Farmer Mac’s future necessarily involve a number of assumptions
and estimates and the evaluation of risks and uncertainties. Various
factors or events could cause Farmer Mac’s actual results to differ materially
from the expectations as expressed or implied by the forward-looking statements,
including the factors discussed under “Risk Factors” in Part I, Item 1A of
Farmer Mac’s Annual Report on Form 10-K for the year ended
December 31, 2009 filed with the SEC on March 16, 2010, as well as
uncertainties regarding:
|
·
|
the
availability to Farmer Mac and Farmer Mac II LLC of debt financing on
reasonable rates and terms;
|
|
·
|
legislative
or regulatory developments that could affect Farmer
Mac;
|
|
·
|
fluctuations
in the fair value of assets held by Farmer Mac and Farmer Mac II
LLC;
|
|
·
|
the
rate and direction of development of the secondary market for agricultural
mortgage and rural utilities loans, including lender interest in Farmer
Mac credit products and the Farmer Mac secondary
market;
|
|
·
|
the
general rate of growth in agricultural mortgage and rural utilities
indebtedness;
|
|
·
|
borrower
preferences for fixed rate agricultural mortgage
indebtedness;
|
|
·
|
the
impact of economic conditions and real estate values on agricultural
mortgage lending;
|
|
·
|
the
willingness of investors to invest in Farmer Mac Guaranteed
Securities;
|
|
·
|
developments
in the financial markets, including possible investor, analyst and rating
agency reactions to events involving GSEs, including Farmer Mac;
and
|
|
·
|
the
future level of interest rates, commodity prices, and export demand for
U.S. agricultural products.
|
In light
of these potential risks and uncertainties, no undue reliance should be placed
on any forward-looking statements expressed in this
report. Furthermore, Farmer Mac undertakes no obligation to release
publicly the results of revisions to any forward-looking statements that may be
made to reflect new information or any future events or circumstances, except as
otherwise mandated by the SEC.
Overview
With the
new capital raised during first quarter 2010, Farmer Mac is well-positioned to
partner with agricultural and rural utilities lenders, and Farmer Mac II LLC is
well-positioned to partner with lenders participating in USDA’s guaranteed loan
programs, to continue to fulfill Farmer Mac’s mission to provide capital and
liquidity to rural America. As of June 30, 2010, Farmer Mac’s excess
core capital above its statutory minimum capital requirement was
$206.6 million.
During
first and second quarters 2010, increased loan purchase activity in the
Farmer Mac I program continued in part due to attractive long-term
fixed interest rates offered by Farmer Mac along with farmers and ranchers
reaching Farmer Mac’s commercial bank business partners’
borrower exposure
limits. Similarly, purchases of USDA Guaranteed Securities by Farmer
Mac II LLC were at a record pace for second quarter 2010. While
Farmer Mac did not complete any of the larger portfolio transactions during
second quarter that have contributed to its historical growth, in July 2010
Farmer Mac purchased an aggregate of $250.0 million of AgVantage securities in
two transactions. Those purchases were the first Farmer Mac I program
portfolio transactions of comparable size completed since third quarter
2008.
The
growth in Farmer Mac’s Rural Utilities program continued during 2010 with the
purchase of $136.7 million of loans under that program during the six
months ended June 30, 2010. That growth occurred at a lower rate than
in 2008 and 2009 when Farmer Mac purchased general obligation notes from
National Rural secured by eligible rural utilities loans in AgVantage structures
in several larger transactions. Beginning in August 2009 and
continuing through 2010, the majority of Farmer Mac’s rural utilities business
was direct purchases of distribution cooperative rural utilities loans, and this
trend of purchasing eligible rural utilities loans, as opposed to guaranteeing
general obligations secured by eligible loans in AgVantage transactions, is
expected to continue for the foreseeable future under the Rural Utilities
program. In late 2009, Farmer Mac developed underwriting standards
for the purchase of loans to generation and transmission
cooperatives. Farmer Mac expects to begin purchasing these types of
rural utilities loans during third quarter 2010.
Critical Accounting Policies
and Estimates
The
preparation of Farmer Mac’s consolidated financial statements in conformity with
GAAP requires the use of estimates and assumptions that affect the amounts
reported in the condensed consolidated financial statements and related notes
for the periods presented. Actual results could differ from those
estimates. The critical accounting policies that are both important
to the portrayal of Farmer Mac’s financial position and results of operations
and require complex, subjective judgments are the accounting policies
for: (1) the allowance for losses, (2) fair value measurement,
and (3) other-than-temporary impairment.
For a
discussion of Farmer Mac’s critical accounting policies related to the allowance
for losses, fair value measurement and other-than-temporary impairment and the
related use of estimates and assumptions that affect the amounts reported in the
condensed consolidated financial statements and related notes for the periods
presented, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Policies and Estimates” in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009
filed with the SEC on March 16, 2010 (as updated by the Current Report on Form
8-K filed with the SEC on August 4, 2010).
Results of
Operations
Farmer
Mac’s net income available to common stockholders for second quarter 2010 was
$1.8 million or $0.17 per diluted common share, compared to net income of
$25.4 million or $2.49 per diluted common share for second quarter
2009. For the six months ended June 30, 2010, Farmer
Mac
’
s
net income available to common stockholders was $3.6 million, compared to $58.9
million for the six months ended June 30, 2009.
Farmer
Mac uses core earnings, a non-GAAP financial measure, to measure corporate
economic performance and develop financial plans because, in financial
management’s view, core earnings more accurately represents Farmer Mac’s
economic performance, transaction economics and business trends. Core
earnings differs from GAAP net income primarily by excluding unrealized gains or
losses on financial derivatives and trading assets, lower of cost or fair value
adjustments on loans held for sale and other items related to the retirement of
preferred stock and the amortization of premiums on assets consolidated at fair
value. Farmer Mac’s disclosure of this non-GAAP measure is not
intended to replace GAAP information but, rather, to supplement it. A
reconciliation of Farmer Mac’s GAAP net income available to common stockholders
to core earnings is presented in the following table, and those reconciling
items are described in more detail below the table.
Reconciliation of GAAP Net Income
Available to Common Stockholders to Core
Earnings
|
|
|
For the Three Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Per
Diluted
|
|
|
|
|
|
Per
Diluted
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
(in
thousands, except per share amounts)
|
|
GAAP net income
available
to common
stockholders
|
|
$
|
1,824
|
|
|
$
|
0.17
|
|
|
$
|
25,385
|
|
|
$
|
2.49
|
|
Less the net of tax effects
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses)/gains on
financial derivatives
|
|
|
(4,016
|
)
|
|
|
(0.38
|
)
|
|
|
20,281
|
|
|
|
1.99
|
|
Unrealized gains on trading
assets
|
|
|
3,288
|
|
|
|
0.31
|
|
|
|
23
|
|
|
|
-
|
|
Amortization of premiums on assets
consolidated at fair value
|
|
|
(2,701
|
)
|
|
|
(0.25
|
)
|
|
|
-
|
|
|
|
-
|
|
Issuance costs on the retirement
of preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net effects of settlements on
agency forward contracts
|
|
|
(94
|
)
|
|
|
(0.01
|
)
|
|
|
367
|
|
|
|
0.04
|
|
Lower of cost or fair value
adjustment on loans held for sale
|
|
|
58
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Core
earnings
|
|
$
|
5,289
|
|
|
$
|
0.50
|
|
|
$
|
4,714
|
|
|
$
|
0.46
|
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Per
Diluted
|
|
|
|
|
|
Per
Diluted
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
(in
thousands, except per share amounts)
|
|
GAAP net income
available
to common
stockholders
|
|
$
|
3,591
|
|
|
$
|
0.34
|
|
|
$
|
58,903
|
|
|
$
|
5.80
|
|
Less the net of tax effects
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses)/gains on
financial derivatives
|
|
|
(2,129
|
)
|
|
|
(0.20
|
)
|
|
|
30,009
|
|
|
|
2.95
|
|
Unrealized gains on trading
assets
|
|
|
5,476
|
|
|
|
0.52
|
|
|
|
20,580
|
|
|
|
2.03
|
|
Amortization of premiums on assets
consolidated at fair value
|
|
|
(3,383
|
)
|
|
|
(0.32
|
)
|
|
|
-
|
|
|
|
-
|
|
Issuance costs on the retirement
of preferred stock
|
|
|
(5,784
|
)
|
|
|
(0.56
|
)
|
|
|
-
|
|
|
|
-
|
|
Net effects of settlements on
agency forward contracts
|
|
|
112
|
|
|
|
0.01
|
|
|
|
(1,193
|
)
|
|
|
(0.12
|
)
|
Lower of cost or fair value
adjustment on loans held for sale
|
|
|
(1,420
|
)
|
|
|
(0.13
|
)
|
|
|
-
|
|
|
|
-
|
|
Core
earnings
|
|
$
|
10,719
|
|
|
$
|
1.02
|
|
|
$
|
9,507
|
|
|
$
|
0.94
|
|
Changes
in the fair values of financial derivatives and trading assets have historically
contributed significant volatility to Farmer Mac’s periodic
earnings. Consistent with that trend, Farmer Mac’s second quarter
2010 loss on financial derivatives was $15.8 million, compared to a gain of
$21.5 million during second quarter 2009. For the six months ended
June 30, 2010, the loss on financial derivatives was $21.6 million, compared to
a gain of $23.2 million for the six months ended June 30, 2009. Fair
value gains on trading assets totaled $5.1 million for second quarter 2010,
compared to gains of $35,000 for second quarter 2009. For the
six months ended June 30, 2010 the gains on trading assets totaled $8.4 million,
compared to $31.7 million for the same period in 2009. While
these volatile changes in fair values of derivatives and trading assets may at
times produce significant income, as was the case in 2009, they may also produce
significant losses, as was the case in the first six months of 2010 and as has
been the case in previous reporting periods. Future changes in those
values cannot be reliably predicted; however, as of June 30, 2010, the
cumulative fair value of after-tax losses recorded on financial derivatives was
$62.1 million.
Over
time, Farmer Mac will realize in earnings the net effect of the cash settlements
on its interest rate swap
contracts
, which may on its own produce either
income or expense, but is expected to generate positive effective net spread
when combined with the interest earned and paid on the assets and liabilities
Farmer Mac holds on its balance sheet. This positive effective net
spread will continue to build retained earnings and capital over
time
. Although
the unrealized fair value fluctuations experienced throughout the term of the
financial derivative
s
will temporarily impact earnings and
capital, th
ose
fluctuations
will have no
permanent effect
if the
financial derivatives are held to
maturity
, as is generally expected
.
Upon the
adoption of the new consolidation guidance on January 1, 2010, Farmer Mac was
determined to be the primary beneficiary of certain VIEs where Farmer Mac held
beneficial interests in trusts used as vehicles for the securitization of rural
utilities loans. Upon consolidation, Farmer Mac transferred these
assets from “Farmer Mac Guaranteed Securities” to “Loans held for investment in
consolidated trusts” on its condensed consolidated balance
sheet. Farmer Mac transferred these assets at their fair value, which
resulted in an unamortized premium of $42.7 million. This premium is
being amortized over the contractual lives of the underlying loans and that
amortization is not included in Farmer Mac’s core earnings.
In
January 2010, Farmer Mac contributed substantially all of the assets, in excess
of $1.1 billion, comprising the Farmer Mac II program to a subsidiary,
Farmer Mac II LLC. Farmer Mac transferred these assets
at their fair value, which resulted in an unamortized premium of
$39.1 million being recorded by Farmer Mac II LLC. This premium
is being amortized over the estimated remaining lives of the underlying
USDA-guaranteed portions and is not included in Farmer Mac’s core
earnings.
In
January 2010, Farmer Mac retired and repurchased all of the outstanding shares
of Series B preferred stock with proceeds from the completed capital
raise. As a result of the repurchase, Farmer Mac wrote off $5.8
million of deferred issuance costs related to those Series B preferred shares as
loss on retirement of preferred stock on the condensed consolidated statements
of operations.
In
addition to those adjustments to reconcile Farmer Mac’s GAAP net income
available to common stockholders to core earnings, Farmer Mac’s year-to-date
2009 results benefited from two transactions that were not replicated in the
year-to-date 2010 results. The first was the sale of a pool of loans
with a total principal balance of $354.5 million that resulted in a gain of
$1.6 million. The second transaction was the sale of Lehman
Brothers Holdings Inc. senior debt securities that had been written down to
$5.4 million as of December 31, 2008. The sale of those
securities during first quarter 2009 for $8.6 million resulted in a $3.2
million recovery of previously written off losses.
The
following sections provide more detail regarding specific components of Farmer
Mac’s results of operations.
Net
Interest Income
. Net interest income for the three and six
months ended June 30, 2010 was $21.6 million and $45.2 million,
respectively, compared to $19.9 million and $43.3 million for the same
periods during 2009. Beginning in first quarter 2010, net interest
income includes the reclassification of guarantee fees related to certain Farmer
Mac Guaranteed Securities previously reported as off-balance sheet as a result
of the adoption of the new consolidation guidance. For the three and
six months ended June 30, 2010, these reclassifications resulted in an increase
in net interest income of $1.3 million and $2.7 million, respectively and a
decrease in the net interest yield of 18 basis points and 19 basis points,
respectively. The decrease in the net interest yield is the result of
the average rate earned on guarantee fees being lower than the net interest
spread earned on assets Farmer Mac purchases and holds on-balance
sheet. For the six months ended June 30, 2010 and 2009, the net
interest yield was 129 basis and 176 basis points,
respectively. Excluding the impacts of the guarantee fee
reclassifications, the net interest yield was 148 basis points for the six
months ended June 30, 2010, compared to 176 basis points for the six months
ended June 30, 2009.
The
following table provides information regarding interest-earning assets and
funding for the six months ended June 30, 2010 and 2009. The balance
of non-accruing loans is included in the average balance of interest-earning
loans and Farmer Mac and USDA Guaranteed Securities presented, though the
related income is accounted for on the cash basis. Therefore, as the
balance of non-accruing loans and the income received increases or decreases,
the net interest yield will fluctuate accordingly. The balance of
consolidated loans with beneficial interests owned by third parties is disclosed
in the net effect of consolidated trusts and is not included in the average
balances of interest-earning assets and interest-bearing
liabilities. The interest income and expense associated with these
trusts are shown net in the net effect of consolidated trusts. The
average rate earned on cash and investments reflects lower short-term market
rates during the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. The lower average rate on loans and Farmer Mac
and USDA Guaranteed Securities during the six months ended June 30, 2010
reflects the decline in market rates reflected in the rates on loans acquired or
reset during the past year. The lower average rate on Farmer Mac’s
notes payable due within one year is consistent with general trends in average
short-term rates during the periods presented. The downward trend in
the average rate on notes payable due after one year reflects the retirement of
older debt and the issuance of new debt at lower market rates during the latter
part of 2008, throughout 2009 and the first half of 2010.
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
June 30, 2009
|
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
|
(dollars
in thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and investments
|
|
$
|
1,535,482
|
|
|
$
|
12,873
|
|
|
1.68%
|
|
$
|
1,554,738
|
|
|
$
|
15,958
|
|
|
2.05%
|
|
Loans
and Farmer Mac and USDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed
Securities (1)
|
|
|
4,194,011
|
|
|
|
70,980
|
|
|
3.38%
|
|
|
3,359,356
|
|
|
|
72,945
|
|
|
4.34%
|
|
Total
interest-earning assets
|
|
|
5,729,493
|
|
|
|
83,853
|
|
|
2.93%
|
|
|
4,914,094
|
|
|
|
88,903
|
|
|
3.62%
|
|
Funding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable due within one year
|
|
|
3,049,991
|
|
|
|
5,137
|
|
|
0.34%
|
|
|
3,223,496
|
|
|
|
15,144
|
|
|
0.94%
|
|
Notes
payable due after one year (2)
|
|
|
2,276,958
|
|
|
|
36,240
|
|
|
3.18%
|
|
|
1,482,193
|
|
|
|
30,418
|
|
|
4.10%
|
|
Total
interest-bearing liabilities (3)
|
|
|
5,326,949
|
|
|
|
41,377
|
|
|
1.55%
|
|
|
4,705,689
|
|
|
|
45,562
|
|
|
1.94%
|
|
Net
non-interest-bearing funding
|
|
|
402,544
|
|
|
|
-
|
|
|
|
|
|
208,405
|
|
|
|
-
|
|
|
|
|
Total
funding
|
|
|
5,729,493
|
|
|
|
41,377
|
|
|
1.44%
|
|
|
4,914,094
|
|
|
|
45,562
|
|
|
1.85%
|
|
Net
interest income/yield prior to consolidation of certain
trusts
|
|
|
5,729,493
|
|
|
|
42,476
|
|
|
1.48%
|
|
|
4,914,094
|
|
|
|
43,341
|
|
|
1.76%
|
|
Net
effect of consolidated trusts (4)
|
|
|
1,308,514
|
|
|
|
2,749
|
|
|
0.42%
|
|
|
-
|
|
|
|
-
|
|
|
0.00%
|
|
Adjusted
net interest income/yield
|
|
$
|
7,038,007
|
|
|
$
|
45,225
|
|
|
1.29%
|
|
$
|
4,914,094
|
|
|
$
|
43,341
|
|
|
1.76%
|
|
(1)
|
Excludes
interest income of $34.2 million related to consolidated trusts with
beneficial interests owned by third
parties.
|
(2)
|
Includes
current portion of long-term notes.
|
(3)
|
Excludes
interest expense of $31.5 million related to consolidated trusts with
beneficial interests owned by third
parties.
|
(4)
|
Includes
the effect of consolidated trusts with beneficial interests owned by third
party investors.
|
The
following table sets forth information regarding the changes in the components
of Farmer Mac’s net interest income for the periods indicated. For
each category, information is provided on changes attributable to changes in
volume (change in volume multiplied by old rate) and changes in rate (change in
rate multiplied by old volume). Combined rate/volume variances, the
third element of the calculation, are allocated based on their relative
size. The decreases in income due to changes in rate reflect the
reset of variable-rate investments and adjustable-rate mortgages to lower rates
and the acquisition of new lower-yielding investments, loans and Farmer Mac and
USDA Guaranteed Securities, as described above. The decreases in
expense reflect the decreased cost of funding due to lower interest rates in the
debt markets.
|
|
For the Six Months Ended June 30, 2010
|
|
|
|
Compared to the Six Months Ended
|
|
|
|
June 30, 2009
|
|
|
|
Increase/(Decrease) Due to
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Income
from interest-earning assets:
|
|
|
|
|
|
|
|
|
|
Cash
and investments
|
|
$
|
(2,889
|
)
|
|
$
|
(195
|
)
|
|
$
|
(3,084
|
)
|
Loans
and Farmer Mac and USDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed
Securities
|
|
|
(17,970
|
)
|
|
|
16,005
|
|
|
|
(1,965
|
)
|
Total
|
|
|
(20,859
|
)
|
|
|
15,810
|
|
|
|
(5,049
|
)
|
Expense
from interest-bearing liabilities
|
|
|
(9,724
|
)
|
|
|
5,540
|
|
|
|
(4,184
|
)
|
Change
in net interest income prior to
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidation
of certain trusts (1)
|
|
$
|
(11,135
|
)
|
|
$
|
10,270
|
|
|
$
|
(865
|
)
|
(1)
Excludes the effect of consolidated trusts with beneficial interests owned by
third parties.
In
addition to the guarantee fee reclassification described above, the net interest
yield includes yield maintenance payments received upon the early payoff of
certain borrower’s loans and the amortization of premiums on assets consolidated
at fair value and excludes the accrual of income and expense related to the
payments on financial derivatives. The following paragraphs describe
the effects of these items on the net interest yield and the table below
presents them as adjustments to reconcile to the net effective spread Farmer Mac
earns on the difference between its interest-earning assets and its net funding
costs, including payments for income and expense related to financial
derivatives.
Farmer
Mac accounts for its financial derivatives as undesignated financial
derivatives. Accordingly, the Corporation records the income or
expense related to financial derivatives as gains and losses on financial
derivatives. For the three months ended June 30, 2010, this resulted
in an increase of the net interest yield of $8.7 million (60 basis points),
compared to an increase of the net interest yield of $9.9 million (83 basis
points) for the three months ended June 30, 2009. For the six months
ended June 30, 2010, this resulted in an increase of the net interest yield of
$17.1 million (60 basis points), compared to an increase of the net
interest yield of $20.5 million (84 basis points) for the six months ended June
30, 2009.
Farmer
Mac’s net interest income and net interest yields for the three months ended
June 30, 2010 and 2009 included the benefits of yield maintenance payments
of $0.2 million (1 basis point) and $0.1 million (1 basis point),
respectively. The net interest yields for the six months ended June
30, 2010 and 2009 included the benefits of yield maintenance payments of $0.3
million (1 basis point) and $0.4 million (2 basis points),
respectively. Yield maintenance payments represent the present value
of expected future interest income streams and accelerate the recognition of
interest income from the related loans. Because the timing and size
of these payments vary greatly, variations do not necessarily indicate positive
or negative trends to gauge future financial results.
Upon
the adoption of the new consolidation guidance on January 1, 2010, Farmer Mac
was determined to be the primary beneficiary of certain VIEs where Farmer Mac
held beneficial interests in trusts used as vehicles for the securitization of
agricultural real estate mortgage loans or rural utilities
loans. Upon consolidation, Farmer Mac transferred these assets from
“Farmer Mac Guaranteed Securities” to “Loans held for investment in consolidated
trusts.” The transferred assets on January 1, 2010 included Farmer
Mac Guaranteed Securities – Rural Utilities with an unpaid principal balance of
$412.9 million and a fair value of $455.6 million. Farmer Mac
was reporting these assets at their fair values, with changes in fair value
recorded in earnings, based on its election of the fair value option in
2008. Upon consolidation of the underlying rural utilities loans,
Farmer Mac reclassified the unrealized gain of $42.7 million as of January 1,
2010 to unamortized premiums on loans held for investment. The
related premium is being amortized over the contractual lives of the underlying
rural utilities loans.
On
January 25, 2010, Farmer Mac contributed substantially all of the assets, in
excess of $1.1 billion, comprising the Farmer Mac II program to Farmer
Mac’s subsidiary, Farmer Mac II LLC. Farmer Mac
transferred these assets at their fair value which resulted in an unamortized
premium of $39.1 million being recorded by Farmer Mac II LLC. This
premium is being amortized over the estimated remaining lives of the underlying
USDA Guaranteed Securities.
Farmer
Mac’s net interest income and net interest yield for the three and six months
ended June 30, 2010 include expenses of $4.2 million (29 basis points) and $5.2
million (18 basis points), respectively, related to the amortization of the
premiums described above.
The
following table presents the net effective spread between Farmer Mac’s
interest-earning assets and its net funding costs. This spread is
measured by including income or expense related to financial derivatives and
subtracting yield maintenance payments and the amortization of premiums on
assets consolidated at fair value.
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Dollars
|
|
|
Yield
|
|
|
Dollars
|
|
|
Yield
|
|
|
Dollars
|
|
|
Yield
|
|
|
Dollars
|
|
|
Yield
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income/yield
|
|
$
|
20,326
|
|
|
1.40%
|
|
|
$
|
19,901
|
|
|
1.66%
|
|
|
$
|
42,476
|
|
|
1.48%
|
|
|
$
|
43,341
|
|
|
1.76%
|
|
Expense
related to financial
derivatives
|
|
|
(8,733
|
)
|
|
-0.60%
|
|
|
|
(9,937
|
)
|
|
-0.83%
|
|
|
|
(17,068
|
)
|
|
-0.60%
|
|
|
|
(20,525
|
)
|
|
-0.84%
|
|
Yield
maintenance payments
|
|
|
(200
|
)
|
|
-0.01%
|
|
|
|
(108
|
)
|
|
-0.01%
|
|
|
|
(256
|
)
|
|
-0.01%
|
|
|
|
(372
|
)
|
|
-0.02%
|
|
Amortization
of premiums on assets consolidated at fair
value
|
|
|
4,156
|
|
|
0.29%
|
|
|
|
-
|
|
|
-
|
|
|
|
5,204
|
|
|
0.18%
|
|
|
|
-
|
|
|
-
|
|
Net
effective spread
|
|
$
|
15,549
|
|
|
1.08%
|
|
|
$
|
9,856
|
|
|
0.82%
|
|
|
$
|
30,356
|
|
|
1.05%
|
|
|
$
|
22,444
|
|
|
0.90%
|
|
Provision
for Loan Losses
. During the three months ended June 30, 2010, Farmer Mac
recorded releases to its allowance for loan losses of $1.9 million and
recoveries of $2.2 million. The releases recorded during second
quarter 2010 were the result of increased provision needs of $0.3 million offset
by recoveries of $2.2 million on a loan secured by an ethanol
plant. During the six months ended June 30, 2010, Farmer Mac recorded
provisions to its allowance for loan losses of $1.0 million and recoveries of
$2.2 million. The provisions to the allowance for loan losses during
the first half of 2010 include:
|
·
|
the
reclassification of $2.0 million from the reserve for losses to the
allowance for loan losses upon adoption of the new consolidation guidance
in first quarter 2010;
|
|
·
|
increased
provision needs of $1.2 million; offset
by
|
|
·
|
recoveries
of $2.2 million on a loan secured by an ethanol
plant.
|
During
the three and six months ended June 30, 2009, Farmer Mac recorded releases to
its allowance for loan losses of $5.7 million and $2.2 million,
respectively. Farmer Mac also recorded $5.7 million and $7.7
million of charge-offs, respectively, for the three and six months ended
June 30, 2009. Farmer Mac recorded no recoveries during the
three months ended June 30, 2009 and $0.8 million of recoveries for
the six months ended June 30, 2009. The activity in the allowance for
loan losses in 2009 was largely attributable to defaulted ethanol loans
previously purchased from AgStar Financial Services, a related party, pursuant
to the terms of an LTSPC agreement. As of June 30, 2010, Farmer Mac’s
total allowance for loan losses was $9.5 million, compared to
$6.3 million as of December 31, 2009 and $1.8 million as of June 30,
2009. See “—Risk Management—Credit Risk – Loans.”
Provision
for Losses
. During the three and six months ended June 30,
2010, Farmer Mac recorded provisions to its reserve for losses of
$3.0 million and $1.6 million, respectively. The provisions
recorded in the second quarter 2010 primarily relate to Farmer Mac’s exposure to
the ethanol industry pursuant to loans underlying LTSPCs. Farmer Mac
recorded provisions to its reserve for losses of $3.6 million in the first half
of 2010, which were partially offset by the reclassification of $2.0 million
from the reserve for losses to the allowance for loan losses upon adoption of
the new consolidation guidance in first quarter 2010. During the
three and six months ended June 30, 2009, Farmer Mac recorded a release of
$0.5 million and provisions of $2.0 million, respectively, for losses
related to its guarantee activities and LTSPCs. As of
June 30, 2010, Farmer Mac’s reserve for losses was $9.5 million,
compared to $7.9 million as of December 31, 2009 and $7.5 million as of
June 30, 2009. See “—Risk Management—Credit Risk –
Loans.”
Guarantee
and Commitment Fees
. Guarantee and commitment fees, which
compensate Farmer Mac for assuming the credit risk on loans underlying Farmer
Mac Guaranteed Securities and LTSPCs, were $5.7 million for second quarter 2010
and $11.6 million for the six months ended June 30, 2010, compared to $7.9
million for second quarter 2009 and $15.3 million for the six months ended June
30, 2009. Guarantee and commitment fees for the three and six months
ended June 30, 2010 includes the reclassification of $1.3 million and $2.7
million, respectively, to net interest income related to Farmer Mac Guaranteed
Securities previously reported as off- balance sheet as a result of the adoption
of the new consolidation guidance.
Gains
and Losses on Financial Derivatives
. Farmer Mac accounts for
its financial derivatives as undesignated financial derivatives and does not
apply hedge accounting available under FASB guidance on
derivatives. The net effect of gains and losses on financial
derivatives for the three and six months ended June 30, 2010 was a net loss of
$15.8 million and $21.6 million, respectively, compared to net gains of
$21.5 million and $23.2 million, respectively, for the same periods in
2009.
The components of
gains and losses on financial derivatives for the three and six months ended
June 30, 2010 and 2009 are summarized in the following
table:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense related to financial
derivatives
|
|
$
|
(8,733
|
)
|
|
$
|
(9,937
|
)
|
|
$
|
(17,068
|
)
|
|
$
|
(20,525
|
)
|
(Losses)/gains due to terminations
or net settlements
|
|
|
(885
|
)
|
|
|
255
|
|
|
|
(1,257
|
)
|
|
|
(2,378
|
)
|
Unrealized (losses)/gains due to
fair value changes
|
|
|
(6,177
|
)
|
|
|
31,287
|
|
|
|
(3,239
|
)
|
|
|
46,280
|
|
Amortization of financial
derivatives transition adjustment
|
|
|
(45
|
)
|
|
|
(77
|
)
|
|
|
(80
|
)
|
|
|
(138
|
)
|
(Losses)/gains on financial
derivatives
|
|
$
|
(15,840
|
)
|
|
$
|
21,528
|
|
|
$
|
(21,644
|
)
|
|
$
|
23,239
|
|
The accrual of periodic cash settlements
for interest paid or received from Farmer Mac’s interest rate swap
contracts
is shown as
e
xpense related to financial derivatives
in the table above. Payments or receipts to terminate derivative
positions or net cash settle forward sales contracts on
the debt of other
GSEs and U.S. Treasury futures are included in gains/(losses) due to
terminations or net settlements. Changes in the fair value of Farmer
Mac’s open derivative positions are captured in unrealized gains/(losses) due to
fair value changes
and
are primarily the result of
fluctuations in market interest rates. The amortization of the
financial derivatives transition adjustment reflects the reclassification into
earnings of the unrealized gains/(losses) on financial derivatives included in
accumulated other comprehensive income/(loss) as a result of the adoption of the
FASB standard on derivatives.
The remaining financial
derivatives transition adjustment will be reclassified into earnings in the same
period or periods during which the hedged forecasted transactions (either the
payment of interest or the issuance of discount notes) affect earnings or
immediately when it becomes probable that the original hedged forecasted
transaction will not occur within two months of the originally specified
date.
For the
three and six months ended June 30, 2010, Farmer Mac was a party to interest
rate swap contracts with one related party, Zions First National
Bank. Farmer Mac realized expenses of $0.8 million and $1.6 million
for three and six months ended June 30, 2010 and June 30, 2009,
respectively. Farmer Mac recognized unrealized losses $0.1 million
and $25,000 for the three and six months ended June 30, 2010, respectively,
compared to unrealized gains of $0.8 million and $0.3 million, respectively, for
the same periods in 2009.
Gains
and Losses on Trading Assets
. During the three and six months
ended June 30, 2010, Farmer Mac recognized gains on trading assets of
$5.1 million and $8.4 million, respectively, compared to gains of $35,000
and $31.7 million, respectively, for the same periods in 2009. During
first quarter 2010, Farmer Mac changed its primary source of valuation for its
investment in the preferred stock of AgFirst Farm Credit Bank. Taking
into consideration its own recently executed trades during first quarter 2010,
along with an increase in observable trading activity for this and similar
securities, Farmer Mac determined that the best estimates of fair value for this
security as of March 31, 2010 and June 30, 2010 were the fair values provided by
an independent third party pricing service. For the three and six
months ended June 30, 2010, Farmer Mac recorded $0.7 million and $2.2 million of
trading losses, respectively, related to the decline in the fair value of its
investment in AgFirst Farm Credit Bank preferred stock. During first
and second quarters 2010, Farmer Mac also recorded trading gains of $5.0 million
and $5.6 million, respectively, related to an increase in the fair value of the
USDA Guaranteed Securities contributed to its subsidiary, Farmer Mac II LLC,
which had previously been selected for the fair value option.
Farmer
Mac made no fair value option elections during the three and six months ended
June 30, 2010 and 2009.
Gains
and Losses on Sale of Available-for-Sale Investment
Securities
. During the three months ended June 30, 2010,
Farmer Mac did not sell any securities from its available-for-sale- portfolio,
compared to realized losses of $0.3 million from the sale of securities for the
three months ended June 30, 2009. During the six months ended June
30, 2010, Farmer Mac realized gains of $0.2 million from the sale of securities
from its available-for-sale portfolio, compared to gains of $2.9 million six
months ended June 30, 2009.
General
and Administrative Expenses
. General and administrative
expenses, including legal, independent audit, and consulting fees, were
$2.1 million for second quarter 2010 and $4.6 million for the six
months ended June 30, 2010, compared to $3.0 million and $5.9 million,
respectively, for the same periods in 2009. The higher level of
expenses in 2009 compared to 2010 was largely attributable to legal and
consulting fees related to the development of Farmer Mac programs and related
transactions.
Regulatory
Fees
.
Regulatory fees for the three and six months ended June 30, 2010 were $0.6
million and $1.1 million, respectively, compared to $0.5 million and $1.0
million for the same periods in 2009. FCA has advised Farmer Mac that
its estimated fees for the federal fiscal year ending September 30, 2010
will be $2.3 million, compared to $2.1 million for the federal fiscal year
ended September 30, 2009. After the end of a federal government
fiscal year, FCA may revise its prior year estimated assessments to reflect
actual costs incurred, and has issued both additional assessments and refunds in
the past.
Income
Tax Expense/Benefit
. Income tax expense totaled $0.8 million
and $5.1 million for the three and six months ended June 30, 2010, respectively,
compared to $16.5 million and $34.6 million, respectively, for the same periods
in 2009. Income tax expense decreased significantly primarily due to
the decrease in pre-tax book income. Farmer Mac’s effective tax rates
for the three and six months ended June 30, 2010 were 8.5 percent and 19.0
percent, respectively, compared to 35.9 percent and 34.0 percent, respectively,
for the same periods in 2009. The reduction in the effective tax rate
was due primarily to the income attributed to the non-controlling interest in
Farmer Mac II LLC, for which Farmer Mac does not accrue income tax
expense.
Business
Volume
.
During second
quarter 2010, Farmer Mac added $331.5 million of new program volume in the form
of:
|
·
|
purchases
of $98.2 million of Farmer Mac I
loans;
|
|
·
|
the
placement of $32.4 million of Farmer Mac I loans under
LTSPCs;
|
|
·
|
purchases
of $123.2 million of USDA-guaranteed portions of loans;
and
|
|
·
|
purchases
of $77.7 million of Rural Utilities
loans.
|
This new
business volume was partially offset by principal paydowns on outstanding loans
and loans underlying Farmer Mac Guaranteed Securities and
LTSPCs. Farmer Mac’s outstanding program volume was $10.8 billion as
of June 30, 2010.
In addition to the second quarter
business volume, in July 2010 Farmer Mac purchased (1) $200.0 million
of AgVantage securities representing a five-year general obligation of MetLife
Insurance Company of Connecticut secured by agricultural mortgage loans eligible
for the Farmer Mac I program; and (2) $50.0 million of AgVantage
securities representing a five-year general obligation of Metropolitan Life
Insurance Company secured by agricultural mortgage loans eligible for the Farmer
Mac I program.
The
following table sets forth loan purchase, LTSPC and guarantee activities for
current loans under the Farmer Mac I, Farmer Mac II and Rural Utilities programs
during the periods indicated:
Farmer
Mac Loan Purchases, Guarantees and
LTSPCs
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
98,235
|
|
|
$
|
37,900
|
|
|
$
|
176,183
|
|
|
$
|
67,714
|
|
LTSPCs
|
|
|
32,430
|
|
|
|
22,717
|
|
|
|
109,573
|
|
|
|
88,437
|
|
AgVantage
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Farmer
Mac II:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USDA
Guaranteed Securities
|
|
|
115,109
|
|
|
|
-
|
|
|
|
201,672
|
|
|
|
-
|
|
Farmer
Mac Guaranteed Securities
|
|
|
7,953
|
|
|
|
96,322
|
|
|
|
13,678
|
|
|
|
175,377
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
77,726
|
|
|
|
-
|
|
|
|
136,744
|
|
|
|
-
|
|
Guaranteed
Securities
|
|
|
-
|
|
|
|
900,000
|
|
|
|
-
|
|
|
|
1,170,000
|
|
Total
purchases, guarantees and commitments
|
|
$
|
331,453
|
|
|
$
|
1,056,939
|
|
|
$
|
637,850
|
|
|
$
|
1,501,528
|
|
The
outstanding principal balance of loans held and loans underlying LTSPCs and on-
and off-balance sheet Farmer Mac and USDA Guaranteed Securities was
$10.8 billion as of June 30, 2010 and $10.7 billion as of
December 31, 2009. The following table sets forth information
regarding those outstanding balances as of the dates indicated:
Outstanding
Balance of Farmer Mac Loans and Loans Underlying
|
Farmer
Mac and USDA Guaranteed Securities and
LTSPCs
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
On-balance
sheet:
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
Loans
|
|
$
|
844,227
|
|
|
$
|
733,422
|
|
Loans
held in trusts:
|
|
|
|
|
|
|
|
|
Beneficial
interests owned by Farmer Mac
|
|
|
4,369
|
|
|
|
5,307
|
|
Beneficial
interests owned by third party investors
|
|
|
880,035
|
|
|
|
-
|
|
Farmer
Mac Guaranteed Securities - AgVantage
|
|
|
43,550
|
|
|
|
48,800
|
|
Farmer
Mac II:
|
|
|
|
|
|
|
|
|
USDA
Guaranteed Securities
|
|
|
1,218,329
|
|
|
|
-
|
|
Farmer
Mac Guaranteed Securities
|
|
|
41,756
|
|
|
|
1,164,996
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
Loans
|
|
|
165,388
|
|
|
|
28,644
|
|
Loans
held in trusts:
|
|
|
|
|
|
|
|
|
Beneficial
interests owned by Farmer Mac
|
|
|
406,679
|
|
|
|
412,948
|
|
Farmer
Mac Guaranteed Securities - AgVantage
|
|
|
1,587,200
|
|
|
|
1,675,000
|
|
Total
on-balance sheet
|
|
$
|
5,191,533
|
|
|
$
|
4,069,117
|
|
|
|
|
|
|
|
|
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
Farmer
Mac I:
|
|
|
|
|
|
|
|
|
AgVantage
|
|
$
|
2,945,000
|
|
|
$
|
2,945,000
|
|
LTSPCs
|
|
|
1,739,979
|
|
|
|
2,165,706
|
|
Farmer
Mac Guaranteed Securities
|
|
|
826,910
|
|
|
|
1,492,239
|
|
Farmer
Mac II:
|
|
|
|
|
|
|
|
|
Farmer
Mac Guaranteed Securities
|
|
|
40,860
|
|
|
|
34,802
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
AgVantage
|
|
|
14,393
|
|
|
|
14,240
|
|
Total
off-balance sheet
|
|
$
|
5,567,142
|
|
|
$
|
6,651,987
|
|
Total
|
|
$
|
10,758,675
|
|
|
$
|
10,721,104
|
|
Of the
$10.8 billion outstanding principal balance of volume included in Farmer Mac’s
three programs as of June 30, 2010, $4.6 billion are Farmer Mac Guaranteed
Securities structured as AgVantage securities. Each AgVantage
security is a general obligation of an issuing institution approved by Farmer
Mac and is secured by eligible loans in an amount at least equal to the
outstanding principal amount of the security. Unlike business volume
in the form of purchased loans and loans underlying LTSPCs and non-AgVantage
Farmer Mac Guaranteed Securities, the Farmer Mac Guaranteed Securities
structured as AgVantage securities generally do not pay down principal based on
amortization schedules and instead have fixed maturity dates when the secured
general obligation is due.
The
following table summarizes by maturity date the outstanding principal amount of
AgVantage securities as of June 30, 2010.
AgVantage Balances by Year of Maturity
|
|
|
|
As
of
|
|
|
|
June 30, 2010
|
|
|
|
(in thousands)
|
|
|
|
|
|
2010
|
|
$
|
102,550
|
|
2011
|
|
|
2,051,400
|
|
2012
|
|
|
497,000
|
|
2013
|
|
|
157,750
|
|
2014
|
|
|
761,900
|
|
Thereafter
|
|
|
1,019,543
|
|
Total
|
|
$
|
4,590,143
|
|
As shown
in the table above, $2.1 billion of the outstanding $4.6 billion of
AgVantage securities matures in 2011. If the issuer of a maturing
AgVantage security does not refinance the security through Farmer Mac and Farmer
Mac does not find alternate sources of business volume, the Corporation’s income
could be adversely affected. However, the income effect of less
AgVantage business may not be material and will likely not be proportional to
the amount of any decrease in business volume as a result of the maturity of
AgVantage securities.
The
weighted-average ages of the Farmer Mac I newly originated and current seasoned
loans purchased during each of second quarter 2010 and second quarter 2009 was
less than one month. Of the Farmer Mac I newly originated and
current seasoned loans purchased during second quarter 2010 and second quarter
2009, 75 percent and 77 percent, respectively, had principal amortization
periods longer than the maturity date, resulting in balloon payments at
maturity, with a weighted-average remaining terms to maturity of 15.0 years and
16.2 years, respectively. The weighted-average age of delinquent
loans purchased out of securitized pools and LTSPCs during second quarter 2010
and second quarter 2009 was 5.6 years and 2.3 years,
respectively.
As part
of fulfilling its guarantee obligations for Farmer Mac I Guaranteed Securities
and commitments to purchase eligible loans underlying LTSPCs, Farmer Mac
purchases defaulted loans, all of which are at least 90 days delinquent or
in material non-monetary default at the time of purchase, out of the loan pools
underlying those securities and LTSPCs, and records the purchased loans as such
on its balance sheet. The purchase price for defaulted loans
purchased out of Farmer Mac I Guaranteed Securities is the current outstanding
principal balance of the loan plus accrued and unpaid interest. The
purchase price for defaulted loans purchased under an LTSPC is the then-current
outstanding principal balance of the loan, with accrued and unpaid interest on
the defaulted loans payable out of any future loan payments or liquidation
proceeds as received. The purchase price of a defaulted loan is not
an indicator of the expected loss on that loan; many other factors affect
expected loss, if any, on loans so purchased. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Risk
Management—Credit Risk—Loans” in the Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2009 filed with the SEC on March 16, 2010
(as updated by the Current Report on Form 8-K filed with the SEC on August 4,
2010).
The
following table presents Farmer Mac’s loan purchases of newly originated and
current seasoned loans and defaulted loans purchased underlying Farmer Mac I
Guaranteed Securities and LTSPCs:
|
|
For the Three Months
Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Farmer
Mac I newly originated and current seasoned loan purchases
|
|
$
|
98,235
|
|
|
$
|
37,900
|
|
|
$
|
176,183
|
|
|
$
|
67,714
|
|
Defaulted
loans purchased underlying
Farmer
Mac I Guaranteed Securities owned by third party
investors
|
|
|
-
|
|
|
|
-
|
|
|
|
2,323
|
|
|
|
-
|
|
Defaulted
loans purchased underlying LTSPCs
|
|
|
913
|
|
|
|
572
|
|
|
|
1,080
|
|
|
|
3,386
|
|
Defaulted
loans underlying on-balance sheet Farmer Mac I Guaranteed Securities
transferred to loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,216
|
|
Total
loan purchases
|
|
$
|
99,148
|
|
|
$
|
38,472
|
|
|
$
|
179,586
|
|
|
$
|
73,316
|
|
Farmer
Mac II LLC
.
In January 2010,
Farmer Mac contributed substantially all of the assets comprising the Farmer Mac
II program (in excess of $1.1 billion) to Farmer Mac’s subsidiary, Farmer Mac II
LLC. The assets that Farmer Mac contributed to Farmer Mac II LLC
consisted primarily of USDA-guaranteed portions that had not been securitized by
Farmer Mac but also included $35.0 million of Farmer Mac II Guaranteed
Securities. Farmer Mac did not guarantee the timely payment of
principal and interest on the $1.1 billion of contributed USDA-guaranteed
portions and will provide a guarantee in connection with the issuance of Farmer
Mac II Guaranteed Securities only to the extent that either Farmer Mac or Farmer
Mac II LLC is approached by an investor. The contributed
USDA-guaranteed portions had previously been presented as Farmer Mac II
Guaranteed Securities on the condensed consolidated financial statements of
Farmer Mac and are now presented as “USDA Guaranteed Securities” on the
condensed consolidated balance sheets. The financial information
presented in this report reflects the accounts of Farmer Mac and its
subsidiaries on a consolidated basis. Accordingly, Farmer Mac’s
reportable operating segments presented in this report will differ from the
stand-alone financial statements of Farmer Mac II LLC. Those separate
financial statements are available on the website of Farmer Mac II
LLC.
The
assets of Farmer Mac II LLC would be available to creditors of Farmer Mac only
after all obligations owed to creditors of and equity holders in Farmer Mac II
LLC had been satisfied. As of June 30, 2010, Farmer Mac II LLC held
assets with a fair value of $1.3 billion, had debt outstanding of $46.0 million,
had preferred stock outstanding with a liquidation preference of
$250.0 million, and had $1.0 billion of common stock outstanding, all of
which is held by Farmer Mac. For more information about the formation
and operations of Farmer Mac II LLC and the features of the preferred stock
issued by Farmer Mac II LLC in January 2010, see Notes 3, 5, 6 and 8 to the
condensed consolidated financial statements and Note 15 to the consolidated
financial statements in the Corporation’s Annual Report on Form 10-K for the
year ended December 31, 2009 filed with the SEC on March 16, 2010 (as updated by
the Current Report on Form 8-K filed with the SEC on August 4,
2010).
Outlook
. The
agricultural sector is made up of diverse industries that respond in different
ways to changes in economic conditions. Those industries often are
affected differently, sometimes positively and sometimes negatively, by
prevailing economic conditions, which results in cycles where one or more
industries may be under stress at any one time. Conditions in the
agricultural sector during 2009 and the first half of 2010 were more stable than
the national economy in general, but agriculture was not completely insulated
from the effects of the economic downturn and remained subject to traditional
commodity price cycles and national agricultural and energy policy
reconsideration. Although some industries in the agricultural sector
prospered, others, such as the dairy sector, experienced operating losses
throughout most of 2009 due to oversupply and the worldwide economic
slowdown. This situation has only slightly moderated throughout 2010,
as low-cost dairy operators began to operate close to or slightly above
break-even cash flow levels. Farmer Mac expects that the remainder of
2010 will continue to be a challenge for dairy producers, which could lead to
higher delinquencies and additional provisions for losses and
charge-offs. The protein sector (i.e., cattle, poultry and pork
producers) has seen continued improvement in prices received during the first
half of 2010. However, given the multi-year period of stress and
recent trends in feed prices, these industries will continue to be monitored
closely. In addition, competing interests for the water supply have
limited the flow to farmers in some areas to a level well below that embedded in
long-standing water contract agreements. Ethanol margins tightened
during the first half of 2010, and, on average, ethanol plants operated at
breakeven levels. Federal support of this industry, in the form of an
excise tax credit and an import tariff, expire at the end of 2010 and Congress
is in the process of considering what, if any, future price supports should be
in place. Congress is considering an increase in the mandate for
ethanol use, which would be a positive for the industry, but a reduction in or
loss of current price supports via blending credits or tax policies would be
detrimental to the industry. Farmer Mac will continue to closely
monitor developments in industries and geographic areas experiencing
stress. The cyclical credit issues related to the agricultural sector
are expected to remain within Farmer Mac’s historical experience, but are likely
to be greater than the historical average.
With
respect to the agricultural operating and lending markets, recent farmland sales
have reflected more limited interest and the effects of reduced profitability in
some of the noted agricultural sectors. Elevated farm input costs and
lower current commodity prices have significantly squeezed profits and the
related farmer demand for additional land, especially in the dairy sector and
those isolated stressed irrigation water areas. Although these
factors have slowed the rapid farm real estate value appreciation of the past
several years, Farmer Mac generally expects farmland values to remain
stable. Farmer Mac also monitors the establishment and evolution of
governmental policies and regulations that affect farmers, ranchers, and
lenders, including agricultural polices contained in the current Farm Bill due
to expire in 2012. Congress has begun the process of preparing a new
Farm Bill that is targeted to be passed in 2012.
Broader
trends underway now, such as the deleveraging of capital, will also have an
effect in reducing credit availability from traditional lenders to the
agricultural sector. Accordingly, Farmer Mac expects a growing need
for financial vehicles to expand credit availability to those agricultural
industries that have sound financial fundamentals, which presents both a
challenge and an opportunity that Farmer Mac is actively
pursuing. For example, based on recent communications between a
Farmer Mac commercial bank business partner and its banking regulator, it is
expected that loans from commercial banks that are placed in the LTSPC program
will receive favorable capital treatment, thereby increasing opportunities for
LTSPC transactions with commercial banks. As the disruptions in the
financial industry subside and agricultural lenders’ business strategies are
recast, Farmer Mac has identified and is pursuing related business opportunities
and is confident new business partners will result.
Farmer
Mac also foresees opportunities for continued business growth in the rural
utilities segment, though not at the pace experienced during 2008 and
2009. In the near term, Farmer Mac expects that the majority of any
new rural utilities business will be in the form of direct credit exposures to
both electric distribution and generation and transmission loans through
purchases of those loans, rather than indirect credit exposures to those loans
through AgVantage transactions.
Farmer
Mac expects that, in the near term, demand for rural utilities loans will
reflect the state of the general economy. Recently, electric
consumption has been reduced, which has slowed loan demand, but is expected to
return as the economy strengthens. The industry recently added
significant new generation capacity for the first time since the 1970s, and in
some areas planned residential and commercial development did not keep pace with
generation expansion. Nonetheless, Farmer Mac believes that the rural
utilities sector is a strong and growing industry with significant needs for
future financing during the next five to ten years, as capital will be needed to
finance the construction of new generation and transmission facilities,
modernize existing equipment, and comply with environmental
regulations. Farmer Mac’s ability to participate in the growth of the
rural utilities portion of its business will be limited by Farmer Mac’s limits
on borrower exposures, its overall risk tolerance, and the ability of Farmer Mac
to maintain its funding costs at levels conducive to further growth in the Rural
Utilities program.
The
electrical power generated by and for rural electric cooperatives generally uses
coal as a fuel, and Farmer Mac continues to closely monitor the risk factors
associated with the electric industry and their potential effect on the
Corporation’s rural utilities portfolio. As green energy sources
continue to be developed, new power transmission lines will be needed to support
the development and operation of many new wind and solar power plants to
transfer their power from remote locations to the ultimate
consumer. Public policy shifts in the energy sector, such as carbon
tax, cap and trade legislation, and clean energy incentives, may also alter
Farmer Mac’s opportunities in this area as cooperatives invest in clean energy
projects and demand-side management and have more limited funding options for
the construction of new coal-fired generating projects. Any of those
developments could lead to increased or decreased business volume for Farmer Mac
in the rural utilities sector depending on how any new initiatives, legislation,
or regulations are implemented and their effect on lending to rural utilities
cooperative borrowers.
With
lenders in both the agricultural and rural utilities sectors continuing to face
capital markets and economic challenges, Farmer Mac represents a source of
liquidity, capital, and risk management to help lenders meet the borrowing needs
of their customers. Farmer Mac intends to continue to explore new
possibilities for advancing the Corporation’s mission of serving the financing
needs of agriculture and rural America, especially as the structures,
strategies, and programs deployed by the financial markets continue to evolve in
attempts to unlock the credit markets. These efforts will take time
to develop, but Farmer Mac believes that the flexibility provided in its charter
is a strength that offers advantages in current market
conditions. The charter permits both (1) loan purchases, which create
value in new loan originations by providing liquidity for them, and (2)
guarantees and LTSPCs, which enhance the value of eligible loans already in the
portfolios of lenders while reducing the required regulatory capital support for
those loans. Farmer Mac’s business strategies in the near term will
focus on flexibility, identification of opportunities, and growth through
multiple channels and with numerous business partners. In pursuing
these objectives, Farmer Mac intends to actively search for new program
business, aggressively work with business partners to create new products,
continue to improve operations with the goal of improving the customer
experience, and continue to seek out new relationships and strengthen long-term
relationships.
Balance Sheet
Review
During
first quarter 2010, Farmer Mac adopted two new accounting standards that
eliminated the concept of QSPEs and amended the accounting for transfers of
financial assets and the consolidation model for VIEs. The impact
upon adoption was an increase in consolidated assets and liabilities of $1.5
billion, which resulted in an incremental regulatory capital requirement of
$30.4 million. Pursuant to this new guidance, Farmer Mac
routinely assesses its securitization trusts to determine whether it is the
primary beneficiary and thereby required to consolidate the assets and
liabilities of the trust onto its balance sheet, or if determined not to be the
primary beneficiary of a previously consolidated trust, deconsolidate the assets
and liabilities from its balance sheet.
As of
March 31, 2010, Farmer Mac consolidated $1.1 billion of its outstanding
$1.4 billion securitization trusts created when loans subject to LTSPCs
were converted to Farmer Mac I Guaranteed Securities at the request of program
participants. Those securitization transactions contain provisions
resulting in shared power over default mitigation decisions. For
those transactions where the power is shared with a related party (as defined by
applicable accounting guidance), Farmer Mac was determined to be the primary
beneficiary and thus is required to consolidate the assets and liabilities of
the trust onto its balance sheet. For those transactions where the
power was shared with an unrelated party, Farmer Mac was not determined to be
the primary beneficiary and is not required to consolidate the assets and
liabilities of the trust onto its balance sheet.
Determinations
about which business partners of Farmer Mac are related parties often depend on
whether an officer or director of that business partner is a member of Farmer
Mac’s board of directors, ten of whom are elected on an annual basis by the
holders of Farmer Mac’s outstanding voting common stock. Changes in
the membership of the board of directors may result in Farmer Mac consolidating
a trust previously disclosed as off-balance sheet, or deconsolidating a trust
previously consolidated on balance sheet. Although this will have no
net effect on Farmer Mac’s net income, it may, at times, produce volatility in
the statutory minimum capital Farmer Mac is required to hold.
At Farmer
Mac’s Annual Meeting of Stockholders on June 3, 2010, ten directors were elected
to serve one-year terms, nine of whom were re-elected as directors of Farmer Mac
and one of whom was new to Farmer Mac’s board. As a result of this
change in membership of the board of directors, Farmer Mac deconsolidated $0.4
billion of securitization transactions with a business partner that was no
longer a related party (as defined by applicable accounting
guidance). As of June 30, 2010, Farmer Mac consolidated $0.6 billion
of its outstanding $1.4 billion securitization trusts created when loans
subject to LTSPCs were converted to Farmer Mac I Guaranteed Securities at the
request of program participants.
For more
information on Farmer Mac’s policy relating to the consolidation of VIEs, see
Note 1(g) to the condensed consolidated financial
statements. For a discussion of Farmer Mac’s related party
transactions, see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Related Party Transactions” and Note 3 in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009
filed with the SEC on March 16, 2010 (as updated by the Current Report
on Form 8-K filed with the SEC on August 4, 2010).
Assets
. Total
assets were $7.1 billion as of June 30, 2010 and $6.1 billion as of
December 31, 2009. The increase in the first half of 2010 was
largely attributable to the consolidation as of March 31, 2010 of $1.3
billion of off-balance sheet Farmer Mac Guaranteed Securities resulting from the
adoption of new consolidation guidance. During the second quarter
2010, this increase was partially offset by the deconsolidation of $0.4 billion
of Farmer Mac Guaranteed Securities due to a change in related party
status. A corresponding increase to liabilities was also recorded and
presented as “Debt securities of consolidated trusts held by third parties” on
the condensed consolidated balance sheets.
As of
June 30, 2010, Farmer Mac had $325.3 million of cash and cash equivalents,
compared to $654.8 million as of December 31, 2009. As of June
30, 2010, Farmer Mac had $1.3 billion of investment securities, compared to
$1.1 billion as of December 31, 2009.
Liabilities
and Total Equity
. During the six months ended June 30, 2010,
total liabilities increased $0.8 billion as a result of the consolidation of
trusts. Total equity, including mezzanine equity, increased $133.1
million during the same period. The increase in total equity was
primarily the result of raising new capital. On January 25, 2010,
Farmer Mac used the proceeds from the sale of $250.0 million of preferred stock
of its subsidiary, Farmer Mac II LLC, to repurchase and retire the
Corporation’s $150.0 million of outstanding Series B preferred stock and to
further strengthen Farmer Mac’s financial position to support the continued
fulfillment of its mission. That transaction provided Farmer Mac with
additional capital at a significantly lower cost, with the net effective cost of
the new $250.0 million of preferred stock of 5.77 percent per year
after consideration of the consolidated tax benefits to Farmer
Mac. As a result, the net cost of the new preferred stock on Farmer
Mac’s consolidated financial statements will be approximately $14.4 million
per year, compared to an annual cost of $18.0 million per year for the $150.0
million of Series B preferred stock (based on the 2010 dividend rate of
12 percent for the Series B preferred stock, which was scheduled to
increase to 14 percent at the end of 2010 and 16 percent in 2011).
Regulatory
Capital Compliance
. Farmer Mac was in compliance with its
statutory minimum capital requirement and its risk-based capital standard as of
June 30, 2010. Farmer Mac is required to hold capital at the higher
of its statutory minimum capital requirement or the amount required by its
risk-based capital stress test. As of June 30, 2010, Farmer Mac’s
core capital totaled $442.0 million and exceeded its statutory minimum
capital requirement of $235.4 million by $206.6 million. As of
December 31, 2009, Farmer Mac’s core capital totaled $337.2 million and exceeded
its statutory minimum capital requirement of $217.0 million by $120.2
million. As of June 30, 2010, Farmer Mac’s risk-based capital stress
test generated a risk-based capital requirement of $29.9
million. Farmer Mac’s regulatory capital of $461.0 million exceeded
that amount by approximately $431.1 million. Accumulated other
comprehensive income/(loss) is not a component of Farmer Mac’s core capital or
regulatory capital. For more information, see “—Liquidity and Capital
Resources—Capital” and “—Regulatory Matters.”
Off-Balance Sheet Program
Activities
Farmer
Mac offers approved lenders two credit enhancement alternatives to increase
their liquidity or lending capacity while retaining the cash flow benefits of
their loans: (1) Farmer Mac Guaranteed Securities, which are
available through each of the Farmer Mac I, Farmer Mac II and Rural Utilities
programs; and (2) LTSPCs, which are available only through the Farmer Mac I
and Rural Utilities programs. For securitization trusts where Farmer
Mac is the primary beneficiary, the trust assets and liabilities are included on
Farmer Mac’s condensed consolidated balance sheet. For the remainder
of these transactions, and in the event of deconsolidation, both of these
alternatives result in the creation of off-balance sheet obligations for Farmer
Mac. In the future, Farmer Mac will operate only that part of the
Farmer Mac II program that involves the transfer of USDA-guaranteed portions to
trusts and the issuance of Farmer Mac II Guaranteed Securities, and will only do
so to the extent that Farmer Mac is approached or referred by an
investor. Farmer Mac will not issue Farmer Mac II Guaranteed
Securities to Farmer Mac II LLC in the future. See Note 5 to the
condensed consolidated financial statements for further information regarding
Farmer Mac’s off-balance sheet program activities.
Risk
Management
|
·
|
loans
underlying Farmer Mac Guaranteed Securities;
and
|
|
·
|
loans
underlying LTSPCs.
|
Farmer
Mac generally assumes 100 percent of the credit risk on loans held and
loans underlying Farmer Mac I Guaranteed Securities, LTSPCs and Farmer Mac
Guaranteed Securities – Rural Utilities. Farmer Mac has direct credit
exposure on loans in non-AgVantage transactions and indirect credit exposure on
AgVantage transactions, which involve a general obligation of a lender secured
by qualified loans. The credit exposure of Farmer Mac and Farmer Mac
II LLC on USDA-guaranteed portions is covered by the full faith and credit of
the United States. Farmer Mac believes that the Corporation and
Farmer Mac II LLC have little or no credit risk exposure to USDA-guaranteed
portions because of the USDA guarantee. As of June 30, 2010, neither
Farmer Mac nor Farmer Mac II LLC had experienced any credit losses on any
USDA-guaranteed portions or Farmer Mac II Guaranteed Securities and does not
expect to incur any such losses in the future.
Farmer
Mac has established underwriting, collateral valuation and documentation
standards for eligible loans to mitigate the risk of loss from borrower defaults
and to provide guidance concerning the management, administration and conduct of
underwriting and appraisals to all participating sellers and potential sellers
in its programs. In general, Farmer Mac limits its maximum loan size
to $22.5 million for transactions involving direct exposure to credit risk on
loans and $50.0 million for AgVantage and similar Rural Utilities transactions
that involve a general obligation of a lender and include indirect exposure to
credit risk on the underlying loans. More detailed information
regarding loan limits and Farmer Mac’s underwriting and collateral valuation
standards and seller eligibility requirements are presented in “Business—Farmer
Mac Programs—Farmer Mac I—Underwriting and Collateral Valuation (Appraisal)
Standards,” “Business—Farmer Mac Programs—Farmer Mac I—Sellers” and
“Business—Farmer Mac Programs—Rural Utilities” in the Corporation’s Annual
Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on
March 16, 2010.
Farmer
Mac has developed different underwriting standards for rural utilities loans
that depend on whether direct or indirect credit exposure is assumed on a loan
and whether the borrower is an electric distribution cooperative or a generation
and transmission cooperative. As of June 30, 2010, there were no
delinquencies or non-performing assets in Farmer Mac’s portfolio of rural
utilities loans, which includes rural utilities loans held and rural utilities
loans underlying or securing Farmer Mac Guaranteed Securities – Rural
Utilities. Farmer Mac’s current direct credit exposure to rural
utilities loans as of June 30, 2010 was $572.1 million, all of which loans were
to electric distribution cooperatives. Farmer Mac also had indirect
credit exposure to the rural utilities loans securing Farmer Mac Guaranteed
Securities – Rural Utilities structured as AgVantage securities, some of which
were secured by loans to generation and transmission
cooperatives. See “—Credit Risk – Institutional” for more information
about Farmer Mac’s credit risk on AgVantage securities.
Farmer
Mac AgVantage securities are general obligations of institutions approved by
Farmer Mac and are secured by eligible loans in an amount at least equal to the
outstanding principal amount of the security. Farmer Mac excludes the
loans that secure AgVantage securities from the credit risk metrics it discloses
because of the credit quality of the issuing institutions, the collateralization
level for the securities, and because delinquent loans are required to be
removed from the pool of pledged loans and replaced with current eligible
loans. As of June 30, 2010, Farmer Mac had not experienced any
credit losses on any AgVantage securities and does not expect to incur any such
losses in the future.
Farmer
Mac maintains an allowance for losses to cover estimated probable losses on
loans held and loans underlying Farmer Mac I Guaranteed Securities, LTSPCs and
Farmer Mac Guaranteed Securities – Rural Utilities. The methodology
that Farmer Mac uses to determine the level of its allowance for losses is
described in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Policies and Estimates—Allowance for
Losses” in the Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2009 filed with the SEC on March 16, 2010 (as updated by the
Current Report on Form 8-K filed with the SEC on August 4,
2010). Management believes that this methodology produces a reliable
estimate of probable losses, as of the balance sheet date, for all loans held
and loans underlying Farmer Mac Guaranteed Securities and LTSPCs, in accordance
with FASB standards on accounting for contingencies and on measuring individual
impairment of a loan.
The
following table summarizes the components of Farmer Mac’s allowance for losses
as of June 30, 2010 and December 31, 2009:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Allowance
for loan losses
|
|
$
|
9,495
|
|
|
$
|
6,292
|
|
Reserve
for losses:
|
|
|
|
|
|
|
|
|
Off-balance
sheet Farmer Mac I Guaranteed Securities
|
|
|
560
|
|
|
|
2,033
|
|
LTSPCs
|
|
|
8,910
|
|
|
|
5,862
|
|
Total
|
|
$
|
18,965
|
|
|
$
|
14,187
|
|
Upon the
adoption of the new consolidation guidance on January 1, 2010, Farmer Mac
reclassified $2.0 million from the reserve for losses to the allowance for loan
losses as a result of Farmer Mac being determined the primary beneficiary of
certain VIEs with beneficial interests owned by third party
investors. In June 2010, Farmer Mac deconsolidated certain VIEs with
beneficial interests owned by third party investors because Farmer Mac was no
longer determined to be the primary beneficiary. This deconsolidation
did not result in a material reclassification from the allowance for loan losses
to the reserve for losses during second quarter 2010. Consolidated
interests in VIEs with beneficial interests owned by third party investors are
presented as “loans held for investment in consolidated trusts” on Farmer Mac’s
condensed consolidated balance sheets. Upon deconsolidation, Farmer
Mac classifies these interests as off-balance sheet Farmer Mac Guaranteed
Securities.
The
following table summarizes the changes in the components of Farmer Mac’s
allowance for losses for the three and six months ended June 30, 2010 and
2009:
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
|
|
Allowance
|
|
|
|
|
|
Total
|
|
|
Allowance
|
|
|
|
|
|
Total
|
|
|
|
for
Loan
|
|
|
Reserve
|
|
|
Allowance
|
|
|
for
Loan
|
|
|
Reserve
|
|
|
Allowance
|
|
|
|
Losses
|
|
|
for
Losses
|
|
|
for
Losses
|
|
|
Losses
|
|
|
for
Losses
|
|
|
for
Losses
|
|
|
|
(in
thousands)
|
|
For
the Three Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
9,142
|
|
|
$
|
6,427
|
|
|
$
|
15,569
|
|
|
$
|
13,228
|
|
|
$
|
8,025
|
|
|
$
|
21,253
|
|
Provision/(recovery)
for losses
|
|
|
(1,870
|
)
|
|
|
3,043
|
|
|
|
1,173
|
|
|
|
(5,693
|
)
|
|
|
(529
|
)
|
|
|
(6,222
|
)
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,725
|
)
|
|
|
-
|
|
|
|
(5,725
|
)
|
Recoveries
|
|
|
2,223
|
|
|
|
-
|
|
|
|
2,223
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
9,495
|
|
|
$
|
9,470
|
|
|
$
|
18,965
|
|
|
$
|
1,810
|
|
|
$
|
7,496
|
|
|
$
|
9,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
6,292
|
|
|
$
|
7,895
|
|
|
$
|
14,187
|
|
|
$
|
10,929
|
|
|
$
|
5,506
|
|
|
$
|
16,435
|
|
Provision/(recovery)
for losses
|
|
|
980
|
|
|
|
1,575
|
|
|
|
2,555
|
|
|
|
(2,159
|
)
|
|
|
1,990
|
|
|
|
(169
|
)
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,725
|
)
|
|
|
-
|
|
|
|
(7,725
|
)
|
Recoveries
|
|
|
2,223
|
|
|
|
-
|
|
|
|
2,223
|
|
|
|
765
|
|
|
|
-
|
|
|
|
765
|
|
Ending
balance
|
|
$
|
9,495
|
|
|
$
|
9,470
|
|
|
$
|
18,965
|
|
|
$
|
1,810
|
|
|
$
|
7,496
|
|
|
$
|
9,306
|
|
During
the three and six months ended June 30, 2010, Farmer Mac recorded a provision to
its allowance for losses of $1.2 million and $2.6 million, respectively,
compared to releases of its allowance for losses of $6.2 million and $0.2
million, respectively, for the same periods in 2009. Farmer Mac
recorded no charge-offs during the three and six months ended June 30, 2010,
compared to charge-offs of $5.7 million and $7.7 million during the same periods
in 2009. Farmer Mac recorded recoveries of $2.2 million for both the
three and six months ended June 30, 2010, compared to no recoveries in
three months ended June 30, 2009 and $0.8 million in recoveries for the six
months ended June 30, 2009. There was no previously accrued or
advanced interest on loans or Farmer Mac I Guaranteed Securities charged off in
second quarter 2010 or second quarter 2009. As of June 30, 2010,
Farmer Mac’s allowance for losses totaled $19.0 million, or 44 basis points
of the outstanding principal balance of loans held and loans underlying Farmer
Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs,
compared to $14.2 million or 32 basis points as of
December 31, 2009.
As of
June 30, 2010, Farmer Mac’s 90-day delinquencies were $56.0 million
(1.30 percent), compared to $42.3 million (0.95 percent) as of
June 30, 2009. Ethanol loans comprised $10.9 million of the
90-day delinquencies as of June 30, 2010, compared to $18.8 million as of
June 30, 2009. As of June 30, 2010, Farmer Mac’s non-performing
assets totaled $71.3 million (1.66 percent), compared to
$97.1 million (2.17 percent) as of
June 30, 2009. Ethanol loans comprised $10.9 million of
non-performing assets as of June 30, 2010, compared to $59.7 million
as of June 30, 2009. Loans that have been restructured were
insignificant and are included within the reported 90-day delinquency and
non-performing asset disclosures. From quarter to quarter, Farmer Mac
anticipates that 90-day delinquencies and non-performing assets will fluctuate,
both in dollars and as a percentage of the outstanding portfolio, with higher
levels likely at the end of the first and third quarters of each year
corresponding to the annual (January 1
st
)
and semi-annual (January 1
st
and
July 1
st
)
payment characteristics of most Farmer Mac I loans.
As of
June 30, 2010, Farmer Mac’s ethanol exposure, which includes loans held and
loans subject to LTSPCs, was $239.8 million on 29 different plants, with an
additional $50.9 million of undisbursed commitments. Other than
the undisbursed commitments, Farmer Mac is not seeking to add more ethanol loan
exposure to its portfolio.
The
following table presents historical information regarding Farmer Mac’s
non-performing assets and 90-day delinquencies in the Farmer Mac I program
compared to the principal balance of all loans held and loans underlying Farmer
Mac I Guaranteed Securities (excluding AgVantage securities) and
LTSPCs:
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Guarantees (1),
|
|
|
Non-
|
|
|
|
|
|
REO and
|
|
|
|
|
|
|
|
|
|
LTSPCs,
|
|
|
performing
|
|
|
|
|
|
Performing
|
|
|
90-day
|
|
|
|
|
|
|
and
REO
|
|
|
Assets
|
|
|
Percentage
|
|
|
Bankruptcies
|
|
|
Delinquencies
|
|
|
Percentage
|
|
|
|
(dollars
in thousands)
|
|
As
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2010
|
|
$
|
4,299,417
|
|
|
$
|
71,300
|
|
|
1.66%
|
|
|
$
|
15,289
|
|
|
$
|
56,011
|
|
|
1.30%
|
|
March
31, 2010
|
|
|
4,303,663
|
|
|
|
83,977
|
|
|
1.95%
|
|
|
|
13,542
|
|
|
|
70,435
|
|
|
1.64%
|
|
December
31, 2009
|
|
|
4,396,642
|
|
|
|
62,020
|
|
|
1.41%
|
|
|
|
12,494
|
|
|
|
49,526
|
|
|
1.13%
|
|
September
30, 2009
|
|
|
4,379,450
|
|
|
|
84,779
|
|
|
1.94%
|
|
|
|
25,341
|
|
|
|
59,438
|
|
|
1.36%
|
|
June
30, 2009
|
|
|
4,471,567
|
|
|
|
97,123
|
|
|
2.17%
|
|
|
|
54,816
|
|
|
|
42,307
|
|
|
0.95%
|
|
March
31, 2009
|
|
|
4,530,892
|
|
|
|
96,175
|
|
|
2.12%
|
|
|
|
9,941
|
|
|
|
86,234
|
|
|
1.90%
|
|
December
31, 2008
|
|
|
4,983,963
|
|
|
|
80,032
|
|
|
1.61%
|
|
|
|
12,912
|
|
|
|
67,120
|
|
|
1.35%
|
|
September
30, 2008
|
|
|
4,989,755
|
|
|
|
32,883
|
|
|
0.66%
|
|
|
|
21,402
|
|
|
|
11,481
|
|
|
0.23%
|
|
June
30, 2008
|
|
|
4,937,870
|
|
|
|
28,230
|
|
|
0.57%
|
|
|
|
23,060
|
|
|
|
5,170
|
|
|
0.11%
|
|
(1)
Excludes loans underlying AgVantage securities.
As of
June 30, 2010, Farmer Mac individually analyzed $49.2 million of its
$147.4 million of impaired assets for collateral shortfalls against updated
appraised values, other updated collateral valuations or discounted
values. Farmer Mac evaluated the remaining $98.2 million of
impaired assets for which updated valuations were not available in the aggregate
in consideration of their similar risk characteristics and historical
statistics. As of June 30, 2010, Farmer Mac had recorded
specific allowances of $3.0 million for under-collateralized
assets. Farmer Mac’s non-specific or general allowances were $16.0
million as of June 30, 2010.
As of
June 30, 2010, the weighted-average original loan-to-value ratio (“LTV”) for
loans held and loans underlying LTSPCs and Farmer Mac I Guaranteed Securities
(excluding AgVantage securities) was 51.2 percent, and the weighted-average
original LTV for all non-performing assets was
54.6 percent.
The
following table presents outstanding loans held and loans underlying LTSPCs and
Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and
non-performing assets as of June 30, 2010 by year of origination, geographic
region and commodity/collateral type.
Farmer
Mac I Non-performing Assets as of June 30, 2010
|
|
|
|
Distribution
of
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
Loans,
|
|
|
|
|
|
|
|
|
|
Loans,
|
|
Guarantees,
|
|
|
Non-
|
|
|
Non-
|
|
|
|
Guarantees,
|
|
LTSPCs
|
|
|
performing
|
|
|
performing
|
|
|
|
LTSPCs and REO
|
|
and REO (1)
|
|
|
Assets (2)
|
|
|
Asset Rate
|
|
|
|
(dollars
in thousands)
|
|
By
year of origination:
|
|
|
|
|
|
|
|
|
|
|
|
Before
1997
|
|
7%
|
|
$
|
294,463
|
|
|
$
|
7,526
|
|
|
2.56%
|
|
1997
|
|
3%
|
|
|
114,511
|
|
|
|
1,634
|
|
|
1.43%
|
|
1998
|
|
4%
|
|
|
169,036
|
|
|
|
3,912
|
|
|
2.31%
|
|
1999
|
|
5%
|
|
|
227,130
|
|
|
|
2,749
|
|
|
1.21%
|
|
2000
|
|
3%
|
|
|
117,116
|
|
|
|
1,105
|
|
|
0.94%
|
|
2001
|
|
5%
|
|
|
220,277
|
|
|
|
6,900
|
|
|
3.13%
|
|
2002
|
|
7%
|
|
|
294,580
|
|
|
|
5,644
|
|
|
1.92%
|
|
2003
|
|
8%
|
|
|
341,848
|
|
|
|
3,878
|
|
|
1.13%
|
|
2004
|
|
6%
|
|
|
279,141
|
|
|
|
1,420
|
|
|
0.51%
|
|
2005
|
|
10%
|
|
|
410,563
|
|
|
|
2,189
|
|
|
0.53%
|
|
2006
|
|
11%
|
|
|
462,031
|
|
|
|
1,890
|
|
|
0.41%
|
|
2007
|
|
10%
|
|
|
436,435
|
|
|
|
21,766
|
|
|
4.99%
|
|
2008
|
|
10%
|
|
|
461,879
|
|
|
|
10,687
|
|
|
2.31%
|
|
2009
|
|
6%
|
|
|
274,210
|
|
|
|
-
|
|
|
0.00%
|
|
2010
|
|
5%
|
|
|
196,197
|
|
|
|
-
|
|
|
0.00%
|
|
Total
|
|
100%
|
|
$
|
4,299,417
|
|
|
$
|
71,300
|
|
|
1.66%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
geographic region (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northwest
|
|
15%
|
|
$
|
655,873
|
|
|
$
|
17,375
|
|
|
2.65%
|
|
Southwest
|
|
40%
|
|
|
1,692,623
|
|
|
|
16,438
|
|
|
0.97%
|
|
Mid-North
|
|
21%
|
|
|
920,198
|
|
|
|
17,116
|
|
|
1.86%
|
|
Mid-South
|
|
12%
|
|
|
534,883
|
|
|
|
11,030
|
|
|
2.06%
|
|
Northeast
|
|
8%
|
|
|
338,517
|
|
|
|
4,068
|
|
|
1.20%
|
|
Southeast
|
|
4%
|
|
|
157,323
|
|
|
|
5,273
|
|
|
3.35%
|
|
Total
|
|
100%
|
|
$
|
4,299,417
|
|
|
$
|
71,300
|
|
|
1.66%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
commodity/collateral type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crops
|
|
40%
|
|
$
|
1,692,849
|
|
|
$
|
25,299
|
|
|
1.49%
|
|
Permanent
plantings
|
|
19%
|
|
|
831,908
|
|
|
|
12,536
|
|
|
1.51%
|
|
Livestock
|
|
27%
|
|
|
1,180,931
|
|
|
|
15,741
|
|
|
1.33%
|
|
Part-time
farm/rural housing
|
|
7%
|
|
|
314,928
|
|
|
|
6,600
|
|
|
2.10%
|
|
Ag
storage and processing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(including
ethanol facilities)
|
|
6%
|
|
|
252,639
|
|
|
|
10,893
|
|
|
4.31%
|
|
Other
|
|
1%
|
|
|
26,162
|
|
|
|
231
|
|
|
0.88%
|
|
Total
|
|
100%
|
|
$
|
4,299,417
|
|
|
$
|
71,300
|
|
|
1.66%
|
|
|
(1)
|
Excludes
loans underlying AgVantage
securities.
|
|
(2)
|
Includes
loans 90 days or more past due, in foreclosure, restructured after
delinquency, in bankruptcy (including loans performing under either their
original loan terms or a court-approved bankruptcy plan), and real estate
owned.
|
|
(3)
|
Geographic
regions - Northwest (AK, ID, MT, ND, NE, OR, SD, WA, WY); Southwest (AZ,
CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South
(KS, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA,
RI, TN, VA, VT, WV); and Southeast (AL, AR, FL, GA, LA, MS,
SC).
|
The
following table presents Farmer Mac’s cumulative net credit losses relative to
the cumulative original balance for all loans purchased and loans underlying
LTSPCs and Farmer Mac I Guaranteed Securities (excluding AgVantage securities)
as of June 30, 2010, by year of origination, geographic region and
commodity/collateral type. The purpose of this information is to
present information regarding losses relative to original guarantees and
commitments.
Farmer
Mac I Credit Losses Relative to all
|
|
Cumulative
Original Loans, Guarantees and LTSPCs
|
|
As
of June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
Original Loans,
|
|
|
Cumulative
|
|
|
Cumulative
|
|
|
|
Guarantees and
|
|
|
Net Credit
|
|
|
Loss
|
|
|
|
LTSPCs
|
|
|
Losses
|
|
|
Rate
|
|
|
|
(dollars
in thousands)
|
|
By
year of origination:
|
|
|
|
|
|
|
|
|
|
Before
1997
|
|
$
|
3,449,100
|
|
|
$
|
1,593
|
|
|
0.05%
|
|
1997
|
|
|
765,895
|
|
|
|
2,256
|
|
|
0.29%
|
|
1998
|
|
|
1,142,569
|
|
|
|
3,885
|
|
|
0.34%
|
|
1999
|
|
|
1,164,917
|
|
|
|
1,291
|
|
|
0.11%
|
|
2000
|
|
|
763,480
|
|
|
|
2,550
|
|
|
0.33%
|
|
2001
|
|
|
1,121,439
|
|
|
|
45
|
|
|
0.00%
|
|
2002
|
|
|
1,123,116
|
|
|
|
-
|
|
|
0.00%
|
|
2003
|
|
|
931,446
|
|
|
|
-
|
|
|
0.00%
|
|
2004
|
|
|
652,102
|
|
|
|
32
|
|
|
0.00%
|
|
2005
|
|
|
778,419
|
|
|
|
131
|
|
|
0.02%
|
|
2006
|
|
|
809,238
|
|
|
|
7,689
|
|
|
0.95%
|
|
2007
|
|
|
582,272
|
|
|
|
750
|
|
|
0.13%
|
|
2008
|
|
|
578,451
|
|
|
|
1,821
|
|
|
0.31%
|
|
2009
|
|
|
323,946
|
|
|
|
1,193
|
|
|
0.37%
|
|
2010
|
|
|
216,792
|
|
|
|
-
|
|
|
0.00%
|
|
Total
|
|
$
|
14,403,182
|
|
|
$
|
23,236
|
|
|
0.16%
|
|
By
geographic region (1):
|
|
|
|
|
|
|
|
|
|
|
|
Northwest
|
|
$
|
2,632,691
|
|
|
$
|
10,569
|
|
|
0.40%
|
|
Southwest
|
|
|
5,657,975
|
|
|
|
6,010
|
|
|
0.11%
|
|
Mid-North
|
|
|
2,451,650
|
|
|
|
6,659
|
|
|
0.27%
|
|
Mid-South
|
|
|
1,336,984
|
|
|
|
(314
|
)
|
|
-0.02%
|
|
Northeast
|
|
|
1,299,422
|
|
|
|
83
|
|
|
0.01%
|
|
Southeast
|
|
|
1,024,460
|
|
|
|
229
|
|
|
0.02%
|
|
Total
|
|
$
|
14,403,182
|
|
|
$
|
23,236
|
|
|
0.16%
|
|
By
commodity/collateral type:
|
|
|
|
|
|
|
|
|
|
|
|
Crops
|
|
$
|
5,772,301
|
|
|
$
|
1,309
|
|
|
0.02%
|
|
Permanent
plantings
|
|
|
3,193,304
|
|
|
|
9,378
|
|
|
0.29%
|
|
Livestock
|
|
|
3,732,126
|
|
|
|
2,676
|
|
|
0.07%
|
|
Part-time
farm/rural housing
|
|
|
1,010,283
|
|
|
|
371
|
|
|
0.04%
|
|
Ag
storage and processing
|
|
|
|
|
|
|
|
|
|
|
|
(including
ethanol facilities) (2)
|
|
|
545,556
|
|
|
|
9,502
|
|
|
1.74%
|
|
Other
|
|
|
149,612
|
|
|
|
-
|
|
|
0.00%
|
|
Total
|
|
$
|
14,403,182
|
|
|
$
|
23,236
|
|
|
0.16%
|
|
|
(1)
|
Geographic
regions - Northwest (AK, ID, MT, ND, NE, OR, SD, WA, WY); Southwest (AZ,
CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South
(KS, OK, TX);Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA,
RI, TN, VA, VT, WV); and Southeast (AL, AR, FL, GA, LA, MS,
SC).
|
|
(2)
|
Several
of the loans underlying agricultural storage and processing LTSPCs are for
facilities under construction and, as of June 30, 2010, approximately
$50.9 million of the loans were not yet disbursed by the
lender.
|
Historically,
losses and collateral deficiencies have been less prevalent in the loans secured
by real estate producing agricultural commodities that receive significant
government support (such as cotton, soybeans, wheat, and corn) and more
prevalent in those that do not receive such support (such as the protein sector,
permanent plantings and vegetables). However, the level of government support
may vary and is not necessarily the primary factor to forecast future losses and
collateral deficiencies. In Farmer Mac’s experience, another significant
determinant of ultimate losses on loans is the degree to which the collateral is
specialized or highly improved, such as permanent plantings and facilities. As
adverse economic conditions persist for the agricultural commodities or products
related to those types of collateral, the prospective sale value of the
collateral is likely to decrease and the related loans may become
under-collateralized.
This
analysis is consistent with corresponding commodity analyses, which indicate
that Farmer Mac has experienced higher loss and collateral deficiency rates in
its loans classified as permanent plantings as well as storage and processing
loans, which include Farmer Mac’s exposure to loans on ethanol
plants. Most of the loans classified as permanent plantings do not
receive significant government support and are therefore more susceptible to
adverse commodity-specific economic trends, while the collateral for storage and
processing loans is typically highly improved and specialized. Farmer
Mac anticipates that one or more particular commodity groups will be under
economic pressure at any one time and actively manages its portfolio to mitigate
concentration risks while preserving Farmer Mac’s ability to meet the financing
needs of all commodity groups. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Results of
Operations—Outlook.”
Analysis
of portfolio performance by geographic distribution indicates that, while
commodities are the primary determinant of exposure to loss, within most
commodity groups certain geographic areas allow greater economies of scale or
proximity to markets than others and, consequently, result in more successful
farms within the commodity group. Likewise, certain geographic areas
offer better growing conditions than others and, consequently, result in more
versatile and more successful farms within a given commodity group – and the
ability to switch crops among commodity groups.
Farmer Mac’s methodologies for pricing
its guarantee and commitment fees, managing credit risks and providing adequate
allowances for losses consider all of the foregoing factors and
information.
Credit
Risk – Institutional
. Farmer Mac is also exposed to credit
risk arising from its business relationships with other institutions,
including:
|
·
|
issuers
of AgVantage securities and other investments held or guaranteed by Farmer
Mac;
|
|
·
|
sellers
and servicers; and
|
|
·
|
interest
rate swap contract
counterparties.
|
AgVantage
securities are general obligations of the AgVantage issuers and are secured by
eligible loans in an amount at least equal to the outstanding principal amount
of the security, with some level of overcollateralization also required for
Farmer Mac I AgVantage securities. The required collateralization
level is established at the time of issuance and does not change during the life
of the security. In AgVantage transactions, the corporate obligor is
required to remove from the pool of pledged collateral any loan that becomes
more than 30 days delinquent in the payment of principal or interest and to
substitute an eligible loan that is current in payment to maintain the minimum
required collateralization level. In the event of a default on the
general obligation, Farmer Mac would have recourse to the pledged collateral and
have rights to the ongoing borrower payments of principal and
interest. For a more detailed description of AgVantage securities,
see “Business—Farmer Mac Programs—Farmer Mac I—AgVantage Securities” in the
Corporation’s Annual Report on Form 10-K for the year ended December 31,
2009 filed with the SEC on March 16, 2010.
Outstanding
AgVantage on-balance sheet Farmer Mac I Guaranteed Securities totaled
$43.6 million and $48.8 million as of June 30, 2010 and December 31, 2009,
respectively. Farmer Mac Guaranteed Securities – Rural Utilities
structured as AgVantage transactions issued by National Rural totaled $1.6
billion and $1.7 billion as of June 30, 2010 and December 31, 2009,
respectively. In addition, outstanding off-balance sheet AgVantage
Farmer Mac I Guaranteed Securities totaled $2.9 billion as of June
30, 2010 and December 31, 2009. The following table
provides information about the issuers of AgVantage securities, as well as the
required collateralization levels for those transactions as of June 30, 2010 and
December 31, 2009.
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Credit
|
|
|
Required
|
|
|
|
|
|
Credit
|
|
|
Required
|
|
Counterparty
|
|
Balance
|
|
|
Rating
|
|
|
Collateralization
|
|
|
Balance
|
|
|
Rating
|
|
|
Collateralization
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MetLife
(1)
|
|
$
|
2,500,000
|
|
|
AA-
|
|
|
103%
|
|
|
$
|
2,500,000
|
|
|
AA-
|
|
|
103%
|
|
National
Rural
|
|
|
1,601,593
|
|
|
A
|
|
|
100%
|
|
|
|
1,689,240
|
|
|
A
|
|
|
100%
|
|
M&I
Bank
|
|
|
475,000
|
|
|
BBB
|
|
|
106%
|
|
|
|
475,000
|
|
|
BBB
|
|
|
106%
|
|
Other
(2)
|
|
|
13,550
|
|
|
N/A
|
|
|
111%
to 120%
|
|
|
|
18,800
|
|
|
N/A
|
|
|
111%
to 120%
|
|
Total
outstanding
|
|
$
|
4,590,143
|
|
|
|
|
|
|
|
|
$
|
4,683,040
|
|
|
|
|
|
|
|
(1)
|
MetLife
was put on credit watch negative (*-) in February
2010.
|
(2)
|
Consists
of AgVantage securities issued by 5 different issuers as of June 30, 2010
and 6 different issuers as of December 31,
2009.
|
Farmer
Mac manages institutional credit risk related to sellers and servicers by
requiring those institutions to meet Farmer Mac’s standards for
creditworthiness. Farmer Mac monitors the financial condition of
those institutions by evaluating financial statements and bank credit rating
agency reports. For more information on Farmer Mac’s approval of
sellers, see “Business—Farmer Mac Programs—Farmer Mac I—Sellers” in the
Corporation’s Annual Report on Form 10-K for the year ended December 31,
2009 filed with the SEC on March 16, 2010.
Credit
Risk – Other Investments
. As of June 30, 2010, Farmer Mac had
$325.3 million of cash and cash equivalents and $1.3 billion of investment
securities. The management of the credit risk inherent in these
investments is governed by Farmer Mac’s own policies and FCA’s Liquidity and
Investment Regulations.
In
general, these policies and regulations require each investment or issuer of an
investment to be highly rated by a nationally-recognized statistical rating
organization (“NRSRO”). Investments in mortgage securities and
asset-backed securities are required to have a rating in the highest NRSRO
category. Corporate debt securities with maturities of no more than
five years but more than three years are required to be rated in one of the two
highest categories; corporate debt securities with maturities of three years or
less are required to be rated in one of the three highest
categories. There are investments for which a rating is not required,
such as obligations of the United States or diversified investment funds
regulated under the Investment Company Act of 1940. Investments
in diversified investment funds are further limited to those funds that are
holding only instruments approved for direct investment by Farmer
Mac.
FCA’s
Liquidity and Investment Regulations and Farmer Mac’s policies also establish
concentration limits, which are intended to limit exposure to any one
counterparty. FCA’s Liquidity and Investment Regulations limit Farmer
Mac’s total credit exposure to any single issuer of securities and
uncollateralized financial derivatives is limited by regulation to 25 percent of
the Corporation’s regulatory capital (as of June 30, 2010, 25 percent of Farmer
Mac’s regulatory capital was $115.2 million). This limitation is
not applied to the obligations of the United States or to qualified investment
funds. The limitation applied to the obligations of any GSE is
100 percent of Farmer Mac’s regulatory capital. Since June 2009,
Farmer Mac’s policies applicable to new investments have limited the
Corporation’s total exposure to any single issuer of securities and
uncollateralized financial derivatives to the lower of (1) 10 percent of the
Corporation’s regulatory capital and (2) 50 percent of the expected net interest
income from the investment portfolio over 12 months.
Interest
Rate Risk
. Farmer Mac is subject to interest rate risk on all
assets held for investment because of possible timing differences in the cash
flows of the assets and related liabilities. This risk is primarily
related to loans held and on-balance sheet Farmer Mac Guaranteed Securities due
to the ability of borrowers to prepay their mortgages before the scheduled
maturities, thereby increasing the risk of asset and liability cash flow
mismatches. Cash flow mismatches in a changing interest rate
environment can reduce the earnings of the Corporation if assets repay sooner
than expected and the resulting cash flows must be reinvested in lower-yielding
investments when Farmer Mac’s funding costs cannot be correspondingly reduced,
or if assets repay more slowly than expected and the associated debt must be
replaced by higher-cost debt.
Yield
maintenance provisions and other prepayment penalties contained in many
agricultural mortgage and rural utilities loans reduce, but do not eliminate,
prepayment risk, particularly in the case of a defaulted loan where yield
maintenance may not be collected. Those provisions require borrowers
to make an additional payment when they prepay their loans so that, when
reinvested with the prepaid principal, yield maintenance payments generate
substantially the same cash flows that would have been generated had the loan
not prepaid. Those provisions create a disincentive to prepayment and
compensate the Corporation for some of its interest rate risks. As of
June 30, 2010, 17 percent of the outstanding balance of loans in the Farmer Mac
I program where Farmer Mac either owned the loan or the beneficial interest in
the underlying loan had yield maintenance provisions and 8 percent had other
forms of prepayment protection (together covering 48 percent of all loans with
fixed interest rates). Of the Farmer Mac I current loans
purchased in second quarter 2010, none had yield maintenance or other forms of
prepayment protection. As of June 30, 2010, none of the
USDA-guaranteed portions held or underlying Farmer Mac II Guaranteed Securities
had yield maintenance provisions; however, 12 percent contained prepayment
penalties. Of the USDA-guaranteed portions purchased in the first six
months of 2010, 8 percent contained various forms of prepayment
penalties. As of June 30, 2010, 29 percent of the rural
utilities loans owned by Farmer Mac had yield maintenance
provisions. Of the rural utilities loans purchased in second quarter
2010, 37 percent had yield maintenance provisions. As of June
30, 2010, all of the rural utilities loans held in trusts where Farmer Mac owned
the beneficial interest in the underlying loan had yield maintenance
provisions.
Taking
into consideration the prepayment provisions and the default probabilities
associated with its mortgage assets, Farmer Mac uses prepayment models to
project and value cash flows associated with these assets. Because
borrowers’ behaviors in various interest rate environments may change over time,
Farmer Mac periodically evaluates the effectiveness of these models compared to
actual prepayment experience and adjusts and refines the models as necessary to
improve the precision of subsequent prepayment forecasts.
Farmer
Mac’s $325.3 million of cash and cash equivalents mature within three months and
are funded with discount notes having similar maturities. As of June
30, 2010, $743.4 million of the $1.3 billion of investment securities
(59 percent) were floating rate securities with rates that adjust within one
year or fixed rate securities with original maturities between three months and
one year. Such securities are funded with floating rate medium-term
notes or discount notes that closely match the rate adjustment dates of the
associated investments. As of June 30, 2010, Farmer Mac had outstanding discount
notes of $2.1 billion, medium-term notes that mature within one year of $1.1
billion and medium-term notes that mature after one year of $2.3
billion.
The goal
of interest rate risk management at Farmer Mac is to create and maintain a
portfolio that generates stable earnings and value across a variety of interest
rate environments. Farmer Mac’s primary strategy for managing
interest rate risk is to fund asset purchases with liabilities that have similar
durations and cash flows so that they will perform similarly as interest rates
change. To achieve this match, Farmer Mac issues discount notes and
both callable and non-callable medium-term notes across a spectrum of
maturities. Farmer Mac issues callable debt to offset the prepayment
risk associated with some loans. By using a blend of liabilities that
includes callable debt, the interest rate sensitivities of the liabilities tend
to increase or decrease as interest rates change in a manner similar to changes
in the interest rate sensitivities of the assets. Farmer Mac also
uses financial derivatives to better match the durations of the Corporation’s
assets and liabilities, thereby reducing overall interest rate
sensitivity.
An
important “stress test” of Farmer Mac’s exposure to long-term interest rate risk
is the measurement of the sensitivity of its market value of equity (“MVE”) to
yield curve shocks. MVE represents management’s estimate of the
present value of all future cash flows from on- and off-balance sheet assets,
liabilities and financial derivatives, discounted at current interest rates and
appropriate spreads. Farmer Mac’s MVE sensitivity decreased
significantly during the first half of 2010. This reduction in
sensitivity resulted from the $250.0 million of preferred stock issued by the
Corporation’s subsidiary, Farmer Mac II LLC. This transaction
extended the duration of Farmer Mac’s liabilities relative to its assets thereby
reducing MVE sensitivity. The following schedule summarizes the
results of Farmer Mac’s MVE sensitivity analysis as of June 30, 2010 and
December 31, 2009 to an immediate and instantaneous uniform or “parallel”
shift in the yield curve.
|
|
Percentage Change in MVE from
Base Case
|
|
Interest Rate
|
|
June 30,
|
|
|
December 31,
|
|
Scenario
|
|
2010
|
|
|
2009
|
|
+
300 bp
|
|
3.4%
|
|
|
-23.1%
|
|
+
200 bp
|
|
4.9%
|
|
|
-13.8%
|
|
+
100 bp
|
|
4.1%
|
|
|
-5.4%
|
|
-
100 bp
|
|
*
|
|
|
*
|
|
-
200 bp
|
|
*
|
|
|
*
|
|
-
300 bp
|
|
*
|
|
|
*
|
|
|
*
|
As
of the date indicated, a parallel shift of the U.S. Treasury yield curve
by the number of basis points indicated produced negative interest rates
for portions or all of this curve.
|
As of
June 30, 2010, Farmer Mac’s effective duration gap, another standard measure of
interest rate risk that measures the difference between the sensitivities of
assets compared to that of liabilities, was minus 2.2 months, compared to
plus 1.1 months as of December 31, 2009. This change
in duration gap is also attributable to the preferred stock issued by Farmer Mac
II LLC. Duration matching helps to maintain the correlation of cash
flows and stabilize portfolio earnings even when interest rates are not
stable.
Farmer
Mac also calculates the sensitivity of net interest income (“NII”) to changes in
interest rates which represents a shorter-term measure of interest rate
risk. As of June 30, 2010, a parallel increase of 100 basis
points would have decreased Farmer Mac’s NII by 7.1 percent, while a
parallel decrease of 25 basis points would have decreased NII by 3.2
percent. Farmer
Mac also measures the sensitivity of both MVE and NII to a variety of
non-parallel interest rate shocks, including flattening and steepening yield
curve scenarios. As of June 30, 2010, both MVE and NII showed
similar or lesser sensitivity to non-parallel shocks than to the parallel
shocks.
The
economic effects of financial derivatives are included in the Corporation’s MVE,
NII and duration gap analyses. Farmer Mac enters into the following
financial derivative transactions principally to protect against risk from the
effects of market price or interest rate movements on the value of assets,
future cash flows, credit exposure and debt issuance, not for trading or
speculative purposes:
|
·
|
“pay-fixed”
interest rate swaps, in which it pays fixed rates of interest to, and
receives floating rates of interest from,
counterparties;
|
|
·
|
“receive-fixed”
interest rate swaps, in which it receives fixed rates of interest from,
and pays floating rates of interest to,
counterparties;
|
|
·
|
“basis
swaps,” in which it pays variable rates of interest based on one index to,
and receives variable rates of interest based on another index from,
counterparties; and
|
|
·
|
“credit
default swaps,” in which it pays a periodic fee to a counterparty in
exchange for the counterparty’s agreement to make payments in the event of
an instrument’s default or other credit
event.
|
As of
June 30, 2010, Farmer Mac had $4.1 billion combined notional amount of interest
rate and credit default swaps, with terms ranging from one to fifteen
years, of which $1.3 billion were pay-fixed interest rate swaps,
$2.5 billion were receive-fixed interest rate swaps, $0.2 billion were
basis swaps and $30.0 million were credit default swaps.
Liquidity and Capital
Resources
Farmer
Mac depends on regular access to the capital markets for liquidity, and Farmer
Mac maintained access to the capital markets at favorable rates throughout
second quarter 2010. Assuming continuation of current market
conditions, Farmer Mac believes it has sufficient liquidity and capital
resources to support its operations for the next 12 months and for the
foreseeable future. Farmer Mac also has a liquidity contingency plan
to manage unanticipated disruptions in its access to the capital
markets. That plan involves borrowing through repurchase agreement
arrangements and the sale of liquid assets. In accordance with the
calculation prescribed by FCA regulations, Farmer Mac maintains a minimum of 60
days of liquidity and a target of 90 days of liquidity. In
accordance with the methodology prescribed by those regulations, Farmer Mac
maintained an average of 155 days of liquidity during second quarter 2010
and had 169 days of liquidity as of June 30, 2010.
Debt
Issuance
. Farmer Mac funds its purchases of program and
non-program assets primarily by issuing debt obligations of various maturities
in the public capital markets. Debt obligations issued by Farmer Mac
include discount notes and fixed and floating rate medium-term notes, including
callable notes. Farmer Mac also issues discount notes and medium-term
notes to obtain funds to finance its investment activities, transaction costs,
guarantee payments and LTSPC purchase obligations. See
“Business—Financing—Debt Issuance” in the Corporation’s Annual Report on Form
10-K for the year ended December 31, 2009 filed with the SEC on March 16,
2010 for more information about Farmer Mac’s debt issuance.
Farmer
Mac’s board of directors has authorized the issuance of up to $7.0 billion
of discount notes and medium-term notes (of which $5.5 billion was outstanding
as of June 30, 2010), subject to periodic review of the adequacy of
that level relative to Farmer Mac’s borrowing requirements. Farmer
Mac invests the proceeds of such issuances in loans, Farmer Mac Guaranteed
Securities, and non-program investment assets in accordance with policies
established by its board of directors and subject to regulations established by
FCA.
Liquidity
. The
funding and liquidity needs of Farmer Mac’s business are driven by the purchase
of loans, USDA-guaranteed portions and Farmer Mac Guaranteed Securities; the
maturities of and interest payments on Farmer Mac’s discount notes and
medium-term notes; and payment of principal and interest on Farmer Mac
Guaranteed Securities. Farmer Mac’s primary sources of funds to meet
these needs are:
|
·
|
principal
and interest payments and ongoing guarantee and commitment fees received
on loans, Farmer Mac Guaranteed Securities, and
LTSPCs;
|
|
·
|
principal
and interest payments received from investment securities;
and
|
|
·
|
the
issuance of new discount notes and medium-term
notes.
|
Farmer
Mac’s short-term borrowing costs have remained at favorable levels despite
continued market volatility. Prior to 2009, Farmer Mac historically
used pay-fixed interest rate swaps, combined with a planned series of discount
note issuances, as an alternative source of effectively fixed rate
funding. While the swap market may have provided favorable
effectively fixed rates, interest rate swap transactions expose Farmer Mac to
the risk of future widening of its own issuance spreads versus corresponding
LIBOR rates. If the spreads on the Farmer Mac discount notes were to
increase relative to LIBOR, Farmer Mac would be exposed to a commensurate
reduction on its net interest yield on the notional amount of its pay-fixed
interest rate swaps and its LIBOR-based floating rate
assets. Conversely, if the rates on the Farmer Mac discount notes
were to decrease relative to LIBOR, Farmer Mac would benefit from a commensurate
increase on its net interest yield on the notional amount of its pay-fixed
interest rate swaps and its LIBOR-based floating rate
assets. Further, the widespread use of pay-fixed interest rate swaps
subjected the Corporation’s regulatory capital surplus to the potential adverse
effects of a downward move in the fair values of those interest rate
swaps. Such a downward move was seen in the third and fourth quarters
of 2008. Since September 2008, Farmer Mac has systematically entered
into various offsetting interest rate swaps (receive-fixed swaps) to counteract
the fair value movements of previously-existing swaps. These
transactions have dampened the susceptibility of Farmer Mac’s regulatory capital
surplus to changes in the fair values of its financial
derivatives. Farmer Mac remains cautious about using pay-fixed
interest rate swaps, but may use that type of financial derivative as necessary
in the future to manage specific interest rate risks for specific
transactions.
The
following table presents Farmer Mac’s cash and cash equivalents and investment
securities which, in addition to the proceeds from the issuance of discount
notes and medium-term notes, comprise Farmer Mac’s primary sources of
liquidity.
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Cash
and cash equivalents
|
|
$
|
325,333
|
|
|
$
|
654,794
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
Guaranteed
by US Government agencies
|
|
|
636,489
|
|
|
|
635,679
|
|
Guaranteed
by GSEs
|
|
|
340,907
|
|
|
|
117,760
|
|
Corporate
debt securities
|
|
|
195,916
|
|
|
|
245,605
|
|
Asset-backed
securities principally backed by Government
|
|
|
|
|
|
|
|
|
guaranteed
student loans (1)
|
|
|
84,020
|
|
|
|
132,851
|
|
Total
|
|
$
|
1,582,665
|
|
|
$
|
1,786,689
|
|
|
(1)
|
None
of Farmer Mac's asset-backed securities were backed by sub-prime or Alt-A
residential or commercial mortgages or home-equity
loans.
|
Farmer
Mac’s asset-backed investment securities include callable, AAA-rated
auction-rate certificates (“ARCs”), the interest rates on which are reset
through an auction process, most commonly at intervals of 28 days, or at
formula-based floating rates as set forth in the related transaction documents
in the event of a failed auction. These formula-based floating rates,
which may at times reset to zero, are intended to preserve the underlying
principal balance of the securities and avoid overall cash
shortfalls. Accordingly, payments of accrued interest may also be
delayed and are ultimately subject to cash availability. Beginning in
mid-February 2008, there were widespread failures of the auction mechanism
designed to provide regular liquidity to these types of
securities. Consequently, Farmer Mac has not sold any of its ARCs
into the auctions since that time. All ARCs held by Farmer Mac are
collateralized entirely by pools of Federal Family Education Loan Program
(“FFELP”) guaranteed student loans that are backed by the full faith and credit
of the United States. Farmer Mac continues to believe that the credit
quality of these securities is high, based on the underlying collateralization
and the securities’ continued AAA ratings. To date, Farmer Mac has
received all interest due on ARCs it holds and expects to continue to do
so. Farmer Mac does not believe that the auction failures will affect
the Corporation’s liquidity or its ability to fund its operations or make
dividend payments. All ARCs held by Farmer Mac are callable by the
issuers at par at any time.
Farmer
Mac held $63.3 million of ARCs as of June 30, 2010, compared to
$72.9 million as of December 31, 2009. As of June 30, 2010,
Farmer Mac’s carrying value of its ARCs was 85 percent of
par. The discounted carrying value reflects uncertainty regarding the
ability to obtain par in the absence of any active market trading.
As of
June 30, 2010 and December 31, 2009, Farmer Mac had a remaining investment of
$0.5 million and $5.3 million, respectively, in The Reserve Primary Fund
(the “Fund”), a money market fund that has suspended redemptions and is being
liquidated. Farmer Mac has presented its unsettled trades in the Fund
as “Prepaid expenses and other assets” on the condensed consolidated balance
sheets. Farmer Mac received the remaining investment in the Fund on
July 16, 2010, resulting in a recovery of $37,000 of amounts previously
written off.
Capital
. During
the six months ended June 30, 2010, Farmer Mac issued $250.0 million of
non-voting, non-cumulative preferred stock of its newly formed subsidiary Farmer
Mac II LLC and simultaneously retired and repurchased all $150.0 million Farmer
Mac Series B preferred stock. No Series C preferred stock was issued
in first or second quarters 2010. For more information about the
Series C preferred stock, see Note 6 to the condensed consolidated financial
statements and Farmer Mac’s Form 10-K for the fiscal year ended December 31,
2009 filed with the SEC on March 16, 2010 (as updated by the Current Report on
Form 8-K filed with the SEC on August 4, 2010). See “—Balance
Sheet Review—Capital” for more information about Farmer Mac’s capital position
and “—Regulatory Matters” for more information about proposed changes to the
risk-based capital stress test applicable to Farmer Mac.
Other
Matters
Common
Stock Dividends
. For the first and second quarters of 2010 and
for each quarter in 2009, Farmer Mac’s board of directors declared a quarterly
dividend of $0.05 per share on the Corporation’s common stock. Farmer
Mac’s ability to pay dividends on its common stock is subject to the payment of
dividends on its outstanding preferred stock. On August 5, 2010,
Farmer Mac’s board of directors declared a quarterly dividend of $0.05 per share
on the Corporation’s common stock, payable on September 30, 2010 to shareholders
of record on September 15, 2010. Farmer Mac’s ability to declare and
pay dividends could be restricted if it were to fail to comply with the
applicable regulatory capital
requirements. See “Business—Government Regulation of Farmer
Mac—Regulation—Capital Standards—Enforcement levels” in Farmer Mac’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 filed with
the SEC on March 16, 2010.
Preferred
Stock Dividends.
For the first and second quarters of 2010,
Farmer Mac’s board of directors declared a quarterly dividend of $12.50 per
share on the Corporation’s Series C Preferred Stock. On
August 5, 2010, Farmer Mac’s board of directors declared a quarterly
dividend of $12.50 per share on the Corporation’s Series C Preferred Stock,
payable on September 30, 2010 to shareholders of record on September 15, 2010.
On January 25, 2010, all of the outstanding shares of the Corporation’s Series B
preferred stock was repurchased and retired. The price paid to
repurchase the Series B Preferred Stock included accrued dividends of $8.33 per
share through the purchase date.
Non-controlling
Interest.
For the first and second quarter 2010, Farmer Mac II
LLC’s board of directors declared a quarterly dividend of $16.02 per share and
$22.1875 per share, respectively, on the company’s preferred
stock. On August 5, 2010, Farmer Mac II LLC’s board of directors
declared a quarterly dividend of $22.1875 per share payable on September 30,
2010 to holders of record on September 15, 2010. Farmer Mac’s net
income attributable to non-controlling interest totaled $5.5 million and
$9.6 million for the three and six months ended June 30, 2010,
respectively. These amounts represent the gross dividend cost of the
Farmer Mac II LLC preferred stock held by third parties. Pre-tax
income is reduced by this dividend cost before Farmer Mac’s income tax expense
is determined.
Regulatory
Matters
In the
January 22, 2010 issue of the Federal Register, FCA published for public
comment a proposed rule that would revise certain FCA regulations governing the
risk-based capital stress test applicable to Farmer Mac. In its
announcement of the proposed rule, FCA stated that the purpose of the proposed
changes is to update the risk-based capital model to address the addition of
rural utilities loans to Farmer Mac’s program authorities, to revise the
existing treatment of risk mitigations of general obligations in the AgVantage
structure, and to revise the treatment of counterparty risk on Farmer Mac’s
non-program investments. The public comment period for the proposed
rule closed April 22, 2010. Farmer Mac has provided written
comments on the proposed rule to FCA.
In the
preamble to the proposed rule, FCA noted that had the proposed rule been in
effect on March 31, 2009, Farmer Mac’s risk-based capital requirement as of
that date would have been approximately $62.9 million, compared to the
risk-based capital requirement of approximately $40.1 million under the
existing risk-based capital stress test at that time. Farmer Mac is
required to hold capital at the higher of the statutory minimum capital
requirement or the amount required by the risk-based capital stress
test. As of June 30, 2010, Farmer Mac’s minimum capital
requirement was $235.4 million, and Farmer Mac’s core capital level was
$442.0 million, $206.6 million above the minimum capital
requirement. Based on the risk-based capital stress test currently in
effect, Farmer Mac’s risk-based capital requirement as of June 30, 2010 was
$29.9 million, and Farmer Mac’s regulatory capital of $461.0 million
exceeded that requirement by approximately $431.1 million.
On May
19, 2010, FCA issued an advance notice of proposed rulemaking (“ANPRM”)
regarding the Corporation’s investments and liquidity portfolio policies and
solicited comments. The public comment period for the ANPRM closed on
July 6, 2010, and Farmer Mac provided written comments to the ANPRM on July 2,
2010.
On July
21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act
contains a variety of provisions designed to regulate financial markets,
including credit and derivatives transactions. Certain provisions of
the Dodd-Frank Act, such as the requirement to retain a five percent credit risk
in any securitized loan, do not apply to Farmer Mac or, with respect to any loan
sold to Farmer Mac, the seller of such loan. In addition, Farmer
Mac’s equity and debt securities are excluded from the Dodd-Frank Act’s
prohibitions on proprietary trading by banking entities. However,
certain provisions of the Dodd-Frank Act, such as those regarding derivatives
regulation, corporate governance and executive compensation, do not contain
specific exemptions for Farmer Mac. Until various studies are
completed and final regulations are promulgated pursuant to the Dodd-Frank Act,
the full effect of the legislation on the Corporation’s business activities and
operations cannot be completely assessed, particularly how it will affect
the Corporation
’
s
hedging operations and costs. Farmer Mac will continue to monitor all
applicable developments in the implementation of the Dodd-Frank Act and expects
to be able to adapt successfully to any new applicable legislative and
regulatory requirements.
Supplemental
Information
The
following tables present quarterly and annual information regarding loan
purchases, guarantees and LTSPCs and outstanding loans, guarantees and
LTSPCs.
Farmer
Mac Purchases, Guarantees and LTSPCs
|
|
|
|
Farmer
Mac I
|
|
|
Farmer
Mac II
|
|
|
Rural
Utilities
|
|
|
|
|
|
|
Loans
and
|
|
|
|
|
|
and
USDA
|
|
|
Loans
and
|
|
|
|
|
|
|
Guaranteed
|
|
|
|
|
|
Guaranteed
|
|
|
Guaranteed
|
|
|
|
|
|
|
Securities
|
|
|
LTSPCs
(1)
|
|
|
Securities
|
|
|
Securities
(2)
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
For
the quarter ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2010
|
|
$
|
98,235
|
|
|
$
|
32,430
|
|
|
$
|
123,062
|
|
|
$
|
77,726
|
|
|
$
|
331,453
|
|
March
31, 2010
|
|
|
77,948
|
|
|
|
77,143
|
|
|
|
92,288
|
|
|
|
59,018
|
|
|
|
306,397
|
|
December
31, 2009
|
|
|
86,872
|
|
|
|
108,646
|
|
|
|
94,936
|
|
|
|
16,009
|
|
|
|
306,463
|
|
September
30, 2009
|
|
|
40,732
|
|
|
|
37,083
|
|
|
|
76,119
|
|
|
|
553,644
|
|
|
|
707,578
|
|
June
30, 2009
|
|
|
37,900
|
|
|
|
22,717
|
|
|
|
96,322
|
|
|
|
900,000
|
|
|
|
1,056,939
|
|
March
31, 2009
|
|
|
29,814
|
|
|
|
65,720
|
|
|
|
79,055
|
|
|
|
270,000
|
|
|
|
444,589
|
|
December
31, 2008
|
|
|
72,137
|
|
|
|
121,440
|
|
|
|
87,455
|
|
|
|
230,000
|
|
|
|
511,032
|
|
September
30, 2008
|
|
|
508,179
|
|
|
|
239,170
|
|
|
|
83,672
|
|
|
|
-
|
|
|
|
831,021
|
|
June
30, 2008
|
|
|
53,838
|
|
|
|
116,472
|
|
|
|
79,700
|
|
|
|
1,330,676
|
|
|
|
1,580,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the year ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
195,318
|
|
|
|
234,166
|
|
|
|
346,432
|
|
|
|
1,739,653
|
|
|
|
2,515,569
|
|
December
31, 2008
|
|
|
671,622
|
|
|
|
530,363
|
|
|
|
303,941
|
|
|
|
1,560,676
|
|
|
|
3,066,602
|
|
(1)
|
As
of June 30, 2010, approximately $50.9 million of the loans underlying
$545.6 million of AgStorage and processing LTSPCs (including ethanol
facilities) were not yet disbursed by the
lender.
|
(2)
|
The
enactment of the Farm Bill on May 22, 2008 expanded Farmer Mac’s
authorities to include providing a secondary market for rural electric and
telephone loans made by cooperative
lenders.
|
|
|
Guarantees
and LTSPCs and USDA Guarantees
|
|
|
|
Farmer
Mac I
|
|
|
Farmer
Mac II
|
|
|
Rural
Utilities
|
|
|
|
|
|
|
Loans
and
|
|
|
|
|
|
and
USDA
|
|
|
Loans
and
|
|
|
|
|
|
|
Guaranteed
|
|
|
|
|
|
Guaranteed
|
|
|
Guaranteed
|
|
|
|
|
|
|
Securities
|
|
|
LTSPCs
|
|
|
Securities
|
|
|
Securities
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
As
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2010 (1)
|
|
$
|
5,544,091
|
|
|
$
|
1,739,979
|
|
|
$
|
1,300,945
|
|
|
$
|
2,173,660
|
|
|
$
|
10,758,675
|
|
March
31, 2010 (2)
|
|
|
5,444,448
|
|
|
|
1,846,244
|
|
|
|
1,237,539
|
|
|
|
2,183,576
|
|
|
|
10,711,807
|
|
December
31, 2009
|
|
|
5,224,768
|
|
|
|
2,165,706
|
|
|
|
1,199,798
|
|
|
|
2,130,832
|
|
|
|
10,721,104
|
|
September
30, 2009
|
|
|
5,227,939
|
|
|
|
2,135,445
|
|
|
|
1,141,570
|
|
|
|
2,266,592
|
|
|
|
10,771,546
|
|
June
30, 2009
|
|
|
5,241,145
|
|
|
|
2,181,712
|
|
|
|
1,115,025
|
|
|
|
1,819,033
|
|
|
|
10,356,915
|
|
March
31, 2009
|
|
|
5,313,680
|
|
|
|
2,216,564
|
|
|
|
1,082,215
|
|
|
|
1,319,033
|
|
|
|
9,931,492
|
|
December
31, 2008
|
|
|
5,759,773
|
|
|
|
2,224,181
|
|
|
|
1,043,425
|
|
|
|
1,054,941
|
|
|
|
10,082,320
|
|
September
30, 2008
|
|
|
5,724,867
|
|
|
|
2,264,880
|
|
|
|
995,639
|
|
|
|
824,941
|
|
|
|
9,810,327
|
|
June
30, 2008
|
|
|
5,474,303
|
|
|
|
1,997,172
|
|
|
|
960,278
|
|
|
|
1,330,676
|
|
|
|
9,762,429
|
|
(1)
|
The
Loans and Guaranteed Securities and LTSPCs amounts reflect the conversion
of $86.0 million of existing LTSPCs to Farmer Mac I Guaranteed Securities
during the second quarter 2010 at the request of a program
participant.
|
|
The
Loans and Guaranteed Securities and LTSPCs amounts reflect the conversion
of $265.8 million of existing LTSPCs to Farmer Mac I Guaranteed Securities
during the first quarter 2010 at the request of a program
participant.
|
Outstanding
Balance of Loans Held and Loans Underlying
|
|
On-Balance
Sheet Farmer Mac and USDA Guaranteed Securities
|
|
|
|
|
|
|
5-to-10-Year
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
ARMs &
|
|
|
1-Month-to-
|
|
|
Held in
|
|
|
|
Fixed Rate
|
|
|
Resets
|
|
|
3 Year ARMs
|
|
|
Portfolio
|
|
|
|
(in
thousands)
|
|
As
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2010
|
|
$
|
2,347,206
|
|
|
$
|
1,051,722
|
|
|
$
|
1,914,096
|
|
|
$
|
5,313,024
|
|
March
31, 2010
|
|
|
2,431,701
|
|
|
|
1,340,856
|
|
|
|
1,840,181
|
|
|
|
5,612,738
|
|
December
31, 2009
|
|
|
1,983,749
|
|
|
|
729,700
|
|
|
|
1,439,267
|
|
|
|
4,152,716
|
|
September
30, 2009
|
|
|
2,138,544
|
|
|
|
685,553
|
|
|
|
1,403,298
|
|
|
|
4,227,395
|
|
June
30, 2009
|
|
|
1,716,678
|
|
|
|
649,078
|
|
|
|
1,303,332
|
|
|
|
3,669,088
|
|
March
31, 2009
|
|
|
1,728,174
|
|
|
|
660,398
|
|
|
|
759,535
|
|
|
|
3,148,107
|
|
December
31, 2008
|
|
|
1,659,983
|
|
|
|
746,623
|
|
|
|
819,234
|
|
|
|
3,225,840
|
|
September
30, 2008
|
|
|
1,412,136
|
|
|
|
699,611
|
|
|
|
743,146
|
|
|
|
2,854,893
|
|
June
30, 2008
|
|
|
1,974,048
|
|
|
|
772,859
|
|
|
|
739,642
|
|
|
|
3,486,549
|
|
Item
3.
|
Quantitative and
Qualitative Disclosures About Market
Risk
|
Farmer
Mac is exposed to market risk attributable to changes in interest
rates. Farmer Mac manages this market risk by entering into various
financial transactions, including financial derivatives, and by monitoring its
exposure to changes in interest rates. See “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Risk
Management—Interest Rate Risk” for more information about Farmer Mac’s exposure
to interest rate risk and strategies to manage such risk. For
information regarding Farmer Mac’s use of and accounting policies for financial
derivatives, see Note 1(c) to the condensed consolidated financial statements
contained in this report. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Liquidity and Capital
Resources” for further information regarding Farmer Mac’s debt issuance and
liquidity risks.
Item
4.
|
Controls and
Procedures
|
(a)
Management’s Evaluation of
Disclosure Controls and Procedures
. Farmer Mac maintains
disclosure controls and procedures designed to ensure that information required
to be disclosed in the Corporation’s periodic filings under the Securities
Exchange Act of 1934 (the “Exchange Act”), including this report, is recorded,
processed, summarized and reported on a timely basis. These
disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed under the Exchange Act is
accumulated and communicated to the Corporation’s management on a timely basis
to allow decisions regarding required disclosure. Management,
including Farmer Mac’s Chief Executive Officer (the “CEO”) and Chief Financial
Officer (the “CFO”), has evaluated the effectiveness of the design and operation
of the Corporation’s disclosure controls and procedures (as defined under
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30,
2010.
The
Corporation carried out the evaluation required by paragraph (b) of Exchange Act
Rules 13a-15 and 15d-15, under the supervision and with the participation of
management, including the CEO and CFO, of the effectiveness of Farmer Mac’s
disclosure controls and procedures. Based upon this evaluation, the
CEO and CFO concluded that the Corporation’s disclosure controls and procedures
were effective as of June 30, 2010.
(b)
Changes in Internal Control
Over Financial Reporting
. There were no changes in Farmer
Mac’s internal control over financial reporting during the quarter ended June
30, 2010 that has materially affected, or is reasonably likely to materially
affect, Farmer Mac’s internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1.
|
Legal
Proceedings
|
None.
There
were no material changes from the risk factors previously disclosed in Farmer
Mac’s Annual Report on Form 10-K for the year ended December 31, 2009 filed with
the SEC on March 16, 2010.
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds
|
|
(a)
|
Farmer
Mac is a federally chartered instrumentality of the United States and its
debt and equity securities are exempt from registration pursuant to
Section 3(a)(2) of the Securities Act of
1933.
|
During
second quarter 2010, two types of transactions occurred related to Farmer Mac
common stock that were not registered under the Securities Act of 1933 and not
otherwise reported on a Current Report on Form 8-K:
|
1.
|
On
April 26, 2010, pursuant to Farmer Mac’s policy that permits
directors of Farmer Mac to elect to receive shares of Class C Non-Voting
Common Stock in lieu of their cash retainers, Farmer Mac issued an
aggregate of 1,114 shares of its Class C Non-Voting Common Stock
to the five directors who elected to receive such stock in lieu of their
cash retainers. The number of shares issued to the directors
was calculated based on a price of $11.33 per share, which was the closing
price of the Class C Non-Voting Common Stock on March 31, 2010 as
reported by the New York Stock
Exchange.
|
|
2.
|
On
June 3, 2010, Richard H. Davidson was granted 2,699 restricted
shares of Farmer Mac’s Class C Non-Voting Common Stock in connection with
his election as a director of the Corporation. Those restricted
shares have the same terms as the restricted shares granted to the other
Farmer Mac directors on April 1, 2010 (as reported on a Current Report on
Form 8-K filed on April 5, 2010) and will vest on March 31, 2011 or upon
Mr. Davidson’s (i) death, (ii) disability or (iii) involuntary
removal as a director without
cause.
|
Item
3.
|
Defaults Upon Senior
Securities
|
Item
4.
|
(Removed and
Reserved)
|
Item
5.
|
Other
Information
|
*
|
|
3.1
|
|
-
|
|
Title
VIII of the Farm Credit Act of 1971, as most recently amended by the Food,
Conservation and Energy Act of 2008 (Form 10-Q filed August 12,
2008).
|
|
|
|
|
|
|
|
**
|
|
3.2
|
|
-
|
|
Amended
and Restated By-Laws of the Registrant.
|
|
|
|
|
|
|
|
*
|
|
4.1
|
|
-
|
|
Specimen
Certificate for Farmer Mac Class A Voting Common Stock (Form 10-Q filed
May 15, 2003).
|
|
|
|
|
|
|
|
*
|
|
4.2
|
|
-
|
|
Specimen
Certificate for Farmer Mac Class B Voting Common Stock (Form 10-Q filed
May 15, 2003).
|
|
|
|
|
|
|
|
*
|
|
4.3
|
|
-
|
|
Specimen
Certificate for Farmer Mac Class C Non-Voting Common Stock (Form 10-Q
filed May 15, 2003).
|
|
|
|
|
|
|
|
*
|
|
4.4
|
|
-
|
|
Amended
and Restated Certificate of Designation of Terms and Conditions of
Non-Voting Cumulative Preferred Stock, Series C (Previously filed as
Exhibit 4.7 to Form 10-Q filed November 9, 2009).
|
|
|
|
|
|
|
|
†*
|
|
10.1
|
|
-
|
|
Amended
and Restated 1997 Incentive Plan (Form 10-Q filed November 14,
2003).
|
|
|
|
|
|
|
|
†*
|
|
10.1.1
|
|
-
|
|
Form
of stock option award agreement under 1997 Incentive Plan (Form 10-K filed
March 16, 2005).
|
|
|
|
|
|
|
|
†*
|
|
10.1.2
|
|
-
|
|
2008
Omnibus Incentive Plan (Form 10-Q filed August 12,
2008).
|
|
|
|
|
|
|
|
†*
|
|
10.1.3
|
|
-
|
|
Form
of SAR Agreement under the 2008 Omnibus Incentive Plan (Previously filed
as Exhibit 10 to Form 8-K filed June 11, 2008).
|
|
|
|
|
|
|
|
†*
|
|
10.1.4
|
|
-
|
|
Form
of Restricted Stock Agreement (Officers) under the 2008 Omnibus Incentive
Plan (Previously filed as Exhibit 10.1 to Form 8-K filed June 10,
2009).
|
|
|
|
|
|
|
|
†*
|
|
10.1.5
|
|
-
|
|
Form
of Restricted Stock Agreement (Directors) under the 2008 Omnibus Incentive
Plan (Previously filed as Exhibit 10.2 to Form 8-K filed June 10,
2009).
|
|
|
|
|
|
|
|
†*
|
|
10.2
|
|
-
|
|
Employment
Agreement dated as of March 1, 2009 between Michael A. Gerber and the
Registrant (Form 10-Q filed May 12,
2009).
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
†*
|
|
10.3
|
|
-
|
|
Compiled
Amended and Restated Employment Contract dated as of June 5, 2008 between
Tom D. Stenson and the Registrant (Previously filed as Exhibit 10.4 to
Form 10-Q filed August 12, 2008).
|
|
|
|
|
|
|
|
†*
|
|
10.4
|
|
-
|
|
Compiled
Amended and Restated Employment Contract dated June 5, 2008 between
Timothy L. Buzby and the Registrant (Previously filed as Exhibit 10.5 to
Form 10-Q filed August 12, 2008).
|
|
|
|
|
|
|
|
†*
|
|
10.4.1
|
|
-
|
|
Amendment
No. 6 to Employment Contract between Timothy L. Buzby and the Registrant,
dated as of April 2, 2009 (Form 10-Q filed August 10,
2009).
|
|
|
|
|
|
|
|
†*
|
|
10.5
|
|
-
|
|
Compiled
Amended and Restated Employment Contract dated June 5, 2008 between Mary
K. Waters and the Registrant (Previously filed as Exhibit 10.6 to Form
10-Q filed August 12, 2008).
|
|
|
|
|
|
|
|
|
|
10.6
|
|
-
|
|
Exhibit
number reserved for future use.
|
|
|
|
|
|
|
|
*
|
|
10.7
|
|
-
|
|
Farmer
Mac I Seller/Servicer Agreement dated as of August 7, 1996 between Zions
First National Bank and the Registrant (Form 10-Q filed November 14,
2002).
|
|
|
|
|
|
|
|
*
|
|
10.8
|
|
-
|
|
Medium-Term
Notes U.S. Selling Agency Agreement dated as of October 1, 1998 between
Zions First National Bank and the Registrant (Form 10-Q filed November 14,
2002).
|
|
|
|
|
|
|
|
*
|
|
10.9
|
|
-
|
|
Discount
Note Dealer Agreement dated as of September 18, 1996 between Zions First
National Bank and the Registrant (Form 10-Q filed November 14,
2002).
|
|
|
|
|
|
|
|
*#
|
|
10.10
|
|
-
|
|
ISDA
Master Agreement and Credit Support Annex dated as of June 26, 1997
between Zions First National Bank and the Registrant (Form 10-Q filed
November 14, 2002).
|
|
|
|
|
|
|
|
*#
|
|
10.11
|
|
-
|
|
Amended
and Restated Master Central Servicing Agreement dated as of May 1, 2004
between Zions First National Bank and the Registrant (Previously filed as
Exhibit 10.11.2 to Form 10-Q filed August 9, 2004).
|
|
|
|
|
|
|
|
*#
|
|
10.11.1
|
|
-
|
|
Amendment
No. 1 to Amended and Restated Master Central Servicing Agreement between
Zions First National Bank and the Registrant, dated as of June 1, 2009
(Form 10-Q filed August 10, 2009).
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
*#
|
|
10.12
|
|
-
|
|
Loan
Closing File Review Agreement dated as of August 2, 2005 between Zions
First National Bank and the Registrant (Form 10-Q filed November 9,
2005).
|
|
|
|
|
|
|
|
*#
|
|
10.13
|
|
-
|
|
Long
Term Standby Commitment to Purchase dated as of August 1, 1998 between
AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed November 14,
2002).
|
|
|
|
|
|
|
|
*#
|
|
10.13.1
|
|
-
|
|
Amendment
No. 1 dated as of January 1, 2000 to Long Term Standby Commitment to
Purchase dated as of August 1, 1998 between AgFirst Farm Credit Bank and
the Registrant (Form 10-Q filed November 14, 2002).
|
|
|
|
|
|
|
|
*
|
|
10.13.2
|
|
-
|
|
Amendment
No. 2 dated as of September 1, 2002 to Long Term Standby Commitment to
Purchase dated as of August 1, 1998, as amended by Amendment No. 1 dated
as of January 1, 2000, between AgFirst Farm Credit Bank and the Registrant
(Form 10-Q filed November 14, 2002).
|
|
|
|
|
|
|
|
*
|
|
10.14
|
|
-
|
|
Lease
Agreement, dated June 28, 2001 between EOP – Two Lafayette, L.L.C. and the
Registrant (Previously filed as Exhibit 10.10 to Form 10-K filed March 27,
2002).
|
|
|
|
|
|
|
|
*#
|
|
10.15
|
|
-
|
|
Long
Term Standby Commitment to Purchase dated as of August 1, 2007 between
Farm Credit Bank of Texas and the Registrant (Previously filed as Exhibit
10.20 to Form 10-Q filed November 8, 2007).
|
|
|
|
|
|
|
|
*#
|
|
10.16
|
|
-
|
|
Long
Term Standby Commitment to Purchase dated as of June 1, 2003 between Farm
Credit Bank of Texas and the Registrant (Form 10-Q filed November 9,
2004).
|
|
|
|
|
|
|
|
*#
|
|
10.16.1
|
|
-
|
|
Amendment
No. 1 dated as of December 8, 2006 to Long Term Standby Commitment to
Purchase dated as of June 1, 2003 between Farm Credit Bank of Texas and
the Registrant (Form 10-K filed March 15, 2007).
|
|
|
|
|
|
|
|
*#
|
|
10.17
|
|
-
|
|
Central
Servicer Delinquent Loan Servicing Transfer Agreement dated as of July 1,
2004 between AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed
November 9, 2004).
|
|
|
|
|
|
|
|
†*
|
|
10.18
|
|
-
|
|
Form
of Indemnification Agreement for Directors (Previously filed as Exhibit
10.1 to Form 8-K filed April 9, 2008).
|
|
|
|
|
|
|
|
†*
|
|
10.19
|
|
-
|
|
Description
of compensation agreement between the Registrant and its directors (Form
10-Q filed August 9, 2007).
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
†*
|
|
10.20
|
|
-
|
|
Agreement
and General Release dated as of January 30, 2009 between Henry D. Edelman
and the Registrant (Form 10-Q filed May 12, 2009).
|
|
|
|
|
|
|
|
†*
|
|
10.21
|
|
-
|
|
Agreement
and General Release dated as of February 6, 2009 between Nancy E.
Corsiglia and the Registrant (Form 10-Q filed May 12,
2009).
|
|
|
|
|
|
|
|
**
|
|
10.22
|
|
|
|
Master
Trust, Sale and Servicing Agreement dated as of October 20, 2006 between
CFC Advantage, LLC, National Rural Utilities Cooperative Finance
Corporation, U.S. Bank National Association, and the
Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.23
|
|
|
|
Registration
Rights Agreement Series 2007-1 dated as of February 15, 2007 between CFC
Advantage, LLC, National Rural Utilities Cooperative Finance Corporation,
and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.24
|
|
|
|
Registration
Rights Agreement Series 2007-2 dated as of August 10, 2007 between CFC
Advantage, LLC, National Rural Utilities Cooperative Finance Corporation
and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.25
|
|
|
|
Note
Purchase Agreement dated as of December 15, 2008 between Farmer Mac
Mortgage Securities Corporation, National Rural Utilities Cooperative
Finance Corporation, and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.25.1
|
|
|
|
First
Amendment to Note Purchase Agreement dated as of July 13, 2009 between
Farmer Mac Mortgage Securities Corporation, National Rural Utilities
Cooperative Finance Corporation, and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.26
|
|
|
|
Pledge
Agreement dated as of December 15, 2008 between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance
Corporation, U.S. Bank Trust National Association, and the
Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.26.1
|
|
|
|
First
Amendment to Pledge Agreement dated as of September 23, 2009 between
Farmer Mac Mortgage Securities Corporation, National Rural Utilities
Cooperative Finance Corporation, U.S. Bank Trust National Association, and
the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.27
|
|
|
|
Setoff
Rights Letter Agreement dated as of December 15, 2008 between National
Rural Utilities Cooperative Finance Corporation, Farmer Mac Mortgage
Securities Corporation, and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.28
|
|
|
|
Note
Purchase Agreement dated as of February 5, 2009 between Farmer Mac
Mortgage Securities Corporation, National Rural Utilities Cooperative
Finance Corporation, and the
Registrant.
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
**
|
|
10.28.1
|
|
First
Amendment to Note Purchase Agreement dated as of July 13, 2009 between
Farmer Mac Mortgage Securities Corporation, National Rural Utilities
Cooperative Finance Corporation, and the Registrant.
|
|
|
|
|
|
**
|
|
10.29
|
|
Pledge
Agreement dated as of February 5, 2009 between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance
Corporation, U.S. Bank Trust National Association, and the
Registrant.
|
|
|
|
|
|
**
|
|
10.29.1
|
|
First
Amendment to Pledge Agreement dated as of September 23, 2009 between
Farmer Mac Mortgage Securities Corporation, National Rural Utilities
Cooperative Finance Corporation, U.S. Bank Trust National Association, and
the Registrant.
|
|
|
|
|
|
**
|
|
10.30
|
|
Setoff
Rights Letter Agreement dated as of February 5, 2009 between National
Rural Utilities Cooperative Finance Corporation, Farmer Mac Mortgage
Securities Corporation, and the Registrant.
|
|
|
|
|
|
**
|
|
10.31
|
|
Note
Purchase Agreement dated as of March 23, 2009 between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance
Corporation, and the Registrant.
|
|
|
|
|
|
**
|
|
10.32
|
|
Pledge
Agreement dated as of March 23, 2009 between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance
Corporation, U.S. Bank Trust National Association, and the
Registrant.
|
|
|
|
|
|
**
|
|
10.32.1
|
|
First
Amendment to Pledge Agreement dated as of September 23, 2009 between
Farmer Mac Mortgage Securities Corporation, National Rural Utilities
Cooperative Finance Corporation, U.S. Bank Trust National Association, and
the Registrant.
|
|
|
|
|
|
**
|
|
10.33
|
|
Setoff
Rights Letter Agreement dated as of March 23, 2009 between National Rural
Utilities Cooperative Finance Corporation, Farmer Mac Mortgage Securities
Corporation, and the Registrant.
|
|
|
|
|
|
**
|
|
10.34
|
|
Note
Purchase Agreement dated as of May 22, 2009 between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance
Corporation, and the Registrant.
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
**
|
|
10.35
|
|
|
|
Pledge
Agreement dated as of May 22, 2009 between Farmer Mac Mortgage Securities
Corporation, National Rural Utilities Cooperative Finance Corporation,
U.S. Bank Trust National Association, and the
Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.36
|
|
|
|
Setoff
Rights Letter Agreement dated as of May 22, 2009 between National Rural
Utilities Cooperative Finance Corporation, Farmer Mac Mortgage Securities
Corporation, and the Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.37
|
|
|
|
Master
Sale and Servicing Agreement dated as of July 24, 2009 between National
Rural Utilities Cooperative Finance Corporation and the
Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.37.1
|
|
|
|
Amendment
No. 1 to Master Sale and Servicing Agreement dated as of February 1, 2010
between National Rural Utilities Cooperative Finance Corporation and the
Registrant.
|
|
|
|
|
|
|
|
**#
|
|
10.38
|
|
|
|
Credit
Support Agreement dated as of September 1, 2009 between National Rural
Utilities Cooperative Finance Corporation and the
Registrant.
|
|
|
|
|
|
|
|
**
|
|
10.39
|
|
|
|
Indenture
dated as of September 1, 2009 between National Rural Utilities Cooperative
Finance Corporation, U.S. Bank National Association and the
Registrant.
|
|
|
|
|
|
|
|
*
|
|
21
|
|
-
|
|
List
of Registrant’s subsidiaries (Form 10-K filed March 16,
2010).
|
|
|
|
|
|
|
|
**
|
|
31.1
|
|
-
|
|
Certification
of Chief Executive Officer relating to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010, pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
**
|
|
31.2
|
|
-
|
|
Certification
of Chief Financial Officer relating to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010, pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
**
|
|
32
|
|
-
|
|
Certification
of Chief Executive Officer and Chief Financial Officer relating to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2010, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
*
|
Incorporated
by reference to the indicated prior
filing.
|
**
|
Filed
with this report.
|
†
|
Management
contract or compensatory
plan.
|
#
|
Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
August 9,
2010
|
By:
|
/s/
Michael A. Gerber
|
|
|
Michael
A. Gerber
President
and Chief Executive Officer
(Principal
Executive Officer)
|
|
|
/s/
Timothy L. Buzby
|
|
|
Timothy
L. Buzby
Senior
Vice President – Chief Financial Officer and Treasurer
(Principal
Financial Officer)
|
EXHIBIT
3.2
BY-LAWS
OF THE
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
(“FARMER
MAC”)
as
amended by the Board of Directors
through
June 2, 2010
Table of
Contents
ARTICLE
I
|
NAME
AND LOCATION OF OFFICES
|
|
|
|
|
|
Section
1.
|
|
Name
|
|
1
|
Section
2.
|
|
Principal
Office and Other Offices
|
|
1
|
Section
3.
|
|
Seal
|
|
1
|
Section
4.
|
|
Service
of Process
|
|
1
|
Section
5.
|
|
Fiscal
Year
|
|
1
|
|
|
|
|
|
ARTICLE
II
|
PURPOSES
|
|
|
|
|
|
Section
1.
|
|
Statutory
Purposes
|
|
1
|
Section
2.
|
|
Ancillary
Purposes
|
|
2
|
|
|
|
|
|
ARTICLE
III
|
OFFICERS
AND EMPLOYEES
|
|
|
|
|
|
Section
1.
|
|
Number
and Type
|
|
2
|
Section
2.
|
|
Appointment
and Confirmation
|
|
2
|
Section
3.
|
|
Removal
|
|
2
|
Section
4.
|
|
Vacancies
|
|
2
|
Section
5.
|
|
The
President
|
|
3
|
Section
6.
|
|
The
Secretary
|
|
3
|
Section
7.
|
|
The
Treasurer
|
|
3
|
Section
8.
|
|
The
Controller
|
|
3
|
Section
9.
|
|
Employee
Conduct
|
|
4
|
Section
10.
|
|
Outside
or Private Employment
|
|
4
|
|
|
|
|
|
ARTICLE
IV
|
BOARD
OF DIRECTORS
|
|
|
|
|
|
Section
1.
|
|
Powers
|
|
4
|
Section
2.
|
|
Number
and Type of Directors
|
|
5
|
Section
3.
|
|
Meetings
and Waiver of Notice
|
|
6
|
Section
4.
|
|
Meetings
by Telephone
|
|
6
|
Section
5.
|
|
Quorum
|
|
6
|
Section
6.
|
|
Action
Without a Meeting
|
|
6
|
Section
7.
|
|
Compensation
|
|
7
|
Section
8.
|
|
Chairman
and Vice Chairman
|
|
7
|
Section
9.
|
|
Standing
Committees
|
|
7
|
|
|
(a)
Audit Committee
|
|
7
|
|
|
(b)
Compensation Committee
|
|
8
|
|
|
(c)
Corporate Governance Committee
|
|
8
|
|
|
(d)
Credit Committee
|
|
9
|
|
|
(e)
Finance Committee
|
|
9
|
|
|
(f)
Marketing Committee
|
|
10
|
|
|
(g)
Public Policy Committee
|
|
10
|
Section
10.
|
|
Ad
Hoc Committees
|
|
10
|
|
|
|
|
|
ARTICLE
V
|
SHAREHOLDERS
|
|
|
|
|
|
Section
1.
|
|
Special
Meeting
|
|
10
|
Section
2.
|
|
Annual
Meeting
|
|
11
|
Section
3.
|
|
Notice
|
|
11
|
Section
4.
|
|
Waiver
of Notice
|
|
11
|
Section
5.
|
|
Record
Date
|
|
11
|
Section
6.
|
|
Voting
Lists
|
|
12
|
Section
7.
|
|
Quorum
|
|
12
|
Section
8.
|
|
Proxies
|
|
12
|
Section
9.
|
|
Organization
|
|
13
|
Section
10.
|
|
Voting
of Shares
|
|
13
|
Section
11.
|
|
Inspectors
of Votes
|
|
14
|
|
|
|
|
|
ARTICLE
VI
|
SHARES
OF STOCK
|
|
|
|
|
|
Section
1.
|
|
Issuance
and Conditions
|
|
14
|
Section
2.
|
|
Common
Stock
|
|
14
|
Section
3.
|
|
Redemption
|
|
15
|
Section
4.
|
|
Dividends on Voting
Common Stock and Non-Voting
Common
Stock
|
|
15
|
Section
5.
|
|
Preferred
Stock
|
|
15
|
Section
6.
|
|
Dividends,
Redemption, Conversion of Preferred Shares
|
|
15
|
Section
7.
|
|
Preference
on Liquidation
|
|
16
|
Section
8.
|
|
Purchase
of Own Shares
|
|
16
|
Section
9.
|
|
Consideration
for Shares
|
|
16
|
Section
10.
|
|
Stated
Capital
|
|
16
|
Section
11.
|
|
No
Preemptive Rights
|
|
17
|
Section
12.
|
|
Liability
of Shareholders
|
|
17
|
Section
13.
|
|
Reclassifications,
Etc
|
|
17
|
ARTICLE
VII
|
CERTIFICATES
FOR SHARES AND THEIR TRANSFER
|
|
|
|
|
|
Section
1.
|
|
Certificates
|
|
17
|
Section
2.
|
|
Contents
|
|
18
|
Section
3.
|
|
Transfer
|
|
18
|
Section
4.
|
|
Records
|
|
19
|
|
|
|
|
|
ARTICLE
VIII
|
INDEMNIFICATION
|
|
|
|
|
|
Section
1.
|
|
Authorization
|
|
19
|
Section
2.
|
|
Procedure
|
|
20
|
Section
3.
|
|
Advance
Payments
|
|
20
|
Section
4.
|
|
Other
Rights to Indemnification
|
|
20
|
Section
5.
|
|
Indemnification
Insurance
|
|
20
|
|
|
|
|
|
ARTICLE
IX
|
CONTRACTS,
LOANS, CHECKS, DEPOSITS AND INVESTMENTS
|
|
|
|
|
|
Section
1.
|
|
Contracts
|
|
21
|
Section
2.
|
|
Loans
|
|
21
|
Section
3.
|
|
Checks,
Drafts, etc.
|
|
21
|
Section
4.
|
|
Deposits
|
|
21
|
Section
5.
|
|
Investments
|
|
21
|
|
|
|
|
|
|
|
ARTICLE
X
|
|
|
|
|
FACSIMILE
SIGNATURES
|
|
21
|
|
|
|
|
|
|
|
ARTICLE
XI
|
|
|
|
|
AMENDMENTS
|
|
22
|
ARTICLE
I
NAME
AND LOCATION OF OFFICES
The Corporation shall do business as
the Federal Agricultural Mortgage Corporation.
Section
2.
|
Principal Office and
Other Offices
|
The principal office of the Corporation
shall be located in Washington, D.C. The Corporation may establish
other offices in such other places, within or without the District of Columbia,
as the Board of Directors shall, from time to time, deem useful for the conduct
of the Corporation’s business.
The seal of the Corporation shall be of
such design as shall be approved and adopted from time to time by the Board of
Directors, and may be affixed to any document by impression, by printing, by
rubber stamp, or otherwise.
Section
4.
|
Service of
Process
|
The Corporate Secretary or any
Assistant Secretary of the Corporation shall be agents of the Corporation upon
whom any process, notice or demand required or permitted by law to be served
upon the Corporation may be served.
The fiscal year of the Corporation
shall end on the thirty-first day of December of each year.
ARTICLE
II
PURPOSES
Section
1.
|
Statutory
Purposes
|
The Corporation is organized pursuant
to its governing statute, Title VIII of the Farm Credit Act of 1971, as amended,
to provide a secondary market for agricultural real estate mortgage loans and to
enhance the ability of individuals in small rural communities to obtain
financing for moderate-priced homes and to undertake such other activities
authorized by such Act as may be necessary and appropriate to further the
availability of funds for agricultural real estate mortgage loans and housing in
small rural communities.
Section
2.
|
Ancillary
Purposes
|
The Corporation is further organized to
engage in such other related activities that are not prohibited and as the Board
of Directors shall from time to time determine to be in the furtherance of its
statutory purposes.
ARTICLE
III
OFFICERS
AND EMPLOYEES
Section
1.
|
Number and
Type
|
The officers of the Corporation shall
be a President, one or more Executive and/or Senior Vice Presidents (the number
thereof to be determined by the Board of Directors), a Secretary, a Treasurer,
and a Controller, each of whom shall be appointed by resolution of the Board of
Directors. Such other executive officers as may be deemed necessary
may be appointed by resolution of the Board of Directors. Any other
officers, including, if appropriate, one or more Vice Presidents of the
Corporation, shall be appointed by the President. Any of the above
offices may be held by the same person, except the offices of President and
Secretary.
Section
2.
|
Appointment and
Confirmation
|
The initial officers of the Corporation
shall be appointed and confirmed at such time as may be
appropriate. Thereafter, the officers shall be appointed and
confirmed annually at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the selection of officers
is not held at such meeting, such selection shall be held as soon thereafter as
practicable. Each officer shall hold office until his successor shall
have been duly appointed and confirmed or until his death or until he shall
resign or shall have been removed in the manner hereinafter
provided.
Any officer may be removed by a
majority of the Board of Directors, whenever in its judgment the best interests
of the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the persons so
removed. Appointment or confirmation of an officer shall not of
itself create contract rights.
A vacancy
in an office because of death, resignation, removal, disqualification or
otherwise, may be filled by the Chairman of the Board of Directors, subject to
confirmation by the Board of Directors at the meeting next following the
appointment, for the unexpired portion of the term.
The
President shall be the principal executive officer of the Corporation and,
subject to the control of the Board of Directors, shall in general supervise and
control all of the business and affairs of the Corporation. He may
sign, singly or with the Secretary or any other proper officer of the
Corporation authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except where the signing
and execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation, or shall be required to be
otherwise signed or executed, and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
The
Secretary shall: (a) keep the minutes of the shareholders’ and of the Board of
Directors’ meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these By-Laws;
(c) be the custodian of the corporate records and of the seal of the Corporation
and see that the Seal of the Corporation is affixed to all documents, the
execution of which on behalf of the Corporation under its seal is duly
authorized; (d) keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general control of the stock transfer books of the
Corporation; and (g) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
The
Treasurer shall: (a) have charge and custody of and be responsible for all funds
and securities of the Corporation, receive and give receipts for monies due and
payable to the Corporation from any source whatsoever, and deposit all such
monies in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with a resolution of the Board
of Directors; and (b) in general, perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the President or by the Board of Directors.
Section
8.
|
The
Controller
|
The
Controller shall: (a) keep full and accurate accounts of all assets,
liabilities, commitments, receipts, disbursements, and other financial
transactions of the Corporation; (b) certify vouchers for payment by the
Treasurer or his designee, and designate, with the written concurrence of the
Chairman of the Board, such other officers, agents, and employees, severally,
who may so certify; and (c) in general, perform all the duties ordinarily
incident to the office of Controller and such other duties as may be assigned to
him by the Board of Directors or by the Chairman of the Board.
Section
9.
|
Employee
Conduct
|
No
officer or employee shall engage, directly or indirectly, in any personal
business transaction or private arrangement for personal profit which arises
from or is based upon his official position or authority or upon confidential
information which he gains by reason of such position or authority, and he shall
reasonably restrict his personal business affairs so as to avoid conflicts of
interest with his official duties. No officer or employee shall
divulge confidential information to any unauthorized person, or release any such
information in advance of authorization for its release, nor shall he accept,
directly or indirectly, any valuable gift favor or service from any person with
whom he transacts business on behalf of the Corporation.
Section
10.
|
Outside Private
Employment
|
No
officer or employee shall have any outside or private employment or affiliation
with any firm or organization incompatible with his concurrent employment by the
Corporation and he shall not accept or perform any outside or private employment
which the President of the Corporation determines will interfere with the
efficient performance of his official duties. Any officer or employee
who intends to perform services for compensation or to engage in any business
shall report his intention to do so to the President of the Corporation prior to
such acceptance or performance.
ARTICLE
IV
BOARD
OF DIRECTORS
Except as otherwise provided in these
By-Laws, the powers of the Corporation shall be exercised by the Board of
Directors, which shall have all powers granted to it by the Corporation’s
governing statute, as may be amended from time to time, and such other powers
including, but not limited to, the power:
a. to
determine the general policies that shall govern the operations of the
Corporation;
b. to
issue stock in the manner provided in Section 8.4 of TitleVIII of the Farm
Credit Act of 1971, as amended;
c. to
adopt, alter and use a corporate seal, which shall be judicially
noted;
d. to
provide for a president, one or more vice presidents, secretary, treasurer, and
such other officers, employees and agents, as may be necessary and define their
duties and compensation levels, all without regard to title 5, United States
Code, and require surety bonds or make other provisions against losses
occasioned by acts of the aforementioned persons;
e. to
provide guarantees in the manner provided under Section 8.6 of Title VIII of the
Farm Credit Act of 1971, as amended;
f. to
have succession until dissolved by law enacted by the Congress;
g. to
prescribe such standards as may be necessary to carry out Title VIII of the Farm
Credit Act of 1971, as amended;
h. to
enter into contracts and make payments with respect to the
contracts;
i. to
sue and be sued in its corporate capacity and to complain and defend in any
action brought by or against the Corporation in any state or federal court of
competent jurisdiction;
j. to
make and perform contracts, agreements, and commitments with persons and
entities both inside and outside the Farm Credit System;
k. to
acquire, hold, lease, mortgage or dispose of, at public or private sale, real
and personal property, purchase or sell any securities or obligations, and
otherwise exercise all the usual incidents of ownership of property necessary
and convenient to the business of the Corporation;
1. to
conduct its business, carry on its operations, and have officers and exercise
the power granted by the governing statute in any state without regard to any
qualification or similar statute in any such state;
m. to
accept gifts or donations of services, of property, real, personal or mixed,
tangible or intangible; and
n. to
exercise such other incidental powers as are necessary to carry out the powers,
duties, and functions of the Corporation in accordance with the governing
statute.
Section
2.
|
Number and Type of
Directors
|
The Board
of Directors shall consist of those directors appointed or elected as provided
in Section 8.2 of Title VIII of the Farm Credit Act of 1971, as
amended.
Section 3.
|
Meetings and Waiver of
Notice
|
The Board
of Directors shall meet at the call of the Chairman or a majority of its
members. Notice shall be given to each member by the Secretary at the
direction of the calling authority. Such notice shall be by letter,
telegram, cable, or radiogram delivered for transmission not later than during
the third day immediately preceding the day of the meeting or by word of mouth,
telephone, or radio phone, received not later than during the second day
immediately preceding the day of the meeting. Notice of any such
meeting may be waived in writing signed by the person or persons entitled
thereto either before or after the time of the meeting. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice or waiver of notice of the
meeting.
Section
4.
|
Meetings by
Telephone
|
Any
meeting of the Board of Directors or any meeting of a Board committee may be
held with the members of the Board or such committee participating in such
meeting by telephone or by any other means of communication by which all such
members participating in the meeting are able to speak to and hear one
another.
The
presence, in person or otherwise, in accordance with Section 6 of this Article,
of eight of the then incumbent members of the Board of Directors or of a
majority of the then incumbent members of a Board committee, as applicable, at
the time of any meeting of the Board or such committee, shall constitute a
quorum for the transaction of business. The act of the majority of
such members present at a meeting at which a quorum is present shall be the act
of the Board of Directors or committee, as applicable, unless the act of a
greater number is required by these By-Laws. Members may not be
represented by proxy at any meeting of the Board of Directors or committee
thereof.
Section
6.
|
Action Without a
Meeting
|
Any
action required to be taken by the Board of Directors at a meeting, or by a
committee of the Board at a meeting can be taken without a meeting, if a consent
in writing, setting forth the actions so taken, is later signed by a majority of
the directors, or a majority of the members of the committee, as the case may
be. Such consent shall have the same effect as a majority vote of the
Board of Directors or committee, as the case may be. Written notice
of any action taken pursuant to this section by a majority of the directors, or
members of a committee, as the case may be, shall, within 10 days of such
action, be given to all directors or members of a committee not consenting to
the action.
Each
director shall be paid such compensation as may be fixed from time to time by
resolution of the Board of Directors, and each director shall also be reimbursed
for his or her travel and subsistence expenses incurred while attending meetings
of the Board of Directors or committees thereof.
Section
8.
|
Chairman and Vice
Chairman
|
Under the
authority of the Corporation’s governing statute, the President of the United
States shall designate one director from among those directors appointed by the
President as provided in Section 8.2 of the Farm Credit Act of 1971, as amended,
to be Chairman of the Board of Directors. The Chairman shall preside
over meetings of the Board of Directors.
The Board
of Directors shall select a Vice Chairman from among the directors appointed by
the President of the United States who shall have all the rights, duties and
obligations of the Chairman at any time when the incumbent Chairman is absent,
unable or unwilling so to act, and at any time when there is a vacancy in the
office of Chairman. The Vice Chairman shall serve at the
pleasure of the Board and shall be selected no less frequently than annually for
a term expiring on December 31 of each year.
Section
9.
|
Standing
Committees
|
The
Standing Committees described in this Section shall have such responsibilities
and authority as are set forth herein, together with such other responsibilities
and authority as may from time to time be provided in resolutions adopted by the
Board of Directors. The Board of Directors shall designate members of
the Standing Committees from among its members.
The Audit Committee shall select and
engage independent accountants to audit the books, records and accounts of the
Corporation and its subsidiaries, if any, and to perform such other duties as
the Committee may from time to time prescribe. The Committee shall
review the scope of audits as recommended by the public accountants to ensure
that the recommended scope is sufficiently comprehensive. The Audit
Committee’s selection of accountants shall be made annually in advance of the
Annual Meeting of Stockholders and shall be submitted for ratification or
rejection at such meeting.
The Audit Committee shall receive a
special report from the independent accountants, prior to the public
accountants’ report on the published financial statements. The
special report shall, among other things, point out and describe each material
item affecting the financial statements of the Corporation which might in the
opinion of the independent public accountants receive, under generally accepted
accounting principles, treatment varying from that proposed for such
statements. The Committee shall decide in its discretion upon
the treatment to be accorded such items and shall take such other action in
respect of the special report as the Committee may deem
appropriate. A copy of the special report shall be transmitted to the
Compensation Committee, together with the Audit Committee’s
decision.
|
(b)
|
Compensation
Committee
|
The Compensation Committee shall make
recommendations to the Board on the salaries and benefit plans of all corporate
directors and officers. The Committee shall recommend a framework to
the Board for all compensation plans and shall have authority to act within the
framework approved by the Board. The Committee shall have exclusive
jurisdiction on behalf of the Corporation to make recommendations to the full
Board to approve, disapprove, modify or amend all plans to compensate employees
eligible for incentive compensation.
The Compensation Committee shall review
and approve, prior to implementation, any employee benefit plan and any
amendment or modification thereof submitted to the Board to the extent such plan
or amendment or modification affects employees under its
jurisdiction.
|
(c)
|
Corporate Governance
Committee
|
The Corporate Governance Committee
shall assist the Board in: (i) developing and recommending to the Board a
set of effective corporate governance guidelines and principles applicable to
the Corporation; (ii) reviewing, on a regular basis, the overall corporate
governance of the Corporation and recommending improvements when necessary; and
(iii) identifying individuals qualified to serve as directors and recommending
to the Board nominees for the directors to be elected by the holders of voting
common stock at each Annual Meeting of Stockholders. In addition, the
Corporate Governance Committee shall, during the intervals between meetings of
the Board, have and may exercise the powers of the Board, other than those
assigned to the Audit and Compensation Committees, except that it shall
not
have the authority to
take any of the following actions:
|
·
|
the
submission to stockholders of any action requiring stockholders’
authorization;
|
|
·
|
the
filling of vacancies on the Board of Directors or on the Corporate
Governance Committee;
|
|
·
|
the
fixing of compensation of directors for serving on the Board or on the
Corporate Governance Committee;
|
|
·
|
the
removal of any director, the President or any Vice President, except that
vacancies in established management positions may be filled subject to
ratification by the Board of
Directors;
|
|
·
|
the
amendment or repeal of the By-Laws or the adoption of new
by-laws;
|
|
·
|
the
amendment or repeal of any resolution of the Board which, by its terms, is
not so amendable or repealable;
|
|
·
|
the
declaration of dividends; and
|
|
·
|
any
action which the Chairman or Vice Chairman of the Board of Directors (in
the event that the Vice Chairman is the Chairman of the Board due to the
absence, inability or unwillingness of the Chairman so to act) or the
President shall, by written instrument filed with the Secretary, designate
as a matter which should be considered by the Board of
Directors.
|
The Corporate Governance Committee
shall include two members of the Board who were appointed by the President of
the United States, one of whom shall be the chairman of the Committee, and two
representatives from each of the Corporation’s two elected classes of
directors. The designation of such Committee and the delegation
thereto of authority shall not relieve any director of any duty he or she owes
to the Corporation. The Corporate Governance Committee shall meet at
the call of its chairman or a majority of its members. A majority of
the members of the Committee shall constitute a quorum sufficient for the taking
of any action by the Committee, except that at least one member appointed by the
President of the United States, one member who has been elected to the Board by
the holders of Class A voting common stock and one member who has been elected
to the Board by the holders of Class B voting common stock must be present to
constitute a quorum. The action of the majority of the members of the
Committee present at a duly convened meeting shall be the action of the
Committee. Members of the Committee may not be represented by proxy
at any meeting of the Committee. In connection with each regular
meeting of the Board of Directors, the minutes of all meetings of the Corporate
Governance Committee since the last meeting of the Board shall be distributed to
the Board, and the Board shall take such action, if any, as the Board may deem
appropriate, to approve, alter or rescind actions, if any, previously taken by
the Committee under these By-Laws, provided that rights or acts of third parties
vested or taken in reliance on such action prior to any such alteration or
rescission shall not be adversely affected thereby.
The Credit Committee shall have primary
responsibility for reviewing and approving all policy matters relating to
changes, additions or deletions to the credit, collateral valuation,
underwriting and loan diversification standards and any forms or documents used
in the Corporation’s programs. The Committee shall have primary
responsibility for matters relating to mortgage portfolio servicing and
management, including the methodology that results in the
Corporation’s allowance for loan losses.
The Finance Committee shall be
responsible for determining the financial policies of the Corporation and
managing the Corporation’s financial affairs, except those financial policies
and affairs that are assigned to the Audit and Compensation
Committees.
The guarantee fee policies of the
Corporation shall be reviewed and approved by the Finance Committee and
recommended to the Board for its approval. All capital
expenditures of the Corporation shall be approved by the Committee, except that
it may authorize the President to approve expenditures which do not involve the
Corporation in a new line of business. All action taken by the
Finance Committee shall be reported to the Board and shall be subject to
revision by the Board, provided that no acts or rights of third parties shall be
affected thereby.
The
Marketing Committee shall have primary responsibility for the development of the
Corporation’s programs and shall make recommendations to the Board with respect
to commencement of new programs and modification or discontinuance of existing
programs. The Committee shall routinely monitor the
Corporation’s success in accomplishing its Marketing Plan as contained in the
Business Plan.
|
(g)
|
Public Policy
Committee
|
The Public Policy Committee shall
consider matters of public policy referred to it by the Board or the Chairman
including: (i) the Corporation’s relationship with and policies regarding
Borrowers; (ii) the Corporation’s relationship with and policies regarding
Congress and governmental agencies and instrumentalities; and (iii) matters
which generate actual or apparent conflicts of interest between the Corporation
and one or more of its directors. The Committee shall report the
outcome of its evaluation of matters under preceding clause (iii) within a
reasonable time after reference is made.
Section
10.
|
Ad Hoc
Committees
|
The Board of Directors may, by
resolution adopted by a majority of its members, designate from among its
members one or more ad hoc committees, each of which to the extent provided in
the resolution and in these By-Laws shall have and may exercise all the
authority of the Board of Directors. No such ad hoc committee shall
have the authority of the Board of Directors in reference to any powers reserved
to the full Board of Directors by the resolution or these By-Laws.
ARTICLE
V
SHAREHOLDERS
Section
1.
|
Special
Meeting
|
Special meetings of the shareholders
shall be held upon the call of either the Chairman or a majority of the
directors of the Corporation, and shall be called by the Chairman upon the
written request of holders of at least one-third of the shares of the
Corporation having voting power. A special meeting may be called for
any purpose or purposes for which shareholders may legally meet, and shall be
held, within or without the District of Columbia, at such place as may be
determined by the Chairman or a majority of the directors of the Corporation,
whichever shall call the meeting.
Section
2.
|
Annual
Meeting
|
An annual
meeting of the shareholders shall be held each year at such date and at such
time as designated by the Board of Directors. At the meeting, the
shareholders entitled to vote shall elect directors and transact such other
business as may properly be brought before the meeting.
Written
or printed notice stating the place, day and hour of any meeting and, in the
case of a special meeting, the purpose for which the meeting is called, shall be
delivered not less than 10 nor more than 50 days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, or the Secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid, addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation or such other
address as the shareholder has in writing instructed the Secretary.
Section
4.
|
Waiver of
Notice
|
Attendance
by a shareholder at a shareholders’ meeting, whether in person or by proxy,
without objection to the notice or lack thereof, shall constitute a waiver of
notice of the meeting. Any shareholder may, either before or after
the time of the meeting, execute a waiver of notice of such
meeting.
For the
purpose of determining shareholders entitled to notice or to vote at any meeting
of shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors shall fix in advance a date as
the record date for any such determination of shareholders, such date in any
case to be not more than 60 days, in the case of a meeting of shareholders, not
less than 10 days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the Board of
Directors fails to designate such a date, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividends is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a date is set for
the determination of shareholders entitled to vote at any meeting of
shareholders, such determination shall apply to any adjournment
thereof.
The
officer or agent having charge of the stock transfer books for shares of the
Corporation shall make a complete record of the shareholders entitled to vote at
each meeting of the shareholders or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by
each. Such officer or agent shall also prepare two separate lists of
such shareholders, one indicating in alphabetical order which shareholders are
financial institutions not members of the Farm Credit System and another
indicating in alphabetical order which shareholders are member institutions of
the Farm Credit System. Such records shall be produced and kept open
at the time and place of the meeting and shall be subject to inspection by any
shareholder during the whole time of the meeting for the purposes
thereof.
A
majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn a
meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum. Shares of its own
stock belonging to the Corporation shall not be counted in determining the total
number of outstanding shares at any given time.
At all
meetings of shareholders, a shareholder entitled to vote may vote by proxy
executed in writing by the shareholder or by its duly authorized attorney in
fact. Shares standing in the name of another corporation may be voted
by such officer, agent or proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provisions, as the board of directors of
such corporation may determine. All proxies shall be filed with the
Secretary of the Corporation before or at the time of the meeting, and shall be
revocable, if such revocation be in writing, until exercised. No
proxy shall be valid after eleven months from the date of its executions unless
otherwise provided in the proxy.
The Board
of Directors may solicit proxies from shareholders to be voted by such person or
persons as shall be designated by resolution of the Board of
Directors. The Corporation shall assume the expense of solicitations
undertaken by the Board.
Any
solicitation of proxies by the Corporation shall contain the names of all
persons the Corporation proposes to nominate for directorships to be filled at
the next meeting, their business addresses, and a brief summary of their
business experience during the last five years. Each proxy
solicitation shall be accompanied by a copy of the most recent annual report of
the Corporation which report, to the satisfaction of the Board of Directors,
shall reasonably represent the financial situation of the Corporation as of the
time of its preparation.
If any
shareholder entitled to vote at a meeting of shareholders shall seek a list of
shareholders for the purpose of soliciting proxies from any other shareholders,
the Corporation may, at its option, either (a) provide the soliciting
shareholder with a complete and current list containing the names of all
shareholders of the Corporation entitled to vote at such meeting; and their
addresses as they appear on the transfer books of the Corporation; or (b) mail
such proxy solicitations on behalf of the soliciting shareholders, upon being
furnished the material to be mailed and the reasonable cost of the
mailing.
Meetings
of the shareholders shall be presided over by the Chairman of the Board of
Directors. The Secretary of the Corporation shall act as secretary of
every meeting and, if the Secretary is not present, the meeting shall choose any
person present to act as secretary of the meeting.
Section
10.
|
Voting of
Shares
|
Except as
provided in this Section, at every meeting of the shareholders, every holder of
common stock entitled to vote on a matter coming before such meeting shall be
entitled to one vote for each share of common stock registered in its name on
the stock transfer books of the Corporation at the close of the record
date.
At each
election of directors, the Chairman of the meeting shall inform the shareholders
present of the persons appointed by the President of the United States to be the
appointed directors of the Corporation. The shareholders entitled to
vote for the election of directors which are institutions of the Farm Credit
System shall constitute a single class and shall then proceed to elect five
directors. Following the election of directors by shareholders which
are institutions of the Farm Credit System, the shareholders entitled to vote
for the election of directors which are financial institutions and are not
institutions of the Farm Credit System shall constitute a single class and shall
proceed to elect five directors.
Every
holder of common stock entitled to vote for the election of directors shall have
the right to cast the number of votes that is equal to the product of the number
of shares owned by it multiplied by the number of directors to be elected of the
class for which it may vote, and it may cast all such votes for one person or
may distribute them evenly or unevenly among any number of persons not greater
than the number of such directors of such class to be elected, at its
option. Shares of its own stock belonging to the Corporation shall
not be eligible to vote on any matter.
Section
11.
|
Inspectors of
Votes
|
The Board
of Directors, in advance of any meeting of shareholders, may appoint one or more
Inspectors of Votes to act at the meeting or any adjournment
thereof. In case any person so appointed resigns or fails to act, the
vacancy may be filled by appointment by the Chairman of the
meeting. The Inspectors of Votes shall determine all questions
concerning the qualification of voters, the validity of proxies, the acceptance
or rejection of votes and, with respect to each vote by ballot, shall collect
and count the ballots and report in writing to the secretary of the meeting the
result of the vote. The Inspectors of Votes need not be shareholders
of the Corporation. No person who is an officer or director of the
Corporation, or who is a candidate for election as a director, shall be eligible
to be an Inspector of Votes.
ARTICLE
VI
SHARES
OF STOCK
Section
1.
|
Issuance and
Conditions
|
The Board
of Directors shall have the power in accordance with the provisions of the
governing statute to authorize the issuance of voting common, non-voting common
and preferred shares of stock. The Board of Directors may by
resolution impose a stock purchase requirement as a prerequisite to
participation in any program of the Corporation. Any stock purchase
requirement shall not apply to any participant who is prohibited by law from
acquiring stock of the Corporation, provided such participant undertakes to make
such purchase when such legal restrictions are alleviated, or to such otherwise
eligible participants as the Board may by resolution provide.
The
Corporation shall have voting common stock having such par value as may be fixed
by the Board of Directors, which may only be issued to institutions which are
authorized to be issued such shares pursuant to Title VIII of the Farm Credit
Act of 1971, as amended.
The
Corporation may issue non-voting common stock having such par value as may be
fixed by the Board of Directors, which may be issued without limitations as to
the status of the holders thereof.
Except as
otherwise provided in these By-Laws, the powers, preferences and relative and
other special rights and the qualifications, limitations and restrictions
applicable to all shares of common stock, whether voting common stock or
non-voting common stock, shall be identical in every respect.
Except as
provided in this Section, the voting common stock and the non-voting common
stock of the Corporation shall be fully transferable, except that, as to the
Corporation, they shall be transferred only on the books of the
Corporation.
Whenever
the Corporation shall determine that any shares of the voting common stock of
the Corporation are held by a person, including a partnership, joint venture,
trust, corporation or any other association, not eligible to acquire such shares
under the provisions of Title VIII of the Farm Credit Act of 1971, as amended,
the Corporation shall notify such person in writing that such shares are to be
disposed of to a person eligible to acquire such shares within a period of not
more than 30 days. If the Corporation determines that the shares have
not been transferred within 30 days of such notice, the Corporation may redeem
such shares at the lesser of the fair market value thereof or the book value
thereof at the date established for such redemption.
The power
to redeem voting common stock found to be held by ineligible persons granted by
this Section shall not be deemed to limit the right of the Corporation, at its
discretion, to pursue any other lawful remedy against such ineligible
person.
Section
4.
|
Dividends on Voting
Common Stock and Non-Voting Common
Stock
|
To the
extent that income is earned and realized, the Board of Directors may from time
to time declare and the Corporation shall pay, dividends on the voting common
stock and the non-voting common stock, except that no such dividends shall be
payable with respect to any share that has been called for redemption after the
date established for such redemption. No dividend shall be declared
or paid on any share of voting common stock or non-voting common stock at any
time when any dividend is due on the shares of preferred stock and has not been
paid.
Section
5.
|
Preferred
Stock
|
The
Corporation may issue shares of preferred stock having such par value, and such
other powers, preferences and relative and other special rights, and
qualifications, limitations and restrictions applicable thereto, as may be fixed
by the Board of Directors. Such shares shall be freely
transferable, except that, as to the Corporation, such shares shall be
transferred only on the books of the Corporation.
Section
6.
|
Dividends, Redemption,
Conversion of Preferred
Shares
|
The
holders of the preferred shares shall be entitled to such rate of cumulative
dividends, and such shares shall be subject to such redemption or conversion
provisions, as may be provided for at the time of issuance. Such
dividends shall be paid out of the net income of the Corporation, to the extent
earned and realized.
Section
7.
|
Preference on
Liquidation
|
In the
event of any liquidation, dissolution, or winding up of the Corporation’s
business, the holders of shares of preferred stock shall be paid in full at par
value thereof, plus all accrued dividends, before the holders of the voting
common stock and non-voting common stock receive any payment.
Section
8.
|
Purchase of Own
Shares
|
The
Corporation shall have the right, pursuant to resolution by the Board of
Directors, to purchase, take, receive or otherwise acquire its own shares, but
purchases, whether direct or indirect, shall be made only to the extent of
unreserved and unrestricted earned or capital surplus available
therefor.
Section
9.
|
Consideration for
Shares
|
The
Corporation shall issue shares of stock for such consideration, expressed in
dollars, but not less than the par value thereof, as shall be fixed from time to
time by the Board of Directors. That part of the surplus of the
Corporation which is transferred to stated capital upon issuance of shares as a
share dividend shall be deemed to be the consideration for the shares so
issued.
The
consideration for the issuance of shares may be paid, in whole or in part, in
cash or other property acceptable to the Board of Directors, except that a
promissory note shall not constitute payment or partial payment for the issuance
of shares of the Corporation.
Section
10.
|
Stated
Capital
|
The
consideration received upon the issuance of any share of stock shall constitute
stated capital to the extent of the par value of such shares and the excess, if
any, of such consideration shall constitute capital surplus. The
stated capital of the Corporation may be increased from time to time by
resolution of the Board of Directors directing that all or a part of the surplus
of the Corporation be transferred to stated capital. The Board of
Directors may direct that the amount of the surplus so transferred shall be
deemed to be stated capital in respect of any designated class of
shares.
The Board
of Directors may, by resolution from time to time, reduce the stated capital of
the Corporation but only in the amount of the aggregate par value of any shares
of the Corporation which shall have been reacquired and canceled. Any
surplus created by virtue of a reduction of stated capital shall be deemed to be
capital surplus.
Section
11.
|
No Preemptive
Rights
|
No holder
of the shares of the Corporation of any class, now or hereafter authorized,
shall as such holder have any preemptive or preferential rights to subscribe to,
purchase, or receive any shares of the Corporation of any class, now or
hereafter authorized, or any rights or options for any such shares or any rights
or options to subscribe to or purchase any such shares or other securities
convertible into or exchangeable for or carrying rights or options to purchase
shares of any class or other securities, which may at any time be issued, sold
or offered for sale by the Corporation or subjected to the rights or
options to purchase granted by the Corporation.
Section
12.
|
Liability of
Shareholders
|
A holder
of shares of the Corporation shall be under no obligation to the Corporation
with respect to such shares other than the obligation to pay to the Corporation
the full consideration for which such shares were or are to be
issued.
Any
person becoming a transferee of shares in good faith and without notice or
knowledge that the full consideration thereof had not been paid shall not be
personally liable to the Corporation for any unpaid portion of such
consideration.
Section
13.
|
Reclassifications,
Etc.
|
No class
of outstanding voting or non-voting common stock may be subdivided, combined,
reclassified or otherwise changed unless contemporaneously therewith all other
classes of outstanding common stock are subdivided, combined, reclassified or
otherwise changed in the same proportion and in the same manner.
ARTICLE
VII
CERTIFICATES
FOR SHARES AND THEIR TRANSFER
The
interest of each shareholder of the Corporation shall be evidenced by
(i) certificates representing shares of stock of the Corporation,
certifying the number of shares represented thereby, (ii) uncertificated
shares that may be evidenced by a book-entry maintained by a transfer agent or
registrar of such stock, or (iii) a combination of both (i) and
(ii). Any such shares shall be in such form not inconsistent with the
governing statute of the Corporation as the Board of Directors may from time to
time prescribe.
To the
extent that shares are represented by certificates of stock, such certificates
shall be signed by the Chairman of the Board of Directors or the President and
by the Secretary or Assistant Secretary and sealed with the corporate seal or an
engraved or printed facsimile thereof. The signatures of such
officers upon a certificate may be facsimile if the certificate is manually
signed on behalf of a transfer agent or a registrar other than the Corporation
itself or one of its employees. In the event that any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such before such certificate is issued, it may be issued by
the Corporation with the same effect as if such officer had not ceased to be
such at the time of the issue.
Each
certificate or share shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled, and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new certificate may be issued upon such terms and with indemnity to the
Corporation as the Board of Directors may prescribe.
Each
certificate representing shares shall state:
|
a.
|
That
the Corporation is organized pursuant to an Act of
Congress;
|
|
b.
|
The
name of the person to whom issued;
|
|
c.
|
The
number and class of shares, and the designation of the series, if any,
which such certificate represents;
|
|
d.
|
The
par value of each share represented by such
certificate;
|
|
e.
|
The
provisions by which such shares may be redeemed;
and
|
|
f.
|
That
the shares represented shall not have any preemptive rights to purchase
unissued or treasury shares of the
Corporation.
|
Each
certificate representing shares of preferred stock shall state upon the face
thereof the annual dividend rate for such shares, and shall state upon the
reverse side thereof the powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions applicable to such
shares of preferred stock.
No
certificate shall be issued for any share until such share is fully
paid.
Transfer
of certificated shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of the authority to
transfer, or by his attorney thereto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares.
Transfer
of uncertificated shares of the Corporation shall be made only on the stock
transfer books of the Corporation upon receipt of proper transfer instructions
from the holder of record thereof or by his legal representative, who shall
furnish proper evidence of the authority to transfer, or by his attorney thereto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation.
The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
The
Corporation shall keep at its principal place of business, or at the office of
its transfer agent or registrar, a record of its shareholders, giving the names
and addresses of all shareholders and the number of shares held by
each. Any person who shall be the holder of at least five percent of
the aggregate number of shares of any class of common stock of the Corporation
shall upon written demand stating the purpose therefor, have the right to
examine, in person, or by agent or attorney, duly authorized in writing, at any
reasonable time or times, for any proper purpose, the Corporation’s record of
shareholders and minutes of meetings of the shareholders and the Board of
Directors, and to make extracts therefrom.
ARTICLE
VIII
INDEMNIFICATION
The
Corporation shall, to the extent permitted by law, indemnify any person who was
or is a party, whether as a plaintiff acting with the approval of the Board of
Directors or as a defendant, or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including attorneys’
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Any such person shall be indemnified by
the Corporation to the extent he or she is successful in the action, suit or
proceeding. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Any
indemnification under this Article shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the officer, director, employee or agent has
met the applicable standard of conduct set forth in this
Article. Such determination shall be made by a majority vote of the
members of the Board of Directors who were not parties to such action, suit or
proceeding. If all members of the Board of Directors were
parties to such action, suit or proceeding, such determination shall be made
either (a) by legal counsel or (b) by the shareholders at the next meeting of
shareholders. In any case under this Article, the Board or
shareholders are authorized to obtain the opinion of independent legal
counsel.
Section
3.
|
Advance
Payments
|
Expenses,
including attorneys’ fees, incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding, whether formal or
informal, shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized in the manner provided in
section 2 of this Article upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount only if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Corporation.
Section
4.
|
Other Rights to
Indemnification
|
The
indemnification provided in this Article shall not be deemed exclusive of any
other rights to which the director, officer, employee or agent may be entitled
under any by-law, agreement, vote of shareholders or disinterested directors or
otherwise. The indemnification provided by this Article shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
Section
5.
|
Indemnification
Insurance
|
The
Corporation, pursuant to a resolution of the Corporation, may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her in any such capacity or arising out of his status as
such whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article.
ARTICLE
IX
CONTRACTS,
LOANS, CHECKS, DEPOSITS AND STATEMENTS
The Board
of Directors may authorize the Chairman or officers of the Corporation to enter
into any contract or execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
No loans
shall be contracted on behalf of the Corporation and no evidence of indebtedness
shall be issued in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific
instances.
Section
3.
|
Checks, Drafts,
etc.
|
All
checks, drafts or other orders for the payment of money, notes or other evidence
of indebtedness issued in the name of the Corporation shall be signed by the
Chairman or officers of the Corporation and in such manner as shall from time to
time be determined by a resolution of the Board of Directors.
All funds
of the Corporation not otherwise employed shall be deposited from time to time
to the credit of the Corporation at such banks, trust companies or other
depositories as the Board of Directors may select.
The Board
of Directors may authorize the Chairman or officers of the Corporation to invest
the funds of the Corporation in such securities and in such manner as shall from
time to time be determined by a resolution of the Board of
Directors.
ARTICLE
X
FACSIMILE
SIGNATURES
The Board
of Directors may by resolution authorize the use of facsimile signatures in lieu
of manual signatures.
ARTICLE
XI
AMENDMENTS
These
By-Laws may be altered, amended or repealed and new by-laws, consistent with the
governing statute, may be adopted by the majority vote of the Board of
Directors.
EXHIBIT
10.22
EXECUTION
COPY
CFC ADVANTAGE,
LLC
,
as
Depositor
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
as Master
Servicer
and
U.S.
BANK NATIONAL ASSOCIATION,
as
Trustee
and
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION,
as
Calculation and Paying Agent
MASTER
TRUST, SALE AND SERVICING AGREEMENT
Dated
as of October 20, 2006
MASTER
TRUST, SALE AND SERVICING AGREEMENT made and entered into as of October 20, 2006
by and among the CFC ADVANTAGE, LLC, a Delaware limited liability company, as
depositor (in such capacity, the “
Depositor
”), NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative association
organized and existing under the laws of the District of Columbia, as master
servicer (in such capacity, the “
Master Servicer
”),
U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (in
such capacity, the “
Trustee
”), and
FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally chartered instrumentality
of the United States, as calculation and paying agent (in such capacity, the
“
Calculation and
Paying Agent
”).
WITNESSETH
WHEREAS,
National Rural Utilities Cooperative Finance Corporation (“
CFC
”) owns or will
from time to time own certain Qualified Loans.
WHEREAS,
CFC desires from time to time to assemble pools of Qualified Loans and, pursuant
to the Master Loan Purchase Agreement, by and between CFC and the Depositor (the
“
Master Loan Purchase
Agreement
”), to sell to the Depositor the Qualified Loans identified in
connection with the execution and delivery of each Master Loan Purchase
Agreement Supplement upon the terms and subject to the conditions set forth
therein.
WHEREAS,
contemporaneously with the sale by CFC to the Depositor of such Loans, the
Depositor will sell such Loans to the Trustee in connection with the execution
and delivery of each Issue Supplement upon the terms and subject to the
conditions set forth herein.
WHEREAS,
each of the Trusts created pursuant to this Master Agreement and the related
Issue Supplement shall issue a series of Rural Utilities MBS Certificates,
backed by certain Loans identified in the related Issue Supplement, and bearing
the designation specified in each such Issue Supplement.
NOW,
THEREFORE, the parties to this Master Agreement, in the capacities hereinabove
set forth, in consideration of the agreements and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, do hereby
undertake and otherwise agree as follows:
ARTICLE
I
Defined
Terms
Section
1.01.
General
Definitions
.
Whenever
used in this Master Agreement, the following words and phrases shall have the
following meanings:
Additional
Collateral Documents:
With respect to any Loan, any security
documents (including any UCC-1, UCC-2 or UCC-3 financing statement), other than
those listed in clauses (i) through (iv) of Section 2.02(b), that evidence the
creation or perfection of a security interest in the related Mortgaged Property
and are in the possession of or within the control of the
Depositor.
Affiliate:
With
respect to any particular Person, (a) any Person that, directly or indirectly,
is in control of, is controlled by, or is under common control with, such Person
or (b) any person who is a director or officer or general partner (i) of such
Person, (ii) of any subsidiary of such Person, or (iii) of any Person described
in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 5% or more of the
securities having ordinary voting power to elect the directors of such Person,
or (ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
Aggregate
Certificate Principal Balance:
With respect to any date of
determination, the aggregate Certificate Principal Balance of all Certificates
of a Series as of the date of determination.
Authenticating
Agent:
The meaning ascribed to such term in Section
3.02.
Authorized
Officer:
The Chairman of the Board, the President or any Vice
President.
Available
Interest:
With respect to any Distribution Date, the sum of
the following amounts received during the related Collection
Period: (i) that portion of all collections on the Loans other
than Defaulted Loans allocable to interest including, without limitation,
interest paid at default rates, penalties and late payment fees, and
(ii) Cash Liquidation Proceeds to the extent allocable to interest (net of
the sum of any amounts expended by the Master Servicer for the account of the
Borrower and not already netted from the amount of Available Principal for such
Distribution Period) received on a Defaulted Loan in accordance with the Master
Servicer’s Customary Servicing Procedures.
Available
Principal:
With respect to any Distribution Date, the sum of
the following amounts received during the related Collection
Period: (i) that portion of all collections on the Loans other
than Defaulted Loans allocable to principal, (ii) Cash Liquidation Proceeds
to the extent allocable to principal (net of the sum of any amount expended by
the Master Servicer for the account of the Borrower) due on Defaulted Loans in
accordance with the Master Servicer’s Customary Servicing Procedures, and
(iii) any Substitution Adjustment Principal Amount.
Borrower:
The
obligor or obligors under a Loan.
Business
Day:
Any day other than (i) a Saturday or a Sunday, (ii) a day
on which the Federal Reserve Bank of New York authorizes banking institutions in
the Second Federal Reserve District to be closed, (iii) a day on which banking
institutions in the District of Columbia or the State of New York are required
or authorized by law to be closed, or (iv) a day on which the principal offices
of the Trustee, the Calculation and Paying Agent or the Master Servicer are
closed.
Cash Liquidation
Proceeds:
All cash proceeds recovered by the Master Servicer
with respect to the termination of any Defaulted Loan, including all Other
Insurance Proceeds, Condemnation Proceeds and other payments or recoveries
whether made at one time or over a period of time, in connection with the sale
or assignment of such Defaulted Loan, trustee’s sale, foreclosure sale or
otherwise.
Certificate:
A
Rural Utilities MBS Certificate, which is issued pursuant to the terms of this
Master Agreement and the applicable Issue Supplement.
Certificate
Account:
With respect to any Series, the account created and
maintained with respect to the Certificates of such Series pursuant to Section
6.01.
Certificate
Account Deposit Date:
With respect to any Distribution Date,
the 20th day of the month of such Distribution Date relating to such Series, or
if not a Business Day, the Business Day immediately preceding such
date.
Certificate
Distribution Amount:
With respect to any Series, the meaning ascribed to
such term in the related Issue Supplement.
Certificate
Distribution Amount Determination Date:
With respect to a
Series and any Distribution Date relating to such Series, the 10th Business Day
during the month of such Distribution Date.
Certificate
Principal Balance:
With respect to any Certificate prior to
the initial Distribution Date for the related Series, the Denomination thereof
and, as to any Certificate subsequent to such initial Distribution Date, the
Denomination thereof multiplied by the Certificate Principal Factor applicable
to such Class of Certificate.
Certificate
Principal Factor:
With respect to any date of determination
and as to any Class of Certificates, a fraction, the numerator of which is (i)
the aggregate of the Denominations of all Certificates of such Class
less
(ii) the
aggregate amount of all Principal Distribution Amounts, if any, allocable to
such Class prior to such date of determination, and the denominator of which is
the aggregate of the Denominations of all of the Certificates of such
Class.
Certificate
Registrar:
The meaning ascribed to such term in Section
3.03.
Certificate
Register:
The meaning ascribed to such term in Section
3.03.
Certificateholder
or Holder:
With respect to each Series, the person in whose
name a certificate is registered in the Certificate Register.
Class:
With
respect to any Series, all Certificates of such Series with the same
terms.
Class A
Distributable Amount:
With respect to any Distribution Date,
the sum of the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
Class A Interest
Carryover Shortfall:
As of the close of business on any Distribution
Date, the excess, if any, of the Class A Interest Distributable Amount for such
Distribution Date plus any outstanding unpaid interest owed to holders of Class
A Certificates from the preceding Distribution Date, plus interest on such
outstanding unpaid interest amount, to the extent permitted by law, at the
Class A Pass-Through Rate from such preceding Distribution Date to but not
including such current Distribution Date, over the amount of interest that the
holders of the Class A Certificates actually received on such current
Distribution Date.
Class A Interest
Distributable Amount:
With respect to any Series, the meaning ascribed to
such term in the related Issue Supplement.
Class A
Pass-Through Rate:
With respect to any Series, the meaning
ascribed to such term in the related Issue Supplement.
Class A
Percentage:
With respect to any Distribution Date,
99%.
Class A Principal
Carryover Shortfall:
As of the close of business on any Distribution
Date, the excess, if any, of the Class A Principal Distributable Amount for such
Distribution Date plus any outstanding unpaid principal owed to holders of Class
A Certificates from preceding Distribution Dates over the amount of principal
that the holders of the Class A Certificates actually received on such current
Distribution Date.
Class A Principal
Distributable Amount:
With respect to any Distribution Date, the Class A
Percentage of the sum of: (i) the principal portion of all
collections on the Loans, including prepayments of principal received during the
related Collection Period, (ii) the aggregate of all Substitution
Adjustment Principal Amounts received in connection with the substitution of
Loans during the related Collection Period, (iii) the principal portion of the
Repurchase Price received with respect to any Defective Loan during the related
Collection Period and (iv) the aggregate outstanding principal balance as
of the beginning of the related Collection Period of all Loans that became
Defaulted Loans during the related Collection Period (without duplication of
amounts referred to in clauses (i) and (ii) above).
Class B
Distributable Amount:
With respect to any Distribution Date,
the sum of the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
Class B Interest
Carryover Shortfall:
As of the close of business on any Distribution
Date, the excess, if any, of the Class B Interest Distributable Amount for such
Distribution Date plus any outstanding unpaid interest owed to holders of Class
B Certificates from the preceding Distribution Date plus interest on such
outstanding unpaid interest amount, to the extent permitted by law, at the
Class B Pass-Through Rate from such preceding Distribution Date to but not
including such Distribution Date, over the amount of interest that the holders
of the Class B Certificates actually received on such current Distribution
Date.
Class B Interest
Distributable Amount:
With respect to any Series, the meaning ascribed to
such term in the related Issue Supplement.
Class B
Pass-Through Rate:
With respect to any Series, the meaning
ascribed to such terms in the related Issue Supplement.
Class B
Percentage:
With respect to any Distribution Date,
1%.
Class B Principal
Carryover Shortfall:
As of the close of any Distribution Date,
the excess, if any, of the Class B Principal Distributable Amount plus any
outstanding unpaid principal owed to holders of Class B Certificates from the
preceding Distribution Date over the amount of principal that the holders of the
Class B Certificates actually received on such current Distribution
Date.
Class B Principal
Distributable Amount:
means, with respect to any Distribution
Date, the Class B Percentage of the sum of: (i) the principal
portion of all collections on the Loans, including prepayments of principal
received during the related Collection Period, (ii) the aggregate of all
Substitution Adjustment Principal Amounts received in connection with the
substitution of Loans during the related Collection Period, (iii) the principal
portion of the Repurchase Price received with respect to any Defective Loan
during the related Collection Period and (iv) the aggregate outstanding
principal balance as of the beginning of the related Collection Period of
all Loans that became Defaulted Loans during the related Collection Period
(without duplication of amounts referred to in clauses (i) and
(ii) above).
Class Certificate
Principal Balance:
With respect to any Class at any time, the
aggregate of the Certificate Principal Balances of all Certificates of such
Class.
Code:
The
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
Collection
Period:
With respect to any Series and any Distribution Date,
the 6 calendar months immediately preceding the month in which such Distribution
Date falls.
Compliance
Certification:
The annual certification by a Borrower to CFC
under the related Loan Agreement.
Condemnation
Proceeds:
All awards or settlements in respect of a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or
condemnation.
Customary
Servicing Procedures:
With respect to the Master Servicer, the
customary and usual standards of practice employed by the Master Servicer when
servicing and administering loans in the Master Servicer’s portfolio of a type
comparable to the loans included in each applicable Trust Fund.
Cut-Off
Date:
With respect to any Loan, the last day of the month
preceding the month of the Series Closing Date on which such Loan became a part
of the Trust Fund established on that Series Closing Date.
Custodial
Account:
With respect to any Series, the account created and
maintained by the applicable Master Servicer pursuant to Section 5.02(b) with
respect to the Loans within the Trust Fund relating to such Series.
Cut-Off Date
Principal Balance:
With respect to any Loan other than an
Eligible Substitute Loan, the unpaid principal balance thereof at the Cut-Off
Date after giving effect to all installments of principal due on or prior
thereto, whether or not received. As to any Eligible Substitute Loan,
the unpaid principal balance thereof as of the date such Eligible Substitute
Loan is sold to the Trustee hereunder.
Defaulted
Loan:
Any
Loan as to which (i) any payment or part thereof, remains unpaid for 30
days or more after the original due date for such payment, (ii) the
related Borrower is subject to any bankruptcy or insolvency proceeding, (iii)
the lien of the related Mortgage has been foreclosed, the related Mortgaged
Property has been sold pursuant to a power of sale or trustee’s sale or
repossessed, or proceedings for foreclosure, sale or repossession have been
commenced, or (iv) the Master Servicer has determined, consistent with Customary
Servicing Procedures, that such Loan is not collectible.
Defective
Loan:
Any Loan which is required to be cured, repurchased or
substituted for pursuant to Section 2.02 or Section 4.02.
Denomination:
With
respect to any Certificate, the principal balance of such Certificate as of the
Series Closing Date on which such Certificate was issued.
Distribution
Date:
With respect to any Series, the dates specified in the
related Issue Supplement as a Distribution Date for the Certificates of such
Series.
DSC
Ratio:
The DSC Coverage Ratio for any Borrower, for any
calendar year means the ratio determined by adding such Borrower’s Patronage
Capital and Operating Margins, Non-Operating Margins – Interest, cash received
in respect of generation and transmission and other capital credits, Interest
Expense with respect to Long-Term Debt and Depreciation and Amortization Expense
for such year, and dividing the sum so obtained by the sum of all payments of
principal and interest expense required to be made during such year on account
of such Borrower’s Long-Term Debt (but in the event any portion of such
Borrower’s Long-Term Debt is refinanced during such year the payments of
principal and interest expense required to be made during such year in respect
thereof shall be based (in lieu of actual payments thereon) upon the
larger of (x) an annualization of such payments required to be made with respect
to the refinancing debt during the portion of such year such refinancing debt is
outstanding and (y) the payments of principal and interest expense required to
be made during the following year on account of such refinancing debt);
Patronage Capital and Operating Margins, Interest Expense with respect to
Long-Term Debt, Depreciation and Amortization Expense, principal and interest
expense, Non-Operating Margins – Interest and Long-Term Debt being determined in
accordance with the Uniform System of Accounts prescribed at the time by RUS or,
if such Borrower is not required to maintain its accounts in accordance with
said Uniform System of Accounts, otherwise determined in accordance with GAAP,
except that in computing Interest Expense with respect to Long-Term Debt, and
payments of interest required to be made on account of Long-Term Debt, for the
purpose of the foregoing definition, there shall be added, to the extent not
otherwise included, an amount equal to 33-1/3% of the excess of the Restricted
Rentals paid by such Borrower for such year over 2% of such Borrower’s Equities
and Margins for such year as defined in the Uniform System of Accounts
prescribed by RUS or, if such Borrower is not required to maintain its accounts
in accordance with said Uniform System of Accounts, otherwise determined in
accordance with GAAP.
Due
Date:
With respect to any Loan, any date upon which any
Installment Payment is due in accordance with the terms of the related Mortgage
Note.
Eligible
Account:
An account that is a segregated account (including a
securities account) with an Eligible Depository.
Eligible
Depository:
Any Reserve Bank, the Trustee or any other
depository institution or trust company approved in writing by an Authorized
Officer of the Calculation and Paying Agent incorporated under the laws of the
United States of America or any state thereof and subject to supervision and
examination by federal or state banking authorities.
Eligible
Substitute Loan
:
A Qualified Loan
that is substituted for a Defective Loan pursuant to Section 2.02(d), Section
4.02 or Section 4.04.
Farmer
Mac:
The Federal Agricultural Mortgage Corporation, a
federally chartered instrumentality of the United States, together with its
successors and assigns.
Form
7:
The reporting form designated as such by RUS, or in the
event a Borrower does not borrow from RUS, the reporting form designated as such
by CFC for its Class A distribution system members.
Final
Distribution Date:
With respect to any Class, the Distribution
Date specified in the related Issue Supplement as being the Distribution Date on
or before which the Certificate Principal Balance of each Certificate within
such Class shall have been reduced to zero.
GAAP:
Generally
accepted accounting principles in the United States as in effect from time to
time.
Governmental
Authority:
Any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
Initial Closing
Date:
The date specified in the preamble to this Master
Agreement.
Installment
Payment
: With respect to any Loan and any Due Date, any
payment of principal and/or interest thereon in accordance with the amortization
schedule of such Loan (after adjustment for any curtailments occurring prior to
the Due Date but before adjustment to such amortization schedule by reason of
any bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period).
Interest Accrual
Period:
With respect to any Class and Distribution Date, the
period prior thereto specified in the related Issue Supplement.
Issue
Supplement:
An instrument executed by the parties hereto
pursuant to Section 2.01, which supplements this Master Agreement and identifies
and establishes, among other things, a particular Trust and issues a particular
Series of Certificates related to such Trust.
Investment
Company Act:
The Investment Company Act of 1940, as
amended
.
Investment
Letter:
A
letter substantially in the applicable form attached as an exhibit to the Issue
Supplement in respect of a particular Series (with such changes and
modifications as the Depositor, the Trustee and the Calculation and Paying Agent
shall agree).
Key Ratio Trend
Analysis
:
An annual report
generated by the Seller containing key financial and operating ratios and other
growth indicators for each Borrower.
Loan
Agreement:
An original loan agreement to which the applicable
Borrower is a party and providing for the Loan which is evidenced by the related
Mortgage Note and secured by the related Mortgage.
Loan Interest
Rate:
With respect to any Loan, the per annum rate of interest
borne thereby as specified in the Mortgage Note or the Loan Agreement relating
to such Loan.
Loans:
With respect to each
Trust Fund, the Qualified Loans identified on the Schedule of Qualified Loans
relating to the Issue Supplement applicable to such Trust Fund.
Master
Agreement:
This Master Trust, Sale and Servicing Agreement, as
it may be modified, amended or supplemented in accordance with the applicable
provisions hereof.
Mortgage:
An
original mortgage, deed of trust or other instrument that constitutes a first
lien on an interest in real property securing a Mortgage Note. Such
Mortgage may be an RUS form of mortgage, a CFC form of mortgage or the form
specified by another lender and agreed to by CFC. It is understood
that the Mortgages provide that one or more promissory notes may be secured by
such Mortgage without being specifically identified in such Mortgage and without
such Mortgage being amended to reflect such fact.
Mortgage
File:
The mortgage documents listed in Section 2.02(b)
pertaining to the applicable Loan.
Mortgage
Note:
The originally executed note or other evidence of
indebtedness of a Borrower under a Loan, together with all riders thereto and
amendments thereof.
Mortgaged
Property:
The underlying property, which includes real
property and may include improvements thereon, securing a Loan.
Net Loan Interest
Rate:
With respect to any Loan, the Loan Interest Rate
applicable to such Loan, net of the Servicing Fee Rate applicable to such
Loan.
Officers’
Certificate:
With respect to any Person, a certificate signed
by the Governor, the Chairman of the Board, the Vice Chairman of the Board, the
President, any Executive Vice President, Senior Vice President, Vice President
or Second Vice President, and any of the Treasurer, the Secretary, or any of the
Assistant Treasurers or Assistant Secretaries of such Person delivered pursuant
to this Master Agreement.
Opinion of
Counsel:
A written opinion of counsel of a law firm reasonably
acceptable to the recipient thereof. Any Opinion of Counsel may be
provided by in-house counsel of a Person if reasonably acceptable to the
addressee thereof.
Other Insurance
Proceeds:
Proceeds of any hazard policy or other insurance
policy covering a Mortgaged Property, to the extent such proceeds are not to be
applied to the restoration of such Mortgaged Property or released to the
Borrower in accordance with the procedures that the Master Servicer would follow
in servicing Qualified Loans held for its own account.
Permitted
Investments:
One or more of the following:
(i) obligations
of, or guaranteed as to principal and interest by, Farmer Mac or the United
States or any agency or instrumentality thereof;
(ii) repurchase
agreements on obligations specified in clause (i), which repurchase agreements
will mature not later than the day preceding the immediately following
Distribution Date, provided that (a) the unsecured short-term obligations of the
party agreeing to repurchase such obligations are at the time rated not less
than A-1 by Standard & Poor's and not less than Prime-1 by Moody's, (b) such
repurchase agreements are effected with a primary dealer recognized by a Federal
Reserve Bank or (c) such repurchase agreements are secured by obligations
specified in clause (i) above at not less than 102% of market value determined
on a daily basis;
(iii) demand
and time deposits in, certificates of deposit of, or bankers' acceptances
maturing in not more than 60 days and issued by, any depository institution or
trust company incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal and/or state
banking authorities, so long as at the time of such investment or contractual
commitment providing for such investment the commercial paper or other
short-term debt obligations of such depository institution or trust company (or
in the case of a depository institution that is the principal subsidiary of a
holding company, the commercial paper or other short-term obligations of such
holding company) have rating of not less than A-1 from Standard & Poor's and
a rating of not less than Prime-1 from Moody's;
(iv) commercial
paper (having remaining maturities of not more than 60 days) of any corporation
incorporated under the laws of the United States or any state thereof, which on
the date of acquisition has been rated not less than A-1by Standard & Poor's
and not less than Prime-1 by Moody's;
(v) securities
bearing interest or sold at a discount issued by any corporation incorporated
under the laws of the United States of America or any state thereof if such
securities are rated in the highest long-term unsecured rating
categories at the time of investment or the contractual commitment providing for
such investment by Standard & Poor's and Moody's; provided, however, that
securities issued by any particular corporation will not be Permitted
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and held
as part of the Custodial Account for any Series to exceed 10% of the outstanding
principal balance of the Qualified Loans included in the Trust for such Series
(it being understood that the entity directing the investment shall be
responsible for compliance with the foregoing restriction on
investments);
(vi) units
of a taxable money-market portfolio rated "P-1" by Moody's and "AAAm" by
Standard & Poor's and restricted to investments in obligations issued or
guaranteed by the United States of America or entities whose obligations are
backed by the full faith and credit of the United States of America and
repurchase agreements collateralized by such obligations (for which U.S. Bank
National Association or an Affiliate thereof may act as portfolio
advisor);
(vii) units
of a taxable money-market portfolio restricted to investments which would be
“Permitted Investments” under paragraphs (i) through (vi) of this definition of
“Permitted Investments”; and
(viii) other
obligations or securities that are specified in the Issue
Supplement;
provided
that any
Permitted Investment shall mature not later than the next applicable Certificate
Account Deposit Date (or on the next Distribution Date, in the case of Permitted
Investments maintained in the Certificate Account);
provided
further,
that a Permitted Investment may not be an investment which is subject to any
deduction or withholding of tax with respect to a Certificateholder that is not
a “United States person” under the Code. Each Permitted Investment
may be purchased by the Trustee or through an Affiliate of the
Trustee.
Person:
Any
legal person, including any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
Governmental Authority.
Prepayment
Premium:
With respect to any Loan, any premium or yield
maintenance payment paid or payable, as the context requires, by the related
Borrower in connection with any Principal Prepayment.
Principal
Distribution Amount:
With respect to a particular Series and
Distribution Date, the sum of the Class A Principal Distributable Amount and the
Class B Principal Distributable Amount, each with respect to such series and
such Distribution Date.
Principal
Prepayment:
Any payment or other recovery of principal on a
Loan which is received in advance of its scheduled Due Date, which is not
accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of
prepayment.
Qualified
Loan:
A loan that satisfies the following
criteria:
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1.
|
The
Borrower is a Class A Member of CFC; a distribution system eligible to
borrow from RUS and serving primarily in communities of less than 50,000
residents.
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2.
|
Such
loan is a fixed or variable rate term loan that was closed by
CFC. At the time of sale, such loan has an outstanding
principal amount in the range of $1 million to $22.5 million and a
remaining period until maturity in the range of 3 to 35 years, provided
that if such loan provides for an interest rate reset, the resets shall
occur no more frequently than once every three years. Such loan
is secured by substantially all of the assets of the Borrower, which must
include real estate. Such assets may also secure one or more
prior or future loans made by CFC, RUS or another party to the same
Borrower.
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|
3.
|
Such
loan is payable in full upon maturity or amortizes on a level principal or
level debt service basis.
|
|
4.
|
Interest
is payable on such loan semi-annually. A 30/360 day year is
used for calculation purposes.
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5.
|
The
documentation for such loan provides that in the event of prepayment of a
fixed rate loan on any date other than an interest reset date, the
Borrower must pay a premium equivalent to a market make whole
amount.
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6.
|
The
full amount of such loan is advanced by the time of sale and no further
draws are permitted.
|
|
7.
|
The
Borrower’s ratio of equity to total assets, measured as of the end of the
most recent calendar year prior to the time of sale, is at least
20%.
|
|
8.
|
The
Borrower’s ratio of Long-Term Debt to net utility plant, measured as of
the end of the most recent calendar year prior to the time of sale, does
not exceed 90% (Net utility plant to be determined in accordance with the
Uniform Systems of Accounts prescribed at the time by RUS); provided, that
Long-Term Debt is determined in accordance with the Uniform System of
Accounts prescribed at the time by RUS or, if such Borrower is not
required to maintain its accounts in accordance with said Uniform System
of Accounts, otherwise determined in accordance with
GAAP.
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9.
|
The
average of the Borrower’s two highest annual DSC Ratios during the most
recent three calendar years prior to the time of sale is not less than
1.4:1.
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|
10.
|
At
the time of the sale, CFC will have at least one other loan to the same
Borrower in CFC’s portfolio. In addition, at the time of sale,
it will be the intention of CFC to maintain a credit relationship with
such Borrower until such time as the Loan to such Borrower purchased by
the Trustee pursuant to this Master Agreement and the related Issue
Supplement is repaid in full.
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|
11.
|
No
event of default with respect to such loan shall have been declared by CFC
and be continuing at the time of
sale.
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12.
|
Such
loan shall have been documented in accordance with CFC’s existing
practices and procedures at the time such loan was closed, provided that
prior to its sale hereunder to the Trustee, the Mortgage Note and related
Loan Agreement will be prepared and will include all of the provisions of
a Qualified Loan contemplated by this Master
Agreement.
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Record
Date:
With respect to any Distribution Date, the last day of
the month immediately preceding the month of such Distribution
Date.
REO
Property
: A Mortgaged Property acquired on behalf of the
applicable Trust Fund through foreclosure or deed-in-lieu of foreclosure in
connection with a Defaulted Loan.
Repurchase
Price:
With respect to any Loan, the unpaid principal balance
thereof together with accrued and unpaid interest thereon at the Loan Interest
Rate to the Due Date next preceding the Distribution Date upon which the net
proceeds of such Repurchase Price are to be distributed to the applicable
Certificateholders.
Required
Certificateholder
: With respect to any Series, the Class B
Certificateholder.
Reserve
Bank:
Any U.S. Federal Reserve Bank, including its
branches.
Responsible
Officer:
When used with respect to the Trustee, the
Calculation and Paying Agent, the Depositor or the Master Servicer, any officer
of such Person, including any Governor, Chairman or any President, any Vice
President, any Assistant Vice President, any Assistant Treasurer, any Assistant
Secretary or any other officer of such party customarily performing functions
similar to those performed by the persons who at the time shall be such officers
and, in respect of the Trustee in each case, who is responsible for the
administration of this Master Agreement.
Restricted
Rentals:
All rentals required to be paid under finance leases
and charged to income, exclusive of any amounts paid under any such lease
(whether or not designated therein as rental or additional rental) for
maintenance or repairs, insurance, taxes, assessments, water rates or similar
charges. For the purpose of this definition the term “
finance lease
” shall
mean any lease having a rental term (including the term for which such lease may
be renewed or extended at the option of the lessee) in excess of 3 years and
covering property having an initial cost in excess of $250,000 other than
automobiles, trucks, trailers, tractors, other vehicles (including without
limitation aircraft and ships), office, garage and warehouse space and office
equipment (including without limitation computers).
Rule
144A:
The meaning ascribed to such term in Section
3.03(d).
RUS:
Means
the Rural Utilities Service of the United States Department of Agriculture,
acting by and through the Administrator of the Rural Utilities Service, and
including any successor agencies or departments.
Schedule of
Qualified Loans:
With respect to each Trust, the list of Loans
transferred to the Trustee with respect to such Trust on the applicable Series
Closing Date and incorporated into and made part of the applicable Issue
Supplement, which list may be amended pursuant to Section 4.04 upon conveyance
of an Eligible Substitute Loan. Such schedule may consist of multiple
reports that collectively set forth all of the requisite
information.
Scheduled
Principal Balance:
With respect to any Eligible Substitute
Loan and the related date of substitution, the principal balance of such
Eligible Substitute Loan as of such date of substitution.
Securities
Act:
The Securities Act of 1933, as amended.
Series
:
A separate series
of Certificates issued pursuant to this Master Agreement and the related Issue
Supplement.
Series Closing
Date:
With respect to any Series, the date specified in the
related Issue Supplement, which date shall coincide with the Pool Closing Date
specified in the PA Supplement for the related Loans.
Servicer
Default:
An event described in Section 5.15.
Servicing
Advances:
With respect to each Loan, all customary and
reasonable costs and expenses (including the reasonable fees and disbursements
of counsel to the Master Servicer) incurred in accordance with the Customary
Servicing Procedures of the Master Servicer in the performance by the Master
Servicer of its servicing obligations consisting of or relating to (i) the
preservation, restoration and protection of the related Mortgaged Property, (ii)
any enforcement or remedial activities or judicial proceedings, including
foreclosures and (iii) the amendment, modification, restructuring or work-out of
such Loan.
Servicing
Certificate:
With respect to each Trust, a certificate
completed and executed by a Servicing Officer on behalf of the Master Servicer
in accordance with Section 5.13(a). Each Servicing Certificate shall
be substantially in the form of Exhibit A (with such changes and modifications
as the Master Servicer, the Trustee and the Calculation and Paying Agent shall
agree).
Servicing
Fee:
With respect to each Loan, the product of (i) the
Servicing Fee Rate with respect to such Loan, and (ii) the outstanding principal
amount of such Loan, as determined in the following sentence. The
Servicing Fee shall be payable on the Due Date that interest on such Loan is
payable and computed on the basis of the same time period with respect to which
interest on such Loan is computed, without giving effect to any principal amount
of such Loan paid or payable on the applicable Due Date.
Servicing Fee
Rate:
With respect to each Loan within a Trust Fund, the rate
per annum set forth in the applicable Issue Supplement or, if applicable, the
Schedule of Qualified Loans relating to such Issue Supplement.
Servicing
File
:
The following
documents pertaining to each Loan:
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1.
|
a
copy of the most recent Compliance Certification by an officer
of the related Borrower;
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|
2.
|
the
most recent fiscal year-end certified audit of such
Borrower;
|
|
3.
|
a
copy of the most recent unaudited annual financial statements of such
Borrower (which may be set forth on a Seller form or Form 7);
and
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|
4.
|
the
most recent Key Ratio Trend Analysis, as
available.
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Servicing
Officer
: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Loans whose name and
specimen signature appears on a list of Servicing Officers furnished to the
Trustee by the Master Servicer on the applicable Series Closing Date, as such
list may from time to time be amended by delivery of written notice by an
existing Servicing Officer.
Stated Principal
Balance
: With respect to any Loan and date, the unpaid
principal balance of such Loan as of the Due Date immediately preceding such
date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any moratorium
or similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Cash Liquidation Proceeds allocable to principal and
to the payment of principal due on such Due Date and irrespective of any
delinquency in payment by the related Borrower.
Substitution
Adjustment Principal Amount:
With respect to any date of
substitution, the amount, if any, by which the unpaid principal balance of any
Defective Loan for which one or more Eligible Substitute Loans are substituted
on such date of substitution, exceeds the aggregate Scheduled Principal Balances
of such Eligible Substitute Loans.
Total Available
Amount:
means, for each Distribution Date, the sum of the Available
Interest and the Available Principal.
Trust:
Each
separate trust created pursuant to this Master Agreement and each Issue
Supplement.
Trust
Fund:
With respect to any particular Series, the corpus of the
Trust created by this Master Agreement and the Issue Supplement applicable
thereto, consisting (without duplication) of (i) the Loans identified on the
Schedule of Qualifying Loans relating to the applicable Issue Supplement,
together with all proceeds thereof, (ii) the Mortgage Files and other documents
delivered pursuant to Section 2.02(b), (iii) the rights in the Custodial Account
relating to the applicable Trust and in all cash and investments therein from
time to time, and (iv) the Certificate Account relating to the Certificates
representing beneficial interests in such Trust Fund and in all cash and
investments held therein.
Trustee:
The
meaning ascribed to such term in the preamble to this Master
Agreement.
Section
1.02.
Other
Definitional Provisions
.
(a) All
terms defined in this Master Agreement shall have the defined meanings when used
in any Issue Supplement, certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As
used in this Master Agreement and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Master Agreement or in any such Issue Supplement, certificate or other document,
and accounting terms partly defined in this Master Agreement or in any such
Issue Supplement, certificate or other document to the extent not defined, shall
have the respective meanings given to them under GAAP. To the extent
that the definitions of accounting terms in this Master Agreement or in any such
Issue Supplement, certificate or other document are inconsistent with the
meanings of such terms under GAAP in effect on the date hereof, the definitions
contained in this Master Agreement or in any such Issue Supplement certificate
or other document shall control.
(c) The
words “hereof,” “herein,” “hereunder,” and words of similar import when used in
this Master Agreement shall refer to this Master Agreement as a whole and not to
any particular provision of this Master Agreement; Section and Exhibit
references contained in this Master Agreement are references to Sections and
Exhibits in or to this Master Agreement unless otherwise specified; and the term
“including” shall mean “including without limitation.”
(d) The
definitions contained in this Master Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
ARTICLE
II
Applicable
Documentation; Sale of Qualifying Loans
Section
2.01.
Trust
Established
.
An
Issue Supplement establishing a Trust, selling the applicable Loans and issuing
the Certificates evidencing beneficial ownership interests in the Trust Fund of
such Trust shall be executed by the Trustee, the Calculation and Paying Agent,
the Depositor and the Master Servicer on each Series Closing
Date. Each Issue Supplement shall identify and relate to a particular
Series of Certificates and establish a distinct Trust and a distinct Trust
Fund.
Section
2.02.
Sale of
Loans
.
(a) On
each Series Closing Date, pursuant to the execution and delivery of the
applicable Issue Supplement and concurrently with the delivery of the Series of
Certificates issued on such Series Closing Date, the Depositor shall sell,
transfer, assign, set-over and otherwise convey to the Trustee and the Trustee
shall purchase from the Depositor, without recourse except as specifically set
forth herein or in the Issue Supplement, all the right, title and interest of
the Depositor in, to and under the Loans identified on the Schedule of Qualified
Loans incorporated into such Issue Supplement. The Loans identified
on the Schedule of Qualified Loans incorporated into each Issue Supplement shall
be identical to the Loans identified on the Schedule of Qualified Loans
incorporated into the PA Supplement relating to such Series. Each
Issue Supplement shall specify the Servicing Fee Rate applicable to the Loans
identified on the Schedule of Qualified Loans incorporated into such Issue
Supplement. In connection with such sale, the Depositor assigns to
the Trustee or Trustees for the benefit of the Certificateholders all (but not
less than all) of the Depositor's right, title and interest in, to and under any
PA Supplement, together with all of its right, title and interest in, to and
under the Master Loan Purchase Agreement as it relates to such PA Supplement, as
provided in Section 4.05. Such rights assigned to the Trustee
include, but are not limited to, the rights of the Depositor under Section 2.01,
Section 4.01 and Section 5.01 of the Master Loan Purchase
Agreement.
(b) In
connection with such sale, transfer, assignment, setting over and conveyance
described in Section 2.02(a), the Depositor will deliver to, or deposit with,
the Trustee the following documents or instruments with respect to each Loan so
sold, transferred, assigned, set over and otherwise conveyed:
(i) the
Mortgage Note, endorsed, without recourse, to the Trustee, with all necessary
intervening endorsements showing a complete chain of endorsement from the
originator to the Depositor, if applicable;
(ii) a
copy of the applicable Mortgage;
(iii) an
original of each amendment to the Mortgage Note and a copy of each amendment to
the Mortgage in CFC’s possession;
(iv) the
original Loan Agreement;
(v) the
original Opinion of Counsel of Borrower’s counsel; and
(vi) copies
of any Additional Collateral Documents.
The
Depositor acknowledges and understands that ownership of each document in a
Mortgage File is vested in the Trust. Neither the Depositor nor the
Master Servicer shall take any action inconsistent with such
ownership. Each of the Depositor and the Master Servicer (as the
originator of the Loans) agrees to indicate on its books and records at each
Series Closing Date that the Loans sold pursuant to Section 2.02(a) on such
Series Closing Date have been sold to the Trustee, and to advise all inquiring
parties that such Loans have been sold to the Trustee.
The
Trustee acknowledges receipt of those documents referred to in this Section
2.02(b) and declares that it holds and will hold such documents and the other
documents delivered to it constituting the Mortgage Files in trust for the
exclusive use and benefit of all present and future
Certificateholders.
(c) The
Depositor shall execute, acknowledge and deliver all other documents furnished
to the Depositor by the Trustee as may be necessary to effectuate the transfer
contemplated by this Section 2.02 and the applicable Issue Supplement to the
Trustee of all right, title and interest of the Depositor in and to the Loans
and the related Mortgages.
(d) If
within 90 days of the applicable Series Closing Date, the Trustee finds any
document or documents constituting a part of a Mortgage File to be missing,
mutilated, torn, damaged or defective on its face, the Trustee shall, as
assignee of the rights of the Depositor under the Master Loan Purchase Agreement
and the PA Supplements, notify the Depositor and CFC of such fact in
writing. CFC shall then correct or cure the subject matter of such
notice within one year from the date of such notice. If (x) CFC does
not
correct or cure
the subject matter of such notice within such one year period and (y) such
omission or defect relates to any document identified in Section 2.02(b)(i),
(ii), (iii), (iv) or (vi), the Trustee shall direct CFC to replace the related
Defective Loan with one or more Eligible Substitute Loans in the manner and
subject to the conditions set forth in Section 4.03 of the Master Loan Purchase
Agreement. Upon receipt of such Eligible Substitute Loan or Eligible
Substitute Loans, the Trustee promptly shall deliver to the Depositor the
related Mortgage File, and shall also execute and deliver such instruments of
transfer or assignment prepared by the Depositor, in each case without recourse,
as may be necessary to effectuate the transfer to the Depositor of all right,
title and interest of the Trustee in and to each applicable Loan.
Section
2.03.
Delivery and
Payment
.
With
respect to each Series, the Depositor shall deliver to the Trustee on the
related Series Closing Date, all of the documents referred to in Section 2.02(b)
with respect to the applicable Loans, together with all interest and principal
received on or with respect to the applicable Loans from and after the Cut-Off
Date (other than payments due on such Loans on or before the Cut-Off Date and
other than that portion of any payment of interest received after the Cut-Off
Date that represents interest accruing on or prior to the Cut-Off
Date). Such delivery shall be made against payment to the Depositor
of the Purchase Price for the applicable Loans as defined and set forth in the
applicable Issue Supplement.
Section
2.04.
Safekeeping and Release of
Required Documents
.
The
Mortgage Files and all other documents with respect to the Loans constituting
part of a Trust Fund delivered by the Depositor pursuant to this Master
Agreement and the applicable Issue Supplement shall be kept by the Trustee or an
agent of the Trustee (appointed after consultation with the Depositor) on its
behalf in trust for the exclusive use and benefit of all present and future
Holders of Certificates of the applicable Series.
Section
2.05.
Authorized
Officers
.
The
manual or facsimile signature of any individual appearing on this Master
Agreement, any Issue Supplement or any document or certificate issued pursuant
to this Master Agreement, and which is designated as the signature of a
Responsible Officer of any Person, shall constitute conclusive evidence that
such individual is, in fact, authorized to execute such document,
notwithstanding that such authorization may have lapsed prior to the effective
date of such document.
Section
2.06.
Delivery of
Instruments
.
The
Trustee shall furnish to each Certificateholder, upon request, without
attachments, copies of this Master Agreement, the Issue Supplement relating to
such Certificateholder and the Certificate or Certificates held by such
Holder.
Section
2.07.
Agreed
Treatment of Trusts and Certificates
.
The
parties hereto and, by acceptance or acquisition of a Certificate, the Holder of
each Certificate, intend to treat each Trust as a grantor trust for United
States federal, state and local tax purposes, and to treat the Certificates
(including all payments and proceeds with respect to such Certificates) as
undivided beneficial ownership interests in the related Trust Fund for United
States federal, state and local tax purposes. The provisions of this
Master Agreement shall be applied and interpreted to further this intention and
agreement of the parties, including, without limitation, so as to circumscribe
any right to exercise discretion granted to the Master Servicer, the Trustee or
the Calculation and Paying Agent herein as to matters relating to the
Loans.
Section
2.08.
Notice of
Sale of Loans
.
Promptly
following each Series Closing Date, CFC shall notify the Borrower under each
Loan identified on the related Schedule of Qualified Loans that such Loan has
been conveyed to the Trust identified on such schedule.
ARTICLE
III
The
Certificates
Section
3.01.
Certificates Issuable in
Classes; General Provisions with Respect to Principal and Interest
Distributions
.
(a) The
Certificates may consist of only one Class or may be divided into two or more
Classes and shall be designated generally as Rural Utilities MBS Certificates,
with such particular designations added or incorporated into such title for the
Certificates of any particular Class as specified in the related Issue
Supplement.
(b) Distributions
on the Certificates shall be made in such amounts as among Classes of
Certificates, and subject to such other conditions, as are provided in the Issue
Supplement with respect to such Class. Each Certificate will share
ratably in all rights of the related Class.
Section
3.02.
Issuance
and Authentication of Certificates
.
(a) The
Certificates shall be issued in definitive, fully registered form only,
substantially in the form attached to each Issue Supplement. The
Certificates shall be executed by manual or facsimile signature on behalf of the
Certificate Registrar by an authorized officer.
(b) No
Certificate shall be entitled to any benefit under this Master Agreement, or be
valid for any purpose, unless there appears on such Certificate a certificate of
authentication executed by an authentication agent appointed by the Trustee (the
“
Authenticating
Agent
”) by manual signature, and such certificate of authentication upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. The
Trustee is hereby initially appointed to act as the Authenticating Agent with
power to act on the Trustee’s behalf in the authentication and delivery of the
Certificates in connection with transfers and exchanges as herein
provided. If the Authenticating Agent resigns or is terminated, the
Trustee shall appoint a successor Authenticating Agent which may be the Trustee
or an affiliate thereof.
(c) Except
as limited by this Master Agreement, the Certificates of any Class shall be
subject to the provisions of the related Issue Supplement.
Section
3.03.
Registration of Transfer and
Exchange of Certificates; Transfer Restrictions
.
(a) At
all times during the term of this Master Agreement, there shall be maintained at
the office of a registrar appointed by the Trustee (the “
Certificate
Registrar
”) a register (the “
Certificate
Register
”) in which, subject to such reasonable regulations as the
Certificate Registrar may prescribe, the Certificate Registrar shall provide for
the registration of Certificates and transfers and exchanges of Certificates as
herein provided. The Trustee is hereby initially appointed as
Certificate Registrar for the purpose of registering Certificates and transfers
and exchanges of Certificates as herein provided. The Trustee may
appoint any other bank or trust company to act as Certificate Registrar under
such conditions as the Trustee may prescribe; provided that the Trustee shall
not be relieved of any of its duties or responsibilities hereunder as
Certificate Registrar by reason of such appointment. If the Trustee
resigns or is removed in accordance with the terms hereof, the successor trustee
shall immediately succeed to its predecessor’s duties as Certificate
Registrar.
(b) In
the event that there is a discrepancy between (i) the Certificate Principal
Balance as noted on the grid attached to a Certificate and (ii) the Certificate
Principal Balance reflected in the Certificate Register, the Certificate
Register shall be controlling in the absence of manifest error. No
service charge shall be made to a Holder for any registration of transfer or
exchange of Certificates, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of
Certificates.
(c) The
Certificates shall contain the following restrictive legends:
THIS
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITY
LAW. THE HOLDER HEREOF AGREES THAT, FOR THE BENEFIT OF THE TRUST,
NEITHER THIS CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF OR (Y) AT ANY TIME BY ANY TRANSFEROR THAT WAS
AN AFFILIATE OF THE TRUST DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
OFFER, RESALE, PLEDGE OR OTHER TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE
TRUST, (2) TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
(“RULE 144A”) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER, IN EACH CASE, TO WHOM NOTICE IS GIVEN THAT THE OFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH AN INVESTMENT LETTER RELATING
TO THE TRANSFER OF THIS CERTIFICATE, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR
(AS THAT TERM IS DESCRIBED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH AN
INVESTMENT LETTER RELATING TO THE TRANSFER OF THIS CERTIFICATE, (4) TO NON-U.S.
PERSONS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT, THAT, PRIOR TO THE TRANSFER, FURNISHES THE TRUSTEE WITH AN
INVESTMENT LETTER RELATING TO THE TRANSFER OF THIS CERTIFICATE, (5) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, INCLUDING THAT PROVIDED BY RULE 144 (IF AVAILABLE) UNDER THE
SECURITIES ACT, PROVIDED THAT, PRIOR TO THE TRANSFER, THE TRANSFEREE FURNISHES
THE TRUSTEE WITH AN INVESTMENT LETTER RELATING TO THE TRANSFER OF THIS
CERTIFICATE, OR (6) FOLLOWING THE REGISTRATION OF THIS CERTIFICATE UNDER THE
SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAW OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION.
NO
TRANSFER, SALE, PLEDGE OR OTHER DISPOSITION OF THIS CERTIFICATE OR INTEREST
THEREIN SHALL BE MADE UNLESS THAT TRANSFER, SALE, PLEDGE OR OTHER DISPOSITION
WILL NOT CAUSE THE TRUST TO BECOME SUBJECT TO REGISTRATION UNDER THE INVESTMENT
COMPANY ACT OF 1940 (THE “INVESTMENT COMPANY ACT”) OR EXCEPT AS PROVIDED IN
CLAUSE (6) ABOVE, TO BECOME SUBJEC TO REGISTRATION UNDER THE SECURITIES
ACT.
NO
TRANSFER, SALE, PLEDGE OR OTHER DISPOSITION OF THIS CERTIFICATE OR INTEREST
THEREIN MAY BE MADE TO ANY EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT WHICH IS
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, OR TO AN ENTITY WHOSE UNDERLYING ASSETS
ARE SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986.
(d) No
Certificate, nor any interest or participation therein, may be offered, resold,
pledged or otherwise transferred (i) prior to the second anniversary of the
issuance hereof or (ii) at any time by any transferor that was an affiliate
of the applicable Trust during the three months preceding the date of such
offer, resale, pledge or other transfer, in either case, other than (1) to such
Trust, (2) to a person whom the transferor reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act
(“
Rule 144A
”),
purchasing for its own account or for the account of a qualified institutional
buyer, in each case, to whom notice is given that the offer, resale, pledge or
other transfer is being made in reliance on Rule 144A, that prior to the
transfer of any Certificate, furnishes the Trustee with an Investment Letter
relating to the transfer of such Certificate, (3) to an institutional accredited
investor (as that term is described in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that prior to the transfer of any Certificate, furnishes the
Trustee with an Investment Letter relating to the transfer of such Certificate,
(4) to a non-U.S. person in an offshore transaction in accordance with
regulation S under the Securities Act that prior to the transfer of any
Certificate, furnishes the Trustee with an Investment Letter relating to the
transfer of such Certificate, (5) pursuant to another available exemption from
the registration requirements under the Securities Act, including that provided
by Rule 144 (if available) under the Securities Act, provided that the
transferee provide a written opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee opining as to such exemption, or (6)
following the registration of the Certificates under the Securities Act, in each
case, in accordance with any applicable securities Law of any state of the
United States or any other applicable jurisdiction. No transfer,
sale, pledge or other disposition of any Certificate or interest therein shall
be made unless that transfer, sale, pledge or other disposition will not cause
the applicable Trust to become subject to registration under either the
Securities Act or the Investment Company Act. To the extent that any
purported transfer, sale, pledge or other disposition of a Certificate or
interest therein is made in contravention of the terms contained in this Section
3.03(d), such transfer shall be deemed null and void ab initio, shall have no
effect hereunder and shall not be effective to grant or transfer any rights to
the purported transferee.
(e) No
transfer, sale, pledge or other disposition of any Certificate or interest
therein may be made to any employee benefit plan, trust or account which is
subject to the Employee Retirement Income Security Act of 1974, as amended, or
section 4975 of the Code, or to an entity whose underlying assets are subject to
the Employee Retirement Income Security Act of 1974 or section 4975 of the
Code. The Calculation and Paying Agent hereby indemnifies and holds
harmless the Depositor and CFC from and against all costs, expenses, fines,
penalties, tax consequences, liabilities, obligations and losses, including
without limitation reasonable attorneys’ fees and expenses, incurred by the
Depositor , CFC or both as a result of, relating to, or as a consequence of the
violation of the covenant in the preceding sentence.
Section
3.04.
Mutilated,
Destroyed, Lost or Stolen Certificates
.
If
(i) any mutilated Certificate is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee such security or
indemnity as may be required by the Trustee, the Depositor or the Master
Servicer to save the Trustee, the Depositor and the Master Servicer harmless,
then, in the absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor, class and percentage
interest. Upon the issuance of any new Certificate under this Section
3.04, the Trustee may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. Any duplicate Certificate issued pursuant to this Section
3.04 shall constitute complete and indefeasible evidence of ownership in the
Trust Fund, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section
3.05.
Persons
Deemed Owners
.
The
Trustee, the Depositor, the Master Servicer and any agent thereof may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 6.04
and for all other purposes whatsoever.
ARTICLE
IV
Representations
and Warranties
Section
4.01.
Representations and
Warranties of the Calculation and Paying Agent
.
The
Calculation and Paying Agent represents and warrants as of the Initial Closing
Date and each Series Closing Date as follows:
(a) The
Calculation and Paying Agent is a federally chartered instrumentality of the
United States duly organized, validly existing and in good standing under the
laws governing its creation and existence and with corporate power and authority
to conduct its business as it is currently being conducted; the Calculation and
Paying Agent holds all licenses, certificates and permits necessary for the
conduct of its business as it is currently being conducted.
(b) The
Calculation and Paying Agent has the requisite power and authority to execute
and deliver this Master Agreement and each Issue Supplement and to perform its
duties thereunder and to take all other actions and execute and deliver all
other documents which are requisite or pertinent to the performance of such
duties; the persons signing such documents and taking such actions on behalf of
the Calculation and Paying Agent, respectively, have been duly authorized to do
so and such documents and actions are valid, legally binding and enforceable
against it in accordance with their terms.
(c) No
action, suit or proceeding is pending or, to the best of Calculation and Paying
Agent’s knowledge, threatened against it that would prohibit its entering into
this Master Agreement or any Issue Supplement or performing its obligations
under this Master Agreement or any Issue Supplement or, in the reasonable
opinion of the Calculation and Paying Agent has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated by this
Master Agreement or any Issue Supplement.
(d) The
Calculation and Paying Agent is not required to obtain the consent of any other
Person or any consents, licenses, approvals or authorizations from, or
registrations or declarations with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Master Agreement, any Issue Supplement or any of the
other agreements executed in connection therewith, except for such consents,
licenses, approvals or authorizations, or registrations or declarations, as
shall have been obtained or filed, as the case may be.
(e) The
Calculation and Paying Agent is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default would reasonably be expected to
have consequences that would materially and adversely affect the condition
(financial or otherwise) or operations of the Calculation and Paying Agent or
its respective properties or would reasonably be expected to have consequences
that would materially adversely affect the performance of the Calculation and
Paying Agent hereunder or under any Issue Supplement.
(f) The
execution and delivery of this Master Agreement by the Calculation and Paying
Agent and the performance and compliance with the terms of this Master
Agreement or any Issue Supplement by the Calculation and Paying Agent
will not violate the statues and regulations which govern the operation of the
Calculation and Paying Agent, or constitute a material default (or an event
which, with notice or lapse of time, or both, would constitute a material
default) under, or result in the material breach of, any material contract,
agreement or other instrument to which the Calculation and Paying Agent is a
party or which may be applicable to the Calculation and Paying Agent, or any of
its assets.
(g) The
Calculation and Paying Agent is not in default hereunder and no event or
circumstance has occurred or exists which, with notice or lapse of time or both,
would constitute a default by the Calculation and Paying Agent
hereunder.
Upon
discovery by any party hereto of a breach of any of the representations and
warranties set forth in this Section 4.01, such discovering party shall give
prompt written notice to the other parties. It is understood and
agreed by the parties hereto that the representations and warranties set forth
in this Section 4.01 shall survive delivery of the respective Mortgage Files to
the Trustee.
Section
4.02.
Representations, Warranties
and Agreement of the Depositor
.
The
Depositor hereby represents and warrants as of the Initial Closing Date and each
Series Closing Date as follows:
(a) The
Depositor is a Delaware limited liability company duly organized, validly
existing and in good standing under the laws governing its creation and
existence and with the requisite power and authority to conduct its business as
it is currently being conducted; the Depositor holds all licenses, certificates
and permits necessary for the conduct of its business as it is currently being
conducted.
(b) The
Depositor has the requisite power and authority to execute and deliver this
Master Agreement and each Issue Supplement, to transfer, assign and deliver all
the Loans identified on each applicable Schedule of Qualified Loans to the
Trustee and to take all other actions and execute and deliver all other
documents which are requisite or pertinent to the transactions described in this
Master Agreement and each Issue Supplement. The persons signing such
documents and taking such actions on its behalf have been duly authorized to do
so and such documents and actions are valid, legally binding and enforceable
against the Depositor in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforcement of creditors’ rights and to general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(c) The
Depositor is not required to obtain the consent of any other Person or any
consents, licenses, approvals or authorizations from, or registrations or
declarations with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Master Agreement or any Issue Supplement except for such consents, licenses,
approvals or authorizations, or registrations or declarations, as shall have
been obtained or filed, as the case may be.
(d) No
action, suit or proceeding is pending or, to the best of the Depositor’s
knowledge, threatened against it that would prohibit it from entering into this
Master Agreement or any Issue Supplement or performing its obligations under
this Master Agreement and each Issue Supplement or, in the reasonable opinion of
the Depositor has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Master Agreement or any Issue
Supplement.
(e) The
Depositor is not in default with respect to any order or decree of any court or
any order, regulation or demand of any federal, state, municipal or governmental
agency, which default would reasonably be expected to have consequences that
would materially and adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or would reasonably be expected to
have consequences that would materially adversely affect its performance
hereunder or under any Issue Supplement.
(f) This
Master Agreement constitutes a valid transfer and assignment to the Trustee of
all right, title and interest of the Depositor in and to the Loans, and the
other property conveyed pursuant to this Master Agreement and each Issue
Supplement.
(g) The
execution and delivery of this Master Agreement and each Issue Supplement by the
Depositor and the performance and compliance with the terms of this Master
Agreement and each Issue Supplement by the Depositor will not violate the
organizational and operational documents of the Depositor, or constitute a
material default (or an event which, with notice or lapse of time, or both,
would constitute a material default) under, or result in the material breach of,
any material contract, agreement or other instrument to which the Depositor is a
party or which may be applicable to the Depositor, or any of its
assets.
(h) Following
payment in full for the Loans identified on a Schedule of Qualified Loans, the
Depositor will have no right, title or interest in, to or under any such Loans,
or the related Trust Fund or the assets and properties thereof.
Upon
discovery by any party hereto of a breach of any of the representations and
warranties set forth in this Section 4.02, such discovering party shall give
prompt written notice thereof to the other parties.
If any
party to this Master Trust Agreement becomes aware of any breach of any
representation or warranty set forth in Section 4.01(i) of the Master Loan
Purchase Agreement that materially and adversely affects the interests of the
Trust Fund in the related Qualified Loan, that party shall promptly notify each
of the other parties to this Master Agreement and the Required Certificateholder
of such breach and the Trustee shall direct CFC to comply with its obligations
under the Master Loan Purchase Agreement to either (i) cure such breach in all
material respects, (ii) purchase the Defective Loan in question from the Trustee
by the deposit of the Repurchase Price into an account designated by the
Trustee, or (iii) replace such Defective Loan with one or more Eligible
Substitute Loans in the manner and subject to the conditions set forth in Master
Loan Purchase Agreement;
provided
, that CFC
may only replace a Defective Loan with one or more Eligible Substitute Loans on
or before the date which is two (2) years following the Series Closing Date
relating to the Trust Fund which contains such Defective Loan.
It is
understood and agreed by the parties hereto that the representations and
warranties set forth in this Section 4.02 shall survive delivery of the
respective Mortgage Files to the Trustee.
Section
4.03.
Representations and
Warranties of the Master Servicer
.
The
Master Servicer hereby represents and warrants as of the Initial Closing Date
and each Series Closing Date as follows:
(a) The
Master Servicer is a cooperative association duly organized, validly existing
and in good standing under the laws governing its creation and existence and
with the requisite power and authority to conduct its business as it is
currently being conducted; the Master Servicer holds all licenses, certificates
and permits necessary for the conduct of its business as it is currently being
conducted and is or will be in compliance with the laws of each state in which
any Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Loan.
(b) The
Master Servicer has the requisite power and authority to execute and deliver
this Master Agreement and each Issue Supplement, to service and administer all
the Loans identified on each applicable Schedule of Qualified Loans in
accordance with the terms of this Master Agreement and each Issue Supplement, as
applicable, and to take all other actions and execute and deliver all other
documents which are requisite or pertinent to the transactions described in this
Master Agreement and each Issue Supplement. The persons signing such
documents and taking such actions on its behalf have been duly authorized to do
so and such documents and actions are valid, legally binding and enforceable
against the Master Servicer in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforcement of creditors’ rights and to general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(c) The
Master Servicer is not required to obtain the consent of any other Person or any
consents, licenses, approvals or authorizations from, or registrations or
declarations with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Master Agreement, any Issue Supplement or any of the other Transaction
Documents, except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as the case
may be.
(d) No
action, suit or proceeding is pending or, to the best of the Master Servicer’s
knowledge, threatened against it that would prohibit it from entering into this
Master Agreement or any Issue Supplement or performing its obligations under
this Master Agreement and each Issue Supplement or, in the reasonable opinion of
the Master Servicer has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Master Agreement or any
Issue Supplement.
(e) The
Master Servicer is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would reasonably be expected to have
consequences that would materially and adversely affect the condition (financial
or otherwise) or operations of the Master Servicer or its respective properties
or would reasonably be expected to have consequences that would materially
adversely affect the performance of the Master Servicer hereunder or under any
Issue Supplement.
(f) The
execution and delivery of this Master Agreement by the Master Servicer and the
performance and compliance with the terms of this Master Agreement or
any Issue Supplement by the Master Servicer will not violate the Articles of
Incorporation or Bylaws of the Master Servicer, or constitute a material default
(or an event which, with notice or lapse of time, or both, would constitute a
material default) under, or result in the material breach of, any material
contract, agreement or other instrument to which the Master Servicer is a party
or which may be applicable to the Master Servicer, or any of its
assets.
(g) No
Servicer Default has occurred and is continuing and no event or circumstance has
occurred or exists which, with notice or lapse of time or both, would constitute
a Servicer Default.
Upon
discovery by any party hereto of a breach of any of the representations and
warranties set forth in this Section 4.03, such discovering party shall give
prompt written notice to the other parties. It is understood and
agreed by the parties hereto that the representations and warranties set forth
in this Section 4.03 shall survive delivery of the respective Mortgage Files to
the Trustee.
Section
4.04.
Substitution or Repurchase
of Loans
.
(a) If
CFC elects to substitute an Eligible Substitute Loan or Loans for a Defective
Loan pursuant to the Master Loan Purchase Agreement, the Trustee shall direct
CFC, on each date of substitution, to:
(i) convey
the Eligible Substitute Loans and deliver the related Mortgage Files to the
Trustee as provided in Section 2.01(b) and Section 2.01(c) of the Master Loan
Purchase Agreement and Section 2.02(b) and Section 2.02(c) hereof;
(ii) deposit
or cause to be deposited into the applicable Custodial Account no later than the
date of substitution (A) the related Substitution Adjustment Principal Amount,
if any, plus (B) interest on such Substitution Adjustment Principal Amount at
the Loan Interest Rate of the related Defective Loan being replaced from the
previous Due Date for such Defective Loan (or, if there has been no Due Date for
such Loan subsequent to the Cut-Off Date, from the Cut-Off Date) to the Due Date
next preceding the first Distribution Date to occur after such substitution, at
which time such Substitution Adjustment Principal Amount and related interest is
to be distributed to the applicable Certificateholders; and
(iii) deliver
to the Trustee an Officer’s Certificate certifying that the requirements of the
Master Loan Purchase Agreement with respect to the replacement of the Defective
Loans in question have been met.
(b) The
Depositor shall amend the Schedule of Qualified Loans to reflect the repurchase
or transfer to CFC of each Loan that has become a Defective Loan and the
substitution of the Eligible Substitute Loan or Loans and the Depositor shall
deliver the amended Schedule of Qualified Loans to the Trustee. Upon
such substitution, each Eligible Substitute Loan shall be subject to the terms
of this Master Agreement and the related Issue Supplement in all respects and
all rights of the Depositor under the Master Loan Purchase Agreement with
respect to such Eligible Substitute Loan shall be and hereby are assigned to the
Trustee for the benefit of the Certificateholders. Upon any such
substitution and the deposit to the Custodial Account of the Repurchase Price or
of any required Substitution Adjustment Principal Amount, the Trustee promptly
shall deliver the Mortgage File relating to such Defective Loan to CFC and shall
execute and deliver at CFC’s direction such instruments of transfer or
assignment prepared by CFC, in each case without recourse, as shall be necessary
to transfer to CFC, or its designee, any Defective Loan substituted for or
repurchased pursuant to this Section 4.04(b).
Section
4.05.
Assignment of Interest in
the Master Loan Purchase Agreement
.
The
Depositor hereby assigns to the Trustee for the benefit of the
Certificateholders all (but not less than all) of the Depositor’s right, title
and interest in, to and under any PA Supplement, together with all of its
rights, title and interest in, to and under the Master Loan Purchase Agreement
as it relates to such PA Supplement, to the Trustee or Trustees for the benefit
of the Certificateholders. The rights assigned under the Master Loan
Purchase Agreement shall include, but not be limited to, the rights under
Section 2.01, Section 4.01 and Section 5.01 of the Master Loan Purchase
Agreement. Insofar as such assignment relates to representations and
warranties in the Master Loan Purchase Agreement and any remedies provided
thereunder for any breach of such representations and warranties (including the
provisions of Section 2.01(d), Section 4.01 and Section 4.02 of the Master Loan
Purchase Agreement), such right, title and interest may be enforced by the
Trustee on behalf of the Certificateholders.
ARTICLE
V
Administration
And Servicing of Loans
Section
5.01.
Servicing of the
Loans
.
(a)
The Master Servicer hereby agrees to service and administer the Loans sold
pursuant to this Master Agreement and each Issue Supplement in accordance with
the terms of this Master Agreement, the applicable Issue Supplement, applicable
law and the terms of the Loans. In connection with such servicing and
administration, the Master Servicer shall have full power and authority, acting
alone and/or through sub-servicers, to do or cause to be done any and all
things, in connection with such servicing and administration, that the Master
Servicer may deem necessary or desirable and consistent with the terms of this
Master Agreement including, but not limited to, the power and authority, subject
to the terms hereof, (a) to execute and deliver, on behalf of the Trustee or the
Certificateholders, customary consents or waivers and other instruments and
documents, (b) to consent to transfers of any Mortgaged Property and assumptions
of the Mortgage Notes and related Mortgages (but only in the manner provided in
this Master Agreement), (c) to collect any Other Insurance Proceeds and other
Cash Liquidation amounts, and (d) to effectuate foreclosure or other conversion
of the ownership of the Mortgaged Property securing any Loan. In
servicing and administering the Loans, the Master Servicer shall employ
procedures in accordance with the Customary Servicing Procedures of the Master
Servicer. The Master Servicer will exercise the same care in
servicing the Loans that it exercises in servicing loans to the same Borrower
held in the Master Servicer’s portfolio. The Master Servicer will act
in the best interest of the Trust Fund in servicing Loans held in such Trust
Fund. Without limiting the generality of the foregoing, the Master
Servicer, in its own name or in the name of the Trustee, is hereby authorized
and empowered by the Trustee, when the Master Servicer believes it appropriate
in its reasonable judgment, to execute and deliver on behalf of the Trustee any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Loans and with respect to the related Mortgaged Properties. The
Master Servicer shall prepare and deliver to the Trustee such documents
requiring execution and delivery by it as is necessary or appropriate to enable
the Master Servicer to service and administer the Loans to the extent that the
Master Servicer is not permitted to execute and deliver such documents pursuant
to the preceding sentence. In addition to the foregoing, the Trustee
shall provide a power of attorney or other appropriate authorization as shall be
necessary or desirable, in the Master Servicer’s judgment, to enable the Master
Servicer to act as the agent of the Trustee as the mortgagee under each Mortgage
and as the secured party under each Additional Collateral
Document. Upon receipt of such documents, the Trustee, upon the
direction of the Master Servicer, shall promptly execute such documents and
deliver them to the Master Servicer.
(b) With
respect to each Loan as to which the Master Servicer holds one or more loans to
the same Borrower in the Master Servicer’s portfolio on the applicable Series
Closing Date (the “
Master Servicer’s
Loans
”), the Master Servicer will provide the following information about
each such Master Servicer’s Loan to the Trustee and the Required
Certificateholder on such Series Closing Date: (i) the type of
credit involved in such Master Servicer’s Loan, (ii) whether such Master
Servicer’s Loan is secured by some or all of the collateral which secures the
Loan, (iii) the principal amount of such Master Servicer’s Loan,
(iv) whether any Event of Default (as defined in such Master Servicer’s
Loan) has occurred and is continuing, and (v) the maturity date of such
Master Servicer’s Loan.
(c) The
relationship of the Master Servicer (and of any successor to the Master Servicer
as servicer under this Master Agreement) to each Trust, the Depositor, the
Trustee and the Calculation and Paying Agent under this Master Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venture, partner or agent.
(d) In
accordance with the terms of this Master Agreement, the Master Servicer may
waive, modify, amend or vary any term of any Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to any
Borrower if in the Master Servicer’s judgment such waiver, modification,
consent, postponement or indulgence will make it more likely that such Borrower
will be able to successfully repay the Loan in question;
provided
,
however
, that the
Master Servicer will notify the Trustee and the Required Certificateholder of
each event of default (as such term is defined in the documentation for the
applicable Loan) that has occurred and is continuing under the documentation for
such Loan, and the Master Servicer shall not: (i) waive any event of
default under such Loan documents, (ii) reduce the Loan Interest Rate applicable
to such Loan or forgive any principal, (iii) postpone any date for the payment
of principal or interest on account of such Loan, (iv) extend the maturity date
of such Loan, or (v) implement a workout plan, commence a foreclosure
proceeding, accept a deed in lieu of foreclosure, conduct a pre-foreclosure sale
or seek a deficiency judgment without, in each such case, giving the Trustee and
the Required Certificateholder at least 10 Business Day’s prior written notice
of its intention to do so (each such notice, a “
10 Business Day
Notice
”). In addition to the foregoing, if one or more loans
in the Master Servicer’s own portfolio present the same issue or issues as the
Loan which is the subject of a 10 Business Day Notice but the Master Servicer
does not propose to handle such issues under such loans in a manner similar to
the proposal submitted to the Trustee and the Required Certificateholder, the
Master Servicer will so state in the 10 Business Day Notice and include a
description of how such issues will be handled in such loans. If by
the end of the applicable 10 Business Day Notice period, the Master Servicer has
not received written notice from the Required Certificateholder disapproving of
the proposal set forth in the applicable 10 Business Day Notice, the Master
Servicer may proceed to implement such proposal. If the Required
Certificateholder notifies the Master Servicer within the applicable 10 Business
Day Notice period that it disapproves of any such proposal with respect to a
Loan, the Master Servicer and the Required Certificateholder will consult with
one another as to the best way to proceed and the Required Certificateholder’s
decision with respect to such Loan will be binding on the Master Servicer;
provided
, however,
that the Master Servicer shall have the right to handle such issues under the
loans in its own portfolio in such manner as the Master Servicer deems
appropriate or desirable.
(e) Without
limiting the generality of the foregoing, the Master Servicer is hereby
authorized and empowered to execute and deliver on behalf of itself and the
Trustee, all agreements and instruments as may be necessary or desirable in
connection with the performance of its rights and obligations pursuant to this
Section 5.01. If reasonably required by the Master Servicer, the
Trustee shall furnish the Master Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties under this Master Agreement, the
Mortgages and the other documentation pertaining to the loans.
(f) In
the ordinary course of business, the Master Servicer at any time may delegate
any of its duties hereunder to any Person, including any of its Affiliates, who
agrees to conduct such duties in accordance with this Master Agreement and each
applicable Issue Supplement including those standards set forth in this Section
5.01. Any such delegation may include entering into subservicing
agreements with any Person or Persons, for the servicing and administration of
the Loans or a portion thereof. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation. Notwithstanding anything to the
contrary contained herein, or in any agreement relating to any such delegation,
the Master Servicer shall remain obligated and liable to the Trustee and the
Certificateholder for the servicing and administration of the Loans in
accordance with the provisions of this Master Agreement and each applicable
Issue Supplement to the same extent and under the same terms and conditions as
if it alone were servicing and administering the Loans. The Master Servicer
shall provide the Trustee with written notice of delegation of any of its duties
to any Person other than any of the Master Servicer’s Affiliates or their
respective successors and assigns on the later of the respective Series Closing
Date or 60 days prior to such delegation.
Section
5.02.
Collection
of Loan Payments; Establishment of Series Custodial
Accounts
.
(a) Continuously
from the date hereof until the principal and interest on all Loans is paid in
full, the Master Servicer will proceed diligently, in accordance with this
Master Agreement, to collect all payments due under each of the Loans it
services when the same shall become due and payable.
(b) On
each Series Closing Date, the Master Servicer shall establish and maintain a
Custodial Account with respect to such Series, which shall be an Eligible
Account. The Master Servicer shall deposit or cause to be deposited
into each applicable Custodial Account, all on a daily basis within two Business
Days of receipt, except as otherwise specifically provided herein or in an
applicable Issue Supplement, the following payments and collections received by
the Master Servicer in respect of the Loans relating to such Series subsequent
to the Cut-Off Date (other than in respect of interest accruing on the Loans on
or before the Cut-Off Date applicable to such Series and principal due on the
Loans on or before the Cut-Off Date applicable to such Series, which collections
shall be paid to CFC) and the following amounts required to be deposited
hereunder with respect to the Loans it services:
(i) all
payments on account of principal of the Loans in the Trust Fund of such Series,
including Principal Prepayments with respect to such related Loans;
(ii) all
payments on account of interest on the Loans in the Trust Fund of such Series,
net of the Servicing Fee with respect to such related Loans;
(iii) all
Other Insurance Proceeds and Cash Liquidation Proceeds, each with respect to the
Loans in the Trust Fund of such Series;
(iv) all
Repurchase Prices and all Substitution Adjustment Principal Amounts received by
the Master Servicer with respect to the Loans in the Trust Fund of such Series;
and
(v) any
other amounts required to be deposited hereunder.
If the
Master Servicer shall deposit in any Custodial Account any amount not required
to be deposited, it may at any time withdraw or direct the institution
maintaining the applicable Custodial Account to withdraw such amount from the
applicable Custodial Account, any provision herein to the contrary
notwithstanding. The Master Servicer shall maintain adequate records
with respect to all withdrawals made pursuant to this Section
5.02. Except as otherwise provided in Section 5.02(c), all funds
required to be deposited in any Custodial Account shall be held in trust for the
applicable Certificateholder of the related Trust until withdrawn in accordance
with Section 5.04.
(c) Each
institution at which a Custodial Account is maintained for such Series shall
invest the funds therein as directed in writing by the Required
Certificateholder for such related Series in Permitted Investments, which shall
mature not later than the next applicable Certificate Account Deposit Date and
shall not be sold or disposed of prior to its maturity unless such Permitted
Investments are in default. All such Permitted Investments shall be
made in the name of the Trustee of the related Trust. All income or
gain (net of any losses) realized from any such investment of funds on deposit
in any Custodial Account shall, unless otherwise provided in the applicable
Issue Supplement, on each Distribution Date be paid to the Required
Certificateholder as provided in Section 7.02.
(d) The
Master Servicer shall give notice to the Trustee and the Calculation and Paying
Agent of any proposed change of the location of any Custodial Account maintained
by the Master Servicer not later than 2 days and not more than 45 days prior to
any change thereof.
Section
5.03.
Realization Upon Defaulted
Loans
.
The
Master Servicer shall use reasonable efforts to realize upon Defaulted Loans, in
such manner as in the Master Servicer’s judgment will maximize the receipt of
principal and interest by the Trustee. The Master Servicer is
obligated to make every effort it deems reasonable to work out a troubled Loan
before proposing foreclosure, a deed in lieu of foreclosure, a pre-foreclosure
sale or other remedial action. The Master Servicer shall use
reasonable efforts to foreclose upon or otherwise comparably convert the
ownership of Mortgaged Properties securing such of the Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments. The foregoing is subject to the
provisions that, in any case in which Mortgaged Property shall have suffered
damage, the Master Servicer shall not be required to expend its own funds toward
the restoration of such Mortgaged Property.
The
decision of the Master Servicer to foreclose on a Defaulted Loan shall be
subject to a determination by the Master Servicer that the proceeds of such
foreclosure would exceed the costs and expenses of bringing such a
proceeding.
The
proceeds from any liquidation of a Mortgage Loan will be applied in the
following order of priority: first, to reimburse the Master Servicer
for any related unreimbursed Servicing Advances and Servicing Fees with respect
to the related Loan; second, to reimburse the Trustee for any amounts incurred
by it in connection with such Loan; third, to accrued and unpaid interest on the
Loan at the Net Loan Rate to the Due Date occurring in the month in which such
amounts are required to be distributed; and fourth, as a recovery of principal
of such Loan.
In the
event that, as a result of or in connection with the exercise of remedies with
respect to a Loan, the Trust becomes the owner of real estate, the Master
Servicer will immediately commence appropriate procedures, on behalf of the
Trust, to liquidate such real estate.
Section
5.04.
Permitted Withdrawals From
the Custodial Accounts
.
The
Master Servicer may, from time to time, and with respect to clause (i) below,
shall, withdraw funds from the applicable Custodial Accounts for the following
purposes:
(i) on
or prior to the close of business on the Certificate Account Deposit Date
relating to each Distribution Date, to withdraw an amount equal to the related
Certificate Distribution Amount with respect to the related Series on such
Distribution Date, and deposit such amount into the Certificate Account relating
to such Series on such Certificate Account Deposit Date;
(ii) to
pay to the Master Servicer (to the extent not previously retained) the servicing
compensation to which it is entitled pursuant to Section 5.07;
(iii) to
reimburse the Master Servicer for unreimbursed Servicing Advances made by it in
connection with the Loans in the Trust Fund relating to such Custodial Account,
such right of reimbursement pursuant to this clause (iii) being limited to
amounts received on the Loans in respect of which any such Servicing Advance was
made;
(iv) to
pay to the Depositor, with respect to each Loan that has been repurchased or
substituted for pursuant to Section 2.02(d) or Section 4.02, all amounts
received thereon after the date of such repurchase or substitution (excluding
any Installment Payment due on any Due Date prior to such date of
repurchase);
(v) to
withdraw any amount deposited in such Custodial Account and not required to be
deposited therein;
(vi) to
clear and terminate such Custodial Account upon termination of the related
Series; and
(vii) to
reimburse the Master Servicer for expenses incurred by and reimbursable pursuant
to Section 5.17.
Section
5.05.
Fidelity Bond,
Insurance
.
The
Master Servicer shall maintain insurance coverage and financial institution bond
protection consistent with that maintained by the Master Servicer as of the date
of this Master Agreement. Such insurance coverage shall include
coverage in the amount of $4,000,000 insuring the Master Servicer against losses
on account of employee dishonesty, loss inside the premises coverage, loss
outside the premises coverage, money orders and counterfeit paper currency
coverage and depositors forgery coverage. Such financial institution
bond protection shall include $6,000,000 single loss limit of liability coverage
on account of forgery or alteration, securities, computer systems fraud,
telefacsimile transfer fraud and voice initiated transfer fraud.
Section
5.06.
Satisfaction of Mortgages
and Release of Mortgage Files
.
Upon
the payment in full of any Loan, or the receipt by the Master Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer shall immediately notify the
Trustee. Such notice shall include a statement to the effect that all
amounts received or to be received in connection with such payment, which are
required to be deposited in the related Custodial Account pursuant to Section
5.02, have been or will be so deposited, and shall request delivery to the
Master Servicer of the portion of the Mortgage File held by the
Trustee. Upon receipt of such notice and request, the Trustee shall,
within five (5) Business Days, deliver or cause to be delivered to the Master
Servicer the related Mortgage File and the Master Servicer shall prepare and
process any satisfaction or release that may be necessary. In the
event that the Trustee fails to deliver or cause to be delivered to the Master
Servicer the related Mortgage File within five (5) Business Days of the Master
Servicer’s request therefor, the Trustee shall be liable to the Master Servicer
for any additional expenses or costs, including, but not limited to, outsourcing
fees and penalties, incurred by the Master Servicer resulting from such
failure.
From time
to time and as appropriate for the servicing or foreclosure of a Loan, the
Trustee shall, within five (5) Business Days of the Master Servicer’s request
and delivery to the Trustee of a servicing receipt signed by a Servicing
Officer, deliver or cause to be delivered to the Master Servicer the portion of
the Mortgage File held by the Trustee. Pursuant to the servicing
receipt, the Master Servicer shall be obligated to return to the Trustee the
related Mortgage File when the Master Servicer no longer needs such file, unless
the Loan has been liquidated and the Cash Liquidation Proceeds relating to such
Loan have been deposited in the applicable Custodial Account or the Mortgage
File or a portion thereof has been delivered to an attorney, or to a public
trustee or other public official as required by law, for purposes of initiating
or pursuing legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially. In the event
that the Trustee fails to deliver or cause to be delivered to the Master
Servicer the portion of the Mortgage File held by the Trustee or its designee
within five (5) Business Days of the Master Servicer’s request therefor, the
Trustee shall be liable to the Master Servicer for any additional expenses or
costs, including, but not limited to, outsourcing fees and penalties, incurred
by the Master Servicer resulting from such failure. Upon receipt of
notice from the Master Servicer stating that such Loan was liquidated, the
Trustee shall release the Master Servicer from its obligations under the related
servicing receipt.
Section
5.07.
Servicing Compensation and
Reimbursement
.
With
respect to each Distribution Date, the Master Servicer shall be entitled, out of
the interest portion of amounts collected by the Master Servicer with respect to
each Loan, to retain or withdraw from the applicable Custodial Account an amount
equal to the Servicing Fee for such Distribution Date.
Additional
servicing compensation in the form of assumption fees, and all other customary
and ancillary income and fees shall be retained by the Master Servicer to the
extent not required to be deposited in the Custodial Account pursuant to Section
5.02. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except that the Master Servicer is
entitled to reimbursement for all Servicing Advances and as otherwise provided
in this Master Agreement or any Issue Supplement.
Section
5.08.
RUS
.
The
rights and obligations of the Depositor, Master Servicer, the Trustee, the
Calculation and Paying Agent and any other Persons with respect to the
administration and servicing of the Loans are subject in all respects to
applicable law and to the rights of RUS and all other Persons secured
by any Mortgage.
Section
5.09.
Documents, Records and Funds
in Possession of the Master Servicer to be Held for the
Trustee
.
The Master
Servicer shall account fully to the Trustee for any funds received by the Master
Servicer or which otherwise are collected by the Master Servicer, including any
Cash Liquidation Proceeds, in respect of any Loan. All Mortgage Files
and funds collected or held by, or under the control of, the Master Servicer in
respect of any Loans, whether from the collection of principal and interest
payments or from Cash Liquidation Proceeds, including but not limited to any
funds on deposit in the applicable Custodial Account, shall be held by the
Master Servicer for and on behalf of the Trustee and shall be and remain the
sole and exclusive property of the Trustee, subject to the applicable provisions
of this Master Agreement and the Issue Supplement. The Master
Servicer also agrees that it shall not knowingly create, incur or subject any
Mortgage File or any funds that are deposited in any Custodial Account or any
Certificate Account, or any funds that otherwise are or may become due or
payable to the Trustee or the Calculation and Paying Agent, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance
created by the Master Servicer, or assert by legal action or otherwise any claim
or right of setoff against any Mortgage File or any funds collected on, or in
connection with, a Loan, except, however, that the Master Servicer shall be
entitled to set off against and deduct from any such funds any amounts that are
properly due and payable to the Master Servicer under this Master
Agreement.
Section
5.10.
Rights of the Trustee in
Respect of the Master Servicer
.
The
Trustee may, but is not obligated to, enforce the obligations of the Master
Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any obligation of the Master Servicer hereunder upon the
occurrence and during the continuation of a Servicer Default, and in connection
with the performance of any such obligation to exercise the related rights of
the Master Servicer hereunder; provided that the Master Servicer shall not be
relieved of any of its obligations hereunder by virtue of such performance by
the Trustee or its designee. None of the Trustee or the Calculation
and Paying Agent shall have any responsibility or liability for any action or
failure to act by the Master Servicer nor shall either of the Trustee or the
Calculation and Paying Agent be obligated to supervise the performance of the
Master Servicer hereunder or otherwise.
Section
5.11.
Annual Statement as to
Compliance
.
The
Master Servicer shall deliver to the Trustee and the Calculation and Paying
Agent on or before the date which is 120 days after the end of the Master
Servicer’s fiscal year, commencing with its 2007 fiscal year, an Officer’s
Certificate stating, as to the signer thereof, that (a) a review of the
activities of the Master Servicer during the preceding fiscal year and of the
performance of the Master Servicer under this Master Agreement has been made
under such officer’s supervision, and (b) to the best of such officer’s
knowledge, based on such review, the Master Servicer has fulfilled all its
obligations under this Master Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
Section
5.12.
Annual Independent Public
Accountants’ Servicing Statement; Financial Statements
.
The
Master Servicer shall, at its own expense, on or before 120 days after the end
of the Master Servicer’s fiscal year, commencing with the fiscal year, if any,
during which the Certificates of a Series are registered under the Securities
Act and each fiscal year thereafter during which such Certificates are subject
to a reporting obligation under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, cause a firm of independent public accountants (who may
also render other services to the Master Servicer or any affiliate thereof)
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Trustee to the effect that such firm has, with
respect to the Master Servicer’s servicing operations under this Master
Agreement with respect to such Series, examined such operations in accordance
with the requirements of Item 1122 of Regulation AB, stating such firm’s
conclusions relating thereto. If the Trustee is asked by such
accountants to approve the procedures used in such report, the Trustee shall do
so only upon the direction of the Master Servicer.
Section
5.13.
Statements to
Certificateholders
.
(a) With
respect to each Trust and each Distribution Date, on the related Certificate
Distribution Amount Determination Date, the Master Servicer shall forward the
Servicing Certificate applicable to each Trust to the Calculation and Paying
Agent and the Calculation and Paying Agent shall make such Servicing Certificate
available, on a secure basis on its website or otherwise, to each applicable
Certificateholder and the Trustee, but not to any other Person or
Persons.
If a
Servicer Default shall occur, on the Business Day following the related
Certificate Distribution Amount Determination Date, the Master Servicer shall
forward to the Calculation and Paying Agent, and the Calculation and Paying
Agent shall forward or cause to be forwarded by mail or otherwise make
available, on its website or otherwise, to each Certificateholder and the
Trustee, a statement to such effect, including the nature
thereof. Such statement may be included in, or separate from, the
regular statement sent to Certificateholders.
(b) The
Master Servicer shall forward to the Calculation and Paying Agent any other
information reasonably requested by the Calculation and Paying Agent necessary
to make distributions pursuant to Section 6.03 and Section 6.04. The
determination by the Master Servicer of the information contained in each
Servicing Certificate shall, in the absence of obvious error, be deemed to be
presumptively correct for all purposes hereunder, and the Trustee and the
Calculation and Paying Agent shall be protected in relying upon the same without
any independent check or verification.
Section
5.14.
Tax
Returns
.
The
Master Servicer shall prepare or cause to be prepared for execution by the
Trustee, and after execution shall file or cause to be filed, all tax and
information returns of the each Trust Fund.
Section
5.15.
Servicer
Default
.
With
respect to any Trust Fund, each of the following events shall constitute a
servicer default (each, a “
Servicer
Default
”):
(a) any
failure by the Master Servicer to make any payment, deposit or transfer required
to be made under the terms of this Master Agreement or the applicable Issue
Supplement which continues unremedied for a period of five days after the date
upon which written notice of such failure, requiring the same to be remedied,
shall have been: (i) received by the Master Servicer from the Trustee
or the Calculation and Paying Agent, or (ii) received by the Master Servicer and
the Trustee from the Required Certificateholder; or
(b) failure
on the part of the Master Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Master
Servicer in this Master Agreement or the applicable Issue Supplement which
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been: (i) received by the Master Servicer from the Trustee or the
Calculation and Paying Agent, or (ii) received by the Master Servicer and the
Trustee from the Required Certificateholder; or
(c) a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period of 60
days; or
(d) consent
by the Master Servicer to the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings relating to the Master Servicer or to all or
substantially all of its property; or
(e) The
Master Servicer’s admission in writing of its inability to pay its debts
generally as they become due, filing of a petition to invoke any applicable
insolvency or reorganization statute, making of an assignment for the benefit of
its creditors, or voluntarily suspending payment of its
obligations.
With
respect to any Trust Fund, upon the occurrence of a Servicer Default, and so
long as such Servicer Default shall not have been remedied, the Trustee or the
Required Certificateholder may (a) terminate all obligations and duties imposed
upon the Master Servicer under this Master Agreement and the related Issue
Supplement, and (b) name and appoint a successor or successors to succeed to and
assume all of such obligations and duties of the Master
Servicer. Such actions shall be effected by notice in writing to the
Master Servicer and shall become effective upon receipt of such notice by the
Master Servicer and the acceptance of such appointment by such successor or
successors.
On and
after the receipt by the Master Servicer of such written notice and the
acceptance by the successor or successors to the Master Servicer, all
obligations and duties imposed upon the Master Servicer under this Master
Agreement and each related Issue Supplement shall pass to and vest in the
successor or successors named in the notice, and such successor or successors
shall be authorized, and hereby are authorized, to take all such action and
execute and deliver all such instruments and documents on behalf of the Master
Servicer, as attorney in fact or otherwise, as may be necessary and appropriate
to effect the purposes of such written notice. The Master Servicer
shall pay the reasonable costs and expenses relating to a transition to a
successor Master Servicer.
Section
5.16.
Inspection
Rights
.
The
Master Servicer shall, once per calendar year (or, if a Servicer Default has
occurred and is continuing, as often as the Required Certificateholder deems
necessary or appropriate), upon three Business Days’ prior written request from
the Required Certificateholder, during normal business hours, permit the
Required Certificateholder to examine the Servicing Files which relate to Loans
in the Trust Funds;
provided
, that,
notwithstanding such annual examination, if the Farm Credit Administration (as
the Governmental Authority that regulates the Required Certificateholder) so
requests, the Master Servicer shall, upon three Business Day’s prior written
request from the Required Certificateholder (with evidence of such request by
the Farm Credit Administration) or from the Farm Credit Administration, permit
the Required Certificateholder to reexamine or permit the Farm Credit
Administration to examine the Servicing File which relates to Loans in the Trust
Funds, and
provided
,
further
, that any
Person obtaining such information from the Master Servicer pursuant to this
Section 5.16 shall be required to maintain the confidentiality thereof and use
such information solely in connection with the transactions contemplated by this
Master Agreement or as otherwise required by law, unless otherwise agreed to in
writing by such Person and the Master Servicer, with such agreement by the
Master Servicer not to be unreasonably withheld.
Section
5.17.
Limitation on Liability of
the Depositor, the Master Servicer and Others
.
(a) Neither
the Depositor, the Master Servicer nor any of the directors, officers, employees
or agents of the Depositor or the Master Servicer shall be under any liability
to the Trustee, the Trust Fund, the Calculation of Paying Agent or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith and without gross negligence pursuant to this Master
Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such Person against
any breach of warranties or representations made herein or any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of disregard of
obligations and duties hereunder. The Depositor, the Master Servicer
and any director, officer, employee or agent of the Depositor or the Master
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising
hereunder. The Depositor, the Master Servicer and any director,
officer, employee or agent of the Depositor or the Master Servicer shall be
indemnified by the Trust Fund and held harmless by the Trust Fund against any
loss, liability or expense incurred in connection with any legal action relating
to this Master Agreement, any Issue Supplement, the transactions contemplated
hereby or thereby, the Certificates, or the Depositor’s or the Master Servicer’s
duties in connection therewith, other than any loss, liability or expense
related to any specific Loan or Loans and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of disregard of obligations and
duties hereunder.
(b) Neither
the Depositor nor the Master Servicer shall be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
respective duties under this Master Agreement and for which it will not be
reimbursed or indemnified hereunder; provided, however, that each of the
Depositor and the Master Servicer may in its discretion undertake any such
action it may deem necessary or desirable in respect to this Master Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust Fund, and the Depositor and the Master
Servicer shall be entitled to be reimbursed therefore out of amounts
attributable to the Qualified Loans on deposit in the Custodial Account as
provided by Section 5.04.
(c) The
Master Servicer and its directors, officers, employees and agents shall be
deemed to have exercised the degree of skill and care appropriate hereunder if
such Person has acted in accordance with Customary Servicing Procedures and in
good faith in (i) managing, administering, servicing, making collections,
foreclosing, counseling with respect to, and supervising the Qualified Loans;
(ii) administering, interpreting, and enforcing the Mortgages, Mortgage
Notes and all forms, documents and certificates required thereunder;
(iii) fulfilling all obligations hereunder; and (iv) all duties,
obligations and actions taken in respect of the Mortgage Property.
ARTICLE
VI
Series
Certificate Accounts, Distributions
Section
6.01.
Series Certificate
Accounts
.
(a) On
or before each Series Closing Date, the Calculation and Paying Agent shall
either (i) open with an Eligible Depository one or more trust accounts in the
name of the Trustee applicable to the related Trust Fund created on such Series
Closing Date that shall be the “Certificate Account” for such Series or (ii) in
lieu of maintaining any such account or accounts, maintain the Certificate
Account for the related Trust Fund by means of appropriate entries on its books
and records designating all amounts credited thereto in respect of the Loans as
being held by it for the benefit of the Holders of Certificates evidencing
beneficial ownership interests in such Trust Fund. To the extent that
any Certificate Account for any Trust Fund is maintained by the Calculation and
Paying Agent in the manner provided in clause (ii) above, all references
herein to deposits and withdrawals from such Certificate Account shall be deemed
to refer to credits and debits to the related books of the Calculation and
Paying Agent.
(b) The
Calculation and Paying Agent shall deposit into each Certificate Account all
amounts remitted to it by the Master Servicer representing withdrawals from the
related Custodial Account. All amounts deposited by the Calculation
and Paying Agent from time to time in a Certificate Account, and all investments
made with such moneys, including all income or other gain from such investments,
shall be held by the Calculation and Paying Agent in the Certificate Account as
part of the Trust Fund as herein provided, subject to withdrawal by the
Calculation and Paying Agent for the purposes set forth in Section
6.03.
(c) All
or a portion of amounts on deposit in the Certificate Account shall be invested
and reinvested by Calculation and Paying Agent in one or more Permitted
Investments bearing interest or sold at a discount. No such
investment shall mature later than the Business Day immediately preceding the
next applicable Distribution Date;
provided
,
however
, that any
investment on which the Eligible Depository, in its commercial capacity, the
Trustee or the Calculation and Paying Agent is the obligor, may mature on the
related Distribution Date. No Permitted Investment may be sold while
in a Certificate Account.
Section
6.02.
Calculation of Certificate
Distribution Amount; Publication of Certificate Principal
Factors
.
On
or before each Certificate Distribution Amount Determination Date, the
Calculation and Paying Agent shall calculate the Available Interest, the
Available Principal, the Class A Distributable Amount and the Class B
Distributable Amount, each with respect to the related Distribution Date and,
based on the Total Available Amount for such Distribution Date and the other
distributions to be made on such Distribution Date, determine the amount
distributable to Certificateholders of each class. Immediately
following each such calculation, the Calculation and Paying Agent shall notify
the Trustee in writing as to the amount so calculated. As soon as
practicable thereafter, the Calculation and Paying Agent shall make available
generally to the Certificateholder the Certificate Principal Factor for each
Class of Certificates after giving effect to the distribution of the Class A
Principal Distribution Amount and the Class B Principal Distribution Amount on
the following Distribution Date. All computations of interest accrued
on any Certificate shall be made as specified in the applicable Issue
Supplement.
Section
6.03.
Withdrawals from the
Certificate Account
.
The
rights of the Class B Certificateholders to receive distributions in
respect of the Class B Certificates shall be and hereby are subordinated to the
rights of the Class A Certificateholders to receive distributions in respect of
the Class A Certificates as provided below. Amounts on deposit on any
Distribution Date in any Certificate Account shall be withdrawn therefrom by the
Calculation and Paying Agent, in the amounts required, to the extent funds are
available therefor, for application as follows:
(i) first,
to the Class A Certificateholders, from Available Interest, an amount equal to
the sum of the Class A Interest Distributable Amount and any outstanding
Class A Interest Carryover Shortfall as of the close of business on the
preceding Distribution Date; and if such Available Interest is insufficient, the
Class A Certificateholders will receive such shortfall, to the extent
available, from the Class B Percentage of Available Principal;
(ii) second,
to the Class A Certificateholders, from Available Principal, an amount equal to
the sum of the Class A Principal Distributable Amount and any outstanding Class
A Principal Carryover Shortfall as of the close of business on the preceding
Distribution Date; and if such Available Principal is insufficient, the
Class A Certificateholders will receive such shortfall from Available
Interest (as such Available Interest has been reduced as described in
clause (i) above);
(iii) third,
to the Class B Certificateholders, from Available Interest (as such Available
Interest has been reduced by the distributions described above in clauses (i)
and (ii) above), an amount equal to the sum of the Class B Interest
Distributable Amount and any outstanding Class B Interest Carryover Shortfall as
of the close of business on the preceding Distribution Date; and
(iv) fourth,
to the Class B Certificateholders, from Available Principal (as such Available
Principal has been reduced as described in clauses (ii) above), an amount equal
to the sum of the Class B Principal Distributable Amount and any outstanding
Class B Principal Carryover Shortfall as of the close of business on the
preceding Distribution Date; and if such Available Principal is insufficient,
the Class B Certificateholders will receive such shortfall from Available
Interest (as such Available Interest has been reduced as described in
clauses (i), (ii) and (iii) above).
Section
6.04.
Distributions on
Certificates
.
As
provided in Section 6.03, on each Distribution Date, the Calculation and Paying
Agent shall withdraw from each applicable Certificate Account to the extent of
funds available therefor, the Certificate Distribution Amount applicable to each
Series for such Distribution Date previously calculated by it pursuant to
Section 6.02. Any installment of interest or principal that is
payable on any Certificate and that is on deposit in the applicable Certificate
Account on the applicable Distribution Date, shall be paid to the
Certificateholder of record thereof on the immediately preceding Record Date by
wire transfer to an account specified in writing by such Certificateholder (or,
if any Certificateholder shall not have specified such account in writing at
least 3 Business Days prior to any Payment Date, by check or money order mailed
to such Certificateholder at such Certificateholder’s address appearing in the
Note Register);
provided
that the
Calculation and Paying Agent shall not be required to pay to any such
Certificateholder any amounts required to be withheld from a payment to such
Certificateholder by any applicable tax law.
ARTICLE
VII
Concerning
the Calculation and Paying Agent
Section
7.01.
Duties of the Calculation
and Paying Agent
.
Farmer
Mac, in its individual capacity, agrees to perform the following duties in
connection with the Trust, subject to the terms of the related Issue Supplement
and the Certificates:
(a) Act
as Calculation and Paying Agent, and in particular calculating amounts payable
and remittance of payments to Certificateholders of each Series as required by
Section 6.02 and Section 6.04 of this Master Agreement and making such
verification as it deems necessary of the amounts deposited in each Custodial
Account and Certificate Account, in each case by the Master Servicer
hereunder;
(b) Upon
receipt of the Servicing Certificates as described in Section 5.13, make such
Servicing Certificates available to each applicable Certificateholder and the
Trustee as provided in Section 5.13.
Section
7.02.
Calculation and Paying Agent
Compensation
.
As
compensation for its activities and obligations hereunder, with respect to each
Series, unless otherwise provided in the Issue Supplement, the Calculation and
Paying Agent shall on each Distribution Date for such Series, be entitled to all
income or gain (net of any losses) realized from investment of funds on deposit
in the applicable Custodial Account.
(b) The
Calculation and Paying Agent shall pay all expenses incurred by it hereunder in
connection with its activities and shall, except for any reimbursable expenses
as may be set forth herein, not be entitled to reimbursement
therefor.
Section
7.03.
Resignation
.
The
Calculation and Paying Agent shall not resign from the duties imposed upon it by
the terms of this Master Agreement or, without the consent of the Master
Servicer, voluntarily assign any of its rights or duties hereunder to any other
Person.
Section
7.04.
Merger or
Consolidation
.
Any
corporation or other entity into which the Calculation and Paying Agent is
merged or consolidated, or any corporation or other entity resulting from any
merger, conversion or consolidation to which the Calculation and Paying Agent
shall be a party or any entity which shall by statute be a successor to the
Calculation and Paying Agent shall succeed to and assume all duties imposed upon
the Calculation and Paying Agent by the terms of this Master Agreement, without
the filing of any instrument or the performance of any further act by the
Calculation and Paying Agent or any Certificateholder. The
Calculation and Paying Agent promptly shall furnish written notice of such
succession to the Trustee and all Certificateholders.
Section
7.05.
Calculation and Paying Agent
as Holder
.
Calculation
and Paying Agent, in its individual or any other capacity, shall have the right
to purchase and hold for its own account any Certificate issued pursuant to the
terms of this Master Agreement and any Issue Supplement, notwithstanding the
rights and duties conferred and imposed upon the Calculation and Paying Agent by
this Master Agreement and any such applicable Issue Supplement.
ARTICLE
VIII
Concerning
the Trustee
Section
8.01.
Duties of
Trustee
.
(a)
The Trustee, prior to the occurrence of a Servicer Default and after the curing
of all Servicer Defaults that may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Master
Agreement. If a Servicer Default occurs and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this Master
Agreement and use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the conduct of
such investor’s own affairs. Any permissive right of the Trustee
contained in this Master Agreement shall not be construed as a
duty.
(b) The
Trustee, upon receipt of all resolutions, certificates, statements, opinions,
reports, documents, orders or other instruments furnished to the Trustee, which
are specifically required to be furnished pursuant to any provision of this
Master Agreement, shall examine them to determine whether they conform to the
requirements of this Master Agreement. If any such instrument is
found not to conform to the requirements of this Master Agreement in a material
manner, the Trustee shall take action as it deems appropriate to have the
instrument corrected and, if the instrument is not corrected to the Trustee’s
satisfaction, the Trustee will provide notice thereof to the applicable
Certificateholders.
(c) No
provision of this Master Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own misconduct;
provided
,
however
,
that:
(i) prior
to the occurrence of a Servicer Default, and after the curing of all such
Servicer Defaults that may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of this Master
Agreement and each Issue Supplement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Master Agreement, and each Issue Supplement, no implied covenants or
obligations shall be read into this Master Agreement or any Issue Supplement
against the Trustee and, in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this Master
Agreement and each Issue Supplement;
(ii) the
Trustee shall not be personally liable for an error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(iii) the
Trustee shall not be personally liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction of the Calculation and Paying Agent as to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Master
Agreement or any Issue Supplement, and
(iv) no
provision of this Master Agreement or any Issue Supplement shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(d) For
all purposes of this Master Agreement, the Trustee shall not be deemed to have
knowledge of any Servicer Default or event that, with notice or lapse of time,
or both, would become a Servicer Default, unless a Responsible Officer of the
Trustee shall have received written notice thereof from a Certificateholder, the
Calculation and Paying Agent or a Responsible Officer of the Trustee shall have
actual knowledge thereof, and in the absence of such written notice or
knowledge, no provision hereof requiring the taking of any action or the
assumption of any duties or responsibility by the Trustee following the
occurrence of any Servicer Default or event which, with notice or lapse of time,
or both, would become a Servicer Default, shall be effective as to the
Trustee.
Section
8.02.
Certain Matters Affecting
the Trustee
.
Except
as otherwise provided in Section 8.01:
(a) The
Trustee may request and rely upon, and shall be protected in acting or
refraining from acting upon, any resolution, Officer’s Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
prima facie in proper form and believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) The
Trustee may consult with counsel (including counsel for the Calculation and
Paying Agent) and any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such Opinion of
Counsel;
(c) The
Trustee shall be under no obligation to exercise any of the trusts or powers
vested in it by this Master Agreement or any Issue Supplement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Certificateholders or the Calculation and
Paying Agent, pursuant to the provisions of this Master Agreement or any Issue
Supplement, unless such Certificateholders or the Calculation and Paying Agent,
as applicable, shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; nothing contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of a Servicer Default (which has not been
cured), to exercise such of the rights and powers vested in it by this Master
Agreement, and to use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the conduct of
such investor’s own affairs;
(d) The
Trustee shall not be personally liable for any action taken, suffered or omitted
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Master Agreement or any applicable
Issue Supplement;
(e) Prior
to the occurrence of a Servicer Default hereunder and after the curing of all
Servicer Defaults that may have occurred, the Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing so
to do by the Calculation and Paying Agent or by the Required Certificateholder;
provided
,
however
, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Master Agreement, the Trustee may
require reasonable indemnity against such expense or liability as a condition to
so proceeding the reasonable expense of every such investigation shall be paid
by the Calculation and Paying Agent or the requesting Certificateholders, as
applicable; and
(f) The
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys.
Section
8.03.
Trustee Not Liable for
Certificates or Loans
.
Except
as otherwise expressly provided herein, the Trustee shall not be accountable for
the use or application by the Master Servicer or the Calculation and Paying
Agent of any funds paid to the Master Servicer or the Calculation and Paying
Agent, in respect of the Loans or deposited in or withdrawn from any Custodial
Account or any Certificate Account by the Master Servicer or the Calculation and
Paying Agent, as the case may be. The Trustee makes no
representations or warranties as to the validity or sufficiency of the
Certificates or of any Loan or related document, except that the Trustee
represents that this Master Agreement has been duly authorized, executed and
delivered by it and, assuming due execution and delivery by the other parties
hereto, constitutes its valid and binding obligation, enforceable against it in
accordance with its terms, except that such enforceability may be subject to (i)
applicable bankruptcy and insolvency laws and other similar laws affecting the
enforcement of the rights of creditors generally, and (ii) general principles of
equity regardless of whether such enforcement is considered in a proceeding in
equity or at law.
Section
8.04.
Trustee May Own
Certificates
.
The
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates of any Series with the same rights it would have if it were not
Trustee.
Section
8.05.
Indemnification of the
Trustee
.
Each
Trust shall indemnify the Trustee in its individual capacity and as Trustee and
any director, officer, employee or agent of the Trustee in its individual
capacity and as Trustee for, and hold each of them harmless against, any loss or
liability incurred by any of them in connection with such Trust without
negligence or bad faith on the part of the Trustee in its individual capacity
and as Trustee or any such director, officer, employee or agent of the Trustee
in its individual capacity and as Trustee and arising out of or in connection
with the acceptance or administration of the Trust created pursuant to this
Master Agreement and each Issue Supplement, including the costs and expenses of
defending the Trustee in its individual capacity and as Trustee or any such
director, officer, employee or agent of the Trustee in its individual capacity
and as Trustee against any claim or liability incurred by any of them in
connection with the exercise or performance of any of their powers or duties
hereunder without negligence or bad faith on its or their part and including any
liability for any environmental hazards or issues relating to any Mortgaged
Property, but not including any expenses incurred in the ordinary course of
performing the Trustee’s duties as set forth herein.
Section
8.06.
Eligibility Requirements for
Trustee
.
The
Trustee hereunder shall at all times be a corporation having its principal
office in a state and city acceptable to the Calculation and Paying Agent and
organized and doing business under the laws of such state or the United States
of America, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.07. The Trustee shall secure an Opinion
of Counsel (which shall be an expense of the Trustee) to the effect that, to the
extent that the Trust is not subject to federal income taxation, the Trust Fund
is not subject to state and local taxation in the jurisdiction where the Trustee
is located.
Section
8.07.
Resignation and Removal of
the Trustee
.
(a)
The Trustee may at any time resign and be discharged from the trusts created
pursuant to this Master Agreement by giving written notice of resignation to the
Master Servicer and the Calculation and Paying Agent. Upon receiving
such notice of resignation, the Calculation and Paying Agent, after consultation
with the Master Servicer, shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee with a copy of such
instrument delivered to the Master Servicer. If no successor trustee
shall have been so appointed and have accepted appointment within 90 days after
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor
trustee.
(b) If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.06 and shall fail to resign after written request
therefor by the Calculation and Paying Agent, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Calculation and Paying Agent may remove the Trustee and, after consultation with
the Master Servicer, appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, with a copy of such instrument
delivered to the Master Servicer, and the Calculation and Paying Agent shall
give written notice thereof to the
Certificateholders. Notwithstanding the foregoing, any liability of
the Trustee under this Master Agreement arising prior to such termination shall
survive such termination.
(c) The
Calculation and Paying Agent may at any time remove the Trustee solely pursuant
to this Master Agreement and, after consultation with the Master Servicer,
appoint a successor trustee by written instrument or instruments within 90 days
of such predecessor trustee’s removal. If no successor trustee shall
have been so appointed and have accepted appointment within 90 days after the
giving of such notice of removal, the predecessor trustee may petition any court
of competent jurisdiction for the appointment of a successor
trustee.
(d) Any
resignation or removal of the Trustee and appointment of a successor trustee
pursuant to any of the provisions of this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 8.08
but in no event shall it become effective until a successor has been appointed
and has accepted the duties of the Trustee.
Section
8.08.
Successor
Trustee
.
(a)
Any successor trustee appointed as provided in Section 8.07 shall execute,
acknowledge and deliver to its predecessor trustee (with copies delivered to the
Calculation and Paying Agent and the Master Servicer) an instrument accepting
such appointment hereunder, and the successor trustee shall secure an Opinion of
Counsel (which shall be an expense of such successor trustee) to the effect
that, to the extent that the Trust is not subject to federal income taxation,
the Trust Fund is not subject to state and local taxation in the jurisdiction
where the successor trustee is located, whereupon the resignation or removal of
the predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the like effect as if originally named as trustee herein. The
predecessor trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No
successor trustee shall accept appointment as provided in this Section unless at
the time of such acceptance such successor trustee shall be eligible under the
provisions of Section 8.06.
Section
8.09.
Merger or Consolidation of
Trustee
.
Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder,
provided
such
corporation shall be eligible under the provisions of Section 8.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section
8.10.
Appointment of Co-Trustee or
Separate Trustee
.
(a)Notwithstanding
any other provisions hereof, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of a Trust Fund or property
securing the same may at the time be located, the Calculation and Paying Agent
(after consultation with the Master Servicer) and the Trustee, acting jointly,
shall have the power to execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the related Trust Fund, and to vest in such Person or Persons, in
such capacity, such title to such Trust Fund, or any part thereof, and, subject
to the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as Calculation and Paying Agent and the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 8.06. Except as specifically provided in the first sentence
of this paragraph, the Trustee shall have no other rights to appoint a
co-trustee.
(b) In
the case of any appointment of a co-trustee or separate trustee pursuant to this
Section 8.10, all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly, except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to any Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate trustee or co-trustee at the direction of the Trustee.
(c) Any
notice, request or other writing given to the Trustee shall be deemed to have
been given to each of the then separate trustees and co-trustees, as effectively
as if given to each of them. Every instrument appointing any separate
trustee and co-trustee shall refer to this Master Agreement and the conditions
of this ARTICLE VIII. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Master Agreement, specifically including every provision of this Master
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with
the Trustee.
(d) Any
separate trustee and co-trustee may at any time constitute the Trustee its agent
or attorney-in-fact, with full power and authority, to the extent not prohibited
by law, to do any lawful act under or in respect of this Master Agreement on its
behalf and in its name. If any separate trustee or co-trustee shall
die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section
8.11.
Trustee
Fees
.
As
compensation for its services hereunder, the Trustee shall be entitled to
receive from the Trust fees at such times, and in such amounts, as shall be
specified in the related Issue Supplement. The Trustee’s compensation
shall not be limited by any law on compensation of a trustee of an express
trust.
ARTICLE
IX
Termination
Section
9.01.
Termination upon Purchase or
Liquidation of All Loans
.
The
respective obligations and responsibilities of the Depositor, the Master
Servicer, the Calculation and Paying Agent and the Trustee with respect to any
Series of Certificates created hereby (other than the obligation of the
Calculation and Paying Agent to make certain payments to Certificateholders
after the Final Distribution Date) shall terminate upon the last action required
to be taken by the Calculation and Paying Agent on the Final Distribution Date
pursuant to this Article IX following the earlier of (a) the purchase of all the
Loans and all REO Property remaining in the Trust Fund by the Master Servicer at
a price equal to the sum of (i) 100% of the unpaid principal balance of each
Loan in the applicable Trust Fund (other than any Loan as to which REO Property
has been acquired and whose fair market value is included pursuant to clause
(ii) below), (ii) the fair market value of such REO Property, plus any accrued
and unpaid interest through the last day of the month of such purchase at the
related Loan Interest Rate on the unpaid principal balance of each Loan
(including any Loan as to which REO Property has been acquired) and (iii) any
Repurchase Price owed to the applicable Trust Fund pursuant to Section 4.02 or
(b) the final payment or other liquidation (or any advance with respect thereto)
of the last Loan remaining in the Trust Fund or the disposition of all REO
Property.
The
Master Servicer may not exercise its purchase option for the Loans until all
Repurchase Prices for the Defective Loans have been paid.
Regardless
of the foregoing, in no event shall any Trust created hereby continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the
Court of St. James’s, living on the date hereof.
The right
of the Master Servicer to purchase the Loans in any Trust Fund is conditioned
upon the aggregate Stated Principal Balance of the Loans in such Trust Fund
being less than 10% of the unpaid principal balance of the Loans in such Trust
Fund at the applicable Cut-off Date.
If such
right is exercised with respect to any Series by the Master Servicer, the
Trustee shall, promptly following payment of the cleanup purchase price, deliver
to the Master Servicer, or its respective designees, the Mortgage Files
pertaining to such Loans applicable to such Series being purchased.
Notice of
the exercise of any purchase option by the Master Servicer and notice of any
termination of any Trust, specifying the Final Distribution Date with respect to
such Trust or the applicable Distribution Date, upon which the applicable
Certificateholders may surrender their Certificates to the Calculation and
Paying Agent for payment of the final distribution and for cancellation, shall
be given promptly by the Calculation and Paying Agent by letter to the
applicable Certificateholders mailed not earlier than the 10th day and not later
than the 15th day of the month next preceding the month of such final
distribution specifying (1) the Final Distribution Date for such
Series or the applicable Distribution Date, upon which final payment of the
applicable Certificates will be made upon presentation and surrender of the
Certificates of such Series at the office or agency of the Calculation and
Paying Agent therein designated, (2) the amount of any such final payment
and (3) that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and surrender of the
applicable Certificates at the office or agency of the Calculation and Paying
Agent therein specified. The Master Servicer exercising its call
right shall remit to the Calculation and Paying Agent for deposit to the
Distribution Account on or before the Final Distribution Date or the applicable
Distribution Date, in immediately available funds an amount equal to the amount
necessary to make the amount, if any, on deposit in the Distribution Account on
such Final Distribution Date or Distribution Date, as applicable, equal to the
purchase price for the related assets of the Trust Fund or any portion of the
Trust Fund computed as above provided, together with a statement as to the
amount to be distributed on each applicable Class of Certificates pursuant to
the next succeeding paragraph.
Upon
presentation and surrender of the applicable Certificates, the Calculation and
Paying Agent shall cause to be distributed to the applicable Certificateholders
of each Class, in the order set forth in Section 6.03 hereof, on the Final
Distribution Date applicable to such Series or the applicable Distribution Date,
and in proportion to their respective percentage interests, with respect to
Certificateholders of the same Class, an amount equal, as to each such Class of
Certificates, the Class Certificate Principal Balance thereof plus accrued
interest thereon in the case of an interest-bearing Certificate.
If some
or all Certificateholders do not surrender their Certificates for final payment
and cancellation on or before the Final Distribution Date for the applicable
Series, the Calculation and Paying Agent shall on such date cause all funds in
the applicable Certificate Account not distributed in final distribution to such
Certificateholders to continue to be held by the Calculation and Paying Agent in
such Certificate Account for the benefit of such Certificateholders and the
Calculation and Paying Agent shall give a second written notice to the remaining
applicable Certificateholders to surrender their Certificates for cancellation
and receive a final distribution with respect thereto. If within one
year after the second notice all the applicable Certificates shall not have been
surrendered for cancellation, the Calculation and Paying Agent may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining applicable Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds on deposit in
such applicable Certificate Account.
Upon the
exercise of the purchase option by the Master Servicer with respect to any Trust
Fund, the applicable Trust Fund shall be terminated in accordance with
applicable law.
ARTICLE
X
Supplemental
Agreements
Section
10.01.
Permissible Without Action
by Certificateholders
.
The
Depositor, the Master Servicer, the Calculation and Paying Agent and the
Trustee, from time to time and at any time, may, without the consent of or
notice (other than pursuant to Section 10.01(b)) to any Holder of a Certificate,
enter into an agreement or other instrument supplemental hereto and which
thereafter shall form a part hereof (so long as no such agreement or instrument
affects the permitted activities of the Trust), for any one or more of the
following purposes:
(a) to
add to the covenants of any part hereto, whether applicable to one or more
Trusts;
(b) to
evidence the succession pursuant to ARTICLE VIII of another Person or Persons to
the Trustee and the assumption by such successor or successors of the
obligations of the Trustee hereunder;
(c) to
eliminate any right reserved to or conferred upon any party hereto;
(d) to
take such action to cure any ambiguity or correct or supplement any provision in
this Master Agreement; or
(e) to
modify, eliminate or add to the provisions of this Master Agreement to such
extent as shall be necessary so that the Trust is not subject to federal income
taxation and state taxation;
provided
that (i)
there shall have been delivered to the Trustee an Opinion of Counsel to the
effect that such action is necessary or advisable to maintain such status, and
(ii) such amendment shall not have any of the effects described in paragraphs
(a) and (b) of the proviso to Section 10.02;
Section
10.02.
Waivers and Supplemental
Agreements with Consent of Holders
.
To
the extent not permitted by Section 10.01, with the consent of the Required
Certificateholder with respect to each Series which is affected thereby, (i)
compliance by the Master Servicer or the Trustee with any of the terms of this
Master Agreement may be waived or (ii) the parties hereto may enter into
any supplemental agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Master
Agreement and any Issue Supplement or of modifying in any manner the rights of
the Holders of the Certificates issued under this Master Agreement;
provided
that no such
waiver or supplemental agreement shall:
(a) without
the consent of all Certificateholders affected thereby, reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Certificate; or
(b) without
the consent of all Certificateholders, remove the aforesaid consent of the
Required Certificateholder to any waiver or any supplemental agreement;
or
(c) without
the consent of all Certificateholders, alter the classification of the Trust
Fund as a grantor trust for federal income tax purposes.
It shall
not be necessary for Holders to approve the particular form of any proposed
supplemental agreement, but it shall be sufficient if such Holders shall approve
the substance thereof.
Promptly
after the execution of any supplemental agreement pursuant to this Section, the
Calculation and Paying Agent shall give notice thereof to Holders of
Certificates. Any failure of the Calculation and Paying Agent to give
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental agreement.
ARTICLE
XI
Miscellaneous
Section
11.01.
Holders
.
(a)
The death or incapacity of any Holder of a Certificate shall not operate to
terminate this Master Agreement or any Issue Supplement, nor entitle such
Holder’s legal representative or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of the affairs
of the related Trust, nor otherwise affect the rights, duties and obligations of
any of the parties to this Master Agreement.
(b) No
Holder shall have any right to control or to participate in the control and
administration of any Trust, nor shall any of the terms of this Master Agreement
be construed to constitute the Holders and the Depositor, the Master Servicer,
the Trustee or the Calculation and Paying Agent or the Calculation and Paying
Agent as partners or members of an association, nor shall any Holder have any
duty or liability to any third person by reason of any action taken by the
parties to this Master Agreement pursuant to the provisions hereof and
thereof.
(c) No
Holder shall have any right by virtue of any provision of this Master Agreement
or any Issue Supplement to institute any suit, action or proceeding in equity or
at law upon or under or with respect to this Master Agreement. For
the protection and enforcement of the provisions of this Section, each and every
Holder and the Trustee shall be entitled to such relief as can be given either
at law or in equity.
Section
11.02.
Governing
Law
.
The
terms of this Master Agreement and any Certificates issued hereunder shall be
governed by, and construed in accordance with, the laws of the State of New
York.
Section
11.03.
Demands, Notices,
Communications
.
All
formal demands, notices and communications by and between the Depositor, the
Master Servicer, the Trustee, the Calculation and Paying Agent and the Holder of
any Certificate shall be in writing and delivered in person or by first-class
mail, postage prepaid (a) if to the Calculation and Paying Agent, to
919 18th Street, N.W., Washington, D.C. 20006, or to such other address as
shall be set forth in a notification to Holders (b) if to the Depositor, to
2201 Cooperative Way, Herndon, VA 20171-3025, (c) if to the
Master Servicer, to 2201 Cooperative Way, Herndon, VA 20171-3025,
(d) if to the Trustee, to EP-MN-WS3D, 60 Livingston Ave., St. Paul,
Minnesota 55107, Attn: Structured Finance - CFC, or (e) if to
the Holder of a Certificate, to the appropriate Holder at the address provided
to the Certificate Registrar by such Holder. Any notice so mailed
within the time prescribed in this Master Agreement shall be conclusively
presumed to have been duly given whether or not the Holder receives such
notice.
Section
11.04.
Severability of
Provisions
.
If
any one or more of the covenants, agreements, provisions or terms of this Master
Agreement shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Master Agreement and shall in
no way affect the validity or enforceability of the other provisions of this
Master Agreement or of the Certificates or the rights of the Holders
thereof.
IN
WITNESS WHEREOF, the parties hereto hereby execute this Master Agreement as of
the day and year first above written.
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CFC
ADVANTAGE, LLC, as Depositor
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SEAL
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By:
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Attest:
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Name:
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Title:
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FEDERAL
AGRICULTURAL MORTGAGE
CORPORATION,
as Calculation and Paying
Agent
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SEAL
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By:
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Attest:
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Name:
Title:
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NATIONAL
RURAL UTILITIES COOPERATIVE
FINANCE
CORPORATION, as Master
Servicer
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SEAL
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By:
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Attest:
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Name:
Title:
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U.S.
BANK NATIONAL ASSOCIATION,
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as
Trustee
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SEAL
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By:
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Attest:
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Name:
Title:
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[Signature
Page to Master Trust, Sale and Servicing Agreement]
TABLE
OF CONTENTS
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Page
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ARTICLE
I
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Defined
Terms
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Section
1.01.
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General
Definitions.
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1
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Section
1.02.
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Other
Definitional Provisions.
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14
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ARTICLE
II
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Applicable
Documentation; Sale of Qualifying Loans
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Section
2.01.
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Trust
Established.
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15
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Section
2.02.
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Sale
of Loans.
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15
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Section
2.03.
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Delivery
and Payment.
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17
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Section
2.04.
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Safekeeping
and Release of Required Documents.
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17
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Section
2.05.
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Authorized
Officers.
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17
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Section
2.06.
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Delivery
of Instruments.
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17
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Section
2.07.
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Agreed
Treatment of Trusts and Certificates.
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17
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Section
2.08.
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Notice
of Sale of Loans.
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17
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ARTICLE
III
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The
Certificates
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Section
3.01.
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Certificates
Issuable in Classes; General Provisions with Respect to Principal and
Interest Distributions.
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18
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Section
3.02.
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Issuance
and Authentication of Certificates.
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18
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Section
3.03.
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Registration
of Transfer and Exchange of Certificates; Transfer
Restrictions.
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18
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Section
3.04.
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Mutilated,
Destroyed, Lost or Stolen Certificates.
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21
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Section
3.05.
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Persons
Deemed Owners.
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21
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ARTICLE
IV
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Representations
and Warranties
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Section
4.01.
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Representations
and Warranties of the Calculation and Paying Agent.
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21
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Section
4.02.
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Representations,
Warranties and Agreement of the Depositor.
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22
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Section
4.03.
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Representations
and Warranties of the Master Servicer.
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24
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Section
4.04.
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Substitution
or Repurchase of Loans.
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26
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Section
4.05.
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Assignment
of Interest in the Master Loan Purchase Agreement.
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26
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ARTICLE
V
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Administration
And Servicing of Loans
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Section
5.01.
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Servicing
of the Loans.
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27
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Section
5.02.
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Collection
of Loan Payments; Establishment of Series Custodial
Accounts.
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29
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Section
5.03.
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Realization
Upon Defaulted Loans.
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30
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TABLE
OF CONTENTS
(continued)
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Page
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Section
5.04.
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Permitted
Withdrawals From the Custodial Accounts.
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31
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Section
5.05.
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Fidelity
Bond, Insurance.
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31
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Section
5.06.
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Satisfaction
of Mortgages and Release of Mortgage Files.
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32
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Section
5.07.
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Servicing
Compensation and Reimbursement.
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32
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Section
5.08.
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RUS.
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33
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Section
5.09.
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Documents,
Records and Funds in Possession of the Master Servicer to be Held for the
Trustee.
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33
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Section
5.10.
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Rights
of the Trustee in Respect of the Master Servicer.
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33
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Section
5.11.
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Annual
Statement as to Compliance.
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33
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Section
5.12.
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Annual
Independent Public Accountants’ Servicing Statement; Financial
Statements.
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34
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Section
5.13.
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Statements
to Certificateholders.
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34
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Section
5.14.
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Tax
Returns.
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34
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Section
5.15.
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Servicer
Default.
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35
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Section
5.16.
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Inspection
Rights.
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36
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Section
5.17.
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Limitation
on Liability of the Depositor, the Master Servicer and
Others.
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36
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ARTICLE
VI
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Series
Certificate Accounts, Distributions
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Section
6.01.
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Series
Certificate Accounts.
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37
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Section
6.02.
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Calculation
of Certificate Distribution Amount; Publication of Certificate Principal
Factors.
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38
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Section
6.03.
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Withdrawals
from the Certificate Account.
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38
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Section
6.04.
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Distributions
on Certificates.
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39
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ARTICLE
VII
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Concerning
the Calculation and Paying Agent
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Section
7.01.
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Duties
of the Calculation and Paying Agent.
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39
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Section
7.02.
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Calculation
and Paying Agent Compensation.
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39
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Section
7.03.
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Resignation.
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40
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Section
7.04.
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Merger
or Consolidation.
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40
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Section
7.05.
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Calculation
and Paying Agent as Holder.
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40
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ARTICLE
VIII
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Concerning
the Trustee
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Section
8.01.
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Duties
of Trustee.
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40
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Section
8.02.
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Certain
Matters Affecting the Trustee.
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41
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Section
8.03.
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Trustee
Not Liable for Certificates or Loans.
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42
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Section
8.04.
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Trustee
May Own Certificates.
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43
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Section
8.05.
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Indemnification
of the Trustee.
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43
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Section
8.06.
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Eligibility
Requirements for Trustee.
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43
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TABLE
OF CONTENTS
(continued)
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Page
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Section
8.07.
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Resignation
and Removal of the Trustee.
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44
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Section
8.08.
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Successor
Trustee.
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44
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Section
8.09.
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Merger
or Consolidation of Trustee.
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45
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Section
8.10.
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Appointment
of Co-Trustee or Separate Trustee.
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45
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Section
8.11.
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Trustee
Fees.
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46
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ARTICLE
IX
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Termination
|
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Section
9.01.
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Termination
upon Purchase or Liquidation of All Loans.
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46
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ARTICLE
X
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Supplemental
Agreements
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Section
10.01.
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Permissible
Without Action by Certificateholders.
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48
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Section
10.02.
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Waivers
and Supplemental Agreements with Consent of Holders.
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48
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ARTICLE
XI
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Miscellaneous
|
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Section
11.01.
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Holders.
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49
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Section
11.02.
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Governing
Law.
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49
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Section
11.03.
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Demands,
Notices, Communications.
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49
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Section
11.04.
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Severability
of Provisions.
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50
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EXHIBIT
10.23
EXECUTION
COPY
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
CFC
ADVANTAGE, LLC
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
REGISTRATION
RIGHTS AGREEMENT SERIES 2007-1
Dated
as of February 15, 2007
TABLE OF
CONTENTS
ARTICLE
I
|
DEFINITIONS
|
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Section
1.01.
|
Definitions.
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1
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ARTICLE
II
|
REGISTRATION
AND SALE
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Section
2.01.
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Registration
Request.
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1
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Section
2.02.
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Registration.
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1
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Section
2.03.
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Expenses.
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2
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Section
2.04.
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Conditions.
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2
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Section
2.05.
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Rating.
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3
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Section
2.06.
|
Blackout
Periods.
|
3
|
|
ARTICLE
III
|
MISCELLANEOUS
|
|
|
|
Section
3.01.
|
GOVERNING
LAW.
|
3
|
Section
3.02.
|
WAIVER
OF JURY TRIAL.
|
3
|
Section
3.03.
|
Notices.
|
3
|
Section
3.04.
|
Benefit
of Agreement.
|
3
|
Section
3.05.
|
Amendments
and Waivers.
|
4
|
Section
3.06.
|
Counterparts.
|
4
|
Section
3.07.
|
Severability.
|
4
|
REGISTRATION
RIGHTS AGREEMENT, dated as of February 15, 2007 between FEDERAL AGRICULTURAL
MORTGAGE CORPORATION, a federally-chartered instrumentality of the United States
and an institution of the Farm Credit System (“
Farmer
Mac
”), CFC ADVANTAGE, LLC, a limited liability company existing
under the laws of the State of Delaware (the “
Depositor
”), and
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
CFC
”).
RECITALS
WHEREAS,
the Depositor wishes to cause Series 2007-1 Rural Utilities Trust, a grantor
trust (the “
Issuer
”) to deliver
the Certificates, and Farmer Mac wishes to purchase such Certificates, all on
the terms and subject to the conditions set forth in the Certificate Purchase
Agreement dated as of the date hereof by and among Farmer Mac, the Depositor and
CFC (the “
Certificate
Purchase Agreement
”); and
WHEREAS,
Farmer Mac wishes to have the right to resell the Class A Certificates from time
to time, including in a public offering registered under the Securities Act of
1933 (the “
Act
”);
NOW,
THEREFORE, Farmer Mac, the Depositor and CFC agree as follows:
ARTICLE
I
Definitions
SECTION
1.01.
Definitions
.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Certificate Purchase Agreement.
ARTICLE
II
Registration and
Sale
SECTION
2.01.
Registration
Request
.
Under
the conditions described herein, Farmer Mac may request the Depositor (such
request, a “
Registration
Request
”) to effect the registration under the Act of the issuance of
Exchange Certificates (as defined below) in an amount set forth in the
Registration Request and to deliver such Exchange Certificates to Farmer Mac in
exchange for an equal amount of the Certificates (the “
Sale Certificates
”),
and the sale by Farmer Mac of the Exchange Certificates.
SECTION
2.02.
Registration
.
(a) Upon
receipt of a Registration Request, the Depositor shall be obligated to file a
registration statement under the Act for the registration (the “
Registration
”) of
such principal amount of Exchange Certificates (as defined below) as set forth
in the Registration Request, registering the exchange by the Depositor with
Farmer Mac of the Exchange Certificates for the Sale Certificates and the sale
of the Exchange Certificates by Farmer Mac. The Depositor shall use
its reasonable best efforts to cause such registration statement to become
effective within 180 days of receipt of the Registration Request.
(b) As
used herein, “
Exchange
Certificates
” shall mean the Certificates delivered by the Issuer under
the Master Agreement and the Issue Supplement having terms identical to the Sale
Certificates except that they will be without the transfer restrictions set
forth in Section 3.03(c) of the Master Agreement (other than the transfer
restrictions set forth in the last paragraph of Section 3.03 of the Master
Agreement), will be payable to the registered holder, available in denominations
of $1,000 and integral multiples thereof and, to the extent the Master Agreement
and Issue Supplement are required to be qualified under the Trust Indenture Act,
will contain any terms required in order for the Master Agreement as
supplemented by the Issue Supplement to be so qualified.
(c)
Periods of
Effectiveness
. The Depositor agrees to keep the Registration
Statement effective, and to update as necessary (including by incorporation by
reference) any prospectus included in the Registration Statement, until the
later of the completion of the distribution of the Exchange Certificates and 45
days after the Registration Statement has become effective. The
45-day period provided in the preceding sentence, and the 180-day period
provided in Section 2.02(a), shall be suspended during any Blackout Period as
defined in Section 2.06 hereof.
SECTION
2.03.
Expenses
.
Farmer
Mac shall be responsible for the following expenses in connection with the
Registration: the SEC filing fee for the Registration Statement; the
fees and expenses of its counsel, if any; the costs of having the Exchange
Certificates rated; the underwriting commissions and discounts of its
underwriters for the sale of the Exchange Certificates, if any; the reasonable
fees and expenses of the Depositor’s and CFC’s counsel, if any; the reasonable
fees and expenses of the Depositor’s and CFC’s auditors, if any; and the
printing costs of the prospectus, if any.
SECTION
2.04.
Conditions
.
The
right of Farmer Mac to make a Registration Request shall be subject to the
following conditions:
(a) Farmer
Mac can issue no more than one Registration Request with respect to the
Certificates;
(b) Farmer
Mac shall provide all information (such as the plan of distribution) reasonably
required by the Depositor to be included in the registration statement that
relates to Farmer Mac’s sale of the Exchange Certificates;
(c) If
the sale of the Exchange Certificates by Farmer Mac is proposed to be by
underwriters, then the firm or firms acting as underwriters for the offering
will be subject to reasonable approval by CFC; and
(d) The
Issuer is not required to be registered under the Investment Company Act of
1940, as amended (the “
Investment Company
Act
”) as a result of the issuance of the Registration Request or the sale
by Farmer Mac of Exchange Certificates pursuant to a Registration
Statement.
SECTION
2.05.
Rating
.
If,
in connection with the Registration Request and the sale of the Exchange
Certificates by Farmer Mac, Farmer Mac requests that some or all of the Exchange
Certificates be rated by one or more rating agencies, then, to the extent, if
any, that such rating by any rating agency is conditioned upon the furnishing of
documents or information or the taking of reasonable actions by the Depositor or
CFC, each shall furnish such documents or information and take such reasonable
actions;
provided
, that,
without limiting the generality of the foregoing, for purposes of this Section
2.05, “reasonable action” shall not include any change in the structure of the
transactions contemplated by the Certificate Documents, any material change in
the servicing obligations of the Master Servicer or any requirement to obtain
credit enhancement in respect of the Exchange Certificates.
SECTION
2.06.
Blackout
Periods
.
The
Depositor shall have no obligation to cause the Registration Statement to become
or to remain effective, and Farmer Mac agrees that it will not sell any Exchange
Certificates, during any period or periods (which may not exceed 45 continuous
days or 90 days in any calendar year) during which CFC has reasonably determined
that it is not appropriate for Rural Utilities MBS Program Certificates to be
sold pursuant to a Registration Statement
;
provided
that CFC
shall not during any such period be selling for its own account any debt
securities registered under the Act (each such period, a “
Blackout
Period
”).
ARTICLE
III
Miscellaneous
SECTION
3.01.
GOVERNING
LAW
.
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT APPLICABLE.
SECTION
3.02.
WAIVER OF JURY
TRIAL
.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.02.
SECTION
3.03.
Notices
.
All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto as
appropriate. The address, telephone number or facsimile number for
any party may be changed at any time and from time to time upon written notice
given by such changing party to the other parties hereto. A properly
addressed notice or other communication shall be deemed to have been delivered
at the time it is sent by facsimile (fax) transmission to the party or parties
to which it is given.
SECTION
3.04.
Benefit of
Agreement
.
This
Agreement shall become effective when it shall have been executed by Farmer Mac,
the Depositor and CFC, and thereafter shall be binding upon and inure to the
respective benefit of the parties and their permitted successors and
assigns.
SECTION
3.05.
Amendments and
Waivers
.
(a) No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Depositor and
CFC. No provision of this Agreement may be waived except in writing
by the party or parties receiving the benefit of and under such
provision.
(b) No
failure or delay of Farmer Mac, the Depositor or CFC in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. No waiver of any provision of this Agreement or consent to any
departure by Farmer Mac, the Depositor or CFC therefrom shall in any event be
effective unless the same shall be authorized as provided in paragraph (a) of
this Section 3.05, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on Farmer Mac, the Depositor or CFC in any case shall entitle such
party to any other or further notice or demand in similar or other
circumstances.
SECTION
3.06.
Counterparts
.
This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
3.07.
Severability
.
If
any term or provision of this Agreement or any Certificate Document or the
application thereof to any circumstance shall in any jurisdiction and to any
extent, be invalid or unenforceable, such term or such provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
enforceability without invalidating or rendering unenforceable any remaining
terms or provisions of such Certificate Document or the application of such term
or provision to circumstances other than those as to which it is held invalid or
unenforceable.
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, all as of the day and year first above
written.
|
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
|
|
|
|
By
|
|
|
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
CFC
ADVANTAGE, LLC
|
|
|
|
By
|
|
|
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
|
|
|
|
By
|
|
|
|
|
|
|
Name:
|
|
|
Title:
|
[Signature
Page to Series 2007-1 Registration Rights Agreement]
SCHEDULE
I
Addresses for
Notices
The
addresses referred to in Section 3.03 hereof, for purposes of delivering
communications and notices, are as follows:
If
to Farmer Mac:
|
|
|
|
Federal
Agricultural Mortgage Corporation
1133
21st Street, N.W., Suite 600
Washington,
DC 20036
Fax:
202-872-7713
Attention
of: Nancy E. Corsiglia, Chief Financial Officer
|
|
|
|
With
a copy to:
|
|
|
|
Federal
Agricultural Mortgage Corporation
1133
21st Street, N.W., Suite 600
Washington,
DC 20036
Fax:
202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General
Counsel
|
|
|
If
to CFC:
|
|
|
|
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6819
Attention
of: Steven L. Lilly, Chief Financial Officer
|
|
|
|
With
a copy to:
|
|
|
|
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., General Counsel
|
|
|
If
to Depositor:
|
|
|
|
CFC
Advantage, LLC
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List
|
EXHIBIT
10.24
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
REGISTRATION
RIGHTS AGREEMENT SERIES 2007-2
Dated
as of August 10, 2007
TABLE OF
CONTENTS
ARTICLE
I
|
|
|
DEFINITIONS
|
|
|
SECTION
1.01.Definitions
|
1
|
ARTICLE
II
|
|
|
REGISTRA
TION AND SALE
|
|
|
SECTION
2.0 l.Registration Request.
|
1
|
|
SECTION
2.02.Registration
|
1
|
|
SECTION
2.03.Expenses
|
2
|
|
SECTION
2.04.Conditions
|
2
|
|
SECTION
2.05.Rating
|
2
|
|
SECTION
2.06.Blackout Periods
|
3
|
ARTICLE
III
|
|
|
MISCELLANEOUS
|
|
|
SECTION
3.0l.GOVERNING LAW
|
3
|
|
SECTION
3.02.WAIVER OF JURY TRIAL.
|
3
|
|
SECTION
3.03.Notices
|
3
|
|
SECTION
3.04.Benefit of Agreement.
|
3
|
|
SECTION
3.05.Amendments and Waivers
|
4
|
|
SECTION
3.06.Counterparts
|
4
|
|
SECTION
3.07.Severability
|
4
|
REGISTRATION
RIGHTS AGREEMENT, dated as of August 10, 2007 between FEDERAL AGRICULTURAL
MORTGAGE CORPORATION, a federally chartered instrumentality of the United States
and an institution of the Farm Credit System ("
Farmer Mac
"), CFC
ADVANTAGE, LLC, a limited liability company existing under the laws of the State
of Delaware (the "
Depositor
"), and
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia ("
CFC
").
WHEREAS,
the Depositor wishes to cause Series 2007-2 Rural Utilities Trust, a grantor
trust (the "
Issuer
") to deliver
the Certificates, and Farmer Mac wishes to purchase such Certificates, all on
the terms and subject to the conditions set forth in the Certificate Purchase
Agreement dated as of the date hereof by and among Farmer Mac, the Depositor and
CFC (the "
Certificate
Purchase Agreement
"); and
WHEREAS,
Farmer Mac wishes to have the right to resell the Series 2007-2 Tranche I Class
A Certificates and Series 2007-2 Tranche II Class A Certificates (collectively,
the "
Certificates
") from
time to time, including in a public offering registered under the Securities Act
of 1933 (the "
Act
");
NOW,
THEREFORE, Farmer Mac, the Depositor and CFC agree as
follows:
SECTION
1.01.
Definitions
.
Capitalized terms used herein and not defined herein shall have the meanings
given to those terms in the Certificate Purchase Agreement.
ARTICLE
II
Registration and
Sale
SECTION
2.01.
Registration
Request.
Under the conditions described herein, Farmer Mac may request
the Depositor (such request, a "
Registration
Request
") to effect the registration under the Act of the issuance of
Exchange Certificates (as defined below) in an amount set forth in the
Registration Request and to deliver such Exchange Certificates to Farmer Mac in
exchange for an equal amount of the Certificates (the "
Sale Certificates
"),
and the sale by Farmer Mac of the Exchange Certificates.
SECTION
2.02.
Registration
.
(a) Upon
receipt of a Registration Request, the Depositor shall be obligated to file a
registration
statement under the Act for the registration (the "
Registration
") of
such principal amount of Exchange Certificates (as defined below) as set forth
in the Registration Request, registering the exchange by the Depositor with
Farmer Mac of the Exchange Certificates for the Sale Certificates and the sale
of the Exchange Certificates by Farmer Mac. The Depositor shall use its
reasonable best efforts to cause such registration statement to become effective
within 180 days of receipt of the Registration Request.
(b) As
used herein, "
Exchange
Certificates
" shall mean the Certificates delivered by
the
Issuer under the Master Agreement and the Issue Supplement having terms
identical to the Sale Certificates except that they will be without the transfer
restrictions set forth in Section 3.03(c) of the Master Agreement (other than
the transfer restrictions set forth in the last paragraph of Section 3.03 of the
Master Agreement), will be payable to the registered holder, available in
denominations of $1,000 and integral multiples thereof and, to the extent the
Master Agreement and Issue Supplement are required to be qualified under the
Trust Indenture Act, will contain any terms required in order for the Master
Agreement as supplemented by the Issue Supplement to be so
qualified.
(c)
Periods of
Effectiveness
. The Depositor agrees to keep the Registration Statement
effective, and to update as necessary (including by incorporation by reference)
any prospectus included in the Registration Statement, until the later of the
completion of the distribution of the Exchange Certificates and 45 days after
the Registration Statement has become effective. The 45-day period provided in
the preceding sentence, and the 180-day period provided in Section 2.02(a),
shall be suspended during any Blackout Period as defined in Section 2.06
hereof.
SECTION
2.03.
Expenses
.
Farmer Mac shall be responsible for the following expenses in connection with
the Registration: the SEC filing fee for the Registration Statement; the fees
and expenses of its counsel, if any; the costs of having the Exchange
Certificates rated; the underwriting commissions and discounts of its
underwriters for the sale of the Exchange Certificates, if any; the reasonable
fees and expenses of the Depositor's and CFC's counsel, if any; the reasonable
fees and expenses of the Depositor's and CFC's auditors, if any; and the
printing costs of the prospectus, if any.
SECTION
2.04.
Conditions
. The right
of Farmer Mac to make a Registration Request shall be subject to the following
conditions:
(a) Farmer
Mac can issue no more than one Registration Request with respect to the
Certificates;
(b) Farmer
Mac shall provide all information (such as the plan of distribution) reasonably
required by the Depositor to be included in the registration statement that
relates to Farmer Mac's sale of the Exchange Certificates;
(c) If
the sale of the Exchange Certificates by Farmer Mac is proposed to be by
underwriters, then the firm or firms acting as underwriters for the offering
will be subject to reasonable approval by CFC; and
(d) The
Issuer is not required to be registered under the Investment Company Act of
1940, as amended (the "
Investment Company
Act
") as a result of the issuance of the Registration Request or the sale
by Farmer Mac of Exchange Certificates pursuant to a Registration
Statement.
SECTION
2.05.
Rating
.
If, in connection with the Registration Request and the sale of the Exchange
Certificates by Farmer Mac, Farmer Mac requests that some or all ofthe Exchange
Certificates be rated by one or more rating agencies, then, to the extent, if
any, that such rating
by any
rating agency is conditioned upon the furnishing of documents or information or
the taking of reasonable actions by the Depositor or CFC, each shall furnish
such documents or information and take such reasonable actions;
provided
, that,
without limiting the generality of the foregoing, for purposes of this Section
2.05, "reasonable action" shall not include any change in the structure of the
transactions contemplated by the Certificate Documents, any material change in
the servicing obligations of the Master Servicer or any requirement to obtain
credit enhancement in respect of the Exchange Certificates.
SECTION
2.06.
Blackout
Periods
. The Depositor shall have no obligation to cause the Registration
Statement to become or to remain effective, and Farmer Mac agrees that it will
not sell any Exchange Certificates, during any period or periods (which may not
exceed 45 continuous days or 90 days in any calendar year) during which CFC has
reasonably determined that it is not appropriate for Rural Utilities MBS Program
Certificates to be sold pursuant to a Registration Statement;
provided
that CFC
shall not during any such period be selling for its own account any debt
securities registered under the Act (each such period, a "
Blackout
Period
").
ARTICLE
III
Miscellaneous
SECTION
3.01.
GOVERNING
LAW
. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT
APPLICABLE.
SECTION
3.02.
WAIVER OF JURY
TRIAL.
EACH PARTY HERETO HEREBY
W AlVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
3.02.
SECTION
3.03.
Notices
.
All notices and other communications hereunder to be made to any party shall be
in writing and shall be addressed as specified in Schedule I attached hereto as
appropriate. The address, telephone number or facsimile number for any party may
be changed at any time and from time to time upon written notice given by such
changing party to the other parties hereto. A properly addressed notice or other
communication shall be deemed to have been delivered at the time it is sent by
facsimile (fax) transmission to the party or parties to which it is
given.
SECTION
3.04.
Benefit of
Agreement.
This Agreement shall become effective when it shall have been
executed by Farmer Mac, the Depositor and CFC, and thereafter shall be binding
upon and inure to the respective benefit of the parties and their permitted
successors and assigns.
SECTION
3.05.
Amendments and
Waivers
.
(a) No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Depositor and CFC. No
provision of this Agreement may be waived except in writing by the party or
parties receiving the benefit of and under such provision.
(b) No
failure or delay of Farmer Mac, the Depositor or CFC in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No waiver
of any provision of this Agreement or consent to any departure by Farmer Mac,
the Depositor or CFC therefrom shall in any event be effective unless the same
shall be authorized as provided in paragraph (a) of this Section 3.05, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on Farmer Mac, the Depositor or
CFC in any case shall entitle such party to any other or further notice or
demand in similar or other circumstances.
SECTION
3.06.
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
3.07.
Severability
. If any
term or provision of this Agreement or any Certificate Document or the
application thereof to any circumstance shall in any jurisdiction and to any
extent, be invalid or unenforceable, such term or such provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
enforceability without invalidating or rendering unenforceable any remaining
terms or provisions of such Certificate Document or the application of such term
or provision to circumstances other than those as to which it is held invalid or
unenforceable.
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, all as of the day and year first above
written.
FEDERAL
AGRICULTURAL MORTGAGE
CORPORATION
CFC
ADVANTAGE,
LLC
NATIONAL
RURAL UTILITIES COOPERATIVE
FINANCE
CORPORATION
[Signature
Page to Series 2007-2 Registration Rights Agreement]
The
addresses referred to in Section 3.03 hereof, for purposes of delivering
communications and notices, are as follows:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600 Washington,
DC
20036
Fax:
202-872-7713
Attention
of: Nancy E. Corsiglia, Chief Financial Officer
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600 Washington,
DC
20036
Fax:
202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone:
703-709-6718
Fax:
703-709-6819
Attention
of: Steven L. Lilly, Chief Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone:
703-709-6712
Fax:
703-709-6811
Attention
of: John J. List, Esq., General Counsel
CFC
Advantage, LLC
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone:
703-709-6712
Fax:
703-709-6811
Attention
of: John J. List
EXHIBIT
10.25
FARMER
MAC MORTGAGE SECURITIES CORPORATION
as
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
as
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
as
Guarantor
NOTE
PURCHASE AGREEMENT
Dated
as of December 15, 2008
TABLE OF
CONTENTS
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Page
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RECITALS
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1
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ARTICLE
I DEFINITIONS
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1
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Definitions
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1
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Principles of Construction
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5
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ARTICLE
II PURCHASE OF NOTES
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5
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Purchase of Notes; Minimum
Denominations
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5
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Interest Rates and Payment
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5
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Maturity
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7
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ARTICLE
III CONDITIONS PRECEDENT
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7
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Conditions Precedent to the Purchase of Each
Note
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7
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Certificate of Pledged
Collateral
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8
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ARTICLE
IV REPORTING REQUIREMENTS
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8
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Annual Reporting
Requirements
|
8
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Default Notices
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9
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ARTICLE
V REPRESENTATIONS OF THE PARTIES
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9
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Representations of Farmer Mac and the
Purchaser
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9
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Representations of National
Rural
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9
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ARTICLE
VI SECURITY AND COLLATERAL
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11
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Security and Collateral
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11
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ARTICLE
VII EVENTS OF DEFAULT
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12
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Events of Default
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12
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Acceleration
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12
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Remedies Not Exclusive
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13
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ARTICLE
VIII MISCELLANEOUS
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13
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GOVERNING LAW
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13
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WAIVER OF JURY TRIAL
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13
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Notices
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13
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Benefit of Agreement
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13
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Entire Agreement
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13
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Amendments and Waivers
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14
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Counterparts
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14
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Termination of Agreement
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14
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Survival
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14
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Severability
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14
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ARTICLE
IX GUARANTEE
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15
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Guarantee
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15
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Control by the Guarantor
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16
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Schedule
I – Addresses for Notices
Schedule
II – Form of Applicable Margin Notice
Schedule
III – Form of Pricing Agreement
Annex A-1
– Form of Fixed Rate Note-5/1
Annex A-2
– Form of Fixed Rate Note 5Y
Annex A-3
– Form of Floating Rate Note
Annex B –
Opinion of Counsel to National Rural
Annex C –
Officers’ Certificate
Annex D –
Form of Securities Purchase Agreement
NOTE
PURCHASE AGREEMENT
NOTE
PURCHASE AGREEMENT, dated as of December [15], 2008, among FARMER MAC MORTGAGE
SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS
National Rural wishes from time to time to issue and sell Notes to the
Purchaser, and the Purchaser wishes from time to time to purchase such Notes
from National Rural, all on the terms and subject to the conditions herein
provided; and
WHEREAS
Farmer Mac is an instrumentality of the United States formed to provide for
a secondary marketing arrangement for agricultural real estate mortgages;
National Rural is a non-profit cooperative and Farmer Mac, the Purchaser and
National Rural have agreed that the Notes will be secured by the pledge of notes
for borrowings from National Rural by members of National Rural, as provided
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
DEFINITIONS
Definitions
.
As used in this Agreement, the following terms shall have the following
meanings:
“
Agreement
” means this
Note Purchase Agreement, as the same may be amended from time to
time.
“
Applicable Margin
”
means the Applicable Margin (LIBOR) or the Applicable Margin (Treasury), as the
context may require.
“
Applicable Margin
(LIBOR)
” means the margin to be added to the LIBOR Rate to determine the
rate of interest payable on the Floating Rate Notes from time to time. The
Applicable Margin (LIBOR) shall be communicated in writing by Farmer Mac to
National Rural in accordance with Section 2.02(d) hereof and calculated by
Farmer Mac as follows: (i) Farmer Mac’s Cost of Funds (expressed in relation to
the LIBOR Rate), plus 0.75%, minus (ii) the LIBOR Rate. The Applicable
Margin (LIBOR) for any Floating Rate Note shall be set forth in the applicable
Pricing Agreement.
“
Applicable Margin
(Treasury)
” means the margin to be added to the Treasury Rate to
determine the rate of interest payable on the Fixed Rate Notes. The
Applicable Margin (Treasury) shall be communicated in writing by Farmer Mac to
National Rural in accordance with Section 2.02(d) hereof and calculated by
Farmer Mac as follows: (i) Farmer Mac’s Cost of Funds (expressed in relation to
the Treasury Rate), plus 0.75%, minus (ii) the Treasury Rate. The
Applicable Margin (Treasury) for any Fixed Rate Note shall be set forth in the
applicable Pricing Agreement.
“
Business Day
” means
any day other than a Saturday, a Sunday, or a day on which any of the Federal
Reserve Bank of New York, Farmer Mac’s office in Washington, DC or National
Rural’s office in Virginia is not open for business.
“
Certificate of Pledged
Collateral
” has the meaning given to that term in the Pledge
Agreement.
“
Closing Date
” means
the date of the closing of each issuance of Notes hereunder.
“
Collateral Agent
”
means U.S. Bank Trust National Association, or its successor, as collateral
agent under the Pledge Agreement.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Dollar
” or “
$
” means the lawful
money of the United States of America.
“
Eligible Member
” has
the meaning given to that term in the Pledge Agreement.
“
Event of Default
” has
the meaning given to that term in Section 7.01.
“
Farmer Mac’s Cost of
Funds
” means the cost of funds quoted by Farmer Mac to National Rural
based on Farmer Mac’s estimate of the economic cost to obtain cash funds from
the wholesale funding market by issuing unsecured medium – term notes to fully
fund to maturity the Note or Notes purchased by Farmer Mac from National
Rural.
“
Farmer Mac Series C
Preferred Stock
” means the Non-Voting Cumulative Preferred Stock Series
C, of Farmer Mac.
“
Financial
Statements
”, in respect of a Fiscal Year, means the consolidated
financial statements (including footnotes) of National Rural for that Fiscal
Year as audited by independent certified public accountants selected by National
Rural.
“
Fiscal Year
” means
the fiscal year of National Rural, as such may be changed from time to time,
which at the date hereof commences on June 1 of each calendar year and ends on
May 31 of the following calendar year.
“
Fixed Rate Notes
”
means the Fixed Rate Notes-5/1 and the Fixed Rate Notes-5Y.
“
Fixed Rate Notes-5/1
”
means one or more five-year fixed rate notes, callable after one year, of
National Rural payable to the Purchaser, having the terms provided for in
Article II of this Agreement and otherwise in the form of Annex A-1 attached
hereto, except to the extent Farmer Mac and National Rural may have approved
changes therein.
“
Fixed Rate Notes- 5Y
”
means one or more five-year noncallable fixed rate notes of National Rural
payable to the Purchaser, having the terms provided for in Article II of this
Agreement and otherwise in the form of Annex A-2 attached hereto, except to the
extent Farmer Mac and National Rural may have approved changes
therein.
“
Floating Rate Notes
”
means one or more two-year noncallable floating rate notes of National Rural
payable to the Purchaser, having the terms provided for in Article II of this
Agreement and otherwise in the form of Annex A-3 attached hereto, except to the
extent Farmer Mac and National Rural may have approved changes
therein.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX
which is existing and continuing.
“
Interest Payment
Date
” means an Interest Payment Date (Fixed Rate Note) or an Interest
Payment Date (Floating Rate Note), as the context may require.
“
Interest Payment Date (Fixed
Rate Note)
” means the dates set forth in the Pricing Agreement for fixed
rate notes as the interest payment dates therefor; provided, however, that if
any such date is not a Business Day, such Interest Payment Date that would
otherwise be such date will be the next Business Day following such date.
The Interest Payment Dates (Fixed Rate Note) will be set forth in the applicable
Pricing Agreement.
“
Interest Payment Date
(Floating Rate Note)
” means the first (1
st
) day of
each January, April, July and October, unless other dates are agreed by the
parties hereto provided, however, that if any such date is not a Business Day,
such Interest Payment Date that would otherwise be such date will be the next
Business Day following such date. The Interest Payment Dates (Floating
Rate Note) will be set forth in the applicable Pricing Agreement.
“
Interest Period (Floating
Rate Note)
”
means, until all
outstanding principal amount of the Floating Rate Notes and interest accrued
thereon have been paid in full, each 3-month period comprising a calendar
quarter from and including the first day of a calendar quarter (i.e., January
1
st
,
April 1
st
, July
1
st
and October 1
st
)
(unless another period is agreed by the parties hereto and set forth in the
applicable Pricing Agreement) to and including the last day of the same calendar
quarter (i.e., March 31
st
, June
30
th
,
September 30
th
and
December 31
st
)
(unless otherwise agreed by the parties hereto and set forth in a Pricing
Agreement);
provided
, that the initial Interest Period (Floating Rate Note) means the
period from and including the date of issuance to and excluding the first
Interest Payment Date (Floating Rate Note) following the date of issuance;
provided, further
,
that if any Interest Period (Floating Rate Note) would end on a day other than a
Business Day, then such Interest Period shall be extended to and include the
next succeeding Business Day and the next Interest Period shall commence on the
next succeeding day.
“
LIBOR Rate
” shall
mean, for any Interest Period, the rate appearing on Reuters Page LIBOR01 (or on
any successor or substitute page of such service, or if the Reuters service
ceases to be available, any successor to or substitute for such service
providing rate quotations comparable to those currently provided on such page of
such service, as mutually agreed by National Rural and Farmer Mac from time to
time for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) as of 11:00 a.m., London time, on the
day that is two London Banking Days prior to the commencement of such Interest
Period (Floating Rate Note), as the rate for the offering of Dollar deposits
with a maturity of three months. Such rate shall apply for the initial
Interest Period (Floating Rate Note) for any advance notwithstanding that such
initial Interest Period (Floating Rate Note) for an advance may be shorter than
three months.
“
London Banking Day
”
shall mean any day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealings in foreign
exchange and foreign currency deposits) in the Dollar, in London,
England.
“
Member
” shall mean
any Person who is member of National Rural.
“
National Rural
Notice
” has the meaning given to that term in the Pledge
Agreement.
“
Notes
” means the
Fixed Rate Notes-5/1, the Fixed Rate Notes-5Y and the Floating Rate Notes, or
any one or more of them as the context may require.
“
Note Documents
” means
the Notes, this Agreement, and the Pledge Agreement.
“
Notice of Borrowing
”
has the meaning set forth in Section 2.01 hereof.
“
Person
” means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“
Pledge Agreement
”
means the Pledge Agreement dated as of the date hereof, among National Rural,
the Purchaser, Farmer Mac and the Collateral Agent.
“
Pledged Collateral
”
has the meaning given to that term in the Pledge Agreement.
“
Pledged Securities
”
has the meaning given to that term in the Pledge Agreement.
“
Pricing Agreement
”
means the Pricing Agreement for each issuance of Notes among Farmer Mac, the
Purchaser and National Rural in the form of Schedule III attached
hereto.
“
Securities Purchase
Agreement
” means the Series C Preferred Stock Purchase Agreement, a form
of which is attached hereto as
Annex D
.
“
Treasury Rate
” means
the applicable 5-year benchmark United States Treasury rate at the time of
pricing a Note, unless otherwise agreed to by the parties and set forth in the
applicable Pricing Agreement.
Principles of
Construction
. Unless the context shall otherwise indicate, the
terms defined in Section 1.01 hereof include the plural as well as the
singular and the singular as well as the plural. The words “hereafter”,
“herein”, “hereof”, “hereto” and “hereunder”, and words of similar import, refer
to this Agreement as a whole. The descriptive headings of the various
articles and sections of this Agreement were formulated and inserted for
convenience only and shall not be deemed to affect the meaning or construction
of the provisions hereof.
PURCHASE
OF NOTES
Purchase of Notes; Minimum
Denominations
. The Purchaser agrees to purchase Notes, at 100% of
their principal amount, from time to time, on or before December 31, 2010, as
requested by National Rural by written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes purchased
hereunder, not in excess of $500 million, subject to satisfaction of the
conditions set forth herein. Each advance under this Agreement shall
be disbursed in a minimum amount of $50 million and additional increments of $25
million in excess thereof. Each advance shall price within 3 Business Days
of National Rural providing a Notice of Borrowing to Farmer Mac and shall close
and fund within 3 Business Days of pricing, subject to satisfaction of the
conditions set forth herein and in accordance with the procedures set forth in
Section 2.02(d) hereof.
Interest Rates and
Payment
.
Floating Rate
Notes
. Each Floating Rate Note shall bear interest, payable
quarterly in arrears unless otherwise agreed by the parties hereto and set forth
in the applicable Pricing Agreement, on the outstanding principal amount thereof
(computed on the basis of a 360-day year and the actual number of days elapsed)
from its date of issuance until final payment on the maturity date thereof or
otherwise at a variable rate per annum equal to the LIBOR Rate for each Interest
Period (Floating Rate Note) plus the Applicable Margin (LIBOR). The LIBOR
Rate shall reset as of the first day of each Interest Period. The (i)
initial LIBOR Rate and (ii) Applicable Margin (LIBOR) for the term of each
Floating Rate Note shall be specified in the applicable Pricing Agreement.
Interest only shall be payable on each Interest Payment Date (Floating Rate
Note). The Interest Payment Dates (Floating Rate Note) shall be determined
at the time of an advance and set forth in the applicable Pricing
Agreement. The principal amount of each Floating Rate Note, together with
any accrued but unpaid interest, shall be due and payable on the maturity
date.
Fixed Rate
Notes
. Each Fixed Rate Note-5/1 and Fixed Rate Note-5Y shall bear
interest, payable semi-annually in arrears unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing Agreement on the
outstanding principal amount thereof (computed on the basis of a 30-day month
and a 360-day year) from its date of issuance until final payment on the
maturity date thereof or otherwise at a fixed rate per annum equal to the
Treasury Rate plus the Applicable Margin (Treasury), in each case as specified
for the term of each Fixed Rate Note in the applicable Pricing Agreement.
Interest only shall be payable on each Interest Payment Date (Fixed
Rate Note). The Interest Payment Dates (Fixed Rate Note) shall be
determined at the time of an advance and set forth in the applicable Pricing
Agreement. The principal amount of each Fixed Rate Note-5/1 and Fixed Rate
Note-5Y, together with any accrued but unpaid interest, shall be due and payable
on the applicable maturity date.
Default
Interest
. To the extent any payment of interest or principal is not
paid when due, interest shall continue to accrue thereon at the applicable rate
per annum determined as provided above plus one percent.
Notice of Borrowing;
Determination of
Applicable Margin; Procedure
for Pricing
. (i) Each Notice of Borrowing shall indicate
the amount of Notes requested to be advanced and the type of Note that National
Rural wishes to advance. A Notice of Borrowing may request preliminary
pricing indications for more than one type of Note, with the understanding that
only one type of Note will be issued on any particular Closing Date, unless
otherwise agreed by the parties hereto in a Pricing Agreement. Each Notice
of Borrowing shall also provide name, telephone and email contact information of
an authorized representative of National Rural.
Upon
receipt of a Notice of Borrowing from National Rural, Farmer Mac shall, within 2
Business Days, provide to National Rural a preliminary indication of the
Applicable Margin (LIBOR) or Applicable Margin (Treasury), or both, as
applicable to any Notice of Borrowing. Upon an acceptance of such
preliminary indication of pricing by National Rural, the applicable Note will
price within one Business Day (and may price on the day of the preliminary
pricing if the parties so agree) thereafter. Farmer Mac shall provide
National Rural with written notice of the final Applicable Margin (LIBOR) or
Applicable Margin (Treasury) no later than the time of pricing of each
advance. National Rural shall be deemed to approve of such pricing so long
as the Applicable Margin (LIBOR) or Applicable Margin (Treasury) shall not
exceed the preliminary indication by more than 5 basis points (0.05%). If
the final pricing does exceed the preliminary indication by more than 5 basis
points (0.05%), an authorized representative of National Rural must agree via
email confirmation prior to or simultaneously with the pricing to accept such
margin.
Payments
and Prepayments.
Each
Floating Rate Note and Fixed Rate Note-5Y shall not be prepayable during the
term of such Note.
National
Rural shall have the right, at its option, at any time and from time to time, to
repay or prepay the principal amount of any Fixed Rate Note-5/1, in whole or in
part, on or after the first (1
st
)
anniversary of the applicable Closing Date on the scheduled call dates set forth
in the applicable Pricing Agreement, upon at least nine (9) days prior written
notice to Farmer Mac. In the event that any such repayment or prepayment
of the principal amount of any Note is made on a day other than an Interest
Payment Date (Fixed Rate Note), accrued interest on the principal amount thereof
shall be payable through and excluding the call date on which such repayment or
prepayment is made.
Payment Notice
.
Farmer Mac shall send to National Rural, not later than the fifth Business Day
prior to an Interest Payment Date for any Note, a notice setting forth the
amount of principal and interest, as applicable, due and owing on the next
Interest Payment Date for such Note.
SECTION
1.03.
Maturity
.
Floating Rate
Notes
. The Floating Rate Notes will mature the earlier of: (i) two
years from the applicable Closing Date and (ii) December 31, 2012.
Fixed Rate
Notes-5/1
. The Fixed Rate Notes-5/1 will mature the earlier of: (i)
five years from the applicable Closing Date and (ii) December 31,
2015.
Fixed Rate
Notes-5Y
. The Fixed Rate Notes-5Y will mature the earlier of: (i)
five years from the applicable Closing Date and (ii) December 31,
2015.
CONDITIONS
PRECEDENT
Conditions Precedent to the
Purchase of Each Note
. On each Closing Date, the Purchaser shall be
under no obligation to purchase any Note unless and until the following
conditions have been satisfied:
The Notes
.
Farmer Mac shall have received the original of such Notes, duly executed on
behalf of National Rural, in the applicable form attached as Annex A-1, A-2 or
A-3 hereto.
The Pledge
Agreement
. Farmer Mac shall have received an original of the Pledge
Agreement duly executed on behalf of National Rural and the Collateral
Agent.
Opinion of
Counsel
. Farmer Mac shall have received an opinion of counsel to
National Rural substantially in the form of Annex B, attached
hereto.
Financial and Other
Information
. National Rural shall have provided Farmer Mac with its
most recent Financial Statements and such other information concerning National
Rural as Farmer Mac shall have reasonably requested.
No Material Adverse
Change
. National Rural shall have certified to Farmer Mac (in the
manner specified in paragraph (i) of this Section 3.01), and Farmer Mac shall be
satisfied, that no material adverse change shall have occurred in the financial
condition or business of National Rural between the end of National Rural’s most
recently completed Fiscal Year for which Financial Statements have been made
publicly available and the date of the purchase of such Note, which has not been
set forth in documents, certificates or financial information furnished to
Farmer Mac or publicly filed.
UCC Filing
.
National Rural shall have provided Farmer Mac with evidence that National Rural
has filed the financing statement required pursuant to Section 2.02(i) of the
Pledge Agreement.
No Event of
Default
. National Rural shall have certified to Farmer Mac and
Farmer Mac shall be satisfied that no Event of Default shall have occurred and
be continuing.
Invest to
Participate
. National Rural shall have entered into a Securities
Purchase Agreement to purchase Farmer Mac Series C Preferred Stock such that
National Rural shall own or have agreed to purchase at least 4% of the aggregate
principal amount of the Notes outstanding hereunder, taking into account the
advance made on the Closing Date.
Certification of Senior
Management
. National Rural shall have provided Farmer Mac a
certification by any vice president of National Rural, substantially in the form
of Annex C attached hereto, as to the following: (i) that National Rural is
a lending institution organized as a private, not-for-profit, cooperative
association with the appropriate expertise, experience and qualifications to
make loans to its Members for rural electrification and related purposes; (ii)
the matters to be certified under paragraphs (e) and (g) of this
Section 3.01; and (iii) the representations and warranties of National
Rural.
Certificate of Pledged
Collateral
. No later than three Business Days after each advance
hereunder, National Rural shall provide Farmer Mac a copy of a Certificate of
Pledged Collateral, dated as of the last day of the calendar month most recently
ended at least 10 Business Days prior to such authentication and delivery, in
accordance with the terms of the Pledge Agreement.
REPORTING
REQUIREMENTS
Annual Reporting
Requirements
. So long as any Notes remain outstanding, National
Rural shall provide Farmer Mac with the following items within 90 days of the
end of each Fiscal Year, in each case, in form and substance satisfactory to
Farmer Mac:
the
Financial Statements for such Fiscal Year;
a
Certificate of Pledged Collateral;
a receipt
from the Collateral Agent, or such other evidence as is satisfactory to Farmer
Mac, as to the Pledged Collateral held by the Collateral Agent at the end of
such Fiscal Year; and
such
other information concerning National Rural as is reasonably requested by Farmer
Mac.
Default Notices
. If an action, occurrence or event shall happen that is, or with notice
and the passage of time would become, an Event of Default, National Rural shall
deliver a National Rural Notice of such action, occurrence or event to Farmer
Mac before 4:00 p.m. (District of Columbia time) on the Business Day
following the date National Rural becomes aware of such action, occurrence or
event, and, if such Event of Default should occur, shall submit to Farmer Mac,
within five days thereafter, a report setting forth its views as to the reasons
for the Event of Default, the anticipated duration of the Event of Default and
what corrective actions National Rural is taking to cure such Event of
Default.
REPRESENTATIONS
OF THE PARTIES
Representations of Farmer
Mac and the Purchaser
. Each of Farmer Mac and the Purchaser jointly
and severally represent to National Rural that on the date hereof and on each
date on which the Purchaser purchases a Note from National Rural:
it has
all necessary authority and has taken all necessary corporate action, and
obtained all necessary approvals, in order for it to execute and deliver all
Note Documents to which it is a party and for its obligations and agreements
under the Note Documents to constitute valid and binding obligations of Farmer
Mac and the Purchaser; and in particular the terms of the transaction, and the
actions taken by Farmer Mac and the Purchaser, are in compliance with and in
satisfaction of the requirements of the Farm Credit Administration, as amended
or waived by the Farm Credit Administration; and
The
Purchaser is purchasing the Notes for its own account and not with a view to the
distribution thereof, provided that the disposition by Farmer Mac or the
Purchaser of their property shall at all times be within their control.
Farmer Mac and the Purchaser each understands that the Notes have not been
registered under the Act and may be resold only if an exemption from
registration is available.
Representations of National
Rural
.. National Rural hereby represents to Farmer Mac and the
Purchaser that on the date hereof and on each date on which the Purchaser
purchases a Note from National Rural:
National
Rural has been duly organized and is validly existing and in good standing as a
cooperative association under the laws of the District of Columbia;
National
Rural has the corporate power and authority to execute and deliver this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder;
National
Rural has taken all necessary corporate and other action to authorize the
execution and delivery of this Agreement, each of the other Note Documents and
the applicable Pricing Agreement and Securities Purchase Agreement, if any, the
consummation by National Rural of the transactions contemplated hereby and
thereby and the performance by National Rural of its obligations hereunder and
thereunder;
this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, have been duly authorized, executed
and delivered by National Rural and constitute the legal, valid and binding
obligations of National Rural, enforceable against National Rural in accordance
with their respective terms, subject to: (i) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws of general applicability
relating to or affecting creditors’ rights generally; and (ii) the
application of general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law;
no
approval, consent, authorization, order, waiver, exemption, variance,
registration, filing, notification, qualification, license, permit or other
action is now, or under existing law in the future will be, required to be
obtained, given, made or taken, as the case may be, with, from or by any
regulatory body, administrative agency or governmental authority having
jurisdiction over National Rural or any third party under any agreement to which
National Rural is a party to authorize the execution and delivery by National
Rural of this Agreement, any of the other Note Documents or the applicable
Pricing Agreement and Securities Purchase Agreement, if any, or the consummation
by National Rural of the transactions contemplated hereby or thereby or the
performance by National Rural of its obligations hereunder or
thereunder;
neither
the execution or delivery by National Rural of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, nor the consummation by National Rural of any of the
transactions contemplated hereby or thereby nor the performance by National
Rural of its obligations hereunder or thereunder, including, without limitation,
the pledge of the Pledged Securities (as such term is defined in the Pledge
Agreement) to Farmer Mac, conflicts with or will conflict with, violates or will
violate, results in or will result in a breach of, constitutes or will
constitute a default under, or results in or will result in the imposition of
any lien or encumbrance pursuant to any term or provision of the articles of
incorporation or the bylaws of National Rural or any provision of any existing
law or any rule or regulation currently applicable to National Rural or any
judgment, order or decree of any court or any regulatory body, administrative
agency or governmental authority having jurisdiction over National Rural or the
terms of any mortgage, indenture, contract or other agreement to which National
Rural is a party or by which National Rural or any of its properties is
bound;
there is
no action, suit, proceeding or investigation before or by any court or any
regulatory body, administrative agency or governmental authority presently
pending or, to the knowledge of National Rural, threatened with respect to
National Rural, this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if any,
challenging the validity or enforceability of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or seeking to restrain, enjoin or otherwise prevent National
Rural from engaging in its business as currently conducted or the consummation
by National Rural of the transactions contemplated by this Agreement, any of the
other Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or which, if adversely determined, would have a material
adverse effect on National Rural’s financial condition or its ability to perform
its obligations under this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if
any;
National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification purposes;
and
no
material adverse change has occurred in the financial condition or business of
National Rural between the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date this representation is given which has not been set forth in documents,
certificates or financial information furnished to Farmer Mac or publicly
filed.
SECURITY
AND COLLATERAL
Security and Collateral
.
National
Rural shall cause the Allowable Amount of the Pledged Collateral (as such terms
are defined in the Pledge Agreement) to be at all times not less than 100% of
the aggregate outstanding principal amount of the Notes.
National
Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage,
encumbrance, debenture, hypothecation or other similar security instrument that
secures, or in any way attaches to, such Pledged Collateral, other than the lien
of the Pledge Agreement, without the prior written consent of Farmer
Mac.
The
Pledged Securities will at all times be notes issued to National Rural by
Eligible Members (as defined in the Pledge Agreement).
EVENTS OF
DEFAULT
Events of
Default
. Each of the following actions, occurrences or events
shall, but only (except in the case of subsections (a), (d) and (e) below) if
National Rural does not cure such action, occurrence or event within
30 days of notice from Farmer Mac requesting that it be cured, constitute
an “
Event of
Default
” under the terms of this Agreement:
a failure
by National Rural to make a payment of principal or interest on any Note for
more than ten days after the same becomes due and payable;
a
material representation by National Rural to Farmer Mac in connection with this
Agreement, any Note or the Pledge Agreement, or any material information
reported pursuant to Article V, shall prove to be incorrect or untrue in any
material respect when made or deemed made;
a failure
by National Rural to comply with any other material covenant or provision
contained in this Agreement or any of the other Note Documents;
the entry
of a decree or order by a court having jurisdiction in the premises adjudging
National Rural a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of National Rural under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of National Rural or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
the
commencement by National Rural of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or the
consent by it to the filing of any such petition or to the appointment of
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
National Rural or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking of
corporate action by National Rural in furtherance of any such
action.
Acceleration
.
Upon the occurrence, and during the continuance, of an Event of Default, Farmer
Mac may, upon notice to that effect to National Rural, declare the entire
principal amount of, and accrued interest on, the Notes at the time outstanding
to be immediately due and payable.
Remedies Not
Exclusive
. Upon the occurrence, and during the continuance, of an
Event of Default, Farmer Mac shall be entitled to take such other action as is
provided for by law, in this Agreement, or in any of the other Note Documents,
including injunctive or other equitable relief.
MISCELLANEOUS
GOVERNING LAW
.
EXCEPT AS SET FORTH IN SECTION 9.01 HEREOF, THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
WAIVER OF JURY
TRIAL
. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.02.
Notices
. All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto
as appropriate except as otherwise provided herein. The address, telephone
number, or facsimile number for any party may be changed at any time and from
time to time upon written notice given by such changing party to the other
parties hereto. A properly addressed notice or other communication shall
be deemed to have been delivered at the time it is sent by facsimile (fax)
transmission to the party or parties to which it is given.
Benefit of
Agreement
. This Agreement shall become effective when it shall have
been executed by Farmer Mac, the Purchaser and National Rural, and thereafter
shall be binding upon and inure to the respective benefit of the parties and
their permitted successors and assigns.
Entire
Agreement
. This Agreement, including the Schedules and Annexes
hereto, and the other Note Documents, constitute the entire agreement between
the parties hereto concerning the matters contained herein and supersede all
prior oral and written agreements and understandings between the
parties.
Amendments and Waivers
.
No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Purchaser and National
Rural. No provision of this Agreement may be waived except in writing by
the party or parties receiving the benefit of and under such
provision.
No
failure or delay of Farmer Mac, the Purchaser or National Rural in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
waiver of any provision of this Agreement or consent to any departure by
National Rural therefrom shall in any event be effective unless the same shall
be authorized as provided in paragraph (a) of this Section 8.06, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on National Rural in
any case shall entitle National Rural to any other or further notice or demand
in similar or other circumstances.
Counterparts
.
This Agreement may be executed in two or more counterparts, each of which shall
be an original, but all of which together shall constitute one and the same
instrument.
Termination of
Agreement
. This Agreement shall terminate upon the indefeasible
payment in full of all amounts payable hereunder and under the
Notes.
Survival
. The
representations and warranties of each of the parties hereto contained in this
Agreement and contained in each of the other Note Documents, and the parties’
obligations under any and all thereof, shall survive and shall continue in
effect following the execution and delivery of this Agreement, any disposition
of the Notes and the expiration or other termination of any of the other Note
Documents, but, in the case of each Note Document, shall not survive the
expiration or the earlier termination of such Note Document, except to the
extent expressly set forth in such Note Document.
Severability
.
If any term or provision of this Agreement or any Note Document or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or such provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable any remaining
terms or provisions of such Note Document or the application of such term or
provision to circumstances other than those as to which it is held invalid or
unenforceable.
GUARANTEE
Guarantee
.
The
Guarantor agrees to pay in full to the holder of each Note, the principal of,
and interest on, the Notes when due, whether at maturity, upon redemption or
otherwise (the “
Guaranteed
Obligations
”), on the applicable due date for such payment.
The
Guarantor’s obligations hereunder shall inure to the benefit of and shall be
enforceable by any holder of a Note if, for reason beyond the control of such
holder, such holder shall have failed to receive the interest or principal, as
applicable, payable to such holder any payment date, redemption date or stated
maturity date. The Guarantor hereby irrevocably agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
legality or enforceability of, or any change in or amendment to, this Agreement,
the Pledge Agreement or any Note, the absence of any action to enforce the same,
the waiver or consent by the holder of any Note or by the Collateral Agent with
respect to any provisions of this Agreement or the Pledge Agreement, or any
action to enforce the same or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor hereby waives diligence, presentment, demand of payment, protest or
notice with respect to each Note or the interest represented thereby, and all
demands whatsoever, and covenants that the guarantee will not be discharged
except upon complete irrevocable payment of the principal and interest
obligations represented by the Notes.
The
Guarantor shall be subrogated to and is hereby assigned all rights of the holder
of the Notes against National Rural and the proceeds of the Pledged Collateral,
all in respect of any amounts paid by the Guarantor pursuant to the provisions
of the guarantee contained in this Article IX. Each holder shall execute
and deliver to the Guarantor in each holder’s name such instruments and
documents as the Guarantor may reasonably request in writing confirming or
evidencing such subrogation and assignment.
No
reference herein shall alter or impair the guarantee, which is absolute and
unconditional, of the due and punctual payment of principal of, and interest on,
the Notes, on the dates such payments are due.
The
guarantee is not an obligation of, and is not a guarantee as to principal or
interest by the Farm Credit Administration, the United States or any other
agency or instrumentality of the United States (other than the
Guarantor).
The
guarantee shall be governed by, and construed in accordance with, Federal
law. To the extent Federal law incorporates state law, that state law
shall be the laws of the District of Columbia applicable to contracts made and
performed therein.
Control by the
Guarantor
. If the Guarantor is the Control Party, the Guarantor
shall be considered the holder of all Notes outstanding for all purposes under
the Pledge Agreement and shall be permitted to take any and all actions
permitted to be taken by the holder thereunder. The Control Party will
have the sole right to direct the time, method and place of conducting any
proceeding for any remedy available to the Collateral Agent or any holder with
respect to the Notes or exercising any power conferred on the Collateral Agent
with respect to the Notes provided that:
such
direction shall not be in conflict with any rule of law or with the Pledge
Agreement;
the
Collateral Agent shall have been provided with indemnity from the Control Party
reasonably satisfactory to it; and
the
Collateral Agent may take any other action deemed proper by such Collateral
Agent that is not inconsistent with such direction, provided, however, that the
Collateral Agent need not take any action which it determines might expose it to
liability.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by
an authorized officer as of the day and year first above written.
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FARMER
MAC MORTGAGE SECURITIES
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CORPORATION,
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By:
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Title:
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FEDERAL
AGRICULTURAL
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MORTGAGE
CORPORATION,
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By:
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Title:
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION,
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By:
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Title:
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SCHEDULE
I
TO
NOTE
PURCHASE AGREEMENT
Addresses
for Notices
1.
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The
addresses referred to in Section 8.03 hereof, for purposes of
delivering communications and notices, are as
follows:
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If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President and Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Robert Owens/Jitin Singhal, Capital Markets Group
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6748
Fax: 703-709-6779
Attention
of: John Suter, Vice President, Capital Market Funding
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
SCHEDULE
II
TO
NOTE
PURCHASE AGREEMENT
FORM
OF
APPLICABLE
MARGIN NOTICE
Issuer Name:
National Rural Utilities
Cooperative Finance Corporation
Date
of Note(s): __________________________
Type
of Note: ____________________________
Applicable
Margin: ________________________
Effective
Date of Applicable Margin: _________________________
This
Applicable Margin Notice is delivered pursuant to the Note Purchase Agreement,
dated as of December 15, 2008 between Federal Agricultural Mortgage Corporation,
Farmer Mac Mortgage Securities Corporation and National Rural Utilities
Cooperative Finance Corporation (the “Note Purchase Agreement”).
Capitalized terms used but not defined herein shall have the meanings given to
them in the Note Purchase Agreement.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
By:
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Signature
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Date
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Title
of Authorized Officer
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Name: _____________________
ACCEPTED
BY:
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
By:
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Signature
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Date
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Title
of Authorized Officer
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Name: _____________________
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SCHEDULE
III
TO
NOTE
PURCHASE AGREEMENT
FORM OF
PRICING AGREEMENT
The
Federal Agricultural Mortgage Corporation, a federally chartered instrumentality
of the United States and an institution of the Farm Credit System (“Farmer
Mac”), Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of
Farmer Mac (the “Purchaser”) and National Rural Utilities Cooperative Finance
Corporation, a cooperative association existing under the laws of the District
of Columbia (“National Rural”), agree that, on _______ __, 20__ (the “Closing
Date”), the Purchaser will purchase from National Rural and National Rural will
sell to the Purchaser $________________ aggregate principal amount of [Fixed
Rate Notes-5Y][Fixed Rate Notes-5/1 ][Floating Rate Notes] (the “Notes”) with
the following terms:
[Initial
LIBOR Rate: _______]
[Treasury
Rate:______]
Applicable
Margin (LIBOR or Treasury):__________
Interest
Payment Dates:___________
Interest
Periods:_____________
[The
Notes may not be prepaid at any time.]
[The
Notes may be not be prepaid prior to __________ __, 20__ [one year from the date
of issuance]. On or after _____________ __, 20__ the Notes may be prepaid
on the scheduled call dates set forth herein, in whole or in part, at the option
of National Rural, according to the terms of the Note Purchase Agreement (as
defined below).]
[Scheduled
call dates: __________________]
The
issuance and sale of the Notes by National Rural to the Purchaser shall occur
under the terms and conditions of the Note Purchase Agreement, dated as of
December 15, 2008, among Farmer Mac, the Purchaser and National Rural (the “Note
Purchase Agreement”). All of the provisions contained in the Note Purchase
Agreement are hereby incorporated by reference in their entirety and shall be
deemed to be a part of this Pricing Agreement to the same extent as if such
provisions had been set forth in full herein. Capitalized terms used
herein and not defined herein shall have the meanings given to those terms in
the Note Purchase Agreement. This Pricing Agreement may be executed in two
or more counterparts.
Agreed to
this __ day of _______, 20__.
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Federal
Agricultural Mortgage Corporation,
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By:
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Name:
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Title:
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Farmer
Mac Mortgage Securities
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Corporation,
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By:
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Name:
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Title:
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National
Rural Utilities Cooperative
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Finance
Corporation,
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By:
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Name:
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Title:
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ANNEX
A-1
[FORM OF
FIXED RATE NOTE-5/1]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
__% Fixed
Rate 5/1 Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below) (“
the Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated
by written notice to National Rural from the registered holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of December 15, 2008
(as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”), and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of December 15, 2008, among National
Rural, the Purchaser, Farmer Mac and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer,
National Rural may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and National Rural will not be affected by any notice to the
contrary.
This Note
may be not be prepaid prior to __________ __, 20__ [one year from the date of
issuance]. On or after _____________ __, 20__ this Note may be prepaid at
any time, in whole or in part, at the option of National Rural, according to the
terms of the Note Purchase Agreement and provided that, if such optional
prepayment is made on a date other than an Interest Payment Date, accrued
interest on the principal amount hereof that is being prepaid shall be payable
through and excluding the date such optional prepayment is
made.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
A-2
[FORM OF
FIXED RATE NOTE-5Y]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
__% Fixed
Rate 5-Year Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated
by written notice to National Rural from the registered holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of December 15, 2008
(as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of December 15, 2008, among National
Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer,
National Rural may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
A-3
[FORM OF
FLOATING RATE NOTE]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Variable
Rate 2-Year Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated
by written notice to National Rural from the registered holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of December 15, 2008
(as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of December 15, 2008, among National
Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer,
National Rural may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
B
[FORM OF
OPINION OF COUNSEL TO NATIONAL RURAL]
[•]
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, NW
Suite
600
Washington,
DC 20036
Gentlemen:
I am
delivering this opinion as general counsel (“Counsel”) of National Rural
Utilities Cooperative Finance Corporation, a District of Columbia cooperative
association (the “Borrower”), and am familiar with matters pertaining to the
loan to Borrower in the principal amount of $500,000,000.00, provided for
in the Note Purchase Agreement, dated as of December 15, 2008 (“Note
Purchase Agreement"), among the Borrower, Farmer Mac Mortgage Securities
Corporation (the “Purchaser”) and Federal Agricultural Mortgage Corporation
(“Farmer Mac”).
I have
examined such corporate records and proceedings of the Borrower, and such other
documents as I have deemed necessary as a basis for the opinions hereinafter
expressed.
I have
also examined the following documents as executed and delivered: (a) the Note
Purchase Agreement; (b) the Note dated as of ____________, in the principal
amount of $____________ (“Note”), said Note payable to the Purchaser; and (c)
the Pledge Agreement, dated as of December 15, 2008, among the Borrower, the
Purchaser, Farmer Mac and U.S. Bank Trust National Association. The
documents described in items (a) through (c) above are collectively referred to
herein as the "Note Documents."
Based on
the foregoing, but subject to the assumptions, exceptions, qualifications and
limitations hereinafter expressed, I am of the opinion that:
(1) The
Borrower has been duly incorporated and is validly existing as a cooperative
association in good standing under the laws of the District of Columbia with
corporate power and authority to execute and perform its obligations under the
Note Documents.
(2) The
Note Documents have been duly authorized, executed and delivered by the
Borrower, and such documents constitute the legal, valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
(3) Neither
the execution nor the delivery by the Borrower of any of the Note Documents nor
the consummation by the Borrower of any of the transactions contemplated
therein, including, without limitation, the pledge of the Pledged Securities (as
such term is defined in the Pledge Agreement) to Farmer Mac, nor the fulfillment
by the Borrower of the terms of any of the Note Documents will conflict with or
violate, result in a breach of or constitute a default under any term or
provision of the Articles of Incorporation or By-laws of the Borrower or any law
or any regulation or any order known to Counsel currently applicable to the
Borrower of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Borrower or the terms of any indenture, deed
of trust, note, note agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its properties is bound.
(4) No
approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency
or body having jurisdiction over the Borrower is required for any consummation
by the Borrower of the transactions contemplated by the Note Documents;
provided
,
however
, no opinion
is expressed as to the applicability of any Federal or state securities law to
any sale, transfer or other disposition of the Note after the date
hereof.
(5) Except
as set forth in writing and previously delivered to Farmer Mac, there is no
pending or, to Counsel’s knowledge, threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator with
respect to the Borrower, or any of the Note Documents, which, if adversely
determined, would have a material adverse effect on the Borrower’s financial
condition or its ability to perform its obligations under any of the Note
Documents.
(6) With
respect to the Pledged Securities in the Certificate of Pledged Collateral, (x)
all action with respect to the recording, registering or filing of financing
statements in the jurisdiction of organization of National Rural has been taken
as is necessary to perfect the security interest intended to be created in such
items under the Uniform Commercial Code and (y) in the case of each Eligible
Security constituting a certificated security or instrument under the Uniform
Commercial Code, such Eligible Security has been delivered to the Collateral
Agent such that the taking and retention of the possession by the Collateral
Agent of such Eligible Security is sufficient to perfect the security interest
to be created under the Uniform Commercial Code. For purposes of the
opinion set forth in this section (6), I have assumed that the Uniform
Commercial Code of the District of Columbia is the same as that of the State of
New York.
The foregoing opinions are subject to
the following assumptions, exceptions, qualifications and
limitations:
A.
I am a member of the Bar
of the District of Columbia and render no opinion on the laws of any
jurisdiction other than the laws of the District of Columbia, the federal laws
of the United States of America and the General Corporation Law of the District
of Columbia.
B.
My opinions are limited to
the present laws and to the facts, as they presently exist. I assume no
obligation to revise or supplement this opinion should the present laws of the
jurisdictions referred to in paragraph A above be changed by legislative action,
judicial decision or otherwise.
C.
The opinions expressed in
paragraph 2 above shall be understood to mean only that if there is a default in
performance of an obligation, (i) if a failure to pay or other damage can be
shown and (ii) if the defaulting party can be brought into a court which will
hear the case and apply the governing law, then, subject to the availability of
defenses, and to the exceptions set forth in the next paragraph, the court will
provide a money damage (or perhaps injunctive or specific performance)
remedy.
D.
My opinions are also
subject to the effect of: (1) bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting creditors’ rights (including,
without limitation, the effect of statutory and other law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers); and (2) the
exercise of judicial discretion and the application of principles of equity,
good faith, fair dealing, reasonableness, conscionability and materiality
(regardless of whether the applicable agreements are considered in proceeding in
equity or at law).
E.
This letter is rendered to
you in connection with the Note Documents and the transactions related thereto,
and may not be relied upon by any other person or by you in any other context or
for any other purpose.
F.
I have assumed with your
permission (i) the genuineness of all signatures by each party other than the
Borrower, (ii) the authenticity of documents submitted to me as originals and
the conformity to authentic original documents of all documents submitted to me
as copies, and (iii) the due execution and delivery, pursuant to due
authorization, of the Note Documents by each party other than the
Borrower.
Yours
sincerely,
John J.
List
General
Counsel
ANNEX
C
[FORM OF
OFFICERS’ CERTIFICATE]
Officers’
Certificate
TO: Federal
Agricultural Mortgage Corporation.
We,
_________________, _________________, and ________________,
_____________________, of National Rural Utilities Cooperative Finance
Corporation (“
National
Rural
”), pursuant to the Note Purchase Agreement dated as of December 15,
2008, among National Rural, Farmer Mac Mortgage Securities Corporation, and
Federal Agricultural Mortgage Corporation (the “
Note Purchase
Agreement
”), hereby certify on behalf of National Rural that as at the
date hereof:
(1) National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification and
related purposes;
(2) no
material adverse change has occurred in the financial condition of National
Rural between the date of the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date hereof, which has not been set forth in documents, certificates, or
financial information furnished to Farmer Mac or publicly filed;
(3) all
of the representations contained in Section 5.02 of the Note Purchase Agreement
remain true and correct in all material respects on and as of the date hereof;
and
(4)
no Event of Default exists.
Capitalized
terms used in this certificate shall have the meanings given to those terms in
the Note Purchase Agreement.
DATED as
of this _____ day of ______________, _________.
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE
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CORPORATION,
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Name:
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Title
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Name:
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Title:
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ANNEX
D
[FORM OF
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
FARMER
MAC MORTGAGE SECURITIES CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION,
As
Guarantor
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT
Dated
as of July 13, 2009
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT, dated as of July 13, 2009 (“Amendment”),
among FARMER MAC MORTGAGE SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS,
the Purchaser, Farmer Mac, and National Rural are parties to a certain Note
Purchase Agreement dated as of December 15, 2009 (“Note Purchase Agreement”);
and
WHEREAS,
the parties have agreed to modify the Note Purchase Agreement as set forth
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
1.
Recitals
. The
foregoing Recitals are hereby incorporated by reference into this
Amendment.
2.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Note Purchase Agreement.
3.
Amendment
.
(a) The
Note Purchase Agreement is hereby amended by deleting the existing definition of
Closing Date and replacing it with the following definition in Section
1.01:
“
Closing Date
” means
the date of the funding of each issuance of Notes hereunder, which date shall be
set forth in the applicable Pricing Agreement.
(b) The
Note Purchase Agreement is hereby amended by adding the following definition of
Final Maturity Date in Section 1.01:
“
Final Maturity Date
”
means December 31, 2016, or such other date as agreed to by the
parties.
(c) The
Note Purchase Agreement is hereby amended by deleting Section 2.01 in its
entirety and replacing it with the following:
SECTION
2.01
Purchase of Notes; Minimum
Denominations
. The
Purchaser agrees to purchase Notes, at 100% of their principal amount, from time
to time, on or before the Final Maturity Date, as requested by National Rural by
written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes outstanding
hereunder at any one time, not in excess of $500 million, subject to
satisfaction of the conditions set forth herein. National Rural may
borrow, repay (subject to the terms of the applicable Notes being repaid) and
reborrow funds at any time or from time to time up to, but not including the
Final Maturity Date. Each advance under this Agreement shall be
disbursed in a minimum amount of $50 million and additional increments of
$5 million in excess thereof or such other amounts as agreed to in the
applicable Pricing Agreement. Each advance shall price within 3
Business Days of National Rural providing a Notice of Borrowing to Farmer Mac
and shall close and fund within 3 Business Days of pricing, subject to
satisfaction of the conditions set forth herein and in accordance with the
procedures set forth in Section 2.02(d) hereof, unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing Agreement.
(d) The
Note Purchase Agreement is hereby amended by deleting Section 2.02(d) in its
entirety and replacing it with the following:
(d)
Notice of Borrowing;
Determination of Applicable Margin; Procedure for
Pricing
. (i) Each Notice of Borrowing shall
indicate the amount of the Note and the desired maturity date of such Note that
National Rural requests to be advanced. A Notice of Borrowing may
request preliminary pricing indications for more than one type of Note, with the
understanding that only one type of Note will be issued on any particular
Closing Date, unless otherwise agreed by the parties hereto in a Pricing
Agreement. Each Notice of Borrowing shall also provide name,
telephone and email contact information of an authorized representative of
National Rural.
(ii) Upon receipt of a Notice of
Borrowing from National Rural, Farmer Mac shall, within 2 Business Days, provide
to National Rural a preliminary indication of the Applicable Margin (LIBOR) or
Applicable Margin (Treasury), or both, as applicable to any Notice of Borrowing;
provided
that
Farmer Mac shall not be obligated to provide an indication of pricing if Farmer
Mac uses its best efforts to obtain and provide such preliminary indication, but
determines in its sole discretion reasonably exercised after consultation with
National Rural that market conditions are unfavorable for the issuance of debt
to fund Notes with the terms set forth in the Notice of
Borrowing. Upon an acceptance of such preliminary indication of
pricing by National Rural, the applicable Note will price within one Business
Day (and may price on the day of the preliminary pricing if the parties so
agree) thereafter, unless the parties otherwise agree to a longer period of time
as set forth in the applicable Pricing Agreement. Farmer Mac shall
provide National Rural with written notice of the final Applicable Margin
(LIBOR) or Applicable Margin (Treasury) no later than the time of pricing of
each advance. National Rural shall be deemed to approve of such
pricing so long as the Applicable Margin (LIBOR) or Applicable Margin (Treasury)
shall not exceed the preliminary indication by more than 5 basis points
(0.05%). If the final pricing does exceed the preliminary indication
by more than 5 basis points (0.05%), an authorized representative of National
Rural must agree via email confirmation prior to or simultaneously with the
pricing to accept such margin.
(e) The
Note Purchase Agreement is hereby amended by deleting Section 2.03 in its
entirety and replacing it with the following:
SECTION
2.03
Maturity
. Each
Note shall mature on the maturity date set forth in the applicable Pricing
Agreement and in any event no later than the Final Maturity Date.
(f) The
Note Purchase Agreement is hereby amended by deleting Section 4.01(d) in its
entirety and replacing it with the following:
(d) such
other information concerning National Rural or the Pledged Collateral as is
reasonably requested by Farmer Mac.
4.
GOVERNING
LAW
. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
5.
Inconsistency with Note
Purchase Agreement
. Except as otherwise amended or modified
herein, the terms, conditions and provisions of the Note Purchase Agreement
remain in full force and effect. In the event of any conflict or
inconsistency between the terms of this Amendment and the Note Purchase
Agreement, the terms of this Amendment shall control.
6.
Counterparts
. This
Amendment may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed as of the day and
year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION
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By:
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Name:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
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By:
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Name:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
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By:
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Name:
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Title:
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EXHIBIT
10.26
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK TRUST NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
PLEDGE
AGREEMENT
Dated
as of December 15, 2008
i
ARTICLE
I
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Definitions
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Section
1.01.
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Definitions
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3
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Section
1.02.
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Principles
of Construction
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7
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ARTICLE
II
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Provisions
as to Pledged Collateral
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Section
2.01.
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Holding
of Pledged Securities
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7
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Section
2.02.
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UCC
Filings
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7
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Section
2.03.
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Withdrawal
and Substitution of Pledged Collateral
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8
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Section
2.04.
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[Reserved]
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8
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Section
2.05.
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Addition
of Pledged Collateral
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8
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Section
2.06.
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Accompanying
Documentation
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8
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Section
2.07.
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Renewal;
Extension; Substitution
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9
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Section
2.08.
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Voting
Rights; Interest and Principal
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9
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Section
2.09.
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Protection
of Title; Payment of Taxes; Liens, etc
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10
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Section
2.10.
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Maintenance
of Pledged Collateral
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11
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Section
2.11.
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Representations,
Warranties and Covenants
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11
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Section
2.12.
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Further
Assurances
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12
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ARTICLE
III
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[Reserved]
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ARTICLE
IV
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Remedies
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Section
4.01.
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Events
of Default
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Section
4.02.
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Remedies
upon Default
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13
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Section
4.03.
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Application
of Proceeds
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14
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Section
4.04.
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Securities
Act
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15
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ARTICLE
V
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The
Collateral Agent
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Section
5.01.
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Certain
Duties and Responsibilities
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16
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Section
5.02.
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Certain
Rights of Collateral Agent
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17
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Section
5.03.
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Money
Held by Collateral Agent
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18
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Section
5.04.
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Compensation
and Reimbursement
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18
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ii
Section
5.05.
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Corporate
Collateral Agent Required; Eligibility
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19
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Section
5.06.
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Resignation
and Removal; Appointment of Successor
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19
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Section
5.07.
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Acceptance
of Appointment by Successor
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20
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Section
5.08.
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Merger,
Conversion, Consolidation or Succession to Business
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21
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ARTICLE
VI
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Miscellaneous
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Section
6.01.
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Notices
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21
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Section
6.02.
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Waivers;
Amendment
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21
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Section
6.03.
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Successors
and Assigns
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22
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Section
6.04.
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Counterparts;
Effectiveness
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22
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Section
6.05.
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Severability
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22
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Section
6.06.
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GOVERNING
LAW
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22
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Section
6.07.
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WAIVER
OF JURY TRIAL
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22
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Section
6.08.
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Headings
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22
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Section
6.09.
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Security
Interest Absolute
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23
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Section
6.10.
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Termination
or Release
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23
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Section
6.11.
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Collateral
Agent Appointed Attorney-in-Fact
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Schedule
I – Additional Criteria for Eligible Securities
Schedule
II – Addresses for Notices
Annex A –
Form of Certificate of Pledged Collateral
PLEDGE
AGREEMENT, dated as of December 15, 2008, among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association
and its successors and assigns (hereinafter called “
National Rural
”),
FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a wholly owned
subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered
instrumentality of the United States and an institution of the Farm Credit
System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK TRUST NATIONAL ASSOCIATION, a national banking association and its
successors and assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
OF NATIONAL RURAL
WHEREAS,
National Rural may from time to time issue one or more Notes to the Purchaser,
and the Purchaser may purchase such Notes, all upon the terms and subject to the
conditions set forth in the Note Purchase Agreement; and
WHEREAS,
National Rural is required pursuant to the terms of the Note Purchase Agreement
to pledge certain property to the Collateral Agent for the benefit of the
Control Party to secure National Rural’s obligations on the Notes;
NOW,
THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of
the certain Obligations contained in the Notes, the Note Purchase Agreement and
herein, National Rural hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the benefit of the Control Party, and grants to the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, a security interest in the following (collectively referred to as the
“
Pledged
Collateral
”) as provided in Article II: (a)(i) the Pledged
Securities and the certificates representing the Pledged Securities;
(ii) subject to Section 2.08, all payments of principal or interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for, and all other Proceeds
received in respect of, the Pledged Securities pledged hereunder;
(iii) subject to Section 2.08, all rights and privileges of National
Rural with respect to the Pledged Securities; (iv) all Proceeds of any of
the foregoing above; that may, on the date hereof or from time to time
hereafter, be subjected to the Lien hereof by National Rural by delivery,
assignment or pledge thereof to the Collateral Agent hereunder and the
Collateral Agent is authorized to receive the same as additional security
hereunder (subject to any reservations, limitations or conditions agreed to in
writing by National Rural and the Control Party respecting the scope or priority
of such security or the use and disposition of such property or the Proceeds
thereof).
3
TO HAVE
AND TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, forever;
subject
,
however
, to the
terms, covenants and conditions hereinafter set forth.
ARTICLE
I
Definitions
SECTION
1.01.
Definitions.
As used in this Pledge Agreement, the
following terms shall have the following meanings:
“Accounting
Requirements”
shall mean any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the Member or, in the absence
thereof, the requirements of GAAP applicable to businesses similar to that of
the Member.
“
Allowable Amount
” on
any date, means with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date.
“
Certificate of Pledged
Collateral
” means a certificate delivered to the Collateral Agent and the
Control Party substantially in the form of Annex A attached
hereto.
“
Class A Member
” means
any Class A Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Class B Member
” means
any Class B Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Collateral Agent
”
means the Person named as the “
Collateral Agent
” in
the first paragraph of this instrument.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Control Party Notice
”
and “
Control Party
Order
” mean, respectively, a written notice or order signed by any Vice
President of the Control Party and delivered to the Collateral Agent and
National Rural.
“
Control Party Notice of
Default
” has the meaning given to that term in
Section 4.02.
“
Depreciation and
Amortization Expense
”
shall mean an amount
constituting the depreciation and amortization of the Member computed pursuant
to Accounting Requirements.
4
“
Eligible Member
”
means any Class A Member or Class B Member of National Rural as described in
National Rural’s Bylaws currently in effect.
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million, (ii) no default has occurred in the payment of
principal or interest in accordance with the terms of such note or bond that is
continuing beyond the contractual grace period (if any) provided in such note or
bond for such payment and (iii) no “event of default” as defined in such
note or bond (or in any instrument creating a security interest in favor of
National Rural in respect of such note or bond), shall exist that has resulted
in the exercise of any right or remedy described in such note or bond (or in any
such instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto.
“
Equity
” means the
aggregate of the Member's equities and margins computed pursuant to Accounting
Requirements.
“
Event of Default
” has
the meaning set forth in Section 4.01.
“
Facility Rating
”
means the facility rating assigned by National Rural to an Eligible Security
from time to time in accordance with National Rural's internal risk rating
system.
“
GAAP
” means generally
accepted accounting principles in the United States as in effect from time to
time.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX of
the Note Purchase Agreement which is existing and continuing.
“
Interest Expense
”
means an amount constituting the interest expense with respect to Long-Term Debt
of the Member computed pursuant to Accounting Requirements.
“
Lien
” means any lien,
pledge, charge, mortgage, encumbrance, debenture, hypothecation or other similar
security interest attaching to any part of the Pledged Collateral.
“
Lien of this Pledge
Agreement
” or “
Lien hereof
” means
the Lien created by these presents.
5
“
Long-Term Debt
” is
determined in accordance with the Uniform System of Accounts prescribed at the
time by RUS or, if such Member is not required to maintain its accounts in
accordance with said Uniform System of Accounts, otherwise determined in
accordance with GAAP.
“
Member
” shall mean
any Person who is member of National Rural.
“
Modified Debt Service
Coverage Ratio—Distribution
” shall mean the definition of Coverage Ratio
as defined in the Indenture dated October 25, 2007 by and between National Rural
Utilities Cooperative Finance Corporation and U.S. Bank National Association for
the Collateral Trust Bonds.
"
Modified Debt Service
Coverage Ratio—G&T
" shall mean the ratio determined as follows: for
any calendar year add (i) Operating Margins, (ii) Non-Operating
Margins—Interest, (iii) Interest Expense, (iv) Depreciation and Amortization
Expense, and (v) cash received in respect of generation and transmission and
other capital credits, and divide the sum so obtained by the sum of all payments
of Principal and Interest Expense required to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
“
National Rural
Notice
” and “
National Rural Order
”
mean, respectively, a written notice or order signed in the name of National
Rural by either its Chief Executive Officer or its Chief Financial Officer, and
by any Vice President of National Rural, and delivered to the Collateral Agent
and the Control Party.
“
Non-Operating
Margins—Interest
” means the amount representing the interest component of
non-operating margins of the Member computed pursuant to Accounting
Requirements.
“
Note Purchase
Agreement
” means the Note Purchase Agreement dated the date hereof
between National Rural, the Purchaser and Farmer Mac, as the same may be amended
from time to time in accordance with the terms thereof.
“
Notes
” means the note
or notes issued by National Rural to the Purchaser under the Note Purchase
Agreement.
“
Obligations
” means
the due and punctual performance of the obligations of National Rural to make
payments of principal, and interest on the Notes.
6
“
Officers’
Certificate
” means a certificate signed by any Vice President of National
Rural, and delivered to the Control Party and/or the Collateral Agent, as
applicable.
“
Operating Margins
”
means the amount of patronage capital and operating margins of the Member
computed pursuant to Accounting Requirements.
“
Person
” means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
“
Pledge Agreement
”
means this Pledge Agreement, as originally executed and as it may from time to
time be amended pursuant to the applicable provisions hereof.
“
Pledged Collateral
”
has the meaning set forth in the Granting Clause.
“
Pledged Securities
”
means at any time the Eligible Securities listed on Schedule A and/or
Schedule B to the Certificate of Pledged Collateral most recently
delivered.
“
Principal
” means the
amount of principal billed on account of Long-Term Debt of the Member computed
pursuant to Accounting Requirements.
“
Proceeds
” has the
meaning specified in Section 9-102 of the Uniform Commercial
Code.
“
RUS
” mean the Rural
Utilities Service of the United States Department of Agriculture, acting by and
through the Administrator of the Rural Utilities Service, and including any
successor agencies or departments.
“
Total Assets Ratio
”
means an amount constituting the total assets of the Member computed pursuant to
Accounting Requirements.
“
Total Capitalization
Ratio
” means the Total Margins and Equity as a percentage of the sum of
((1)Total Margins and Equity plus (2) Long Term Debt).
“
Total Margins and
Equity
” means the Member’s total margins and equity computed pursuant to
Accounting Requirements.
“
Uniform Commercial
Code
” means the Uniform Commercial Code as from time to time in effect in
the District of Columbia.
“
Vice President
” means
any vice president of National Rural or Farmer Mac or the Purchaser, as
applicable, whether or not designated by a number or a word or words added
before or after the title “vice president”.
7
SECTION
1.02.
Other
Defined Terms; Principles of Construction
. Capitalized terms used
but not defined in this Pledge Agreement shall have the meanings given to them
in the Note Purchase Agreement. Unless the context shall otherwise
indicate, the terms defined in Section 1.01 hereof include the plural as
well as the singular and the singular as well as the plural. The words
“hereafter”, “herein”, “hereof”, “hereto” and “hereunder”, and words of similar
import, refer to this Agreement as a whole. The descriptive headings of
the various articles and sections of this Agreement were formulated and inserted
for convenience only and shall not be deemed to affect the meaning or
construction of the provisions hereof.
ARTICLE
II
Provisions as to Pledged
Collateral
SECTION
2.01.
Holding of
Pledged Securities.
(a) National
Rural shall provide to the Control Party, within thirty (30) days of a pledge of
the Pledged Securities in connection with an advance, such back-up information
as is reasonably necessary in order to allow the Control Party to confirm
compliance of such Pledged Securities to the requisite criteria as outlined
herein. Upon receipt of the back-up information, the Control Party shall
have ninety (90) days to object in writing to the inclusion of any item of the
Pledged Securities as part of the Pledged Collateral. If the Control Party
reasonably determines that any of the Pledged Securities do not meet the
criteria for Eligible Securities, then National Rural shall have thirty (30)
days in which to provide substitute collateral, and the timeline specified above
for National Rural to provide back-up material and confirmation shall also apply
as to the substituted collateral.
(b) The
Collateral Agent, on behalf of the Control Party, shall hold the Pledged
Securities in the name of National Rural (or its nominee), endorsed or assigned
in blank or in favor of the Collateral Agent. Upon occurrence of an Event
of Default, the Collateral Agent, on behalf of the Control Party, shall have the
right (in its sole and absolute discretion), to the extent a register is
maintained therefor, to register the Pledged Securities in the Collateral
Agent’s own name as pledgee, or in the name of the Collateral Agent’s nominee
(as pledgee or as sub-agent) or to continue to hold the Pledged Securities in
the name of National Rural, endorsed or assigned in blank or in favor of the
Collateral Agent. Upon cessation of such Event of Default, the Collateral
Agent shall take such action as is necessary to again cause the Pledged
Securities to be registered in the name of National Rural (or its
nominee).
SECTION
2.02.
UCC
Filings.
National Rural
shall prepare and file in the proper Uniform Commercial Code filing office in
the District of Columbia (i) on or prior to the date of the first purchase of a
Note under the Note Purchaser Agreement, a financing statement recording the
Collateral Agent’s interest in the Pledged Collateral; and (ii) from time to
time thereafter, continuation statements or such other filings as are necessary
to maintain the perfection of the Lien hereof on the Pledged
Collateral.
8
SECTION
2.03.
Withdrawal
and Substitution of Pledged Collateral.
(a) Any part of the Pledged
Collateral may be withdrawn by National Rural or substituted for other Eligible
Securities by National Rural and shall be delivered to National Rural by the
Collateral Agent upon National Rural Order at any time and from time to time,
together with any other documents or instruments of transfer or assignment
necessary to reassign to National Rural said Pledged Collateral and the interest
of National Rural,
provided
the
aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal
or substitution shall at least equal the aggregate principal amount of the Notes
outstanding after such withdrawal or substitution, as shown by the Certificate
of Pledged Collateral furnished to the Collateral Agent pursuant to
Subsection (b)(i) of this Section.
(b) Prior
to any such withdrawal or substitution, the Collateral Agent shall be furnished
with the following instruments:
(i) a
Certificate of Pledged Collateral, dated as of the last day of the calendar
month most recently ended at least 10 Business Days prior to such withdrawal or
substitution, showing that immediately after such withdrawal or substitution the
requirements of Subsection (a) of this Section will be satisfied;
and
(ii) an
Officers’ Certificate certifying that no Event of Default has occurred which has
not been remedied.
Upon any
such withdrawal or substitution, National Rural shall deliver any Eligible
Securities to be substituted and the Collateral Agent shall execute any
instruments of transfer or assignment specified in a National Rural Order as
necessary to vest in National Rural any part of the Pledged Collateral
withdrawn.
In case
an Event of Default shall have occurred and be continuing, National Rural shall
not withdraw or substitute any part of the Pledged Collateral.
SECTION
2.04. [Reserved.]
SECTION
2.05.
Addition
of Pledged Collateral.
At
any time, National Rural may pledge additional Eligible Securities under this
Pledge Agreement by delivering such Pledged Collateral to the Collateral Agent,
accompanied by a Certificate of Pledged Collateral specifying such additional
collateral and dated as of the last day of the calendar month most recently
ended at least 10 Business Days prior thereto.
SECTION
2.06.
Accompanying
Documentation.
Where
Eligible Securities are delivered to the Collateral Agent under Section 2.01,
2.03 or Section 2.05, such securities shall be accompanied by the
appropriate instruments of transfer executed in blank and in a form satisfactory
to the Collateral Agent and by such other instruments and documents as the
Collateral Agent may reasonably request. All other property delivered to
the Collateral Agent under Section 2.01, 2.03 or Section 2.05 and
comprising part of the Pledged Collateral shall be accompanied by proper
instruments of assignment duly executed by National Rural and such other
instruments or documents as the Collateral Agent may reasonably
request.
9
SECTION
2.07.
Renewal;
Extension; Substitution.
Unless and until an Event of Default shall have occurred and be
continuing, National Rural may at any time renew or extend, subject to the Lien
of this Pledge Agreement, any Pledged Security upon any terms or may accept in
place of and in substitution for any such Pledged Security, another
Eligible Security or Securities of the same issuer or of any successor thereto
for at least the same unpaid principal amount, all as evidenced by a National
Rural Order delivered to the Collateral Agent;
provided
,
however
, that in case
of any substitution, Eligible Securities substituted as aforesaid shall be
subject to the Lien of this Pledge Agreement as part of the Pledged Collateral
and be held in the same manner as those for which they shall be substituted, and
in the case of each substituted Eligible Security National Rural shall provide
an Officers’ Certificate certifying to the Collateral Agent that such
substituted security satisfies the requirements of this Section. So long
as no Event of Default shall have occurred and be continuing, the Collateral
Agent, upon National Rural Order stating that no Event of Default shall have
occurred and be continuing, shall execute any consent to any such renewal,
extension or substitution as shall be specified in such National Rural
Order.
SECTION
2.08.
Voting
Rights; Interest and Principal
.
(a) Unless and
until an Event of Default has occurred and is continuing, and the Control Party
delivers to the Collateral Agent a Control Party Notice of Default suspending
National Rural’s rights under this clause:
(i)
National Rural shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof
provided
that such
rights and powers shall not be exercised in any manner inconsistent with the
terms of the Note Purchase Agreement or this Pledge Agreement.
(ii) The
Collateral Agent shall execute and deliver to National Rural, or cause to be
executed and delivered to National Rural, all such proxies, powers of attorney
and other instruments as National Rural may reasonably request for the purpose
of enabling National Rural to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i)
above.
(iii)
National Rural shall be entitled to receive and retain any and all interest,
principal and other distributions paid on or distributed in respect of the
Pledged Securities;
provided
that any
non-cash interest, principal or other distributions that would constitute
Pledged Securities if pledged hereunder, and received in exchange for Pledged
Securities or any part thereof pledged hereunder, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer of Pledged Securities may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by National
Rural, shall not be commingled by National Rural with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).
10
(b) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to interest, principal or other distributions that
National Rural is authorized to receive pursuant to paragraph (a)(iii) of
this Section 2.08 shall cease, and all such suspended rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such interest, principal or
other distributions. All interest, principal or other distributions
received by National Rural contrary to the provisions of this Section 2.08
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of National Rural and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to
or received by the Collateral Agent pursuant to the provisions of this paragraph
(b) shall be retained by the Collateral Agent in an account to be established by
the Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 4.03 to the fullest
extent permitted by applicable law. After all Events of Default have
ceased, the Collateral Agent shall promptly repay to National Rural (without
interest) all interest, principal or other distributions that National Rural
would otherwise be permitted to retain pursuant to the terms of paragraph
(a)(iii) of this Section 2.08 and that remain in such account.
(c) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to exercise the voting and consensual rights and powers
it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 2.08, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 2.08, shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers;
provided
that the
Collateral Agent shall have the right from time to time during the existence of
such Event of Default to permit National Rural to exercise such rights and
powers.
SECTION
2.09.
Protection
of Title; Payment of Taxes; Liens, etc.
National Rural will:
(i) duly
and promptly pay and discharge, or cause to be paid and discharged, before they
become delinquent, all taxes, assessments, governmental and other charges
lawfully levied, assessed or imposed upon or against any of the Pledged
Collateral, including the income or profits therefrom and the interests of the
Collateral Agent in such Pledged Collateral;
(ii) duly
observe and conform to all valid requirements of any governmental authority
imposed upon National Rural relative to any of the Pledged Collateral, and all
covenants, terms and conditions under or upon which any part thereof is
held;
11
(iii)
cause to be paid and discharged all lawful claims (including, without
limitation, income taxes) which, if unpaid, might become a lien or charge upon
Pledged Collateral; and
(iv) do
all things and take all actions necessary to keep the Lien of this Pledge
Agreement a first and prior lien upon the Pledged Collateral and protect its
title to the Pledged Collateral against loss by reason of any foreclosure or
other proceeding to enforce any lien prior to or
pari
passu
with the Lien
of this Pledge Agreement.
Nothing
contained in this Section shall require the payment of any such tax,
assessment, claim, lien or charge or the compliance with any such requirement so
long as the validity, application or amount thereof shall be contested in good
faith;
provided
,
however
, that
National Rural shall have set aside on its books such reserves (segregated to
the extent required by generally accepted accounting principles) as shall be
deemed adequate with respect thereto as determined by the Board of Directors of
National Rural (or a committee thereof).
SECTION
2.10.
Maintenance of Pledged
Collateral.
National Rural
shall cause the Allowable Amount of Pledged Collateral held by the Collateral
Agent at all times to be not less than 100% of the aggregate principal amount of
the Notes outstanding.
SECTION
2.11.
Representations, Warranties
and Covenants.
National Rural
represents, warrants and covenants to the Collateral Agent, for the benefit of
the Control Party, that from the time that they are pledged hereunder, and for
so long as they are required to remain pledged:
(a)
except for the Lien hereof and any Lien consented to in writing by Farmer Mac or
the Control Party, National Rural (i) is and will continue to be the direct
owner, beneficially and of record, of the Pledged Securities from time to time
pledged hereunder, (ii) holds and will continue to hold the same free and
clear of all Liens, other than Liens created by this Pledge Agreement,
(iii) will make no assignment, pledge, hypothecation or transfer of, or
create or permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than Liens created by this Pledge Agreement and (iv) will
defend its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Pledge Agreement), however arising, of all Persons
whomsoever;
(b)
except for restrictions and limitations imposed by the Note Purchase Agreement
or securities laws generally, the Pledged Securities are and will continue to be
freely transferable and assignable, and none of the Pledged Securities are or
will be subject to any restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Securities hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Collateral
Agent of rights and remedies hereunder;
12
(c)
National Rural has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;
(d) no
consent or approval of any governmental authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and effect);
and
(e) by
virtue of the execution and delivery by National Rural of this Pledge Agreement,
when any Pledged Securities are delivered to the Collateral Agent in accordance
with this Pledge Agreement, the Collateral Agent will obtain a legal and valid
Lien upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations.
SECTION
2.12.
Further
Assurances.
National Rural
will execute and deliver, or cause to be executed and delivered, all such
additional instruments and do, or cause to be done, all such additional acts as
(a) may be necessary or proper, consistent with the Granting Clause hereof,
to carry out the purposes of this Pledge Agreement and to make subject to the
Lien hereof any property intended so to be subject or (b) may be necessary
or proper to transfer to any successor the estate, powers, instruments and funds
held hereunder and to confirm the Lien of this Pledge Agreement. National
Rural will also cause to be filed, registered or recorded any instruments of
conveyance, transfer, assignment or further assurance in all offices in which
such filing, registering or recording is necessary to the validity thereof or to
give notice thereof.
ARTICLE
III
[Reserved]
ARTICLE
IV
Remedies
SECTION
4.01.
Events of
Default.
“
Event of Default
”,
wherever used herein, means any “Event of Default” as defined in
Sections 7.01(a) of the Note Purchase Agreement,
provided
that, for
the purposes of this Pledge Agreement:
(a) the
Collateral Agent shall not be required to recognize that an Event of Default
exists before such time as the Collateral Agent receives a Control Party Notice
or National Rural Notice stating that an Event of Default exists and specifying
the particulars of such default in reasonable detail; and
(b) the
Collateral Agent shall not be required to recognize that an Event of Default has
ceased until (i) such time as the Collateral Agent receives a Control Party
Notice stipulating that such event has ceased to exist; or (ii) 30 days after
receipt by the Collateral Agent of a National Rural Notice stipulating that such
event has ceased to exist,
provided
that the
Collateral Agent does not receive a Control Party Notice within such timeframe
disputing the cessation of such Event of Default, and
further provided
that
no additional Control Party Notice of Default shall have been received in
respect of any other subsisting Event(s) of Default. Upon receipt of any
National Rural Notice under subparagraph (ii) of this Subsection, the Collateral
Agent shall provide a copy of such National Rural Notice to the Control
Party.
13
SECTION
4.02.
Remedies
upon Default.
If an Event of
Default shall have occurred and be continuing, the Control Party may issue a
notice (a “
Control
Party Notice of Default
”), which may be combined with the notice provided
under Section 4.01(b), suspending the rights of National Rural under
Section 2.08 in part without suspending all such rights (as specified by
the Control Party in its sole and absolute discretion) without waiving or
otherwise affecting the Control Party’s rights to give additional Control Party
Notices of Default from time to time suspending other rights under
Section 2.08
so long as an Event of
Default has occurred and is continuing. Subject to paragraph (b) of this
Section 4.02, upon cessation of an Event of Default, all rights of National
Rural suspended under the applicable Control Party Notice of Default shall
revest in National Rural.
(a) Upon
the occurrence of an Event of Default, the Collateral Agent shall, for the
benefit and at the direction of the Control Party, have the right to exercise
any and all rights afforded to a secured party under the Uniform Commercial Code
or other applicable law. Without limiting the generality of the foregoing,
National Rural agrees that the Collateral Agent shall have the right, but only
if so instructed by a the Control Party Order and subject to the requirements of
applicable law and the Collateral Agent’s right (in its sole and absolute
discretion) to receive indemnification or other reasonable assurances that its
costs and expenses in connection therewith will be paid, to sell or otherwise
dispose of all or any part of the Pledged Collateral at a public or private sale
or at any broker’s board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale of securities (if it deems
it advisable to do so) to restrict the prospective bidders or purchasers to
Persons who will represent and agree that they are purchasing the Pledged
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Pledged Collateral so sold. Each such
purchaser at any sale of Pledged Collateral shall hold the property sold
absolutely, free from any claim or right on the part of National Rural, and
National Rural hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which National Rural now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
14
(b) The
Collateral Agent shall give National Rural 10 days’ written notice (which
National Rural agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of Pledged
Collateral. Such notice, in the case of a public sale, shall state the
time and place for such sale and, in the case of a sale at a broker’s board or
on a securities exchange, shall state the board or exchange at which such sale
is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Pledged Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of
any Pledged Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Pledged Collateral shall have been given.
The Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case
any sale of all or any part of the Pledged Collateral is made on credit or for
future delivery, the Pledged Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Pledged Collateral
so sold and, in case of any such failure, such Pledged Collateral may be sold
again upon like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Pledge Agreement, the Control Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of National Rural (all said
rights being also hereby waived and released to the extent permitted by law),
the Pledged Collateral or any part thereof offered for sale and may make payment
on account thereof by using any claim then due and payable to the Control Party
from National Rural as a credit against the purchase price, and the Control
Party may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to Pledged Collateral
therefor. For purposes hereof, a written agreement to purchase the Pledged
Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and National Rural shall not be entitled to the return of the Pledged Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Pledge Agreement and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant
to the provisions of this Section 4.02 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-610(b) of the
Uniform Commercial Code or its equivalent in other jurisdictions.
SECTION
4.03.
Application of
Proceeds.
The Collateral
Agent shall apply the proceeds of any collection or sale of Pledged Collateral,
including any Pledged Collateral consisting of cash, as follows to the fullest
extent permitted by applicable law:
15
FIRST, to
the payment of all reasonable costs and expenses incurred by the Collateral
Agent in connection with or reasonably related or reasonably incidental to such
collection or sale or otherwise in connection with or related or incidental to
this Pledge Agreement or any of the Obligations, including all court costs and
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Collateral Agent (in its sole discretion) hereunder
on behalf of National Rural and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
SECOND,
to the payment to
the Control Party
in full of the Obligations
;
such payment to be for an amount certified in a
Control Party
Notice delivered to the Collateral Agent as being the amount due and owing to
the Control
Party
under the Obligations; and
THIRD, to
National Rural, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any
sale of the Pledged Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Pledged Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of
any part of the purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.
SECTION
4.04.
Securities
Act
.
In view of the
position of National Rural in relation to the Pledged Collateral, or because of
other current or future circumstances, a question may arise under the Securities
Act of 1933, as now or hereafter in effect, or any similar statute hereafter
enacted analogous in purpose or effect (such Act and any such similar statute as
from time to time in effect being called the “
Federal Securities
Laws
”) with respect to any disposition of the Pledged Collateral
permitted hereunder. National Rural understands that compliance with the
Federal Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or
any part of the Pledged Collateral, and might also limit the extent to which or
the manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or
part of the Pledged Collateral under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. National
Rural recognizes that in light of such restrictions and limitations the
Collateral Agent may, with respect to any sale of the Pledged Collateral, limit
the purchasers to those who will agree, among other things, to acquire such
Pledged Collateral for their own account, for investment, and not with a view to
the distribution or resale thereof. National Rural acknowledges and agrees
that in light of such restrictions and limitations, the Collateral Agent, in its
sole and absolute discretion (a) may proceed to make such a sale whether or
not a registration statement for the purpose of registering such Pledged
Collateral or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser
to effect such sale. National Rural acknowledges and agrees that any such
sale might result in prices and other terms less favorable to the seller than if
such sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 4.04 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
16
ARTICLE
V
The Collateral
Agent
SECTION
5.01.
Certain
Duties and Responsibilities.
(a) At all times under this Pledge Agreement:
(i) the
Collateral Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Pledge Agreement, and no implied covenants or
obligations shall be read into this Pledge Agreement against the Collateral
Agent; and
(ii) in
the absence of bad faith on its part, the Collateral Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Collateral
Agent and substantially conforming to the requirements of this Pledge Agreement;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Collateral Agent the
Collateral Agent shall be under a duty to examine the same to determine whether
or not they substantially conform to the requirements of this Pledge
Agreement.
(b) No
provision of this Pledge Agreement shall be construed to relieve the Collateral
Agent from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except
that:
(i) this
Subsection shall not be construed to limit the effect of Subsection (a) of this
Section;
(ii) the
Collateral Agent shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Collateral Agent was grossly negligent
in ascertaining the pertinent facts; and
(iii) no
provision of this Pledge Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
17
(c) Whether
or not therein expressly so provided, every provision of this Pledge Agreement
relating to the conduct or affecting the liability of or affording protection to
the Collateral Agent shall be subject to the provisions of this
Section.
SECTION
5.02.
Certain
Rights of Collateral Agent.
Except as otherwise provided in Section 5.01:
(a) the
Collateral Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any
request or direction of National Rural mentioned herein shall be sufficiently
evidenced by a National Rural Notice or National Rural Order;
(c) any
request or direction of the Control Party mentioned herein shall be sufficiently
evidenced by a Control Party Notice or Control Party Order;
(d)
whenever in the administration of this Pledge Agreement the Collateral Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Collateral Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers’ Certificate in the case of National Rural, and
a certificate signed by any Vice President of the Control Party in the case of
the Control Party;
(e) the
Collateral Agent may consult with counsel and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(f) the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Pledge Agreement at the request or direction of
either National Rural or the Control Party pursuant to this Pledge Agreement,
unless such party shall have offered to the Collateral Agent reasonable security
or indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(g) the
Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Collateral Agent, in its sole and
absolute discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Collateral Agent shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of National Rural, personally or by agent or
attorney;
18
(h) the
Collateral Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Collateral Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(i)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no duty to inquire as to the performance of National Rural’s covenants
herein. In addition, the Collateral Agent shall not be deemed to have
knowledge of any Event of Default unless the Collateral Agent has received a
Control Party Notice in accordance with Section 4.01(a), and shall not be
deemed to have knowledge of the cessation of the same until such time as it
receives a National Rural Notice in accordance with Section 4.01(b);
and
(j)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no obligation to take any action with respect to any Event of Default until it
has received a Control Party Notice applicable to such event in accordance with
Section 4.01(a), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable Control Party Notice is delivered.
Similarly, the Collateral Agent shall have no obligation to take any action with
respect to the cessation of an Event of Default until it has received a National
Rural Notice applicable to such event in accordance in accordance with
Section 4.01(b), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable National Rural Notice is
delivered.
SECTION
5.03.
Money Held
by Collateral Agent.
Money held by the Collateral Agent
hereunder need not be segregated from other funds except to the extent required
by law. The Collateral Agent shall have no liability to pay interest on or
(except as expressly provided herein) invest any such moneys.
SECTION
5.04.
Compensation and
Reimbursement.
(a) National Rural agrees:
(i) to
pay to the Collateral Agent from time to time such reasonable compensation for
all services rendered by it hereunder as shall have been set forth in an
agreement signed by National Rural;
(ii)
except as otherwise expressly provided herein, to reimburse the Collateral Agent
upon its request for all reasonable expenses, out-of-pocket costs, disbursements
and advances incurred or made by the Collateral Agent in accordance with any
provision of this Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the extent
any such expense, disbursement or advance may be attributable to its gross
negligence or bad faith; and
19
(iii) to
indemnify the Collateral Agent for, and to defend and hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Pledge Agreement or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent such loss, liability or expense may be
attributable to its gross negligence or bad faith;
provided
,
however
, that
National Rural shall have no liability under this clause for any settlement of
any litigation or other dispute effected without the prior written consent of
National Rural (such consent not to be unreasonably withheld).
(b) Any
such amounts payable as provided hereunder shall be additional Obligations
secured by the Lien hereof. The provisions of this Section 5.04 shall
remain operative and in full force and effect regardless of the termination of
this Pledge Agreement or the Note Purchase Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Pledge Agreement
or the Note Purchase Agreement, or any investigation made by or on behalf of the
Collateral Agent or the Control Party. All amounts due under this
Section 5.04 shall be payable on written demand therefor.
SECTION
5.05.
Corporate
Collateral Agent Required; Eligibility.
There shall at all times be a Collateral
Agent hereunder which shall be a corporation or association organized and doing
business under the laws of the United States of America or of any State,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. Neither National Rural nor any Person
directly or indirectly controlling, controlled by or under common control with
National Rural shall serve as Collateral Agent hereunder. If at any time
the Collateral Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION
5.06.
Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of the Collateral Agent and no
appointment of a successor Collateral Agent pursuant to this Article shall
become effective until the acceptance of appointment by the successor Collateral
Agent under Section 5.07.
20
(b) The
Collateral Agent may resign at any time by giving written notice thereof to
National Rural. If an instrument of acceptance by a successor Collateral
Agent shall not have been delivered to the Collateral Agent within 30 days after
the giving of such notice of resignation, the resigning Collateral Agent may
petition any court of competent jurisdiction for the appointment of a successor
Collateral Agent.
(c) If
at any time:
(i)
except if an Event of Default has occurred and is continuing, National Rural, in
its sole and absolute discretion, elects to remove the Collateral Agent;
or
(ii) the
Collateral Agent shall cease to be eligible under Section 5.05 or shall
become incapable of acting or shall be adjudged a bankrupt or insolvent or a
receiver of the Collateral Agent or of its property shall be appointed or any
public officer shall take charge or control of the Collateral Agent or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in
any such case, National Rural may remove the Collateral Agent by delivery of a
National Rural Order to that effect.
(d) If
the Collateral Agent shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Collateral Agent for any cause,
National Rural shall promptly appoint a successor Collateral Agent by delivering
a National Rural Notice to the retiring Collateral Agent, the successor
Collateral Agent and the Control Party to such effect.
SECTION
5.07.
Acceptance
of Appointment by Successor.
Every successor Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to National Rural, the Control Party and to the retiring
Collateral Agent an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Collateral Agent shall become effective
and such successor Collateral Agent, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Collateral Agent; but, on request of National Rural, the Control
Party or the successor Collateral Agent, such retiring Collateral Agent shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Collateral Agent all the rights, powers and trusts of the
retiring Collateral Agent, and shall duly assign, transfer and deliver to such
successor Collateral Agent all property and money held by such retiring
Collateral Agent hereunder, subject nevertheless to its Lien, if any, provided
for in Section 5.04. Upon request of any such successor Collateral
Agent, National Rural shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Collateral Agent all such
rights, powers and trusts.
No
successor Collateral Agent shall accept its appointment unless at the time of
such acceptance such successor Collateral Agent shall be eligible under
Section 5.05 hereof.
21
SECTION
5.08.
Merger,
Conversion, Consolidation or Succession to Business.
Any corporation into which the Collateral
Agent may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Collateral Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Collateral Agent, shall
be the successor of the Collateral Agent hereunder, provided such corporation
shall be eligible under Section 5.05 hereof without the execution or filing
of any paper or any further act on the part of any of the parties
hereto.
ARTICLE
VI
Miscellaneous
SECTION
6.01.
Notices.
All notices and other communications
hereunder to be made to any party shall be in writing and shall be addressed as
specified in Schedule II attached hereto as appropriate. The address,
telephone number, or facsimile number for any party may be changed at any time
and from time to time upon written notice given by such changing party to the
other parties hereto. A properly addressed notice or other communication shall
be deemed to have been delivered at the time it is sent by facsimile (fax)
transmission to the party or parties to which it is given.
(a) All
National Rural Notices and National Rural Orders delivered to the Collateral
Agent shall be contemporaneously copied to the Control Party by National Rural;
all Control Party Notices and Control Party Orders delivered to the Collateral
Agent shall be contemporaneously copied by Farmer Mac to National Rural; and all
Collateral Agent notices delivered to either National Rural or Farmer Mac shall
be contemporaneously copied to the other such party by the Collateral
Agent.
SECTION
6.02.
Waivers;
Amendment.
(a) No failure or delay by
a party in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies that such party would
otherwise have. No waiver of any provision of this Pledge Agreement or
consent to any departure by any party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this
Section 6.02, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or
demand on any party in any case shall entitle any party to any other or further
notice or demand in similar or other circumstances.
(b) Neither
this Pledge Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by National Rural, the Collateral Agent, the Purchaser and Farmer
Mac.
22
SECTION
6.03.
Successors
and Assigns.
Whenever in this
Pledge Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of National Rural, the
Collateral Agent, the Purchaser, the Control Party or Farmer Mac that are
contained in this Pledge Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION
6.04.
Counterparts;
Effectiveness.
This Pledge
Agreement may be executed in counterparts, each of which shall constitute an
original but all of which when taken together shall constitute a single
contract. Delivery of an executed signature page to this Pledge Agreement
by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Pledge Agreement.
SECTION
6.05.
Severability.
Any provision of this Pledge Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION
6.06.
GOVERNING
LAW.
THIS PLEDGE AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE UNITED STATES OF AMERICA, TO THE EXTENT APPLICABLE, AND OTHERWISE THE LAWS
OF THE STATE OF NEW YORK.
SECTION
6.07.
WAIVER OF
JURY TRIAL.
EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.07.
SECTION
6.08.
Headings.
Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Pledge Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Pledge
Agreement.
23
SECTION
6.09.
Security
Interest Absolute.
All rights
of the Collateral Agent and/or the Control Party hereunder, the grant of a
security interest in the Pledged Collateral and all obligations of National
Rural hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Note Purchase Agreement, any Note, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Note Purchase Agreement, any Note or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, National Rural in respect of the
Obligations or this Pledge Agreement.
SECTION
6.10.
Termination or
Release.
(a) This
Pledge Agreement shall terminate on the date when the Obligations have been
indefeasibly paid in full, and at such time the Lien hereof shall be
released.
(b) Upon
any withdrawal, substitution or other disposal by National Rural of any Pledged
Collateral that is permitted by the terms of this Pledge Agreement, or upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Pledged Collateral, the Lien hereof securing such Pledged
Collateral shall be automatically released.
(c) In
connection with any termination or release pursuant to paragraph (a) or (b)
the Collateral Agent shall deliver to National Rural the Pledged Collateral and
shall execute and deliver to National Rural, at National Rural’s expense, all
documents that National Rural shall reasonably request to evidence such
termination or release. Any execution and delivery of documents pursuant
to this Section 6.10 shall be without recourse to or warranty by the
Collateral Agent.
24
SECTION
6.11.
Collateral
Agent Appointed Attorney-in-Fact.
National Rural hereby appoints the
Collateral Agent the attorney-in-fact of National Rural for the purpose of, upon
the occurrence and during the continuance of an Event of Default, carrying out
the provisions of this Pledge Agreement with respect to the Pledged Collateral
and taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest but is subject nevertheless to the
terms and conditions of this Pledge Agreement. Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent’s name or in the name of National
Rural (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Pledged Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or
any of the Pledged Collateral; (c) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Pledged
Collateral or to enforce any rights in respect of any Pledged Collateral;
(d) to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Pledged Collateral; (e) to
notify, or to require National Rural to notify, obligors under Pledged
Securities to make payment directly to the Collateral Agent; and
(f) subject to the second sentence of Section 4.02(a), to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Pledged Collateral, and to do all other acts and things
necessary to carry out the purposes of this Pledge Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Pledged
Collateral for all purposes;
provided
that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the
Control Party shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to
National Rural for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
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by
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Name:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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by
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Name:
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Title:
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NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION,
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By
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Name:
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Title:
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U.S.
BANK TRUST NATIONAL ASSOCIATION,
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By
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Name:
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Title:
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SCHEDULE
I
TO
PLEDGE
AGREEMENT
ADDITIONAL
CRITERIA FOR ELIGIBLE SECURITIES
1
Criteria for Eligible
Security of Class A Eligible Member
: Each Class A Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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·
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Long-Term
Debt to Net Utility Plant Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available,
does not exceed 90%.
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·
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Modified
Debt Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.35.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 20%.
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·
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The
Eligible Security has a facility rating by National Rural of “4.9” or
lower.
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Criteria for Eligible
Security of Class B Eligible Member
: Each Class B Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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·
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Equity
to Total Capitalization Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available, is
greater than or equal to 25%.
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·
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Modified
Debt Service Coverage Ratio—G&T, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.10.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 10%.
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·
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The
Eligible Security has a facility rating by National Rural of “4.9” or
lower.
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1
The
criteria set forth on this Schedule I shall be required to be satisfied only as
of the date of pledge of (1) any Pledged Securities that is being pledged for a
new advance or (2) any Pledged Securities that is being pledged for an existing
advance which is in substitution of, or in addition to, existing collateral, and
such criteria shall not be required to be satisfied with respect to Eligible
Securities after such date.
SCHEDULE
II
TO
PLEDGE
AGREEMENT
Addresses for
Notices
The
addresses referred to in Section 6.01 hereof, for purposes of delivering
communications and notices, are as follows:
If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133
21
st
Street N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention:
Timothy L. Buzby, Vice President/Controller
If to
Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President/Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
SCHEDULE
II
TO
PLEDGE
AGREEMENT
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
If to the
Collateral Agent:
U.S. Bank
Trust National Association
100 Wall
Street
Suite
1600
New York,
NY 10005-3701
Telephone: (212)
361-2893
Fax: (212)
509-3384
Attention
of: Beverly A. Freeney
ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF ________________, 2008
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
TRUST NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer) and ____________________,
Vice-President, respectively, of National Rural Utilities Cooperative Finance
Corporation, hereby certify to the Control Party and the Collateral Agent under
the above-mentioned Pledge Agreement as amended to the date hereof (herein
called the “Pledge Agreement”) as follows:
1.
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The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule A
hereto, is
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$
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2.
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The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule B
hereto, is
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$
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3.
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The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
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$
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4.
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The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
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$
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5.
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The
sum of amounts in items 3 and 4 is
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$
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6.
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The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (item 1
plus 2 and minus 5) is
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$
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7.
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The
Allowable Amount of Pledged Collateral which is included in items 1
and 2 above from Class B Eligible Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by
National Rural or any affiliate to Farmer Mac or any affiliate; (3) sold
by National Rural or any affiliate to Farmer Mac or any affiliate; or (4)
sold to any trust whose beneficial ownership is owned or controlled by
Farmer Mac or an affiliate.
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ANNEX
A
TO
PLEDGE
AGREEMENT
8.
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To
the knowledge of the undersigned, each Eligible Security from Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or better.
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9.
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To
the knowledge of the undersigned, each Eligible Security from Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or better.
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10.
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So
far as is known to the undersigned, no Event of Default
exists.
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ANNEX
A
TO
PLEDGE
AGREEMENT
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
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OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
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Allowable Amount (Item 1)
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Pledged
Securities
(Here
List Securities)
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
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Allowable Amount (Item 2)
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Pledged
Securities
(Here
List Securities)
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EXHIBIT
10.26.1
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK TRUST NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
FIRST
AMENDMENT TO PLEDGE AGREEMENT
Dated
as of September 23, 2009
FIRST
AMENDMENT TO PLEDGE AGREEMENT
FIRST
AMENDMENT TO PLEDGE AGREEMENT, dated as of September 23, 2009, among NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a District of Columbia
cooperative association and its successors and assigns (hereinafter called
“
National
Rural
”), FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a
wholly owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK TRUST NATIONAL ASSOCIATION, a national banking association and its
successors and assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
WHEREAS,
the Purchaser, National Rural, Farmer Mac, and the Collateral Agent are parties
to a certain Pledge Agreement dated as of December 15, 2008 (“Pledge
Agreement”); and
WHEREAS,
the parties have agreed to modify the Pledge Agreement as set forth
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser, National Rural and the Collateral Agent agree as
follows:
1.
Recitals
. The
foregoing Recitals are hereby incorporated by reference into this
Amendment.
2.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Pledge Agreement.
3.
Amendment
.
(a) The
Pledge Agreement is hereby amended by deleting the definition of Allowable
Amount in Section 1.01 in its entirety and replacing it with the
following:
“
Allowable Amount
” on
any date means, with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date, subject to any limitation on the Allowable Amount
applicable through the definition of “Eligible Security.”
(b) The
Pledge Agreement is hereby amended by deleting the definition of Eligible
Security in Section 1.01 in its entirety and replacing it with the
following:
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million; provided, however, that a note or bond in
excess of $35 million may be pledged hereunder but up to $35 million principal
amount of such note or bond (considered together with any other note or bond of
such Eligible Member pledged hereunder or pledged to secure any other notes or
bonds issued by National Rural to Farmer Mac or any affiliate or sold by
National Rural or any affiliate to Farmer Mac, any affiliate or any trust whose
beneficial ownership is owned or controlled by Farmer Mac) shall be counted in
the Allowable Amount of such Eligible Security (with the amount of any such
excess recorded in Item 7 of the Certificate of Pledged Collateral in the form
of
Annex A
attached hereto), (ii) no default has occurred in the payment of principal or
interest in accordance with the terms of such note or bond that is continuing
beyond the contractual grace period (if any) provided in such note or bond for
such payment and (iii) no “event of default” as defined in such note or
bond (or in any instrument creating a security interest in favor of National
Rural in respect of such note or bond), shall exist that has resulted in the
exercise of any right or remedy described in such note or bond (or in any such
instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto, as such Schedule I may be amended from time to time as mutually agreed
upon in writing by Farmer Mac and National Rural, with notice of any such
amendment to the Collateral Agent prior to the pledge of such Eligible
Security.
(c) The
Pledge Agreement is hereby amended by deleting Section 2.01(a) in its entirety
and replacing it with the following:
(a) National
Rural shall make available to the Control Party, within forty-five (45) days of
a pledge of the Pledged Securities in connection with an advance (or for a
longer period as National Rural and the Control Party agree), such back-up
information as is reasonably necessary in order to allow the Control Party to
confirm compliance of such Pledged Securities to the requisite criteria as
outlined herein. Upon receipt of the back-up information, the Control
Party shall have ninety (90) days to object in writing to the inclusion of any
item of the Pledged Securities as part of the Pledged Collateral. If
the Control Party reasonably determines that any of the Pledged Securities do
not meet the criteria for Eligible Securities, then National Rural shall have
forty-five (45) days in which to provide substitute collateral, and the timeline
specified above for National Rural to make available back-up material and
confirmation shall also apply as to the substituted collateral.
(d) The
Pledge Agreement is hereby amended by adding new Section 2.11(f) as
follows:
(f) the
Allowable Amount of Pledged Collateral from Class B Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by National
Rural or any affiliate to Farmer Mac or any affiliate; (3) sold by National
Rural or any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
(e) The
Pledge Agreement is hereby amended by deleting Annex A to the Pledge Agreement
in its entirety and replacing it with Annex A attached to this
Amendment.
4.
GOVERNING
LAW
. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
5.
Inconsistency with
Pledge
Agreement
. Except as otherwise amended or modified herein, the
terms, conditions and provisions of the Pledge Agreement remain in full force
and effect. In the event of any conflict or inconsistency between the
terms of this Amendment and the Pledge Agreement, the terms of this Amendment
shall control.
6.
Counterparts
. This
Amendment may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed as of the day and
year first above written.
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FARMER
MAC MORTGAGE
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SECURITIES
CORPORATION
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By:
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Title:
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FEDERAL
AGRICULTURAL
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MORTGAGE
CORPORATION
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By:
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Title:
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE
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CORPORATION
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By:
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Title:
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U.S.
BANK TRUST NATIONAL
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ASSOCIATION
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By:
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Title:
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ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF DECEMBER 15, 2008
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer or Controller) and
____________________, Vice-President, respectively, of National Rural Utilities
Cooperative Finance Corporation, hereby certify to the Control Party and the
Collateral Agent under the above-mentioned Pledge Agreement as amended to the
date hereof (herein called the “Pledge Agreement”) as follows:
1.
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The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule A
hereto, is
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$
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2.
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The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule B
hereto, is
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$
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3.
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The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
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$
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4.
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The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
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$
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5.
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The
sum of amounts in items 3 and 4 is
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$
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6.
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The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (the sum
of items 1 and 2 minus item 5) is
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$
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7.
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The
cumulative amount by which each Eligible Security listed on Schedule A or
Schedule B exceeds $35 million is
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$
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ANNEX
A
TO
PLEDGE
AGREEMENT
8.
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The
Allowable Amount of Pledged Collateral which is included in items 1 and 2
above from Class B Eligible Members does not constitute more than 20% of
the aggregate amount of any notes or bonds: (1) pledged hereunder; (2)
pledged to secure any other notes or bonds issued by National Rural or any
affiliate to Farmer Mac or any affiliate; (3) sold by National Rural or
any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
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9.
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To
the knowledge of the undersigned, each Eligible Security from a Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
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10.
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To
the knowledge of the undersigned, each Eligible Security from a Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
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ANNEX
A
TO
PLEDGE
AGREEMENT
11.
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So
far as is known to the undersigned, no Event of Default
exists.
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12.
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To
the extent an Eligible Security listed on Schedule A or Schedule B
has an outstanding principal amount of more than $35 million, the
Allowable Amount of Pledged Collateral set forth in items 1 and 2 above
reflects only $35 million with respect to such Eligible Security (or
a lesser amount representing the difference between $35 million and
the aggregate amount of any notes or bonds of the same Eligible Member
pledged or sold to Farmer Mac or any affiliate in any previous
transaction), with any excess above $35 million (or the lesser
amount) reflected in item 7 above.
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13.
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Each
Eligible Member whose notes are Pledged Securities has received or is
eligible to receive a loan or commitment for a loan from RUS or any
successor agency.
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All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated: _____________________
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OF
NATIONAL RURAL UTILITIES
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COOPERATIVE
FINANCE
CORPORATION
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
Eligible Securities
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Name of Issuer
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Allowable Amount (Item 1)
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Pledged
Securities
(Here
List Securities)
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
Eligible Securities
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Name of Issuer
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Allowable Amount (Item 2)
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Pledged
Securities
(Here
List Securities)
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EXHIBIT
10.27
December
15, 2008
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
Virginia 20171
Re:
Setoff Rights under Note
Purchase Agreement
Ladies
and Gentlemen:
In connection with that certain Note
Purchase Agreement, dated as of December 15, 2008 (the “
Agreement
”), by and
among National Rural Utilities Cooperative Finance Corporation (“
National Rural
” or
“
Borrower
”),
Farmer Mac Mortgage Securities Corporation (“
Purchaser
”), and
Federal Agricultural Mortgage Corporation (“
Guarantor
”), National
Rural has agreed, in the event of a payment default by National Rural on the
Notes, to grant the Control Party certain rights of setoff against amounts due
and owing to National Rural on any Series C Preferred Stock, par value $1,000
per share (the “
Preferred Stock
”), of
Guarantor. Capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Agreement.
Borrower, Guarantor and Purchaser
hereby agree that in the event of, and only in the event of, a payment Event of
Default by Borrower pursuant to Section 7.01(a) of the Agreement (“
Payment Default
”),
the Control Party shall have the right, at the Control Party’s sole option and
discretion, to setoff any amounts due to Borrower in respect of Guarantor’s
Preferred Stock, whether in respect of dividends, redemption, liquidation or
otherwise (the “
Preferred Payments
”),
and to apply the Preferred Payments on a dollar-for-dollar basis against the
amount of Borrower’s Payment Default. Such setoff amount by the
Control Party shall not exceed the amount of Borrower’s Payment Default, and
under no circumstances shall Borrower be liable to Purchaser or the Guarantor in
connection with the transactions described herein for any amount in excess of
the principal amount of the Notes plus interest, as provided in the
Agreement. Borrower’s amount due under the Notes shall be satisfied
and discharged to the extent of, but only to the extent of, the Control Party’s
effective setoff. If no Payment Default by Borrower has occurred,
however, the Guarantor shall have no right to setoff or otherwise withhold the
Preferred Payments from Borrower. The Control Party shall provide
Borrower with notice of, and reasonably detailed back up information with
respect to, any setoff effected by the Control Party under this letter
agreement.
The rights of the Control Party herein
shall be in addition to, and not in substitution or limitation of, any other
rights and remedies available to the Control Party, whether such rights or
remedies arise pursuant to law, the Agreement or any other agreement between the
parties.
[SIGNATURE
PAGE FOLLOWS]
Please acknowledge your acceptance of
the foregoing terms by executing this letter agreement in the space below,
whereupon this agreement shall constitute a valid agreement binding upon
Purchaser and Borrower.
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Very
truly yours,
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FARMER
MAC MORTGAGE SECURITIES
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CORPORATION
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By:
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Name:
Jerome G. Oslick
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Title:
Vice President and Secretary
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FEDERAL
AGRICULTURAL
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MORTGAGE
CORPORATION
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By:
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Name: Timothy
L. Buzby
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Title: Vice
President – Controller
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ACKNOWLEDGED
AND AGREED:
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION
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By:
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Name:
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Title:
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FARMER
MAC MORTGAGE SECURITIES CORPORATION
as
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
as
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
as
Guarantor
NOTE
PURCHASE AGREEMENT
Dated
as of February 5, 2009
TABLE OF
CONTENTS
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Page
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RECITALS
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1
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ARTICLE
I DEFINITIONS
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1
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SECTION
1.01.
Definitions
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1
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SECTION
1.02.
Principles of
Construction
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5
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ARTICLE
II PURCHASE OF NOTES
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5
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SECTION
2.01.
Purchase of Notes; Minimum
Denominations
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5
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SECTION
2.02.
Interest Rates and
Payment
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5
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SECTION
2.03.
Maturity
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7
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ARTICLE
III CONDITIONS PRECEDENT
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8
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SECTION
3.01.
Conditions
Precedent to the Purchase of Each Note
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8
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SECTION
3.02.
Certificate of Pledged
Collateral
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9
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ARTICLE
IV REPORTING REQUIREMENTS
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9
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SECTION
4.01.
Annual Reporting
Requirements
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9
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SECTION
4.02.
Default
Notices
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9
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ARTICLE
V REPRESENTATIONS OF THE PARTIES
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10
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SECTION
5.01.
Representations of Farmer Mac and the
Purchaser
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10
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SECTION
5.02.
Representations of National
Rural
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10
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ARTICLE
VI SECURITY AND COLLATERAL
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12
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SECTION
6.01.
Security and
Collateral
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12
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ARTICLE
VII EVENTS OF DEFAULT
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13
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SECTION
7.01.
Events of
Default
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13
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SECTION
7.02.
Acceleration
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13
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SECTION
7.03.
Remedies Not
Exclusive
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14
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ARTICLE
VIII MISCELLANEOUS
|
14
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SECTION
8.01.
GOVERNING
LAW
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14
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SECTION
8.02.
WAIVER OF JURY
TRIAL
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14
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SECTION
8.03.
Notices
|
14
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SECTION
8.04.
Benefit of
Agreement
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14
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SECTION
8.05.
Entire
Agreement
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14
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SECTION
8.06.
Amendments and
Waivers
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15
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SECTION
8.07.
Counterparts
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15
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SECTION
8.08.
Termination of
Agreement
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15
|
SECTION
8.09.
Survival
|
15
|
SECTION
8.10.
Severability
|
15
|
|
|
ARTICLE
IX GUARANTEE
|
16
|
SECTION
9.01.
Guarantee
|
16
|
SECTION
9.02.
Control by the
Guarantor
|
17
|
Schedule
I – Addresses for Notices
Schedule
II – Form of Applicable Margin Notice
Schedule
III – Form of Pricing Agreement
Annex A-1
– Form of Fixed Rate Note-5/1
Annex A-2
– Form of Fixed Rate Note 5Y
Annex A-3
– Form of Floating Rate Note
Annex B –
Opinion of Counsel to National Rural
Annex C –
Officers’ Certificate
Annex D –
Form of Securities Purchase Agreement
NOTE
PURCHASE AGREEMENT
NOTE
PURCHASE AGREEMENT, dated as of February 5, 2009, among FARMER MAC MORTGAGE
SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS
National Rural wishes from time to time to issue and sell Notes to the
Purchaser, and the Purchaser wishes from time to time to purchase such Notes
from National Rural, all on the terms and subject to the conditions herein
provided; and
WHEREAS
Farmer Mac is an instrumentality of the United States formed to provide for
a secondary marketing arrangement for agricultural real estate mortgages;
National Rural is a non-profit cooperative and Farmer Mac, the Purchaser and
National Rural have agreed that the Notes will be secured by the pledge of notes
for borrowings from National Rural by members of National Rural, as provided
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01.
Definitions
. As
used in this Agreement, the following terms shall have the following
meanings:
“
Agreement
” means this
Note Purchase Agreement, as the same may be amended from time to
time.
“
Applicable Margin
”
means the Applicable Margin (LIBOR) or the Applicable Margin (Treasury), as the
context may require.
“
Applicable Margin
(LIBOR)
” means the margin to be added to the LIBOR Rate to determine the
rate of interest payable on the Floating Rate Notes from time to
time. The Applicable Margin (LIBOR) shall be communicated in writing
by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof, in
the form of Schedule II hereof, and calculated by Farmer Mac as follows: (i)
Farmer Mac’s Cost of Funds (expressed in relation to the LIBOR Rate), plus
0.75%, minus (ii) the LIBOR Rate. The Applicable Margin (LIBOR) for
any Floating Rate Note shall be set forth in the applicable Pricing
Agreement.
“
Applicable Margin
(Treasury)
” means the margin to be added to the Treasury Rate to
determine the rate of interest payable on the Fixed Rate Notes. The
Applicable Margin (Treasury) shall be communicated in writing by Farmer Mac to
National Rural in accordance with Section 2.02(d) hereof, in the form of
Schedule II hereof, and calculated by Farmer Mac as follows: (i) Farmer Mac’s
Cost of Funds (expressed in relation to the Treasury Rate), plus 0.75%, minus
(ii) the Treasury Rate. The Applicable Margin (Treasury) for any
Fixed Rate Note shall be set forth in the applicable Pricing
Agreement.
“
Business Day
” means
any day other than a Saturday, a Sunday, or a day on which any of the Federal
Reserve Bank of New York, Farmer Mac’s office in Washington, DC or National
Rural’s office in Virginia is not open for business.
“
Certificate of Pledged
Collateral
” has the meaning given to that term in the Pledge
Agreement.
“
Closing Date
” means
the date of the closing of each issuance of Notes hereunder.
“
Collateral Agent
”
means U.S. Bank National Association, or its successor, as collateral agent
under the Pledge Agreement.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Dollar
” or “
$
” means the lawful
money of the United States of America.
“
Eligible Member
” has
the meaning given to that term in the Pledge Agreement.
“
Event of Default
” has
the meaning given to that term in Section 7.01.
“
Farmer Mac’s Cost of
Funds
” means the cost of funds quoted by Farmer Mac to National Rural
based on Farmer Mac’s estimate of the economic cost to obtain cash funds from
the wholesale funding market by issuing unsecured medium-term notes to fully
fund to maturity the Note or Notes purchased by Purchaser from National
Rural.
“
Farmer Mac Series C
Preferred Stock
” means the Non-Voting Cumulative Preferred Stock Series
C, of Farmer Mac.
“
Financial
Statements
”, in respect of a Fiscal Year, means the consolidated
financial statements (including footnotes) of National Rural for that Fiscal
Year as audited by independent certified public accountants selected by National
Rural.
“
Fiscal Year
” means
the fiscal year of National Rural, as such may be changed from time to time,
which at the date hereof commences on June 1 of each calendar year and ends on
May 31 of the following calendar year.
“
Fixed Rate Notes
”
means the Fixed Rate Notes-5/1, the Fixed Rate Notes-5Y, or any other fixed rate
notes with terms determined by the parties pursuant to the terms of a Pricing
Agreement.
“
Fixed Rate Notes-5/1
”
means one or more five-year fixed rate notes, callable after one year, of
National Rural payable to the Purchaser, having the terms provided for in
Article II of this Agreement and otherwise in the form of Annex A-1 attached
hereto, except to the extent Farmer Mac and National Rural may have approved
changes therein.
“
Fixed Rate Notes- 5Y
”
means one or more five-year noncallable fixed rate notes of National Rural
payable to the Purchaser, having the terms provided for in Article II of this
Agreement and otherwise in the form of Annex A-2 attached hereto, except to the
extent Farmer Mac and National Rural may have approved changes
therein.
“
Floating Rate Notes
”
means one or more two-year noncallable floating rate notes of National Rural
payable to the Purchaser, having the terms provided for in Article II of this
Agreement and otherwise in the form of Annex A-3 attached hereto, except to the
extent Farmer Mac and National Rural may have approved changes therein, or any
other floating rate notes with terms determined by the parties pursuant to the
terms of a Pricing Agreement.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX
which is existing and continuing.
“
Interest Payment
Date
” means an Interest Payment Date (Fixed Rate Note) or an Interest
Payment Date (Floating Rate Note), as the context may require.
“
Interest Payment Date (Fixed
Rate Note)
” means the dates set forth in the Pricing Agreement for fixed
rate notes as the interest payment dates therefor; provided, however, that if
any such date is not a Business Day, such Interest Payment Date that would
otherwise be such date will be the next Business Day following such
date. The Interest Payment Dates (Fixed Rate Note) will be set forth
in the applicable Pricing Agreement.
“
Interest Payment Date
(Floating Rate Note)
” means the first (1
st
) day of
each January, April, July and October, unless other dates are agreed by the
parties hereto; provided, however, that if any such date is not a Business Day,
such Interest Payment Date that would otherwise be such date will be the next
Business Day following such date. The Interest Payment Dates
(Floating Rate Note) will be set forth in the applicable Pricing
Agreement.
“
Interest Period (Floating
Rate Note)
”
means, until all
outstanding principal amount of the Floating Rate Notes and interest accrued
thereon have been paid in full, each 3-month period comprising a calendar
quarter from and including the first day of a calendar quarter (i.e., January
1
st
,
April 1
st
, July
1
st
and October 1
st
)
(unless another period is agreed by the parties hereto and set forth in the
applicable Pricing Agreement) to and including the last day of the same calendar
quarter (i.e., March 31
st
, June
30
th
,
September 30
th
and
December 31
st
)
(unless otherwise agreed by the parties hereto and set forth in a Pricing
Agreement);
provided
, that the initial Interest Period (Floating Rate Note) means the
period from and including the date of issuance to and excluding the first
Interest Payment Date (Floating Rate Note) following the date of issuance;
provided, further
,
that if any Interest Period (Floating Rate Note) would end on a day other than a
Business Day, then such Interest Period shall be extended to and include the
next succeeding Business Day and the next Interest Period shall commence on the
next succeeding day.
“
LIBOR Rate
” shall
mean, for any Interest Period, the rate appearing on Reuters Page LIBOR01 (or on
any successor or substitute page of such service, or if the Reuters service
ceases to be available, any successor to or substitute for such service
providing rate quotations comparable to those currently provided on such page of
such service, as mutually agreed by National Rural and Farmer Mac from time to
time for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) as of 11:00 a.m., London time, on the
day that is two London Banking Days prior to the commencement of such Interest
Period (Floating Rate Note), as the rate for the offering of Dollar deposits
with a maturity of three months (unless another maturity is agreed by the
parties hereto and set forth in the applicable Pricing
Agreement). Such rate shall apply for the initial Interest Period
(Floating Rate Note) for any advance notwithstanding that such initial Interest
Period (Floating Rate Note) for an advance may be shorter than three
months.
“
London Banking Day
”
shall mean any day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealings in foreign
exchange and foreign currency deposits) in the Dollar, in London,
England.
“
Member
” shall mean
any Person who is member of National Rural.
“
National Rural
Notice
” has the meaning given to that term in the Pledge
Agreement.
“
Notes
” means the
Fixed Rate Notes and the Floating Rate Notes, or any one or more of them as the
context may require.
“
Note Documents
” means
the Notes, this Agreement, and the Pledge Agreement.
“
Notice of Borrowing
”
has the meaning set forth in Section 2.01 hereof.
“
Person
” means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“
Pledge Agreement
”
means the Pledge Agreement dated as of the date hereof, among National Rural,
the Purchaser, Farmer Mac and the Collateral Agent.
“
Pledged Collateral
”
has the meaning given to that term in the Pledge Agreement.
“
Pledged Securities
”
has the meaning given to that term in the Pledge Agreement.
“
Pricing Agreement
”
means the Pricing Agreement for each issuance of Notes among Farmer Mac, the
Purchaser and National Rural in the form of Schedule III attached
hereto.
“
Securities Purchase
Agreement
” means the Series C Preferred Stock Purchase Agreement, a form
of which is attached hereto as
Annex D
.
“
Treasury Rate
” means
the applicable 5-year benchmark United States Treasury rate at the time of
pricing a Note, unless otherwise agreed to by the parties and set forth in the
applicable Pricing Agreement.
SECTION
1.02.
Principles of
Construction
. Unless
the context shall otherwise indicate, the terms defined in Section 1.01
hereof include the plural as well as the singular and the singular as well as
the plural. The words “hereafter”, “herein”, “hereof”, “hereto” and
“hereunder”, and words of similar import, refer to this Agreement as a
whole. The descriptive headings of the various articles and sections
of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions
hereof.
ARTICLE
II
PURCHASE
OF NOTES
SECTION
2.01.
Purchase of Notes; Minimum
Denominations
. The
Purchaser agrees to purchase Notes, at 100% of their principal amount, from time
to time, on or before February 28, 2011, as requested by National Rural by
written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes purchased
hereunder, not in excess of $500 million, subject to satisfaction of the
conditions set forth herein. Each advance under this Agreement
shall be disbursed in a minimum amount of $50 million and additional increments
of $5 million in excess thereof. Each advance shall price within
3 Business Days of National Rural providing a Notice of Borrowing to Farmer Mac
and shall close and fund within 3 Business Days of pricing, subject to
satisfaction of the conditions set forth herein and in accordance with the
procedures set forth in Section 2.02(d) hereof, unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing Agreement.
SECTION
2.02.
Interest Rates and
Payment
.
(a)
Floating Rate
Notes
. Each Floating Rate Note shall bear interest, payable
quarterly in arrears unless otherwise agreed by the parties hereto and set forth
in the applicable Pricing Agreement, on the outstanding principal amount thereof
(computed on the basis of a 360-day year and the actual number of days elapsed)
from its date of issuance until final payment on the maturity date thereof or
otherwise at a variable rate per annum equal to the LIBOR Rate for each Interest
Period (Floating Rate Note) plus the Applicable Margin (LIBOR). The
LIBOR Rate shall reset as of the first day of each Interest
Period. The (i) initial LIBOR Rate and (ii) Applicable Margin (LIBOR)
for the term of each Floating Rate Note shall be specified in the applicable
Pricing Agreement. Interest only shall be payable on each Interest
Payment Date (Floating Rate Note). The Interest Payment Dates
(Floating Rate Note) shall be determined at the time of an advance and set forth
in the applicable Pricing Agreement. The principal amount of each
Floating Rate Note, together with any accrued but unpaid interest, shall be due
and payable on the maturity date.
(b)
Fixed Rate
Notes
. Each Fixed Rate Note shall bear interest, payable
semi-annually in arrears unless otherwise agreed by the parties hereto and set
forth in the applicable Pricing Agreement on the outstanding principal amount
thereof (computed on the basis of a 30-day month and a 360-day year) from its
date of issuance until final payment on the maturity date thereof or otherwise
at a fixed rate per annum equal to the Treasury Rate plus the Applicable Margin
(Treasury), in each case as specified for the term of each Fixed Rate Note in
the applicable Pricing Agreement. Interest only shall be payable on
each Interest Payment Date (Fixed Rate Note). The Interest Payment
Dates (Fixed Rate Note) shall be determined at the time of an advance and set
forth in the applicable Pricing Agreement. The principal amount of
each Fixed Rate Note, together with any accrued but unpaid interest, shall be
due and payable on the applicable maturity date.
(c)
Default
Interest
. To the extent any payment of interest or principal
is not paid when due, interest shall continue to accrue thereon at the
applicable rate per annum determined as provided above plus one
percent.
(d)
Notice of Borrowing;
Determination of
Applicable Margin; Procedure
for Pricing
.
(i) Each
Notice of Borrowing shall indicate the amount of Notes requested to be advanced
and the type of Note that National Rural wishes to advance. A Notice
of Borrowing may request preliminary pricing indications for more than one type
of Note, with the understanding that only one type of Note will be issued on any
particular Closing Date, unless otherwise agreed by the parties hereto in a
Pricing Agreement. Each Notice of Borrowing shall also provide name,
telephone and email contact information of an authorized representative of
National Rural.
(ii) Upon
receipt of a Notice of Borrowing from National Rural, Farmer Mac shall, within 2
Business Days, provide to National Rural a preliminary indication of the
Applicable Margin (LIBOR) or Applicable Margin (Treasury), or both, as
applicable to any Notice of Borrowing. Upon an acceptance of such preliminary
indication of pricing by National Rural, the applicable Note will price within
one Business Day (and may price on the day of the preliminary pricing if the
parties so agree) thereafter, unless the parties otherwise agree to a longer
period of time as set forth in the applicable Pricing Agreement. Farmer Mac
shall provide National Rural with written notice of the final Applicable Margin
(LIBOR) or Applicable Margin (Treasury) no later than the time of pricing of
each advance. National Rural shall be deemed to approve of such pricing so long
as the Applicable Margin (LIBOR) or Applicable Margin (Treasury) shall not
exceed the preliminary indication by more than 5 basis points (0.05%). If the
final pricing does exceed the preliminary indication by more than 5 basis points
(0.05%), an authorized representative of National Rural must agree via email
confirmation prior to or simultaneously with the pricing to accept such
margin.
(e)
Payments
and Prepayments.
(i) Each
Floating Rate Note and Fixed Rate Note-5Y shall not be prepayable during the
term of such Note.
(ii)
National Rural shall have the right, at its option, at any time and from time to
time, to repay or prepay the principal amount of any Fixed Rate Note-5/1, in
whole only or in whole or in part (as specified in the applicable Pricing
Agreement) on or after the first (1
st
)
anniversary of the applicable Closing Date on the scheduled call dates set forth
in the applicable Pricing Agreement, upon at least nine (9) Business Days prior
written notice to Farmer Mac, which notice shall be received by Farmer Mac on a
day that is on or before the ninth Business Day prior to the related call date,
but in any event, no later than noon eastern time on the ninth Business Day
prior to the related call date. In the event that any such repayment or
prepayment of the principal amount of any Note is made on a day other than an
Interest Payment Date (Fixed Rate Note), accrued interest on the principal
amount thereof shall be payable through and excluding the call date on which
such repayment or prepayment is made.
(iii) The
prepayment terms of any other type of Fixed Rate Note or Floating Rate Note
shall be set forth in the applicable Pricing Agreement.
(f)
Payment
Notice
. Farmer Mac shall send to National Rural, not later
than the fifth Business Day prior to an Interest Payment Date for any Note, a
notice setting forth the amount of principal and interest, as applicable, due
and owing on the next Interest Payment Date for such Note.
SECTION
2.03.
Maturity
.
(a)
Floating Rate
Notes
. The Floating Rate Notes will mature the earlier of: (i)
two years from the applicable Closing Date and (ii) February 28,
2013.
(b)
Fixed Rate
Notes-5/1
. The Fixed Rate Notes-5/1 will mature the earlier
of: (i) five years from the applicable Closing Date and (ii) February 29,
2016.
(c)
Fixed Rate
Notes-5Y
. The Fixed Rate Notes-5Y will mature the earlier of:
(i) five years from the applicable Closing Date and (ii) February 29,
2016.
(d)
Other
Notes
. Any other type of Note issued hereunder will have the
maturity date set forth in the applicable Pricing Agreement.
ARTICLE
III
CONDITIONS
PRECEDENT
SECTION
3.01.
Conditions Precedent to the
Purchase of Each Note
. On
each Closing Date, the Purchaser shall be under no obligation to purchase any
Note unless and until the following conditions have been satisfied:
(a)
The
Notes
. Farmer Mac shall have received the original of such
Notes, duly executed on behalf of National Rural, in the applicable form
attached as Annex A-1, A-2 or A-3 hereto, or otherwise in a form agreed by the
parties.
(b)
The Pledge
Agreement
. Farmer Mac shall have received an original of the
Pledge Agreement duly executed on behalf of National Rural and the Collateral
Agent.
(c)
Opinion of
Counsel
. Farmer Mac shall have received an opinion of counsel
to National Rural substantially in the form of Annex B, attached
hereto.
(d)
Financial and Other
Information
. National Rural shall have provided Farmer Mac
with its most recent Financial Statements and such other information concerning
National Rural as Farmer Mac shall have reasonably requested.
(e)
No Material Adverse
Change
. National Rural shall have certified to Farmer Mac (in
the manner specified in paragraph (i) of this Section 3.01), and Farmer Mac
shall be satisfied, that no material adverse change shall have occurred in the
financial condition or business of National Rural between the end of National
Rural’s most recently completed Fiscal Year for which Financial Statements have
been made publicly available and the date of the purchase of such Note, which
has not been set forth in documents, certificates or financial information
furnished to Farmer Mac or publicly filed.
(f)
UCC
Filing
. National Rural shall have provided Farmer Mac with
evidence that National Rural has filed the financing statement required pursuant
to Section 2.02(i) of the Pledge Agreement.
(g)
No Event of
Default
. National Rural shall have certified to Farmer Mac and
Farmer Mac shall be satisfied that no Event of Default shall have occurred and
be continuing.
(h)
Invest to
Participate
. National Rural shall have entered into a
Securities Purchase Agreement to purchase Farmer Mac Series C Preferred Stock
such that National Rural shall own or have agreed to purchase at least 4% of the
sum of (1) the aggregate principal amount of the Notes outstanding hereunder and
(2) the aggregate principal amount of the notes outstanding under the Note
Purchase Agreement among the parties dated as of December 15, 2008, taking into
account the advance made hereunder on the Closing Date.
(i)
Certification of Senior
Management
. National Rural shall have provided Farmer Mac a
certification by any vice president of National Rural, substantially in the form
of Annex C attached hereto, as to the following: (i) that National Rural is
a lending institution organized as a private, not-for-profit, cooperative
association with the appropriate expertise, experience and qualifications to
make loans to its Members for rural electrification and related purposes; (ii)
the matters to be certified under paragraphs (e) and (g) of this
Section 3.01; and (iii) the representations and warranties of National
Rural.
SECTION
3.02.
Certificate of Pledged
Collateral
. No
later than three Business Days after each advance hereunder, National Rural
shall provide Farmer Mac and the Collateral Agent a copy of a Certificate of
Pledged Collateral, dated as of the last day of the calendar month most recently
ended at least 10 Business Days prior to such authentication and delivery, or a
more recent date, at National Rural’s option, in accordance with the terms of
the Pledge Agreement.
ARTICLE
IV
REPORTING
REQUIREMENTS
SECTION
4.01.
Annual Reporting
Requirements
. So
long as any Notes remain outstanding, National Rural shall provide Farmer Mac
with the following items within 90 days of the end of each Fiscal Year, in each
case, in form and substance satisfactory to Farmer Mac:
(a)
the
Financial Statements for such Fiscal Year;
(b)
a
Certificate of Pledged Collateral;
(c)
a
receipt from the Collateral Agent, or such other evidence as is satisfactory to
Farmer Mac, as to the Pledged Collateral held by the Collateral Agent at the end
of such Fiscal Year; and
(d)
such
other information concerning National Rural as is reasonably requested by Farmer
Mac.
SECTION
4.02.
Default
Notices
. If
an action, occurrence or event shall happen that is, or with notice and the
passage of time would become, an Event of Default, National Rural shall deliver
a National Rural Notice of such action, occurrence or event to Farmer Mac before
4:00 p.m. (District of Columbia time) on the Business Day following the
date National Rural becomes aware of such action, occurrence or event, and, if
such Event of Default should occur, shall submit to Farmer Mac, within five days
thereafter, a report setting forth its views as to the reasons for the Event of
Default, the anticipated duration of the Event of Default and what corrective
actions National Rural is taking to cure such Event of Default.
ARTICLE
V
REPRESENTATIONS
OF THE PARTIES
SECTION
5.01.
Representations of Farmer
Mac and the Purchaser
. Each
of Farmer Mac and the Purchaser jointly and severally represent to National
Rural that on the date hereof and on each date on which the Purchaser purchases
a Note from National Rural:
(a)
it
has all necessary authority and has taken all necessary corporate action, and
obtained all necessary approvals, in order for it to execute and deliver all
Note Documents to which it is a party and for its obligations and agreements
under the Note Documents to constitute valid and binding obligations of Farmer
Mac and the Purchaser; and in particular the terms of the transaction, and the
actions taken by Farmer Mac and the Purchaser, are in compliance with and in
satisfaction of the requirements of the Farm Credit Administration, as amended
or waived by the Farm Credit Administration; and
(b)
The
Purchaser is purchasing the Notes for its own account and not with a view to the
distribution thereof, provided that the disposition by Farmer Mac or the
Purchaser of their property shall at all times be within their
control. Farmer Mac and the Purchaser each understands that the Notes
have not been registered under the Act and may be resold only if an exemption
from registration is available.
SECTION
5.02.
Representations of National
Rural
.
National
Rural hereby represents to Farmer Mac and the Purchaser that on the date hereof
and on each date on which the Purchaser purchases a Note from National
Rural:
(a)
National
Rural has been duly organized and is validly existing and in good standing as a
cooperative association under the laws of the District of Columbia;
(b)
National
Rural has the corporate power and authority to execute and deliver this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder;
(c)
National
Rural has taken all necessary corporate and other action to authorize the
execution and delivery of this Agreement, each of the other Note Documents and
the applicable Pricing Agreement and Securities Purchase Agreement, if any, the
consummation by National Rural of the transactions contemplated hereby and
thereby and the performance by National Rural of its obligations hereunder and
thereunder;
(d)
this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, have been duly authorized, executed
and delivered by National Rural and constitute the legal, valid and binding
obligations of National Rural, enforceable against National Rural in accordance
with their respective terms, subject to: (i) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws of general applicability
relating to or affecting creditors’ rights generally; and (ii) the
application of general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e)
no
approval, consent, authorization, order, waiver, exemption, variance,
registration, filing, notification, qualification, license, permit or other
action is now, or under existing law in the future will be, required to be
obtained, given, made or taken, as the case may be, with, from or by any
regulatory body, administrative agency or governmental authority having
jurisdiction over National Rural or, except to the extent set forth on Schedule
5.02 hereto, any third party under any agreement to which National Rural is a
party to authorize the execution and delivery by National Rural of this
Agreement, any of the other Note Documents or the applicable Pricing Agreement
and Securities Purchase Agreement, if any, or the consummation by National Rural
of the transactions contemplated hereby or thereby or the performance by
National Rural of its obligations hereunder or thereunder;
(f)
neither
the execution or delivery by National Rural of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, nor the consummation by National Rural of any of the
transactions contemplated hereby or thereby nor the performance by National
Rural of its obligations hereunder or thereunder, including, without limitation,
the pledge of the Pledged Securities (as such term is defined in the Pledge
Agreement) to Farmer Mac, conflicts with or will conflict with, violates or will
violate, results in or will result in a breach of, constitutes or will
constitute a default under, or results in or will result in the imposition of
any lien or encumbrance pursuant to any term or provision of the articles of
incorporation or the bylaws of National Rural or any provision of any existing
law or any rule or regulation currently applicable to National Rural or any
judgment, order or decree of any court or any regulatory body, administrative
agency or governmental authority having jurisdiction over National Rural or,
except to the extent set forth on Schedule 5.02 hereto, the terms of any
mortgage, indenture, contract or other agreement to which National Rural is a
party or by which National Rural or any of its properties is bound;
(g)
there
is no action, suit, proceeding or investigation before or by any court or any
regulatory body, administrative agency or governmental authority presently
pending or, to the knowledge of National Rural, threatened with respect to
National Rural, this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if any,
challenging the validity or enforceability of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or seeking to restrain, enjoin or otherwise prevent National
Rural from engaging in its business as currently conducted or the consummation
by National Rural of the transactions contemplated by this Agreement, any of the
other Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or which, if adversely determined, would have a material
adverse effect on National Rural’s financial condition or its ability to perform
its obligations under this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if
any;
(h)
National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification
purposes;
(i)
no
material adverse change has occurred in the financial condition or business of
National Rural between the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date this representation is given which has not been set forth in documents,
certificates or financial information furnished to Farmer Mac or publicly filed;
and
(j)
to
the extent that National Rural is required to obtain the consent of any lenders
or to amend any applicable credit agreement for National Rural to incur liens to
secure a Note pursuant to the Agreement and the Pledge Agreement, as described
in Schedule 5.02, National Rural shall have obtained such consent or amendment
on or prior to each date on which the Purchaser purchases that Note from
National Rural.
ARTICLE
VI
SECURITY
AND COLLATERAL
SECTION
6.01.
Security and
Collateral
.
(a)
National
Rural shall cause the Allowable Amount of the Pledged Collateral (as such terms
are defined in the Pledge Agreement) to be at all times not less than 100% of
the aggregate outstanding principal amount of the Notes.
(b)
National
Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage,
encumbrance, debenture, hypothecation or other similar security instrument that
secures, or in any way attaches to, such Pledged Collateral, other than the lien
of the Pledge Agreement, without the prior written consent of Farmer
Mac.
(c)
The
Pledged Securities will at all times be notes issued to National Rural by
Eligible Members (as defined in the Pledge Agreement).
ARTICLE
VII
EVENTS OF
DEFAULT
SECTION
7.01.
Events of
Default
. Each
of the following actions, occurrences or events shall, but only (except in the
case of subsections (a), (d) and (e) below) if National Rural does not cure such
action, occurrence or event within 30 days of notice from Farmer Mac
requesting that it be cured, constitute an “
Event of Default
”
under the terms of this Agreement:
(a)
a
failure by National Rural to make a payment of principal or interest on any Note
for more than ten days after the same becomes due and payable;
(b)
a
material representation by National Rural to Farmer Mac in connection with this
Agreement, any Note or the Pledge Agreement, or any material information
reported pursuant to Article V, shall prove to be incorrect or untrue in any
material respect when made or deemed made;
(c)
a
failure by National Rural to comply with any other material covenant or
provision contained in this Agreement or any of the other Note
Documents;
(d)
the
entry of a decree or order by a court having jurisdiction in the premises
adjudging National Rural a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or
in respect of National Rural under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of National Rural or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
(e)
the
commencement by National Rural of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or the
consent by it to the filing of any such petition or to the appointment of
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
National Rural or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking of
corporate action by National Rural in furtherance of any such
action.
SECTION
7.02.
Acceleration
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
may, upon notice to that effect to National Rural, declare the entire principal
amount of, and accrued interest on, the Notes at the time outstanding to be
immediately due and payable.
SECTION
7.03.
Remedies Not
Exclusive
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
shall be entitled to take such other action as is provided for by law, in this
Agreement, or in any of the other Note Documents, including injunctive or other
equitable relief.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.01.
GOVERNING
LAW
. EXCEPT
AS SET FORTH IN SECTION 9.01 HEREOF, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
SECTION
8.02.
WAIVER OF JURY
TRIAL
. EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.02.
SECTION
8.03.
Notices
. All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto
as appropriate except as otherwise provided herein. The address,
telephone number, or facsimile number for any party may be changed at any time
and from time to time upon written notice given by such changing party to the
other parties hereto. A properly addressed notice or other
communication shall be deemed to have been delivered at the time it is sent by
facsimile (fax) transmission to the party or parties to which it is
given.
SECTION
8.04.
Benefit of
Agreement
. This
Agreement shall become effective when it shall have been executed by Farmer Mac,
the Purchaser and National Rural, and thereafter shall be binding upon and inure
to the respective benefit of the parties and their permitted successors and
assigns.
SECTION
8.05.
Entire
Agreement
. This
Agreement, including the Schedules and Annexes hereto, and the other Note
Documents, constitute the entire agreement between the parties hereto concerning
the matters contained herein and supersede all prior oral and written agreements
and understandings between the parties.
SECTION
8.06.
Amendments and
Waivers
.
(a)
No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Purchaser and National
Rural. No provision of this Agreement may be waived except in writing
by the party or parties receiving the benefit of and under such
provision.
(b)
No
failure or delay of Farmer Mac, the Purchaser or National Rural in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. No waiver of any provision of this Agreement or consent to any
departure by National Rural therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (a) of this
Section 8.06, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on National Rural in any case shall entitle National Rural to any
other or further notice or demand in similar or other
circumstances.
SECTION
8.07.
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
8.08.
Termination of
Agreement
. This
Agreement shall terminate upon the indefeasible payment in full of all amounts
payable hereunder and under the Notes.
SECTION
8.09.
Survival
. The
representations and warranties of each of the parties hereto contained in this
Agreement and contained in each of the other Note Documents, and the parties’
obligations under any and all thereof, shall survive and shall continue in
effect following the execution and delivery of this Agreement, any disposition
of the Notes and the expiration or other termination of any of the other Note
Documents, but, in the case of each Note Document, shall not survive the
expiration or the earlier termination of such Note Document, except to the
extent expressly set forth in such Note Document.
SECTION
8.10.
Severability
. If
any term or provision of this Agreement or any Note Document or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or such provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms or provisions of
such Note Document or the application of such term or provision to circumstances
other than those as to which it is held invalid or unenforceable.
ARTICLE
IX
GUARANTEE
SECTION
9.01.
Guarantee
.
(a)
The
Guarantor agrees to pay in full to the holder of each Note, the principal of,
and interest on, the Notes when due, whether at maturity, upon redemption or
otherwise (the “
Guaranteed
Obligations
”), on the applicable due date for such payment.
(b)
The
Guarantor’s obligations hereunder shall inure to the benefit of and shall be
enforceable by any holder of a Note if, for reason beyond the control of such
holder, such holder shall have failed to receive the interest or principal, as
applicable, payable to such holder any payment date, redemption date or stated
maturity date. The Guarantor hereby irrevocably agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
legality or enforceability of, or any change in or amendment to, this Agreement,
the Pledge Agreement or any Note, the absence of any action to enforce the same,
the waiver or consent by the holder of any Note or by the Collateral Agent with
respect to any provisions of this Agreement or the Pledge Agreement, or any
action to enforce the same or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor. The Guarantor hereby waives diligence, presentment, demand
of payment, protest or notice with respect to each Note or the interest
represented thereby, and all demands whatsoever, and covenants that the
guarantee will not be discharged except upon complete irrevocable payment of the
principal and interest obligations represented by the Notes.
(c)
The
Guarantor shall be subrogated to and is hereby assigned all rights of the holder
of the Notes against National Rural and the proceeds of the Pledged Collateral,
all in respect of any amounts paid by the Guarantor pursuant to the provisions
of the guarantee contained in this Article IX. Each holder shall
execute and deliver to the Guarantor in each holder’s name such instruments and
documents as the Guarantor may reasonably request in writing confirming or
evidencing such subrogation and assignment.
(d)
No
reference herein shall alter or impair the guarantee, which is absolute and
unconditional, of the due and punctual payment of principal of, and interest on,
the Notes, on the dates such payments are due.
(e)
The
guarantee is not an obligation of, and is not a guarantee as to principal or
interest by the Farm Credit Administration, the United States or any other
agency or instrumentality of the United States (other than the
Guarantor).
(f)
The
guarantee shall be governed by, and construed in accordance with, Federal
law. To the extent Federal law incorporates state law, that state law
shall be the laws of the District of Columbia applicable to contracts made and
performed therein.
SECTION
9.02.
Control by the
Guarantor
.
If the
Guarantor is the Control Party, the Guarantor shall be considered the holder of
all Notes outstanding for all purposes under the Pledge Agreement and shall be
permitted to take any and all actions permitted to be taken by the holder
thereunder. The Control Party will have the sole right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Collateral Agent or any holder with respect to the Notes or exercising any
power conferred on the Collateral Agent with respect to the Notes provided
that:
(i) such
direction shall not be in conflict with any rule of law or with the Pledge
Agreement;
(ii) the
Collateral Agent shall have been provided with indemnity from the Control Party
reasonably satisfactory to it; and
(iii) the
Collateral Agent may take any other action deemed proper by such Collateral
Agent that is not inconsistent with such direction, provided, however, that the
Collateral Agent need not take any action which it determines might expose it to
liability.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by
an authorized officer as of the day and year first above written.
FARMER
MAC MORTGAGE SECURITIES
CORPORATION,
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By:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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By:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By:
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Title:
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SCHEDULE
I
TO
NOTE
PURCHASE AGREEMENT
Addresses
for Notices
1.
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The
addresses referred to in Section 8.03 hereof, for purposes of
delivering communications and notices, are as
follows:
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If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President and Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Robert Owens/Jitin Singhal, Capital Markets Group
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6748
Fax: 703-709-6779
Attention
of: John Suter, Vice President, Capital Market Funding
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
SCHEDULE
II
TO
NOTE
PURCHASE AGREEMENT
FORM
OF
APPLICABLE
MARGIN NOTICE
Issuer Name:
National Rural Utilities
Cooperative Finance Corporation
Date
of Note(s): __________________________
Type
of Note: ____________________________
Applicable
Margin: ________________________
Effective
Date of Applicable Margin: _________________________
This
Applicable Margin Notice is delivered pursuant to the Note Purchase Agreement,
dated as of February 5, 2009 among Federal Agricultural Mortgage Corporation,
Farmer Mac Mortgage Securities Corporation and National Rural Utilities
Cooperative Finance Corporation (the “Note Purchase
Agreement”). Capitalized terms used but not defined herein shall have
the meanings given to them in the Note Purchase Agreement.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
By:
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Signature
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Date
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Title of Authorized Officer
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Name: _____________________
PLEASE
FAX
TO: ______________________ ATTN: ________________________
ACCEPTED
BY:
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
By:
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Signature
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Date
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Title of Authorized Officer
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Name: _____________________
SCHEDULE
III
TO
NOTE
PURCHASE AGREEMENT
FORM OF
PRICING AGREEMENT
The
Federal Agricultural Mortgage Corporation, a federally chartered instrumentality
of the United States and an institution of the Farm Credit System (“Farmer
Mac”), Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of
Farmer Mac (the “Purchaser”) and National Rural Utilities Cooperative Finance
Corporation, a cooperative association existing under the laws of the District
of Columbia (“National Rural”), agree that, on _______ __, 20__ (the “Closing
Date”), the Purchaser will purchase from National Rural and National Rural will
sell to the Purchaser $________________ aggregate principal amount of [Fixed
Rate Notes-5Y][Fixed Rate Notes-5/1 ][Floating Rate Notes][specify other Fixed
Rate or Floating Rate Notes] (the “Notes”) with the following
terms:
[Initial
LIBOR Rate: _______]
[Treasury
Rate:______]
Applicable
Margin (LIBOR or Treasury):__________
Interest
Payment Dates:___________
Interest
Periods:_____________
[The
Notes may not be prepaid at any time.]
[The
Notes may not be prepaid prior to __________ __, 20__ [[one] year from the date
of issuance]. On or after _____________ __, 20__ the Notes may be
prepaid on the scheduled call dates set forth herein, in whole [only] [or in
part], at the option of National Rural, according to the terms of the Note
Purchase Agreement (as defined below).]
[Scheduled
call dates: __________________]
Maturity
Date: __________________
The
issuance and sale of the Notes by National Rural to the Purchaser shall occur
under the terms and conditions of the Note Purchase Agreement, dated as of
February 5, 2009, among Farmer Mac, the Purchaser and National Rural (the
“Note Purchase Agreement”). All of the provisions contained in the
Note Purchase Agreement are hereby incorporated by reference in their entirety
and shall be deemed to be a part of this Pricing Agreement to the same extent as
if such provisions had been set forth in full herein. Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement. This Pricing Agreement may be
executed in two or more counterparts.
In the
event of any inconsistency between the terms of this Pricing Agreement and the
Note Purchase Agreement, the terms of this Pricing Agreement shall
apply.
Agreed to
this __ day of _______, 20__.
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Federal
Agricultural Mortgage Corporation,
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By:
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Name:
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Title:
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Farmer
Mac Mortgage Securities
Corporation,
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By:
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Name:
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Title:
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National
Rural Utilities Cooperative
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Finance
Corporation,
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By:
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Name:
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Title:
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ANNEX
A-1
[FORM OF
FIXED RATE NOTE-5/1]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
__% Fixed
Rate 5/1 Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below) (“
the Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of February 5,
2009, as well as the Pricing Agreement for $__ Fixed Rate Notes dated as of
______ __, 20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”), and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of February 5, 2009, among
National Rural, the Purchaser, Farmer Mac and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid prior to __________ __, 20__ [one year from the date of
issuance]. On or after _____________ __, 20__ this Note may be
prepaid at any time, in whole [only] [or in part], at the option of National
Rural, according to the terms of the Note Purchase Agreement and provided that,
if such optional prepayment is made on a date other than an Interest Payment
Date, accrued interest on the principal amount hereof that is being prepaid
shall be payable through and excluding the date such optional prepayment is
made.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
A-2
[FORM OF
FIXED RATE NOTE-5Y]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
__% Fixed
Rate 5-Year Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of February 5,
2009, as well as the Pricing Agreement for $__ Fixed Rate Notes dated as of
_________ __, 20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of February 5, 2009, among
National Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
A-3
[FORM OF
FLOATING RATE NOTE]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Variable
Rate 2-Year Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of February 5,
2009, as well as the Pricing Agreement for $__ Floating Rate Notes dated as of
_________ __, 20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of February 5, 2009, among
National Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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ANNEX
B
[FORM OF
OPINION OF COUNSEL TO NATIONAL RURAL]
[•]
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, NW
Suite
600
Washington,
DC 20036
Gentlemen:
I am
delivering this opinion as general counsel (“Counsel”) of National Rural
Utilities Cooperative Finance Corporation, a District of Columbia cooperative
association (the “Borrower”), and am familiar with matters pertaining to the
loan to Borrower in the principal amount of $500,000,000.00, provided for
in the Note Purchase Agreement, dated as of February 5, 2009 (“Note
Purchase Agreement”), among the Borrower, Farmer Mac Mortgage Securities
Corporation (the “Purchaser”) and Federal Agricultural Mortgage Corporation
(“Farmer Mac”).
I have
examined such corporate records and proceedings of the Borrower, and such other
documents as I have deemed necessary as a basis for the opinions hereinafter
expressed.
I have
also examined the following documents as executed and delivered: (a) the Note
Purchase Agreement; (b) the Note dated as of ____________, in the principal
amount of $____________ (“Note”), said Note payable to the Purchaser;
(c) the Pricing Agreement for $__________ [Fixed] [Floating] Rate Notes
dated as of ____________ among the Borrower, the Purchaser and Farmer Mac (the
“Pricing Agreement”) and (d) the Pledge Agreement, dated as of February 5,
2009, among the Borrower, the Purchaser, Farmer Mac and U.S. Bank National
Association (the “Pledge Agreement”). The documents described in
items (a) through (d) above are collectively referred to herein as the “Note
Documents.”
Based on
the foregoing, but subject to the assumptions, exceptions, qualifications and
limitations hereinafter expressed, I am of the opinion that:
(1) The
Borrower has been duly incorporated and is validly existing as a cooperative
association in good standing under the laws of the District of Columbia with
corporate power and authority to execute and perform its obligations under the
Note Documents.
(2) The
Note Documents have been duly authorized, executed and delivered by the
Borrower, and such documents constitute the legal, valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
(3) Neither
the execution nor the delivery by the Borrower of any of the Note Documents nor
the consummation by the Borrower of any of the transactions contemplated
therein, including, without limitation, the pledge of the Pledged Securities (as
such term is defined in the Pledge Agreement) to Farmer Mac, nor the fulfillment
by the Borrower of the terms of any of the Note Documents will conflict with or
violate, result in a breach of or constitute a default under any term or
provision of the Articles of Incorporation or By-laws of the Borrower or any law
or any regulation or any order known to Counsel currently applicable to the
Borrower of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Borrower or the terms of any indenture, deed
of trust, note, note agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its properties is bound.
(4) No
approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency
or body having jurisdiction over the Borrower is required for any consummation
by the Borrower of the transactions contemplated by the Note Documents;
provided
,
however
, no opinion
is expressed as to the applicability of any Federal or state securities law to
any sale, transfer or other disposition of the Note after the date
hereof.
(5) Except
as set forth in writing and previously delivered to Farmer Mac or attached
hereto as Exhibit A, there is no pending or, to Counsel’s knowledge, threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator with respect to the Borrower, or any of the Note
Documents, which, if adversely determined, would have a material adverse effect
on the Borrower’s financial condition or its ability to perform its obligations
under any of the Note Documents.
(6) With
respect to the Pledged Securities in the Certificate of Pledged Collateral (as
such term is defined in the Pledge Agreement), (x) all action with respect to
the recording, registering or filing of financing statements in the jurisdiction
of organization of National Rural has been taken as is necessary to perfect the
security interest intended to be created in such items under the Uniform
Commercial Code and (y) in the case of each Eligible Security (as such term is
defined in the Pledge Agreement) constituting a certificated security or
instrument under the Uniform Commercial Code, such Eligible Security has been
delivered to the Collateral Agent such that the taking and retention of the
possession by the Collateral Agent of such Eligible Security is sufficient to
perfect the security interest to be created under the Uniform Commercial
Code. For purposes of the opinion set forth in this section (6), I
have assumed that the Uniform Commercial Code of the District of Columbia is the
same as that of the State of New York.
The foregoing opinions are subject to
the following assumptions, exceptions, qualifications and
limitations:
A. I
am a member of the Bar of the District of Columbia and render no opinion on the
laws of any jurisdiction other than the laws of the District of Columbia, the
federal laws of the United States of America and the General Corporation Law of
the District of Columbia.
B. My
opinions are limited to the present laws and to the facts, as they presently
exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph A above be
changed by legislative action, judicial decision or otherwise.
C. The
opinions expressed in paragraph 2 above shall be understood to mean only that if
there is a default in performance of an obligation, (i) if a failure to pay or
other damage can be shown and (ii) if the defaulting party can be brought into a
court which will hear the case and apply the governing law, then, subject to the
availability of defenses, and to the exceptions set forth in the next paragraph,
the court will provide a money damage (or perhaps injunctive or specific
performance) remedy.
D. My
opinions are also subject to the effect of: (1) bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
creditors’ rights (including, without limitation, the effect of statutory and
other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers); and (2) the exercise of judicial discretion and the
application of principles of equity, good faith, fair dealing, reasonableness,
conscionability and materiality (regardless of whether the applicable agreements
are considered in proceeding in equity or at law).
E. This
letter is rendered to you in connection with the Note Documents and the
transactions related thereto, and may not be relied upon by any other person or
by you in any other context or for any other purpose.
F. I
have assumed with your permission (i) the genuineness of all signatures by each
party other than the Borrower, (ii) the authenticity of documents submitted to
me as originals and the conformity to authentic original documents of all
documents submitted to me as copies, and (iii) the due execution and delivery,
pursuant to due authorization, of the Note Documents by each party other than
the Borrower.
Yours
sincerely,
John J.
List
General
Counsel
ANNEX
C
[FORM OF
OFFICERS’ CERTIFICATE]
Officers’
Certificate
TO:
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Federal
Agricultural Mortgage Corporation.
|
We,
_________________, _________________, and ________________,
_____________________, of National Rural Utilities Cooperative Finance
Corporation (“
National
Rural
”), pursuant to the Note Purchase Agreement dated as of
February 5, 2009, among National Rural, Farmer Mac Mortgage Securities
Corporation, and Federal Agricultural Mortgage Corporation (the “
Note Purchase
Agreement
”), hereby certify on behalf of National Rural that as at the
date hereof:
(1) National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification and
related purposes;
(2) no
material adverse change has occurred in the financial condition of National
Rural between the date of the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date hereof, which has not been set forth in documents, certificates, or
financial information furnished to Farmer Mac or publicly filed;
(3) all
of the representations contained in Section 5.02 of the Note Purchase Agreement
remain true and correct in all material respects on and as of the date hereof;
and
(4) no
Event of Default exists.
Capitalized
terms used in this certificate shall have the meanings given to those terms in
the Note Purchase Agreement.
DATED as
of this _____ day of ______________, _________.
NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE
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CORPORATION,
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Name:
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Title
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Name:
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Title:
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ANNEX
D
[FORM OF
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
Schedule
5.02
For
purposes of making the representations and warranties contained in Section
5.02(e) and (f) of the Agreement on the date of the Agreement and on any Closing
Date up to the time the aggregate amount of Notes outstanding under the
Agreement exceeds $100 million, note the following:
Certain
credit agreements of the Borrower require consent of the lenders or amendment of
the credit agreements in order for the Borrower to incur liens to secure amounts
in excess of $100 million pursuant to the Agreement and the Pledge
Agreement.
EXHIBIT
10.28.1
FARMER
MAC MORTGAGE SECURITIES CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION,
As
Guarantor
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT
Dated
as of July 13, 2009
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT
FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT, dated as of July 13, 2009 (“Amendment”),
among FARMER MAC MORTGAGE SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS,
the Purchaser, Farmer Mac, and National Rural are parties to a certain Note
Purchase Agreement dated as of February 5, 2009 (“Note Purchase Agreement”);
and
WHEREAS,
the parties have agreed to modify the Note Purchase Agreement as set forth
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
1.
Recitals
. The
foregoing Recitals are hereby incorporated by reference into this
Amendment.
2.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Note Purchase Agreement.
3.
Amendment
.
(a) The
Note Purchase Agreement is hereby amended by deleting the existing definition of
Closing Date and replacing it with the following definition in Section
1.01:
“
Closing Date
” means
the date of the funding of each issuance of Notes hereunder, which date shall be
set forth in the applicable Pricing Agreement.
(b) The
Note Purchase Agreement is hereby amended by adding the following definition of
Final Maturity Date in Section 1.01:
“
Final Maturity Date
”
means December 31, 2016, or such other date as agreed to by the
parties.
(c) The
Note Purchase Agreement is hereby amended by deleting Section 2.01 in its
entirety and replacing it with the following:
SECTION
2.01
Purchase of Notes; Minimum
Denominations
. The
Purchaser agrees to purchase Notes, at 100% of their principal amount, from time
to time, on or before the Final Maturity Date, as requested by National Rural by
written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes outstanding
hereunder at any one time, not in excess of $500 million, subject to
satisfaction of the conditions set forth herein. National Rural may
borrow, repay (subject to the terms of the applicable Notes being repaid) and
reborrow funds at any time or from time to time up to, but not including the
Final Maturity Date. Each advance under this Agreement shall be
disbursed in a minimum amount of $50 million and additional increments of
$5 million in excess thereof or such other amounts as agreed to in the
applicable Pricing Agreement. Each advance shall price within 3
Business Days of National Rural providing a Notice of Borrowing to Farmer Mac
and shall close and fund within 3 Business Days of pricing, subject to
satisfaction of the conditions set forth herein and in accordance with the
procedures set forth in Section 2.02(d) hereof, unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing Agreement.
(d) The
Note Purchase Agreement is hereby amended by deleting Section 2.02(d) in its
entirety and replacing it with the following:
(d)
Notice of Borrowing;
Determination of Applicable Margin; Procedure for
Pricing
. (i) Each Notice of Borrowing shall
indicate the amount of the Note and the desired maturity date of such Note that
National Rural requests to be advanced. A Notice of Borrowing may
request preliminary pricing indications for more than one type of Note, with the
understanding that only one type of Note will be issued on any particular
Closing Date, unless otherwise agreed by the parties hereto in a Pricing
Agreement. Each Notice of Borrowing shall also provide name,
telephone and email contact information of an authorized representative of
National Rural.
(ii) Upon receipt of a Notice of
Borrowing from National Rural, Farmer Mac shall, within 2 Business Days, provide
to National Rural a preliminary indication of the Applicable Margin (LIBOR) or
Applicable Margin (Treasury), or both, as applicable to any Notice of Borrowing;
provided
that
Farmer Mac shall not be obligated to provide an indication of pricing if Farmer
Mac uses its best efforts to obtain and provide such preliminary indication, but
determines in its sole discretion reasonably exercised after consultation with
National Rural that market conditions are unfavorable for the issuance of debt
to fund Notes with the terms set forth in the Notice of
Borrowing. Upon an acceptance of such preliminary indication of
pricing by National Rural, the applicable Note will price within one Business
Day (and may price on the day of the preliminary pricing if the parties so
agree) thereafter, unless the parties otherwise agree to a longer period of time
as set forth in the applicable Pricing Agreement. Farmer Mac shall
provide National Rural with written notice of the final Applicable Margin
(LIBOR) or Applicable Margin (Treasury) no later than the time of pricing of
each advance. National Rural shall be deemed to approve of such
pricing so long as the Applicable Margin (LIBOR) or Applicable Margin (Treasury)
shall not exceed the preliminary indication by more than 5 basis points
(0.05%). If the final pricing does exceed the preliminary indication
by more than 5 basis points (0.05%), an authorized representative of National
Rural must agree via email confirmation prior to or simultaneously with the
pricing to accept such margin.
(e) The
Note Purchase Agreement is hereby amended by deleting Section 2.03 in its
entirety and replacing it with the following:
SECTION
2.03
Maturity
. Each
Note shall mature on the maturity date set forth in the applicable Pricing
Agreement and in any event no later than the Final Maturity Date.
(f) The
Note Purchase Agreement is hereby amended by deleting Section 4.01(d) in its
entirety and replacing it with the following:
(d) such
other information concerning National Rural or the Pledged Collateral as is
reasonably requested by Farmer Mac.
4.
GOVERNING
LAW
. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
5.
Inconsistency with Note
Purchase Agreement
. Except as otherwise amended or modified
herein, the terms, conditions and provisions of the Note Purchase Agreement
remain in full force and effect. In the event of any conflict or
inconsistency between the terms of this Amendment and the Note Purchase
Agreement, the terms of this Amendment shall control.
6.
Counterparts
. This
Amendment may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed as of the day and
year first above written.
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FARMER
MAC MORTGAGE
SECURITIES
CORPORATION
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By:
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Name:
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Title:
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FEDERAL
AGRICULTURAL
|
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MORTGAGE
CORPORATION
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By:
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Name:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
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By:
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Name:
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Title:
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FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
PLEDGE
AGREEMENT
Dated
as of February 5, 2009
i
ARTICLE
I
|
|
Definitions
|
|
|
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Section
1.01.
|
Definitions
|
3
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Section
1.02.
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Principles
of Construction
|
6
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ARTICLE
II
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Provisions
as to Pledged Collateral
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Section
2.01.
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Holding
of Pledged Securities
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7
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Section
2.02.
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UCC
Filings
|
7
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Section
2.03.
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Withdrawal
and Substitution of Pledged Collateral
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8
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Section
2.04.
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[Reserved]
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8
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Section
2.05.
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Addition
of Pledged Collateral
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8
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Section
2.06.
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Accompanying
Documentation
|
8
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Section
2.07.
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Renewal;
Extension; Substitution
|
9
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Section
2.08.
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Voting
Rights; Interest and Principal
|
9
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Section
2.09.
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Protection
of Title; Payment of Taxes; Liens, etc
|
10
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Section
2.10.
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Maintenance
of Pledged Collateral
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11
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Section
2.11.
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Representations,
Warranties and Covenants
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11
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Section
2.12.
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Further
Assurances
|
12
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ARTICLE
III
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[Reserved]
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ARTICLE
IV
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Remedies
|
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Section
4.01.
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Events
of Default
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12
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Section
4.02.
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Remedies
upon Default
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13
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Section
4.03.
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Application
of Proceeds
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15
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Section
4.04.
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Securities
Act
|
15
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ARTICLE
V
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The
Collateral Agent
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Section
5.01.
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Certain
Duties and Responsibilities
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16
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Section
5.02.
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Certain
Rights of Collateral Agent
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17
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Section
5.03.
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Money
Held by Collateral Agent
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18
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Section
5.04.
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Compensation
and Reimbursement
|
19
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ii
Section
5.05.
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Corporate
Collateral Agent Required; Eligibility
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19
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Section
5.06.
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Resignation
and Removal; Appointment of Successor
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20
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Section
5.07.
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Acceptance
of Appointment by Successor
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20
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Section
5.08.
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Merger,
Conversion, Consolidation or Succession to Business
|
21
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ARTICLE
VI
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Miscellaneous
|
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Section
6.01.
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Notices
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21
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Section
6.02.
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Waivers;
Amendment
|
21
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Section
6.03.
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Successors
and Assigns
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22
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Section
6.04.
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Counterparts;
Effectiveness
|
22
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Section
6.05.
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Severability
|
22
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Section
6.06.
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GOVERNING
LAW
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22
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Section
6.07.
|
WAIVER
OF JURY TRIAL
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22
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Section
6.08.
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Headings
|
23
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Section
6.09.
|
Security
Interest Absolute
|
23
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Section
6.10.
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Termination
or Release
|
23
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Section
6.11.
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Collateral
Agent Appointed Attorney-in-Fact
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23
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Schedule
I – Additional Criteria for Eligible Securities
Schedule
II – Addresses for Notices
Annex A –
Form of Certificate of Pledged Collateral
PLEDGE
AGREEMENT, dated as of February 5, 2009, among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association
and its successors and assigns (hereinafter called “
National Rural
”),
FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a wholly owned
subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered
instrumentality of the United States and an institution of the Farm Credit
System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK NATIONAL ASSOCIATION, a national banking association and its successors and
assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
OF NATIONAL RURAL
WHEREAS,
National Rural may from time to time issue one or more Notes to the Purchaser,
and the Purchaser may purchase such Notes, all upon the terms and subject to the
conditions set forth in the Note Purchase Agreement; and
WHEREAS,
National Rural is required pursuant to the terms of the Note Purchase Agreement
to pledge certain property to the Collateral Agent for the benefit of the
Control Party to secure National Rural’s obligations on the Notes;
NOW,
THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of
the certain Obligations contained in the Notes, the Note Purchase Agreement and
herein, National Rural hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the benefit of the Control Party, and grants to the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, a security interest in the following (collectively referred to as the
“
Pledged
Collateral
”) as provided in Article II: (a)(i) the Pledged
Securities and the certificates representing the Pledged Securities;
(ii) subject to Section 2.08, all payments of principal or interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for, and all other Proceeds
received in respect of, the Pledged Securities pledged hereunder;
(iii) subject to Section 2.08, all rights and privileges of National
Rural with respect to the Pledged Securities; (iv) all Proceeds of any of
the foregoing above; that may, on the date hereof or from time to time
hereafter, be subjected to the Lien hereof by National Rural by delivery,
assignment or pledge thereof to the Collateral Agent hereunder and the
Collateral Agent is authorized to receive the same as additional security
hereunder (subject to any reservations, limitations or conditions agreed to in
writing by National Rural and the Control Party respecting the scope or priority
of such security or the use and disposition of such property or the Proceeds
thereof).
3
TO HAVE
AND TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, forever;
subject
,
however
, to the
terms, covenants and conditions hereinafter set forth.
ARTICLE
I
Definitions
SECTION
1.01.
Definitions.
As
used in this Pledge Agreement, the following terms shall have the following
meanings:
“Accounting
Requirements”
shall mean any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the Member or, in the absence
thereof, the requirements of GAAP applicable to businesses similar to that of
the Member.
“
Allowable Amount
” on
any date, means with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date.
“
Certificate of Pledged
Collateral
” means a certificate delivered to the Collateral Agent and the
Control Party substantially in the form of Annex A attached
hereto.
“
Class A Member
” means
any Class A Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Class B Member
” means
any Class B Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Collateral Agent
”
means the Person named as the “
Collateral Agent
” in
the first paragraph of this instrument.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Control Party Notice
”
and “
Control Party
Order
” mean, respectively, a written notice or order signed by any Vice
President of the Control Party and delivered to the Collateral Agent and
National Rural.
“
Control Party Notice of
Default
” has the meaning given to that term in
Section 4.02.
“
Depreciation and
Amortization Expense
”
shall mean an amount
constituting the depreciation and amortization of the Member computed pursuant
to Accounting Requirements.
4
“
Eligible Member
”
means any Class A Member or Class B Member of National Rural as described in
National Rural’s Bylaws currently in effect.
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million, (ii) no default has occurred in the payment of
principal or interest in accordance with the terms of such note or bond that is
continuing beyond the contractual grace period (if any) provided in such note or
bond for such payment and (iii) no “event of default” as defined in such
note or bond (or in any instrument creating a security interest in favor of
National Rural in respect of such note or bond), shall exist that has resulted
in the exercise of any right or remedy described in such note or bond (or in any
such instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto.
“
Equity
” means the
aggregate of the Member's equities and margins computed pursuant to Accounting
Requirements.
“
Event of Default
” has
the meaning set forth in Section 4.01.
“
Facility Rating
”
means the facility rating assigned by National Rural to an Eligible Security
from time to time in accordance with National Rural's internal risk rating
system.
“
GAAP
” means generally
accepted accounting principles in the United States as in effect from time to
time.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX of
the Note Purchase Agreement which is existing and continuing.
“
Interest Expense
”
means an amount constituting the interest expense with respect to Long-Term Debt
of the Member computed pursuant to Accounting Requirements.
“
Lien
” means any lien,
pledge, charge, mortgage, encumbrance, debenture, hypothecation or other similar
security interest attaching to any part of the Pledged Collateral.
“
Lien of this Pledge
Agreement
” or “
Lien hereof
” means
the Lien created by these presents.
5
“
Long-Term Debt
” is
determined in accordance with the Uniform System of Accounts prescribed at the
time by RUS or, if such Member is not required to maintain its accounts in
accordance with said Uniform System of Accounts, otherwise determined in
accordance with GAAP.
“
Member
” shall mean
any Person who is member of National Rural.
“
Modified Debt Service
Coverage Ratio—Distribution
” shall mean the definition of Coverage Ratio
as defined in the Indenture dated October 25, 2007 by and between National Rural
Utilities Cooperative Finance Corporation and U.S. Bank National Association for
the Collateral Trust Bonds.
"
Modified Debt Service
Coverage Ratio—G&T
" shall mean the ratio determined as follows: for
any calendar year add (i) Operating Margins, (ii) Non-Operating
Margins—Interest, (iii) Interest Expense, (iv) Depreciation and Amortization
Expense, and (v) cash received in respect of generation and transmission and
other capital credits, and divide the sum so obtained by the sum of all payments
of Principal and Interest Expense required to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
“
National Rural
Notice
” and “
National Rural Order
”
mean, respectively, a written notice or order signed in the name of National
Rural by either its Chief Executive Officer or its Chief Financial Officer, and
by any Vice President of National Rural, and delivered to the Collateral Agent
and the Control Party.
“
Non-Operating
Margins—Interest
” means the amount representing the interest component of
non-operating margins of the Member computed pursuant to Accounting
Requirements.
“
Note Purchase
Agreement
” means the Note Purchase Agreement dated the date hereof
between National Rural, the Purchaser and Farmer Mac, as the same may be amended
from time to time in accordance with the terms thereof.
“
Notes
” means the note
or notes issued by National Rural to the Purchaser under the Note Purchase
Agreement.
“
Obligations
” means
the due and punctual performance of the obligations of National Rural to make
payments of principal, and interest on the Notes.
6
“
Officers’
Certificate
” means a certificate signed by any Vice President of National
Rural, and delivered to the Control Party and/or the Collateral Agent, as
applicable.
“
Operating Margins
”
means the amount of patronage capital and operating margins of the Member
computed pursuant to Accounting Requirements.
“
Person
” means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
“
Pledge Agreement
”
means this Pledge Agreement, as originally executed and as it may from time to
time be amended pursuant to the applicable provisions hereof.
“
Pledged Collateral
”
has the meaning set forth in the Granting Clause.
“
Pledged Securities
”
means at any time the Eligible Securities listed on Schedule A and/or
Schedule B to the Certificate of Pledged Collateral most recently
delivered.
“
Principal
” means the
amount of principal billed on account of Long-Term Debt of the Member computed
pursuant to Accounting Requirements.
“
Proceeds
” has the
meaning specified in Section 9-102 of the Uniform Commercial
Code.
“
RUS
” mean the Rural
Utilities Service of the United States Department of Agriculture, acting by and
through the Administrator of the Rural Utilities Service, and including any
successor agencies or departments.
“
Total Assets Ratio
”
means an amount constituting the total assets of the Member computed pursuant to
Accounting Requirements.
“
Total Capitalization
Ratio
” means the Total Margins and Equity as a percentage of the sum of
((1)Total Margins and Equity plus (2) Long Term Debt).
“
Total Margins and
Equity
” means the Member’s total margins and equity computed pursuant to
Accounting Requirements.
“
Uniform Commercial
Code
” means the Uniform Commercial Code as from time to time in effect in
the District of Columbia.
“
Vice President
” means
any vice president of National Rural or Farmer Mac or the Purchaser, as
applicable, whether or not designated by a number or a word or words added
before or after the title “vice president”.
7
SECTION
1.02.
Other
Defined Terms; Principles of Construction
. Capitalized terms
used but not defined in this Pledge Agreement shall have the meanings given to
them in the Note Purchase Agreement. Unless the context shall
otherwise indicate, the terms defined in Section 1.01 hereof include the
plural as well as the singular and the singular as well as the
plural. The words “hereafter”, “herein”, “hereof”, “hereto” and
“hereunder”, and words of similar import, refer to this Agreement as a
whole. The descriptive headings of the various articles and sections
of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions
hereof.
ARTICLE
II
Provisions as to Pledged
Collateral
SECTION
2.01.
Holding of Pledged
Securities.
(a) National
Rural shall make available to the Control Party, within thirty (30) days of a
pledge of the Pledged Securities in connection with an advance (or for a longer
period as National Rural and the Control Party agree), such back-up information
as is reasonably necessary in order to allow the Control Party to confirm
compliance of such Pledged Securities to the requisite criteria as outlined
herein. Upon receipt of the back-up information, the Control Party
shall have ninety (90) days to object in writing to the inclusion of any item of
the Pledged Securities as part of the Pledged Collateral. If the
Control Party reasonably determines that any of the Pledged Securities do not
meet the criteria for Eligible Securities, then National Rural shall have thirty
(30) days in which to provide substitute collateral, and the timeline specified
above for National Rural to make available back-up material and confirmation
shall also apply as to the substituted collateral.
(b) The
Collateral Agent, on behalf of the Control Party, shall hold the Pledged
Securities in the name of National Rural (or its nominee), endorsed or assigned
in blank or in favor of the Collateral Agent. Upon occurrence of an
Event of Default, the Collateral Agent, on behalf of the Control Party, shall
have the right (in its sole and absolute discretion), to the extent a register
is maintained therefor, to register the Pledged Securities in the Collateral
Agent’s own name as pledgee, or in the name of the Collateral Agent’s nominee
(as pledgee or as sub-agent) or to continue to hold the Pledged Securities in
the name of National Rural, endorsed or assigned in blank or in favor of the
Collateral Agent. Upon cessation of such Event of Default, the
Collateral Agent shall take such action as is necessary to again cause the
Pledged Securities to be registered in the name of National Rural (or its
nominee).
SECTION
2.02.
UCC
Filings.
National Rural shall prepare and file in the proper
Uniform Commercial Code filing office in the District of Columbia (i) on or
prior to the date of the first purchase of a Note under the Note Purchaser
Agreement, a financing statement recording the Collateral Agent’s interest in
the Pledged Collateral; and (ii) from time to time thereafter, continuation
statements or such other filings as are necessary to maintain the perfection of
the Lien hereof on the Pledged Collateral.
8
SECTION
2.03.
Withdrawal and Substitution
of Pledged Collateral.
(a) Any part of the Pledged Collateral may be withdrawn by National
Rural or substituted for other Eligible Securities by National Rural and shall
be delivered to National Rural by the Collateral Agent upon National Rural Order
at any time and from time to time, together with any other documents or
instruments of transfer or assignment necessary to reassign to National Rural
said Pledged Collateral and the interest of National Rural,
provided
the
aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal
or substitution shall at least equal the aggregate principal amount of the Notes
outstanding after such withdrawal or substitution, as shown by the Certificate
of Pledged Collateral furnished to the Collateral Agent pursuant to
Subsection (b)(i) of this Section.
(b) Prior
to any such withdrawal or substitution, the Collateral Agent shall be furnished
with the following instruments:
(i) a
Certificate of Pledged Collateral, dated as of the last day of the calendar
month most recently ended at least 10 Business Days prior to such withdrawal or
substitution (or a more recent date, at National Rural’s option), showing that
immediately after such withdrawal or substitution the requirements of Subsection
(a) of this Section will be satisfied; and
(ii) an
Officers’ Certificate certifying that no Event of Default has occurred which has
not been remedied.
Upon any
such withdrawal or substitution, National Rural shall deliver any Eligible
Securities to be substituted and the Collateral Agent shall execute any
instruments of transfer or assignment specified in a National Rural Order as
necessary to vest in National Rural any part of the Pledged Collateral
withdrawn.
In case
an Event of Default shall have occurred and be continuing, National Rural shall
not withdraw or substitute any part of the Pledged Collateral.
SECTION
2.04. [Reserved.]
SECTION
2.05.
Addition of Pledged
Collateral.
At any time, National Rural may pledge additional
Eligible Securities under this Pledge Agreement by delivering such Pledged
Collateral to the Collateral Agent, accompanied by a Certificate of Pledged
Collateral specifying such additional collateral and dated as of the last day of
the calendar month most recently ended at least 10 Business Days prior thereto
(or a more recent date at National Rural’s option).
SECTION
2.06.
Accompanying
Documentation.
Where Eligible Securities are delivered to the
Collateral Agent under Section 2.01, 2.03 or Section 2.05, such securities
shall be accompanied by the appropriate instruments of transfer executed in
blank and in a form satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably
request. All other property delivered to the Collateral Agent under
Section 2.01, 2.03 or Section 2.05 and comprising part of the Pledged
Collateral shall be accompanied by proper instruments of assignment duly
executed by National Rural and such other instruments or documents as the
Collateral Agent may reasonably request.
9
SECTION
2.07.
Renewal; Extension;
Substitution.
Unless and until an Event of Default shall have
occurred and be continuing, National Rural may at any time renew or extend,
subject to the Lien of this Pledge Agreement, any Pledged Security upon any
terms or may accept in place of and in substitution for any such
Pledged Security, another Eligible Security or Securities of the same
issuer or of any successor thereto for at least the same unpaid principal
amount, all as evidenced by a National Rural Order delivered to the Collateral
Agent;
provided
,
however
, that in case
of any substitution, Eligible Securities substituted as aforesaid shall be
subject to the Lien of this Pledge Agreement as part of the Pledged Collateral
and be held in the same manner as those for which they shall be substituted, and
in the case of each substituted Eligible Security National Rural shall provide
an Officers’ Certificate certifying to the Collateral Agent that such
substituted security satisfies the requirements of this Section. So
long as no Event of Default shall have occurred and be continuing, the
Collateral Agent, upon National Rural Order stating that no Event of Default
shall have occurred and be continuing, shall execute any consent to any such
renewal, extension or substitution as shall be specified in such National Rural
Order.
SECTION
2.08.
Voting Rights; Interest and
Principal
.
(a) Unless
and until an Event of Default has occurred and is continuing, and the Control
Party delivers to the Collateral Agent a Control Party Notice of Default
suspending National Rural’s rights under this clause:
(i)
National Rural shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof
provided
that such
rights and powers shall not be exercised in any manner inconsistent with the
terms of the Note Purchase Agreement or this Pledge Agreement.
(ii) The
Collateral Agent shall execute and deliver to National Rural, or cause to be
executed and delivered to National Rural, all such proxies, powers of attorney
and other instruments as National Rural may reasonably request for the purpose
of enabling National Rural to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i)
above.
(iii)
National Rural shall be entitled to receive and retain any and all interest,
principal and other distributions paid on or distributed in respect of the
Pledged Securities;
provided
that any
non-cash interest, principal or other distributions that would constitute
Pledged Securities if pledged hereunder, and received in exchange for Pledged
Securities or any part thereof pledged hereunder, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer of Pledged Securities may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by National
Rural, shall not be commingled by National Rural with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).
10
(b) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to interest, principal or other distributions that
National Rural is authorized to receive pursuant to paragraph (a)(iii) of
this Section 2.08 shall cease, and all such suspended rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such interest, principal or
other distributions. All interest, principal or other distributions
received by National Rural contrary to the provisions of this Section 2.08
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of National Rural and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property paid
over to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in an account to be
established by the Collateral Agent upon receipt of such money or other property
and shall be applied in accordance with the provisions of Section 4.03 to
the fullest extent permitted by applicable law. After all Events of
Default have ceased, the Collateral Agent shall promptly repay to National Rural
(without interest) all interest, principal or other distributions that National
Rural would otherwise be permitted to retain pursuant to the terms of paragraph
(a)(iii) of this Section 2.08 and that remain in such account.
(c) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to exercise the voting and consensual rights and powers
it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 2.08, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 2.08, shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers;
provided
that the
Collateral Agent shall have the right from time to time during the existence of
such Event of Default to permit National Rural to exercise such rights and
powers.
SECTION
2.09.
Protection of Title; Payment
of Taxes; Liens, etc.
National Rural will:
(i) duly
and promptly pay and discharge, or cause to be paid and discharged, before they
become delinquent, all taxes, assessments, governmental and other charges
lawfully levied, assessed or imposed upon or against any of the Pledged
Collateral, including the income or profits therefrom and the interests of the
Collateral Agent in such Pledged Collateral;
11
(ii) duly
observe and conform to all valid requirements of any governmental authority
imposed upon National Rural relative to any of the Pledged Collateral, and all
covenants, terms and conditions under or upon which any part thereof is
held;
(iii)
cause to be paid and discharged all lawful claims (including, without
limitation, income taxes) which, if unpaid, might become a lien or charge upon
Pledged Collateral; and
(iv) do
all things and take all actions necessary to keep the Lien of this Pledge
Agreement a first and prior lien upon the Pledged Collateral and protect its
title to the Pledged Collateral against loss by reason of any foreclosure or
other proceeding to enforce any lien prior to or
pari
passu
with the Lien
of this Pledge Agreement.
Nothing
contained in this Section shall require the payment of any such tax,
assessment, claim, lien or charge or the compliance with any such requirement so
long as the validity, application or amount thereof shall be contested in good
faith;
provided
,
however
, that
National Rural shall have set aside on its books such reserves (segregated to
the extent required by generally accepted accounting principles) as shall be
deemed adequate with respect thereto as determined by the Board of Directors of
National Rural (or a committee thereof).
SECTION
2.10.
Maintenance of Pledged
Collateral.
National Rural shall cause the Allowable Amount of
Pledged Collateral held by the Collateral Agent at all times to be not less than
100% of the aggregate principal amount of the Notes outstanding.
SECTION
2.11.
Representations, Warranties
and Covenants.
National Rural represents, warrants and
covenants to the Collateral Agent, for the benefit of the Control Party, that
from the time that Pledged Collateral is pledged hereunder, and for so long as
such Pledged Collateral is required to remain pledged:
(a)
except for the Lien hereof and any Lien consented to in writing by Farmer Mac or
the Control Party, National Rural (i) is and will continue to be the direct
owner, beneficially and of record, of the Pledged Securities from time to time
pledged hereunder, (ii) holds and will continue to hold the same free and
clear of all Liens, other than Liens created by this Pledge Agreement,
(iii) will make no assignment, pledge, hypothecation or transfer of, or
create or permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than Liens created by this Pledge Agreement and (iv) will
defend its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Pledge Agreement), however arising, of all Persons
whomsoever;
12
(b)
except for restrictions and limitations imposed by the Note Purchase Agreement
or securities laws generally, the Pledged Securities are and will continue to be
freely transferable and assignable, and none of the Pledged Securities are or
will be subject to any restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Securities hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Collateral
Agent of rights and remedies hereunder;
(c)
National Rural has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;
(d) no
consent or approval of any governmental authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and effect);
and
(e) by
virtue of the execution and delivery by National Rural of this Pledge Agreement,
when any Pledged Securities are delivered to the Collateral Agent in accordance
with this Pledge Agreement, the Collateral Agent will obtain a legal and valid
Lien upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations.
SECTION
2.12.
Further
Assurances.
National Rural will execute and deliver, or cause
to be executed and delivered, all such additional instruments and do, or cause
to be done, all such additional acts as (a) may be necessary or proper,
consistent with the Granting Clause hereof, to carry out the purposes of this
Pledge Agreement and to make subject to the Lien hereof any property intended so
to be subject or (b) may be necessary or proper to transfer to any
successor the estate, powers, instruments and funds held hereunder and to
confirm the Lien of this Pledge Agreement. National Rural will also
cause to be filed, registered or recorded any instruments of conveyance,
transfer, assignment or further assurance in all offices in which such filing,
registering or recording is necessary to the validity thereof or to give notice
thereof.
ARTICLE
III
[Reserved]
ARTICLE
IV
Remedies
SECTION
4.01.
Events of
Default.
“
Event of Default
”,
wherever used herein, means any “Event of Default” as defined in
Section 7.01(a) of the Note Purchase Agreement,
provided
that, for
the purposes of this Pledge Agreement:
(a) the
Collateral Agent shall not be required to recognize that an Event of Default
exists before such time as the Collateral Agent receives a Control Party Notice
or National Rural Notice stating that an Event of Default exists and specifying
the particulars of such default in reasonable detail; and
13
(b) the
Collateral Agent shall not be required to recognize that an Event of Default has
ceased until (i) such time as the Collateral Agent receives a Control Party
Notice stipulating that such event has ceased to exist; or (ii) 30 days after
receipt by the Collateral Agent of a National Rural Notice stipulating that such
event has ceased to exist,
provided
that the
Collateral Agent does not receive a Control Party Notice within such timeframe
disputing the cessation of such Event of Default, and
further provided
that
no additional Control Party Notice of Default shall have been received in
respect of any other subsisting Event(s) of Default. Upon receipt of
any National Rural Notice under subparagraph (ii) of this Subsection, the
Collateral Agent shall provide a copy of such National Rural Notice to the
Control Party.
SECTION
4.02.
Remedies upon
Default.
If an Event of Default shall have occurred and be
continuing, the Control Party may issue a notice (a “
Control Party Notice of
Default
”), which may be combined with the notice provided under
Section 4.01(b), suspending the rights of National Rural under
Section 2.08 in part without suspending all such rights (as specified by
the Control Party in its sole and absolute discretion) without waiving or
otherwise affecting the Control Party’s rights to give additional Control Party
Notices of Default from time to time suspending other rights under
Section 2.08
so long as an Event of
Default has occurred and is continuing. Subject to paragraph (b) of
this Section 4.02, upon cessation of an Event of Default, all rights of
National Rural suspended under the applicable Control Party Notice of Default
shall revest in National Rural.
(a) Upon
the occurrence of an Event of Default, the Collateral Agent shall, for the
benefit and at the direction of the Control Party, have the right to exercise
any and all rights afforded to a secured party under the Uniform Commercial Code
or other applicable law. Without limiting the generality of the
foregoing, National Rural agrees that the Collateral Agent shall have the right,
but only if so instructed by a the Control Party Order and subject to the
requirements of applicable law and the Collateral Agent’s right (in its sole and
absolute discretion) to receive indemnification or other reasonable assurances
that its costs and expenses in connection therewith will be paid, to sell or
otherwise dispose of all or any part of the Pledged Collateral at a public or
private sale or at any broker’s board or on any securities exchange, for cash,
upon credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such
sale of securities (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Pledged Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Pledged Collateral so
sold. Each such purchaser at any sale of Pledged Collateral shall
hold the property sold absolutely, free from any claim or right on the part of
National Rural, and National Rural hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which National Rural now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
14
(b) The
Collateral Agent shall give National Rural 10 days’ written notice (which
National Rural agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of Pledged
Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker’s board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix and state in the notice (if
any) of such sale. At any such sale, the Pledged Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any
sale of any Pledged Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of such Pledged Collateral shall have been
given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Pledged
Collateral is made on credit or for future delivery, the Pledged Collateral so
sold may be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. At any public
(or, to the extent permitted by law, private) sale made pursuant to this Pledge
Agreement, the Control Party may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay, valuation or appraisal on
the part of National Rural (all said rights being also hereby waived and
released to the extent permitted by law), the Pledged Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
claim then due and payable to the Control Party from National Rural as a credit
against the purchase price, and the Control Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to Pledged Collateral therefor. For purposes hereof, a
written agreement to purchase the Pledged Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and National Rural shall not be
entitled to the return of the Pledged Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Pledge Agreement and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this
Section 4.02 shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-610(b) of the Uniform Commercial Code or
its equivalent in other jurisdictions.
15
SECTION
4.03.
Application of
Proceeds.
The Collateral Agent shall apply the proceeds of any
collection or sale of Pledged Collateral, including any Pledged Collateral
consisting of cash, as follows to the fullest extent permitted by applicable
law:
FIRST, to
the payment of all reasonable costs and expenses incurred by the Collateral
Agent in connection with or reasonably related or reasonably incidental to such
collection or sale or otherwise in connection with or related or incidental to
this Pledge Agreement or any of the Obligations, including all court costs and
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Collateral Agent (in its sole discretion) hereunder
on behalf of National Rural and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
SECOND,
to the payment to
the Control Party
in full of the Obligations
;
such payment to be for an amount certified in a
Control Party
Notice delivered to the Collateral Agent as being the amount due and owing to
the Control
Party
under the Obligations; and
THIRD, to
National Rural, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any
sale of the Pledged Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Pledged Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of
any part of the purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.
SECTION
4.04.
Securities Act
.
In
view of the position of National Rural in relation to the Pledged Collateral, or
because of other current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being called the “
Federal Securities
Laws
”) with respect to any disposition of the Pledged Collateral
permitted hereunder. National Rural understands that compliance with
the Federal Securities Laws might very strictly limit the course of conduct of
the Collateral Agent if the Collateral Agent were to attempt to dispose of all
or any part of the Pledged Collateral, and might also limit the extent to which
or the manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions
or limitations affecting the Collateral Agent in any attempt to dispose of all
or part of the Pledged Collateral under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or
effect. National Rural recognizes that in light of such restrictions
and limitations the Collateral Agent may, with respect to any sale of the
Pledged Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Collateral for their own account, for
investment, and not with a view to the distribution or resale
thereof. National Rural acknowledges and agrees that in light of such
restrictions and limitations, the Collateral Agent, in its sole and absolute
discretion (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Collateral or
part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a single potential purchaser to effect
such sale. National Rural acknowledges and agrees that any such sale
might result in prices and other terms less favorable to the seller than if such
sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 4.04 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
16
ARTICLE
V
The Collateral
Agent
SECTION
5.01.
Certain Duties and
Responsibilities.
(a) At all times under this
Pledge Agreement:
(i) the
Collateral Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Pledge Agreement, and no implied covenants or
obligations shall be read into this Pledge Agreement against the Collateral
Agent; and
(ii) in
the absence of bad faith on its part, the Collateral Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Collateral
Agent and substantially conforming to the requirements of this Pledge Agreement;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Collateral Agent the
Collateral Agent shall be under a duty to examine the same to determine whether
or not they substantially conform to the requirements of this Pledge
Agreement.
(b) No
provision of this Pledge Agreement shall be construed to relieve the Collateral
Agent from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except
that:
(i) this
Subsection shall not be construed to limit the effect of Subsection (a) of this
Section;
17
(ii) the
Collateral Agent shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Collateral Agent was grossly negligent
in ascertaining the pertinent facts; and
(iii) no
provision of this Pledge Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(c) Whether
or not therein expressly so provided, every provision of this Pledge Agreement
relating to the conduct or affecting the liability of or affording protection to
the Collateral Agent shall be subject to the provisions of this
Section.
SECTION
5.02.
Certain Rights of Collateral
Agent.
Except as otherwise provided in
Section 5.01:
(a) the
Collateral Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any
request or direction of National Rural mentioned herein shall be sufficiently
evidenced by a National Rural Notice or National Rural Order;
(c) any
request or direction of the Control Party mentioned herein shall be sufficiently
evidenced by a Control Party Notice or Control Party Order;
(d)
whenever in the administration of this Pledge Agreement the Collateral Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Collateral Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers’ Certificate in the case of National Rural, and
a certificate signed by any Vice President of the Control Party in the case of
the Control Party;
(e) the
Collateral Agent may consult with counsel and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(f) the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Pledge Agreement at the request or direction of
either National Rural or the Control Party pursuant to this Pledge Agreement,
unless such party shall have offered to the Collateral Agent reasonable security
or indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
18
(g) the
Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Collateral Agent, in its sole and
absolute discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Collateral Agent shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of National Rural, personally or by agent or
attorney;
(h) the
Collateral Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Collateral Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(i)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no duty to inquire as to the performance of National Rural’s covenants
herein. In addition, the Collateral Agent shall not be deemed to have
knowledge of any Event of Default unless the Collateral Agent has received a
Control Party Notice in accordance with Section 4.01(a), and shall not be
deemed to have knowledge of the cessation of the same until such time as it
receives a National Rural Notice in accordance with Section 4.01(b);
and
(j)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no obligation to take any action with respect to any Event of Default until it
has received a Control Party Notice applicable to such event in accordance with
Section 4.01(a), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable Control Party Notice is
delivered. Similarly, the Collateral Agent shall have no obligation
to take any action with respect to the cessation of an Event of Default until it
has received a National Rural Notice applicable to such event in accordance in
accordance with Section 4.01(b), and the Collateral Agent shall have no
liability for any action or inaction taken, suffered or omitted in respect of
any such event by it prior to such time as the applicable National Rural Notice
is delivered.
SECTION
5.03.
Money
Held by Collateral Agent.
Money held by the Collateral Agent
hereunder need not be segregated from other funds except to the extent required
by law. The Collateral Agent shall have no liability to pay interest
on or (except as expressly provided herein) invest any such
moneys.
19
SECTION
5.04.
Compensation and
Reimbursement.
(a) National Rural
agrees:
(i) to
pay to the Collateral Agent from time to time such reasonable compensation for
all services rendered by it hereunder as shall have been set forth in an
agreement signed by National Rural;
(ii)
except as otherwise expressly provided herein, to reimburse the Collateral Agent
upon its request for all reasonable expenses, out-of-pocket costs, disbursements
and advances incurred or made by the Collateral Agent in accordance with any
provision of this Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the extent
any such expense, disbursement or advance may be attributable to its gross
negligence or bad faith; and
(iii) to
indemnify the Collateral Agent for, and to defend and hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Pledge Agreement or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent such loss, liability or expense may be
attributable to its gross negligence or bad faith;
provided
,
however
, that
National Rural shall have no liability under this clause for any settlement of
any litigation or other dispute effected without the prior written consent of
National Rural (such consent not to be unreasonably withheld).
(b) Any
such amounts payable as provided hereunder shall be additional Obligations
secured by the Lien hereof. The provisions of this Section 5.04
shall remain operative and in full force and effect regardless of the
termination of this Pledge Agreement or the Note Purchase Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Pledge Agreement or the Note Purchase Agreement, or any investigation made
by or on behalf of the Collateral Agent or the Control Party. All
amounts due under this Section 5.04 shall be payable on written demand
therefor.
SECTION
5.05.
Corporate Collateral Agent
Required; Eligibility.
There shall at all times be a
Collateral Agent hereunder which shall be a corporation or association organized
and doing business under the laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. Neither National Rural nor
any Person directly or indirectly controlling, controlled by or under common
control with National Rural shall serve as Collateral Agent
hereunder. If at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
20
SECTION
5.06.
Resignation and Removal;
Appointment of Successor.
(a) No resignation or
removal of the Collateral Agent and no appointment of a successor Collateral
Agent pursuant to this Article shall become effective until the acceptance of
appointment by the successor Collateral Agent under
Section 5.07.
(b) The
Collateral Agent may resign at any time by giving written notice thereof to
National Rural. If an instrument of acceptance by a successor
Collateral Agent shall not have been delivered to the Collateral Agent within 30
days after the giving of such notice of resignation, the resigning Collateral
Agent may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent.
(c) If
at any time:
(i)
except if an Event of Default has occurred and is continuing, National Rural, in
its sole and absolute discretion, elects to remove the Collateral Agent;
or
(ii) the
Collateral Agent shall cease to be eligible under Section 5.05 or shall
become incapable of acting or shall be adjudged a bankrupt or insolvent or a
receiver of the Collateral Agent or of its property shall be appointed or any
public officer shall take charge or control of the Collateral Agent or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in
any such case, National Rural may remove the Collateral Agent by delivery of a
National Rural Order to that effect.
(d) If
the Collateral Agent shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Collateral Agent for any cause,
National Rural shall promptly appoint a successor Collateral Agent by delivering
a National Rural Notice to the retiring Collateral Agent, the successor
Collateral Agent and the Control Party to such effect.
SECTION
5.07.
Acceptance of Appointment by
Successor.
Every successor Collateral Agent appointed
hereunder shall execute, acknowledge and deliver to National Rural, the Control
Party and to the retiring Collateral Agent an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Collateral
Agent shall become effective and such successor Collateral Agent, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Collateral Agent; but, on request of
National Rural, the Control Party or the successor Collateral Agent, such
retiring Collateral Agent shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Collateral Agent all the
rights, powers and trusts of the retiring Collateral Agent, and shall duly
assign, transfer and deliver to such successor Collateral Agent all property and
money held by such retiring Collateral Agent hereunder, subject nevertheless to
its Lien, if any, provided for in Section 5.04. Upon request of
any such successor Collateral Agent, National Rural shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Collateral Agent all such rights, powers and
trusts.
21
No
successor Collateral Agent shall accept its appointment unless at the time of
such acceptance such successor Collateral Agent shall be eligible under
Section 5.05 hereof.
SECTION
5.08.
Merger, Conversion,
Consolidation or Succession to Business.
Any corporation into
which the Collateral Agent may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Collateral Agent, shall be the successor of the Collateral Agent hereunder,
provided such corporation shall be eligible under Section 5.05 hereof
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
ARTICLE
VI
Miscellaneous
SECTION
6.01.
Notices.
All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule II attached hereto
as appropriate. The address, telephone number, or facsimile number
for any party may be changed at any time and from time to time upon written
notice given by such changing party to the other parties hereto. A properly
addressed notice or other communication shall be deemed to have been delivered
at the time it is sent by facsimile (fax) transmission to the party or parties
to which it is given.
(a) All
National Rural Notices and National Rural Orders delivered to the Collateral
Agent shall be contemporaneously copied to the Control Party by National Rural;
all Control Party Notices and Control Party Orders delivered to the Collateral
Agent shall be contemporaneously copied by Farmer Mac to National Rural; and all
Collateral Agent notices delivered to either National Rural or Farmer Mac shall
be contemporaneously copied to the other such party by the Collateral
Agent.
SECTION
6.02.
Waivers;
Amendment.
(a) No failure or delay by a party in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies that such party would
otherwise have. No waiver of any provision of this Pledge Agreement
or consent to any departure by any party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this
Section 6.02, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on any party in any case shall entitle any party to any other or
further notice or demand in similar or other
circumstances.
22
(b) Neither
this Pledge Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by National Rural, the Collateral Agent, the Purchaser and Farmer
Mac.
SECTION
6.03.
Successors and
Assigns.
Whenever in this Pledge Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of National Rural, the Collateral Agent, the Purchaser, the Control Party
or Farmer Mac that are contained in this Pledge Agreement shall bind and inure
to the benefit of their respective successors and assigns.
SECTION
6.04.
Counterparts;
Effectiveness.
This Pledge Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract. Delivery of an
executed signature page to this Pledge Agreement by facsimile transmission shall
be as effective as delivery of a manually signed counterpart of this Pledge
Agreement.
SECTION
6.05.
Severability.
Any
provision of this Pledge Agreement held to be invalid, illegal or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions hereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction. The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION
6.06.
GOVERNING
LAW.
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO
THE EXTENT APPLICABLE, AND OTHERWISE THE LAWS OF THE STATE OF NEW
YORK.
SECTION
6.07.
WAIVER OF JURY
TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.07.
23
SECTION
6.08.
Headings.
Article
and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Pledge Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Pledge Agreement.
SECTION
6.09.
Security Interest
Absolute.
All rights of the Collateral Agent and/or the
Control Party hereunder, the grant of a security interest in the Pledged
Collateral and all obligations of National Rural hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of
the Note Purchase Agreement, any Note, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Note Purchase Agreement, any
Note or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
National Rural in respect of the Obligations or this Pledge
Agreement.
SECTION
6.10.
Termination or
Release.
(a) This Pledge Agreement shall terminate
on the date when the Obligations have been indefeasibly paid in full, and at
such time the Lien hereof shall be released.
(b) Upon
any withdrawal, substitution or other disposal by National Rural of any Pledged
Collateral that is permitted by the terms of this Pledge Agreement, or upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Pledged Collateral, the Lien hereof securing such Pledged
Collateral shall be automatically released.
(c) In
connection with any termination or release pursuant to paragraph (a) or (b)
the Collateral Agent shall deliver to National Rural the Pledged Collateral and
shall execute and deliver to National Rural, at National Rural’s expense, all
documents that National Rural shall reasonably request to evidence such
termination or release. Any execution and delivery of documents
pursuant to this Section 6.10 shall be without recourse to or warranty by
the Collateral Agent.
24
SECTION
6.11.
Collateral Agent Appointed
Attorney-in-Fact.
National Rural hereby appoints the
Collateral Agent the attorney-in-fact of National Rural for the purpose of, upon
the occurrence and during the continuance of an Event of Default, carrying out
the provisions of this Pledge Agreement with respect to the Pledged Collateral
and taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest but is subject nevertheless to the
terms and conditions of this Pledge Agreement. Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent’s name or in the name of National
Rural (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Pledged Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or
any of the Pledged Collateral; (c) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Pledged
Collateral or to enforce any rights in respect of any Pledged Collateral;
(d) to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Pledged Collateral; (e) to
notify, or to require National Rural to notify, obligors under Pledged
Securities to make payment directly to the Collateral Agent; and
(f) subject to the second sentence of Section 4.02(a), to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Pledged Collateral, and to do all other acts and things
necessary to carry out the purposes of this Pledge Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Pledged
Collateral for all purposes;
provided
that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the
Control Party shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to
National Rural for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
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by
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Name:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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by
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Name:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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U.S.
BANK NATIONAL ASSOCIATION,
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By
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Name:
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Title:
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SCHEDULE I
TO
PLEDGE
AGREEMENT
ADDITIONAL
CRITERIA FOR ELIGIBLE SECURITIES
1
Criteria for Eligible
Security of Class A Eligible Member
: Each Class A Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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·
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Long-Term
Debt to Net Utility Plant Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available,
does not exceed 90%.
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·
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Modified
Debt Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.35.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 20%.
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·
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The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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Criteria for Eligible
Security of Class B Eligible Member
: Each Class B Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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·
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Equity
to Total Capitalization Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available, is
greater than or equal to 25%.
|
|
·
|
Modified
Debt Service Coverage Ratio—G&T, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.10.
|
|
·
|
Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 10%.
|
|
·
|
The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
|
1
The
criteria set forth on this Schedule I shall be required to be satisfied only as
of the date of pledge of (1) any Pledged Securities that is being pledged for a
new advance or (2) any Pledged Securities that is being pledged for an existing
advance which is in substitution of, or in addition to, existing collateral, and
such criteria shall not be required to be satisfied with respect to Eligible
Securities after such date.
SCHEDULE II
TO
PLEDGE
AGREEMENT
Addresses for
Notices
|
The
addresses referred to in Section 6.01 hereof, for purposes of
delivering communications and notices, are as
follows:
|
If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133
21
st
Street N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention:
Timothy L. Buzby, Vice President/Controller
If to
Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President/Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
SCHEDULE II
TO
PLEDGE
AGREEMENT
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
If to the
Collateral Agent:
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005-3701
Telephone: (212)
361-2893
Fax: (212)
509-3384
Attention
of: Beverly A. Freeney
ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF FEBRUARY 5, 2009
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer) and ____________________,
Vice-President, respectively, of National Rural Utilities Cooperative Finance
Corporation, hereby certify to the Control Party and the Collateral Agent under
the above-mentioned Pledge Agreement as amended to the date hereof (herein
called the “Pledge Agreement”) as follows:
1.
|
The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule
A
hereto, is
|
|
$
|
|
|
|
|
|
|
|
|
2.
|
The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule
B
hereto, is
|
|
$
|
|
|
|
|
|
|
|
|
3.
|
The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
|
|
$
|
|
|
|
|
|
|
|
|
4.
|
The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
|
|
$
|
|
|
|
|
|
|
|
|
5.
|
The
sum of amounts in items 3 and 4 is
|
|
$
|
|
|
|
|
|
|
|
|
6.
|
The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (item 1
plus 2 and minus 5) is
|
|
$
|
|
|
|
|
|
|
|
|
7.
|
The
Allowable Amount of Pledged Collateral which is included in items 1
and 2 above from Class B Eligible Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by
National Rural or any affiliate to Farmer Mac or any affiliate; (3) sold
by National Rural or any affiliate to Farmer Mac or any affiliate; or (4)
sold to any trust whose beneficial ownership is owned or controlled by
Farmer Mac or an affiliate.
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
8.
|
To
the knowledge of the undersigned, each Eligible Security from Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
|
|
|
|
|
|
9.
|
To
the knowledge of the undersigned, each Eligible Security from Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
|
|
|
|
|
|
10.
|
So
far as is known to the undersigned, no Event of Default
exists.
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated: _____________________
|
|
|
|
OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable Amount (Item 1)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable Amount (Item 2)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
_______________________________
FIRST
AMENDMENT TO PLEDGE AGREEMENT
_______________________________
Dated
as of September 23, 2009
FIRST
AMENDMENT TO PLEDGE AGREEMENT
FIRST
AMENDMENT TO PLEDGE AGREEMENT, dated as of September 23, 2009, among NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a District of Columbia
cooperative association and its successors and assigns (hereinafter called
“
National
Rural
”), FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a
wholly owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK NATIONAL ASSOCIATION, a national banking association and its successors and
assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
WHEREAS,
the Purchaser, National Rural, Farmer Mac, and the Collateral Agent are parties
to a certain Pledge Agreement dated as of February 5, 2009 (“Pledge Agreement”);
and
WHEREAS,
the parties have agreed to modify the Pledge Agreement as set forth
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser, National Rural and the Collateral Agent agree as
follows:
1.
Recitals
. The
foregoing Recitals are hereby incorporated by reference into this
Amendment.
2.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Pledge Agreement.
3.
Amendment
.
(a) The
Pledge Agreement is hereby amended by deleting the definition of Allowable
Amount in Section 1.01 in its entirety and replacing it with the
following:
“
Allowable Amount
” on
any date means, with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date, subject to any limitation on the Allowable Amount
applicable through the definition of “Eligible Security.”
(b) The
Pledge Agreement is hereby amended by deleting the definition of Eligible
Security in Section 1.01 in its entirety and replacing it with the
following:
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million; provided, however, that a note or bond in
excess of $35 million may be pledged hereunder but up to $35 million principal
amount of such note or bond (considered together with any other note or bond of
such Eligible Member pledged hereunder or pledged to secure any other notes or
bonds issued by National Rural to Farmer Mac or any affiliate or sold by
National Rural or any affiliate to Farmer Mac, any affiliate or any trust whose
beneficial ownership is owned or controlled by Farmer Mac) shall be counted in
the Allowable Amount of such Eligible Security (with the amount of any such
excess recorded in Item 7 of the Certificate of Pledged Collateral in the form
of
Annex A
attached hereto), (ii) no default has occurred in the payment of principal or
interest in accordance with the terms of such note or bond that is continuing
beyond the contractual grace period (if any) provided in such note or bond for
such payment and (iii) no “event of default” as defined in such note or
bond (or in any instrument creating a security interest in favor of National
Rural in respect of such note or bond), shall exist that has resulted in the
exercise of any right or remedy described in such note or bond (or in any such
instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto, as such Schedule I may be amended from time to time as mutually agreed
upon in writing by Farmer Mac and National Rural, with notice of any such
amendment to the Collateral Agent prior to the pledge of such Eligible
Security.
(c) The
Pledge Agreement is hereby amended by deleting Section 2.01(a) in its entirety
and replacing it with the following:
(a) National
Rural shall make available to the Control Party, within forty-five (45) days of
a pledge of the Pledged Securities in connection with an advance (or for a
longer period as National Rural and the Control Party agree), such back-up
information as is reasonably necessary in order to allow the Control Party to
confirm compliance of such Pledged Securities to the requisite criteria as
outlined herein. Upon receipt of the back-up information, the Control
Party shall have ninety (90) days to object in writing to the inclusion of any
item of the Pledged Securities as part of the Pledged Collateral. If
the Control Party reasonably determines that any of the Pledged Securities do
not meet the criteria for Eligible Securities, then National Rural shall have
forty-five (45) days in which to provide substitute collateral, and the timeline
specified above for National Rural to make available back-up material and
confirmation shall also apply as to the substituted collateral.
(d) The
Pledge Agreement is hereby amended by adding new Section 2.11(f) as
follows:
(f) the
Allowable Amount of Pledged Collateral from Class B Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by National
Rural or any affiliate to Farmer Mac or any affiliate; (3) sold by National
Rural or any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
(e) The
Pledge Agreement is hereby amended by deleting Annex A to the Pledge Agreement
in its entirety and replacing it with Annex A attached to this
Amendment.
4.
GOVERNING
LAW
. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
5.
Inconsistency with
Pledge
Agreement
. Except as otherwise amended or modified herein, the
terms, conditions and provisions of the Pledge Agreement remain in full force
and effect. In the event of any conflict or inconsistency between the
terms of this Amendment and the Pledge Agreement, the terms of this Amendment
shall control.
6.
Counterparts
. This
Amendment may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed as of the day and
year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION
|
|
|
By:
|
|
Title:
|
|
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
|
|
|
By:
|
|
Title:
|
|
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
|
|
|
By:
|
|
Title:
|
|
U.S.
BANK NATIONAL ASSOCIATION
|
|
|
By:
|
|
Title:
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF FEBRUARY 5, 2009
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer or Controller) and
____________________, Vice-President, respectively, of National Rural Utilities
Cooperative Finance Corporation, hereby certify to the Control Party and the
Collateral Agent under the above-mentioned Pledge Agreement as amended to the
date hereof (herein called the “Pledge Agreement”) as follows:
1.
|
The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule A
hereto, is
|
|
$
|
|
|
|
|
|
|
|
|
2.
|
The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule B
hereto, is
|
|
$
|
|
|
|
|
|
|
|
|
3.
|
The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
|
|
$
|
|
|
|
|
|
|
|
|
4.
|
The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
|
|
$
|
|
|
|
|
|
|
|
|
5.
|
The
sum of amounts in items 3 and 4 is
|
|
$
|
|
|
|
|
|
|
|
|
6.
|
The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (the sum
of items 1 and 2 minus item 5) is
|
|
$
|
|
|
|
|
|
|
|
|
7.
|
The
cumulative amount by which each Eligible Security listed on
Schedule A or Schedule B exceeds $35 million is
|
|
$
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
8.
|
The
Allowable Amount of Pledged Collateral which is included in items 1 and 2
above from Class B Eligible Members does not constitute more than 20% of
the aggregate amount of any notes or bonds: (1) pledged hereunder; (2)
pledged to secure any other notes or bonds issued by National Rural or any
affiliate to Farmer Mac or any affiliate; (3) sold by National Rural or
any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
|
|
|
|
|
|
|
|
|
|
|
9.
|
To
the knowledge of the undersigned, each Eligible Security from a Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
|
|
|
|
|
|
10.
|
To
the knowledge of the undersigned, each Eligible Security from a Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
11.
|
So
far as is known to the undersigned, no Event of Default
exists.
|
|
|
|
|
|
|
|
|
|
|
12.
|
To
the extent an Eligible Security listed on Schedule A or Schedule B
has an outstanding principal amount of more than $35 million, the
Allowable Amount of Pledged Collateral set forth in items 1 and 2 above
reflects only $35 million with respect to such Eligible Security (or
a lesser amount representing the difference between $35 million and
the aggregate amount of any notes or bonds of the same Eligible Member
pledged or sold to Farmer Mac or any affiliate in any previous
transaction), with any excess above $35 million (or the lesser
amount) reflected in item 7 above.
|
|
|
|
|
|
|
|
|
|
|
13.
|
Each
Eligible Member whose notes are Pledged Securities has received or is
eligible to receive a loan or commitment for a loan from RUS or any
successor agency.
|
|
|
|
|
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated: _____________________
|
|
|
|
OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable
Amount (Item 1)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable
Amount (Item 2)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
EXHIBIT
10.30
February
5, 2009
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
Virginia 20171
Re:
Setoff Rights under Note
Purchase Agreement
Ladies
and Gentlemen:
In
connection with that certain Note Purchase Agreement, dated as of the date
hereof (the “
Agreement
”), by and
among National Rural Utilities Cooperative Finance Corporation (“
National Rural
” or
“
Borrower
”),
Farmer Mac Mortgage Securities Corporation (“
Purchaser
”), and
Federal Agricultural Mortgage Corporation (“
Guarantor
”), National
Rural has agreed, in the event of a payment default by National Rural on the
Notes, to grant the Control Party certain rights of setoff against amounts due
and owing to National Rural on any Series C Preferred Stock, par value $1,000
per share (the “
Preferred Stock
”), of
Guarantor. Capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Agreement.
Borrower,
Guarantor and Purchaser hereby agree that in the event of, and only in the event
of, a payment Event of Default by Borrower pursuant to Section 7.01(a) of the
Agreement (“
Payment
Default
”), the Control Party shall have the right, at the Control Party’s
sole option and discretion, to setoff any amounts due to Borrower in respect of
Guarantor’s Preferred Stock, whether in respect of dividends, redemption,
liquidation or otherwise (the “
Preferred Payments
”),
and to apply the Preferred Payments on a dollar-for-dollar basis against the
amount of Borrower’s Payment Default. Such setoff amount by the
Control Party shall not exceed the amount of Borrower’s Payment Default, and
under no circumstances shall Borrower be liable to Purchaser or the Guarantor in
connection with the transactions described herein for any amount in excess of
the principal amount of the Notes plus interest, as provided in the
Agreement. Borrower’s amount due under the Notes shall be satisfied
and discharged to the extent of, but only to the extent of, the Control Party’s
effective setoff. If no Payment Default by Borrower has occurred,
however, the Guarantor shall have no right to setoff or otherwise withhold the
Preferred Payments from Borrower. The Control Party shall provide
Borrower with notice of, and reasonably detailed back up information with
respect to, any setoff effected by the Control Party under this letter
agreement.
The
rights of the Control Party herein shall be in addition to, and not in
substitution or limitation of, any other rights and remedies available to the
Control Party, whether such rights or remedies arise pursuant to law, the
Agreement or any other agreement between the parties.
[SIGNATURE
PAGE FOLLOWS]
Please
acknowledge your acceptance of the foregoing terms by executing this letter
agreement in the space below, whereupon this agreement shall constitute a valid
agreement binding upon Purchaser and Borrower.
|
Very
truly yours,
|
|
|
|
FARMER
MAC MORTGAGE SECURITIES CORPORATION
|
|
|
|
By:
|
|
|
|
Name: Tom
D. Stenson
|
|
|
Title: Vice
President
|
|
|
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
|
|
|
|
By:
|
|
|
|
Name: Michael
A. Gerber
|
|
|
Title: Acting
President and CEO
|
|
|
ACKNOWLEDGED
AND AGREED:
|
|
|
|
NATIONAL
RURAL UTILITIES
|
|
COOPERATIVE
FINANCE CORPORATION
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
EXHIBIT
10.31
FARMER
MAC MORTGAGE SECURITIES CORPORATION
as
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
as
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
as
Guarantor
NOTE
PURCHASE AGREEMENT
Dated
as of March 23, 2009
TABLE OF
CONTENTS
|
Page
|
|
|
RECITALS
|
1
|
|
|
ARTICLE
I DEFINITIONS
|
1
|
SECTION
1.01.
Definitions
|
1
|
SECTION
1.02.
Principles
of Construction
|
4
|
|
|
ARTICLE
II PURCHASE OF NOTES
|
4
|
SECTION
2.01.
Purchase
of Notes; Minimum Denominations
|
4
|
SECTION
2.02.
Interest
Rates and Payment
|
5
|
SECTION
2.03.
Maturity
|
6
|
SECTION
2.04.
Use
of Proceeds
|
6
|
|
|
ARTICLE
III CONDITIONS PRECEDENT
|
6
|
SECTION
3.01.
Conditions
Precedent to the Purchase of Each
Note
|
6
|
SECTION
3.02.
Certificate
of Pledged Collateral
|
7
|
|
|
ARTICLE
IV REPORTING REQUIREMENTS
|
7
|
SECTION
4.01.
Annual
Reporting Requirements
|
7
|
SECTION
4.02.
Default
Notices
|
7
|
|
|
ARTICLE
V REPRESENTATIONS OF THE PARTIES
|
8
|
SECTION
5.01.
Representations
of Farmer Mac and the Purchaser
|
8
|
SECTION
5.02.
Representations
of National Rural
.
|
8
|
|
|
ARTICLE
VI SECURITY AND COLLATERAL
|
10
|
SECTION
6.01.
Security
and Collateral
|
10
|
|
|
ARTICLE
VII EVENTS OF DEFAULT
|
10
|
SECTION
7.01.
Events
of Default
|
10
|
SECTION
7.02.
Acceleration
|
11
|
SECTION
7.03.
Remedies
Not Exclusive
|
11
|
|
|
ARTICLE
VIII MISCELLANEOUS
|
12
|
SECTION
8.01.
GOVERNING
LAW
|
12
|
SECTION
8.02.
WAIVER
OF JURY TRIAL
|
12
|
SECTION
8.03.
Notices
|
12
|
SECTION
8.04.
Benefit
of Agreement
|
12
|
SECTION
8.05.
Entire
Agreement
|
12
|
SECTION
8.06.
Amendments
and Waivers
|
12
|
SECTION
8.07.
Counterparts
|
13
|
SECTION
8.08.
Termination
of Agreement
|
13
|
SECTION
8.09.
Survival
|
13
|
SECTION
8.10.
Severability
|
13
|
ARTICLE
IX GUARANTEE
|
13
|
SECTION
9.01.
Guarantee
.
|
13
|
SECTION
9.02.
Control
by the Guarantor
.
|
14
|
|
|
Schedule
I – Addresses for Notices
|
|
Schedule
II – Form of Applicable Margin Notice
|
|
Schedule
III – Form of Pricing Agreement
|
|
|
|
Annex
A– Form of Floating Rate Note
|
|
Annex
B – Opinion of Counsel to National Rural
|
|
Annex
C – Officers’ Certificate
|
|
NOTE
PURCHASE AGREEMENT
NOTE
PURCHASE AGREEMENT, dated as of March 23, 2009, among FARMER MAC MORTGAGE
SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS
National Rural wishes from time to time to issue and sell Notes to the
Purchaser, and the Purchaser wishes from time to time to purchase such Notes
from National Rural, in order to refinance the notes issued pursuant to that
certain Note Purchase Agreement between Farmer Mac and National Rural dated as
of March 27, 2008 (the “
Original NPA
”), all
on the terms and subject to the conditions herein provided; and
WHEREAS
Farmer Mac is an instrumentality of the United States formed to provide for
a secondary marketing arrangement for agricultural real estate mortgages;
National Rural is a non-profit cooperative and Farmer Mac, the Purchaser and
National Rural have agreed that the Notes will be secured by the pledge of notes
for borrowings from National Rural by members of National Rural, as provided
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01.
Definitions
. As
used in this Agreement, the following terms shall have the following
meanings:
“
Agreement
” means this
Note Purchase Agreement, as the same may be amended from time to
time.
“
Applicable Margin
”
means the margin to be added to the LIBOR Rate to determine the rate of interest
payable on the Floating Rate Notes from time to time. The Applicable
Margin shall be communicated in writing by Farmer Mac to National Rural in
accordance with Section 2.02(d) hereof, in the form of Schedule II hereof, and
calculated by Farmer Mac as follows: (i) Farmer Mac’s Cost of Funds (expressed
in relation to the LIBOR Rate), plus 0.75%, minus (ii) the LIBOR
Rate. The Applicable Margin for any Floating Rate Note shall be set
forth in the applicable Pricing Agreement.
“
Business Day
” means
any day other than a Saturday, a Sunday, or a day on which any of the Federal
Reserve Bank of New York, Farmer Mac’s office in Washington, DC or National
Rural’s office in Virginia is not open for business.
“
Certificate of Pledged
Collateral
” has the meaning given to that term in the Pledge
Agreement.
“
Closing Date
” means
the date of the funding of each issuance of Notes hereunder, which date shall be
set forth in the applicable Pricing Agreement.
“
Collateral Agent
”
means U.S. Bank National Association, or its successor, as collateral agent
under the Pledge Agreement.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Dollar
” or “
$
” means the lawful
money of the United States of America.
“
Eligible Member
” has
the meaning given to that term in the Pledge Agreement.
“
Event of Default
” has
the meaning given to that term in Section 7.01.
“
Farmer Mac’s Cost of
Funds
” means the cost of funds quoted by Farmer Mac to National Rural
based on Farmer Mac’s estimate of the economic cost to obtain cash funds from
the wholesale funding market by issuing unsecured medium-term notes to fully
fund to maturity the Note or Notes purchased by Purchaser from National
Rural.
“
Final Maturity Date
”
means April 1, 2014.
“
Financial
Statements
”, in respect of a Fiscal Year, means the consolidated
financial statements (including footnotes) of National Rural for that Fiscal
Year as audited by independent certified public accountants selected by National
Rural.
“
Fiscal Year
” means
the fiscal year of National Rural, as such may be changed from time to time,
which at the date hereof commences on June 1 of each calendar year and ends on
May 31 of the following calendar year.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX
which is existing and continuing.
“
Interest Payment
Date
” means the first (1
st
) day of
each January, April, July and October, unless other dates are agreed by the
parties hereto; provided, however, that if any such date is not a Business Day,
such Interest Payment Date that would otherwise be such date will be the next
Business Day following such date. The Interest Payment Dates will be
set forth in the applicable Pricing Agreement.
“
Interest Period
”
means,
until all outstanding principal amount of the Notes and interest accrued thereon
have been paid in full, each 3-month period comprising a calendar quarter from
and including the first day of a calendar quarter (i.e., January 1
st
, April
1
st
,
July 1
st
and
October 1
st
)
(unless another period is agreed by the parties hereto and set forth in the
applicable Pricing Agreement) to and including the last day of the same calendar
quarter (i.e., March 31
st
, June
30
th
,
September 30
th
and
December 31
st
)
(unless otherwise agreed by the parties hereto and set forth in a Pricing
Agreement);
provided
, that the initial Interest Period means the period from and
including the date of issuance to and excluding the first Interest Payment
Date following the date of issuance;
provided, further
,
that if any Interest Period would end on a day other than a Business Day, then
such Interest Period shall be extended to and include the next succeeding
Business Day and the next Interest Period shall commence on the next succeeding
day.
“
LIBOR Rate
” shall
mean, for any Interest Period, the rate appearing on Reuters Page LIBOR01 (or on
any successor or substitute page of such service, or if the Reuters service
ceases to be available, any successor to or substitute for such service
providing rate quotations comparable to those currently provided on such page of
such service, as mutually agreed by National Rural and Farmer Mac from time to
time for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) as of 11:00 a.m., London time, on the
day that is two London Banking Days prior to the commencement of such Interest
Period, as the rate for the offering of Dollar deposits with a maturity of three
months (unless another maturity is agreed by the parties hereto and set forth in
the applicable Pricing Agreement). Such rate shall apply for the
initial Interest Period for any advance notwithstanding that such initial
Interest Period for an advance may be shorter than three months.
“
London Banking Day
”
shall mean any day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealings in foreign
exchange and foreign currency deposits) in the Dollar, in London,
England.
“
Member
” shall mean
any Person who is member of National Rural.
“
National Rural
Notice
” has the meaning given to that term in the Pledge
Agreement.
“
Notes
” means one or
more noncallable floating rate notes of National Rural payable to the Purchaser,
having the terms provided for in Article II of this Agreement and otherwise in
the form of Annex A attached hereto, except to the extent Farmer Mac and
National Rural may have approved changes therein, or any other notes with terms
determined by the parties pursuant to the terms of a Pricing
Agreement.
“
Note Documents
” means
the Notes, this Agreement, and the Pledge Agreement.
“
Notice of Borrowing
”
has the meaning set forth in Section 2.01 hereof.
“
Original Note
” means
the note in the original principal amount of $400 million issued to Farmer Mac
pursuant to the Original NPA.
“
Original
NPA
” has the meaning set forth in the Recitals
hereof.
“
Person
” means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“
Pledge Agreement
”
means the Pledge Agreement dated as of the date hereof, among National Rural,
the Purchaser, Farmer Mac and the Collateral Agent.
“
Pledged Collateral
”
has the meaning given to that term in the Pledge Agreement.
“
Pledged Securities
”
has the meaning given to that term in the Pledge Agreement.
“
Pricing Agreement
”
means the Pricing Agreement for each issuance of Notes among Farmer Mac, the
Purchaser and National Rural in the form of Schedule III attached
hereto.
SECTION
1.02.
Principles of
Construction
. Unless
the context shall otherwise indicate, the terms defined in Section 1.01
hereof include the plural as well as the singular and the singular as well as
the plural. The words “hereafter”, “herein”, “hereof”, “hereto” and
“hereunder”, and words of similar import, refer to this Agreement as a
whole. The descriptive headings of the various articles and sections
of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions
hereof.
ARTICLE
II
PURCHASE
OF NOTES
SECTION
2.01.
Purchase of Notes; Minimum
Denominations
. The
Purchaser agrees to purchase Notes, at 100% of their principal amount, from time
to time, on or before the Final Maturity Date, as requested by National Rural by
written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes outstanding
hereunder at any one time, not in excess of $400 million, subject to
satisfaction of the conditions set forth herein. National Rural may
borrow, repay and reborrow funds at any time or from time to time up to, but not
including, the Final Maturity Date. Each advance under this Agreement
shall be disbursed in a minimum amount of $50 million and additional increments
of $5 million in excess thereof, or such other amounts as agreed to in the
applicable Pricing Agreement. Each advance shall price within 3
Business Days of National Rural providing a Notice of Borrowing to Farmer Mac
and shall close and fund within 3 Business Days of pricing, subject to
satisfaction of the conditions set forth herein and in accordance with the
procedures set forth in Section 2.02(d) hereof, unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing
Agreement.
SECTION
2.02.
Interest Rates and
Payment
.
(a)
Each
Note shall bear interest, payable quarterly in arrears unless otherwise agreed
by the parties hereto and set forth in the applicable Pricing Agreement, on the
outstanding principal amount thereof (computed on the basis of a 360-day year
and the actual number of days elapsed) from its date of issuance until final
payment on the maturity date thereof or otherwise at a variable rate per annum
equal to the LIBOR Rate for each Interest Period plus the Applicable
Margin. The LIBOR Rate shall reset as of the first day of each
Interest Period. The (i) initial LIBOR Rate and (ii) Applicable
Margin for the term of each Note shall be specified in the applicable Pricing
Agreement. Interest only shall be payable on each Interest Payment
Date. The Interest Payment Dates shall be determined at the time of
an advance and set forth in the applicable Pricing Agreement. The
principal amount of each Note, together with any accrued but unpaid interest,
shall be due and payable on the maturity date for such Note.
(b)
Default
Interest
. To the extent any payment of interest or principal
is not paid when due, interest shall continue to accrue thereon at the
applicable rate per annum determined as provided above plus one
percent.
(c)
Notice of Borrowing;
Determination of
Applicable Margin; Procedure
for Pricing
.
(i) Each
Notice of Borrowing shall indicate the amount of the Note, the type of Note and
the desired maturity date of such Note that National Rural requests to be
advanced. A Notice of Borrowing may request preliminary pricing
indications for more than one type of Note, with the understanding that only one
type of Note will be issued on any particular Closing Date, unless otherwise
agreed by the parties hereto in a Pricing Agreement. Each Notice of
Borrowing shall also provide name, telephone and email contact information of an
authorized representative of National Rural.
(ii)
Upon receipt of a Notice of
Borrowing from National Rural, Farmer Mac shall, within 2 Business Days, provide
to National Rural a preliminary indication of the Applicable Margin applicable
to any Notice of Borrowing. Upon an acceptance of such preliminary
indication of pricing by National Rural, the applicable Note will price within
one Business Day (and may price on the day of the preliminary pricing if the
parties so agree) thereafter, unless the parties otherwise agree to a longer
period of time as set forth in the applicable Pricing
Agreement. Farmer Mac shall provide National Rural with written
notice of the final Applicable Margin no later than the time of pricing of each
advance. National Rural shall be deemed to approve of such pricing so
long as the Applicable Margin shall not exceed the preliminary indication by
more than 5 basis points (0.05%). If the final pricing does exceed
the preliminary indication by more than 5 basis points (0.05%), an authorized
representative of National Rural must agree via email confirmation prior to or
simultaneously with the pricing to accept such margin.
(d)
Payments and
Prepayments
. Each Note shall not be prepayable during the term
of such Note, unless otherwise set forth in the Pricing Agreement.
(e)
Payment
Notice
. Farmer Mac shall send to National Rural, not later
than the fifth Business Day prior to an Interest Payment Date for any Note, a
notice setting forth the amount of principal and interest, as applicable, due
and owing on the next Interest Payment Date for such Note.
SECTION
2.03.
Maturity
. The
Notes will mature on the date set forth in the applicable Pricing Agreement and
in any event no later than the Final Maturity Date.
SECTION
2.04.
Use of
Proceeds
. The proceeds of the Notes issued hereunder shall be
used (i) to repay amounts outstanding under the Original NPA or (ii) for general
corporate purposes; provided, however, that the aggregate principal amount
outstanding under the Original Note and the Notes issued hereunder shall not
exceed $400 million at any time. Notwithstanding anything contained in the
Original NPA, Farmer Mac shall not require that interest on the Original Note be
paid to the next interest payment date under the Original NPA so long as
interest on such Original Note is paid to the Closing Date of the Note being
purchased hereunder.
ARTICLE
III
CONDITIONS
PRECEDENT
SECTION
3.01.
Conditions Precedent to the
Purchase of Each Note
. On
each Closing Date, the Purchaser shall be under no obligation to purchase any
Note unless and until the following conditions have been satisfied:
(a)
The
Notes
. Farmer Mac shall have received the original of such
Notes, duly executed on behalf of National Rural, in the applicable form
attached as Annex A hereto, or otherwise in a form agreed by the
parties.
(b)
The Pledge
Agreement
. Farmer Mac shall have received an original of the
Pledge Agreement duly executed on behalf of National Rural and the Collateral
Agent.
(c)
Opinion of
Counsel
. Farmer Mac shall have received an opinion of counsel
to National Rural substantially in the form of Annex B, attached
hereto.
(d)
Financial and Other
Information
. National Rural shall have provided Farmer Mac
with its most recent Financial Statements and such other information concerning
National Rural as Farmer Mac shall have reasonably requested.
(e)
No Material Adverse
Change
. National Rural shall have certified to Farmer Mac (in
the manner specified in paragraph (i) of this Section 3.01), and Farmer Mac
shall be satisfied, that no material adverse change shall have occurred in the
financial condition or business of National Rural between the end of National
Rural’s most recently completed Fiscal Year for which Financial Statements have
been made publicly available and the date of the purchase of such Note, which
has not been set forth in documents, certificates or financial information
furnished to Farmer Mac or publicly filed.
(f)
UCC
Filing
. National Rural shall have provided Farmer Mac with
evidence that National Rural has filed the financing statement required pursuant
to Section 2.02(i) of the Pledge Agreement.
(g)
No Event of
Default
. National Rural shall have certified to Farmer Mac and
Farmer Mac shall be satisfied that no Event of Default shall have occurred and
be continuing.
(h)
Certification of Senior
Management
. National Rural shall have provided Farmer Mac a
certification by any vice president of National Rural, substantially in the form
of Annex C attached hereto, as to the following: (i) that National Rural is
a lending institution organized as a private, not-for-profit, cooperative
association with the appropriate expertise, experience and qualifications to
make loans to its Members for rural electrification and related purposes; (ii)
the matters to be certified under paragraphs (e) and (g) of this
Section 3.01; and (iii) the representations and warranties of National
Rural.
SECTION
3.02.
Certificate of Pledged
Collateral
. No
later than three Business Days after each advance hereunder, National Rural
shall provide Farmer Mac and the Collateral Agent a copy of a Certificate of
Pledged Collateral, dated as of the last day of the calendar month most recently
ended at least 10 Business Days prior to such authentication and delivery, or a
more recent date, at National Rural’s option, in accordance with the terms of
the Pledge Agreement.
ARTICLE
IV
REPORTING
REQUIREMENTS
SECTION
4.01.
Annual Reporting
Requirements
. So
long as any Notes remain outstanding, National Rural shall provide Farmer Mac
with the following items within 90 days of the end of each Fiscal Year, in each
case, in form and substance satisfactory to Farmer Mac:
(a)
the
Financial Statements for such Fiscal Year;
(b)
a
Certificate of Pledged Collateral;
(c)
a
receipt from the Collateral Agent, or such other evidence as is satisfactory to
Farmer Mac, as to the Pledged Collateral held by the Collateral Agent at the end
of such Fiscal Year; and
(d)
such
other information concerning National Rural as is reasonably requested by Farmer
Mac.
SECTION
4.02.
Default
Notices
. If
an action, occurrence or event shall happen that is, or with notice and the
passage of time would become, an Event of Default, National Rural shall deliver
a National Rural Notice of such action, occurrence or event to Farmer Mac before
4:00 p.m. (District of Columbia time) on the Business Day following the
date National Rural becomes aware of such action, occurrence or event, and, if
such Event of Default should occur, shall submit to Farmer Mac, within five days
thereafter, a report setting forth its views as to the reasons for the Event of
Default, the anticipated duration of the Event of Default and what corrective
actions National Rural is taking to cure such Event of Default.
ARTICLE
V
REPRESENTATIONS
OF THE PARTIES
SECTION
5.01.
Representations of Farmer
Mac and the Purchaser
. Each
of Farmer Mac and the Purchaser jointly and severally represent to National
Rural that on the date hereof and on each date on which the Purchaser purchases
a Note from National Rural:
(a)
it
has all necessary authority and has taken all necessary corporate action, and
obtained all necessary approvals, in order for it to execute and deliver all
Note Documents to which it is a party and for its obligations and agreements
under the Note Documents to constitute valid and binding obligations of Farmer
Mac and the Purchaser; and in particular the terms of the transaction, and the
actions taken by Farmer Mac and the Purchaser, are in compliance with and in
satisfaction of the requirements of the Farm Credit Administration, as amended
or waived by the Farm Credit Administration; and
(b)
The
Purchaser is purchasing the Notes for its own account and not with a view to the
distribution thereof, provided that the disposition by Farmer Mac or the
Purchaser of their property shall at all times be within their
control. Farmer Mac and the Purchaser each understands that the Notes
have not been registered under the Act and may be resold only if an exemption
from registration is available.
SECTION
5.02.
Representations of National
Rural
.
National
Rural hereby represents to Farmer Mac and the Purchaser that on the date hereof
and on each date on which the Purchaser purchases a Note from National
Rural:
(a)
National
Rural has been duly organized and is validly existing and in good standing as a
cooperative association under the laws of the District of Columbia;
(b)
National
Rural has the corporate power and authority to execute and deliver this
Agreement, each of the other Note Documents and the applicable Pricing
Agreement, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder;
(c)
National
Rural has taken all necessary corporate and other action to authorize the
execution and delivery of this Agreement, each of the other Note Documents and
the applicable Pricing Agreement, the consummation by National Rural of the
transactions contemplated hereby and thereby and the performance by National
Rural of its obligations hereunder and thereunder;
(d)
this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
have been duly authorized, executed and delivered by National Rural and
constitute the legal, valid and binding obligations of National Rural,
enforceable against National Rural in accordance with their respective terms,
subject to: (i) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws of general applicability relating to or affecting
creditors’ rights generally; and (ii) the application of general principles
of equity regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(e)
no
approval, consent, authorization, order, waiver, exemption, variance,
registration, filing, notification, qualification, license, permit or other
action is now, or under existing law in the future will be, required to be
obtained, given, made or taken, as the case may be, with, from or by any
regulatory body, administrative agency or governmental authority having
jurisdiction over National Rural or any third party under any agreement to which
National Rural is a party to authorize the execution and delivery by National
Rural of this Agreement, any of the other Note Documents or the applicable
Pricing Agreement, or the consummation by National Rural of the transactions
contemplated hereby or thereby or the performance by National Rural of its
obligations hereunder or thereunder;
(f)
neither
the execution or delivery by National Rural of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement, nor the consummation by
National Rural of any of the transactions contemplated hereby or thereby nor the
performance by National Rural of its obligations hereunder or thereunder,
including, without limitation, the pledge of the Pledged Securities (as such
term is defined in the Pledge Agreement) to Farmer Mac, conflicts with or will
conflict with, violates or will violate, results in or will result in a breach
of, constitutes or will constitute a default under, or results in or will result
in the imposition of any lien or encumbrance pursuant to any term or provision
of the articles of incorporation or the bylaws of National Rural or any
provision of any existing law or any rule or regulation currently applicable to
National Rural or any judgment, order or decree of any court or any regulatory
body, administrative agency or governmental authority having jurisdiction over
National Rural or the terms of any mortgage, indenture, contract or other
agreement to which National Rural is a party or by which National Rural or any
of its properties is bound;
(g)
there
is no action, suit, proceeding or investigation before or by any court or any
regulatory body, administrative agency or governmental authority presently
pending or, to the knowledge of National Rural, threatened with respect to
National Rural, this Agreement, any of the other Note Documents or the
applicable Pricing Agreement, challenging the validity or enforceability of this
Agreement, any of the other Note Documents or the applicable Pricing Agreement,
or seeking to restrain, enjoin or otherwise prevent National Rural from engaging
in its business as currently conducted or the consummation by National Rural of
the transactions contemplated by this Agreement, any of the other Note Documents
or the applicable Pricing Agreement, or which, if adversely determined, would
have a material adverse effect on National Rural’s financial condition or its
ability to perform its obligations under this Agreement, any of the other Note
Documents or the applicable Pricing Agreement;
(h)
National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification purposes;
and
(i)
no
material adverse change has occurred in the financial condition or business of
National Rural between the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date this representation is given which has not been set forth in documents,
certificates or financial information furnished to Farmer Mac or publicly
filed.
ARTICLE
VI
SECURITY
AND COLLATERAL
SECTION
6.01.
Security and
Collateral
.
(a)
National
Rural shall cause the Allowable Amount of the Pledged Collateral (as such terms
are defined in the Pledge Agreement) to be at all times not less than 100% of
the aggregate outstanding principal amount of the Notes.
(b)
National
Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage,
encumbrance, debenture, hypothecation or other similar security instrument that
secures, or in any way attaches to, such Pledged Collateral, other than the lien
of the Pledge Agreement, without the prior written consent of Farmer
Mac.
(c)
The
Pledged Securities will at all times be notes issued to National Rural by
Eligible Members (as defined in the Pledge Agreement).
ARTICLE
VII
EVENTS OF
DEFAULT
SECTION
7.01.
Events of
Default
. Each
of the following actions, occurrences or events shall, but only (except in the
case of subsections (a), (d) and (e) below) if National Rural does not cure such
action, occurrence or event within 30 days of notice from Farmer Mac
requesting that it be cured, constitute an “
Event of Default
”
under the terms of this Agreement:
(a)
a
failure by National Rural to make a payment of principal or interest on any Note
for more than ten days after the same becomes due and payable;
(b)
a
material representation by National Rural to Farmer Mac in connection with this
Agreement, any Note or the Pledge Agreement, or any material information
reported pursuant to Article V, shall prove to be incorrect or untrue in any
material respect when made or deemed made;
(c)
a
failure by National Rural to comply with any other material covenant or
provision contained in this Agreement or any of the other Note
Documents;
(d)
the
entry of a decree or order by a court having jurisdiction in the premises
adjudging National Rural a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or
in respect of National Rural under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of National Rural or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
(e)
the
commencement by National Rural of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or the
consent by it to the filing of any such petition or to the appointment of
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
National Rural or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking of
corporate action by National Rural in furtherance of any such
action.
SECTION
7.02.
Acceleration
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
may, upon notice to that effect to National Rural, declare the entire principal
amount of, and accrued interest on, the Notes at the time outstanding to be
immediately due and payable.
SECTION
7.03.
Remedies Not
Exclusive
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
shall be entitled to take such other action as is provided for by law, in this
Agreement, or in any of the other Note Documents, including injunctive or other
equitable relief.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.01.
GOVERNING
LAW
. EXCEPT
AS SET FORTH IN SECTION 9.01 HEREOF, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
SECTION
8.02.
WAIVER OF JURY
TRIAL
. EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.02.
SECTION
8.03.
Notices
. All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto
as appropriate except as otherwise provided herein. The address,
telephone number, or facsimile number for any party may be changed at any time
and from time to time upon written notice given by such changing party to the
other parties hereto. A properly addressed notice or other
communication shall be deemed to have been delivered at the time it is sent by
facsimile (fax) transmission to the party or parties to which it is
given.
SECTION
8.04.
Benefit of
Agreement
. This
Agreement shall become effective when it shall have been executed by Farmer Mac,
the Purchaser and National Rural, and thereafter shall be binding upon and inure
to the respective benefit of the parties and their permitted successors and
assigns.
SECTION
8.05.
Entire
Agreement
. This
Agreement, including the Schedules and Annexes hereto, and the other Note
Documents, constitute the entire agreement between the parties hereto concerning
the matters contained herein and supersede all prior oral and written agreements
and understandings between the parties.
SECTION
8.06.
Amendments and
Waivers
.
(a)
No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Purchaser and National
Rural. No provision of this Agreement may be waived except in writing
by the party or parties receiving the benefit of and under such
provision.
(b)
No
failure or delay of Farmer Mac, the Purchaser or National Rural in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. No waiver of any provision of this Agreement or consent to any
departure by National Rural therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (a) of this
Section 8.06, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on National Rural in any case shall entitle National Rural to any
other or further notice or demand in similar or other
circumstances.
SECTION
8.07.
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
8.08.
Termination of
Agreement
. This
Agreement shall terminate upon the indefeasible payment in full of all amounts
payable hereunder and under the Notes.
SECTION
8.09.
Survival
. The
representations and warranties of each of the parties hereto contained in this
Agreement and contained in each of the other Note Documents, and the parties’
obligations under any and all thereof, shall survive and shall continue in
effect following the execution and delivery of this Agreement, any disposition
of the Notes and the expiration or other termination of any of the other Note
Documents, but, in the case of each Note Document, shall not survive the
expiration or the earlier termination of such Note Document, except to the
extent expressly set forth in such Note Document.
SECTION
8.10.
Severability
. If
any term or provision of this Agreement or any Note Document or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or such provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms or provisions of
such Note Document or the application of such term or provision to circumstances
other than those as to which it is held invalid or unenforceable.
ARTICLE
IX
GUARANTEE
SECTION
9.01.
Guarantee
.
(a)
The
Guarantor agrees to pay in full to the holder of each Note, the principal of,
and interest on, the Notes when due, whether at maturity, upon redemption or
otherwise (the “
Guaranteed
Obligations
”), on the applicable due date for such
payment.
(b)
The
Guarantor’s obligations hereunder shall inure to the benefit of and shall be
enforceable by any holder of a Note if, for reason beyond the control of such
holder, such holder shall have failed to receive the interest or principal, as
applicable, payable to such holder any payment date, redemption date or stated
maturity date. The Guarantor hereby irrevocably agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
legality or enforceability of, or any change in or amendment to, this Agreement,
the Pledge Agreement or any Note, the absence of any action to enforce the same,
the waiver or consent by the holder of any Note or by the Collateral Agent with
respect to any provisions of this Agreement or the Pledge Agreement, or any
action to enforce the same or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor. The Guarantor hereby waives diligence, presentment, demand
of payment, protest or notice with respect to each Note or the interest
represented thereby, and all demands whatsoever, and covenants that the
guarantee will not be discharged except upon complete irrevocable payment of the
principal and interest obligations represented by the Notes.
(c)
The
Guarantor shall be subrogated to and is hereby assigned all rights of the holder
of the Notes against National Rural and the proceeds of the Pledged Collateral,
all in respect of any amounts paid by the Guarantor pursuant to the provisions
of the guarantee contained in this Article IX. Each holder shall
execute and deliver to the Guarantor in each holder’s name such instruments and
documents as the Guarantor may reasonably request in writing confirming or
evidencing such subrogation and assignment.
(d)
No
reference herein shall alter or impair the guarantee, which is absolute and
unconditional, of the due and punctual payment of principal of, and interest on,
the Notes, on the dates such payments are due.
(e)
The
guarantee is not an obligation of, and is not a guarantee as to principal or
interest by the Farm Credit Administration, the United States or any other
agency or instrumentality of the United States (other than the
Guarantor).
(f)
The
guarantee shall be governed by, and construed in accordance with, Federal
law. To the extent Federal law incorporates state law, that state law
shall be the laws of the District of Columbia applicable to contracts made and
performed therein.
SECTION
9.02.
Control by the
Guarantor
.
If the
Guarantor is the Control Party, the Guarantor shall be considered the holder of
all Notes outstanding for all purposes under the Pledge Agreement and shall be
permitted to take any and all actions permitted to be taken by the holder
thereunder. The Control Party will have the sole right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Collateral Agent or any holder with respect to the Notes or exercising any
power conferred on the Collateral Agent with respect to the Notes provided
that:
(i)
such direction shall not be
in conflict with any rule of law or with the Pledge Agreement;
(ii)
the Collateral Agent shall
have been provided with indemnity from the Control Party reasonably satisfactory
to it; and
(iii)
the Collateral Agent may
take any other action deemed proper by such Collateral Agent that is not
inconsistent with such direction, provided, however, that the Collateral Agent
need not take any action which it determines might expose it to
liability.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by
an authorized officer as of the day and year first above written.
FARMER
MAC MORTGAGE SECURITIES
CORPORATION,
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By:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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By:
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Title:
|
|
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By:
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Title:
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SCHEDULE
I
TO
NOTE
PURCHASE AGREEMENT
Addresses
for Notices
1.
|
The
addresses referred to in Section 8.03 hereof, for purposes of
delivering communications and notices, are as
follows:
|
If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President and Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Robert Owens/Jitin Singhal, Capital Markets Group
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6748
Fax: 703-709-6779
Attention
of: John Suter, Vice President, Capital Market Funding
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
SCHEDULE
II
TO
NOTE
PURCHASE AGREEMENT
FORM
OF
APPLICABLE
MARGIN NOTICE
Issuer Name:
National Rural Utilities
Cooperative Finance Corporation
Date
of Note(s): __________________________
Type
of Note: ____________________________
Applicable
Margin: ________________________
Effective
Date of Applicable Margin: _________________________
This
Applicable Margin Notice is delivered pursuant to the Note Purchase Agreement,
dated as of March 23, 2009 among Federal Agricultural Mortgage Corporation,
Farmer Mac Mortgage Securities Corporation and National Rural Utilities
Cooperative Finance Corporation (the “Note Purchase
Agreement”). Capitalized terms used but not defined herein shall have
the meanings given to them in the Note Purchase Agreement.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
By:
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Signature
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Date
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Title
of Authorized
Officer
|
Name: _____________________
ACCEPTED
BY:
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
By:
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Signature
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Date
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Title
of Authorized Officer
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SCHEDULE
III
TO
NOTE
PURCHASE AGREEMENT
FORM OF
PRICING AGREEMENT
The
Federal Agricultural Mortgage Corporation, a federally chartered instrumentality
of the United States and an institution of the Farm Credit System (“Farmer
Mac”), Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of
Farmer Mac (the “Purchaser”) and National Rural Utilities Cooperative Finance
Corporation, a cooperative association existing under the laws of the District
of Columbia (“National Rural”), agree that, on _______ __, 20__ (the “Closing
Date”), the Purchaser will purchase from National Rural and National Rural will
sell to the Purchaser $________________ aggregate principal amount of [Floating
Rate Notes][specify other type of Notes] (the “Notes”) with the following
terms:
[Initial
LIBOR Rate: _______]
Applicable
Margin:__________
Interest
Payment Dates:___________
Interest
Periods:_____________
[The
Notes may not be prepaid at any time.]
Maturity
Date: __________________
The
issuance and sale of the Notes by National Rural to the Purchaser shall occur
under the terms and conditions of the Note Purchase Agreement, dated as of March
23, 2009, among Farmer Mac, the Purchaser and National Rural (the “Note Purchase
Agreement”). All of the provisions contained in the Note Purchase
Agreement are hereby incorporated by reference in their entirety and shall be
deemed to be a part of this Pricing Agreement to the same extent as if such
provisions had been set forth in full herein. Capitalized terms used
herein and not defined herein shall have the meanings given to those terms in
the Note Purchase Agreement. This Pricing Agreement may be executed
in two or more counterparts.
In the
event of any inconsistency between the terms of this Pricing Agreement and the
Note Purchase Agreement, the terms of this Pricing Agreement shall
apply.
Agreed to
this __ day of _______, 20__.
Federal
Agricultural Mortgage Corporation,
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By:
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Name:
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Title:
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Farmer
Mac Mortgage Securities Corporation,
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By:
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Name:
|
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Title:
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National
Rural Utilities Cooperative
|
Finance
Corporation,
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By:
|
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Name:
|
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Title:
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[FORM OF
NOTE]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Floating
Rate [__-Year] Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of March 23, 2009, as
well as the Pricing Agreement for $__ [Floating Rate] Notes dated as of
_________ __, 20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of March 23, 2009, among National
Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:
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ANNEX
B
[FORM OF
OPINION OF COUNSEL TO NATIONAL RURAL]
[•]
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, NW
Suite
600
Washington,
DC 20036
Gentlemen:
I am
delivering this opinion as general counsel (“Counsel”) of National Rural
Utilities Cooperative Finance Corporation, a District of Columbia cooperative
association (the “Borrower”), and am familiar with matters pertaining to the
loan to Borrower in the principal amount of $400,000,000.00, provided for
in the Note Purchase Agreement, dated as of March 23, 2009 (“Note
Purchase Agreement”), among the Borrower, Farmer Mac Mortgage Securities
Corporation (the “Purchaser”) and Federal Agricultural Mortgage Corporation
(“Farmer Mac”).
I have
examined such corporate records and proceedings of the Borrower, and such other
documents as I have deemed necessary as a basis for the opinions hereinafter
expressed.
I have
also examined the following documents as executed and delivered: (a) the Note
Purchase Agreement; (b) the Note dated as of ____________, in the principal
amount of $____________ (“Note”), said Note payable to the Purchaser;
(c) the Pricing Agreement for $__________ Notes dated as of ____________
among the Borrower, the Purchaser and Farmer Mac (the “Pricing Agreement”) and
(d) the Pledge Agreement, dated as of March 23, 2009, among the Borrower, the
Purchaser, Farmer Mac and U.S. Bank National Association (the “Pledge
Agreement”). The documents described in items (a) through (d) above
are collectively referred to herein as the “Note Documents.”
Based on
the foregoing, but subject to the assumptions, exceptions, qualifications and
limitations hereinafter expressed, I am of the opinion that:
(1) The
Borrower has been duly incorporated and is validly existing as a cooperative
association in good standing under the laws of the District of Columbia with
corporate power and authority to execute and perform its obligations under the
Note Documents.
(2) The
Note Documents have been duly authorized, executed and delivered by the
Borrower, and such documents constitute the legal, valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
(3) Neither
the execution nor the delivery by the Borrower of any of the Note Documents nor
the consummation by the Borrower of any of the transactions contemplated
therein, including, without limitation, the pledge of the Pledged Securities (as
such term is defined in the Pledge Agreement) to Farmer Mac, nor the fulfillment
by the Borrower of the terms of any of the Note Documents will conflict with or
violate, result in a breach of or constitute a default under any term or
provision of the Articles of Incorporation or By-laws of the Borrower or any law
or any regulation or any order known to Counsel currently applicable to the
Borrower of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Borrower or the terms of any indenture, deed
of trust, note, note agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its properties is bound.
(4) No
approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency
or body having jurisdiction over the Borrower is required for any consummation
by the Borrower of the transactions contemplated by the Note Documents;
provided
,
however
, no opinion
is expressed as to the applicability of any Federal or state securities law to
any sale, transfer or other disposition of the Note after the date
hereof.
(5) Except
as set forth in writing and previously delivered to Farmer Mac or attached
hereto as Exhibit A, there is no pending or, to Counsel’s knowledge, threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator with respect to the Borrower, or any of the Note
Documents, which, if adversely determined, would have a material adverse effect
on the Borrower’s financial condition or its ability to perform its obligations
under any of the Note Documents.
(6) With
respect to the Pledged Securities in the Certificate of Pledged Collateral (as
such term is defined in the Pledge Agreement), (x) all action with respect to
the recording, registering or filing of financing statements in the jurisdiction
of organization of National Rural has been taken as is necessary to perfect the
security interest intended to be created in such items under the Uniform
Commercial Code and (y) in the case of each Eligible Security (as such term is
defined in the Pledge Agreement) constituting a certificated security or
instrument under the Uniform Commercial Code, such Eligible Security has been
delivered to the Collateral Agent such that the taking and retention of the
possession by the Collateral Agent of such Eligible Security is sufficient to
perfect the security interest to be created under the Uniform Commercial
Code. For purposes of the opinion set forth in this section (6), I
have assumed that the Uniform Commercial Code of the District of Columbia is the
same as that of the State of New York.
The foregoing opinions are subject to
the following assumptions, exceptions, qualifications and
limitations:
A. I
am a member of the Bar of the District of Columbia and render no opinion on the
laws of any jurisdiction other than the laws of the District of Columbia, the
federal laws of the United States of America and the General Corporation Law of
the District of Columbia.
B. My
opinions are limited to the present laws and to the facts, as they presently
exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph A above be
changed by legislative action, judicial decision or otherwise.
C. The
opinions expressed in paragraph 2 above shall be understood to mean only that if
there is a default in performance of an obligation, (i) if a failure to pay or
other damage can be shown and (ii) if the defaulting party can be brought into a
court which will hear the case and apply the governing law, then, subject to the
availability of defenses, and to the exceptions set forth in the next paragraph,
the court will provide a money damage (or perhaps injunctive or specific
performance) remedy.
D. My
opinions are also subject to the effect of: (1) bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
creditors’ rights (including, without limitation, the effect of statutory and
other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers); and (2) the exercise of judicial discretion and the
application of principles of equity, good faith, fair dealing, reasonableness,
conscionability and materiality (regardless of whether the applicable agreements
are considered in proceeding in equity or at law).
E. This
letter is rendered to you in connection with the Note Documents and the
transactions related thereto, and may not be relied upon by any other person or
by you in any other context or for any other purpose.
F. I
have assumed with your permission (i) the genuineness of all signatures by each
party other than the Borrower, (ii) the authenticity of documents submitted to
me as originals and the conformity to authentic original documents of all
documents submitted to me as copies, and (iii) the due execution and delivery,
pursuant to due authorization, of the Note Documents by each party other than
the Borrower.
Yours
sincerely,
John J.
List
General
Counsel
ANNEX
C
[FORM OF
OFFICERS’ CERTIFICATE]
Officers’
Certificate
TO: Federal
Agricultural Mortgage Corporation.
We,
_________________, _________________, and ________________,
_____________________, of National Rural Utilities Cooperative Finance
Corporation (“
National
Rural
”), pursuant to the Note Purchase Agreement dated as of March 23,
2009, among National Rural, Farmer Mac Mortgage Securities Corporation, and
Federal Agricultural Mortgage Corporation (the “
Note Purchase
Agreement
”), hereby certify on behalf of National Rural that as at the
date hereof:
(1) National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification and
related purposes;
(2) no
material adverse change has occurred in the financial condition of National
Rural between the date of the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date hereof, which has not been set forth in documents, certificates, or
financial information furnished to Farmer Mac or publicly filed;
(3) all
of the representations contained in Section 5.02 of the Note Purchase Agreement
remain true and correct in all material respects on and as of the date hereof;
and
(4) no
Event of Default exists.
Capitalized
terms used in this certificate shall have the meanings given to those terms in
the Note Purchase Agreement.
DATED as
of this _____ day of ______________, _________.
NATIONAL
RURAL UTILITIES
|
COOPERATIVE
FINANCE
|
CORPORATION,
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Name:
|
Title
|
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Name:
|
Title:
|
EXHIBIT
10.32
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
PLEDGE
AGREEMENT
Dated
as of March 23, 2009
ARTICLE
I
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Definitions
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Section
1.01.
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Definitions
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2
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Section
1.02.
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Principles
of Construction
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6
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ARTICLE
II
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Provisions
as to Pledged Collateral
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Section
2.01.
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Holding
of Pledged Securities
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6
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Section
2.02.
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UCC
Filings
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6
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Section
2.03.
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Withdrawal
and Substitution of Pledged Collateral
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7
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Section
2.04.
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[Reserved]
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7
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Section
2.05.
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Addition
of Pledged Collateral
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7
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Section
2.06.
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Accompanying
Documentation
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7
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Section
2.07.
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Renewal;
Extension; Substitution
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8
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Section
2.08.
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Voting
Rights; Interest and Principal
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8
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Section
2.09.
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Protection
of Title; Payment of Taxes; Liens, etc
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9
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Section
2.10.
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Maintenance
of Pledged Collateral
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10
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Section
2.11.
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Representations,
Warranties and Covenants
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10
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Section
2.12.
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Further
Assurances
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11
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ARTICLE
III
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[Reserved]
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ARTICLE
IV
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Remedies
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Section
4.01.
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Events
of Default
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11
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Section
4.02.
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Remedies
upon Default
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12
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Section
4.03.
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Application
of Proceeds
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14
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Section
4.04.
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Securities
Act
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14
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ARTICLE
V
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The
Collateral Agent
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Section
5.01.
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Certain
Duties and Responsibilities
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15
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Section
5.02.
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Certain
Rights of Collateral Agent
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16
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Section
5.03.
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Money
Held by Collateral Agent
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18
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Section
5.04.
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Compensation
and Reimbursement
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18
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Section
5.05.
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Corporate
Collateral Agent Required; Eligibility
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19
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Section
5.06.
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Resignation
and Removal; Appointment of Successor
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19
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Section
5.07.
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Acceptance
of Appointment by Successor
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20
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Section
5.08.
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Merger,
Conversion, Consolidation or Succession to Business
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20
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ARTICLE
VI
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Miscellaneous
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Section
6.01.
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Notices
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20
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Section
6.02.
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Waivers;
Amendment
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21
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Section
6.03.
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Successors
and Assigns
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21
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Section
6.04.
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Counterparts;
Effectiveness
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21
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Section
6.05.
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Severability
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21
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Section
6.06.
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GOVERNING
LAW
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21
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Section
6.07.
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WAIVER
OF JURY TRIAL
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22
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Section
6.08.
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Headings
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22
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Section
6.09.
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Security
Interest Absolute
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22
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Section
6.10.
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Termination
or Release
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22
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Section
6.11.
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Collateral
Agent Appointed Attorney-in-Fact
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23
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Schedule
I – Additional Criteria for Eligible Securities
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Schedule
II – Addresses for Notices
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Annex
A – Form of Certificate of Pledged Collateral
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PLEDGE
AGREEMENT, dated as of March 23, 2009, among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association
and its successors and assigns (hereinafter called “
National Rural
”),
FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a wholly owned
subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered
instrumentality of the United States and an institution of the Farm Credit
System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK NATIONAL ASSOCIATION, a national banking association and its successors and
assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
OF NATIONAL RURAL
WHEREAS,
National Rural may from time to time issue one or more Notes to the Purchaser,
and the Purchaser may purchase such Notes, all upon the terms and subject to the
conditions set forth in the Note Purchase Agreement; and
WHEREAS,
National Rural is required pursuant to the terms of the Note Purchase Agreement
to pledge certain property to the Collateral Agent for the benefit of the
Control Party to secure National Rural’s obligations on the Notes;
NOW,
THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of
the certain Obligations contained in the Notes, the Note Purchase Agreement and
herein, National Rural hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the benefit of the Control Party, and grants to the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, a security interest in the following (collectively referred to as the
“
Pledged
Collateral
”) as provided in Article II: (a)(i) the Pledged
Securities and the certificates representing the Pledged Securities;
(ii) subject to Section 2.08, all payments of principal or interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for, and all other Proceeds
received in respect of, the Pledged Securities pledged hereunder;
(iii) subject to Section 2.08, all rights and privileges of National
Rural with respect to the Pledged Securities; (iv) all Proceeds of any of
the foregoing above; that may, on the date hereof or from time to time
hereafter, be subjected to the Lien hereof by National Rural by delivery,
assignment or pledge thereof to the Collateral Agent hereunder and the
Collateral Agent is authorized to receive the same as additional security
hereunder (subject to any reservations, limitations or conditions agreed to in
writing by National Rural and the Control Party respecting the scope or priority
of such security or the use and disposition of such property or the Proceeds
thereof).
TO HAVE
AND TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, forever;
subject
,
however
, to the
terms, covenants and conditions hereinafter set forth.
ARTICLE
I
Definitions
SECTION
1.01.
Definitions.
As
used in this Pledge Agreement, the following terms shall have the following
meanings:
“Accounting
Requirements”
shall mean any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the Member or, in the absence
thereof, the requirements of GAAP applicable to businesses similar to that of
the Member.
“
Allowable Amount
” on
any date, means with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date.
“
Certificate of Pledged
Collateral
” means a certificate delivered to the Collateral Agent and the
Control Party substantially in the form of Annex A attached
hereto.
“
Class A Member
” means
any Class A Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Class B Member
” means
any Class B Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Collateral Agent
”
means the Person named as the “
Collateral Agent
” in
the first paragraph of this instrument.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Control Party Notice
”
and “
Control Party
Order
” mean, respectively, a written notice or order signed by any Vice
President of the Control Party and delivered to the Collateral Agent and
National Rural.
“
Control Party Notice of
Default
” has the meaning given to that term in
Section 4.02.
“
Depreciation and
Amortization Expense
”
shall mean an amount
constituting the depreciation and amortization of the Member computed pursuant
to Accounting Requirements.
“
Eligible Member
”
means any Class A Member or Class B Member of National Rural as described in
National Rural’s Bylaws currently in effect.
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million, (ii) no default has occurred in the payment of
principal or interest in accordance with the terms of such note or bond that is
continuing beyond the contractual grace period (if any) provided in such note or
bond for such payment and (iii) no “event of default” as defined in such
note or bond (or in any instrument creating a security interest in favor of
National Rural in respect of such note or bond), shall exist that has resulted
in the exercise of any right or remedy described in such note or bond (or in any
such instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto.
“
Equity
” means the
aggregate of the Member's equities and margins computed pursuant to Accounting
Requirements.
“
Event of Default
” has
the meaning set forth in Section 4.01.
“
Facility Rating
”
means the facility rating assigned by National Rural to an Eligible Security
from time to time in accordance with National Rural's internal risk rating
system.
“
GAAP
” means generally
accepted accounting principles in the United States as in effect from time to
time.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX of
the Note Purchase Agreement which is existing and continuing.
“
Interest Expense
”
means an amount constituting the interest expense with respect to Long-Term Debt
of the Member computed pursuant to Accounting Requirements.
“
Lien
” means any lien,
pledge, charge, mortgage, encumbrance, debenture, hypothecation or other similar
security interest attaching to any part of the Pledged Collateral.
“
Lien of this Pledge
Agreement
” or “
Lien hereof
” means
the Lien created by these presents.
“
Long-Term Debt
” is
determined in accordance with the Uniform System of Accounts prescribed at the
time by RUS or, if such Member is not required to maintain its accounts in
accordance with said Uniform System of Accounts, otherwise determined in
accordance with GAAP.
“
Member
” shall mean
any Person who is member of National Rural.
“
Modified Debt Service
Coverage Ratio--Distribution
” shall mean the definition of Coverage Ratio
as defined in the Indenture dated October 25, 2007 by and between National Rural
Utilities Cooperative Finance Corporation and U.S. Bank National Association for
the Collateral Trust Bonds.
"
Modified Debt Service
Coverage Ratio--G&T
" shall mean the ratio determined as follows: for
any calendar year add (i) Operating Margins, (ii) Non-Operating
Margins--Interest, (iii) Interest Expense, (iv) Depreciation and Amortization
Expense, and (v) cash received in respect of generation and transmission and
other capital credits, and divide the sum so obtained by the sum of all payments
of Principal and Interest Expense required to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
“
National Rural
Notice
” and “
National Rural Order
”
mean, respectively, a written notice or order signed in the name of National
Rural by either its Chief Executive Officer or its Chief Financial Officer, and
by any Vice President of National Rural, and delivered to the Collateral Agent
and the Control Party.
“
Non-Operating
Margins—Interest
” means the amount representing the interest component of
non-operating margins of the Member computed pursuant to Accounting
Requirements.
“
Note Purchase
Agreement
” means the Note Purchase Agreement dated the date hereof
between National Rural, the Purchaser and Farmer Mac, as the same may be amended
from time to time in accordance with the terms thereof.
“
Notes
” means the note
or notes issued by National Rural to the Purchaser under the Note Purchase
Agreement.
“
Obligations
” means
the due and punctual performance of the obligations of National Rural to make
payments of principal, and interest on the Notes.
“
Officers’
Certificate
” means a certificate signed by any Vice President of National
Rural, and delivered to the Control Party and/or the Collateral Agent, as
applicable.
“
Operating Margins
”
means the amount of patronage capital and operating margins of the Member
computed pursuant to Accounting Requirements.
“
Person
” means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
“
Pledge Agreement
”
means this Pledge Agreement, as originally executed and as it may from time to
time be amended pursuant to the applicable provisions hereof.
“
Pledged Collateral
”
has the meaning set forth in the Granting Clause.
“
Pledged Securities
”
means at any time the Eligible Securities listed on Schedule A and/or
Schedule B to the Certificate of Pledged Collateral most recently
delivered.
“
Principal
” means the
amount of principal billed on account of Long-Term Debt of the Member computed
pursuant to Accounting Requirements.
“
Proceeds
” has the
meaning specified in Section 9-102 of the Uniform Commercial
Code.
“
RUS
” mean the Rural
Utilities Service of the United States Department of Agriculture, acting by and
through the Administrator of the Rural Utilities Service, and including any
successor agencies or departments.
“
Total Assets Ratio
”
means an amount constituting the total assets of the Member computed pursuant to
Accounting Requirements.
“
Total Capitalization
Ratio
” means the Total Margins and Equity as a percentage of the sum of
((1)Total Margins and Equity plus (2) Long Term Debt).
“
Total Margins and
Equity
” means the Member’s total margins and equity computed pursuant to
Accounting Requirements.
“
Uniform Commercial
Code
” means the Uniform Commercial Code as from time to time in effect in
the District of Columbia.
“
Vice President
” means
any vice president of National Rural or Farmer Mac or the Purchaser, as
applicable, whether or not designated by a number or a word or words added
before or after the title “vice president”.
SECTION
1.02.
Other
Defined Terms; Principles of Construction
. Capitalized terms
used but not defined in this Pledge Agreement shall have the meanings given to
them in the Note Purchase Agreement. Unless the context shall
otherwise indicate, the terms defined in Section 1.01 hereof include the
plural as well as the singular and the singular as well as the
plural. The words “hereafter”, “herein”, “hereof”, “hereto” and
“hereunder”, and words of similar import, refer to this Agreement as a
whole. The descriptive headings of the various articles and sections
of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions
hereof.
ARTICLE
II
Provisions as to Pledged
Collateral
SECTION
2.01.
Holding of Pledged
Securities.
(a) National
Rural shall make available to the Control Party, within forty-five (45) days of
a pledge of the Pledged Securities in connection with an advance (or for a
longer period as National Rural and the Control Party agree), such back-up
information as is reasonably necessary in order to allow the Control Party to
confirm compliance of such Pledged Securities to the requisite criteria as
outlined herein. Upon receipt of the back-up information, the Control
Party shall have ninety (90) days to object in writing to the inclusion of any
item of the Pledged Securities as part of the Pledged Collateral. If
the Control Party reasonably determines that any of the Pledged Securities do
not meet the criteria for Eligible Securities, then National Rural shall have
forty-five (45) days in which to provide substitute collateral, and the timeline
specified above for National Rural to make available back-up material and
confirmation shall also apply as to the substituted collateral.
(b) The
Collateral Agent, on behalf of the Control Party, shall hold the Pledged
Securities in the name of National Rural (or its nominee), endorsed or assigned
in blank or in favor of the Collateral Agent. Upon occurrence of an
Event of Default, the Collateral Agent, on behalf of the Control Party, shall
have the right (in its sole and absolute discretion), to the extent a register
is maintained therefor, to register the Pledged Securities in the Collateral
Agent’s own name as pledgee, or in the name of the Collateral Agent’s nominee
(as pledgee or as sub-agent) or to continue to hold the Pledged Securities in
the name of National Rural, endorsed or assigned in blank or in favor of the
Collateral Agent. Upon cessation of such Event of Default, the
Collateral Agent shall take such action as is necessary to again cause the
Pledged Securities to be registered in the name of National Rural (or its
nominee).
SECTION
2.02.
UCC
Filings.
National Rural shall prepare and file in the proper
Uniform Commercial Code filing office in the District of Columbia (i) on or
prior to the date of the first purchase of a Note under the Note Purchaser
Agreement, a financing statement recording the Collateral Agent’s interest in
the Pledged Collateral; and (ii) from time to time thereafter, continuation
statements or such other filings as are necessary to maintain the perfection of
the Lien hereof on the Pledged Collateral.
SECTION
2.03.
Withdrawal and Substitution
of Pledged Collateral.
(a) Any
part of the Pledged Collateral may be withdrawn by National Rural or substituted
for other Eligible Securities by National Rural and shall be delivered to
National Rural by the Collateral Agent upon National Rural Order at any time and
from time to time, together with any other documents or instruments of transfer
or assignment necessary to reassign to National Rural said Pledged Collateral
and the interest of National Rural,
provided
the
aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal
or substitution shall at least equal the aggregate principal amount of the Notes
outstanding after such withdrawal or substitution, as shown by the Certificate
of Pledged Collateral furnished to the Collateral Agent pursuant to
Subsection (b)(i) of this Section.
(b) Prior
to any such withdrawal or substitution, the Collateral Agent shall be furnished
with the following instruments:
(i) a
Certificate of Pledged Collateral, dated as of the last day of the calendar
month most recently ended at least 10 Business Days prior to such withdrawal or
substitution (or a more recent date, at National Rural’s option), showing that
immediately after such withdrawal or substitution the requirements of Subsection
(a) of this Section will be satisfied; and
(ii) an
Officers’ Certificate certifying that no Event of Default has occurred which has
not been remedied.
Upon any
such withdrawal or substitution, National Rural shall deliver any Eligible
Securities to be substituted and the Collateral Agent shall execute any
instruments of transfer or assignment specified in a National Rural Order as
necessary to vest in National Rural any part of the Pledged Collateral
withdrawn.
In case
an Event of Default shall have occurred and be continuing, National Rural shall
not withdraw or substitute any part of the Pledged Collateral.
SECTION
2.04. [Reserved.]
SECTION
2.05.
Addition of Pledged
Collateral.
At any time, National Rural may pledge additional
Eligible Securities under this Pledge Agreement by delivering such Pledged
Collateral to the Collateral Agent, accompanied by a Certificate of Pledged
Collateral specifying such additional collateral and dated as of the last day of
the calendar month most recently ended at least 10 Business Days prior thereto
(or a more recent date at National Rural’s option).
SECTION
2.06.
Accompanying
Documentation.
Where Eligible Securities are delivered to the
Collateral Agent under Section 2.01, 2.03 or Section 2.05, such securities
shall be accompanied by the appropriate instruments of transfer executed in
blank and in a form satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably
request. All other property delivered to the Collateral Agent under
Section 2.01, 2.03 or Section 2.05 and comprising part of the Pledged
Collateral shall be accompanied by proper instruments of assignment duly
executed by National Rural and such other instruments or documents as the
Collateral Agent may reasonably request.
SECTION
2.07.
Renewal; Extension;
Substitution.
Unless and until an Event of Default shall have
occurred and be continuing, National Rural may at any time renew or extend,
subject to the Lien of this Pledge Agreement, any Pledged Security upon any
terms or may accept in place of and in substitution for any such
Pledged Security, another Eligible Security or Securities of the same
issuer or of any successor thereto for at least the same unpaid principal
amount, all as evidenced by a National Rural Order delivered to the Collateral
Agent;
provided
,
however
, that in case
of any substitution, Eligible Securities substituted as aforesaid shall be
subject to the Lien of this Pledge Agreement as part of the Pledged Collateral
and be held in the same manner as those for which they shall be substituted, and
in the case of each substituted Eligible Security National Rural shall provide
an Officers’ Certificate certifying to the Collateral Agent that such
substituted security satisfies the requirements of this Section. So
long as no Event of Default shall have occurred and be continuing, the
Collateral Agent, upon National Rural Order stating that no Event of Default
shall have occurred and be continuing, shall execute any consent to any such
renewal, extension or substitution as shall be specified in such National Rural
Order.
SECTION
2.08.
Voting Rights; Interest and
Principal
.
(a) Unless
and until an Event of Default has occurred and is continuing, and the Control
Party delivers to the Collateral Agent a Control Party Notice of Default
suspending National Rural’s rights under this clause:
(i)
National Rural shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof
provided
that such
rights and powers shall not be exercised in any manner inconsistent with the
terms of the Note Purchase Agreement or this Pledge Agreement.
(ii) The
Collateral Agent shall execute and deliver to National Rural, or cause to be
executed and delivered to National Rural, all such proxies, powers of attorney
and other instruments as National Rural may reasonably request for the purpose
of enabling National Rural to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i)
above.
(iii)
National Rural shall be entitled to receive and retain any and all interest,
principal and other distributions paid on or distributed in respect of the
Pledged Securities;
provided
that any
non-cash interest, principal or other distributions that would constitute
Pledged Securities if pledged hereunder, and received in exchange for Pledged
Securities or any part thereof pledged hereunder, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer of Pledged Securities may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by National
Rural, shall not be commingled by National Rural with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).
(b) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to interest, principal or other distributions that
National Rural is authorized to receive pursuant to paragraph (a)(iii) of
this Section 2.08 shall cease, and all such suspended rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such interest, principal or
other distributions. All interest, principal or other distributions
received by National Rural contrary to the provisions of this Section 2.08
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of National Rural and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property paid
over to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in an account to be
established by the Collateral Agent upon receipt of such money or other property
and shall be applied in accordance with the provisions of Section 4.03 to
the fullest extent permitted by applicable law. After all Events of
Default have ceased, the Collateral Agent shall promptly repay to National Rural
(without interest) all interest, principal or other distributions that National
Rural would otherwise be permitted to retain pursuant to the terms of paragraph
(a)(iii) of this Section 2.08 and that remain in such account.
(c) If
an Event of Default shall have occurred and be continuing, then, to the extent
such rights are suspended by the applicable Control Party Notice of Default, all
rights of National Rural to exercise the voting and consensual rights and powers
it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 2.08, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 2.08, shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers;
provided
that the
Collateral Agent shall have the right from time to time during the existence of
such Event of Default to permit National Rural to exercise such rights and
powers.
SECTION
2.09.
Protection of Title; Payment
of Taxes; Liens, etc.
National Rural will:
(i) duly
and promptly pay and discharge, or cause to be paid and discharged, before they
become delinquent, all taxes, assessments, governmental and other charges
lawfully levied, assessed or imposed upon or against any of the Pledged
Collateral, including the income or profits therefrom and the interests of the
Collateral Agent in such Pledged Collateral;
(ii) duly
observe and conform to all valid requirements of any governmental authority
imposed upon National Rural relative to any of the Pledged Collateral, and all
covenants, terms and conditions under or upon which any part thereof is
held;
(iii)
cause to be paid and discharged all lawful claims (including, without
limitation, income taxes) which, if unpaid, might become a lien or charge upon
Pledged Collateral; and
(iv) do
all things and take all actions necessary to keep the Lien of this Pledge
Agreement a first and prior lien upon the Pledged Collateral and protect its
title to the Pledged Collateral against loss by reason of any foreclosure or
other proceeding to enforce any lien prior to or
pari
passu
with the Lien
of this Pledge Agreement.
Nothing
contained in this Section shall require the payment of any such tax,
assessment, claim, lien or charge or the compliance with any such requirement so
long as the validity, application or amount thereof shall be contested in good
faith;
provided
,
however
, that
National Rural shall have set aside on its books such reserves (segregated to
the extent required by generally accepted accounting principles) as shall be
deemed adequate with respect thereto as determined by the Board of Directors of
National Rural (or a committee thereof).
SECTION
2.10.
Maintenance of Pledged
Collateral.
National Rural shall cause the Allowable Amount of
Pledged Collateral held by the Collateral Agent at all times to be not less than
100% of the aggregate principal amount of the Notes outstanding.
SECTION
2.11.
Representations, Warranties
and Covenants.
National Rural represents, warrants and
covenants to the Collateral Agent, for the benefit of the Control Party, that
from the time that Pledged Collateral is pledged hereunder, and for so long as
such Pledged Collateral is required to remain pledged:
(a)
except for the Lien hereof and any Lien consented to in writing by Farmer Mac or
the Control Party, National Rural (i) is and will continue to be the direct
owner, beneficially and of record, of the Pledged Securities from time to time
pledged hereunder, (ii) holds and will continue to hold the same free and
clear of all Liens, other than Liens created by this Pledge Agreement,
(iii) will make no assignment, pledge, hypothecation or transfer of, or
create or permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than Liens created by this Pledge Agreement and (iv) will
defend its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Pledge Agreement), however arising, of all Persons
whomsoever;
(b)
except for restrictions and limitations imposed by the Note Purchase Agreement
or securities laws generally, the Pledged Securities are and will continue to be
freely transferable and assignable, and none of the Pledged Securities are or
will be subject to any restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Securities hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Collateral
Agent of rights and remedies hereunder;
(c)
National Rural has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;
(d) no
consent or approval of any governmental authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and
effect);
(e) by
virtue of the execution and delivery by National Rural of this Pledge Agreement,
when any Pledged Securities are delivered to the Collateral Agent in accordance
with this Pledge Agreement, the Collateral Agent will obtain a legal and valid
Lien upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations; and
(f) the
Allowable Amount of Pledged Collateral from Class B Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by National
Rural or any affiliate to Farmer Mac or any affiliate; (3) sold by National
Rural or any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
SECTION
2.12.
Further
Assurances.
National Rural will execute and deliver, or cause
to be executed and delivered, all such additional instruments and do, or cause
to be done, all such additional acts as (a) may be necessary or proper,
consistent with the Granting Clause hereof, to carry out the purposes of this
Pledge Agreement and to make subject to the Lien hereof any property intended so
to be subject or (b) may be necessary or proper to transfer to any
successor the estate, powers, instruments and funds held hereunder and to
confirm the Lien of this Pledge Agreement. National Rural will also
cause to be filed, registered or recorded any instruments of conveyance,
transfer, assignment or further assurance in all offices in which such filing,
registering or recording is necessary to the validity thereof or to give notice
thereof.
ARTICLE
III
[Reserved]
ARTICLE
IV
Remedies
SECTION
4.01.
Events of
Default.
“
Event of Default
”,
wherever used herein, means any “Event of Default” as defined in
Section 7.01(a) of the Note Purchase Agreement,
provided
that, for
the purposes of this Pledge Agreement:
(a) the
Collateral Agent shall not be required to recognize that an Event of Default
exists before such time as the Collateral Agent receives a Control Party Notice
or National Rural Notice stating that an Event of Default exists and specifying
the particulars of such default in reasonable detail; and
(b) the
Collateral Agent shall not be required to recognize that an Event of Default has
ceased until (i) such time as the Collateral Agent receives a Control Party
Notice stipulating that such event has ceased to exist; or (ii) 30 days after
receipt by the Collateral Agent of a National Rural Notice stipulating that such
event has ceased to exist,
provided
that the
Collateral Agent does not receive a Control Party Notice within such timeframe
disputing the cessation of such Event of Default, and
further provided
that
no additional Control Party Notice of Default shall have been received in
respect of any other subsisting Event(s) of Default. Upon receipt of
any National Rural Notice under subparagraph (ii) of this Subsection, the
Collateral Agent shall provide a copy of such National Rural Notice to the
Control Party.
SECTION
4.02.
Remedies upon
Default.
If an Event of Default shall have occurred and be
continuing, the Control Party may issue a notice (a “
Control Party Notice of
Default
”), which may be combined with the notice provided under
Section 4.01(b), suspending the rights of National Rural under
Section 2.08 in part without suspending all such rights (as specified by
the Control Party in its sole and absolute discretion) without waiving or
otherwise affecting the Control Party’s rights to give additional Control Party
Notices of Default from time to time suspending other rights under
Section 2.08
so long as an Event of
Default has occurred and is continuing. Subject to paragraph (b) of
this Section 4.02, upon cessation of an Event of Default, all rights of
National Rural suspended under the applicable Control Party Notice of Default
shall revest in National Rural.
(a) Upon
the occurrence of an Event of Default, the Collateral Agent shall, for the
benefit and at the direction of the Control Party, have the right to exercise
any and all rights afforded to a secured party under the Uniform Commercial Code
or other applicable law. Without limiting the generality of the
foregoing, National Rural agrees that the Collateral Agent shall have the right,
but only if so instructed by a the Control Party Order and subject to the
requirements of applicable law and the Collateral Agent’s right (in its sole and
absolute discretion) to receive indemnification or other reasonable assurances
that its costs and expenses in connection therewith will be paid, to sell or
otherwise dispose of all or any part of the Pledged Collateral at a public or
private sale or at any broker’s board or on any securities exchange, for cash,
upon credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such
sale of securities (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Pledged Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Pledged Collateral so
sold. Each such purchaser at any sale of Pledged Collateral shall
hold the property sold absolutely, free from any claim or right on the part of
National Rural, and National Rural hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which National Rural now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
(b) The
Collateral Agent shall give National Rural 10 days’ written notice (which
National Rural agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of Pledged
Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker’s board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix and state in the notice (if
any) of such sale. At any such sale, the Pledged Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any
sale of any Pledged Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of such Pledged Collateral shall have been
given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Pledged
Collateral is made on credit or for future delivery, the Pledged Collateral so
sold may be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. At any public
(or, to the extent permitted by law, private) sale made pursuant to this Pledge
Agreement, the Control Party may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay, valuation or appraisal on
the part of National Rural (all said rights being also hereby waived and
released to the extent permitted by law), the Pledged Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
claim then due and payable to the Control Party from National Rural as a credit
against the purchase price, and the Control Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to Pledged Collateral therefor. For purposes hereof, a
written agreement to purchase the Pledged Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and National Rural shall not be
entitled to the return of the Pledged Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Pledge Agreement and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this
Section 4.02 shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-610(b) of the Uniform Commercial Code or
its equivalent in other jurisdictions.
SECTION
4.03.
Application of
Proceeds.
The Collateral Agent shall apply the proceeds of any
collection or sale of Pledged Collateral, including any Pledged Collateral
consisting of cash, as follows to the fullest extent permitted by applicable
law:
FIRST, to
the payment of all reasonable costs and expenses incurred by the Collateral
Agent in connection with or reasonably related or reasonably incidental to such
collection or sale or otherwise in connection with or related or incidental to
this Pledge Agreement or any of the Obligations, including all court costs and
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Collateral Agent (in its sole discretion) hereunder
on behalf of National Rural and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
SECOND,
to the payment to
the Control Party
in full of the Obligations
;
such payment to be for an amount certified in a
Control Party
Notice delivered to the Collateral Agent as being the amount due and owing to
the Control
Party
under the Obligations; and
THIRD, to
National Rural, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any
sale of the Pledged Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Pledged Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of
any part of the purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.
SECTION
4.04.
Securities Act
.
In
view of the position of National Rural in relation to the Pledged Collateral, or
because of other current or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being called the “
Federal Securities
Laws
”) with respect to any disposition of the Pledged Collateral
permitted hereunder. National Rural understands that compliance with
the Federal Securities Laws might very strictly limit the course of conduct of
the Collateral Agent if the Collateral Agent were to attempt to dispose of all
or any part of the Pledged Collateral, and might also limit the extent to which
or the manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions
or limitations affecting the Collateral Agent in any attempt to dispose of all
or part of the Pledged Collateral under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or
effect. National Rural recognizes that in light of such restrictions
and limitations the Collateral Agent may, with respect to any sale of the
Pledged Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Collateral for their own account, for
investment, and not with a view to the distribution or resale
thereof. National Rural acknowledges and agrees that in light of such
restrictions and limitations, the Collateral Agent, in its sole and absolute
discretion (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Collateral or
part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a single potential purchaser to effect
such sale. National Rural acknowledges and agrees that any such sale
might result in prices and other terms less favorable to the seller than if such
sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 4.04 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
ARTICLE
V
The Collateral
Agent
SECTION
5.01.
Certain Duties and
Responsibilities.
(a) At all times under this
Pledge Agreement:
(i) the
Collateral Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Pledge Agreement, and no implied covenants or
obligations shall be read into this Pledge Agreement against the Collateral
Agent; and
(ii) in
the absence of bad faith on its part, the Collateral Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Collateral
Agent and substantially conforming to the requirements of this Pledge Agreement;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Collateral Agent the
Collateral Agent shall be under a duty to examine the same to determine whether
or not they substantially conform to the requirements of this Pledge
Agreement.
(b) No
provision of this Pledge Agreement shall be construed to relieve the Collateral
Agent from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except
that:
(i) this
Subsection shall not be construed to limit the effect of Subsection (a) of this
Section;
(ii) the
Collateral Agent shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Collateral Agent was grossly negligent
in ascertaining the pertinent facts; and
(iii) no
provision of this Pledge Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(c) Whether
or not therein expressly so provided, every provision of this Pledge Agreement
relating to the conduct or affecting the liability of or affording protection to
the Collateral Agent shall be subject to the provisions of this
Section.
SECTION
5.02.
Certain Rights of Collateral
Agent.
Except as otherwise provided in
Section 5.01:
(a) the
Collateral Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any
request or direction of National Rural mentioned herein shall be sufficiently
evidenced by a National Rural Notice or National Rural Order;
(c) any
request or direction of the Control Party mentioned herein shall be sufficiently
evidenced by a Control Party Notice or Control Party Order;
(d)
whenever in the administration of this Pledge Agreement the Collateral Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Collateral Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers’ Certificate in the case of National Rural, and
a certificate signed by any Vice President of the Control Party in the case of
the Control Party;
(e) the
Collateral Agent may consult with counsel and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(f) the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Pledge Agreement at the request or direction of
either National Rural or the Control Party pursuant to this Pledge Agreement,
unless such party shall have offered to the Collateral Agent reasonable security
or indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(g) the
Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Collateral Agent, in its sole and
absolute discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Collateral Agent shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of National Rural, personally or by agent or
attorney;
(h) the
Collateral Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Collateral Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(i)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no duty to inquire as to the performance of National Rural’s covenants
herein. In addition, the Collateral Agent shall not be deemed to have
knowledge of any Event of Default unless the Collateral Agent has received a
Control Party Notice in accordance with Section 4.01(a), and shall not be
deemed to have knowledge of the cessation of the same until such time as it
receives a National Rural Notice in accordance with Section 4.01(b);
and
(j)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no obligation to take any action with respect to any Event of Default until it
has received a Control Party Notice applicable to such event in accordance with
Section 4.01(a), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable Control Party Notice is
delivered. Similarly, the Collateral Agent shall have no obligation
to take any action with respect to the cessation of an Event of Default until it
has received a National Rural Notice applicable to such event in accordance in
accordance with Section 4.01(b), and the Collateral Agent shall have no
liability for any action or inaction taken, suffered or omitted in respect of
any such event by it prior to such time as the applicable National Rural Notice
is delivered.
SECTION
5.03.
Money
Held by Collateral Agent.
Money held by the Collateral Agent
hereunder need not be segregated from other funds except to the extent required
by law. The Collateral Agent shall have no liability to pay interest
on or (except as expressly provided herein) invest any such moneys.
SECTION
5.04.
Compensation and
Reimbursement.
(a) National Rural
agrees:
(i) to
pay to the Collateral Agent from time to time such reasonable compensation for
all services rendered by it hereunder as shall have been set forth in an
agreement signed by National Rural;
(ii)
except as otherwise expressly provided herein, to reimburse the Collateral Agent
upon its request for all reasonable expenses, out-of-pocket costs, disbursements
and advances incurred or made by the Collateral Agent in accordance with any
provision of this Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the extent
any such expense, disbursement or advance may be attributable to its gross
negligence or bad faith; and
(iii) to
indemnify the Collateral Agent for, and to defend and hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Pledge Agreement or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent such loss, liability or expense may be
attributable to its gross negligence or bad faith;
provided
,
however
, that
National Rural shall have no liability under this clause for any settlement of
any litigation or other dispute effected without the prior written consent of
National Rural (such consent not to be unreasonably withheld).
(b) Any
such amounts payable as provided hereunder shall be additional Obligations
secured by the Lien hereof. The provisions of this Section 5.04
shall remain operative and in full force and effect regardless of the
termination of this Pledge Agreement or the Note Purchase Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Pledge Agreement or the Note Purchase Agreement, or any investigation made
by or on behalf of the Collateral Agent or the Control Party. All
amounts due under this Section 5.04 shall be payable on written demand
therefor.
SECTION
5.05.
Corporate Collateral Agent
Required; Eligibility.
There shall at all times be a
Collateral Agent hereunder which shall be a corporation or association organized
and doing business under the laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. Neither National Rural nor
any Person directly or indirectly controlling, controlled by or under common
control with National Rural shall serve as Collateral Agent
hereunder. If at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION
5.06.
Resignation and Removal;
Appointment of Successor.
(a) No resignation or
removal of the Collateral Agent and no appointment of a successor Collateral
Agent pursuant to this Article shall become effective until the acceptance of
appointment by the successor Collateral Agent under
Section 5.07.
(b) The
Collateral Agent may resign at any time by giving written notice thereof to
National Rural. If an instrument of acceptance by a successor
Collateral Agent shall not have been delivered to the Collateral Agent within 30
days after the giving of such notice of resignation, the resigning Collateral
Agent may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent.
(c) If
at any time:
(i)
except if an Event of Default has occurred and is continuing, National Rural, in
its sole and absolute discretion, elects to remove the Collateral Agent;
or
(ii) the
Collateral Agent shall cease to be eligible under Section 5.05 or shall
become incapable of acting or shall be adjudged a bankrupt or insolvent or a
receiver of the Collateral Agent or of its property shall be appointed or any
public officer shall take charge or control of the Collateral Agent or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in
any such case, National Rural may remove the Collateral Agent by delivery of a
National Rural Order to that effect.
(d) If
the Collateral Agent shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Collateral Agent for any cause,
National Rural shall promptly appoint a successor Collateral Agent by delivering
a National Rural Notice to the retiring Collateral Agent, the successor
Collateral Agent and the Control Party to such effect.
SECTION
5.07.
Acceptance of Appointment by
Successor.
Every successor Collateral Agent appointed
hereunder shall execute, acknowledge and deliver to National Rural, the Control
Party and to the retiring Collateral Agent an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Collateral
Agent shall become effective and such successor Collateral Agent, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Collateral Agent; but, on request of
National Rural, the Control Party or the successor Collateral Agent, such
retiring Collateral Agent shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Collateral Agent all the
rights, powers and trusts of the retiring Collateral Agent, and shall duly
assign, transfer and deliver to such successor Collateral Agent all property and
money held by such retiring Collateral Agent hereunder, subject nevertheless to
its Lien, if any, provided for in Section 5.04. Upon request of
any such successor Collateral Agent, National Rural shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Collateral Agent all such rights, powers and trusts.
No
successor Collateral Agent shall accept its appointment unless at the time of
such acceptance such successor Collateral Agent shall be eligible under
Section 5.05 hereof.
SECTION
5.08.
Merger, Conversion,
Consolidation or Succession to Business.
Any corporation into
which the Collateral Agent may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Collateral Agent, shall be the successor of the Collateral Agent hereunder,
provided such corporation shall be eligible under Section 5.05 hereof
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
ARTICLE
VI
Miscellaneous
SECTION
6.01.
Notices.
All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule II attached hereto
as appropriate. The address, telephone number, or facsimile number
for any party may be changed at any time and from time to time upon written
notice given by such changing party to the other parties hereto. A properly
addressed notice or other communication shall be deemed to have been delivered
at the time it is sent by facsimile (fax) transmission to the party or parties
to which it is given.
(a) All
National Rural Notices and National Rural Orders delivered to the Collateral
Agent shall be contemporaneously copied to the Control Party by National Rural;
all Control Party Notices and Control Party Orders delivered to the Collateral
Agent shall be contemporaneously copied by Farmer Mac to National Rural; and all
Collateral Agent notices delivered to either National Rural or Farmer Mac shall
be contemporaneously copied to the other such party by the Collateral
Agent.
SECTION
6.02.
Waivers;
Amendment.
(a) No failure or delay by a party in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies that such party would
otherwise have. No waiver of any provision of this Pledge Agreement
or consent to any departure by any party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this
Section 6.02, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on any party in any case shall entitle any party to any other or
further notice or demand in similar or other circumstances.
(b) Neither
this Pledge Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by National Rural, the Collateral Agent, the Purchaser and Farmer
Mac.
SECTION
6.03.
Successors and
Assigns.
Whenever in this Pledge Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of National Rural, the Collateral Agent, the Purchaser, the Control Party
or Farmer Mac that are contained in this Pledge Agreement shall bind and inure
to the benefit of their respective successors and assigns.
SECTION
6.04.
Counterparts;
Effectiveness.
This Pledge Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract. Delivery of an
executed signature page to this Pledge Agreement by facsimile transmission shall
be as effective as delivery of a manually signed counterpart of this Pledge
Agreement.
SECTION
6.05.
Severability.
Any
provision of this Pledge Agreement held to be invalid, illegal or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions hereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction. The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION
6.06.
GOVERNING
LAW.
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO
THE EXTENT APPLICABLE, AND OTHERWISE THE LAWS OF THE STATE OF NEW
YORK.
SECTION
6.07.
WAIVER OF JURY
TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.07.
SECTION
6.08.
Headings.
Article
and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Pledge Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Pledge Agreement.
SECTION
6.09.
Security Interest
Absolute.
All rights of the Collateral Agent and/or the
Control Party hereunder, the grant of a security interest in the Pledged
Collateral and all obligations of National Rural hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of
the Note Purchase Agreement, any Note, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Note Purchase Agreement, any
Note or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
National Rural in respect of the Obligations or this Pledge
Agreement.
SECTION
6.10.
Termination or
Release.
(a) This Pledge Agreement shall terminate
on the date when the Obligations have been indefeasibly paid in full, and at
such time the Lien hereof shall be released.
(b) Upon
any withdrawal, substitution or other disposal by National Rural of any Pledged
Collateral that is permitted by the terms of this Pledge Agreement, or upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Pledged Collateral, the Lien hereof securing such Pledged
Collateral shall be automatically released.
(c) In
connection with any termination or release pursuant to paragraph (a) or (b)
the Collateral Agent shall deliver to National Rural the Pledged Collateral and
shall execute and deliver to National Rural, at National Rural’s expense, all
documents that National Rural shall reasonably request to evidence such
termination or release. Any execution and delivery of documents
pursuant to this Section 6.10 shall be without recourse to or warranty by
the Collateral Agent.
SECTION
6.11.
Collateral Agent Appointed
Attorney-in-Fact.
National Rural hereby appoints the
Collateral Agent the attorney-in-fact of National Rural for the purpose of, upon
the occurrence and during the continuance of an Event of Default, carrying out
the provisions of this Pledge Agreement with respect to the Pledged Collateral
and taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest but is subject nevertheless to the
terms and conditions of this Pledge Agreement. Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent’s name or in the name of National
Rural (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Pledged Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or
any of the Pledged Collateral; (c) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Pledged
Collateral or to enforce any rights in respect of any Pledged Collateral;
(d) to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Pledged Collateral; (e) to
notify, or to require National Rural to notify, obligors under Pledged
Securities to make payment directly to the Collateral Agent; and
(f) subject to the second sentence of Section 4.02(a), to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Pledged Collateral, and to do all other acts and things
necessary to carry out the purposes of this Pledge Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Pledged
Collateral for all purposes;
provided
that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the
Control Party shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to
National Rural for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
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by
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Name:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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by
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Name:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
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By
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Name:
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Title:
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U.S.
BANK NATIONAL ASSOCIATION,
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By
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SCHEDULE I
TO
PLEDGE
AGREEMENT
ADDITIONAL
CRITERIA FOR ELIGIBLE SECURITIES
1
Criteria for Eligible
Security of Class A Eligible Member
: Each Class A Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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Long-Term
Debt to Net Utility Plant Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available,
does not exceed 90%.
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·
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Modified
Debt Service Coverage Ratio--Distribution, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to
1.35.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 20%.
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·
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The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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Criteria for Eligible
Security of Class B Eligible Member
: Each Class B Eligible
Member must satisfy the following criteria only on the date of the pledge of
such Eligible Security:
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Equity
to Total Capitalization Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available, is
greater than or equal to 25%.
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Modified
Debt Service Coverage Ratio--G&T, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.10.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 10%.
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·
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The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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1
The
criteria set forth on this Schedule I shall be required to be satisfied only as
of the date of pledge of (1) any Pledged Securities that is being pledged for a
new advance or (2) any Pledged Securities that is being pledged for an existing
advance which is in substitution of, or in addition to, existing collateral, and
such criteria shall not be required to be satisfied with respect to Eligible
Securities after such date.
SCHEDULE II
TO
PLEDGE
AGREEMENT
Addresses for
Notices
The
addresses referred to in Section 6.01 hereof, for purposes of delivering
communications and notices, are as follows:
If to the
Purchaser or Farmer Mac:
Federal Agricultural Mortgage
Corporation
1133 21
st
Street
N.W., Suite 600
Washington, DC 20036
Fax: 202-872-7713
Attention: Timothy L. Buzby, Vice
President/Controller
If to
Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President/Controller
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Jerome G. Oslick, Vice President - General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
SCHEDULE II
TO
PLEDGE
AGREEMENT
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General Counsel
If to the
Collateral Agent:
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005-3701
Telephone: (212)
361-2893
Fax: (212)
509-3384
Attention
of: Beverly A. Freeney
ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF MARCH 23, 2009
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer or Controller) and
____________________, Vice-President, respectively, of National Rural Utilities
Cooperative Finance Corporation, hereby certify to the Control Party and the
Collateral Agent under the above-mentioned Pledge Agreement as amended to the
date hereof (herein called the “Pledge Agreement”) as follows:
1.
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The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule
A
hereto, is
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$
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2.
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The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule
B
hereto, is
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$
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3.
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The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
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$
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4.
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The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
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$
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5.
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The
sum of amounts in items 3 and 4 is
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$
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6.
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The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (item 1
plus 2 and minus 5) is
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$
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7.
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The
Allowable Amount of Pledged Collateral which is included in items 1
and 2 above from Class B Eligible Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by
National Rural or any affiliate to Farmer Mac or any affiliate; (3) sold
by National Rural or any affiliate to Farmer Mac or any affiliate; or (4)
sold to any trust whose beneficial ownership is owned or controlled by
Farmer Mac or an affiliate.
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ANNEX
A
TO
PLEDGE
AGREEMENT
8.
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To
the knowledge of the undersigned, each Eligible Security from Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio--Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
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9.
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To
the knowledge of the undersigned, each Eligible Security from Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio--G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
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10.
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So
far as is known to the undersigned, no Event of Default
exists.
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ANNEX
A
TO
PLEDGE
AGREEMENT
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated: _____________________
_______________________________________
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_______________________________________
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OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
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Allowable Amount (Item 1)
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Pledged
Securities
(Here
List Securities)
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
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Allowable
Amount (Item 2)
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Pledged
Securities
(Here
List Securities)
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FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
_______________________________
FIRST
AMENDMENT TO PLEDGE AGREEMENT
_______________________________
Dated
as of September 23, 2009
FIRST
AMENDMENT TO PLEDGE AGREEMENT
FIRST
AMENDMENT TO PLEDGE AGREEMENT, dated as of September 23, 2009, among NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a District of Columbia
cooperative association and its successors and assigns (hereinafter called
“
National
Rural
”), FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a
wholly owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK NATIONAL ASSOCIATION, a national banking association and its successors and
assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
WHEREAS,
the Purchaser, National Rural, Farmer Mac, and the Collateral Agent are parties
to a certain Pledge Agreement dated as of March 23, 2009 (“Pledge
Agreement”); and
WHEREAS,
the parties have agreed to modify the Pledge Agreement as set forth
herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser, National Rural and the Collateral Agent agree as
follows:
1.
Recitals
. The
foregoing Recitals are hereby incorporated by reference into this
Amendment.
2.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Pledge Agreement.
3.
Amendment
.
(a) The
Pledge Agreement is hereby amended by deleting the definition of Allowable
Amount in Section 1.01 in its entirety and replacing it with the
following:
“
Allowable Amount
” on
any date means, with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date, subject to any limitation on the Allowable Amount
applicable through the definition of “Eligible Security.”
(b) The
Pledge Agreement is hereby amended by deleting the definition of Eligible
Security in Section 1.01 in its entirety and replacing it with the
following:
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million; provided, however, that a note or bond in
excess of $35 million may be pledged hereunder but up to $35 million principal
amount of such note or bond (considered together with any other note or bond of
such Eligible Member pledged hereunder or pledged to secure any other notes or
bonds issued by National Rural to Farmer Mac or any affiliate or sold by
National Rural or any affiliate to Farmer Mac, any affiliate or any trust whose
beneficial ownership is owned or controlled by Farmer Mac) shall be counted in
the Allowable Amount of such Eligible Security (with the amount of any such
excess recorded in Item 7 of the Certificate of Pledged Collateral in the form
of
Annex A
attached hereto), (ii) no default has occurred in the payment of principal or
interest in accordance with the terms of such note or bond that is continuing
beyond the contractual grace period (if any) provided in such note or bond for
such payment and (iii) no “event of default” as defined in such note or
bond (or in any instrument creating a security interest in favor of National
Rural in respect of such note or bond), shall exist that has resulted in the
exercise of any right or remedy described in such note or bond (or in any such
instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto, as such Schedule I may be amended from time to time as mutually agreed
upon in writing by Farmer Mac and National Rural, with notice of any such
amendment to the Collateral Agent prior to the pledge of such Eligible
Security.
(c) The
Pledge Agreement is hereby amended by deleting Annex A to the Pledge Agreement
in its entirety and replacing it with Annex A attached to this
Amendment.
4.
GOVERNING
LAW
. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
5.
Inconsistency with
Pledge
Agreement
. Except as otherwise amended or modified herein, the
terms, conditions and provisions of the Pledge Agreement remain in full force
and effect. In the event of any conflict or inconsistency between the
terms of this Amendment and the Pledge Agreement, the terms of this Amendment
shall control.
6.
Counterparts
. This
Amendment may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed as of the day and
year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION
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By:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
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By:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
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By:
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Title:
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U.S.
BANK NATIONAL ASSOCIATION
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By:
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Title:
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ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF MARCH 23, 2009
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer or Controller) and
____________________, Vice-President, respectively, of National Rural Utilities
Cooperative Finance Corporation, hereby certify to the Control Party and the
Collateral Agent under the above-mentioned Pledge Agreement as amended to the
date hereof (herein called the “Pledge Agreement”) as follows:
1.
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The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule A
hereto, is
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$
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2.
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The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule B
hereto, is
|
|
$
|
|
|
|
|
|
|
|
|
3.
|
The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
|
|
$
|
|
|
|
|
|
|
|
|
4.
|
The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
|
|
$
|
|
|
|
|
|
|
|
|
5.
|
The
sum of amounts in items 3 and 4 is
|
|
$
|
|
|
|
|
|
|
|
|
6.
|
The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (the sum
of items 1 and 2 minus item 5) is
|
|
$
|
|
|
|
|
|
|
|
|
7.
|
The
cumulative amount by which each Eligible Security listed on
Schedule A or Schedule B exceeds $35 million is
|
|
$
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
8.
|
The
Allowable Amount of Pledged Collateral which is included in items 1 and 2
above from Class B Eligible Members does not constitute more than 20% of
the aggregate amount of any notes or bonds: (1) pledged hereunder; (2)
pledged to secure any other notes or bonds issued by National Rural or any
affiliate to Farmer Mac or any affiliate; (3) sold by National Rural or
any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
|
|
|
|
|
|
|
|
|
|
|
9.
|
To
the knowledge of the undersigned, each Eligible Security from a Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Long-Term Debt to Net Utility Plant Ratio, as
the average ratio of the most recent three full calendar years for which
financial information is available, does not exceed 90%; (2) Modified Debt
Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 1.35; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
20%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
|
|
|
|
|
|
10.
|
To
the knowledge of the undersigned, each Eligible Security from a Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this
Certificate: (1) Equity to Total Capitalization Ratio, as the
average ratio of the most recent three full calendar years for which
financial information is available, is greater than or equal to 25%; (2)
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the
most recent three full calendar years for which financial information is
available, is greater than or equal to 1.10; (3) Equity to Total Assets
Ratio, as the average ratio of the most recent three full calendar years
for which financial information is available, is greater than or equal to
10%; and (4) the Eligible Security has a Facility Rating by National Rural
of “4.9” or lower.
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
11.
|
So
far as is known to the undersigned, no Event of Default
exists.
|
|
|
|
|
|
|
|
|
|
|
12.
|
To
the extent an Eligible Security listed on Schedule A or Schedule B
has an outstanding principal amount of more than $35 million, the
Allowable Amount of Pledged Collateral set forth in items 1 and 2 above
reflects only $35 million with respect to such Eligible Security (or
a lesser amount representing the difference between $35 million and
the aggregate amount of any notes or bonds of the same Eligible Member
pledged or sold to Farmer Mac or any affiliate in any previous
transaction), with any excess above $35 million (or the lesser
amount) reflected in item 7 above.
|
|
|
|
|
|
|
|
|
|
|
13.
|
Each
Eligible Member whose notes are Pledged Securities has received or is
eligible to receive a loan or commitment for a loan from RUS or any
successor agency.
|
|
|
|
|
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated: _____________________
|
|
|
|
OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE
CORPORATION
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable
Amount (Item 1)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
|
|
|
|
Allowable
Amount (Item 2)
|
Pledged
Securities
(Here
List Securities)
|
|
|
|
|
EXHIBIT
10.33
March 23,
2009
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
Virginia 20171
Re:
Setoff Rights under Note
Purchase Agreement
Ladies
and Gentlemen:
In
connection with that certain Note Purchase Agreement, dated as of the date
hereof (the “
Agreement
”), by and
among National Rural Utilities Cooperative Finance Corporation (“
National Rural
” or
“
Borrower
”),
Farmer Mac Mortgage Securities Corporation (“
Purchaser
”), and
Federal Agricultural Mortgage Corporation (“
Guarantor
”), National
Rural has agreed, in the event of a payment default by National Rural on the
Notes, to grant the Control Party certain rights of setoff against amounts due
and owing to National Rural on any Series C Preferred Stock, par value $1,000
per share (the “
Preferred Stock
”), of
Guarantor. Capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Agreement.
Borrower,
Guarantor and Purchaser hereby agree that in the event of, and only in the event
of, a payment Event of Default by Borrower pursuant to Section 7.01(a) of the
Agreement (“
Payment
Default
”), the Control Party shall have the right, at the Control Party’s
sole option and discretion, to setoff any amounts due to Borrower in respect of
Guarantor’s Preferred Stock, whether in respect of dividends, redemption,
liquidation or otherwise (the “
Preferred Payments
”),
and to apply the Preferred Payments on a dollar-for-dollar basis against the
amount of Borrower’s Payment Default. Such setoff amount by the
Control Party shall not exceed the amount of Borrower’s Payment Default, and
under no circumstances shall Borrower be liable to Purchaser or the Guarantor in
connection with the transactions described herein for any amount in excess of
the principal amount of the Notes plus interest, as provided in the
Agreement. Borrower’s amount due under the Notes shall be satisfied
and discharged to the extent of, but only to the extent of, the Control Party’s
effective setoff. If no Payment Default by Borrower has occurred,
however, the Guarantor shall have no right to setoff or otherwise withhold the
Preferred Payments from Borrower. The Control Party shall provide
Borrower with notice of, and reasonably detailed back up information with
respect to, any setoff effected by the Control Party under this letter
agreement.
The
rights of the Control Party herein shall be in addition to, and not in
substitution or limitation of, any other rights and remedies available to the
Control Party, whether such rights or remedies arise pursuant to law, the
Agreement or any other agreement between the parties.
[SIGNATURE
PAGE FOLLOWS]
Please
acknowledge your acceptance of the foregoing terms by executing this letter
agreement in the space below, whereupon this agreement shall constitute a valid
agreement binding upon Purchaser and Borrower.
|
Very
truly yours,
|
|
|
|
FARMER
MAC MORTGAGE SECURITIES CORPORATION
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
|
|
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|
By:
|
|
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|
Name:
|
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|
Title:
|
|
|
ACKNOWLEDGED
AND AGREED:
|
|
|
|
NATIONAL
RURAL UTILITIES
|
|
COOPERATIVE
FINANCE CORPORATION
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
EXHIBIT
10.34
FARMER
MAC MORTGAGE SECURITIES CORPORATION
as
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
as
Borrower
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
as
Guarantor
NOTE
PURCHASE AGREEMENT
Dated
as of May 22, 2009
TABLE OF
CONTENTS
|
|
Page
|
|
|
|
RECITALS
|
|
1
|
|
|
|
ARTICLE
I DEFINITIONS
|
|
1
|
SECTION 1.01.
Definitions
|
|
1
|
SECTION 1.02.
Principles
of Construction
|
|
4
|
|
|
|
ARTICLE
II PURCHASE OF NOTES
|
|
5
|
SECTION 2.01.
Purchase of
Notes; Minimum Denominations
|
|
5
|
SECTION 2.02.
Interest
Rates and Payment
|
|
5
|
SECTION 2.03.
Maturity
|
|
7
|
|
|
|
ARTICLE
III CONDITIONS PRECEDENT
|
|
7
|
SECTION 3.01.
Conditions
Precedent to the Purchase of Each Note
|
|
7
|
SECTION 3.02.
Certificate
of Pledged Collateral
|
|
8
|
|
|
|
ARTICLE
IV REPORTING REQUIREMENTS
|
|
8
|
SECTION 4.01.
Annual
Reporting Requirements
|
|
8
|
SECTION 4.02.
Default
Notices
|
|
9
|
|
|
|
ARTICLE
V REPRESENTATIONS OF THE PARTIES
|
|
9
|
SECTION 5.01.
Representations of Farmer Mac and the
Purchaser
|
|
9
|
SECTION 5.02.
Representations of National Rural
|
|
9
|
|
|
|
ARTICLE
VI SECURITY AND COLLATERAL
|
|
11
|
SECTION 6.01.
Security and
Collateral
|
|
11
|
|
|
|
ARTICLE
VII EVENTS OF DEFAULT
|
|
12
|
SECTION
7.01.
Events of Default
|
|
12
|
SECTION
7.02.
Acceleration
|
|
13
|
SECTION
7.03.
Remedies Not Exclusive
|
|
13
|
|
|
|
ARTICLE
VIII MISCELLANEOUS
|
|
13
|
SECTION
8.01.
GOVERNING LAW
|
|
13
|
SECTION
8.02.
WAIVER OF JURY
TRIAL
|
|
13
|
SECTION
8.03.
Notices
|
|
13
|
SECTION
8.04.
Benefit of Agreement
|
|
13
|
SECTION
8.05.
Entire Agreement
|
|
14
|
SECTION
8.06.
Amendments and Waivers
|
|
14
|
SECTION
8.07.
Counterparts
|
|
14
|
SECTION
8.08.
Termination of Agreement
|
|
14
|
SECTION
8.09.
Survival
|
|
14
|
SECTION
8.10.
Severability
|
|
14
|
|
|
|
ARTICLE
IX GUARANTEE
|
|
15
|
SECTION
9.01.
Guarantee
.
|
|
15
|
SECTION
9.02.
Control by the Guarantor
.
|
|
16
|
Schedule
I – Addresses for Notices
Schedule
II – Form of Applicable Margin Notice
Schedule
III – Form of Pricing Agreement
Annex A-1
– Form of Fixed Rate Note
Annex A-2
– Form of Floating Rate Note
Annex B –
Opinion of Counsel to National Rural
Annex C –
Officers’ Certificate
Annex D –
Form of Securities Purchase Agreement
NOTE
PURCHASE AGREEMENT
NOTE
PURCHASE AGREEMENT, dated as of May 22, 2009, among FARMER MAC MORTGAGE
SECURITIES CORPORATION (the “
Purchaser
”), a wholly
owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a
federally-chartered instrumentality of the United States and an institution of
the Farm Credit System (“
Farmer Mac
” or the
“
Guarantor
”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia (“
National Rural
”); and
Farmer Mac, as Guarantor.
RECITALS
WHEREAS
National Rural wishes from time to time to issue and sell Notes to the
Purchaser, and the Purchaser wishes from time to time to purchase such Notes
from National Rural, all on the terms and subject to the conditions herein
provided; and
WHEREAS
Farmer Mac is an instrumentality of the United States formed to provide for
a secondary market for agricultural real estate mortgages and rural utilities
loans; National Rural is a non-profit cooperative and Farmer Mac, the Purchaser
and National Rural have agreed that the Notes will be secured by the pledge of
notes for borrowings from National Rural by members of National Rural, as
provided herein.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac, the Purchaser and National Rural agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01.
Definitions
. As
used in this Agreement, the following terms shall have the following
meanings:
“
Agreement
” means this
Note Purchase Agreement, as the same may be amended from time to
time.
“
Applicable Margin
”
means the Applicable Margin (LIBOR) or the Applicable Margin (Treasury), as the
context may require.
“
Applicable Margin
(LIBOR)
” means the margin to be added to the LIBOR Rate to determine the
rate of interest payable on the Floating Rate Notes from time to
time. The Applicable Margin (LIBOR) shall be communicated in writing
by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof, in
the form of Schedule II hereof, and calculated by Farmer Mac as follows: (i)
Farmer Mac’s Cost of Funds (expressed in relation to the LIBOR Rate), plus
0.75%, minus (ii) the LIBOR Rate. The Applicable Margin (LIBOR) for
any Floating Rate Note shall be set forth in the applicable Pricing
Agreement.
“
Applicable Margin
(Treasury)
” means the margin to be added to the Treasury Rate to
determine the rate of interest payable on the Fixed Rate Notes. The
Applicable Margin (Treasury) shall be communicated in writing by Farmer Mac to
National Rural in accordance with Section 2.02(d) hereof, in the form of
Schedule II hereof, and calculated by Farmer Mac as follows: (i) Farmer Mac’s
Cost of Funds (expressed in relation to the Treasury Rate), plus 0.75%, minus
(ii) the Treasury Rate. The Applicable Margin (Treasury) for any
Fixed Rate Note shall be set forth in the applicable Pricing
Agreement.
“
Business Day
” means
any day other than a Saturday, a Sunday, or a day on which any of the Federal
Reserve Bank of New York, Farmer Mac’s office in Washington, DC or National
Rural’s office in Virginia is not open for business.
“
Certificate of Pledged
Collateral
” has the meaning given to that term in the Pledge
Agreement.
“
Closing Date
” means
the date of the funding of each issuance of Notes hereunder, which date shall be
set forth in the applicable Pricing Agreement.
“
Collateral Agent
”
means U.S. Bank National Association, or its successor, as collateral agent
under the Pledge Agreement.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Dollar
” or “
$
” means the lawful
money of the United States of America.
“
Eligible Member
” has
the meaning given to that term in the Pledge Agreement.
“
Event of Default
” has
the meaning given to that term in Section 7.01.
“
Farmer Mac’s Cost of
Funds
” means the cost of funds quoted by Farmer Mac to National Rural
based on Farmer Mac’s estimate of the economic cost to obtain cash funds from
the wholesale funding market by issuing unsecured medium-term notes to fully
fund to maturity the Note or Notes purchased by Purchaser from National
Rural.
“
Farmer Mac Series C
Preferred Stock
” means shares of Non-Voting Cumulative Preferred Stock,
Series C issued by Farmer Mac.
“
Final Maturity Date
”
means December 31, 2016, or such other date as agreed to by the
parties.
“
Financial
Statements
”, in respect of a Fiscal Year, means the consolidated
financial statements (including footnotes) of National Rural for that Fiscal
Year as audited by independent certified public accountants selected by National
Rural.
“
Fiscal Year
” means
the fiscal year of National Rural, as such may be changed from time to time,
which at the date hereof commences on June 1 of each calendar year and ends on
May 31 of the following calendar year.
“
Fixed Rate Notes
”
means one or more fixed rate notes of National Rural payable to the Purchaser,
having the terms provided for in Article II of this Agreement and otherwise in
the form of Annex A-1 attached hereto, except to the extent the parties may have
approved changes therein in the applicable Pricing Agreement.
“
Floating Rate Notes
”
means one or more floating rate notes of National Rural payable to the
Purchaser, having the terms provided for in Article II of this Agreement and
otherwise in the form of Annex A-2 attached hereto, except to the extent the
parties may have approved changes therein in the applicable Pricing
Agreement.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX
which is existing and continuing.
“
Interest Payment
Date
” means the dates set forth in the Pricing Agreement for notes as the
interest payment dates therefor; provided, however, that if any such date is not
a Business Day, such Interest Payment Date that would otherwise be such date
will be the next Business Day following such date.
“
Interest Period
”
means, with respect to
Floating Rate Notes, until all outstanding principal amount of the Floating Rate
Notes and interest accrued thereon have been paid in full, each 3-month period
determined as set forth in the applicable Pricing Agreement unless a different
period is agreed by the parties hereto and set forth in such Pricing
Agreement;
provided
, that the initial Interest Period means the period from and
including the date of issuance to and excluding the first Interest Payment Date
following the date of issuance;
provided, further
,
that if any Interest Period would end on a day other than a Business Day, then
such Interest Period shall be extended to and include the next succeeding
Business Day and the next Interest Period shall commence on the next succeeding
day.
“
LIBOR Rate
” shall
mean, for any Interest Period, the rate appearing on Reuters Page LIBOR01 (or on
any successor or substitute page of such service, or if the Reuters service
ceases to be available, any successor to or substitute for such service
providing rate quotations comparable to those currently provided on such page of
such service, as mutually agreed by National Rural and Farmer Mac from time to
time for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) as of 11:00 a.m., London time, on the
day that is two London Banking Days prior to the commencement of such Interest
Period, as the rate for the offering of Dollar deposits with a maturity of three
months (unless another maturity is agreed by the parties hereto and set forth in
the applicable Pricing Agreement). Unless otherwise agreed by the
parties hereto and set forth in the applicable Pricing Agreement, such rate
shall apply for the initial Interest Period for any advance notwithstanding that
such initial Interest Period for an advance may be shorter than three
months.
“
London Banking Day
”
shall mean any day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealings in foreign
exchange and foreign currency deposits) in the Dollar, in London,
England.
“
Member
” shall mean
any Person who is member of National Rural.
“
National Rural
Notice
” has the meaning given to that term in the Pledge
Agreement.
“
Notes
” means the
Fixed Rate Notes and the Floating Rate Notes, or any one or more of them as the
context may require.
“
Note Documents
” means
the Notes, this Agreement, and the Pledge Agreement.
“
Notice of Borrowing
”
has the meaning set forth in Section 2.01 hereof.
“
Person
” means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“
Pledge Agreement
”
means the Pledge Agreement dated as of the date hereof, among National Rural,
the Purchaser, Farmer Mac and the Collateral Agent.
“
Pledged Collateral
”
has the meaning given to that term in the Pledge Agreement.
“
Pledged Securities
”
has the meaning given to that term in the Pledge Agreement.
“
Pricing Agreement
”
means the Pricing Agreement for each issuance of Notes among Farmer Mac, the
Purchaser and National Rural in the form of Schedule III attached
hereto.
“
Securities Purchase
Agreement
” means the Series C Preferred Stock Purchase Agreement, a form
of which is attached hereto as
Annex D
.
“
Treasury Rate
” means
the applicable benchmark United States Treasury rate agreed at the time of
pricing a Note and set forth in the applicable Pricing Agreement.
SECTION
1.02.
Principles of
Construction
. Unless
the context shall otherwise indicate, the terms defined in Section 1.01
hereof include the plural as well as the singular and the singular as well as
the plural. The words “hereafter”, “herein”, “hereof”, “hereto” and
“hereunder”, and words of similar import, refer to this Agreement as a
whole. The descriptive headings of the various articles and sections
of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions
hereof.
ARTICLE
II
PURCHASE
OF NOTES
SECTION
2.01.
Purchase of Notes; Minimum
Denominations
. The
Purchaser agrees to purchase Notes, at 100% of their principal amount, from time
to time before the Final Maturity Date, as requested by National Rural by
written notice (each, a “
Notice of Borrowing
”)
to Farmer Mac in an aggregate principal amount, for all Notes outstanding
hereunder at any one time, not in excess of $1 billion, subject to satisfaction
of the conditions set forth herein. National Rural may borrow, repay
(subject to the terms of the applicable Notes being repaid) and reborrow funds
at any time or from time to time up to, but not including, the Final Maturity
Date. Each advance under this Agreement shall be disbursed in a
minimum amount of $50 million and additional increments of $5 million in
excess thereof or such other amounts as agreed to in the applicable Pricing
Agreement. Each advance shall price within 3 Business Days of
National Rural providing a Notice of Borrowing to Farmer Mac and shall close and
fund within 3 Business Days of pricing, subject to satisfaction of the
conditions set forth herein and in accordance with the procedures set forth in
Section 2.02(d) hereof, unless otherwise agreed by the parties hereto and set
forth in the applicable Pricing Agreement.
SECTION
2.02.
Interest Rates and
Payment
.
(a)
Floating Rate
Notes
. Each Floating Rate Note shall bear interest, payable
quarterly in arrears unless otherwise agreed by the parties hereto and set forth
in the applicable Pricing Agreement, on the outstanding principal amount thereof
(computed on the basis of a 360-day year and the actual number of days elapsed)
from its date of issuance until final payment on the maturity date thereof or
otherwise at a variable rate per annum equal to the LIBOR Rate for each Interest
Period plus the Applicable Margin (LIBOR). The LIBOR Rate shall reset
as of the first day of each Interest Period. The (i) initial LIBOR
Rate and (ii) Applicable Margin (LIBOR) for the term of each Floating Rate Note
shall be specified in the applicable Pricing Agreement. Interest only
shall be payable on each Interest Payment Date. The Interest Payment
Dates shall be determined at the time of an advance and set forth in the
applicable Pricing Agreement. The principal amount of each Floating
Rate Note, together with any accrued but unpaid interest, shall be due and
payable on the maturity date for such Note.
(b)
Fixed Rate
Notes
. Each Fixed Rate Note shall bear interest, payable
semi-annually in arrears unless otherwise agreed by the parties hereto and set
forth in the applicable Pricing Agreement on the outstanding principal amount
thereof (computed on the basis of a 30-day month and a 360-day year) from its
date of issuance until final payment on the maturity date thereof or otherwise
at a fixed rate per annum equal to the Treasury Rate plus the Applicable Margin
(Treasury), in each case as specified for the term of each Fixed Rate Note in
the applicable Pricing Agreement. Interest only shall be payable on
each Interest Payment Date. The Interest Payment Dates shall be
determined at the time of an advance and set forth in the applicable Pricing
Agreement. The principal amount of each Fixed Rate Note, together
with any accrued but unpaid interest, shall be due and payable on the applicable
maturity date for such Note.
(c)
Default
Interest
. To the extent any payment of interest or principal
is not paid when due, interest shall continue to accrue thereon at the
applicable rate per annum determined as provided above plus one
percent.
(d)
Notice of Borrowing;
Determination of
Applicable Margin; Procedure
for Pricing
.
(i) Each
Notice of Borrowing shall indicate the amount of the Note and the desired
maturity date of such Note that National Rural requests to be
advanced. A Notice of Borrowing may request preliminary pricing
indications for more than one type of Note, with the understanding that only one
type of Note will be issued on any particular Closing Date, unless otherwise
agreed by the parties hereto in a Pricing Agreement. Each Notice of
Borrowing shall also provide name, telephone and email contact information of an
authorized representative of National Rural.
(ii)
Upon receipt of a Notice of
Borrowing from National Rural, Farmer Mac shall, within 2 Business Days, provide
to National Rural a preliminary indication of the Applicable Margin (LIBOR) or
Applicable Margin (Treasury), or both, as applicable to any Notice of Borrowing;
provided
that
Farmer Mac shall not be obligated to provide an indication of pricing if Farmer
Mac uses its best efforts to obtain and provide such preliminary indication, but
determines in its sole discretion reasonably exercised after consultation with
National Rural that market conditions are unfavorable for the issuance of debt
to fund Notes with the terms set forth in the Notice of
Borrowing. Upon an acceptance of such preliminary indication of
pricing by National Rural, the applicable Note will price within one Business
Day (and may price on the day of the preliminary pricing if the parties so
agree) thereafter, unless the parties otherwise agree to a longer period of time
as set forth in the applicable Pricing Agreement. Farmer Mac shall
provide National Rural with written notice of the final Applicable Margin
(LIBOR) or Applicable Margin (Treasury) no later than the time of pricing of
each advance. National Rural shall be deemed to approve of such
pricing so long as the Applicable Margin (LIBOR) or Applicable Margin (Treasury)
shall not exceed the preliminary indication by more than 5 basis points
(0.05%). If the final pricing does exceed the preliminary indication
by more than 5 basis points (0.05%), an authorized representative of National
Rural must agree via email confirmation prior to or simultaneously with the
pricing to accept such margin.
(e)
Payments and
Prepayments.
(i)
Each Floating Rate Note
shall not be prepayable during the term of such Note.
(ii)
Each Fixed Rate Note shall
not be prepayable during the term of such Note unless otherwise agreed by Farmer
Mac and National Rural and set forth in the applicable Pricing
Agreement. If the parties agree that an issuance of Fixed Rate Notes
may be prepayable prior to the maturity date of such Notes, then (A) the
applicable Pricing Agreement shall set forth the scheduled call dates, and (B)
unless otherwise agreed by the parties and set forth in the applicable Pricing
Agreement, National Rural may prepay such Note upon at least nine (9) Business
Days prior written notice to Farmer Mac, which notice shall be received by
Farmer Mac on a day that is on or before the ninth Business Day prior to the
related call date, but in any event, no later than noon eastern time on the
ninth Business Day prior to the related call date. In the event that
any such repayment or prepayment of the principal amount of any Note is made on
a day other than an Interest Payment Date, accrued interest on the principal
amount thereof shall be payable through and excluding the call date on which
such repayment or prepayment is made.
(iii)
The prepayment terms of
any other type of Fixed Rate Note or Floating Rate Note shall be set forth in
the applicable Pricing Agreement.
(f)
Payment
Notice
. Farmer Mac shall send to National Rural, not later
than the fifth Business Day prior to an Interest Payment Date for any Note, a
notice setting forth the amount of principal and interest, as applicable, due
and owing on the next Interest Payment Date for such Note.
SECTION
2.03.
Maturity
. Each
Note shall mature on the maturity date set forth in the applicable Pricing
Agreement and in any event no later than the Final Maturity Date.
ARTICLE
III
CONDITIONS
PRECEDENT
SECTION
3.01.
Conditions Precedent to the
Purchase of Each Note
. On
each Closing Date, the Purchaser shall be under no obligation to purchase any
Note unless and until the following conditions have been satisfied:
(a)
The
Notes
. Farmer Mac shall have received the original of such
Notes, duly executed on behalf of National Rural, in the applicable form
attached as Annex A-1 or A-2 hereto, or otherwise in a form agreed by the
parties.
(b)
The Pledge
Agreement
. Farmer Mac shall have received an original of the
Pledge Agreement duly executed on behalf of National Rural and the Collateral
Agent.
(c)
Opinion of
Counsel
. Farmer Mac shall have received an opinion of counsel
to National Rural substantially in the form of Annex B, attached
hereto.
(d)
Financial and Other
Information
. National Rural shall have provided Farmer Mac
with its most recent Financial Statements and such other information concerning
National Rural as Farmer Mac shall have reasonably requested.
(e)
No Material Adverse
Change
. National Rural shall have certified to Farmer Mac (in
the manner specified in paragraph (i) of this Section 3.01), and Farmer Mac
shall be satisfied, that no material adverse change shall have occurred in the
financial condition or business of National Rural between the end of National
Rural’s most recently completed Fiscal Year for which Financial Statements have
been made publicly available and the date of the purchase of such Note, which
has not been set forth in documents, certificates or financial information
furnished to Farmer Mac or publicly filed.
(f)
UCC
Filing
. National Rural shall have provided Farmer Mac with
evidence that National Rural has filed the financing statement required pursuant
to Section 2.02(i) of the Pledge Agreement.
(g)
No Event of
Default
. National Rural shall have certified to Farmer Mac and
Farmer Mac shall be satisfied that no Event of Default shall have occurred and
be continuing.
(h)
Invest to
Participate
. National Rural shall have entered into a
Securities Purchase Agreement to purchase Farmer Mac Series C Preferred Stock
such that National Rural shall own or have agreed to purchase at least 4% of the
sum of (1) the aggregate principal amount of the Notes outstanding hereunder and
(2) the aggregate principal amount of the notes outstanding under both of the
Note Purchase Agreement among the parties dated as of December 15, 2008 and the
Note Purchase Agreement among the parties dated as of February 5, 2009, taking
into account the advance made hereunder on the Closing Date.
(i)
Certification of Senior
Management
. National Rural shall have provided Farmer Mac a
certification by any vice president of National Rural, substantially in the form
of Annex C attached hereto, as to the following: (i) that National Rural is
a lending institution organized as a private, not-for-profit, cooperative
association with the appropriate expertise, experience and qualifications to
make loans to its Members for rural electrification and related purposes; (ii)
the matters to be certified under paragraphs (e) and (g) of this
Section 3.01; and (iii) the representations and warranties of National
Rural.
SECTION
3.02.
Certificate of Pledged
Collateral
. No
later than three Business Days after each advance hereunder, National Rural
shall provide Farmer Mac and the Collateral Agent a copy of a Certificate of
Pledged Collateral, dated as of the last day of the calendar month most recently
ended at least 10 Business Days prior to such authentication and delivery, or a
more recent date, at National Rural’s option, in accordance with the terms of
the Pledge Agreement.
ARTICLE
IV
REPORTING
REQUIREMENTS
SECTION
4.01.
Annual Reporting
Requirements
. So
long as any Notes remain outstanding, National Rural shall provide Farmer Mac
with the following items within 90 days of the end of each Fiscal Year, in each
case, in form and substance satisfactory to Farmer Mac:
(a)
the
Financial Statements for such Fiscal Year;
(b)
a
Certificate of Pledged Collateral;
(c)
a
receipt from the Collateral Agent, or such other evidence as is satisfactory to
Farmer Mac, as to the Pledged Collateral held by the Collateral Agent at the end
of such Fiscal Year; and
(d)
such
other information concerning National Rural or the Pledged Collateral as is
reasonably requested by Farmer Mac.
SECTION
4.02.
Default
Notices
. If
an action, occurrence or event shall happen that is, or with notice and the
passage of time would become, an Event of Default, National Rural shall deliver
a National Rural Notice of such action, occurrence or event to Farmer Mac before
4:00 p.m. (District of Columbia time) on the Business Day following the
date National Rural becomes aware of such action, occurrence or event, and, if
such Event of Default should occur, shall submit to Farmer Mac, within five days
thereafter, a report setting forth its views as to the reasons for the Event of
Default, the anticipated duration of the Event of Default and what corrective
actions National Rural is taking to cure such Event of Default.
ARTICLE
V
REPRESENTATIONS
OF THE PARTIES
SECTION
5.01.
Representations of Farmer
Mac and the Purchaser
. Each
of Farmer Mac and the Purchaser jointly and severally represent to National
Rural that on the date hereof and on each date on which the Purchaser purchases
a Note from National Rural:
(a)
it
has all necessary authority and has taken all necessary corporate action, and
obtained all necessary approvals, in order for it to execute and deliver all
Note Documents to which it is a party and for its obligations and agreements
under the Note Documents to constitute valid and binding obligations of Farmer
Mac and the Purchaser; and in particular the terms of the transaction, and the
actions taken by Farmer Mac and the Purchaser, are in compliance with and in
satisfaction of the requirements of the Farm Credit Administration, as amended
or waived by the Farm Credit Administration; and
(b)
The
Purchaser is purchasing the Notes for its own account and not with a view to the
distribution thereof, provided that the disposition by Farmer Mac or the
Purchaser of their property shall at all times be within their
control. Farmer Mac and the Purchaser each understands that the Notes
have not been registered under the Securities Act of 1933, as amended, and may
be resold only if an exemption from registration is available.
SECTION
5.02.
Representations of National
Rural
.
National
Rural hereby represents to Farmer Mac and the Purchaser that on the date hereof
and on each date on which the Purchaser purchases a Note from National
Rural:
(a)
National
Rural has been duly organized and is validly existing and in good standing as a
cooperative association under the laws of the District of
Columbia;
(b)
National
Rural has the corporate power and authority to execute and deliver this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder;
(c)
National
Rural has taken all necessary corporate and other action to authorize the
execution and delivery of this Agreement, each of the other Note Documents and
the applicable Pricing Agreement and Securities Purchase Agreement, if any, the
consummation by National Rural of the transactions contemplated hereby and
thereby and the performance by National Rural of its obligations hereunder and
thereunder;
(d)
this
Agreement, each of the other Note Documents and the applicable Pricing Agreement
and Securities Purchase Agreement, if any, have been duly authorized, executed
and delivered by National Rural and constitute the legal, valid and binding
obligations of National Rural, enforceable against National Rural in accordance
with their respective terms, subject to: (i) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws of general applicability
relating to or affecting creditors’ rights generally; and (ii) the
application of general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e)
no
approval, consent, authorization, order, waiver, exemption, variance,
registration, filing, notification, qualification, license, permit or other
action is now, or under existing law in the future will be, required to be
obtained, given, made or taken, as the case may be, with, from or by any
regulatory body, administrative agency or governmental authority having
jurisdiction over National Rural or any third party under any agreement to which
National Rural is a party to authorize the execution and delivery by National
Rural of this Agreement, any of the other Note Documents or the applicable
Pricing Agreement and Securities Purchase Agreement, if any, or the consummation
by National Rural of the transactions contemplated hereby or thereby or the
performance by National Rural of its obligations hereunder or
thereunder;
(f)
neither
the execution or delivery by National Rural of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, nor the consummation by National Rural of any of the
transactions contemplated hereby or thereby nor the performance by National
Rural of its obligations hereunder or thereunder, including, without limitation,
the pledge of the Pledged Securities (as such term is defined in the Pledge
Agreement) to Farmer Mac, conflicts with or will conflict with, violates or will
violate, results in or will result in a breach of, constitutes or will
constitute a default under, or results in or will result in the imposition of
any lien or encumbrance pursuant to any term or provision of the articles of
incorporation or the bylaws of National Rural or any provision of any existing
law or any rule or regulation currently applicable to National Rural or any
judgment, order or decree of any court or any regulatory body, administrative
agency or governmental authority having jurisdiction over National Rural or the
terms of any mortgage, indenture, contract or other agreement to which National
Rural is a party or by which National Rural or any of its properties is
bound;
(g)
there
is no action, suit, proceeding or investigation before or by any court or any
regulatory body, administrative agency or governmental authority presently
pending or, to the knowledge of National Rural, threatened with respect to
National Rural, this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if any,
challenging the validity or enforceability of this Agreement, any of the other
Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or seeking to restrain, enjoin or otherwise prevent National
Rural from engaging in its business as currently conducted or the consummation
by National Rural of the transactions contemplated by this Agreement, any of the
other Note Documents or the applicable Pricing Agreement and Securities Purchase
Agreement, if any, or which, if adversely determined, would have a material
adverse effect on National Rural’s financial condition or its ability to perform
its obligations under this Agreement, any of the other Note Documents or the
applicable Pricing Agreement and Securities Purchase Agreement, if
any;
(h)
National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification purposes;
and
(i)
no
material adverse change has occurred in the financial condition or business of
National Rural between the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date this representation is given which has not been set forth in documents,
certificates or financial information furnished to Farmer Mac or publicly
filed.
ARTICLE
VI
SECURITY
AND COLLATERAL
SECTION
6.01.
Security and
Collateral
.
(a)
National
Rural shall cause the Allowable Amount of the Pledged Collateral (as such terms
are defined in the Pledge Agreement) to be at all times not less than 100% of
the aggregate outstanding principal amount of the Notes.
(b)
National
Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage,
encumbrance, debenture, hypothecation or other similar security instrument that
secures, or in any way attaches to, such Pledged Collateral, other than the lien
of the Pledge Agreement, without the prior written consent of Farmer
Mac.
(c)
The
Pledged Securities will at all times be notes issued to National Rural by
Eligible Members (as defined in the Pledge Agreement).
ARTICLE
VII
EVENTS OF
DEFAULT
SECTION
7.01.
Events of
Default
. Each
of the following actions, occurrences or events shall, but only (except in the
case of subsections (a), (d) and (e) below) if National Rural does not cure such
action, occurrence or event within 30 days of notice from Farmer Mac
requesting that it be cured, constitute an “
Event of Default
”
under the terms of this Agreement:
(a)
a
failure by National Rural to make a payment of principal or interest on any Note
for more than ten days after the same becomes due and payable;
(b)
a
material representation by National Rural to Farmer Mac in connection with this
Agreement, any Note or the Pledge Agreement, or any material information
reported pursuant to Article V, shall prove to be incorrect or untrue in any
material respect when made or deemed made;
(c)
a
failure by National Rural to comply with any other material covenant or
provision contained in this Agreement or any of the other Note
Documents;
(d)
the
entry of a decree or order by a court having jurisdiction in the premises
adjudging National Rural a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or
in respect of National Rural under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of National Rural or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
(e)
the
commencement by National Rural of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law or law of the District of Columbia, or the
consent by it to the filing of any such petition or to the appointment of
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
National Rural or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking of
corporate action by National Rural in furtherance of any such
action.
SECTION
7.02.
Acceleration
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
may, upon notice to that effect to National Rural, declare the entire principal
amount of, and accrued interest on, the Notes at the time outstanding to be
immediately due and payable.
SECTION
7.03.
Remedies Not
Exclusive
. Upon
the occurrence, and during the continuance, of an Event of Default, Farmer Mac
shall be entitled to take such other action as is provided for by law, in this
Agreement, or in any of the other Note Documents, including injunctive or other
equitable relief.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.01.
GOVERNING
LAW
. EXCEPT
AS SET FORTH IN SECTION 9.01 HEREOF, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW
INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
SECTION
8.02.
WAIVER OF JURY
TRIAL
. EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.02.
SECTION
8.03.
Notices
. All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto
as appropriate except as otherwise provided herein. The address,
telephone number, or facsimile number for any party may be changed at any time
and from time to time upon written notice given by such changing party to the
other parties hereto. A properly addressed notice or other
communication shall be deemed to have been delivered at the time it is sent by
facsimile (fax) transmission to the party or parties to which it is
given.
SECTION
8.04.
Benefit of
Agreement
. This
Agreement shall become effective when it shall have been executed by Farmer Mac,
the Purchaser and National Rural, and thereafter shall be binding upon and inure
to the respective benefit of the parties and their permitted successors and
assigns.
SECTION
8.05.
Entire
Agreement
. This
Agreement, including the Schedules and Annexes hereto, and the other Note
Documents, constitute the entire agreement between the parties hereto concerning
the matters contained herein and supersede all prior oral and written agreements
and understandings between the parties.
SECTION
8.06.
Amendments and
Waivers
.
(a)
No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac, the Purchaser and National
Rural. No provision of this Agreement may be waived except in writing
by the party or parties receiving the benefit of and under such
provision.
(b)
No
failure or delay of Farmer Mac, the Purchaser or National Rural in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. No waiver of any provision of this Agreement or consent to any
departure by National Rural therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (a) of this
Section 8.06, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on National Rural in any case shall entitle National Rural to any
other or further notice or demand in similar or other
circumstances.
SECTION
8.07.
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
8.08.
Termination of
Agreement
. This
Agreement shall terminate upon the indefeasible payment in full of all amounts
payable hereunder and under the Notes.
SECTION
8.09.
Survival
. The
representations and warranties of each of the parties hereto contained in this
Agreement and contained in each of the other Note Documents, and the parties’
obligations under any and all thereof, shall survive and shall continue in
effect following the execution and delivery of this Agreement, any disposition
of the Notes and the expiration or other termination of any of the other Note
Documents, but, in the case of each Note Document, shall not survive the
expiration or the earlier termination of such Note Document, except to the
extent expressly set forth in such Note Document.
SECTION
8.10.
Severability
. If
any term or provision of this Agreement or any Note Document or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or such provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms or provisions of
such Note Document or the application of such term or provision to circumstances
other than those as to which it is held invalid or
unenforceable.
ARTICLE
IX
GUARANTEE
SECTION
9.01.
Guarantee
.
(a)
The
Guarantor agrees to pay in full to the holder of each Note, the principal of,
and interest on, the Notes when due, whether at maturity, upon redemption or
otherwise (the “
Guaranteed
Obligations
”), on the applicable due date for such payment.
(b)
The
Guarantor’s obligations hereunder shall inure to the benefit of and shall be
enforceable by any holder of a Note if, for reason beyond the control of such
holder, such holder shall have failed to receive the interest or principal, as
applicable, payable to such holder any payment date, redemption date or stated
maturity date. The Guarantor hereby irrevocably agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
legality or enforceability of, or any change in or amendment to, this Agreement,
the Pledge Agreement or any Note, the absence of any action to enforce the same,
the waiver or consent by the holder of any Note or by the Collateral Agent with
respect to any provisions of this Agreement or the Pledge Agreement, or any
action to enforce the same or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor. The Guarantor hereby waives diligence, presentment, demand
of payment, protest or notice with respect to each Note or the interest
represented thereby, and all demands whatsoever, and covenants that the
guarantee will not be discharged except upon complete irrevocable payment of the
principal and interest obligations represented by the Notes.
(c)
The
Guarantor shall be subrogated to and is hereby assigned all rights of the holder
of the Notes against National Rural and the proceeds of the Pledged Collateral,
all in respect of any amounts paid by the Guarantor pursuant to the provisions
of the guarantee contained in this Article IX. Each holder shall
execute and deliver to the Guarantor in each holder’s name such instruments and
documents as the Guarantor may reasonably request in writing confirming or
evidencing such subrogation and assignment.
(d)
No
reference herein shall alter or impair the guarantee, which is absolute and
unconditional, of the due and punctual payment of principal of, and interest on,
the Notes, on the dates such payments are due.
(e)
The
guarantee is not an obligation of, and is not a guarantee as to principal or
interest by the Farm Credit Administration, the United States or any other
agency or instrumentality of the United States (other than the
Guarantor).
(f)
The
guarantee shall be governed by, and construed in accordance with, Federal
law. To the extent Federal law incorporates state law, that state law
shall be the laws of the District of Columbia applicable to contracts made and
performed therein.
SECTION
9.02.
Control by the
Guarantor
.
If the
Guarantor is the Control Party, the Guarantor shall be considered the holder of
all Notes outstanding for all purposes under the Pledge Agreement and shall be
permitted to take any and all actions permitted to be taken by the holder
thereunder. The Control Party will have the sole right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Collateral Agent or any holder with respect to the Notes or exercising any
power conferred on the Collateral Agent with respect to the Notes provided
that:
(i)
such direction shall not be
in conflict with any rule of law or with the Pledge Agreement;
(ii)
the Collateral Agent shall
have been provided with indemnity from the Control Party reasonably satisfactory
to it; and
(iii)
the Collateral Agent may
take any other action deemed proper by such Collateral Agent that is not
inconsistent with such direction, provided, however, that the Collateral Agent
need not take any action which it determines might expose it to
liability.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by
an authorized officer as of the day and year first above written.
FARMER
MAC MORTGAGE SECURITIES
CORPORATION
|
|
|
By:
|
|
Name:
Title:
|
|
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION
|
|
|
By:
|
|
Name:
Title:
|
|
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
|
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By:
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Name:
Title:
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SCHEDULE
I
TO
NOTE
PURCHASE AGREEMENT
Addresses
for Notices
1.
|
The
addresses referred to in Section 8.03 hereof, for purposes of
delivering communications and notices, are as
follows:
|
If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Timothy L. Buzby, Vice President – Chief Financial Officer
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Robert Owens/Jitin Singhal, Capital Markets Group
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Stephen P. Mullery, Assistant General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6748
Fax: 703-709-6779
Attention
of: John Suter, Vice President, Capital Market Funding
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
SCHEDULE
II
TO
NOTE
PURCHASE AGREEMENT
FORM
OF
APPLICABLE
MARGIN NOTICE
Issuer Name:
National Rural Utilities
Cooperative Finance Corporation
Date
of Note(s): __________________________
Type
of Note: ____________________________
Applicable
Margin: ________________________
Effective
Date of Applicable Margin: _________________________
This
Applicable Margin Notice is delivered pursuant to the Note Purchase Agreement,
dated as of May 22, 2009 among Federal Agricultural Mortgage Corporation, Farmer
Mac Mortgage Securities Corporation and National Rural Utilities Cooperative
Finance Corporation (the “Note Purchase Agreement”). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Note Purchase Agreement.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
By:
|
|
|
|
Signature
|
Date
|
|
Title
of Authorized Officer
|
Name: _____________________
PLEASE
FAX
TO: ______________________ ATTN: ________________________
ACCEPTED
BY:
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
By:
|
|
|
|
Signature
|
Date
|
|
Title
of Authorized Officer
|
Name: _____________________
SCHEDULE
III
TO
NOTE
PURCHASE AGREEMENT
FORM OF
PRICING AGREEMENT
The
Federal Agricultural Mortgage Corporation, a federally chartered instrumentality
of the United States and an institution of the Farm Credit System (“Farmer
Mac”), Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of
Farmer Mac (the “Purchaser”) and National Rural Utilities Cooperative Finance
Corporation, a cooperative association existing under the laws of the District
of Columbia (“National Rural”), agree that, on _______ __, 20__ (the “Closing
Date”), the Purchaser will purchase from National Rural and National Rural will
sell to the Purchaser $________________ aggregate principal amount of [Fixed
Rate Notes] [Floating Rate Notes] (the “Notes”) with the following
terms:
[Initial
LIBOR Rate: _______]
[Treasury
Rate:______]
Applicable
Margin (LIBOR or Treasury):__________
Interest
Payment Dates:___________
Interest
Periods:_____________
[The
Notes may not be prepaid at any time.]
[The
Notes may not be prepaid prior to __________ __, 20__. On or after
_____________ __, 20__ the Notes may be prepaid on the scheduled call dates set
forth herein, in whole [only] [or in part], at the option of National Rural,
according to the terms of the Note Purchase Agreement (as defined below).][The
Notes may be prepaid in whole [only] [or in part] at any time.]
[Scheduled
call dates: __________________]
Maturity
Date: __________________
The
issuance and sale of the Notes by National Rural to the Purchaser shall occur
under the terms and conditions of the Note Purchase Agreement, dated as of May
22, 2009, among Farmer Mac, the Purchaser and National Rural (the “Note Purchase
Agreement”). All of the provisions contained in the Note Purchase
Agreement are hereby incorporated by reference in their entirety and shall be
deemed to be a part of this Pricing Agreement to the same extent as if such
provisions had been set forth in full herein. Capitalized terms used
herein and not defined herein shall have the meanings given to those terms in
the Note Purchase Agreement. This Pricing Agreement may be executed
in two or more counterparts.
In the
event of any inconsistency between the terms of this Pricing Agreement and the
Note Purchase Agreement, the terms of this Pricing Agreement shall
apply.
Agreed to
this __ day of _______, 20__.
|
Federal
Agricultural Mortgage Corporation,
|
|
|
|
By:
______________________
|
|
Name:
____________________
|
|
Title:
_____________________
|
|
|
|
Farmer
Mac Mortgage Securities
Corporation,
|
|
|
|
By:
______________________
|
|
Name:
____________________
|
|
Title:
_____________________
|
|
|
|
National
Rural Utilities Cooperative
|
|
Finance
Corporation,
|
|
|
|
By:
____________________
|
|
Name: __________________
|
|
Title: ___________________
|
ANNEX
A-1
[FORM
OF FIXED RATE NOTE]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
__% Fixed
Rate Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below) (“
the Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of May 22, 2009, as
well as the Pricing Agreement for $__ Fixed Rate Notes dated as of ______ __,
20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”), and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of May 22, 2009, among National
Rural, the Purchaser, Farmer Mac and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
[This
Note may not be prepaid at any time.][This Note may not be prepaid prior to
__________ __, 20__. On or after _____________ __, 20__ this Note may
be prepaid at any time, in whole [only] [or in part], at the option of National
Rural, according to the terms of the Note Purchase Agreement and provided that,
if such optional prepayment is made on a date other than an Interest Payment
Date, accrued interest on the principal amount hereof that is being prepaid
shall be payable through and excluding the date such optional prepayment is
made.][This Note is prepayable at any time by National Rural, in whole [only]
[or in part] at the option of National Rural on the terms set forth in the Note
Purchase Agreement.]
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
|
|
By
|
|
|
|
Name:
|
|
Title:
|
ANNEX
A-2
[FORM OF
FLOATING RATE NOTE]
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Floating
Rate Senior Note due _______
Washington,
D.C.
____________,
20__
FOR VALUE
RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (“
National
Rural
”), a District of Columbia cooperative association, hereby promises
to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary
of Farmer Mac (as defined below)(the “
Purchaser
”), or
registered assigns, the principal sum of _______________ MILLION DOLLARS
($___,000,000.00) on __________________, together with interest computed from
the date hereof according to the terms of the Note Purchase Agreement (as
defined below).
Payments
of principal and interest on this Note are to be made in lawful money of the
United States of America at such place as shall have been designated by written
notice to National Rural from the registered holder of this Note as provided in
the Note Purchase Agreement referred to below.
This Note
is issued pursuant to a Note Purchase Agreement, dated as of May 22, 2009, as
well as the Pricing Agreement for $__ Floating Rate Notes dated as of _________
__, 20__ (together, as from time to time amended, the “
Note Purchase
Agreement
”), among National Rural, the Purchaser and Federal Agricultural
Mortgage Corporation (“
Farmer Mac
”) and is
entitled to the benefits thereof. This Note is also entitled to the
benefits of the Pledge Agreement, dated as of May 22, 2009, among National
Rural, Farmer Mac, the Purchaser and the Collateral Agent named
therein.
Capitalized
terms used herein and not defined herein shall have the meanings given to those
terms in the Note Purchase Agreement.
This Note
is a registered Note and, upon surrender of this Note for registration of
transfer or exchange, accompanied by a written instrument of transfer duly
executed by the registered holder hereof or such holder’s attorney duly
authorized in writing, a new Note will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of
transfer, National Rural may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and National Rural will not be affected by any notice to the
contrary.
This Note
may not be prepaid at any time.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Note
shall be construed and enforced in accordance with, and the rights of National
Rural and the holder hereof shall be governed by, the laws of the District of
Columbia, excluding choice-of-law principles of the law of the District of
Columbia that would require the application of the laws of another
jurisdiction.
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
|
|
By
|
|
|
|
|
|
|
ANNEX
B
[FORM OF
OPINION OF COUNSEL TO NATIONAL RURAL]
[•]
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, NW
Suite
600
Washington,
DC 20036
Gentlemen:
I am
delivering this opinion as general counsel (“Counsel”) of National Rural
Utilities Cooperative Finance Corporation, a District of Columbia cooperative
association (the “Borrower”), and am familiar with matters pertaining to the
loan to Borrower in the principal amount of $1,000,000,000.00, provided for
in the Note Purchase Agreement, dated as of May 22, 2009 (“Note
Purchase Agreement”), among the Borrower, Farmer Mac Mortgage Securities
Corporation (the “Purchaser”) and Federal Agricultural Mortgage Corporation
(“Farmer Mac”).
I have
examined such corporate records and proceedings of the Borrower, and such other
documents as I have deemed necessary as a basis for the opinions hereinafter
expressed.
I have
also examined the following documents as executed and delivered: (a) the Note
Purchase Agreement; (b) the Note dated as of ____________, in the principal
amount of $____________ (“Note”), said Note payable to the Purchaser;
(c) the Pricing Agreement for $__________ [Fixed] [Floating] Rate Notes
dated as of ____________ among the Borrower, the Purchaser and Farmer Mac (the
“Pricing Agreement”) and (d) the Pledge Agreement, dated as of May 22, 2009,
among the Borrower, the Purchaser, Farmer Mac and U.S. Bank National Association
(the “Pledge Agreement”). The documents described in items (a)
through (d) above are collectively referred to herein as the “Note
Documents.”
Based on
the foregoing, but subject to the assumptions, exceptions, qualifications and
limitations hereinafter expressed, I am of the opinion that:
(1) The
Borrower has been duly incorporated and is validly existing as a cooperative
association in good standing under the laws of the District of Columbia with
corporate power and authority to execute and perform its obligations under the
Note Documents.
(2) The
Note Documents have been duly authorized, executed and delivered by the
Borrower, and such documents constitute the legal, valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
(3) Neither
the execution nor the delivery by the Borrower of any of the Note Documents nor
the consummation by the Borrower of any of the transactions contemplated
therein, including, without limitation, the pledge of the Pledged Securities (as
such term is defined in the Pledge Agreement) to Farmer Mac, nor the fulfillment
by the Borrower of the terms of any of the Note Documents will conflict with or
violate, result in a breach of or constitute a default under any term or
provision of the Articles of Incorporation or By-laws of the Borrower or any law
or any regulation or any order known to Counsel currently applicable to the
Borrower of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Borrower or the terms of any indenture, deed
of trust, note, note agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its properties is bound.
(4) No
approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency
or body having jurisdiction over the Borrower is required for any consummation
by the Borrower of the transactions contemplated by the Note Documents;
provided
,
however
, no opinion
is expressed as to the applicability of any Federal or state securities law to
any sale, transfer or other disposition of the Note after the date
hereof.
(5) Except
as set forth in writing and previously delivered to Farmer Mac or attached
hereto as Exhibit A, there is no pending or, to Counsel’s knowledge, threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator with respect to the Borrower, or any of the Note
Documents, which, if adversely determined, would have a material adverse effect
on the Borrower’s financial condition or its ability to perform its obligations
under any of the Note Documents.
(6) With
respect to the Pledged Securities in the Certificate of Pledged Collateral (as
such term is defined in the Pledge Agreement), (x) all action with respect to
the recording, registering or filing of financing statements in the jurisdiction
of organization of National Rural has been taken as is necessary to perfect the
security interest intended to be created in such items under the Uniform
Commercial Code and (y) in the case of each Eligible Security (as such term is
defined in the Pledge Agreement) constituting a certificated security or
instrument under the Uniform Commercial Code, such Eligible Security has been
delivered to the Collateral Agent such that the taking and retention of the
possession by the Collateral Agent of such Eligible Security is sufficient to
perfect the security interest to be created under the Uniform Commercial
Code. For purposes of the opinion set forth in this section (6), I
have assumed that the Uniform Commercial Code of the District of Columbia is the
same as that of the State of New York.
The foregoing opinions are subject to
the following assumptions, exceptions, qualifications and
limitations:
A. I
am a member of the Bar of the District of Columbia and render no opinion on the
laws of any jurisdiction other than the laws of the District of Columbia, the
federal laws of the United States of America and the General Corporation Law of
the District of Columbia.
B. My
opinions are limited to the present laws and to the facts, as they presently
exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph A above be
changed by legislative action, judicial decision or otherwise.
C. The
opinions expressed in paragraph 2 above shall be understood to mean only that if
there is a default in performance of an obligation, (i) if a failure to pay or
other damage can be shown and (ii) if the defaulting party can be brought into a
court which will hear the case and apply the governing law, then, subject to the
availability of defenses, and to the exceptions set forth in the next paragraph,
the court will provide a money damage (or perhaps injunctive or specific
performance) remedy.
D. My
opinions are also subject to the effect of: (1) bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
creditors’ rights (including, without limitation, the effect of statutory and
other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers); and (2) the exercise of judicial discretion and the
application of principles of equity, good faith, fair dealing, reasonableness,
conscionability and materiality (regardless of whether the applicable agreements
are considered in proceeding in equity or at law).
E. This
letter is rendered to you in connection with the Note Documents and the
transactions related thereto, and may not be relied upon by any other person or
by you in any other context or for any other purpose.
F. I
have assumed with your permission (i) the genuineness of all signatures by each
party other than the Borrower, (ii) the authenticity of documents submitted to
me as originals and the conformity to authentic original documents of all
documents submitted to me as copies, and (iii) the due execution and delivery,
pursuant to due authorization, of the Note Documents by each party other than
the Borrower.
Yours
sincerely,
John J.
List
General
Counsel
ANNEX
C
[FORM OF
OFFICERS’ CERTIFICATE]
Officers’
Certificate
TO: Federal
Agricultural Mortgage Corporation.
We,
_________________, _________________, and ________________,
_____________________, of National Rural Utilities Cooperative Finance
Corporation (“
National
Rural
”), pursuant to the Note Purchase Agreement dated as of May 22,
2009, among National Rural, Farmer Mac Mortgage Securities Corporation, and
Federal Agricultural Mortgage Corporation (the “
Note Purchase
Agreement
”), hereby certify on behalf of National Rural that as at the
date hereof:
(1) National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification and
related purposes;
(2) no
material adverse change has occurred in the financial condition of National
Rural between the date of the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date hereof, which has not been set forth in documents, certificates, or
financial information furnished to Farmer Mac or publicly filed;
(3) all
of the representations contained in Section 5.02 of the Note Purchase Agreement
remain true and correct in all material respects on and as of the date hereof;
and
(4) no
Event of Default exists.
Capitalized
terms used in this certificate shall have the meanings given to those terms in
the Note Purchase Agreement.
DATED as
of this _____ day of ______________, _________.
|
NATIONAL
RURAL UTILITIES
|
|
COOPERATIVE
FINANCE
|
|
CORPORATION,
|
|
|
|
______________________________
|
|
Name:
|
|
Title
|
|
|
|
______________________________
|
|
Name:
|
|
Title:
|
ANNEX
D
[FORM OF
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
EXHIBIT
10.35
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
As
Note Purchaser
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
As
Borrower
U.S.
BANK NATIONAL ASSOCIATION,
As
Collateral Agent
FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
As
Guarantor
PLEDGE
AGREEMENT
Dated
as of May 22, 2009
ARTICLE
I
|
|
|
|
Definitions
|
|
Section
1.01.
|
|
Definitions
|
3
|
|
|
|
|
Section
1.02.
|
|
Principles
of Construction
|
7
|
|
|
|
|
ARTICLE
II
|
|
|
|
Provisions
as to Pledged Collateral
|
|
|
|
Section
2.01.
|
|
Holding
of Pledged Securities
|
7
|
|
|
|
|
Section
2.02.
|
|
UCC
Filings
|
8
|
|
|
|
|
Section
2.03.
|
|
Withdrawal
and Substitution of Pledged Collateral
|
8
|
|
|
|
|
Section
2.04.
|
|
[Reserved]
|
9
|
|
|
|
|
Section
2.05.
|
|
Addition
of Pledged Collateral
|
9
|
|
|
|
|
Section
2.06.
|
|
Accompanying
Documentation
|
9
|
|
|
|
|
Section
2.07.
|
|
Renewal;
Extension; Substitution
|
9
|
|
|
|
|
Section
2.08.
|
|
Voting
Rights; Interest and Principal
|
9
|
|
|
|
|
Section
2.09.
|
|
Protection
of Title; Payment of Taxes; Liens, etc
|
11
|
|
|
|
|
Section
2.10.
|
|
Maintenance
of Pledged Collateral
|
11
|
|
|
|
|
Section
2.11.
|
|
Representations,
Warranties and Covenants
|
11
|
|
|
|
|
Section
2.12.
|
|
Further
Assurances
|
13
|
ARTICLE
III
|
|
|
|
[Reserved]
|
|
|
|
ARTICLE
IV
|
|
|
|
Remedies
|
|
|
|
Section
4.01.
|
|
Events
of Default
|
13
|
|
|
|
|
Section
4.02.
|
|
Remedies
upon Default
|
13
|
|
|
|
|
Section
4.03.
|
|
Application
of Proceeds
|
15
|
|
|
|
|
Section
4.04.
|
|
Securities
Act
|
16
|
|
|
|
|
ARTICLE
V
|
|
|
|
The
Collateral Agent
|
|
|
|
Section
5.01.
|
|
Certain
Duties and Responsibilities
|
17
|
|
|
|
|
Section
5.02.
|
|
Certain
Rights of Collateral Agent
|
18
|
|
|
|
|
Section
5.03.
|
|
Money
Held by Collateral Agent
|
19
|
|
|
|
|
Section
5.04.
|
|
Compensation
and Reimbursement
|
19
|
|
|
|
|
Section
5.05.
|
|
Corporate
Collateral Agent Required; Eligibility
|
20
|
|
|
|
|
Section
5.06.
|
|
Resignation
and Removal; Appointment of Successor
|
20
|
|
|
|
|
Section
5.07.
|
|
Acceptance
of Appointment by Successor
|
21
|
|
|
|
|
Section
5.08.
|
|
Merger,
Conversion, Consolidation or Succession to Business
|
21
|
ARTICLE
VI
|
|
|
|
Miscellaneous
|
|
|
|
Section
6.01.
|
|
Notices
|
22
|
|
|
|
|
Section
6.02.
|
|
Waivers;
Amendment
|
22
|
|
|
|
|
Section
6.03.
|
|
Successors
and Assigns
|
22
|
|
|
|
|
Section
6.04.
|
|
Counterparts;
Effectiveness
|
23
|
|
|
|
|
Section
6.05.
|
|
Severability
|
23
|
|
|
|
|
Section
6.06.
|
|
GOVERNING
LAW
|
23
|
|
|
|
|
Section
6.07.
|
|
WAIVER
OF JURY TRIAL
|
23
|
|
|
|
|
Section
6.08.
|
|
Headings
|
23
|
|
|
|
|
Section
6.09.
|
|
Security
Interest Absolute
|
24
|
|
|
|
|
Section
6.10.
|
|
Termination
or Release
|
24
|
|
|
|
|
Section
6.11.
|
|
Collateral
Agent Appointed Attorney-in-Fact
|
24
|
|
|
|
|
Schedule
I – Additional Criteria for Eligible Securities
|
|
Schedule
II – Addresses for Notices
|
|
|
|
Annex
A – Form of Certificate of Pledged Collateral
|
|
PLEDGE
AGREEMENT, dated as of May 22, 2009, among NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION, a District of Columbia cooperative association and its
successors and assigns (hereinafter called “
National Rural
”),
FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a wholly owned
subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered
instrumentality of the United States and an institution of the Farm Credit
System and its successors and assigns (“
Farmer Mac
”), U.S.
BANK NATIONAL ASSOCIATION, a national banking association and its successors and
assigns (hereinafter called the “
Collateral Agent
”),
and Farmer Mac, as Guarantor.
RECITALS
OF NATIONAL RURAL
WHEREAS,
National Rural may from time to time issue one or more Notes to the Purchaser,
and the Purchaser may purchase such Notes, all upon the terms and subject to the
conditions set forth in the Note Purchase Agreement; and
WHEREAS,
National Rural is required pursuant to the terms of the Note Purchase Agreement
to pledge certain property to the Collateral Agent for the benefit of the
Control Party to secure National Rural’s obligations on the Notes;
NOW,
THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of
the certain Obligations contained in the Notes, the Note Purchase Agreement and
herein, National Rural hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the benefit of the Control Party, and grants to the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, a security interest in the following (collectively referred to as the
“
Pledged
Collateral
”) as provided in Article II: (a)(i) the Pledged
Securities and the certificates representing the Pledged Securities;
(ii) subject to Section 2.08, all payments of principal or interest,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for, and all other Proceeds
received in respect of, the Pledged Securities pledged hereunder;
(iii) subject to Section 2.08, all rights and privileges of National
Rural with respect to the Pledged Securities; (iv) all Proceeds of any of
the foregoing above; that may, on the date hereof or from time to time
hereafter, be subjected to the Lien hereof by National Rural by delivery,
assignment or pledge thereof to the Collateral Agent hereunder and the
Collateral Agent is authorized to receive the same as additional security
hereunder (subject to any reservations, limitations or conditions agreed to in
writing by National Rural and the Control Party respecting the scope or priority
of such security or the use and disposition of such property or the Proceeds
thereof).
TO HAVE
AND TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of the Control
Party, forever;
subject
,
however
, to the
terms, covenants and conditions hereinafter set forth.
ARTICLE
I
Definitions
SECTION
1.01.
Definitions.
As
used in this Pledge Agreement, the following terms shall have the following
meanings:
“Accounting
Requirements
” shall mean any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the Member or, in the absence
thereof, the requirements of GAAP applicable to businesses similar to that of
the Member.
“
Allowable Amount
” on
any date, means with respect to Eligible Securities, the aggregate principal
amount of such Eligible Securities theretofore advanced thereon which remains
unpaid on such date, subject to any limitation on the Allowable Amount
applicable through the definition of “Eligible Security”.
“
Certificate of Pledged
Collateral
” means a certificate delivered to the Collateral Agent and the
Control Party substantially in the form of Annex A attached
hereto.
“
Class A Member
” means
any Class A Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Class B Member
” means
any Class B Member of National Rural as described in National Rural’s Bylaws
currently in effect.
“
Collateral Agent
”
means the Person named as the “
Collateral Agent
” in
the first paragraph of this instrument.
“
Control Party
” means
(i) the Guarantor, so long as no Guarantor Default has occurred and is
continuing, or (ii) the holders of the Notes for so long as a Guarantor Default
has occurred and is continuing.
“
Control Party Notice
”
and “
Control Party
Order
” mean, respectively, a written notice or order signed by any Vice
President of the Control Party and delivered to the Collateral Agent and
National Rural.
“
Control Party Notice of
Default
” has the meaning given to that term in
Section 4.02.
“
Depreciation and
Amortization Expense
”
shall mean an amount
constituting the depreciation and amortization of the Member computed pursuant
to Accounting Requirements.
“
Eligible Member
”
means any Class A Member or Class B Member of National Rural as described in
National Rural’s Bylaws currently in effect.
“
Eligible Security
”
means a note or bond of any Eligible Member payable or registered to, or to the
order of, National Rural, (A) in respect of which (i) the outstanding
principal amount under such note or bond, together with the outstanding
principal amount of any other notes or bonds of such Eligible Member pledged
hereunder or pledged to secure any other notes or bonds issued by National Rural
to Farmer Mac or any affiliate or sold by National Rural or any affiliate to any
trust whose beneficial ownership is owned or controlled by Farmer Mac, does not
aggregate more than $35 million; provided, however, that a note or bond in
excess of $35 million (considered together with any other note or bond of such
Eligible Member pledged hereunder or pledged to secure any other notes or bonds
issued by National Rural to Farmer Mac or any affiliate or sold by National
Rural or any affiliate to Farmer Mac, any affiliate or any trust whose
beneficial ownership is owned or controlled by Farmer Mac) may be pledged
hereunder but only $35 million principal amount of such note or bond shall be
counted in the Allowable Amount of such Eligible Security (with the amount of
any such excess recorded in Item 7 of the Certificate of Pledged Collateral in
the form of
Annex
A
attached hereto), (ii) no default has occurred in the payment of
principal or interest in accordance with the terms of such note or bond that is
continuing beyond the contractual grace period (if any) provided in such note or
bond for such payment and (iii) no “event of default” as defined in such
note or bond (or in any instrument creating a security interest in favor of
National Rural in respect of such note or bond), shall exist that has resulted
in the exercise of any right or remedy described in such note or bond (or in any
such instrument); (B) which is not classified by National Rural as a
non-performing loan under generally accepted accounting principles in the United
States; and (C) which otherwise satisfies the criteria set forth on Schedule I
hereto, as such Schedule I may be amended from time to time as mutually agreed
upon in writing by Farmer Mac and National Rural, with notice of any such
amendment to the Collateral Agent prior to the pledge of such Eligible
Security.
“
Equity
” means the
aggregate of the Member's equities and margins computed pursuant to Accounting
Requirements.
“
Event of Default
” has
the meaning set forth in Section 4.01.
“
Facility Rating
”
means the facility rating assigned by National Rural to an Eligible Security
from time to time in accordance with National Rural's internal risk rating
system.
“
GAAP
” means generally
accepted accounting principles in the United States as in effect from time to
time.
“
Guarantor Default
”
means a default by the Guarantor under its obligations pursuant to Article IX of
the Note Purchase Agreement which is existing and continuing.
“
Interest Expense
”
means an amount constituting the interest expense with respect to Long-Term Debt
of the Member computed pursuant to Accounting Requirements.
“
Lien
” means any lien,
pledge, charge, mortgage, encumbrance, debenture, hypothecation or other similar
security interest attaching to any part of the Pledged Collateral.
“
Lien of this Pledge
Agreement
” or “
Lien hereof
” means
the Lien created by these presents.
“
Long-Term Debt
” is
determined in accordance with the Uniform System of Accounts prescribed at the
time by RUS or, if such Member is not required to maintain its accounts in
accordance with said Uniform System of Accounts, otherwise determined in
accordance with GAAP.
“
Member
” shall mean
any Person who is member of National Rural.
“
Modified Debt Service
Coverage Ratio—Distribution
” shall mean the definition of Coverage Ratio
as defined in the Indenture dated October 25, 2007 by and between National Rural
Utilities Cooperative Finance Corporation and U.S. Bank National Association for
the Collateral Trust Bonds.
“
Modified Debt Service
Coverage Ratio—G&T
” shall mean the ratio determined as follows: for
any calendar year add (i) Operating Margins, (ii) Non-Operating
Margins—Interest, (iii) Interest Expense, (iv) Depreciation and Amortization
Expense, and (v) cash received in respect of generation and transmission and
other capital credits, and divide the sum so obtained by the sum of all payments
of Principal and Interest Expense required to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
“
National Rural
Notice
” and “
National Rural Order
”
mean, respectively, a written notice or order signed in the name of National
Rural by either its Chief Executive Officer or its Chief Financial Officer, and
by any Vice President of National Rural, and delivered to the Collateral Agent
and the Control Party.
“
Non-Operating
Margins—Interest
” means the amount representing the interest component of
non-operating margins of the Member computed pursuant to Accounting
Requirements.
“
Note Purchase
Agreement
” means the Note Purchase Agreement dated the date hereof
between National Rural, the Purchaser and Farmer Mac, as the same may be amended
from time to time in accordance with the terms thereof.
“
Notes
” means the note
or notes issued by National Rural to the Purchaser under the Note Purchase
Agreement.
“
Obligations
” means
the due and punctual performance of the obligations of National Rural to make
payments of principal, and interest on the Notes.
“
Officers’
Certificate
” means a certificate signed by any Vice President of National
Rural, and delivered to the Control Party and/or the Collateral Agent, as
applicable.
“
Operating Margins
”
means the amount of patronage capital and operating margins of the Member
computed pursuant to Accounting Requirements.
“
Person
” means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
“
Pledge Agreement
”
means this Pledge Agreement, as originally executed and as it may from time to
time be amended pursuant to the applicable provisions hereof.
“
Pledged Collateral
”
has the meaning set forth in the Granting Clause.
“
Pledged Securities
”
means at any time the Eligible Securities listed on Schedule A and/or
Schedule B to the Certificate of Pledged Collateral most recently
delivered.
“
Principal
” means the
amount of principal billed on account of Long-Term Debt of the Member computed
pursuant to Accounting Requirements.
“
Proceeds
” has the
meaning specified in Section 9-102 of the Uniform Commercial
Code.
“
RUS
” mean the Rural
Utilities Service of the United States Department of Agriculture, acting by and
through the Administrator of the Rural Utilities Service, and including any
successor agencies or departments.
“
Total Assets Ratio
”
means an amount constituting the total assets of the Member computed pursuant to
Accounting Requirements.
“
Total Capitalization
Ratio
” means the Total Margins and Equity as a percentage of the sum of
(1) Total Margins and Equity plus (2) Long-Term Debt.
“
Total Margins and
Equity
” means the Member’s total margins and equity computed pursuant to
Accounting Requirements.
“
Uniform Commercial
Code
” means the Uniform Commercial Code as from time to time in effect in
the District of Columbia.
“
Vice President
” means
any vice president of National Rural or Farmer Mac or the Purchaser, as
applicable, whether or not designated by a number or a word or words added
before or after the title “vice president”.
SECTION
1.02.
Other
Defined Terms; Principles of Construction
. Capitalized terms used
but not defined in this Pledge Agreement shall have the meanings given to them
in the Note Purchase Agreement. Unless the context shall otherwise
indicate, the terms defined in Section 1.01 hereof include the plural as
well as the singular and the singular as well as the plural. The words
“hereafter”, “herein”, “hereof”, “hereto” and “hereunder”, and words of similar
import, refer to this Agreement as a whole. The descriptive headings of
the various articles and sections of this Agreement were formulated and inserted
for convenience only and shall not be deemed to affect the meaning or
construction of the provisions hereof.
ARTICLE
II
Provisions as to Pledged
Collateral
SECTION
2.01.
Holding of
Pledged Securities.
(a)
National Rural shall make available to the Control Party, within forty-five (45)
days of a pledge of the Pledged Securities in connection with an advance (or for
a longer period as National Rural and the Control Party agree), such back-up
information as is reasonably necessary in order to allow the Control Party to
confirm compliance of such Pledged Securities to the requisite criteria as
outlined herein. Upon receipt of the back-up information, the Control
Party shall have ninety (90) days to object in writing to the inclusion of any
item of the Pledged Securities as part of the Pledged Collateral. If the
Control Party reasonably determines that any of the Pledged Securities do not
meet the criteria for Eligible Securities, then National Rural shall have
forty-five (45) days in which to provide substitute collateral, and the timeline
specified above for National Rural to make available back-up material and
confirmation shall also apply as to the substituted collateral.
(b)
The Collateral Agent, on behalf of the Control Party, shall hold the Pledged
Securities in the name of National Rural (or its nominee), endorsed or assigned
in blank or in favor of the Collateral Agent. Upon occurrence of an Event
of Default, the Collateral Agent, on behalf of the Control Party, shall have the
right (in its sole and absolute discretion), to the extent a register is
maintained therefor, to register the Pledged Securities in the Collateral
Agent’s own name as pledgee, or in the name of the Collateral Agent’s nominee
(as pledgee or as sub-agent) or to continue to hold the Pledged Securities in
the name of National Rural, endorsed or assigned in blank or in favor of the
Collateral Agent. Upon cessation of such Event of Default, the Collateral
Agent shall take such action as is necessary to again cause the Pledged
Securities to be registered in the name of National Rural (or its
nominee).
SECTION
2.02.
UCC
Filings.
National Rural shall prepare and file in the proper
Uniform Commercial Code filing office in the District of Columbia (i) on or
prior to the date of the first purchase of a Note under the Note Purchaser
Agreement, a financing statement recording the Collateral Agent’s interest in
the Pledged Collateral; and (ii) from time to time thereafter, continuation
statements or such other filings as are necessary to maintain the perfection of
the Lien hereof on the Pledged Collateral.
SECTION
2.03.
Withdrawal
and Substitution of Pledged Collateral.
(a)
Any part of the Pledged Collateral may be withdrawn by National Rural or
substituted for other Eligible Securities by National Rural and shall be
delivered to National Rural by the Collateral Agent upon National Rural Order at
any time and from time to time, together with any other documents or instruments
of transfer or assignment necessary to reassign to National Rural said Pledged
Collateral and the interest of National Rural,
provided
the
aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal
or substitution shall at least equal the aggregate principal amount of the Notes
outstanding after such withdrawal or substitution, as shown by the Certificate
of Pledged Collateral furnished to the Collateral Agent pursuant to
Subsection (b)(i) of this Section.
(b)
Prior to any such withdrawal or substitution, the Collateral Agent shall be
furnished with the following instruments:
(i) a
Certificate of Pledged Collateral, dated as of the last day of the calendar
month most recently ended at least 10 Business Days prior to such withdrawal or
substitution (or a more recent date, at National Rural’s option), showing that
immediately after such withdrawal or substitution the requirements of Subsection
(a) of this Section will be satisfied; and
(ii) an
Officers’ Certificate certifying that no Event of Default has occurred which has
not been remedied.
Upon any
such withdrawal or substitution, National Rural shall deliver any Eligible
Securities to be substituted and the Collateral Agent shall execute any
instruments of transfer or assignment specified in a National Rural Order as
necessary to vest in National Rural any part of the Pledged Collateral
withdrawn.
In case
an Event of Default shall have occurred and be continuing, National Rural shall
not withdraw or substitute any part of the Pledged Collateral.
SECTION
2.04. [Reserved.]
SECTION
2.05.
Addition
of Pledged Collateral.
At any time, National Rural may pledge
additional Eligible Securities under this Pledge Agreement by delivering such
Pledged Collateral to the Collateral Agent, accompanied by a Certificate of
Pledged Collateral specifying such additional collateral and dated as of the
last day of the calendar month most recently ended at least 10 Business Days
prior thereto (or a more recent date at National Rural’s option).
SECTION
2.06.
Accompanying
Documentation.
Where Eligible Securities are delivered to the
Collateral Agent under Section 2.01, 2.03 or Section 2.05, such securities
shall be accompanied by the appropriate instruments of transfer executed in
blank and in a form satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request.
All other property delivered to the Collateral Agent under Section 2.01, 2.03 or
Section 2.05 and comprising part of the Pledged Collateral shall be
accompanied by proper instruments of assignment duly executed by National Rural
and such other instruments or documents as the Collateral Agent may reasonably
request.
SECTION
2.07.
Renewal;
Extension; Substitution.
Unless and until an Event of Default shall
have occurred and be continuing, National Rural may at any time renew or extend,
subject to the Lien of this Pledge Agreement, any Pledged Security upon any
terms or may accept in place of and in substitution for any such Pledged
Security, another Eligible Security or Securities of the same issuer or of any
successor thereto for at least the same unpaid principal amount, all as
evidenced by a National Rural Order delivered to the Collateral Agent;
provided
,
however
, that in case
of any substitution, Eligible Securities substituted as aforesaid shall be
subject to the Lien of this Pledge Agreement as part of the Pledged Collateral
and be held in the same manner as those for which they shall be substituted, and
in the case of each substituted Eligible Security National Rural shall provide
an Officers’ Certificate certifying to the Collateral Agent that such
substituted security satisfies the requirements of this Section. So long
as no Event of Default shall have occurred and be continuing, the Collateral
Agent, upon National Rural Order stating that no Event of Default shall have
occurred and be continuing, shall execute any consent to any such renewal,
extension or substitution as shall be specified in such National Rural
Order.
SECTION
2.08.
Voting
Rights; Interest and Principal
.
(a) Unless and until an Event of Default has occurred and is continuing,
and the Control Party delivers to the Collateral Agent a Control Party Notice of
Default suspending National Rural’s rights under this clause:
(i)
National Rural shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof
provided
that such
rights and powers shall not be exercised in any manner inconsistent with the
terms of the Note Purchase Agreement or this Pledge Agreement.
(ii) The
Collateral Agent shall execute and deliver to National Rural, or cause to be
executed and delivered to National Rural, all such proxies, powers of attorney
and other instruments as National Rural may reasonably request for the purpose
of enabling National Rural to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i)
above.
(iii)
National Rural shall be entitled to receive and retain any and all interest,
principal and other distributions paid on or distributed in respect of the
Pledged Securities;
provided
that any
non-cash interest, principal or other distributions that would constitute
Pledged Securities if pledged hereunder, and received in exchange for Pledged
Securities or any part thereof pledged hereunder, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer of Pledged Securities may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by National
Rural, shall not be commingled by National Rural with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Collateral Agent and shall be forthwith delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement).
(b)
If an Event of Default shall have occurred and be continuing, then, to the
extent such rights are suspended by the applicable Control Party Notice of
Default, all rights of National Rural to interest, principal or other
distributions that National Rural is authorized to receive pursuant to
paragraph (a)(iii) of this Section 2.08 shall cease, and all such
suspended rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to receive and retain such
interest, principal or other distributions. All interest, principal or
other distributions received by National Rural contrary to the provisions of
this Section 2.08 shall be held in trust for the benefit of the Collateral
Agent, shall be segregated from other property or funds of National Rural and
shall be forthwith delivered to the Collateral Agent in the same form as so
received (with any necessary endorsement). Any and all money and other
property paid over to or received by the Collateral Agent pursuant to the
provisions of this paragraph (b) shall be retained by the Collateral Agent in an
account to be established by the Collateral Agent upon receipt of such money or
other property and shall be applied in accordance with the provisions of
Section 4.03 to the fullest extent permitted by applicable law. After
all Events of Default have ceased, the Collateral Agent shall promptly repay to
National Rural (without interest) all interest, principal or other distributions
that National Rural would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) of this Section 2.08 and that remain in such
account.
(c)
If an Event of Default shall have occurred and be continuing, then, to the
extent such rights are suspended by the applicable Control Party Notice of
Default, all rights of National Rural to exercise the voting and consensual
rights and powers it is entitled to exercise pursuant to paragraph (a)(i)
of this Section 2.08, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 2.08, shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers;
provided
that the
Collateral Agent shall have the right from time to time during the existence of
such Event of Default to permit National Rural to exercise such rights and
powers.
SECTION
2.09.
Protection
of Title; Payment of Taxes; Liens, etc.
National Rural
will:
(i) duly
and promptly pay and discharge, or cause to be paid and discharged, before they
become delinquent, all taxes, assessments, governmental and other charges
lawfully levied, assessed or imposed upon or against any of the Pledged
Collateral, including the income or profits therefrom and the interests of the
Collateral Agent in such Pledged Collateral;
(ii) duly
observe and conform to all valid requirements of any governmental authority
imposed upon National Rural relative to any of the Pledged Collateral, and all
covenants, terms and conditions under or upon which any part thereof is
held;
(iii)
cause to be paid and discharged all lawful claims (including, without
limitation, income taxes) which, if unpaid, might become a lien or charge upon
Pledged Collateral; and
(iv) do
all things and take all actions necessary to keep the Lien of this Pledge
Agreement a first and prior lien upon the Pledged Collateral and protect its
title to the Pledged Collateral against loss by reason of any foreclosure or
other proceeding to enforce any lien prior to or
pari
passu
with the Lien
of this Pledge Agreement.
Nothing
contained in this Section shall require the payment of any such tax,
assessment, claim, lien or charge or the compliance with any such requirement so
long as the validity, application or amount thereof shall be contested in good
faith;
provided
,
however
, that
National Rural shall have set aside on its books such reserves (segregated to
the extent required by generally accepted accounting principles) as shall be
deemed adequate with respect thereto as determined by the Board of Directors of
National Rural (or a committee thereof).
SECTION
2.10.
Maintenance of Pledged
Collateral.
National Rural shall cause the Allowable Amount of
Pledged Collateral held by the Collateral Agent at all times to be not less than
100% of the aggregate principal amount of the Notes outstanding.
SECTION
2.11.
Representations, Warranties
and Covenants.
National Rural represents, warrants and covenants to
the Collateral Agent, for the benefit of the Control Party, that from the time
that Pledged Collateral is pledged hereunder, and for so long as such Pledged
Collateral is required to remain pledged:
(a)
except for the Lien hereof and any Lien consented to in writing by Farmer Mac or
the Control Party, National Rural (i) is and will continue to be the direct
owner, beneficially and of record, of the Pledged Securities from time to time
pledged hereunder, (ii) holds and will continue to hold the same free and
clear of all Liens, other than Liens created by this Pledge Agreement,
(iii) will make no assignment, pledge, hypothecation or transfer of, or
create or permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than Liens created by this Pledge Agreement and (iv) will
defend its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Pledge Agreement), however arising, of all Persons
whomsoever;
(b)
except for restrictions and limitations imposed by the Note Purchase Agreement
or securities laws generally, the Pledged Securities are and will continue to be
freely transferable and assignable, and none of the Pledged Securities are or
will be subject to any restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Pledged Securities hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Collateral
Agent of rights and remedies hereunder;
(c)
National Rural has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;
(d) no
consent or approval of any governmental authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and
effect).
(e) by
virtue of the execution and delivery by National Rural of this Pledge Agreement,
when any Pledged Securities are delivered to the Collateral Agent in accordance
with this Pledge Agreement, the Collateral Agent will obtain a legal and valid
Lien upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations; and
(f) the
Allowable Amount of Pledged Collateral from Class B Members does not constitute
more than 20% of the aggregate amount of any notes or bonds: (1) pledged
hereunder; (2) pledged to secure any other notes or bonds issued by National
Rural or any affiliate to Farmer Mac or any affiliate; (3) sold by National
Rural or any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
SECTION
2.12.
Further
Assurances.
National Rural will execute and deliver, or cause to be
executed and delivered, all such additional instruments and do, or cause to be
done, all such additional acts as (a) may be necessary or proper,
consistent with the Granting Clause hereof, to carry out the purposes of this
Pledge Agreement and to make subject to the Lien hereof any property intended so
to be subject or (b) may be necessary or proper to transfer to any
successor the estate, powers, instruments and funds held hereunder and to
confirm the Lien of this Pledge Agreement. National Rural will also cause
to be filed, registered or recorded any instruments of conveyance, transfer,
assignment or further assurance in all offices in which such filing, registering
or recording is necessary to the validity thereof or to give notice
thereof.
ARTICLE
III
[Reserved]
ARTICLE
IV
Remedies
SECTION
4.01.
Events of
Default.
“
Event of Default
”,
wherever used herein, means any “Event of Default” as defined in
Section 7.01(a) of the Note Purchase Agreement,
provided
that, for
the purposes of this Pledge Agreement:
(a) the
Collateral Agent shall not be required to recognize that an Event of Default
exists before such time as the Collateral Agent receives a Control Party Notice
or National Rural Notice stating that an Event of Default exists and specifying
the particulars of such default in reasonable detail; and
(b) the
Collateral Agent shall not be required to recognize that an Event of Default has
ceased until (i) such time as the Collateral Agent receives a Control Party
Notice stipulating that such event has ceased to exist; or (ii) 30 days after
receipt by the Collateral Agent of a National Rural Notice stipulating that such
event has ceased to exist,
provided
that the
Collateral Agent does not receive a Control Party Notice within such timeframe
disputing the cessation of such Event of Default, and
further provided
that
no additional Control Party Notice of Default shall have been received in
respect of any other subsisting Event(s) of Default. Upon receipt of any
National Rural Notice under subparagraph (ii) of this Subsection, the Collateral
Agent shall provide a copy of such National Rural Notice to the Control
Party.
SECTION
4.02.
Remedies
upon Default.
If an Event of Default shall have occurred and be
continuing, the Control Party may issue a notice (a “
Control Party Notice of
Default
”), which may be combined with the notice provided under
Section 4.01(b), suspending the rights of National Rural under
Section 2.08 in part without suspending all such rights (as specified by
the Control Party in its sole and absolute discretion) without waiving or
otherwise affecting the Control Party’s rights to give additional Control Party
Notices of Default from time to time suspending other rights under
Section 2.08
so long as an Event of
Default has occurred and is continuing. Subject to paragraph (b) of this
Section 4.02, upon cessation of an Event of Default, all rights of National
Rural suspended under the applicable Control Party Notice of Default shall
revest in National Rural.
(a)
Upon the occurrence of an Event of Default, the Collateral Agent shall, for the
benefit and at the direction of the Control Party, have the right to exercise
any and all rights afforded to a secured party under the Uniform Commercial Code
or other applicable law. Without limiting the generality of the foregoing,
National Rural agrees that the Collateral Agent shall have the right, but only
if so instructed by a the Control Party Order and subject to the requirements of
applicable law and the Collateral Agent’s right (in its sole and absolute
discretion) to receive indemnification or other reasonable assurances that its
costs and expenses in connection therewith will be paid, to sell or otherwise
dispose of all or any part of the Pledged Collateral at a public or private sale
or at any broker’s board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale of securities (if it deems
it advisable to do so) to restrict the prospective bidders or purchasers to
Persons who will represent and agree that they are purchasing the Pledged
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Pledged Collateral so sold. Each such
purchaser at any sale of Pledged Collateral shall hold the property sold
absolutely, free from any claim or right on the part of National Rural, and
National Rural hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which National Rural now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
(b)
The Collateral Agent shall give National Rural 10 days’ written notice
(which National Rural agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code or its equivalent in other
jurisdictions) of the Collateral Agent’s intention to make any sale of Pledged
Collateral. Such notice, in the case of a public sale, shall state the
time and place for such sale and, in the case of a sale at a broker’s board or
on a securities exchange, shall state the board or exchange at which such sale
is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Pledged Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of
any Pledged Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Pledged Collateral shall have been given.
The Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case
any sale of all or any part of the Pledged Collateral is made on credit or for
future delivery, the Pledged Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Pledged Collateral
so sold and, in case of any such failure, such Pledged Collateral may be sold
again upon like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Pledge Agreement, the Control Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of National Rural (all said
rights being also hereby waived and released to the extent permitted by law),
the Pledged Collateral or any part thereof offered for sale and may make payment
on account thereof by using any claim then due and payable to the Control Party
from National Rural as a credit against the purchase price, and the Control
Party may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to Pledged Collateral
therefor. For purposes hereof, a written agreement to purchase the Pledged
Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and National Rural shall not be entitled to the return of the Pledged Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Pledge Agreement and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant
to the provisions of this Section 4.02 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-610(b) of the
Uniform Commercial Code or its equivalent in other
jurisdictions.
SECTION
4.03.
Application of
Proceeds.
The Collateral Agent shall apply the proceeds of any
collection or sale of Pledged Collateral, including any Pledged Collateral
consisting of cash, as follows to the fullest extent permitted by applicable
law:
FIRST, to
the payment of all reasonable costs and expenses incurred by the Collateral
Agent in connection with or reasonably related or reasonably incidental to such
collection or sale or otherwise in connection with or related or incidental to
this Pledge Agreement or any of the Obligations, including all court costs and
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Collateral Agent (in its sole discretion) hereunder
on behalf of National Rural and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
SECOND,
to the payment to
the Control Party
in full of the Obligations; such payment to be for an amount certified in a
Control Party
Notice delivered to the Collateral Agent as being the amount due and owing to
the Control
Party
under the Obligations; and
THIRD, to
National Rural, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any
sale of the Pledged Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Pledged Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of
any part of the purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.
SECTION
4.04.
Securities
Act
.
In view of the position of National Rural in relation to the Pledged Collateral,
or because of other current or future circumstances, a question may arise under
the Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and any such
similar statute as from time to time in effect being called the “
Federal Securities
Laws
”) with respect to any disposition of the Pledged Collateral
permitted hereunder. National Rural understands that compliance with the
Federal Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or
any part of the Pledged Collateral, and might also limit the extent to which or
the manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or
part of the Pledged Collateral under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. National
Rural recognizes that in light of such restrictions and limitations the
Collateral Agent may, with respect to any sale of the Pledged Collateral, limit
the purchasers to those who will agree, among other things, to acquire such
Pledged Collateral for their own account, for investment, and not with a view to
the distribution or resale thereof. National Rural acknowledges and agrees
that in light of such restrictions and limitations, the Collateral Agent, in its
sole and absolute discretion (a) may proceed to make such a sale whether or
not a registration statement for the purpose of registering such Pledged
Collateral or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser
to effect such sale. National Rural acknowledges and agrees that any such
sale might result in prices and other terms less favorable to the seller than if
such sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 4.04 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
ARTICLE
V
The Collateral
Agent
SECTION
5.01.
Certain
Duties and Responsibilities.
(a) At all times under this
Pledge Agreement:
(i) the
Collateral Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Pledge Agreement, and no implied covenants or
obligations shall be read into this Pledge Agreement against the Collateral
Agent; and
(ii) in
the absence of bad faith on its part, the Collateral Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Collateral
Agent and substantially conforming to the requirements of this Pledge Agreement;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Collateral Agent the
Collateral Agent shall be under a duty to examine the same to determine whether
or not they substantially conform to the requirements of this Pledge
Agreement.
(b)
No provision of this Pledge Agreement shall be construed to relieve the
Collateral Agent from liability for its own grossly negligent action, its own
grossly negligent failure to act, or its own willful misconduct, except
that:
(i) this
Subsection shall not be construed to limit the effect of Subsection (a) of this
Section;
(ii) the
Collateral Agent shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Collateral Agent was grossly negligent
in ascertaining the pertinent facts; and
(iii) no
provision of this Pledge Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(c)
Whether or not therein expressly so provided, every provision of this Pledge
Agreement relating to the conduct or affecting the liability of or affording
protection to the Collateral Agent shall be subject to the provisions of this
Section.
SECTION
5.02.
Certain
Rights of Collateral Agent.
Except as otherwise provided in
Section 5.01:
(a) the
Collateral Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any
request or direction of National Rural mentioned herein shall be sufficiently
evidenced by a National Rural Notice or National Rural Order;
(c) any
request or direction of the Control Party mentioned herein shall be sufficiently
evidenced by a Control Party Notice or Control Party Order;
(d)
whenever in the administration of this Pledge Agreement the Collateral Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Collateral Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers’ Certificate in the case of National Rural, and
a certificate signed by any Vice President of the Control Party in the case of
the Control Party;
(e) the
Collateral Agent may consult with counsel and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(f) the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Pledge Agreement at the request or direction of
either National Rural or the Control Party pursuant to this Pledge Agreement,
unless such party shall have offered to the Collateral Agent reasonable security
or indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(g) the
Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Collateral Agent, in its sole and
absolute discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Collateral Agent shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of National Rural, personally or by agent or
attorney;
(h) the
Collateral Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Collateral Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(i)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no duty to inquire as to the performance of National Rural’s covenants
herein. In addition, the Collateral Agent shall not be deemed to have
knowledge of any Event of Default unless the Collateral Agent has received a
Control Party Notice in accordance with Section 4.01(a), and shall not be
deemed to have knowledge of the cessation of the same until such time as it
receives a National Rural Notice in accordance with Section 4.01(b);
and
(j)
unless explicitly stated herein to the contrary, the Collateral Agent shall have
no obligation to take any action with respect to any Event of Default until it
has received a Control Party Notice applicable to such event in accordance with
Section 4.01(a), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable Control Party Notice is delivered.
Similarly, the Collateral Agent shall have no obligation to take any action with
respect to the cessation of an Event of Default until it has received a National
Rural Notice applicable to such event in accordance in accordance with
Section 4.01(b), and the Collateral Agent shall have no liability for any
action or inaction taken, suffered or omitted in respect of any such event by it
prior to such time as the applicable National Rural Notice is
delivered.
SECTION
5.03.
Money Held
by Collateral Agent.
Money held by the Collateral Agent hereunder
need not be segregated from other funds except to the extent required by
law. The Collateral Agent shall have no liability to pay interest on or
(except as expressly provided herein) invest any such moneys.
SECTION
5.04.
Compensation and
Reimbursement.
(a) National Rural agrees:
(i) to
pay to the Collateral Agent from time to time such reasonable compensation for
all services rendered by it hereunder as shall have been set forth in an
agreement signed by National Rural;
(ii)
except as otherwise expressly provided herein, to reimburse the Collateral Agent
upon its request for all reasonable expenses, out-of-pocket costs, disbursements
and advances incurred or made by the Collateral Agent in accordance with any
provision of this Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the extent
any such expense, disbursement or advance may be attributable to its gross
negligence or bad faith; and
(iii) to
indemnify the Collateral Agent for, and to defend and hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Pledge Agreement or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent such loss, liability or expense may be
attributable to its gross negligence or bad faith;
provided
,
however
, that
National Rural shall have no liability under this clause for any settlement of
any litigation or other dispute effected without the prior written consent of
National Rural (such consent not to be unreasonably withheld).
(b)
Any such amounts payable as provided hereunder shall be additional Obligations
secured by the Lien hereof. The provisions of this Section 5.04 shall
remain operative and in full force and effect regardless of the termination of
this Pledge Agreement or the Note Purchase Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Pledge Agreement
or the Note Purchase Agreement, or any investigation made by or on behalf of the
Collateral Agent or the Control Party. All amounts due under this
Section 5.04 shall be payable on written demand therefor.
SECTION
5.05.
Corporate
Collateral Agent Required; Eligibility.
There shall at all times be
a Collateral Agent hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. Neither National
Rural nor any Person directly or indirectly controlling, controlled by or under
common control with National Rural shall serve as Collateral Agent
hereunder. If at any time the Collateral Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this
Article.
SECTION
5.06.
Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of
the Collateral Agent and no appointment of a successor Collateral Agent pursuant
to this Article shall become effective until the acceptance of appointment by
the successor Collateral Agent under Section 5.07.
(b)
The Collateral Agent may resign at any time by giving written notice thereof to
National Rural. If an instrument of acceptance by a successor Collateral
Agent shall not have been delivered to the Collateral Agent within 30 days after
the giving of such notice of resignation, the resigning Collateral Agent may
petition any court of competent jurisdiction for the appointment of a successor
Collateral Agent.
(c)
If at any time:
(i)
except if an Event of Default has occurred and is continuing, National Rural, in
its sole and absolute discretion, elects to remove the Collateral Agent;
or
(ii) the
Collateral Agent shall cease to be eligible under Section 5.05 or shall
become incapable of acting or shall be adjudged a bankrupt or insolvent or a
receiver of the Collateral Agent or of its property shall be appointed or any
public officer shall take charge or control of the Collateral Agent or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in
any such case, National Rural may remove the Collateral Agent by delivery of a
National Rural Order to that effect.
(d)
If the Collateral Agent shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Collateral Agent for any cause,
National Rural shall promptly appoint a successor Collateral Agent by delivering
a National Rural Notice to the retiring Collateral Agent, the successor
Collateral Agent and the Control Party to such effect.
SECTION
5.07.
Acceptance
of Appointment by Successor.
Every successor Collateral Agent
appointed hereunder shall execute, acknowledge and deliver to National Rural,
the Control Party and to the retiring Collateral Agent an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Collateral Agent shall become effective and such successor Collateral Agent,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Collateral Agent; but, on
request of National Rural, the Control Party or the successor Collateral Agent,
such retiring Collateral Agent shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Collateral Agent all the
rights, powers and trusts of the retiring Collateral Agent, and shall duly
assign, transfer and deliver to such successor Collateral Agent all property and
money held by such retiring Collateral Agent hereunder, subject nevertheless to
its Lien, if any, provided for in Section 5.04. Upon request of any
such successor Collateral Agent, National Rural shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Collateral Agent all such rights, powers and trusts.
No
successor Collateral Agent shall accept its appointment unless at the time of
such acceptance such successor Collateral Agent shall be eligible under
Section 5.05 hereof.
SECTION
5.08.
Merger,
Conversion, Consolidation or Succession to Business.
Any
corporation into which the Collateral Agent may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Collateral Agent shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Collateral Agent, shall be the successor of the Collateral Agent
hereunder, provided such corporation shall be eligible under Section 5.05
hereof without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE
VI
Miscellaneous
SECTION
6.01.
Notices.
All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule II attached hereto
as appropriate. The address, telephone number, or facsimile number for any
party may be changed at any time and from time to time upon written notice given
by such changing party to the other parties hereto. A properly addressed notice
or other communication shall be deemed to have been delivered at the time it is
sent by facsimile (fax) transmission to the party or parties to which it is
given.
(a)
All National Rural Notices and National Rural Orders delivered to the Collateral
Agent shall be contemporaneously copied to the Control Party by National Rural;
all Control Party Notices and Control Party Orders delivered to the Collateral
Agent shall be contemporaneously copied by Farmer Mac to National Rural; and all
Collateral Agent notices delivered to either National Rural or Farmer Mac shall
be contemporaneously copied to the other such party by the Collateral
Agent.
SECTION
6.02.
Waivers;
Amendment.
(a) No failure or delay by a party in exercising
any right or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of each party hereunder are cumulative and are not exclusive
of any rights or remedies that such party would otherwise have. No waiver
of any provision of this Pledge Agreement or consent to any departure by any
party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section 6.02, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any party in any case shall
entitle any party to any other or further notice or demand in similar or other
circumstances.
(b)
Neither this Pledge Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by National Rural, the Collateral Agent, the Purchaser and Farmer
Mac.
SECTION
6.03.
Successors
and Assigns.
Whenever in this Pledge Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of National Rural, the Collateral Agent, the Purchaser, the Control Party
or Farmer Mac that are contained in this Pledge Agreement shall bind and inure
to the benefit of their respective successors and assigns.
SECTION
6.04.
Counterparts;
Effectiveness.
This Pledge Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract. Delivery of an executed
signature page to this Pledge Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Pledge
Agreement.
SECTION
6.05.
Severability.
Any provision of this Pledge Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability without
affecting the validity, legality and enforceability of the remaining provisions
hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other
jurisdiction. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION
6.06.
GOVERNING
LAW.
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO THE
EXTENT APPLICABLE, AND OTHERWISE THE LAWS OF THE STATE OF NEW YORK.
SECTION
6.07.
WAIVER OF
JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS PLEDGE
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 6.07.
SECTION
6.08.
Headings.
Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Pledge Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Pledge Agreement.
SECTION
6.09.
Security
Interest Absolute.
All rights of the Collateral Agent and/or the
Control Party hereunder, the grant of a security interest in the Pledged
Collateral and all obligations of National Rural hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of
the Note Purchase Agreement, any Note, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Note Purchase Agreement, any
Note or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
National Rural in respect of the Obligations or this Pledge
Agreement.
SECTION
6.10.
Termination or
Release.
(a) This Pledge Agreement shall terminate on the
date when the Obligations have been indefeasibly paid in full, and at such time
the Lien hereof shall be released.
(b)
Upon any withdrawal, substitution or other disposal by National Rural of any
Pledged Collateral that is permitted by the terms of this Pledge Agreement, or
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Pledged Collateral, the Lien hereof securing such
Pledged Collateral shall be automatically released.
(c)
In connection with any termination or release pursuant to paragraph (a) or
(b) the Collateral Agent shall deliver to National Rural the Pledged Collateral
and shall execute and deliver to National Rural, at National Rural’s expense,
all documents that National Rural shall reasonably request to evidence such
termination or release. Any execution and delivery of documents pursuant
to this Section 6.10 shall be without recourse to or warranty by the
Collateral Agent.
SECTION
6.11.
Collateral
Agent Appointed Attorney-in-Fact.
National Rural hereby appoints
the Collateral Agent the attorney-in-fact of National Rural for the purpose of,
upon the occurrence and during the continuance of an Event of Default, carrying
out the provisions of this Pledge Agreement with respect to the Pledged
Collateral and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest but is
subject nevertheless to the terms and conditions of this Pledge Agreement.
Without limiting the generality of the foregoing, the Collateral Agent shall
have the right, upon the occurrence and during the continuance of an Event of
Default, with full power of substitution either in the Collateral Agent’s name
or in the name of National Rural (a) to receive, endorse, assign and/or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Pledged Collateral or any part thereof;
(b) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Pledged Collateral; (c) to
commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of the Pledged Collateral or to enforce any rights in respect of any
Pledged Collateral; (d) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Pledged
Collateral; (e) to notify, or to require National Rural to notify, obligors
under Pledged Securities to make payment directly to the Collateral Agent; and
(f) subject to the second sentence of Section 4.02(a), to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Pledged Collateral, and to do all other acts and things
necessary to carry out the purposes of this Pledge Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Pledged
Collateral for all purposes;
provided
that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the
Control Party shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to
National Rural for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.
FARMER
MAC MORTGAGE
SECURITIES
CORPORATION,
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By
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Name:
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Title:
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FEDERAL
AGRICULTURAL
MORTGAGE
CORPORATION,
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By
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Name:
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Title:
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NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
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By
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Name:
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Title:Title:
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U.S.
BANK NATIONAL ASSOCIATION,
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By
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Name:
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Title:Title:
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SCHEDULE I
TO
PLEDGE
AGREEMENT
ADDITIONAL
CRITERIA FOR ELIGIBLE SECURITIES
1
Criteria for Eligible
Security of Class A Eligible Member
: Each Class A Eligible Member
must satisfy the following criteria only on the date of the pledge of such
Eligible Security:
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·
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Long-Term
Debt to Net Utility Plant Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available,
does not exceed 90%.
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·
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Modified
Debt Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.35.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 20%.
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·
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The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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Criteria for Eligible
Security of Class B Eligible Member
: Each Class B Eligible Member
must satisfy the following criteria only on the date of the pledge of such
Eligible Security:
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Equity
to Total Capitalization Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available, is
greater than or equal to 25%.
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·
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Modified
Debt Service Coverage Ratio—G&T, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.10.
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·
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Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 10%.
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·
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The
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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1
Upon
notice to the Collateral Agent, the criteria set forth on this Schedule 1 may be
modified as mutually agreed upon in writing by Farmer Mac and National
Rural. The criteria set forth on this Schedule I shall be required to be
satisfied only as of the date of pledge of (1) any Pledged Securities that is
being pledged for a new advance or (2) any Pledged Securities that is being
pledged for an existing advance which is in substitution of, or in addition to,
existing collateral, and such criteria shall not be required to be satisfied
with respect to Eligible Securities after such date.
SCHEDULE II
TO
PLEDGE
AGREEMENT
Addresses for
Notices
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The
addresses referred to in Section 6.01 hereof, for purposes of
delivering communications and notices, are as
follows:
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If to the
Purchaser:
Federal Agricultural Mortgage
Corporation
1133 21
st
Street
N.W., Suite 600
Washington, DC 20036
Fax: 202-872-7713
Attention: Jerome G. Oslick, Vice
President
If to
Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax:
202-872-7713
Attention
of: Timothy L. Buzby, Vice President – CFO
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax:
202-872-7713
Attention
of: Stephen P. Mullery, Assistant General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone:
703-709-6718
Fax:
703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
SCHEDULE II
TO
PLEDGE
AGREEMENT
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone:
703-709-6712
Fax:
703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General Counsel
If to the
Collateral Agent:
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005-3701
Telephone:
(212) 361-2893
Fax:
(212) 509-3384
Attention
of: Beverly A. Freeney
ANNEX
A
TO
PLEDGE
AGREEMENT
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
PLEDGE
AGREEMENT DATED AS OF MAY 22, 2009
CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH
U.S. BANK
NATIONAL ASSOCIATION, Collateral Agent
________________,
Chief Executive Officer (or Chief Financial Officer or Controller) and
____________________, Vice-President, respectively, of National Rural Utilities
Cooperative Finance Corporation, hereby certify to the Control Party and the
Collateral Agent under the above-mentioned Pledge Agreement as amended to the
date hereof (herein called the “Pledge Agreement”) as follows:
1.
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The
Allowable Amount of Pledged Collateral certified hereby, remaining on
deposit with the Collateral Agent, as shown on
Schedule A
hereto, is
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$
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2.
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The
Allowable Amount of Pledged Collateral certified hereby, being deposited
as shown on
Schedule B
hereto, is
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$
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3.
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The
aggregate principal amount of the Note(s) outstanding at the date hereof
is
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$
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4.
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The
aggregate amount, if any, of the Note(s) to be issued on the basis of this
Certificate is
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$
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5.
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The
sum of amounts in items 3 and 4 is
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$
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6.
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The
aggregate amount by which the Allowable Amount of Pledged Collateral
exceeds the aggregate principal amount of the Note(s) outstanding (the sum
of items 1 and 2 minus item 5) is
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$
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ANNEX
A
TO
PLEDGE
AGREEMENT
7.
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The
cumulative amount by which each Eligible Security listed on
Schedule A or Schedule B exceeds $35 million is
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$
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8.
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The
Allowable Amount of Pledged Collateral which is included in items 1 and 2
above from Class B Eligible Members does not constitute more than 20% of
the aggregate amount of any notes or bonds: (1) pledged hereunder; (2)
pledged to secure any other notes or bonds issued by National Rural or any
affiliate to Farmer Mac or any affiliate; (3) sold by National Rural or
any affiliate to Farmer Mac or any affiliate; or (4) sold to any trust
whose beneficial ownership is owned or controlled by Farmer Mac or an
affiliate.
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9.
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To
the knowledge of the undersigned, each Eligible Security from a Class A
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this Certificate:
(1) Long-Term Debt to Net Utility Plant Ratio, as the average ratio of the
most recent three full calendar years for which financial information is
available, does not exceed 90%; (2) Modified Debt Service Coverage
Ratio—Distribution, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 1.35; (3) Equity to Total Assets Ratio, as the average
ratio of the most recent three full calendar years for which financial
information is available, is greater than or equal to 20%; and (4) the
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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ANNEX
A
TO
PLEDGE
AGREEMENT
10.
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To
the knowledge of the undersigned, each Eligible Security from a Class B
Eligible Member the Allowable Amount of which is included in item 2
satisfies the following criteria on the date of this Certificate:
(1) Equity to Total Capitalization Ratio, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to 25%; (2) Modified Debt Service
Coverage Ratio—G&T, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 1.10; (3) Equity to Total Assets Ratio, as the average
ratio of the most recent three full calendar years for which financial
information is available, is greater than or equal to 10%; and (4) the
Eligible Security has a Facility Rating by National Rural of “4.9” or
lower.
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11.
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So
far as is known to the undersigned, no Event of Default
exists.
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12.
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To
the extent an Eligible Security listed on Schedule A or Schedule B
has an outstanding principal amount of more than $35 million, the
Allowable Amount of Pledged Collateral set forth in items 1 and 2 above
reflects only $35 million with respect to such Eligible Security (or
a lesser amount representing the difference between $35 million and
the aggregate amount of any notes or bonds of the same Eligible Member
pledged or sold to Farmer Mac or any affiliate in any previous
transaction), with any excess above $35 million (or the lesser
amount) reflected in item 7 above.
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13.
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Each
Eligible Member whose notes are Pledged Securities has received or is
eligible to receive a loan or commitment for a loan from RUS or any
successor agency.
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ANNEX
A
TO
PLEDGE
AGREEMENT
All terms
which are defined in the Pledge Agreement are used herein as so
defined.
Dated:
_____________________
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OF
NATIONAL RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES ON DEPOSIT
SCHEDULE
A TO OFFICERS’ CERTIFICATE
DATED
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Allowable Amount (Item 1)
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Pledged
Securities
(Here
List Securities)
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ANNEX
A
TO
PLEDGE
AGREEMENT
PLEDGED
SECURITIES BEING DEPOSITED
SCHEDULE
B TO OFFICERS’ CERTIFICATE
DATED
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Allowable Amount (Item 2)
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Pledged
Securities
(Here
List Securities)
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EXHIBIT
10.36
May 22,
2009
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
Virginia 20171
Re:
Setoff Rights under Note
Purchase Agreement
Ladies
and Gentlemen:
In
connection with that certain Note Purchase Agreement, dated as of the date
hereof (the “
Agreement
”), by and
among National Rural Utilities Cooperative Finance Corporation (“
National Rural
” or
“
Borrower
”),
Farmer Mac Mortgage Securities Corporation (“
Purchaser
”), and
Federal Agricultural Mortgage Corporation (“
Guarantor
”), National
Rural has agreed, in the event of a payment default by National Rural on the
Notes, to grant the Control Party certain rights of setoff against amounts due
and owing to National Rural on any Series C Preferred Stock, par value $1,000
per share (the “
Preferred Stock
”), of
Guarantor. Capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Agreement.
Borrower,
Guarantor and Purchaser hereby agree that in the event of, and only in the event
of, a payment Event of Default by Borrower pursuant to Section 7.01(a) of the
Agreement (“
Payment
Default
”), the Control Party shall have the right, at the Control Party’s
sole option and discretion, to setoff any amounts due to Borrower in respect of
Guarantor’s Preferred Stock, whether in respect of dividends, redemption,
liquidation or otherwise (the “
Preferred Payments
”),
and to apply the Preferred Payments on a dollar-for-dollar basis against the
amount of Borrower’s Payment Default. Such setoff amount by the
Control Party shall not exceed the amount of Borrower’s Payment Default, and
under no circumstances shall Borrower be liable to Purchaser or the Guarantor in
connection with the transactions described herein for any amount in excess of
the principal amount of the Notes plus interest, as provided in the
Agreement. Borrower’s amount due under the Notes shall be satisfied
and discharged to the extent of, but only to the extent of, the Control Party’s
effective setoff. If no Payment Default by Borrower has occurred,
however, the Guarantor shall have no right to setoff or otherwise withhold the
Preferred Payments from Borrower. The Control Party shall provide
Borrower with notice of, and reasonably detailed back up information with
respect to, any setoff effected by the Control Party under this letter
agreement.
The
rights of the Control Party herein shall be in addition to, and not in
substitution or limitation of, any other rights and remedies available to the
Control Party, whether such rights or remedies arise pursuant to law, the
Agreement or any other agreement between the parties.
[SIGNATURE
PAGE FOLLOWS]
Please
acknowledge your acceptance of the foregoing terms by executing this letter
agreement in the space below, whereupon this agreement shall constitute a valid
agreement binding upon Purchaser and Borrower.
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Very
truly yours,
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FARMER
MAC MORTGAGE SECURITIES CORPORATION
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By:
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Name: Jerome
G. Oslick
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Title: Vice
President
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FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
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By:
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Name: Jerome
G. Oslick
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Title: Vice
President – General Counsel
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ACKNOWLEDGED
AND AGREED:
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NATIONAL
RURAL UTILITIES
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COOPERATIVE
FINANCE CORPORATION
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By:
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Name:
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Title:
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EXHIBIT
10.37
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION,
as Seller
and Master Servicer
and
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION,
as
Purchaser
MASTER
SALE AND SERVICING AGREEMENT
Dated as of July 24, 2009
MASTER SALE AND SERVICING
AGREEMENT
(this "
Master Agreement
")
made and entered into as of July 24, 2009 by and between NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative association organized
and existing under the laws of the District of Columbia (referred to herein as
"
CFC
," "
Master Servicer
" or
the "
Seller
"),
and FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally chartered
instrumentality of the United States (referred to herein as "
Farmer Mac
" or the
"
Purchaser
").
WHEREAS,
Seller desires from time to time to sell to Purchaser, and Purchaser desires
from time to time to purchase from Seller, certain loans pursuant to the terms,
conditions and provisions of this Master Agreement and each related Commitment
Letter (as defined herein).
NOW,
THEREFORE, the parties to this Master Agreement, in the capacities hereinabove
set forth, in consideration of the mutual agreements and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, do hereby
undertake and otherwise agree as follows:
ARTICLE
I
Defined
Terms
Section
1.01.
General
Definitions
. Whenever used in this Master Agreement, the
following words and phrases shall have the following meanings:
10 Business Day
Notice
: The notice specified in Section 5.01(d).
Accounting
Requirements:
Any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the Member or, in the absence
thereof, the requirements of GAAP applicable to businesses similar to that of
the Member.
Additional
Collateral Documents:
With respect to any Qualified Loan, any
security documents (including any UCC-1, UCC-2 or UCC-3 financing statement),
other than those listed in clauses (i) through (iv) of Section 2.03(b), that
evidence the creation or perfection of a security interest in the related
Mortgaged Property and are in the possession of or within the control of the
Purchaser.
Advance:
With
respect to any Qualified Loan, as defined in the applicable Loan
Agreement.
Affiliate:
With
respect to any particular Person, (a) any Person that, directly or indirectly,
is in control of, is controlled by, or is under common control with, such Person
or (b) any person who is a director or officer or general partner (i) of such
Person, (ii) of any subsidiary of such Person, or (iii) of any Person described
in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 5% or more of the
securities having ordinary voting power to elect the directors of such Person,
or (ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
Amortization
Expense
: Determined in accordance with Accounting
Requirements.
Amount Held for
Future Distribution:
As to any Distribution Date, the total of
all amounts held in either the Collection Account or the Investment Account on
that Distribution Date on account of (i) Installment Payments due after the
preceding Due Date and (ii) Principal Prepayments received after the
preceding Due Date.
Assignment
: With
respect to the Qualified Loans sold hereunder on each Sale Date, an assignment
by the Seller substantially in the form of
Exhibit 1
hereto.
Authorized
Officer:
The Chairman of the Board, the President, any
Executive Vice President, any Senior Vice President or any Vice
President.
Average Equity to
Total Assets Ratio:
The average of a Borrower’s Equity to
Total Assets Ratio for the most recent three (3) full calendar years for which
financial information is available.
Average Equity to
Total Capitalization Ratio:
The average of a Borrower’s Equity
to Total Capitalization Ratio for the most recent three (3) full calendar years
for which financial information is available.
Average Long-Term
Debt to Net Utility Plant Ratio:
The average of a Borrower’s
Long-Term Debt to Net Utility Plant Ratio for the most recent three (3) full
calendar years for which financial information is available.
Average Modified
Debt Service Coverage Ratio—Distribution:
The average of a
Borrower’s Modified Debt Service Coverage Ratio—Distribution for the most recent
three (3) full calendar years for which financial information is
available.
Average Modified
Debt Service Coverage Ratio—G&T:
The average of a
Borrower’s Modified Debt Service Coverage Ratio—G&T for the most recent
three (3) full calendar years for which financial information is
available.
Borrower:
The
obligor or obligors under a Qualified Loan.
Borrower
Rating:
The borrower rating assigned by the Seller to a
Qualified Loan from time to time in accordance with the Seller’s internal risk
rating system.
Business
Day:
Any day other than (i) a Saturday or a Sunday, (ii) a day
on which the Federal Reserve Bank of New York authorizes banking institutions in
the Second Federal Reserve District to be closed, (iii) a day on which banking
institutions in the District of Columbia or the State of New York are required
or authorized by law to be closed, or (iv) a day on which the principal offices
of the Purchaser or the Master Servicer are closed.
Cash Liquidation
Proceeds:
All cash proceeds recovered by the Master Servicer
with respect to the termination of any Defaulted Loan, including all Other
Insurance Proceeds, Condemnation Proceeds and other payments or recoveries
whether made at one time or over a period of time, in connection with the sale
or assignment of such Defaulted Loan, trustee's sale, foreclosure sale or
otherwise.
Change in
Control:
Either (i) the consummation of a reorganization,
merger, or consolidation unless immediately after such reorganization, merger,
or consolidation the Master Servicer remains a cooperative organization and more
than 75 percent of its members are rural electric or rural telephone
cooperatives; or (ii) the sale or other disposition of all or substantially all
of the assets of the Master Servicer.
CFC:
The
meaning set forth in the preamble hereto.
Class A
Member:
Any Class A Member of CFC as described in CFC's Bylaws
currently in effect.
Class B
Member:
Any Class B Member of CFC as described in CFC's Bylaws
currently in effect.
Code:
The
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
Collection
Account:
The Eligible Account or Accounts created and
maintained pursuant to Section 5.02(b). Funds required to be
deposited in the Collection Account shall be held in trust for Farmer
Mac.
Collection
Period:
With respect to any Distribution Date, the period from
and including the second Business Day of the month immediately preceding such
Distribution Date through and including the first Business Day of the month of
the Distribution Date.
Commitment
Letter
: A commitment letter, substantially in the form of
Exhibit 2
,
between the Seller and the Purchaser relating to the Qualified Loans to be
conveyed on the related Sale Date. If a Commitment Letter relates to
more than one Qualified Loan, the Commitment Letter may have attached one or
more schedules that collectively set forth all of the requisite information with
respect to each Qualified Loan.
Compliance
Certification:
The annual certification by a Borrower to CFC
under the related Loan Agreement.
Condemnation
Proceeds:
All awards or settlements in respect of a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or
condemnation.
Custodial
Agreement:
The Custodial Agreement by and between the
Purchaser and the Custodian, as the same may be amended, modified or
supplemented from time to time in accordance with the terms
thereof.
Custodian:
U.S.
Bank National Association, in its capacity as Custodian under the Custodial
Agreement.
Customary
Servicing Procedures:
With respect to the Master Servicer, the
customary and usual standards of practice employed by the Master Servicer when
servicing and administering loans in the Master Servicer's portfolio of a type
comparable to the Qualified Loans sold pursuant to this Master
Agreement.
Defaulted And
Qualified Loan Exception Report:
The report provided on an
Exception Basis to Farmer Mac by the Master Servicer pursuant to Section
5.01(g), providing information with respect to all Defaulted Loans and Qualified
Loans identified by Farmer Mac as “watch-listed” loans. The Defaulted
And Qualified Loan Exception Report shall be provided in an electronic format
agreed upon between the parties, substantially in the form of
Exhibit
3
.
Defaulted
Loan:
Any
Qualified Loan as to which (i) any payment or part thereof, remains unpaid
for thirty (30) days or more after the original due date for such payment,
(ii) the related Borrower is subject to any bankruptcy or insolvency
proceeding, (iii) the lien of the related Mortgage has been foreclosed, the
related Mortgaged Property has been sold pursuant to a power of sale or
trustee's sale or repossessed, or proceedings for foreclosure, sale or
repossession have been commenced, or (iv) the Master Servicer has determined,
consistent with Customary Servicing Procedures, that such Qualified Loan is not
collectible.
Defective
Loan:
Any loan which is required to be cured or repurchased
pursuant to Section 2.03(c) or Section 4.03(j).
Depreciation and
Amortization Expense:
The amount constituting the depreciation
and amortization of the applicable Member computed in accordance with Accounting
Requirements.
Distribution
Account:
The account or accounts established by Farmer Mac
into which the Master Servicer will make deposits on each Distribution Date
pursuant to Section 5.05.
Distribution
Date:
The 15th day (or if such 15th day is not a Business Day,
the next succeeding Business Day) of each month.
Due
Date:
With respect to any Qualified Loan, any date upon which
any Installment Payment is due in accordance with the terms of the related
Mortgage Note or Loan Agreement. Unless otherwise specified in the
applicable Commitment Letter, the Due Date for a Qualified Loan shall be on the
first calendar day of a month,
provided, however
, that if
not a Business Day, then such Due Date shall be the next succeeding Business
Day. The Due Date for a Qualified Loan is sometimes referred to as
the “Payment Date” in the applicable Loan Agreement.
Eligible
Account:
An account that is a segregated account (including a
securities account) with an Eligible Depository that is either (i) maintained
with a depository institution the obligations of which would qualify as
Permitted Investments pursuant to clause (iii) of the definition thereof, (ii)
an account or accounts the deposits in which are insured by the Federal Deposit
Insurance Corporation, or (iii) an account or accounts in a depository
institution acting in its fiduciary capacity in which the deposits in such
accounts are held in trust and are invested in an account as described in (i) or
(ii) above or in Permitted Investments. Funds deposited in each
Eligible Account shall be held in trust pending application in accordance with
the provisions of this Master Agreement.
Eligible Class A
Member:
Each Class A Member that satisfies the following
criteria on the Sale Date of such Member's Qualified Loan:
(i) Such
Member’s Average Long-Term Debt to Net Utility Plant Ratio does not exceed
90%;
(ii) Such
Member’s Average Modified Debt Service Coverage Ratio—Distribution is at least
1.35;
(iii)
Such Member’s Average Equity to Total Assets Ratio is at least 20%;
and
(iv) Such
Member’s Qualified Loan has a Facility Rating of "4.9" or lower.
Eligible Class B
Member:
Each Class B Member that satisfies the following
criteria on the Sale Date of such Member's Qualified Loan:
(i) Such
Member’s Average Equity to Total Capitalization Ratio at least 25%;
(ii) Such
Member’s Average Modified Debt Service Coverage Ratio—G&T is at least
1.10;
(iii)
Such Member’s Average Equity to Total Assets Ratio is at least 10%;
and
(iv) Such
Member’s Qualified Loan has a Facility Rating of "4.9" or lower.
Eligible
Depository:
Any Reserve Bank or any other depository
institution or trust company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
federal or state banking authorities, which institution or company is approved
in writing by an Authorized Officer of the Purchaser.
Equities and
Margins
: Determined in accordance with Accounting
Requirements.
Equity:
With
respect to any Member, the aggregate of such Member's equities and margins
computed pursuant to Accounting Requirements.
Equity to Total
Assets Ratio
: Determined in accordance with Accounting
Requirements.
Equity to Total
Capitalization Ratio
: Determined in accordance with Accounting
Requirements.
Exception
Basis:
With respect to the Defaulted And Qualified Loan
Exception Report provided by the Servicer hereunder, a report that is required
only in the event that information or data exists for the reporting period to
which such report relates.
Facility
Rating:
The facility rating assigned by the Seller to a
Qualified Loan from time to time in accordance with the Seller’s internal risk
rating system.
Farmer
Mac:
The Federal Agricultural Mortgage Corporation, a
federally chartered instrumentality of the United States, together with its
successors and assigns.
Form
7:
The reporting form designated as such by RUS, or in the
event a Borrower does not borrow from RUS, the reporting form designated as such
by CFC for its Class A Members.
GAAP:
Generally
accepted accounting principles in the United States as in effect from time to
time.
Governmental
Authority:
Any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
Insolvency
Event
: With respect to any Person, such Person (a) generally
is not paying their debts as such debts become due or (b) admits in writing
their inability to pay their debts generally, (c) makes a general assignment for
the benefit of creditors, (d) files a voluntary petition in bankruptcy, (e) is
adjudged as bankrupt or insolvent, or has had entered against such Person an
order for relief in any bankruptcy or insolvency proceeding, (f) files a
petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, (g) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against such Person in any
proceeding specified in clause (i) below, (h) seeks, consents to or acquiesces
in the appointment of a trustee, receiver or liquidator of such Person or of all
or any substantial part of the assets of such Person or (i) fails to obtain
dismissal within sixty (60) days of the commencement of any proceeding against
such Person seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
or the entry of any order appointing a trustee, liquidator or receiver of such
Person or of such Person's assets or any substantial portion
thereof.
Installment
Payment
: With respect to any Qualified Loan and any Due Date,
any payment of principal and/or interest thereon in accordance with the
amortization schedule of such Qualified Loan (after adjustment for any
curtailments occurring prior to the Due Date but before adjustment to such
amortization schedule by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period).
Interest
Expense
: Determined in accordance with Accounting
Requirements.
Investment
Account:
The Eligible Account or Accounts created and
maintained pursuant to Section 5.02(c). Funds required to be
deposited in the Investment Account shall be held in trust for Farmer
Mac.
Key Ratio Trend
Analysis
:
An annual report
generated by the Seller containing key financial and operating ratios and other
growth indicators for each Borrower.
Loan
Agreement:
An original loan agreement to which the applicable
Borrower is a party and providing for the Qualified Loan which is evidenced by
the related Mortgage Note and secured by the related Mortgage.
Loan Interest
Rate:
With respect to any Qualified Loan, the per annum rate
of interest borne thereby as specified in the Mortgage Note or the Loan
Agreement relating to such Qualified Loan.
Loan Setup
File:
The information about each Qualified Loan serviced by
the Master Servicer, as provided to Farmer Mac by the Master Servicer pursuant
to Section 5.01(g). The Loan Setup File shall be provided in an
electronic format agreed upon between the parties, substantially in the form of
Exhibit
4
.
Long-Term Debt:
With respect to any Qualified Loan and any Member, is determined in
accordance with the Uniform System of Accounts prescribed at the time by RUS or,
if such Member is not required to maintain its accounts in accordance with said
Uniform System of Accounts, otherwise determined in accordance with
GAAP.
Long-Term Debt to
Net Utility Plant Ratio
: With respect to a Borrower, means the
ratio obtained by dividing the amount of such Borrower’s Long-Term Debt by its
Net Utility Plant, and expressing the quotient as a percentage.
Master
Agreement:
This Master Sale and Servicing Agreement, as it may
be modified, amended or supplemented in accordance with the applicable
provisions hereof.
Master
Servicer:
National Rural Utilities Cooperative Finance
Corporation.
Master Servicer's
Loans
: As defined in Section 5.01(b).
Master Servicer’s
Report:
The report regarding activity with respect to each
Qualified Loan, as provided monthly to Farmer Mac by the Master Servicer
pursuant to Section 5.01(g). The Master Servicer’s Report shall be
provided in an electronic format agreed upon between the parties, substantially
in the form of
Exhibit
5
.
Member:
Any
Person who is member of Seller.
Modified Debt
Service Coverage Ratio—Distribution:
With respect to each
Class A Member, the ratio determined as follows: for any calendar year the sum
of (i) Operating Margins, (ii) Non-Operating Margins—Interest, (iii) Interest
Expense, (iv) Depreciation and Amortization Expense, and (v) cash received in
respect of generation and transmission and other capital credits, and divide the
sum so obtained by the sum of all payments of Principal and Interest Expense
required to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
Modified Debt
Service Coverage Ratio—G&T:
With respect to each Class B
Member, the ratio determined as follows: for any calendar year the sum of (i)
Operating Margins, (ii) Non-Operating Margins—Interest, (iii) Interest Expense,
(iv) Depreciation and Amortization Expense, and (v) cash received in respect of
generation and transmission and other capital credits, and divide the sum so
obtained by the sum of all payments of Principal and Interest Expense required
to be made during such calendar year;
provided
,
however
, that in the
event that any amount of Long-Term Debt has been refinanced during such year,
the payments of Principal and Interest Expense required to be made during such
year on account of such refinanced amount of Long-Term Debt shall be based (in
lieu of actual payments required to be made on such refinanced amount of
Long-Term Debt) upon the larger of (i) an annualization of the payments required
to be made with respect to the refinancing debt during the portion of such year
such refinancing debt is outstanding or (ii) the payment of Principal and
Interest Expense required to be made during the following year on account of
such refinancing debt.
Mortgage:
An
original mortgage, deed of trust or other instrument that constitutes a first
lien on an interest in real property securing a Mortgage Note. Such
Mortgage may be an RUS form of mortgage, a CFC form of mortgage or the form
specified by another lender and agreed to by CFC. It is understood
that the Mortgages provide that one or more promissory notes may be secured by
such Mortgage without being specifically identified in such Mortgage and without
such Mortgage being amended to reflect such fact.
Mortgage
File:
The mortgage documents listed in Section 2.03(b)
pertaining to the applicable Qualified Loan.
Mortgage
Note:
The originally executed secured promissory note or other
evidence of indebtedness of a Borrower under a Qualified Loan, together with all
riders thereto and amendments thereof.
Mortgaged
Property:
The underlying real property, improvements, fixtures
and personal property, as more particularly described in each Mortgage, that
constitutes the collateral securing the related Qualified Loan.
Net Loan Interest
Rate:
With respect to any Qualified Loan, the Loan Interest
Rate applicable to such Qualified Loan, net of the Servicing Fee Rate applicable
to such Qualified Loan.
Net Utility
Plant:
The amount constituting the total utility plant of the
Borrower, less depreciation computed in accordance with Accounting
Requirements.
Non-Operating
Margins—Interest:
The amount representing the interest
component of Non-Operating Margins of the applicable Member computed in
accordance with Accounting Requirements.
Officer's
Certificate:
With respect to any Person, a certificate signed
by the Governor, the Chairman of the Board, the Vice Chairman of the Board, the
President, any Executive Vice President, Senior Vice President, Vice President
or Second Vice President, and any of the Treasurer, the Secretary, or any of the
Assistant Treasurers or Assistant Secretaries of such Person delivered pursuant
to this Master Agreement.
Operating
Margins
: Determined in accordance with Accounting
Requirements.
Opinion of
Counsel:
A written opinion of counsel of a law firm reasonably
acceptable to the recipient thereof. Any Opinion of Counsel may be
provided by in-house counsel of a Person if reasonably acceptable to the
addressee thereof.
Other Insurance
Proceeds:
Proceeds of any hazard policy or other insurance
policy covering a Mortgaged Property, to the extent such proceeds are not to be
applied to the restoration of such Mortgaged Property or released to the
Borrower in accordance with the procedures that the Master Servicer would follow
in servicing Qualified Loans held for its own account.
Other Pledged
Obligations:
With respect to any Borrower, any notes or bonds
of such Borrower payable to the Seller which are pledged to secure any other
notes or bonds issued by the Seller to Farmer Mac or any Affiliate
thereof.
Other Sold
Obligations:
With respect to any Borrower, any notes or bonds
of such Borrower payable to the Seller which are sold by the Seller or any
Affiliate thereof to Farmer Mac or any Affiliate thereof or to any trust whose
beneficial ownership is owned or controlled by Farmer Mac or an Affiliate
thereof.
Permitted
Investments:
One or more of the following, but only to the
extent permitted by applicable regulations:
(i) obligations
of, or guaranteed as to principal and interest by, Farmer Mac or the United
States or any agency or instrumentality thereof;
(ii) repurchase
agreements on obligations specified in clause (i), which repurchase agreements
will mature not later than the day preceding the immediately following
Remittance Date, provided that (a) the unsecured short-term obligations of the
party agreeing to repurchase such obligations are at the time rated not less
than A-1 by Standard & Poor’s and not less than Prime-1 by Moody’s, (b)
such repurchase agreements are effected with a primary dealer recognized by a
Federal Reserve Bank or (c) such repurchase agreements are secured by
obligations specified in clause (i) above at not less than 102% of market value
determined on a daily basis;
(iii) demand
and time deposits in, certificates of deposit of, or bankers’ acceptances
maturing in not more than 60 days and issued by, any depository institution or
trust company incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal and/or state
banking authorities, so long as at the time of such investment or contractual
commitment providing for such investment the commercial paper or other
short-term debt obligations of such depository institution or trust company (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, the commercial paper or other short-term obligations of such
holding company) have a rating of not less than A-1 from Standard &
Poor’s and a rating of not less than Prime-1 from Moody’s;
(iv) commercial
paper (having remaining maturities of not more than 60 days) of any corporation
incorporated under the laws of the United States or any state thereof, which on
the date of acquisition has been rated not less than A-1 from
Standard & Poor’s and not less than Prime-1 by Moody’s;
and
(v) securities
bearing interest or sold at a discount issued by any corporation incorporated
under the laws of the United States of America or any state thereof if such
securities are rated in the highest long-term unsecured rating categories at the
time of investment or the contractual commitment providing for such investment
by Standard & Poor’s and Moody’s;
provided
,
however
, that
securities issued by any particular corporation will not be Permitted
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and held
as part of the Collection Account to exceed 10% of the outstanding
principal balance of the Qualified Loans being serviced under this Master
Agreement (it being understood that the entity directing the investment shall be
responsible for compliance with the foregoing restriction on
investments);
(vi) units
of a taxable money-market portfolio rated “P-1” by Moody’s and “AAAm” by
Standard & Poor’s and restricted to investments in obligations issued or
guaranteed by the United States of America or entities whose obligations are
backed by the full faith and credit of the United States of America and
repurchase agreements collateralized by such obligations;
(vii) units
of a taxable money-market portfolio restricted to investments which would be
“Permitted Investments” under paragraphs (i) through (vi) of this definition of
“Permitted Investments”; and
(viii) any
other obligation or security that is acceptable to (and specified in writing by)
Farmer Mac and that is an eligible non-program investment for Farmer Mac under
applicable investment management regulations promulgated by the Farm Credit
Administration (currently 12 C.F.R. § 652.35).
The
foregoing is qualified to the extent that no instrument described above shall be
a Permitted Investment if such instrument evidences either (x) a right to
receive only interest payments with respect to the obligations underlying such
instrument or (y) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity of greater than 120% of the yield
to maturity at par of such underlying obligations.
Person:
Any
legal person, including any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
Governmental Authority.
Prepayment
Premium:
With respect to any Qualified Loan, any premium or
yield maintenance payment paid or payable, as the context requires, by the
related Borrower in connection with any Principal Prepayment, as specified in
the related Commitment Letter and Loan Agreement.
Principal and
Interest Expense
: Determined in accordance with Accounting
Requirements.
Principal
Prepayment:
Any payment or other recovery of principal on a
Qualified Loan which is received in advance of its scheduled Due Date, which is
not accompanied by an amount of interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of
prepayment.
Purchase
Price
:
The amount
required to be paid by the Purchaser to the Seller for the purchase of Qualified
Loans, as set forth in the related Commitment Letter for such Qualified
Loans.
Purchaser:
Farmer
Mac.
Qualified
Loan:
A loan, or an interest in a loan, for an electric or
telephone facility that satisfies the following criteria:
|
i.
|
The
Borrower is either an Eligible Class A Member or an Eligible Class B
Member that has received, or is eligible to receive, a loan from RUS under
the Rural Electrification Act of
1936.
|
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ii.
|
Such
loan is a fixed or variable rate term loan that was closed by the
Seller. At the time of sale, such loan has an outstanding
principal amount of up to $15 million (or any higher amount permitted by
Farmer Mac and specified as the Purchase Price for a Qualified Loan in the
applicable Commitment Letter) and a remaining period until maturity in the
range of one (1) to thirty-five (35) years,
provided
that
if such loan provides for an interest rate reset, the resets shall occur
no more frequently than once every month. Such loan is secured
by substantially all of the assets of the Borrower. Such assets
may also secure one or more prior or future loans made by the Seller, RUS
or another party to the same
Borrower.
|
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iii.
|
Such
loan is payable in full upon maturity or amortizes on a level principal or
level debt service basis.
|
|
iv.
|
Interest
is payable on such loan monthly, semi-annually or annually, as specified
in the applicable Commitment Letter. Unless otherwise specified
in the related Commitment Letter, interest due under the loan shall be
calculated on the basis of a 360-day year consisting of twelve 30-day
months.
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|
v.
|
The
documentation for such loan provides that in the event of prepayment of a
fixed rate loan on any date other than an interest reset date, the
Borrower must pay a Prepayment
Premium.
|
|
vi.
|
The
full amount of such loan is advanced by the time of sale and no further
draws are permitted.
|
|
vii.
|
At
the time of the sale, the Seller will have at least one other loan to the
same Borrower in the Seller's portfolio. In addition, at the
time of sale, it will be the intention of the Seller to maintain a credit
relationship with such Borrower until such time as the loan to such
Borrower purchased by the Purchaser pursuant to this Master Agreement is
repaid in full.
|
|
viii.
|
No
event of default with respect to such loan shall have been declared by the
Seller and be continuing at the time of
sale.
|
|
ix.
|
Such
loan shall have been documented in accordance with the Seller's existing
practices and procedures at the time such loan was closed,
provided
that
prior to its sale hereunder to the Purchaser, the Mortgage Note and
related Loan Agreement will be prepared and will include all of the
provisions of a Qualified Loan contemplated by this Master
Agreement.
|
|
x.
|
The
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all loans to the same Borrower previously sold
hereunder, (y) the aggregate principal balance of all Other Pledged
Obligations with respect to the same Borrower and (z) the aggregate
principal balance of all Other Sold Obligations with respect to the same
Borrower, will not exceed $35,000,000 (or any higher amount permitted by
Farmer Mac and communicated to CFC in
writing).
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xi.
|
The
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all loans to the same Borrower previously sold
hereunder and (y) the aggregate principal balance of all Other Sold
Obligations with respect to the same Borrower, will not exceed $15,000,000
(or any higher amount permitted by Farmer Mac and communicated to CFC in
writing).
|
|
xii.
|
With
respect to any loan, the Borrower of which is a Class B Member, the
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all other loans to Class B Members previously sold
hereunder, (y) the aggregate principal balance of all Other Sold
Obligations with respect to Class B Members and (z) the aggregate
principal balance of all Other Pledged Obligations with respect to Class B
Members, will not exceed 20% (or any higher percentage permitted by Farmer
Mac and communicated to CFC in writing) of the sum of (a) the
aggregate principal balance of all loans sold hereunder, (b) the aggregate
principal balance of all Other Pledged Obligations and (c) the aggregate
principal balance of all Other Sold
Obligations.
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xiii.
|
With
respect to any loan, the Borrower of which is a Class B Member, the
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all other loans to Class B Members previously sold
hereunder and (y) the aggregate principal balance of all Other Sold
Obligations with respect to Class B Members, will not exceed 10% (or any
higher percentage permitted by Farmer Mac and communicated to CFC in
writing) of the sum of (a) the aggregate principal balance of all loans
sold hereunder, (b) the aggregate principal balance of all Other Pledged
Obligations and (c) the aggregate principal balance of all Other Sold
Obligations.
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xiv.
|
Unless
otherwise specified in the related Commitment Letter, the repayment terms
of such Qualified Loan shall not provide a conversion option exercisable
by the Borrower to convert to a different loan
product.
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Qualified Loan
Receipts:
The sum of (i) all amounts paid by Borrowers on
account of Qualified Loans that is on deposit in the Collection Account or the
Investment Account on the Distribution Date, including Borrower Payments, Cash
Liquidation Proceeds, and Other Insurance Proceeds, and (ii) any amount in
respect of Defective Loans purchased by the Seller pursuant to Section 2.03(c)
or Section 4.03(j),
less
the sum of (i) any Amount Held for Future Distribution and (ii) all amounts
permitted to be retained or withdrawn by the Master Servicer pursuant to Section
5.04.
REO
Property:
A Mortgaged Property acquired on behalf of the
Purchaser through foreclosure or deed-in-lieu of foreclosure in connection with
a Defaulted Loan.
Repurchase
Price:
With respect to any Qualified Loan, the unpaid
principal balance thereof together with accrued and unpaid interest thereon at
the Loan Interest Rate to the date of repurchase.
Reserve
Bank:
Any U.S. Federal Reserve Bank, including its
branches.
Responsible
Officer:
When used with respect to the Purchaser or the Master
Servicer, any officer of such Person, including any Governor, Chairman or any
President, any Executive Vice President, any Senior Vice President, Vice
President, any Assistant Vice President, any Assistant Treasurer, any Assistant
Secretary or any other officer of such party customarily performing functions
similar to those performed by the persons who at the time shall be such
officers.
RUS:
The
Rural Utilities Service of the United States Department of Agriculture, acting
by and through the Administrator of the Rural Utilities Service, and including
any successor agencies or departments.
Sale
Date:
Each closing date upon which the sale of one or more
Qualified Loans is sold to Purchaser. Each Sale Date shall occur on
the first Business Day of a month unless otherwise specified in the related
Commitment Letter.
SEC:
The
United States Securities and Exchange Commission.
Securities
Offering:
Any transaction in which Farmer Mac guarantees the
payment of principal and interest on securities that represent interests in, or
obligations fully backed by, any pool of loans that includes any Qualified Loan
sold to the Purchaser hereunder and such securities are offered pursuant to a
registration statement under the Securities Act of 1933, as
amended.
Seller:
National
Rural Utilities Cooperative Finance Corporation.
Servicer
Default:
An event described in Section 5.11.
Servicing Advance
Account:
The account established on the Master Servicer’s
books and records by the Master Servicer in which it shall record all funds paid
through advances of the Master Servicer in connection with the Qualified
Loans. All recoveries of such advances from the Borrower or
reimbursements of such advances by Farmer Mac shall also be recorded to this
account. The account may be located in the same account as the
Collection Account, but for which separate records (or entries) shall be
maintained.
Servicing
Advances
: With respect to each Qualified Loan, all customary
and reasonable costs and expenses (including the reasonable fees and
disbursements of counsel to the Master Servicer) incurred in accordance with the
Customary Servicing Procedures of the Master Servicer in the performance by the
Master Servicer of its servicing obligations consisting of or relating to (i)
the preservation, restoration and protection of the related Mortgaged Property,
(ii) any enforcement or remedial activities or judicial proceedings,
including foreclosures and (iii) the amendment, modification, restructuring
or work-out of such Qualified Loan.
Servicing
Certificate:
A certificate completed and executed by a
Servicing Officer on behalf of the Master Servicer in accordance with Section
5.15. Each Servicing Certificate shall be substantially in the form
of
Exhibit 6
hereto (with such changes and modifications as the Master Servicer and the
Purchaser shall agree).
Servicing
Fee:
With respect to each Qualified Loan, the product of (i)
the Servicing Fee Rate with respect to such Qualified Loan, and (ii) the
outstanding principal amount of such Qualified Loan, as determined in the
following sentence. The Servicing Fee shall be payable on the
Distribution Date corresponding to the Due Date that interest on such Qualified
Loan is payable and computed on the basis of the same time period with respect
to which interest on such Qualified Loan is computed, without giving effect to
any principal amount of such Qualified Loan paid or payable on the applicable
Due Date.
Servicing Fee
Rate:
With respect to each Qualified Loan, a rate per annum as
specified in the related Commitment Letter.
Servicing
File
:
The comprehensive
set of files maintained in an organized format by the Master Servicer to
properly document all current and pertinent information related to a Qualified
Loan. These files may consist of documents maintained in hard copy
form or easily accessible electronic data and shall include at a minimum the
following documents pertaining to each Qualified Loan:
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i.
|
a
copy of the most recent Compliance Certification by an officer of the
related Borrower;
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|
ii.
|
the
most recent fiscal year-end certified audit of such
Borrower;
|
|
iii.
|
a
copy of the most recent unaudited annual financial statements of such
Borrower (which may be set forth on a Seller form or Form
7);
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iv.
|
copies
of the Form 7 of such Borrower for each of the three most recent
years;
|
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v.
|
the
most recent Key Ratio Trend Analysis, as
available;
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vi.
|
the
most recent narrative with respect to such Borrower, as prepared by the
Seller;
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vii.
|
the
most recent Borrower Rating of such
Borrower;
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viii.
|
all
correspondence between the Master Servicer and such Borrower that pertains
to the Qualified Loan sold under this Master Agreement, or to the
collateral by which it is secured, from origination of the Qualified Loan
until payoff or foreclosure; and
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ix.
|
documentation
of any loan servicing actions taken with respect to the Qualified
Loan.
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Servicing
Officer
: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Qualified Loans whose
name and specimen signature appears on a list of Servicing Officers furnished to
the Purchaser by the Master Servicer from time to time.
Total Assets
Ratio:
With respect to any Member, an amount constituting the
total assets of such Member computed pursuant to Accounting
Requirements.
Total
Capitalization Ratio:
With respect to any Member, the Total Margins and
Equity as a percentage of the sum of (1) Total Margins and Equity
plus
(2) Long-Term
Debt.
Total Margins and
Equity:
With respect to any Member, such Member's total margins and
equity computed pursuant to Accounting Requirements.
Transaction
Documents
: This Master Agreement, each Assignment and each
Commitment Letter.
Section
1.02
Other
Definitional Provisions
.
(a) All
terms defined in this Master Agreement shall have the defined meanings when used
in any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b)
As
used in this Master Agreement or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Master Agreement or in
any certificate or other document, and accounting terms partly defined in this
Master Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms in this
Master Agreement or in any certificate or other document are inconsistent with
the meanings of such terms under GAAP in effect on the date hereof, the
definitions contained in this Master Agreement or in any certificate or other
document shall control.
(c)
The
words "hereof," "herein," "hereunder," and words of similar import when used in
this Master Agreement shall refer to this Master Agreement as a whole and not to
any particular provision of this Master Agreement; Section and Exhibit
references contained in this Master Agreement are references to Sections and
Exhibits in or to this Master Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation."
(d)
The
definitions contained in this Master Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
ARTICLE
II
Applicable
Documentation; Sale of Qualifying Qualified Loans
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Section
2.01.
Commitment to
Purchase
.
|
(a)
From
time to time, the Seller may present one or more loans for sale to the
Purchaser. If the Purchaser determines that such loans meet its
eligibility criteria, then the Purchaser and the Seller may execute a Commitment
Letter, in the form of
Exhibit 2
hereto,
setting forth the terms of the sale and delivery of such Qualified
Loans.
(b)
The
execution of a Commitment Letter by the Seller and the Purchaser with respect to
a Qualified Loan shall obligate the Seller to deliver, and shall obligate the
Purchaser to pay for, the related Qualified Loan. In the event the
Seller does not deliver a Qualified Loan on the related Sale Date, or in the
event the Purchaser does not pay for a Qualified Loan on the related Sale Date,
then the defaulting party shall be liable to the non-defaulting party for proven
monetary damages (if any) available to it under applicable law.
(c)
Upon
execution of a Commitment Letter as set forth in Section 2.01(b), the Seller
shall sell, and the Purchaser shall purchase, on the terms and conditions stated
herein and in the related Commitment Letter, without recourse, except as
specifically set forth herein, all of the Seller's right, title and interest in,
to and under Qualified Loans, as set forth in such Commitment
Letter.
(d)
The
terms and conditions set forth in the Commitment Letter with respect to each
Qualified Loan and Sale Date shall be incorporated herein. In the
event of any conflict between the terms of this Master Agreement and the related
Commitment Letter, the Commitment Letter shall control.
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Section
2.02.
Confirmation, Timing,
Delivery
|
(a)
Seller
Notification and Offer by Purchaser
. The Seller shall notify
Farmer Mac of the desired Sale Date with respect to one or more Qualified Loans
by delivering a Loan Setup File not later than seven (7) Business Days prior to
the desired Sale Date. Upon receipt of a Loan Setup File, if Farmer
Mac determines that one or more Qualified Loans meet its eligibility criteria,
Farmer Mac shall prepare a Commitment Letter and deliver to the Seller a copy of
such Commitment Letter signed by Farmer Mac no later than five (5) Business Days
prior to the desired Sale Date. Farmer Mac shall deliver the signed
Commitment Letter to the Seller via facsimile transmission to Director,
Strategic Project Management at 703-709-6776. Such notification
evidences the Purchaser’s offer to purchase the Qualified Loans referenced
therein under the terms and conditions set forth in such Commitment Letter and
this Master Agreement, which offer shall expire at the close of business on the
Commitment Expiration Date specified in the Commitment Letter if not accepted by
the Seller before that date.
(b)
Acceptance
by Seller
. If the Seller accepts the offer set forth in the
Commitment Letter, then the Seller shall notify Farmer Mac of its acceptance by
executing and returning a copy of the Commitment Letter to Farmer Mac no later
than five (5) Business Days prior to the Sale Date referenced
therein. The Seller shall deliver the signed Commitment Letter to
Farmer Mac via e-mail to capitalmarkets@farmermac.com and
AccountingOps@farmermac.com or by any other method or to any other person
specified in writing to the Seller by Farmer Mac from time to
time. Such notification evidences the Seller’s irrevocable commitment
to sell and deliver to Farmer Mac the Qualified Loans referenced therein under
the terms and conditions set forth in such Commitment Letter and this Master
Agreement.
(c)
Funds
Transfer by Purchaser
. Farmer Mac will purchase all Qualified
Loans sold under this Master Agreement via a wire transfer of funds on the
related Sale Date. Farmer Mac will prepare a loan settlement report
confirming the Loan Interest Rate and other applicable information for each
Qualified Loan referenced in a signed Commitment Letter and deliver such report
to the Seller via e-mail to MSG-Strategic.Projects@nrucfc.coop and
Josh.Silverman@nrucfc.coop by 9:00 a.m. eastern time on the related Sale
Date. The Seller shall confirm, via return e-mail to
AccountingOps@farmermac.com no later than 10:00 a.m. eastern time on the related
Sale Date, the accuracy of the information set forth in the loan settlement
report and the Master Servicer’s expectation to receive funds for the sale of
the applicable Qualified Loans on the related Sale Date. The wire
transfer of funds will normally be scheduled for transmission by 12:00 p.m.
eastern time, but in no event later than 5:00 p.m. eastern time. The
Seller shall provide Farmer Mac with written wire transfer instructions in the
Commitment Letter, which shall include the name and phone number of the person
requesting the wire, the wire instructions of the bank where the funds are to be
wired, and the calculation of the dollar amount of the funds to be
wired.
(d)
Delivery
by Seller
.
(i)
Assignment
. The
Seller, simultaneously with the payment of the Purchase Price, shall execute and
deliver to the Purchaser an Assignment with respect to the related Qualified
Loans substantially in the form attached hereto as
Exhibit 1
, or in such
other form as the Purchaser may reasonably require,
provided, however,
that no
such form shall contain any provision indicating or referencing that the Seller
retains any rights, obligations or liabilities with respect to the Qualified
Loan, or any recourse by the Purchaser to the Seller in connection therewith,
except as otherwise explicitly set forth in this Master Agreement.
(ii)
Mortgage File
. On
each Sale Date, the Seller shall transmit for delivery to the Custodian, on
behalf of the Purchaser, all of the documents referred to in Section 2.03(b)
with respect to the applicable Qualified Loans, with the Purchaser entitled to
all interest and principal received on or with respect to the applicable
Qualified Loans from and after the Sale Date (other than payments due on such
Qualified Loans on or before the Sale Date and other than that portion of any
payment of interest received after the Sale Date that represents interest
accruing on or prior to the Sale Date). Such delivery shall be made
against payment by the Purchaser to the Seller of the Purchase
Price.
(iii)
Other Transfer
Documentation
. The Seller shall execute, acknowledge and
deliver all other documents furnished to the Seller by the Purchaser as may be
necessary to effectuate the transfer contemplated by this Section 2.02 to the
Purchaser of all right, title and interest of the Seller in and to the Qualified
Loans and the related Mortgages.
(e)
Interest
Payments on Qualified Loans
. Unless otherwise specified in the
related Commitment Letter, interest due under each Qualified Loan shall be
calculated on the basis of a 360-day year consisting of twelve 30-day
months. For illustration purposes, if the first calendar day of the
month is a Saturday and the following Monday is a holiday, the first Business
Day of that month would be the following Tuesday. Assuming that the
month in this example is a 30-day month, a Qualified Loan purchased by Farmer
Mac on that Tuesday would have 27 days of interest accrual for that
month. Farmer Mac also acknowledges and agrees that, unless otherwise
specified in the applicable Commitment Letter, the first required Installment
Payment for each Qualified Loan shall be for the payment of interest only and
all subsequent Installment Payments shall be for the payment of interest and
principal.
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Section
2.03.
Servicing File and
Mortgage File
.
|
(a)
Servicing
File
. The Seller, in its capacity as Master Servicer, shall
retain the Servicing File on behalf of the Purchaser with respect to each
Qualified Loan sold to the Purchaser pursuant to this Master
Agreement. The Seller acknowledges and understands that ownership of
each document in a Servicing File is vested in the Purchaser. The
Master Servicer shall not take any action inconsistent with such
ownership. The Master Servicer (as the originator of the Qualified
Loans) agrees to indicate on its books and records at each Sale Date that the
Qualified Loans sold pursuant to Section 2.02 on such Sale Date have been sold
to the Purchaser, and to advise all inquiring parties that such Qualified Loans
have been sold to the Purchaser. The Seller shall, upon three (3)
Business Days' prior written request provide Purchaser or its designee with
reasonable access, during normal business hours and at the office of the Seller,
to the Servicing File regarding any and all Qualified Loans sold to the
Purchaser pursuant to this Master Agreement. The Master Servicer
shall maintain the Servicing File for a Qualified Loan for three years from
either (i) the date that all principal and interest due on the Qualified
Loan is paid in full or (ii) in the case of REO Property, the date of the sale
of the collateral securing the Qualified Loan.
(b)
Mortgage File
. In
connection with such sale, transfer, assignment, setting over and conveyance
described in clause (a) above, the Seller will deliver to the Custodian the
following documents or instruments with respect to each loan so sold,
transferred, assigned, set over and otherwise conveyed:
(i) the
Mortgage Note, endorsed without recourse to the Purchaser (or to such other
Person as directed by the Purchaser), with all necessary intervening
endorsements showing a complete chain of endorsement from the originator to the
Seller, if applicable;
(ii) a
copy of the applicable Mortgage;
(iii) an
original of each amendment to the Mortgage Note and a copy of each amendment to
the Mortgage in Seller's possession;
(iv) the
original Loan Agreement;
(v) the
original Opinion of Counsel of Borrower's counsel; and
(vi) copies
of any Additional Collateral Documents.
(c)
Document
Deficiencies
. If within sixty (60) days of the applicable Sale
Date, the Custodian finds any document or documents constituting a part of a
Mortgage File to be missing, mutilated, torn, damaged or defective on its face,
the Custodian shall notify the Seller and the Purchaser of such fact in
writing. The Seller shall then correct or cure the subject matter of
such notice within one hundred eighty (180) days from the date of such
notice. If (x) the Seller does not correct or cure the subject matter
of such notice within such one hundred eighty day period and (y) such omission
or defect relates to any document identified in Section 2.03(b)(i) - (iv), the
Seller shall repurchase the related Defective Loan at the Repurchase
Price. Upon receipt of the Repurchase Price, the Purchaser promptly
shall release, or cause the Custodian to release, to the Seller the related
Mortgage File, and shall also execute and deliver such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as may be
necessary to effectuate the transfer to the Seller of all right, title and
interest of the Purchaser in and to each applicable Defective Loan.
Section
2.04.
Treatment of
Sale
. It is the express and specific intent of the parties
hereto that the sale of the loans from the Seller to the Purchaser as provided
in Section 2.02 (the "
Purchase
") is and
shall be construed for all purposes as a true and absolute sale of such loans,
shall be absolute and irrevocable and provide the Purchaser with the full
benefits of ownership of the loans.
Section
2.05.
No
recourse
. Each of the Seller and the Purchaser hereby agree
and acknowledge that, following payment of the Purchase Price for the Qualified
Loans identified in the related Commitment Letter:
(a)
the
Seller will not have any obligation to repay any of the consideration received
by it from the Purchaser hereunder;
(b)
the
Seller will not have any obligation to repurchase such Qualified Loans, or to
reimburse or otherwise compensate the Purchaser for any losses attributable to
payment defaults under such loans or, except as set forth in Section 2.03(c) and
Section 4.03(j), for any other losses arising from investment in and ownership
of such loans; and
(c)
the
Purchaser will not have or claim to have any recourse to the Seller for any
losses attributable to payment defaults under the loans or, except as set forth
in Section 2.03(c) and Section 4.03(j), for any other losses arising from
investment in and ownership of the loans.
Section
2.06.
Notice of Sale of Qualified
Loans
. Promptly following each Sale Date, CFC shall notify the
Borrower under each Qualified Loan identified on the related Commitment Letter
that such Qualified Loan has been conveyed to the Purchaser.
ARTICLE
III
Conditions
Precedent
Section
3.01.
Conditions to Sale of
Loans
. The following shall be conditions precedent to the
effectiveness of each purchase and sale of a Qualified Loan made
hereunder:
(a)
the
Seller shall have received the related Purchase Price from the
Purchaser;
(b)
the
Custodian shall have received the Mortgage File from the Seller;
and
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(c)
|
as
of the date(s) that the conditions set forth in (a) and (b) above have
been met, an Insolvency Event shall not have occurred and be continuing
with respect to the Seller or the
Purchaser.
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ARTICLE
IV
Representations
and Warranties
Section
4.01.
Representations and
Warranties of the Master Servicer
. The Master Servicer hereby
represents and warrants as of the date of this Master Agreement and each Sale
Date as follows:
(a)
The
Master Servicer is a cooperative association duly organized, validly existing
and in good standing under the laws governing its creation and existence and
with the requisite power and authority to conduct its business as it is
currently being conducted; the Master Servicer holds all licenses, certificates
and permits necessary for the conduct of its business as it is currently being
conducted and is or will be in compliance with the laws of each state in which
any Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Qualified Loan.
(b)
The
Master Servicer has the requisite power and authority to execute and deliver
this Master Agreement, to service and administer all the Qualified Loans
identified on each applicable Commitment Letter in accordance with the terms of
this Master Agreement, and to take all other actions and execute and deliver all
other documents which are requisite or pertinent to the transactions described
in this Master Agreement and the Transaction Documents. The persons
signing such documents and taking such actions on its behalf have been duly
authorized to do so and such documents and actions are valid, legally binding
and enforceable against the Master Servicer in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors' rights and to general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c)
The
Master Servicer is not required to obtain the consent of any other Person or any
consents, licenses, approvals or authorizations from, or registrations or
declarations with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Master Agreement or any of the other Transaction Documents, except for such
consents, licenses, approvals or authorizations, or registrations or
declarations, as shall have been obtained or filed, as the case may
be.
(d)
No
action, suit or proceeding is pending or, to the best of the Master Servicer's
knowledge, threatened against it that would prohibit it from entering into this
Master Agreement or the Transaction Documents or performing its obligations
under this Master Agreement or the Transaction Documents or, in the reasonable
opinion of the Master Servicer has a reasonable likelihood of resulting in a
material adverse effect on the transactions contemplated by this Master
Agreement or the Transaction Documents.
(e)
The
Master Servicer is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would reasonably be expected to have
consequences that would materially and adversely affect the condition (financial
or otherwise) or operations of the Master Servicer or its respective properties
or would reasonably be expected to have consequences that would materially
adversely affect the performance of the Master Servicer hereunder.
(f)
The
execution and delivery of this Master Agreement and the Transaction Documents by
the Master Servicer and the performance and compliance with the terms of this
Master Agreement and the Transaction Documents by the Master Servicer will not
violate the Articles of Incorporation or Bylaws of the Master Servicer, or
constitute a material default (or an event which, with notice or lapse of time,
or both, would constitute a material default) under, or result in the material
breach of, any material contract, agreement or other instrument to which the
Master Servicer is a party or which may be applicable to the Master Servicer, or
any of its assets.
(g)
No
Servicer Default has occurred and is continuing and no event or circumstance has
occurred or exists which, with notice or lapse of time or both, would constitute
a Servicer Default.
(h)
Following
payment in full for a Qualified Loan identified on a Commitment Letter, the
Seller will have no right, title or interest in, to or under such Qualified
Loan, or the assets and properties thereof.
(i)
Upon discovery by any party hereto of a breach of any of the
representations and warranties set forth in this Section 4.01, such discovering
party shall give prompt written notice to the other party. It is
understood and agreed by the parties hereto that the representations and
warranties set forth in this Section 4.01 shall survive delivery of the
respective Mortgage Files to the Custodian.
Section
4.02.
Representations and
Warranties of the Purchaser
.
The
Purchaser hereby represents and warrants as of the date of this Master Agreement
and each Sale Date as follows:
(a) The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws governing its creation and existence and with the requisite power
and authority to conduct its business as it is currently being conducted; the
Purchaser holds all licenses, certificates and permits necessary for the conduct
of its business as it is currently being conducted and is or will be in
compliance with the laws of each state in which any Mortgaged Property is
located to the extent necessary to ensure the enforceability of each Qualified
Loan.
(b) The
Purchaser has the requisite power and authority to execute and deliver this
Master Agreement and the other Transaction Documents and to take all other
actions and execute and deliver all other documents which are requisite or
pertinent to the transactions described in this Master Agreement and the
Transaction Documents. The persons signing such documents and taking
such actions on its behalf have been duly authorized to do so and such documents
and actions are valid, legally binding and enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the enforcement
of creditors' rights and to general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at
law).
(c) The
Purchaser is not required to obtain the consent of any other Person or any
consents, licenses, approvals or authorizations from, or registrations or
declarations with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Master Agreement or any of the other Transaction Documents, except for such
consents, licenses, approvals or authorizations, or registrations or
declarations, as shall have been obtained or filed, as the case may
be.
(d) No
action, suit or proceeding is pending or, to the best of the Purchaser's
knowledge, threatened against it that would prohibit it from entering into this
Master Agreement or any Assignment or performing its obligations under this
Master Agreement or the Transaction Documents or, in the reasonable opinion of
the Purchaser has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Master Agreement or the
Transaction Documents.
(e) The
Purchaser is not in default with respect to any order or decree of any court or
any order, regulation or demand of any federal, state, municipal or governmental
agency, which default would reasonably be expected to have consequences that
would materially and adversely affect the condition (financial or otherwise) or
operations of the Purchaser or its respective properties or would reasonably be
expected to have consequences that would materially adversely affect the
performance of the Purchaser hereunder or under any Assignment.
(f) The
execution and delivery of this Master Agreement and the Transaction Documents by
the Purchaser and the performance and compliance with the terms of this Master
Agreement and the Transaction Documents by the Purchaser does not violate the
organizational and operational documents of the Purchaser, or constitute a
material default (or an event which, with notice or lapse of time, or both,
would constitute a material default) under, or result in the material breach of,
any material contract, agreement or other instrument to which the Purchaser is a
party or which may be applicable to the Purchaser, or any of its
assets.
(g) Upon
discovery by any party hereto of a breach of any of the representations and
warranties set forth in this Section 4.02, such discovering party shall give
prompt written notice to the other party. It is understood and agreed
by the parties hereto that the representations and warranties set forth in this
Section 4.02 shall survive delivery of the respective Mortgage Files to the
Custodian.
Section
4.03.
Representations and
Warranties of the Seller
. The Seller hereby represents and
warrants, with respect to paragraphs (a) through (h) as of the date of this
Master Agreement and each Sale Date, and with respect to paragraph (i) as of the
applicable Sale Date, as follows:
(a) The
Seller is a cooperative association duly organized, validly existing and in good
standing under the laws governing its creation and existence and with the
requisite power and authority to conduct its business as it is currently being
conducted; the Seller holds all licenses, certificates and permits necessary for
the conduct of its business as it is currently being conducted and is or will be
in compliance with the laws of each state in which any Mortgaged Property is
located to the extent necessary to ensure the enforceability of each Qualified
Loan.
(b) The
Seller has the requisite power and authority to execute and deliver this Master
Agreement and the Transaction Documents, to transfer, assign and deliver all of
the Qualified Loans identified on each applicable Commitment Letter to the
Purchaser and to take all other actions and execute and deliver all other
documents which are requisite or pertinent to the transactions described in this
Master Agreement and the Transaction Documents. The persons signing
such documents and taking such actions on its behalf have been duly authorized
to do so and such documents and actions are valid, legally binding and
enforceable against the Seller in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights and to general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c) The
Seller is not required to obtain the consent of any other Person or any
consents, licenses, approvals or authorizations from, or registrations or
declarations with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Master Agreement or the Transaction Documents except for such consents,
licenses, approvals or authorizations, or registrations or declarations, as
shall have been obtained or filed, as the case may be.
(d) No
action, suit or proceeding is pending or, to the best of the Seller's knowledge,
threatened against it that would prohibit it from entering into this Master
Agreement or the Transaction Documents or performing its obligations under this
Master Agreement and the Transaction Documents or, in the reasonable opinion of
the Seller has a reasonable likelihood of resulting in a material adverse effect
on the transactions contemplated by this Master Agreement or the Transaction
Documents.
(e) The
Seller is not in default with respect to any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or governmental
agency, which default would reasonably be expected to have consequences that
would materially and adversely affect the condition (financial or otherwise) or
operations of the Seller or its properties or would reasonably be expected to
have consequences that would materially adversely affect its performance
hereunder or under any Assignment.
(f) This
Master Agreement and each Assignment constitutes a valid transfer and assignment
to the Purchaser of all right, title and interest of the Seller in and to the
Qualified Loans, and the other property conveyed pursuant to this Master
Agreement and each Assignment.
(g) The
execution and delivery of this Master Agreement and the Transaction Documents by
the Seller and the performance and compliance with the terms of this Master
Agreement the Transaction Documents by the Seller does not violate the Articles
of Incorporation or Bylaws of the Seller, or constitute a material default (or
an event which, with notice or lapse of time, or both, would constitute a
material default) under, or result in the material breach of, any material
contract, agreement or other instrument to which the Seller is a party or which
may be applicable to the Seller, or any of its assets.
(h) Following
payment of the Purchase Price for a Qualified Loan identified on a Commitment
Letter:
(i) the
Seller will have no right, title or interest in, to or under any such Qualified
Loans;
(ii) the
Seller will not retain any rights of ownership or control with respect to any of
such Qualified Loans; and
(iii) the
Seller will not have or purport to have any right to sell, pledge or otherwise
dispose of, or control the disposition of, any of such Qualified Loans or their
proceeds.
(i) With
respect to each Qualified Loan being sold to the Purchaser on the related Sale
Date:
(i) The
information set forth in the related Commitment Letter is true and correct in
all material respects.
(ii) The
related Mortgage File contains the documents required by
Section 2.03(b).
(iii) The
Qualified Loan conforms in all respects to the criteria specified in the
definition of "Qualified Loan" in this Master Agreement.
(iv) The
terms of the Loan Agreement, Mortgage Note and the Mortgage have not been
amended in any respect by the Seller nor have the terms thereof been waived by
the Seller, except in accordance with the Customary Servicing Procedures and by
written instrument which is included in the Mortgage File. No
Borrower has been released from its obligations under the applicable Loan
Agreement, Mortgage Note and Mortgage except in connection with an assumption
agreement, which assumption agreement is included in the Mortgage
File.
(v) The
Mortgage Note and the Loan Agreement are not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto.
(vi) The
Mortgage obligates the related Borrower to take out and maintain the classes and
amounts of insurance coverages which conform to generally accepted utility
industry standards for such classes and amounts of coverages of utilities of the
size and character of such Borrower and the Borrower is in compliance with such
obligations. The Mortgage obligates the Borrower thereunder to
maintain all such insurance at the Borrower's cost and expense, and on the
Borrower's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at Borrower's cost and expense and to seek reimbursement therefor
from the Borrower.
(vii) As
of the date the Qualified Loan was made to the applicable Borrower, any and all
material requirements of any federal, state or local law including, without
limitation, usury, real estate settlement procedures or disclosure laws
applicable to the origination of such Qualified Loan were complied
with.
(viii) Each
Mortgage has not been satisfied, rescinded or canceled, and the related
Mortgaged Property has not been released from the lien of the Mortgage, except
for partial releases of the Mortgaged Property done in accordance with Customary
Servicing Procedures.
(ix) The
Mortgage creates a validly recorded, filed and perfected mortgage lien shared
pari passu
and
pro rata
by the lenders that
are parties to the Mortgage on the Borrower's real property included in the
Mortgaged Property. The Mortgage is a valid, existing and enforceable
(subject to the effect of laws relating to creditors rights and principles of
equity) first lien on the Mortgaged Property subject only to (A) the lien
of current real property taxes and assessments not yet due and payable,
(B) covenants, conditions and restrictions, rights of way, easements and
other matters of the public record as of the date of recording which do not
materially adversely affect the value of the Mortgaged Property, (C) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by the
Mortgage or the use, enjoyment, value or marketability of the related Mortgaged
Property and (D) encumbrances customarily permitted by utility industry
mortgages.
(x) Each
Loan Agreement, the Mortgage Note and the related Mortgage are valid and binding
obligations of the applicable Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforceability may be limited
by (A) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the enforcement of the rights of
creditors and (B) general principles of equity, whether enforcement is
sought in a proceeding in equity or at law.
(xi) The
proceeds of the Qualified Loan have been fully disbursed to or for the account
of the Borrower and there is no obligation for the Mortgagee to advance
additional funds thereunder. All costs, fees and expenses incurred in
making or closing the Qualified Loan and the recording of the Mortgage have been
paid, and the Borrower is not entitled to any refund of any amounts paid to the
Mortgagee pursuant to the Mortgage Note or Mortgage.
(xii) No
Event of Default has occurred and is continuing under the Mortgage or the
Mortgage Note and no event has occurred which, with the passage of time or with
the giving of notice and the expiration of any grace or cure period, would
constitute such an Event of Default. For purposes of this clause
(xii), "Event of Default" is defined in each of the Mortgages in a manner
consistent with the definition of such phrase customarily utilized in utility
industry mortgages.
(xiii) There
is no proceeding pending or to the Seller's knowledge threatened for the
condemnation of all or any material portion of the Mortgaged Property and such
Mortgaged Property has not been damaged by waste, fire or other casualty to such
an extent as to materially adversely affect the value of the Mortgaged
Property.
(xiv) To
the Seller's knowledge, there is nothing relating to or involving the Qualified
Loan, the Mortgage, the Mortgaged Property, the Borrower or the Borrower's
credit standing that can reasonably be expected to (a) cause the Qualified
Loan to become delinquent, or (b) adversely affect the Qualified Loan's
value or marketability.
(xv) The
Loan Agreement, Mortgage and Mortgage Note permit–and such documents and
instrument were not originated under and are not subject to laws which would
prohibit or restrict–the sale, transfer or assignment of the Qualified Loan, the
Loan Agreement, the Mortgage and the Mortgage Note as contemplated by this
Master Agreement and the Transaction Documents or the enforcement thereof by the
Purchaser or its assignee.
(xvi) The
Mortgaged Property is not subject to any bankruptcy proceeding or foreclosure
proceeding and the Borrower has not filed for protection under applicable
bankruptcy laws.
(xvii) No
fraud or misrepresentation of a material fact was committed or made by the
Seller in connection with the Qualified Loan made to the applicable
Borrower.
(xviii) As
of the related Sale Date, the Qualified Loan is not a loan as to which any
payment, or part thereof, remains unpaid for more than thirty (30) days after
the original due date for such payment.
(xix) The
Seller has delivered to the Custodian a complete Mortgage File for the Qualified
Loan.
(xx) Immediately
prior to the transfer and assignment contemplated herein, the Seller was the
sole owner and holder of the Qualified Loan, the Seller had good and marketable
title thereto, and the Seller had full right and authority to transfer and sell
the Qualified Loan to the Purchaser free and clear of any encumbrance, lien,
pledge or security interest.
(xxi) The
Qualified Loan is denominated and payable only in United States dollars and the
related Borrower is a corporation or other legal entity organized under the laws
of the United States or any state thereof or the District of Columbia or a
territory of the United States.
(xxii) To
the Seller's knowledge, the Mortgaged Property is in material compliance with
all applicable zoning laws and environmental laws pertaining to environmental
hazards, and the related Borrower has not received any notice of any violation
or potential violation of such laws.
(xxiii) The
Qualified Loan is represented by only one executed Mortgage Note.
(xxiv) The
Mortgage Note is a "promissory note" within the meaning of Article 9 of the
New York UCC.
(xxv) The
loan narrative for a Qualified Loan submitted by the Seller to Farmer Mac in
advance of the related Sale Date was prepared or updated no more than one year
prior to the Sale Date, and the Seller is not aware of any material adverse
change regarding the Borrower or the Qualified Loan that is not reflected in
such loan narrative, or as previously communicated to Farmer Mac in
writing.
(j)
Upon discovery by any party hereto of a breach of any of the representations and
warranties set forth in this Section 4.03, such discovering party shall give
prompt written notice to the other party and, if such breach is of any
representation or warranty set forth in Section 4.01(i) that materially and
adversely affects the interests of the Purchaser in the related Qualified Loan,
then the Seller shall either (i) cure such breach in all material respects or
(ii) repurchase the Defective Loan in question from the Purchaser by remitting
the Repurchase Price to an account designated by the Purchaser.
(k) It
is understood and agreed by the parties hereto that the representations and
warranties set forth in this Section 4.03 shall survive delivery of the
respective Mortgage Files to the Custodian and will continue in full force and
effect for the remaining life of the related Qualified Loan, notwithstanding
termination of this Master Agreement for any reason.
ARTICLE
V
Administration
and Servicing of Qualified Loans
Section
5.01.
Servicing of the Qualified
Loans
.
(a)
General
Servicing Provision
. The Master Servicer hereby agrees to
service and administer the Qualified Loans sold pursuant to this Master
Agreement in accordance with the terms of this Master Agreement, applicable law
and the terms of the Qualified Loans. In connection with such
servicing and administration, the Master Servicer shall, consistent with and
subject to all other servicing-related provisions in this Master Agreement, have
full power and authority, acting alone and/or through sub-servicers, to do or
cause to be done any and all things, in connection with such servicing and
administration, that the Master Servicer may deem necessary or desirable and
consistent with the terms of this Master Agreement including, but not limited
to, the power and authority, subject to the terms hereof, (a) to execute and
deliver, on behalf of the Purchaser, customary consents or waivers and other
instruments and documents, (b) to consent to transfers of any Mortgaged Property
and assumptions of the Mortgage Notes and related Mortgages (but only in the
manner provided in this Master Agreement), (c) to collect any Other Insurance
Proceeds and other Cash Liquidation amounts, and (d) with Farmer Mac’s prior
consent, to effectuate foreclosure or other conversion of the ownership of the
Mortgaged Property securing any Qualified Loan. In servicing and
administering the Qualified Loans, the Master Servicer shall employ procedures
in accordance with the Customary Servicing Procedures of the Master
Servicer. The Master Servicer will exercise the same care in
servicing the Qualified Loans that it exercises in servicing Qualified Loans to
the same Borrower held in the Master Servicer's portfolio. The Master
Servicer will act in the best interest of the Purchaser in servicing Qualified
Loans. Without limiting the generality of the foregoing, the Master
Servicer, in its own name or in the name of the Purchaser, is hereby authorized
and empowered by the Purchaser, when the Master Servicer believes it appropriate
in its reasonable judgment, to execute and deliver on behalf of the Purchaser
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Qualified Loans and with respect to the related Mortgaged
Properties. The Master Servicer shall prepare and deliver to the
Purchaser such documents requiring execution and delivery by it as is necessary
or appropriate to enable the Master Servicer to service and administer the
Qualified Loans to the extent that the Master Servicer is not permitted to
execute and deliver such documents pursuant to the preceding
sentence. In addition to the foregoing, the Purchaser shall provide a
power of attorney or other appropriate authorization as shall be necessary or
desirable, in the Master Servicer's judgment, to enable the Master Servicer to
act as the agent of the Purchaser as the mortgagee under each Mortgage and as
the secured party under each Additional Collateral Document. Upon
receipt of such documents, the Purchaser, upon the direction of the Master
Servicer, shall promptly execute such documents and deliver them to the Master
Servicer.
(b)
Reserved
.
(c)
Agency
Relationship Only
. The relationship of the Master Servicer
(and of any successor to the Master Servicer as servicer under this Master
Agreement) to the Purchaser under this Master Agreement is intended by the
parties to be that of an independent contractor and not that of a joint venture,
partner or agent.
(d)
Modifications,
Waivers, Consents
. In accordance with the terms of this Master
Agreement, the Master Servicer may waive, modify, amend or vary any term of any
Qualified Loan or consent to the postponement of strict compliance with any such
term or in any manner grant indulgence to any Borrower if, in the Master
Servicer’s judgment and consistent with Customary Servicing Procedures, such
waiver, modification, consent, postponement or indulgence will make it more
likely that such Borrower will be able to successfully repay the Qualified Loan
in question;
provided,
however
, that the Master Servicer shall not take any of the following
actions without, in each such case, giving the Purchaser at least 10 Business
Day's prior written notice of its intention to do so (each such notice, a "10
Business Day Notice"): (i) waive any event of default (as such
term is defined in the documentation for the applicable Qualified Loan), (ii)
reduce the Loan Interest Rate applicable to such Qualified Loan (iii) forgive
any principal of a Qualified Loan, (iv) postpone any date for the payment of
principal or interest on account of such Qualified Loan, (v) extend the maturity
date of such Qualified Loan, (vi) change the amortization method or amortization
term of such Qualified Loan, or (vii) implement a workout plan, commence a
foreclosure proceeding, accept a deed in lieu of foreclosure, conduct a
pre-foreclosure sale, seek a deficiency judgment or exercise any other remedy
available under the documentation for the applicable Qualified
Loan. To the extent the terms of any Qualified Loan is modified or
amended, the Master Servicer shall notify Farmer Mac with respect to such
Qualified Loan and provide Farmer Mac a modified Loan Setup File no later than
the fifth Business Day following the effective date of such modification or
amendment. In addition to the foregoing, if one or more Qualified
Loans in the Master Servicer's own portfolio present the same issue or issues as
the Qualified Loan which is the subject of a 10 Business Day Notice but the
Master Servicer does not propose to handle such issues under such Master
Servicer's Loans in a manner similar to the proposal submitted to the Purchaser,
the Master Servicer will so state in the 10 Business Day Notice and include
a description of how such issues will be handled in such Master Servicer's
Loans. If by the end of the applicable 10 Business Day Notice period,
the Master Servicer has not received written notice from the Purchaser
disapproving of the proposal set forth in the applicable 10 Business Day Notice,
the Master Servicer may proceed to implement such proposal. If the
Purchaser notifies the Master Servicer within the applicable 10 Business
Day Notice period that it disapproves of any such proposal with respect to a
Qualified Loan, the Master Servicer and the Purchaser will consult with one
another as to the best way to proceed and the Purchaser's decision with respect
to such Qualified Loan will be binding on the Master Servicer; provided,
however, that the Master Servicer shall have the right to handle such issues
under the Qualified Loans in its own portfolio in such manner as the Master
Servicer deems appropriate or desirable. In addition to the
foregoing, and regardless of whether any action is proposed to be taken by the
Master Servicer with respect to a Qualified Loan, the Master Servicer shall
notify the Purchaser promptly after becoming aware of: (i) each event of default
(as such term is defined in the documentation for the applicable Qualified Loan)
that has occurred and is continuing under the documentation for any Qualified
Loan, (ii) any receipt of a notice of a Borrower’s or Mortgage Property’s
violation or potential violation of applicable zoning laws or environmental laws
pertaining to environmental hazards, (iii) any proposed material change in
the control or ownership of a Borrower, and (iv) any material pending
lawsuit involving a Borrower or Mortgaged Property which in the opinion of the
Master Servicer would materially and adversely affect such Borrower's ability to
perform its obligations under the Loan Agreement.
(e)
Powers
of Attorney
. Without limiting the generality of the foregoing,
the Master Servicer is hereby authorized and empowered to execute and deliver on
behalf of itself and the Purchaser, all agreements and instruments as may be
necessary or desirable in connection with the performance of its rights and
obligations pursuant to this Section 5.01. If reasonably required by
the Master Servicer, the Purchaser shall furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties under this
Master Agreement, the Mortgages and the other documentation pertaining to the
Qualified Loans.
(f)
Delegation
. In
the ordinary course of business, the Master Servicer at any time may delegate
any of its duties hereunder to any Person, including any of its Affiliates, who
agrees to conduct such duties in accordance with this Master Agreement including
those standards set forth in this Section 5.01. Any such delegation
may include entering into subservicing agreements with any Person or Persons,
for the servicing and administration of the Qualified Loans or a portion
thereof. Such delegation shall not relieve the Master Servicer of its
liabilities and responsibilities with respect to such duties and shall not
constitute a resignation. Notwithstanding anything to the contrary
contained herein, or in any agreement relating to any such delegation, the
Master Servicer shall remain obligated and liable to the Purchaser for the
servicing and administration of the Qualified Loans in accordance with the
provisions of this Master Agreement to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Qualified
Loans. The Master Servicer shall provide the Purchaser with written
notice of delegation of any of its duties to any Person other than any of the
Master Servicer's Affiliates or their respective successors and assigns on the
later of the respective Sale Date or sixty (60) days prior to such
delegation.
(g)
Reporting
. The
Master Servicer will provide the following reports to the Purchaser, which
reports may be transmitted via e-mail to
Famcloanadministration@farmermac.com
or in such other form as may be agreed between the Purchaser and the Master
Servicer:
(i)
Not later than seven
(7) Business Days prior to a desired Sale Date for a Qualified Loan, the Master
Servicer shall provide a Loan Setup File to Farmer Mac with respect to each
Qualified Loan contemplated to be sold pursuant to this Master
Agreement.
(ii) After
the Sale Date and until the Qualified Loan is no longer serviced under the
Master Agreement, the Master Servicer shall deliver to Farmer Mac (1) an Invoice
Register Report (a form of which is attached to this Master Agreement as
Exhibit 7
) five
Business Days prior to each Payment Date and (2) a Master Servicer’s Report (a
form of which is attached to this Master Agreement as
Exhibit 5
) and a
Remittance Reconciliation Report (a form of which is attached to this Master
Agreement as
Exhibit 8
) not
later than the related Distribution Date.
(iii) If
there are any Principal Prepayments with respect to any Qualified Loan or
Qualified Loan becomes a Defaulted Loan during the immediately preceding
Collection Period, then the Master Servicer will provide to Farmer Mac and its
designee a Defaulted And Qualified Loan Exception Report (a form of which is
attached to this Master Agreement as
Exhibit 3
) on or
before the fifteenth day of each calendar month (or if such fifteenth day is not
a Business Day, the next succeeding Business Day).
Section
5.02.
Collection of Qualified Loan
Payments; Establishment of Collection Account
.
(a)
Payment;
Collection
.
Continuously from the date hereof until the principal and interest on all
Qualified Loans is paid in full, the Master Servicer will proceed diligently, in
accordance with this Master Agreement, to (i) collect all payments due under
each of the Qualified Loans it services when the same shall become due and
payable, (ii) apply payments to Qualified Loans in accordance with the terms of
the related Mortgage Notes, and (iii) determine and accept the amount required
to pay a Qualified Loan in full, including interest to the next scheduled Due
Date.
(b)
Collection
Account
. The Master Servicer shall establish and maintain a
Collection Account, which shall be an Eligible Account. The Master
Servicer shall deposit or cause to be deposited into the Collection Account all
Qualified Loan Receipts plus any Amount Held for Future Distribution plus all
amounts permitted to be retained or withdrawn by the Master Servicer pursuant to
Section 5.04 within two (2) Business Days of receipt thereof. Except
as otherwise provided in Section 5.02(c), all funds required to be deposited in
the Collection Account shall be held for the benefit of the Purchaser until
withdrawn in accordance with Section 5.04 or remitted to the Purchaser. The
Master Servicer shall give notice to the Purchaser of the initial location of
the Collection Account and of any proposed change of the location of the
Collection Account maintained by the Master Servicer not later than two (2)
Business Days and not more than forty-five (45) days prior to any change
thereof.
(c)
Investment
Account
. The Master Servicer shall establish and maintain an
Investment Account, which shall be an Eligible Account. The Master
Servicer shall deposit or cause to be deposited into the Investment Account all
Qualified Loan Receipts plus any Amount Held for Future Distribution from the
Collection Account within two (2) Business Days of being deposited into the
Collection Account. Except as otherwise directed by the Purchaser in
writing, the Master Servicer shall cause the institution with which the
Investment Account is maintained to invest the funds in the Investment Account
attributable to the Qualified Loans in those Permitted Investments specified in
writing by Farmer Mac, which shall mature in immediately available funds not
later than the day preceding the next Distribution Date and shall not be sold or
disposed of prior to maturity unless otherwise directed in writing by Farmer
Mac. All earnings and gains realized from any such investments in the
Investment Account shall be for the benefit of Farmer Mac and shall be deposited
in the Distribution Account, along with all Qualified Loan Receipts, on each
Distribution Date. The amount of any losses or expenses incurred in
connection with the investment of amounts in, withdrawals from, and the
maintenance of, the Collection Account and the Investment Account shall be
deducted from the amount to be distributed to Farmer Mac; except that, such
expenses may be so deducted only to the extent Farmer Mac has concurred in the
selection of such institution and form of Investment Account.
Section
5.03.
Realization Upon Defaulted
Loans
.
(a) The
Master Servicer shall use reasonable efforts to realize upon Defaulted Loans in
such manner as in the Master Servicer's judgment will maximize the receipt of
principal and interest by the Purchaser. The Master Servicer is
obligated to make every effort it deems reasonable to work out a troubled
Qualified Loan before proposing foreclosure, a deed in lieu of foreclosure, a
pre-foreclosure sale or other remedial action. The Master Servicer
shall use reasonable efforts to foreclose upon or otherwise comparably convert
the ownership of Mortgaged Properties securing such of the Qualified Loans as
come into and continue in default and as to which no satisfactory arrangements
can be made for collection of delinquent payments. The foregoing is
subject to the provisions that, in any case in which Mortgaged Property shall
have suffered damage, the Master Servicer shall not be required to expend its
own funds toward the restoration of such Mortgaged Property. The
Master Servicer shall promptly notify Farmer Mac when a Mortgaged Property
suffers material damage to allow Farmer Mac the opportunity to expend funds
toward restoration only to the extent that: (1) the Master Servicer
has notice of such damage; and (2) in the opinion of the Master Servicer there
are insufficient funds or no reasonable likelihood that there will be sufficient
funds received in the future from insurance proceeds, any federal or state
governmental agency or any other sources.
(b) The
decision of the Master Servicer to foreclose on a Defaulted Loan shall be
subject to the written consent of Farmer Mac.
(c) Any
proceeds to which the Purchaser is entitled as a mortgagee under a Mortgage
securing any Qualified Loan will be paid, subject to the following order of
priority: first, to the Master Servicer to reimburse the Master
Servicer for any related unreimbursed Servicing Advances and Servicing Fees with
respect to the related Qualified Loan; and second, to the Purchaser as a
recovery of principal of such Qualified Loan.
(d) In
the event that, as a result of or in connection with the exercise of remedies
with respect to a Qualified Loan, Farmer Mac becomes the owner of real estate or
other property, the Master Servicer will immediately commence appropriate
procedures to liquidate such real estate or other property if so requested by
Farmer Mac.
Section
5.04.
Permitted Withdrawals From
the Collection Account
. The Master Servicer shall maintain adequate
records with respect to all withdrawals made pursuant to this
Section 5.04. The Master Servicer may from time to time, and
with respect to clause (i) below shall, withdraw funds from the Collection
Account or the Investment Account for the following purposes:
(i)
to
pay to the Master Servicer (to the extent not previously retained) the servicing
compensation to which it is entitled pursuant to Section 5.08;
(ii)
to
reimburse the Master Servicer for unreimbursed Servicing Advances made by it in
connection with the Qualified Loans, only from amounts received with respect to
the Qualified Loans in respect of which any such Servicing Advance was
made;
(iii)
to
withdraw any amount deposited in the Collection Account or the Investment
Account and not required to be deposited therein;
(iv)
to
reimburse the Master Servicer for costs and expenses incurred by it and
reimbursable pursuant hereto; and
(v)
to
remit all remaining amounts to the Purchaser on each Distribution
Date.
Section
5.05.
Distribution
Account
. On or before the first Sale Date, Farmer Mac shall
establish the Distribution Account and provide the Master Servicer with wire
instructions and all other information required for the Master Servicer to wire
funds into such account. On each Distribution Date, the Master
Servicer shall wire to the Distribution Account in same day funds an amount
equal to the Qualified Loan Receipts for the preceding Collection
Period. The wire transfer of funds will normally be scheduled for
transmission by 12:00 p.m. eastern time, but in no event later than 5:00 p.m.
eastern time.
Section
5.06.
Fidelity Bond,
Insurance
. The Master Servicer shall maintain insurance
coverage and financial institution bond protection consistent with that
maintained by the Master Servicer as of the date of this Master
Agreement. Such insurance coverage shall include coverage in the
amount of $4,000,000 insuring the Master Servicer against losses on account of
employee dishonesty, loss inside the premises coverage, loss outside the
premises coverage, money orders and counterfeit paper currency coverage and
depositors forgery coverage. Such financial institution bond
protection shall include $6,000,000 single loss limit of liability coverage on
account of forgery or alteration, securities, computer systems fraud,
telefacsimile transfer fraud and voice initiated transfer fraud.
Section
5.07.
Satisfaction of Mortgages
and Release of Mortgage Files
.
(a) Upon
the payment in full of any Qualified Loan, or the receipt by the Master Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes, the Master Servicer shall immediately notify the Purchaser
and the Custodian. Such notice shall include a statement to the
effect that all amounts received or to be received in connection with such
payment that are required to be deposited in the related Collection Account
pursuant to Section 5.02 have been or will be so deposited, and shall request
delivery to the Master Servicer of the related Mortgage File. Upon
receipt of such notice and request, the Purchaser shall, within five (5)
Business Days, deliver, or cause the Custodian to deliver, to the Master
Servicer the related Mortgage File and the Master Servicer shall prepare and
process any satisfaction or release that may be necessary. In the
event that the Purchase fails to deliver or cause to be delivered to the Master
Servicer the related Mortgage File within five (5) Business Days of the Master
Servicer's request therefor, the Purchaser shall be liable to the Master
Servicer for any additional expenses or costs, including, but not limited to,
outsourcing fees and penalties, incurred by the Master Servicer resulting from
such failure.
(b) From
time to time and as appropriate for the servicing or foreclosure of a Qualified
Loan, the Purchaser shall, within five (5) Business Days of the Master
Servicer's request and delivery to the Purchaser of a servicing receipt signed
by a Servicing Officer, deliver or cause the Custodian to deliver to the Master
Servicer the related Mortgage File. Pursuant to the servicing
receipt, the Master Servicer shall be obligated to return to the Custodian the
related Mortgage File when the Master Servicer no longer needs such file, unless
the Qualified Loan has been liquidated and the Cash Liquidation Proceeds
relating to such Qualified Loan have been deposited in the Collection Account or
the Mortgage File or a portion thereof has been delivered to an attorney, or to
a public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially. In the
event that the Purchaser fails to deliver or cause the Custodian to deliver to
the Master Servicer the applicable Mortgage File within five (5) Business Days
of the Master Servicer's request therefor, the Purchaser shall be liable to the
Master Servicer for any additional expenses or costs, including, but not limited
to, outsourcing fees and penalties, incurred by the Master Servicer resulting
from such failure. Upon receipt of notice from the Master Servicer
stating that such Qualified Loan was liquidated, the Purchaser shall release the
Master Servicer from its obligations under the related servicing
receipt.
Section
5.08.
Servicing Compensation and
Reimbursement
.
(a) With
respect to each Distribution Date, the Master Servicer shall be entitled to
retain or withdraw from the Collection Account an amount equal to the accrued
and unpaid Servicing Fee with respect to each Qualified Loan only out of the
interest portion of amounts collected by the Master Servicer with respect to
such Qualified Loan.
(b) Additional
servicing compensation in the form of assumption fees, and all other customary
and ancillary income and fees shall be retained by the Master Servicer to the
extent not required to be deposited in the Collection Account pursuant to
Section 5.02. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement therefor except that the Master
Servicer is entitled to reimbursement for all Servicing Advances and as
otherwise provided in this Master Agreement, including but not limited to
Section 5.14(a).
Section
5.09.
RUS
. The
rights and obligations of the Master Servicer, and any other Persons with
respect to the administration and servicing of the Qualified Loans are subject
in all respects to applicable law and to the rights of RUS and all other Persons
secured by any Mortgage.
Section
5.10.
Documents, Records and Funds
in Possession of the Master Servicer
. The Master Servicer
shall account fully to the Purchaser for any funds received by the Master
Servicer or which otherwise are collected by the Master Servicer, including any
Cash Liquidation Proceeds, in respect of any Qualified Loan. All
Servicing Files and Mortgage Files and funds collected or held by, or under the
control of, the Master Servicer in respect of any Qualified Loans, whether from
the collection of principal and interest payments or from Cash Liquidation
Proceeds, including but not limited to any funds on deposit in the Collection
Account, shall be held by the Master Servicer for and on behalf of the Purchaser
and shall be and remain the sole and exclusive property of the Purchaser,
subject to the applicable provisions of this Master Agreement. The
Master Servicer also agrees that it shall not knowingly create, incur or subject
any Servicing File, Mortgage File or any funds that are deposited in the
Collection Account, or any funds that otherwise are or may become due or payable
to the Purchaser, to any claim, lien, security interest, judgment, levy, writ of
attachment or other encumbrance created by the Master Servicer, or assert by
legal action or otherwise any claim or right of setoff against any Servicing
File, Mortgage File or any funds collected on, or in connection with, a
Qualified Loan, except, however, that the Master Servicer shall be entitled to
set off against and deduct from any such funds any amounts that are properly due
and payable to the Master Servicer under this Master Agreement.
Section
5.11.
Servicer
Default
. Each of the following events shall constitute a
servicer default (each, a "
Servicer
Default
"):
(a)
any
failure by the Master Servicer to make any payment, deposit or transfer required
to be made under the terms of this Master Agreement which continues unremedied
for a period of two (2) Business Day after the date upon which written notice of
such failure, requiring the same to be remedied, shall have been received by the
Master Servicer from the Purchaser; or
(b)
failure
on the part of the Master Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Master
Servicer in this Master Agreement which continues unremedied for a period of
forty-five (45) days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been received by the Master
Servicer from the Purchaser; or
(c)
a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period of
sixty (60) days; or
(d)
consent
by the Master Servicer to the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings relating to the Master Servicer or to all or
substantially all of its property; or
(e)
the
Master Servicer's admission in writing of its inability to pay its debts
generally as they become due, filing of a petition to invoke any applicable
insolvency or reorganization statute, making of an assignment for the benefit of
its creditors, or voluntarily suspending payment of its obligations;
or
(f)
a
court of competent jurisdiction shall have found that the Master Servicer or any
of its senior executive officers has committed an act of civil fraud;
or
(g)
the
Master Servicer or any of its principal officers shall have been convicted of a
felony, or shall have been convicted of any criminal act related to the Master
Servicer’s lending or mortgage selling or servicing activities.
(h)
the
Master Servicer consummates a transaction that results in a Change of Control;
or
(i)
the Master Servicer ceases to be a cooperative
association in good standing under the laws of the District of Columbia or any
state of the United States for a period of thirty (30) days following notice
thereof by any governmental authority having jurisdiction over such
determination.
Section
5.12.
Resignation and Termination
of Master Servicer
.
(a)
The
Master Servicer may at any time resign and terminate its obligations under this
Master Agreement upon at least one hundred eighty (180) days' prior written
notice to the Purchaser;
provided, however,
that no
such resignation or termination shall be effective until a successor Master
Servicer is appointed (and accepts such appointment) pursuant to the terms of
this Section 5.12. Promptly after receipt of notice of the Master
Servicer's intended resignation, the Purchaser shall appoint, by written
instrument, a successor master servicer. If the Purchaser fails to
appoint a successor master servicer pursuant to the terms hereof within thirty
(30) days after receipt of the Master Servicer's notice of resignation, Master
Servicer may petition a court of competent jurisdiction to appoint a successor
master servicer. One original counterpart of any aforementioned
instrument of appointment shall be delivered to each of the Purchaser and the
successor master servicer.
(b)
Upon
the occurrence of a Servicer Default, and so long as such Servicer Default shall
not have been remedied, the Purchaser may (a) terminate all obligations and
duties imposed upon the Master Servicer under this Master Agreement, and (b)
name and appoint a successor or successors to succeed to and assume all of such
obligations and duties of the Master Servicer. Such actions shall be
effected by notice in writing to the Master Servicer and shall become effective
upon receipt of such notice by the Master Servicer and the acceptance of such
appointment by such successor or successors.
(c)
On
and after the receipt by the Master Servicer of written notice of termination,
if applicable, and the acceptance by the successor or successors to the Master
Servicer, all obligations and duties imposed upon the Master Servicer under this
Master Agreement shall pass to and vest in the successor or successors named in
the notice, and such successor or successors shall be authorized, and hereby are
authorized, to take all such action and execute and deliver all such instruments
and documents on behalf of the Master Servicer, as attorney in fact or
otherwise, as may be necessary and appropriate to effect the purposes of such
written notice. The Master Servicer shall pay the reasonable costs
and expenses relating to a transition to a successor Master
Servicer.
(d)
This
Section 5.12 shall survive any termination of this Master Agreement and any
termination of this Master Agreement shall not prejudice the rights of the
Master Servicer to recover any amounts due to the Master Servicer under this
Master Agreement.
Section
5.13.
Inspection
Rights
. The Master Servicer shall, upon three (3) Business
Days' prior written request from the Purchaser, during normal business hours,
permit the Purchaser to examine the Servicing Files which relate to Qualified
Loans. These inspection rights shall extend to representatives of the
Farm Credit Administration (as the Governmental Authority that regulates Farmer
Mac).
Section
5.14.
Limitation on Liability of
the Master Servicer and Others
.
(a) Neither
the Master Servicer nor any of the directors, officers, employees or agents of
the Master Servicer shall be under any liability to the Purchaser for any action
taken or for refraining from the taking of any action in good faith and without
gross negligence pursuant to this Master Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Master Servicer or
any such Person against any breach of warranties or representations made herein
or any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder. The Master Servicer and any director, officer, employee or
agent of the Master Servicer may rely in good faith on any document of any kind
prima facie
properly
executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer and any director, officer, employee or
agent of the Master Servicer shall be indemnified by the Purchaser and held
harmless by the Purchaser against any loss, liability or expense incurred in
connection with any legal action relating to this Master Agreement, the
transactions contemplated hereby or thereby, the Master Servicer's duties in
connection therewith, other than any unrecovered Servicing Fee or Servicing
Advance related to any specific Qualified Loan or Qualified Loans and any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder.
(b) The
Master Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its respective duties under
this Master Agreement and for which it will not be reimbursed or indemnified
hereunder;
provided,
however
, that the Master Servicer may in its discretion undertake any
such action it may deem necessary or desirable in respect to this Master
Agreement and the rights and duties of the parties hereto and the interests of
the Purchaser hereunder. In such event, the legal expenses and costs
of such action and any liability resulting therefrom shall be expenses, costs
and liabilities of the Master Servicer entitled to be reimbursed therefore out
of amounts attributable to the Qualified Loans on deposit in the Collection
Account as provided by Section 5.04 and otherwise pursuant to Section
5.14(a).
(c) The
Master Servicer and its directors, officers, employees and agents shall be
deemed to have exercised the degree of skill and care appropriate hereunder if
such Person has acted in accordance with Customary Servicing Procedures and in
good faith in (i) managing, administering, servicing, making collections,
foreclosing, counseling with respect to, and supervising the Qualified Loans;
(ii) administering, interpreting, and enforcing the Mortgages, Mortgage
Notes and all forms, documents and certificates required thereunder;
(iii) fulfilling all obligations hereunder; and (iv) all duties,
obligations and actions taken in respect of the Mortgaged Property.
Section
5.15.
Statements and Certificates
to Purchaser
.
(a) Within
sixty (60) days after the close of each calendar year, beginning with the
calendar year ending December 31, 2009, the Master Servicer shall deliver to
Farmer Mac a Servicing Certificate. If the aggregate outstanding
principal balance of all the Qualified Loans purchased by Farmer Mac under this
Master Agreement exceeds $500 million in the future, the Master Servicer
shall also provide such assertion letters and attestation reports as Farmer Mac
may require to reasonably comply with applicable laws and regulations, the form
of which letters and reports shall be agreed upon between Farmer Mac and the
Master Servicer.
(b) Within
one hundred and twenty (120) days after the close of each fiscal year of the
Master Servicer, beginning with the fiscal year ending in 2009, the Master
Servicer shall deliver to Farmer Mac a copy of the report of independent
accountants respecting the Master Servicer’s, or the Master Servicer’s parent
corporation’s, consolidated financial statements for the preceding fiscal
year.
(c) The
Master Servicer agrees to indemnify and hold harmless each of Farmer Mac, each
person or entity, if any, who “controls” Farmer Mac within the meaning of the
Securities Act of 1933, as amended, and their respective officers and directors
(collectively, the “Indemnitees”) against any and all losses, damages,
penalties, fines, forfeitures, legal fees and related costs, judgments and any
other costs, fees and expenses that any Indemnitee may sustain arising out of
third party claims (including any criminal or civil action brought by a
government agency or department) based on the failure of the Master Servicer to
deliver or cause to be delivered when required the reports required under this
Section 5.15 or any material misstatement or material omission
therein. If the indemnification provided for herein is unavailable or
insufficient to hold harmless any Indemnitee, then the Master Servicer agrees
that it shall contribute to the amount paid or payable by the Indemnitee as a
result of the losses, claims, damages or liabilities of the Indemnitee in such
proportion as is appropriate to reflect the relative fault of the Indemnitee on
the one hand and the Master Servicer on the other.
(d) In
approving CFC as the Master Servicer, a major consideration is the information
the CFC has provided about CFC’s servicing qualifications and financial
status. Consequently, CFC shall notify Farmer Mac promptly
of: (1) any event resulting in the filing by CFC of a Current Report
on Form 8-K with the SEC; (2) a material adverse change in the financial
condition of CFC or any Affiliate that could materially and adversely affect
Farmer Mac’s interests in the Qualified Loans; or (3) a loss of any license,
qualification to transact business or exemption therefrom in any state where
such loss would materially and adversely impact CFC’s authority or ability to
perform its obligations under this Master Agreement.
Section
5.16.
Annual
Independent Public Accountants’ Servicing Statement; Financial
Statements
.
Farmer Mac shall provide at least sixty
(60) days written notice to Master Servicer prior to the filing of a
registration statement with respect to any Securities
Offering. Farmer Mac shall pay the following fees and costs to the
extent incurred in connection with the offering of securities pursuant to a
registration statement under the Securities Act of 1933, as
amended: (i) the fees and costs associated with the filing of a
registration statement or other offering document with any Governmental
Authority, (ii) the fees and expenses of Farmer Mac’s counsel, (iii) any fees
and expenses associated with having the securities rated, (iv) underwriting
commissions and discounts of Farmer Mac’s underwriters for the sale of the
securities, (v) the reasonable fees and expenses of CFC’s counsel, (vi) the
reasonable fees and expenses of CFC’s auditors, and (vii) printing costs of the
prospectus or other offering documents.
The
Master Servicer shall, at its own expense, on or before seventy-five (75) days
after the end of each calendar year, commencing with the calendar year, if any,
during which Purchaser has consummated a Securities Offering, and each calendar
year thereafter during which such Securities Offering is subject to a reporting
obligation under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, cause a firm of independent public accountants (who may also render
other services to the Master Servicer or any affiliate thereof) which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Purchaser to the effect that such firm has, with respect to the
Master Servicer’s servicing operations under this Master Agreement with respect
to such Securities Offering, examined such operations in accordance with the
requirements of Item 1122 of Regulation AB, stating such firm’s conclusions
relating thereto. The Master Servicer shall also provide (i) a
servicer compliance statement as contemplated by Item 1123 of Regulation AB, and
(ii) such information as may be necessary or appropriate in order to fulfill the
requirements set forth in Item 1108 of Regulation AB.
ARTICLE
VI
Miscellaneous
Section
6.01.
Governing
Law
. The terms of this Master Agreement shall be governed by,
and construed in accordance with, federal law. To the extent federal
law incorporates state law, that state law shall be the laws of the State of New
York.
Section
6.02.
Demands, Notices,
Communications
. All formal demands, notices and communications
by and between the Master Servicer, and Purchaser shall be in writing and
delivered in person or by an overnight delivery service, in each case with proof
of delivery:
If to the
Purchaser or Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Chief Financial Officer
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: General Counsel
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Chief Operating Officer
If to
Master Servicer:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6716
Fax: 703-709-6779
Attention
of: Robert Geier, Vice President and Controller
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6751
Fax: 703-709-6776
Attention
of: Leslie Ebert, Director, Strategic Project Management
Any
notice so delivered within the time prescribed in this Master Agreement shall be
conclusively presumed to have been duly given whether or not the intended
recipient receives such notice, provided that the party giving such notice has
received proof of delivery.
Section
6.03.
Severability of
Provisions
. If any one or more of the covenants, agreements,
provisions or terms of this Master Agreement shall be for any reason whatsoever
held invalid, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms
of this Master Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Master Agreement.
Section
6.04.
Amendment
. This
Master Agreement may be amended from time to time or the provisions hereof may
be waived or otherwise modified by the parties hereto only by written agreement
signed by the parties hereto.
Section
6.05.
Counterparts
. This
Master Agreement may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
Section
6.06.
Authorized
Officers
. The manual or facsimile signature of any individual
appearing on this Master Agreement, or any document or certificate issued
pursuant to this Master Agreement, and which is designated as the signature of a
Responsible Officer of any Person, shall constitute conclusive evidence that
such individual is, in fact, authorized to execute such document,
notwithstanding that such authorization may have lapsed prior to the effective
date of such document.
Section
6.07.
Assignability
. Except
as provided in Section 5.12, this Master Agreement shall not be assigned by
either of the parties hereto without the prior written consent of the other
party
; provided,
however
, that Farmer Mac may, without the prior consent of the Master
Servicer, assign this Agreement to any subsidiary of Farmer Mac or any Trust or
any special purpose entity formed to hold the Qualified Loans. Farmer
Mac shall promptly notify the Master Servicer of any such
assignment. For purposes of this Section 6.08 only, it is agreed that
delegation by the Master Servicer permitted pursuant to Section 5.01(f) shall
not be deemed an attempted assignment or transfer of servicing prohibited by
this Master Agreement, but a Change in Control of the Master Servicer shall be
deemed an attempted assignment or transfer of servicing prohibited by this
Master Agreement without the prior written consent of Farmer Mac. Any
attempted assignment or transfer contrary to the provisions of this Section 6.08
shall be null, void, and of no force or effect.
[SIGNATURES
FOLLOW ON NEXT PAGE]
IN
WITNESS WHEREOF, the parties hereto hereby execute this Master Agreement as of
the day and year first above written.
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FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
, as Purchaser
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By:
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Name:
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Title:
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NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
, as Seller and Master
Servicer
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By:
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Name:
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Title:
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EXHIBIT
1
FORM
OF ASSIGNMENT
On this
_______ day of ________, 200_, National Rural Utilities Cooperative Finance
Corporation (the "
Seller
"), as Seller
under that certain Master Sale and Servicing Agreement, dated as of
July 24, 2009 (the "
Master Agreement
"),
does hereby sell, transfer, assign, set over and convey to Federal Agricultural
Mortgage Corporation (the "
Purchaser
"), as
Purchaser under the Master Agreement, without recourse, but subject to the terms
of the Master Agreement, all right, title and interest of the Seller in and to
the Qualified Loans listed on the schedule attached hereto as
Schedule 1
, together
with the related documents and all rights and obligations arising
thereunder. The ownership of each Qualified Loan and the related
documents is vested in the Purchaser and the ownership of all records and
documents with respect to the related Qualified Loan prepared by or which come
into the possession of the Seller shall immediately vest in the Purchaser and
shall be retained and maintained, in trust, by the Seller at the will of the
Purchaser in such custodial capacity only.
Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Master Agreement.
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NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
, as Seller and
Master Servicer
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By:
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Name:
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Title:
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EXHIBIT
2
FORM
OF COMMITMENT LETTER
[Date]
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, N.W.
Suite
600
Washington,
DC 20036
Re:
[Loan
ID]
Ladies
and Gentlemen:
National
Rural Utilities Cooperative Finance Corporation (the "
Seller
") agrees to
sell and Federal Agricultural Mortgage Corporation (the "
Purchaser
") agrees to
purchase certain Qualified Loans, as described herein, pursuant to the terms and
conditions of that certain Master Sale and Servicing Agreement, dated as of
July 24, 2009 (the "
Master
Agreement
").
Capitalized
terms used and not defined herein shall have the meaning(s) ascribed thereto in
the Agreement.
[Note: The
following information may be included on an attached
schedule/spreadsheet. Bracketed terms in italics reflect terms of the
initial series of Qualified Loans that Seller intends to originate and sell
pursuant to this Master Agreement.]
1. Sale Date (same as
Commitment Expiration Date):
[First Business Day of
Month]
2. Mortgage Loans:
[#] [$]
3. Purchase Price:
[100% of Principal
Balance]
4. Mortgage
Loan Interest Rate:
Rate
Index
[One-Month
Libor]
Reset
Margin ____
basis points
Servicing Fee
Rate
_____ basis points
[35]
4. Scheduled Installment
Payment Dates:
[February 1 & August
1]
5. First Principal Payment
Date:
[First Payment
Date after First Billing Cycle]
6. First Interest Payment
Date:
[First Payment
Date]
7. Interest Rate Reset
Date:
[first day of
each month]
8. Amortization
Term:
[15 Years or 25
Years]
9. Amortization Method:
[Level Debt
Service]
10. Maturity Date:
[15
Years]
11. Wire
Instructions:
12. Delivery:
The
sale and purchase of Qualified Loans under this letter agreement is mandatory no
later than the Sale Date. All Mortgage Files shall be delivered to
Purchaser or Purchaser's custodian, in accordance with the terms and conditions
of the Master Agreement.
14. Additional
Terms:
(Signature
Page to Follow)
This
letter agreement and the Master Agreement together contain the entire agreement
relating to the subject matter hereof between us and supersedes any prior oral
or written agreement between us. This letter agreement may only be
amended by a written document signed by both Seller and
Purchaser. This letter agreement shall be kept confidential unless
otherwise agreed to in writing by Seller and Purchaser or otherwise required by
law.
Please
confirm that the foregoing specifies the terms of our agreement by signing and
returning this letter via e-mail to capitalmarkets@farmermac.com and
AccountingOps@farmermac.com [or facsimile to [__________]] no later than
__________, 200__.
This
letter may be executed by facsimile and in any number of counterparts, each of
which shall be deemed an original, and shall be governed by the laws of the
State of New York.
Very
truly yours,
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
, as Purchaser
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By:
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Name:
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Title:
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Accepted
and Agreed:
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NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
, as Seller and Master
Servicer
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By:
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Name:
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Title:
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EXHIBIT
3
FORM
OF DEFAULTED AND QUALIFIED LOAN EXCEPTION REPORT
QUALIFIED
REPORT
:
Coop ID
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Loan
Number
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Date of
Payment
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Total
Payment
Amount
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Principal
Payment
Amount
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Interest
Payment
Amount
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Servicing
Fee
Amount
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Net
Interest
Payment
Amount
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Date: __________________
DEFAULT
REPORT
:
Borrower Name
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Coop ID
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Payment Due
Date
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Servicer’s
Comments
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Date:
__________________
EXHIBIT
4
FORM
OF LOAN SETUP FILE
Coop
ID
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Borrower
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Loan
Number
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Loan
Amount
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Sale
Date
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Maturity
Date
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Servicing
Fee
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Payment
Frequency
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EXHIBIT
5
FORM
OF MASTER SERVICER’S REPORT
Coop
ID
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Loan
Number
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Beginning
Principal
Balance
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Ending
Principal
Balance
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Loan
Interest
Rate
(Base
Rate)
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Gross
Monthly
Interest
Accrual
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Delinquency Code
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Delinquency
Codes:
Delinquency Code
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Delinquency Code Description
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1
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Current
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2
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30-60
Days
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3
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60-90
Days
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4
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90-180
Days
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5
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180+
Days
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6
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Foreclosure
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7
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Bankruptcy
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8
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REO
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EXHIBIT
6
FORM
OF SERVICING CERTIFICATE
I, [name of certifying individual], a
duly elected and acting officer of National Rural Utilities Cooperative Finance
Corporation (the “Master Servicer”), certify pursuant to Section 5.15(a) of
the Master Sale and Servicing Agreement dated as of July 24, 2009 (as it may be
amended from time to time, the “Servicing Agreement”) between the Master
Servicer and Federal Agricultural Mortgage Corporation (“Farmer Mac”) to Farmer
Mac and each person or entity, if any, who “controls” Farmer Mac within the
meaning of the Securities Act of 1933, as amended, and their respective officers
and directors, with respect to the calendar year immediately preceding the date
of this Certificate (the “Relevant Year”), as follows:
1.
I am responsible for reviewing the activities performed by the
Master Servicer under the Servicing Agreement during the Relevant
Year.
2.
Based upon the review required by the Servicing Agreement and except as
disclosed in this Officer’s Certificate or in any accountants’ statement
provided pursuant to Section 5.15(a) or Section 5.16 of the Servicing Agreement,
to the best of my knowledge, the Master Servicer has fulfilled all of its
obligations under the Servicing Agreement throughout the Relevant
Year.
3.
The Master Servicer has a comprehensive disaster recovery and business
continuity plan that includes the following elements:
(a) duplication
of the Servicer’s production information systems at an off-site facility coupled
with an extensive business recovery plan to utilize those remote
systems;
(b) replication
of the Master Servicer’s production data in real time to the recovery
site;
(c) processes
for each of the Master Servicer’s operating groups to conduct business with a
view to minimizing disruption for customers;
(d) periodic
disaster recovery exercises that include both the information technology group
and business areas;
(e) contracts
with an external vendor for facilities to house the Master Servicer’s backup
systems as well as office space and related office equipment; and
(f) backup
tapes stored at an off-site storage location managed by an external
vendor.
4.
With respect to each Mortgaged Property, except as identified in writing to
Farmer Mac, the Master Servicer has received no notification of a delinquency in
the payment of all insurance premiums, assessments, taxes and other
charges that may become liens having precedence over the related
Mortgage.
5. For
purposes of this Officer’s Certificate, “Relevant Information” means the
information included herein for the Relevant Year and the information in all
Master Servicer’s Reports provided by the Master Servicer pursuant to Section
5.15(a) of the Servicing Agreement during the Relevant Year. To the
best of my knowledge, the Relevant Information, taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein which is necessary to make the statements made
therein, in light of the circumstances under which such statements were made,
not misleading as of the last day of the Relevant Year.
DATED as
of _______________.
EXHIBIT
7
FORM
OF INVOICE REGISTER REPORT
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Coop ID
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Loan Number
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Interest
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Principal
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Total
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Billing
Period:
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EXHIBIT
8
FORM
OF REMITTANCE RECONCILIATION REPORT
|
To:
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From:
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Date:
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Re:
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Month/Year
Remittance
Amount
|
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The
amount to be transferred on the
Month/Year
Distribution
Date is as follows:
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Interest
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$
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Principal
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Principal
Prepayments
|
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|
Prepayment
Premiums
|
|
|
|
|
Investment
Account Earnings
|
|
|
|
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Late
Charges
|
|
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Total
Remittance
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$
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EXHIBIT
10.37.1
AMENDMENT
NO. 1
TO
MASTER
SALE AND SERVICING AGREEMENT
AMENDMENT NO. 1 TO MASTER SALE AND
SERVICING AGREEMENT
(this “
Amendment
”) is made
and entered into as of February 1, 2010 by and between NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a cooperative association organized and
existing under the laws of the District of Columbia (referred to herein as
“
CFC
,” “
Master Servicer
” or
the “
Seller
”),
and FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally chartered
instrumentality of the United States (referred to herein as “
Farmer Mac
” or the
“
Purchaser
”).
WHEREAS,
CFC and Farmer Mac are parties to that certain MASTER SALE AND SERVICING
AGREEMENT (the “
Master
Agreement
”) made and entered into as of July 24, 2009; and
WHEREAS,
the parties desire to amend the Master Agreement as set forth herein in order
to, among other things, enable the purchase and sale of loans made to certain
power supply borrowers to CFC; and
WHEREAS,
the parties have executed this Amendment as a written agreement intended to
modify the Master Agreement pursuant to Section 6.04 thereof.
NOW,
THEREFORE, the parties to this Amendment, in the capacities hereinabove set
forth, in consideration of the mutual agreements and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, do hereby
undertake and otherwise agree as follows:
ARTICLE
I
Amendments
Section
1.01.
Additional
Definitions
. The following defined terms and their definitions
are hereby added to Section 1.01 of the Master Agreement and placed in
alphabetical order together with the existing defined terms:
Debt to EBITDA
Ratio:
with respect to any Member, the ratio obtained by
dividing the amount of such Member’s Long-Term Debt by its EBITDA, with the
quotient expressed as a numerical value.
EBITDA:
with
respect to any Member, an amount equal to the sum of: (i) net
margins, (ii) Interest Expense on Long-Term Debt, (iii) income taxes, and (iv)
Depreciation and Amortization Expense, all as calculated in accordance with
Accounting Requirements.
2
Federal Energy
Regulatory Commission (“FERC”):
an independent regulatory agency whose
function is to regulate the electric, natural gas, hydroelectric and oil
pipeline industries in the United States.
FERC Form
1:
the annual reporting form designated as such by FERC that
is required to be filed under the Federal Power Act by electric utilities
subject to FERC jurisdiction.
Form
12:
the reporting form designated as such by RUS, or in the
event a Borrower does not borrow from RUS, the reporting form designated as such
by CFC for its Class B Members, including any secondary forms carrying
designations such as “Form 12a”, “Form12b”, and the like.
G&T Trend
Analysis:
an annual report generated by the Seller containing
key financial and operating ratios and other growth indicators for each Class B
Member.
Indenture
Borrower:
any Eligible Class A Member or Eligible Class B Member that has
issued Mortgage Notes secured by a Mortgage in the form of an indenture of trust
that permits the issuance of additional Mortgage Notes under the terms and
conditions set forth therein, but without the consent of existing
noteholders.
Section
1.02.
Amended Defined Terms and
Definitions
. The defined terms “Compliance Certification,”
“Eligible Class B Member,” “Mortgage,” “Qualified Loan” and “Servicing File,”
and their respective definitions set forth in Section 1.01 of the Master
Agreement, are hereby deleted and replaced in their entirety with the following
defined terms and definitions:
Compliance
Certification:
The annual certification by a Borrower to CFC
under the related Loan Agreement or, in the case of Indenture Borrowers, a
comparable annual certification submitted under the terms of the
indenture.
Eligible Class B
Member:
Each Class B Member that satisfies the following
criteria on the Sale Date of such Member's Qualified Loan:
(i) Such
Member’s Average Equity to Total Capitalization Ratio is at least
25%;
|
(ii)
|
Such
Member’s Average Modified Debt Service Coverage Ratio—G&T is at least
1.15;
|
|
(iii)
|
Such
Member’s Average Equity to Total Assets Ratio is at least
10%;
|
|
(iv)
|
Such
Member’s Debt to EBITDA Ratio is no greater than 12;
and
|
|
(v)
|
Such
Member’s Qualified Loan has a Facility Rating of “4.9” or
lower.
|
Mortgage:
An
original mortgage, deed of trust or other instrument that constitutes a first
lien on an interest in real property securing a Mortgage Note. Such
Mortgage may be an RUS form of mortgage, a CFC form of mortgage, the form
specified by another lender and agreed to by CFC, or an indenture of trust
substantially in the form as is usual and customary for rural electric utility
borrowers. It is understood that some of the Mortgages provide that
one or more promissory notes may be secured by such Mortgage without being
specifically identified in such Mortgage and without such Mortgage being amended
to reflect such fact.
3
Qualified
Loan:
A loan, or an interest in a loan, for an electric or
telephone facility that satisfies the following criteria:
|
i.
|
The
Borrower is either an Eligible Class A Member or an Eligible Class B
Member that has received, or is eligible to receive, a loan from RUS under
the Rural Electrification Act of
1936.
|
|
ii.
|
Such
loan is a fixed or variable rate term loan that was closed by the
Seller. At the time of sale, such loan has an outstanding
principal amount of up to $15 million (or any higher amount permitted by
Farmer Mac and specified as the Purchase Price for a Qualified Loan in the
applicable Commitment Letter) and a remaining period until maturity in the
range of one (1) to thirty-five (35) years,
provided
that
if such loan provides for an interest rate reset, the resets shall occur
no more frequently than once every month. Such loan is secured
by substantially all of the assets of the Borrower. Such assets
may also secure one or more prior or future loans made by the Seller, RUS
or another party to the same
Borrower.
|
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iii.
|
Such
loan is payable in full upon maturity or amortizes on a level principal or
level debt service basis.
|
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iv.
|
Interest
is payable on such loan monthly, semi-annually or annually, as specified
in the applicable Commitment Letter. Unless otherwise specified
in the related Commitment Letter, interest due under the loan shall be
calculated on the basis of a 360-day year consisting of twelve 30-day
months.
|
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v.
|
The
documentation for such loan provides that in the event of prepayment of a
fixed rate loan on any date other than an interest reset date, the
Borrower must pay a Prepayment
Premium.
|
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vi.
|
The
full amount of such loan is advanced by the time of sale and no further
draws are permitted.
|
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vii.
|
At
the time of the sale, the Seller will have at least one other loan to the
same Borrower in the Seller's portfolio. In addition, at the
time of sale, it will be the intention of the Seller to maintain a credit
relationship with such Borrower until such time as the loan to such
Borrower purchased by the Purchaser pursuant to this Master Agreement is
repaid in full.
|
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viii.
|
No
event of default with respect to such loan shall have been declared by the
Seller and be continuing at the time of
sale.
|
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ix.
|
Such
loan is a performing loan and is not more than thirty (30) days delinquent
in payment.
|
4
|
x.
|
Such
loan shall have been documented in accordance with the Seller's existing
practices and procedures at the time, and in form and substance that are
substantially similar to the documentation used by Seller for loans of
similar character in the Seller’s own loan portfolio as of the Sale Date,
provided
that prior to its sale hereunder to the Purchaser, the Mortgage Note and
related Loan Agreement will be prepared and will include all of the
provisions of a Qualified Loan contemplated by this Master
Agreement.
|
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xi.
|
The
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all loans to the same Borrower previously sold
hereunder, (y) the aggregate principal balance of all Other Pledged
Obligations with respect to the same Borrower and (z) the aggregate
principal balance of all Other Sold Obligations with respect to the same
Borrower, will not exceed $35,000,000 (or any higher amount permitted by
Farmer Mac and communicated to CFC in
writing).
|
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xii.
|
The
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all loans to the same Borrower previously sold
hereunder and (y) the aggregate principal balance of all Other Sold
Obligations with respect to the same Borrower, will not exceed $15,000,000
(or any higher amount permitted by Farmer Mac and communicated to CFC in
writing).
|
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xiii.
|
With
respect to any loan, the Borrower of which is a Class B Member, the
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all other loans to Class B Members previously sold
hereunder, (y) the aggregate principal balance of all Other Sold
Obligations with respect to Class B Members and (z) the aggregate
principal balance of all Other Pledged Obligations with respect to Class B
Members, will not exceed 20% (or any higher percentage permitted by Farmer
Mac and communicated to CFC in writing) of the sum of (a) the
aggregate principal balance of all loans sold hereunder, (b) the aggregate
principal balance of all Other Pledged Obligations and (c) the aggregate
principal balance of all Other Sold
Obligations.
|
|
xiv.
|
With
respect to any loan, the Borrower of which is a Class B Member, the
principal balance of such loan, when aggregated with (x) the aggregate
principal balance of all other loans to Class B Members previously sold
hereunder and (y) the aggregate principal balance of all Other Sold
Obligations with respect to Class B Members, will not exceed 10% (or any
higher percentage permitted by Farmer Mac and communicated to CFC in
writing) of the sum of (a) the aggregate principal balance of all loans
sold hereunder, (b) the aggregate principal balance of all Other Pledged
Obligations and (c) the aggregate principal balance of all Other Sold
Obligations.
|
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xv.
|
With
respect to any loan, the Borrower of which is a Class B Member, the
documentation for such loan contains a representation and warranty from
the Borrower as of the Sale Date that the Borrower has not acquired, or
committed to acquire, an ownership interest in any nuclear energy
generating facility built or planned to be built after January 1,
2010.
|
5
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xvi.
|
Unless
otherwise specified in the related Commitment Letter, the repayment terms
of such Qualified Loan shall not provide a conversion option exercisable
by the Borrower to convert to a different loan
product.
|
Servicing
File
:
The comprehensive
set of files maintained in an organized format by the Master Servicer to
properly document all current and pertinent information related to a Qualified
Loan. These files may consist of documents maintained in hard copy
form or easily accessible electronic data and shall include at a minimum the
following documents pertaining to each Qualified Loan:
|
i.
|
a
copy of the most recent Compliance Certification by an officer of the
related Borrower;
|
|
ii.
|
the
most recent fiscal year-end certified audit of such
Borrower;
|
|
iii.
|
with
respect to Class A Members, a copy of the most recent unaudited annual
financial statements of such Borrower (which may be set forth on a Seller
form or Form 7);
|
|
iv.
|
with
respect to Class A Members, copies of the Form 7 of such Borrower for each
of the three most recent years;
|
|
v.
|
with
respect to Class A Members, the most recent Key Ratio Trend Analysis, as
available;
|
|
vi.
|
with
respect to Class B Members, a copy of the most recent unaudited annual
financial statements of such Borrower (which may be set forth on a Seller
form, Form 12, or FERC Form 1, as
applicable);
|
|
vii.
|
with
respect to Class B Members, copies of the Form 12, or FERC Form 1, as
applicable, of such Borrower for each of the three most recent
years;
|
|
viii.
|
with
respect to Class B Members, the most recent G&T Trend Analysis, as
available;
|
|
ix.
|
the
most recent narrative with respect to such Borrower, as prepared by the
Seller;
|
|
x.
|
the
most recent Borrower Rating of such
Borrower;
|
|
xi.
|
all
correspondence between the Master Servicer and such Borrower that pertains
to the Qualified Loan sold under this Master Agreement, or to the
collateral by which it is secured, from origination of the Qualified Loan
until payoff or foreclosure; and
|
6
|
xii.
|
documentation
of any loan servicing actions taken with respect to the Qualified
Loan.
|
Section
1.03.
Amended Defined
Term
. The defined term “Total Assets Ratio” in
Section 1.01 of the Master Agreement (but not the definition associated
therewith), is hereby amended to read “Total Assets.”
Section
1.04.
Other Conforming
Amendments
.
A. Section
4.03(i)(vi) of the Master Agreement is hereby deleted in its entirety and
replaced with the following:
(vi) The
Mortgage obligates the related Borrower to take out and maintain the classes and
amounts of insurance coverages which conform to generally accepted utility
industry standards for such classes and amounts of coverages of utilities of the
size and character of such Borrower and the Borrower is in compliance with such
obligations. The Mortgage obligates the Borrower thereunder to
maintain all such insurance at the Borrower's cost and expense, and on the
Borrower's failure to do so, authorizes the holder of the Mortgage (or, in the
case of an Indenture Borrower, the trustee thereunder) to advance or to procure
from others all sums required to maintain such insurance at Borrower's cost and
expense and to seek reimbursement therefor from the Borrower.
B. Section
5.01(d) of the Master Agreement is hereby amended by adding the following to the
end thereof:
Notwithstanding
the foregoing, the Purchaser acknowledges and agrees that, with respect to a
Mortgage Note for a Qualified Loan made to an Indenture Borrower, the
noteholder’s ability to waive, modify, amend or vary any term of the related
indenture, and its ability to exercise remedies thereunder, is governed and may
be limited by the terms contained in such indenture as applicable to all
noteholders. However, no provision of any indenture or any other
document related to a Qualified Loan to an Indenture Borrower shall prevent,
restrict or otherwise encumber the Master Servicer’s ability to fulfill its
obligations with respect to the 10 Business Day Notice requirement set forth
above, or the Master Servicer’s obligation to notify the Purchaser of the events
specified in this Section 5.01(d), except to the extent that noteholders under
an indenture have the ability to waive an event of default under such indenture
(but not an event of default under the Loan Agreement or Mortgage Note
associated with such Qualified Loan) in accordance with the terms
thereof.
7
ARTICLE
II
Miscellaneous
Section
2.01.
Defined
Terms
. Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Master Agreement.
Section
2.02.
Authorized
Officers
. The manual or facsimile signature of any individual
appearing on this Amendment, or any document or certificate issued pursuant to
this Amendment, and which is designated as the signature of a Responsible
Officer of any Person, shall constitute conclusive evidence that such individual
is, in fact, authorized to execute such document, notwithstanding that such
authorization may have lapsed prior to the effective date of such
document.
Section
2.03.
Entire
Agreement
. This Amendment contains the entire agreement
between the parties regarding the modifications made to the Master
Agreement. Except as explicitly modified by this Amendment, each and
every term, condition, exhibit, and provision of the Master Agreement shall
remain in full force and effect.
Section
2.04.
Governing
Law
. The terms of this Amendment shall be governed by, and
construed in accordance with, federal law. To the extent federal law
incorporates state law, that state law shall be the laws of the State of New
York.
Section
2.05.
Counterparts
. This
Amendment may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto hereby execute this Amendment as of the day
and year first above written.
[signatures
on following page]
8
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
, as Purchaser
|
|
By:
|
|
Name:
|
Title:
|
|
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
, as Seller and Master
Servicer
|
|
By:
|
|
|
John
J. List
|
|
Senior
Vice President - Member Services
General
Counsel
|
EXHIBIT
10.38
CLEAN
RENEWABLE ENERGY BONDS
SECURED
TAX CREDIT SERIES 2009A
NATIONAL
RURAL UTILITIES
COOPERATIVE
FINANCE CORPORATION
as
Issuer
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
as
Guarantor
CREDIT
SUPPORT AGREEMENT
Dated
as of September 1, 2009
CREDIT
SUPPORT AGREEMENT, dated as of September 1, 2009, between FEDERAL AGRICULTURAL
MORTGAGE CORPORATION, a federally-chartered instrumentality of the United States
and an institution of the Farm Credit System, as guarantor, (“
Farmer Mac
” or the
“
Guarantor
”)
and NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative
association existing under the laws of the District of Columbia, as issuer
(“
National
Rural
”).
RECITALS
WHEREAS
National Rural is a non-profit cooperative association whose primary business is
making rural utilities loans; and
WHEREAS
National Rural wishes to fund certain rural utilities loans for clean renewable
energy projects by issuing $28,908,000 of Clean Renewable Energy Bonds, Secured
Tax Credit Series 2009A (the “2009A Bonds”); and
WHEREAS
Farmer Mac is an instrumentality of the United States formed to provide for
a secondary market for agricultural real estate and rural housing mortgage
loans, rural utilities loans, and USDA-guaranteed farm program and
rural development loans; and
WHEREAS
at National Rural’s request, Farmer Mac has agreed to issue its guarantee of the
timely payment of interest (if any) on the Series 2009A Bonds and, in the case
of principal, an amount equal to the amount of outstanding principal of the
Series 2009A Bonds less any amounts in the Series 2009A Project Account
(the “Guarantee”), subject to the limitations set forth herein and in the
Indenture; and
WHEREAS,
Farmer Mac’s agreement to provide its guarantee on the 2009A Bonds is subject to
the condition that National Rural pledge Eligible Loans to the Trustee such that
the sum of (i) the aggregate outstanding principal balance of the Eligible Loans
and (ii) any amounts in the Borrower Repayments Fund or the Bond Fund shall at
all times be at least equal to the amount of the Guarantee.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, Farmer
Mac and National Rural agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01.
Definitions
. As
used in this Agreement, the following terms shall have the following
meanings:
“
Agreement
” means this
Credit Support Agreement, as the same may be amended from time to
time.
“
Bond Fund
” has the
meaning given to that term in the Indenture.
“
Borrower Repayments
Fund
” has the meaning given to that term in the Indenture.
“
Business Day
” has the
meaning given to that term in the Indenture.
“
Certificate of Pledged
Collateral
” has the meaning given to that term in the Pledge
Agreement.
“
Closing Date
” means
the issuance date of the 2009A Bonds.
“
Eligible Loan
” is
defined in Annex F hereto.
“
Event of Default
” has
the meaning given to that term in Section 7.01.
“
Farmer Mac Series C
Preferred Stock
” means shares of Non-Voting Cumulative Preferred Stock,
Series C issued by Farmer Mac.
“
Financial
Statements
”, in respect of a Fiscal Year, means the consolidated
financial statements (including footnotes) of National Rural for that Fiscal
Year as audited by an independent registered public accounting firm selected by
National Rural.
“
Fiscal Year
” means
the fiscal year of National Rural, as such may be changed from time to time,
which at the date hereof commences on June 1 of each calendar year and ends on
May 31 of the following calendar year.
“
Guarantor Default
”
has the meaning given to that term in the Indenture.
“
Indenture
” means that
certain indenture dated as of September 1, 2009 between National Rural, U.S.
Bank National Association, a national banking association, as Trustee, and
Farmer Mac, as guarantor.
“
Indenture Event of
Default
” means an “Event of Default” as such term is defined in the
Indenture.
“
Member
” shall mean
any Person who is member of National Rural.
“
National Rural
Notice
” has the meaning given to that term in the Pledge
Agreement.
“
Payment Date
” means
any date upon which the payment of principal and, if applicable, interest on the
Series 2009A Bonds is due to the holders thereof.
“
Person
” means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
“
Pledge Agreement
”
means the Pledge and Security Agreement dated as of the date hereof between
National Rural and the Trustee for the benefit and security of the holders of
the 2009A Bonds and Farmer Mac, as guarantor, to the extent Farmer Mac is
subrogated to the rights of the holders of the 2009A Bonds.
“
Pledged Collateral
”
has the meaning given to that term in the Pledge Agreement.
“
Purchase Agreement
”
means the Securities Purchase Agreement between National Rural and Farmer Mac,
substantially in the form of Annex C hereto, pursuant to which National
Rural agrees to purchase Farmer Mac Series C Preferred Stock in an amount equal
to 2% of the outstanding principal amount of the Series 2009A Bonds as of the
Closing Date.
“
Series 2009A Project
Account
” has the meaning given to that term in the
Indenture.
“
Transaction
Documents
” means this Agreement, the Indenture, the Pledge Agreement, and
the Purchase Agreement.
“
Trustee
” means U.S.
Bank National Association, or its successor, as Trustee under the
Indenture.
SECTION
1.02.
Principles of
Construction
. As used in this Agreement, the terms defined in
Section 1.01 include the plural as well as the singular and the singular as
well as the plural. The words “hereafter”, “herein”, “hereof”,
“hereto” and “hereunder”, and words of similar import, refer to this Agreement
as a whole. The descriptive headings of the various articles and
sections of this Agreement were formulated and inserted for convenience only and
shall not be deemed to affect the meaning or construction of the provisions
hereof. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the Indenture, as supplemented by the
First Supplemental Indenture.
ARTICLE
II
GUARANTEE
SECTION
2.01.
Guarantee
. Farmer
Mac shall issue the Guarantee in accordance with the terms, conditions and
provisions of the Indenture and this Agreement. No reference herein
shall alter or impair the Guarantee.
SECTION
2.02.
Payment of
Guarantee and Administrative Fee
.
(a)
In
consideration of the Guarantee and subject to the terms and conditions of this
Agreement, National Rural shall pay to Farmer Mac a nonrefundable guarantee fee
quarterly in arrears in an amount equal to the product of (i) the outstanding
principal balance of the Series 2009A Bonds less any amounts in the Series 2009A
Project Account as of the last calendar day of each February, May, August and
November through and including the final maturity date of the Series 2009A
Bonds, and (ii) a rate equal to one fourth of the per annum fee of [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION],
computed on the basis of a 360-day year comprised of twelve 30-day months (the
“Guarantee Fee”). National Rural shall also pay to Farmer Mac a
nonrefundable administrative fee quarterly in arrears in an amount equal to the
product of (i) the outstanding principal balance of the Series 2009A Bonds less
any amounts in the Series 2009A Project Account as of the last calendar day of
each February, May, August and November through and including the final maturity
date of the Series 2009A Bonds, and (ii) a rate equal to one fourth of the per
annum fee of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH SECURITIES
AND EXCHANGE COMMISSION], computed on the basis of a 360-day year comprised of
twelve 30-day months (the “Administrative Fee”). Upon the occurrence,
and during the continuance, of an Event of Default by National Rural set forth
in Section 7.01(d), the rate used to calculate the quarterly Administrative Fee
shall be one fourth of the per annum fee of [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION]. Payments
of the Guarantee Fee and the Administrative Fee will be rounded to the nearest
cent.
(b)
The
first quarterly Guarantee Fee and the Administrative Fee shall be paid on the
first Farmer Mac Payment Date (as defined below) occurring after the Closing
Date and then subsequently on each succeeding Farmer Mac Payment Date (as
defined below) through and including the final maturity date of the Series 2009A
Bonds. National Rural shall pay the Guarantee Fee and the
Administrative Fee to Farmer Mac by 11 a.m. New York City time on the 20
th
day of
each March, June, September and December (each, a “Farmer Mac Payment Date”), in
United States dollars, by wire transfer of immediately available funds to such
account as Farmer Mac shall specify to National Rural. If a specified
Farmer Mac Payment Date is not a Business Day, the Guarantee Fee and the
Administrative Fee will be paid on the next Business Day with the same force and
effect as if made on the applicable Farmer Mac Payment Date.
(c)
Payment
of the Guarantee Fee and the Administrative Fee by National Rural shall be
suspended during any period in which a Guarantor Default shall have occurred and
be continuing; provided that at the time the Guarantor Default is cured all
accrued and unpaid Guarantee Fees and Administrative Fees shall then become due
and payable.
(d)
All
payments in respect of the Guarantee Fee and the Administrative Fee will be made
without any withholding or deduction for or on account of any present or future
taxes, duties, levies, assessments or other governmental charges of whatever
nature imposed or levied on behalf of any governmental authority in the United
States having the power to tax, unless National Rural, based on an opinion of
counsel acceptable to the Guarantor, determines that it is required by law to
make such withholding or deduction.
(e)
Payment
of the Guarantee Fee and the Administrative Fee will not be subject to
counterclaim or setoff for any claim or dispute of National
Rural.
SECTION
2.03.
Invest to
Participate
. In further consideration of the Guarantee,
National Rural shall enter into the Purchase Agreement and purchase Farmer Mac
Series C Preferred Stock in an amount equal to 2% of the outstanding principal
amount of the Series 2009A Bonds as of the Closing Date.
SECTION
2.04.
Payment on the
Series 2009A Bonds
. In accordance with the Indenture, at least
two (2) Business Days prior to each Payment Date, National Rural shall remit to
the Trustee, in immediately available funds, an amount sufficient to make a full
payment of all principal and interest (if any) on the Series 2009A Bonds due on
such Payment Date. Beginning with the day that Farmer Mac makes an
advance under the Guarantee, National Rural agrees to pay to the Guarantor all
amounts necessary to reimburse Farmer Mac for any payments made to holders of
Series 2009A Bonds under the Guarantee to the extent to which the Guarantor has
not already been reimbursed through the liquidation of Pledged
Collateral.
ARTICLE
III
CONDITIONS
PRECEDENT
SECTION
3.01.
Conditions Precedent to
Famer Mac’s Obligation
. Farmer Mac’s obligation to issue its
Guarantee on the Closing Date is subject to the following conditions
precedent:
(a)
Bond
Issuance
. The Series 2009A Bonds shall have been issued
pursuant to and in accordance with the terms, conditions and provisions of the
Indenture.
(b)
Opinion of
Counsel
. Farmer Mac shall have received an opinion of counsel
to National Rural substantially in the form of Annex A attached hereto, and such
other opinions as provided for in the Indenture.
(c)
Financial and Other
Information
. National Rural shall have provided Farmer Mac
with its most recent Financial Statements and such other information concerning
National Rural as Farmer Mac shall have reasonably requested.
(d)
No Material Adverse
Change
. National Rural shall have certified to Farmer Mac (in
the manner specified in paragraph (g) of this Section 3.01), and Farmer Mac
shall be satisfied, that no material adverse change shall have occurred in the
financial condition or business of National Rural between the end of National
Rural’s most recently completed Fiscal Year for which Financial Statements have
been made publicly available and the Closing Date, which has not been set forth
in documents, certificates or financial information furnished to Farmer Mac or
publicly filed.
(e)
No Event of
Default
. National Rural shall have certified to Farmer Mac and
Farmer Mac shall be satisfied that no Event of Default or Indenture Event of
Default shall have occurred and be continuing.
(f)
Securities
Purchase
. National Rural shall have entered into the Purchase
Agreement pursuant to Section 2.03.
(g)
Certification of Senior
Management
. National Rural shall have provided Farmer Mac a
certification by any vice president of National Rural, substantially in the form
of Annex B attached hereto, as to the following: (i) that National Rural is
a lending institution organized as a private, not-for-profit, cooperative
association with the appropriate expertise, experience and qualifications to
make loans to its Members for rural electrification and related purposes; (ii)
the matters to be certified under paragraphs (d) and (e) of this
Section 3.01; and (iii) the representations and warranties of National
Rural.
ARTICLE
IV
REPORTING
REQUIREMENTS
SECTION
4.01.
Annual Reporting
Requirements
. So long as any 2009A Bond remains outstanding,
National Rural shall provide Farmer Mac with the following items within 90 days
of the end of each Fiscal Year, in each case, in form and substance satisfactory
to Farmer Mac:
(a)
the
Financial Statements for such Fiscal Year;
(b)
a
Certificate of Pledged Collateral; and
(c)
a
receipt from the Trustee, or such other evidence as is satisfactory to Farmer
Mac, as to the Pledged Collateral held by the Trustee at the end of such Fiscal
Year.
SECTION
4.02.
Other Reporting
Requirements
. So long as any Series 2009A Bond remains
outstanding, National Rural shall provide Farmer Mac with the following items,
which items may be included on a consolidated report of other loans serviced by
National Rural on behalf of Farmer Mac:
(a)
within
30 days of the end of each calendar quarter ending March 31
st
, June
30
th
,
September 30
th
, and
December 31
st
, a
report substantially in the form of Annex D hereto that identifies each
Eligible Loan that constitutes Pledged Collateral, which report shall include
the outstanding principal balance of such Eligible Loan, the related facility
rating assigned by National Rural and the related borrower rating assigned by
National Rural, in each case as of the end of such quarter;
(b)
within
30 days following the end of the calendar quarter ending December 31
st
, a
report substantially in the form of Annex E hereto that identifies each
Eligible Loan that constitutes Pledged Collateral, which report shall include
the appropriate financial data (as described in Annex E) from the most recent
year end unaudited financial statements, which may be on a Form 7 (the financial
and statistical report used by National Rural for a distribution system Member)
or Form 12 (the financial and statistical report used by National Rural for a
power supply Member); and
(c)
National
Rural shall provide written notice to Farmer Mac within 30 days after the
occurrence of any of the following material changes to National Rural’s current
internal risk rating methodology for determining facility ratings or borrower
ratings: (1) any material change to the weighting of the risk rating
criteria; and (2) any material change in the criteria in the risk rating;
and
(d)
such
other information concerning National Rural or the Eligible Loans that
constitute Pledged Collateral as is reasonably requested by Farmer
Mac.
SECTION
4.03.
Default
Notices
. If an action, occurrence or event shall happen that
is, or with notice and the passage of time would become, an Event of Default or
an Indenture Event of Default, National Rural shall deliver a National Rural
Notice of such action, occurrence or event to Farmer Mac before 4:00 p.m.
(District of Columbia time) on the Business Day following the date National
Rural becomes aware of such action, occurrence or event, and, if such Event of
Default or Indenture Event of Default should occur, shall promptly submit to
Farmer Mac, within five days of such occurrence, a report setting forth its
views as to the reasons for the Event of Default or Indenture Event of Default
(as applicable), the anticipated duration of the Event of Default or Indenture
Event of Default and what corrective actions National Rural is taking to cure
such Event of Default or Indenture Event of Default.
SECTION
4.04.
Access to Information by
Farmer Mac
. Upon 30 days prior written request and
identification of specific Eligible Loans by Farmer Mac, which shall not exceed
40% of the total amount of Eligible Loans that constitute Pledged Collateral
(“Identified Loans”), National Rural shall provide to representatives of Farmer
Mac access to the following documentation related to each Identified Loan:
(1) credit recommendation associated with the Eligible Loan; (2) three most
recent calendar year end unaudited financial statements of the Member, which may
be on a Form 7 or Form 12; (3) most recent borrower rating by National
Rural; (4) most recent facility rating by National rural; (5) most recent
key ratio trend analysis (the annual report generated by National Rural
containing key financial and operating ratios and other growth indicators for
each Class A Member); (6) most recent annual certification by an officer of
a Member to National Rural under the applicable loan agreement; (7) most recent
fiscal year-end certified independent audit of the Member; (8) most recent
mortgage of the Member, if applicable; (9) loan agreement associated with the
Eligible Loan; (10) opinion of counsel associated with the Eligible Loan, if
applicable; and (11) most recent rating on the Member issued by a
nationally recognized statistical rating organization, if
applicable. All such access shall occur during normal business hours
at the offices of National Rural, and the information disclosed shall be treated
by the representatives of Farmer Mac as confidential and proprietary to National
Rural for so long as National Rural is the owner of the Eligible Loans and to
the extent that such information has not otherwise been made public by National
Rural.
ARTICLE
V
REPRESENTATIONS
OF THE PARTIES
SECTION
5.01.
Representations of Farmer
Mac
. Farmer Mac represents to National Rural as of the Closing Date that
it has all necessary authority and has taken all necessary corporate action, and
obtained all necessary approvals, in order for it to guarantee the 2009A Bonds,
to execute and deliver this Agreement and all other documents executed or to be
executed by Farmer Mac in connection with the issuance of the 2009A Bonds, and
that such documents constitute valid and binding obligations of Farmer Mac; and
the actions taken by Farmer Mac in connection with the issuance of the 2009A
Bonds are in compliance with and in satisfaction of the requirements of the Farm
Credit Administration, as amended or waived by the Farm Credit
Administration,
SECTION
5.02.
Representations of National
Rural
. National Rural hereby represents to Farmer Mac that as
of the Closing Date:
(a)
National
Rural has been duly organized and is validly existing and in good standing as a
cooperative association under the laws of the District of Columbia;
(b)
National
Rural has the corporate power and authority, and has taken all necessary
corporate and other action to (i) issue the 2009A Bonds, (ii) execute and
deliver this Agreement, (iii) consummate the transactions contemplated hereby
and in the other Transaction Documents, and (iv) perform its obligations
hereunder and under the other Transaction Documents;
(c)
this
Agreement, the other Transaction Documents, and each other document to National
Rural has executed in connection with the issuance of the 2009A Bonds have been
duly authorized, executed and delivered by National Rural and constitute the
legal, valid and binding obligations of National Rural, enforceable against
National Rural in accordance with their respective terms, subject to:
(i) applicable bankruptcy, reorganization, insolvency, moratorium and other
laws of general applicability relating to or affecting creditors’ rights
generally; and (ii) the application of general principles of equity
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(d)
no
approval, consent, authorization, order, waiver, exemption, variance,
registration, filing, notification, qualification, license, permit or other
action is now, or under existing law in the future will be, required to be
obtained, given, made or taken, as the case may be, with, from or by any
regulatory body, administrative agency or governmental authority having
jurisdiction over National Rural or any third party under any agreement to which
National Rural is a party to authorize the execution and delivery by National
Rural of this Agreement, the other Transaction Documents, and each other
document National Rural has executed in connection with the issuance of the
2009A Bonds, or the consummation by National Rural of the transactions
contemplated hereby or by the other Transaction Documents;
(e)
neither
the execution nor delivery by National Rural of this Agreement, the other
Transaction Documents, and each other document National Rural has executed in
connection with the issuance of the 2009A Bonds, nor the consummation by
National Rural of the transactions contemplated hereby or by the other
Transaction Documents, conflicts with or will conflict with, violates or will
violate, results in or will result in a breach of, constitutes or will
constitute a default under, or results in or will result in the imposition of
any lien or encumbrance (other than the lien on the Pledged Collateral as
contemplated by the Indenture) prohibited by, any term or provision of the
articles of incorporation or the bylaws of National Rural or any provision of
any existing law or any rule or regulation currently applicable to National
Rural or any judgment, order or decree of any court or any regulatory body,
administrative agency or governmental authority having jurisdiction over
National Rural or the terms of any mortgage, indenture, contract or other
agreement to which National Rural is a party or by which National Rural or any
of its properties is bound;
(f)
there
is no action, suit, proceeding or investigation before or by any court or any
regulatory body, administrative agency or governmental authority presently
pending or, to the knowledge of National Rural, threatened with respect to
National Rural, this Agreement or any other Transaction Documents, or
challenging the validity or enforceability of this Agreement or any other
Transaction Documents, or seeking to restrain, enjoin or otherwise prevent
National Rural from engaging in its business as currently conducted or the
consummation by National Rural of the transactions contemplated by this
Agreement or any other Transaction Documents, if any, or which, if adversely
determined, would have a material adverse effect on National Rural’s financial
condition or its ability to perform its obligations under this Agreement or any
other Transaction Documents;
(g)
National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification
purposes;
(h)
no
material adverse change has occurred in the financial condition or business of
National Rural between the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date this representation is given which has not been set forth in documents,
certificates or financial information furnished to Farmer Mac or publicly filed;
and
(i)
Each
Member whose notes are Eligible Loans that constitute Pledged Collateral has
received, or is eligible to receive, a loan or commitment for a loan from the
Rural Utilities Service of the United States Department of Agriculture or any
successor agency.
ARTICLE
VI
SECURITY
AND COLLATERAL
SECTION
6.01.
Security and
Collateral
.
(a)
National
Rural shall cause the amount of Eligible Loans that constitute Pledged
Collateral to be maintained such that the sum of (i) the aggregate outstanding
principal balance of the Eligible Loans and (ii) any amounts in the Borrower
Repayments Fund or the Bond Fund shall at all times be at least equal to the
amount of the Guarantee.
(b)
National
Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage,
encumbrance, debenture, hypothecation or other similar security instrument that
secures, or in any way attaches to, such Pledged Collateral, other than the lien
of the Pledge Agreement and the Indenture, without the prior written consent of
Farmer Mac and the Trustee.
ARTICLE
VII
EVENTS OF
DEFAULT
SECTION
7.01.
Events of
Default
. Each of the following actions, occurrences or events
shall constitute an “
Event of Default
”
under the terms of this Agreement:
(a)
a
failure by National Rural to make any payment required to be made under Section
2.04;
(b)
the
Trustee has declared the 2009A Bonds immediately due and payable;
(c)
an
Insolvency Event, as defined in the Indenture, shall have occurred and be
continuing with respect to National Rural; or
(d)
a
failure of National Rural to observe or perform the covenant set forth in
Section 6.01(a) hereof, which shall remain unremedied for five (5) Business Days
after National Rural Shall have become aware of such failure or shall have been
given notice thereof, whichever occurs earlier.
SECTION
7.02.
Exercise of
Remedies
.
(a)
Any
remedies provided to Farmer Mac under this Agreement shall be in addition to its
remedies under the Indenture, Pledge Agreement and Securities Purchase
Agreement.
(b)
In
addition to the provisions regarding an increase in the fee payable to Farmer
Mac under Section 2.02, upon the occurrence, and during the continuance, of an
Event of Default set forth in Section 7.01(d), Farmer Mac may institute one or
more legal proceedings against National Rural seeking, individually or in the
aggregate, (i) recovery of actual monetary damages, and (ii) injunctive relief
or specific performance, in each case without proof of actual
damages.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.01.
GOVERNING
LAW
. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, FEDERAL LAW. TO THE EXTENT FEDERAL LAW INCORPORATES
STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF COLUMBIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.
SECTION
8.02.
WAIVER OF JURY
TRIAL
. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.02.
SECTION
8.03.
Notices
. All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule I attached hereto
as appropriate except as otherwise provided herein. The address,
telephone number, or facsimile number for any party may be changed at any time
and from time to time upon written notice given by such changing party to the
other parties hereto. A properly addressed notice or other
communication shall be deemed to have been delivered at the time it is sent by
facsimile (fax) transmission to the party or parties to which it is
given.
SECTION
8.04.
Benefit of
Agreement
. This Agreement shall become effective when it shall
have been executed by Farmer Mac and National Rural, and thereafter shall be
binding upon and inure to the respective benefit of the parties and their
permitted successors and assigns.
SECTION
8.05.
Entire
Agreement
. This Agreement, including the Schedules and
Annexes hereto, constitute the entire agreement between the parties hereto
concerning the matters contained herein and supersede all prior oral and written
agreements and understandings between the parties.
SECTION
8.06.
Amendments and Waivers;
Assignment
.
(a)
No
provision of this Agreement may be amended or modified except pursuant to an
agreement in writing entered into by Farmer Mac and National
Rural. No provision of this Agreement may be waived except in writing
by the party or parties receiving the benefit of and under such
provision.
(b)
Neither
party may assign this Agreement without the prior consent of the other
party.
(c)
No
failure or delay of Farmer Mac or National Rural in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. No waiver of any provision of this Agreement or consent to any
departure by National Rural therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (a) of this
Section 8.06, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
or demand on National Rural in any case shall entitle National Rural to any
other or further notice or demand in similar or other
circumstances.
SECTION
8.07.
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION
8.08.
Termination of
Agreement
. This Agreement shall terminate upon the
indefeasible payment in full of all amounts payable on the 2009A
Bonds.
SECTION
8.09.
Survival
. The
representations and warranties of each of the parties hereto contained in this
Agreement and the parties’ obligations hereunder shall survive and shall
continue in effect following the execution and delivery of this
Agreement.
SECTION
8.10.
Severability
. If
any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or such provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable any remaining terms or provisions hereof
or the application of such term or provision to circumstances other than those
as to which it is held invalid or unenforceable.
IN
WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by
an authorized officer as of the day and year first above written.
FEDERAL
AGRICULTURAL
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MORTGAGE
CORPORATION
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By:
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Name:
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Title:
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NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
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By:
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Name:
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Title:
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SCHEDULE
I
TO
CREDIT
SUPPORT AGREEMENT
Addresses
for Notices
1.
|
The
addresses referred to in Section 8.03 hereof, for purposes of
delivering communications and notices, are as
follows:
|
If to
Farmer Mac:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Chief Financial Officer
With a
copy to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: Chief Operating Officer
With a
copy also to:
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
DC 20036
Fax: 202-872-7713
Attention
of: General Counsel
If to
National Rural:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6718
Fax: 703-709-6779
Attention
of: Steven L. Lilly, Senior Vice President &
Chief
Financial Officer
With a
copy to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6748
Fax: 703-709-6779
Attention
of: John Suter, Vice President, Capital Market Funding
With a
copy also to:
National
Rural Utilities Cooperative Finance Corporation
2201
Cooperative Way
Herndon,
VA 20171-3025
Telephone: 703-709-6712
Fax: 703-709-6811
Attention
of: John J. List, Esq., Senior Vice President &
General
Counsel
ANNEX
A
[FORM OF
OPINION OF COUNSEL TO NATIONAL RURAL]
__________________,
2009
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, NW
Suite
600
Washington,
DC 20036
Gentlemen:
I am
delivering this opinion as general counsel of National Rural Utilities
Cooperative Finance Corporation, a District of Columbia cooperative association
(“National Rural”).
I am
familiar with matters pertaining to the issuance of $28,908,000 of Clean
Renewable Energy Bonds, Secured Tax Credit Series 2009A (the “2009A
Bonds”). I, or attorneys under my supervision, have examined such
corporate records and proceedings of National Rural, and such other documents as
I have deemed necessary as a basis for the opinions hereinafter
expressed.
I, or
attorneys under my supervision, have also examined the Credit Support Agreement
dated as of September 1 (“Credit Support Agreement"), between National Rural and
Federal Agricultural Mortgage Corporation (“Farmer Mac”).
Based on
the foregoing, but subject to the assumptions, exceptions, qualifications and
limitations hereinafter expressed, I am of the opinion that:
(1) National
Rural has been duly incorporated and is validly existing as a cooperative
association in good standing under the laws of the District of Columbia with
corporate power and authority to execute and perform its obligations under the
Credit Support Agreement.
(2) The
Credit Support Agreement has been duly authorized, executed and delivered by
National Rural, and constitutes the legal, valid and binding agreement of
National Rural, enforceable against National Rural in accordance with its
terms.
(3) Neither
the execution nor the delivery by National Rural of any of the Credit Support
Agreement nor the consummation by National Rural of any of the transactions
contemplated therein, including, without limitation, the pledge of the Pledged
Securities (as such term is defined in the Pledge Agreement) to Farmer Mac, nor
the fulfillment by National Rural of the terms of any of the Credit Support
Agreement will conflict with or violate, result in a breach of or constitute a
default under any term or provision of the Articles of Incorporation or By-laws
of National Rural or any law or any regulation or any order known to me
currently applicable to National Rural of any court, regulatory body,
administrative agency or governmental body having jurisdiction over National
Rural or the terms of any indenture, deed of trust, note, note agreement or
instrument to which National Rural is a party or by which National Rural or any
of its properties is bound.
(4) No
approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency
or body having jurisdiction over National Rural is required for any consummation
by National Rural of the transactions contemplated by the Credit Support
Agreement;
provided
,
however
, no opinion
is expressed as to the applicability of any Federal or state securities law to
any sale, transfer or other disposition of the Bonds after the date
hereof.
(5) Except
as set forth in writing and previously delivered to Farmer Mac, there is no
pending or, to my knowledge, threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator with respect
to National Rural, or the Credit Support Agreement, which, if adversely
determined, would have a material adverse effect on National Rural’s financial
condition or its ability to perform its obligations under any of the Credit
Support Agreement.
The foregoing opinions are subject to
the following assumptions, exceptions, qualifications and
limitations:
A. I
am a member of the Bar of the District of Columbia and render no opinion on the
laws of any jurisdiction other than the laws of the District of Columbia, the
federal laws of the United States of America and the General Corporation Law of
the District of Columbia.
B. My
opinions are limited to the present laws and to the facts, as they presently
exist. I assume no obligation to revise or supplement this opinion
should the present laws of the jurisdictions referred to in paragraph A above be
changed by legislative action, judicial decision or otherwise.
C. The
opinions expressed in paragraph 2 above shall be understood to mean only that if
there is a default in performance of an obligation, (i) if a failure to pay or
other damage can be shown and (ii) if the defaulting party can be brought into a
court which will hear the case and apply the governing law, then, subject to the
availability of defenses, and to the exceptions set forth in the next paragraph,
the court will provide a money damage (or perhaps injunctive or specific
performance) remedy.
D. My
opinions are also subject to the effect of: (1) bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
creditors’ rights (including, without limitation, the effect of statutory and
other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers); and (2) the exercise of judicial discretion and the
application of principles of equity, good faith, fair dealing, reasonableness,
conscionability and materiality (regardless of whether the applicable agreements
are considered in proceeding in equity or at law).
E. This
letter is rendered to you in connection with the Credit Support Agreement, and
may not be relied upon by any other person or by you in any other context or for
any other purpose.
F. I
have assumed with your permission (i) the genuineness of all signatures by each
party other than National Rural, (ii) the authenticity of documents submitted to
me as originals and the conformity to authentic original documents of all
documents submitted to me as copies, and (iii) the due execution and delivery,
pursuant to due authorization, of the Credit Support Agreement by each party
other than National Rural.
Yours
sincerely,
John J.
List
General
Counsel
ANNEX
B
[FORM OF
OFFICERS’ CERTIFICATE]
Officers’
Certificate
TO: Federal
Agricultural Mortgage Corporation.
The
undersigned, _________________, _____________________, of National Rural
Utilities Cooperative Finance Corporation (“
National Rural
”),
pursuant to the Credit Support Agreement dated as of September 1, 2009, among
National Rural and Federal Agricultural Mortgage Corporation (the “
Credit Support
Agreement
”), hereby certifies on behalf of National Rural that as at the
date hereof:
(1) National
Rural is a lending institution organized as a private, not-for-profit,
cooperative association with the appropriate expertise, experience and
qualifications to make loans to its Members for rural electrification and
related purposes;
(2) no
material adverse change has occurred in the financial condition of National
Rural between the date of the end of National Rural’s most recently completed
Fiscal Year for which Financial Statements have been made publicly available and
the date hereof, which has not been set forth in documents, certificates, or
financial information furnished to Farmer Mac or publicly filed;
(3) all
of the representations contained in Section 5.02 of the Credit Support Agreement
remain true and correct in all material respects on and as of the date hereof;
and
(4) no
Event of Default or Indenture Event of Default exists.
Capitalized
terms used in this certificate shall have the meanings given to those terms in
the Credit Support Agreement.
DATED as
of this _____ day of ______________, _________.
NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
ANNEX
C
[FORM OF
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
SERIES
C PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
[●]
AND
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
DATED
AS OF [●]
TABLE
OF CONTENTS
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Page
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Article
I DEFINITIONS
|
2
|
1.1
|
Certain
Terms
|
2
|
1.2
|
Additional
Terms
|
4
|
1.3
|
Terms
Generally
|
5
|
|
|
Article
II SALE AND PURCHASE OF THE SECURITIES; CLOSING
|
5
|
2.1
|
Authorization
of Securities
|
5
|
2.2
|
Closing
|
6
|
|
|
Article
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
6
|
3.1
|
Organization
and Standing
|
6
|
3.2
|
Corporate
Power; Authorization
|
6
|
3.3
|
Issuance
of Preferred Stock
|
7
|
3.4
|
Consents;
No Conflicts
|
7
|
3.5
|
Compliance
with Laws; Permits
|
7
|
3.6
|
Exempt
Securities
|
8
|
|
|
Article
IV ADDITIONAL AGREEMENTS
|
8
|
4.1
|
Further
Assurances
|
8
|
4.2
|
Tax
Treatment
|
8
|
|
|
Article
V MISCELLANEOUS
|
8
|
5.1
|
Notices
|
8
|
5.2
|
Severability
|
9
|
5.3
|
Entire
Agreement; Assignment
|
9
|
5.4
|
Specific
Performance
|
9
|
5.5
|
Burden
and Benefit
|
10
|
5.6
|
Governing
Law; Forum
|
10
|
5.7
|
Waiver
of Jury Trial
|
10
|
5.8
|
Headings
|
11
|
5.9
|
Counterparts
|
11
|
5.10
|
Waiver
|
11
|
SERIES
C PREFERRED STOCK SECURITIES PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
(this “
Agreement
”) is made
as of [●], between [●], a [●] (the “
Purchaser
”), and
Federal Agricultural Mortgage Corporation, a federally chartered instrumentality
of the United States of America (the “
Company
”).
RECITALS
WHEREAS,
the Company has
authorized the issuance and sale of up to 100,000 shares of Preferred Stock (as
defined herein) to be sold from time to time; and
WHEREAS,
the Company and the
Purchaser desire to set forth herein the terms and conditions of such issuance
and sale of shares of Preferred Stock by the Company to the
Purchaser.
NOW, THEREFORE,
in
consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE
IX
DEFINITIONS
SECTION
9.01. Certain Terms. Whenever used in this Agreement, the following
terms shall have the respective meanings given to them below:
“
Act
” means the Farm
Credit Act of 1971, as amended.
“
Affiliate
” means any
Person that, directly or indirectly, controls, is controlled by or is under
common control with another Person. As used in this definition,
“control” (including its correlative meanings, “controlled by” and “under common
control with”) shall mean the possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise). To the extent that any such term is used in relation
to, or in connection with, any statute, and the definition of such term in such
statute is broader or different, then, in such context, such term shall have the
meaning set forth in such statute.
“
Board
” means the
Board of Directors of the Company.
“
Bylaws
” means the
By-Laws of the Company.
“
Charter
” means Title
VIII of the Act.
“
Company Reports
”
means all registration statements, prospectuses, forms, reports, schedules,
statements and other documents filed by the Company and the Subsidiary with the
SEC.
“
Contract
” means,
whether written or oral, any note, bond, mortgage, indenture, contract,
agreement, permit, license, lease, purchase order, sales order, arrangement or
other commitment, obligation or understanding (including any understanding with
respect to pricing) to which a Person is a party or by which a Person or its
assets or properties are bound.
“
Encumbrance
” means
any liens, pledges, hypothecations, mortgages, deeds of trust, charges, claims,
security interests, options, restrictions, encumbrances, rights, warrants,
licenses, burdens, Title defects, Title retention agreements, voting trust
agreements, proxy or other similar interests, restrictions or
limitations.
“
FCA
” means the Farm
Credit Administration.
“
Governmental Entity
”
means any court or tribunal or administrative, governmental or regulatory body,
agency, commission, board, legislature, instrumentality, division, department,
public body or other authority of any nation or government or any political
subdivision thereof, whether foreign or domestic and whether national,
supranational, state or local and any industry self-regulatory
organization.
“
Law
” means any
foreign, national, state, provincial, municipal or local statute, law,
ordinance, regulation, treaty, rule, code, injunction, decree, judgment, writ,
order, determination, award or decree, other order or applicable
regulations.
“
Material Adverse
Effect
” means any fact, circumstance, event, change, violation,
development, effect, condition or occurrence, either individually or in the
aggregate with any other fact, circumstance, event, change, violation,
development, effect, condition or occurrence, that is, or would reasonably be
expected to be, materially adverse to the business, operations (including
results of operations), assets, liabilities, properties or condition (financial
or otherwise) of the Company and the Subsidiary, taken as a whole, excluding any
such fact, circumstance, event, change, violation, development, effect,
condition or occurrence arising out of, in connection with or resulting from, in
whole or in part (a) general economic conditions or changes therein,
(b) changes in or events affecting the industries in which the Company or
the Subsidiary participate generally, (c) any effect arising out of a
change in U.S. GAAP or applicable Law, (d) national or international
political conditions, including any engagement in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack, (e) any change in the market price or
trading volume of the Company’s outstanding securities, in and of itself,
(f) announcement of the transactions contemplated by this Agreement or
(g) actions or omissions by the Company or the Subsidiary pursuant to this
Agreement or with the prior written consent of the Purchaser, to the extent that
any such fact, circumstance, event, change, violation, development, effect,
condition or occurrence described in the foregoing clauses (a) through (e)
does not have a disproportionate impact on the Company or the Subsidiary as
compared to other Persons participating in businesses or industries in which the
Company or the Subsidiary operates.
“
NYSE
” means the New
York Stock Exchange.
“
Per Share Purchase
Price
” means $1,000 per share of Preferred Stock.
“
Person
” means any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity or other entity of any kind or
nature.
“
SEC
” means the United
States Securities and Exchange Commission.
“
Securities Act
” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“
Tax
” or “
Taxes
” means all
federal, state, local, foreign and other taxes, charges, fees, duties, imposts,
levies, penalties or other assessments or other similar charges imposed by any
Taxing Authority, including, but not limited to, income, excise, property, sales
and use, franchise, payroll, withholding, social security profits, capital
gains, capital stock, transfer, gross receipts, production, customs, goods and
services, service, state guarantee fund assessment, occupation, ad valorem,
excise, severance, windfall profits, premium, stamp, license, employment,
workers compensation, unemployment, disability, alternative minimum, add-on,
value-added, capital, or other taxes, duties or assessments including any
interest, penalties or additions attributable thereto. For purposes
of this Agreement, “Taxes” also includes any liability pursuant to
section 1.1502-6 of the Treasury Regulations or comparable provisions of
state, local or foreign Law, any obligations under any Contract with any Person
with respect to the liability for, or sharing of, Taxes (including pursuant to
section 1.1502-6 of the Treasury Regulations or comparable provisions of
state, local or foreign Tax Law) and any liability for Taxes as a transferee or
successor, by contract or otherwise.
“
Taxing Authority
”
shall mean any federal, national, provincial, foreign, state or local
government, or any subdivision, agency, commission or authority thereof
exercising Tax regulatory, enforcement, collection or other
authority.
SECTION
9.02. Additional Terms. The following terms are defined in the
corresponding Sections of this Agreement:
Term
|
|
Section
|
|
|
|
Agreement
|
|
Preamble
|
Certificate
of Designation
|
|
Section 2.1
|
Closing
|
|
Section 5.1
|
Closing
Date
|
|
Section 2.2
|
Company
|
|
Preamble
|
Issue
Date
|
|
Section
2.1
|
Letter
Agreement
|
|
Recitals
|
New
York Courts
|
|
Section 7.6(b)
|
Observers
|
|
Section 5.3
|
Order
|
|
Section
3.5
|
Preferred
Stock
|
|
Section 2.1
|
Purchaser
|
|
Preamble
|
Subsidiary
|
|
Section
3.1
|
SECTION
9.03. Terms Generally. For the purposes of this Agreement,
(a) words (including capitalized terms defined herein) in the singular
shall be held to include the plural and
vice
versa
and words
(including capitalized terms defined herein) of one gender shall be held to
include the other gender as the context requires; (b) the terms “hereof,”
“herein” and “herewith” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Exhibits) and not to any particular provision of this Agreement, and Article,
Section, paragraph and Exhibit references are to the Articles, Sections,
paragraphs and Exhibits to this Agreement, unless otherwise specified;
(c) the word “including” and words of similar import when used in this
Agreement shall mean “including, without limitation”; (d) the phrase
“ordinary course of business” and phrases of similar import when used in this
Agreement shall mean “ordinary course of business consistent with past
practice”; (e) the word “liability” and words of similar import when used
in this Agreement shall be deemed to include any liabilities, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and whether due or to
become due; (f) all references to any period of days shall be deemed to be
to the relevant number of calendar days unless otherwise specified;
(g) references to any statute, rule or regulation are to the statute, rule
or regulation as amended, modified, supplemented or replaced from time to time
(and, in the case of statutes, include any rules and regulations promulgated
under said statutes) and to any section of any statute, rule or regulation
include any successor to said section; (h) the word “or” shall not be
interpreted to be exclusive or disjunctive; and (i) all references herein
to “$” or dollars shall refer to United States dollars, unless otherwise
specified.
ARTICLE
X
SALE AND
PURCHASE OF THE SECURITIES; CLOSING
SECTION
10.01. Authorization of Securities.
The
Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
agrees to purchase from the Company, [●] shares of the Company’s Non-Voting
Cumulative Preferred Stock, Series C, par value $1,000 per share
(“
Preferred
Stock
”), free and clear of all Encumbrances, each of which shares of
Preferred Stock will have the designations, powers, preferences, rights,
privileges, qualifications, limitations, restrictions, terms and conditions set
forth in the Amended and Restated Certificate of Designation of Terms and
Conditions of Non-Voting Cumulative Preferred Stock, Series C previously
provided to the Purchaser (the “
Certificate of
Designation
”), for a purchase price per share of Preferred Stock equal to
the Per Share Purchase Price. The Company and the Purchaser hereby
agree that, for the purposes of the Certificate of Designation, the “
Issue Date
” with
respect to the shares of Preferred Stock being purchased by the Purchaser
pursuant to this Agreement shall be [●].
SECTION
10.02. Closing. On [●] (the “
Closing Date
”),
(a) the Company will deliver to the Purchaser a certificate representing
[●] shares of Preferred Stock, registered in the name of the Purchaser,
(b) the Purchaser, in full payment for the Preferred Stock being purchased
by it, will deliver to the Company by wire transfer of immediately available
funds to such account as the Company shall specify, an amount equal to $[●] and
(c) each party shall take or cause to happen such other actions, and shall
execute and deliver such other instruments or documents, as shall be required
pursuant to this Agreement.
ARTICLE
XI
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as
set forth in the Company Reports filed prior to the date of this Agreement
(excluding any disclosures set forth in any section of any such Company Report
entitled “Risk Factors” or “Forward-Looking Statements”), the Company hereby
represents and warrants to the Purchaser as follows:
SECTION
11.01. Organization and Standing. The Company is a federally
chartered instrumentality of the United States, duly organized, validly existing
and in good standing under the Act. The Company’s wholly-owned
subsidiary, Farmer Mac Mortgage Securities Corporation, a Delaware corporation
(the “
Subsidiary
”), is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Company and the Subsidiary has full corporate
power and authority to own, lease, use and operate its properties and to carry
on its business as currently conducted where now owned, leased, used, operated
and conducted. Each of the Company and the Subsidiary is duly
qualified to do business in all jurisdictions in which the character of the
business conducted by it or the property it owns, leases or operates requires it
to so qualify, except where the failure to be so qualified or in good standing
in such jurisdiction would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. The Company is not in
default in the performance, observance or fulfillment of any provision of the
Charter or Bylaws. The Subsidiary is not in default in the
performance, observance or fulfillment of any provision of its organizational or
corporate governance Contracts (including any federal statutes similar to the
Charter).
SECTION
11.02. Corporate Power; Authorization. The Company has all requisite
corporate power and has taken all necessary corporate action required for the
due authorization, execution, delivery and performance by the Company of this
Agreement, the execution and filing (if necessary) of the Certificate of
Designation and the consummation of the transactions contemplated hereby and
thereby. The issuance and delivery of Preferred Stock have been duly
authorized by all necessary corporate action on the part of the Company, and no
further corporate proceedings are required by the Company, the Board or the
Company’s stockholders. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
creditors’ rights generally and to general equitable
principles.
SECTION
11.03. Issuance of Preferred Stock. The Preferred Stock being
purchased by the Purchaser pursuant to this Agreement, upon payment of the Per
Share Purchase Price therefore, will be (a) duly authorized, validly
issued, fully paid and nonassessable, (b) will not be subject to any
preemptive or similar rights of any other Person and (c) will be delivered
to the Purchaser (or the Purchaser’s transferee) free and clear of all
Encumbrances. When issued, the Purchaser will be the sole record and
beneficial owner of each share of Preferred Stock.
SECTION
11.04. Consents; No Conflicts.
(a)
The
Company has obtained all consents and approvals, and has taken all actions
necessary, in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby (including the issuance
of Preferred Stock in connection therewith) such that the execution and delivery
of this Agreement and the consummation of such transactions do not and will
not:
(i)
conflict, or result in a breach or violation of any provision of, or constitute
a default under, the Charter or the Bylaws;
(ii)
conflict with, or result in a breach or violation of any provision of, or
constitute a default (or an event that, with the giving of notice, the passage
of time or otherwise, would constitute a default) under, or entitle any Person
(with the giving of notice, the passage of time or otherwise) to terminate,
accelerate, modify or call a default under, or result in the creation of any
Encumbrances upon any of the properties or assets of the Company or the
Subsidiary under, any of the terms, conditions or provisions of any Contract to
which the Company or the Subsidiary is a party or to which any of their
respective properties or assets are bound;
(iii)
materially violate any Law applicable to the Company or the Subsidiary or any of
their respective properties or assets; or
(iv)
require any further action or consent or approval of, or review by, or any
registration or filing by the Company or any of its Affiliates with, any third
party or any Governmental Entity, including (A) approval of this Agreement
and the other transactions contemplated hereby by the FCA,
(B) registrations or other actions required under United States federal and
state securities laws and (C) compliance with any applicable requirements
of the NYSE,
except,
in the case of clause (ii) above, as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company
has obtained from the FCA and any other regulatory Governmental Entity written
assurances that the proceeds from the sale of shares of Preferred Stock pursuant
to this Agreement will be treated as capital for minimum capital purposes under
the Charter.
SECTION
11.05. Compliance with Laws; Permits. Neither the Company nor the
Subsidiary, nor the conduct of their respective businesses, is in material
violation of or material default under any judicial or administrative judgment,
decision, decree, order, settlement, injunction, writ, stipulation,
determination, award or permit (each, an “
Order
”) or any Law
(including the Sarbanes-Oxley Act). No investigation or review by any
Governmental Entity with respect to the Company or the Subsidiary is pending or,
to the knowledge of the Company, threatened, nor has any Governmental Entity
indicated in writing an intention to conduct any such investigation or
review.
SECTION
11.06. Exempt Securities. The shares of Preferred Stock are being
issued and are properly exempt under Section 3(a)(2) of the Securities Act
from the registration and prospectus delivery requirements of the Securities Act
and such registration or prospectus delivery is not required in connection with
the issuance, sale, resale or delivery of such securities as contemplated
herein.
ARTICLE
XII
ADDITIONAL
AGREEMENTS
SECTION
12.01. Further Assurances. Following the closing of the transactions
contemplated by this Agreement (the “
Closing
”), the
Purchaser, on the one hand, and the Company, on the other hand, shall execute
all such further certificates, agreements, instruments and other documents and
take all such other actions as are reasonably required in order to more
effectively consummate or implement the transactions contemplated by this
Agreement or the Certificate of Designation or otherwise carry out, and comply
with its obligations under, the terms and conditions of this Agreement and the
Certificate of Designation.
SECTION
12.02. Tax Treatment. The parties agree to treat the Preferred Stock
as equity for all Tax purposes.
ARTICLE
XIII
MISCELLANEOUS
SECTION
13.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by prepaid
overnight courier (providing proof of delivery), by facsimile or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses or facsimile numbers (or at such other
address for a party as shall be specified in a notice given in accordance with
this
Section 5.1
):
if to the
Purchaser:
[●]
if to the
Company:
Federal
Agricultural Mortgage Corporation
1133
Twenty-First Street, N.W.
Suite
600
Washington,
D.C. 20036
Telecopier
No: (202) 872-7713
Attention: General
Counsel
with a
copy to:
Shearman
& Sterling LLP
801
Pennsylvania Avenue, N.W.
Suite
900
Washington,
D.C. 20004
Telecopier
No: (202) 508-8100
Attention: Abigail
Arms, Esq.
SECTION
13.02. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy or the application of this Agreement to any person or circumstance is
invalid or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. To such end, the provisions of this
Agreement are agreed to be severable. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated by this
Agreement be consummated as originally contemplated to the fullest extent
possible.
SECTION
13.03. Entire Agreement; Assignment. This Agreement, including any
Exhibits hereto and the other documents delivered pursuant hereto constitute the
full and entire understanding and agreement among the parties with respect to
the subject matter hereof, and supersede and preempt all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned by any party without the
prior written consent of the other parties;
provided
, that in the
event of any such assignment, such assignee shall be required to execute a
joinder to and agree to be bound by this Agreement. No such
assignment shall release the assignor from any of its obligations
hereunder.
SECTION
13.04. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that money damages would
not be a sufficient remedy for any breach of this Agreement, and accordingly,
the parties hereto shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
SECTION
13.05. Burden and Benefit. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. This Agreement and all of its
conditions and provisions are for the sole and exclusive benefit of the parties
hereto and their respective successors and permitted assigns, and nothing in
this Agreement, express or implied, is intended to confer upon any Person other
than the parties hereto any rights or remedies of any nature whatsoever under or
by reason of this Agreement or any provision hereof.
SECTION
13.06. Governing Law; Forum.
(a)
All
disputes, claims or controversies arising out of or relating to this Agreement,
or the negotiation, validity or performance of this Agreement or the
transactions contemplated by this Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its rules
of conflict of laws.
(b)
Except
as set out below, the Company and the Purchaser hereby irrevocably and
unconditionally consent to submit to the sole and exclusive jurisdiction of the
United States District Court for the Southern District of New York (the “
New York Courts
”) for
any litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement or the transactions contemplated by
this Agreement (and agree not to commence any litigation relating thereto except
in such courts), waive any objection to the laying of venue of any such
litigation in the New York Courts and agree not to plead or claim in any New
York Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees (i) to the
extent such party is not otherwise subject to service of process in the State of
New York, to appoint and maintain an agent in the State of New York as such
party’s agent for acceptance of legal process and (ii) that service of
process may also be made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service constituting
evidence of valid service. Service made pursuant to (i) or
(ii) above shall have the same legal force and effect as if served upon
such party personally within the State of New York.
SECTION
13.07. Waiver of Jury Trial. Each of the parties hereto hereby waives
to the fullest extent permitted by applicable Law any right it may have to a
trial by jury with respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
by this Agreement. Each of the parties hereto (a) certifies that
no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (b) acknowledges that
it and the other hereto have been induced to enter into this Agreement and the
transactions contemplated by this Agreement, as applicable, by, among other
things, the mutual waivers and certifications in this
Section 5.7
.
SECTION
13.08. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION
13.09. Counterparts. This Agreement may be executed and delivered,
including by facsimile transmission, in two or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION
13.10. Waiver. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other provision
hereunder.
IN
WITNESS WHEREOF, each party has caused this Agreement to be duly executed on its
behalf by an authorized officer as of the date first above written.
|
FEDERAL
AGRICULTURAL
|
|
MORTGAGE
CORPORATION
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
[COUNTERPARTY
NAME]
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
ANNEX
D
SAMPLE
Coopid
|
|
Facilityid
|
|
Indenture
|
|
Name
|
|
Class
|
|
|
Facility Risk Rating
|
|
|
Coop Risk Rating
|
|
|
Facility O/s Balance
|
|
AK002
|
|
|
9033
|
|
FMCT
|
|
Matanuska
Electric Association, Inc.
|
|
A
|
|
|
|
2.5
|
|
|
|
3
|
|
|
$
|
3,250,000.00
|
|
AK002
|
|
|
9034
|
|
FMCT
|
|
Matanuska
Electric Association, Inc.
|
|
A
|
|
|
|
2.5
|
|
|
|
3
|
|
|
$
|
3,350,000.00
|
|
AK002
|
|
|
9035
|
|
FMCT
|
|
Matanuska
Electric Association, Inc.
|
|
A
|
|
|
|
2.5
|
|
|
|
3
|
|
|
$
|
3,470,000.00
|
|
NOTE: The
“Indenture” designation may not be changed in subsequent reporting periods once
established with respect to an Eligible Loan.
ANNEX
E
SAMPLE
COOP
IDS
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year
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dep_amort_exp
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interest_ltd_exp
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patcap_op_margins
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non_op_margins_interest
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g_and_t_capital_credits
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other_capital_credits_pat_div
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net_utility_plant
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MN048
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2008
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8417985
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6310184
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-3177921
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174637
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6333697
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993039
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192833241
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tot_assets_other_debits
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tot_margins_equities
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tot_ltd
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long_term_lease_rental_tot
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tot_pmt_ltd_bc
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tot_pmt_ltd_ffb
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tot_pmt_ltd_rus_edl
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tot_pmt_ltd_other1
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tot_pmt_ltd_other2
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311655261
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127968457
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112263396
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payee_ltd_other4
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payee_ltd_other5
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tot_pmt_ltd_other6
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tot_pmt_ltd_other7
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tot_pmt_ltd_other8
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tot_pmt_ltd_other9
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tot_pmt_ltd_other10
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cfc_bill_debt_service_tot
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rus_bill_debt_service_tot
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11079647
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|
ANNEX
F
Eligible
Loan Criteria
“
Eligible Member
”
means any Class A Member or Class B Member of Nat Rural as described in Nat
Rural’s Bylaws currently in effect.
“
Eligible Loan
” means
a note or bond of any Eligible Member payable or registered to, or to the order
of, Nat Rural, (A) in respect of which (i) the outstanding principal
amount under such note or bond, together with the outstanding principal amount
of any other notes or bonds of such Eligible Member pledged hereunder or pledged
to secure any other notes or bonds issued by Nat Rural to Farmer Mac or any
affiliate or sold by Nat Rural or any affiliate to any trust whose beneficial
ownership is owned or controlled by Farmer Mac, does not aggregate more than $35
million; (ii) no default has occurred in the payment of principal or interest in
accordance with the terms of such note or bond that is continuing beyond the
contractual grace period (if any) provided in such note or bond for such payment
and (iii) no “event of default” as defined in such note or bond (or in any
instrument creating a security interest in favor of Nat Rural in respect of such
note or bond), shall exist that has resulted in the exercise of any right or
remedy described in such note or bond (or in any such instrument);
(B) which is not classified by Nat Rural as a non-performing loan under
generally accepted accounting principles in the United States; and (C) which
otherwise satisfies the additional criteria set forth below.
Additional Criteria for
Eligible Loan of Class A Eligible Member
: Each Class A
Eligible Member must satisfy the following criteria only on the date of the
pledge of such Eligible Loan:
|
·
|
Long-Term
Debt to Net Utility Plant Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available,
does not exceed 90%.
|
|
·
|
Modified
Debt Service Coverage Ratio—Distribution, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.35.
|
|
·
|
Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 20%.
|
|
·
|
The
Eligible Loan has a Facility Rating by Nat Rural of “4.9” or
lower.
|
Additional Criteria for
Eligible Loan of Class B Eligible Member
: Each Class B
Eligible Member must satisfy the following criteria only on the date of the
pledge of such Eligible Loan:
|
·
|
Equity
to Total Capitalization Ratio, as the average ratio of the most recent
three full calendar years for which financial information is available, is
greater than or equal to 25%.
|
|
·
|
Modified
Debt Service Coverage Ratio—G&T, as the average ratio of the most
recent three full calendar years for which financial information is
available, is greater than or equal to
1.10.
|
|
·
|
Equity
to Total Assets Ratio, as the average ratio of the most recent three full
calendar years for which financial information is available, is greater
than or equal to 10%.
|
The
Eligible Loan has a Facility Rating by Nat Rural of “4.9” or lower
National
Rural Utilities
Cooperative
Finance Corporation
Company
U.S.
Bank National Association
Trustee
and
Federal
Agricultural Mortgage Corporation
Guarantor
Indenture
Dated as
of September 1, 2009
National
Rural Utilities Cooperative Finance Corporation
Clean
Renewable Energy Bonds, Secured Tax Credit Series 2009A
Table
of Contents
Section
|
|
Heading
|
|
Page
|
|
|
|
|
|
Granting
Clauses
|
|
|
|
2
|
|
|
|
|
|
Article
One
|
|
Definitions
and Other Provisions of General Application
|
|
3
|
|
|
|
|
|
Section
101.
|
|
Definitions
|
|
3
|
Section
102.
|
|
Compliance
Certificates and Opinions
|
|
13
|
Section
103.
|
|
Form
of Documents Delivered to Trustee
|
|
14
|
Section
104.
|
|
Acts
of Holders
|
|
15
|
Section
105.
|
|
Notices,
Etc., to Trustee and Company
|
|
16
|
Section
106.
|
|
Notice
to Holders of Securities; Waiver
|
|
16
|
Section
107.
|
|
Language
of Notices, Etc.
|
|
16
|
Section
108.
|
|
Effect
of Headings and Table of Contents
|
|
17
|
Section
109.
|
|
Successors
and Assigns
|
|
17
|
Section
110.
|
|
Separability
Clause
|
|
17
|
Section
111.
|
|
Benefits
of Indenture
|
|
17
|
Section
112.
|
|
Governing
Law
|
|
17
|
Section
113.
|
|
Legal
Holidays
|
|
17
|
|
|
|
|
|
Article
Two
|
|
Security
Forms
|
|
17
|
|
|
|
|
|
Section
201.
|
|
Forms
Generally
|
|
17
|
Section
202.
|
|
Form
of Trustee’s Certificate of Authentication
|
|
18
|
Section
203.
|
|
Securities
in Global Form
|
|
18
|
|
|
|
|
|
Article
Three
|
|
The
Securities
|
|
19
|
|
|
|
|
|
Section
301.
|
|
Issuance
of the Series 2009A Bonds
|
|
19
|
Section
302.
|
|
Denominations
|
|
19
|
Section
303.
|
|
Execution,
Authentication, Delivery and Dating
|
|
20
|
Section
304.
|
|
Temporary
Securities; Exchange of Temporary Securities
|
|
21
|
Section
305.
|
|
Registration,
Registration of Transfer and Exchange
|
|
21
|
Section
306.
|
|
Mutilated,
Destroyed, Lost and Stolen Securities
|
|
23
|
Section
307.
|
|
Payment
of Interest; Interest Rights Preserved
|
|
24
|
Section
308.
|
|
Persons
Deemed Owners
|
|
25
|
Section
309.
|
|
Cancellation
|
|
25
|
Section
310.
|
|
Computation
of Interest
|
|
26
|
Section
311.
|
|
CUSIP
Numbers
|
|
26
|
|
|
|
|
|
Article
Four
|
|
Application
of Proceeds; Project Fund; Bond Fund; Borrower Repayments
Fund
|
|
26
|
|
|
|
|
|
Section
401.
|
|
Deposit
of Funds
|
|
26
|
Section
402.
|
|
Project
Fund
|
|
26
|
Section
403.
|
|
Bond
Fund
|
|
30
|
Section
404.
|
|
Borrower
Repayments Fund
|
|
31
|
|
|
|
|
|
Article
Five
|
|
Guarantee;
Action by the Trustee
|
|
33
|
|
|
|
|
|
Section
501.
|
|
Guarantee
of the Series 2009A Bonds
|
|
33
|
Section
502.
|
|
Action
by the Trustee
|
|
34
|
|
|
|
|
|
Article
Six
|
|
Events
of Default; Remedies
|
|
36
|
|
|
|
|
|
Section
601.
|
|
Events
of Default; Remedies
|
|
36
|
Section
602.
|
|
Acceleration
of Maturity, Rescission and Annulment
|
|
37
|
Section
603.
|
|
Collection
of Indebtedness
|
|
37
|
Section
604.
|
|
Trustee
May Enforce Claims Without Possession of Securities
|
|
38
|
Section
605.
|
|
Application
of Proceeds
|
|
38
|
Section
606.
|
|
Suits
for Enforcement
|
|
40
|
Section
607.
|
|
Restoration
of Rights on Abandonment of Proceedings
|
|
40
|
Section
608.
|
|
Limitations
on Suits by Holders
|
|
40
|
Section
609.
|
|
Powers
and Remedies Cumulative; Delay or Omission Not Waiver of
Default
|
|
40
|
Section
610.
|
|
Control
by the Holders
|
|
41
|
Section
611.
|
|
Waiver
of Past Defaults
|
|
41
|
Section
612.
|
|
Costs
of Litigation
|
|
41
|
Section
613.
|
|
Unconditional
Right of Holders to Receive Principal, Premium and
Interest
|
|
41
|
Section
614.
|
|
Undertaking
for Costs
|
|
42
|
Section
615.
|
|
Waiver
of Stay, Extension or Usury Laws
|
|
42
|
|
|
|
|
|
Article
Seven
|
|
Control
By the Guarantor; Additional Rights of the Guarantor
|
|
42
|
|
|
|
|
|
Section
701.
|
|
Control
by the Guarantor
|
|
42
|
Section
702.
|
|
Rights
of the Guarantor to Direct Actions of the Trustee
|
|
43
|
Section
703.
|
|
Additional
Rights of the Guarantor
|
|
43
|
|
|
|
|
|
Article
Eight
|
|
The
Trustee
|
|
45
|
|
|
|
|
|
Section
801.
|
|
Certain
Duties and Responsibilities.
|
|
45
|
Section
802.
|
|
Notice
of Defaults
|
|
46
|
Section
803.
|
|
Certain
Rights of Trustee
|
|
46
|
Section
804.
|
|
Not
Responsible for Recitals or Issuance of Securities
|
|
48
|
Section
805.
|
|
May
Hold Securities
|
|
48
|
Section
806.
|
|
Money
Held in Trust
|
|
48
|
Section
807.
|
|
Compensation
and Reimbursement
|
|
48
|
Section
808.
|
|
Disqualification;
Conflicting Interests
|
|
49
|
Section
809.
|
|
Corporate
Trustee Required; Eligibility
|
|
54
|
Section
810.
|
|
Resignation
and Removal; Appointment of Successor
|
|
54
|
Section
811.
|
|
Acceptance
of Appointment by Successor
|
|
56
|
Section
812.
|
|
Merger,
Conversion, Consolidation or Succession to Business
|
|
57
|
Section
813.
|
|
Preferential
Collection of Claims Against Company
|
|
57
|
Section
814.
|
|
Appointment
of Authenticating Agent
|
|
61
|
|
|
|
|
|
Article
Nine
|
|
Holders’
Lists and Reports by Trustee and Company
|
|
62
|
|
|
|
|
|
Section
901.
|
|
Holder
Lists; Communications to Holders
|
|
62
|
Section
902.
|
|
Reports
by Trustee
|
|
63
|
Section
903.
|
|
Reports
by Company
|
|
64
|
|
|
|
|
|
Article
Ten
|
|
Consolidation,
Merger, Conveyance or Transfer
|
|
66
|
|
|
|
|
|
Section
1001.
|
|
Company
May Consolidate, Etc., Only on Certain Terms.
|
|
66
|
Section
1002.
|
|
Successor
Substituted.
|
|
66
|
|
|
|
|
|
Article
Eleven
|
|
Supplemental
Indentures
|
|
67
|
|
|
|
|
|
Section
1101.
|
|
Supplemental
Indentures Without Consent of Holders.
|
|
67
|
Section
1102.
|
|
Supplemental
Indentures with Consent of Holders.
|
|
68
|
Section
1103.
|
|
Execution
of Supplemental Indentures
|
|
69
|
Section
1104.
|
|
Effect
of Supplemental Indentures
|
|
69
|
Section
1105.
|
|
Reference
in Securities to Supplemental Indentures
|
|
69
|
|
|
|
|
|
Article
Twelve
|
|
Covenants
|
|
69
|
|
|
|
|
|
Section
1201.
|
|
Payment
of Principal, Premium and Interest
|
|
69
|
Section
1202.
|
|
Maintenance
of Office or Agency
|
|
69
|
Section
1203.
|
|
Money
for Securities Payments to Be Held in Trust
|
|
70
|
Section
1204.
|
|
Officers’
Certificate
|
|
71
|
|
|
|
|
|
Article
Thirteen
|
|
Redemption
of Securities
|
|
72
|
|
|
|
|
|
Section
1301.
|
|
Applicability
of Article.
|
|
72
|
Section
1302.
|
|
Election
to Redeem; Notice to Trustee
|
|
72
|
Section
1303.
|
|
Extraordinary
Mandatory Redemption
|
|
72
|
Section
1304.
|
|
Mandatory
Sinking Fund Redemption
|
|
73
|
Section
1305.
|
|
Selection
by Trustee of Securities to Be Redeemed
|
|
73
|
Section
1306.
|
|
Notice
of Redemption
|
|
73
|
Section
1307.
|
|
Deposit
of Redemption Price
|
|
74
|
Section
1308.
|
|
Securities
Payable on Redemption Date
|
|
74
|
Section
1309.
|
|
Securities
Redeemed in Part
|
|
75
|
|
|
|
|
|
Article Fourteen
|
|
Meetings
of Holders of Securities
|
|
75
|
|
|
|
|
|
Section
1401.
|
|
Purposes
for Which Meetings May Be Called
|
|
75
|
Section
1402.
|
|
Call,
Notice and Place of Meetings
|
|
75
|
Section
1403.
|
|
Persons
Entitled to Vote at Meetings
|
|
75
|
Section
1404.
|
|
Quorum;
Action
|
|
76
|
Section
1405.
|
|
Determination
of Voting Rights; Conduct and Adjournment of Meetings
|
|
77
|
Section
1406.
|
|
Counting
Votes and Recording Action of Meetings
|
|
77
|
|
|
|
|
|
Article
Fifteen
|
|
Sinking
Funds
|
|
78
|
|
|
|
|
|
Section
1501.
|
|
Applicability
of Article
|
|
78
|
Section
1502.
|
|
Satisfaction
of Sinking Fund Payments with Securities
|
|
78
|
Section
1503.
|
|
Redemption
of Securities for Sinking Fund
|
|
78
|
|
|
|
|
|
Article
Sixteen
|
|
Satisfaction
and Discharge
|
|
78
|
|
|
|
|
|
Section
1601.
|
|
Satisfaction
and Discharge of Indenture
|
|
78
|
Section
1602.
|
|
Application
of Trust Money
|
|
80
|
Section
1603.
|
|
Satisfaction,
Discharge and Defeasance of Securities
|
|
80
|
Section
1604.
|
|
Reinstatement
|
|
82
|
|
|
|
|
|
Article Seventeen
|
|
Grant
of Security Interest in Pledged Collateral
|
|
83
|
|
|
|
|
|
Section
1701.
|
|
Security
Interest
|
|
83
|
|
|
|
|
|
Article
Eighteen
|
|
Immunity
of Incorporators, Stockholders, Officers and Directors
|
|
83
|
|
|
|
|
|
Section
1801.
|
|
Exemption
from Individual Liability
|
|
83
|
Exhibit
A Form of Security
Exhibit
B Form of Expense Requisition Statement
Exhibit
C Form of Demand Letter
Exhibit
D Form of Control Party Instructions
Exhibit
E Form of Funds Direction Statement
Indenture
,
dated as of September 1, 2009, among
National
Rural Utilities Cooperative Finance Corporation
, a District of Columbia
cooperative association (herein called the
“Company”
), having its
principal executive office and mailing address at 2201 Cooperative Way,
Herndon, Virginia 20171-3025, U.S.
Bank
National Association
, a national banking association, as Trustee (herein
called the
“Trustee”
)
and the
Federal
Agricultural Mortgage Corporation
, a federally chartered instrumentality
of the United States, as guarantor (herein called the
“Guarantor”
) having its
principal executive office and mailing address at 1133 21st Street, N.W., Suite
600, Washington, D.C.
Recitals
of the Company
Whereas
,
the Company has duly authorized the execution and delivery of this Indenture to
provide for the issuance of its clean renewable energy bonds, to be issued as in
this Indenture provided.
Whereas
,
the Company desires to provide for the creation of a series of clean renewable
energy bonds to be known as the National Rural Utilities Cooperative Finance
Corporation Clean Renewable Energy Bonds, Secured Tax Credit Series 2009A
(herein called the
“Series 2009A Bonds”
or
the
“Securities”
).
Whereas
,
the Company intends to lend the proceeds of the Securities to one or more
members of the Company, as borrowers, to finance the cost of certain clean
renewable energy facilities.
Whereas
,
the Guarantor has agreed to fully and unconditionally guarantee to the Trustee
for the benefit of the Holders of the Series 2009A Bonds and the Company,
the timely payment of the interest on the Series 2009A Bonds and, in the
case of principal, an amount equal to the amount of outstanding principal of the
Series 2009A Bonds less any amounts in the Series 2009A Project
Account (as defined below), as set forth in this Indenture (the
“Guarantee”
).
Whereas
,
all things necessary to make this Indenture a valid and legally binding
agreement of the Company, enforceable in accordance with its terms, have been
done and the Company proposes to do all things necessary to make the Bonds, when
issued by the Company, valid and legally binding obligations of the Company as
hereinafter provided;
Whereas
,
all Securities will be secured by an assignment to the Trustee of the
Company’s interest in the Pledged Collateral (as defined herein) and all moneys
and securities from time to time held by the Trustee under the terms of this
Indenture (except for moneys or securities in the Series 2009A Expense
Account) and any and all other property conveyed as and for additional security
hereunder by the Company.
Granting
Clauses
Now,
Therefore, This Indenture of Trust Witnesseth
:
That the
Company in consideration of the premises and the acceptance by the Trustee of
the trusts hereby created and of the purchase and acceptance of the Securities
by the Holders thereof, and of the sum of one dollar, lawful money of the United
States of America, to it duly paid by the Trustee at or before the execution and
delivery hereof, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, in order to secure the payment of
the principal and interest on the Securities according to their tenor and
effect, to secure the performance and observance by the Company of the
Obligations (as hereinafter defined) and of all the covenants expressed or
implied herein and in the Securities, does hereby grant, bargain, sell, convey,
assign and pledge to the Trustee, and its successors in trust and assigns
forever, to the extent provided in this Indenture, a security interest in the
following, whether now owned, existing or held or hereafter acquired, and
wherever located (the
“Trust
Estate”
):
Granting
Clause First
All
rights, title and interest of the Company in, to and under the Pledged
Collateral assigned pursuant to Article Seventeen hereof; and the proceeds of
all thereof in accordance with the Pledge and Security Agreement.
Granting
Clause Second
All
rights, title and interest of the Company in, to and under all moneys and
securities from time to time held directly or indirectly by the Trustee under
the terms of this Indenture, including, without limitation, moneys and
securities held in the Bond Fund and the Series 2009A Project Account, but
not moneys or securities in the Series 2009A Expense Account, and any and
all other real and personal property of every name and nature from time to time
hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged,
assigned or transferred, as and for additional security hereunder by the Company
or by anyone on its behalf or with its written consent, to the Trustee which is
hereby authorized to receive any and all such property at any and all times and
to hold and apply the same subject to the terms hereof;
To
Have and To Hold
all and singular the Trust Estate, whether now owned or
hereafter acquired, unto the Trustee and its respective successors in said trust
and assigns forever;
In
Trust Nevertheless
, upon the terms and trusts herein set forth for the
equal and proportionate benefit, security and protection of all present and
future owners of Securities, without privilege, priority or distinction as to
the lien or otherwise of any of the Securities over any of the other bonds,
except as expressly provided herein;
Provided
,
however, that if the Company, its successors or assigns, shall well and truly
pay, or cause to be paid, the principal of and interest on all of the Securities
due or to become due thereon, at the times and in the manner mentioned in the
Securities according to the true intent and meaning thereof, and shall cause all
payments to be made on the Securities as required herein, or shall provide, as
permitted hereby, for the payment thereof by depositing with the Trustee the
entire amount due or to become due thereon (or United States Treasury Securities
sufficient for the purpose as provided in Article Sixteen hereof), and
shall well and truly keep, perform and observe all the covenants and conditions
pursuant to the terms of this Indenture to be kept, performed and observed by
it, and shall pay or cause to be paid to the Trustee all sums of money due or to
become due to it in accordance with the terms and provisions hereof, then upon
the final payment thereof this Indenture and the rights hereby granted shall
cease, determine and be void except as otherwise provided herein; otherwise this
Indenture to be and remain in full force and effect.
This
Indenture Further Witnesseth
and it is expressly declared that all
Securities issued and secured hereunder are to be issued, authenticated and
delivered and all said property, rights and interests, including, without
limitation, the amounts hereby assigned and pledged, are to be dealt with and
disposed of under, upon and subject to the terms, conditions, stipulations,
covenants, agreements, trusts, uses and purposes as hereinafter expressed, and
the Company has agreed and covenanted, and does hereby agree and covenant, with
the Trustee and with the respective Holders of Securities as
follows:
Article
One
Definitions
and Other Provisions of General Application
Section
101.
Definitions.
For all purposes
of this Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1)
the terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;
(2)
all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States of America, and, except as otherwise herein expressly
provided, the term “generally accepted accounting principles” with respect to
any computation required or permitted hereunder shall mean such accounting
principles as are generally accepted in the United States of America at the date
of such computation;
(3)
the words “herein”, “hereof” and “hereunder” and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(4)
certain terms, used principally in Article Eight, are defined in that
Article.
“Act”
, when used with respect
to any Holder of a Security, has the meaning specified in Section
104.
“Affiliate”
of any specified
Person means any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified
Person. For the purposes of this definition, “control”, when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the
foregoing.
“Authenticating Agent”
means
any Person authorized by the Trustee pursuant to Section 814 to act on
behalf of the Trustee to authenticate Securities.
“Authorized Newspaper”
means
a newspaper, in the English language or in an official language of the country
of publication, customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays, and of general circulation in the
place in connection with which the term is used or in the financial community of
such place. Where successive publications are required to be made in
Authorized Newspapers, the successive publications may be made in the same or in
different newspapers in the same city meeting the foregoing requirements and in
each case on any Business Day.
“Authorized Officer of the
Borrower”
means the Chairman, General Manager or Chief Financial Officer
of the Borrower or any other person authorized by the Board of the Borrower so
to act or any other person performing a function similar to the function
performed by any such officer or authorized person.
“Authorized Officer of the
Company”
means one or more of the following officers of the Company: its
Chief Executive Officer, President, Chief Financial Officer, one of its Vice
Presidents, its Secretary-Treasurer, Secretary, or one of its Assistant
Secretary-Treasurers, or any other person authorized by the Board of the Company
so to act or any other person performing a function similar to the function
performed by any such officer or authorized person.
“Board of Directors”
means
the board of directors of the Company, the executive committee or any other
committee of such board duly authorized to act hereunder.
“Board Resolution”
means a
copy of a resolution certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
“Bond Counsel”
means an
attorney at law or a firm of attorneys (designated by the Company and acceptable
to the Trustee) of nationally recognized standing in matters pertaining to the
tax-exempt nature of interest or tax credits on bonds issued by states and their
political subdivisions, duly admitted to the practice of law before the highest
court of any state of the United States of America.
“Bond Fund”
means the Bond
Fund created in Section 403.
“Borrower”
means a member of
the Company that has entered into a Loan Agreement with the Company for a loan
of proceeds from the Securities.
“Borrower Repayments Fund”
means the Borrower Repayments Fund created in Section 404.
“Business Day”
means, any
day, other than a (i) Saturday, (ii) Sunday, (iii) a day on which banking
institutions are authorized or required by law, regulation or executive order to
close in the City of New York or the City of Chicago, (iv) a day that
the Company is not open for business, or, (v) for any place when used with
respect to any Place of Payment or any other particular location referred to in
this Indenture or in the Securities, means any day that is not a day on which
banking institutions in that Place of Payment or other location, as the case may
be, are authorized or required by law, regulation or executive order to
close.
“Code”
means Internal Revenue
Code of 1986, as supplemented and amended, including any successor statutes and
any applicable rules, regulations, notices or orders promulgated
thereunder.
“Company”
means the Person
named as the “Company” in the first paragraph of this instrument until a
successor Person shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter “Company” shall mean such successor
Person.
“Company Request”
and
“Company Order”
mean,
respectively, a written request or order signed in the name of the Company by
its Chief Executive Officer, President, Chief Financial Officer or one of its
Vice Presidents, and by its Secretary-Treasurer, or one of its Assistant
Secretary-Treasurers, and delivered to the Trustee. Such request may
be incorporated into any Officers’ Certificate delivered hereunder.
“Control Party”
means (i) the
Guarantor, so long as no Guarantor Default is existing and continuing or (ii)
the Holders of a majority of the aggregate principal amount of the
Series 2009A Bonds Outstanding, or the Trustee acting on their behalf, in
accordance with the provisions of this Indenture, for so long as a Guarantor
Default is existing and continuing.
“Corporate Trust Office”
means the designated office of the Trustee, at which at any particular
time corporate trust business of the Trustee shall be administered, which office
at the date of original execution of this Indenture is located at 100 Wall
Street, Suite 1600, New York, New York 10005, Attention: Corporate Trust
Services, or at any other time at such other address as the Trustee may
designate from time to time by notice to the Holders.
“corporation”
shall include
any cooperative association, voluntary association, company, corporation,
joint-stock company, business trust or similar organization.
“Credit Support Agreement”
means the credit support agreement between the Company and the Guarantor dated
as of September 1, 2009.
“Determination of Potential Tax
Credit Ineligibility”
shall mean a determination by the Company that the
Securities may cease to be eligible for a tax credit for the owner thereof under
Section 54 of the Code in the absence of some corrective action to be taken
on the part of the Company, which determination may be supported by a written
opinion of Bond Counsel to that effect.
“Determination of Tax Credit
Ineligibility”
shall mean a determination that the Securities does not
qualify for a tax credit for the owner thereof under Section 54 of the
Code, which determination shall be deemed to have been made upon the occurrence
of the first to occur of the following:
(a)
the date on which the Company determines that there is a significant
likelihood that the Securities may not qualify for a tax credit, if such
determination is supported by a written opinion of Bond Counsel to that effect;
or
(b)
the date on which the Company shall receive notice in writing that the
Trustee has been advised by the owner of any Security that the Securities does
not qualify for a tax credit for the owner thereof, based upon a final
determination made either by: (A) the Internal Revenue Service in a published or
private ruling or technical advice memorandum or (B) any court of competent
jurisdiction in the United States of America, as a result of a failure by the
Company or any borrower to observe any agreement or representation in the Tax
Compliance Agreement or a Loan Agreement or Project Agreement relating to the
proceeds of the Securities. Any such determination will not be
considered final for this purpose unless the Owner of the Securities involved in
the proceeding or action resulting in the determination (i) gives the Company
and the Trustee prompt written notice of the commencement thereof and (ii) if
the Company agrees to pay all expenses in connection therewith and to indemnify
such Owner of the Securities against all liabilities in connection therewith,
offers the Company an opportunity to contest the determination, either directly
or in the name of the Owner of the Securities, and until conclusion of any
review, if sought.
“Discharged”
means that the
Company will be deemed to have paid and discharged the entire indebtedness
represented by, and obligations under, the Securities and all provisions of this
Indenture relating to the Securities shall no longer be deemed in effect (and
the Trustee, at the expense of the Company, will execute proper instruments
acknowledging the same), except as to (A) the rights of Holders thereof to
receive, from the trust fund described in clause 1603(q)(1) above, payment
of the principal of and the interest on the Securities when such payments are
due, (B) the Company’s obligations with respect to the Securities under
Sections 305, 306, 1202, 1203 (last paragraph only) and 1602 and the
Company’s obligations to the Trustee under Sections 807 and 810,
(C) the rights of Holders of the Securities with respect to the payments
which they are to receive of principal, premium and interest and (D) the
rights, powers, trusts, duties and immunities of the Trustee hereunder, will
survive such discharge. The Company will reimburse the trust fund for
any loss suffered by it as a result of any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations, or any principal or
interest paid on such obligations, and, subject to the provisions of
Section 807, will indemnify the Trustee against any claims made against the
Trustee in connection with any such loss.
“Dollar”
or
“$”
means a dollar or other
equivalent unit in such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and private
debts.
“Equivalent Principal Terms”
has the meaning specified in Section 1302.
“Event of Default”
has the
meaning specified in Section 601.
“Expense Requisition
Statement”
means the written direction of the Company as described in
Section 402(c).
“FCA”
means the Farm Credit
Administration, or any successor agency having oversight authority over the
Guarantor.
“Funds Direction Statement”
means the certificate of the Company as described in
Section 404(c).
“Funds Requisition Statement”
means the certificate of a Borrower as described in
Section 402(b).
“Guarantee”
shall mean the
full and unconditional guarantee by the Guarantor to the Trustee for the benefit
of the Holders of the Series 2009A Bonds and the Company of the timely
payment of interest on the Series 2009A Bonds and, in the case of
principal, an amount equal to the amount of outstanding principal of the
Series 2009A Bonds less any amounts in the Series 2009A Project
Account, as set forth in this Indenture.
“Guarantee Event”
shall mean
with respect to the Series 2009A Bonds the occurrence and continuation (for
whatever the reason) of a failure by the Company to make or cause to be made the
required payment into the Bond Fund at the Trustee of any amounts needed to pay
interest on or principal of the Series 2009A Bonds by the close of business
two (2) Business Days prior to when such amount becomes due for a Payment Date
with respect to the Series 2009A Bonds.
“Guarantor”
means the Person
named as the “Guarantor” in the first paragraph of this instrument until a
successor Person shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter “Guarantor” shall mean such successor
Person.
“Guarantor Default”
means
(1) a default by the Guarantor under its obligations pursuant to
Section 501 which is existing and continuing; or (2) the appointment of a
receiver, voluntary liquidation and involuntary liquidation pursuant to 12
U.S.C. § 2279cc;
provided,
however,
the appointment of a conservator (or other similar official) by
a regulator having jurisdiction over the Guarantor, whether or not the Guarantor
consents to that appointment, will not constitute a Guarantor Default
hereunder.
“Holder”
, when used with
respect to any Security means the Person in whose name the Security is
registered in the Security Register.
“Indenture”
means this
instrument as originally executed or as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof.
“Initial Purchaser”
means
Merrill Lynch, Pierce Fenner & Smith, Incorporated and its successor or
assigns.
“Insolvency Event”
means, for
a specified Person, other than the Guarantor, (a) the filing of a decree or
order for relief by a court or administrative or governmental body having
jurisdiction in the premises in respect of such Person in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrate or similar official for such Person, or ordering
the winding-up or liquidation of such Person’s affairs, and such decree or order
shall remain unstayed and in effect for a period of sixty (60) consecutive days;
or (b) the commencement by such Person of a voluntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by such Person to the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person, or the making by such Person of any general assignment
for the benefit of creditors, or the failure by such Person generally to pay its
debts as such debts become due, or the taking of action by such Person in
furtherance of any of the foregoing; and for the Guarantor, as specified in 12
U.S. C. §2279cc and the rules and regulations thereunder.
“Insolvency Law”
means any
United States federal or state bankruptcy, insolvency or similar law for relief
of debtors, now or thereafter in effect or any amendment thereto or the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, and any subsequent amendments.
“Interest”
, when used with
respect to the Securities, means interest payable to the owner thereof including
any Supplemental Interest thereon.
“Interest Payment Date”
, when
used with respect to any Security, means the Stated Maturity of an installment
of interest on such Security, payable semi-annually on June 15 and
December 15, commencing December 15, 2009.
“Loan Agreement”
means a loan
agreement between the Company and a Borrower relating to all or a portion of
proceeds of an issue of Securities, as amended from time to time.
“Maturity”
, when used with
respect to any Security, means the date on which the principal of such Security
or an installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, exercise of option for repayment or otherwise.
“Mortgage”
means the mortgage
and security agreement applicable to substantially all of the property of a
Borrower.
“Note”
means a secured
promissory note, payable to the order of the Company, executed by a Borrower,
pursuant to a Loan Agreement.
“Obligations”
means the
obligations of the Company under this Indenture and the Series 2009A Bonds
including, without limitation, (i) all principal of, interest and Unpaid
Interest (including, without limitation, any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company, whether or not allowed or allowable
as a claim in any such proceeding) on such Series 2009A Bonds or pursuant
to this Indenture, (ii) all other amounts payable by the Company hereunder,
under the Series 2009A Bonds, including (A) all costs and expenses
(including reasonable attorneys’ fees) incurred by the Trustee or any Holder
thereof in realizing on the Pledged Accounts or Pledged Collateral to satisfy
such obligations and (B) all costs and expenses of, including reasonable
compensation to, the Trustee (or its agents, as applicable) payable in
accordance with the provisions of this Indenture and (iii) any renewals or
extensions of the foregoing.
“Officers’ Certificate”
means
a certificate signed by the Chief Executive Officer, the President, the Chief
Financial Officer or a Vice President, and by the Secretary-Treasurer, or one of
the Assistant Secretary-Treasurers of the Company, and delivered to the
Trustee. Each such Officers’ Certificate shall contain the statements
set forth in Section 102.
“Opinion of Counsel”
means a
written opinion of counsel, who may (except as otherwise expressly provided in
this Indenture) be counsel for the Company. Each such Opinion of
Counsel shall contain the statements set forth in Section 102.
“Original Issue Discount
Security”
means any Security which provides for an amount less than the
principal amount thereof to be due and payable at the Maturity
thereof.
“Outstanding”
, when used with
respect to Securities, means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(i)
Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii)
Securities for whose payment or redemption money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the Company (if
the Company shall act as its own Paying Agent) for the Holders of such
Securities;
provided
that, if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii)
Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however,
that in
determining whether the Holders of the requisite principal amount of the
Outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or whether a quorum is present at a meeting
of Holders of Securities (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon the Maturity thereof, and (ii) Securities owned by the
Company or any other obligor upon the Securities or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver or upon any such determination as to the presence of a quorum, only
Securities which a Responsible Officer in the Corporate Trust Office of the
Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee’s right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or of such other obligor.
“Payment Date”
means, any
Interest Payment Date, Stated Maturity or Maturity of the principal of or
interest on the Securities.
“Paying Agent”
means any
Person authorized by the Company to pay the principal of and premium or interest
on any Securities on behalf of the Company.
“Person”
means any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, limited liability company or other
entity, or government or any agency, instrumentality or political subdivision
thereof.
“Place of Payment”
, when used
with respect to the Securities, means the place or places where, subject to the
provisions of Section 1202, the principal of and premium or interest on the
Securities are payable as specified as contemplated by
Section 301.
“Pledge and Security
Agreement”
means the pledge and security agreement, dated as of the date
hereof, between the Company and the Trustee for the benefit of the Secured
Parties.
“Pledged Collateral”
shall
have the meaning set forth in the Granting Clause of the Pledge and Security
Agreement.
“Predecessor Security”
of any
particular Security means every previous Security evidencing all or a portion of
the same debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and delivered under
Section 306 in exchange for or in lieu of a mutilated, lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the mutilated,
lost, destroyed or stolen Security.
“Proceeds”
means: (i) all “proceeds” as defined in Article 9 of the UCC as in
effect from time to time in the State of New York; (ii) all interest, dividends,
payments or distributions made with respect to any of the Pledged Collateral;
and (iii) whatever is receivable or received when the Pledged Collateral or
proceeds are sold, exchanged, collected, converted or otherwise disposed of,
whether such disposition is voluntary or involuntary.
“Project”
shall mean a
project being financed under a Loan Agreement, as described in Schedule 1
to such Loan Agreement.
“Project Agreement”
shall
mean the Project Agreement between the Company and a Borrower, with respect to
the Borrower’s Project and the Series 2009A Bonds.
“Project Fund”
means the
Project Fund created in Section 402.
“Qualified Investments”
shall
mean, subject to the applicable provisions of the Tax Compliance Agreement, any
obligations having a maturity date not later than the final maturity date of the
Securities in which the Company is authorized to invest, including, without
limitation, certificates of deposit, money market funds, revenue obligations of
state or local governments or their agencies or instrumentalities, the interest
on which is excludable from gross income of the owner thereof for Federal income
tax purposes, guaranteed investment contracts or other liquid
investments.
“Redemption Date”
, when used
with respect to any Security to be redeemed, means the date fixed for such
redemption by or pursuant to this Indenture.
“Redemption Price”
, when used
with respect to any Security to be redeemed, means the price at which it is to
be redeemed pursuant to this Indenture.
“Regular Record Date”
for the
interest payable on any Interest Payment Date on the Securities means the
15th day immediately preceding such Interest Payment Date.
“Required Collateralization
Level”
shall have the meaning set forth in the Pledge
Agreement.
“Responsible Officer”
, when
used with respect to the Trustee, shall mean any officer within the Corporate
Trust Office having direct responsibility for the administration of this
Indenture.
“Secured Parties”
shall have
the meaning set forth in Section 1701 of this Indenture.
“Security Register”
has the
meaning specified in Section 305.
“Security Registrar”
means
the Person appointed by the Company to register Securities and transfers of
Securities as provided in Section 305 and Section 1202.
“Series 2009A Bonds”
or
the
“Securities”
has
the meaning stated in the first recital of this Indenture and more particularly
means any Securities authenticated and delivered under this
Indenture.
“Series 2009A Expense
Account”
has the meaning specified in Section 402.
“Series 2009A Project
Account”
has the meaning specified in Section 402.
“Special Record Date”
for the
payment of any Unpaid Interest on the Securities means a date fixed by the
Company pursuant to Section 307.
“Stated Maturity”
, when used
with respect to any Security or any installment of principal thereof or interest
thereon, means the date specified in such Security as the fixed date on which
the principal of such Security or such installment of principal or interest is
due and payable.
“Supplemental Indenture”
means a supplemental indenture amending this Indenture signed by the Chief
Executive Officer, the President, the Chief Financial Officer or a Vice
President, and by the Secretary-Treasurer, or one of the Assistant
Secretary-Treasurer, of the Company, and an authorized officer of the
Trustee.
“Supplemental Interest”
means
the amount of interest to be payable on the Securities.
“Tax Compliance Agreement”
means the tax compliance certificate and agreement of the Company, with respect
to the Securities, accepted by the Trustee, as amended.
“Tax Credit Rate”
means the
tax credit rate for each maturity of the Securities, as set forth in the
Indenture and the Tax Compliance Agreement relating to the
Securities.
“Trustee”
means the Person
named as the “Trustee” in the first paragraph of this instrument until a
successor Trustee shall have become such with respect to the Securities pursuant
to the applicable provisions of this Indenture, and thereafter “Trustee” shall
mean or include each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, “Trustee” shall mean the Trustee with
respect to the Securities.
“United States”
means the
United States of America (including the States and the District of Columbia) and
its possessions.
“United States Alien”
means
any Person who, for United States federal income tax purposes, is a foreign
corporation, a nonresident alien individual, a non-resident alien fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the members of
which is, for United States federal income tax purposes, a foreign corporation,
a non-resident alien individual or a non-resident alien fiduciary of a foreign
estate or trust.
“United States Person”
means
a citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States and an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
“Unpaid Interest”
has the
meaning set forth in Section 307 hereof.
“U.S. Government Obligations”
means securities which are (i) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
“Vice President”
, when used
with respect to the Trustee, means any vice president, whether or not designated
by a number or a word or words added before or after the title “vice
president.”
“Voting Stock”
means, with
respect to any Person, any and all shares, interests, participations or other
equivalents (however designated) in the equity interests of such Person,
including, without limitation, capital stock, partnership interests and limited
liability company interests, in each case having voting power for the election
of, or to appoint or approve the appointment of, the directors, trustees or
other persons holding similar positions or other governing body of such Person,
whether at all times or only so long as no senior class of stock or other equity
interests has such voting power because of default in dividends or other
default.
Section
102.
Compliance Certificates and
Opinions.
Except as otherwise expressly provided by this
Indenture, upon any application or request by the Company to the Trustee to take
any action or refrain from taking any action under any provision of this
Indenture, the Company shall furnish to the Trustee an Officers’ Certificate
stating that all conditions precedent or covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent or covenants, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1)
a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating
thereto;
(2)
a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3)
a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4)
a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section
103.
Form of Documents Delivered to
Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
Any
certificate or opinion of an officer of the Company may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are
erroneous. An officer of the Company who signs any certificate or
opinion shall be identified by the position(s) he or she holds at the Company
that are relevant to such certificate or opinion, and the certificate or opinion
may, but need not, identify every position such officer holds at the
Company.
Where any
Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this
Indenture, they may, but need not, be consolidated and form one
instrument. Each party agrees to accept a consolidated instrument
produced by the other party, as long as the consolidated instrument gives the
recipient substantively the same assurances the recipient would have obtained if
individual instruments were used.
Section
104.
Acts of
Holders.
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor and terms signed by such Holders in
person or by agent duly appointed in writing. Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments or record or both are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such
instrument or instruments and any such record (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the “Act” of the
Holders signing such instrument or instruments and so voting at any such
meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security, shall
be sufficient for any purpose of this Indenture and (subject to
Section 801) conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section. The record of any meeting of
Holders of Securities shall be proved in the manner provided in
Section 1406.
Without
limiting the generality of this Section 104, unless otherwise provided in
or pursuant to this Indenture, a Holder, including a depositary that is (or
whose nominee is) a Holder of a global Security, may make, give or take, by a
proxy or proxies, duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other Act provided in or pursuant to this
Indenture or the Securities to be made, given or taken by Holders, and a
depositary that is (or whose nominee is) a Holder of a global Security may
provide its proxy or proxies to the beneficial owners of interests in any such
global Security through such depositary’s standing instructions and customary
practices.
(b)
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems
sufficient.
(c)
The ownership of Securities shall be proved by the Security
Register.
(d)
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e)
The Company may set a record date for purposes of determining the
identity of Holders of Securities entitled to vote or consent to any action by
vote or consent authorized or permitted by Sections 610, 611 or
1102. Such record date shall be the later of 30 days prior to
the first solicitation of such consent or the date of the most recent list of
Holders of such Securities furnished to the Trustee pursuant to Section 901
prior to such solicitation.
Section
105.
Notices, Etc., to Trustee and
Company.
Any request, demand, authorization, direction,
notice, consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed
with,
(1)
the Trustee by any Holder or by the Company or the Guarantor
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention:
Corporate Trust
Services, or such other address provided in writing by the Trustee,
or
(2)
the Company by the Trustee or the Guarantor or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid (or by
overnight delivery), to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument,
Attention: Chief Financial Officer, or at any other address
previously furnished in writing to the Trustee by the Company for such purpose,
or
(3)
the Guarantor by the Company or the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid (or by overnight
delivery), to the Guarantor addressed to it at the address of its
principal office specified in the first paragraph of this instrument,
Attention: Vice President-Finance, or at any other address previously
furnished in writing to the Trustee by the Guarantor for such
purpose.
Section
106.
Notice to Holders of Securities;
Waiver.
Where this Indenture provides for notice to Holders of
any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver. In case by reason of
the suspension of regular mail service or by reason of any other cause it shall
be impracticable to give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
Section
107.
Language of Notices,
Etc.
Any request, demand, authorization, direction, notice,
consent or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in an official
language of the country of publication.
Section
108.
Effect of Headings and Table of
Contents.
The Article and Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.
Section
109.
Successors and
Assigns
. All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so expressed or not, and
all covenants and agreements in this Indenture by the Guarantor shall bind its
successors and assigns, whether so expressed or not.
Section
110.
Separability
Clause.
In case any provision in this Indenture or the
Securities shall be invalid, illegal or unenforceable, then, to the extent
permitted by law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section
111.
Benefits of
Indenture.
Nothing in this Indenture or the Securities,
express or implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders of Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section
112.
Governing
Law.
This Indenture and the Securities shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent set forth in Section 501(g) with respect to the
Guarantee. The Guarantee shall be governed by federal law as
specified in Section 501(g).
Section
113.
Legal Holidays.
In any case
where any Interest Payment Date, Redemption Date or Stated Maturity of any
Security shall not be a Business Day at any Place of Payment for that Security,
then payment of principal or interest and premium, if any, need not be made at
such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date, or at the Stated Maturity,
provided
that no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
Article
Two
Security
Forms
Section
201.
Forms
Generally.
The Securities shall be substantially in the form
set forth in
Exhibit A
hereto, with such variations from such form (including temporary or
permanent global form) as shall be established by or pursuant to a Board
Resolution or a Supplemental Indenture and set forth in, or determined in the
manner provided in, an Officers’ Certificate or established in one or more
Supplemental Indentures, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any such legends
or endorsements placed on such Securities by the Company after the execution of
the Securities shall be delivered in writing to the Trustee by the
Company. If temporary Securities are issued in global form as
permitted by Section 304, the form thereof shall be established as provided
in the second preceding sentence. If the forms of Securities are
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary-Treasurer
or an Assistant Secretary-Treasurer of the Company and delivered to the Trustee
at or prior to the delivery of the Company Order contemplated by
Section 303 for the authentication and delivery of such Securities (or any
such temporary global Security);
provided, however,
that if
the Secretary-Treasurer or Assistant Secretary-Treasurer of the Company is a
signatory to an Officers’ Certificate delivered pursuant to this
Section 201, then a separate certification by the Secretary-Treasurer or
Assistant Secretary-Treasurer of the Company shall not be required.
The
definitive Securities shall be typed, printed, lithographed or engraved on steel
engraved borders or may be produced in any other manner, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
Section
202.
Form of Trustee’s Certificate of
Authentication.
The Trustee’s certificate of authentication
shall be in substantially the following form:
This is
one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
|
U.S.
Bank National Association
, as Trustee
|
|
|
|
By
|
|
|
Authorized
Signatory
|
Section
203.
Securities in Global
Form.
If the Securities are issuable in global form, any such
Security shall represent such of the Outstanding Securities as shall be
specified therein and may provide that it shall represent the aggregate amount
of Outstanding Securities from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities represented thereby may from time to
time be reduced or increased to reflect exchanges. Any endorsement of
a Security in global form to reflect the amount, or any increase or decrease in
the amount, of Outstanding Securities represented thereby shall be made by the
Trustee in such manner and upon written instructions given by such Person or
Persons as shall be specified therein, or in the Company Order to be delivered
to the Trustee pursuant to Section 303 or
Section 304. Subject to the provisions of Section 303 and,
if applicable, Section 304, the Trustee shall deliver and redeliver any
Security in global form in the manner and upon written instructions given by the
Person or Persons specified therein or in the applicable Company
Order. If a Company Order pursuant to Section 303 or
Section 304 has been, or simultaneously is, delivered, any instructions by
the Company with respect to endorsement or delivery or redelivery of a Security
in global form shall be in writing but need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel.
The
provisions of the last sentence of Section 303 shall apply to any Security
represented by a Security in global form if such Security was never issued and
sold by the Company and the Company delivers to the Trustee the Security in
global form together with written instructions (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel) with
regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.
Article
Three
The
Securities
Section
301.
Issuance of the Series 2009A
Bonds.
There shall be a series of Securities entitled
“National Rural Utilities Cooperative Finance Corporation Clean Renewable Energy
Bonds, Tax Credit Series 2009A” and the form thereof shall be substantially
as set forth as Exhibit A hereto. The aggregate principal amount of
the Series 2009A Bonds at any one time outstanding shall be limited to
$28,908,000, exclusive of substitution or replacement Series 2009A Bonds
authenticated and delivered under this Indenture. The
Series 2009A Bonds are issuable only in registered form without
coupons. The Series 2009A Bonds shall bear the tax credit rates,
bear interest per annum at the rates and mature on December 15 of the years
and in the amounts set forth below:
Maturity
Date
(December
15)
|
|
Principal
Amount
|
|
|
Tax
Credit
Rate
|
|
|
Interest
Rate
|
|
Maturity
Date
(December
15)
|
|
Principal
Amount
|
|
|
Tax
Credit
Rate
|
|
|
Interest
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
1,807,000
|
|
|
|
2.12
|
%
|
|
|
3.19
|
%
|
2017
|
|
$
|
1,807,000
|
|
|
|
5.37
|
%
|
|
|
3.29
|
%
|
2010
|
|
|
1,807,000
|
|
|
|
2.82
|
%
|
|
|
3.20
|
%
|
2018
|
|
|
1,807,000
|
|
|
|
5.62
|
%
|
|
|
3.04
|
%
|
2011
|
|
|
1,807,000
|
|
|
|
3.59
|
%
|
|
|
3.25
|
%
|
2019
|
|
|
1,807,000
|
|
|
|
5.73
|
%
|
|
|
2.93
|
%
|
2012
|
|
|
1,806,000
|
|
|
|
4.24
|
%
|
|
|
3.30
|
%
|
2020
|
|
|
1,806,000
|
|
|
|
5.84
|
%
|
|
|
2.82
|
%
|
2013
|
|
|
1,807,000
|
|
|
|
4.47
|
%
|
|
|
3.33
|
%
|
2021
|
|
|
1,807,000
|
|
|
|
5.95
|
%
|
|
|
2.71
|
%
|
2014
|
|
|
1,807,000
|
|
|
|
4.85
|
%
|
|
|
3.23
|
%
|
2022
|
|
|
1,807,000
|
|
|
|
6.04
|
%
|
|
|
2.62
|
%
|
2015
|
|
|
1,807,000
|
|
|
|
5.07
|
%
|
|
|
3.30
|
%
|
2023
|
|
|
1,807,000
|
|
|
|
6.10
|
%
|
|
|
2.56
|
%
|
2016
|
|
|
1,806,000
|
|
|
|
5.15
|
%
|
|
|
3.31
|
%
|
2024
|
|
|
1,806,000
|
|
|
|
6.18
|
%
|
|
|
2.48
|
%
|
Interest
on the Bonds will be computed as provided in Section 310 hereof and will be
paid semi-annually on June 15 and December 15 of each year, commencing
December 15, 2009.
Section
302.
Denominations.
The
Securities shall be issuable in denominations of $100,000 and any integral
multiple of $1,000 over $100,000.
Section
303.
Execution, Authentication, Delivery
and Dating.
The Securities shall be executed on behalf of the
Company by its Chief Executive Officer, the President, the Chief Financial
Officer or a Vice President, and by the Secretary-Treasurer or one of the
Assistant Secretary-Treasurers of the Company. The signature of any
of these officers on the Securities may be manual or facsimile.
Securities
bearing the manual or facsimile signatures of individuals who were at any time
the proper officers of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.
At any
time and from time to time after the execution and delivery of this Indenture,
the Company may deliver the Securities executed by the Company to the Trustee
for authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities.
In
connection with the issuance of the Securities, in authenticating such
Securities, and accepting the responsibilities under this Indenture in relation
to such Securities, the Trustee shall be entitled to receive, and (subject to
Section 803(a)) shall be fully protected in relying upon, an Opinion of
Counsel substantially to the effect that such Securities, when executed by the
Company, authenticated and delivered by the Trustee and issued in accordance
with this Indenture, will constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their terms and the terms of the
Indenture, subject to such matters as shall be specified therein.
In giving
such Opinion of Counsel, (i) such Counsel may rely as to matters governed
by the law of any particular jurisdiction upon opinions of counsel in any such
jurisdiction upon whom they believe they and the Trustee are justified in
relying, and, in such event, they shall deliver copies of such opinions to the
Trustee, (ii) such Counsel may include in any such Opinions customary
qualifications and assumptions, including without limitation qualifications to
the effect that (x) any sale or transfer by the Trustee of any of the
Pledged Collateral (other than a transfer into the name of the Trustee or a
nominee thereof) may be subject to the provisions of the Securities Act of 1933,
other applicable securities laws and regulations promulgated thereunder, and
(y) the enforceability of certain of the remedies under the Indenture are
subject to equitable requirements of good faith which may render ineffective any
consent by the Company to the sale of Pledged Collateral at private sale, and
(iii) that the enforceability thereof may be limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors’ rights and that the enforceability thereof may be
limited by laws with respect to or affecting the remedies provided for in said
agreement or instrument (
provided
that such laws do
not in the opinion of such Counsel make inadequate the remedies afforded thereby
for the realization of the benefits provided for in such agreement or
instrument).
The
Trustee shall not be required to authenticate such Securities if the issue of
such Securities pursuant to this Indenture will affect the Trustee’s own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee.
Each
Security shall be dated the date of its authentication.
No
Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing,
if any Security shall have been duly authenticated and delivered hereunder but
never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with Section 102
and need not be accompanied by an Opinion of Counsel) stating that such Security
has never been issued and sold by the Company, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.
Section
304.
Temporary Securities; Exchange of
Temporary Securities.
Pending the preparation of definitive
Securities, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor and terms of the definitive Securities in lieu of
which they are issued, in registered form or, if authorized, in bearer form with
one or more coupons or without coupons, and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such
Securities.
If
temporary Securities are issued, the Company will cause definitive Securities to
be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company in a Place of Payment for the Securities, without
charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities,
of any authorized denominations and of like tenor and aggregate principal
amount.
Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of such
tenor.
Section
305.
Registration, Registration of
Transfer and Exchange.
The Company shall cause to be kept at an office or
agency to be maintained in accordance with Section 1202 a register (being
the combined register of the Security Registrar and all transfer agents
designated pursuant to Section 1202 for the purpose of registration of
transfer of Securities and sometimes collectively referred to as the
“Security Register”
) in
which, subject to such reasonable regulations as may be prescribed, the Company
shall cause to be provided the registration of Securities and the registration
of transfers of Securities.
Upon
surrender for registration of transfer of any Security at the office or agency
of the Security Register maintained pursuant to Section 1202 for such
purpose in a Place of Payment for such Securities, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denominations and of a like aggregate principal amount and tenor and
terms.
At the
option of the Holder, the Securities may be exchanged for other Securities in
any authorized denominations and of a like aggregate principal amount and tenor
and terms, upon surrender of the Securities to be exchanged at any such office
or agency.
Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
The
global Securities shall be exchangeable for definitive certificated Securities
if (i) the depositary for such global Securities notifies the Company that it is
unwilling or unable to continue as depositary for such global Securities or at
any time such depositary ceases to be a clearing agency registered as such under
the Securities Exchange Act of 1934, as amended (or any successor thereto), if
so required by applicable law or regulation, and the Company shall not have
appointed a successor depositary for such Securities within 90 days of such
notification or of the Company becoming aware of the depositary’s ceasing to be
so registered, as the case may be or (ii) the Company, in its sole discretion,
determines that the global Securities shall be exchangeable for definitive
certificated Securities and executes and delivers to the Trustee a Company Order
to the effect that such global Securities shall be so
exchangeable. If the Holders of, or beneficial owners of interests
in, a global Security are entitled to exchange such interests for definitive
Securities as a result of an event described in the preceding sentence, such
exchanges shall be effected in accordance with the provisions set forth in the
immediately preceding paragraph. Any global Security that is
exchangeable for definitive certificated Securities pursuant to this paragraph
will be exchangeable for definitive certificated Securities registered in such
name or names as the depositary for such global Security shall instruct the
Trustee in writing.
All
Securities issued upon any registration of transfer or in exchange for
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every
Security presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee or any transfer agent) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or any transfer agent
duly executed, by the Holder thereof or his attorney duly authorized in
writing.
No
service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 1105 or 1308 not involving any
transfer.
If the
Securities are to be redeemed in part, neither the Trustee nor the Company shall
be required, pursuant to the provisions of this Section 305, (A) to
issue, register the transfer of or exchange any Securities (of any specified
tenor) during a period beginning at the opening of business 15 days before the
day of the mailing of a notice of redemption of any such Securities selected for
redemption under Section 1305 and ending at the close of business on the
day of such mailing, or (B) to register the transfer of or exchange any
Security so selected for redemption, in whole or in part, except, in the case of
any Security to be redeemed in part, any portion not to be
redeemed.
Section
306.
Mutilated, Destroyed, Lost and
Stolen Securities
. If any mutilated Security is surrendered to
the Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security and of like tenor and terms and
principal amount and bearing a number not contemporaneously outstanding and
shall cancel and dispose of such mutilated Security in accordance with customary
procedures.
If there
shall be delivered to the Company and the Trustee (i) evidence to their
satisfaction of the destruction, loss or theft of any Security and
(ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice of
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and terms and principal amount and
bearing a number not contemporaneously outstanding.
In case
any such mutilated, destroyed, lost or stolen Security has become or is about to
become due and payable, the Company in its discretion may, instead of issuing a
new Security, pay such Security.
Upon the
issuance of any new Security under this Section, the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the reasonable
fees and expenses of the Trustee) connected therewith.
Every new
Security issued pursuant to this Section in lieu of any destroyed, lost or
stolen Security, shall constitute an original additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Security shall be
at any time enforceable by anyone, and any such new Security shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Securities and of like tenor and terms duly issued
hereunder.
The
provisions of this Section are (to the extent lawful) exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen
Securities.
Section
307.
Payment of Interest; Interest Rights
Preserved.
Interest, if any, on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
with respect to such Interest Payment Date. At the option of the Company,
payment of interest on any Security may be made by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or by wire transfer to an account designated by such Person pursuant to
an arrangement that is satisfactory to the Trustee and the
Company. In the event that payments shall be made by wire transfer,
the Company shall arrange by 10:00 a.m. New York time on the Interest Payment
Date for the wire transfer of money in immediately available funds to the
Trustee or Paying Agent. The Trustee shall not be responsible or held
liable for any loss resulting from a failure of the federal funds wire system or
any other occurrence beyond its control in connection with wire transfers made
pursuant to this Section.
Any
interest on any Security which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called
“Unpaid Interest”
) shall
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Unpaid Interest may be paid by
the Company, at its election in each case, as provided in Clause (1) or (2)
below:
(1)
The Company may elect to make payment of any Unpaid Interest to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Unpaid Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount
of Unpaid Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Unpaid Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Unpaid Interest as in this Clause provided. At the same time the
Company shall fix a Special Record Date for the payment of such Unpaid Interest
which shall be not more than 15 days and not less than 10 days prior to the date
of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. Upon receipt of
written notice of such Special Record Date from the Company the Trustee, in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Unpaid Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities at the address
of such Holder as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Unpaid Interest and the Special Record Date therefor having been so mailed,
such Unpaid Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2)
The Company may make payment of any Unpaid Interest on the Securities in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after written notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject
to the foregoing provisions of this Section and Section 305, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other
Security.
Section
308.
Persons Deemed
Owners.
Prior to due presentment of a Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security is registered as
the owner of such Security for the purpose of receiving payment of principal of
and premium, if any, and (subject to Sections 305 and 307) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
No owner
of any beneficial interest in any global Security held on its behalf by a
depositary (or its nominee) shall have any rights under this Indenture with
respect to such global Security, and such depositary may be treated by the
Company, the Trustee, and any agent of the Company or the Trustee as the owner
of such global Security for all purposes whatsoever. None of the
Company, the Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Security issued
in global form or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee, any Paying
Agent or the Security Registrar from giving effect to any written certification,
proxy or other authorization furnished by the applicable depositary or its
nominee, as a Holder, with respect to a global Security or impair, as between
such depositary and the owners of beneficial interests in such global Security,
the operation of customary practices governing the exercise of the rights of
such depositary (or its nominees) as the Holder of such global
Security.
Section
309.
Cancellation.
All Securities
surrendered for payment, redemption, repayment, registration of transfer or
exchange or for credit against any sinking fund payment shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee. All
Securities so delivered shall be promptly cancelled by the
Trustee. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever and may deliver to
the Trustee (or to any Person for delivery to the Trustee) for cancellation any
Securities previously authenticated hereunder which the Company has not issued
and sold, and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of by the Trustee in accordance with its
customary practices.
Section
310.
Computation of
Interest.
Interest on the Securities, if any, shall be
computed on the basis of a 360-day year of twelve 30-day months. If
any principal of or premium, if any, or interest on the Securities is not paid
when due then, to the extent permitted by law, interest will accrue and be
payable by the Company on such overdue principal, premium, if any, and interest
at the rate or rates prescribed therefor in such Securities. Accrual
of the Tax Credit Rate shall be computed on the basis provided by the Internal
Revenue Service.
Section 311.
CUSIP
Numbers.
The Company in issuing the Securities may use “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP”
numbers in notices of redemption as a convenience to Holders;
provided
that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will
promptly notify the Trustee in writing of any change in the “CUSIP”
numbers.
Article
Four
Application
of Proceeds; Project Fund; Bond Fund; Borrower Repayments Fund
Section 401.
Deposit of
Funds.
The Company shall apply the proceeds from the sale of
the Securities (less Initial Purchaser’s discount, original issue discount or
accrued interest, if any) to make loans to the Borrowers for whose benefit, and
at whose request, such Securities are issued, and to pay related expenses, and
shall deposit with the Trustee all such sale proceeds. The Trustee
shall deposit proceeds from the sale of the Securities into the Project Fund
created below in order that such proceeds may be used (i) to reimburse
Borrowers for the costs of acquiring, constructing, or equipping Projects and
(ii) to pay costs relating to the issuance of the Securities hereunder, all
as more fully described in Section 402 hereof.
Section 402.
Project
Fund
.
(a)
General
. The
Trustee shall establish and maintain so long as any Securities are outstanding a
separate Fund to be known as the “Project Fund—CREBs Program” (the
“Project Fund”
) and within
the Project Fund the Trustee shall establish two separate Accounts to be known
as the “Series 2009A Project Account” of the Project Fund and the
“Series 2009A Expense Account” of the Project Fund.
In
accordance with the specific direction provided in the Company Request, the
Trustee shall divide the proceeds from the sale of the Securities into the
portion to be deposited into the Series 2009A Project Account and the
portion to be deposited into the Series 2009A Expense Account.
(b)
Disbursements from
Series 2009A Project Account of the Project Fund.
(i)
Withdrawals.
Except
for withdrawals made in accordance with the Tax Compliance Agreements, moneys
deposited in the Series 2009A Project Fund shall be paid out from time to
time by the Trustee to the Company in order to reimburse a Borrower for payments
made, for costs of a Borrower’s Project (including any capital expenditure for
planning, financing or other services constituting a cost of the Project), in
each case only upon receipt by the Trustee from the Company of the
following:
A copy of
the Funds Requisition Statement of such Borrower, which must be approved by
signature of an Authorized Officer of the Company, in substantially the form
attached as
Exhibit A
to the Loan Agreement with such Borrower, which
Exhibit A shall include, among other things, representations:
(1) stating the
number of such Funds Requisition Statement, the issue of Securities to which
such Funds Requisition Statement relates, the name of the Borrower to whom each
such payment is due, each amount to be reimbursed and the general classification
of the costs for which each obligation to be paid was incurred;
(2) stating
that such costs have been incurred by the Borrower and have been paid by the
Borrower in connection with the Project and are reimbursable under the Loan
Agreement and each item thereof is a capital expenditure and has not been
previously reimbursed from the Series 2009A Project Fund;
(3)
stating that the representations and warranties contained in such
Borrower’s Loan Agreement and Project Agreement are true and will continue to be
true upon use of the funds as requested herein; and
(4)
stating that no event of default has occurred and is continuing under
such Borrower’s Loan Agreement or its Mortgage.
(ii)
Completion
Certificate
. A Borrower with respect to its Project is
required by its related Loan Agreement to submit to the Company within
30 days after the completion of such Project, a Completion Certificate
signed by an Authorized Officer of the Borrower, which shall promptly be
submitted by the Company to the Trustee:
A.
stating that all portions of such Project have been fully completed
substantially in accordance with any plans and specifications therefor, as then
amended, and the date of completion; and
B.
stating that the amounts advanced on the Loan and the use of the property
financed, refinanced or reimbursed therefrom will not cause any of the
representations or certifications contained in such Borrower’s Project Agreement
to be untrue or result in a violation of any covenant in such Borrower’s Project
Agreement.
(iii)
Termination
Certificate
. If a Borrower determines that its Project will
not be completed as described in Section 402(b)(ii) above, the Borrower is
required by its related Loan Agreement to submit to the Company within
30 days of such determination, a Termination Certificate signed by an
Authorized Officer of the Borrower, which shall promptly be submitted by the
Company to the Trustee:
A.
stating that no more acquisition, construction or installation will occur
with respect to the Project; and
B.
stating that the Borrower does not intend to request any further Advances
on the Loan.
(iv)
Disposition of Moneys after
Completion, Termination Borrower Default or Draw Period Expiry; Financing
Additional Project Costs
. When (y) the Company shall have
received a Completion Certificate as described in subparagraph (b)(ii) of
this Section 402 or a Termination Certificate as described in
subparagraph (b)(iii) of this Section 402 with respect to any Project
of a Borrower and shall have submitted such Completion Certificate or
Termination Certificate to the Trustee or determined that it will cease making
Advances to a Borrower under a Loan Agreement following an Event of Default (as
defined therein) thereunder or (z) the Draw Period (as defined in the Loan
Agreement) has ended, and the Company has paid all Funds Requisition Statements
theretofore tendered by such Borrower to the Company under the provisions of
subparagraph (b)(i) of this Section 402 with respect to such Project,
the Company shall calculate what portion the proceeds of the Securities which
were expected to be loaned to such Borrower will thus be unused by the Borrower
for such Project. Likewise, if a Borrower has defaulted on the terms
and conditions of the related Loan Agreement, the Company may require the
Borrower to prepay the Loan under the terms of the Loan
Agreement. The Company shall then determine how to allocate such
unused proceeds remaining in the Series 2009A Project Account or such
prepaid amounts following a default among one or more of following
purposes:
A.
to the extent permitted by law (expressed in an Opinion of Bond Counsel),
except in the case of a Draw Period expiration referred to in (z) above, to be
applied to pay additional unreimbursed costs of other “qualifying projects” (as
such term is defined in the Section 54 of the Code) of borrowers (including
such Borrower) which have received loans of the proceeds of Securities, provided
that each such project has obtained an allocation of clean renewable energy bond
cap from the Internal Revenue Service;
B.
if the Company makes a Determination of Potential Tax Credit
Ineligibility, to be withdrawn by the Trustee from the Series 2009A
Project Account and deposited into the Bond Fund to redeem Securities pursuant
to Section 1303 hereof; and/or
C.
to be held or applied in any other lawful manner, provided that there
shall be delivered to the Trustee and the Company an Opinion of Bond Counsel to
the effect that such application will not adversely affect the validity of the
Securities or any tax credit to which the owners of the Securities would
otherwise be entitled.
(c)
Disbursement from Series 2009A
Expense Account of the Project Fund
. Moneys deposited in the
Expense Account of the Project Fund shall be paid out from time to time by the
Trustee to the Company, upon receipt by the Trustee of an Expense Requisition
Statement of the Company, in substantially the form attached as
Exhibit B
, which
Exhibit B shall state that such amount is due and owing, has not been
previously paid with moneys disbursed from such Account and is a proper cost of
issuing the Securities, and shall be used to pay the fees, costs and expenses of
issuing Securities, including, without limitation, all printing expenses in
connection with this Indenture, Borrower Loan Agreements, Project Agreements and
Series 2009A Bonds, Rating Agency fees, legal fees, administrative charges
of the Company and the initial fees and expenses of the Trustee. Any
moneys that remain on deposit in the Series 2009A Expense Account on the
earlier of (i) the date on which the Company notifies the Trustee that all
such fees and expenses to be paid by the Company have been paid, or (ii) six
months following the issuance date of the Securities shall be transferred by the
Trustee and deposited in the Series 2009A Project Account, as directed by
the Company.
(d)
Investment of Project Fund
Moneys
. Subject to the provisions of Section 403(h) of
this Indenture, moneys at any time on deposit in the Project Fund shall be
invested or reinvested by the Trustee at the written direction of the Company in
Qualified Investments maturing, redeemable or marketable at such time or times
so that funds will be available from time to time for the purposes set forth in
this Section 402,
provided,
however,
that moneys in the Project Fund may only be invested in money
market funds or short-term federal securities direct obligations of (including
obligations issued or held in book entry form on the books of) or obligations
the principal of and interest on which are guaranteed by, the United States of
America and having a maturity date of less than 12 months. The
Trustee and the Company shall be entitled to rely upon a schedule of anticipated
payments of construction and equipment costs approved by a Borrower, in
scheduling such investments. Any interest or profit on such
investments shall be credited to, and any losses on such investments shall be
charged against, the Account in which such investments are held. The
Company may direct the sale or present for redemption any obligations so
purchased whenever it shall be necessary in order to provide moneys to meet any
payment pursuant to this Section 402 and neither the Trustee nor the
Company shall be liable or responsible for any loss resulting from such
investments. Notwithstanding any other provisions of this
Section 402, all investment earnings shall be subject to the provisions of
the Tax Compliance Agreement(s).
(e)
Disposition of Excess Moneys in the
Series 2009A Project Account; Financing Additional Project
Costs
. When the Company determines that excess proceeds exist
in the Series 2009A Project Account due to a return of unused monies from
the related Expense Account pursuant to subsection (c) of this
Section 402 or because of investment earnings on such account pursuant to
subsection (d) of this Section 402, the Company shall calculate the amount
of such excess. The Company shall then determine how to allocate such
unused proceeds remaining in the Project Fund among one or more of following
purposes:
A.
to the extent permitted by law (expressed in an Opinion of Bond Counsel), to be
applied to pay additional unreimbursed costs of other “qualifying projects” (as
such term is defined in the Section 54 of the Code) of borrowers which have
received loans of the proceeds of Securities, provided that each such project
has obtained an allocation of clean renewable energy bond cap from the Internal
Revenue Service;
B.
if the Company makes a Determination of Potential Tax Credit
Ineligibility, to be withdrawn by the Trustee from the Series 2009A
Project Account and deposited into the Bond Fund to redeem
Securities pursuant to Section 1303 hereof; and/or
C.
to be held or applied in any other lawful manner, provided that there
shall be delivered to the Trustee and the Company an Opinion of Bond Counsel to
the effect that such application will not adversely affect the validity of the
Securities or any tax credit to which the owners of the Securities would
otherwise be entitled.
Section 403.
Bond
Fund
.
(a)
General
. The
Trustee shall establish and maintain so long as any Securities are outstanding a
separate Fund to be known as the “Bond Fund—CREBs Program” (the
“Bond Fund”
).
(b)
Payments into Bond Fund; Excess
Amount.
There shall be deposited in the Bond Fund, as and when
received (a) any amount in the Project Fund directed by the Company to be
deposited in the Bond Fund under Section 402 hereof; (b) all
repayments and revenues from a Borrower or the Company under a Loan Agreement or
a Note intended to pay principal and premium and interest on the Securities;
(c) all income or other gain realized from the investment of moneys in the
Bond Fund; (d) any amount deposited by the Company in the Bond Fund; and
(e) all other moneys received by the Trustee under and pursuant to any of the
provisions of any Loan Agreement, any Note or a Tax Compliance Agreement that is
specifically directed to be deposited in the Bond Fund. So long as no
acceleration of principal or any interest on the Securities has occurred, the
amounts due to be deposited in the Bond Fund shall be reduced by any “Excess
Amount” in the Bond Fund. The term “Excess Amount” as of a payment
date shall mean the amount of cash in the Bond Fund on such date already on hand
and available for payment of the principal or interest on the
Securities.
(c)
Use of Moneys in Bond
Fund.
Except as provided in Section 403(h) hereof, moneys
in the Bond Fund shall be used solely for the payment of the principal of and
premium and interest on the Securities, including for the redemption of
Securities prior to maturity. As provided in the Tax Compliance
Agreement, other than any amounts being held to pay principal on matured
Securities that have not been presented for payment, any moneys deposited in the
Bond Fund shall be spent within the 12-month period beginning on the date of
deposit therein.
(d)
Custody of Bond
Fund.
Moneys held in the Bond Fund shall be in the custody of
the Trustee. The Company hereby authorizes and directs the Trustee to
withdraw sufficient funds from the Bond Fund to pay the principal of and premium
and interest on the Securities as the same become due and payable, including for
the redemption of Series 2009A Bonds prior to maturity, which authorization
and direction the Trustee hereby accepts.
(e)
Moneys to Be Held in
Trust.
All moneys deposited under any provision of this
Indenture in the Bond Fund, the Project Fund or the Borrower Repayments Fund
created below shall be held by the Trustee in trust and, except for moneys
deposited with or paid to the Trustee for the payment of Series 2009A Bonds
or for the redemption of Series 2009A Bonds notice of the redemption of
which has been duly given, shall, while held in the Bond Fund, the
Series 2009A Project Account or the Borrowers Repayment Fund by the
Trustee, constitute part of the Trust Estate as defined herein and be subject to
the lien or security interest created hereby.
(f)
Investment of Bond Fund
Moneys.
Subject to the provisions of Section 403(h) of
this Indenture, moneys at any time on deposit in the Bond Fund shall be invested
or reinvested by the Trustee at the written direction of the Company in
Qualified Investments maturing, redeemable or marketable at such time or times
in order to pay principal, premium, if any, and interest on the Securities when
due. During the period that the Project Fund is actively being used
to provide loans to Borrowers from the Securities and prior to the completion or
termination of such Borrower projects, any interest or profit on the investments
in the Bond Fund shall be credited to, and any losses on such investments shall
be charged against, the Project Fund. Thereafter, any interest or profit on the
investments in the Bond Fund shall be credited to, and any losses on such
investments shall be charged against, the Bond Fund in which such investments
are held. Notwithstanding any other provisions of this Section 403, all
investment earnings shall be subject to the provisions of the Tax Compliance
Agreement.
(g)
Repayment to the Company from Bond
Fund.
After payment in full of (i) the Securities (or
provision for payment thereof having been made in accordance with the provisions
of Article Sixteen hereof), (ii) the related fees, charges and
expenses of the Trustee and any Paying Agent in accordance with this Indenture,
(iii) all other amounts required to be paid under this Indenture and the
Loan Agreements relating to such Securities, and (iv) all amounts relating to
the Guarantee required to be paid under this Indenture, any amounts remaining in
the Bond Fund, shall belong to, and upon written order of an Officer of the
Company shall be paid by the Trustee to, the Company. The Trustee
shall be entitled to rely upon a certificate of an Officer of the Company as to
any amount payable to the Company under the provisions of this
Section.
(h)
Compliance with Tax Compliance
Agreement.
Notwithstanding anything herein to the contrary
with respect to the funds discussed in Article Four hereof, moneys held
under the provisions of this Indenture shall be used in accordance with the
applicable provisions of the Tax Compliance Agreement.
Section 404.
Borrower Repayments
Fund
.
(a)
General
. The
Trustee shall establish and maintain so long as any Securities are outstanding a
separate Fund to be known as the “Borrower Repayments Fund—Series 2009A
CREBs Program” (the
“Borrower
Repayments Fund”
).
(b)
Payments into Borrower Repayments
Fund.
The Company will collect all repayments and revenues
from Borrowers on their Notes pursuant to a Loan Agreement and, after making
certain deductions, will deliver such monies intended to pay principal and
interest on the Securities to the Trustee for deposit into the Borrower
Repayments Fund.
(c)
Use of Moneys in
Borrower Repayments Fund.
Except as provided in
Sections 404(d) and (f) hereof, moneys in the Borrower Repayments Fund may
be used, without limitation, (i) for transfer to the Bond Fund, pursuant to
a Funds Direction Statement from the Company to the Trustee in the form attached
as Exhibit E, for the payment of the principal of and premium and interest
on the Securities, including for the redemption of such Securities prior to
maturity; (ii) to the extent not needed for (i) above, as determined by the
Company, to be withdrawn by the Company, pursuant to a Funds Direction Statement
from the Company to the Trustee, on each payment date with respect to the
Securities, to pay the Company for the costs of operating the Securities
program. As provided in the Tax Compliance Agreement, any moneys
deposited in the Borrower Repayments Fund shall be used as provided in
(i) or (ii) above within the 12-month period beginning on the date of
deposit therein or in the related Bond Fund.
The
Company agrees to direct the Trustee to transfer to the Bond Fund from the
Borrower Repayments Fund, or otherwise remit, at least two (2) business days
prior to a Payment Date on the Series 2009A Bonds sufficient amounts to
make full payment of any principal and/or interest on the Series 2009A
Bonds to be due on such Payment Date.
(d)
Investment of Borrower
Repayments Fund Moneys.
Subject to the provisions of
Section 404(f) of this Indenture, moneys at any time on deposit in the
Borrower Repayments Fund shall be invested or reinvested by the Trustee at the
written direction of the Company in Qualified Investments maturing, redeemable
or marketable at such time or times in order to pay principal, premium, if any,
and interest on the Securities when due. Any interest or profit on
such investments shall be credited to, and any losses on such investments shall
be charged against, the Company, and need not be used for the purpose specified
in subsection (c) above. Notwithstanding any other provisions of this
Section 404, all investment earnings shall be subject to the provisions of
the Tax Compliance Agreement(s).
(e)
Repayment to the
Company from Borrower Repayments Fund.
After payment in full
of (i) the Securities (or provision for payment thereof having been made in
accordance with the provisions of Article Sixteen hereof), (ii) the fees,
charges and expenses of the Trustee and any Paying Agent relating to the
Securities in accordance with this Indenture, and (iii) all other amounts
relating to such Securities required to be paid under this Indenture and the
related Loan Agreements, any amounts remaining in the account within the
Borrower Repayments Fund shall belong to, and upon written order of an Officer
of the Company shall be paid by the Trustee to, the Company. The
Trustee shall be entitled to rely upon a certificate of an Officer of the
Company as to any amount payable to the Company under the provisions of this
Section.
(f)
Compliance with Tax
Compliance Agreement.
Notwithstanding anything herein to the
contrary with respect to the funds discussed in Article Four hereof, moneys
held under the provisions of this Indenture shall be used in accordance with the
applicable provisions of the Tax Compliance Agreement.
Article
Five
Guarantee;
Action by the Trustee
Section 501.
Guarantee of the
Series 2009A Bonds
. In addition to the provisions of the
Indenture regarding the Securities generally:
(a)
If a Guaranty Event shall occur, the Guarantor agrees to pay in full to
the Trustee, for deposit into the Bond Fund, for the benefit of the Holders of
the Series 2009A Bonds, an amount equal to the interest on the
Series 2009A Bonds and principal of the Series 2009A Bonds then due,
as set forth in Section 301 of this Indenture, whether at maturity, by
acceleration or otherwise, not later than 2:30 p.m. New York City time on the
applicable due date, subject to the Company’s right to pay as set forth in
Section 502(b);
provided,
however,
that the amount of principal paid hereunder shall not exceed an
amount equal to the outstanding principal of the Series 2009A Bonds less
any amounts in the Series 2009A Project Account.
(b)
The Guarantor’s obligations hereunder shall inure to the benefit of and
shall be enforceable by any Holder of a Series 2009A Bond through the
Trustee (or individually by any such Holder in the event the Trustee shall have
failed to make prompt demand upon the Guarantor after due notification from any
such Holder) if, for any reason beyond the control of such Holder, such Holder
shall have failed to receive on any Payment Date of the interest or principal,
as applicable, payable to such Holder on such date.
The
Guarantor hereby irrevocably agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, legality or enforceability of, or
any change in or amendment to, the Indenture or any Series 2009A Bond, or
any breach of any obligation of the Company to the Guarantor in consideration of
its Guarantee, the absence of any action to enforce the same, the waiver or
consent by the Holder of any Series 2009A Bond or by the Trustee with
respect to any provisions of the Indenture, or any action to enforce the same or
any other circumstance that might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, protest or notice with respect to each
Series 2009A Bond or the interest represented thereby, and all demands
whatsoever, and covenants that the Guarantee will not be discharged except upon
complete irrevocable payment of the principal and interest obligations
represented by the Series 2009A Bonds.
(c)
To the fullest extent permitted by applicable law, the Guarantor hereby
waives and agrees not to assert, solely for the benefit of Holders of the
Series 2009A Bonds, all defenses, set-offs and counterclaims of any kind
(including, without limitation, the defense of fraud in inducement or fact, any
defense based on any duty claimed to arise from the doctrine of “utmost good
faith” or any similar or related doctrine or any other circumstances that would
have the effect of discharging a surety, guarantor or any other person in law or
in equity) that the Guarantor otherwise might have asserted as a defense to its
obligation to pay in full any amounts that have become due and payable in
accordance with the terms and conditions of the Indenture. Nothing in this
paragraph, however, shall be deemed to constitute a waiver of any rights,
remedies, claims or counterclaims that the Guarantor may have with respect to
the Company.
(d)
No reference herein shall alter or impair the Guarantee, which is
absolute and unconditional, of the due and punctual payment of principal of, and
interest on, the Series 2009A Bonds, on the dates specified in (a)
above.
(e)
The Guarantee is not an obligation of, and is not a guarantee as to
principal or interest by the Farm Credit Administration, the United States or
any other agency or instrumentality of the United States (other than the
Guarantor). The Guarantor’s obligations under the Guarantee will not be backed
by the full faith and credit of the United States.
(f)
The Guarantee shall not be valid or become obligatory for any purpose
with respect to any Series 2009A Bond until the certificate of
authentication on such Series 2009A Bond shall have been signed by the
Trustee under the Indenture.
(g)
The Guarantee and this Article V shall be governed by, and construed in
accordance with, federal law. To the extent federal law incorporates state law,
that state law shall be the laws of the State of New York applicable to
contracts made and performed therein.
Section 502.
Action by the
Trustee
.
(a)
If a Guaranty Event occurs, the Trustee shall promptly (but in no event
later than 10:00 a.m. on the Payment Date) make a written demand for payment to
the Guarantor, substantially in the form attached hereto as Exhibit C,
delivering to the Company at the same time a copy of such demand.
(b)
If the Company remits to the Trustee the required amount on the next
Business Day following a Guarantee Event, the Trustee shall promptly notify the
Guarantor that the Guarantee Event is no longer continuing, cancelling the
request for a payment by the Guarantor.
(c)
If any Guaranty Event shall have occurred and be continuing, then, not
later than 2:30 p.m. New York City time on the Payment Date, the Guarantor
will pay to the Trustee for the benefit of the Holders of the Series 2009A
Bonds, immediately upon demand by the Trustee, such of the principal or interest
amounts then due and payable and any other amounts payable with respect to, the
Series 2009A Bonds as set forth in Section 501(a) hereof.
(d)
If the Guarantor shall fail to pay to the Trustee such amounts described
in (c) above following a Guaranty Event, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to institute any
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against the
Company, the Guarantor or other obligor upon the Series 2009A Bonds, as
applicable, and collect in the manner provided by law out of the property of the
Company, the Guarantor or other obligor upon the Series 2009A Bonds, as
applicable, wherever the funds adjudged or decreed to be payable are situated.
If there shall be pending proceedings relative to the Company, the Guarantor or
any other obligor upon the Series 2009A Bonds, as applicable, under
Insolvency Law, or if a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Company, the Guarantor, such other
obligor, or any such party’s property or in case of any other comparable
judicial proceedings relative to the Company, the Guarantor or other obligor
upon the Series 2009A Bonds, as applicable, or to the creditors or property
of the Company, the Guarantor or such other obligor, the Trustee, irrespective
of whether the principal of the Series 2009A Bonds shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:
(i)
to file such proofs of a claim or claims and to file such other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, by the Trustee and each
predecessor Trustee, except as those adjudicated in a court of competent
jurisdiction to be the result of any such Trustee’s negligence or bad faith) and
of the Holders of the Series 2009A Bonds and the Guarantor allowed in any
judicial proceedings relative to the Company, the Guarantor or other obligor
upon the Series 2009A Bonds, or to the creditors or property of the
Company, the Guarantor or such other obligor, as applicable;
(ii)
unless prohibited by applicable law and regulations, to vote on behalf of
the Holders of the Series 2009A Bonds in any election of a receiver,
liquidator or trustee or a standby receiver, liquidator or trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or Person performing similar functions in comparable proceedings;
and
(iii)
to collect and receive any funds or other property payable or deliverable
on any such claims, and to distribute all amounts received with respect to the
claims of each Holder, the Guarantor and of the Trustee on each Holder’s behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
authorized by each Holder and the Guarantor to make payments to the Trustee,
and, in the event that the Trustee shall consent to the making of payments
directly to any Holder and to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee except as those adjudicated in a court of competent
jurisdiction to be the result of any such Trustee’s negligence or bad
faith.
(e)
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any Holder
any plan or reorganization, arrangement, adjustment or composition affecting the
Series 2009A Bonds or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(f)
All rights of action and of asserting claims under this Indenture and the
Series 2009A Bonds may be enforced by the Trustee without any possession of
any of the Series 2009A Bonds or the production thereof at trial or any
other proceeding relative thereto, and any such action or proceedings instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be distributed in accordance with the terms
of the Indenture.
(g)
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture) the Trustee
shall be held to represent every Holder of the Series 2009A Bonds, and it
shall not be necessary to make any Holder of the Series 2009A Bonds party
to any such proceedings.
Article
Six
Events
of Default; Remedies
Section
601.
Events of Default; Remedies.
“Event of Default”, wherever used herein with respect to the Securities
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental
body):
(1)
default in the payment of any interest on any Security when it becomes
due and payable; or
(2)
default in the payment of any principal of or any premium on any Security
at its Maturity; or
(3)
default in the performance, or breach, of any covenant or warranty of the
Company in this Indenture or in the Securities, and continuance of such default
or breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of not less than 25% in principal amount of the Outstanding
Securities a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a “Notice of Default” hereunder;
or
(4)
an Insolvency Event relating to the Company shall have occurred and be
continuing; or
(5)
a failure by the Company to maintain the Required Collateralization Level
and a continuation of such default for a period of five (5) Business Days after
the Company becomes aware of such default.
Section
602.
Acceleration of Maturity, Rescission
and Annulment
.
(a)
Subject to the provisions of Section 701, if an Event of Default occurs
and is continuing, the Control Party may, or the Trustee acting at the direction
of the Control Party shall (subject to Section 803) or, if the Guarantor is not
the Control Party, the Trustee acting at the direction of the Holders of at
least 50% of the aggregate principal amount of the Series 2009A Bonds
Outstanding shall (subject to Section 803), in each case, by written notice to
each of the Guarantor and the Company, accelerate the maturity of the Bonds by
declaring the principal and all accrued and unpaid interest, if any, of such
Bonds due and owing and any other amounts payable with respect thereto to be due
and payable immediately.
(b)
Notwithstanding Section 602 (a), if at any time after the principal of
the Bonds, any interest due and owing and any other amounts payable with respect
thereto shall have been so declared due and payable and before any judgment or
decree for the payment of the funds due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay all due and payable interest on, and any other amounts
payable with respect to, the Series 2009A Bonds and the principal of the
Series 2009A Bonds which shall have become due and payable otherwise than
by acceleration pursuant to Section 602(a) (in each case, with interest
(including post-petition interest in any proceeding under any Insolvency Law, to
the extent lawful) on such principal at the same rate as the rate of interest
applicable to the Series 2009A Bonds to the date of such payment or
deposit) and such amount as shall be sufficient to cover reasonable compensation
to the Trustee and each predecessor Trustee, their respective agents, attorneys
and counsel, and all other expenses and liabilities incurred, and all advances
made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith, and if any and all Events of Default, other than the
non-payment of the principal of or interest on the Series 2009A Bonds which
shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein, then and in every such case the Control
Party or, if the Guarantor is not the Control Party, the holders of at least 50%
of the aggregate principal amount of the Series 2009A Bonds Outstanding by
written notice to the Guarantor, the Company and the Trustee, may waive all
defaults and rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
Section
603.
Collection of
Indebtedness.
If an Event of Default under Section 601(1)
or (2) occurs and is continuing, the Company covenants that the Company will,
upon demand of the Trustee upon Act of the Control Party, or if Farmer Mac is
not the Control Party, not less than 50% in principal amount of the Securities,
pay to it, for the benefit of the Holders of such Securities, the whole amount
then due and payable on such Securities for principal and any premium, sinking
fund installment and interest, and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal and premium,
sinking fund installment and on any overdue interest, computed from the date of
default in the payment of such interest, at the rate or rates prescribed
therefor in such Securities and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the
Company fails to pay such amounts and the Guarantor fails to pay the amounts
required pursuant to Section 501(a) hereof, the Company shall pay, to the
extent that payment of such interest shall be legally enforceable, interest on
any overdue principal and premium, sinking fund installment and on any overdue
interest, computed from the date of default in the payment of such interest, at
the rate equivalent to the Tax Credit Rate prescribed therefor for such
Securities pursuant to Section 301.
If the
Company fails to pay such amounts, the Trustee, in its own name and as trustee
of an express trust, may upon Act of the Control Party, or if Farmer Mac is not
the Control Party,
the Holders of not less
than 50% in principal amount of the Securities institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such proceeding
to judgment or final decree and may enforce the same against the Company or any
other obligor upon such Securities and collect the moneys adjudged or decreed to
be payable in the manner provided by law out of the property of the Company or
any other obligor upon such Securities, wherever situated.
Section
604.
Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims
under this Indenture or the Securities may be prosecuted and enforced by the
Trustee without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section
605.
Application of
Proceeds
. (a) So long as there is no Guarantor Default,
funds collected by the Trustee (i) following the occurrence and during the
continuance of an Event of Default, from the Company or the Guarantor for the
payment of the principal of, and interest (including Unpaid Interest) on, the
Series 2009A Bonds and (ii) under Section 3.02 of the Pledge and Security
Agreement shall be applied in the following order:
(i)
first, to the payment in full of all accrued and unpaid interest on the
Series 2009A Bonds that is then due and payable, ratably, according to the
aggregate principal amounts due and payable on such Series 2009A Bonds
(including, to reimburse the Guarantor for any such amounts paid to Holders
pursuant to the Guarantee), which shall be paid to the Trustee or to the
Guarantor;
(ii)
second, to the payment in full of all principal on Outstanding
Series 2009A Bonds then due (including, to reimburse the Guarantor for any
such amounts paid to holders of Series 2009A Bonds pursuant to the
Guarantee), which shall be paid to the Trustee or to the Guarantor;
(iii)
third, to the payment of costs, expenses and liabilities of the Trustee,
if any, to the extent not paid directly to the Trustee by the
Company;
(iv)
fourth, to the payment of all other obligations then due and owing with
respect to such Series 2009A Bonds, ratably, without preference or priority
of any kind, which shall be paid to the Trustee; and
(v)
fifth, to the payment of any remaining balance to the Company in the case
of Proceeds from the sale of Pledged Collateral under Section 3.02 of the
Pledge and Security Agreement, only after the payment in full of all principal
on Outstanding Series 2009A Bonds at maturity.
(b) If a
Guarantor Default has occurred and is continuing, funds collected by the Trustee
(i) following the occurrence and during the continuance of an Event of Default
from the Company or the Guarantor for the payment of the principal of, and
interest (including Unpaid Interest) on, the Series 2009A Bonds and (ii)
under Section 3.02 of the Pledge and Security Agreement shall be applied in the
following order:
(i)
first, to the payment in full of all accrued and unpaid interest on the
Series 2009A Bonds that is then due and payable, ratably, according to the
aggregate principal amounts due and payable on such Series 2009A Bonds,
which shall be paid to the Trustee;
(ii)
second, to the payment in full of all principal on Outstanding
Series 2009A Bonds then due, which shall be paid to the
Trustee;
(iii)
third, to the payment of costs, expenses and liability of the Trustee, if
any, to the extent not paid directly to the Trustee by the Company;
(iv)
fourth, to the payment of all other obligations then due and owing with
respect to such Series 2009A Bonds, ratably, without preference or priority
of any kind, which shall be paid to the Trustee; and
(v)
fifth, to the payment of any remaining balance to the Company in the case
of Proceeds from the sale of Pledged Collateral under Section 3.02 of the Pledge
and Security Agreement only after the payment in full of all principal on
Outstanding Series 2009A Bonds at maturity.
The
Trustee shall, in applying funds pursuant to this Section 605, follow the
written instructions of the Control Party at the time of such application, as
transmitted in a form substantially similar to Exhibit D
hereof. Funds drawn under the Guarantee shall be applied solely to
the payment of interest on and principal of the Series 2009A Bonds
(including any Series 2009A Bonds held by the Guarantor) and shall not be
paid to the Guarantor for payments it is due as subrogee as described in Section
703 until the Holders of the Series 2009A Bonds (including any
Series 2009A Bonds held by the Guarantor) have been paid all amounts owed
under the Series 2009A Bonds.
Section
606.
Suits for
Enforcement
. If an Event of Default has occurred, has not been
waived and is continuing, with respect to the Series 2009A Bonds, the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either at
law or in equity or in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by
law.
Section
607.
Restoration of Rights on Abandonment
of Proceedings
. If the Trustee, the Guarantor or any Holder
shall have proceeded to enforce any right under this Indenture, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to the Trustee, the Guarantor or such Holder,
then and in every such case, the Company, the Trustee, the Guarantor and such
Holder shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee, the
Guarantor and such Holder shall continue as though no such proceedings had been
taken.
Section
608.
Limitations on Suits by
Holders
. Except as provided in Sections 501(b) and 601,
neither the Control Party nor any Holder has the right under this Indenture to
institute any action or proceeding at law or in equity or in bankruptcy or
otherwise, or for the appointment of a receiver or trustee, or for any other
remedy, unless:
(a)
the Control Party or, if the Guarantor is not the Control Party, the
Holders of at least 50% of the aggregate principal amount of the
Series 2009A Bonds Outstanding previously has given each of the Guarantor
and the Company written notice of an Event of Default and its continuance;
and
(b)
the Event of Default continues unremedied for forty-five (45) days
following the date written notice of such Event of Default by the Control Party
or, if the Guarantor is not the Control Party, the Holders of at least 50% of
the aggregate principal amount of the Series 2009A Bonds Outstanding has
been given to each of the Guarantor and the Company; it being understood and
intended that no Holder or Holders of Series 2009A Bonds shall have any
right in any manner whatever by virtue of, or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holder,
or to obtain or to seek to obtain priority or preference over any other Holder
of any Note or to enforce any right under this Indenture, except in the manner
provided in this Indenture and for the equal and ratable benefit of all of the
Holders. For the protection and enforcement of the provisions of this
Section 608, each Holder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Section
609.
Powers and Remedies Cumulative;
Delay or Omission Not Waiver of Default
. (a) No right or
remedy herein conferred upon or reserved to the Trustee, the Control Party or to
any Holder is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or
remedy.
(b)
No delay or omission of the Trustee, the Control Party, or of any Holder
to exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and, subject to Section 608, every power and remedy given by this
Indenture or by law to the Trustee, the Control Party or to any Holder may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee, the Control Party or by such Holder.
Section 610.
Control by the
Holders
. Subject to Article Seven hereof, Holders of a
majority of the aggregate principal amount of the Series 2009A Bonds
Outstanding shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee by this Indenture.
Section
611.
Waiver of Past
Defaults
. (a) Prior to the declaration of the maturity of
the Bonds as provided in Section 601, the Control Party or, if the
Guarantor is not the Control Party, the Holders of at least 50% of the aggregate
principal amount of the Series 2009A Bonds Outstanding may on behalf of the
Holders of all Series 2009A Bonds waive any past default or Event of
Default hereunder and its consequences.
(b)
Upon any such waiver, such default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent
thereon.
Section 612.
Costs of
Litigation
. In any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee for any action
taken or omitted by it as an Trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the suit, and the court in its discretion may assess reasonable costs, including
reasonable attorney’s fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 612 does not apply to a suit by
the Trustee, a suit by a Holder for right to payment or pursuant to Section 606
hereof, a suit by Holders of more than 10% of the aggregate principal amount of
the then Outstanding Series 2009A Bonds or a suit by the Guarantor as
subrogee or assignee in connection with the Guarantee.
Section
613.
Unconditional Right of Holders to
Receive Principal, Premium and Interest.
Notwithstanding any
other provision in this Indenture, the Holder of any Security shall have the
right, which is absolute and unconditional, to receive payment of the principal
of and any premium and (subject to Sections 305 and 307) any interest on such
Security or payment on the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption or repayment, on the Redemption Date)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
Section
614.
Undertaking for
Costs.
All parties to this Indenture agree, and each Holder of
any Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys’ fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder or group of
Holders holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder of any Security
for the enforcement of the payment of the principal of or any premium or
interest on any Security on or after the Stated Maturity or Maturities expressed
in such Security (or, in the case of redemption or repayment, on or after the
Redemption Date or Repayment Date, as the case may be).
Section
615.
Waiver of Stay, Extension or Usury
Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture or the Securities or
that would prohibit or forgive the Company from paying all or any portion of the
principal of or premium or interest on any Securities as contemplated herein and
therein; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Article
Seven
Control
By the Guarantor; Additional Rights of the Guarantor
Section
701.
Control by the
Guarantor
. (a) If the Guarantor is the Control Party, the
Guarantor shall be considered the Holder of all Series 2009A Bonds
Outstanding for all purposes under this Indenture and shall be permitted to take
any and all actions permitted to be taken by the Holders or a specified
percentage of Holders hereunder, provided, however, the Guarantor shall not be
entitled to receive payments of principal of and interest on the
Series 2009A Bonds other than (i) pursuant to the Guarantor’s subrogation
rights provided in Section 703 or (ii) to the extent that the Guarantor is
a Holder of the Series 2009A Bonds. The Control Party will have
the sole right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Series 2009A
Bonds or exercising any trust or power conferred on the Trustee with respect to
the Series 2009A Bonds provided that:
(i)
such direction shall not be in conflict with any rule of law or with this
Indenture;
(ii)
the Trustee shall have been provided with indemnity from the Control
Party reasonably satisfactory to it;
(iii)
the Trustee may take any other action deemed proper by such trustee that
is not inconsistent with such direction, provided, however, that the Trustee
need not take any action which it determines might expose it to liability;
and
(iv)
the Guarantor shall not be permitted to declare all of the
Series 2009A Bonds to be immediately due and payable unless it
simultaneously delivers to the Trustee, for deposit into the Bond Fund, an
amount equal to the full amount guaranteed by the Guarantor under Section 501(a)
hereof.
Section
702.
Rights of the Guarantor to Direct
Actions of the Trustee
. (a) The Trustee agrees that
so long as the Guarantor is the Control Party, following the written request of
a Responsible Party of the Guarantor with a copy to the Company, the Trustee
will take or refrain from taking any action and exercise or refrain from
exercising any rights of the Trustee hereunder in the manner described in the
Guarantor’s written request; provided, however, that the obligation of the
Trustee to take or refrain from taking, or to exercise or refrain from
exercising, any such action or rights shall be limited to those actions and
rights that can be exercised or taken (or not exercised or taken, as the case
may be) in full compliance with the provisions hereof and applicable
law.
(b) The Trustee
hereby irrevocably makes, designates, constitutes and appoints the Guarantor for
so long as the Guarantor is still the Control Party as its attorney-in-fact,
with power in the name of the Trustee, subject to the conditions and limitations
set forth herein, to:
(i)
enforce, foreclose upon or repossess any Pledged Collateral;
and
(ii)
exercise or direct the Trustee in writing to exercise (in which case the
Trustee agrees to exercise) any and all rights of the Trustee pursuant to this
Indenture.
Section
703.
Additional Rights of the
Guarantor
. (a) The Trustee shall receive as
attorney-in-fact of each Holder any amount paid by the Guarantor. Any
and all amounts disbursed by the Trustee from amounts received under the
Guarantee shall not be considered payment by the Company with respect to the
Series 2009A Bonds and shall not discharge the obligations of the Company
with respect thereto. The Guarantor shall, to the extent it makes any
payment of any amount with respect to the Series 2009A Bonds, become
subrogated to the rights of the recipient of such payments to the extent of such
payments. Subject to and conditioned upon any payment with respect to
the Series 2009A Bonds by or on behalf of the Guarantor, the Trustee hereby
assigns to the Guarantor all rights to the payment of interest or principal with
respect to the Series 2009A Bonds which are then due for payment to the
extent of all payments made by the Guarantor, and the Guarantor may exercise any
option, vote, right, power or the like with respect to the Series 2009A
Bonds to the extent that it has made a payment on the Series 2009A Bonds
pursuant to the Guarantee. To evidence such subrogation, the Trustee
shall note the Guarantor’s rights as subrogee in the Bond Register upon receipt
from the Guarantor of payment by the Guarantor of any amount with respect to the
Series 2009A Bonds. The foregoing subrogation shall in all cases
not impair the rights of the Holders of the Series 2009A Bonds to receive
all amounts payable by the Guarantor in respect of the Series 2009A Bonds
pursuant to the Guarantee. Each Holder of Series 2009A Bonds is
hereby deemed to acknowledge and agree to the rights of subrogation of the
Guarantor hereunder, under the Guarantee and otherwise under applicable
law.
(b)
In furtherance and not in limitation of the Guarantor’s equitable right
of subrogation and the Guarantor’s rights under the Guarantee, each Holder of
the Series 2009A Bonds acknowledges that the Guarantor shall be fully
subrogated to, and shall be vested with, all of the options, rights, powers and
remedies of the Trustee and the Holders of the Series 2009A Bonds under the
Transaction Documents to which any such Person is a party or under which any of
the Trustee or the Holders of the Series 2009A Bonds has any options,
rights, powers or remedies in respect of such amounts and, to the extent of such
payment only, shall be fully subrogated to each such Person’s rights against any
and all parties in connection with the Series 2009A Bonds until such
nonpayment has been cured by or on behalf of the Company, and the Guarantor
shall have been reimbursed in full by or on behalf of the Company, for amounts
paid by the Guarantor to the Holders of the Series 2009A Bonds as a result
of the nonpayment by or on behalf of the Company, plus Unpaid Interest accrued
on the amount of such nonpayment. Each Holder of Series 2009A
Bonds hereby acknowledges that the Guarantor shall have the absolute right and
discretion, without notice to any of the Trustee, the Holders of the
Series 2009A Bonds or any other Person, to exercise or fail to exercise any
right, power or remedy that the Guarantor may have under the Guarantee or this
Indenture or under any assignment required hereby or thereby. Each
Holder of Series 2009A Bonds hereby acknowledges that the Guarantor shall
have no liability to any of the Trustee, the Holders of Series 2009A Bonds
or any other Person for any loss, damage or injury resulting from the
Guarantor’s exercise or failure to exercise any right, power or remedy that the
Guarantor may have under the Guarantee or this Indenture or under any assignment
required hereby or thereby, so long as such exercise or failure to exercise is
in accordance with the Transaction Documents and applicable law.
(c)
Each Holder of Series 2009A Bonds agrees that it will, at the
Company’s expense, execute and deliver such documents, instruments, and
assurances and to take, or cause to be taken, all actions reasonably required by
the Guarantor to evidence, preserve, enforce, perfect, or maintain the
perfection in the Guarantor’s favor of such interests, rights, and remedies and
such equitable rights of subrogation. Each Holder of
Series 2009A Bonds agrees that it shall not without the prior written
consent of the Guarantor, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding relating
to the preservation, enforcement, perfection or maintenance of the Guarantor’s
rights of subrogation or assignment with respect to the Series 2009A Bonds,
to the extent of any payment made by the Guarantor that has not been reimbursed
by or on behalf of the Company.
Article
Eight
The
Trustee
Section
801.
Certain Duties and
Responsibilities.
(a) Except during the continuance of an
Event of Default,
(1)
the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee;
and
(2)
in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
substantially conforming to the requirements of this Indenture; but in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they substantially
conform to the requirements of this Indenture but need not confirm the accuracy
of the information contained therein.
(b) In case an
Event of Default has occurred and is continuing, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
(c)
No
provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that
(1)
this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2)
the Trustee shall not be liable for any error of judgment made by it in
good faith, unless it shall be conclusively determined by a court of competent
jurisdiction that the Trustee was negligent in ascertaining the pertinent
facts;
(3)
the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of a majority in principal amount of the Outstanding Securities relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Indenture with respect to such Securities; and
(4)
no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d)
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this
Section.
Section
802.
Notice of
Defaults.
Within 90 days after the occurrence of any default
hereunder with respect to the Securities the Trustee shall transmit to all
Holders of the Securities in the manner and to the extent provided in
Section 106, notice of all such defaults hereunder known to the Trustee,
except for such defaults as shall have been cured or waived;
provided, however,
that,
except in the case of a default in the payment of the principal of or premium or
interest on any Security or in the payment of any sinking fund installment with
respect to the Securities, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors or officers of the Trustee in good faith determines
that the withholding of such notice is in the interest of the Holders of the
Securities. For the purpose of this Section, the term “default” means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to the Securities.
The
Trustee shall not be charged with knowledge of any default unless either (1) a
Responsible Officer of the Trustee shall have actual knowledge or (2) the
Trustee shall have received written notice thereof from the Company or a
Holder.
Section
803.
Certain Rights of
Trustee.
Subject to the provisions of
Section 801:
(a)
the Trustee may conclusively rely and shall be fully protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b)
any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c)
whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers’ Certificate;
(d)
before the Trustee acts or refrains from acting, the Trustee may consult
with counsel of its selection and the advice of such counsel, or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e)
the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the Holders
of any Securities or of any related Coupons pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f)
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g)
the
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, custodians or
nominees and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent, attorney, custodian or nominee appointed
with due care by it hereunder;
(h)
the
Trustee shall not be liable for any action taken or omitted to be taken by it in
good faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(i)
in no event shall the Trustee be liable for the selection of investments
or for investment losses incurred thereon; the Trustee shall have no liability
in respect of losses incurred as a result of the liquidation of any such
investment prior to its stated maturity or the failure of the party directing
such investment to provide timely written investment directions; the Trustee
shall have no obligation to invest or reinvest any amounts held hereunder in the
absence of such written investment directions;
(j)
in no event shall the Trustee be responsible or liable for special,
indirect, punitive or consequential loss or damage of any kind whatsoever
(including, but not limited to, loss of profit) irrespective of whether the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action; and
(k)
the Trustee shall not be deemed to have notice of any default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
In the
event that the Trustee is also acting as Paying Agent, Security Registrar or
transfer agent hereunder, the rights and protections afforded to the Trustee
pursuant to this Article Eight shall also be afforded to such Paying Agent,
Security Registrar or transfer agent.
The
parties hereto acknowledge that, in order to comply with the United States
Patriot Act, U.S. Bank National Association, like all financial institutions, is
required to obtain, verify and record certain information and documentation from
the other parties hereto. Each of the parties hereby agree that they
will provide U.S. Bank National Association with such information as it may
reasonably request in order for it to satisfy the requirements of the USA
Patriot Act.
Section
804.
Not Responsible for Recitals or
Issuance of Securities.
The recitals contained herein and in the
Securities (except the Trustee’s certificates of authentication) shall be taken
as the statements of the Company, and the Trustee or any Authenticating Agent
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee or any Authenticating Agent shall not be (i)
accountable for the use or application by the Company of Securities or the
proceeds thereof, (ii) accountable for any money paid to the Company, or upon
the Company’s direction, if made under and in accordance with any provision of
this Indenture or (iii) responsible for the use or application of any money
received by any Paying Agent other than the Trustee.
Section
805.
May Hold Securities.
The
Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or
any other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 808 and 813,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other agent.
Section 806.
Money Held in
Trust
. Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by law or by this
Indenture. The Trustee or any Paying Agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
Section
807.
Compensation and Reimbursement.
The Company agrees
(1)
to pay to the Trustee from time to time such compensation for all
services rendered by it hereunder as may be agreed upon by the Company and the
Trustee in writing (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(2)
to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(3)
to indemnify the Trustee in its individual capacity and as Trustee, and each of
its officers, directors, attorneys-in-fact, employees and agents for, and to
hold it harmless against, any loss, claim, liability, obligation, damage,
injury, penalty, action, suit, judgment, cost or expense (including attorneys’
fees and expenses) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The
foregoing provisions shall survive the termination of this Indenture or any
resignation or removal of the Trustee.
As
security for the performance of the obligations of the Company under this
Section the Trustee shall have a lien prior to the Securities upon all property
and funds held or collected by the Trustee as such. Such lien shall
survive the satisfaction and discharge of this Indenture and, to the extent
permitted by law, any rejection or termination of this Indenture under any
federal or state bankruptcy law.
To the
fullest extent permitted by law, when the Trustee incurs reasonable expenses or
renders services in connection with an Event of Default specified in
Section 601(4), the Holders of the Securities, by their acceptance of such
Securities, agree that such reasonable expenses and the compensation for such
services are intended to constitute expenses of administration under any
applicable bankruptcy law.
Section 808.
Disqualification;
Conflicting Interests.
(a) If the Trustee has or shall
acquire any conflicting interest, as defined in this Section, with respect to
the Securities then, within 90 days after ascertaining that it has such
conflicting interest, and if the Event of Default, but exclusive of any period
of grace or requirement of notice, to which such conflicting interest relates
has not been cured or duly waived or otherwise eliminated before the end of such
90-day period, the Trustee shall either eliminate such conflicting interest or,
except as otherwise provided below in this Section, resign in the manner and
with the effect hereinafter specified in this Article and the Company shall take
prompt steps to have a successor appointed in the manner provided
herein.
(b)
(1) If the Trustee shall fail to comply with the provisions of
Subsection (a) of this Section with respect to the Securities, the Trustee
shall, within 10 days after the expiration of such 90-day period, transmit, in
the manner and to the extent provided in Section 106, to all Holders of
Securities notice of such failure.
(2)
Subject to the provisions of Section 614, unless the Trustee’s duty to
resign is stayed as provided in Subsection (f) of this Section, any Holder
who has been a bona fide Holder of Securities referred to in Subsection (a)
of this Section for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of such Trustee, and the appointment of a successor, if such Trustee fails,
after written request thereof by such Holder to comply with the provisions of
Subsection (a) of this Section.
(c)
For the purposes of this Section, the Trustee shall be deemed to have a
conflicting interest with respect to the Securities if a default (defined as an
Event of Default hereunder, but exclusive of any period of grace or requirement
of notice) has occurred with respect to the Securities and;
(1)
the Trustee is trustee under another indenture under which any other securities,
or certificates of interest or participation in any other securities, of the
Company are outstanding, unless such other indenture is a collateral trust
indenture under which the only collateral consists of the Securities issued
under this Indenture, provided that there shall be excluded from the operation
of this paragraph any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding and this Indenture and such other indenture or indentures (and
all securities issuable thereunder) are wholly unsecured and rank equally with
such other indenture or indentures of the Company;
(2)
the Trustee or any of its directors or executive officers is an underwriter for
the Company;
(3)
the Trustee directly or indirectly controls or is directly or indirectly
controlled by or is under direct or indirect common control with an underwriter
for the Company;
(4)
the Trustee or any of its directors or executive officers is a director,
officer, partner, employee, appointee or representative of the Company, or of an
underwriter (other than the Trustee itself) for the Company who is currently
engaged in the business of underwriting, except that (i) one individual may be a
director or an executive officer, or both, of the Trustee and a director or
an executive officer, or both, of the Company but may not be at the
same time an executive officer of both the Trustee and the Company; (ii) if
and so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer, or
both, of the Trustee and a director of the Company; and (iii) the Trustee
may be designated by the Company or by any underwriter for the Company to act in
the capacity of transfer agent, registrar, custodian, paying agent, fiscal
agent, escrow agent or depositary, or in any other similar capacity, or, subject
to the provisions of paragraph (1) of this Subsection, to act as trustee,
whether under an indenture or otherwise;
(5) 10%
or more of the voting securities of the Trustee is beneficially owned either by
the Company or by any director, partner or executive officer thereof, or 20% or
more of such voting securities is beneficially owned, collectively, by any two
or more of such persons; or 10% or more of the voting securities of the Trustee
is beneficially owned either by an underwriter for the Company or by any
director, partner or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(6)
the Trustee is the beneficial owner of, or holds as collateral security for an
obligation which is in default (as hereinafter in this Subsection defined),
(i) 5% or more of the voting securities, or 10% or more of any other class
of security, of the Company not including the Securities issued under this
Indenture and securities issued under any other indenture under which the
Trustee is also trustee, or (ii) 10% or more of any class of security of an
underwriter for the Company;
(7)
the Trustee is the beneficial owner of, or holds as collateral security for an
obligation which is in default (as hereinafter in this Subsection defined), 5%
or more of the voting securities of any person who, to the knowledge of the
Trustee, owns 10% or more of the voting securities of, or controls directly or
indirectly or is under direct or indirect common control with, the
Company;
(8)
the Trustee is the beneficial owner of, or holds as collateral security for an
obligation which is in default (as hereinafter in this Subsection defined), 10%
or more of any class of security of any person who, to the knowledge of the
Trustee, owns 50% or more of the voting securities of the Company;
(9)
the Trustee owns, on the date any default (defined as an Event of Default
hereunder, but exclusive of any period of grace or requirement of notice) has
occurred upon the Securities or any anniversary of such default while such
default upon such Securities remains outstanding, in the capacity of executor,
administrator, testamentary or
inter vivos
trustee,
guardian, committee or conservator, or in any other similar capacity, an
aggregate of 25% or more of the voting securities, or of any class of security,
of any person, the beneficial ownership of a specified percentage of which would
have constituted a conflicting interest under paragraph (6), (7) or
(8) of this Subsection. As to any such securities of which the
Trustee acquired ownership through becoming executor, administrator or
testamentary trustee of an estate which included them, the provisions of the
preceding sentence shall not apply, for a period of not more than two years from
the date of such acquisition, to the extent that such securities included in
such estate do not exceed 25% of such voting securities or 25% of any such class
of security. Promptly after the dates of any such default upon the
Securities and annually in each succeeding year that such default upon such
Securities continues, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such
dates. If the Company fails to make payment in full of the principal
of or any premium or interest on any of the Securities when and as the same
becomes due and payable, and such failure continues for 30 days thereafter,
the Trustee shall make a prompt check of its holdings of such securities in any
of the above-mentioned capacities as of the date of the expiration of such
30-day period, and after such date, notwithstanding the foregoing provisions of
this paragraph, all such securities so held by the Trustee, with sole or joint
control over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned by the
Trustee for the purposes of paragraphs (6), (7) and (8) of this Subsection;
or
(10)
except under the circumstances described in paragraphs (1), (3), (4), (5) or (6)
of Section 813(b), the Trustee shall be or shall become a creditor of the
Company.
The
specification of percentages in paragraphs (5) to (9), inclusive, of this
Subsection shall not be construed as indicating that the ownership of such
percentages of the securities of a person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes of paragraph
(3) or (7) of this Subsection.
For the
purposes of paragraphs (6), (7), (8) and (9) of this Subsection only,
(i) the terms “security” and “securities” shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed to be “in default”
when a default in payment of principal shall have continued for 30 days or
more and shall not have been cured; and (iii) the Trustee shall not be
deemed to be the owner or holder of (A) any security which it holds as
collateral security, as trustee or otherwise, for an obligation which is not in
default as defined in clause (ii) above, or (B) any security
which it holds as collateral security under this Indenture, irrespective of any
default hereunder, or (C) any security which it holds as agent for
collection, or as custodian, escrow agent or depositary, or in any similar
representative capacity.
(d)
For the purposes of this Section:
(1)
The term “underwriter,” when used with reference to the Company, means every
person who, within one year prior to the time as of which the determination is
made, has purchased from the Company with a view to, or has offered or sold for
the Company in connection with, the distribution of any security of the Company
outstanding at such time, or has participated or has had a direct or indirect
participation in any such undertaking, or has participated or has had a
participation in the direct or indirect underwriting of any such undertaking,
but such term shall not include a person whose interest was limited to a
commission from an underwriter or dealer not in excess of the usual and
customary distributors’ or sellers’ commission.
(2)
The term “director” means any director of a corporation or any individual
performing similar functions with respect to any organization, whether
incorporated or unincorporated.
(3)
The term “person” means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an unincorporated organization or a
government or political subdivision thereof. As used in this
paragraph, the term “trust” shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a
security.
(4)
The term “voting security” means any security presently entitling the owner or
holder thereof to vote in the direction or management of the affairs of a
person, or any security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the direction or
management of the affairs of a person.
(5)
The term “Company” means any obligor upon the Securities.
(6)
The term “executive officer” means the president, every vice president, every
trust officer, the cashier, the secretary and the treasurer of a corporation,
and any individual customarily performing similar functions with respect to any
organization whether incorporated or unincorporated, but shall not include the
chairman of the board of directors.
(e)
The percentages of voting securities and other securities specified in this
Section shall be calculated in accordance with the following
provisions:
(1)
A specified percentage of the voting securities of the Trustee, the Company or
any other person referred to in this Section (each of whom is referred to as a
“person” in this paragraph) means such amount of the outstanding voting
securities of such person as entitles the holder or holders thereof to cast such
specified percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in the
direction or management of the affairs of such person.
(2)
A specified percentage of a class of securities of a person means such
percentage of the aggregate amount of securities of the class
outstanding.
(3)
The term “amount,” when used in regard to securities, means the principal amount
if relating to evidences of indebtedness, the number of shares if relating to
capital shares and the number of units if relating to any other kind of
security.
(4)
The term “outstanding” means issued and not held by or for the account of the
issuer. The following securities shall not be deemed outstanding
within the meaning of this definition:
(i)
securities of an issuer held in a sinking fund relating to securities of the
issuer of the same class;
(ii)
securities of an issuer held in a sinking fund relating to another class of
securities of the issuer, if the obligation evidenced by such other class of
securities is not in default as to principal or interest or
otherwise;
(iii) securities
pledged by the issuer thereof as security for an obligation of the issuer not in
default as to principal or interest or otherwise; and
(iv)
securities held in escrow if placed in escrow by the issuer
thereof;
provided, however,
that any
voting securities of an issuer shall be deemed outstanding if any person other
than the issuer is entitled to exercise the voting rights thereof.
(5)
A security shall be deemed to be of the same class as another security if both
securities confer upon the holder or holders thereof substantially the same
rights and privileges;
provided, however,
that, in
the case of secured evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or maturity dates of various
series thereof shall not be deemed sufficient to constitute such series
different classes and
provided, further,
that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity dates thereof shall
not be deemed sufficient to constitute them securities of different classes,
whether or not they are issued under a single indenture.
(f)
Except in the case of a default in the payment of the principal of or interest
on any Securities, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section if the Trustee shall have sustained the burden of proving that
(i) the Event of Default may be cured or waived during a reasonable period
and under the procedures described in such application, and (ii) a stay of
the Trustee’s duty to resign will not be inconsistent with the interests of
Holders of such Securities.
Section 809.
Corporate Trustee
Required; Eligibility.
There shall at all times be a Trustee
hereunder which shall be a corporation or national banking association organized
and doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$5,000,000 and subject to supervision or examination by Federal or State
authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. Neither the Company nor any person directly or indirectly
controlling, controlled by or under common control with the Company may serve as
Trustee. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this
Article.
Section 810.
Resignation and
Removal; Appointment of Successor.
(a) No resignation or
removal of the Trustee and no appointment of a successor Trustee pursuant to
this Article shall become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements of
Section 811.
(b)
The Trustee may resign at any time with respect to the Securities by giving
written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 811 shall not have
been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may, at the expense of the Company,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities.
(c)
The Trustee may be removed at any time by Act of the Holders of two-thirds in
principal amount of the Outstanding Securities delivered to the Trustee and to
the Company if at any time:
(1)
the Trustee shall fail to comply with Section 808 with respect to the
Securities after written request therefor by the Company or by any Holder of a
Security who has been a bona fide Holder of a Security for at least six months,
unless the Trustee’s duty to resign has been stayed as provided in
Section 808(f), or
(2)
the Trustee shall cease to be eligible under Section 809 and shall fail to
resign after written request therefor by the Company or by any Holder,
or
(3)
the Trustee shall become incapable of acting with respect to the Securities or a
decree or order for relief by a court having jurisdiction in the premises shall
have been entered in respect of the Trustee in an involuntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or similar law, or a decree
or order by a court having jurisdiction in the premises shall have been entered
for the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or other similar official of the Trustee or its property
or affairs, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation,
winding up or liquidation, or
(4)
the Trustee shall commence a voluntary case under the federal bankruptcy laws,
as now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or similar law or shall consent to the appointment of or
taking possession by a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trustee or its property or
affairs, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall take corporate action in furtherance of any such action, then, in any such
case, (i) the Company by a Board Resolution may remove the Trustee, or
(ii) subject to Section 614, any Holder of a Security who has been a
bona fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated (including those who have been Holders for
less than six months), petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee or
Trustees.
(d)
In addition to (c) above, the Trustee may be removed at any time by an
instrument in writing delivered to the Trustee and the Holders of the
Securities, and signed by an Officer of the Company,
provided
that the Company is
not in default under the Indenture, and such removal shall take effect at the
appointment of a successor Trustee pursuant to the provisions of
Section 810(e) hereof and acceptance by the successor Trustee of
such trusts.
(e)
If the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, the Company, by a
Company Order, shall promptly appoint a successor Trustee or Trustees and shall
comply with the applicable requirements of Section 811. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of two-thirds in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 811, become the successor
Trustee and to that extent supersede the successor Trustee appointed by the
Company,
provided
that
such successor shall be acceptable to the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner required by Section 811, any Holder
of a Security who has been a bona fide Holder of a Security for at least six
months may, on behalf of himself and all others similarly situated (including
those who have been Holders for less than six months), or the Trustee may,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities.
(f)
The Company shall give notice of each resignation and each removal of the
Trustee and each appointment of a successor Trustee in the manner provided in
Section 106. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
Section 811.
Acceptance of
Appointment by Successor.
(a) In case of the appointment
hereunder of a successor Trustee, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder, subject nevertheless
to its liens, if any, provided for in Section 807.
(b)
In case of the appointment hereunder of a successor Trustee, the Company, the
retiring Trustee and each successor Trustee shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee, and
(2) shall add to or change any of the provisions of this Indenture as shall
be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees as co-trustees of
the same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
(c)
Upon request of any such successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in paragraph
(a) or (b) of this Section, as the case may be.
(d)
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article.
Section 812.
Merger, Conversion,
Consolidation or Succession to Business.
Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such
Securities.
Section 813.
Preferential Collection
of Claims Against Company.
(a) Subject to
Subsection (b) of this Section, if the Trustee shall be or shall become a
creditor, directly or indirectly, secured or unsecured, of the Company within
three months prior to a default, as defined in Subsection (c) of this
Section, or subsequent to such a default, then, unless and until such default
shall be cured, the Trustee shall set apart and hold in a special account for
the benefit of the Trustee individually, the Holders of the Securities and the
holders of other indenture securities, as defined in Subsection (c) of
this Section:
(1) an
amount equal to any and all reductions in the amount due and owing upon any
claim as such creditor in respect of principal or interest, effected after the
beginning of such three-month period and valid as against the Company and its
other creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this Subsection,
or from the exercise of any right of set-off which the Trustee could have
exercised if a voluntary or involuntary case had been commenced in respect of
the Company under the federal bankruptcy laws, as now or hereafter constituted,
or any other applicable federal or state bankruptcy, insolvency or other similar
law upon the date of such default; and
(2)
all property received by the Trustee in respect of any claims as such creditor,
either as security therefor, or in satisfaction or composition thereof, or
otherwise, after the beginning of such three months’ period, or an amount equal
to the proceeds of any such property, if disposed of, subject, however, to the
rights, if any, of the Company and its other creditors in such property or such
proceeds.
Nothing
herein contained, however, shall affect the right of the Trustee:
(A)
to retain for its own account (i) payments made on account of any such
claim by any Person (other than the Company) who is liable thereon, and
(ii) the proceeds of the bona fide sale of any such claim by the Trustee to
a third Person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law;
(B)
to realize, for its own account, upon any property held by it as security for
any such claim, if such property was so held prior to the beginning of such
three-month period;
(C)
to realize, for its own account, but only to the extent of the claim hereinafter
mentioned, upon any property held by it as security for any such claim, if such
claim was created after the beginning of such three-month period and such
property was received as security therefor simultaneously with the creation
thereof, and if the Trustee shall sustain the burden of proving that at the time
such property was so received the Trustee had no reasonable cause to believe
that a default, as defined in Subsection (c) of this Section, would
occur within three months; or
(D)
to receive payment on any claim referred to in paragraph (B) or (C),
against the release of any property held as security for such claim as provided
in paragraph (B) or (C), as the case may be, to the extent of the fair
value of such property.
For the
purposes of paragraphs (B), (C) and (D), property substituted after the
beginning of such three-month period for property held as security at the time
of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the
Trustee shall be required to account, the funds and property held in such
special account and the proceeds thereof shall be apportioned among the Trustee,
the Holders of Securities and the holders of other indenture securities in such
manner that the Trustee, the Holders of Securities and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, the same
percentage of their respective claims, figured before crediting to the claim of
the Trustee anything on account of the receipt by it from the Company of the
funds and property in such special account and before crediting to the
respective claims of the Trustee and the Holders of Securities and the holders
of other indenture securities dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, but
after crediting thereon receipts on account of the indebtedness represented by
their respective claims from all sources other than from such dividends and from
the funds and property so held in such special account. As used in
this paragraph, with respect to any claim, the term “dividends” shall include
any distribution with respect to such claim, in bankruptcy or receivership or
proceedings for reorganization pursuant to the federal bankruptcy laws, as now
or hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, whether such distribution is made in cash,
securities or other property, but shall not include any such distribution with
respect to the secured portion, if any, of such claim. The court in
which such bankruptcy, receivership or proceedings for reorganization is pending
shall have jurisdiction (i) to apportion among the Trustee, the Holders of
Securities and the holders of other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such apportionment, in
whole or in part, to give to the provisions of this paragraph due consideration
in determining the fairness of the distributions to be made to the Trustee and
the Holders of Securities and the holders of other indenture securities with
respect to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any
Trustee which has resigned or been removed after the beginning of such
three-month period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee
has resigned or been removed prior to the beginning of such three-month period,
it shall be subject to the provisions of this Subsection if and only if the
following conditions exist:
(i)
the receipt of property or reduction of claim, which would have given rise to
the obligation to account, if such Trustee had continued as Trustee, occurred
after the beginning of such three-month period; and
(ii)
such receipt of property or reduction of claim occurred within three months
after such resignation or removal.
(b)
There shall be excluded from the operation of Subsection (a) of this
Section a creditor relationship arising from:
(1)
the ownership or acquisition of securities issued under any indenture, or any
security or securities having a maturity of one year or more at the time of
acquisition by the Trustee;
(2) advances
authorized by a receivership or bankruptcy court of competent jurisdiction or by
this Indenture, for the purpose of preserving any property which shall at any
time be subject to the lien of this Indenture or of discharging tax liens or
other prior liens or encumbrances thereon, if notice of such advances and of the
circumstances surrounding the making thereof is given to the Holders of
Securities at the time and in the manner provided in this
Indenture;
(3) disbursements
made in the ordinary course of business in the capacity of trustee under an
indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or
depositary, or other similar capacity;
(4)
an indebtedness created as a result of services rendered or premises rented; or
an indebtedness created as a result of goods or securities sold in a cash
transaction, as defined in Subsection (c) of this
Section;
(5)
the ownership of stock or of other securities of a corporation organized under
the provisions of Section 25(a) of the Federal Reserve Act, as amended,
which is directly or indirectly a creditor of the Company; or
(6)
the acquisition, ownership, acceptance or negotiation of any drafts, bills of
exchange, acceptances or obligations which fall within the classification of
self-liquidating paper, as defined in Subsection (c) of this
Section.
(c)
For the purposes of this Section only:
(1)
the term “default” means any failure to make payments in full of the principal
of or interest on any of the Securities or upon the other indenture securities
when and as such principal or interest becomes due and payable;
(2)
the term “other indenture securities” means securities upon which the Company is
an obligor outstanding under any other indenture (i) under which the
Trustee is also trustee, (ii) which contains provisions substantially
similar to the provisions of this Section, and (iii) under which a default
exists at the time of the apportionment of the funds and property held in such
special account;
(3)
the term “cash transaction” means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the goods
or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand;
(4)
the term “self-liquidating paper” means any draft, bill of exchange, acceptance
or obligation which is made, drawn, negotiated or incurred by the Company for
the purpose of financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is secured by documents
evidencing title to, possession of, or a lien upon, the goods, wares or
merchandise or the receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security, provided the security
is received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation;
and
(5)
the term “Company” means any obligor upon the Securities.
Section 814.
Appointment of
Authenticating Agent.
The Trustee may appoint an
Authenticating Agent or Agents with respect to the Securities which shall be
authorized to act on behalf of the Trustee to authenticate the Securities issued
upon original issue or upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and if the Trustee is
required to appoint one or more Authenticating Agents with respect to the
Securities, to authenticate the Securities upon original issuance and
to take such other actions as are specified in Sections 303, 304, 305, 309,
905, 1305 and 1603, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Wherever reference is made
in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee’s certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$5,000,000 and subject to supervision or examination by Federal or State
authority or authority of such country. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any
corporation into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a party,
or any corporation succeeding to all or substantially all the corporate agency
or corporate trust business of such Authenticating Agent, shall continue to be
an Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or such Authenticating Agent.
An
Authenticating Agent may resign at any time by giving written notice thereof to
the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall provide notice to the
Holders as provided in Section 106. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The
Trustee agrees to pay to each Authenticating Agent from time to time reasonable
compensation for its services under this Section, and the Trustee shall be
entitled to be reimbursed for such payments, subject to the provisions of
Section 807.
If an
appointment is made pursuant to this Section, the Securities may have endorsed
thereon, in addition to the Trustee’s certificate of authentication, an
alternative certificate of authentication in the following form:
This is
one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
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U.S.
Bank National Association,
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as
Trustee
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By
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Authorized
Signatory
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By
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As
Authenticating
Agent
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If
all of the Securities may not be originally issued at one time, and if the
Trustee does not have an office capable of authenticating Securities upon
original issuance located in a Place of Payment where the Company wishes to have
Securities authenticated upon original issuance, the Trustee, if so requested by
the Company in writing (which writing need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel), shall appoint in accordance
with this Section an Authenticating Agent having an office in a Place of Payment
designated by the Company with respect to such Securities.
Article
Nine
Holders’
Lists and Reports by Trustee and Company
Section 901.
Holder Lists;
Communications to Holders
. (a) Trustee shall preserve, in
as current a form as is reasonably practicable, the names and addresses of
Holders received by the Trustee in its capacity as Security Registrar or Paying
Agent.
(b)
If 3 or more Holders of Securities (hereinafter referred to as
“applicants”
) apply in
writing to the Trustee, and furnish to the Trustee reasonable proof that each
such applicant has owned a Security for a period of at least 6 months preceding
the date of such application, and such application states that the applicants
desire to communicate with other Holders of Securities with respect of their
rights under this Indenture or under the Securities and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the Trustee shall, within 5 business days after the receipt of
such application, at its election, either
(i) afford
such applicants access to the information preserved at the time by the Trustee
in accordance with Section 901(a), or
(ii)
inform such applicants as to the approximate number of Holders of Securities
whose names and addresses appear in the information preserved at the time by the
Trustee in accordance with Section 901(a), and as to the approximate cost
of mailing to such Securityholders the form of proxy or other communication, if
any, specified in such application.
If the
Trustee shall elect not to afford such applicants access to such information,
the Trustee shall, upon the written request of such applicants, mail to each
Securityholder whose name and address appear in the information preserved a the
time by the Trustee in accordance with Section 901(a), a copy of the form
of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within 5 days after such tender, the Trustee shall mail to such
applicants a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interest of the Holders of
Securities or would be in violation of applicable law. Such written
statement shall specify the basis of such opinion.
(c)
Every Holder of Securities, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders of Securities in accordance with
Section 901(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 901(b).
Section
902.
Reports by
Trustee.
(a) The term
“reporting date,”
as used in
this Section, means the date specified in Article Seven. Within
60 days after the reporting date in each year, the Trustee shall transmit by
mail to all Securityholders, as their names and addresses appear in the Security
Register, a brief report dated as of such reporting date with respect
to:
(1)
its eligibility under Section 809 and its qualifications under
Section 808, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under said Sections, a written statement
to such effect;
(2)
the character and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee (as such)
which remain unpaid on the date of such report, and for the reimbursement of
which it claims or may claim a lien or charge, prior to that of the Securities,
on any property or funds held or collected by it as Trustee, except that the
Trustee shall not be required (but may elect) to report such advances if such
advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal
amount of the Securities Outstanding on the date of such
report;
(3)
the amount, interest rate and maturity date of all other indebtedness owing by
the Company (or by any other obligor on the Securities) to the Trustee in its
individual capacity, on the date of such report, with a brief description of any
property held as collateral security therefor, except an indebtedness based upon
a creditor relationship arising in any manner described in
Section 813(b)(2), (3), (4) or (6);
(4)
the property and funds, if any, physically in the possession of the Trustee as
such on the date of such report;
(5)
any additional Securities which the Trustee has not previously reported;
and
(6)
any action taken by the Trustee in the performance of its duties hereunder which
it has not previously reported and which in its opinion materially affects the
Securities, except action in respect of a default, notice of which has been or
is to be withheld by the Trustee in accordance with
Section 802.
(b)
The Trustee shall transmit by mail to all Securityholders, as their names and
addresses appear in the Security Register, a brief report with respect to the
character and amount of any advances (and if the Trustee elects so to state, the
circumstances surrounding the making thereof) made by the Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of
this Section (or if no such report has yet been so transmitted, since the date
of execution of this instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on property or funds
held or collected by it as Trustee, and which it has not previously reported
pursuant to this Subsection, except that the Trustee shall not be required (but
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Securities Outstanding at
such time, such report to be transmitted within 90 days after such
time.
(c)
A copy of each such report shall, at the time of such transmission to
Securityholders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, and also with the Commission.
Section 903.
Reports by
Company
. The Company will
(a)
file with the Trustee, within 15 days after the Company files the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company
is not required to file information, documents or reports pursuant to either of
said Sections, then it will file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on a
National Securities Exchange as may be prescribed from time to time in such
rules and regulations;
(b)
file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations;
(c)
transmit by mail to all Securityholders, as their names and addresses appear in
the Security Register, within 30 days after the filing thereof with the Trustee,
such summaries of any information, documents and reports required to be filed by
the Company pursuant to paragraphs (a) and (b) of this Section as may be
required by rules and regulations prescribed from time to time by the
Commission; and
(d)
in addition, the Company agrees that for so long as any Securities remain
Outstanding, the Company will furnish to the Securityholders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Exchange
Act of 1934, as amended. As of September 1, 2009, the requirements of
such Rule 144A(d)(4) shall be met if the Holder and a prospective purchaser
designated by the Holder have the right to obtain from the Company, upon request
of the Holder, and the prospective purchaser has received from the Company, the
seller, or a person acting on either of their behalf, at or prior to the time of
sale, upon such prospective purchaser’s request to the Holder or the Company,
the following information (which shall be reasonably current in relation to the
date of resale under this section): a very brief statement of the
nature of the business of the Company and the products and services it offers;
and the Company’s most recent balance sheet and profit and loss and retained
earnings statements, and similar financial statements for such part of the two
preceding fiscal years as the Company has been in operation (the financial
statements should be audited to the extent reasonably available).
(e)
delivery of any reports, information and documents by the Company to the Trustee
pursuant to the provisions of this Section 903 is for informational
purposes only and the Trustee’s receipt of same shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company’s compliance with any of
the covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers’ Certificates).
(f)
the Company intends to file the reports referred to in this Section 903
hereof with the Commission in electronic form pursuant to Regulation S-T of the
Commission using the Commission’s Electronic Data Gathering, Analysis and
Retrieval system. Compliance with the foregoing, or any successor
electronic system approved by the Commission, shall constitute delivery by the
Company of such reports to the Trustee and Holders in compliance with the
provision of Section 903. Notwithstanding anything to the
contrary herein, the Trustee shall have no duty to search for or obtain any
electronic or other filings that the Company makes with the Commission,
regardless of whether such filings are periodic, supplemental or
otherwise. Delivery of the reports, information and documents to the
Trustee pursuant to this Section 903(f) shall be solely for the purposes of
compliance with Section 903. The Trustee’s receipt of such
reports, information and documents shall not constitute notice to it of the
content thereof or of any matter determinable from the content thereof (and the
Trustee shall not have any duty to ascertain or inquire as to such content or
matter), including the Company’s compliance with any of its covenants hereunder,
as to which the Trustee is absolutely entitled to rely upon Officers’
Certificates.
Article
Ten
Consolidation,
Merger, Conveyance or Transfer
Section 1001.
Company May
Consolidate, Etc., Only on Certain Terms.
The Company shall
not consolidate with or merge into any Person or sell, assign, lease, convey or
otherwise transfer its properties and assets substantially as an entirety to any
Person, unless
(1)
the Person formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, lease, conveyance or other
transfer the properties and assets of the Company substantially as an entirety
shall be a corporation, instrumentality, partnership, cooperative association,
other association, limited liability company or similar organization or a trust
organized and existing under the laws of the United States of America or any
State thereof or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, the due
and punctual payment of the principal of and premium and interest on all the
Securities and the performance and observance of every covenant of this
Indenture and the Securities on the part of the Company to be performed or
observed;
(2)
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and
(3)
the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel each stating that such consolidation, merger, sale, assignment,
lease, conveyance or other transfer and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating to
such transactions have been complied with.
Section 1002.
Successor
Substituted.
Upon any consolidation of the Company with, or
merger of the Company into, any other Person or any sale, assignment, lease,
conveyance or other transfer of the properties and assets of the Company
substantially as an entirety in accordance with Section 1001, the successor
Person formed by such consolidation or into which the Company is merged or to
which such sale, assignment, lease, conveyance or other transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
Article
Eleven
Supplemental
Indentures
Section 1101.
Supplemental Indentures
Without Consent of Holders.
Without the consent of any Holders
of Securities or the Control Party, the Company, the Guarantor and the Trustee,
at any time and from time to time, may enter into one or more Supplemental
Indentures amending and supplementing this Indenture, for any of the following
purposes:
(1)
to evidence the succession of another Person to the Company or the Guarantor and
the assumption by any such successor of the covenants of the Company or the
Guarantor herein and in the Securities; or
(2)
to add to the covenants of the Company for the benefit of the Control Party or,
if the Guarantor is not the Control Party, the Holders of the Securities or to
surrender any right or power herein conferred upon the Company or the Guarantor;
or
(3)
to add any additional Events of Default; or
(4)
to add to or change any of the provisions of this Indenture to such extent as
shall be necessary to permit or facilitate the issuance of Securities in bearer
form, registrable or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of Securities in
uncertificated form; or
(5)
to change or eliminate any of the provisions of this Indenture, provided that
any such change or elimination (a) shall become effective only when there
is no Security Outstanding created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision or (b) shall
not apply to any Security Outstanding; or
(6)
to establish the form of Securities as permitted by Sections 201 and 301;
or
(7)
to evidence and provide for the acceptance of appointment hereunder by a
successor Trustee with respect to the Securities and to add to or change any of
the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee
pursuant to the requirements of Section 811(b); or
(8)
(A) to cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or
(B) to make any other provisions with respect to matters or questions
arising under this Indenture, provided that such action shall not adversely
affect the interests of the Control Party or, if the Guarantor is not the
Control Party, the Holders of Securities in any material respect.
Section 1102.
Supplemental Indentures
with Consent of Holders.
The Company, the Trustee and the Guarantor also
may from time to time and at any time enter into an indenture or indentures
supplemental to this Indenture to amend or supplement the terms of the
Series 2009A Bonds with (1) the written consent of the Control Party, or,
if the Guarantor is not the Control Party, the written consent of the Holders of
at least 50% of the aggregate principal amount of the Series 2009A Bonds
Outstanding, or (2) the approval by resolution of the Control Party or, if the
Guarantor is not the Control Party, holders of over 50% of the aggregate
principal amount of the Series 2009A Bonds Outstanding represented at a
meeting of Holders where a Quorum is present. However, each affected
Holder (for purposes of this Section the Control Party shall not be considered
such affected Holder or permitted to take action on their behalf) and the
Control Party or, if the Guarantor is not the Control Party, each affected
Holder and the Guarantor, must consent for the parties to amend or supplement
the terms of the Indenture or the Series 2009A Bonds to:
(1)
change the Stated Maturity of the principal of, or any installment of principal
of or interest on, any Security, or reduce the principal amount thereof, or the
rate of interest thereon or any premium payable thereon, or reduce the amount of
the principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 602 or change the coin or currency in which any Security or any
premium or any interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption at the option of the Company, on or after
the Redemption Date), or
(2)
reduce the percentage in principal amount of the Outstanding Securities, the
consent of whose Holders is required for any such Supplemental Indenture, or the
consent of whose Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in Section 611 of this Indenture, or reduce the
requirements of Section 1404 for quorum or voting, or
(3)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes specified in Section 1202, or
(4)
adversely affect the right to repayment, if any, of any Securities at the option
of the Holders thereof;
(5)
eliminate or modify the mandatory redemption provided by Section 1303;
or
(6)
modify any of the provisions of this Section or Section 611, except to
increase any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby;
provided, however,
that this
clause shall not be deemed to require the consent of any Holder of a Security
with respect to changes in the references to “the Trustee” and concomitant
changes in this Section, or the deletion of this proviso, in accordance with the
requirements of Sections 811(b) and 1101(7).
It shall
not be necessary for any Act of Holders of Securities under this Section to
approve the particular form of any proposed Supplemental Indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 1103.
Execution of
Supplemental Indentures.
In executing, or accepting the
additional trusts created by, any Supplemental Indenture permitted by this
Article or the modifications thereby of the trusts created by this Indenture,
the Trustee shall receive, and (subject to Section 801) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such Supplemental Indenture is authorized or permitted by this Indenture and
such Supplemental Indenture constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject to customary
exceptions. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise.
Section 1104.
Effect of Supplemental
Indentures.
Upon the execution of any Supplemental Indenture
under this Article, this Indenture shall be modified in accordance therewith,
and such Supplemental Indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.
Section 1105.
Reference in Securities
to Supplemental Indentures.
Securities authenticated and
delivered after the execution of any Supplemental Indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such Supplemental
Indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Company, to any
such Supplemental Indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
Article
Twelve
Covenants
Section 1201.
Payment of Principal,
Premium and Interest.
The Company covenants and agrees for the
benefit of the Holders of the Securities that it will duly and punctually pay
the principal of and premium and interest on the Securities in accordance with
the terms of the Securities and this Indenture.
Section 1202.
Maintenance of Office
or Agency.
The Company will maintain in each Place of Payment
for the Securities an office or agency where the Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee and the Holders of the
Securities of the location, and any change in the location, of any such office
or agency. If at any time the Company shall fail to maintain any such
required office or agency in respect of the Securities or shall fail to furnish
the Trustee with the address thereof, such presentations, and surrenders of the
Securities may be made and notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The
Company may also from time to time designate one or more other offices or
agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations;
provided, however,
that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in accordance with the requirements
set forth above for the Securities for such purposes. The Company
will give prompt written notice to the Trustee and the Holders of such
Securities of any such designation or rescission and of any change in the
location of any such other office or agency.
The
Company hereby designates the Corporate Trust Office of the Trustee as a Place
of Payment for the Securities, initially appoints the Corporate Trust Office of
the Trustee as its agency for the purposes of the first sentence of this Section
and initially appoints the Trustee, acting through its Corporate Trust Office,
as Paying Agent, transfer agent and Security Registrar for the Securities, and
the Trustee accepts such appointments.
Section 1203.
Money for Securities
Payments to Be Held in Trust.
If the Company shall at any time
act as its own Paying Agent with respect to the Securities, it will, on or
before each due date of the principal of and any premium or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal and any premium or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee in
writing of its action or failure so to act.
Whenever
the Company shall have one or more Paying Agents for the Securities, it will, on
each due date of the principal of and any premium or interest on any Securities,
deposit or instruct the Trustee to deposit with a Paying Agent a sum sufficient
to pay the principal and any premium or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee in writing of its action or failure so to
act.
The
Company will cause each Paying Agent for the Securities other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1)
hold all sums held by it for the payment of the principal of and any premium or
interest on the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(2)
give the Trustee notice in writing of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal of and
any premium or interest on the Securities; and
(3)
at any time during the continuance of any such default, upon the written request
of the Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying Agent.
The
Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such
money.
Any money
deposited with the Trustee or any Paying Agent or held by the Company in trust
for the payment of the principal of and any premium or interest on any Security
and remaining unclaimed for two years after such principal or any premium or
interest, as the case may be, has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in an Authorized Newspaper in each Place of Payment, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Company.
Section 1204.
Officers’
Certificate.
The Company will deliver to the Trustee, within
120 days after the end of each fiscal year of the Company, a written
statement signed by the Chief Financial Officer, Secretary-Treasurer or an
Assistant Secretary-Treasurer of the Company, stating, as to each signer
thereof, that
(1)
a review of the activities of the Company during such year and of performance
under this Indenture has been made under his supervision, and
(2)
to the best of his knowledge, based on such review, (a) the Company has
fulfilled all its obligations under this Indenture throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to him and the nature and status thereof, and
(b) no event has occurred and is continuing which is, or upon notice or
lapse of time or both would become, an Event of Default, or, if such an event
has occurred and is continuing, specifying each such event known to him and the
nature and status thereof.
The
Company will deliver a written notice to the Trustee promptly after any officer
of the Company has knowledge of the occurrence of any event which with the
giving of notice or the lapse of time or both would become an Event of
Default.
Article
Thirteen
Redemption
of Securities
Section 1301.
Applicability of
Article.
Securities which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and in accordance
with this Article.
Section 1302.
Election to Redeem;
Notice to Trustee.
In the case of any redemption at the
election of the Company of less than all the Securities with the same
(i) Stated Maturity, (ii) period or periods within which, price or
prices at which and terms and conditions upon which such Securities may or shall
be redeemed or purchased, in whole or in part, at the option of the Company or
pursuant to any sinking fund or analogous provision or repayable at the option
of the Holder, (iii) rate or rates at which the Securities bear interest or
formula pursuant to which such rate or rates accrue, and (iv) date or dates
on which any interest shall be payable (collectively, the
“Equivalent Principal
Terms”
), the Company shall, at least 45 days prior to the Redemption
Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date and of the
principal amount of the Securities and with such Equivalent Principal Terms to
be redeemed. In the case of any redemption of Securities
(i) prior to the expiration of any restriction on such redemption provided
in the terms of such Securities with Equivalent Principal Terms or elsewhere in
this Indenture, or (ii) pursuant to an election of the Company which is
subject to a condition specified in the terms of such Securities with Equivalent
Principal Terms, the Company shall furnish the Trustee with an Officers’
Certificate evidencing compliance with such restriction or
condition.
Section 1303.
Extraordinary Mandatory
Redemption.
(a) The Securities are subject to
extraordinary mandatory redemption, and shall be redeemed, with funds provided
by the Company, on a redemption date selected by the Trustee, which shall not be
more than 60 days following a Determination of Tax Credit Ineligibility, at a
redemption price equal to the principal amount thereof of the Securities being
so redeemed plus accrued interest therein to the redemption date. Any
such redemption shall be in whole, unless the Trustee receives an opinion of
Bond Counsel delivered to the Trustee by the 45th day prior to the redemption
date that the redemption of a portion of the Outstanding Securities would have
the result that the tax credit under Section 54 of the Code will be
available to the Holders of the Securities remaining outstanding after such
redemption, in which case only such portion need be redeemed. If
fewer than all Securities are redeemed, the Trustee will select the Securities
to be redeemed as provided in Section 1305 hereof, subject to
Section 54 of the Code.
(b)
The Securities are subject to extraordinary mandatory redemption, and shall be
redeemed, with funds on hand with the Trustee in the Project Account pursuant to
a written direction by the Company, on a redemption date selected by the
Trustee, which shall be at least 45 days but not more than 225 days following a
Determination of Potential Tax Credit Ineligibility, at a redemption price equal
to the principal amount thereof of the Securities being so redeemed plus accrued
interest therein to the redemption date. Any such redemption shall
only be that portion of the Outstanding Securities that need to be redeemed so
that the tax credit under Section 54 of the Code will continue to be
available to the Holders of the Securities remaining outstanding after such
redemption. If fewer than all Securities are redeemed, the Trustee
will select the Securities to be redeemed as provided in Section 1305
hereof, subject to Section 54 of the Code.
Section 1304.
Mandatory Sinking Fund
Redemption
. The Securities are also subject to mandatory
redemption pursuant to the terms of the sinking fund as provided in the form of
Securities and in Article Fifteen hereof, at a redemption price equal to 100% of
the principal amount thereof plus (if the redemption date is not an Interest
Payment Date) accrued interest thereon to the redemption date.
As and
for a sinking fund for the retirement of a part of the Series 2009A Bonds,
the Company shall deposit or cause to be deposited in the Bond Fund in Federal
or other immediately available funds current in New York, New York, on or before
each sinking fund redemption date referred to in the form of the Security hereto
an amount sufficient to redeem (after credit as provided in Article Fifteen) the
principal amount of the Series 2009A Bonds to be redeemed on such date as
set forth in such Security.
Section 1305.
Selection by Trustee of
Securities to Be Redeemed.
If less than all the Securities
with Equivalent Principal Terms are to be redeemed, the particular Securities to
be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities with Equivalent Principal
Terms not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denomination for the Securities or
any integral multiple thereof) of the principal amount of Securities with
Equivalent Principal Terms of a denomination larger than the minimum authorized
denomination for Securities with Equivalent Principal Terms.
The
Trustee shall promptly notify the Company in writing of the Securities selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be
redeemed.
Section 1306.
Notice of
Redemption.
Notice of redemption shall be given in the manner
provided in Section 106 to the Holders of Securities to be redeemed not
less than 30 nor more than 60 days prior to the Redemption
Date.
All
notices of redemption shall state:
(1) the
Redemption Date,
(2)
the Redemption Price,
(3)
if less than all the Outstanding Securities with Equivalent Principal
Terms are to be redeemed, the identification (and, in the case of
partial redemption, the principal amounts) of the particular Securities to be
redeemed,
(4)
that on the Redemption Date the Redemption Price will become due and payable
upon each such Security to be redeemed and, if applicable, that interest thereon
will cease to accrue on and after said date unless the Company shall default in
the payment of the Redemption Price plus accrued interest,
(5) the
place or places where such Securities are to be surrendered for payment of the
Redemption Price,
(6) that
the redemption is for a sinking fund, if such is the case, and
(7) the
CUSIP number of the Securities, if any.
Notice of
redemption of Securities to be redeemed at the election of the Company shall be
given by the Company or, at the Company’s written request, by the Trustee in the
name and at the expense of the Company in which event the Company shall provide
the Trustee with the information required by Clauses (1) through
(7) above.
Section 1307.
Deposit of Redemption
Price.
On or prior to any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in
Section 1203) an amount of money in immediately available funds sufficient
to pay the Redemption Price of, and (if accrued interest is to be paid to the
Persons surrendering the relevant Securities for redemption) accrued interest
on, all the Securities which are to be redeemed on that date.
Section 1308.
Securities Payable on
Redemption Date.
Notice of redemption having been given as
aforesaid, the Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified, and from and
after such date (unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for redemption in
accordance with said notice, maturing after the Redemption Date, such Security
shall be paid by the Company at the Redemption Price, together (if accrued
interest is to be paid to the Persons surrendering the relevant Securities for
redemption) with accrued interest to the Redemption Date;
provided, however,
that,
unless otherwise specified as contemplated by Section 301, installments of
interest on Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of
Section 307.
If any
Security called for redemption shall not be so paid upon surrender thereof for
redemption, the principal and any premium shall, until paid, bear interest from
the Redemption Date at the rate prescribed therefor in the Security or with
respect to such Securities pursuant to Section 301, as the case may be, or,
if no such interest rate is prescribed therefor, at the interest rate or rates,
if any, borne by such Securities.
Section 1309.
Securities Redeemed in
Part.
Any Security which is to be redeemed only in part shall
be surrendered at a Place of Payment therefor (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities and of like tenor
and terms, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
Article
Fourteen
Meetings
of Holders of Securities
Section 1401.
Purposes for Which Meetings May Be
Called.
A meeting of Holders of Securities may be called at
any time and from time to time pursuant to this Article to make, give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be made, given or taken by Holders of the
Securities.
Section 1402.
Call, Notice and Place
of Meetings.
(a) The Trustee may at any time call a
meeting of Holders of Securities for any purpose specified in Section 1401,
to be held at such time and at such place in the Borough of Manhattan, The City
of New York as the Trustee shall determine. Notice of every
meeting of Holders of Securities, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given, in the manner provided in Section 106, not less than 21 nor
more than 180 days prior to the date fixed for the meeting.
(b)
In case at any time the Company, pursuant to a Board Resolution, or the Holders
of at least 10% in principal amount of the Outstanding Securities shall have
requested the Trustee to call a meeting of the Holders of the Securities for any
purpose specified in Section 1401, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have made the first publication of the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the Company or
the Holders of the Securities in the amount above specified, as the case may be,
may determine the time and the place in the Borough of Manhattan, The City of
New York for such meeting and may call such meeting for such purposes by
giving notice thereof as provided in Subsection (a) of this
Section.
Section 1403.
Persons Entitled to
Vote at Meetings.
To be entitled to vote at any meeting of
Holders of Securities, a Person shall be (1) a Holder of one or more
Outstanding Securities, or (2) a Person appointed by an instrument in
writing as proxy for a Holder or Holders of one or more Outstanding Securities
by such Holder or Holders. The only Persons who shall be entitled to
be present or to speak at any meeting of Holders of Securities shall be the
Persons entitled to vote at such meeting and their counsel, any representatives
of the Trustee and its counsel and any representatives of the Company and its
counsel.
Section 1404.
Quorum;
Action.
The Persons entitled to vote a majority in principal
amount of the Outstanding Securities shall constitute a quorum for a meeting of
Holders of the Securities;
provided, however,
that if
any action is to be taken at such meeting with respect to a request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture or the Securities expressly provides may be given, made or taken by
the Holders of not less than 66-2/3% in principal amount of the Outstanding
Securities, the Persons entitled to vote 66-2/3% in principal amount of the
Outstanding Securities shall constitute a quorum. In the absence of a
quorum within 30 minutes of the time appointed for any such meeting, the meeting
shall, if convened at the request of Holders of the Securities, be
dissolved. In any other case the meeting may be adjourned for a
period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may be further
adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such adjourned
meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1402(a), except that such notice need be given
only once not less than five days prior to the date on which the meeting is
scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Securities which shall constitute a
quorum.
Except as
limited by the proviso set forth in the first paragraph of Section 1102,
any resolution presented to a meeting or adjourned meeting duly reconvened at
which a quorum is present as aforesaid may be adopted by the affirmative vote of
the Holders of a majority in principal amount of the Outstanding Securities;
provided, however,
that, except as limited by the proviso set forth in the first paragraph
of Section 1102, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture or the Securities expressly provides may be given, made or taken by
the Holders of not less than 66-2/3% in principal amount of the Outstanding
Securities may be adopted at a meeting or an adjourned meeting duly reconvened
and at which a quorum is present as aforesaid only by the affirmative vote of
the Holders of 66-2/3% in principal amount of the Outstanding Securities; and
provided, further,
that, except as limited by the proviso set forth in the first paragraph of
Section 1102, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture or the Securities expressly provides may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities may be adopted at a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as aforesaid
by the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Securities.
Any
resolution passed or decision taken at any meeting of Holders of Securities duly
held in accordance with this Section shall be binding on all the Holders of
Securities, whether or not present or represented at the meeting.
Section 1405.
Determination of Voting
Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of the Securities in regard to proof of the
holding of the Securities and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem
appropriate.
(b)
The Trustee shall, by an instrument in writing, appoint a temporary chairman of
the meeting, unless the meeting shall have been called by the Company or by
Holders of the Securities as provided in Section 1402(b), in which case the
Company or the Holders of Securities calling the meeting, as the case may be,
shall appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in principal amount of the Outstanding Securities
represented at the meeting.
(c)
At any meeting each Holder of a Security and each proxy shall be entitled to one
vote for each $1,000 principal amount of the Outstanding Securities held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of
the meeting shall have no right to vote, except as a Holder of a Security or as
a proxy.
(d)
Any meeting of Holders of Securities duly called pursuant to Section 1402
at which a quorum is present may be adjourned from time to time by Persons
entitled to vote a majority in principal amount of the Outstanding Securities
represented at the meeting; and the meeting may be held as so adjourned without
further notice.
Section 1406.
Counting Votes and
Recording Action of Meetings.
The vote upon any resolution
submitted to any meeting of Holders of Securities shall be by written ballots on
which shall be subscribed the signatures of the Holders of Securities or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record, at least in
duplicate of the proceedings of each meeting of Holders of Securities shall be
prepared by the secretary of the meeting and there shall be attached to such
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that such
notice was given as provided in Section 1402 and, if applicable,
Section 1404. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
Article
Fifteen
Sinking
Funds
Section 1501.
Applicability of
Article.
The provisions of this Article shall be applicable to
any sinking fund for the retirement of the Securities.
The
minimum amount of any sinking fund payment provided for by the terms of the
Securities is herein referred to as a “mandatory sinking fund
payment.” If provided for by the terms of the Securities, the cash
amount of any sinking fund payment may be subject to reduction as provided in
Section 1502. Each sinking fund payment shall be applied to the
redemption of Securities as provided for by the terms of the
Securities.
Section 1502.
Satisfaction of Sinking
Fund Payments with Securities.
The Company (1) may
deliver Outstanding Securities (other than any previously called for redemption)
and (2) may apply as a credit Securities which have been redeemed either at
the election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities, in each case under Clause (1) or
(2) above in satisfaction of all or any part of any sinking fund payment
with respect to the Securities required to be made pursuant to the terms of such
Securities; provided that such Securities have not been previously so
credited. Such Securities shall be received and credited for such
purpose by the Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
Section 1503.
Redemption of
Securities for Sinking Fund.
Not less than 60 days prior
to each sinking fund payment date for the Securities or such shorter period as
shall be satisfactory to the Trustee, the Company will deliver to the Trustee an
Officers’ Certificate specifying the amount of the next ensuing sinking fund
payment for such Securities pursuant to the terms of such Securities, the
portion thereof, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and crediting
the Securities pursuant to Section 1502 and will also deliver to the
Trustee any Securities to be so delivered. The Trustee shall select
the Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 1305 and cause notice of the redemption thereof to be
given in the name of and at the expense of the Company in the manner provided in
Section 1306. Such notice having been duly given, the redemption
of such Securities shall be made upon the terms and in the manner stated in
Sections 1308 and 1309.
Article
Sixteen
Satisfaction
and Discharge
Section 1601.
Satisfaction and
Discharge of Indenture.
This Indenture shall upon Company Request cease
to be of further effect (except as to any surviving rights expressly provided
for in the last paragraph of this Section 1601), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1)
either
(A)
all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306, (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1203) have been delivered to the
Trustee for cancellation; or
(B)
all such Securities not theretofore delivered to the Trustee for
cancellation
(i)
have become due and payable, or
(ii) will
become due and payable at their Stated Maturity within ninety days,
and the
Company, in the case of (i) or (ii) above, has deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose (A) an
amount of cash or (B) U.S. Government Obligations, which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any payment of
principal (including any premium), and interest under the Securities, money in
an amount or (C) a combination of (A) and (B) sufficient (in the opinion
with respect to (B) and (C) of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee) to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal and
premium, if any, and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
provided, however,
that the
Company shall not make or cause to be made the deposit provided by
subclause (B) unless the Company shall have delivered to the Trustee an
Opinion of Bond Counsel to the effect that such deposit will not impair the tax
credit of the owners of the Securities or violate the provisions of the Tax
Compliance Agreement;
(2) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company; and
(3)
the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding
the satisfaction and discharge of this Indenture, the obligations of the Company
to the Trustee under Section 807, the obligations of the Company to the
Holders of any Securities which are repayable by the Company at the option of
such Holders in accordance with Article Fifteen, the provisions of Sections 304,
305, 306, 307, 1202, 1203 and 1205 and the payment obligations to any
Authenticating Agent under Section 814 shall survive and, if cash or U.S.
Government Obligations shall have been deposited with the Trustee pursuant to
Clause (1)(B) of clause (1) of this Section, or if money, U.S.
Government Obligations shall have been deposited with or received by the Trustee
pursuant to Section 1603, the obligations of the Trustee under
Section 1602 and the last paragraph of Section 1203 shall survive this
Section, the provisions of Section 1602, the rights of Holders of
Outstanding Securities to receive, from the trust funds described in this
Section and as more fully provided in Section 1602, payments in respect of
the principal of and any premium and interest on such Securities when such
payments are due, the other provisions of this Article Sixteen and, if
applicable, the provisions of Article Thirteen, shall also
survive.
Section
1602.
Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1203, all
cash or U.S. Government Obligations deposited with the Trustee pursuant to
Section 1601 shall be held in trust and applied by it, in accordance with
the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (other than the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal and premium and interest for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
Section 1603.
Satisfaction, Discharge
and Defeasance of Securities
. If, at the Company’s option,
either
(a)
the Company will be deemed to have been Discharged from its obligations with
respect to the Securities or
(b)
the Company will cease to be under any obligation to comply with any term,
provision or condition set forth in (x) Sections 1001 and 1002 or
(y) the instrument or instruments setting forth the terms, provisions or
conditions of such Securities pursuant to Section 301 (
provided
in case of this
subclause (y) that such instrument or instruments specify which terms,
provisions or conditions, if any, are subject to this clause (b);
provided further, however,
that no such instrument may specify that the Company may cease to comply with
any obligations as to which it may not be Discharged pursuant to the definition
of
“Discharged”
);
in each
case (a) and (b) with respect to the Securities and Coupons, if any, thereof, on
the 91st day after the applicable conditions set forth below in (p) and either
(q) or (r) have been satisfied:
(p)(1)
the Company has paid or caused to be paid all other sums payable with respect to
the Outstanding Securities, if any (in addition to any sums required under (q)
or (r)); and
(2)
the Company has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel as contemplated by Section 102 and each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of the entire indebtedness on all Outstanding Securities, if any, have
been complied with;
(q)(1)
the Company shall have deposited or caused to be deposited irrevocably with the
Trustee as a trust fund specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Securities (i) money in an
amount or (ii) U.S. Government Obligations (as defined below), which
through the payment of interest and principal in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment of principal (including any premium) and interest under the Securities,
money in an amount (or (iii) a combination of (i) and (ii)) sufficient (in
the opinion with respect to (ii) and (iii) of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee) to pay and discharge each installment of principal of
and premium, if any, and interest on, the Outstanding Securities, if any, on the
dates such installments of interest or principal are due;
provided, however,
that the
Company shall not make or cause to be made the deposit provided by this
clause (1) unless the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that such deposits will not impair the tax
credit of the owners of the Securities or violate the provisions of the Tax
Compliance Agreement;
(2)(i)
no Event of Default or event (including such deposit) which with notice or lapse
of time or both would become an Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit, (ii) no
Event of Default as defined in clause (4) of Section 601, or event
which with notice or lapse of time or both would become an Event of Default
under either such clause, shall have occurred within 90 days after the date of
such deposit and (iii) such deposit and the related intended consequence
under (a) or (b) will not result in any default or event of default under any
material indenture, agreement or other instrument binding upon the Company or
any of its properties;
(3) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that Holders of the Securities will not
recognize income, gain or loss for Federal income tax purposes as a result of
the Company’s exercise of its option under this Section 1603 and will be
subject to Federal income tax in the same amount, in the same manner and at the
same times as would have been the case if such option had not been exercised;
and
(r)
the Company has properly fulfilled such other means of satisfaction and
discharge as is specified, as contemplated by Section 301, to be applicable
to the Securities.
Any
deposits with the Trustee referred to in clause (q)(1) above will be made
under the terms of an escrow trust agreement in form and substance satisfactory
to the Trustee. If any Outstanding Securities are to be redeemed
prior to their Stated Maturity, whether pursuant to any mandatory redemption
provisions or in accordance with any mandatory sinking fund requirement, the
applicable escrow trust agreement will provide therefor and the Company will
make arrangements for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company.
(c)
The Trustee shall deliver or pay to the Company from time to time upon Company
Request any U.S. Government Obligations or money held by it as provided in
Section 1601 or 1603 which, in the opinion of a nationally-recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are then in excess of the amount thereof which then
would have been required to be deposited for the purpose for which such
obligations or money were deposited or received. The Trustee shall
also deliver or pay to the Company from time to time upon Company Request any
U.S. Government Obligations or money held by it as provided in Section 1601
or 1603, in exchange for other U.S. Government Obligations or money, upon the
following conditions:
(1)
such exchange shall occur simultaneously;
(2)
the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for
relating to the exchange contemplated by paragraph (c) of this Section have
been complied with; and
(3)
in the opinion of a nationally-recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee,
immediately after such exchange the U.S. Government Obligations or money then
held by the Trustee as provided in Section 1601 or 1603 shall be in such
amount as then would have been required to be deposited in order to comply with
Section 1601(l) or 1603(q)(1) hereof, as the case may be.
Section 1604.
Reinstatement
. If
the Trustee is unable to apply any money or U.S. Government Obligations in
accordance with Section 1601 by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company’s obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 1601 until such time as
the Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with Section 1601;
provided, however,
that if
the Company has made any payment of any interest on or principal of (and
premium, if any) on any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee.
Article
Seventeen
Grant
of Security Interest in Pledged Collateral
Section
1701.
Security
Interest
. To secure the full and punctual payment of the
Obligations in accordance with the terms of this Indenture, the Securities and
the Credit Support Agreement, the Company shall enter into the Pledge and
Security Agreement with the Trustee, pursuant to which the Company shall grant a
security interest to the Trustee for the ratable benefit of the Holders from
time to time of the Securities (such Trustee and Holders from time to time being
collectively the
“Secured
Parties”
) in, and shall pledge and collaterally assign to and with the
Trustee for the ratable benefit of the Secured Parties, the Pledged Collateral
and all of the rights and remedies of the Company in and to the Pledged
Collateral (such security interest, pledge and collateral assignment being
the
“Security
Interest”
).
Article
Eighteen
Immunity of Incorporators,
Stockholders, Officers and Directors
Section 1801.
Exemption from
Individual Liability.
No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of any Security, or for
any claim based thereon or otherwise in respect thereof, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor Person, either directly or through
the Company, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers or
directors, as such, of the Company or of any successor Person, or any of them,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any of the Securities or inferred therefrom; and that any and all such
personal liability, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer or director, as such, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom, are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture and the issue of
such Securities.
* * *
This
instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
In
Witness Whereof
, the parties hereto have caused this Indenture to be duly
executed, all as of the day and year first written above.
National
Rural Utilities Cooperative
Finance
Corporation
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By
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Name:
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Title:
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U.S.
Bank National Association
, as Trustee
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By
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Name:
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Title:
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Federal
Agricultural Mortgage
Corporation
,
as Guarantor
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By
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Name:
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Title:
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Exhibit
A
[Form
of Series 2009A Bond]
This
Security is a Global Security registered in the name of the Depositary (referred
to herein) or a nominee thereof and, unless and until it is exchanged in whole
or in part for the individual Securities represented hereby, this Global
Security may not be transferred except as a whole by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee or such successor Depositary.
Unless
this Global Security is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York), to the Trustee
for registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment is
made to Cede & Co., any transfer, pledge or other use hereof for value or
otherwise by or to any person is wrongful since the Registered Owner hereof,
Cede & Co., has an interest herein.
This
Security is not a savings account deposit or obligation of any bank and is not
insured or guaranteed by any governmental agency of the United States, including
the Federal Deposit Insurance Corporation, Bank Insurance Fund or Savings
Association Insurance Fund.
National
Rural Utilities
Cooperative
Finance Corporation
Clean
Renewable Energy Bonds
Secured
Tax Credit Series 2009A
Original
Issue Date:
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CUSIP: 637432
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October
23, 2009
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Maturity
Date: December 15,
Registered
Owner: Cede & Co.
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Principal
Amount:
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Tax
Credit Rate:
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Interest
Rate:
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per
annum
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National
Rural Utilities Cooperative Finance Corporation, a cooperative association duly
organized and existing under the laws of the District of Columbia (herein called
the
“Company,”
which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to the Registered Owner
identified above, or registered assigns, on the Maturity Date identified above,
the Principal Amount identified above.
This
Security has been designated by the Company as a Clean Renewable Energy Bond
under Section 54 of the Internal Revenue Code of 1986, as
amended. An Owner of this Security (an
“Owner”
) on any Credit
Allowance Date of this Security occurring during any taxable year will be
allowed a credit against the Owner’s federal income tax. The total
annual credit with respect to the Series 2009A Bonds is equal to the
product of (a) the Tax Credit Rate identified above; multiplied by
(b) the outstanding face amount of such Securities. The credit
allowed to an Owner for its taxable year is equal to the sum of the credits
determined on each Credit Allowance Date that falls within the Owner’s tax
year. The Credit Allowance Dates are March 15, June 15,
September 15, December 15, and the last day on which the Securities
are outstanding. The amount of the credit allowed on each Credit
Allowance Date is equal to 25% of the annual credit unless the Securities are
issued less than three months prior to the first credit allowance date or
redeemed less than three months after the last credit allowance
date. With respect to those periods, the amount of credit allowed on
the respective credit allowance date is a ratable portion of the otherwise
allowable credit, based upon the portion of the three-month period during which
the Security is outstanding. Ownership of the Securities may result
in other federal income tax consequences to certain taxpayers. Each
owner of a Security should consult its own tax advisor concerning tax
consequences of ownership of the Securities.
Interest
on the Bonds will be computed on the basis of a 360-day year of twelve 30-day
months and will be paid semi-annually on June 15 and December 15 of
each year, commencing December 15, 2009. Payment of the
principal of (and premium, if any) and interest on this Security will be made at
the office or agency of the Paying Agent maintained for that purpose in New
York, New York, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however,
that
at the option of the Company payment of interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated in
writing by the Person entitled thereto as specified in the Security Register at
least fifteen days prior to the relevant Interest Payment Date.
This
Security has not been registered under the Securities Act of 1933 (the
“1933 Act”
). The
Bondholder hereof, by purchasing this Security, agrees for the benefit of the
Company that this Security may not be resold, pledged or otherwise transferred
other than (i) in a transaction exempt from registration under the 1933 Act
and only to the Initial Purchaser or through the Initial Purchaser to an
institutional investor approved by the Initial Purchaser as an institutional
accredited investor or a qualified institutional buyer purchasing for its own
account or for the account of an institutional accredited investor or qualified
institutional buyer, respectively, or (ii) to a qualified institutional
buyer that purchases for its own account or for the account of a qualified
institutional buyer and to whom notice is given that the transfer is being made
in reliance on Rule 144A, in each case in accordance with any applicable
securities laws of any state of the United States. The Bondholder
hereof further agrees for the benefit of the Company that it will notify any
purchaser hereof of the resale restrictions referred to above. Any
Bondholder holding this Security agrees that it will notify the Company and the
Trustee of any transfer by it of this Security and that it will furnish to the
Company and the Initial Purchaser such certificates and other information as
they may reasonably require to confirm that any transfer by it of this Security
complies with the foregoing restrictions. The Bondholder hereof, by
purchasing this Security represents and agrees for the benefit of the Company
that it is (1) a qualified institutional buyer within the meaning of
Rule 144A or (2) an institution that is an “Accredited Investor” as
defined in Rule 501(A)(1), (2), (3) or (7) under the 1933 Act and that it
is holding this Security for investment purposes and not for
distribution.
This
Security is one of a duly authorized issue of securities of the Company (herein
called the
“Securities”
), issued under
an Indenture, dated as of September 1, 2009 (the
“Indenture”
) among the
Company, U.S. Bank National Association, as Trustee (herein called the
“Trustee,”
which term
includes any successor trustee under the Indenture) and the Federal Agricultural
Mortgage Corporation (the
“Guarantor”
), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one of the
series designated National Rural Utilities Cooperative Finance Corporation Clean
Renewable Energy Bonds, Secured Tax Credit Series 2009A (the
“Series 2009A Bonds”
)
and limited in aggregate principal amount to $28,908,000.
Pursuant
to the Indenture, the Guarantor has agreed to fully and unconditionally
guarantee (the
“Guarantee”
) to the Trustee
for the benefit of the Holders of the Series 2009A Bonds and the Company,
the timely payment of interest on the Series 2009A Bonds and, in the case
of principal, an amount equal to the amount of outstanding principal of the
Series 2009A Bonds less any amounts in the Series 2009A Project
Account (as set forth in the Indenture). Although the Guarantor is a
federally chartered instrumentality of the United States, the obligations of the
Guarantor under the Indenture will be obligations solely of the Guarantor, and
the Guarantee will not be an obligation of, and will not be guaranteed by, the
Farm Credit Administration, the United States or any agency or instrumentality
of the United States.
Payment
by the Guarantor under the Indenture of any amount required to be paid by the
Company under the Indenture shall be deemed to be a payment thereunder for
purposes of determining whether there is an Event of Default under the Indenture
which will permit the Trustee to exercise any remedies under such
instrument.
The
Series 2009A Bonds are subject to redemption by the Company prior to their
Stated Maturity, in the following events:
(a)
Not more than 60 days following a Determination of Tax Credit Ineligibility, at
a redemption price equal to the principal amount thereof of the Securities being
so redeemed plus accrued interest thereon to the redemption date. Any
such redemption shall be in whole, unless the Trustee receives an opinion of
Bond Counsel delivered to the Trustee by the 45th day prior to the redemption
date that the redemption of a portion of Series 2009A Bonds would have the
result that the tax credit under Section 54 of the Code will be available
to the Holders of the Series 2009A Bonds remaining outstanding after such
redemption, in which case only such portion need be redeemed. If
fewer than all Series 2009A Bonds are redeemed, the Trustee will select the
Series 2009A Bonds to be redeemed as provided in the Indenture, subject to
Section 54 of the Code; or
(b)
At least 45 days but not more than 225 days following a Determination of
Potential Tax Credit Ineligibility, at a redemption price equal to the principal
amount thereof of the Series 2009A Bonds being so redeemed plus accrued
interest thereon to the redemption date. Any such redemption shall
only be that portion of the Series 2009A Bonds that need to be redeemed so
that the tax credit under Section 54 of the Code will continue to be
available to the Holders of the Series 2009A Bonds remaining outstanding
after such redemption. If fewer than all Series 2009A Bonds are
redeemed, the Trustee will select the Series 2009A Bonds to be redeemed as
provided in the Indenture, subject to Section 54 of the Code.
So long
as no “Guarantor Default” (as defined under the Indenture) is existing and
continuing, the Guarantor shall be the “Control Party” under the
Indenture. If the Guarantor is the Control Party, the Guarantor shall
be considered the Holder of all Series 2009A Bonds Outstanding for all
purposes under the Indenture and shall be permitted to take any and all actions
permitted to be taken by the Holders or a specified percentage of Holders
thereunder,
provided, however,
the Guarantor shall not be entitled to receive payments of principal of
and interest on the Series 2009A Bonds other than (i) pursuant to the
Guarantor’s subrogation rights and (ii) to the extent that the Guarantor is a
Holder of the Series 2009A Bonds. The Control Party will have
the sole right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Series 2009A
Bonds or exercising any trust or power conferred on the Trustee with respect to
the Series 2009A Bonds. The Guarantor shall, to the extent it
makes any payment of any amount with respect to the Series 2009A Bonds,
become subrogated to the rights of the recipient of such payments to the extent
of such payments. Subject to and conditioned upon any payment with
respect to the Series 2009A Bonds by or on behalf of the Guarantor, the
Trustee assigns to the Guarantor, pursuant the Indenture, all rights to the
payment of interest or principal with respect to the Series 2009A Bonds
which are then due for payment to the extent of all payments made by the
Guarantor, and the Guarantor may exercise any option, vote, right, power or the
like with respect to the Series 2009A Bonds to the extent that it has made
a payment on the Series 2009A Bonds pursuant to the
Guarantee. To evidence such subrogation, the Trustee shall note the
Guarantor’s rights as subrogee in the Bond Register upon receipt from the
Guarantor of payment by the Guarantor of any amount with respect to the
Series 2009A Bonds. Such subrogation shall in all cases not
impair the rights of the Holders of the Series 2009A Bonds to receive all
amounts payable by the Guarantor in respect of the Series 2009A Bonds
pursuant to the Guarantee. Each Holder of Series 2009A Bonds is
hereby deemed to acknowledge and agree to the rights of subrogation of the
Guarantor hereunder, under the Indenture, under the Guarantee and otherwise
under applicable law.
The
Indenture contains provisions for satisfaction and discharge of the entire
indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
If an
Event of Default with respect to the Series 2009A Bonds shall occur and be
continuing, the principal of the Series 2009A Bonds may be declared due and
payable in the manner and with the effect provided in the
Indenture.
The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities to be affected under the Indenture
at any time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding to be
affected, treated as one class. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities at the time Outstanding, on behalf of the Holders of all
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As
provided in and subject to the provisions of the Indenture, the Holder of this
Security shall not have the right to institute any proceeding with respect to
the Indenture or for the appointment of a receiver or trustee or for any other
remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the
Series 2009A Bonds, the Holders of not less than 25% in principal amount of
the Series 2009A Bonds at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee indemnity satisfactory to it, the
Trustee shall not have received from the Holders of a majority in principal
amount of Series 2009A Bonds at the time Outstanding a direction
inconsistent with such request, and the Trustee shall have failed to institute
any such proceeding, for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to any suit
instituted by the Holder of this Bond for the enforcement of any payment of
principal hereof or any premium or interest hereon on or after the respective
due dates expressed or provided for herein.
No
reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of and any premium and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Series 2009A Bonds and of like
tenor, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees. No
service charge shall be made for any such registration of transfer or exchange,
but the Company and the Security Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to
due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
The
Series 2009A Bonds are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple of $1,000 in excess of
$100,000. As provided in the Indenture and subject to certain
limitations therein set forth, Series 2009A Bonds are exchangeable for a
like aggregate principal amount of Securities of like tenor of a different
authorized denomination, as requested by the Holder surrendering the
same.
All terms
used in this Bond which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
The
Indenture and this Security shall be governed by and construed in accordance
with the laws of the State of New York without regard to conflicts of laws
principles thereof.
This
Security is a global security within the meaning of the Indenture hereinafter
referred to and is registered in the name of a depositary or a nominee of a
depositary. This Security is exchangeable for securities registered
in the name of a person other than the depositary or its nominee only in the
limited circumstances described in the indenture and may not be transferred
except as a whole by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary.
Unless
the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
In
Witness Whereof
, the Company has caused this instrument to be duly
executed.
Dated:
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National
Rural Utilities Cooperative
Finance
Corporation
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By:
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Name:
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Title:
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Certificate
of Authentication
This is
one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
Date:
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U.S.
Bank National Association
, as Trustee
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By:
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Authorized
Signatory
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Assignment
The
following abbreviations, when used in the inscription on the face of the within
Security, shall be construed as though they were written out in full according
to applicable laws or regulations
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TEN
COM
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— as
tenants in common
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TENANT
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— as
tenants by the entireties
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JT
TEN
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— as
joint tenants with right of survivorship and not as tenants in
common
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UNIF GIFT
MIN
ACT — _____________ Custodian _____________
(Cust) (Minor)
under
Uniform Gifts to Minors Act
Additional
abbreviations may also be used though not in the above list.
For
Value Received
, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
____________________________________________________________
Please
Insert Social Security or
other
Identifying Number of Assignee:
________________________________________________________________________________________________________
________________________________________________________________________________________________________
(Please
Print or Typewrite Name and Address, Including Postal Zip Code, of
Assignee)
________________________________________________________________________________________________________
the
within Security and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________________________________ to transfer said
Security on the books of the Company, with full power of substitution in the
premises.
If less than the entire principal
amount of the within Security is to be sold, transferred or assigned, specify
the portion thereof which the Holder elects to have sold, transferred or
assigned: ______________; and specify the denomination or
denominations (which shall not be less than the minimum-authorized denomination)
of the Securities to be issued to the Holder for the portion of the within
Security not being sold, transferred or assigned (in the absence of any such
specification, one such Security will be issued for the portion not being sold,
transferred or
assigned): ______________________.
Dated: ______________
Signature: _________________________
(Sign
exactly as your name appears on the other side of this Security
Certificate)
Signature
Guarantee*: _________________________
*
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Signature
must be guaranteed by an “eligible guarantor institution” that is a bank,
stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program
(
“STAMP”
)
or such other “signature guarantee program” as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as
amended.
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Exhibit
B
Form
of Expense Requisition Statement
(pursuant
to Section 402(c) of the Indenture)
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005
Attn: Corporate
Trust Services
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Requisition
No: ___
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Requisition
Amount: $________
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Date: ___________,
200_
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Ladies
and Gentlemen:
This
Certificate is provided pursuant to Section 402(c) of the Indenture, dated as of
September 1, 2009 (the
“Indenture”
) by and among
National Rural Utilities Cooperative Finance Corporation (the
“Company”
), Federal
Agricultural Mortgage Corporation and U.S. Bank National Association,
Trustee (the
“Trustee”
), relating to that
issue of Clean Renewable Energy Bonds, Secured Tax Credit Series 2009A of
National Rural Utilities Cooperative Finance Corporation (the
“Series 2009A Bonds”
),
requesting payment out of the Series 2009A Expense Account of the Project
Fund (the
“Account”
),
as defined and established in the Indenture. Capitalized terms used
herein and not otherwise defined herein shall have the meaning assigned to them
in the Indenture. Payment in the amount listed above as the
“Requisition Amount” should be wired to Company. The account
information is as follows:
[Name of
Bank]
ABA
Routing
Number:
__________
Account
Name:
__________
Account
Number:
__________
The
undersigned Authorized Officer of the Company, on behalf of the Company, does
hereby represent as follows:
(i)
the amount of money listed above as the “Requisition Amount” is due and owing,
has not been previously paid with moneys disbursed from the Account and is a
proper cost of issuing the Series 2009A Bonds; and
(ii)
the money received pursuant to this requisition will be used to pay the fees,
costs and expenses of issuing the Series 2009A Bonds, including, without
limitation, all printing expenses in connection with the Indenture, Loan
Agreements, Project Agreements and Series 2009A Bonds, Rating Agency fees,
legal fees, administrative charges of the Company and the initial fees and
expenses of the Trustee.
Sincerely,
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National
Rural Utilities Cooperative Finance
Corporation
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By
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Authorized
Company
Representative
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Exhibit
C
Form
of Demand Letter
[Date]
Federal
Agricultural Mortgage Corporation
1133 21st
Street, N.W., Suite 600
Washington,
D.C. 20036
Attn: Timothy
L. Buzby, Vice President – Finance
Telecopier: 202-872-7713
Re:
Indenture dated as of September 1, 2009 (the
“Indenture”
), among
National
Rural Utilities Cooperative Finance Corporation, as Company (the
“Company”
), Federal
Agricultural Mortgage Corporation, as guarantor (the
“Guarantor”
), and U.S. Bank
National Association, as trustee (the
“Trustee”
)
Ladies
and Gentlemen:
In
accordance with Section 502(a) of the Indenture, the Trustee hereby makes a
claim under the Guarantee due to a Guaranty Event. Please remit funds
in the amount of ______________________________ ($__________) to the Trustee by
2:30 p.m. Eastern time on the following payment
date:_______________________. Capitalized terms used but not
otherwise defined herein have the meanings set forth in the
Indenture.
Sincerely,
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U.S.
Bank National Association
, as Trustee
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By:
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Name:
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Title:
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cc:
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CFO
of National Rural Utilities
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Cooperative
Finance Corporation
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Exhibit
D
Form
of Control Party Instructions
[Date]
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005
Attn: Corporate
Trust Services
Re:
Indenture dated as of September 1, 2009 (the
“Indenture”
), among
National
Rural Utilities Cooperative Finance Corporation, as Company (the
“Company”
), Federal
Agricultural Mortgage Corporation, as guarantor (the
“Guarantor”
), and U.S. Bank
National Association, as trustee (the
“Trustee”
)
Ladies
and Gentlemen:
[__________________],
as Control Party, hereby directs U.S. Bank National Association, as Trustee, to
distribute funds in the following amounts to the following parties as required
by Section 605 of the Indenture:
[List of
amounts and locations $s/b sent]
Capitalized
terms used but not otherwise defined herein have the meanings set forth in the
Indenture.
Sincerely,
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By:
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Name:
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Title:
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cc:
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CFO
of National Rural Utilities
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Cooperative
Finance Corporation
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Exhibit
E
Form
of Funds Direction Statement
(pursuant
to Section 404(c) of the Indenture)
U.S. Bank
National Association
100 Wall
Street
Suite
1600
New York,
NY 10005
Attn: Corporate
Trust Services
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Direction
No: ___
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Direction
Amount: $________
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Date: ___________,
200_
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Ladies
and Gentlemen:
This
Certificate is provided pursuant to Section 404(c) of the Indenture, dated as of
September 1, 2009 (the
“Indenture”
) by and among
National Rural Utilities Cooperative Finance Corporation (the
“Company”
), Federal
Agricultural Mortgage Corporation and U.S. Bank National Association,
Trustee (the
“Trustee”
), relating to that
issue of Clean Renewable Energy Bonds, Secured Tax Credit Series 2009A of
National Rural Utilities Cooperative Finance Corporation (the
“Series 2009A Bonds”
),
requesting transfer out of the Borrower Repayments Fund relating (the
“Fund”
), as defined and
established in the Indenture. Capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to them in the
Indenture.
The
Trustee is hereby requested to transfer $_________ from the Borrower Repayments
Account to be used as set forth below.
The
undersigned Authorized Officer of the Company, on behalf of the Company, does
hereby represent as follows:
(i)
For transfer to the Bond Fund to be used to pay principal or interest on the
Series 2009A Bonds; or
(ii)
for payment to the Company, to be used to pay the fees, costs and expenses of
maintaining the Series 2009A Bonds program, including, without limitation,
all administrative charges of the Company.
Sincerely,
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National
Rural Utilities Cooperative
Finance
Corporation
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By
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Authorized
Company
Representative
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Exhibit
31.1
CERTIFICATION
I,
Michael A. Gerber, certify that:
1.
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I
have reviewed this Quarterly Report on Form 10-Q of the Federal
Agricultural Mortgage Corporation for the fiscal quarter ended June 30,
2010;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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(a)
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Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
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(b)
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Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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(c)
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Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
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(d)
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Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
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(a)
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All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
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(b)
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Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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Date:
August 9, 2010
/s/ Michael A.
Gerber
Michael
A. Gerber
Chief
Executive Officer
Exhibit
31.2
CERTIFICATION
I,
Timothy L. Buzby, certify that:
1.
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I
have reviewed this Quarterly Report on Form 10-Q of the Federal
Agricultural Mortgage Corporation for the fiscal quarter ended June 30,
2010;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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(a)
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Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
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(b)
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Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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(c)
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Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
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(d)
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Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
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(a)
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All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
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(b)
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Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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Date:
August 9, 2010
/s/ Timothy L.
Buzby
Timothy
L. Buzby
Chief
Financial Officer
Exhibit
32
CERTIFICATION
PURSUANT TO
18 U.S.C.
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of the Federal Agricultural
Mortgage Corporation (the “Corporation”) for the quarterly period ended June 30,
2010 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned, Michael A. Gerber, Chief Executive Officer of
the Corporation, and Timothy L. Buzby, Chief Financial Officer of the
Corporation, each hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his
knowledge:
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(1)
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The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
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(2)
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Corporation.
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/s/ Michael A.
Gerber
Michael
A. Gerber
Chief
Executive Officer
/s/ Timothy L.
Buzby
Timothy
L. Buzby
Chief
Financial Officer
Date:
August 9, 2010