Title: NOTICE OF MARKET ACCESS AGREEMENT; REQUEST FOR COMMENTS--Market Access Agreement
Issue Date: 05/17/1994
Agency: FCA
Federal Register Cite: 59 FR 25644
___________________________________________________________________________
FARM CREDIT ADMINISTRATION

Market Access Agreement


ACTION: Notice of market access agreement; request for comments.

[*25644]

SUMMARY: The Farm Credit Administration (FCA) is publishing for comment a Market Access Agreement (Agreement) to be entered into by all of the banks of the Farm Credit System (System) and the Federal Farm Credit Banks Funding Corporation (Funding Corporation). The Agreement is designed to set forth the understanding of the parties and to represent the legal obligation of each of the parties regarding their respective rights and responsibilities when the financial condition of a bank falls below specified levels. The Agreement is designed to establish an orderly process for addressing such situations and to minimize the possibility of market disruption or further risk to the other parties to the Agreement. The FCA is seeking comments from the public on the Agreement and will take into consideration those comments prior to [*25645] granting final approval to the Agreement.

DATES: Written comments must be received on or before June 16, 1994.

ADDRESSES: Comments should be submitted in writing, in triplicate, to Jean Noonan, General Counsel, Office of General Counsel, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all communications received will be available for examination by interested parties in the Office of General Counsel, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Jean Noonan, General Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444, or

Gary L. Norton, Assistant General Counsel, Regulatory Operations Division, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: The Agreement sets forth the understanding of the parties and will legally bind the signatories to the contract by establishing each party's respective rights and responsibilities in the event of the decline in the financial condition of one of the banks beyond the levels specified in the Agreement. This Agreement is to be entered into among each of the banks of the System and the Funding Corporation. The Agreement provides that it will not be implemented until it is approved by the FCA and the Farm Credit System Insurance Corporation (FCSIC) expresses its support for the Agreement. Prior to granting final approval to the Agreement, the FCA is publishing the Agreement for comment by any interested member of the public. The FCA will take these comments into consideration prior to approving the Agreement.

The Agreement states that the parties propose to enter into the Agreement based on their recognition of the joint and several liability of the banks on Systemwide debt securities and because of their ultimate responsibility and that of their affiliated associations to make additional premium payments into the Farm Credit System Insurance Fund if monies in the fund are used to pay the principal or interest on Systemwide debt securities or assist financially troubled banks. In light of that, each bank has a significant interest in controlling the risk associated with the level of borrowing by any bank facing financial difficulty. The banks further recognized that there is a need to provide some flexibility for dealing with the specific facts and circumstances that may face a bank that is in financial difficulty. The parties also recognize that under the Farm Credit Act of 1971, as amended, (Act) the Funding Corporation has the responsibility to determine, subject to the approval of the FCA, the conditions of participation by each of the several banks in each issue of Systemwide debt securities and that the Funding Corporation has adopted a market access and risk alert program to fulfill its understanding of its responsibilities under the Act.

In addition, the parties recognize the authority of the FCA under section 5.17(a)(10) of the Act to exercise its enforcement authorities to ensure the safety and soundness of System institutions and the FCA's authorities under sections 4.2 and 4.9 of the Act to approve the issuance of Systemwide debt securities. The parties also recognize the authority of the FCSIC under section 5.61 of the Act to assist institutions experiencing financial difficulties.

In summary, the Agreement establishes certain financial thresholds at which conditions are placed on the activities of a bank or the bank's access to participation in Systemwide obligations is either restricted or curtailed. The Agreement establishes three categories, which are based on each bank's collateral position, permanent capital position, and scores under the Contractual Inter-bank Performance Agreement (CIPA).

As a bank's financial condition declines, it moves into Category I then Category II and finally Category III. When a bank reaches Category I, it is required to provide certain information to a committee of bank and Funding Corporation representatives established under the Agreement, the Monitoring and Advisory Committee, including information as to how it is going to improve its financial condition. When a bank reaches Category II, in addition to being required to provide additional information, the bank's access to the markets is limited to only those amounts necessary for the bank to be able to roll over its debt. When the bank reaches Category III, the bank is precluded from joining in the issuance of Systemwide obligations.

The Agreement includes provisions that enable a bank in Category II or III to request the opportunity to continue its access to the market. The Agreement also provides that the FCA may override a decision to impose Category III prohibitions on access to the market for a period of 60 days, which may be renewed for an additional 60-day period.

In February 1993 the boards of directors of the banks and the Funding Corporation approved a draft Agreement and submitted the Agreement to the FCA and the FCSIC for approval. On September 9, 1993 the FCA Board granted preliminary approval to the Agreement subject to certain conditions. The conditions in the preliminary approval required the Agreement to be modified as follows:

1. Provide for the periodic review of the Agreement by the parties.

2. Include at least one of the independent directors of the Funding Corporation on the Monitoring and Advisory Committee and as part of the decision group.

3. Provide that a decision to deny market access because of a Category III trigger is effective only if the FCA does not veto the decision within 30 days from the end of the forbearance process and that the FCA and the FCSIC have been so notified.

4. Provide that no bank could challenge a conservatorship or receivership on the grounds that market access had been restricted or denied pursuant to the Agreement.

5. Clarify that the Agreement does not apply to a bank in conservatorship or receivership, thereby ensuring that the FCSIC, when acting as receiver or conservator, would be able to access the market to the same extent as if the Agreement were not in place.

6. Preclude the banks from gaining access to information involving communications with the FCA or the FCSIC without the consent of the affected agency.

7. Require that all information provided pursuant to the Agreement and the minutes of the Monitoring and Advisory Committee be retained by the Funding Corporation to facilitate their review by the FCA or the FCSIC.

8. Make clear that the FCA's approval of the agreement in no way restricts the statutory rights of the FCA or the FCSIC.

9. Delete the FCA and the FCSIC as parties to the Agreement.

In addition, the FCA provided that the Agreement would be published in the Federal Register for public comment before final approval.

Following the FCA's conditional preliminary approval, the System banks and the Funding Corporation modified the Agreement to bring the Agreement into conformance with the FCA's conditions. The FCA reviewed the Agreement as revised, and agrees that it complies with the FCA's conditions. Thereafter, the boards of directors of each of the banks and of the Funding [*25646] Corporation adopted a resolution whereby each party agrees to enter into the Agreement in the form submitted to the FCA, subject to the FCA's approval. The resolution of each party provides that if the FCA requires modifications to the Agreement in response to public comments, the resolutions shall be ineffective and each Board shall consider what further action to take.

Based on the foregoing, the FCA is now seeking public comment on the Agreement as set forth below:

MARKET ACCESS AGREEMENT

AMONG

AGRIBANK, FCB,

FARM CREDIT BANK OF BALTIMORE,

FARM CREDIT BANK OF COLUMBIA,

FARM CREDIT BANK OF OMAHA,

FARM CREDIT BANK OF SPOKANE,

FARM CREDIT BANK OF SPRINGFIELD,

FARM CREDIT BANK OF TEXAS,

FARM CREDIT BANK OF WICHITA,

NATIONAL BANK FOR COOPERATIVES (COBANK),

ST. PAUL BANK FOR COOPERATIVES,

SPRINGFIELD BANK FOR COOPERATIVES,

WESTERN FARM CREDIT BANK

AND

FEDERAL FARM CREDIT BANKS FUNDING CORPORATION

This MARKET ACCESS AGREEMENT is entered into among Agribank, FCB, the Farm Credit Bank of Baltimore, the Farm Credit Bank of Columbia, the Farm Credit Bank of Omaha, the Farm Credit Bank of Spokane, the Farm Credit Bank of Springfield, the Farm Credit Bank of Texas, the Farm Credit Bank of Wichita, the National Bank for Cooperatives (CoBank), the St. Paul Bank for Cooperatives, the Springfield Bank for Cooperatives, the Western Farm Credit Bank and the Federal Farm Credit Banks Funding Corporation.

Whereas, the Banks concur that, because of their joint and several liability on Systemwide Debt Securities, and because of their ultimate responsibility, and that of their constituent Associations, to make additional premium payments into the Insurance Fund if monies in the Insurance Fund are used to pay principal or interest on Systemwide Debt Securities or assist financially troubled Banks, each Bank has a significant stake in the financial strength of the others and a significant interest in controlling the risks associated with the level of borrowing by Banks facing financial difficulty; and

Whereas, the Parties also recognize that it is important to take account of the unique facts and circumstances in each actual instance of a Bank's facing financial difficulty; and

Whereas, Section 4.9(b)(2) of the Act provides that, subject to the approval of FCA, the Funding Corporation, acting for the Banks, "shall determine the * * * conditions of participation by the several banks in each issue" of Systemwide Debt Securities; and

Whereas, certain Parties have taken differing positions on whether Section 4.9(b)(2) of the Act authorizes, and whether it requires, the Funding Corporation to put in place a program for restricting or prohibiting Banks under certain circumstances from participating in issues of Systemwide Debt Securities; and

Whereas, the Funding Corporation has adopted and maintained in place a Market Access and Risk Alert Program designed to fulfill what it has understood to be its responsibilities under Section 4.9(b)(2) of the Act with respect to determining conditions of participation; and

Whereas, the Banks and the Funding Corporation have been desirous of arriving at an agreement regarding market access that would render it unnecessary to resolve the aforementioned differing views of Section 4.9(b)(2) of the Act; and

Whereas, an Ad Hoc Committee consisting of a director and an executive officer of each Bank met on December 4, 1992 and adopted guidelines for such an agreement and appointed a Work Group (the "Work Group") to prepare a draft agreement; and

Whereas, the Work Group deliberated during December 1992 and January 1993, and presented a draft agreement to the Presidents' Planning Committee on January 15, 1993; and

Whereas, the Presidents' Planning Committee suggested certain revisions to that draft agreement, and the Work Group revised the draft agreement and submitted it to the Ad Hoc Committee; and

Whereas, the Ad Hoc Committee met on January 23, 1993 and approved the revised draft agreement for presentation to the Banks and the Funding Corporation; and

Whereas, the boards of directors of the Banks and of the Funding Corporation approved the revised draft agreement in principle at meetings in February 1993; and

Whereas, thereafter, the revised draft agreement was considered by FCA and the Insurance Corporation; and

Whereas, on September 9, 1993, FCA granted preliminary approval to the revised draft agreement subject to certain conditions, and on September 16, 1993, the Insurance Corporation expressed its support for FCA's action; and

Whereas, the Work Group proposed certain further revisions to the revised draft agreement to address the concerns reflected in FCA's conditions; and

Whereas, FCA has stated that it intends to publish the Agreement in the Federal Register and seek comments thereon; and

Whereas, the Parties are mindful of FCA's independent authority under Section 5.17(a)(10) of the Act to ensure the safety and soundness of Banks, FCA's independent authority under Sections 4.2 and 4.9 of the Act to approve the terms of specific issuances of Systemwide Debt Securities, the Insurance Corporation's independent authority under Section 5.61 of the Act to assist troubled Banks, and the Banks' independent obligations under Section 4.3(c) of the Act to maintain necessary collateral levels for Systemwide Debt Securities; and

Whereas, the Banks are entering into this Agreement pursuant to, inter alia, Section 4.2(d) of the Act; and

Whereas, the Funding Corporation believes the execution and implementation of this Agreement will materially accomplish the objectives which it has concluded are appropriate for a market access program under Section 4.9(b)(2) of the Act; and

Whereas, subject to the approval of FCA as described in Section 7.01(f) and the conditions set forth in Section 7.03(f), the Funding Corporation is prepared (i) to adopt as the "conditions of participation" that it understands to be required by Section 4.9(b)(2) of the Act each Bank's compliance with this Agreement, (ii) to become a party to this Agreement, and (iii) on the date this Agreement becomes effective, to discontinue the Market Access and Risk Alert Program as described in Section 7.03(f); and

Whereas, the Funding Corporation is entering into this Agreement pursuant to, inter alia, Section 4.9(b)(2) of the Act,

Now Therefore, in consideration of the foregoing, the mutual promises and agreements herein contained, and other good and valuable consideration, receipt of which is hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:

Article I-Categories

Section 1.01. Scorekeeper. The Scorekeeper, for purposes of this Agreement, shall be the same as the Scorekeeper under Section 4.1 of CIPA, as amended from time to time, or any successor thereto.

Section 1.02. CIPA Oversight Body. The CIPA Oversight Body, for purposes of this Agreement, shall be the same as the Oversight Body under Section 6.1 of [*25647] CIPA, as amended from time to time, or any successor thereto.

Section 1.03. CIPA Scores. Net Composite Scores and Average Net Composite Scores, for purposes of this Agreement, shall be the same as those determined under Article II of CIPA, the Model referred to therein, and Section 1.2(f)(i) of CIPA, as in effect on January 1, 1994, and as amended under CIPA or replaced by successor provisions under CIPA in the future, to the extent such future amendments or replacements are by agreement of all the Banks.

Section 1.04. Collateral and Permanent Capital Figures. Each Bank shall report to the Scorekeeper within fifteen days after the end of each month its Collateral Figure as of the last day of that month. Each Bank shall report to the Scorekeeper within fifteen days after the end of each quarter its Permanent Capital Figure as of the last day of that quarter, except that any Bank that is in Category I, II or III, as indicated in the most recent notice from the Scorekeeper, shall report to the Scorekeeper within fifteen days after the end of each month its Permanent Capital Figure as of the last day of that month. Should any Bank later correct or revise, or be required to correct or revise, any past financial data in a way that would cause any Collateral or Permanent Capital Figure previously reported hereunder to have been different, the Bank shall promptly report a revised Figure to the Scorekeeper. Should the Scorekeeper consider it necessary to verify any Collateral or Permanent Capital Figure, it shall so report to the Committee, or, if the Committee is not in existence, to the CIPA Oversight Body, and the Committee or the CIPA Oversight Body, as the case may be, may verify the Figures as it deems appropriate, through reviews of Bank records by its designees (including experts or consultants retained by it) or otherwise. The reporting Bank shall cooperate in any such verification, and the other Banks shall provide such assistance in conducting any such verification as the Committee or the CIPA Oversight Body, as the case may be, may reasonably request.

Section 1.05. Category I. A Bank shall be in Category I if it: (a) Has an Average Net Composite Score of 35.0 or more, but less than 45.0, for the most recent calendar quarter for which an Average Net Composite Score is available, (b) has a Net Composite Score of 30.0 or more, but less than 40.0, for the most recent calendar quarter for which a Net Composite Score is available, (c) has both a Collateral Figure of 102.00 percent or more, but less than 103.00 percent, for the last day of the most recent month, and an Average Net Composite Score of less than 55.0 for the most recent calendar quarter for which an Average Net Composite Score is available, or (d) has a Permanent Capital Figure of 5.50 percent or more, but less than 8.00 percent, for the period ending on the last day of the most recent month. Clause (c) of the preceding sentence shall not apply if a Bank (i) has the unconditional legal right, not terminable without the Bank's consent, to require its constituent Associations to make additional investments in the Bank, and provides to the Scorekeeper an opinion of counsel confirming that it has such right, and (ii) the capital available to the Bank through this means would, if called upon, be sufficient to cause the Bank to have a Collateral Figure of 103.00 percent or more.

Section 1.06. Category II. A Bank shall be in Category II if it: (a) Has an Average Net Composite Score of 25.0 or more, but less than 35.0, for the most recent calendar quarter for which an Average Net Composite Score is available, (b) has a Net Composite Score of 20.0 or more, but less than 30.0, for the most recent calendar quarter for which a Net Composite Score is available, (c) would come within the provisions of Section 1.07(a) or (b) if the parenthetical phrases were omitted therefrom, (d) has a Collateral Figure of 101.00 percent, or more, but less than 102.00 percent, for the last day of the most recent month, (e) has a Permanent Capital Figure of 3.50 percent or more, but less than 5.50 percent, for the period ending on the last day of the most recent month, or (f) is in Category I and has failed to provide information to the Committee as required by Article III within two Business Days after written notice from the Committee of such failure.

Section 1.07. Category III. A Bank shall be in Category III if it: (a) Has an Average Net Composite Score (computed without making any Liquidity Deficiency Deduction) of less than 25.0 for the most recent calendar quarter for which an Average Net Composite Score is available, (b) has a Net Composite Score (computed without making any Liquidity Deficiency Deduction) of less than 20.0 for the most recent calendar quarter for which a Net Composite Score is available, (c) has an Excess Collateral Figure of less than 101.00 percent for the last day of the most recent month, (d) has a Permanent Capital Figure of less than 3.50 percent for the period ending on the last day of the most recent month, or (e) is in Category II and has failed to provide information to the Committee as required by Article III within two Business Days after written notice from the Committee of such failure.

Section 1.08. Highest Category. If a Bank would come within more than one Category by reason of the various provisions of Sections 1.05 through 1.07, it shall be considered to be in the highest-numbered Category for which it qualifies (e.g., Category III rather than Category II).

Section 1.09. Notice by Scorekeeper. Within twenty days of the end of each month, after receiving the reports due under Section 1.04 within fifteen days of the end of the prior month, the Scorekeeper shall provide to all Banks, FCA, the Insurance Corporation, the Funding Corporation if it is not the Scorekeeper, and either the CIPA Oversight Body or, if it is in existence, the Committee a notice identifying the Banks, if any, that are in Categories I, II and III, or stating that no Banks are in such Categories.

Article II-The Committee

Section 2.01. Formation. A Monitoring and Advisory Committee, referred to herein as "the Committee," shall be formed at the instance of the CIPA Oversight Body within seven days of the date that it receives a notice from the Scorekeeper under Section 1.09 that any Bank is in Category I, II or III (unless such a Committee is already in existence). The Committee shall remain in existence thereafter for so long as the most recent notice from the Scorekeeper under Section 1.09 indicates that any Bank is in Category I, II or III. If not already in existence, the Committee may also be formed: (a) At the instance of the CIPA Oversight Body at any other time, in order to consider a Continued Access Request that has been submitted or is expected to be submitted, (b) for purposes of preparing the reports described in Section 7.05, and (c) as provided for in Section 8.04(b).

Section 2.02. Composition. The Committee shall be made up of two representatives of each Bank and two representatives of the Funding Corporation. One of the representatives of each Bank shall be that Bank's representative on the CIPA Oversight Body. The other representative of each Bank shall be an individual designated by the Bank's board of directors, who may be a member of the Bank's board of directors or a senior officer of the Bank, in the discretion of the board. One of the representatives of the Funding Corporation shall be an outside director of the Funding Corporation designated by the Funding Corporation board of directors. The other representative of [*25648] the Funding Corporation shall be designated by the board of directors of the Funding Corporation from among the members of its board and/or its senior officers. The removal and replacement of the Committee members designated directly by Bank boards of directors and by the Funding Corporation shall be in the sole discretion of each Bank board and of the Funding Corporation, respectively. A replacement for a member of the CIPA Oversight Body shall automatically replace such member on the Committee.

Section 2.03. Authority and Responsibilities. The Committee shall have the authority and responsibilities specified in Article II, in Sections 1.04, 3.01, 3.02, 3.05, 3.06, 4.02, 7.05, 8.04 and 8.08, and in Article VI, and such incidental powers as are necessary and appropriate to effectuating such authority and responsibilities.

Section 2.04. Meetings. The initial meeting of the Committee shall be held at the call of the Chairman of the CIPA Oversight Body or a majority of the Parties entitled to vote on Committee business (with each Party acting through at least one of its representatives). Thereafter, the Committee shall meet at the call of the Chairman of the Committee or a majority of the Parties entitled to vote on Committee business (with each Party acting through at least one of its representatives). Written notice of each meeting shall be given to each member by the Chairman or his or her designee not less than 48 hours prior to the time of the meeting. A meeting may be held without such notice upon the signing of a waiver of notice by all of the Parties entitled to vote on Committee business (with each Party acting through at least one of its representatives). A majority of the Parties entitled to vote on Committee business (with each Party acting through at least one of its representatives) shall constitute a quorum for the conduct of business, provided, however, that if a quorum cannot be raised after seven days of efforts, the Parties that attend a meeting upon proper notice thereafter shall constitute a quorum. A meeting may be held by a telephone conference arrangement allowing each speaker to be heard by all others in attendance.

Section 2.05. Action Without a Meeting. Action may be taken by the Committee without a meeting if each Bank and the Funding Corporation (with each Party acting through at least one of its representatives) consents in writing to consideration of a matter without a meeting and a majority of the Parties entitled to vote on Committee business (with each Party acting through at least one of its representatives) approves the action in writing, which writings shall be kept with the minutes of the Committee.

Section 2.06. Voting. Each Bank and the Funding Corporation shall have one vote on Committee business. Voting on Committee business (including recommendations on Continued Access Decisions, but not the ultimate vote on Continued Access Decisions, which is addressed in Article VI) shall be by a simple majority of the Parties entitled to vote on Committee business that are present (physically or by telephone) through at least one representative. If a Bank or the Funding Corporation has two representatives present, they shall agree in casting the vote of the Bank or the Funding Corporation, and if they cannot agree on a particular matter, that Bank or the Funding Corporation shall not cast a vote on that matter, and, in determining the necessary majority (but not in determining a quorum), shall not be counted as a Party entitled to vote on that matter.

Section 2.07. Officers. The Committee shall elect from among its members a Chairman, a Vice Chairman, a Secretary and such other officers as it shall from time to time deem appropriate. The Chairman shall chair the meetings of the Committee and have such other duties as the Committee may delegate to him or her. The Vice Chairman shall perform such duties of the Chairman as the Chairman is unable to perform, and shall have such other duties as the Committee may delegate to him or her. The Secretary shall keep the minutes and maintain the minute book of the Committee. Other officers shall have such duties as the Committee may delegate to them.

Section 2.08. Retention of Staff, Consultants and Experts. The Committee shall be authorized to retain staff, consultants and experts as it deems necessary and appropriate to carry out its functions.

Section 2.09. Expenses. Any compensation of each member of the Committee for time spent on Committee business and for his or her out-of-pocket expenses, such as travel, shall be paid by the Party that designated that member to the Committee or to the CIPA Oversight Body. All other expenses incurred by the Committee shall be borne by the Banks in such shares as the Committee shall from time to time determine.

Section 2.10. Custody of Records. All information received by the Committee pursuant to this Agreement, and all Committee minutes, shall be lodged, while not in active use by the Committee, at the Funding Corporation, and shall be deemed records of the Funding Corporation for purposes of FCA examination. The Parties agree that documents in active use by the Committee may also be examined by FCA.

Article III-Provision of Information

Section 3.01. Information To Be Provided By All Banks in Categories I, II and III. If a Bank is in Category I, II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, and if the prior monthly notice by the Scorekeeper did not indicate that the Bank was in any Category, then the Bank shall within thirty days provide to the Committee: (a) a detailed explanation of the causes of its being in that Category, (b) an action plan to improve its financial situation so that it is no longer in any of the three Categories, (c) a timetable for achieving that result, and (d) such other pertinent materials and information as the Committee shall, within seven days of receiving notice from the Scorekeeper, request in writing from the Bank. Such Bank shall summarize, aggregate or analyze data, as well as provide raw data, in such manner as the Committee may request. Such information shall be promptly updated (without any need for a request by the Committee) whenever the facts significantly change, and shall also be updated or supplemented as the Committee so requests in writing of the Bank by such deadlines as the Committee may reasonably specify.

Section 3.02. Additional Information To Be Provided By Banks in Categories II and III. If a Bank is in Category II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, and if the prior monthly notice by the Scorekeeper did not indicate that the Bank was in Category II or III, then the Bank shall within thirty days provide to the Committee, in addition to the information required by Section 3.01, the following information: (a) copies of its complete Business Plan, as revised to take account of the financial difficulties the Bank is facing, (b) a report as to the status of any Bank discussions with the Insurance Corporation concerning possible assistance to the Bank or other steps to improve the Bank's financial condition, and (c) a detailed list of all materials provided by the Bank to the Insurance Corporation. Such information shall be promptly updated (without any need for a request by the Committee) whenever the facts significantly change, and shall also be updated or supplemented as the Committee so requests in writing of the Bank by such deadlines as the Committee may reasonably specify. Such Bank shall also allow designees of [*25649] the Committee (including experts or consultants retained by the Committee) to conduct on-site inspections of credit and financial files, examination reports (if inspection of such reports is permitted by law), auditors' letters, and other Bank documents. The Committee may draw upon the resources of the other Banks in conducting such inspections.

Section 3.03. Documents or Information Relating to Communications With FCA or the Insurance Corporation. Notwithstanding Sections 3.01 and 3.02, a Bank shall not disclose to the Committee any communications between the Bank and FCA or the Insurance Corporation, or documents describing such communications, except as consented to by, and subject to such restrictive conditions as may be imposed by, whichever of FCA or the Insurance Corporation was involved in the communication. However, facts regarding the Bank's condition or plans that pre-existed a communication with FCA or the Insurance Corporation and then were included in such a communication are not barred from disclosure by this section. Nothing in this section shall preclude a Bank from making disclosures to the System Disclosure Agent necessary to allow the System Disclosure Agent to comply with its obligations under the securities laws or other applicable law or regulations with regard to disclosure to investors.

Section 3.04. Sources of Information; Certification. Information provided to the Committee under Sections 3.01 and 3.02 shall, to the extent applicable, be data used in the preparation of financial statements in accordance with generally accepted accounting principles, or data used in the preparation of call reports submitted to FCA pursuant to 12 CFR part 621, subpart B, as amended from time to time, or any successor thereto. A Bank shall certify, through its chief executive officer or, if there is no chief executive officer, a senior executive officer, the completeness and accuracy of all information provided to the Committee under Sections 3.01 and 3.02.

Section 3.05. Failure to Provide Information. If a Bank fails to provide information to the Committee as and when required under Sections 3.01 and 3.02, and does not correct such failure within two Business Days of written notice by the Committee of the failure, then the Committee shall so advise the Scorekeeper.

Section 3.06. Provision of Information to Banks. Any information provided to the Committee under Sections 3.01 and 3.02 shall be provided by the Committee to any Bank upon request. A Bank shall not have the right under this Agreement to obtain information directly from another Bank.

Section 3.07. Cessation of Obligations. A Bank's obligation to provide information to the Committee under Section 3.01 shall cease as soon as the Bank is no longer in Category I, II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09. A Bank's obligation to provide to the Committee information under Section 3.02 shall cease as soon as the Bank is no longer in Category II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09.

Article IV-Restrictions on Market Access

Section 4.01. Final Restrictions. As of the Effective Date, a Bank in Category II, as indicated in the most recent notice from the Scorekeeper under Section 1.09, (a) shall be permitted to participate in issues of Systemwide Debt Securities only to the extent necessary to roll over the principal (net of any original issue discount) of maturing debt, and (b) shall comply with the Additional Restrictions.

Section 4.02. Category II Interim Restrictions. From the day that a Bank receives a notice from the Scorekeeper that it is in Category II until (a) 10 days thereafter, if the Bank does not by that day submit a Continued Access Request to the Committee, or (b) if the Bank does by that day submit a Continued Access Request to the Committee, the seventh day following the day that notice is received that the Request is granted or denied, the Bank (i) may participate in issues of Systemwide Debt Securities only to the extent necessary to roll over the principal (net of any original issue discount) of maturing debt unless the Committee, taking into account the criteria in Section 6.03, shall specifically authorize participation to a greater extent, and (ii) shall comply with the Additional Restrictions. Notwithstanding the foregoing, the Category II Interim Restrictions shall not go into effect if a Continued Access Request has already been granted in anticipation of the formal notice that the Bank is in Category II.

Section 4.03. FCA Action. The Final Restrictions and the Category II Interim Restrictions shall go into effect without the need for case-by-case approval by FCA.

Section 4.04. Cessation of Restrictions. The Final Restrictions and the Category II Interim Restrictions shall cease as soon as the Bank is no longer in Category II, as indicated in the most recent notice from the Scorekeeper under Section 1.09. The Bank shall continue, however, to be subject to such other obligations under this Agreement as may apply to it by reason of its being in another Category.

Article V-Prohibition of Market Access

Section 5.01. Final Prohibition. As of the Effective Date, a Bank in Category III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, (a) shall be prohibited from participating in issues of Systemwide Debt Securities, and (b) shall comply with the Additional Restrictions.

Section 5.02. Category III Interim Restrictions. From the day that a Bank receives a notice from the Scorekeeper that it is in Category III until (a) 25 days thereafter, if the Bank does not by that day submit a Continued Access Request to the Committee, or (b) if the Bank does by that day submit a Continued Access Request to the Committee, the seventh day following the day that notice is received that the Request is granted or denied, the Bank (i) may participate in issues of Systemwide Debt Securities only to the extent necessary to roll over the principal (net of any original issue discount) of maturing debt, and (ii) shall comply with the Additional Restrictions. Notwithstanding the foregoing, the Category III Interim Restrictions shall not go into effect if a Continued Access Request has already been granted in anticipation of the formal notice that the Bank is in Category III.

Section 5.03. FCA Action. The Category III Interim Restrictions shall go into effect without the need for case-by-case approval by FCA. The Parties agree that the Final Prohibition shall go into effect without the need for approval by FCA; provided, however, that FCA may override the Final Prohibition, for such time period up to 60 days as FCA may specify (or, if FCA does not so specify, for 60 days), by so ordering before the Effective Date, and may renew such an override once only, for such time period up to 60 additional days as FCA may specify (or, if FCA does not so specify, for 60 days), by so ordering before the expiration of the initial override period. If the Final Prohibition is overridden by FCA, the Category III Interim Restrictions shall remain in effect.

Section 5.04. Cessation of Restrictions. The Final Prohibition and the Category III Interim Restrictions shall cease as soon as the Bank is no longer in Category III, as indicated in the most recent notice from the [*25650] Scorekeeper under Section 1.09. The Bank shall continue, however, to be subject to such other obligations under this Agreement as may apply to it by reason of its being in another Category.

Article VI-Continued Access Decisions

Section 6.01. Process. The process for action on Continued Access Requests shall be as follows:

(a) Submission of Request. A Bank may submit a Continued Access Request for consideration by the Committee at any time, including (i) prior to formal notice from the Scorekeeper that it is in Category II or III, if the Bank anticipates such notice, and (ii) subsequent to the Effective Date of Final Restrictions or a Final Prohibition.

(b) Committee Recommendation. After a review of the Request, the supporting information and any other pertinent information available to the Committee, the Committee shall arrive at a recommendation regarding the Request (including, if the recommendation is to grant the Request, recommendations as to the expiration date of the Continued Access Decision and as to any conditions to be imposed on the Decision). The Funding Corporation, drawing upon its expertise and specialized knowledge, shall provide to the Committee all pertinent information in its possession (and the Banks authorize the Funding Corporation to provide such information to the Committee for its use as provided herein, and, to that limited extent only, waive their right to require the Funding Corporation to maintain the confidentiality of such information). The Committee shall send its recommendation and a statement of the reasons therefore, including a description of any considerations that were expressed for and against the recommendation by members of the Committee during its deliberations, together with the Request, the supporting information, a report of how the members of the Committee voted on the recommendation, a report by the Funding Corporation concerning its position on the recommendation, and any other material information that was considered by the Committee, to all Banks and the Funding Corporation by overnight delivery service within fourteen days after receiving the Request. If the Committee fails to act within such fourteen-day period, the Continued Access Request shall be deemed forwarded to all Banks entitled to vote thereon for their consideration. If the Committee has failed to act, the Funding Corporation shall send to all Banks, within two days following the deadline for Committee action, a report concerning the position of the Funding Corporation on the Continued Access Request.

(c) Vote on the Request. The Banks entitled to vote on the Request shall be all Banks other than those in Category II and III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, and other than the Bank requesting the Continued Access Decision. Within ten days of receiving the Committee's recommendation and the accompanying materials (or, if the Committee failed to act within fourteen days, within ten days following the fourteenth day), the board of directors of each Bank entitled to vote on the Request, or its designee, after review of the recommendation, the accompanying materials, the report of the Funding Corporation, and any other pertinent information, shall vote to grant or deny the Request (as modified or supplemented by any recommendations of the Committee as to the expiration date of the Continued Access Decision and as to conditions to be imposed on the Decision), and shall provide written notice of its vote to the Committee. If the Committee has recommended in favor of a Continued Access Decision, the vote of a Bank shall be either to accept or reject the Committee's recommendation, including the recommended expiration date and conditions; if the Committee has recommended against a Continued Access Decision or has failed to act, the vote of a Bank shall be either to grant the Continued Access Request on the terms requested by the requesting Bank, or to deny it. Failure to vote within the ten-day period shall be considered a "no" vote. A Continued Access Request shall be granted only upon a 75 percent Vote within the ten-day period, and shall be considered denied if a 75 percent Vote is not forthcoming by that day.

(d) Notice. The Committee shall promptly provide written notice to the Parties, FCA and the Insurance Corporation of the granting or denial of the Request, and, if the Request was granted, of all the particulars of the Continued Access Decision.

Section 6.02. Provision of Information to FCA and the Insurance Corporation. FCA and the Insurance Corporation shall be advised by the Committee of the submission of a Continued Access Request, shall be provided by the Committee with appropriate materials relating to the Request, and shall be advised by the Committee of the recommendation made by the Committee concerning the Request.

Section 6.03. Criteria. The Committee, in arriving at its recommendation on a Continued Access Request, and the voting Banks, in voting on a Continued Access Request, shall consider (a) the present financial strength of the Bank in issue, (b) the prospects for financial recovery of the Bank in issue, (c) the probable costs of particular courses of action to the Banks and the Insurance Fund, (d) any intentions expressed by the Insurance Corporation with regard to assisting or working with the Bank in issue, (e) any existing lending commitments and any particular high-quality new lending opportunities of the Bank, (f) seasonal variations in the borrowing needs of the Bank, (g) whether the Bank's independent public accountants have included a Going Concern Qualification in the most recent combined financial statements of the Bank and its constituent Associations, and (h) any other matters deemed pertinent.

Section 6.04. Expiration Date. A Continued Access Decision shall have such expiration date as the Committee recommends and is approved by a 75 percent Vote. If the Committee recommends against or fails to act on a Continued Access Request, and it is subsequently approved by a 75 percent Vote, the expiration date of the Continued Access Decision shall be the earlier of the date requested by the Bank or 180 days from the date the Request is granted. A Continued Access Decision may be terminated prior to that date, or renewed for an additional term, upon a new recommendation by the Committee and 75 percent Vote. A Continued Access Decision (including any conditions to which it may be subject) will terminate automatically as soon as the Bank is no longer in the same Category as it was when it requested the Decision, as indicated in the most recent notice from the Scorekeeper under Section 1.09.

Section 6.05. Conditions. A Continued Access Decision shall be subject to such conditions as the Committee recommends and are approved by a 75 percent Vote. If specifically approved by a 75 percent Vote, administration of the details of the conditions and ongoing refinement of the conditions to take account of changing circumstances can be left to the Committee or such subcommittee as it may establish for that purpose. Among the conditions that may be imposed on a Continued Access Decision are (a) a requirement of remedial action by the Bank, failing which the Continued Access Decision will [*25651] terminate, (b) a requirement of other appropriate conduct on the part of the Bank (such as compliance with the Additional Restrictions), failing which the Continued Access Decision will terminate, and (c) specific restrictions on continued borrowing by the Bank, such as a provision allowing a Bank in Category II to borrow only for specified types of business in addition to rolling over the principal of maturing debt, or allowing such a Bank only to roll over interest on maturing debt in addition to rolling over the principal of maturing debt, or a provision allowing a Bank in Category III to roll over a portion of its maturing debt. The Committee shall be responsible for monitoring and determining compliance with conditions, and shall promptly advise the Parties of any failure by a Bank to comply with conditions. The Committee's determination with respect to compliance with conditions shall be final, until and unless overturned or modified in arbitration pursuant to Section 7.08.

Section 6.06. FCA Action. The Parties agree that a Continued Access Decision shall go into effect without the need for approval by FCA, but that FCA may override the Continued Access Decision, for such time period as FCA may specify (or, if FCA does not so specify, until a new Continued Access Decision is made pursuant to a recommendation of the Committee and a 75 percent Vote, in which case it is again subject to override by FCA), by so ordering at any time.

Section 6.07. Notice to FCA of Intent to File Continued Access Request. A Bank that receives notice that it is in Category III shall advise FCA, within ten days of receiving such notice, whether it intends to file a Continued Access Request.

Article VII-Other

Section 7.01. Conditions Precedent. This Agreement shall go into effect upon the execution by each Party of a certificate in substantially the form of Attachment A hereto that all of the following conditions precedent have been satisfied: (a) the delivery to the Banks of an opinion of Covington & Burling in substantially the form of Attachment B hereto [re authority, enforceability, compliance with Section 4.9(b)(2) by the Funding Corporation], (b) the delivery to the Funding Corporation of an opinion of Sutherland, Asbill & Brennan in substantially the form of Attachment C hereto [re same], (c) adoption by each of the Banks of a resolution in substantially the form of Attachment D hereto; (d) adoption by the Funding Corporation of a resolution substantially in the form of Attachment E hereto, (e) action by the Insurance Corporation, through its board, expressing its support for this Agreement, and (f) action by FCA, through its board, approving this Agreement pursuant to Section 4.2(d) of the Act, and (without necessarily expressing any view as to the proper interpretation of Section 4.9(b)(2) of the Act) approving this Agreement pursuant to Section 4.9(b)(2) of the Act insofar as such approval may be required, which action shall (i) be taken after interested parties have been given notice and afforded the opportunity to comment to FCA on whether this Agreement should be approved, (ii) indicate that the entry into and compliance with this Agreement by the Funding Corporation fully satisfy such obligations as the Funding Corporation may have with respect to establishing "conditions of participation" for market access under Section 4.9(b)(2), and (iii) contain no reservations or other conditions or qualifications except for those which may be specifically agreed to by the Funding Corporation's board of directors and the other Parties. Upon execution of its certificate, each Party shall forward a copy to the Farm Credit Bank of Springfield, attn. Allan Kantrowitz, General Counsel, which shall advise all other Parties when a complete set of certificates is received.

Section 7.02. Representations and Warranties. Each Party represents and warrants to the other Parties that (a) it has duly executed and delivered this Agreement, (b) its performance of this Agreement in accordance with its terms will not conflict with or result in the breach of or violation of any of the terms or conditions of, or constitute (or with notice or lapse of time or both constitute) a default under any order, judgment or decree applicable to it, or any instrument, contract or other agreement to which it is a party or by which it is bound, (c) it is duly constituted and validly existing under the laws of the United States, (d) it has the corporate and other authority, and has obtained all necessary approvals, to enter into this Agreement and perform all of its obligations hereunder, and (e) its performance of this Agreement in accordance with its terms will not conflict with or result in the breach of or violation of any of the terms or conditions of, or constitute (or with notice or lapse of time or both constitute) a default under its charter (with respect to the Party Banks), or its bylaws.

Section 7.03. Additional Covenants.

(a) Each Bank agrees to notify the other Parties and the Scorekeeper if, at any time, it anticipates that within the following three months it will come to be in Category I, II or III, or will move from one Category to another.

(b) Whenever a Bank is subject to Final Restrictions, a Final Prohibition, Category II Interim Restrictions, Category III Interim Restrictions, or a Continued Access Decision, the Committee shall promptly so notify the Funding Corporation, and the Funding Corporation shall take all necessary steps to ensure that the Bank participates in issues of Systemwide Debt Securities only to the extent permitted thereunder. The Funding Corporation may rely on the determination of the Committee as to whether a Bank has complied with a condition to a Continued Access Decision.

(c) Each Bank agrees that it will not at any time that it is in Category I, II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, and will not without twelve months' prior notice to all other Banks and the Funding Corporation at any other time, either (i) withdraw, or (ii) modify, in a fashion that would impede the issuance of Systemwide Debt Securities, the funding resolution it has adopted pursuant to Section 4.4(b) of the Act. Should a violation of this covenant be asserted, and should the Bank deny same, the funding resolution shall be deemed still to be in full effect, without modification, until arbitration of the matter is completed, and each Bank, by entering into this Agreement, consents to emergency injunctive relief to enforce this provision. Nothing in this Agreement shall be construed to restrict any Party's ability to take the position that a Bank's withdrawal or modification of its funding resolution is not authorized by law.

(d) Each Bank agrees that it will not at any time that it is in Category I, II or III, as indicated in the most recent notice from the Scorekeeper under Section 1.09, and will not without twelve months' prior notice to all other Banks and the System Disclosure Agent at any other time, fail to report information to the System Disclosure Agent pursuant to the Disclosure Program for the issuance of Systemwide Debt Securities and for the System Disclosure Agent to have a reasonable basis for making disclosures pursuant to the Disclosure Program. Should the System Disclosure Agent assert a violation of this covenant, and should the Bank deny same, the Bank shall furnish such information as the System Disclosure Agent shall request until arbitration of the matter is completed, and each Bank, by entering into this Agreement, consents to emergency injunctive relief to enforce this provision. Nothing in this Agreement shall be construed to restrict the ability of the System Disclosure Agent to comply with its obligations under the [*25652] securities laws or other applicable law or regulations with regard to disclosure to investors.

(e) Without implying that suit may be brought on any other matter, each Bank and the Funding Corporation specifically agree not to bring suit to challenge this Agreement or to challenge any Final Prohibition, Final Restrictions, Category II Interim Restrictions, Category III Interim Restrictions, Continued Access Decision, denial of a Continued Access Request or recommendation of the Committee with respect to a Continued Access Request arrived at in accordance with this Agreement. This provision shall not be construed to preclude judicial actions under the U.S. Arbitration Act, 9 U.S.C. 1-15, to enforce or vacate arbitration decisions rendered pursuant to Section 7.08, or for an order that arbitration proceed pursuant to Section 7.08.

(f) The Funding Corporation agrees that, promptly following the date this Agreement becomes effective, it will discontinue the Market Access and Risk Alert Program, and that it will thereafter adopt no similar such program for so long as (i) this Agreement is in effect, and (ii) Section 4.9(b)(2) of the Act is not amended in a manner which would require, nor is there any other change in applicable law or regulations which would require, the Funding Corporation to establish "conditions of participation" different from those contained in this Agreement. Should the condition described in clause (ii) no longer apply and the Funding Corporation adopt a market access program, this Agreement shall be deemed terminated. All Banks reserve the right to argue, if the conditions described in clauses (i) or (ii) of the preceding sentence should no longer apply and the Funding Corporation should adopt such a program, that any such program adopted by the Funding Corporation is contrary to law, either because Section 4.9(b)(2) of the Act does not authorize such a program, or for any other reason, and the entry by any Bank into this Agreement shall not be construed as waiving such right.

(g) It is expressly agreed that this Agreement and FCA approval hereof do not provide any grounds for challenging FCA or Insurance Corporation actions with respect to the creation of or the conduct of receiverships or conservatorships. Without limiting the preceding statement, each Bank specifically and expressly agrees and acknowledges that it cannot, and agrees that it shall not, attempt to challenge FCA's appointment of a receiver or conservator for itself or any other System institution or FCA's or the Insurance Corporation's actions in the conduct of any receivership or conservatorship (i) on the basis of this Agreement or FCA's approval of this Agreement; or (ii) on the grounds that Category II Interim Restrictions, Final Restrictions, Category III Interim Restrictions, or Final Prohibitions were or were not imposed, whether by reason of FCA's or the Insurance Corporation's action or inaction or otherwise. The Banks jointly and severally agree that they shall indemnify and hold harmless FCA and the Insurance Corporation against all costs, expenses, and damages, including without limitation, attorneys' fees and litigation costs, resulting from any such challenge by any Party.

Section 7.04. Termination. This Agreement shall terminate on December 31, 2011, or at an earlier date if so agreed in writing by 75 percent of all the Banks. Commencing a year before December 31, 2011, the Parties shall meet to consider its extension. It is understood that the termination of this Agreement shall not affect any rights and obligations of the Funding Corporation under Section 4.9(b)(2) of the Act.

Section 7.05. Periodic Review. During the years 2000 and 2006, and at such more frequent intervals as the Parties may agree, the Banks and the Funding Corporation, through their boards of directors, shall review this Agreement and consider whether any amendments to it are appropriate. In connection with such review, the Committee shall report to the boards on the operation of the Agreement and recommend any amendments it considers appropriate.

Section 7.06. Confidentiality. The Parties may disclose this Agreement and any amendments to it and any actions taken pursuant to this Agreement to restrict or prohibit borrowing by a Bank. All other information relating to this Agreement shall be kept confidential and shall be used solely for purposes of this Agreement, except that, to the extent permitted by applicable law and regulations, such information may be disclosed by (a) the System Disclosure Agent under the Disclosure Program, (b) a Bank, upon coordination of such disclosure with the System Disclosure Agent, as the Bank deems appropriate for purposes of the Bank's disclosures to borrowers or shareholders; (c) a Bank as deemed appropriate for purposes of disclosure to transacting parties (subject, to the extent the Bank reasonably can obtain such agreement, to such a transacting party's agreeing to keep the information confidential) of material information relating to that Bank, or (d) any Party in order to comply with legal or regulatory obligations. Notwithstanding the preceding sentence, the Parties shall make every effort, to the extent consistent with legal requirements, securities disclosure obligations and other business necessities, to preserve the confidentiality of information provided to the Committee by a Bank and designated as "Proprietary and Confidential." Any expert or consultant retained in connection with this Agreement shall execute a written undertaking to preserve the confidentiality of any information received in connection with this Agreement. Notwithstanding the foregoing, nothing in this Agreement shall prevent Parties from disclosing information to FCA or the Insurance Corporation.

Section 7.07. Amendments. This Agreement may be amended only by the written agreement of all the Parties.

Section 7.08. Dispute Resolution. All disputes between or among Parties relating to this Agreement shall be submitted to final and binding arbitration pursuant to the U.S. Arbitration Act, 9 U.S.C. 1-15, provided, however, that any recommendation by the Committee regarding a Continued Access Request (including, if the recommendation is to grant the Request, recommendations as to the expiration date of the Continued Access Decision and as to any conditions to be imposed on the Decision), and any vote by a Bank on a Continued Access Request, shall be final and not subject to arbitration. Arbitrations shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association before a single arbitrator. An arbitrator shall be selected within fourteen days of the initiation of arbitration by any Party, and the arbitrator shall render a decision within thirty days of his or her selection.

Section 7.09. Governing Law. This Agreement shall be governed by and construed in accordance with the Federal law of the United States of America to the extent applicable, and, to the extent that Federal law is not applicable, in accordance with the law of the State of New York.

Section 7.10. Notices. Notices under this Agreement shall be in writing, shall be sent both by facsimile transmission and by overnight delivery service, and shall be deemed received on the Business Day after they are sent. Notices shall be addressed as follows unless [*25653] such address is changed by written notice hereunder:

To AgriBank, FCB:
AgriBank, FCB, 375 Jackson Street, St. Paul, MN 55101.
ATTENTION: __________
Telecopier: 612-282-8666

To the Farm Credit Bank of Baltimore:
Farm Credit Bank of Baltimore, Farm Credit Building, 14114 York Road, Sparks, MD 21152.
ATTENTION: __________
Telecopier: 410-329-5705

To the Farm Credit Bank of Columbia:
Farm Credit Bank of Columbia, Farm Credit Bank Building, 1401 Hampton Street, Columbia, SC 29201.
ATTENTION: __________
Telecopier: 803-254-1776

To the Farm Credit Bank of Omaha:
Farm Credit Bank of Omaha, Farm Credit Building, 206 South 19th Street, Omaha, NB 68102-1755.
ATTENTION: __________
Telecopier: 402-348-3699

To the Farm Credit Bank of Spokane:
Farm Credit Bank of Spokane, W. 601 First Avenue, Spokane, WA 99204.
ATTENTION: __________
Telecopier: 509-838-9445

To the Farm Credit Bank of Springfield:
Farm Credit Bank of Springfield, 67 Hunt Street, Agawam, MA 01001.
ATTENTION: __________
Telecopier: 413-789-0140

To the Farm Credit Bank of Texas:
Farm Credit Bank of Texas, La Costa Office Park, 6210 Highway 290 East, Austin, TX 78723.
ATTENTION: __________
Telecopier: 512-465-0675

To the Farm Credit Bank of Wichita:
Farm Credit Bank of Wichita, 245 North Waco, Wichita, KS 67202.
ATTENTION: __________
Telecopier: 316-266-5121

To National Bank for Cooperatives:
National Bank for Cooperatives, 5500 South Quebec Street, Englewood, CO 80111.
ATTENTION: __________
Telecopier: 303-740-4002

To St. Paul Bank for Cooperatives:
St. Paul Bank for Cooperatives, 375 Jackson Street, St. Paul, MN 55101.
ATTENTION: __________
Telecopier: 612-282-8201

To Springfield Bank for Cooperatives:
Springfield Bank for Cooperatives, 67 Hunt Street, Agawam, MA 01001.
ATTENTION: __________
Telecopier: 413-789-0140

To Western Farm Credit Bank:
Western Farm Credit Bank, 3636 American River Drive, Sacramento, CA 95864-5996.
ATTENTION: __________
Telecopier: 916-971-2837

To Federal Farm Credit Banks Funding Corporation:
Federal Farm Credit Banks Funding Corporation, Suite 1401, 10 Exchange Place, Jersey City, NJ 07302,
ATTENTION: __________
Telecopier: 201-200-8109

To the Farm Credit System Insurance Corporation:
Farm Credit System Insurance Corporation, 1501 Farm Credit Drive, McLean, Virginia 22102-0826,
ATTENTION: __________
Telecopier: 703-734-5784

To the Farm Credit Administration:
Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090.
ATTENTION: __________
Telecopier: 703-734-5784

To the CIPA Oversight Body:
At such address and telecopier number as shall be supplied to the Parties from time to time by the Chairman of the CIPA Oversight Body.

To the Committee:
At such address and telecopier number as shall be supplied by the Committee, which the Committee shall promptly transmit to each Party.

To a Scorekeeper other than the Funding Corporation:

At such address and telecopier number as shall be supplied by such Scorekeeper, which such Scorekeeper shall promptly transmit to each Party.

Section 7.11. Headings; Conjunctive/Disjunctive; Singular/Plural. The headings of any article or section of this Agreement are for convenience only and shall not be used to interpret any provision of the Agreement. Uses of the conjunctive include the disjunctive, and vice versa, unless the context clearly requires otherwise. Uses of the singular include the plural, and vice versa, unless the context clearly requires otherwise.

Section 7.12. Successors and Assigns. Except as provided in the definitions of "Bank" and "Banks" in Article IX, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties, including entities resulting from the merger or consolidation of one or more Banks.

Section 7.13. Counterparts. This Agreement, and any document provided for hereunder, may be executed in one or more counterparts.

Section 7.14. Waiver. Any provision of this Agreement may be waived, but only if such waiver is in writing and is signed by all Parties to this Agreement.

Section 7.15. Entire Agreement. Except as provisions of CIPA are cited in this Agreement (which provisions are expressly incorporated herein by reference), this Agreement sets forth the entire agreement of the Parties and supersedes all prior understandings or agreements, oral or written, among the Parties with respect to the subject matter hereof.

Section 7.16. Relation to CIPA. This Agreement and CIPA are separate agreements, and invalidation of one does not affect the other. Should CIPA be invalidated or terminated, the Parties will take the necessary steps to maintain those aspects of CIPA that are referred to in Sections 1.01, 1.02 and 1.03, and to replace the CIPA Oversight Body for purposes of continued administration of this Agreement.

Section 7.17. Third Parties. Except as provided in Sections 2.10, 3.03, 7.03(g), 7.21 and 7.22, this Agreement is for the benefit of the Parties and their respective successors and assigns, and no rights are intended to be, or are, created hereunder for the benefit of any third party.

Section 7.18. Time Is Of The Essence. Time is of the essence in interpreting and performing this Agreement.

Section 7.19. Statutory Collateral Requirement. Nothing in this Agreement shall be construed to permit a Bank to participate in issues of Systemwide Debt Securities or other obligations if it does not satisfy the collateral requirements of Section 4.3(c) of the Act. For purposes of this Section, "Bank" shall include any System bank in conservatorship or receivership.

Section 7.20. Termination of System Status. Nothing in this Agreement shall be construed to preclude a Bank from terminating its status as a System institution pursuant to Section 7.10 of the Act, or from at that time withdrawing, as from that time forward, the funding resolution it has adopted pursuant to Section 4.4(b) of the Act. A Bank that terminates its System status shall cease to have any rights or obligations under this Agreement, except that it shall continue to be subject to Article VIII with respect to claims accruing through the date of such termination of System status.

Section 7.21. Restrictions Concerning Subsequent Litigation. It is expressly agreed by the Banks that (a) characterization or categorization of Banks, (b) information furnished to the Committee or other Banks, and (c) discussions or decisions of the Banks or Committee under this Agreement shall not be used in any subsequent litigation challenging FCA's or the Insurance Corporation's action or inaction.

Section 7.22. Effect of this Agreement. Neither this Agreement nor FCA approval hereof shall in any way restrict or qualify the authority of FCA or the Insurance Corporation to exercise any of the powers, rights, or duties granted by law to FCA or the Insurance Corporation.

Article VIII-Indemnification

Section 8.01. Definitions. As used in this Article VIII: [*25654]

(a) Indemnified Party means any Bank, the Funding Corporation, the Committee, the Scorekeeper, or any of the past, present or future directors, officers, stockholders, employees or agents of the foregoing.

(b) Damages means any and all losses, costs, liabilities, damages and expenses, including, without limitation, court costs and reasonable fees and expenses of attorneys expended in investigation, settlement and defense (at the trial and appellate levels and otherwise), which are incurred by an Indemnified Party as a result of or in connection with a claim alleging liability to any non-Party for actions taken pursuant to or in connection with this Agreement. Except to the extent otherwise provided in this Article VIII, Damages shall be deemed to have been incurred by reason of a final settlement or the dismissal with prejudice of any such claim, or the issuance of a final nonappealable order by a court of competent jurisdiction which ultimately disposes of such a claim, whether favorably or unfavorably.

Section 8.02. Indemnity. To the extent consistent with governing law, the Banks, jointly and severally, shall indemnify and hold harmless each Indemnified Party against and in respect of Damages, provided, however, that an Indemnified Party shall not be entitled to indemnification under this Article VIII in connection with conduct of such Indemnified Party constituting gross negligence, willful misconduct, intentional tort or criminal act, or in connection with civil money penalties imposed by FCA. In addition, the Banks, jointly and severally, shall indemnify an Indemnified Party for all costs and expenses (including, without limitation, fees and expenses of attorneys) incurred reasonably and in good faith by an Indemnified Party in connection with the successful enforcement of rights under any provision of this Article VIII.

Section 8.03. Advancement of Expenses. The Banks, jointly and severally, shall advance to an Indemnified Party, as and when incurred by the Indemnified Party, all reasonable expenses, court costs and attorneys' fees incurred by such Indemnified Party in defending any proceeding involving a claim against such Indemnified Party based upon or alleging any matter that constitutes, or if sustained would constitute, a matter in respect of which indemnification is provided for in Section 8.02, so long as the Indemnified Party provides the Banks with a written undertaking to repay all amounts so advanced if it is ultimately determined by a court in a final nonappealable order or by agreement of the Banks and the Indemnified Party that the Indemnified Party is not entitled to be indemnified under Section 8.02.

Section 8.04. Assertion of Claim.

(a) Promptly after the receipt by an Indemnified Party of notice of the assertion of any claim or the commencement of any action against him, her or it in respect of which indemnity may be sought against the Banks hereunder (an "Assertion"), such Indemnified Party shall apprise the Banks, through a notice to each of them, of such Assertion. The failure so to notify the Banks shall not relieve the Banks of liability they may have to such Indemnified Party hereunder, except to the extent that failure to give such notice results in material prejudice to the Banks.

(b) Any Bank receiving a notice under paragraph (a) shall forward it to the Committee (which, if not in existence, shall be formed at the instance of such Bank to consider the matter). The Banks, through the Committee, shall be entitled to participate in, and to the extent the Banks, through the Committee, elect in writing on thirty days' notice, to assume, the defense of an Assertion, at their own expense, with counsel chosen by them and satisfactory to the Indemnified Party. Notwithstanding that the Banks, through the Committee, shall have elected by such written notice to assume the defense of any Assertion, such Indemnified Party shall have the right to participate in the investigation and defense thereof, with separate counsel chosen by such Indemnified Party, but in such event the fees and expenses of such separate counsel shall be paid by such Indemnified Party and shall not be subject to indemnification by the Banks unless (i) the Banks, through the Committee, shall have agreed to pay such fees and expenses, (ii) the Banks shall have failed to assume the defense of such Assertion and to employ counsel satisfactory to such Indemnified Party, or (iii) in the reasonable judgment of such Indemnified Party, based upon advice of his, her or its counsel, a conflict of interest may exist between the Banks and such Indemnified Party with respect to such Assertion, in which case, if such Indemnified Party notifies the Banks, through the Committee, that such Indemnified Party elects to employ separate counsel at the Banks' expense, the Banks shall not have the right to assume the defense of such Assertion on behalf of such Indemnified Party. Notwithstanding anything to the contrary in this Article VIII, neither the Banks, through the Committee, nor the Indemnified Party shall settle or compromise any action or consent to the entering of any judgment (x) without the prior written consent of the other, which consent shall not be unreasonably withheld, and (y) without obtaining, as an unconditional term of such settlement, compromise or consent, the delivery by the claimant or plaintiff to such Indemnified Party of a duly executed written release of such Indemnified Party from all liability in respect of such Assertion, which release shall be satisfactory in form and substance to counsel to such Indemnified Party. The Funding Corporation shall not be entitled to vote on actions by the Committee under this paragraph (b) or Section 8.08.

Section 8.05. Remedies; Survival. The indemnification, rights and remedies provided to an Indemnified Party under this Article VIII shall be (i) in addition to and not in substitution for any other rights and remedies to which any of the Indemnified Parties may be entitled, under any other agreement with any other Person, or otherwise at law or in equity, and (ii) provided prior to and without regard to any other indemnification available to any Indemnified Party. This Article VIII shall survive the termination of this Agreement.

Section 8.06. No Rights in Third Parties. This Agreement shall not confer upon any Person other than the Indemnified Party any rights or remedies of any nature or kind whatsoever under or by reason of the indemnification provided for in this Article VIII.

Section 8.07. Subrogation; Insurance. Upon the payment by the Banks to an Indemnified Party of any amounts for which an Indemnified Party shall be entitled to indemnification under this Article VIII, if the Indemnified Party shall also have the right to recover such amount under any commercial insurance, the Banks shall be subrogated to such rights to the extent of the indemnification actually paid. Where coverage under such commercial insurance may exist, the Indemnified Party shall promptly file and diligently pursue a claim under said insurance. Any amounts paid pursuant to such claim shall be refunded to the Banks to the extent the Banks have provided indemnification payments under this Article VIII, provided, however, that recovery under such insurance shall not be deemed a condition precedent to the indemnification obligations of the Banks under this Article VIII.

Section 8.08. Sharing in Costs. The Banks shall share in the costs of any indemnification payment hereunder as the Committee shall determine. [*25655]

Article IX-Definitions

The following definitions are used in this Agreement:

Act means the Farm Credit Act of 1971, 12 U.S.C. 2001, et seq., as amended from time to time, or any successors thereto.

The Additional Restrictions are that a Bank (a) shall manage its asset/liability mix so as not to increase, and, to the extent possible, so as to reduce or eliminate, any Interest-Rate Sensitivity Deduction in its Net Composite Score, and (b) shall not increase the dollar amount of any liabilities, or take any action giving rise to a lien or pledge on its assets, senior to its liability on Systemwide Debt Securities other than (i) tax liabilities and secured liabilities arising in the ordinary course of business through activities other than borrowing, such as mechanic's liens or judgment liens, and (ii) secured liabilities, or an action giving rise to such a lien or pledge, incurred in the ordinary course of business as the result of issuing secured debt or entering into repurchase agreements, provided, however, that such debt issuances and agreements may be undertaken to the extent that the proceeds therefrom are used to repay the principal of outstanding Systemwide Debt Securities and the value of the collateral securing the debt issuances or the agreements (computed in the same manner as provided under Section 4.3(c) of the Act) does not exceed the amount of principal so repaid.

Associations means agricultural credit associations, federal land bank associations, federal land credit associations and production credit associations.

Average Net Composite Score is defined in Section 1.03.

Bank means a bank of the Farm Credit System, other than (except where noted) any bank in conservatorship or receivership.

Banks means the banks of the Farm Credit System, other than (except where noted) any banks in conservatorship or receivership.

Business Day means any day other than a Saturday, Sunday or Federal holiday.

Business Plan means the business plan required under 12 CFR 618.8440, as amended from time to time, or any successors thereto.

CIPA means that certain "Contractual Interbank Performance Agreement Among the Banks of the Farm Credit System, the Farm Credit System Financial Assistance Corporation and the Federal Farm Credit Banks Funding Corporation, the Scorekeeper, Dated as of January 1, 1992," as amended from time to time.

CIPA Oversight Body is defined in Section 1.02.

Category I is defined in Section 1.05.

Category II is defined in Section 1.06.

Category II Interim Restrictions means the requirements set forth in Section 4.02.

Category III is defined in Section 1.07.

Category III Interim Restrictions means the requirements set forth in Section 5.02.

Collateral is defined as in Section 4.3(c) of the Act and the regulations thereunder, as amended from time to time, or any successors thereto.

Collateral Figure means a Bank's Collateral, divided by its Collateralized Obligations, times 100 percent.

Collateralized Obligations means obligations required by Section 4.3(c) of the Act to be backed by collateral as set forth therein.

The Committee is defined in Section 2.01.

Continued Access Decision means a decision, subject to the procedures, terms and conditions described in Article VI, that Final Restrictions or a Final Prohibition not go into effect, or be lifted.

Continued Access Request means a request for a Continued Access Decision.

Days means calendar days, unless the term Business Days is used.

Disclosure Program means the program established, pursuant to resolutions of the Banks and the Funding Corporation adopted in 1987 and revised in 1989, for disclosure at the Systemwide level of financial and other information in connection with the issuance of Systemwide Debt Securities, as amended from time to time, or any successor thereto.

The Effective Date is (a) the tenth day after a Bank receives a notification from the Scorekeeper that it is in Category II or the twenty-fifth day after a Bank receives a notification from the Scorekeeper that it is in Category III, in each case if the Bank does not by that day submit a Continued Access Request to the Committee, or (b) if the Bank does by that day submit a Continued Access Request to the Committee, the seventh day following the day that notice is received that the Request is denied.

FCA means the Farm Credit Administration.

Final Prohibition means the requirements set forth in Section 5.01.

Final Restrictions means the requirements set forth in Section 4.01.

Funding Corporation means the Federal Farm Credit Banks Funding Corporation.

Going Concern Qualification means a qualification expressed pursuant to Statement of Auditing Standards No. 59, "The Auditor's Consideration of an Entity's Ability to Continue As a Going Concern."

Insurance Corporation means the Farm Credit System Insurance Corporation.

Insurance Fund means the Farm Credit Insurance Fund maintained by the Insurance Corporation pursuant to Section 5.60 of the Act.

Interest-Rate Sensitivity Deduction is defined as in Article II of CIPA, and the Model referred to therein, as amended from time to time, or any successor thereto.

Liquidity Deficiency Deduction is defined as in Article II of CIPA, and the Model referred to therein, as amended from time to time, or any successor thereto.

Net Composite Score is defined in Section 1.03.

Parties means the parties to this Agreement. A bank in conservatorship or receivership is not a party to this Agreement.

Permanent Capital is defined as in Section 4.3A(a)(1) of the Act and the regulations thereunder, as amended from time to time, or any successors thereto.

Permanent Capital Figure means a Bank's Permanent Capital as a percentage of its Risk-Adjusted Asset Base.

Person means any human being, partnership, association, joint venture, corporation, legal representative or trust, or any other entity.

Risk-Adjusted Asset Base is defined as in 12 CFR 615.5210(e), as amended from time to time, or any successor thereto.

Scorekeeper is defined in Section 1.01.

Seventy-five (75) Percent Vote means an affirmative vote, through each voting Bank's board of directors or its designee, of 75 percent of those Banks that are entitled to vote on a matter.

System means the Farm Credit System.

System Disclosure Agent means the Funding Corporation or such other disclosure agent as all Banks shall unanimously agree upon, to the extent permitted by law or regulation. For purposes of this definition, "Banks" shall include any System bank in conservatorship or receivership.

Systemwide Debt Securities means Systemwide obligations issued through the Funding Corporation, within the meaning of Sections 4.2(d) and 4.9 of the Act.
[*25656]

Dated: May 11, 1994.

Curtis M. Anderson,

Secretary, Farm Credit Administration Board.

[FR Doc. 94-11907 Filed 5-16-94; 8:45 am]

BILLING CODE 6705-01-P