UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed
by
the Registrant S Filed
by
a Party other than the Registrant £
Check
the
appropriate box:
£ Preliminary
Proxy Statement
£ Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
S Definitive
Proxy Statement
£ Definitive
Additional Materials
£ Soliciting
Material Pursuant to §240.14a-12
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
(Name
of
Registrant as Specified In Its Charter)
__________________________________________________________________________________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
S
No
fee
required.
£ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title
of
each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate
number of securities to which transaction applies:
________________________________________________________________________
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
|
________________________________________________________________________
(4) Proposed
maximum aggregate value of transaction:
________________________________________________________________________
(5) Total
fee
paid:
________________________________________________________________________
£ Fee
paid
previously with preliminary materials.
|
£
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
|
(1) Amount
Previously Paid:
________________________________________________________________________
(2) Form,
Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing
Party:
________________________________________________________________________
(4) Date
Filed:
________________________________________________________________________
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
1133
Twenty-First Street, N.W.
Suite
600
Washington,
D.C. 20036
_____________
TO
HOLDERS OF FARMER MAC
VOTING
COMMON
STOCK
April
28,
2006
Dear
Farmer Mac Stockholder:
The
Board
of Directors of the Federal Agricultural Mortgage Corporation (“Farmer Mac” or
the “Corporation”) is pleased to invite you to attend the 2006 Annual Meeting of
Stockholders of the Corporation to be held on Thursday, June 1, 2006, at
9:00
a.m. local time at the Embassy Suites Hotel, 1250 Twenty-Second Street,
N.W.,
Washington, D.C. 20037. The Notice of Annual Meeting and Proxy Statement
accompanying this letter describe the business to be transacted at the
meeting.
We
hope
you will be able to attend the meeting and suggest you read the enclosed
Notice
of Annual Meeting and Proxy Statement for information about your Corporation
and
the Annual Meeting of Stockholders. We have also enclosed Farmer Mac’s 2005
Annual Report. Although the report is not proxy soliciting material, we
suggest
you read it for additional information about your Corporation. Please complete,
sign, date and return a proxy card at your earliest convenience to help
us
establish a quorum and avoid the cost of further solicitation. The giving
of
your proxy will not affect your right to vote your shares personally if
you do
attend the meeting. If you plan to attend the meeting, please so indicate
on the
enclosed proxy card.
Sincerely,
Fred
L.
Dailey
Chairman
of the
Board
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
1133 Twenty-First Street, N.W.
Suite 600
Washington, D.C. 20036
________________
TO HOLDERS OF FARMER MAC
NON-VOTING
COMMON
STOCK
April
28,
2006
Dear
Farmer Mac Stockholder:
The
Board
of Directors of the Federal Agricultural Mortgage Corporation (“Farmer Mac” or
the “Corporation”) is pleased to invite you to attend the 2006 Annual Meeting of
Stockholders of the Corporation to be held on Thursday, June 1, 2006, at
9:00
a.m. local time at the Embassy Suites Hotel, 1250 Twenty-Second Street,
N.W.,
Washington, D.C. 20037.
Although
the type of stock you hold does not entitle you to vote at the meeting
and,
accordingly, NO PROXY IS REQUESTED, we hope you will be able to attend
and
suggest you read the enclosed Notice of Annual Meeting, Proxy Statement
and
Annual Report, which will provide you with information about your Corporation
and the meeting. If you plan to attend the meeting, please advise Farmer
Mac’s
Corporate Secretary at the above address.
Sincerely,
Fred
L.
Dailey
Chairman of the Board
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
________________
NOTICE
OF ANNUAL MEETING
April
28,
2006
Notice
is
hereby given that the 2006 Annual Meeting of Stockholders of the Federal
Agricultural Mortgage Corporation (“Farmer Mac” or the “Corporation”) will be
held on Thursday, June 1, 2006, at 9:00 a.m. local time at the Embassy Suites
Hotel, 1250 Twenty-Second Street, N.W., Washington, D.C. 20037.
As
described in the attached Proxy Statement, the meeting will be held for the
following purposes:
| · |
to
elect ten directors, five of whom will be elected by holders of Class
A
Voting Common Stock and five of whom will be elected by holders of
Class B
Voting Common Stock, to serve until the next annual meeting of
stockholders and until their respective successors are elected and
qualified;
|
| · |
to
ratify the selection by the Audit Committee of Deloitte & Touche LLP
as the Corporation’s independent auditors for fiscal year 2006;
and
|
| · |
to
consider and act upon any other business that may properly be brought
before the meeting or any adjournment or postponement of the meeting.
Please read the attached Proxy Statement for complete information
on the
matters to be considered and acted upon.
|
Holders
of record of the Corporation’s Class A Voting Common Stock and Class B Voting
Common Stock at the close of business on April 11, 2006
are
entitled to notice of and to vote at the meeting and any adjournment(s) of
the
meeting.
For
at
least ten days prior to the meeting, a list of Farmer Mac stockholders will
be
available for examination by any stockholder for any purpose germane to the
meeting at the offices of the Corporation between the hours of 9:00 a.m.
and
5:00 p.m. local time.
Whether
you intend to be present at the meeting or not, please complete the enclosed
proxy card, date and sign it exactly as your name appears on the card and
return
it in the postpaid envelope. This will ensure the voting of your shares if
you
do not attend the meeting. Giving your proxy will not affect your right to
vote
your shares personally if you do attend the meeting. THIS PROXY IS SOLICITED
BY
THE BOARD OF DIRECTORS OF THE CORPORATION.
By
order of the Board
of Directors,
/s/ Jerome G. Oslick
Jerome
G.
Oslick
Corporate
Secretary
Page
i
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
1133
Twenty-First Street, N.W.
Suite
600
Washington,
D.C. 20036
PROXY
STATEMENT
For
the Annual Meeting of Stockholders
to
be held on June 1, 2006
This
Proxy Statement is furnished in connection with the solicitation by the Board
of
Directors of the Federal Agricultural Mortgage Corporation (“Farmer Mac” or the
“Corporation”) of proxies from the holders of the Corporation’s Class A Voting
Common Stock and Class B Voting Common Stock (together, the “Voting Common
Stock”). The Corporation is not soliciting proxies from the holders of its Class
C Non-Voting Common Stock. The proxies will be voted at the Annual Meeting
of
Stockholders of the Corporation (the “Meeting”), to be held on Thursday, June 1,
2006, at 9:00 a.m. local time, at the Embassy Suites Hotel, 1250 Twenty-Second
Street, N.W., Washington, D.C. 20037, and at any adjournments or postponements
of the Meeting. The Notice of Annual Meeting, this Proxy Statement and the
enclosed proxy card are being mailed to stockholders on or about April 28,
2006.
The
Board
of Directors of the Corporation (the “Board of Directors” or “Board”) will
present for a vote at the Meeting the election of ten members to the Board
and
the ratification of the appointment of Deloitte & Touche LLP as independent
auditors for the Corporation for fiscal year 2006. The Board is not aware of
any
other matter to be presented for a vote at the Meeting.
One
of
the purposes of the Meeting is to elect ten members to the Board of Directors.
Title VIII of the Farm Credit Act of 1971, as amended, (the “Act”) provides that
the Corporation’s Class A Voting Common Stock may be held only by banks,
insurance companies and other financial institutions or entities that are not
Farm Credit System institutions. The Act also provides that the Corporation’s
Class B Voting Common Stock may be held only by Farm Credit System
institutions. Holders of the Class A Voting Common Stock (the “Class A Holders”)
and holders of the Class B Voting Common Stock (the “Class B Holders”) must each
elect five members to the Board of Directors. The remaining five members of
the
Board are appointed by the President of the United States, with the advice
and
consent of the United States Senate. None of Farmer Mac’s directors is or has
been an officer or employee of the Corporation, resulting in a Board of
Directors composed entirely of non-management directors. Currently, fourteen
of
Farmer Mac’s fifteen directors are “independent,” as defined in Farmer Mac’s
Corporate Governance Guidelines, Securities and Exchange Commission (“SEC”)
rules and New York Stock Exchange (“NYSE”) listing standards. After the Meeting,
assuming all of the nominees for director are elected, fourteen of Farmer Mac’s
fifteen directors will be independent. See “Director Independence” for more
information regarding the Board’s independence
determinations.
The
Board
of Directors has fixed April 11, 2006 as the record date for the
determination of stockholders entitled to receive notice of and to vote at
the
Meeting. At the close of business on that date, there were issued and
outstanding 1,030,780 shares
of
Class A Voting Common Stock and 500,301 shares of Class B Voting Common Stock,
which constitute the only outstanding capital stock of the Corporation entitled
to vote at the Meeting. See “Principal Holders of Voting Common
Stock.”
The
holders of Farmer Mac’s Voting Common Stock are entitled to one vote per share,
with cumulative voting at all elections of directors. Under cumulative voting,
each stockholder is entitled to cast the number of votes equal to the number
of
shares of the class of Voting Common Stock owned by that stockholder, multiplied
by the number of directors to be elected by that class. All of a stockholder’s
votes may be cast for a single candidate for director or may be distributed
among any number of candidates. Class A Holders are entitled to vote only for
the five directors to be elected by Class A Holders, and Class B Holders are
entitled to vote only for the five directors to be elected by Class B Holders.
Other than the election of directors, the Class A Holders and Class B Holders
vote together as a single class on any matter submitted to a vote of the holders
of Voting Common Stock.
The
presence, in person or by proxy, of the holders of at least a majority of the
Corporation’s outstanding Voting Common Stock is required to constitute a quorum
at the Meeting. Thus, 765,541 shares
of Voting Common Stock must be represented by stockholders present at the
Meeting or by proxy to have a quorum.
Although
many of Farmer Mac’s stockholders are unable to attend the Meeting in person,
they are afforded the right to vote by means of the proxy solicited by the
Board
of Directors. When a proxy is returned properly completed and signed, the shares
it represents must be voted by the Proxy Committee (described below) as directed
by the stockholder. Stockholders are urged to specify their choices by marking
the appropriate boxes on the enclosed proxy card. A stockholder may withhold
a
vote from one or more nominees by writing the names of those nominees in the
space provided on the proxy card. Under those circumstances, unless other
instructions are given in writing, the stockholder’s votes will then be cast
evenly among the remaining nominees for its class. The five nominees from each
class who receive the greatest number of votes will be elected directors. If
one
or more of the nominees becomes unavailable for election, the Proxy Committee
will cast votes under the authority granted by the enclosed proxy for such
substitute or other nominee(s) as the Board of Directors may designate. If
no
instructions are indicated on the proxies, the proxies represented by the Class
A Voting Common Stock will be voted in favor of the five nominees specified
in
this Proxy Statement as Class A nominees, with the votes being cast evenly
among
each of the Class A nominees, and the proxies represented by the Class B Voting
Common Stock will be voted in favor of the five nominees specified in this
Proxy
Statement as Class B nominees, with the votes being cast evenly among each
of
the Class B nominees.
Shares
of
Voting Common Stock represented by proxies marked “Abstain” for any proposal
presented at the Meeting (other than the election of directors) will be counted
for purposes of determining the presence of a quorum but will not be voted
for
or against such proposal. If a proposal involves a vote for which a broker
(or
its nominee) may only vote a customer’s shares in accordance with the customer’s
instructions and the broker (or its nominee) does not vote those shares due
to a
lack of instructions, the votes represented by those shares and delivered to
the
Corporation (“broker non-votes”) will be counted as shares present at the
Meeting for purposes of determining whether a quorum is present but will not
be
voted for or against such proposal. Abstentions and broker non-votes (if
applicable) will have the effect of a vote against such proposals (except with
respect to the election of directors). Because only a plurality is required
for
the election of directors, abstentions and broker non-votes (if applicable)
will
have no effect on the election of directors.
Execution
of a proxy will not prevent a stockholder from attending the Meeting, revoking
a
previously submitted proxy and voting in person.
Any
stockholder who gives a proxy may revoke it at any time before it is voted
by
notifying the Corporate Secretary in writing on a date later than the date
of
the proxy, by submitting a later dated proxy, or by voting in person at the
Meeting. Mere attendance at the Meeting, however, will not constitute revocation
of a proxy. Written notices revoking a proxy should be sent to Jerome G. Oslick,
Corporate Secretary, Federal Agricultural Mortgage Corporation, 1133
Twenty-First Street, N.W., Suite 600, Washington, D.C. 20036.
The
Proxy
Committee, composed of three officers of the Corporation, Henry D. Edelman,
Timothy L. Buzby and Jerome G. Oslick, will vote all shares of Voting
Common Stock represented by proxies signed and returned by stockholders. As
authorized by the proxies, the Proxy Committee will also vote the shares
represented thereby on any matters not known at the time this Proxy Statement
was printed that may properly be presented for action at the
Meeting.
Each
year, at the annual meeting, the Board of Directors submits to the stockholders
its nominees for election as Class A and Class B directors. In addition, the
Audit Committee’s selection of independent auditors for the year is submitted
for stockholder ratification at each annual meeting, pursuant to the
Corporation’s By-Laws. The Board of Directors may, in its discretion and upon
proper notice, also present other matters to the stockholders for action at
the
annual meeting. In addition to those matters presented by the Board of
Directors, the stockholders may be asked to act at the annual meeting upon
proposals timely submitted by eligible holders of Voting Common
Stock.
Proposals
of stockholders to be presented at the 2006 Annual Meeting of Stockholders
were
required to be received by the Corporate Secretary before December 22, 2005
for inclusion in this Proxy Statement and the accompanying proxy. Other than
the
election of ten members to the Board of Directors and the ratification of the
appointment of Deloitte & Touche LLP as independent auditors for the
Corporation for fiscal year 2005, the Board of Directors knows of no other
matters to be presented for action at the Meeting. If any other matters are
to
be brought before the Meeting or any adjournment or postponement of the Meeting,
the Proxy Committee intends to vote proxies in accordance with its members’ best
judgment.
If
any
stockholder intends to present a proposal for consideration at the Corporation’s
2007 Annual Meeting of Stockholders, the Corporate Secretary must receive the
proposal before December 19, 2006 to be eligible for inclusion in the 2006
Proxy Statement. Proposals should be sent to Jerome G. Oslick, Corporate
Secretary, Federal Agricultural Mortgage Corporation, 1133 Twenty-First Street,
N.W., Suite 600, Washington, D.C. 20036. In addition, if any stockholder
notifies the Corporation after March 3, 2007 of an intent to present a proposal
at the Corporation’s 2007 Annual Meeting of Stockholders, the Corporation’s
proxy holders will have the right to exercise discretionary voting authority
with respect to that proposal, if presented at the meeting, without the
Corporation including information regarding the proposal in its proxy
materials.
Stockholders
may send communications directly to members of the Board of Directors by writing
to them at Federal
Agricultural Mortgage Corporation, 1133 Twenty-First Street, N.W.,
Suite 600, Washington, D.C. 20036.
In
2005,
the Board of Directors held a total of seven meetings
and committees of the Board held a total of fifty-nine meetings. Each member
of
the Board attended 75 percent or more of the aggregate number of meetings
of the Board of Directors and of the committees on which he or she served during
2005. As Chairman of the Board, Fred L. Dailey presides over all meetings of
the
Board of Directors, including regularly scheduled executive sessions of the
Board in which members of management do not participate. All members of the
Board of Directors are expected to attend the Annual Meeting of Stockholders,
which is held in conjunction with a regularly scheduled meeting of the Board
of
Directors. All fifteen members of the Board of Directors attended the 2005
Annual Meeting of Stockholders.
The
Board
has established a number of standing committees to assist it in the performance
of its responsibilities. The committees currently consist of the following:
Audit Committee, Compensation Committee, Corporate Governance Committee, Credit
Committee, Finance Committee, Marketing Committee and Public Policy Committee.
Each director serves on at least one committee. See “Class A Nominees,” “Class B
Nominees” and “Directors Appointed by the President of the United States” for
information regarding the committees on which directors serve. The Audit
Committee and the Compensation Committee met fourteen times and seven times,
respectively, during the fiscal year ended December 31, 2005. The Corporate
Governance Committee, which selects nominees for election to the Board of
Directors, approves corporate governance policies for the Corporation, sets
agendas for the meetings of the Board of Directors and is able to exercise
certain powers of the Board of Directors during the intervals between meetings
of the Board, met ten times during the fiscal year ended December 31, 2005.
The Credit Committee, which is responsible for reviewing and approving all
policy matters relating to changes to the Corporation’s Seller/Servicer Guide
and making recommendations to the Board of Directors on agricultural credit
matters, met six times during the fiscal year ended December 31, 2005. The
Finance Committee, which is responsible for determining the financial policies
of the Corporation and managing the Corporation’s financial affairs, met eight
times during the fiscal year ended December 31, 2005. The Marketing
Committee, which is responsible for the development and monitoring of the
Corporation’s programs and marketing plan, met seven times during the fiscal
year ended December 31, 2005. The Public Policy Committee, which considers
matters of public policy referred to it by the Board of Directors such as the
Corporation’s relationship with and policies regarding borrowers, Congress and
governmental agencies and conflicts of interest, met seven times during the
fiscal year ended December 31, 2005. See “Item No. 1: Election of
Directors,” “Compensation of Directors and Executive Officers” and “Report of
the Audit Committee” and “Item No. 2: Selection of Independent Auditors” for
information concerning the Corporate Governance Committee, the Compensation
Committee and the Audit Committee, respectively.
Farmer
Mac has adopted a code of business conduct and ethics (the “Code”) that applies
to all directors, officers, employees and agents of Farmer Mac, including the
Corporation’s principal executive officer, principal financial officer and
principal accounting officer. A copy of the Code is available on Farmer Mac’s
website, www.farmermac.com, in the “Corporate Governance” portion of the
“Investors” section. Farmer Mac will post any amendment to, or waiver from, a
provision of the Code in that same location on its website. A print copy of
the
Code is available free of charge upon written request to Jerome G. Oslick,
Corporate Secretary, Federal Agricultural Mortgage Corporation, 1133
Twenty-First Street, N.W., Suite 600, Washington, D.C. 20036.
At
the
Meeting, ten directors will be elected for one-year terms. The Act provides
that
five of the directors will be elected by a plurality of the votes of the Class
A
Holders, and five of the directors will be elected by a plurality of the votes
of the Class B Holders. All of the Class A nominees and Class B nominees
currently are members of the Board of Directors. The directors elected by the
Class A Holders and the Class B Holders will hold office until the
Corporation’s 2007 Annual Meeting of Stockholders, or until their respective
successors have been duly elected and qualified.
The
Act
further provides that the President of the United States will appoint five
members to the Board of Directors with the advice and consent of the United
States Senate (the “Appointed Members”). The Appointed Members serve at the
pleasure of the President of the United States. The Board of Directors, after
the election at the Meeting, will consist of the Appointed Members named under
“Directors Appointed by the President of the United States” below or such other
Appointed Members as may be appointed by the President and confirmed by the
Senate between April 11, 2006 and June 1, 2006 and the ten members who are
elected by the holders of Farmer Mac’s Voting Common Stock.
In
order
to facilitate the selection of director nominees, the Board of Directors
utilizes a Corporate Governance Committee that consists of the Chairman of
the
Board, the Vice Chairman of the Board and two additional members each from
the
Class A directors and Class B directors, resulting in a committee composed
of
two directors from each of the Board’s three constituent groups. The current
members of the Corporate Governance Committee are: Appointed Members
Messrs. Dailey and Junkins; Class A directors Messrs. Kenny and Kruse; and
Class B directors Messrs. DeBriyn and Raines. As described in more
detail in “Director Independence,” the Board has determined that all members of
the Corporate Governance Committee are “independent,” as defined in Farmer Mac’s
Corporate Governance Guidelines, SEC rules and NYSE listing standards. The
charter of the Corporate Governance Committee and Farmer Mac’s Corporate
Governance Guidelines are available on Farmer Mac’s website, www.farmermac.com,
in the “Corporate Governance” portion of the “Investors” section.
The
Board
has adopted a policy statement on directors that expresses the general
principles that should govern director selection and conduct, which the
Corporate Governance Committee uses in identifying and evaluating potential
candidates for director. The Corporate Governance Committee reviews, on an
annual basis, the appropriate skills and characteristics required of Board
members in the context of the perceived needs of the Board at that point in
time. The Committee strives to identify and retain as members of the Board
individuals who have the qualities, business background and experience that
will
enable them to contribute significantly to the development of Farmer Mac’s
business and its future success. The Board has determined that its elected
members should be comprised of individuals with a variety of business
backgrounds and experiences who are deemed to have a broad perspective and
good
record of accomplishment either as senior members of agricultural business
management, as agricultural or commercial lenders, as accountants or auditors,
or as entrepreneurs. The Board has also determined that it is desirable to
have
qualified women and minority representation on the Board. In selecting nominees
for director, the Corporate Governance Committee also considers an individual’s
character, judgment, fairness and overall ability to serve Farmer Mac. Thus,
in
addition to considering the current needs of the Board and the quality of an
individual’s professional background and experience, the Corporate Governance
Committee seeks individuals who:
| · |
have
integrity,
independence, and an inquiring mind; an ability to work with others;
good
judgment; intellectual competence; and
motivation;
|
| · |
have
the willingness and ability to represent all stockholders’ interests, and
not just the particular constituency that elected the director to
serve on
the Board;
|
| · |
have
an awareness of and a sensitivity to the public purpose of Farmer
Mac and
a sense of responsibility to Farmer Mac’s intended
beneficiaries;
|
| · |
are
willing to commit the necessary time and energy to prepare for and
attend
Board and committee meetings; and
|
| · |
are
willing and have the ability to advance their views and opinions
in a
forthright manner, but, upon the conclusion of deliberations, to
act in
the best interests of Farmer Mac, and, once a decision is reached
by a
majority, to support the decision.
|
The
Committee recommended five individuals to be considered for election as
Class A nominees and five individuals to be considered for election as
Class B nominees and the Board of Directors has approved these
recommendations. The individuals recommended by the Corporate Governance
Committee are referred to collectively as the “Nominees.” The Nominees will
stand for election to serve for terms of one year each, or until their
respective successors are duly elected and qualified. Each of the ten Nominees
is a current member of the Board standing for re-election. No fees were paid
to
any director search firms or other third parties to assist in identifying and
evaluating the Nominees.
In
identifying potential candidates for the Board, the Corporate Governance
Committee considers suggestions from Board members, management, stockholders
and
others. From time to time, the Committee may retain a search firm to assist
in
identifying potential candidates and gathering information about the background
and experience of such candidates. The Committee will consider all proposed
nominees, including stockholder nominees, in light of the qualifications
discussed above and the assessed needs of the Board at the time. For the 2007
Annual Meeting of Stockholders, the Corporate Governance Committee will consider
nominees recommended by holders of Farmer Mac’s Voting Common Stock, who may
submit recommendations by letter to Jerome G. Oslick, Corporate Secretary,
Federal
Agricultural Mortgage Corporation, 1133 Twenty-First Street, N.W., Suite 600,
Washington, D.C. 20036, by January 31, 2007.
If
any of
the ten Nominees named below is unable or unwilling to stand as a candidate
for
the office of director on the date of the Meeting or at any adjournment(s)
or
postponement(s) thereof, the proxies received on behalf of such Nominee will
be
voted for such substitute or other Nominee(s) as the Board of Directors may
designate. The Board of Directors has no reason to believe that any of the
Nominees will be unable or unwilling to serve if elected.
Each
of
the Nominees has been principally employed in his or her current position for
the past five years unless otherwise noted.
Class
A Nominees
Dennis
L. Brack,
53, has
been a member of the Board of Directors of the Corporation since June 7,
2001 and serves as chairman of the Compensation Committee and as a member of
the
Credit Committee. Mr. Brack has served as President and Chief Executive Officer
of Bath State Bank, Bath, Indiana, since 1988 and has been a member of the
Franklin County, Indiana Community Foundation Investment Committee since 1999
and was a member of the Union County, Indiana Community board of directors
in
2003 and 2004. He has recently worked on the steering committees for
Comprehensive Plan Development in both Franklin and Union Counties, Indiana.
He
was also a director of the Indiana Bankers Association from 1994 to 1996 and
previously served a three-year term on the Purdue University Dean’s Advisory
Council.
Dennis
A. Everson, 55, has
been
a member of the Board of Directors of the Corporation since June 3, 2004
and is a member of the Finance Committee and the Marketing Committee. Mr.
Everson has been President and Manager of the First Dakota National Bank
Agri-business Division since 2002. From 1984 until 2002, he was Vice President
and Manager of the First Dakota National Bank Agri-business Division. From
2000
until 2002, Mr. Everson was a member of the Federal Home Loan Bank Committee
of
the American Bankers Association. During 1998, he served as Chairman of the
Agricultural & Rural Bankers Committee of the American Bankers
Association.
Mitchell
A. Johnson, 64,
has
been a member of the Board of Directors of the Corporation since June 12,
1997 and is a member of the Compensation Committee and the Finance Committee.
Mr. Johnson is President of MAJ Capital Management, Inc., an investment
management firm that he founded in 1994 following his retirement from the
Student Loan Marketing Association (“Sallie Mae”), the nation’s largest provider
of college education financing. He is a trustee of the Advisors’ Inner Circle
Funds and the Advisors’ Inner Circle Funds II. During his 21 years with Sallie
Mae, Mr. Johnson held numerous positions within that organization
including, for the seven years preceding his retirement, Senior Vice President,
Corporate Finance. He has been a trustee of Citizens Funds, a mutual fund
company based in Portsmouth, New Hampshire and a director of the Rushmore Funds,
a mutual fund company owned by FBR Investment Services, Inc. Mr. Johnson also
served as a director of Eldorado Bankshares, Inc., Laguna Hills, California,
the
holding company for Eldorado and Antelope Valley Banks, and was the first
President and one of the founding members of the Washington Association of
Money
Managers and a trustee of the District of Columbia Retirement Board, among
other
community activities.
Timothy
F. Kenny, 44,
has
been a member of the Board of Directors of the Corporation since June 3,
2004 and serves as a member of the Audit Committee and the Corporate Governance
Committee. He is a Certified Public Accountant and Managing Director with
BearingPoint, Inc. (formerly KPMG Consulting, Inc.) in McLean, Virginia. He
joined KPMG LLP, the predecessor organization to KPMG Consulting, in 1986 and
was a KPMG Audit Partner until the separation of KPMG Consulting from KPMG
LLP
in February 2001. While with KPMG LLP, Mr. Kenny served as a technical resource
for the firm’s audit partners and managers nationwide on mortgage banking
issues, including financial accounting and reporting; auditing; and operational,
strategic, and regulatory matters. Currently, Mr. Kenny directs a team of
financial professionals on consulting projects with various federal credit
agencies and is a member of the BearingPoint, Inc. 401(k) Plan Committee, where
he serves in an independent fiduciary role. Mr. Kenny previously served on
the
Board of Directors of the Mortgage Bankers Association of Metropolitan
Washington.
Charles
E. Kruse, 61,
has
been a member of the Board of Directors of the Corporation since June 7,
2001 and serves as chairman of the Marketing Committee and is a member of the
Corporate Governance Committee. Mr. Kruse has been a member of the Board of
Directors of Central Bancompany since 2000. He has served as President of the
Missouri Farm Bureau since 1992 and has been a member of the American Farm
Bureau Board of Directors, representing 12 midwestern State Farm Bureaus, since
1995. Mr. Kruse has also served on the Commission on 21st Century Production
Agriculture; the Agricultural Technical Advisory Committee for Trade in Grains,
Feed, and Oilseeds; the President’s Council on Rural America; and the U.S. Trade
Representative’s Intergovernmental Advisory Committee.
Class
B Nominees
Ralph
W. “Buddy” Cortese,
59, has
been a member of the Board of Directors of the Corporation since June 5,
2003 and serves as chairman of the Credit Committee and is a member of the
Compensation Committee. He is a farmer, rancher and cattle feeder from Fort
Sumner, New Mexico. Mr. Cortese has been a member of the board of directors
of
the Farm Credit Bank of Texas since 1995. As a member of that board of
directors, he served as vice chairman from 1998 to 2000 and has served as
chairman since 2000. Previously, Mr. Cortese was the chairman of the board
of
directors of the Production Credit Association of Eastern New Mexico (now Ag
New
Mexico, ACA) from 1992 to 1994, a member of the PCA Stockholders’ Advisory
Committee from 1990 to 1994 and a member of the executive committee of the
Tenth
District Federation of PCAs from 1991 to 1994. He has also been a member of
the
American Land Foundation Board since 2001.
Paul
A. DeBriyn, 51,
has
been a member of the Board of Directors of the Corporation since June 1,
2000. He serves as chairman of the Audit Committee and is a member of the
Corporate Governance Committee and the Compensation Committee. Mr. DeBriyn
has
served as President and Chief Executive Officer of AgStar Financial Services,
ACA (and its predecessor, Farm Credit Services of Southern Minnesota) since
1995. He was previously Executive Vice President and Chief Operating Officer
of
Farm Credit Services of Southern Minnesota from 1993 to 1995 and President
and
Chief Executive Officer of Farm Credit Services of Southeast Minnesota from
1987
to 1993.
Ernest
M. Hodges, 58, has
been
a member of the Board of Directors of the Corporation since June 16, 2005
and is
a
member of the Credit Committee. He has served as President and Chief Executive
Officer of Sacramento Valley Farm Credit, ACA, in Woodland California since
1993. Mr. Hodges was Chief Credit Officer of Sacramento Valley Farm Credit
from 1991 to 1993 and served as an Examiner with the United States Office of
the
Comptroller of the Currency in 1991. Mr. Hodges served in executive
management positions with the Western Farm Credit Bank from 1982 to 1990, most
recently as Senior Vice President.
John
G. Nelson III, 56,
has
been a member of the Board of Directors of the Corporation since June 13,
1996. He serves as chairman of the Finance Committee and is a member of the
Compensation Committee. Mr. Nelson is the owner and manager of a grain farm
in
Reardan, Washington. He served as a director of AgAmerica, FCB, Spokane,
Washington from 1994 through 2002. Mr. Nelson also has served as a director
of
Northwest Farm Credit Services, ACA, and its predecessor PCA. In 2005,
Mr. Nelson was hired by Washington State University Extension as Trade
Adjustment Assistance Coordinator for the Western Center for Risk Management
Education.
John
Dan Raines,
62, has
been a member of the Board of Directors of the Corporation since June 18,
1992 and is a member of the Audit Committee and the Corporate Governance
Committee. He is the owner and operator of Raines Commercial Group, Inc., a
general business corporation. From 1986 to 1990, Mr. Raines was a member of
the
board of directors of the South Atlantic Production Credit Association, and
served as its chairman in 1989 and 1990. Since 1990, Mr. Raines has served
as a
member of the board of directors of AgFirst Farm Credit Bank (formerly, the
Farm
Credit Bank of Columbia, South Carolina). He also has served since 1981 as
a
member of the board of directors of AgGeorgia Farm Credit, ACA, and its
predecessor Farm Credit System institution.
Directors
Appointed by the President of the United States
Julia
Bartling,
47, has
been a member of the Board of Directors of the Corporation since June 5,
2003 and is a member of the Audit Committee and the Public Policy Committee.
Her
appointment to the Board was confirmed by the United States Senate on
June 3, 2003. Ms. Bartling has been an elected member of the South Dakota
House since January 1, 2001. She also served as Auditor of Gregory County,
South Dakota from 1983 through 2000. Ms. Bartling and her spouse have owned
and
operated Bartling Feed, Grain & Trucking since 1977.
Fred
L. Dailey,
60, has
been a member of the Board of Directors of the Corporation and has served as
its
Chairman since August 16, 2002. He also serves as chairman of the Corporate
Governance Committee and is a member of the Compensation Committee and the
Public Policy Committee. His appointment to the Board was confirmed by the
United States Senate on July 29, 2002. Mr. Dailey has served as the Director
of
the Ohio Department of Agriculture since 1991. Prior to that time, he was the
executive vice president of the Ohio Beef Council and executive secretary of
the
Ohio Cattlemen’s Association from 1982 to 1991 and served as the Director of the
Indiana Division of Agriculture from 1975 to 1981. Mr. Dailey is past President
of the National Association of State Departments of Agriculture and has received
the FFA Honorary State Farmer degree from both Ohio and Indiana. In 1998, he
received the national “Outstanding State Agriculture Executive” award presented
by the Biotechnology Industry Organization and was named “Man of the Year” by
Progressive Farmer magazine in 1999. Mr. Dailey resides on a working farm in
Ohio where he raises Angus cattle.
Grace
T. Daniel,
60, has
been a member of the Board of Directors of the Corporation since August 17,
2002 and is a member of the Public Policy Committee and the Marketing Committee.
Her appointment to the Board was confirmed by the United States Senate on July
29, 2002. Ms. Daniel is the Principal of Golden State Marketing Services, a
consulting firm that she founded in 1987 and that provides marketing services
for corporations and government agencies. Ms. Daniel served on the
California Agricultural Labor Relations Board from 1997 to 1999. She also served
as the California Governor’s Chief Deputy Appointments Secretary from 1994 to
1997 and as Executive Director at the California Trade and Commerce Agency
Office of Small Business from 1991 to 1994, where she was responsible for the
State’s loan guarantee program. Since 2004, Ms. Daniel has served as Deputy
Director of California Parks and Recreation under Governor
Schwarzenegger.
Lowell
L. Junkins, 62,
has
been a member of the Board of Directors of the Corporation since June 13,
1996 and Vice Chairman of the Board since December 5, 2002. He serves as a
member of the Corporate Governance Committee, the Finance Committee and the
Public Policy Committee. He was appointed to the Board of Directors by President
Clinton in April 1996 while the Senate was in recess and was confirmed by the
Senate on May 23, 1997 and was reconfirmed by the Senate on June 3, 2003.
Mr. Junkins works as a public affairs consultant for Lowell Junkins &
Associates in Des Moines, Iowa. He owns and operates Hillcrest Farms in
Montrose, Iowa, where he served as Mayor from 1971 to 1972. From 1974 through
1986, Mr. Junkins served as an Iowa State Senator, including as majority leader
from 1981 to 1986.
Glen
O. Klippenstein,
68, has
been a member of the Board of Directors of the Corporation since June 5, 2003.
He serves as chairman of the Public Policy Committee and is a member of the
Credit Committee. His appointment to the Board was confirmed by the United
States Senate on June 3, 2003. Mr. Klippenstein has served as the Chief
Executive Officer of the American Chianina Association since November 8, 2000.
Prior to 2000, he operated his family farm, engaged in cattle
production.
In
addition to the affiliations set forth above, the Nominees and Appointed Members
are active in many local and national trade, commodity, charitable, educational
and religious organizations.
As
of the
record date, April 11, 2006, the members of the Board of Directors,
Nominees for election as directors and executive officers of the Corporation
listed in the table below might be deemed to be “beneficial owners” of the
indicated number of equity securities of the Corporation, as defined by the
rules of the Securities and Exchange Commission (“SEC”). The Corporation’s
Voting Common Stock may be held only by banks, insurance companies and financial
institutions and Farm Credit System institutions, and may not be held by
individuals. Accordingly, no executive officer owns, directly or indirectly,
any
shares of any class of the Corporation’s Voting Common Stock. Furthermore,
Appointed Members may not be officers or directors of financial institutions
or
Farm Credit System institutions and may not, directly or indirectly, own Voting
Common Stock of the Corporation. There are no ownership restrictions on the
Class C Non-Voting Common Stock. For information about the beneficial owners
of
5 percent or more of the Voting Common Stock of the Corporation, see
“Principal Holders of Voting Common Stock.”
|
Voting
Common Stock
|
Non-Voting
Common Stock1
|
||||
|
Class
A or
Class
B
|
Percent
of
Class
|
Class
C
|
Percent
of
Class
|
||
|
Julia
Bartling
|
------
|
------
|
12,000
|
*
|
|
|
Dennis
L. Brack
|
------
|
------
|
23,453
|
*
|
|
|
Timothy
L. Buzby
|
------
|
------
|
65,154
|
*
|
|
|
Nancy
E. Corsiglia
|
------
|
------
|
296,053
|
3.09%
|
|
|
Ralph
W. Cortese
|
------
|
------
|
12,713
|
*
|
|
|
Fred
L. Dailey
|
------
|
------
|
12,000
|
*
|
|
|
Grace
T. Daniel
|
------
|
------
|
12,233
|
*
|
|
|
Paul
A. DeBriyn
|
------
|
------
|
23,998
|
*
|
|
|
Henry
D. Edelman
|
------
|
------
|
708,348
|
7.40%
|
|
|
Dennis
A. Everson
|
------
|
------
|
6,265
|
*
|
|
|
Ernest
M. Hodges
|
------
|
------
|
------
|
*
|
|
|
Mitchell
A. Johnson
|
------
|
------
|
25,804
|
*
|
|
|
Lowell
L. Junkins
|
------
|
------
|
20,333
|
*
|
|
|
Timothy
F. Kenny
|
------
|
------
|
6,971
|
*
|
|
|
Glen
O. Klippenstein
|
------
|
------
|
12,589
|
*
|
|
|
Charles
E. Kruse
|
------
|
------
|
24,262
|
*
|
|
|
John
G. Nelson III
|
------
|
------
|
25,454
|
*
|
|
|
Jerome
G. Oslick
|
------
|
------
|
70,893
|
*
|
|
|
John
Dan Raines
|
------
|
------
|
22,187
|
*
|
|
|
Tom
D. Stenson
|
------
|
------
|
174,475
|
1.82%
|
|
|
Mary
K. Waters
|
------
|
------
|
------
|
*
|
|
|
All
directors and executive officers as a group (21 persons)
|
------
|
------
|
1,555,185
|
16.24%
|
|
* Less
than
1%.
1 Includes
shares of Class C Non-Voting Common Stock that may be acquired within 60 days
through the exercise of stock options as follows: Mr. Edelman, 703,950 shares;
Mr. Buzby, 65,154
shares; Ms. Corsiglia,
288,780 shares; Mr. Oslick, 66,643 shares; and Mr. Stenson,
161,899 shares; each of Ms. Bartling, Ms. Daniel and
Messrs. Cortese, Dailey and Klippenstein, 12,000 shares;
Mr. Nelson,
25,000
shares; each of Messrs. Brack, DeBriyn, Johnson, Kruse and Raines,
22,000 shares; Mr. Junkins, 20,333 shares; each of Messrs. Everson and
Kenny, 6,000 shares; and all directors and
executive
officers as a group,
1,513,759 shares.
12
The
Board
of Directors has adopted a formal set of categorical standards to form the
basis
for determinations of director independence required by NYSE rules. To be
considered “independent” for purposes of these standards, the Board must
affirmatively determine that a director does not have a material relationship
with Farmer Mac other than as a director. The standards, which are included
in
Farmer Mac’s Corporate Governance Guidelines available on the Corporation’s
website, www.farmermac.com, under the “Corporate Governance” tab of the
“Investors” section, meet all requirements for director independence contained
in SEC and NYSE rules. Farmer Mac defines a Director as lacking a material
relationship and therefore “independent” if he or she:
| (a) |
is
not and has not been employed by the Corporation within the past
three
years;
|
| (b) |
has
not received more than $100,000 per year in direct compensation from
the
Corporation, other than director and committee fees and pension or
other
forms of deferred compensation for prior service within the past
three
years;
|
| (c) |
is
not and has not been for the past three years a significant advisor
or
consultant to the Corporation, and is not affiliated with a Corporation
or
a firm that is (revenue of the greater of 2% of the other Corporation’s
consolidated gross revenues or $1 million is considered significant);
|
| (d) |
is
not and has not been for the past three years a significant customer
or
supplier of the Corporation nor affiliated with a Corporation or
firm that
is (revenue of the greater of 2% of the other Corporation’s consolidated
gross revenues or $1 million is considered
significant);
|
| (e) |
is
not and has not been for the past three years employed by or affiliated
with an internal or external auditor of the Corporation that provided
services to the Corporation within the past three
years;
|
| (f) |
is
not and has not been for the past three years employed by another
Corporation where any of the Corporation’s present executives serve on
that Corporation’s compensation
committee;
|
| (g) |
is
not a spouse, parent, sibling, child, mother- or father-in-law, son-
and
daughter-in-law and brother- and sister-in-law or any person (other
than
household employees) who shares a residence with any person described
by
(a) through (f);
|
| (h) |
is
not and has not been for the past three years affiliated with a tax-exempt
entity that received significant contributions from the Corporation
(revenue of the greater of 2% of the entity’s consolidated gross revenues
or $1 million is considered significant);
and
|
| (i) |
does
not have any other relationships with the Corporation or the members
of
management of the Corporation that the Board has determined to be
material
not described in (a) through (h).
|
In
applying the standards, the Board broadly considers all relevant facts and
circumstances.
In
April
2006, the Board considered all direct and indirect transactions and
relationships between each director and the Corporation and its management.
As a
result of its review, the Board affirmatively determined that each of Farmer
Mac’s current directors, other than Mr. Hodges, meets the director
independence standards referred to above and, therefore, is independent. Mr.
Hodges was determined to have a material relationship with Farmer Mac by virtue
of Farmer Mac’s receipt of approximately $829,785 in commitment fees in 2004
from Sacramento Valley Farm Credit, ACA, of which Mr. Hodges is the President.
That amount was approximately 2.7 percent of Sacramento Valley Farm Credit,
ACA’s consolidated gross revenues for 2004, which was approximately
$31.0 million. During 2005, Farmer Mac received approximately $736,000 in
commitment fees from Sacramento Valley Farm Credit, ACA. That amount was
approximately 1.8 percent of Sacramento Valley Farm Credit, ACA’s
consolidated gross revenues for 2005, which was approximately
$40.0 million. See “Compensation of Directors and Executive
Officers—Compensation of Executive Officers—Certain Relationships and Related
Transactions.”
The
following report of the Audit Committee shall not be deemed to be “soliciting
material,” or to be “filed” with the SEC, and will not be deemed to be
incorporated by reference into any filing by the Corporation under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Corporation specifically requests that such information be
treated as soliciting material or specifically incorporates the report by
reference into a document.
The
Audit
Committee reviewed and recommended reaffirmation of the Audit Committee Charter,
which reaffirmation was approved by the full Board on February 2, 2006. The
complete text of the charter, which reflects standards set forth in SEC
regulations and NYSE listing standards, is available on the Corporation’s
website, www.farmermac.com, under the “Corporate Governance” tab of the
“Investors” section and is also attached to this Proxy Statement as
Appendix A. The Audit Committee and the Board reviews and approves changes
to the Audit Committee Charter annually. The Board of Directors has determined
that: (1) all the directors who serve on the Audit Committee are “independent,”
as defined in Farmer Mac’s Corporate Governance Guidelines, SEC rules and NYSE
listing standards; and (2) Timothy F. Kenny, a member of the Audit
Committee, is an “audit committee financial expert,” as defined in SEC rules.
Audit
Committee Report for the Year Ended December 31, 2005
To
Our
Stockholders:
Management
is primarily responsible for establishing and maintaining the financial public
reporting process, including the system of internal accounting controls, and
for
the preparation of Farmer Mac’s consolidated financial statements in accordance
with accounting principles generally accepted in the United States. The Audit
Committee, on behalf of the Board, monitors Farmer Mac’s financial reporting
processes and systems of internal accounting control, the independence and
performance of the independent auditors and the performance of the internal
audit function. The Corporation’s independent auditors are responsible for
auditing those consolidated financial statements and expressing an opinion
as to
their conformity with generally accepted accounting principles and on
management’s assessment of the effectiveness of the Corporation’s internal
control over financial reporting. In addition, the independent auditors will
express their own opinion on the effectiveness of Farmer Mac’s internal control
over financial reporting.
Management
has represented to the Audit Committee that Farmer Mac’s audited consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United States. The Audit Committee reviewed and
discussed Farmer Mac’s audited consolidated financial statements with both
management and the Corporation’s independent auditors prior to their issuance.
The Audit Committee has discussed with the independent auditors their evaluation
of the accounting principles, practices and judgments applied by management,
and
the Audit Committee has discussed any items required to be communicated to
it by
the independent auditors pursuant to rules and regulations promulgated by the
Securities and Exchange Commission and the Public Company Oversight Board and
the standards established by the American Institute of Certified Public
Accountants, including matters required to be discussed pursuant to Statement
on
Auditing Standards No. 61 (Communication With Audit Committees).
With
respect to the Corporation’s independent auditors, the Audit Committee, among
other things, received from Deloitte & Touche LLP the written disclosures as
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and discussed with them their independence
from the Corporation and its management. The Audit Committee has reviewed and
pre-approved the audit fees of the independent auditors. It also has approved
non-audit services and reviewed fees for such services to assure compliance
with
applicable provisions of the Securities Exchange Act of 1934, as amended, and
applicable rules and regulations to assure compliance with the auditor
independence requirements that prohibit independent auditors from performing
specified services that might impair their independence as well as compliance
with Farmer Mac’s and the Audit Committee’s policies.
The
Audit
Committee discussed with Farmer Mac’s independent auditors the overall scope of
and plans for its audit. Finally, the Audit Committee continued to monitor
the
scope and adequacy of the Corporation’s internal auditing program, including
proposals for adequate staffing and to strengthen internal procedures and
controls where appropriate.
In
reliance upon these reviews and discussions, the Audit Committee recommended
to
the Board of Directors that the Board approve the inclusion of the Corporation’s
audited consolidated financial statements in the Corporation’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 for filing with the
Securities and Exchange Commission, as filed on March 16, 2006.
Audit
Committee
Paul
A. DeBriyn,
Chairman
Julia
Bartling
Timothy
F.
Kenny
John
Dan
Raines
The
following table sets forth the names and ages of the current executive officers
of Farmer Mac, the principal positions held with the Corporation by such
executive officers, and the officers’ experience prior to joining the
Corporation.
| Name | Age | Capacity in which Served and Five-Year History |
| Henry D. Edelman | 57 |
President
and Chief Executive Officer of the Corporation
since June 1, 1989. From November
1986
|
| until he joined Farmer Mac, Mr. Edelman was First Vice President for Federal Government Finance of PaineWebber Incorporated, New York, New York. Previously, Mr. Edelman was Vice President for Government Finance at Citibank N.A., New York, New York and Director of Financing, Investments and Capital Planning at General Motors Corporation in New York, New York, where he served in various capacities on the Legal Staff and Financial Staff for ten years. | ||
| Timothy
L. Buzby
|
37
|
Vice
President - Controller since June 5, 2003. From July 1997 until
he joined
Farmer Mac as Controller
|
|
in
December 2000, Mr. Buzby, a certified public accountant since
1992, was Chief Financial Officer for
George
Mason Mortgage Corporation, a regional residential mortgage
lender, from March 2000 to
December
2000 and for Mortgage Edge Corporation, a national mortgage
lender, from July 1997 to
February
2000. Prior to July 1997, Mr. Buzby was a Manager on the Mortgage
Consulting Staff of
KPMG
Peat Marwick, LLP.
|
||
| Nancy
E. Corsiglia
|
50
|
Vice
President - Finance since June 1, 2000, Treasurer since
December 8, 1989 and Chief Financial
|
| Officer since May 13, 1993. From December 8, 1989 until June 1, 2000 when she was appointed Vice President - Finance, Ms. Corsiglia was Vice President - Business Development. From 1988 until she joined Farmer Mac, Ms. Corsiglia was Vice President for Federal Government Finance at PaineWebber Incorporated, New York, New York. From 1984 to 1988, she served as a Senior Financial Analyst and a Manager on the Financial Staff of General Motors Corporation, New York, New York. | ||
| Jerome
G. Oslick
|
59
|
Vice
President - General Counsel and Corporate Secretary since February
1, 2000. From 1987 until
|
| he joined Farmer Mac as Assistant General Counsel in February 1994, Mr. Oslick was an associate in the Washington, D.C. office of the New York-based law firm of Brown & Wood. From 1970 to 1987, he was an attorney and branch chief in the Office of General Counsel, United States Department of Agriculture. | ||
| Tom
D. Stenson
|
55
|
Vice
President - Agricultural Finance since August 7, 1997.
From
November 1996 until August
7, 1997,
|
| Mr. Stenson was Director - Agricultural Finance of the Corporation. From 1993 until joining Farmer Mac in 1996, he was Vice President - Agribusiness for ValliWide Bank, a “super-community” bank in the San Joaquin Valley of California. | ||
| Mary
K. Waters
|
47
|
Vice
President - Corporate Relations since June 16, 2005. From From
May 2001 until she joined
|
| Farmer Mac, Ms. Waters was Assistant Secretary, Congressional Relations at the United States Department of Agriculture. From 1986 until her nomination to the position at USDA in 2001, Ms. Waters served as Senior Director and Legislative Counsel for ConAgra Foods. |
The
Compensation Committee determines, subject to ratification by the Board of
Directors, the salaries,
benefit
plans and other compensation of directors and officers of the Corporation.
The
current members of the Compensation Committee are Messrs. Cortese, Dailey,
DeBriyn, Johnson and Brack (chairman). No member of Farmer Mac’s Compensation
Committee is or has been an officer or employee of the Corporation. As described
in more detail in “Director Independence,” the Board has determined that all
members of the Compensation Committee are “independent,” as defined in Farmer
Mac’s Corporate Governance Guidelines, SEC rules and NYSE listing
standards.
The
Compensation Committee adopted a charter on February 5, 2004, which
adoption was reaffirmed by the full Board on February 2, 2006. The complete
text
of the charter, which reflects standards set forth in SEC and NYSE rules, is
available on the Corporation’s website, www.farmermac.com, under the “Corporate
Governance” tab in the “Investors” section.
| — |
Compensation
of Directors
|
The
directors are required to spend a considerable amount of time preparing for,
as
well as participating in, Board and Committee meetings. In addition, they are
often called upon for their counsel between meeting dates. For those services,
each director receives the following compensation: (a) an annual retainer
of $12,500 ($15,000 for the chairman of the Audit Committee and $17,500 for
the
Chairman of the Board); (b) $750 per day, plus expenses, for each meeting of
the
Board and each Committee meeting (if on a day other than that of the Board
meeting) attended; and (c) with the prior approval of the President of the
Corporation, $750 per day, plus expenses, for certain other meetings and
conferences with borrowers, lenders or other groups interested in the Farmer
Mac
program in which they participate. The
total
cash compensation received by all members of the Board of Directors in 2005
was
approximately $386,062. Since June 13, 1997, each director has been granted
options annually to purchase shares of Class C Non-Voting Common Stock under
the
Corporation’s 1997 Incentive Plan, with each such grant occurring on the date of
each Annual Meeting of Stockholders and with the option price being determined
as of such date. The 6,000 options granted to each member of the Board of
Directors in 2005 had a present value of $46,2602
at the
grant date. The total compensation, cash and options received by all members
of
the Board of Directors in 2005 was approximately $1,080,000.
| — |
Compensation
of Executive Officers
|
General
This
section includes: (a) a report from the Compensation Committee of the Board
of Directors on executive compensation; (b) a discussion of Compensation
Committee interlocks and insider participation in Farmer Mac transactions;
(c) a summary description in tabular form of executive compensation;
(d) a summary of aggregate option holdings of the named executive officers;
(e) a description of Corporation’s equity compensation plans; (f) a
description of the executive officers’ employment agreements; (g) a
discussion of certain relationships and related transactions with directors;
and
(h) comparisons of Farmer Mac’s stock performance to market
indices.
Notwithstanding
anything to the contrary set forth in any of Farmer Mac’s documents with respect
to the offer or sale of securities (“Offering Circulars”) or any previous
corporate filings under the Securities Act of 1933 or Securities Exchange Act
of
1934, neither the Compensation Committee Report on Executive Compensation nor
the performance graphs shall be deemed to be incorporated by reference into
any
Offering Circular or any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent Farmer Mac specifically
incorporates such information by reference, and shall not otherwise be deemed
to
have been or to be filed under such Acts.
Compensation
Committee Report on Executive Compensation
Farmer
Mac’s Compensation Policies.
Farmer
Mac was created by Congress to establish a secondary market for agricultural
and
rural housing mortgages that would increase the availability of credit for
agricultural producers, provide greater liquidity and lending capacity for
agricultural lenders and facilitate intermediate- and long-term agricultural
funding. Farmer Mac’s charter, particularly as revised in 1996, casts it in the
mold of the other mortgage loan secondary market government-sponsored
enterprises, Federal National Mortgage Association (“Fannie Mae”) and the
Federal Home Loan Mortgage Corporation (“Freddie Mac”), which, over the past 20
years, have established a mature secondary market for housing mortgages. From
the outset, Farmer Mac’s Board of Directors and its Compensation Committee
recognized that the accomplishment of Farmer Mac’s mission would require that it
attract, retain and motivate highly qualified personnel capable of addressing
the formidable tasks necessary to develop and operate a secondary market for
agricultural mortgage loans where none had previously existed, and to persevere
in their efforts through what would likely be a number of difficult and
uncertain years. The Compensation Committee believes that this approach
continues to be sound, inasmuch as the Corporation must compete in the general
market for the services of individuals with the education, experience and prior
achievements necessary to enhance the financial results and safety and soundness
of Farmer Mac’s expanding and increasingly complex operations. Accordingly, the
Board and the Compensation Committee have undertaken to compensate those
employees in a reasonable manner consistent with compensation for executives
in
other comparable businesses that involve similar duties and responsibilities,
while recognizing that the Corporation would have to set special objectives
as
it progressed through developmental stages, whereby management would focus
on
mission, long-term structural, internal controls, pricing and capital
objectives, balanced with near-term operating results.
Method
of Determining Management Compensation.
Farmer
Mac’s Board of Directors and Compensation Committee have adopted an approach to
executive compensation that relies upon both subjective (qualitative) and
objective (quantitative) evaluation criteria in establishing the compensation
of
the Chief Executive Officer (“CEO”) and other senior members of management. That
approach measures performance primarily on the basis of management’s
accomplishments in implementing business strategies designed to achieve the
annual and long-term objectives defined in the Corporation’s annual business
plan, as approved each year by the Board of Directors, and achieving those
objectives.
As
part
of its ongoing efforts to evaluate its approach and further refine the
Corporation’s compensation practices, the Compensation Committee has employed
the services of a nationally-recognized independent compensation consulting
firm. With significant input and assistance from that independent consultant,
in
2005 the Compensation Committee continued its work to refine the Corporation’s
policies relating to executive compensation. Those policies include: (i) a
system for comparative and competitive evaluation
of base salaries; (ii) an approach to incentive compensation, including
annual cash and long-term equity components; and (iii) a management
performance evaluation form that has resulted in more quantitative measurement
of management’s performance against the achievement of the Corporation’s
business plan objectives.
Each
year, the Corporation’s independent compensation consultant reviews the
Corporation’s compensation practices and establishes an estimated range of
compensation opportunities that are aligned with the Corporation’s annual and
long-term objectives keyed off of executive performance and comparable
to those received by persons with similar qualifications and experience (but
not
necessarily the same position and title) at other peer corporations,
particularly the other government-sponsored enterprises,
to
ensure that the Corporation’s compensation structure is sufficiently competitive
to attract and retain highly qualified executives. The
Corporation’s established practice is to cap compensation at Farmer Mac at no
more than 15 percent above the 50th
percentile of compensation for all components of comparable pay, to reflect
the
challenges and risks of its developmental and political
characteristics.
On
the
basis of that comparative review and other related analyses, the Compensation
Committee selects the range of, and maximum amounts for, total compensation
as
well as for each of the three significant components of compensation - salary,
annual cash incentive pay and long-term non-cash incentive pay - and then makes
recommendations to the Board of Directors as to the actual levels of
compensation to be awarded. The cash and non-cash incentive portions of the
compensation package vary to reflect corporate performance, which is measured
against business plan objectives and results. In measuring the achievement
of
those objectives and results, the Compensation Committee applies criteria
established by the Board and management in the business plan. In 2004, Farmer
Mac changed its business plan cycle, or business planning year, from June 1
through May 31, to July 1 through June 30, resulting in a 13-month transition
planning year from June 1, 2004 to June 30, 2005. For that business
planning year, the Compensation Committee established seven critical objectives
focusing on mission, profitability, volume and quality control: (1) to
continue to fulfill the Corporation’s Congressional mission and serve rural
America; (2) to continue to improve operating results; (3) to manage
effectively the Corporation’s interest rate risk and credit risk; (4) to
optimize internal operations with the evolution of the Corporation’s business,
through effective risk management, internal controls, resource allocation and
corporate governance; (5) to optimize use of the capital markets;
(6) to maintain adequate capital; and (7) to maintain effective
government, public and investor relations.
Method
of Determining Management Compensation for the 2004-05 Business Planning
Year.
The
Corporation’s procedures for determining management compensation are
re-evaluated each year and have remained consistent from year to year. Toward
the end of the Corporation’s June 30th
business
planning year, the Compensation Committee reviews management’s performance
against business plan objectives, taking into account the business conditions
that prevailed during the preceding twelve months.
As
a
benchmark for compensation decisions, the Compensation Committee,
assisted by the independent compensation consultant, compares the salary and
annual and long-term incentive compensation of the CEO and other members of
senior management with the corresponding range of competitive compensation
received by persons with similar qualifications and experience (although not
necessarily the same position and title) at other corporations, particularly
the
other government-sponsored enterprises. This comparison is made on both an
annual and a multi-year basis, in order to take into account pay levels and
rates of increase at Farmer Mac and similar companies.
The
CEO
provides detailed written performance evaluations of the members of senior
management, other than himself, to the Compensation Committee members in
advance, and these are discussed among the members and the CEO. The Compensation
Committee members then meet in executive session (without the CEO present)
to
discuss the performance of the CEO. Thus, the CEO participates in the evaluation
of each other senior member of management, but not in his own. The Compensation
Committee includes the CEO in its consideration of the performance and total
compensation of each of the other members of senior management and then
considers the performance and total compensation of the CEO in an executive
session without the CEO present and prepares a detailed written performance
evaluation of the CEO. Based on those deliberations and input provided by the
independent compensation consultant, the Compensation Committee makes
recommendations consistent with the Corporation’s compensation policies as to
the terms of the contracts under which the CEO and other senior management
are
employed, and its ability to attract and retain a management team with the
skills and talent necessary to achieve the Corporation’s mission.
The
Compensation Committee evaluated the performance of senior management, including
the CEO, for the 2004-05 business
planning year by reviewing the contribution of each individual to the
accomplishment of the strategies and objectives under the 2004-05 business
plan. The Compensation Committee also evaluated the Corporation’s non-financial
achievements during the business planning year, recognizing that the
accomplishment of the Corporation’s Congressional mission is a significant
aspect of the continuing development of Farmer Mac. That mission involves the
establishment of programs and products that provide greater liquidity and
lending capacity to agricultural lenders, increase the availability of long-term
credit to farmers and ranchers and facilitate capital market investments that
result in long-term fixed-rate agricultural mortgages. In that regard, the
Compensation Committee considered the significant business accomplishments
and
financial results achieved during the 2004-05 business
planning year, including advancement of the Corporation’s Congressional mission
and the 12.7 percent increase in annualized core net income for the 2004-05
business planning year compared to the prior business planning year while
maintaining loan delinquency rates at low levels. The Compensation Committee
also recognized other important business accomplishments during the planning
year, including: improvements in internal controls; maximizing revenue through
sophisticated investment techniques; and increasing the profitability of its
programs by holding loans rather than securitizing them when market conditions
were unfavorable. All of these factors were weighed carefully, with particular
weight accorded to internal controls. On that basis, the Compensation Committee
recommended, and the Board approved, the compensation to senior management
disclosed below.
The
proportion of the total compensation package representing incentive compensation
(annual cash and long-term non cash incentive compensation) for the
2004-05 business
planning year was 72.6 percent for the CEO and ranged between
0 percent and 65.4 percent for other executive officers. The
Compensation Committee believes that equity compensation should represent a
significant portion of incentive compensation in order to align the interests
of
senior management and stockholders. Accordingly, for the 2004-05 business
planning year, long-term incentive compensation in the form of stock options
represented 71.5 percent of the total incentive compensation package for
the 2004-05 business
planning year. The basis for determining the level of incentive compensation
was
the Compensation Committee’s evaluation of each individual’s contribution to the
achievement of the business and financial accomplishments of the
2004-05 planning
year, as well as an evaluation of each individual’s performance, based on
subjective standards including professional competence, motivation and
effectiveness in implementing the strategies that led to the achievement of
Farmer Mac’s business plan objectives.
Basis
for Determining the Compensation for the CEO.
For the
2004-05 business planning year, Mr. Edelman received a base salary of $536,036
and was awarded incentive compensation with a total estimated value of
approximately $1,525,106. With respect to the incentive compensation component
of Mr. Edelman’s total compensation, he received $419,717 in cash as well as
options to purchase 152,048 shares of Farmer Mac Class C Non-Voting Common
Stock
(the options, valued at $1,105,389 as of the grant date, vest as follows:
one-third will vest on May 31, 2006; one-third will vest on May 31, 2007; and
the remaining one-third will vest on May 31, 2008). For
a
discussion of the factors and criteria upon which the CEO’s compensation was
based, see the preceding section of this report.
The
Compensation Committee members believe that both the design of Farmer Mac’s
compensation structure, as maintained with the assistance of its outside
independent compensation consultant, and the actual total compensation levels,
as described herein, reflect careful consideration of what was reasonable and
fair, in light of the Corporation’s performance, from both management and
stockholder perspectives.
Compensation
Committee
Dennis
L.
Brack, Chairman
Fred
L.
Dailey Mitchell
A. Johnson
Ralph
W.
Cortese Paul
A.
DeBriyn
Compensation
Committee Interlocks and Insider Participation
Directors
Brack, Cortese, Dailey, DeBriyn, and Johnson comprise the Corporation’s
Compensation Committee. None of these directors is, or has been, an officer
or
employee of the Corporation. None of Farmer Mac’s executive officers serve, or
have served, as a member of the Board or the Compensation
Committee.
Director
Brack, a Class A director, is President and Chief Executive Officer of Bath
State Bank, which is a participant in both the Farmer Mac I and II programs.
Director Cortese, a Class B director, is the chairman of the board of directors
of Farm Credit Bank of Texas, which is the owner of 38,503 shares (or
7.7 percent) of Farmer Mac’s Class B Voting Common Stock and a
participant in the Farmer Mac I program. See “Compensation of Directors and
Executive Officers—Compensation of Executive Officers—Certain Relationships and
Related Transactions” for information about the transactions that occurred
between Bath State Bank and Farmer Mac and between Farm Credit Bank of Texas
and
Farmer Mac during 2005.
The
following table sets forth certain information for each of the last three fiscal
years with respect to the compensation awarded to, earned by, or paid to Farmer
Mac’s CEO and each of Farmer Mac’s four other most highly compensated executive
officers or employees for the fiscal year ended December 31, 2005 (the
“named executive officers”).
|
Long-Term
|
|||||
|
Compensation
Awards
|
|||||
|
Fiscal
|
Annual
Compensation ($)
|
Securities
Underlying
|
All
Other
|
||
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Options
|
Compensation
($)3
|
|
Henry
D. Edelman
|
2005
|
506,060
|
419,717
|
152,048
|
39,462
|
|
President and
|
2004
|
488,410
|
356,598
|
99,955
|
38,895
|
|
Chief Executive Officer
|
2003
|
469,801
|
379,478
|
120,111
|
38,001
|
|
|
|||||
|
Timothy
L. Buzby4
|
2005
|
220,310
|
90,759
|
28,805
|
34,722
|
|
Vice President
-
Controller
|
2004
|
197,161
|
78,413
|
19,374
|
32,352
|
|
2003
|
161,348
|
74,906
|
21,035
|
25,728
|
|
|
Nancy
E. Corsiglia
|
2005
|
324,642
|
196,695
|
71,529
|
34,920
|
|
Vice President
-
Finance,
|
2004
|
313,319
|
179,933
|
52,505
|
34,185
|
|
Treasurer and CFO
|
2003
|
301,381
|
157,853
|
50,356
|
33,291
|
|
Michael
P. Morris5
|
2005
|
208,750
|
110,511
|
29,272
|
34,382
|
|
Vice President
-
|
2004
|
193,750
|
61,577
|
11,180
|
31,558
|
|
Agricultural Credit
|
2003
|
125,731
|
29,766
|
2,500
|
18,624
|
|
Tom
D. Stenson
|
2005
|
265,786
|
146,959
|
51,907
|
35,592
|
|
Vice President
-
|
2004
|
256,517
|
126,915
|
35,970
|
34,425
|
|
Agricultural Finance
|
2003
|
246,743
|
122,371
|
35,852
|
33,531
|
___________________________________________________
3
Includes contributions to the Corporation’s defined contribution pension plan in
the amount of $34,560 for 2005 on behalf of each of Mr. Edelman,
Mr. Buzby, Ms. Corsiglia and Mr. Stenson; and $34,022
on
behalf of Mr. Morris, as well as disability and life insurance premium payments
paid on behalf of each of the named executive officers. See “Employment
Agreements.”
4 Mr. Buzby was appointed Vice
President
-
Controller on June 5, 2003.
5 Mr. Morris was appointed Vice President - Mortgage Servicing on
December 4, 2003 and Vice President - Agricultural Credit on June 4, 2004.
On March 8, 2006, Mr. Morris became Mortgage Servicing
Advisor to Farmer Mac. It is expected that his employment with Farmer Mac will
terminate June 30, 2006.
Option
Grants During 2005
The
table
below sets forth, as to each of the named executive officers, the following
information with respect to option grants during 2005: (1) the number of shares
of Class C Non-Voting Common Stock underlying options granted during 2005;
(2) the percentage that such options represent of all options granted to
employees during that year; (3) the exercise price of such options; (4) the
expiration date of such options; and (5) the present value, as of the grant
date, of such options under the Black-Scholes option pricing model.
|
Name
|
Number
of
Securities
Underlying
Options
Granted6
|
%
of Total
Options
Granted
to
Employees
in
Year
|
Exercise
Price
($/Share)
|
Expiration
Date
|
Grant
Date
Present
Value7
|
|
Henry
D. Edelman
|
152,048
|
38.0
%
|
$20.61
|
June
16, 2015
|
$1,105,389
|
|
Timothy
L. Buzby
|
28,805
|
7.2
|
20.61
|
June
16, 2015
|
209,412
|
|
Nancy
E. Corsiglia
|
71,529
|
17.9
|
20.61
|
June
16, 2015
|
520,016
|
|
Michael
P. Morris
|
29,272
|
7.3
|
20.61
|
June
16, 2015
|
212,807
|
|
Tom
D. Stenson
|
51,907
|
13.0
|
20.61
|
June
16, 2015
|
377,364
|
Option
Exercises and Year End Values
The
following table sets forth certain information relating to stock options
exercised during 2005 by, and the number and value of unexercised stock options
previously granted to, the named executive officers.
|
Number
of
|
Number
of Securities
Underlying
Unexercised
Options
at
Year-End
|
Value
of Unexercised
In-the-Money
Options
at
Year-End8
|
||||||
|
Name
|
Shares
Acquired
on
Exercise
|
Value
Realized
|
Exercisable/
Unexercisable
|
Exercisable/
Unexercisable
|
||||
|
Henry
D. Edelman
|
3,640
|
$70,706
|
667,989
|
/
|
218,685
|
$5,418,017
|
/
|
$2,088,121
|
|
Timothy
L. Buzby
|
—
|
—
|
49,095
|
/
|
41,721
|
286,190
|
/
|
398,527
|
|
Nancy
E. Corsiglia
|
1,460
|
28,360
|
266,696
|
/
|
86,911
|
2,110,234
|
/
|
836,264
|
|
Michael
P. Morris
|
3,726
|
21,015
|
3,500
|
/
|
36,726
|
9,965
|
/
|
347,877
|
|
Tom
D. Stenson
|
—
|
—
|
132,607
|
/
|
75,887
|
884,675
|
/
|
725,252
|
___________________________________
6
Options granted in 2005 are exercisable in installments: one-third vests on
each
of May 31, 2006, May 31, 2007 and May 31, 2008.
7
The
present value
at grant date of options granted during 2005 has been estimated using the
Black-Scholes option pricing model with the following
assumptions: a dividend yield of 0.0%; an
expected volatility of 46.3%; a risk-free interest rate of 3.9%; and an expected
life of 7 years.
8
For purposes of this calculation, the value of the in-the-money
unexercised options is determined by multiplying the number of options by
the
difference between the exercise price and the closing price ($29.93) for
the Class C Non-Voting Common Stock on December 31, 2005.
Equity
Compensation Plans
The
following table sets forth certain information relating to compensation plans
under which equity securities are authorized issuance as of December 31,
2005.
|
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options
|
Weighted
average
exercise
price of
outstanding
options
(per
share)
|
Number
of securities
remaining
available
for
future issuance
under
equity
compensation
plans
|
|
Equity
compensation plans
not
approved by stockholders
|
2,153,008
|
$22.41
|
774,760
|
General.
The
purpose of Farmer Mac’s stock option plans is to encourage stock ownership by
directors, officers and other key employees, to provide an incentive for such
individuals to expand and improve the business of Farmer Mac and to assist
Farmer Mac in attracting and retaining key personnel. The use of stock options
is an attempt to align more closely the long-term interests of employees and
directors with those of Farmer Mac’s stockholders by providing those individuals
with the opportunity to acquire an equity interest in Farmer Mac. Farmer Mac’s
stock option plans are administered by the Compensation Committee of the Board.
Because individuals are prohibited by law from owning shares of Farmer Mac’s
Voting Common Stock, the Corporation uses unrestricted Class C Non-Voting Common
Stock for the purpose of granting options under its stock option plans. Under
the plans, the option price is required to be paid in cash, and no option holder
has any rights as a stockholder with respect to shares subject to an option
until the option price has been paid and the shares are issued upon exercise
of
the option.
1997
Plan.
In
1997, the Board adopted the 1997 Incentive Plan (the “1997 Plan”), a broad-based
option plan for directors, officers and non-officer employees. The 1997 Plan,
as
amended, provides for the issuance of a maximum of 3,750,000 nonqualified stock
options on Class C Non-Voting Common Stock at an option price determined as
of
the grant date, with a term of not more than 10 years from such date. The plan
provides for the automatic annual grant to directors of 5-year options to
purchase 6,000 (split-adjusted) shares of Class C Non-Voting Common Stock,
with
each grant to occur on the day of the annual meeting (including the Meeting),
with the option price to be determined as of such day. Through 2003, options
granted under the 1997 Plan vested one-third on the date of grant, one-third
the
following year and one-third the second following year. Beginning in 2004,
options granted under the 1997 Plan vest one-third in each of the first three
years following the date of option grant. The Board and management have
determined that granting options to qualified non-officer employees would
promote a sense of corporate ownership in the best interest of the Corporation.
Accordingly, the 1997 Plan permits the grant of options to all employees (not
just officers) based on their annual evaluations and to newly-hired
employees.
Prior
to
2004, the Board approved the issuance of shares authorized under the 1997 Plan
to employees and officers, on an individual basis, as annual incentive
compensation in connection with their annual evaluations. For officers, the
stock vested immediately upon grant, but could not be transferred for one year;
for other employees, the stock vested 50 percent after one year and
50 percent after two years. Between 1997 and 2003, the Board approved the
issuance of 220,855 shares of Class C Non-Voting Common Stock as annual
incentive compensation. Farmer Mac has not issued shares of stock as incentive
compensation since June 2003.
If
an
option holder’s employment with Farmer Mac terminates for any reason, including
by reason of retirement, the option holder’s rights to exercise any option under
the 1997 Plan terminate on the earlier of the option expiration date or 90
days
after termination (one year in the case of death or disability). Upon a
termination for “cause,” the options expire immediately. Following the
termination of a director’s service, vested options will remain exercisable
until the earlier of the option expiration date or two years following
termination. The 1997 Plan also provides for accelerated vesting of unvested
options in the event of an option holder’s death or disability.
As
of
December 31, 2005, options covering 2,975,240 shares (net of cancellations)
have
been granted under the 1997 Plan, of which 2,153,008 remain outstanding. As
of
December 31, 2005, 774,760 shares of Class C Non-Voting Common Stock remained
available for future issuance of option grants under the 1997 Plan, excluding
the shares underlying outstanding options. Options granted under the 1997 Plan
during 2005 have exercise prices ranging from $18.21 to $29.93 per
share.
Employment
Agreements with Officers
The
Corporation has entered into employment agreements (the “Agreements”) with the
members of senior management (for purposes of this section, the “officers”),
including the named executive officers, in order to provide them with a
reasonable level of job security, while limiting the Corporation’s ultimate
financial exposure. Significant terms of the Agreements address each officer’s
scope of authority and employment, base salary and incentive compensation (shown
as “bonus” in the Summary Compensation Table), benefits, conditions of
employment, termination of employment and the term of employment. Although
the
Agreements generally expire on dates approximately three to four years from
the
present,9 The
Agreements with the officers expire on June 1 of the following years:
Henry D. Edelman, 2010; Timothy L. Buzby, Nancy E. Corsiglia and
Tom D. Stenson, 2009; Jerome G. Oslick, 2007. The Agreement with Mary
K. Waters expires July 1, 2007. the
Corporation’s exposure to severance pay and other costs of termination are
capped on the basis of the lesser of two years (eighteen months in the case
of
dissolution) or the remaining term of each Agreement.
Under
the
Agreements, the officers are entitled to a base salary and discretionary
incentive compensation. Base compensation for all officers is paid bi-weekly
over the course of each year. The current base salaries for the named executive
officers who, as of April 11, 2006, remain executive officers, are: Mr. Edelman,
$514,100; Mr. Buzby, $226,560; Ms. Corsiglia, $329,800; and
Mr. Stenson, $270,009. Awards of incentive compensation are considered
annually at the end of the business planning year (July 1 to June 30,
except that the 2004-05 business planning year was a 13-month transition year
from June 1, 2004 to June 30, 2005) and are determined and payable under the
circumstances discussed above in “Compensation Committee Report on Executive
Compensation.”
The
Agreements provide that each officer is entitled to certain benefits, such
as
disability insurance, health insurance, dental insurance and life insurance,
which are, in some cases, above the levels provided to employees generally.
See
the Summary Compensation Table for information on other benefits extended to
the
named executive officers.
The
Agreements also provide that an officer’s employment may be terminated “without
cause” upon payment of severance pay consisting of all base salary scheduled to
be paid over the lesser of the remaining term of the Agreement or two years.
If
the Board of Directors adopts a resolution authorizing a dissolution of the
Corporation, the Agreements also may be terminated upon payment of severance
pay
consisting of all base salary scheduled to be paid until the later of the final
date of dissolution or one and one-half years following the effective date
of
the dissolution. Upon termination of employment due to an officer’s death or
disability, the officer will generally be entitled to benefits on the same
basis
as “without cause”; however, the Corporation’s obligations in such instances are
substantially covered by insurance. The Agreements may be terminated by Farmer
Mac for “cause,” as defined in the Agreements, in which event the officer will
be paid only accrued compensation to the date of termination.
Certain
Relationships and Related Transactions
From
time
to time, Farmer Mac purchases or commits to purchase Qualified Loans under
the
Farmer Mac I program and USDA-guaranteed portions under the Farmer Mac II
program from, or enters into other business relationships with, institutions
that own five percent or more of a class of Farmer Mac’s Voting Common Stock or
that have an officer or director who is also a member of Farmer Mac’s Board of
Directors. These transactions are conducted in the ordinary course of business,
with terms and conditions comparable to those applicable to entities
unaffiliated with Farmer Mac.
Dennis
L.
Brack, a Class A director, is the President and Chief Executive Officer of
Bath
State Bank. The following transactions occurred between Bath State Bank and
Farmer Mac during 2005:
| · |
Farmer
Mac purchased 39 USDA-guaranteed portions having an aggregate principal
amount of approximately $7.7 million from Bath State Bank under the
Farmer
Mac II program; and
|
| · |
Farmer
Mac received approximately $50,000 in guarantee fees on Farmer Mac
II
Guaranteed Securities whose underlying USDA-guaranteed portions were
sold
to Farmer Mac by Bath State Bank.
|
Ralph
W.
“Buddy” Cortese, a Class B director, is the chairman of the board of directors
of Farm Credit Bank of Texas, which holds approximately 7.7 percent of
outstanding Class B Voting Common Stock. The following transactions
occurred between Farm Credit Bank of Texas and Farmer Mac during
2005:
| · |
Farmer
Mac extended Long-Term Standby Purchase Commitments (“LTSPCs”) on
106 loans having an aggregate principal balance of approximately
$45.6 million to Farm Credit Bank of Texas (the aggregate outstanding
principal balance of the 568 loans underlying LTSPCs with Farm Credit
Bank of Texas was approximately $122.1 million as of December 31,
2005); and
|
| · |
Farmer
Mac received commitment fees of approximately $512,000 attributable
to
transactions with Farm Credit Bank of
Texas.
|
Paul
A.
DeBriyn, a Class B director, is the President and Chief Executive Officer of
AgStar Financial Services, ACA (“AgStar”). The following transactions occurred
between AgStar and Farmer Mac during 2005:
| · |
Farmer
Mac extended LTSPCs on 1,166 loans having an aggregate principal
balance
of approximately $193.1 million to AgStar (the aggregate outstanding
principal balance of the 3,974 loans underlying LTSPCs with AgStar
was
approximately $382.5 million as of December 31,
2005);
|
| · |
Farmer
Mac received commitment fees of approximately $1.1 million
attributable to transactions with
AgStar;
|
| · |
In
November 2004, Farmer Mac and AgStar entered into a strategic alliance
agreement as part of Farmer Mac’s efforts to capture a greater share of
the market and to serve a cross-section of agricultural lenders in
many
areas of the nation. Under the terms of that agreement, Farmer Mac
paid
AgStar $100,000 in 2005 for joint marketing
expenses;
|
| · |
In
2005, AgStar received $302,000 in servicing fees for its work as
a Farmer
Mac central servicer; and
|
| · |
During
2005, Farmer Mac sold Farmer Mac I Guaranteed Securities to AgStar
in the
amount of $6.6 million. Those sales did not result in a gain or loss
to Farmer Mac.
|
AgStar’s
transactions with Farmer Mac in 2006 under the strategic alliance agreement
have
the potential to include transactions in which the amount involved exceeds
$60,000.
Dennis
A.
Everson, a Class A director, is the President and Manager of the Agri-business
Division of First Dakota National Bank (“Dakota Mac”). The following
transactions occurred between Dakota Mac and Farmer Mac during
2005:
| · |
Farmer
Mac purchased 1 loan having an aggregate principal amount of
approximately $725,000 from Dakota Mac under the Farmer Mac I
program;
|
| · |
Farmer
Mac purchased 18 USDA-guaranteed portions having an aggregate principal
amount of approximately $3.4 million from Dakota Mac under the Farmer
Mac II program; and
|
| · |
Farmer
Mac received approximately $183,000 in guarantee fees on Farmer Mac
Guaranteed Securities whose underlying loans or USDA-guaranteed portions
were sold to Farmer Mac.
|
Ernest
M.
Hodges, a Class B Director, is the President and Chief Executive Officer of
Sacramento Valley Farm Credit, ACA (“SacValley”). The following transactions
occurred between SacValley and Farmer Mac during 2005:
| · |
Farmer
Mac extended LTSPCs on 6 loans having an aggregate principal balance
of approximately $6.6 million to SacValley (the aggregate outstanding
principal balance of the 330 loans underlying LTSPCs with SacValley
was
approximately $144.5 million as of December 31, 2005);
and
|
| · |
Farmer
Mac received commitment fees of approximately $736,000
attributable to transactions with
SacValley.
|
John
Dan
Raines, a Class B director, is a member of the board of directors of AgFirst
Farm Credit Bank (“AgFirst”), which holds approximately 16.8 percent of
outstanding Class B Voting Common Stock. Farmer Mac also owned $88.0
million of AgFirst preferred stock as of December 31, 2005. The following
transactions occurred between AgFirst and Farmer Mac during 2005:
| · |
Farmer
Mac extended LTSPCs on 54 loans having an aggregate principal balance
of
approximately $36.6 million to AgFirst (the aggregate outstanding
principal balance of the 3,009 total loans underlying LTSPCs with
AgFirst
was approximately $430.5 million as of December 31,
2005);
|
| · |
For
the year ended December 31, 2005, the total outstanding guaranteed
amount
of Farmer Mac Guaranteed Securities backed by rural housing loans
under
which Farmer Mac is second-loss guarantor for the last 10 percent
of the
securities was approximately $686.2
million;
|
| · |
Farmer
Mac received approximately $0.2 million in guarantee fees and
approximately $2.2 million in commitment fees attributable to
transactions with AgFirst;
|
| · |
AgFirst
received approximately $334,000 in servicing fees for acting as a
central
servicer in the Farmer Mac I program;
and
|
| · |
Farmer
Mac paid AgFirst $1,300 as reimbursement for marketing expenses related
to
Farmer Mac programs.
|
Zions
First National Bank or its affiliates (“Zions”) is Farmer Mac’s largest holder
of Class A voting common stock and a major holder of Class C non-voting common
stock. During 2005, the following transactions occurred between Farmer Mac
and
Zions:
| · |
Farmer
Mac purchased 68 loans having an aggregate principal amount of
approximately $24.5 million from Zions under the Farmer Mac I program,
representing approximately 22.3 percent of that program’s volume for the
year;
|
| · |
Farmer
Mac purchased 52 USDA-guaranteed portions having an aggregate principal
amount of approximately $11.1 million from Zions under the Farmer
Mac II
program, representing approximately 5.6 percent of that program’s
volume for the year;
|
| · |
Farmer
Mac sold approximately $46.7 million of Farmer Mac Guaranteed Securities
to Zions at no gain or loss;
|
| · |
The
aggregate outstanding notional principal amount of all interest rate
swap
transactions between Farmer Mac and Zions was approximately $225.6
million
as of December 31, 2005. As of December 31, 2005, Farmer Mac had
net
interest payable to Zions under those contracts of approximately
$2.2
million;
|
| · |
Farmer
Mac received approximately $2.4 million in guarantee fees on Farmer
Mac Guaranteed Securities whose underlying loans were swapped or
sold to
Farmer Mac by Zions;
|
| · |
Farmer
Mac paid Zions approximately $10,000 in underwriting and loan file
review
fees;
|
| · |
Farmer
Mac reimbursed Zions $7,000 for audit fees for review of
servicing;
|
| · |
Farmer
Mac reimbursed Zions $6,000 for litigation
expenses;
|
| · |
Zions
received approximately $1.5 million in servicing fees for acting
as a
central servicer in the Farmer Mac I program;
|
| · |
Zions
received approximately $40,000 in commissions for acting as dealer
with
respect to approximately $1.6 billion par value of Farmer Mac
discount notes; and
|
| · |
In
May 2005, Farmer Mac entered into a 3-year lease agreement with Zions
for
office space in Ames, Iowa, under which the annual rental expense
will be
$20,620. In 2005, Farmer Mac paid Zions $11,169 under that lease
agreement.
|
Performance
Graph
Farmer
Mac has three classes of Common Stock: Class A Voting Common Stock, Class
B
Voting Common Stock and Class C Non-Voting Common Stock (collectively, the
“Common Stock”). From January 1994 to June 1999, the Class A Voting Common Stock
and the Class C Non-Voting Common Stock traded on The Nasdaq Stock
Market.10
Since
June 1999, the Class A Voting Common Stock and the Class C Non-Voting Common
Stock have traded on the NYSE.11
As a
result of the limited market for Class B Voting Common Stock and the infrequency
of trades therein, the Class B Voting Common Stock does not trade on any
market or exchange nor is Farmer Mac aware of any publicly available quotations
or prices for Class B Voting Common Stock.
___________________
10 The
Class
A Voting Common Stock was traded on the Nasdaq SmallCap Market tier of The
Nasdaq Stock Market under the symbol FAMCA,
and
the
Class C Non-Voting Common Stock was traded on the Nasdaq National Market
tier of
The Nasdaq Stock Market under the symbol FAMCK.
11 The
Class
A Voting Common Stock is traded under the symbol AGM.A, and the Class C
Non-Voting Common Stock is traded under the symbol AGM.
The
following graph compares the performance of Farmer Mac’s Class A Voting
Common Stock and Class C Non-Voting Common Stock with the performance of the
New
York Stock Exchange Composite Index (“NYSE Comp”) and the Standard & Poor’s
500 Diversified Financials Index (“S&P Div Fin”) over the period from
December 31, 2000 to December 31, 2005. The graph assumes that $100
was invested on December 31, 2000 in each of: Farmer Mac’s Class A
Voting Common Stock; Farmer Mac’s Class C Non-Voting Common Stock; the NYSE
Comp; and the S&P Div Fin. (As a result of a change in New York Stock
Exchange procedures, the NYSE Comp has been manually recreated for years prior
to December 31, 2003.) The graph also assumes that all dividends were reinvested
into the same securities throughout the past five years.
Comparative
Total Return
(Class
A Voting Common Stock and Class C Non-Voting Common Stock vs.
Indices)
2000 2001 2002 2003 2004 2005
AGM 100
173
131
137
100
128
AGM.A 100
158
110
122
94
119
S&P 500
Div Fin
100
86
66
92
98
105
NYSE Comp 100
94
79
93 105
127
This
section shall not be deemed to be “soliciting material” or to be “filed” with
the SEC, and such section shall not be incorporated by reference into any of
Farmer Mac’s filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language contained
in
such filing (except to the extent Farmer Mac specifically incorporates this
section by reference into such filing).
The
By-Laws of the Corporation provide that the Audit Committee shall select the
Corporation’s independent auditors “annually in advance of the Annual Meeting of
Stockholders and [that selection] shall be submitted for ratification or
rejection at such meeting.” In addition, the Audit Committee reviews the scope
and results of the audits, the accounting principles being applied, and the
effectiveness of internal controls. The Audit Committee also ensures that
management fulfills its responsibilities in the preparation of the Corporation’s
financial statements. During the fiscal year ended December 31, 2005, the Audit
Committee, which is composed of Messrs. DeBriyn (Chairman), Kenny and Raines
and
Ms. Bartling, met fourteen times.
In
accordance with the By-Laws, the Audit Committee has unanimously selected and
recommended to the stockholders Deloitte & Touche LLP as the
Corporation’s independent auditors for the fiscal year ending December 31,
2006. This proposal is put before the stockholders as provided in the By-Laws
and in conformity with the current practice of seeking stockholder approval
of
the selection of independent auditors. The ratification of the appointment
of
Deloitte & Touche LLP as the Corporation’s independent public
accountants requires the affirmative vote of a majority of the shares
represented in person or by proxy at the Meeting and entitled to be voted.
Representatives
of Deloitte & Touche LLP are expected to attend the Meeting. They will
have the opportunity to make a statement if they desire to do so and will be
available to answer appropriate questions from stockholders present at the
Meeting.
The
Board
of Directors recommends a vote FOR the proposal to ratify the selection of
Deloitte & Touche LLP as independent auditors for the Federal
Agricultural Mortgage Corporation for 2006. Proxies solicited by the Board
of
Directors will be so voted unless holders of the Corporation’s Voting Common
Stock specify to the contrary on their proxies, or unless authority to vote
is
withheld.
Audit
Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $1,293,078 and $1,255,000
for professional services rendered for the audit of Farmer Mac’s annual
financial statements, the audit of management’s assessment of the effectiveness
of internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002, and the reviews of the financial statements included
in Farmer Mac’s quarterly reports on Form 10-Q for 2005 and 2004,
respectively.
Audit-Related
Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $84,447 and $0 for assurance and
related services that were reasonably related to the performance of the audit
of
Farmer Mac’s annual financial statements and the reviews of the financial
statements included in Farmer Mac’s quarterly reports on Form 10-Q in 2005 and
2004, respectively, and are not reported in “Audit
Fees.”
These
services were for the issuance of comfort letters, various accounting
consultations and other technical issues.
Tax
Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $28,250 and $27,000 for
professional services rendered for tax compliance, tax advice and tax planning
for 2005 and 2004, respectively. These services were for the preparation of
Farmer Mac’s federal tax returns.
All
Other Fees
Deloitte
& Touche LLP did not bill Farmer Mac for any other fees in 2005 or 2004
other than the audit and review fees, audit-related fees and tax fees referred
to above.
Audit
Committee Pre-Approval Policies
Pursuant
to the Audit Committee Charter adopted in February 2004 and reaffirmed in
February 2006 and consistent with SEC policies regarding auditor independence,
the Audit Committee considers and pre-approves, as appropriate, all auditing
and
permissible non-auditing services provided Farmer Mac’s independent auditor
prior to the engagement of the independent auditors with respect to such
services. One hundred percent of the services provided by Deloitte &
Touche LLP in 2004 and 2005 were pre-approved by the Audit
Committee.
Section
16(a) of the Securities Exchange Act of 1934 requires Farmer Mac’s officers and
directors, and persons who beneficially own more than ten percent of a
registered class of Farmer Mac’s equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the SEC. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish Farmer Mac with copies of all Forms 3, 4 and 5
filed.
Based
solely on Farmer Mac’s review of its corporate records, which include copies of
forms it has received, and written representations from certain reporting
persons that they were not required to file a Form 5 for specified fiscal years,
Farmer Mac believes that all of its officers, directors and beneficial owners
of
greater than ten percent of any class of equity securities complied with all
Section 16(a) filing requirements and timely filed all reports applicable to
them for transactions during 2005, except that Zions Bancorporation, the holder
of approximately 31 percent of Farmer Mac’s Class A Voting Common Stock and
approximately 10.5 percent of Farmer Mac’s Class C Non-Voting Common Stock,
filed a Form 4 with the SEC on March 10, 2005 reporting certain sales of Farmer
Mac Class C Non-Voting Common Stock that took place between February 16,
2005 and March 10, 2005.
To
our
knowledge, as of the date of this Proxy Statement, the following institutions
are the beneficial owners of either (i) 5 percent or more of the
outstanding shares of Farmer Mac’s Class A Voting Common Stock or Class B Voting
Common Stock, or (ii) 5 percent or more of the total number of outstanding
shares of Farmer Mac’s Voting Common Stock (both Class A and Class
B).
Number Percent
of Total
Percent
of Total
of Shares
Voting
Shares
Shares
Held
Name
and Address Beneficially
Owned
Outstanding*
By
Class**
|
AgFirst
Farm Credit Bank12
1401
Hampton Street
Columbia,
SC 29202
|
84,024
shares of Class B
Voting
Common Stock
|
5.49%
|
16.79%
|
|
AgriBank,
FCB
375
Jackson Street
St.
Paul, MN 55101
|
201,621
shares of Class B
Voting
Common Stock
|
13.17%
|
40.30%
|
|
CoBank,
ACB
5500
South Quebec Street
Greenwood
Village, CO 80111
|
62,980
shares of Class B
Voting
Common Stock
|
4.11%
|
12.59%
|
|
Farm
Credit Bank of Texas13
6210
Highway 290 East
Austin,
TX 78761
|
38,503
shares of Class B
Voting
Common Stock
|
2.52%
|
7.70%
|
|
U.S.
AgBank, FCB
245
North Waco
Wichita,
KS 67201
|
100,273
shares of Class B
Voting
Common Stock
|
6.55%
|
20.04%
|
|
Zions
First National Bank
One
South Main Street
Salt
Lake City, UT 84111
|
322,100
shares of Class A
Voting
Common Stock
|
21.04%
|
31.25%
|
_________________________________
* The
percentage is determined by dividing the number of shares of Class A or Class
B
Voting Common Stock owned by the total of the number of shares of Class A
and
Class B Voting Common Stock outstanding.
** The
percentage is determined by dividing the number of shares of the class of
Voting
Common Stock owned by the number of shares of that class of Voting Common
Stock
outstanding.
12 John
Dan
Raines, currently a member of the Board of Directors and a Class B Nominee,
is a
member of the board of directors of AgFirst Farm Credit Bank.
13 Ralph
W.
Cortese, currently a member of the Board of Directors and a Class B Nominee,
is
the chairman of the board of directors of Farm Credit Bank of
Texas.
The
Corporation will pay the cost of the Meeting and the costs of soliciting
proxies, including the cost of mailing the proxy material. The Corporation
has
retained Georgeson Shareholder Communications Inc. to act as the Corporation’s
proxy solicitation firm for a fee of approximately $5,000. In addition to
solicitation by mail, employees of Georgeson Shareholder Communications Inc.
may
solicit proxies by telephone, electronic mail, telegram or personal interview.
Brokerage houses, nominees, fiduciaries and other custodians will be requested
to forward solicitation material to the beneficial owners for shares held of
record by them and will be reimbursed for their reasonable expenses by the
Corporation.
In
addition to the scheduled items of business set forth in this Proxy Statement,
the enclosed proxy confers on the Proxy Committee discretionary authority to
vote the shares represented thereby in accordance with the members’ best
judgment with respect to all matters that may be brought before the Meeting
or
any adjournment or postponement thereof and matters incident to the Meeting.
The
Board of Directors does not know of any other matter that may properly be
presented for action at the Meeting. If any other matters should properly come
before the Meeting or any adjournment or postponement thereof, the Proxy
Committee named in the accompanying proxy intends to vote such proxy in accord
with its best judgment.
Upon
written request, Farmer Mac will furnish, without charge, to each person whose
proxy is being solicited a copy of its Annual Report on Form 10-K for the fiscal
year ended December 31, 2005, as filed with the SEC, including financial
statements thereto. Written requests should be directed to Jerome G. Oslick,
Corporate Secretary, Federal Agricultural Mortgage Corporation, 1133
Twenty-First Street, N.W., Suite 600, Washington, D.C. 20036. A copy of Farmer
Mac’s most recent Form 10-K is also available on the Corporation’s website,
www.farmermac.com, in the “Corporate Governance” portion of the “Investors”
section. Please note that all references to www.farmermac.com in this proxy
statement are inactive textual references only and that the information
contained on Farmer Mac’s website is not incorporated by reference into this
proxy statement.
_____________________________
The
giving of your proxy will not affect your right to vote your shares personally
if you do attend the Meeting. In any event, it is important that you complete,
sign and return the enclosed proxy card promptly to ensure that your shares
are
voted.
By
order
of the
Board
of
Directors,
/s/
Jerome G. Oslick
Jerome
G.
Oslick
Corporate
Secretary
April 28, 2006
Washington,
D.C.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
AUDIT
COMMITTEE CHARTER
This
Audit Committee Charter was adopted by the Board of Directors (the “Board”) of
the Federal Agricultural Mortgage Corporation (“Farmer Mac”) on February 5, 2004
and reaffirmed on February 2, 2006.
This
Charter is intended as a component of the flexible framework within which the
Board, assisted by its committees, directs the affairs of Farmer Mac. While
it
should be interpreted in the context of all applicable laws, regulations and
listing requirements, as well as in the context of Farmer Mac’s Federal Charter
and By Laws, it is not intended to establish by its own force any legally
binding obligations.
I.
PURPOSE
The
Audit
Committee (the “Committee”) is appointed by the Board to assist the Board in
fulfilling its responsibility to oversee management regarding: (i) the conduct
and integrity of Farmer
Mac’s
financial reporting to any governmental or regulatory body, the public or other
users thereof; (ii) Farmer
Mac’s
systems of internal accounting and financial and disclosure controls; (iii)
the
qualifications, engagement, compensation, independence and performance of
Farmer
Mac’s
independent auditor, who is registered with the Public Accounting Oversight
Board (the “Independent Auditor”), their conduct of the annual audit, and their
engagement for any other services; (iv) Farmer
Mac’s
legal
and regulatory compliance; (v) Farmer
Mac’s
codes
of ethics as established by management and the Board; and (vi) the preparation
of the audit committee report required by Securities and Exchange Commission
(“SEC”) rules to be included in Farmer
Mac’s
annual
proxy statement.
In
discharging its oversight role, the Committee is authorized: (i) to investigate
any matter that the Committee deems appropriate, with access to all books,
records, facilities and personnel of Farmer Mac; and (ii) to retain independent
counsel, auditors or other experts, with adequate funding provided by Farmer
Mac.
II.
COMMITTEE
MEMBERSHIP
The
Committee shall be comprised of not less than three members of the Board, each
of whom shall be determined by the Board to be “independent” in accordance with
applicable rules of the SEC and shall meet the independence and financial
experience requirements of the New York Stock Exchange (the “NYSE”). In
addition, at least one member shall be an “audit committee financial expert” as
such term is defined under applicable SEC and NYSE rules. No member of the
Committee may serve on the audit committee of more than three public companies,
including Farmer Mac, unless the Board has determined that such simultaneous
service would not impair the ability of such member to effectively serve on
the
Committee. Such determination shall be disclosed in the annual proxy
statement.
III.
KEY
RESPONSIBILITIES
The
Committee shall make regular reports to the Board.
The
Committee shall:
| 1. |
Have
the sole authority to retain (subject to ratification by the stockholders
of Farmer Mac), evaluate, compensate and oversee the work of the
Independent Auditor and, where appropriate, dismiss the Independent
Auditor; and resolve any disagreements between management and the
Independent Auditor regarding financial reporting. The Independent
Auditor
shall report directly to the Committee.
|
| 2. |
Consider
and pre-approve, as appropriate, all auditing and non-auditing services
provided by the Independent Auditor, and ensure that approvals are
disclosed as appropriate in Farmer Mac’s periodic public
filings.14
|
| 3. |
Review
Farmer Mac’s financial statements, including major issues regarding
accounting and auditing principles and practices as well as the adequacy
of internal controls that could significantly affect Farmer Mac’s
financial statements and, prior to public release, reviewing with
management and the Independent Auditor Farmer Mac’s annual and quarterly
financial statements to be filed with the SEC, including (a) Farmer
Mac’s
disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and (b) any certifications regarding
the financial statements or Farmer Mac’s internal accounting and financial
controls and procedures and disclosure controls or procedures filed
with
SEC by Farmer Mac’s senior executive and financial officers.
|
| 4. |
Consider
and review with management, including the Chief Financial Officer
and the
Vice President - Controller, the Independent Auditor and the internal
auditor (i) any significant findings during the year, including the
status
of previous audit recommendations, (ii) any accounting adjustments
that
were noted or proposed by the auditors but were “passed” (as immaterial or
otherwise), (iii) any communications between the audit team and the
audit
firm’s national office respecting auditing or accounting issues presented
by the engagement and (iv) any “management” or “internal control” letter
issued, or proposed to be issued, by the Independent Auditor to Farmer
Mac
and review major changes to Farmer Mac’s auditing and accounting
principles and practices as suggested by the Independent Auditor,
internal
auditors or management.
|
| 5. |
Consider
and review with management, including the Chief Financial Officer
and the
Vice President - Controller, and the Independent Auditor any significant
risks or exposures and assess the steps management has taken to minimize
such risks. Discuss with management, including the Chief Financial
Officer
and the Vice President - Controller, and the Independent Auditor
and
oversee Farmer Mac’s underlying policies with respect to risk assessment
and risk management.
|
| 6. |
Establish
and oversee the maintenance of procedures for the receipt, retention
and
treatment of complaints received by Farmer Mac regarding accounting,
internal accounting controls, or auditing matters, and the confidential,
anonymous submissions by employees of concerns regarding questionable
accounting or auditing matters.
|
| 7. |
Review
and concur in the appointment, reassignment, replacement, compensation
or
dismissal of the Chief Financial Officer and the Vice President -
Controller.
|
| 8. |
Review
periodically with management the provisions of any code of business
conduct and ethics (including Farmer Mac’s policies and procedures
concerning trading in Farmer Mac securities and use in trading of
proprietary or confidential information) applicable to directors
and
senior officers (including financial officers), including any waivers
sought under such code; any waiver to any executive officer or director
granted by the Committee shall be reported by the Committee to the
Board.
|
| 9. |
Review
and discuss with management and the Independent Auditor (i) all critical
accounting policies and practices used by Farmer Mac; (ii) any significant
changes in Farmer Mac accounting policies; (iii) any material alternative
accounting treatments within GAAP that have been discussed with
management, including the ramifications of the use of the alternative
treatments and the treatment preferred by the accounting firm; and
(iv)
any accounting and financial reporting proposals that may have a
significant impact on Farmer Mac’s financial reports.
|
| 10. |
(a)
Receive from the Independent Auditor, prior to the Independent Auditor’s
report on the published financial statements, a special report which
shall, among other things, point out and describe each material item
affecting the financial statements of Farmer Mac which might in the
opinion of the Independent Auditor receive, under generally accepted
accounting principles, treatment varying from that proposed for such
statements; (b) decide, in the Committee's discretion, upon the
treatment to be accorded such items; (c) take such other action in
respect of the special report as the Committee may deem appropriate;
and
(d) transmit to the Compensation Committee a copy of the special
report,
together with the Committee’s
decision.
|
| 11. |
Set
clear hiring policies for employees or former employees of the Independent
Auditor.
|
| 12. |
Review
the Independent Auditor’s proposal letter, review the planning of the
audit and approve the fees to be paid to the Independent Auditor.
In
addition to assuring the regular rotation of the lead audit partner
as
required by law, at least every 3 years, the Committee shall consider
the
rotation of the Independent Auditor.
|
| 13. |
Receive
periodic reports from the Independent Auditor regarding the Independent
Auditor’s independence, discuss such reports with the Independent Auditor,
and, if so determined by the Committee, recommend that the Board
take
appropriate action to satisfy itself of the independence of the
Independent Auditor.
|
| 14. |
Have
the ultimate authority to retain, evaluate, compensate and oversee
the
work of the internal auditor and, where appropriate, dismiss the
internal
auditor. The internal auditor shall report directly to the
Committee.
|
| 15. |
Review
with the Independent Auditor and the internal auditor the coordination
of
audit efforts to assure completeness of coverage, reduction of redundant
efforts, and the effective use of audit
resources.
|
| 16. |
Review
the significant reports to management prepared by the internal auditor
and
management’s responses.
|
| 17. |
At
least annually, obtain and review a report by the Independent Auditor
describing: (i) the firm’s internal quality-control procedures; (ii) any
material issues raised by the most recent internal quality-control
review
of the firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, regarding
one
or more independent audits carried out by the firm, and any steps
taken to
deal with any such issues; and (iii) all relationships between the
Independent Auditor and Farmer Mac.
|
| 18. |
Review
and discuss with the Independent Auditor the matters required to
be
discussed with the Independent Auditor by (i) Statement of Auditing
Standards No. 61 including the auditor’s responsibility under generally
accepted auditing standards, the significant accounting policies
used by
Farmer Mac, accounting estimates used by the Company and the process
used
by management in formulating them, any consultation with other accountants
and any major issues discussed with management prior to its retention,
(ii) Statement of Auditing Standards No. 90 including whether Company
accounting principles as applied are conservative, moderate, or aggressive
from the perspective of income, asset, and liability recognition,
and
whether or not those principles reflect common or minority practices
and
(iii) Statement of Auditing Standards No. 100 including the review of
the interim financial information of the Company and any material
modifications that need to be made to the interim financial information
for it to conform with GAAP.
|
| 19. |
Review
with the Independent Auditor any problems or difficulties the Independent
Auditor may have encountered and any management letter provided by
the
Independent Auditor and Farmer Mac’s response to that letter. Such review
should include:
|
|
a.
|
Any
difficulties encountered in the course of the audit work, including
any
restrictions on the scope of activities or access to required information.
|
|
b.
|
Any
changes required in the planned scope of the internal audit.
|
|
c.
|
The
responsibilities and budget for the internal
audit.
|
| 20. |
Prepare
the report required by the rules of the Securities and Exchange Commission
to be included in Farmer Mac’s annual proxy
statement.
|
| 21. |
Review
with Farmer Mac’s General Counsel legal matters that may have a material
impact on the financial statements, Farmer Mac’s compliance policies and
any material reports or inquiries received from regulators or governmental
agencies.
|
| 22. |
Meet
periodically with senior financial management, the Independent Auditor
and
the internal auditors in separate executive sessions.
|
| 23. |
Prepare
a letter for inclusion in the proxy statement that describes the
Committee’s composition and responsibilities, and how they were
discharged.
|
| 24. |
Discuss
with management and the Independent Auditor, as appropriate, earnings
press releases and financial information and earnings guidance provided
to
analysts and to rating agencies.
|
| 25. |
Meet
four times per year or more frequently as circumstances
require.
|
| 26. |
Conduct
an annual self-evaluation of the performance of the Committee, including
its effectiveness and compliance with this
Charter.
|
| 27. |
Review
and reassess the adequacy of this Charter annually and recommend
any
proposed changes to the Board for
approval.
|
While
the
Committee has the responsibilities and powers set forth in this Charter, it
is
not the duty of the Committee to plan or conduct audits or to determine that
Farmer Mac’s financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is the
responsibility of management and the Independent Auditor. The Committee
recognizes that Farmer Mac’s management and the Independent Auditor have more
time, knowledge and detailed information about Farmer Mac than do Committee
members. Consequently, in carrying out its oversight responsibilities, the
Committee is not providing any expert or special assurance as to Farmer Mac’s
financial statements or any professional certification as to the Independent
Auditor’s work.
1 The
Committee may delegate the authority to grant pre-approvals to one or more
members of the Committee, whose decisions must be presented to the full
Committee at its scheduled meetings.
ANNUAL
MEETING OF STOCKHOLDERS
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
CLASS
A
COMMON STOCK
June
1,
2006
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
↓
Please
detach along perforated line and mail in the envelope provided. ↓
------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
1. Election
of Directors:
NOMINEES:
[
] FOR
ALL
NOMINEES [
]
Dennis L. Brack
[ ] Dennis A. Everson
[
] WITHHOLD
AUTHORITY
[
]
Mitchell A. Johnson
FOR
ALL
NOMINEES
[
]
Timothy F. Kenny
[
]
Charles E. Kruse
[
] FOR
ALL
EXCEPT
(See
instructions below)
The
Board of Directors recommends a vote “FOR ALL NOMINEES.”
INSTRUCTION:
To
withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown
here:
[x]
If
you do
withhold authority to vote for any nominee(s), your votes will be allocated
equally among the remaining nominees unless you specify a different allocation
in the space above.
|
2.
|
Proposal
to approve the appointment of Deloitte & Touche LLP as independent
auditors for the Corporation for the fiscal year ending December
31,
2006.
|
FOR AGAINST ABSTAIN
[
]
[ ]
[
]
The
Board of Directors recommends a vote “FOR” proposal 2.
To
change
the address on your account, please check the box at right and indicate your
new
address in the address space above. Please note that changes to the registered
name(s) on the account may not be submitted via this method. [ ]
Signature
of Stockholder ___________________________________ Date:
____________
Signature
of Stockholder ___________________________________ Date:
____________
|
Note:
|
Please
sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as
such. If the signer is a corporation, please sign full corporate
name by
duly authorized officer, giving full title as such. If signer is
a
partnership, please sign in partnership name by authorized
person.
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
PROXY
FOR
ANNUAL MEETING OF STOCKHOLDERS, JUNE 1, 2006
This
Proxy is Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Henry D. Edelman, Jerome G. Oslick, and
Timothy L. Buzby, and any of them, as Proxies for the undersigned and to
vote all of the shares of Class A Voting Common Stock of the FEDERAL
AGRICULTURAL MORTGAGE CORPORATION (the “Corporation”) that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Corporation
to be
held on June 1, 2006, and any and all adjournments thereof.
The
Board of Directors unanimously recommends a vote
FOR
the election of all nominees and FOR proposal 2.
In
their discretion, the Proxies are authorized to vote on such other matters
as
may properly come before the meeting. THIS PROXY IS SOLICITED ON BEHALF OF
THE
BOARD OF DIRECTORS and, when properly executed, will be voted as instructed
herein. If no instructions are given, this proxy will be voted FOR the election
of all nominees and FOR proposal 2.
PLEASE
VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
ANNUAL
MEETING OF STOCKHOLDERS
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
CLASS
B
COMMON STOCK
June
1,
2006
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
↓
Please
detach along perforated line and mail in the envelope provided. ↓
------------------------------------------------------------------------------------------------------------------------
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
1. Election
of Directors:
NOMINEES:
[
] FOR
ALL
NOMINEES
[
] Ralph
W. “Buddy” Cortese
[
] Paul
A. DeBriyn
[
] WITHHOLD
AUTHORITY
[
]
Ernest M. Hodges
FOR
ALL
NOMINEES
[
] John
G. Nelson, III
[
] John
Dan Raines
[
] FOR
ALL
EXCEPT
(See
instructions below)
The
Board of Directors recommends a vote “FOR ALL NOMINEES.”
INSTRUCTION:
To
withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown
here:
[x]
If
you do
withhold authority to vote for any nominee(s), your votes will be allocated
equally among the remaining nominees unless you specify a different allocation
in the space above.
|
2.
|
Proposal
to approve the appointment of Deloitte & Touche LLP as independent
auditors for the Corporation for the fiscal year ending December
31,
2006.
|
FOR AGAINST ABSTAIN
[
] [
]
[
]
The
Board of Directors recommends a vote “FOR” proposal 2.
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. [ ]
Signature
of Stockholder ___________________________________ Date:
____________
Signature
of Stockholder ___________________________________ Date:
____________
|
Note:
|
Please
sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as
such. If the signer is a corporation, please sign full corporate
name by
duly authorized officer, giving full title as such. If signer is
a
partnership, please sign in partnership name by authorized
person.
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
PROXY
FOR
ANNUAL MEETING OF STOCKHOLDERS, JUNE 1, 2006
This
Proxy is Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Henry D. Edelman, Jerome G. Oslick, and
Timothy L. Buzby, and any of them, as Proxies for the undersigned and to
vote all of the shares of Class B Voting Common Stock of the FEDERAL
AGRICULTURAL MORTGAGE CORPORATION (the “Corporation”) that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Corporation
to be
held on June 1, 2006, and any and all adjournments thereof.
The
Board of Directors unanimously recommends a vote
FOR
the election of all nominees and FOR proposal 2.
In
their discretion, the Proxies are authorized to vote on such other matters
as
may properly come before the meeting. THIS PROXY IS SOLICITED ON BEHALF OF
THE
BOARD OF DIRECTORS and, when properly executed, will be voted as instructed
herein. If no instructions are given, this proxy will be voted FOR the election
of all nominees and FOR proposal 2.
PLEASE
VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.