Source: https://www.federalregister.gov/documents/2006/01/11/06-240/organization-termination-of-system-institution-status
Timestamp: 2018-04-20 13:01:34
Document Index: 193327566

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A Proposed Rule by the Farm Credit Administration on 01/11/2006
Please send your comments to us by March 13, 2006.
71 FR 1704
1704-1718 (15 pages)
Section 611.1215—Communications
https://www.federalregister.gov/d/06-240 https://www.federalregister.gov/d/06-240
This proposed rule would amend our regulations that allow a Farm Credit System (FCS, Farm Credit, or System) bank or association to terminate its FCS charter and become a financial institution under another Federal or State chartering authority. With these amendments, we propose to update the existing regulations to clarify our requirements, separate our review of stockholder disclosure information from our review of the termination itself, improve communications, strengthen the role of an institution's directors in the termination process, and make other changes.
Comments may be sent by electronic mail to “reg-comm@fca.gov,” through the Pending Regulations section of our Web site at http://www.fca.gov or through the Government-wide http://www.regulations.gov portal. You may also send written comments to Gary K. Van Meter, Deputy Director, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090 or by fax to (703) 734-5784.
Dale Aultman, Senior Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4414; TTY (703) 883-4434; or
1. Update the termination procedure for FCS banks and associations under sections 7.10 and 7.11 of the Farm Credit Act of 1971, as amended (Act);
2. Ensure that the FCA, an institution's board of directors, and the institution's equity holders have sufficient time and opportunities to be fully informed about a termination proposal before deciding whether to approve the termination;
3. Provide that we may require a terminating institution to obtain independent analyses and rulings regarding a proposed termination;
4. Ensure that a significant proportion of stockholders are engaged in the termination process; and
5. Clarify existing requirements and ensure that stockholder disclosure materials are informative and easy to understand.
The Agricultural Credit Act of 1987, among other things, amended the Act expressly to permit System institutions to terminate their Farm Credit status and become another type of financial institution. We first issued regulations governing terminations in 1991. At that time, the regulations covered only “small” FCS associations. Our current termination rule, published on April 12, 2002, reflected amendments to cover all associations and banks.[1] Since 1991, no FCS bank or association has terminated its charter under FCA regulations. However, in 2004 one System association adopted a commencement resolution to terminate its Farm Credit charter and subsequently be acquired by the subsidiary of a non-System bank. Ultimately, the association decided not to be acquired and not to terminate Farm Credit status. Although the association never submitted a termination application to us, the experience presented us with an actual event to evaluate the effectiveness and efficiency of our existing termination regulations. We found that, while the existing regulations provide the basic requirements to comply with the Act and effect a termination, certain Start Printed Page 1705revisions to the regulations would ensure a more orderly process for a FCS bank or association to terminate its charter.
The following outlines several new provisions and major revisions we propose to make to our regulations:
1. Proposed new §§ 611.1230 and 611.1247 separate our review of a terminating institution's disclosure information, as required by section 7.11 of the Act, from our approval of the termination itself, as set forth in section 7.10 of the Act. Our review of the disclosure information will precede the submission of the information to equity holders, as in the existing regulation, and we will begin the statutory period on the date the disclosure information is complete, as determined by us. We propose to review and approve or disapprove the termination itself after the equity holders have voted to approve the termination.
2. Proposed new §§ 611.1215 and 611.1216 give a terminating institution more flexibility in communicating with stockholders and the public during the termination process, and also provides that we may require certain termination-related documents to be posted on our Web site or the institution's Web site.
3. Proposed new § 611.1211 provides that we may require a terminating institution to obtain independent analyses of and rulings on matters related to the proposed termination, as well as to hold convenient informational meetings for stockholders.
4. Proposed new § 611.1218 strengthens protections for directors to consult independent legal counsel and allow public or private expressions of their opinions about the termination. In addition, proposed § 611.1235 provides that the board of directors of a terminating institution must again vote to approve the proposed termination before mailing the plan of termination, to ensure that the board continues to support the termination.
5. Proposed amendments to § 611.1240 ensure sufficient equity holder representation in voting processes by imposing a quorum requirement of 30 percent of voting stockholders at the stockholder meetings for the termination vote.
6. Proposed new § 611.1247 eliminates potentially confusing criteria pertaining to reasons why we may disapprove a termination application.
7. Throughout the regulations, we propose to add language requiring disclosure of information related to any planned or contemplated corporate restructuring, such as the merger of the successor institution with, or its acquisition by, another entity.
8. Throughout the regulations, we propose to remove outdated references to the Financial Assistance Corporation (FAC), which was created in 1988 as part of the Federal assistance to the System. That assistance has now been repaid.
We note that we are not proposing substantive amendments to the existing regulations that pertain to the applicability of this subpart, dissenting stockholders rights, repayment of obligations, stockholder reconsiderations, retirement of investments in other System institutions, loan refinancing by borrowers, and continuation of borrower rights.
These proposals are more fully described below.
We do not propose any changes to this section.
We propose to add definitions of “days” to mean calendar days and “business days” to mean days on which the FCA is open for business.
We also propose to define “equity holders” to mean holders of stock, participation certificates, or other equities such as allocated equities.
We propose to require a terminating institution to send us a draft of its notice to equity holders before the notice is sent to equity holders. If we do not request modifications to the draft notice within 2 business days of receiving it, the terminating institution may mail the notice to its equity holders. Our purpose in requiring prior review is to ensure that the notice complies with plain language principles and contains the information required. We propose changing the existing heading to the above heading to better describe the requirements of this section.
We propose to require the terminating institution to place the advance notice to equity holders on its Web site and to send us copies of all contracts and agreements related to the termination.
We also propose other minor and nonsubstantive changes to the language in this section.
We propose a new section with requirements that we may impose regarding special assessments, analyses, rulings, or studies. A termination raises issues that the FCA does not routinely address, such as how to assess the value the institution and the tax implications of terminating. If we determine that expert analyses, studies, or rulings are needed, we will require a terminating institution to engage experts acceptable to us to perform such work. We may require that such analyses, studies, or rulings, or summaries, be provided to equity holders as part of the plan of termination, or separately.
We also propose that we may require a terminating institution to hold regional or local informational meetings for equity holders during the time period after they receive notice of the proposed termination and before the stockholder vote on termination. These meetings will give equity holders an opportunity to ask questions directly to management of the institution at an early point in the termination process, as well as giving management an opportunity to explain the termination plan and procedure. The meetings would be subject to the plain language requirements of proposed § 611.1217(b) regarding balanced statements of anticipated benefits and potential disadvantages.
We note that we may hold public meetings anytime after your notice to equity holders is sent, in order to obtain the perspective of interested parties.
We propose a new section on “Communications with the public and equity holders.” This section would permit a terminating institution to communicate with the public and with its equity holders during the termination process, provided that written communications are filed with the FCA on the date of first use. Such written communications must contain a legend urging equity holders to read the information statement that contains important information about the termination. If we believe any communications are inaccurate or misleading, we will require corrections to be made. We may also require a terminating institution to file written communications made by other participants in the termination and related transactions, such as a merger partner. The regulation contains a safe harbor for unintentional failures to make timely filings with the FCA and provides that communications that Start Printed Page 1706contain no new information from previously filed communications do not need to be filed.
We believe that this proposed regulation on communications will give a timely, reasonable and flexible accommodation to terminating institutions as well as comply with section 7.11(a)(1) of the Act. That statutory provision requires FCA review of information on the termination that is to be distributed to equity holders.
The provisions in existing § 611.1215 would be moved to § 611.1219, as described below.
In proposed new § 611.1216, we provide that we may post on our Web site, or require a terminating institution to post on its Web site, documents related to the termination. We believe that disclosure of the documents will, at an early stage in the termination process, enable equity holders and others to understand the structure and ramifications of the plan of termination. We would expect the institution to post the board of directors' resolution on its Web site to commence the termination process in addition to the notice to equity holders. Also, we may require the posting of other documents such as charter documents of the successor institution or contracts entered into with a merger or acquisition partner. In addition, we may require the posting of the results of any special assessments, analyses, studies, and rulings. It is not our intention to require the posting of confidential information. The proposed rule provides that the terminating institution may request us to keep specific documents confidential.
We propose to move the plain language requirements in existing § 611.1223(a) to new § 611.1217 and to apply them to all communications with equity holders required by these regulations, not just to the information statement. To help ensure a balanced presentation of the information, we also provide that communications describing the anticipated benefits of the proposed termination should also give similar prominence to the potential disadvantages of the termination.
In this new section, we emphasize the importance of directors in the termination process, not only when they take action as the whole board but also when they act individually. First, we provide that directors may not be prohibited by confidentiality agreements or otherwise from publicly or privately commenting on a termination proposal and related transactions. We do not believe such prohibitions would be in the best interests of the equity holders because they prevent directors from consulting with the persons they represent and prevent equity holders from learning the opinions of those who should have the most detailed knowledgeof the proposal. We note that this provision does not permit directors to reveal trade secrets or confidential financial information that they would be prohibited from revealing in the absence of a confidentiality agreement or similar document.
We further propose to provide that one or more directors have the right to obtain legal and financial advice on a proposed or contemplated termination, and that the institution must pay reasonable expenses. This will ensure that each director has the opportunity to obtain advice from parties who have no conflict of interest in the proposed transaction.
We propose to move existing § 611.1215 to this new § 611.1219 with a few revisions. One revision is to delete a reference to our preliminary approval of the termination, because we are proposing to eliminate the preliminary approval provision. We also propose to prohibit the institution and any director, officer, employee, and agent from making any untrue or misleading statement of a material fact, or failing to disclose any material fact to the FCA about the proposed termination and any related transactions. This prohibition already applies to statements made to or withheld from current or prospective equity holders.
Proposed § 611.1220 is an expansion of the requirement in existing § 611.1220(a) for the board to adopt a termination resolution. We propose to require that adoption of the resolution must occur no more than 1 week before submitting the plan of termination to us and to specify that the resolution must authorize submission of the plan of termination to us and to voting stockholders, then (if approved) submission of the application for termination to us and submission of an application to a Federal or State authority to charter the successor institution.
Proposed § 611.1221 revises the existing regulation to provide that a terminating institution may not file a plan of termination until at least 30 days after the institution has sent the notice to equity holders under § 611.1210(b). In addition, we propose to move to this section a requirement from existing § 611.1220(b) regarding the number of copies of the plan to submit to the FCA; to move existing § 611.1220(c) to § 611.1223(d); and to move provisions in existing § 611.1222 to this section.
We also propose to remove references to the FAC because all outstanding FAC debt has been repaid.
We propose to rename this section “Plan of termination—contents” and to remove references to “Information Statement” because the latter term is not found in section 7.11 of the Act. Instead, we propose to refer to the material to be submitted to equity holders as the plan of termination.
As described above, we propose moving the “plain language” requirements in existing § 611.1223(a) to new § 611.1217 and applying them more broadly, and to move the requirement to update information in existing § 611.1220(c) to paragraph (d) of this section. We propose to add several requirements to the contents of the information statement.
Proposed paragraph (b)(7) would require a terminating institution to explain in the summary to the plan of termination whether the successor institution expects to engage in a corporate restructuring in the 18 months following termination.
Proposed paragraph (c)(7) would require a terminating institution to include copies of contracts and agreements in connection with the termination and operations of the successor institution. The FCA may permit or require a summary of the documents instead of copies.
Proposed paragraph (c)(13) would contain the requirement of existing § 611.1223(d)(9) to disclose employment, retirement, and severance agreements, and would also require disclosure of such agreements with any entity that may merge with or acquire the successor institution.
Proposed paragraph (c)(26) would provide that we may require a terminating institution to disclose assessments, analyses, studies, or Start Printed Page 1707rulings that we require the institution to obtain under proposed § 611.1211.
Proposed paragraph (c)(29) would require the terminating institution to include statements by directors that desire to make individual or group statements regarding the proposed termination and related transactions. We believe that directors, especially directors of a cooperative, are entitled to share both supporting and opposing views on such an important matter with equity holders and to have those views set forth in the plan of termination without prior approval or constraint by the board. However, as with all information in the information statement, statements by directors must be reasonable in length and free of material misstatements or omissions. We note that the director certification requirement in new paragraph (c)(28) (existing § 611.1223(d)(24)) would not be deemed to be certifications of the opinions in these statements by directors.
Proposed paragraph (c)(30) would require the terminating institution to include a copy of the reaffirmation resolution, a proposed new requirement set forth in proposed § 611.1235, described below. The terminating institution would add this to the plan of termination after the FCA's review period, since we would require the institution to adopt it just before mailing the plan to equity holders.
Proposed paragraph (d) contains the requirements in existing §§ 611.1220(c) and 611.1223(d)(20).
Existing § 611.1230 provides for our “preliminary approval” of the termination application, which combines our approval of the information statement to be submitted to equity holders with our preliminary approval of the termination itself. The regulation also sets forth certain conditions of final approval of the termination application—i.e., approval of the termination itself—and contains a reservation of our right to disapprove the termination if, in addition to any other reason for disapproval, we determine that the termination would have a material adverse impact on the remaining System institutions to fulfill their statutory purpose.
We propose to revise this section to pertain only to our approval of the plan of termination as described in proposed § 611.1222. As provided in section 7.11(a)(1) of the Act, we state that the terminating institution may submit its plan to its equity holders if we take no action on the plan within 60 days of receiving a complete plan of termination. We will inform the institution in writing of the date on which we determine the application complete.
We also provide that our approval of the plan of termination is not our approval of the termination itself and, the plan may be subject to any condition we impose. As with all proposed corporate restructurings, we may reject a plan of termination that we determine is incomplete.
We propose this new section regarding distribution of the plan of termination. In paragraph (a) we propose requiring your board of directors to adopt another resolution approving the termination, in order to ensure the continuing support of the board for the termination. In addition, we propose to move existing § 611.1240(c) to this section and revise it to require the terminating institution to provide the plan of termination to equity holders at least 45 days (instead of the existing regulation's 30 days) before the stockholder vote will occur. This will ensure that the voting stockholders have ample time to read and evaluate the proposal.
Except for existing paragraph (c), which we propose to move to § 611.1235, we propose to retain existing § 611.1240 with the following revisions. In paragraph (a), we propose to require the stockholder vote to take place at least 60 days after we have approved the plan of termination (or 60 days after the end of our review period) instead of no more than 60 days after. We propose this change to ensure that voters have enough time to review and evaluate the proposal. In paragraph (c), we propose a quorum requirement of 30 percent of voting stockholders present (in person or by proxy) at the meeting. This would not require 30 percent of voting stockholders to cast a vote but would require their presence (in person or by proxy) at the meeting. We are making this proposal because we believe an issue of such importance to all equity holders should be deliberated upon by a significant number of the voting stockholders, regardless of the number who ultimately vote. In paragraph (d), we restate the requirement in section 7.10(a)(6) of the Act that a majority vote by stockholders voting in person or by proxy is needed to approve the termination.
We also propose to add a reference in new paragraph (e) to § 611.340, to clarify that the voting security regulation applies to this stockholder vote as well as § 611.330, which covers confidentiality in voting.
In this section, we propose adding a quorum requirement of at least 30 percent of voting stockholders in paragraph (b) for the same reasons we propose a quorum requirement for the original vote.
Proposed new § 611.1246 provides that, within 90 days of notifying us that voting stockholders have approved the plan of termination, a terminating institution may submit a termination application containing the following:
The board resolutions required by §§ 611.1220 and 611.1235,
A board certification that there has been no material change to the information in the plan of termination or information statement since FCA approval of the plan of termination, and that there have been no subsequent events that could have a material impact on the information in the information statement or the termination, and
Any additional information that is required by the termination regulations, that we request, or that the terminating institution's board wishes to submit.
New § 611.1247 would provide for a separate approval of the termination application. As noted above, we are proposing to review the termination application after our review of the plan of termination required by section 7.11(a)(1) of the Act and after a stockholder vote approving the termination. We have determined that a clear separation of the two approvals will ensure the proper level of scrutiny as to the merits of the proposal apart from the adequacy of the disclosure materials. A termination is an extraordinary event with numerous, complicated ramifications that are of broad interest to equity holders, other System institutions, lawmakers and the public. The FCA's approvals require a significant devotion of time by FCA staff and involve issues not routinely addressed by staff. A separate termination application review would also allow sufficient opportunities to schedule and hold public meetings where appropriate.Start Printed Page 1708
In this new section, paragraph (a) states that, after we receive the termination application, we will review it and either approve or disapprove the termination. Paragraph (b) states that we will disapprove the termination if we determine that there are one or more appropriate reasons for disapproval, consistent with our statutory and regulatory authorities. We propose to delete existing § 611.1230(b), which provides that we may disapprove a termination if we determine it would have a “material adverse effect on the ability of the remaining System institutions to fulfill their statutory purpose.” We are proposing this deletion because of our experience last fall when a System association took some initial steps to terminate. Some members of the public were confused by this provision and incorrectly assumed it would be the only reason for us to disapprove a termination. While we are not ruling out disapproval of a termination based on its “material adverse impact” on the remaining System institutions, we may disapprove a termination for any appropriate reason.
There is a possibility that we could approve a plan of termination and stockholders vote in favor of a termination, and then we disapprove the termination because of the results of special studies, analyses, rulings, meetings, or for any other reason that we deem as appropriate given the specific circumstances.
Paragraph (c) sets forth conditions required for our approval of the termination, including the following:
(1) A stockholder vote and a reconsideration vote, if any, approving the termination,
(2) Submission to FCA of executed copies of all documents required for the plan of termination;
(3) The terminating institution has paid or provided for payment of debts and retirement of equities,
(4) A charter for the successor institution has been granted a Federal or State authority,
(5) The terminating institution has made the escrow payments required by § 611.1255(c), and
(6) The terminating institution has fulfilled any condition of termination we have imposed.
In proposed paragraph (d), we provide that, when we approve a termination, we will also determine an effective date for the termination. Such date could be no earlier than the last to occur of the following events: fulfillment of the conditions in paragraph (c) of this section, 90 days after we received the termination application, 15 days after any reconsideration vote, and the terminating institution's proposed termination date.
We propose several parallel revisions to these sections, which explain how to calculate the preliminary exit fee estimate that must be included in the plan of termination, and how to calculate the final exit fee. We add expenditures for tax services, studies, and equity holder meetings as examples of expenses an institution may incur that are related to a termination in §§ 611.1250(a)(4)(i) and 611.1255(a)(4)(i) pertaining to associations, and in §§ 611.1250(b)(5)(i)(A) and 611.1255(b)(5)(i)(A) pertaining to banks. In § 611.1250(c), which contains the 3-year look-back adjustment provision, we expressly include real property and servicing rights as assets that may be undervalued, overvalued, or not recorded on the institution's books.
We also propose expressly to require a terminating institution to include in assets any tax benefit that has arisen or will arise due to the termination. We already have discretionary authority under existing § 611.1250(c)(1)(vi) to require such an adjustment,[2] but we have decided to apply it to all terminations. This requirement will balance existing and continuing provisions allowing for the deduction of tax expenses, due to termination, from assets in the preliminary and final exit fee calculations. We note that States have a variety of tax expenses and benefits, and many System institutions operate in more than one State. We are seeking comment on whether we should limit the tax expense deductions from, and tax benefits to, assets in the exit fee calculation to Federal taxes. We are also interested in whether we should more narrowly draw the tax provision so that it includes only income taxes, or unavoidable tax expenses, or both.
In § 611.1250(c), we propose to rename the subsection “Adjustments” and to add the phrase “account balances” to paragraph (c)(1) to clarify that we may adjust any balance sheet “assets” whether or not a specific related “transaction” has occurred within the previous 3 years. We also propose to replace references to “tax liability” with the term “tax expense” to clarify that we intend to refer to both current and deferred taxes.
In paragraphs (a) and (b) of both sections, we propose to remove outdated references to the FAC.
Finally, in § 611.1255(a)(4)(i), regarding a terminating association's final exit fee calculation, we remove language that sets a 12-month timeframe for which termination expenses can be added to the calculation. This change will make the calculation parallel to the existing calculation for terminating banks.
In this section, we propose to remove outdated references to the FAC.
We do not propose any amendments to this section.
End List of Subjects Start Printed Page 1709
Dissenting stockholders— rights.
(f) Special class of stock. Notwithstanding any requirements to Start Printed Page 1710the contrary in § 615.5230(b) of this chapter, you may adopt bylaws providing for the issuance of a special class of stock and participation certificates between the date of adoption of a commencement resolution and the termination date. Your voting stockholders must approve the special class before you adopt the commencement resolution. The equities must comply with section 4.3A of the Act and be identical in all respects to existing classes of equities that are entitled to the residual assets of the institution in a liquidation, except for the value a holder will receive in a termination. In a termination, the holder of the special class of stock receives value equal to the lower of either par (or face) value, or the value calculated under § 611.1280(c) and (d). A holder must have the same right to vote (if the equity is held on the voting record date) and to dissent as holders of similar equities issued before the commencement resolution. If the termination does not occur, the special classes of stock and participation certificates must automatically convert into shares of the otherwise identical equities.
(a) Statements by directors. Directors may not be prohibited by confidentiality agreements or otherwise from publicly or privately commenting orally or in writing on the termination proposal and related matters. Start Printed Page 1711
(b) Directors' right to obtain independent legal advice. One or more directors of a terminating institution or an institution that is considering terminating have the right to obtain independent legal and financial advice regarding the proposed termination and related transactions. The institution must pay for such advice and related expenses as are reasonable in light of the circumstances.
(a) Submission to us of a plan of termination and other required submissions that comply with § 611.1222; and
(ii) If we have assigned the chartered territory you serve to another System institution before the plan of termination is mailed to equity holders, or if another System institution is already chartered to make the same type of loans you make in the chartered Start Printed Page 1712territory, identify such institution(s) and provide the following information:
(13) Employment, retirement, and severance agreements. Describe any employment agreement or arrangement between the successor institution (or any entity that will directly or indirectly merge with or acquire the successor institution) and any of your senior officers (as defined in § 619.9265 of this chapter) or directors. Describe any severance and retirement plans that cover your employees or directors and state the costs you expect to incur under the plans in connection with the termination.
(30) Reaffirmation resolution. Provide a copy of the reaffirmation resolution required by § 611.1235.
(3) A description of any subsequent event(s) that could have a material Start Printed Page 1713impact on any information in the plan of termination or on the termination.
(a) FCA review period. No later than 60 days after we receive the plan of termination, we will review it and either approve or disapprove the plan for submission to your equity holders. If we take no action on the plan of termination within 60 days, you may submit the plan to your equity holders. The 60-day review period under section 7.11 of the Act will begin on the date we receive a complete plan of termination. We will advise you in writing when the 60-day period begins.
(b) FCA approval of the plan of termination. Our approval of the plan of termination for submission to your equity stockholders:
(a) Reaffirmation resolution. Not more than 14 days before mailing the plan of termination to your equity holders, your board of directors must adopt, by a majority vote of all directors, a resolution reaffirming support of the termination. A certified copy of the resolution must be sent to us and must accompany the plan of termination when it is distributed to stockholders.
(e) Voting procedures. The voting procedures must comply with §§ 611.330 and 611.340. You must have an independent third party count the ballots. If a voting stockholder notifies you of the stockholder's intent to exercise dissenters' rights, the tabulator must be able to verify to you that the stockholder voted against the termination. Otherwise, the votes of stockholders must remain confidential.
(c) Conditions of FCA approval. We will approve your termination application only if: Start Printed Page 1714
(a) Preliminary exit fee estimate—terminating association. You must provide a preliminary exit fee estimate to us when you submit the plan of termination under § 611.1222. Calculate the preliminary exit fee estimate in the following order:
(i) Add back expenses you have incurred related to termination. Related expenses include, but are not limited to, legal services, accounting services, tax services, studies, auditing, business planning, equity holder meetings, and application fees for the termination and reorganization.
(A) Expenses you have incurred related to termination. Related expenses include, but are not limited to, legal services, accounting services, tax services, studies, auditing, business planning, equity holder meetings, and application fees for the termination and reorganization; and
(vi) Adjust for the dollar amount of significant transactions you reasonably expect to occur between the quarter end before you file your plan of termination and date of termination. Examples of these transactions include, but are not limited to, retirements of equity, loan Start Printed Page 1715repayments, and patronage distributions. Do not make adjustments for future expenses related to termination, such as severance or special retirement payments, or stock retirements to dissenting stockholders and Farm Credit institutions.
(c) Adjustments. (1) We will review your account balances, transactions over the 3 years before the date of the termination resolution under § 611.1220, and any subsequent transactions. Our review will include, but not be limited to, the following:
(i) Add back expenses related to the termination. Related expenses include, but are not limited to, legal services, accounting services, tax services, studies, auditing, business planning, payments of severance and special retirements, equity holder meetings, and application fees for the termination and reorganization.
(A) Expenses you have incurred related to termination. Related expenses include, but are not limited to, legal services, accounting services, tax services, studies, auditing, business planning, payments of severance and special retirements, equity holder meetings, and application fees for the termination and reorganization.
(A) Equity investments held in your institution by affiliated associations that you transferred at termination or during the 12 months before termination; and Start Printed Page 1716
(c) Satisfaction of joint and several liability and liability for interest on individual obligations. (1) You and the other Farm Credit banks must enter into an agreement, which is subject to our approval, covering obligations issued under section 4.2 of the Act and outstanding on the termination date. The agreement must specify how you and your successor institution will make adequate provision for the payment of your joint and several liability to holders of obligations other than those obligations on which you are primarily liable, in the event we make calls for payment under section 4.4 of the Act. You and your successor institution must also provide for your liability under section 4.4(a)(1) of the Act to pay interest on the individual obligations issued by other System banks. As a part of the agreement, you must also agree that your successor institution will provide ongoing information to the Funding Corporation to enable it to fulfill its funding and disclosure duties. The Funding Corporation may, at its option, be a Start Printed Page 1717party to the agreement to the extent necessary to fulfill its duties with respect to financing and disclosure.
(f) Payment to holders of special class of stock. If you have adopted bylaws under § 611.1210(g), you must pay a dissenting stockholder who owns shares of the special class of stock an amount equal to the lower of the par (or face) value or the value of such stock as determined under § 611.1280(c) and (d).
(1) A description of the rights of dissenting stockholders set forth in this section and the approximate value per share that a dissenting stockholder can expect to receive. State whether the successor institution will require borrowers to be stockholders or whether Start Printed Page 1718it will require stockholders to be borrowers.
1. See 67 FR 17907.
2. See the preamble discussion of “Section 611.1240—Exit Fee” in our proposed termination rule for small associations, 55 FR 28639 (July 12, 1990).
[FR Doc. 06-240 Filed 1-10-06; 8:45 am]