Unassociated Document
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 x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
o
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Preliminary Proxy
Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive Proxy
Statement
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o
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Definitive Additional
Materials
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o
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Soliciting Material Pursuant to
§240.14a-12
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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):
¨
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title of each class of securities
to which transaction
applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value
of transaction:
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o
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Fee paid previously with
preliminary materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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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,
2010
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 2010 Annual Meeting of
Stockholders of the Corporation to be held on Thursday, June 3, 2010, at 8:00
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 2009 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.
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Sincerely,
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Lowell
Junkins
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Acting
Chairman of the
Board
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FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
NOTICE OF
ANNUAL MEETING
Notice is
hereby given that the 2010 Annual Meeting of Stockholders of the Federal
Agricultural Mortgage Corporation (“Farmer Mac” or the “Corporation”) will be
held on Thursday, June 3, 2010, at 8:00 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:
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·
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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;
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·
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to
ratify the selection by the Audit Committee of PricewaterhouseCoopers LLP
as the Corporation’s independent auditors for fiscal year 2010;
and
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to
consider and act upon any other business that may properly be brought
before the meeting or any adjournment or postponement of the
meeting.
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Please
read the attached Proxy Statement for complete information on the matters to be
considered and acted upon.
Eligible
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 14, 2010 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 postage prepaid 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.
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By
order of the Board of Directors,
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Jerome
G. Oslick
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Corporate
Secretary
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Table of
Contents
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Page
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Voting
Rights
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1
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Record
Date
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2
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Voting
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2
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Proxy
Procedure
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2
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Stockholder
Proposals
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3
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Communications
with the Board
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4
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Board
of Directors Meetings and Committees
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4
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Enterprise
Risk Management
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5
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Code
of Business Conduct and Ethics
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5
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Item
No. 1: Election of Directors
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5
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Information
about Nominees for Director
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7
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Class
A Nominees
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7
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Class
B Nominees
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9
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Directors
Appointed by the President of the United States
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10
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Compensation
of Directors
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12
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Stock
Ownership of Directors and Executive Officers
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13
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Director
Independence
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15
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Report
of the Audit Committee
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17
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Executive
Officers
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19
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Executive
Compensation Governance
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20
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—
Compensation Discussion and Analysis
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21
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General
Compensation Goals and Pay Elements
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21
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Benchmarking,
Peer Groups and Market Posture
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22
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Compensation
Elements
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25
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Payments
in Connection with a Change-in-Control
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30
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Post-Employment
Compensation
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30
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Impact
of Accounting and Tax Treatments on Compensation Awards
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30
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Farmer
Mac’s Policies Regarding Stock Ownership and Trading
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30
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Compensation
Consultant Fees
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31
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—
Compensation Committee Report
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31
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—
Compensation Committee Interlocks and Insider
Participation
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32
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—
Compensation of Executive Officers
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32
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Summary
Compensation Table
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32
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Grants
of Plan-Based Awards Table
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34
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Outstanding
Equity Awards at Year End
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35
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Option
and SAR Exercises
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37
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Equity
Compensation Plans
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38
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Potential
Payments upon Termination (Employment Agreements with
Officers)
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40
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—
Certain Relationships and Related Person Transactions
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41
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Review
of Related Person Transactions
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41
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Transactions
with Related Persons in 2009
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42
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Item
No. 2: Selection of Independent Auditors
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42
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Audit
Fees
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43
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Audit-Related
Fees
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43
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Tax
Fees
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43
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All
Other Fees
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43
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Audit
Committee Pre-Approval Policies
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44
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Section
16(a) Beneficial Ownership Reporting Compliance
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44
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Principal
Holders of Voting Common Stock
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45
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Solicitation
of Proxies
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46
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Other
Matters
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46
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Appendix
A - Proxy Card for Class A Voting Common Stock
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Appendix
B - Proxy Card for Class B Voting Common Stock
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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 3, 2010
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 2010 Annual Meeting of Stockholders of the Corporation (the “Meeting”), to
be held on Thursday, June 3, 2010, at 8:00 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, 2010.
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 PricewaterhouseCoopers LLP as independent
auditors for the Corporation for fiscal year 2010. The Board is not
aware of any other matter to be presented for a vote at the
Meeting.
Important
Notice Regarding the Availability of Proxy Materials for Farmer Mac’s Annual
Meeting of Stockholders to be held on June 3, 2010: the Proxy
Statement, sample proxy cards and Farmer Mac’s 2009 Annual Report are available
at www.farmermac.com/investors/annualmeeting/.
Voting
Rights
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 Voting Common Stock who are
not eligible holders of that stock should dispose of their ownership of such
stock to eligible holders. Farmer Mac has the right, but not the
obligation, to repurchase shares of Voting Common Stock from ineligible holders
for book value.
The Act
provides that five of the directors will be elected by a plurality of the votes
of the holders of the Class A Voting Common Stock (the “Class A Holders”), and
five of the directors will be elected by a plurality of the votes of the holders
of the Class B Voting Common Stock (the “Class B Holders”). 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. No
director or nominee for director is or has been an officer or employee of the
Corporation. As of April 1, 2010, thirteen of Farmer Mac’s fourteen
directors were “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, nine of Farmer Mac’s directors will be
independent, in part due to a change in the definition of “independent” in
Farmer Mac’s Corporate Governance Guidelines that will become effective on the
date of the Meeting. See “Director Independence” for more information
regarding the Board’s independence determinations and the change to the
definition of “independent” in Farmer Mac’s Corporate Governance
Guidelines.
Record
Date
The Board
of Directors has fixed April 14, 2010 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.”
Voting
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.
Proxy
Procedure
Any
holder of Voting Common Stock who is unable to attend the Meeting in person will
be 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
filling in the circle next to 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. Stockholders who
intend to cumulate their votes for one or more nominee(s) are urged to read the
instructions on the proxy card and to indicate the manner in which votes shall
be cumulated in the space to the right of the nominee name(s) on the proxy
card. 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 is composed of three officers of the Corporation—Timothy L. Buzby,
Jerome G. Oslick and Tom D. Stenson—and will vote all shares of Voting
Common Stock represented by proxies signed and returned by stockholders in the
manner specified. The Proxy Committee will also vote the shares
represented thereby in accordance with its members’ best judgment on any matters
not known at the time this Proxy Statement was printed that may properly be
presented for action at the Meeting.
Stockholder
Proposals
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 Amended and Restated By-Laws (the “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 Meeting were required to be received by
the Corporate Secretary before December 29, 2009 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 PricewaterhouseCoopers LLP as independent auditors for the Corporation for
fiscal year 2010, the Board of Directors knows of no other matters to be
presented for action at the Meeting. If any other matters are
properly 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 eligible to do so intends to present a proposal for consideration at
the Corporation’s 2011 Annual Meeting of Stockholders, the Corporate Secretary
must receive the proposal on or before December 27, 2010 to be considered
for inclusion in the 2011 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 1, 2011 of an intent to present a proposal at the Corporation’s 2011
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.
Communications
with the Board
Stockholders
and other interested parties may communicate directly with 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.
Board
of Directors Meetings and Committees
In 2009,
the Board of Directors held a total of ten meetings. Each member of
the Board attended 75% or more of the aggregate number of meetings of the Board
of Directors and of the committees on which he or she served during
2009. As Acting Chairman of the Board, Lowell L. Junkins 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 members of
the Board of Directors at the time of the 2009 Annual Meeting of Stockholders
attended that meeting.
The Board
has established seven 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 ten times and thirteen times, respectively, during
2009. 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 thirteen times during 2009. 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 credit matters, met seven
times during 2009. The Finance Committee, which is responsible for
determining the financial policies of the Corporation and managing the
Corporation’s financial affairs, met seven times during 2009. The
Marketing Committee, which is responsible for the development and monitoring of
the Corporation’s programs and marketing plan, met five times during
2009. 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 six times during 2009. See
“Item No. 1: Election of Directors,” “Executive Compensation Governance”
and “Report of the Audit Committee” and “Item No. 2: Selection of Independent
Auditors” for information regarding the Corporate Governance Committee, the
Compensation Committee and the Audit Committee, respectively.
Enterprise
Risk Management
The
executive officers have the primary responsibility for managing the risks
associated with Farmer Mac’s business, including operational, credit, asset and
liability management, legal, regulatory and political risks. The
Board of Directors oversees Farmer Mac’s enterprise risk through its system of
committees and the Corporation’s internal audit and internal credit review
functions. The Finance Committee is responsible for overseeing Farmer
Mac’s asset and liabilities management and compliance with Farmer Mac’s
investment and interest rate risk policies. The Credit Committee is
responsible for overseeing the credit risks inherent in Farmer Mac’s fulfillment
of its statutory mission to deliver the benefits of a secondary market to
agricultural and rural utilities lenders. The internal credit review
function provides an independent assessment of credit risk, reporting to both
the Credit and Audit Committees. The Public Policy Committee is
responsible for overseeing the Corporation’s exposure to political
risk. The Compensation Committee is responsible for assuring that Farmer
Mac’s compensation policies and plans are aligned with overall risk tolerance of
Farmer Mac. The Corporate Governance Committee is responsible for overseeing the
governance policies of Farmer Mac and compliance with the Corporation’s Code of
Business Conduct and Ethics. The Audit Committee is responsible for
overseeing the financial reporting and accounting practices of the Corporation,
as well as the internal audit function, which annually compiles an enterprise
risk assessment and, under the supervision of the Audit Committee, conducts
periodic audits of the various risk areas within the Corporation.
Code
of Business Conduct and Ethics
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.
Item
No. 1: Election of Directors
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. Nine of the Class A 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 2011 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 four 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 15, 2010 and June 3, 2010) and the ten
members who are elected by the holders of Farmer Mac’s Voting Common
Stock. On March 17, 2010, the President of the United States
submitted the names of three nominees to the Senate Committee on Agriculture,
Nutrition and Forestry for consideration as Appointed Members. The
three names included the re-nomination of Mr. Junkins (the current Acting
Chairman of the Board). If Mr. Junkins’ nomination is approved
by the Senate, Mr. Junkins will become the Chairman of the Board. The
other two nominees are Sara Louise Faivre-Davis and Myles J.
Watts.
To
facilitate the selection of director nominees, the Board of Directors utilizes a
Corporate Governance Committee that under the By-Laws is to be comprised of two
members of the Board appointed by the President of the United States (one of
whom serves as the chairman of the Committee) and two representatives from each
of the Corporation’s two elected classes of directors. The current
members of the Corporate Governance Committee are: Appointed Members
Messrs. Junkins and Klippenstein; Class A directors Messrs. Brack and
Engebretsen; and Class B directors Messrs. Jackson and
Raines. As described in more detail in “Director Independence,” the
Board has determined that all the current members of the Corporate Governance
Committee are “independent,” as defined in Farmer Mac’s Corporate Governance
Guidelines, SEC rules and NYSE listing standards. The Corporate
Governance Committee Charter 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. Print copies of the
Corporate Governance Committee Charter and Farmer Mac’s Corporate Governance
Guidelines are 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.
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 have a broad perspective and good
record of accomplishment either as senior members of agricultural or other
relevant business management, as agricultural, rural utilities or commercial
lenders, as accountants or auditors, or as entrepreneurs. The Board
has also determined that it is desirable to have qualified female and minority
representation on the Board. In selecting a nominee 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 and the Board exercise judgment in applying these factors to the
selection of individuals to serve on the Board.
The
Corporate Governance 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. Of the ten Nominees, only Richard H. Davidson is not a
current member of the Board standing for re-election. Mr. Davidson
was recommended to the Corporate Governance Committee by AgriBank, FCB, the
holder of approximately 40.3% of the Class B Voting Common Stock. 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 2011 Annual Meeting of Stockholders, the Corporate
Governance Committee will consider nominees recommended by holders of Farmer
Mac’s Voting Common Stock, who may submit written recommendations by January 30,
2011 to Jerome G. Oslick, Corporate Secretary, Federal Agricultural Mortgage
Corporation, 1133 Twenty-First Street, N.W., Suite 600, Washington, D.C.
20036.
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 or
postponement 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.
Information
about Nominees for Director
Each of the Nominees has been
principally employed in his current position for the past five years unless
otherwise noted.
Class
A Nominees
DENNIS L. BRACK, 57, 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
Corporate Governance Committee and the Credit Committee. Mr. Brack
served as President and Chief Executive Officer of Bath State Bank in Bath,
Indiana from 1988 to 2007. He has remained as a director of Bath
State Bank and is currently a director of the board of Bath State Bancorp, the
holding company for the bank. He became a member of the board of
directors of Franklin County Community Foundation, Brookville, Indiana in 2007
and has served as a member of their Investment Committee from 1999 to
2009. Mr. Brack 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.
JAMES R. ENGEBRETSEN, 54, has
been a member of the Board of Directors of the Corporation since June 5, 2008
and serves as a member of the Audit Committee, the Corporate Governance
Committee, the Finance Committee and the Marketing Committee. Mr.
Engebretsen is the Assistant Dean of the Marriott School of Management at
Brigham Young University. He formerly served as the Managing Director
of the Peery Institute of Financial Services at the Marriott School from 2004 to
2006. He joined the Marriott School with nearly fifteen years of work
experience at Lehman Brothers, JP Morgan and Goldman Sachs in New York and
Philadelphia. Mr. Engebretsen left Goldman Sachs in 1995 to set up
his own hedge fund, Associates Capital Management. He earned his MBA
and BS in Economics from Brigham Young University.
DENNIS A. EVERSON, 59, has
been a member of the Board of Directors of the Corporation since June 3,
2004 and serves as chairman of the Marketing Committee and as a member of the
Finance 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, 68, 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 a financial consultant. He
is also a trustee of the Advisors’ Inner Circle Funds, the Advisors’ Inner
Circle Funds II, The Bishop Street Funds and SEI Funds. Mr. Johnson
formerly was 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”). 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, Rushmore Funds and
Diversified Funds. Mr. Johnson also served as a director of Eldorado
Bankshares, Inc., Laguna Hills, California, the holding company for Eldorado and
Antelope Valley Banks. During the past five years, Mr. Johnson has
served as a director for the following companies: Advisors’ Inner
Circle Funds, Advisors’ Inner Circle Funds II, The Bishop Street Funds, SEI
Mutual Funds and Diversified Mutual Funds.
CLARK B. MAXWELL, 38, has been
a member of the Board of Directors of the Corporation since June 5, 2008
and serves as a member of the Audit Committee and the Credit
Committee. Mr. Maxwell has been a Senior Vice President at Chatham
Financial Corp. since 2002, where he is the Director of Accounting Policy and
Global Accounting Services. Chatham provides comprehensive interest
rate and currency hedging expertise to hundreds of financial institutions, real
estate companies, and other institutional clients. From 1998 to 2002,
Mr. Maxwell was a Manager at Ernst & Young LLP, where he specialized in
audits of financial institutions and served as a derivatives and hedging subject
matter expert. Mr. Maxwell was a Postgraduate Technical Assistant at
the Financial Accounting Standards Board from 1997 to 1998, where he worked on
the development of Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities. Mr.
Maxwell is a Certified Public Accountant and a member of the
AICPA. He received his BS, summa cum laude, and Masters in Accounting
from Brigham Young University.
Class
B Nominees
RICHARD H. DAVIDSON, 65, is
presently serving as President of Davidson Farms, Inc. and Vice President of
DSF, Inc., which consists of a 5,000 acre grain farm, cow/calf herd, and beef
cattle operation, located south of Columbus, Ohio. Mr. Davidson has
been operating Davidson Farms, Inc. since 1970 and, together with his son,
operating DSF, Inc. since 2001. Mr. Davidson was elected to the
AgriBank, FCB Board of Directors in March 2005 and currently serves on its
Finance Committee and as chairman of its Enterprise Risk Management
Committee. He also currently serves on the board of the Fayette
County Charitable Foundation and was chairman of the Fayette County Planning
Commission and the Fayette County Zoning Commission. Mr. Davidson has
previously served on the board and as chairman of West Central Ohio Port
Authority (railroad), Fayette Landmark, Inc. Co-op Supply Business and Fayette
County Farm Bureau. He has also previously served on the board of the
Columbus Production Credit Association, the Southern Ohio Farm Credit
Association, Southern State Community College, Robinson Seed Company, Inc. Stock
Company, Fayette County Chamber of Commerce and Royster Clark, Inc. Stock
Company (fertilizer and agricultural supply). Mr. Davidson is a
graduate of Ohio State University with a degree in Agricultural
Economics.
ERNEST M. HODGES, 62, has been
a member of the Board of Directors of the Corporation since June 16, 2005 and
serves as chairman of the Credit Committee and as a member of the Compensation
Committee. He has served as Executive Vice President of Farm Credit
West, ACA in Roseville, California since the merger between Farm Credit West and
Sacramento Valley Farm Credit, ACA in April 2008. Prior to that time,
Mr. Hodges had served as President and Chief Executive Officer of
Sacramento Valley Farm Credit in Woodland California since 1993. He
was also 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.
BRIAN P. JACKSON, 52, has been
a member of the Board of Directors of the Corporation since June 4, 2009 and is
a member of the Audit Committee, the Corporate Governance Committee and the
Credit Committee. Prior to that time, Mr. Jackson represented the
holders of Farmer Mac’s Series B-1 Senior Cumulative Perpetual Preferred Stock
as one of three observers of Farmer Mac’s Board since October
2008. He is currently employed by, and until November 2009 was
Executive Vice President and Chief Financial and Administrative Officer of,
CoBank, ACB, one of the five banks within the Farm Credit System. In
his role as Executive Vice President and Chief Financial and Administrative
Officer of CoBank, Mr. Jackson was responsible for the bank’s finance,
controller, information technology, operations, corporate communications and
administrative services functions and chairs a number of committees, including
CoBank’s Disclosure Committee. Mr. Jackson also served as Vice
Chairman of Farm Credit Leasing Services Corporation and Chairman and President
of the Farm Credit System Association Captive Insurance
Company. Prior to joining CoBank in 2000, Mr. Jackson served as
Senior Vice President – Finance and Administrative Services and Treasurer for
the predecessor to Xcel Energy Inc., a Fortune 500 electric and gas utility
company. From 1980 to 1997, Mr. Jackson worked for Arthur Andersen
LLP, the last several years as an audit partner specializing in electric
utilities, communications and real estate companies. Mr. Jackson is a
Certified Public Accountant and a member of the AICPA. He is active
in local and national charitable organizations, including as chair-elect of Big
Brothers Big Sisters of America, and a member of the Board of Trustees of the
Mile High United Way.
BRIAN J. O’KEANE, 41, has been
a member of the Board of Directors of the Corporation since June 5, 2008 and
serves as chairman of the Finance Committee and as a member of the Marketing
Committee. Mr. O’Keane is the Senior Vice President & Chief
Financial Officer of AgriBank, FCB, the largest of five banks within the Farm
Credit System. He joined AgriBank in September 2007 and provides
leadership and strategic oversight of the finance function including treasury,
capital planning and financial control. From 1997 until joining
AgriBank, Mr. O’Keane held a series of key financial leadership roles within CNH
Capital, the captive financial services arm of Case New Holland Inc. and its
predecessor company, Case Corporation, functioning as global treasurer beginning
in 2002. In his capacity as treasurer, he was responsible for
directing all global treasury and capital markets activities, including
asset-backed securitization, capital structure management, liquidity planning,
corporate finance and financial risk management. His experience also
includes financial leadership roles at The Quaker Oats Company from 1996 to 1997
and Exxon Corporation from 1991 to 1995. Mr. O’Keane holds a BS
degree in Finance from Indiana University and an MBA degree in Finance,
Accounting and International Business from the Kellogg Graduate School of
Management, Northwestern University. During the past five years,
Mr. O’Keane has served as a director of the following
companies: CNH Capital America, LLC, CNH Capital Receivables, LLC and
CNH Wholesale Receivables, LLC.
JOHN DAN RAINES, JR., 66, has
been a member of the Board of Directors of the Corporation since June 18, 1992
and serves as chairman of the Audit Committee and is a member of the
Compensation Committee and the Corporate Governance Committee. He is
the owner and operator of Raines Commercial Group, Inc., a general business
corporation. Since 1991, Mr. Raines has served as a member of the
board of directors of AgGeorgia Farm Credit, ACA, and its predecessor Farm
Credit System institution. He also previously served as a member of
the board of directors of AgFirst Farm Credit Bank (formerly, the Farm Credit
Bank of Columbia, South Carolina) from 1990 to 2009. 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.
Directors
Appointed by the President of the United States
JULIA BARTLING, 51, 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
Legislature 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, and own or lease approximately 1,000 acres of farmland. Ms.
Bartling also serves as the Executive Director of the South Dakota Farmers Union
Foundation.
GRACE T. DANIEL, 64, has been
a member of the Board of Directors of the Corporation since August 17, 2002
and serves as chairman of the Public Policy Committee and is a member of the
Marketing Committee. Her appointment to the Board was confirmed by
the United States Senate on July 29, 2002. From 2004 to 2007, Ms.
Daniel served as Deputy Director of California Parks and Recreation under
Governor Schwarzenegger. She served on the California Agricultural
Labor Relations Board from 1997 to 1999. Ms. Daniel 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. Ms. Daniel earned a Bachelor of Arts in
Business from Pepperdine University and a Master of Public Administration from
the University of Southern California.
LOWELL L. JUNKINS, 66, has
been a member of the Board of Directors of the Corporation since June 13,
1996, Vice Chairman of the Board since December 5, 2002, and Acting Chairman of
the Board since September 15, 2008. He serves as chairman of the
Corporate Governance Committee and is a member of the Compensation 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, 72, has
been a member of the Board of Directors of the Corporation since June 5, 2003
and is a member of the Public Policy Committee, the Corporate Governance
Committee, the Compensation Committee and the Credit Committee. His
appointment to the Board was confirmed by the United States Senate on June 3,
2003. Mr. Klippenstein served as the chief executive officer of the
American Chianina Association from November 8, 2000 until July 2009, and has
previously served two terms as chairman of the Cattleman’s Beef Promotion and
Research Board (Beef Checkoff Board). He currently operates his
family farm, engaged in cattle production, which has sold product
internationally to 22 other countries. Mr. Klippenstein also served
as a Missouri State Senator from 1993 to 1994.
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.
Qualifications,
Attributes, Skills and Experience to be Represented on the Board as a
Whole
The
Corporate Governance Committee has identified particular qualifications,
attributes, skills and experience that are important to be represented on the
Board as a whole in light of Farmer Mac’s current needs and business priorities.
The Corporation’s business is focused primarily on agricultural, agri-business
and rural utilities lending. Therefore, the Corporate Governance
Committee believes that the Board should include some directors who possess
knowledge of the underlying industries, marketing and
lending. Messrs. Brack, Everson, Hodges and Jackson bring to the
Board the necessary expertise in relevant lending; Ms. Daniel and Messrs.
Everson and Klippenstein bring to the Board appropriate marketing experience and
Ms. Bartling and Messrs. Davidson, Junkins, Klippenstein and Raines bring to the
Board direct experience in agriculture.
Farmer
Mac’s business also involves complicated financial transactions and complex
accounting issues. Therefore, the Corporate Governance Committee
believes that the Board should include some directors with a high level of
financial literacy or accounting training or experience. Messrs.
Davidson, Engebretsen, Hodges, Jackson, Johnson, Maxwell and O’Keane bring to
the Board that high level of financial literacy or accounting training or
experience.
As
a Congressionally chartered, highly regulated, government-sponsored enterprise,
Farmer Mac is required to comply with a variety of regulatory and statutory
requirements and be aware of developments in the political
arena. Therefore, the Corporate Governance Committee believes that
governmental or political expertise should be represented on the
Board. That governmental or political experience is brought to the
Board by Ms. Bartling, Ms. Daniel and Messrs. Davidson, Junkins and
Klippenstein.
The fact
that a director is not named in the discussion of a particular attribute does
not mean that the director does not possess that qualification or skill, but
rather that it is not a specific area of focus or expertise on which the Board
currently relies.
Compensation
of Directors
The directors of Farmer Mac 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 $20,000 ($26,500 for the
chairman of the Audit Committee, $23,500 for the chairman of the Compensation
Committee and $30,000 for the Chairman of the Board); (b) $1,000 per day, plus
expenses, for each meeting of the Board and each committee meeting attended (if
on a day other than that of the Board meeting); and (c) with the prior
approval of the President of the Corporation or the Chairman of the Board (or
the chairman of the Compensation Committee in the case of a per diem for the
Chairman of the Board), $1,000 per day, plus expenses, for certain other
meetings and conferences with borrowers, lenders or other groups. The aggregate
amount of cash compensation received by all members of the Board of Directors in
2009 was approximately $605,484.
On June
4, 2009, the date of the 2009 Annual Meeting of Stockholders, each Board member
was granted 8,432 shares of restricted Class C Non-Voting Common Stock under the
Corporation’s 2008 Omnibus Incentive Compensation Plan, with such restricted
stock vesting on May 15, 2010, or earlier if an Appointed Member is removed by
action of the President of the United States. The restricted stock
grants were calculated to provide a grant equal to approximately $50,000 to each
director based on the stock price at the grant date.
The
following table sets forth the compensation received during 2009 by each current
Board member:
Name
|
|
Fees Earned or Paid
in Cash1
|
|
|
Restricted
Stock Awards2
|
|
|
Total
|
|
Julia
Bartling
|
|
$ |
45,000 |
|
|
$ |
50,002 |
|
|
$ |
95,002 |
|
Dennis
Brack
|
|
|
48,500 |
|
|
|
50,002 |
|
|
|
98,502 |
|
Grace
Daniel
|
|
|
39,000 |
|
|
|
50,002 |
|
|
|
89,002 |
|
Paul
DeBriyn
|
|
|
43,690 |
|
|
|
50,002 |
|
|
|
93,692 |
|
James
Engebretsen
|
|
|
46,000 |
|
|
|
50,002 |
|
|
|
96,002 |
|
Dennis
Everson
|
|
|
36,000 |
|
|
|
50,002 |
|
|
|
86,002 |
|
Ernest
Hodges3
|
|
|
44,000 |
|
|
|
— |
|
|
|
44,000 |
|
Brian
Jackson4
|
|
|
17,484 |
|
|
|
— |
|
|
|
17,484 |
|
Mitchell
Johnson
|
|
|
41,000 |
|
|
|
50,002 |
|
|
|
91,002 |
|
Lowell
Junkins
|
|
|
66,000 |
|
|
|
50,002 |
|
|
|
116,002 |
|
Glen
Klippenstein
|
|
|
43,000 |
|
|
|
50,002 |
|
|
|
93,002 |
|
Clark
Maxwell
|
|
|
46,000 |
|
|
|
50,002 |
|
|
|
96,002 |
|
Brian
O’Keane
|
|
|
40,000 |
|
|
|
50,002 |
|
|
|
90,002 |
|
John
Dan Raines
|
|
|
49,810 |
|
|
|
50,002 |
|
|
|
99,811 |
|
1 Includes
amounts the following directors voluntarily used to purchase, at market value,
newly issued Class C Non-Voting Common Stock in lieu of receiving some or all of
their retainers in cash: Paul DeBriyn ($19,245); James Engebretsen ($4,990);
Dennis Everson ($2,843); Mitchell Johnson ($9,495); and Glen Klippenstein
($4,742).
2 The
grant date fair value of the restricted stock awarded in 2009 was $5.93, which
was the price of the stock on the date granted.
3 Mr.
Hodges immediately assigned all equity compensation he received from Farmer Mac
in 2009 to his employer. That equity compensation had a grant date value of
$50,002. Including the equity compensation he immediately assigned to his
employer, Mr. Hodges’ total compensation as a director in 2009 would have been
$94,002.
4 Mr.
Jackson immediately assigned all equity compensation he received from Farmer Mac
in 2009 to his employer. That equity compensation had a grant date value of
$50,002. Including the equity compensation he immediately assigned to his
employer, Mr. Jackson’s total compensation as a director in 2009 would have been
$67,485.
Stock
Ownership of Directors and Executive Officers
As of
April 15, 2010, the members of the Board of Directors, nominees for election as
directors and current 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 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% or more of the Voting Common Stock of the Corporation,
see “Principal Holders of Voting Common Stock.”
|
|
Voting Common Stock
|
|
|
Non-Voting Common Stock1,2,3
|
|
|
|
Class A or
Class B
|
|
|
Percent
of Class
|
|
|
Class C
|
|
|
Percent
of Class
|
|
Timothy
L. Buzby
|
|
|
— |
|
|
|
— |
|
|
|
142,260 |
|
|
|
1.65 |
% |
Michael
A. Gerber
|
|
|
— |
|
|
|
— |
|
|
|
23,688 |
|
|
|
* |
|
Jerome
G. Oslick
|
|
|
— |
|
|
|
— |
|
|
|
113,343 |
|
|
|
1.32 |
% |
Tom
D. Stenson
|
|
|
— |
|
|
|
— |
|
|
|
273,347 |
|
|
|
3.17 |
% |
Julia
Bartling
|
|
|
— |
|
|
|
— |
|
|
|
22,432 |
|
|
|
* |
|
Dennis
L. Brack
|
|
|
— |
|
|
|
— |
|
|
|
28,121 |
|
|
|
* |
|
Grace
T. Daniel
|
|
|
— |
|
|
|
— |
|
|
|
26,665 |
|
|
|
* |
|
Richard
H. Davidson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
Paul
A. DeBriyn+
|
|
|
— |
|
|
|
— |
|
|
|
30,927 |
|
|
|
* |
|
James
R. Engebretsen
|
|
|
— |
|
|
|
— |
|
|
|
9,967 |
|
|
|
* |
|
Dennis
A. Everson
|
|
|
— |
|
|
|
— |
|
|
|
21,764 |
|
|
|
* |
|
Ernest
M. Hodges
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
Brian
P. Jackson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
Mitchell
A. Johnson
|
|
|
— |
|
|
|
— |
|
|
|
29,144 |
|
|
|
* |
|
Lowell
L. Junkins
|
|
|
— |
|
|
|
— |
|
|
|
26,432 |
|
|
|
* |
|
Glen
O. Klippenstein
|
|
|
— |
|
|
|
— |
|
|
|
29,204 |
|
|
|
* |
|
Clark
B. Maxwell
|
|
|
— |
|
|
|
— |
|
|
|
8,432 |
|
|
|
* |
|
Brian
J. O’Keane
|
|
|
— |
|
|
|
— |
|
|
|
8,432 |
|
|
|
|
|
John
Dan Raines
|
|
|
— |
|
|
|
— |
|
|
|
19,941 |
|
|
|
* |
|
All
directors, nominees and current executive officers as a group
(19 persons)
|
|
|
— |
|
|
|
— |
|
|
|
814,078 |
|
|
|
9.45 |
% |
+ Not a
candidate for re-election to the Board
* 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. Buzby, 115,921
shares; Mr. Gerber, 6,000 shares; Mr. Oslick, 94,912 shares;
Mr. Stenson, 231,603 shares; Mr. Raines, 10,800 shares; Messrs.
DeBriyn and Everson, 12,000 shares each; Ms. Bartling,
14,000 shares; Ms. Daniel and Messrs. Brack, Johnson, Junkins and
Klippenstein, 18,000 shares each; and all directors and executive officers
as a group, 587,236 shares.
2 Includes
shares of Class C Non-Voting Common Stock underlying SARs that may be exercised
within 60 days as follows: Mr. Buzby, 26,339 shares; Mr. Gerber,
16,666 shares; Mr. Oslick, 18,431 shares; and Mr. Stenson, 41,744
shares.
3 Includes
8,432 shares of Class C Non-Voting Common Stock that will vest on May 15, 2010
for each current director except Messrs. Hodges and Jackson, who transferred
their shares of restricted stock to their respective employers immediately upon
grant.
Director
Independence
The Board
of Directors has adopted a formal set of 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 of Farmer Mac. The Board
broadly considers all relevant facts and circumstances in making an independence
determination, including the following criteria, among others, in determining
whether a director lacks a material relationship and therefore is
“independent”:
|
(a)
|
the
director is not and has not been employed by the Corporation within the
past three years;
|
|
(b)
|
the
director has not received more than $120,000 per year in direct
compensation from the Corporation, other than director and committee fees,
within the past three years;
|
|
(c)
|
the
director 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
company or a firm that is (revenue of the greater of 2% of the other
company’s consolidated gross revenues or $1 million is considered
significant);
|
|
(d)
|
the
director is not and has not been for the past three years a significant
customer or supplier of the Corporation nor affiliated with a company or
firm that is (revenue of the greater of 2% of the other company’s
consolidated gross revenues or $1 million is considered
significant);
|
|
(e)
|
the
director is not and has not been for the past three years employed by or
affiliated with an internal or external auditor of the company that
provided services to the Corporation within the past three
years;
|
|
(f)
|
the
director is not and has not been for the past three years employed by
another company where any of the Corporation’s present executives serve on
that company’s compensation
committee;
|
|
(g)
|
the
director is not a spouse, parent, sibling, child, mother- or
father-in-law, son- or daughter-in-law or brother- or sister-in-law or any
person (other than household employees) who shares a residence with any
person described by (a) through
(f);
|
|
(h)
|
the
director 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)
|
the
director 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).
|
The
criteria, which are included in Farmer Mac’s Corporate Governance Guidelines
available on the Corporation’s website, www.farmermac.com, in the “Corporate
Governance” portion of the “Investors” section, meet all requirements for
director independence contained in SEC and NYSE rules.
In April
2010, the Board considered all direct and indirect transactions and
relationships between each director (either directly or as a partner,
stockholder, officer or director of an entity that has a business relationship
with Farmer Mac) and the Corporation and its management to determine whether any
such transactions or relationships were inconsistent with a determination that
the director is independent. As a result of its review, the Board
affirmatively determined that each of the following current directors meets the
criteria for director independence set forth above and, therefore, is
independent: Julia Bartling, Dennis L. Brack, Grace T. Daniel, James
R. Engebretsen, Dennis A. Everson, Ernest M. Hodges, Brian P. Jackson,
Mitchell A. Johnson, Lowell L. Junkins, Glen O. Klippenstein, Clark B.
Maxwell, Brian J. O’Keane and John Dan Raines. During the same
review, the Board determined that current director Paul A. DeBriyn, who is
not a nominee for election as a director at the 2010 Annual Meeting of
Stockholders, was not independent of Farmer Mac for the reasons described in
more detail below. The Board has also determined that Richard H.
Davidson, the only Nominee who is not a current member of the Board, meets the
criteria for director independence.
In
applying the criteria for director independence set forth above, Mr. DeBriyn was
determined to have a material relationship with Farmer Mac, and therefore not to
be independent, by virtue of Farmer Mac’s payment of approximately $53.2 million
to AgStar Financial Services, ACA, (“AgStar”) for the purchase of five
participation interests in defaulted loans secured by ethanol facilities under
the long-term standby purchase commitment (“LTSPC”) between AgStar and Farmer
Mac in 2008. In addition, during 2009, Farmer Mac paid to AgStar
approximately $1.6 million in fees for servicing loans owned by Farmer Mac and
purchased from AgStar $11.9 million related to two defaulted loans pursuant to
the terms of the LTSPC. Mr. DeBriyn is the President and CEO of
AgStar. The total amount paid to AgStar by Farmer Mac in 2008
(approximately $55.4 million) was approximately 15.7% of AgStar’s
consolidated gross revenues for 2008 (approximately $353.1 million), which
exceeded the 2% threshold used to determine whether an entity affiliated with a
director is a significant customer of the Corporation.
In
determining that Mr. Davidson and each of the current directors other than Mr.
DeBriyn is independent of Farmer Mac, the Board considered that because
financial institutions are required to own Voting Common Stock to participate in
Farmer Mac’s programs, transactions often occur in the ordinary course of
business between the Corporation and companies or other entities at which some
of Farmer Mac’s directors are or have been officers or directors. In
particular, with respect to each of the most recent three completed fiscal
years, the Board evaluated for each of Messrs. Brack, Everson, Hodges, Jackson,
O’Keane and Raines all transactions between Farmer Mac and the company where he
serves as an executive officer or director. Those transactions
included sales of qualified loans and USDA-guaranteed portions and guarantee and
LTSPC transactions as well as the annual amount of guarantee and commitment fees
paid to Farmer Mac by that company and any servicing or other fees received by
that company from Farmer Mac. In each case, the transactions had
terms and conditions comparable to those applicable to entities unaffiliated
with Farmer Mac, and the amount paid to or received from each of these companies
in each of the last three years did not exceed the 2% of total revenue threshold
in the director independence criteria used to determine whether an entity
affiliated with a director is a significant customer of the
Corporation. The Board determined that none of these relationships it
considered impaired the independence of the named individuals. For
additional information about transactions between Farmer Mac and entities
affiliated with directors, see “Management’s Discussion and Analysis of
Financial Condition and Results of Operations ─ Results of Operations ─ Related
Party Transactions” and Note 3 in Farmer Mac’s Annual Report on Form 10-K
for the year ended December 31, 2009.
On
February 4, 2010, the Board amended Farmer Mac’s Corporate Governance
Guidelines, effective as of June 3, 2010, to include the following criteria to
determine the independence status of a director:
|
(a)
|
the
director is not a candidate for federal political
office;
|
|
(b)
|
the
director is not an employee of an entity that does any business with
Farmer Mac; and
|
|
(c)
|
the
director is not an employee of an entity that holds more than 5% of any
class of Farmer Mac voting common
stock.
|
When the
amended independence standards become effective, Messrs. Hodges and Everson will
no longer be deemed to be “independent directors” because they are employed by
entities that do business with Farmer Mac and Messrs. Jackson and O’Keane will
no longer be deemed to be “independent directors” because they are each employed
by an entity that holds more than 5% of Farmer Mac’s Class B Voting Common
Stock.
Report
of the Audit Committee
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, as amended (the “Securities Act”), or the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), 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 4,
2010. 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, in the “Corporate Governance” portion
of the “Investors” section. A print copy of the Audit Committee
Charter 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. 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) each of Clark Maxwell, a member
of the Audit Committee since June 6, 2008, and Brian Jackson, a member of the
Audit Committee since June 4, 2009, is an “audit committee financial expert,” as
defined in SEC rules. However, Messrs. Maxwell and Jackson are
not auditors or accountants for Farmer Mac, do not perform field work and are
not employees of Farmer Mac. In accordance with the SEC’s safe harbor
relating to audit committee financial experts, a person designated or identified
as an audit committee financial expert will not be deemed to be an “expert” for
purposes of the federal securities laws. In addition, such
designation or identification does not impose on such person any duties,
obligations or liabilities that are greater than those imposed on such person as
a member of the Audit Committee and Board of Directors in the absence of such
designation or identification, and does not affect the duties, obligations or
liabilities of any other member of the Audit Committee or Board of
Directors.
Audit
Committee Report for the Year Ended December 31, 2009
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 Accounting 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, 2009 for filing with the
Securities and Exchange Commission, as filed on March 16, 2010.
|
Audit
Committee
|
|
|
|
|
|
John
Dan Raines, Chairman
|
|
Julia
Bartling
|
|
James
R. Engebretsen
|
Brian
P. Jackson
|
|
Clark
B. Maxwell
|
Executive
Officers
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
|
|
|
|
|
|
Michael
A. Gerber
|
|
51
|
|
President
and Chief Executive Officer of the Corporation since March 1,
2009. Mr. Gerber served as a member of the Board of Directors
of the Corporation from June 7, 2007 through February 28, 2009 and served
as a member of the Finance Committee and the Marketing
Committee. He served as President and Chief Executive Officer
of Farm Credit of Western New York, ACA, located in Batavia, New York,
from 1998 through February 2009, with a leave of absence to serve as
Farmer Mac’s Acting President and CEO from October 1, 2008 through
February 28, 2009. Mr. Gerber was Executive Vice President of
Farm Credit of Western New York from 1994 to 1998 and served as Credit
Supervisor and Director of Financial Services for the former Farm Credit
System Southern New England Association from 1992 to 1994. Mr.
Gerber also served as a director and chairman of the audit committee of
Financial Partners, Inc., a service company owned by Farm Credit System
associations. Mr. Gerber also was a member of the Farm Credit
System’s Presidents’ Planning Committee and is a director of the Genesee
County Economic Development Council.
|
|
|
|
|
|
Tom
D. Stenson
|
|
59
|
|
Executive
Vice President and Chief Operating Officer since June 7,
2007. Prior to that time, Mr. Stenson was Vice President –
Agricultural Finance of the Corporation from August 7, 1997 until June 7,
2007 and Director – Agricultural Finance of the Corporation from November
1996 until August 7,
1997.
|
|
|
|
|
|
Timothy
L. Buzby
|
|
41
|
|
Vice
President – Chief Financial Officer since April 2, 2009 and Treasurer
since October 8, 2009. Prior to April 2009, Mr. Buzby was Vice
President – Controller of the Corporation from June 5, 2003 through April
1, 2009 and Acting Treasurer from October 1, 2008 through April 1,
2009. Mr. Buzby previously served as Chief Financial Officer
for George Mason Mortgage Corporation, a regional residential mortgage
lender, from March 2000 to December 2000 at which time he joined Farmer
Mac as Controller. From July 1997 to February 2000, he was the
Chief Financial Officer for Mortgage Edge Corporation, a national mortgage
lender. Prior to July 1997, Mr. Buzby was a Manager on the
Mortgage Consulting Staff of KPMG Peat Marwick, LLP. Mr. Buzby
has been a certified public accountant since 1992.
|
|
|
|
|
|
Jerome
G. Oslick
|
|
63
|
|
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.
|
Executive
Compensation Governance
The
Compensation Committee determines, subject to ratification by the Board of
Directors in the case of the chief executive officer and directors, the
salaries, incentive plans and other compensation of directors and officers of
the Corporation. The current members of the Compensation Committee
are Messrs. Hodges, Johnson, Junkins, Klippenstein, Raines 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 and NYSE listing standards.
The
Compensation Committee reviewed and recommended amendment and reaffirmation of
the Compensation Committee Charter, which amendment and reaffirmation was
approved by the full Board on April 1, 2010. The complete text of the
charter as amended, which reflects standards set forth in SEC and NYSE rules, is
available on the Corporation’s website, www.farmermac.com, in the “Corporate
Governance” portion of the “Investors” section. A print copy of the
Compensation Committee Charter 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.
The
Compensation Committee makes recommendations to the Board of Directors as to the
actual levels of compensation to be awarded to the chief executive officer and
the directors. The compensation of all other named executive officers
(as defined on the following page) is determined by the Committee after
consultation with the chief executive officer and is based upon an evaluation of
current market compensation levels for comparable positions and an assessment of
the officer’s performance during the business plan year based on discussions
with the chief executive officer. Neither the chief executive officer
nor any other named executive officer is present during deliberations on his or
her compensation by the Committee or the Board. The Compensation
Committee does not delegate any of its authority to other
persons.
During
2009, the Committee engaged Mercer (US) Inc. and Executive Compensation Services
Surveys (“Mercer”) as its independent compensation consultant. Mercer was
accountable to and reported directly to the Committee. The Committee asked
Mercer to provide (1) market data on executive and director compensation and (2)
information regarding compensation trends. The Committee met with
Mercer during the year, both in general committee session and in executive
session without management present. For 2010, the Committee has
engaged Mercer as its independent compensation consultant and, in addition to
requesting updates of the items requested for 2009, asked Mercer to provide
tally sheets for the chief executive officer and chief financial officer
positions.
—
Compensation Discussion and Analysis
General
Compensation Goals and Pay Elements
Farmer
Mac strives to operate a compensation program that will attract and retain
talented and dedicated employees and motivate them to act in our best interests
and those of our stockholders. To accomplish those goals, the
compensation program is designed to reward the execution of strategies
that:
|
·
|
accomplish
our Congressional mission as measured by increases in business volume and
net income (adjusted for non-economic accounting
conventions);
|
|
·
|
maintain
and enhance effective internal
controls;
|
|
·
|
align
compensation with overall risk tolerance of Farmer Mac;
and
|
|
·
|
enhance
stockholder value.
|
To
further the attainment of those goals, at the time that compensation was
established for 2009, the compensation program for the named executive officers
was designed to:
|
·
|
attract,
retain and motivate highly qualified
executives;
|
|
·
|
pay
for performance by linking a significant proportion of an executive’s
compensation to his or her overall individual contribution to Farmer Mac’s
growth and to the achievement of pre-established performance goals;
and
|
|
·
|
align
the interests of executives with the interests of
stockholders.
|
This
Compensation Discussion and Analysis provides an overview of our executive
compensation program, including:
|
·
|
the
general compensation principles and objectives of our executive
compensation program;
|
|
·
|
the
material elements of our executive compensation program and the process we
use for making executive compensation decisions;
and
|
|
·
|
information
about the 2009 compensation earned by the following officers (the “named
executive officers”):
|
|
o
|
Michael
A. Gerber, President and Chief Executive Officer (effective March 1, 2009
and Acting President and CEO prior to that
date);
|
|
o
|
Tom
D. Stenson, Executive Vice President and Chief Operating
Officer;
|
|
o
|
Timothy
L. Buzby, Vice President – Chief Financial Officer (effective April 2,
2009 and Vice President – Controller and Acting Treasurer prior to that
date);
|
|
o
|
Jerome
G. Oslick, Vice President – General
Counsel;
|
|
o
|
Mary
K. Waters, Vice President – Corporate Relations;
and
|
|
o
|
William
T. Sandalls, Jr., Acting CFO through March 31,
2009.
|
In 2009,
executive compensation at Farmer Mac was designed so that compensation levels
are consistent with levels required to attract and retain the talent needed to
execute Farmer Mac’s mission. The Committee strives to balance a
moderate base salary with the opportunity for the executives to realize value in
the form of annual and long-term incentives. The Committee is keenly
aware of the need to discourage excessive risk taking by its executives while
rewarding growth in stockholder value and believes that the Corporation’s
current programs strike an appropriate balance.
For each
named executive officer other than the president and chief executive officer,
the Committee considered recommendations of the chief executive officer in
addition to the above-described factors.
The total
compensation package for officers consists of the following elements, provided
with a view to offering a balanced compensation package:
|
·
|
annual
cash incentive pay;
|
|
·
|
long-term
non-cash incentive pay; and
|
|
·
|
retirement
and other benefits, most of which are similarly provided to all other
full-time employees.
|
On
September 30, 2008, the Board appointed Mr. Gerber as Acting President and Chief
Executive Officer, during which time Mr. Gerber continued to serve as Chief
Executive Officer of Farm Credit of Western New York (“FCWNY”), an Association
in the Farm Credit System. On October 1, 2008, the Board appointed
Mr. Buzby as Acting Treasurer. On October 20, 2008, Farmer Mac
entered into a consulting agreement with Mr. Sandalls under which he agreed to
serve as Acting Chief Financial Officer through March 31, 2009. On
April 2, 2009, the Board appointed Mr. Buzby as Vice President – Chief
Financial Officer.
Farmer
Mac entered into a Secondment Agreement with FCWNY to reimburse FCWNY for the
full costs (other than long-term incentive compensation), including salary,
short-term incentive compensation, medical, disability and life insurance and
automobile allowance, of Mr. Gerber’s employment during the time he served as
Farmer Mac’s Acting President and Chief Executive Officer. Under
Mr. Sandalls’ contract, Farmer Mac paid Mr. Sandalls an annual amount equal
to the base salary of the previous Chief Financial Officer. Farmer
Mac also paid for temporary housing costs in the District of Columbia for both
Mr. Gerber and Mr. Sandalls and reimbursed the acting executive officers for
living and travel expenses.
Benchmarking,
Peer Groups, Market Posture and Compensation Philosophy
Farmer
Mac was created by Congress to establish a secondary market for agricultural and
rural housing mortgages and rural utilities loans that would increase the
availability of credit for agricultural producers and rural utilities, provide
greater liquidity and lending capacity for agricultural and rural lenders and
facilitate intermediate- and long-term agricultural and rural
funding.
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 tasks necessary to develop and operate a secondary market for agricultural
mortgage and rural utilities loans where none had previously existed, and to
persevere in their efforts through what would include difficult and uncertain
years. The Board believes this approach continues to be sound, as
Farmer Mac 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 Committee undertook to compensate Farmer Mac’s named executive
officers in a manner consistent with compensation for executives in other
comparable businesses that involve similar duties and
responsibilities. The compensation program is designed to enable
Farmer Mac to attract and retain this caliber of talent.
Given
Famer Mac’s unique situation as a government-sponsored enterprise that is
regulated by the Farm Credit Administration, yet is also a publicly traded
financial services institution, it is difficult to find truly comparable
employees. The Committee worked with Mercer to identify a blend of
comparably sized publicly-traded financial service institutions and
mission-focused cooperative financial institutions. The Committee and
Mercer looked for organizations that were one-half to twice the size of Farmer
Mac and that had comparable business models or missions. The result is a peer
group that includes regional banks, Farm Credit System institutions, and other
financially oriented cooperatives. The peer group used for
determining the competitive market is:
|
·
|
Peoples’
United Financial, Inc.
|
|
·
|
Webster
Financial Corporation
|
|
·
|
National
Rural Utilities Cooperative Finance
Corporation
|
|
·
|
Farm
Credit Bank of Texas
|
|
·
|
MGIC
Investment Corporation
|
|
·
|
United
Bankshares, Inc.
|
|
·
|
Provident
Financial Services, Inc.
|
|
·
|
Investors
Bancorp, Inc.
|
In
addition to the above peers, the Committee reviewed compensation at
organizations that it deemed to be illustrative of potential sources for talent
in the future. These organizations may not have met the criteria to
be considered peers and were not used to determine the competitive market for
Farmer Mac executives. Instead, these organizations were studied to
enable the Committee to understand the competitive position of the Farmer Mac
compensation programs relative to the illustrative organizations. The
organizations that were included in this analysis were:
|
·
|
AgFirst
Farm Credit Bank
|
|
·
|
Federal
Home Loan Banks of:
|
|
·
|
Federal
Home Loan Bank Office of Finance, Washington,
D.C.
|
Additionally,
Mercer conducted a market pricing analysis by collecting survey market data for
each executive using published survey data. In collecting the data,
Mercer considered Farmer Mac’s asset size, targeting organizations with assets
one-half to twice those of Farmer Mac. The survey analysis was supplemental to
the peer group analysis and provided a broader industry perspective on
compensation. Data was collected from:
|
·
|
Mercer:
2008 US Global Premium Executive Remuneration
Suite
|
|
·
|
Watson
Wyatt Data Services: 2008/2009 Industry Report on Top Management
Compensation
|
The
Committee’s compensation philosophy is to position pay consistent with the
individual’s experience, tenure and performance. The target market
position for base salary is the market median of peers. However, this
may vary by individual named executive officer given the person’s experience,
tenure and performance. Similarly, the objective is to set
compensation aligned with the 50th
percentile of peer compensation through a combination of annual and long-term
performance incentives, while providing the executives with the opportunity to
achieve higher compensation levels, if merited. The targets under the
annual incentive plan are established each year and seek to balance asset and
earnings growth and risk management.
For 2009,
the Committee established four targets to quantify these
measures. They included:
|
·
|
Amount
of Core Earnings
|
|
·
|
New
Total Mission Volume
|
For 2010,
the Committee established four targets to quantify these
measures. They include:
|
·
|
Net
Program Volume Growth over prior
year
|
|
·
|
Increase
in Core Earnings over prior year
|
|
·
|
Adversely
Classified Assets as a Percentage of Risk
Funds
|
Each of
these goals is measured at business plan year-end. Through June 2009,
Farmer Mac’s business plan year ended on June 30. In a transition to
a calendar year business plan year in 2009, Farmer Mac had a “transition”
business plan year from July 1 through December 31, 2009. Therefore,
the named executive officers were eligible to receive two annual incentive
compensation payments with respect to 2009, one for the July 1, 2008 through
June 30, 2009 business plan year and another for the transition business plan
year, which amounts were pro-rated. Each goal is given a weighting
based on the expectations of the Committee and thresholds are established within
each goal to determine the actual levels of attainment necessary for
payout. While it is always a challenge to narrow down the results to
a small number of measures, these measures were chosen because they most closely
represent the business goals established by the Board and management for each
year and balancing the need for mission growth, earnings and disciplined
underwriting.
For the
long-term incentives, grants are awarded in the form of both stock appreciation
rights (“SARs”) and performance-vested restricted stock, with the value of each
being approximately equal. The Committee firmly believes that the
grants of SARs link the executives’ long-term incentive compensation to the
interests of investors in Farmer Mac. SARs only have realizable value
to the extent that the stockholders have received an increase in value over the
period that the SARs vest. The SARs vest ratably in installments over
three years. The restricted stock grants have been linked to Farmer
Mac’s performance so that they only vest at the end of approximately three years
if certain long-term performance targets are achieved. The
performance targets were developed with an eye toward balancing the need for
growth with the need to manage risk. Said another way, the
performance vesting targets were established to reward responsible
growth. The vesting targets established for the 2009 grants of
restricted stock are:
|
·
|
With
respect to 50% of the restricted stock grant, an annual compounded growth
rate of 5% in outstanding guarantees, loans and commitments from the
period starting on April 30, 2009 until December 31, 2011, measured
at those two dates; and
|
|
·
|
With
respect to 50% of the restricted stock
grant:
|
|
o
|
An
annual rate of net charge offs to the average balance of outstanding
guarantees, loans and commitments equal to or less than 20 basis points
for the period from June 1, 2009 to December 31, 2011, measured at those
two dates; and
|
|
o
|
The
average percentage of total non-performing assets (exclusive of
delinquencies of not more than 90 days) to guarantees, loans and
commitments of not greater than 2.5% from June 1, 2009 to December 31,
2011.
|
Compensation
Elements
The
purpose of each element of the pay program is discussed in more detail
below.
Base
Salary. Base salary was paid to provide current and
prospective executives with a predictable core amount of compensation,
regardless of our financial results, so long as they perform their duties in a
competent, professional manner. This pay element was set at a level
that, by itself, would provide executives with a level of financial security
commensurate with the competitive market, but not at a level expected to be
adequate alone to retain executives or motivate outstanding
performance.
Base
salary is reviewed annually by the Committee each February, at the end of the
calendar business plan year, as well as at the time of executive promotions or
other changes in responsibilities. Increases in salary normally take
effect on January 1, and did so in 2010 (there were no salary increases in 2009
that were not tied to the assumption of a new position).
The
Committee recommended to the Board the 2009 base salary for the chief executive
officer and determined the 2009 base salaries for the other named executive
officers based on an evaluation of each executive’s performance, experience,
level of responsibilities, level of base salary and peer group market data
provided by the Committee’s consultant (Mercer).
Annual Cash Incentive
Pay. Annual cash incentive pay was provided as a means of
motivating and rewarding outstanding performance by an executive against his or
her short-term goals, i.e., those slated for accomplishment in the current year
of the business plan.
Prior to
2010, Farmer Mac awarded annual incentive compensation based on performance
during the July 1 through June 30 business planning year. In 2009,
Farmer Mac transitioned from that business planning year to a calendar year
business planning year, with the second half of calendar 2009 being a “stub” or
transition planning year. For the July 2008 through June 2009
planning year, each individual whose individual performance was rated 60% or
higher earned varying percentages of his or her annual cash incentive pay
targeted bonus, determined formulaically pursuant to the table at the top of the
next page. Farmer Mac reached or exceeded the target set forth in the
“Threshold” column for “New total mission volume” and did not reach the targets
set forth in the “Threshold” column for “Core earnings” or “Delinquency rate and
net charge-offs” with respect to corporate performance measures during the
2008-09 planning year. Accordingly, annual cash incentive pay for the
named executive officers employed as of June 30, 2008 was awarded based on the
85.55% target level with respect to the 28% weight (23.95%) related to the
achievement of the “New total mission volume” corporate performance
measure. For the second half of the 2009 planning year, Farmer Mac
reached or exceeded the targets set forth in the target column for “Core
earnings,” the threshold column for “Program asset volume,” and the maximum
column for “net charge-offs.” The threshold level was not met for
“Delinquency rate” in the second half of 2009. When combined, the
level of incentive achieved for the second half of 2009 before taking into
account personal performance was 62.9%. Each of those calculations
was then multiplied by each officer’s Committee established personal annual
incentive compensation percentage to arrive at the final annual incentive
compensation payment for each named executive officer. Annual
incentive compensation payments with respect to the 2008-09 business plan year
were paid in July 2009; the annual incentive payments for the second half of
2009 were paid in April 2010.
In
measuring performance against defined levels based upon business plan objectives
and results, the Committee made comparisons to performance criteria established
by the Board and management in the business plan. In addition,
individual performance (total 30% weight) was assessed in three
categories:
|
·
|
Accountabilities – How
well the incumbent performed the principal day-to-day accountabilities of
the position. All officers are responsible for maintaining
appropriate internal controls in their
areas.
|
|
·
|
Problem Handling – How
well the incumbent handled or responded to problems and unplanned or
changed assignments, projects, conditions and other similar
situations.
|
|
·
|
Managerial Skills – An
assessment of managerial skills, including forecasting, budgeting,
establishing and implementing appropriate policies and procedures,
interaction, teamwork and
communication.
|
For the
2008-09 business plan year, each individual whose individual performance was
rated 60% or higher earned varying percentages of his or her annual cash
incentive pay targeted bonus, determined formulaically pursuant to the following
table:
Measure
|
|
Weight
|
|
|
Threshold
(Pays 50%)
|
|
Target
(Pays 100%)
|
|
Maximum
(Pays 200%)
|
|
Result
|
Core
earnings
|
|
|
28 |
% |
|
75%
of Business Plan
|
|
100%
of Business Plan
|
|
20%
payout above 100% of Business Plan up to additional 100% of
bonus
|
|
Did
not reach Threshold
|
New
total mission volume
|
|
|
28 |
% |
|
$2.3
billion
|
|
$3.1 billion
|
|
$6.0 billion
|
|
$2.8
billion
Paid
23.95%
|
Delinquency
rate and net charge-offs
|
|
|
14 |
% |
|
<0.75%
90-day delinquencies
Net
charge-offs .02% of average unpaid principal balance
|
|
<0.4%
90-day delinquencies
Net
charge-offs .01% of average unpaid principal balance
|
|
<0.15%
90-day delinquencies
Net
charge-offs = 0
|
|
Did
not reach Threshold
|
Individual
rating
|
|
|
30 |
% |
|
Rating
of 60%
|
|
Rating
of 80%
|
|
Rating
of 100%
|
|
|
Total
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
For the
second half 2009 transition business plan year, each individual whose individual
performance was rated 60% or higher earned varying percentages of his or her
targeted bonus, determined formulaically pursuant to the following
table:
Measure
|
|
Weight
|
|
|
Threshold
(Pays 50%)
|
|
Target
(Pays 100%)
|
|
Maximum
(Pays 200%)
|
|
Result
|
Core
earnings
|
|
|
28 |
% |
|
$5.0
million
|
|
$10.0
million
|
|
$15
million
|
|
$10.8
million
Paid
30.2%
|
Program
asset volume
|
|
|
28 |
% |
|
$10.6 billion
|
|
$10.9 billion
|
|
$11.1
billion
|
|
$10.7
billion
Paid
18.7%
|
Delinquency
rate and net charge-offs
|
|
|
7 |
% |
|
<0.75%
90-day delinquencies;
|
|
<0.4%
90-day delinquencies;
|
|
<0.15%
90-day delinquencies;
|
|
Did
not reach Threshold
|
|
|
|
7 |
% |
|
Net
charge-offs <= 0.03% of average unpaid principal balance
($3.2
million)
|
|
Net
charge-offs <= 0.02% of average unpaid principal balance ($2.2
million)
|
|
Net
charge-offs
<=
0.01%
($1.1
million)
|
|
$530,000
Paid
14.0%
|
Individual
rating
|
|
|
30 |
% |
|
Rating
of 60%
|
|
Rating
of 80%
|
|
Rating
of 100%
|
|
|
Total
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
For the
second half of 2009, no annual incentive compensation would have been paid if
the following conditions had not all been met:
|
·
|
Farmer
Mac was in compliance with its capital requirements at each
measurement;
|
|
·
|
Earnings
after dividends was sufficient to pay the incentive compensation;
and
|
|
·
|
Farmer
Mac was not under any regulatory enforcement
action.
|
In both
the 2008-09 and transition second half of 2009 business plan years, performance
between any two of the target points was interpolated on a straight-line
basis. The Board retains discretion to award no annual cash incentive
pay in appropriate circumstances regardless of the achievement of corporate
performance targets.
For the
calendar 2010 business plan year, each individual will earn varying percentages
of his or her targeted bonus, determined formulaically pursuant to the following
table:
Measure
|
|
Weight
|
|
|
Threshold
(Pays 50%)
|
|
|
Target
(Pays 100%)
|
|
|
Maximum
(Pays 200%)
|
|
Core
earnings
|
|
|
30 |
% |
|
5%
increase
over
2009
|
|
|
10%
increase
over
2009
|
|
|
15%
increase
over
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program
asset volume
|
|
|
30 |
% |
|
5%
increase
|
|
|
10%
increase
|
|
|
15%
increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adversely
Classified Assets/Risk Funds (permanent capital plus allowance for
loss)
|
|
|
20 |
% |
|
|
100 |
% |
|
|
60 |
% |
|
|
40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs as a percentage of total on and off balance sheet
assets
|
|
|
20 |
% |
|
|
0.12 |
% |
|
|
0.08 |
% |
|
|
0.05 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
For 2010,
no annual incentive compensation will be paid unless all three of the following
criteria are met:
|
·
|
Farmer
Mac has positive core earnings of at least $5.0 million after the
allowance for losses and preferred stock
dividends;
|
|
·
|
Farmer
Mac is in compliance with the risk-based capital standards and has an
excess of at least $90 million above the statutory minimum capital
requirement; and
|
|
·
|
There
is no regulatory enforcement action taken against Farmer
Mac.
|
Long-Term Incentive
Pay. Long-term incentive pay, in the form of at-the-market
SARs and performance-based restricted stock grants in 2009, was meant as a means
of paying for performance and aligning the interests of executive officers with
the interests of stockholders. Market-level grants also serve to
retain executives in our employ over the longer term.
In 2009, SARs awards to officers were
made at the Board meeting held in conjunction with the Annual Meeting of
Stockholders, and the exercise price is the closing price on the date of
award. The restricted stock grants to officers were also made at the
Board meeting held in conjunction with the Annual Meeting of
Stockholders. In setting the 2009 stock awards, the Committee
acknowledged that the stock price had significantly dropped in
value. However, the Committee did not feel that grants for the year
should be calculated based on value thereby giving management larger numbers of
SARs to achieve the same economic value. In determining the equity
awards, the Committee determined a reasonable number of shares that was less
than in prior years and then tested the economic value of the awards against the
market to confirm reasonableness. The restricted stock granted to
officers in 2009 vests on March 31, 2012, subject to Farmer Mac’s successful
attainment of the performance targets identified on page 25.
Retirement
Plans. Farmer Mac provides retirement benefits for all
employees through a Money Purchase Plan, pursuant to which the Corporation
annually contributes 13.2% of each employee’s base compensation up to the Social
Security wage base (which in 2009 was $106,800), and 18.9% of each employee’s
base compensation above the Social Security wage base, up to the compensation
limit set by the Internal Revenue Service, which in 2009 was
$245,000. Farmer Mac also offers a 401(k) plan to which
employees may make retirement contributions, but to which the Corporation makes
no contributions. Farmer Mac does not maintain any supplemental
retirement plan for executives.
Other
Benefits. The Corporation contractually provides a term life
insurance policy with a face amount approximately equal to one year’s base
compensation for each of the named executive officers who currently serve as
officers of Farmer Mac, as well as long-term disability
insurance. Those named permanent executive officers also participate
in Farmer Mac’s other benefit plans on the same terms as other
employees. These plans include medical and dental insurance and a
$50,000 group term life insurance policy.
Payments
in Connection with a Change-in-Control
Farmer
Mac’s statutory charter is written in a way that substantially precludes any
change-in-control through voting rights associated with its Class A and B voting
common stock. Accordingly, no provision is made for payments to named
executive officers in connection with any change-in-control.
Post-Employment
Compensation
Messrs. Gerber, Buzby and Stenson have
employment agreements that provide for severance payments in the event the
contracts are terminated by Farmer Mac other than for cause. These
termination provisions are described in “Compensation of Executive Officers —
Potential Payments upon Termination (Employment Agreements with Officers)” and
are included in the contracts because they are typically included in similar
agreements among peers and are beneficial retention provisions.
Impact
of Accounting and Tax Treatment on Compensation Awards
Section
162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1
million on the amount of compensation that the Corporation may deduct in any one
year with respect to each of its five most highly paid executive
officers. There is an exception to the limitation for
“performance-based compensation” meeting certain requirements. There
was no Section 162(m) impact on payments to any named executive officer made in
respect of the 2009 tax year.
Farmer
Mac has not historically taken into consideration the impact of the accounting
treatment of compensation to named executive officers in determining their
compensation. Farmer Mac’s compensation program does, however,
discount the impact of SFAS 133 and SFAS 123(R) in the determination of income
for compensation purposes.
Farmer
Mac’s Policies Regarding Stock Ownership and Trading
Farmer
Mac has no policies that require a particular level of stock ownership by named
executive officers. Farmer Mac has a policy on insider trading by all
directors and employees, including named executive officers, that requires
compliance with securities laws and Farmer Mac policies on insider trading
(including “windows” for sale of stock and the adoption of Rule 10b5-1 plans)
and prohibits trading in options on Farmer Mac securities.
Compensation
Consultant Fees
Compensation
Committee.
Mercer
billed Farmer Mac an aggregate $204,912 for 2009 for professional services
rendered for the Compensation Committee.
Other
Work.
In 2009,
Mercer billed Farmer Mac $985 for evaluations of two non-officer positions, work
that was not pre-approved by the Compensation Committee.
Compensation Committee
Pre-Approval Policies
Commencing
in 2010, the Compensation Committee considers and pre-approves, as appropriate,
all permissible non-Committee contracted-for services provided by the
Committee’s compensation consultant prior to the Corporation’s engagement of the
compensation consultant with respect to such services.
—
Compensation Committee Report
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 or the Exchange Act, the Compensation
Committee Report on Executive Compensation will not be deemed to be incorporated
by reference into any Offering Circular or any filing under the Securities Act
or the Exchange Act, except to the extent Farmer Mac specifically incorporates
such information by reference, and will not otherwise be deemed to have been or
to be filed under such Acts.
The Compensation Committee has
reviewed and discussed the Compensation Discussion and Analysis contained herein
with management, and, based on that review and discussion, has recommended to
the Board of Directors that the Compensation Discussion and Analysis be included
in this Proxy Statement and in the Annual Report.
Compensation
Committee
Dennis
L. Brack, Chairman
|
Ernest
M. Hodges
|
Mitchell
A. Johnson
|
Lowell
L. Junkins
|
Glen
O. Klippenstein
|
John
Dan Raines
|
—
Compensation Committee Interlocks and Insider Participation
Directors Brack, Hodges, Johnson,
Junkins, Klippenstein and Raines comprise Farmer Mac’s Compensation
Committee. None of these directors is, or has been, a Farmer Mac
officer or employee, and none had any relationship requiring disclosure by
Farmer Mac as a “related person transaction” under SEC rules. None of
Farmer Mac’s executive officers serves, or has served, as a member of the Board
or the Compensation Committee or as a director of another SEC-reporting entity,
except for Michael Gerber. Mr. Gerber, who was member of the Board
from June 7, 2007 through February 28, 2009, was Acting President and Chief
Executive Officer of the Corporation from September 30, 2008 through February
28, 2009 and since then has been President and Chief Executive
Officer.
—Compensation
of Executive Officers
Summary
Compensation Table
The
following table sets forth certain information with respect to the compensation
awarded to, earned by, or paid to Farmer Mac’s chief executive officer, chief
financial officer and each of Farmer Mac’s five other most highly compensated
executive officers (the “named executive officers”) for the fiscal year ended
December 31, 2009.
Name and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
|
|
|
Restricted
Stock
Awards1
|
|
|
Option/SARs
Awards2
|
|
|
Non-Equity
Incentive
Compensation3
|
|
|
All Other
Compensation4
|
|
|
Total
|
|
Michael
A. Gerber
|
|
2009
|
|
$ |
528,990 |
5 |
|
$ |
148,250 |
|
|
$ |
206,205 |
|
|
$ |
648,544 |
|
|
$ |
368,647 |
7
|
|
$ |
1,900,636
|
|
President
and CEO
|
|
2008
|
|
|
131,712 |
6 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
131,712 |
|
(commencing
10/1/08)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
T. Sandalls, Jr.
|
|
2009
|
|
|
161,690 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
161,690 |
|
Acting
CFO
|
|
2008
|
|
|
70,113 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
70,113 |
|
(10/20/08
- 3/31/09)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom
D. Stenson
|
|
2009
|
|
|
366,097 |
|
|
|
118,600 |
|
|
|
164,964 |
|
|
|
281,192 |
|
|
|
71,913 |
|
|
|
1,002,766 |
|
Executive
Vice President and COO
|
|
2008
|
|
|
346,716 |
|
|
|
|
|
|
|
514,899 |
|
|
|
248,997 |
|
|
|
66,527 |
|
|
|
1,177,139 |
|
|
|
2007
|
|
|
303,434 |
|
|
|
|
|
|
|
659,309 |
|
|
|
318,875 |
|
|
|
64,702 |
|
|
|
1,346,320 |
|
Timothy
L. Buzby
|
|
2009
|
|
|
289,078 |
|
|
|
118,600 |
|
|
|
164,964 |
|
|
|
172,895 |
|
|
|
78,915 |
|
|
|
824,453 |
|
Vice
President – CFO8
|
|
2008
|
|
|
253,591 |
|
|
|
|
|
|
|
235,708 |
|
|
|
140,008 |
|
|
|
72,089 |
|
|
|
701,396 |
|
|
|
2007
|
|
|
243,358 |
|
|
|
|
|
|
|
330,890 |
|
|
|
193,225 |
|
|
|
66,561 |
|
|
|
834,034 |
|
Jerome
G. Oslick
|
|
2009
|
|
|
281,542 |
|
|
|
59,300 |
|
|
|
82,482 |
|
|
|
138,474 |
|
|
|
76,373 |
|
|
|
638,171 |
|
Vice
President – General Counsel
|
|
2008
|
|
|
278,554 |
|
|
|
|
|
|
|
213,223 |
|
|
|
129,786 |
|
|
|
70,260 |
|
|
|
691,823 |
|
|
|
2007
|
|
|
267,313 |
|
|
|
|
|
|
|
214,344 |
|
|
|
100,603 |
|
|
|
65,202 |
|
|
|
647,462 |
|
Mary
K. Waters
|
|
2009
|
|
|
194,834 |
|
|
|
44,475 |
|
|
|
61,862 |
|
|
|
86,858 |
|
|
|
68,017 |
|
|
|
456,045 |
|
Vice
President – Corporate Relations9
|
|
2008
|
|
|
183,133 |
|
|
|
|
|
|
|
179,176 |
|
|
|
87,998 |
|
|
|
62,793 |
|
|
|
513,099 |
|
|
|
2007
|
|
|
156,365 |
|
|
|
|
|
|
|
225,709 |
|
|
|
109,145 |
|
|
|
50,960 |
|
|
|
542,179 |
|
1The grant date fair value for each
share of the restricted stock awarded in 2009 was $5.93, which was the price of
the stock on the date granted.
2 The valuation of the option and SARs
awards was the aggregate grant date fair value computed in accordance with FASB
ASC Topic 718 and was determined based on applying the assumptions used in Note
9 to the financial statements on page 162 of Farmer Mac’s Annual Report on Form
10-K for the year ended December 31, 2009.
3 For 2009, amounts in this column are
comprised of incentive compensation paid in 2009 with respect to Business Plan
Year July 1, 2008-June 30, 2009 and paid in 2010 with respect to the second half
of 2009 in the following amounts: Mr. Gerber, $166,667 with respect to 2008-09,
$273,544 with respect to the second half of 2009; Mr. Stenson, $156,736 with
respect to 2008-09, $124,456 with respect to the second half of 2009; Mr. Buzby,
$91,732 with respect to 2008-09, $81,163 with respect to the second half of
2009; Mr. Oslick, $68,101 with respect to 2008-09, $70,373 with respect to
the second half of 2009; and Ms. Waters $47,213 with respect to 2008-09, 39,645
with respect to the second half of 2009.
4 Includes
contributions to the Corporation’s defined contribution pension plan in the
amount of $40,217 for 2009 on behalf of Messrs. Gerber, Buzby, Stenson and
Oslick and $30,736 for Ms. Waters, as well as health, disability and life
insurance premium payments paid on behalf of each of the named executive
officers (other than the acting executive officers). See “Employment
Agreements.” For Mr. Gerber and Mr. Sandalls, Farmer Mac paid for
temporary living expenses in the District of Columbia through May 2009 and March
2009, respectively.
5 In 2008 and through February 2009,
Farmer Mac reimbursed Mr. Gerber’s employer, Farm Credit of Western New York,
ACA, for the full amount he was paid in his permanent position, including
salary, short-term incentive compensation, medical, disability and life
insurance and automobile allowance.
6 Includes relocation allowance of
$150,000 and payments of $222,917 upon execution of Mr. Gerber’s
contract.
7 Effective
March 1, 2009, Farmer Mac entered into an employment agreement with Mr. Gerber
as President and Chief Executive Officer. That agreement is described
in Farmer Mac’s Current Report on Form 8-K filed with the SEC on March 18,
2009.
8 Mr.
Buzby was Vice President – Controller and Acting Treasurer until April 2, 2009
when he was appointed Vice President – Chief Financial Officer (Mr. Buzby was
also appointed Treasurer on October 8, 2009).
9 Ms.
Waters resigned her position as of April 5, 2010.
Grants
of Plan-Based Awards Table
The table below sets forth, as to each
of the named executive officers, the following information with respect to SARs
grants during 2009: (1) the grant date of SARs granted under the 2008
Omnibus Incentive Plan; (2) the number of shares of Class C Non-Voting Common
Stock underlying SARs granted; (3) the exercise price of such SARs; and
(4) the grant date fair value of such SARs under the Black-Scholes option
pricing model.
Name
|
|
Grant Date
|
|
|
Number of
Securities
Underlying SARs1
(#)
|
|
|
Exercise Price of
SARs Awards
($/Share)
|
|
|
Grant Date
Fair Value of SARs
Awards2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
A. Gerber
|
|
June
4, 2009
|
|
|
|
50,000 |
|
|
$ |
5.93 |
|
|
$ |
206,205 |
|
William
T. Sandalls, Jr.
|
|
—
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Tom
D. Stenson
|
|
June
4, 2009
|
|
|
|
40,000 |
|
|
|
5.93 |
|
|
|
164,964 |
|
Timothy
L. Buzby
|
|
June
4, 2009
|
|
|
|
40,000 |
|
|
|
5.93 |
|
|
|
164,964 |
|
Jerome
G. Oslick
|
|
June
4, 2009
|
|
|
|
20,000 |
|
|
|
5.93 |
|
|
|
82,482 |
|
Mary
K. Waters
|
|
June
4, 2009
|
|
|
|
15,000 |
|
|
|
5.93 |
|
|
|
61,862 |
|
1 SARs
granted in 2009 expire 10 years from the grant date and vest in
installments: one-third vests on each of May 31, 2010, May 31, 2011
and May 31, 2012.
2 The fair
value at grant date of SARs granted during 2009 has been estimated using the
Black-Scholes option pricing model with the following assumptions: a
dividend yield of 3.2%; an expected volatility of 103.6%; a risk-free interest
rate of 1.6%; and an expected life of seven years, resulting in a value of
approximately $4.12 per share.
Outstanding
Equity Awards at Year End
The
following table sets forth certain information relating to stock options
previously granted to the named executive officers as of December 31,
2009.
Name
|
|
Number of
Shares
Underlying
Unexercised
Options
#
Exercisable
|
|
|
Number of Shares
Underlying
Unexercised Options
#
Unexercisable1
|
|
|
Option
Exercise Price
|
|
|
Option
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
A. Gerber
|
|
|
4,000 |
|
|
|
2,000 |
|
|
$ |
29.33 |
|
|
6/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
T. Sandalls, Jr.
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom
D. Stenson
|
|
|
26,951 |
|
|
|
— |
|
|
|
31.24 |
|
|
6/7/2011
|
|
|
|
|
25,901 |
|
|
|
— |
|
|
|
29.10 |
|
|
6/6/2012
|
|
|
|
|
35,870 |
|
|
|
— |
|
|
|
19.86 |
|
|
8/11/2014
|
|
|
|
|
44,478 |
|
|
|
— |
|
|
|
20.61 |
|
|
6/16/2015
|
|
|
|
|
42,345 |
|
|
|
— |
|
|
|
26.36 |
|
|
6/1/2016
|
|
|
|
|
37,372 |
|
|
|
18,686 |
|
|
|
29.33 |
|
|
6/7/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
L. Buzby
|
|
|
4,627 |
|
|
|
— |
|
|
|
31.02 |
|
|
6/13/2011
|
|
|
|
|
13,975 |
|
|
|
— |
|
|
|
29.10 |
|
|
6/6/2012
|
|
|
|
|
14,023 |
|
|
|
— |
|
|
|
22.40 |
|
|
6/5/2013
|
|
|
|
|
12,916 |
|
|
|
— |
|
|
|
19.86 |
|
|
8/11/2014
|
|
|
|
|
19,203 |
|
|
|
— |
|
|
|
20.61 |
|
|
6/16/2015
|
|
|
|
|
23,043 |
|
|
|
— |
|
|
|
26.36 |
|
|
6/1/2016
|
|
|
|
|
18,756 |
|
|
|
9,378 |
|
|
|
29.33 |
|
|
6/7/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
G. Oslick
|
|
|
22,483 |
|
|
|
— |
|
|
|
31.24 |
|
|
6/7/2011
|
|
|
|
|
18,410 |
|
|
|
— |
|
|
|
29.10 |
|
|
6/6/2012
|
|
|
|
|
25,750 |
|
|
|
— |
|
|
|
22.40 |
|
|
6/5/2013
|
|
|
|
|
10,091 |
|
|
|
— |
|
|
|
26.36 |
|
|
6/1/2016
|
|
|
|
|
18,178 |
|
|
|
— |
|
|
|
29.33 |
|
|
6/7/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary
K. Waters2
|
|
|
3,000 |
|
|
|
— |
|
|
|
20.50 |
|
|
7/5/2010
|
|
|
|
|
13,082 |
|
|
|
— |
|
|
|
26.36 |
|
|
7/5/2010
|
|
|
|
|
12,794 |
|
|
|
6,397 |
|
|
|
29.33 |
|
|
7/5/2010
|
|
1 Mr.
Gerber’s unexercisable options that expire in 2012 vest on May 31,
2010. Ms. Waters’ and Messrs. Stenson’s and Buzby’s
unexercisable options that expire in 2017 vest on May 31, 2010.
2 Ms.
Waters resigned from Farmer Mac as of April 5, 2010, accelerating the expiration
date of her options to 90 days after the termination of her
employment.
The
following table sets forth certain information relating to SARs previously
granted to the named executive officers as of December 31, 2009.
Name
|
|
Number of Shares
Underlying
Unexercised SARs
#
Exercisable
|
|
|
Number of Shares
Underlying
Unexercised SARs
#
Unexercisable1
|
|
|
SARs
Exercise Price
|
|
|
SARs
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
A. Gerber
|
|
|
— |
|
|
|
50,000 |
|
|
$ |
5.93 |
|
|
6/4/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
T. Sandalls, Jr.
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom
D. Stenson
|
|
|
14,205 |
|
|
|
28,412 |
|
|
|
28.94 |
|
|
6/5/2018
|
|
|
|
|
— |
|
|
|
40,000 |
|
|
|
5.93 |
|
|
6/4/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
L. Buzby
|
|
|
6,503 |
|
|
|
13,006 |
|
|
|
28.94 |
|
|
6/5/2018
|
|
|
|
|
— |
|
|
|
40,000 |
|
|
|
5.93 |
|
|
6/4/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
G. Oslick
|
|
|
5,882 |
|
|
|
11,764 |
|
|
|
28.94 |
|
|
6/5/2018
|
|
|
|
|
— |
|
|
|
20,000 |
|
|
|
5.93 |
|
|
6/4/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary
K. Waters
|
|
|
4,943 |
|
|
|
9,887 |
|
|
|
28.94 |
|
|
6/5/2018
|
|
|
|
|
— |
|
|
|
15,000 |
|
|
|
5.93 |
|
|
6/4/2019
|
|
1
Unexercisable SARs that expire in 2019 vest one-third on each of May 31, 2010,
2011 and 2012; unexercisable SARs that expire in 2018 vest one-half on each of
May 31, 2010 and 2011.
The
following table sets forth certain information relating to restricted stock
previously granted to the named executive officers as of December 31,
2009.
Name
|
|
Number of
Unvested Shares of
Restricted Stock
Unexercisable
|
|
|
Market Value of
Unvested Shares of
Restricted Stock
|
|
|
Vesting Date1
|
|
|
|
|
|
|
|
|
|
|
|
Michael
A. Gerber
|
|
|
25,000 |
|
|
$ |
175,250 |
|
|
March
31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
T. Sandalls, Jr.
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom
D. Stenson
|
|
|
20,000 |
|
|
|
140,200 |
|
|
March
31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
L. Buzby
|
|
|
20,000 |
|
|
|
140,200 |
|
|
March
31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
G. Oslick
|
|
|
10,000 |
|
|
|
70,100 |
|
|
March
31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary
K. Waters
|
|
|
7,500 |
|
|
|
53,250 |
|
|
|
N/A |
2 |
__________________________
1 With
respect to 50% of the restricted stock grant, an annual compounded growth rate
of 5% in outstanding guarantees, loans and commitments from the period starting
on May 1, 2009 until December 31, 2011, measured at those two dates;
and
With
respect to 50% of the restricted stock grant:
|
•
|
An
annual rate of net charge offs to the average balance of outstanding
guarantees, loans and commitments equal to or less than 20 basis points
for the period from May 1, 2009 to December 31, 2011, measured at those
two dates; and
|
|
•
|
The
average percentage of total non-performing assets (exclusive of
delinquencies of not more than 90 days) to guarantees, loans and
commitments of not greater than 2.5% from May 1, 2009 to December 31,
2011.
|
2 Ms.
Waters resigned her position as an executive officer prior to her restricted
stock vesting.
Option
and SAR Exercises
None of
the named executive officers exercised any stock options or SARs in
2009.
Equity
Compensation Plans
The
following table sets forth certain information relating to compensation plans
under which equity securities are authorized to be issued as of December 31,
2009.
Plan category
|
|
Number of securities
to be issued upon
exercise of
outstanding options,
SARs or restricted
stock
|
|
|
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
|
|
|
1,404,861 |
|
|
$ |
25.68 |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by stockholders
|
|
|
595,152 |
|
|
$ |
7.94 |
|
|
|
1,400,928 |
|
2008
Plan. In 2008, the Board adopted, and the voting stockholders
approved, the 2008 Omnibus Incentive Plan (the “2008 Plan”), a broad-based
incentive compensation plan for directors, officers and non-officer
employees. Subject to adjustment, the total number of shares of
common stock reserved and available for delivery pursuant to awards under the
Plan will be: (1) 1,500,000 shares of common stock; plus (2) any shares
subject to outstanding awards under the 1997 Plan that cease for any reason to
be subject to such awards (other than by reason of exercise or settlement of the
awards to the extent they are exercised for or settled in vested and
nonforfeitable shares) up to an aggregate maximum of 1,000,000
shares. Under the 2008 Plan, no participant may be granted stock
option awards relating to more than 300,000 shares of common stock during any
calendar year, and may be granted no more than 150,000 shares each of restricted
stock, performance shares, performance units or other stock-based
awards. The maximum aggregate amount awarded or credited with respect
to cash-based awards to any one participant in any one plan year may not exceed
the value of $2,000,000 determined as of the date of vesting or payout, as
applicable.
The terms
of the 2008 Plan are intended to, among other things, permit the Compensation
Committee to impose performance goals with respect to any award, thereby
requiring forfeiture of all or part of any award if such performance goals are
not met, or linking the time or amount of exercisability, vesting, payment or
settlement of an award to the achievement of performance goals. The
2008 Plan provides that the performance goals will be based on certain specified
business criteria which are intended to encompass a wide range of financial and
operational activities of the Corporation on a consolidated basis and/or for
specified subsidiaries or business units of the Corporation. For
example, the business criteria used by the Committee in establishing the
performance goals for such awards includes, but is not limited to:
|
(a)
|
Net
earnings or net income (before or after taxes, the impact of changes in
the fair value of derivatives, stock plan expenses, yield maintenance
and/or loan losses) or any other measure that uses all or part of such
components;
|
|
(c)
|
Revenues
or mission volume or growth
therein;
|
|
(d)
|
Net
operating profit;
|
|
(e)
|
Return
measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or
revenue);
|
|
(f)
|
Cash
flow (including, but not limited to, operating cash flow, free cash flow,
cash flow return on equity, and cash flow return on
investment);
|
|
(g)
|
Earnings
before or after taxes, interest, depreciation, and/or
amortization;
|
|
(h)
|
Gross
or operating margins;
|
|
(j)
|
Share
price (including, but not limited to, growth measures and total
shareholder return);
|
|
(m)
|
Operating
efficiency;
|
|
(o)
|
Customer
satisfaction;
|
|
(p)
|
Working
capital targets;
|
|
(s)
|
Economic
value added or EVA (net operating profit after tax minus the sum of
capital multiplied by the cost of
capital).
|
Any performance measure(s) may be used
to measure the performance of the Corporation as a whole or any business unit of
the Corporation, or any combination thereof, as the Compensation Committee may
deem appropriate, or any of the above performance measures as compared to the
performance of a group of comparator companies, or published or special index
that the Compensation Committee, in its sole discretion, deems appropriate, or
the Corporation may select performance measure (j) above as compared to various
stock market indices. The Compensation Committee also has the authority to
provide for accelerated vesting of any award based on the achievement of
performance goals pursuant to the performance measures.
Performance goals may differ for awards
to different participants. The Compensation Committee will specify
the weighting to be given to each business criterion for purposes of determining
the final amount payable with respect to an award. All determinations
by the Compensation Committee as to the attainment of performance goals will be
in writing. The Compensation Committee may not delegate any
responsibility with respect to an award that is intended to qualify as
“performance-based compensation” under Internal Revenue Code section
162(m).
As of
December 31, 2009, SARs covering 394,604 shares (net of cancellations) and
200,548 shares of restricted stock had been granted under the 2008 Plan and
496,080 options granted under the 1997 Plan were cancelled and added to shares
available under the 2008 Plan in 2009, leaving 1,400,928 shares of Class C
Non-Voting Common Stock available for future issuance of grants under the 2008
Plan as of that date. SARs granted under the 2008 Plan during 2009
have exercise prices ranging from $5.93 to $7.78 per share.
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 1997 Plan provides for the
automatic annual grant to directors of five-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 of Stockholders, 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 generally 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.
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, 2009, options covering 3,748,997 shares (net of cancellations) were
granted under the 1997 Plan, of which 1,404,861 remain
outstanding. As of December 31, 2009, no shares of Class C
Non-Voting Common Stock remained available for future issuance of option grants
under the 1997 Plan.
Potential
Payments upon Termination (Employment Agreements with Officers)
The
Corporation has entered into employment agreements (each an “Agreement,”
collectively, the “Agreements”) with members of senior management (for purposes
of this section, the “officers”), including the named executive officers who
currently serve as officers of Farmer Mac other than Mr. Oslick, 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, 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 their
execution, 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. The Agreements with Messrs. Buzby and Stenson expire on
July 1, 2012; the Agreement with Mr. Gerber expires on July 1,
2011.
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 four named executive officers who currently serve as officers of Farmer Mac
are: Mr. Gerber, $550,000; Mr. Buzby, $340,000; Mr. Oslick, $295,619; and
Mr. Stenson, $384,402. Awards of incentive compensation are
considered annually at the end of the calendar year and are determined and
payable under the circumstances discussed above in “Compensation Discussion and
Analysis.”
The
Agreements provide that each officer is entitled to certain benefits, such as
disability insurance, health insurance, dental insurance and life insurance
which, with respect to disability and life insurance, are above the levels
provided to employees generally. Mr. Oslick receives benefits
comparable to those provided for in the Agreements. See the Summary
Compensation Table for information on other benefits extended to the named
executive officers.
Mr.
Gerber’s Agreement also provides that if his employment is terminated other than
“for cause” he will be paid severance in the amount of twice his base
salary. The Agreements of the other officers 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, in which event the officer will be paid
only accrued compensation to the date of termination.
The
following table shows the total that would be payable to the current named
executive officers who currently are officers of Farmer Mac in the event of a
termination without cause.
Name
|
|
Termination Payment
|
|
Michael
A. Gerber
|
|
$ |
1,100,000 |
|
Tom
D. Stenson
|
|
|
768,804 |
|
Timothy
L. Buzby
|
|
|
680,000 |
|
Jerome
G. Oslick
|
|
|
N/A |
|
—
Certain Relationships and Related Person Transactions
Review
of Related Person Transactions
The Board
of Directors has adopted a written Related Person Transactions Approval Policy
that is administered by the Corporate Governance Committee. This
policy applies to any transaction or series of transactions in which Farmer Mac
is a participant, the amount involved exceeds $120,000 and a “related person”
has a direct or indirect material interest. The policy requires each
director or executive officer involved in such a transaction to notify the
General Counsel of each such transaction. Farmer Mac reviews all
relationships and transactions in which the Corporation and its directors and
executive officers or their immediate family members are participants to
determine whether such persons have a direct or indirect material
interest. The Corporation’s legal staff is primarily responsible for
the development and implementation of processes and controls to obtain
information from the directors and executive officers with respect to related
person transactions. Under the policy, the General Counsel will
determine whether a transaction meets the requirements of a “related person
transaction” requiring review by the Corporate Governance
Committee. Transactions that fall within this definition will be
referred to the Committee for approval, ratification or other
action. Based on its consideration of all of the relevant facts and
circumstances, the Corporate Governance Committee will decide whether or not to
approve the transaction and will approve only those transactions that are in the
best interests of the Corporation. If the Corporation becomes aware
of an existing related persons transaction that has not been approved under this
policy, the matter will be referred to the Corporate Governance Committee, which
will then evaluate all options available, including ratification, revision or
termination of the transaction. A related person transaction entered
into without the Committee’s pre-approval will not violate this policy, or be
invalid or unenforceable, so long as the transaction is brought to the Committee
as promptly as reasonably practical after it is entered into or after it becomes
reasonably apparent that the transaction is covered by this
policy. Transactions that are determined to be directly or indirectly
material to Farmer Mac or a related person are disclosed in the Corporation’s
Proxy Statement as required under SEC rules.
Transactions
with Related Persons in 2009
From time
to time, Farmer Mac purchases or commits to purchase qualified loans,
USDA-guaranteed portions or AgVantage®
securities from, or enters into other business relationships with, institutions
that own 5% 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. To the extent such transactions involve
indebtedness issued by the related person, those transactions were made on
substantially the same terms as those prevailing at the time for comparable
loans with persons not related to Farmer Mac and did not involve more than the
normal risk of collectability or present other unfavorable
features. Although Farmer Mac entered into transactions with related
persons in 2009, it was determined that none of those transactions resulted in a
related person having a direct or indirect material interest that would require
disclosure as a “related person transaction” under SEC rules. For
additional information about transactions between Farmer Mac and related
persons, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations ─ Results of Operations ─ Related Party Transactions” and
Note 3 in Farmer Mac’s Annual Report on Form 10-K for the year ended December
31, 2009.
Item
No. 2: Selection of Independent Auditors
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, 2009, the Audit Committee, which is composed of Messrs. Raines
(Chairman), Engebretsen, Jackson and Maxwell and Ms. Bartling, met ten
times.
In
accordance with the By-Laws, the Audit Committee has unanimously selected and
recommended to the stockholders PricewaterhouseCoopers LLP as the Corporation’s
independent auditors for the fiscal year ending December 31,
2010. 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 PricewaterhouseCoopers 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 PricewaterhouseCoopers 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.
PricewaterhouseCoopers
LLP was selected to replace Deloitte & Touche LLP as the Corporation’s
independent auditors on March 30, 2010. Deloitte & Touche LLP had
acted as the Corporation’s independent auditors in connection with the
Corporation’s audited financial statements for the fiscal years ended
December 31, 2002 through 2009. The decision to retain
PricewaterhouseCoopers LLP and not to rehire Deloitte & Touche LLP was
recommended by the Audit Committee based upon proposals received from four major
accounting firms, including Deloitte & Touche LLP, and was not based upon
any disagreements with Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure and there have been no such disagreements with Deloitte & Touche
LLP. Deloitte & Touche LLP’s reports on Farmer Mac’s financial
statements for the previous two years contained no adverse opinion or disclaimer
of an opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles,
except to make reference to Farmer Mac’s adoption of the following accounting
standards: Accounting for
Uncertainty in Income Taxes, as of January 1, 2007; and
Fair
Value Measurements and
The
Fair Value Option for Financial Assets and Financial Liabilities, on January 1,
2008. No representative of Deloitte & Touche LLP is
expected to attend the Meeting.
The Board
of Directors recommends a vote FOR the proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent auditors for the Federal Agricultural
Mortgage Corporation for 2010. 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 $1,493,500 and $1,575,448
for 2009 and 2008, respectively, 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.
Audit-Related
Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $536,753 and $222,772 for 2009
and 2008, respectively, for the issuance of comfort letters, various accounting
consultations and other technical issues 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 and not reported in “Audit Fees”
above.
Tax
Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $40,056 and $59,612 for 2009 and
2008, respectively, for professional services rendered for tax compliance, tax
advice and tax planning.
All
Other Fees
Deloitte
& Touche LLP billed Farmer Mac an aggregate $3,701 for 2008 for fees other
than the audit and review fees, audit-related fees and tax fees referred to
above. There were no fees billed for these items for
2009.
Audit
Committee Pre-Approval Policies
Pursuant
to the Audit Committee Charter 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 by
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 2008 and 2009 were
pre-approved by the Audit Committee.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires Farmer Mac’s officers and directors, and
persons who beneficially own more than 10% 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 owners of
more than 10% of Farmer Mac stock 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 10% 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 2009.
Principal
Holders of Voting Common Stock
To Farmer
Mac’s knowledge, as of the date of this Proxy Statement, the following
institutions are the beneficial owners of either (i) 5% or more of the
outstanding shares of Farmer Mac’s Class A Voting Common Stock or Class B Voting
Common Stock, or (ii) 5% or more of the total number of outstanding shares of
Farmer Mac’s Voting Common Stock (both Class A and Class B).
Name and Address
|
|
Number of Shares
Beneficially Owned
|
|
Percent of Total
Voting Shares
Outstanding
|
|
|
Percent of Total
Shares Held
By Class
|
|
AgFirst
Farm Credit Bank
Columbia,
SC 29202
|
|
84,024
shares of Class B
Voting
Common Stock
|
|
|
5.49 |
% |
|
|
16.79 |
% |
|
|
|
|
|
|
|
|
|
|
|
AgriBank,
FCB1
St.
Paul, MN 55101
|
|
201,621
shares of Class B
Voting
Common Stock
|
|
|
13.17 |
% |
|
|
40.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
CoBank,
ACB2
Greenwood
Village, CO 80111
|
|
62,980
shares of Class B
Voting
Common Stock
|
|
|
4.11 |
% |
|
|
12.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
Farm
Credit Bank of Texas
Austin,
TX 78761
|
|
38,503
shares of Class B
Voting
Common Stock
|
|
|
2.52 |
% |
|
|
7.70 |
% |
|
|
|
|
|
|
|
|
|
|
|
National
Rural Utilities Cooperative Finance Corporation
Herndon,
VA 20171-30025
|
|
79,000
shares of Class A
Voting
Common Stock
|
|
|
5.16 |
% |
|
|
7.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
U.S.
AgBank, FCB
Wichita,
KS 67201
|
|
100,273
shares of Class B
Voting
Common Stock
|
|
|
6.55 |
% |
|
|
20.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
The
Vanguard Group, Inc.
Valley
Forge, PA 19482
|
|
56,295
shares of Class A
Voting
Common Stock
|
|
|
3.68 |
% |
|
|
5.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
Zions
First National Bank
Salt
Lake City, UT 84111
|
|
322,100
shares of Class A
Voting
Common Stock
|
|
|
21.04 |
% |
|
|
31.25 |
% |
1 Brian
J. O’Keane, currently a member of the Board of Directors and a Class B Nominee,
is the Senior Vice President and Chief Financial Officer of AgriBank,
FCB.
2 Brian P.
Jackson, currently a member of the Board of Directors and a Class B Nominee, is
currently an employee of, and formerly the Executive Vice President and Chief
Financial and Administrative Officer of, CoBank, ACB.
Solicitation
of Proxies
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 Inc. to act as the Corporation’s proxy
solicitation firm for a fee of approximately $5,500. In addition to
solicitation by mail, employees of Georgeson Inc. may solicit proxies by
telephone, electronic mail or personal interview. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
solicitation material to the beneficial owners of shares of Voting Common Stock
held of record by them and will be reimbursed for their reasonable expenses by
the Corporation.
Other
Matters
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 its 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 accordance with its members’ 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, 2009, 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 “SEC Filings” portion of
the “Investors—Equity” section of the website. 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,
|
|
|
|
Jerome
G. Oslick
|
|
Corporate
Secretary
|
April
28, 2010
Washington,
D.C.