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the applicable FHLBB rules and regulations, and such dividend payments are in compliance with the conditions imposed by the FHLBB for the payment of dividends at the time of its

approval of American Continental Corporation's application to become a savings and loan holding company.

18. In consideration of Lincoln's commitments under paragraphs 1 and 3, the FHLBB agrees that, where appropriate, Lincoln may reverse existing regulatory accounting reserves booked in response to the FHLBank S.F.'s February 6, 1987 letter to Lincoln's Board of Directors so long as these reserves are considered unnecessary under Generally Accepted Accounting Principles.

19.

Subsequent to a period which shall continue

until the shorter of six months from the date of this Memorandum or the receipt of the March 1988 examination

report, Lincoln may apply to the FHLBank

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Seattle for

approval to increase its regulatory liabilities up to

$2 billion in excess of the growth otherwise allowable under the applicable FHLBB rules and regulations, and the FHLBank

Seattle will not unreasonably withhold such approval.

20. Lincoln represents that its investment,

lending, underwriting, and record-keeping practices and

procedures are now substantially improved. Lincoln

recognizes additional improvements are warranted and Lincoln

agrees that it will continue to make these improvements. FHLBB agrees that the March 1988 examination of Lincoln will focus principally on Lincoln's then current practices and procedures, and its current financial condition pursuant to a review of the status of Lincoln's loans and investments, and on making recommendations for future improvements, rather than on its prior practices and procedures. Lincoln agrees

Seattle in utilizing such

to cooperate with the FHLBank
recommendations to continue to improve its investment,
lending, underwriting and record-keeping practices and
procedures.

21. This Memorandum of Understanding shall not be construed to be a "condition imposed in writing by (FSLIC) in connection with granting of any application or other request" by Lincoln, a "written agreement," an "agreement entered into under 403," a "cease and desist order," an "order which has become final," or a "capital directive" within the meaning of 1730(e) or (k) or 563.14.

12 U.S.C.

22. Lincoln agrees that the FHLBB may institute an action in the United States District Court for the District of Columbia or the Central District of California alleging a material breach of this Memorandum of Understanding and seeking an injunction against any such future breach.

Lincoln consents to the District Court's jurisdiction and

agrees that such an injunction is appropriate if the Court

finds that a material breach has occurred.

23. Pursuant to 12 USC

1424 (b) for the

convenience of both the FHLBB and Lincoln, Lincoln's

membership is hereby transferred from the FHLBank S.F. to the adjoining district, FHLBank Seattle, and Lincoln shall

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be within the Twelfth FHLBank District for all examination

and supervision purposes.

24. The parties acknowledge that they have voluntarily entered into this Memorandum of Understanding solely to resolve all outstanding issues between them. Neither this Memorandum of Understanding, nor the compromise and settlement provided for therein, nor any statements made, action taken, or documents prepared in connection with the negotiation, execution, or implementation of the Memorandum of Understanding, shall be deemed or construed as an admission by either party for the proposition that any claim, allegation, or defense by or against either party has or

lacks. merit.

25. The parties recognize that conditions may change justifying modifications of this agreement in the future, or the results of the March 1988 examination may warrant such modifications, and either party may propose modifications to the other. In such event, the parties will

promptly and in good faith discuss, consider, and make such

modifications as are appropriate.

Lincoln Savings & Loan Association

By: Date:

Federal Home Loan Bank Board

By:

Date:

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6.

DATE: July 21, 1987

Washington.D.C.

Meetings on Capitol Hill with Jack

Yourey

Atchison (Arthur Anderson Accountant) & J. Rousselot

PARTIES PRESENT AND THEIR RESPECTIVE COMPANIES AND TITLES: _see_above_

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