<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 1994
REGISTRATION NO. 33-35261
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DISTRICT OF COLUMBIA 52-089-1669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 22071
(703) 709-6700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOHN JAY LIST, GENERAL COUNSEL
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 22071
(703) 709-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
MARK L. WEISSLER THOMAS R. BROME
MILBANK, TWEED, HADLEY & MCCLOY CRAVATH, SWAINE & MOORE
1 CHASE MANHATTAN PLAZA 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this registration statement as determined by
market conditions.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. / /
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. /X/
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- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
COLLATERAL TRUST BONDS
------------------------
National Rural Utilities Cooperative Finance Corporation ("CFC" or the
"Company") intends to issue in one or more series from time to time debt
securities (the "Bonds"). The Bonds of each series will be offered to the public
on terms determined by market conditions at the time of sale. The Company may
sell Bonds for proceeds up to $300,000,000 (or the equivalent thereof if any of
the Bonds are denominated in a foreign currency or a currency unit) (i) directly
to purchasers, (ii) through agents designated from time to time or (iii) through
underwriters or a group of underwriters which may include Lehman Brothers Inc.
The Bonds may be issued in registered form without coupons, in a form
registered as to principal only with or without coupons, in bearer form with or
without coupons or any combination thereof. In addition, all or a portion of the
Bonds may be issued in temporary or definitive global form. Bonds in bearer form
are offered only to non-United States persons and to offices located outside the
United States of certain United States financial institutions. See "Limitations
on Issuance of Bearer Bonds".
The Bonds may be sold for U.S. dollars, foreign currencies or foreign
currency units, and the principal (including any premium) and any interest on
the Bonds may be payable in U.S. dollars, foreign currencies or foreign currency
units. The Bonds may be issued in one or more series with the same or various
maturities at or above par or with an original issue discount. The specific
designation, aggregate principal amount, currency, currencies or currency unit
or units in which the principal, premium, if any, or interest, if any, is
payable, authorized denominations, purchase price, maturity, rate (or method of
calculation) and time of payment of any interest, any redemption terms, any
listing on a securities exchange, or other specific terms of the Bonds in
respect of which this Prospectus is being delivered ("Offered Bonds") are set
forth in the accompanying Prospectus Supplement or in a supplement thereto
relating to the specific Offered Bonds (together, the "Prospectus Supplement"),
together with the terms of offering of the Offered Bonds.
For a discussion of certain United States Federal income tax consequences,
see "United States Taxation".
A discussion of certain other United States Federal tax matters applicable
to the Offered Bonds may be set forth in the Prospectus Supplement relating to
the Offered Bonds.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF BONDS UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 15, 1994
<PAGE> 3
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING, IF ANY,
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE OFFERED BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected at the office of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, as well as at the Regional Offices of the Commission
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Northwest Atrium
Center, 500 West Madison Street, Chicago, IL 60661. Copies can also be obtained
by mail from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549 at the prescribed rates. In
addition, certain of the Company's securities are listed on, and reports and
other information concerning the Company can also be inspected at, the New York
Stock Exchange, Inc., 20 Broad Street, New York, NY 10005.
---------------------
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1993, Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31 and
November 30, 1993, as filed with the Commission pursuant to the Exchange Act,
are hereby incorporated by reference in this Prospectus.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Bonds, shall be deemed to be incorporated in this Prospectus by reference
and to be a part hereof from the respective date of filing of each such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will furnish without charge upon written or oral request by any
person, including any beneficial owner, to whom this Prospectus is delivered a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates. Requests for such copies
should be directed to Steven L. Lilly, Treasurer and Chief Financial Officer,
National Rural Utilities Cooperative Finance Corporation, Woodland Park, 2201
Cooperative Way, Herndon, VA 22071. Telephone requests may be directed to (703)
709-6700.
---------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR THE PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF, OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SINCE ITS DATE.
2
<PAGE> 4
THE COMPANY
National Rural Utilities Cooperative Finance Corporation ("CFC" or the
"Company") was incorporated as a private, not-for-profit cooperative association
under the laws of the District of Columbia in 1969. The principal purpose of CFC
is to provide its members with a source of financing to supplement the loan
program of the Rural Electrification Administration ("REA") of the United States
Department of Agriculture. CFC makes loans primarily to its rural utility system
members ("Utility Members") to enable them to acquire, construct and operate
electric distribution, generation, transmission and related facilities. CFC also
makes loans to service organization members ("Service Members") to finance
office buildings, equipment, related facilities and services provided by them to
the rural utility systems. CFC has also provided guarantees for tax-exempt
financing of pollution control facilities and other properties constructed or
acquired by its members, and in addition has provided loans or guarantees
through National Cooperative Services Corporation ("NCSC") in connection with
certain lease transactions of its members. Also, through Rural Telephone Finance
Cooperative ("RTFC"), a controlled affiliate of CFC established in 1987, CFC
provides financing to rural telephone and telecommunications companies and their
affiliates. In addition, through Guaranty Funding Cooperative, ("GFC"), a
controlled affiliate of CFC established in 1991, CFC provides financing for
certain members to refinance their debt to the Federal Financing Bank of the
United States Treasury ("FFB"). CFC's offices are located at Woodland Park, 2201
Cooperative Way, Herndon, VA 22071 and its telephone number is (703) 709-6700.
CFC's 1,029 members as of May 31, 1993, included 894 Utility Members,
virtually all of which are consumer-owned cooperatives, 72 service members and
63 associate members. The Utility Members included 830 distribution systems and
64 generation and transmission ("Power Supply") systems operating in 46 states
and U.S. territories. At December 31, 1992, CFC's member systems served
approximately 12.2 million consumers, representing service to an estimated 28.8
million ultimate users of electricity, and owned approximately $60.8 billion
(before depreciation of $16.4 billion) in total utility plant.
CFC's long-term loans to Utility Members generally have 35-year maturities.
They are made primarily in conjunction with concurrent REA loans and are
generally secured ratably with REA's loans by a common mortgage on substantially
all the Utility Member's property (including revenues). Interest rates on these
loans are either fixed or variable. Fixed rates are set weekly based on CFC's
overall cost of long-term capital and may be obtained for any period from one to
30 years. Variable rates are adjusted monthly in line with changes in CFC's cost
of short-term funds.
CFC makes short-term unsecured line-of-credit loans and secured
intermediate-term loans with up to five-year maturities. Rates on these loans
may be adjusted semi-monthly in line with changes in CFC's short-term cost of
funds. The intermediate-term loans are generally made to Power Supply systems in
connection with the planning and construction of new generating plants and
transmission facilities.
CFC also makes loans to telecommunication systems through RTFC. Such loans
are long-term fixed or variable rate loans with maturities not exceeding 15
years and short-term loans.
CFC's guarantees are senior obligations ranking on a par with its other
senior debt. Even if the system defaults in payment of the guaranteed
obligations, the debt cannot be accelerated as long as CFC pays the debt service
under its guarantee as due. The system is generally obligated to reimburse CFC
on demand for amounts paid on the guarantee, and this obligation is usually
secured by a mortgage (often joint with REA) on the system's property or, in the
case of a lease transaction, on the leased property. Holders of $1,120.8 million
of the guaranteed pollution control debt (at May 31, 1993) have the right at
certain times to tender their bonds for remarketing, and, if they cannot
otherwise be remarketed, CFC has committed to purchase bonds so tendered.
By policy, CFC maintains an allowance for loan and guarantee losses at a
level believed to be adequate in relation to the quality and size of its loans
and guarantees outstanding. At May 31, 1993, the allowance was $172.6 million.
At May 31, 1993, CFC's ten largest borrowers, which were all Power Supply
members, had outstanding loans totaling $341.6 million (excluding $297.7 million
of loans guaranteed by REA), which represented approximately 6.6% of CFC's total
loans outstanding. As of May 31, 1993, outstanding guarantees for these same ten
largest borrowers totaled $2,161.6 million, which represented 76.6% of CFC's
total guarantees outstanding, including guarantees of the maximum amounts of
lease obligations at such date. On that date, no
3
<PAGE> 5
member had loans and guarantees outstanding in excess of 10% of the aggregate
amount of CFC's outstanding loans and guarantees; however, one of the ten
largest borrowers, Deseret Generation & Transmission Co-operative ("Deseret"),
was in financial difficulty (See "The Rural Electric Systems--Power Supply
Systems"). At May 31, 1993, Deseret accounted for 1.5% of loans outstanding
(excluding loans guaranteed by REA) and 13.0% of guarantees outstanding and
represented 27.0% of total Members' Equity, Members' Subordinated Certificates
and the allowance for loan and guarantee losses.
4
<PAGE> 6
Set forth below is a table showing loans outstanding to borrowers as of the
dates shown, loans committed but unadvanced to borrowers at May 31, 1993, and
the weighted average interest rates thereon.
<TABLE>
<CAPTION>
LOANS COMMITTED
BUT UNADVANCED AT
LOANS OUTSTANDING AND WEIGHTED AVERAGE INTEREST MAY 31, 1993
RATES THEREON AT MAY 31, (A) AND (B)
------------------------------------------------------------------- -----------------
1993 1992 1991
---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term fixed rate secured loans:
Distribution Systems(C)............. $1,604,275 8.14% $2,148,974 8.93% $2,707,084 9.20% $ 694,051
Power Supply Systems(C)............. 179,384 7.80% 135,778 8.29% 124,238 8.28% 148,329
Service Organizations(C)(D)......... 90,090 9.85% 94,183 9.79% 93,338 10.17% 5,482
Associate Members................... 1,628 10.25% 1,648 10.25% 1,666 10.25% --
Telecommunication Organizations..... 130,552 9.33% 104,350 9.84% 107,368 9.86% --
---------- ---------- ---------- -----------
Total long-term fixed rate
secured loans............... 2,005,929 8.27% 2,484,933 8.97% 3,033,694 9.21% 847,862
---------- ---------- ---------- -----------
Long-term variable rate secured loans:
Distribution Systems................ 1,975,784 4.63% 1,320,823 5.28% 641,231 7.13% 48,640
Power Supply Systems................ 178,095 4.63% 221,552 5.25% 114,498 7.13% 9,480
Service Organizations(D)............ 43,014 4.63% 6,931 5.25% 2,818 7.13% 169,404
Associate Members................... 26,098 4.38% 27,734 5.00% 27,612 6.65% 47,520
Telecommunication Organizations..... 288,234 4.75% 282,082 5.38% 221,361 7.13% 78,910
---------- ---------- ---------- -----------
Total long-term variable rate
secured loans............... 2,511,225 4.64% 1,859,122 5.28% 1,007,520 7.11% 353,954
---------- ---------- ---------- -----------
Refinancing variable rate loans
guaranteed by REA:
Power Supply Systems................ 297,724 3.94% 287,324 5.21% 293,374 6.93% --
---------- ---------- ---------- -----------
Intermediate-term secured loans:
Distribution Systems................ 11,193 4.75% 31,855 5.38% 2,430 7.38% 13,575
Power Supply Systems................ 28,496 4.75% 155,611 5.38% 57,087 7.38% 355,568
Service Organizations............... 507 4.75% 1,528 5.38% 14,326 7.38% 11,676
---------- ---------- ---------- -----------
Total intermediate-term
secured loans............... 40,196 4.75% 188,994 5.38% 73,843 7.38% 380,819
---------- ---------- ---------- -----------
Short-term loans:
Distribution Systems................ 151,941 4.75% 130,891 5.43% 80,566 7.38% 1,735,088
Power Supply Systems................ 14,157 4.75% 3,438 5.38% 59 7.38% 839,239
Service Organizations............... 11,873 4.75% 14,335 5.38% 5,919 7.38% 30,720
Associate Members................... 1,856 4.75% 2,952 5.38% 1,772 7.38% 10,129
Telecommunication Organizations..... 21,370 5.50% 26,032 6.13% 23,071 7.88% 59,164
---------- ---------- ---------- -----------
Total short-term loans........ 201,197 4.83% 177,648 5.52% 111,387 7.48% 2,674,340
---------- ---------- ---------- -----------
Nonperforming loans(E):
Distribution Systems................ 11,164 10.20% 11,797 9.76% 8,414 9.23% 23,500
Power Supply Systems................ 29,584 4.75% 5,225 5.38% 291,505 7.30% --
Associate Members................... 12,963 9.00% -- -- -- -- --
Telecommunication Organizations..... 2,117 9.00% -- -- -- -- --
---------- ---------- ---------- -----------
Total nonperforming loans..... 55,828 6.99% 17,022 8.42% 299,919 7.35% 23,500
---------- ---------- ---------- -----------
Restructured loans(F):
Distribution Systems................ -- -- -- -- 15,673 9.76% --
Power Supply Systems................ 149,685 7.86% 130,541 7.58% 112,004 7.61% 26,500
Service organizations............... 2,000 4.63% -- -- -- -- --
Associate Members................... 2,666 4.46% 12,963 5.00% 13,545 6.62% --
Telecommunication Organizations..... 18,592 4.77% 2,119 5.38% 2,137 7.13% --
---------- ---------- ---------- -----------
Total restructured loans...... 172,943 7.43% 145,623 7.32% 143,359 7.75% 26,500
---------- ---------- ---------- -----------
Total loans................... 5,285,042 6.10% 5,160,666 7.13% 4,963,096 8.43% 4,306,975
---------- ---------- ---------- -----------
Less: Allowance for loan and guarantee
losses.............................. 172,571 157,571 135,599 --
---------- ---------- ---------- -----------
Net loans........................... $5,112,471 $5,003,095 $4,827,497 $ 4,306,975
========== ========== ========== ===========
</TABLE>
- ---------------
(A) The interest rates in effect at February 1, 1994, were 6.45% on seven-year
fixed rate long-term loans, 4.15% on variable rate long-term loans and 4.35%
on intermediate-and short-term loans. The rates in effect at February 1,
1994, on loans to associate members were 6.70% on long-term fixed rate
loans, 3.95% on long-term variable rate loans and 4.35% on intermediate and
short-term loans. The rates in effect at February 1, 1994, on loans to
telecommunications organizations were 7.05% on long-term fixed rate loans,
4.25% on long-term variable rate loans and 5.10% on short-term loans.
5
<PAGE> 7
(B) Unadvanced commitments include loans approved by CFC for which loan
contracts have not yet been executed or for which loan contracts have been
executed, but funds have not been advanced.
(C) During calendar year 1994, $155.8 million of such outstanding fixed rate
loans, which currently have a weighted average interest rate of 8.82% per
annum, will become subject to rate adjustment. During the first quarter of
calendar year 1993, long-term fixed rate loans totaling $45.3 million had
their interest rates adjusted. These loans will be eligible to readjust
their interest rate again during the first quarter of calendar year 1994 to
the lowest long-term fixed rate offered for the term selected during 1993.
At January 1 and May 31, 1993 the seven-year long-term fixed rate was 7.75%
and 7.00%, respectively.
(D) CFC had loans outstanding to NCSC in each of the periods shown. Long-term
fixed rate loans outstanding to NCSC as of May 31, 1993, 1992 and 1991, were
$49.0 million, $50.2 million and $46.5 million, respectively. In addition,
as of May 31, 1993, CFC had unadvanced long-term fixed rate and long-term
variable rate loan commitments to NCSC in the amounts of $0.5 million and
$99.7 million, respectively.
(E) The rates on nonperforming loans are the weighted average of stated rates on
such loans as of the dates shown and do not necessarily relate to the
interest recognized by CFC from such loans.
(F) The rates on restructured loans are the weighted average of effective rates
(based on the present value of scheduled future cashflows) as of the dates
shown and do not necessarily relate to the interest recognized by CFC on
such loans.
Set forth below is a table showing CFC's guarantees as of the dates
indicated. Substantially all these guarantees have been given on behalf of Power
Supply members.
CFC MEMBER GUARANTEES
<TABLE>
<CAPTION>
MAY 31,
----------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Long-term tax-exempt bonds............................. $1,576,230* $1,618,880* $1,648,540*
Debt portions of leveraged lease transactions.......... 670,463 707,560 730,296
Indemnifications of tax benefit transfers.............. 436,860 404,680 422,173
Other guarantees....................................... 130,178 144,954 83,384
---------- ---------- ----------
Total................................... $2,813,731 $2,876,074 $2,884,393
========== ========== ==========
</TABLE>
- ---------------
* Includes $1,120.8 million, $1,068.0 million and $1,111.5 million at May 31,
1993, 1992 and 1991, respectively, of adjustable rate pollution control bonds
which can be tendered for purchase at specified times at the option of the
holders (in the case of $358.6 million, $361.4 million and $452.1 million of
such bonds outstanding at May 31, 1993, 1992 and 1991, respectively, at any
time on seven days' notice and in the case of $233.2 million, $236.3 million
and $268.4 million outstanding at May 31, 1993, 1992 and 1991, respectively,
at any time on a minimum of one day's notice and the remainder tendered on a
five-week or semiannual basis). CFC has agreed to purchase any such bonds that
cannot be remarketed.
6
<PAGE> 8
Set forth below are the weighted average interest rates earned by CFC
(recognized in the case of non-performing and restructured loans) on all loans
outstanding during the fiscal year ended May 31.
INTEREST RATES EARNED ON LOANS
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- ------
<S> <C> <C> <C>
Long-term fixed rate loans......................................... 9.15% 9.16% 9.32%
Long-term variable rate loans...................................... 4.99% 6.09% 8.97%
Variable rate refinancing loans guaranteed by REA.................. 4.09% 5.97% 8.53%
Intermediate-term loans............................................ 4.93% 6.03% 8.80%
Short-term loans................................................... 5.08% 6.18% 8.82%
Telecommunication loans............................................ 6.32% 7.26% 8.78%
Associate member loans............................................. 4.74% 6.09% 9.03%
Nonperforming loans................................................ 1.26% 7.96% 7.97%
Restructured loans................................................. 1.92% 3.52% 2.74%
All loans................................................ 6.54% 7.86% 8.95%
</TABLE>
7
<PAGE> 9
Borrowed funds for CFC's programs are derived primarily from the sale to
its members of its Subordinated Certificates, the sale of Collateral Trust Bonds
and Medium-Term Notes and the sale of its commercial paper and bank bid notes.
Set forth below is a table showing CFC's outstanding borrowings and the interest
rates thereon as of the dates shown.
CFC BORROWINGS
<TABLE>
<CAPTION>
AMOUNTS OUTSTANDING AT MAY 31,
-----------------------------------------------------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Long-and intermediate-term debt:(A)
9 1/4% Series P Bonds,
Due 1992(B).................... $ -- $ 99,700 $ 99,700
10 1/2% Series N Bonds,
Due 1995(B).................... -- 100,000 100,000
9 3/8% Series Q Bonds,
Due 1995(B).................... 149,800 149,800 149,800
9 5/8% Series R Bonds, Due
1996........................... 99,600 99,600 99,600
9.85% Series S Bonds, Due 1996... 99,700 99,700 99,700
9 1/2% Series T Bonds, Due
1997........................... 149,800 149,800 149,800
8 1/2% Series U Bonds, Due
1998........................... 149,800 149,800 149,800
7.40% Series A Bonds, Due 2007... 6,319 8,619 8,419
9 3/4% Series F Bonds,
Due 2009(B).................... -- 76,769 80,722
9 3/4% Series G Bonds,
Due 2009(B).................... -- -- 89,910
Floating Rate Series E-2 Bonds,
Due 2010....................... 2,279 2,315 2,462
9% Series O Bonds, Due 2016...... 91,600 95,800 97,900
9% Series V Bonds, Due 2021...... 149,800 149,800 --
Medium-Term Notes and weighted
average interest rates......... 456,538 (7.29%) 537,365 (7.90%) 438,739 (8.61%)
---------- ---------- ----------
Total long-and
intermediate-term debt and
weighted average
interest rates(C)............ 1,355,236(G) (8.56%) 1,719,068 (8.90%) 1,566,552 (9.20%)
Members' Subordinated
Certificates, including advance
payments and weighted average
interest
rates(D)....................... 1,066,755 (4.58%) 1,056,928 (4.17%) 1,181,091 (4.23%)
---------- ---------- ----------
Total long-and
intermediate-term debt and
Members' Subordinated
Certificates and weighted
average interest rates....... $2,421,991 (6.81%) $2,775,996 (7.10%) $2,747,643 (7.06%)
========== ========== ==========
Short-term debt(E) and weighted
average interest rates(F)........ $2,533,624 (3.14%) $2,143,815 (3.85%) $2,079,548 (5.88%)
========== ========== ==========
Total debt and weighted average
interest rates at May 31......... $4,955,615 (4.93%) $4,919,811 (5.68%) $4,827,191 (6.55%)
========== ========== ==========
</TABLE>
- ---------------
(A) Net of $1.5 million, $30.7 million and $35.7 million principal amount of
bonds held in Treasury at May 31, 1993, 1992 and 1991, respectively, of
which $1.5 million, $1.8 million and $1.8 million, respectively, was
purchased in connection with CFC's Deferred Compensation Program.
(B) Series G Collateral Trust Bonds were called January 16, 1992 and Series N
Collateral Trust Bonds were called July 2, 1992. Series P Collateral Trust
Bonds matured November 2, 1992. Series F Collateral Trust Bonds were called
September 3, 1992, at a premium of 4.07%. Subsequent to year-end, CFC
prepaid Series Q Collateral Trust Bonds on June 16, 1993, at par.
(C) Excludes $2,030.0 million, $1,750.0 million and $1,750.0 million of
commercial paper classified as long-term debt as of May 31, 1993, 1992 and
1991, respectively.
(D) Excluding $116.5 million, $128.0 million and $121.1 million of Debt Service
Reserve Certificates, and $32.4 million, $36.2 million and $31.4 million of
subscribed but unissued Subordinated Certificates as of May 31, 1993, 1992
and 1991, respectively, since such funds are not generally available for
investing in earning assets.
8
<PAGE> 10
(E) Net of discount; includes $2,030.0 million, $1,750.0 million and $1,750.0
million of commercial paper classified as long-term debt as of May 31, 1993,
1992 and 1991, respectively. Includes $335.0 million and $100.0 million of
bid notes at May 31, 1993 and 1992, respectively.
(F) Average interest rates are weighted on the basis of amounts of outstanding
borrowings without adjustment for bank credit compensation arrangements for
short-term borrowings.
(G) Total long-and intermediate-term debt includes $286.8 million which will be
due, mature or be redeemed during fiscal year 1994.
Set forth below are the weighted average interest costs incurred by CFC on
its commercial paper and bank bid notes (giving effect to bank credit
compensation arrangements) and long-term borrowings (including discount and
issuance expenses on Collateral Trust Bonds) during the periods shown.
INTEREST COSTS ON CFC BORROWINGS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------
1993 1992 1991
------ ------ -------
<S> <C> <C> <C>
Short-term borrowings............................. 3.61% 5.23% 7.61%
Long-term borrowings.............................. 8.92% 9.40% 10.14%
All borrowings............................... 5.80% 7.18% 8.76%
</TABLE>
Due to its non-profit character, CFC does not seek to maximize its
operating margins, but rather to achieve margins only to the extent considered
by CFC to be consistent with sound financial practice. CFC is exempt from the
payment of Federal income taxes.
USE OF PROCEEDS
Except as may be otherwise provided in a Prospectus Supplement, the net
proceeds from the sale of the Bonds will be added to the general funds of the
Company and will be available for making loans to members, the repayment of
short-term borrowings, the refinancing of existing long-term debt and for other
corporate purposes. The Company expects to incur additional indebtedness from
time to time, the amount and terms of which will depend upon the volume of its
business, general market conditions and other factors.
9
<PAGE> 11
SUMMARY FINANCIAL INFORMATION
The following is a summary of selected financial data for each of the five
years ended May 31, 1993.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
For the year ended May 31:
Operating income................. $ 336,387 $ 402,255 $ 428,974 $ 423,989 $ 391,612
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Operating margin................. $ 38,352 $ 42,809 $ 28,564 $ 36,542 $ 36,068
Nonoperating income.............. 3,296 2,744 3,883 2,731 2,780
Gain on sale of building......... -- -- 15,858 -- --
Extraordinary loss(A)............ (3,161) (1,398) (2,800) -- --
---------- ---------- ---------- ---------- ----------
Net margins...................... $ 38,487 $ 44,155 $ 45,505 $ 39,273 $ 38,848
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
As of May 31:
Assets........................... $5,464,144 $5,401,473 $5,139,624 $4,963,966 $4,624,691
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Long-term debt(B)(C)............. $3,095,488 $2,971,074 $3,204,357 $3,113,006 $2,793,790
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Members' subordinated
certificates................... $1,215,547 $1,221,095 $1,181,010 $1,189,993 $1,175,823
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Members' equity.................. $ 258,299 $ 246,328 $ 243,491 $ 227,201 $ 208,536
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Fixed charge coverage ratio(A)... 1.16 1.14 1.14 1.11 1.12
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Leverage ratio(D)................ 4.41 4.44 4.43 4.29 4.20
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
(A) During the years ended May 31, 1993, 1992 and 1991, CFC paid premiums
totaling $3.2 million, $1.4 million and $2.8 million, respectively, in
connection with the prepayment of Collateral Trust Bonds. Margins used to
compute the fixed charge coverage ratio represent net margins before
extraordinary loss plus fixed charges. The fixed charges used in the
computation of the fixed charge coverage ratio consist of interest and
amortization of bond discount and bond issuance expenses.
(B) Includes commercial paper reclassified as long-term debt.
(C) Excludes $286.8 million, $494.5 million, $109.6 million, $65.1 million and
$16.8 million in long-term debt that comes due, matures and/or will be
redeemed early during fiscal years 1994, 1993, 1992, 1991 and 1990,
respectively.
(D) In accordance with CFC's Revolving Credit Agreement, the leverage ratio is
calculated by dividing debt and guarantees outstanding, excluding debt used
to fund loans guaranteed by the U.S. Government, by the total of Members'
Subordinated Certificates and Members' Equity.
CFC has had outstanding guarantees for its members' indebtedness in each of
the fiscal years shown above. Members' interest expense on such indebtedness was
approximately $148.9 million for the year ended May 31, 1993.
The Company does not have outstanding any common stock and does not pay
dividends. Under its current policy, CFC retires half of Patronage Capital
Certificates, which represent allocations of CFC's net margins, issued with
respect to a particular year during the year following issuance, with the
remainder being retired after 15 years.
10
<PAGE> 12
CAPITALIZATION
The following table shows the capitalization of the Company as of November
30, 1993.
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
<S> <C>
SENIOR DEBT:
Short-term Indebtedness(A).................................... $ 935,319
Long-term Debt(A)............................................. 3,229,390
----------
Total Senior Debt(B).................................. 4,164,709
----------
SUBORDINATED DEBT AND MEMBERS' EQUITY:
Members' Subordinated Certificates(C)......................... 1,219,521
Members' Equity(D)............................................ 255,336
----------
Total Capitalization.................................. $5,639,566
==========
</TABLE>
- ------------
(A) Short-term indebtedness is used to fund the Company's short-,
intermediate-and long-term variable rate loans, as well as its long-term fixed
rate loans on a temporary basis. It generally consists of commercial paper with
maturities of up to nine months. To support its own commercial paper and its
obligations with respect to tax-exempt debt issued on behalf of members, the
Company had at November 30, 1993, bank lines of credit providing for borrowings
aggregating $95,000,000 and bank revolving credit agreements providing for
borrowings aggregating up to $2,900,000,000. The lines of credit are subject to
termination at the banks' option, and the Company's ability to borrow under the
revolving credit agreements is subject to continued satisfaction of certain
conditions, including the maintenance of Members' Equity and Members'
Subordinated Certificates of at least $1,329,700,000 increased each fiscal year
after 1992 by 90% of net margins not distributed to Members and an average fixed
charge coverage ratio over the six most recent fiscal quarters of at least
1.025. The revolving credit agreement also requires a fixed charge coverage
ratio of 1.05 for the preceding fiscal year as a condition to the retirement of
patronage capital. Commercial paper in the amount of $2,030,000,000, which is
supported by a three-year revolving credit agreement, is shown as long-term
debt. Long-term debt also includes the Company's outstanding collateral trust
bonds and Medium-Term Notes.
(B) At November 30, 1993, the Company had outstanding guarantees of
tax-exempt securities issued on be-
half of members in the aggregate amount of $1,534,150,000. Guaranteed tax-exempt
securities included $1,172,000,000 of long-term adjustable or floating/fixed
rate pollution control bonds which are required to be remarketed at the option
of the holders. The Company has agreed to purchase any such bonds that cannot be
remarketed. At November 30, 1993, the Company had guaranteed its members'
obligations in connection with certain lease transactions, commercial paper and
other debt in the amount of $1,219,483,000.
(C) Subordinated Certificates are subordinated obligations purchased by
members as a condition of membership and in connection with the Company's
extension of long-term credit to them. Those issued as a condition of membership
($640,520,000 at November 30, 1993) generally mature 100 years from issuance and
bear interest at 5% per annum. The others either mature 46 to 50 years from
issuance, or mature at the same time as, or amortize proportionately with, the
credit extended, and either are non-interest bearing or bear interest at varying
rates.
(D) The Company allocates its net margins to its members in proportion to
interest earned by the Company from such members and intends to return the
amounts so allocated to its members on a seven-year, or shorter, cycle with due
regard for the Company's financial condition.
11
<PAGE> 13
THE RURAL ELECTRIC SYSTEMS
GENERAL
CFC's 894 rural electric Utility Members as of May 31, 1993, were drawn
from the approximately 937 rural electric utility systems (the "systems") which
were eligible for REA loans. A large proportion of the eligible systems are
members of CFC and information regarding these systems is available in the
Annual Statistical Reports of REA ("REA Reports"), therefore, commentary in this
section is based on information about the systems generally, rather than CFC
members alone (see Note on page 16). However, the Composite Financial Statements
on pages 17 to 19 relate only to CFC Utility Members. At December 31, 1992 and
for the year then ended, CFC's members accounted for approximately 96% of the
total utility plant, 91% of the total equity, 92% of the net margins and 92% of
the total number of systems covered by REA Reports, and CFC believes that its
members are representative of the systems as a whole.
Although generally stable retail rates have been the historical pattern of
REA borrowers, in the 1970's and early 1980's rising costs of fuel, material,
labor, capital and wholesale power required rate increases by most of the
distribution systems. Increases in costs have also resulted in rate increases by
the power supply systems. Virtually all power contracts between power supply
systems and their member distribution systems provide for rate increases to
cover increased costs of supplying power, although in certain cases such
increases must be approved by regulatory agencies. During the last five years
costs and rates have generally been stable.
THE REA PROGRAM
Since the enactment of the Rural Electrification Act of 1936, REA has
financed the construction and operation of electric generating plants,
transmission facilities and distribution systems in order to provide electricity
to persons in rural areas who were without central station service. Principally
through the organization of systems under the REA loan program in 46 states and
U.S. territories, the percentage of farms and residences in rural areas of the
United States receiving central station electric service increased from 11% in
1934 to almost 99% currently.
Rural electric systems serve 11% of all consumers of electricity in the
United States. They account for approximately 7% of total sales of electricity
and about 6% of energy generation and generating capacity.
The Rural Electrification Act provides for a revolving fund which REA
utilizes to make insured loans and to provide other forms of financing
assistance to borrowers. REA is authorized to make direct loans, generally at an
annual interest rate equal to tax-exempt rates for comparable maturities, to
systems which are eligible to borrow from it. REA is also authorized to
guarantee loans, which have been used mainly to provide financing for
construction of Bulk Power Supply Projects. Guaranteed loans bear interest at a
rate agreed upon by the borrower and the lender (which generally has been the
Federal Financing Bank). REA exercises a high degree of financial and technical
supervision over borrowers' operations. Its loans and guarantees are secured by
a mortgage on substantially all the system's property and revenues.
Legislation has been proposed which would provide funding of $725 million
for the REA insured loan program for electric borrowers for fiscal year 1994. In
addition, $813 million was proposed for the REA guaranteed loan program.
Legislation has been enacted which allows REA borrowers to prepay their
loans to REA at the government's cost of funds at the time of prepayment. If a
borrower chooses to prepay its notes, it becomes ineligible for future REA
lending for a period of ten years. To date regulations regarding the note
buy-out, including computation of discount provisions and certain issues
concerning potential taxes on gains, have not been finalized.
DISTRIBUTION SYSTEMS
Distribution systems are local utilities distributing electric power,
generally purchased from wholesale sources, to consumers in their service areas.
Virtually all are locally-managed cooperative, non-profit associations, and most
have been in operation for at least 40 years. At December 31, 1992, the
approximate number of consumers served by REA borrowers was 12.2 million,
representing an estimated 28.8 million ultimate users. Aggregate operating
revenues of the distribution systems from sales of electric energy for the year
ended December 31, 1992, totaled $14.0 billion, of which 65% was derived from
the sales of electricity to residential
12
<PAGE> 14
consumers (farm and non-farm), 31% from such sales to commercial and industrial
consumers and the remainder from sales to various other consumers.
The composite TIER of CFC member distribution systems increased to 2.19 in
1992 from 2.11 in 1991. The composite DSC ratio fell from 2.13 in 1991 to 2.07
in 1992. Composite equity as a percent of total assets for CFC's Distribution
Systems increased from 38.18% at December 31, 1991 to 39.44% at December 31,
1992.
The cost of purchased wholesale power in 1992 amounted to 66.5% of the
total revenues of the distribution systems. Information from REA concerning the
distribution systems' power purchases during the 12 months ended December 31,
1991 (1992 data is not yet available) indicates that 18.2% was purchased from
power companies including investor-owned utilities and industrial and
manufacturing corporations, 56.0% from rural electric power supply systems and
other distribution systems having generating facilities, 18.7% from Federal
agencies and 7.1% from publicly-owned power suppliers, such as municipal
systems.
Wholesale power supply contracts ordinarily guarantee neither an
uninterrupted supply nor a constant cost of power. Contracts with REA-financed
power supply systems (which generally require the distribution system to
purchase all its power requirements from the power supply system) provide for
rate increases to pass along increases in sellers' costs (subject in certain
cases to regulatory approval). The wholesale power contracts empower the power
supply system, subject to REA approval, to establish rates to its members so as
to produce revenues sufficient, with revenues from all other sources, to meet
the costs of operation and maintenance (including, without limitation,
replacements, insurance, taxes and administrative and general overhead expenses)
of all generating, transmission and related facilities, to pay the cost of any
power and energy purchased for resale, to pay the costs of generation and
transmission, to make all payments on account of all indebtedness and leases of
the power supply system and to provide for the establishment and maintenance of
reasonable reserves. The rates under the wholesale power contracts are required
to be reviewed by the Board of Directors of the power supply system at least
annually.
Power contracts with investor-owned utilities generally have rates subject
to change upon compliance with regulatory provisions. Contracts with Federal
agencies generally permit rate changes by the selling agency (subject, in some
cases, to Federal regulatory approval). In the case of many distribution
systems, only one power supplier is within a feasible distance to provide
wholesale electricity.
POWER SUPPLY SYSTEMS
Power supply systems are utilities which purchase or generate electric
power and provide it wholesale to distribution systems for delivery to the
ultimate retail consumer. Of the 63 operating power supply systems financed in
whole or in part by REA or CFC at December 31, 1992, 60 were cooperatives owned
directly or indirectly by groups of distribution systems and three were
government owned. Of this number, 39 had generating capacity of at least 100,000
kilowatts, and ten had no generating capacity. Five of the ten systems with no
generating capacity operated transmission lines to supply certain distribution
systems, one has applied for REA financing for its first transmission facility
and one has an approved long-term loan commitment from CFC for its first
transmission facility. Certain other power supply systems had been formed but
did not yet own generating or transmission facilities. At December 31, 1992, the
58 power supply systems reporting to REA owned 145 generating units with a total
generating capacity of approximately 29,597,000 kilowatts, or approximately 4.3%
of the nation's estimated electric generating capacity as of December 31, 1992,
and served 700 REA distribution system borrowers (representing an average for
the year of approximately 8.3 million consumers). Certain of the power supply
systems which own generating plants lease these facilities to others and
purchase their power requirements from the lessee-operators.
Of the power supply systems' total generating capacity in place as of
December 31, 1992, steam plants accounted for 94.2% (including nuclear capacity
representing approximately 10.2% of such total generating capacity), internal
combustion plants accounted for 5.5% and hydroelectric plants accounted for
0.3%. REA loans and loan guarantees as of December 31, 1992, have provided funds
for the installation of over 34,031,000 kilowatts, of which nuclear capacity is
approximately 3,806,000 kilowatts, or 11.2% of the total, of which 979,000
kilowatts have officially been cancelled, or 2.9% of the total.
13
<PAGE> 15
The high level of growth in demand for electricity experienced in the
1970's was not expected to decline in the 1980's and the power supply systems
continued their construction programs in anticipation of continued growth in
demand. During the 1980's, however, slower growth in power requirements of the
systems reduced the need for additional generating capacity in most areas of the
country. Thus, many areas are now experiencing a surplus of generating capacity
and, as a result, some power supply systems have significant amounts of fixed
costs for power plant investment not fully supported by increased revenues.
While the level of funds needed for new generating units is expected to be
low over the next few years, the need for transmission and capital additions
will continue to generate substantial long-term capital requirements. The power
supply systems are expected to continue to seek to satisfy these requirements
primarily through the REA loan guarantee program.
Deseret Generation & Transmission Co-operative ("Deseret") and its major
creditors entered into an Agreement Restructuring Obligations ("ARO") document
that restructured Deseret's debt obligations to REA, CFC and certain other
creditors, including certain lease payments due on the Bonanza Power Plant. The
ARO, which closed in January 1991 with an effective date of January 1, 1989,
provides for the reduction of Deseret's debt service and rental obligations on
the Bonanza Power Plant until 1996 when large sales of power are intended to
commence. However, these sales of power are largely contingent upon market
supply/demand factors for power and the competitive cost of delivered power, as
well as the construction/availability of transmission facilities and/or other
options available to potential purchasers.
Under the ARO assumptions, CFC expects to fund Deseret's cash flow
shortfalls until at least 1996 under its various guarantees of debt obligations.
Deseret's ability to generate enough cash flow to service its current debt and
rental payments as well as to begin repayment of the shortfall funded by CFC
thereafter depends on whether it is able to make the large power sales on which
the ARO is premised. Since the ARO, Deseret's cash flow projections have
undergone revision to reflect current expectations concerning power sales. As a
result of these changes, Deseret is expected to be unable to satisfy its payment
obligations under the ARO beginning in 1996. If payments are not made as
provided in the ARO, it may be amended or terminated, allowing CFC to exercise
remedies as a creditor. At November 30, 1993, CFC had funded $67.6 million of
the shortfall.
CFC has placed all loans to Deseret on a nonaccrual basis with respect to
interest income recognition. CFC does not anticipate interest income recognition
on the outstanding loans until Deseret's power sales produce cash flows
sufficient to service all debts.
As part of a separate agreement, in conjunction with the ARO, CFC will be
obligated to repay out of payments by Deseret $25.9 million (plus interest)
received from a party to the Bonanza Lease transaction to cover shortfalls in
the July 1989, January 1990 and July 1990 lease payments which were funded by
that party. This amount will be repaid after the available annual cashflow
exceeds the debt repayment requirements as defined in the ARO (i.e., CFC is no
longer required to fund a shortfall).
As of November 30, 1993, CFC had approximately $446.7 million in current
credit exposure on behalf of Deseret consisting of $85.3 million in secured
loans, and $361.4 million for guarantees by CFC of various direct and indirect
obligations of Deseret. CFC's guarantees included $9.8 million in tax-benefit
indemnifications, $13.2 million for tax-exempt bonds and $39.2 million relating
to mining equipment for a coal supplier of Deseret. The remainder of CFC's
guarantee is for semiannual debt service payments on $299.2 million of bonds
issued in a $655 million leveraged lease financing of a generating station in
1985. Under the ARO, CFC has also provided Deseret a $20.0 million five-year
secured line of credit. At November 30, 1993, there was no balance outstanding
under this line of credit.
CFC believes that given the underlying collateral value and the terms of
the ARO, it has adequately reserved for any potential loss on its loans and
guarantees to Deseret.
Certain other CFC borrowers have defaulted on their obligations, and CFC is
participating in efforts to restructure the debt of such borrowers or is
pursuing collection in certain instances. CFC believes that adequate reserves
have been established for any loss contingencies associated with its loans and
guarantees. Further information concerning these matters can be found in the
financial statements incorporated by reference into this Prospectus.
14
<PAGE> 16
REGULATION AND COMPETITION
The degree of regulation of rural electric systems by state authorities
varies from state to state. The retail rates of rural electric systems are
regulated in 17 states (in which there are approximately 289 systems).
Distribution systems in these states account for approximately 34% of the total
operating revenues and patronage capital of all distribution systems nationwide.
State agencies, principally public utility commissions, of 20 states regulate
those states' approximately 300 systems as to the issuance of long-term debt
securities. In six states (in which there are approximately 100 systems) state
agencies regulate, to varying degrees, the issuance of short-term debt
securities. Since 1967, the Federal Power Commission and its successor, the
Federal Energy Regulatory Commission ("FERC"), which regulates interstate sales
of energy at wholesale, have taken the position that it lacks jurisdiction to
regulate cooperative rural electric systems which are current borrowers from
REA. To the extent power supply borrowers pay off their REA debt or never incur
REA debt, they will be under FERC jurisdiction. To date there is one such
system.
Varying degrees of territorial protection against competing utility systems
are provided to distribution systems in 40 states (in which over 92% of the
distribution systems are located). Changes in administrative or legislative
policy in several states may result in more or in less territorial protection
for the distribution systems.
In addition to competition from other utility systems, some distribution
systems have expressed increasing concern about the loss of desirable suburban
service areas as a result of annexation by expanding municipal or franchised
investor-owned utility systems, regardless of the degree of territorial
protection otherwise provided by applicable law. The systems are also subject to
competition from alternate sources of energy such as bottled gas, natural gas,
fuel oil, diesel generation, wood stoves and self-generation.
The systems, in common with the electric power industry generally, may
incur substantial capital expenditures and increases in operating costs in order
to meet the requirements of both present and future Federal, state and local
standards relating to safety and environmental quality control. These include
possible requirements for burying distribution lines, and meeting air and water
pollution standards.
On November 15, 1990, amendments to the Clean Air Act of 1970 (the
"Amendments"), designed to cause utilities and others to reduce emissions, were
passed into law. The Amendments contain a range of compliance options and a
phase-in period which will help mitigate the immediate costs of implementation.
In addition, many of CFC's member systems already comply with the provisions of
the Amendments. CFC is currently monitoring the overall impact of the Amendments
on individual member systems, which must implement compliance plans and
operating or equipment modifications for Phase I of the Act (1995), and for
those affected in Phase II of the Act (2000). Compliance plans for member
systems with units affected in Phase I primarily involve fuel switching to
low-sulfur coal. The trading of emission allowances may also be an economical
alternative in Phase II. Some member systems originally believed to be affected
by the Amendments have developed strategies that minimize the Amendments'
impact. At this time, it is not anticipated that the Amendments will have a
material adverse impact on the quality of CFC's loan portfolio.
FINANCIAL INFORMATION
The systems differ from investor-owned utilities in that the vast majority
are cooperative, non-profit organizations operating under certificates of
incorporation or by-laws which provide that rates should be established so as to
minimize net income. Revenues in excess of operating costs and expenses are
referred to as "net margins and patronage capital" and are treated as equity
capital furnished by the systems' consumers. This "capital" is transferred to a
balance sheet account designated as "patronage capital," and is usually
allocated to consumers in proportion to their patronage. Such capital is not
refunded to them for a period of years during which time it is available to the
system to be used for proper corporate purposes. Subject to their applicable
contractual obligations, the systems may refund such capital to their members
when doing so will not impair the systems' financial condition. In the
terminology of the Uniform System of Accounts prescribed by REA for its
borrowers, "operating revenues and patronage capital" refers to all utility
operating income received during a given period.
Similar to the practice followed by investor-owned utilities pursuant to
FERC procedures and as prescribed by REA, the systems capitalize as a cost of
construction the interest charges on borrowed funds ("interest
15
<PAGE> 17
charged to construction") and the estimated unearned interest attributable to
internally-generated funds ("allowance for funds used during construction") used
in the construction of generation, and to a lesser extent transmission and
distribution facilities. This accounting policy, which increases net margins by
the amounts of these actual and imputed interest charges, is based on the
premise that the cost of financing construction is an expenditure serving to
increase the productive capacity and value of the utility's assets and thus
should be included in the cost of the assets constructed and recovered over the
life of the asset. In the case of power supply systems, REA has included in its
direct loans and guarantees of loans amounts sufficient to meet the estimated
interest charges during construction. If the foregoing accounting policy were
not followed, utilities would presumably request regulatory permission, if
applicable, to increase their rates to cover such costs. The amounts of interest
charged to construction and allowance for funds used during construction
capitalized by distribution systems are relatively insignificant. Because power
supply systems generally expend substantial amounts on long-term construction
projects, the application of this accounting policy may result in substantially
lower interest expense and in substantially higher net margins for such systems
during construction than would be the case if such a policy were not followed.
On the following pages are tables providing composite statements of
revenues, expenses and patronage capital of the distribution systems which were
members of CFC and the power supply systems which were members of CFC during the
five years ended December 31, 1992, and their respective composite balance
sheets as at the end of each such year. This information has been derived from
the REA 1992 Statistical Report, Rural Electric Borrowers (Information
Publication 201-1).
- ---------------
NOTE: Statistical information in REA Reports has not been examined by CFC's
independent public accountants, and the number and geographical dispersion of
the systems have made impractical an independent investigation by CFC of the
statistical information available from REA. The REA Reports are based upon
financial statements submitted to REA, subject to year-end audit adjustments, by
reporting REA borrowers and do not, with minor exceptions, take into account
current data for certain systems, primarily those which are not active REA
borrowers. As of December 31, 1992, 159 REA borrowers had repaid their REA loans
in full and were accordingly not subject to REA reporting requirements.
16
<PAGE> 18
COMPOSITE SUMMARY FINANCIAL INFORMATION AS REPORTED BY
CFC MEMBER DISTRIBUTION SYSTEMS
THE FOLLOWING ARE UNAUDITED FIGURES WHICH ARE BASED UPON FINANCIAL STATEMENTS
SUBMITTED TO REA OR TO CFC BY CFC MEMBER DISTRIBUTION SYSTEMS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenue and patronage
capital................................ $13,921,515 $13,446,544 $12,819,204 $12,303,951 $11,790,389
----------- ----------- ----------- ----------- -----------
Operating deductions..................... 12,628,989 12,194,103 11,570,307 11,185,808 10,631,054
----------- ----------- ----------- ----------- -----------
Utility operating margins................ 1,292,526 1,252,441 1,248,897 1,118,143 1,159,335
Non-operating margins and capital
credits(1)............................. 377,550 377,701 365,378 337,577 328,927
Interest on long-term debt and other
deductions(2).......................... (777,435) (782,023) (764,072) (712,134) (658,019)
----------- ----------- ----------- ----------- -----------
Net margins and patronage capital........ $ 892,641 $ 848,119 $ 850,203 $ 743,586 $ 830,243
=========== =========== =========== =========== ===========
TIER(3).................................. 2.19 2.11 2.15 2.07 2.31
DSC(4)................................... 2.07 2.13 2.16 2.09 2.26
Number of systems included............... 821 819 820 822 823
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Net utility plant.................... $20,721,332 $19,649,754 $18,662,477 $17,525,582 $16,483,358
Other assets......................... 6,980,758 6,695,615 6,440,000 5,997,422 5,427,329
----------- ----------- ----------- ----------- -----------
Total assets and other debits... $27,702,090 $26,345,369 $25,102,477 $23,523,004 $21,910,687
=========== =========== =========== =========== ===========
Liabilities and other credits:
Total net worth...................... $10,925,009 $10,059,342 $ 9,367,448 $ 8,549,697 $ 7,973,171
Other liabilities and credits........ 16,777,081 16,286,027 15,735,029 14,973,307 13,937,516
----------- ----------- ----------- ----------- -----------
Total liabilities and other
credits....................... $27,702,090 $26,345,369 $25,102,477 $23,523,004 $21,910,687
=========== =========== =========== =========== ===========
Number of systems included............... 821 819 820 822 823
</TABLE>
- ---------------
(1) Represents net margins of power supply systems and other associated
organizations allocated to their member distribution systems and added in
determining net margins and patronage capital of distribution systems under
REA accounting practices. Cash distributions of this credit have rarely been
made by the power supply systems and such other organizations to their
members.
(2) Interest on long-term debt is net of interest charged to construction, which
is stated separately as a credit in REA Reports. For a description of the
reasons for, and the effect on net margins and patronage capital of, the
accounting policies governing interest charged to construction and allowance
for funds used during construction, see "--Financial Information". CFC
believes that amounts incurred by distribution systems for interest charged
to construction and allowance for funds used during construction are
immaterial relative to their total interest on long-term debt and net
margins and patronage capital.
(3) Determined by adding interest on long-term debt (in each year including all
interest charged to construction) and net margins and patronage capital and
dividing the total by interest on long-term debt (in each year including all
interest charged to construction). This is the basis for computing TIER used
by CFC for purposes of determining loan eligibility.
(4) The ratio of (x) net margins and patronage capital plus interest on
long-term debt (including all interest charged to construction) plus
depreciation and amortization to (y) long-term debt service obligations.
17
<PAGE> 19
COMPOSITE SUMMARY FINANCIAL INFORMATION AS REPORTED BY
CFC MEMBER POWER SUPPLY SYSTEMS
THE FOLLOWING ARE UNAUDITED FIGURES WHICH ARE BASED UPON FINANCIAL STATEMENTS
SUBMITTED TO REA OR TO CFC BY CFC MEMBER DISTRIBUTION SYSTEMS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenue and patronage capital... $ 9,111,434 $ 8,615,165 $ 8,553,618 $ 8,589,575 $ 8,442,827
----------- ----------- ----------- ----------- -----------
Operating deductions...................... 7,375,988 6,986,912 6,824,168 6,796,491 6,651,371
----------- ----------- ----------- ----------- -----------
Utility operating margins................. 1,735,446 1,628,253 1,729,450 1,793,084 1,791,456
Non-operating margins and
capital credits(1)...................... 311,581 357,824 340,801 324,326 184,919
Interest on long-term debt and
other deductions(2)..................... (2,213,283) (2,041,969) (2,172,079) (2,170,511) (2,101,865)
----------- ----------- ----------- ----------- -----------
Net margins and patronage capital......... $ (166,256) $ (55,892) $ (101,828) $ (53,101) $ (125,490)
=========== =========== =========== =========== ===========
TIER(3)................................... .92 .97 .95 .97 .94
DSC(4).................................... 1.05 1.06 1.05 1.08 1.06
Number of systems included(5)............. 50 49 50 51 54
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------
1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Net utility plant..................... $23,715,910 $22,558,712 $23,084,888 $24,391,780 $24,704,617
Other assets.......................... 8,539,061 7,929,750 8,432,676 8,485,903 8,028,835
----------- ----------- ----------- ----------- -----------
Total assets and other debits.... $32,254,971 $30,488,462 $31,517,564 $32,877,683 $32,733,452
=========== =========== =========== =========== ===========
Liabilities and other credits:
Total net worth....................... $ 316,039 $ 593,749 $ 545,122 $ 690,729 $ 1,241,273
Other liabilities and credits......... 31,938,932 29,894,713 30,972,442 32,186,954 31,492,179
----------- ----------- ----------- ----------- -----------
Total liabilities and other
credits........................ $32,254,971 $30,488,462 $31,517,564 $32,877,683 $32,733,452
=========== =========== =========== =========== ===========
Number of systems included(5)............. 50 49 50 51 54
</TABLE>
- ---------------
(1) Certain power supply systems purchase wholesale power from other power
supply systems of which they are members. Power supply capital credits
represent net margins of power supply systems allocated to member power
supply systems on the books of the selling power supply systems. This item
has been added in determining net margins and patronage capital of the
purchasing power supply systems under REA accounting practices. Cash
distributions of this credit have rarely been made by the selling power
supply systems to their members. Includes also net margins of associated
organizations allocated to CFC power supply members and added in determining
net margins and patronage capital of the CFC member systems under REA
accounting practices.
(2) Interest on long-term debt is net of interest charged to construction.
Allowance for funds used during construction has been included in
non-operating margins. For a description of the reasons for, and the effect
on net margins and patronage capital of, the accounting policies governing
interest charged to construction and allowance for funds used during
construction, see "--Financial Information". According to unpublished
18
<PAGE> 20
information furnished by REA, interest charged to construction and allowance
for funds used during construction for CFC power supply members in the years
1988-1992 were as follows:
<TABLE>
<CAPTION>
ALLOWANCE FOR
INTEREST CHARGED FUNDS USED
TO CONSTRUCTION DURING CONSTRUCTION TOTAL
---------------- ------------------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
1992 $ 54,093 $ 4,396 $ 58,489
1991 $ 49,495 $ 5,241 $ 54,736
1990 $ 55,670 $ 6,615 $ 62,285
1989 $100,380 $ 6,761 $107,141
1988 $169,045 $ 7,714 $176,759
</TABLE>
(3) Determined by adding interest on long-term debt (in each year including all
interest charged to construction) and net margins and patronage capital and
dividing the total by interest on long-term debt (in each year including all
interest charged to construction). This is the basis for computing TIER used
by CFC for purposes of determining loan eligibility. The TIER calculation
includes the operating results of four financially troubled power supply
systems, without which the composite TIER would have been 1.14, 1.14, 1.08,
1.09 and 1.06 for the years ended December 31, 1992, 1991, 1990, 1989 and
1988, respectively.
(4) The ratio of (x) net margins and patronage capital plus interest on
long-term debt (including all interest charged to construction) plus
depreciation and amortization to (y) long-term debt service obligations. The
DSC calculation includes the operating results of four power supply systems
experiencing financial difficulties. Without these systems, the composite
DSC would have been 1.23, 1.25, 1.22, 1.21 and 1.23 the years ended December
31, 1992, 1991, 1990, 1989 and 1988, respectively.
(5) Twelve CFC power supply system members are not required to report to REA
since they are not currently borrowers from REA. These systems are either in
developmental stages or act as coordinating agents for their members. Their
inclusion would not have a material effect on these data. In addition, REA
has determined not to include data for Wabash Valley Power Association
("WVPA") and Colorado-Ute in their composite statements due to WVPA's
ongoing bankruptcy and the liquidation of Colorado-Ute. WVPA is discussed
further in the combined financial statements incorporated by reference in
this Prospectus.
DESCRIPTION OF BONDS
The Bonds are to be issued under an indenture dated as of February 15, 1994
(said Indenture, as supplemented from time to time, being herein called the
"Indenture"), between CFC and First Bank National Association, as Trustee (the
"Trustee"), which Indenture is an exhibit to the Registration Statement of which
this Prospectus is a part. The following summaries of certain provisions of the
Indenture do not purport to be complete, and, where particular provisions of the
Indenture are referred to, such provisions, including definitions of certain
terms, are incorporated by reference as a part of such summaries, which are
qualified in their entirety by such reference. Section references are to
Sections of the Indenture.
CFC may maintain banking relationships in the ordinary course of business
with First Bank National Association, including the making of investments
through, and borrowings from, said bank.
The Indenture provides that additional debt securities may be issued
thereunder without limitation as to aggregate principal amount except as
described below under "Security," as authorized from time to time by CFC's Board
of Directors. (Sections 2.01, 2.02 and 2.03) Bonds issued at any time under the
Indenture are referred to herein collectively as "Collateral Trust Bonds." The
terms of Bonds of any series will be set forth in or pursuant to a Board
resolution or supplemental indenture adopted or entered into prior to the time
of the issuance thereof. (Section 2.03 and 13.01) The Bonds will rank and be
secured equally and ratably with each other.
19
<PAGE> 21
GENERAL
Reference is made to the Prospectus Supplement for the following terms of
the Bonds with respect to which this Prospectus is delivered: (i) the title of
such Bonds; (ii) any limit upon the aggregate principal amount of such Bonds;
(iii) the persons to whom interest on such Bonds shall be payable, if other than
the persons in whose names such Bonds are registered; (iv) the date or dates on
which the principal of such Bonds is payable or the method by which such date or
dates shall be determined; (v) the rate or rates, if any, at which such Bonds
shall bear interest or any method by which such rate or rates shall be
determined; (vi) the date or dates from which such interest, if any, shall
accrue and the date or dates on which such interest, if any, shall be payable;
(vii) the place or places at which the principal of and premium, if any, and
interest, if any, on such Bonds shall be payable and registration of transfer or
exchanges of such Bonds may be effected, and the registrar for such Bonds;
(viii) the terms and conditions upon which such Bonds may be redeemed, including
any sinking fund or other mandatory redemption provisions; (ix) the
denominations in which such Bonds shall be issuable if other than denominations
of $1,000 and any integral multiple thereof; (x) the coin or currency in which
payment of the principal of and premium, if any, and interest, if any, on such
Bonds shall be payable (if other than the coin or currency in which such Bonds
are denominated), and, if the principal of or premium, if any, or interest, if
any, on such Bonds are to be payable, at the election of the Company or a holder
thereof, in a coin or currency other than that in which such Bonds are
denominated, the period or periods within which, and the terms and conditions
upon which, such election may be made, and if denominated or payable in any coin
or currency, including composite currencies, other then U.S. dollars, the method
by which such Bonds shall be valued; (xi) if the principal of or premium, if
any, or interest, if any, on such Bonds are to be payable in securities or other
property at the election of the Company or a holder thereof, the type and amount
of such securities or other property, or the method by which such amount shall
be determined, and the periods within which, and the terms and conditions upon
which, any such election may be made; (xii) if the amount payable in respect of
principal of or premium, if any, or interest, if any, on such Bonds may be
determined with reference to an index, the manner in which such amounts shall be
determined; (xiii) if other than the principal amount thereof, the portion of
the principal amount of such Bonds, or any tranche thereof, which shall be
payable upon declaration of the acceleration of the maturity thereof; (xiv) the
terms, if any, pursuant to which such Bonds may be converted into or exchanged
for shares of capital stock or other securities of the Company or any other
person; (xv) if such Bonds are to be issued in global form, the depositary with
respect to such global bond or bonds and any limitations on the rights of the
holder or holders of such bonds to transfer or exchange the same or to obtain
the registration of transfer thereof or to obtain certificates therefor in
definitive form in lieu of temporary form; (xvi) if such Bonds are to be
issuable as bearer securities, any and all matters incidental thereto; (xvii)
the right, if any, of the Company to limit or discharge the indenture as to such
Bonds; (xviii) whether and under what circumstances the Company will pay
additional amounts on such Bonds held by a Person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether and on what terms the Company will have the option to redeem such
Bonds rather than pay such additional amounts; and (xix) any other terms of such
Bonds not inconsistent with the Indenture. (Section 2.03)
SECURITY
The Bonds will be secured, equally with outstanding Collateral Trust Bonds,
by the pledge with the Trustee of Eligible Collateral having an Allowable Amount
of at least 100% of the principal amount of Collateral Trust Bonds outstanding.
The Indenture provides that Eligible Collateral shall consist of cash, Eligible
Mortgage Notes of Distribution System Members and Permitted Investments. The
"Allowable Amount" of cash is 100% thereof, the "Allowable Amount" of Eligible
Mortgage Notes is the amount advanced thereon and not repaid and the "Allowable
Amount" of Permitted Investments is their cost to CFC (exclusive of accrued
interest and brokerage commissions), except that the "Allowable Amount" of
Permitted Investments traded on a national securities exchange or in any
over-the-counter market is their fair market value as determined by CFC. For
purposes of the Indenture and as used in describing the Bonds herein, a "Member"
is any person which is a member or patron of CFC; and a "Distribution System
Member" is a Member 50% or more of whose gross operating revenues are derived
from sales of electricity to ultimate consumers. (Sections 1.01 and 3.01)
20
<PAGE> 22
As a condition to the authentication and delivery of Bonds (or, for certain
series of Bonds, prior only to the first issuance thereof and if such
certification has not been made as of a date 90 days prior to the authentication
and delivery of such Bonds) or to the withdrawal of Collateral, and in any event
at least once a year, CFC must certify to the Trustee that:
(1) the Allowable Amount of Eligible Collateral pledged under the
Indenture is at least equal to 100% of the aggregate principal amount of
Collateral Trust Bonds to be outstanding;
(2) each Eligible Mortgage Note included in the Eligible Collateral so
certified is an Eligible Mortgage Note of a Distribution System Member
having an Equity Ratio of at least 20% and an Average Coverage Ratio of at
least 1.35; and
(3) the aggregate Allowable Amount of all Eligible Mortgage Notes of
any one Distribution System Member so certified does not exceed 10% of the
aggregate Allowable Amount of all Eligible Collateral so certified.
(Sections 3.01, 6.01 and 7.13)
CFC is also entitled to the authentication and delivery of Collateral Trust
Bonds on the basis of the retirement of outstanding Collateral Trust Bonds at
their final maturity or by redemption at the option of CFC. (Sections 3.02 and
3.03)
The Indenture provides that Collateral Trust Bonds of one or more other
series may be issued thereunder without limitation as to aggregate principal
amount, subject to the restriction described under "Restriction on
Indebtedness", so long as the Allowable Amount of Eligible Collateral pledged
under the Indenture is at least equal to the aggregate principal amount of
Collateral Trust Bonds to be outstanding and meets the other requirements set
forth herein. (Sections 2.03 and 13.01) "Eligible Mortgage Note" means a note or
bond of a Distribution System Member which is secured by a Mortgage under which
no default exists with respect to the covenants required by the Indenture to be
contained in a Mortgage (as described below), unless consented to by the
mortgagees to the extent permitted in the Mortgage and the Indenture, and under
which no "event of default" as defined in the Mortgage shall have occurred and
shall have resulted in the exercise of remedies. (Section 1.01)
"Equity Ratio" is determined by dividing the sum of the Member's equities
and margins at the end of the particular year by the Member's total assets and
other debts at such date; and "Coverage Ratio" is determined by dividing the sum
of the Member's net margins and patronage capital and depreciation and
amortization expense and interest expense, less power supply system capital
credits, other capital credits and patronage capital, by the Member's long-term
debt service obligations in respect of such year (but in the event any portion
of such Member's long-term debt is refinanced during such year the long-term
debt service obligations during such year in respect thereof will be based upon
the larger of (x) an annualization of such obligations with respect to the
refinancing debt during the portion of the year such refinancing debt is
outstanding and (y) the long-term debt service obligations during the following
year on such refinancing debt). These definitions are based upon the system of
accounting used for REA reporting, except that the Indenture requires that
interest expense and long-term debt service obligations include 33 1/2% of the
amount by which (x) rental payments by such Member with regard to certain
property having an initial cost greater than $250,000 exceed (y) 2% of such
Member's equities and margins, each in respect of such year. For REA reporting
purposes and for purposes of CFC's calculation of borrowers' ratios, obligations
under take-or-pay power contracts, guaranties and other contingent obligations
are not considered debt of a Member. "Average Coverage Ratios" are computed by
averaging the best two of the three calendar years preceding the date of
determination. (Section 1.01)
The Indenture requires that each Mortgage securing an Eligible Mortgage
Note be a first mortgage on the property then owned or thereafter acquired by
the Member issuing the Note (or, in the case of certain public agency borrowers,
on such Member's revenues), subject to usual exceptions in mortgages of utility
companies, and that, if the Mortgage is a common mortgage with REA or any other
lender, the mortgagees be secured equally and ratably. (Section 1.01 and
Schedule I) There are no requirements in the Indenture as to the value of the
property subject to the lien of a Mortgage.
21
<PAGE> 23
The Indenture provides that, unless an Event of Default under the Indenture
exists, and other than certain limited duties specified in the Indenture, the
Trustee shall have no duties or responsibilities with regard to any Mortgage and
no responsibilities with regard to the value of any property subject thereto.
(Section 4.03)
"Permitted Investments" are defined to include certain obligations of or
guaranteed by the United States and of states and municipalities and agencies
thereof which are rated AA (or equivalent) or better by at least two nationally
recognized statistical rating agencies and which mature not more than two years
after purchase, certificates of deposit or time deposits of a bank or trust
company having at least $500,000,000 of capital and surplus and maturing not
more than two years after purchase and commercial paper of bank holding
companies or other corporate issuers (other than CFC) generally rated in the
highest category by at least two nationally recognized statistical rating
agencies and maturing not more than one year after purchase. (Section 5.03)
EXERCISE OF RIGHTS
Until the occurrence of an Event of Default under the Indenture, CFC
retains the right to control the exercise of rights and powers under Eligible
Mortgage Notes and Mortgages pledged under the Indenture. (Section 15.01)
Mortgages which also secure notes issued to REA provide that REA will have the
exclusive right for an initial 30-day period to initiate and control enforcement
proceedings on behalf of the holders of all the notes secured by the particular
Mortgage, including those held by the Trustee.
RESTRICTION ON INDEBTEDNESS
CFC may not incur any Superior Indebtedness or make any optional prepayment
on any Capital Term Certificate if, as a result, the principal amount of
Superior Indebtedness outstanding thereafter or on any future date, less the
principal amount of a Government or Government Insured Obligations held by CFC
on the determination date, would exceed 20 times the sum of the Members' equity
in CFC at the time of determination plus the principal amount of Capital Term
Certificates outstanding at the time of determination or at such given future
date, as the case may be. The principal amounts of Superior Indebtedness and
Capital Term Certificates to be outstanding on any future given date will be
computed after giving effect to maturities and sinking fund requirements.
(Section 7.11) "Superior Indebtedness" means all indebtedness of CFC (including
all guarantees by CFC of indebtedness of others) except Capital Term
Certificates. (Section 1.01). A "Capital Term Certificate" is defined for the
purposes of the Indenture as a note of CFC substantially in the form of the
capital term certificates of CFC outstanding on the date of the Indenture and
any other indebtedness having substantially similar provisions as to
subordination. (Section 1.01). "Government or Government Insured Obligations"
means obligations held by CFC which relate to the REA or successor programs and
which are obligations of the United States or any agency thereof or which are
guaranteed or insured by the United States government or any agency thereof.
(Section 7.11) As of November 30, 1993, CFC had $6,529,400,000 outstanding of
Superior Indebtedness and within the restrictions of the Indenture was permitted
to have outstanding an additional $22,967,740,000 of Superior Indebtedness.
Unless an Event of Default shall occur, CFC will be entitled to receive and
retain all payments on account of principal, premium and interest on the
Eligible Mortgage Notes and Permitted Investments on deposit with the Trustee.
(Section 4.02)
MODIFICATIONS
Modifications of the provisions of the Indenture may be made with the
consent of the holders of not less than a majority in aggregate principal amount
of the then outstanding Collateral Trust Bonds, but, without the consent of the
holder of each Collateral Trust Bond affected thereby, no such modification
shall (i) effect a reduction, or an extension of the stated time of payment, of
the principal of or interest on any Collateral Trust Bond or of any premium
payable on redemption, (ii) permit the creation of any prior or equal lien on
the securities or other property pledged under the Indenture (except as
expressly permitted) or deprive the holder of any Collateral Trust Bond (except
as expressly permitted) of the lien created by the Indenture or (iii) reduce the
above-stated percentage of holders of Collateral Trust Bonds whose consent is
required to modify the Indenture or
22
<PAGE> 24
the percentage of holders of Collateral Trust Bonds whose consent is required
for any waiver under the Indenture. (Section 13.02)
The Indenture provides that the Company and the Trustee may, without the
consent of any holders of Collateral Trust Bonds, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, establishing the form or terms of Bonds of any series, changing or
eliminating any restriction on the manner or place of payment of principal of or
interest on Bearer Bonds or, provided such action shall not adversely affect the
interests of the holders of any series of Bonds in any material respect, curing
ambiguities or inconsistencies in the Indenture or making other provisions with
respect to matters arising under the Indenture. (Section 13.01)
WAIVER OF CERTAIN COVENANTS
The Indenture provides that the Company may omit to comply with certain
restrictive covenants (including that described above under "Restriction on
Indebtedness") if the holders of not less than a majority in principal amount of
all series of Collateral Trust Bonds at the time outstanding affected thereby
(acting as one class) waive compliance with such restrictive covenants. (Section
7.16)
EVENTS OF DEFAULT
The Indenture provides that the following constitute "Events of Default"
thereunder: (i) default in the payment of interest on any Bonds continuing for
30 days; (ii) default in the payment of the principal of (or, premium, if any,
on) any Bonds at their maturity or upon redemption; (iii) default in the making
of any sinking fund payment on any Bonds which provide for mandatory sinking
fund payments; (iv) default in the performance of specified covenants in the
Indenture for 60 days after such default is known to any officer of CFC,
including the restriction on indebtedness and the covenant to maintain Eligible
Collateral outlined above; (v) failure to perform any other covenant in the
Indenture for 60 days after notice from the Trustee to the Company or from
holders of at least 25% in principal amount of Bonds outstanding to the Trustee
and (vi) specified events of bankruptcy, reorganization or insolvency. (Section
9.01)
CFC is required to file with the Trustee annually a written statement as to
CFC's compliance with the conditions and covenants under the Indenture. (Section
7.15) In case an Event of Default should occur and be continuing, the Trustee or
the holders of at least 25% in principal amount of the Bonds then outstanding
may declare the principal of the Bonds to be due and payable. Each declaration
may, under certain circumstances, be rescinded by the holders of a majority in
principal amount of the Bonds at the time outstanding. (Section 9.02)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Bonds, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
Subject to such provisions for indemnification and certain limitations contained
in the Indenture, the holders of a majority in principal amount of the Bonds at
the time outstanding shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. The Trustee is not
required to expend or risk its own funds or incur financial liability if it has
reasonable ground for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(Sections 9.08, 10.01 and 10.03)
The Indenture provides that upon receipt by the Trustee of notice of an
Event of Default, declaring an acceleration or directing the time, method or
place of conducting a proceeding at law if an Event of Default has occurred and
is continuing, the Trustee shall, with respect to any series of Bonds
represented by a global bond or bonds, and may, with respect to any other series
of Bonds, establish a record dated for the purpose of determining holders of
outstanding Bonds of such series entitled to join in such notice. (Section 9.01)
23
<PAGE> 25
SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the Indenture will cease to be in effect as
to the Company (except for certain obligations to register the transfer or
exchange of Bonds and hold moneys for payment in trust) with respect to the
Bonds when (i) the principal of and interest on Bonds and coupons, if any, have
been paid and/or the Company has deposited with the Trustee, in trust, money and
U.S. Government Obligations (as defined in the Indenture), which through the
payment of interest thereon and principal thereof in accordance with their terms
will provide money in an amount sufficient to pay all the principal of, and
interest on, the Bonds in accordance with the terms of the Bonds, or (ii) such
Bonds or coupons are deemed paid and discharged in the manner described in the
next paragraph. (Section 14.01)
Unless the Prospectus Supplement relating to the Offered Bonds provides
otherwise, the Company at its option (a) will be Discharged (as such term is
defined in the Indenture) from any and all obligations in respect of the Offered
Bonds (except for certain obligations to register the transfer or exchange of
Bonds, replace stolen, lost or mutilated Bonds and coupons, maintain paying
agencies and hold moneys for payment in trust) or (b) need not comply with
certain restrictive covenants of the Indenture (including those described above
under "Restriction on Indebtedness"), in each case after the Company deposits
with the Trustee, in trust, money, and, in the case of Bonds and coupons
denominated in a foreign currency, Foreign Government Securities, as defined in
the Indenture, which through the payment of interest thereon and principal
thereof in accordance with their terms will provide money in an amount
sufficient to pay in the currency, currencies or currency unit or units in which
the Offered Bonds are payable all the principal of, and interest on, the Offered
Bonds on the dates such payments are due in accordance with the terms of the
Offered Bonds. Among the conditions to the Company's exercising any such option,
the Company is required to deliver to the Trustee an opinion of counsel to the
effect that the deposit and related defeasance would not cause the holders of
the Offered Bonds to recognize income, gain or loss for United States federal
income tax purposes and that the holders will be subject to United States
federal income tax in the same amounts, in the same manner and at the same times
as would have been the case if such deposit and related defeasance has not
occurred. (Section 14.02)
At the request of the Company, the Trustee will deliver or pay to the
Company any U.S. Government Obligations, Foreign Government Securities or money
deposited, for the purposes described in the preceding two paragraphs, with the
Trustee by the Company and which, in the opinion of a nationally-recognized firm
of independent public accountants, are in excess of the amount thereof which
would then have been required to be deposited for such purposes. In addition,
the Trustee, in exchange for, simultaneously, other U.S. Government Obligations,
Foreign Government Securities or money, will deliver or pay to the Company, at
the Company's request, U.S Government Obligations, Foreign Government Securities
or money deposited with the Trustee for the purposes described in the preceding
two paragraphs, provided that, in the opinion of a nationally-recognized firm of
independent public accountants, immediately after such exchange the obligations,
securities or money then held by the Trustee will be in such amount as would
then have been required to be deposited with the Trustee for such purposes.
(Section 14.02)
LIMITATIONS ON ISSUANCE OF BEARER BONDS
Under U.S. federal tax laws, certain limitations on offers, sales and
delivery apply to Bearer Bonds. These limitations, as well as additional
information regarding the U.S. federal income tax consequences in respect of a
Bearer Bond, will be set forth in any Prospectus Supplement providing for the
issuance of Bearer Bonds.
UNITED STATES TAXATION
The following is a summary of the principal U.S. federal income tax
consequences of the acquisition, ownership and disposition of Registered Bonds.
The summary reflects present law, which is subject to prospective and
retroactive changes. It is not intended as tax advice, and it does not describe
all of the tax considerations that may be relevant to a prospective purchaser.
The summary addresses only original purchasers of the Bonds that hold the Bonds
as capital assets. It does not address U.S. federal income tax issues relevant
to purchasers subject to special rules, such as banks, securities dealers, life
insurance companies, controlled foreign corporations, persons
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holding Bonds in connection with a hedge or persons having a functional currency
other than the U.S. dollar. The summary does not consider the tax consequences
of Bonds with terms other than those described in this Prospectus. PROSPECTIVE
PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISERS ABOUT THE TAX CONSEQUENCES OF
AN INVESTMENT IN THE BONDS UNDER THE LAWS OF THE UNITED STATES AND OTHER
JURISDICTIONS WHERE PURCHASERS ARE SUBJECT TO TAXATION.
For the purposes of this discussion, "U.S. Holder" means (i) a beneficial
owner of the Bonds that is a citizen or resident of the United States, a
corporation or partnership organized in or under the laws of the United States,
or an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source or (ii) any other beneficial owner as to which
income from the Bonds is effectively connected with the conduct of a trade or
business within the United States. The term "Non-U.S. Holder" refers to any
beneficial owner of the Bonds other than a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST
Interest on a Bond generally will be taxable to a U.S. Holder as ordinary
interest income at the time of receipt or accrual in accordance with the U.S.
Holder's method of accounting for U.S. federal income tax purposes. Special
rules for the interest on Bonds with original issue discount are described
below.
ORIGINAL ISSUE DISCOUNT
The following discussion of original issue discount relies in significant
part on the interpretations found in final U.S. Treasury regulations issued in
1994 (the "Final Regulations") and in certain proposed U.S. Treasury regulations
issued in 1986 (the "Proposed Regulations"). The Final Regulations generally are
effective for debt instruments issued on or after April 4, 1994. The Proposed
Regulations dealing with debt instruments that have contingent payments were
modified in 1991. The Proposed Regulations currently are under review, and their
application to the Bonds is subject to change. The Proposed Regulations are not
binding authority, and different proposed, temporary or final Treasury
regulations may apply to the Bonds retroactively.
General. A U.S. Holder of a Bond issued at a discount with a maturity of
more than one year after the date of issue must include original issue discount
in income over the term of the Bond. The U.S. Holder generally must include in
gross income for the taxable year the sum of the daily portions of original
issue discount that accrue on the Bond for each day during the year on which
such holder held the Bond. Accordingly, a U.S. Holder will be required to
include amounts attributable to original issue discount in income before
receiving cash attributable to that income.
A Bond has original issue discount for U.S. federal income tax purposes to
the extent that the Bond's stated redemption price at maturity exceeds its issue
price. The issue price of a Bond is the initial offering price at which a
substantial amount of the Bonds is sold to the public (excluding bond houses,
brokers or similar persons). The stated redemption price of a Bond is the total
of all payments due on the Bond other than payments of "qualified stated
interest." A Bond is not treated as issued at a discount, however, if the
discount is less than 1/4 of 1 percent of the Bond's stated redemption price at
maturity multiplied by the number of complete years to maturity ("de minimis
original issue discount"). A Bond that bears interest for any accrual period at
a rate below the rate for the remaining term of the Bond (e.g., a Bond with a
"teaser rate") also will not be treated as issued at a discount solely on
account of that feature if the greater of (a) the foregone interest and (b) the
excess, if any, of the Bond's stated principal amount over its issue price, is
less than 1/4 of 1 percent of the Bond's adjusted stated redemption price
multiplied by the number of complete years to maturity.
Qualified stated interest is interest that is payable unconditionally in
cash or in property (other than debt of the issuer) at least annually at either
(a) a single fixed rate that appropriately takes into account the length of the
interval between payments or (b) the current values of (i) a single "qualified
floating rate" or (ii) a single "objective rate" (each a "Single Variable
Rate"). A qualified floating rate is any floating rate the variations in which
reasonably can be expected to measure contemporaneous variations in the cost of
newly-borrowed funds in
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the currency in which the Bond is denominated (e.g., LIBOR). For this purpose, a
rate equal to (a) the product of a qualified floating rate and a fixed multiple
that is greater than zero but not more than 1.35 or (b) the product of a
qualified floating rate and a fixed multiple that is greater than zero but not
more than 1.35, increased or decreased by a fixed rate is treated as a single
qualified floating rate. The Final Regulations further provide that (a) interest
that is stated at a fixed rate for an initial period of less than one year
followed by a qualified floating rate for a subsequent period, and the value of
the qualified floating rate on the issue date is intended to approximate the
fixed rate, the fixed rate and the qualified floating rate together constitute a
single qualified floating rate and (b) two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Bond will constitute a single qualified floating rate. The qualified
floating rate will be conclusively presumed for this purpose to approximate the
fixed rate or the predecessor floating rate if the value of the qualified
floating rate on the issue date does not differ from the value of the fixed rate
or predecessor floating rate by more than .25 percentage points (25 basis
points). In addition, if a floating rate has minimum or maximum restrictions or
similar restrictions, the Internal Revenue Service could assert that the
floating rate does not constitute a qualified floating rate. However, the Final
Regulations provide that a floating rate will not fail to be treated as a
qualified floating rate if it is subject to the following restrictions: (a) a
cap, floor or periodic adjustment restriction (a "governor") that is fixed
throughout the term of the Bond, (b) a cap or similar restriction that is not
reasonably expected as of the issue date to cause the yield on the Bond to be
significantly less than the expected yield determined without the cap, (c) a
floor or similar restriction that is not reasonably expected as of the issue
date to cause the yield on the Bond to be significantly more than the expected
yield determined without the floor, or (d) a governor or similar restriction
that is not reasonably expected as of the issue date to cause the yield on the
Bond to be significantly more or less than the expected yield determined without
the governor. Floating rate interest payments subject to caps, floors, or
governors that do not meet the above requirements could be treated as contingent
payments. Under the Proposed Regulations, contingent interest payments generally
would be includible in income on the date when the contingent interest amount
becomes fixed. Because the Proposed Regulations are being reviewed by the U.S.
Treasury, U.S. Holders are urged to consult their tax advisers regarding the tax
treatment of contingent payments. An objective rate is a rate, other than a
qualified floating rate, determined by a single formula that is fixed throughout
the term of the Bond and is based on (i) one or more qualified floating rates
(e.g., a multiple of a qualified floating rate or the inverse of a qualified
floating rate), (ii) one or more rates where each rate would be a qualified
floating rate for a Bond denominated in a currency other than the currency in
which the Bond is denominated, (iii) the yield or the changes in the price of
one or more items of personal property (other than stock or debt of the Company
or a related party), provided each item of property is actively traded, (iv) a
combination of rates described in (i), (ii) or (iii) described above or (v)
other rates designated from time to time by the Internal Revenue Service. The
Final Regulations provide that each rate described in (i) through (iv) above
will not be considered an objective rate, however, if it is reasonably expected
that the average value of the rate during the first half of the Bond's term will
be either significantly less than or greater than the average value of the rate
during the final half of the Bond's term. In addition, the Final Regulations
provide that interest that is stated at a fixed rate for an initial period of
less than one year followed by an objective rate for a subsequent period, and
the value of the objective rate on the issue date is intended to approximate the
fixed rate, the fixed rate and the objective rate together constitute a single
objective rate with a conclusively favorable presumption if the value of the
objective rate on the issue date does not differ from the value of the fixed
rate by more than .25 percentage points (25 basis points).
To determine the daily portions of original issue discount, original issue
discount accruing during an accrual period is divided by the number of days in
the period. Except as described below under "Variable Rate Bonds", the amount of
original discount accruing during an accrual period is determined by using a
constant yield to maturity method, and the accrued amount for any period is the
excess of (i) the product of the Bond's adjusted issue price at the beginning of
the accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted for
the length of the accrual period) over (ii) the amount of any qualified stated
interest payments allocable to the accrual period. The adjusted issue price of a
Bond at the beginning of any accrual period generally equals the issue price of
the Bond increased by the aggregate amount of original issue discount that
accrued on that Bond in all prior accrual periods and reduced by the amount of
payments in prior accrual periods other than payments of qualified stated
interest.
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A U.S. Holder of a Bond issued at a discount that purchases the Bond for
more than the Bond's adjusted issue price but less than the Bond's stated
redemption price at maturity may reduce the daily portions of original issue
discount includible in gross income by daily portions of the acquisition premium
paid for the Bond.
Variable Rate Bonds. Special rules apply to the U.S. Holder of a Bond that
bears interest at a "variable rate" (a "Variable Rate Bond"). A "variable rate"
of interest is interest that is payable unconditionally in cash or in property
(other than debt of the Company) at least annually at (a) a Single Variable
Rate, (b) more than one qualified floating rate, (c) a single fixed rate and one
or more qualified floating rates or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate." Under the Final
Regulations, a qualified inverse floating rate is an objective rate that (a) is
equal to a fixed rate minus a qualified floating rate and (b) the variations of
which can reasonably be expected to inversely reflect contemporaneous variations
in the cost of newly borrowed funds.
In general, to compute the accrual of original issue discount on a Variable
Rate Bond, the Final Regulations convert a Variable Rate Bond into a fixed rate
debt instrument and then apply the general original issue discount rules
discussed above to that deemed fixed rate debt instrument. If a Variable Rate
Bond provides for stated interest at a Single Variable Rate, (a) all stated
interest with respect to the Variable Rate Bond is qualified stated interest and
(b) the amount of original issue discount, if any, is determined under the
original issue discount rules applicable to fixed rate debt instruments
discussed above by assuming that the Single Variable Rate is a fixed rate equal
to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value, as of the issue date of the Variable Rate Bonds, of the
qualified floating rate or qualified inverse floating rate or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Variable Rate
Bond.
If a Variable Rate Bond provides for stated interest other than at a Single
Variable Rate, special rules apply to determine the amounts of interest and
original issue discount accruals. The fixed rate substitute (a) for each
qualified floating rate provided for in the Variable Rate Bond is the value of
each rate as of the issue date of the Variable Rate Bonds (with appropriate
adjustment for any differences in intervals between interest adjustment dates),
(b) for a qualified inverse floating rate is the value of the qualified inverse
floating rate as of the issue date of the Variable Rate Bonds and (c) for an
objective rate (other than a qualified inverse floating rate) is a fixed rate
that reflects the yield that is reasonably expected for the Variable Rate Bond.
The equivalent fixed rate debt instrument has terms that are identical to those
provided under the Variable Rate Bond, except that the equivalent fixed rate
debt instrument provides for the fixed rate substitutes in lieu of the qualified
floating rates or objective rate provided under the Variable Rate Bond. The
amounts of qualified stated interest and original issue discount, if any, are
determined for the equivalent fixed rate debt instrument under the rules
applicable to fixed rate debt instruments as described above and are taken into
account as if the U.S. Holder held the equivalent fixed rate debt instrument.
Qualified stated interest or original issue discount allocable to an accrual
period is increased (or decreased) if the interest actually accrued or paid
during an accrual period exceeds (or is less than) the interest assumed to be
accrued or paid during the accrual period under the equivalent fixed rate debt
instrument. This increase or decrease is an adjustment to qualified stated
interest for the accrual period if the equivalent fixed rate debt instrument
provides for qualified stated interest and the increase or decrease is reflected
in the amount actually paid during the accrual period. Otherwise, this increase
or decrease is an adjustment to original issue discount for the accrual period.
Optional Redemption. For purposes of determining the yield and maturity of
a Bond, the Company will be presumed to exercise any right to redeem a Bond
before its stated maturity or to extend the maturity of a Bond if exercise would
reduce the yield on the Bond. Likewise, the U.S. Holder will be presumed to
exercise any right to require the redemption of a Bond or to extend the maturity
of the Bond if exercise would increase the yield on the Bond. If both the
Company and the U.S. Holder have such options, the rules of this paragraph are
applied to the options in the order that they may be exercised. Accordingly, the
deemed exercise of one option may eliminate other options that are later in
time. If the Bond is not actually redeemed on the date when the option was
presumed to have been exercised, the Bond will be treated only for purposes of
determining the accrual of original issue discount as having been reissued at a
price equal to that Bond's adjusted issue price on that date.
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Anti-Abuse Rule. Under proposed and temporary Treasury regulations, if a
principal purpose in structuring a Bond or applying the Treasury regulations
described above is to achieve a result that is unreasonable in light of the
purposes of the applicable statutes (which generally are intended to achieve the
clear reflection of income for both borrowers and lenders), then the Internal
Revenue Service can apply or depart from the Final Regulations as necessary or
appropriate to achieve a reasonable result. These particular proposed and
temporary Treasury Regulations apply to Notes issued on or after April 4, 1994.
Short-Term Bonds. U.S. Holders that do not use the accrual method of
accounting for tax purposes generally will not be required to recognize original
issue discount on Bonds maturing within one year of original issuance until they
receive payments on the Bonds. U.S. Holders on the accrual method, regulated
investment companies, common trust funds, and certain others, however, must
accrue original issue discount on such short-term Bonds on a straight-line basis
unless they elect to accrue the discount on a constant yield basis with daily
compounding. The original issue discount on a short-term Bond is the amount by
which the total principal and interest payments on the Bond exceed its issue
price. U.S. Holders may elect to include discount on such short-term Bonds into
income based on acquisition discount rather than original issue discount.
Acquisition discount is the excess of a Bond's stated redemption price at
maturity over the U.S. Holder's basis in the Bond.
Gain recognized on the sale or exchange of a short-term Bond by a U.S.
Holder that has not accrued discount on the Bond will be ordinary income to the
extent attributable to accrued interest and original issue discount. Such a
holder also must defer deductions for net interest expense on any borrowing
attributable to the short-term Bond to the extent that the expense does not
exceed accrued but unrecognized interest and original issue discount (or
acquisition discount) on the Bond.
MARKET DISCOUNT
A U.S. Holder that purchases a Bond at a market discount generally will be
required to treat payments other than qualified stated interest payments as
ordinary income to the extent of the accrued market discount and to treat gain
on the sale of the Bond as ordinary income to the extent of the accrued market
discount not previously included in income. See "Sale or Exchange of Bonds"
below. Market discount is the amount by which the stated redemption price at
maturity (or, in the case of a Bond with original issue discount, the revised
issue price) exceeds the purchaser's basis in the Bond immediately after
acquisition. A Bond is not treated as purchased at a market discount, however,
if the discount is less than 1/4 of 1 percent of the stated redemption price at
maturity (or the revised issue price) multiplied by the number of complete years
remaining to maturity ("de minimis market discount"). (The revised issue price
of a Bond is its initial issue price increased by the amount of original issue
discount includible in the gross income of previous holders.) Market discount on
a Bond will accrue, at the election of the holder, either ratably or at a
constant yield to maturity. The U.S. Holder may elect to take market discount
into income as it accrues. Under certain circumstances, the U.S. Holder may be
required to defer deductions for interest expense attributable to debt incurred
or continued to purchase a Bond with market discount.
PREMIUM
A U.S. Holder that purchases a Bond for more than its stated redemption
price at maturity may elect to amortize the bond premium. If a U.S. Holder makes
such an election, the amount of interest on the Bond otherwise to be included in
the U.S. Holder's income will be reduced each year by the amount of amortizable
bond premium allocable to such year on a constant yield to maturity basis
(except to the extent regulations may provide otherwise). Amortized bond premium
will reduce the U.S. Holder's basis in the Bond. An election to amortize bond
premium will apply to certain other debt instruments that the U.S. Holder
acquired at a premium, and the election may have different tax consequences
depending on when the debt instruments were issued or acquired. It also is not
entirely clear how amortizable bond premium would be computed for obligations
with contingent interest payments. A U.S. Holder should consult its tax adviser
before making an election to amortize bond premium.
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INTEREST ELECTION
Under the Final Regulations, U.S. Holders on the accrual method or the cash
method of accounting generally may elect to include all accrued interest on a
Bond in gross income using the constant yield to maturity method. The election
applies to stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium. A U.S. Holder should consult its tax adviser before making this
election.
SALE OR EXCHANGE OF BONDS
Except to the extent that gain or loss is attributable to accrued but
unpaid interest or accrued market discount, a U.S. Holder generally will
recognize capital gain or loss upon a sale, exchange or complete retirement of a
Bond equal to the difference between the amount realized and the U.S. Holder's
adjusted basis in the Bond. The gain or loss will be long-term if the Bond has
been held for more than one year. The adjusted basis of a Bond generally will
equal its initial cost increased by any original issue discount, market discount
or acquisition discount with respect to the Bond previously included in the U.S.
Holder's gross income and reduced by the payments previously received on the
Bond, other than payments of qualified stated interest, and by any amortized
premium.
The tax consequences of the partial redemption of a Bond will depend upon
the price at which the U.S. Holder purchased the Bond. A U.S. Holder that
purchased a Bond at a de minimis market discount or purchased a Bond for more
than its revised issue price, but less than its principal amount, will recognize
capital gain equal to the difference between the principal prepayment and the
U.S. Holder's adjusted basis in the prepaid portion of the Bond. If a U.S.
Holder purchased a Bond at a market discount, (i) the principal prepayment will
be included in ordinary income to the extent of the accrued market discount
allocable to the prepaid portion of the Bond (and it is possible that amounts
allocable to unaccrued market discount allocable to the prepaid portion of the
Bond will be recognized as capital gain) and (ii) any principal prepayment
exceeding the revised issue price allocable to the prepaid portion of the Bond
will be capital gain. If a U.S. Holder purchased a Bond for more than its stated
principal amount and has not elected to amortize bond premium, the U.S. Holder
will recognize a capital loss equal to any amount by which the U.S. Holder's
adjusted basis in the prepaid portion of the Bond exceeds the amount of the
principal prepayment. If the U.S. Holder has elected to amortize bond premium,
all or part of such excess might be deductible as amortizable bond premium
rather than as capital loss. Any capital gain or loss will be long-term if the
Bond has been held for more than one year.
FOREIGN CURRENCY BONDS
The tax treatment of Bonds the interest or principal on which may be
determined by reference to one or more foreign currencies will depend on the
application of special rules to the particular terms of the Bonds. The tax
considerations relevant to such Bonds will be described in an applicable
Prospectus Supplement, and each prospective purchaser should consult its tax
adviser about such matters.
NON-U.S. HOLDERS
Interest received by a Non-U.S. Holder is exempt from U.S. federal income
tax unless the holder actually or constructively owns at least 10% of the total
combined voting power of the Company's stock or the holder is for U.S. income
tax purposes a controlled foreign corporation related to the Company through
stock ownership. To qualify for that exemption, a Non-U.S. Holder must provide a
statement signed under penalties of perjury certifying that the holder is not a
U.S. person for U.S. tax purposes and providing the holder's name and address.
Gain from the sale or other disposition of a Bond by a Non-U.S. Holder is not
subject to U.S. federal income tax unless the Non-U.S. Holder is an individual
who is present in the United States for at least 183 days during the taxable
year of the disposition and certain other conditions are met.
Bonds held by a Non-U.S. Holder will not be subject to the U.S. federal
estate tax unless the holder actually or constructively owns at least 10% of the
total combined voting power of the Company's stock.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
A 31% backup withholding of federal income tax and certain information
reporting requirements may apply to certain payments made on the Bonds and to
the proceeds from the disposition of a Bond if the holder is not a corporation,
a financial institution or otherwise entitled to an exemption. U.S. Holders that
provide a correct taxpayer identification number and Non-U.S. Holders that
provide the statement described above to establish an exemption from withholding
tax generally are exempt from backup withholding. Amounts withheld under the
backup withholding rules can be claimed as a refund or taken as a credit against
the holder's U.S. federal income tax liability on a properly filed annual income
tax return.
PLAN OF DISTRIBUTION
Bonds of any series may be purchased to be reoffered to the public through
underwriting syndicates led by Lehman Brothers Inc. or other underwriters. The
Underwriters with respect to an underwritten offering of Bonds are named in the
Prospectus Supplement relating to such offering. Unless otherwise set forth in
the Prospectus Supplement, the obligations of the Underwriters to purchase Bonds
will be subject to certain conditions precedent and each of the Underwriters
with respect to a sale of Bonds will be obligated to purchase all of its Bonds
if any are purchased. The initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers set forth in the Prospectus
Supplement may be changed from time to time.
The place and time of delivery for the Offered Bonds in respect of which
this Prospectus is delivered are set forth in the Prospectus Supplement.
CFC has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
Each underwriter, dealer and agent participating in the distribution of any
Offered Bonds which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, Offered Bonds in bearer form in
the United States or its possessions or to United States persons (other than
qualifying financial institutions) in connection with the original issuance of
the Offered Bonds. See "Limitations on Issuance of Bearer Bonds".
The Offered Bonds may not be offered or sold directly or indirectly in
Great Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
Prospectus and any Prospectus Supplement or any other offering material relating
to the Offered Bonds may not be distributed in or from Great Britain other than
to persons whose business involves the acquisition and disposal, or the holding,
of securities whether as principal or as agent.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company in the ordinary course of
business.
LEGAL OPINIONS
The validity of the Bonds offered hereby will be passed upon for the
Company by Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York,
New York, and for the agents or underwriters, if any, by Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York.
EXPERTS
The audited financial statements included in the Company's Annual Report on
Form 10-K for the year ended May 31, 1993 incorporated by reference in this
Prospectus have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. LIST OF EXHIBITS
<TABLE>
<C> <S> <C>
1 -- Form of Underwriting Agreement to be used in connection with Bonds.*
4 -- Indenture between the Company and First Bank National Association, as
Trustee.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed charges.
23.1 -- Consent of Arthur Andersen & Co.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of First Bank National Association, as Trustee.
</TABLE>
---------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (other than
as provided in the proviso and instructions to Item 512(a) of Regulation
S-K):
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
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<PAGE> 33
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE> 34
THE REGISTRANT AND EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY
AUTHORIZES EACH OF CHARLES B. GILL, STEVEN L. LILLY AND JOHN JAY LIST (THE
"AGENTS") TO FILE ONE OR MORE AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS)
TO THE REGISTRATION STATEMENT WHICH AMENDMENTS MAY MAKE SUCH CHANGES IN THE
REGISTRATION STATEMENT AS SUCH AGENT DEEMS APPROPRIATE AND THE REGISTRANT AND
EACH SUCH PERSON HEREBY APPOINTS EACH SUCH AGENT AS ATTORNEY-IN-FACT TO EXECUTE
IN THE NAME AND ON BEHALF OF THE REGISTRANT AND EACH SUCH PERSON, INDIVIDUALLY
AND IN EACH CAPACITY STATED BELOW, ANY SUCH AMENDMENTS TO THE REGISTRATION
STATEMENT.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX, COMMONWEALTH OF VIRGINIA, ON THE 11TH
DAY OF FEBRUARY, 1994.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By: /s/ CHARLES B. GILL
------------------------------------
CHARLES B. GILL
Governor and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------- ----------------------
<S> <C> <C>
/s/ CHARLES B. GILL Governor and Chief )
- ---------------------------------------- Executive Officer )
CHARLES B. GILL )
/s/ STEVEN L. LILLY Treasurer and Chief )
- ---------------------------------------- Financial Officer )
STEVEN L. LILLY )
/s/ ANGELO M. SALERA Controller (Principal )
- ---------------------------------------- Accounting Officer) )
ANGELO M. SALERA )
/s/ BILL MCGINNIS President and Director )
- ---------------------------------------- )
BILL MCGINNIS )
/s/ J. CHRIS CARIKER Vice President and Director )
- ---------------------------------------- )
J. CHRIS CARIKER )
) February 11, 1994
/s/ GARRY BYE Secretary-Treasurer and )
- ---------------------------------------- Director )
GARRY BYE )
Director )
- ---------------------------------------- )
JOHN C. ANDERSON )
/s/ JOHNNIE R. AUSTIN Director )
- ---------------------------------------- )
JOHNNIE R. AUSTIN )
/s/ ROBERT J. BAUMAN Director )
- ---------------------------------------- )
ROBERT J. BAUMAN )
/s/ BILL BERTRAM Director )
- ---------------------------------------- )
BILL BERTRAM )
</TABLE>
II-3
<PAGE> 35
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------- ----------------------
<S> <C> <C>
/s/ HAROLD I. DYCUS Director )
- ---------------------------------------- )
HAROLD I. DYCUS )
Director )
- ---------------------------------------- )
GLENN ENGLISH )
/s/ JOHN B. FLOYD, JR. Director )
- ---------------------------------------- )
JOHN B. FLOYD, JR. )
/s/ NADINE GRIFFIN Director )
- ---------------------------------------- )
NADINE GRIFFIN )
/s/ RALPH HARMEYER Director )
- ---------------------------------------- )
RALPH HARMEYER )
/s/ GORDON J. HUDSON Director )
- ---------------------------------------- )
GORDON J. HUDSON )
/s/ GEORGE W. KLINE Director )
- ---------------------------------------- )
GEORGE W. KLINE )
/s/ PAUL J. LIESS Director ) February 11, 1994
- ---------------------------------------- )
PAUL J. LIESS )
/s/ RALPH L. LOVELESS Director )
- ---------------------------------------- )
RALPH L. LOVELESS )
Director )
- ---------------------------------------- )
GERALD PAOLUCCI )
/s/ DAVID E. PIPER Director )
- ---------------------------------------- )
DAVID E. PIPER )
/s/ TERRY PITCHFORD Director )
- ---------------------------------------- )
TERRY PITCHFORD )
Director )
- ---------------------------------------- )
J. C. ROBERTS )
/s/ TOM SLOAN Director )
- ---------------------------------------- )
TOM SLOAN )
Director )
- ---------------------------------------- )
ROBERT O. WILLIAMS )
</TABLE>
II-4
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- -------------
<C> <S> <C>
1 -- Form of Underwriting Agreement to be used in connection with Bonds.*
4 -- Indenture between the Com pany and First Bank National Association, as
Trustee.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy. Included as part of
Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed charges.
23.1 -- Consent of Arthur Andersen & Co.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of
Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of First Bank National Association, as Trustee.
</TABLE>
---------------------
* Previously filed.
<PAGE> 1
[CONFORMED COPY]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION
TO
FIRST BANK NATIONAL ASSOCIATION
TRUSTEE.
------------------------
INDENTURE
DATED AS OF , 199
------------------------
COLLATERAL TRUST BONDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS OF THE INDENTURE
DATED AS OF , 199
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PARTIES............................................................... 1
RECITALS.............................................................. 1
GRANTING CLAUSES...................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions.......................................... 2
"Accountant"......................................... 3
"Act"................................................ 3
"Affiliate".......................................... 3
"Allowable Amount"................................... 3
"Appraiser".......................................... 3
"Authenticating Agent"............................... 4
"Authorized Newspaper"............................... 4
"Average Coverage Ratio"............................. 4
"Bearer Bond"........................................ 4
"Board of Directors"................................. 4
"Board Resolution"................................... 4
"Bondholder"......................................... 4
"Bond Register" and "Bond Registrar"................. 4
"Business Day"....................................... 4
"Capital Term Certificate"........................... 4
"Certificate of Available Eligible Collateral"....... 4
"Commission"......................................... 5
"Company"............................................ 5
"Company Request" and "Company Order"................ 5
"Completed Calendar Year"............................ 5
"Corporate Trust Office"............................. 5
"Corporation"........................................ 5
"Coverage Ratio"..................................... 5
"Defaulted Interest"................................. 6
"Depositary"......................................... 6
</TABLE>
<PAGE> 3
ii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
"Distribution System Member"......................... 6
"Eligible Collateral"................................ 6
"Eligible Mortgage Note"............................. 7
"Equity Ratio"....................................... 7
"Event of Default"................................... 7
"Foreign Currency"................................... 7
"Global Bond"........................................ 7
"Holder"............................................. 7
"Indebtedness"....................................... 7
"Indenture".......................................... 8
"Independent"........................................ 9
"Interest Payment Date".............................. 9
"Lien of this Indenture" or "lien hereof "........... 9
"Loan Agreement"..................................... 9
"Maturity"........................................... 9
"Member"............................................. 9
"Mortgage"........................................... 9
"Mortgage Note"...................................... 10
"Officers' Certificate".............................. 10
"Opinion of Counsel"................................. 10
"Outstanding"........................................ 10
"Paying Agent"....................................... 11
"Permitted Investments".............................. 11
"Person"............................................. 11
"Place of Payment"................................... 11
"Pledged Property"................................... 11
"Predecessor Bonds".................................. 11
"REA"................................................ 11
"Redemption Date".................................... 12
"Redemption Price"................................... 12
"Registered Bond".................................... 12
"Registered Holder".................................. 12
"Regular Record Date"................................ 12
"Responsible Officer"................................ 12
</TABLE>
<PAGE> 4
iii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
"Restricted Rentals"................................. 12
"Special Record Date"................................ 12
"Stated Maturity".................................... 12
"Stock" or "Capital Stock"........................... 12
"Superior Indebtedness".............................. 13
"Trust Indenture Act" or "TIA"....................... 13
"Trustee"............................................ 13
"United States"...................................... 13
"Vice President"..................................... 13
SECTION 1.02. Compliance Certificates and Opinions................. 13
SECTION 1.03. Form of Documents Delivered to Trustee............... 14
SECTION 1.04. Acts of Holders...................................... 15
SECTION 1.05. Notices, etc., to Trustee and Company................ 17
SECTION 1.06. Notices to Holders; Waiver........................... 17
SECTION 1.07. Language of Notices, etc............................. 18
SECTION 1.08. Conflict with Trust Indenture Act.................... 18
SECTION 1.09. Effect of Heading and Table of Contents.............. 18
SECTION 1.10. Successors and Assigns............................... 18
SECTION 1.11. Separability Clause.................................. 18
SECTION 1.12. Benefits of Indenture................................ 19
SECTION 1.13. Governing Law........................................ 19
SECTION 1.14. Legal Holidays....................................... 19
</TABLE>
<PAGE> 5
iv
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE TWO
THE BONDS
SECTION 2.01. General Limitations.................................. 19
SECTION 2.02. Issuable in Series................................... 19
SECTION 2.03. Terms of Particular Series........................... 20
SECTION 2.04. Form and Denominations............................... 23
SECTION 2.05. Execution, Authentication and Delivery and Dating.... 24
SECTION 2.06. Temporary Bonds...................................... 25
SECTION 2.07. Registration, Transfer and Exchange.................. 26
SECTION 2.08. Mutilated, Destroyed, Lost and Stolen Bonds.......... 30
SECTION 2.09. Payment of Interest; Interest Rights Preserved....... 31
SECTION 2.10. Persons Deemed Owners................................ 33
SECTION 2.11. Cancellation......................................... 34
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 3.01. Authentication and Delivery of Bonds on Basis of
Eligible Collateral................................ 34
SECTION 3.02. Authentication and Delivery of Bonds on Basis of
Refunding Outstanding Bonds........................ 48
SECTION 3.03. Authentication and Delivery of Bonds on Basis of
Cancelling Bonds Not Issued by the Company......... 49
SECTION 3.04 Other Authentication and Delivery of Bonds........... 50
</TABLE>
<PAGE> 6
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE FOUR
PROVISIONS AS TO PLEDGED PROPERTY
SECTION 4.01. Holding of Pledged Securities........................ 51
SECTION 4.02. Disposition of Payments on Pledged Property.......... 51
SECTION 4.03. Voting; Consents..................................... 53
SECTION 4.04. Certain Actions in Case of Judicial Proceedings...... 54
SECTION 4.05. Renewal; Extension; Substitution..................... 55
SECTION 4.06. Certain Rights in Respect of Stock................... 56
SECTION 4.07. Consolidation, Merger, etc., of Issuing
Corporations....................................... 56
SECTION 4.08. Certain Voting and Other Powers of the Trustee....... 57
SECTION 4.09. Rights of Trustee and Company After Event of
Default............................................ 57
ARTICLE FIVE
APPLICATION OF MONEYS INCLUDED IN PLEDGED PROPERTY;
PERMITTED INVESTMENTS
SECTION 5.01. Cash Held by Trustee Treated as a Deposit............ 58
SECTION 5.02. Use of Moneys for Payment, Redemption or Purchase
of Bonds........................................... 58
SECTION 5.03. Investment of Moneys by Trustee...................... 59
SECTION 5.04. Trustee to Retain Moneys if Event of Default
Exists............................................. 61
ARTICLE SIX
WITHDRAWAL OF COLLATERAL
SECTION 6.01. Withdrawal of Collateral............................. 61
SECTION 6.02. Reassignment of Mortgage Notes upon Payment.......... 63
</TABLE>
<PAGE> 7
vi
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE SEVEN
PARTICULAR COVENANTS OF THE COMPANY
SECTION 7.01. Payment of Principal, Premium and Interest........... 64
SECTION 7.02. Maintenance of Office or Agencies.................... 64
SECTION 7.03. Money for Bond Payments to be Held in Trust.......... 65
SECTION 7.04. Maintenance of Corporate Existence................... 66
SECTION 7.05. Maintenance of Books of Record and Account; Financial
Statements of Company and Members.................. 67
SECTION 7.06. Warranty of Title and Authority to Pledge............ 67
SECTION 7.07. Protection of Title; Payment of Taxes; Liens, etc.... 68
SECTION 7.08. Recordation; Opinions of Counsel..................... 69
SECTION 7.09. Further Assurances................................... 70
SECTION 7.10. Advances by Trustee.................................. 70
SECTION 7.11. Restriction on Indebtedness.......................... 71
SECTION 7.12. Restriction on Amendment of Certain Instruments...... 72
SECTION 7.13. Maintenance of Eligible Collateral................... 72
SECTION 7.14. Restriction on Assignments of Mortgage and
Loan Agreements.................................... 73
SECTION 7.15. Statement as to Compliance........................... 73
SECTION 7.16. Waiver of Certain Covenants.......................... 73
ARTICLE EIGHT
REDEMPTION OF BONDS
SECTION 8.01. Right of Redemption.................................. 74
SECTION 8.02. Applicability of Article............................. 74
SECTION 8.03. Election to Redeem; Notice to Trustee................ 74
SECTION 8.04. Selection by Trustee of Bonds to be Redeemed......... 74
SECTION 8.05. Notice of Redemption................................. 75
SECTION 8.06. Deposit of Redemption Price.......................... 76
SECTION 8.07. Bonds Payable on Redemption Date..................... 76
SECTION 8.08. Bonds Redeemed in Part............................... 77
</TABLE>
<PAGE> 8
vii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE NINE
REMEDIES
SECTION 9.01. Events of Default.................................... 77
SECTION 9.02. Acceleration of Maturity; Rescission and Annulment... 79
SECTION 9.03. Trustee's Power of Sale of Pledged Property; Notice
Required; Power to Bring Suit...................... 81
SECTION 9.04. Incidents of Sale of Pledged Property................ 82
SECTION 9.05. Upon Default Company Will Pay Principal and Interest
upon Demand of Trustee............................. 84
SECTION 9.06. Judicial Proceedings Instituted by Trustee........... 84
SECTION 9.07. Bondholders May Demand Enforcement of Rights by
Trustee............................................ 87
SECTION 9.08. Control by Bondholders............................... 88
SECTION 9.09. Waiver of Past Defaults.............................. 89
SECTION 9.10. Holder May Not Bring Suit Except Under Certain
Conditions......................................... 89
SECTION 9.11. Undertaking To Pay Court Costs....................... 90
SECTION 9.12. Right of Holders To Receive Payment Not To Be
Impaired........................................... 90
SECTION 9.13. Application of Moneys Collected by Trustee........... 91
SECTION 9.14. Bonds or Coupons Held by Company Not To Share
in Distribution.................................... 92
SECTION 9.15. Waiver of Appraisement, Valuation, Stay, Right
to Marshalling..................................... 93
SECTION 9.16. Remedies Cumulative; Delay or Omission Not a
Waiver............................................. 93
</TABLE>
<PAGE> 9
viii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE TEN
THE TRUSTEE
SECTION 10.01. Certain Duties and Responsibilities.................. 94
SECTION 10.02. Notice of Defaults................................... 95
SECTION 10.03. Certain Rights of Trustee............................ 96
SECTION 10.04. Not Responsible for Recitals or Issuance of Bonds.... 97
SECTION 10.05. May Hold Bonds....................................... 97
SECTION 10.06. Money Held in Trust.................................. 97
SECTION 10.07. Compensation and Reimbursement....................... 98
SECTION 10.08. Disqualification; Conflicting Interests.............. 99
SECTION 10.09. Corporate Trustee Required; Eligibility.............. 99
SECTION 10.10. Resignation and Removal; Appointment of Successor.... 99
SECTION 10.11. Acceptance of Appointment by Successor............... 101
SECTION 10.12. Merger, Conversion, Consolidation or Succession
to Business........................................ 101
SECTION 10.13. Preferential Collection of Claims against Company.... 102
SECTION 10.14 Appointment of Authenticating Agent.................. 102
ARTICLE ELEVEN
BONDHOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 11.01. Company to Furnish Trustee Names and Addresses
of Bondholders..................................... 104
SECTION 11.02. Preservation of Information; Communications
to Bondholders..................................... 105
SECTION 11.03. Reports by Trustee................................... 106
SECTION 11.04. Reports by Company................................... 107
ARTICLE TWELVE
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 12.01. Company May Consolidate, etc., only on Certain
Terms.............................................. 108
SECTION 12.02. Successor Corporation Substituted.................... 108
SECTION 12.03. Limitation on Lease of Properties as Entirety........ 109
</TABLE>
<PAGE> 10
ix
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE THIRTEEN
SUPPLEMENTAL INDENTURES; AMENDMENT OF PLEDGED PROPERTY
SECTION 13.01. Supplemental Indentures and Amendments of Certain
Pledged Property Without Consent of Bondholders.... 109
SECTION 13.02. Supplemental Indentures and Amendments of Certain
Pledged Property With Consent of Bondholders....... 112
SECTION 13.03. Execution of Supplemental Indentures................. 114
SECTION 13.04. Effect of Supplemental Indentures.................... 114
SECTION 13.05. Conformity with Trust Indenture Act.................. 114
SECTION 13.06. Reference in Bonds to Supplemental Indentures........ 115
ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01. Payment of Indebtedness; Satisfaction................ 115
SECTION 14.02. Satisfaction, Discharge and Defeasance of Bonds of
Any Series......................................... 117
SECTION 14.03. Reinstatement........................................ 120
SECTION 14.04. Definitions.......................................... 121
ARTICLE FIFTEEN
SUNDRY PROVISIONS
SECTION 15.01. Exercise of Rights and Powers Under Mortgage
Notes and Mortgages................................ 122
SECTION 15.02. Execution in Counterparts............................ 123
SCHEDULE I--Summary of Terms of Mortgage.............................. 125
</TABLE>
<PAGE> 11
INDENTURE, dated as of , 199 , between NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association
(hereinafter called the "Company"), having its principal executive office and
mailing address at 2201 Cooperative Way, Herndon, VA 22071, and FIRST BANK
NATIONAL ASSOCIATION, a national banking association, as trustee hereunder
(hereinafter called the "Trustee"), having its corporate trust office at 180
East Fifth Street, Saint Paul, MN 55101.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of an
unlimited aggregate principal amount of its bonds in series, from time to time,
as hereinafter provided (hereinafter called the "Bonds"); and, to secure the
Bonds and to provide for the authentication and delivery thereof by the Trustee,
the Company has duly authorized the execution and delivery of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH that, to secure the payment of
the principal of and interest and premium (if any) on all the Bonds
authenticated and delivered hereunder and any coupons appertaining thereto and
issued by the Company and outstanding, and the performance of the covenants
therein and herein contained, and in consideration of the premises and of the
covenants herein contained and of the purchase of the Bonds by the holders
thereof, and of the sum of $1 paid to the Company by the Trustee at or before
the delivery hereof, the receipt whereof is hereby acknowledged, the Company by
these presents does grant, bargain, sell, release, convey, assign, pledge,
transfer, mortgage and confirm unto the Trustee all and singular the following
(which collectively are hereinafter called the "Pledged Property"), to wit:
CLAUSE FIRST
All Mortgage Notes (as hereinafter defined) as shall be actually delivered,
assigned and pledged by the Company to the Trustee, on the date hereof or from
time to time hereafter, together with the interest of the Company (if any) in
the Mortgages (as hereinafter defined) securing said Mortgage Notes.
CLAUSE SECOND
Also any property, including cash and Permitted Investments (as hereinafter
defined), that may, on the date hereof or from time to time hereafter, be
<PAGE> 12
2
subjected to the lien and/or pledge hereof by the Company by delivery,
assignment or pledge thereof to the Trustee hereunder; and the Trustee is hereby
authorized to receive the same at any time as additional security hereunder.
Such subjection to the lien hereof of any such property as additional security
may be made subject to any reservations, limitations or conditions which shall
be set forth in a written instrument executed by the Company and/or by the
Trustee respecting the scope or priority of such lien and/or pledge or the use
and disposition of such property or the proceeds thereof.
TO HAVE AND TO HOLD the Pledged Property unto the Trustee and its
successors and assigns forever, but subject to the terms and conditions
hereinafter set forth.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security (except as any sinking or other fund, established in accordance
herewith, may afford additional special security for the Bonds and any coupons
appertaining thereto of any particular series) of the holders from time to time
of all the Bonds authenticated and delivered hereunder and any coupons
appertaining thereto and issued by the Company and outstanding, without any
priority of any one Bond or coupon over any other Bond or coupon.
AND UPON THE TRUSTS and subject to the covenants and conditions hereinafter
set forth.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.
SECTION 1.01. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
<PAGE> 13
3
(4) all reference in this instrument to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this instrument; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Ten, are defined in that
Article.
"Accountant" means a Person qualified to pass upon accounting questions,
whether or not (unless herein required to be Independent) such Person shall be
an officer or employee of the Company or a Member or of an Affiliate of the
Company or a Member.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.04.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Allowable Amount" of Eligible Collateral on any date means:
(1) with respect to cash, 100% thereof;
(2) with respect to Permitted Investments, the cost to the Company
(exclusive of any accrued interest or brokerage commissions) except that
with respect to any Permitted Investments which are traded on any national
securities exchange or in any over-the-counter market, Allowable Amount on
any date shall mean the fair market value thereof (as determined by the
Company);
(3) with respect to Eligible Mortgage Notes, the principal amount
theretofore advanced thereon which remains unpaid on such date.
"Appraiser" means a Person engaged in the business of appraising property
or otherwise competent to determine the value of the particular property in
question, whether or not (unless herein required to be Independent) such
<PAGE> 14
4
Person shall be an officer or employee of the Company or a Member or of an
Affiliate of the Company or a Member.
"Authenticating Agent" means any Person named as an Authenticating Agent
pursuant to Section 10.14.
"Authorized Newspaper" means a newspaper of general circulation in a Place
of Payment, printed in an official language of the country of publication or in
the English language and customarily published on each Business Day, whether or
not published on Saturdays, Sundays or holidays.
"Averaged Coverage Ratio" of any Member means the average of the two higher
of the Coverage Ratios of such Member for each of the last three Completed
Calendar Years.
"Bearer Bond" means any Bond payable to the bearer thereof.
"Board of Directors" means either the board of directors of the Company or
any committee of that board duly authorized to act for it in respect hereof.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Bondholder" means a bearer of a Bearer Bond or a Registered Holder of a
Registered Bond.
"Bond Register" and "Bond Registrar" have the respective meanings specified
in Section 2.07.
"Business Day" when used with respect to a Place of Payment means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized by law to close.
"Capital Term Certificate" means a note of the Company substantially in the
form of the capital term certificates outstanding on the date of execution and
delivery of this Indenture and any other Indebtedness of the Company having
substantially similar provisions as to subordination as those contained in said
outstanding capital term certificates.
"Certificate of Available Eligible Collateral" means a certificate
substantially in the form provided in Section 3.01(b)(2).
<PAGE> 15
5
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written request
or order signed in the name of the Company by its Governor, Chief Executive
Officer, Chairman of the Board, Vice Chairman of the Board, President, Finance
Officer or one of its Vice Presidents, and by its Treasurer, Secretary, or one
of its Assistant Treasurers or Assistant Secretaries, and delivered to the
Trustee.
"Completed Calendar Year" of a Member means a calendar year ended more than
120 days prior to any date of determination, unless financial statements of such
Member for a later calendar year shall have been furnished to the Company
pursuant to Section 7.05.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time the corporate trust business of the Trustee shall be
administered.
"Corporation" shall include any cooperative association, voluntary
association, joint stock company, business trust or similar organization. Each
reference herein to "corporation" shall be deemed to include Members.
"Coverage Ratio" of any Member for any calendar year of such Member means
the ratio determined by adding such Member's Net Margins and Patronage Capital,
Interest Expense with respect to Long-Term Debt and Depreciation and
Amortization Expense for such year, and subtracting therefrom G&T Capital
Credits, Other Capital Credits and Patronage Capital of other institutions, and
dividing the sum so obtained by the sum of all payments of principal and
interest required to be made during such year on account of such Member's
Long-Term Debt (but in the event any portion of such Member's Long-Term Debt is
refinanced during such year the payments of principal and interest required to
be made during such year in respect thereof shall be based
<PAGE> 16
6
(in lieu of actual payments thereon) upon the larger of (x) an annualization of
such payments required to be made with respect to the refinancing debt during
the portion of such year such refinancing debt is outstanding and (y) the
payments of principal and interest required to be made during the following year
on account of such refinancing debt); Net Margins and Patronage Capital,
Interest Expense with respect to Long-Term Debt, Depreciation and Amortization
Expense, G&T Capital Credits, Other Capital Credits, Patronage Capital and
Long-Term Debt being determined in accordance with the Uniform System of
Accounts prescribed at the time by REA or, if such Member is not required to
maintain its accounts in accordance with said Uniform System of Accounts,
otherwise determined in accordance with generally accepted accounting
principles, except that in computing Interest Expense with respect to Long-Term
Debt, and payments of interest required to be made on account of Long-Term Debt,
for the purpose of the foregoing definition, there shall be added, to the extent
not otherwise included, an amount equal to 33 1/3% of the excess of the
Restricted Rentals paid by such Member for such year over 2% of such Member's
Equities and Margins for such year as defined in the Uniform System of Accounts
prescribed by REA or, if such Member is not required to maintain its accounts in
accordance with said Uniform System of Accounts, otherwise determined in
accordance with generally accepted accounting principles.
"Defaulted Interest" has the meaning set forth in Section 2.09.
"Depositary" means, with respect to the Bonds of any series issuable or
issued in whole or in part in the form of one or more Global Bonds, the Person
designated as Depositary for such series by the Company pursuant to Section
2.03, until a successor Depositary shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depositary" shall mean
or include each Person who is then a Depositary hereunder, and if at any time
there is more than one such Person, "Depositary" as used with respect to the
Bonds of any such series shall mean the Depositary with respect to the Bonds of
that series.
"Distribution System Member" means a Member 50% or more of whose gross
operating revenues are derived from sales of electricity to ultimate consumers,
determined as of the end of its last Completed Calendar Year.
"Eligible Collateral " means cash, Permitted Investments and Eligible
Mortgage Notes eligible for inclusion in a Certificate of Available Eligible
<PAGE> 17
7
Collateral and not deposited with or held by the Trustee for any payment upon
particular Bonds or any coupons appertaining thereto.
"Eligible Mortgage Note" means a Mortgage Note of a Distribution System
Member which is secured by a Mortgage (i) under which no default in respect of
any provision required by paragraphs 1 through 4 under Covenants and Warranties
contained in Schedule I to this Indenture shall have occurred which shall not
have been remedied or under which such a default would exist except for a waiver
by the mortgagee or mortgagees under the Mortgage (it being understood that no
default shall be deemed to exist in any case in which (x) such default relates
only to a portion or portions of any such provision as was not required by said
Schedule I to be included in the Mortgage, or (y) any action, omission to act or
condition has been consented to or approved by the mortgagee or mortgagees
pursuant to authority to grant consents or approvals contemplated by said
paragraphs 1 through 4), and (ii) under which no "event of default" as defined
in the Mortgage shall have occurred and shall have resulted in the exercise of
any right or remedy described in the Mortgage.
"Equity Ratio" of any Member means the ratio determined by dividing such
Member's Equities and Margins at the end of the last Completed Calendar Year by
such Member's Total Assets and Other Debits at such date, in each case computed
in accordance with the Uniform System of Accounts prescribed by REA, or if such
Member is not required to prepare its financial statements in accordance with
the Uniform System of Accounts prescribed by REA, then in accordance with
generally accepted accounting principles.
"Event of Default" has the meaning specified in Section 9.01.
"Foreign Currency" means a currency issued by the government of any country
other than the United States of America.
"Global Bond" means a Bond evidencing all or part of a series of Bonds,
issued to the Depositary for such series or its nominee in accordance with
Section 2.05, registered in the name of such Depositary or nominee and bearing
the legend specified in Section 2.05.
"Holder" when used with respect to any Bond means a Bondholder, and when
used with respect to any coupon means the bearer thereof.
"Indebtedness" of the Company means
(1) all indebtedness which would appear as indebtedness on a balance
sheet of the Company prepared in accordance with generally accepted
<PAGE> 18
8
accounting principles (i) for money borrowed, (ii) which is evidenced by
securities sold for money or (iii) which constitutes purchase money
indebtedness;
(2) all such indebtedness guaranteed, directly or indirectly, in any
manner by the Company, or in effect guaranteed, directly or indirectly, by
the Company through an agreement, contingent or otherwise, to purchase
indebtedness, or to purchase goods, supplies or services primarily for the
purpose of enabling the debtor to make payment of the indebtedness or of
assuring the owner of the indebtedness against loss, or to supply funds to
or in any other manner invest in the debtor, or otherwise;
(3) all such indebtedness of others for the payment or purchase of
which the Company has agreed, contingently or otherwise, to advance or
supply funds;
(4) all indebtedness secured by any mortgage, lien, pledge, charge or
encumbrance upon property owned by the Company, even though the Company has
not assumed or become liable for the payment of such indebtedness; and
(5) all indebtedness of the Company created or arising under any
conditional sale or other title retention agreement (including any lease in
the nature of a title retention agreement) with respect to property
acquired by the Company (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession of such property), but only to the extent that such property
is included as an asset on the balance sheet of the Company;
provided that, in computing the amount of the "Indebtedness" of the Company,
there shall be excluded any particular indebtedness if, upon or prior to the
maturity thereof, there shall have been deposited with the proper depository in
trust money (or such indebtedness) in the necessary amount to pay, redeem or
satisfy such indebtedness, and thereafter such money and indebtedness so
deposited shall not be included in any computation of the assets of the Company;
and, provided, further, that no provision of this definition shall be construed
to include as "Indebtedness" of the Company any indebtedness by virtue of any
agreement by the Company to advance or supply funds to Members.
"Indenture" means this Indenture, as originally executed and as it may from
time to time be supplemented, restated or amended by one or more
<PAGE> 19
9
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Independent" when used with respect to any specified Person means such a
Person who (1) is in fact independent, (2) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor upon the Bonds or in any obligor upon any Mortgage Note or in any
Affiliate of the Company or of any such obligor upon the Bonds or any Mortgage
Note, and (3) is not connected with the Company or any such obligor upon the
Bonds or any Mortgage Note or any Affiliate of the Company or of any such
obligor, as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions (but in the case of an
Accountant may be the accountant who regularly audits the books of the Company
or a Member). Whenever it is herein provided that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
approved by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Interest Payment Date" when used with respect to any Bond means the Stated
Maturity of an instalment of interest on such Bond.
"Lien of this Indenture" or "lien hereof" means the lien created by these
presents.
"Loan Agreement" means a loan agreement (if any) between a Member and the
Company (or between a Member and a wholly-owned subsidiary of the Company whose
interest has been assigned to the Company) providing for the issuance of
Mortgage Notes.
"Maturity" when used with respect to any Bond means the date on which the
principal of such Bond becomes due and payable, whether at the Stated Maturity
or by declaration of acceleration, call for redemption or otherwise.
"Member" means any Person which is a member or patron of the Company.
"Mortgage" means a mortgage or deed of trust or pledges of revenues
securing one or more Mortgage Notes (i) which complies with the requirements set
forth in Schedule I hereto annexed and made a part hereof, (ii) which was made
to the Company (or to a wholly-owned subsidiary of the Company whose interest
has been assigned to the Company) or to a trustee or trustees under a
<PAGE> 20
10
trust indenture, (iii) as to which the interest of the Company (if any) has been
assigned to the Trustee and (iv) an executed or true copy of which has been
delivered to the Trustee.
"Mortgage Note" means a note or bond of a Member payable or registered to
the Company or to the order of the Company (or a wholly-owned subsidiary of the
Company whose interest has been assigned to the Company) and delivered and
assigned to and pledged with the Trustee.
"Officers' Certificate" means a certificate signed by the Governor, the
Chief Executive Officer, the Chairman of the Board, the Vice Chairman of the
Board, the President, the Finance Officer or a Vice President, and by the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries, of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may (except as
otherwise expressly provided in this Indenture) be counsel for the Company or
for a Member, or other counsel acceptable to the Trustee.
"Outstanding" when used with respect to Bonds means, as of the date of
determination, all Bonds theretofore authenticated and delivered under this
Indenture, except:
(i) Bonds theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Bonds for whose payment or redemption moneys or certain
obligations of the United States of America in the necessary amount have
been theretofore deposited with the Trustee or any Paying Agent (other than
the Company) in trust hereunder or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) hereunder for
the Holders of such Bonds and any coupons appertaining thereto as provided
in Section 14.01 or 14.02, provided that, if such Bonds are to be redeemed
(otherwise than pursuant to sinking fund provisions requiring notice of
redemption to be given by the Trustee), notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made; and
(iii) Bonds paid or in exchange for or in lieu of which other Bonds
have been authenticated and delivered pursuant to this Indenture, unless
such Bonds are held by a Person in whose hands they constitute a valid
obligation of the Company;
<PAGE> 21
11
provided, however, that in determining whether the Holders of the requisite
principal amount of Bonds Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (1) Bonds to be
redeemed pursuant to sinking fund provisions shall be deemed to be Outstanding
until the selection of Bonds to be redeemed, and (2) Bonds owned by the Company
or any other obligor upon the Bonds or any Affiliate of the Company or such
other obligor shall be disregarded and deemed not to be Outstanding, except that
in determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Bonds
which the Trustee knows to be so owned shall be so disregarded. Bonds so owned
which have been pledged in good faith shall be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Company or any
other obligor upon the Bonds or any Affiliate of the Company or such other
obligor.
"Paying Agent" when used with respect to any Bond means any Person
authorized by the Company to pay the principal of (and premium, if any) or
interest on such Bond or any coupons appertaining thereto on behalf of the
Company.
"Permitted Investments" has the meaning specified in Section 5.03.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment" when used with respect to any Bond means the Borough of
Manhattan, City and State of New York or any other place or places where such
Bond may be paid.
"Pledged Property" has the meaning set forth in the Granting Clauses.
"Predecessor Bonds" of any particular Bond means every previous Bond which
evidenced all or a portion of the same debt as that evidenced by such particular
Bond.
"REA" means the Rural Electrification Administration of the Department of
Agriculture of the United States of America or if at any time after the
execution of the Indenture said Administration is not existing and performing
the duties now assigned to it, then the body performing such duties at such
time.
<PAGE> 22
12
"Redemption Date" when used with respect to any Bond means the date fixed
for redemption of such Bond.
"Redemption Price" when used with respect to any Bond means the price
(exclusive of accrued interest) at which it is to be redeemed.
"Registered Bond " means any Bond registered in the Bond Register.
"Registered Holder" when used with respect to any Registered Bond means the
Person in whose name such Bond is registered in the Bond Register.
"Regular Record Date" for the interest payable on any Interest Payment Date
when used with respect to any Bond means the date fixed for the determination of
the Holder of such Bond entitled to payment of such interest on such Interest
Payment Date.
"Responsible Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Restricted Rentals" means all rentals required to be paid under finance
leases and charged to income, exclusive of any amounts paid under any such lease
(whether or not designated therein as rental or additional rental) for
maintenance or repairs, insurance, taxes, assessments, water rates or similar
charges. For the purpose of this definition the term "finance lease" shall mean
any lease having a rental term (including the term for which such lease may be
renewed or extended at the option of the lessee) in excess of 3 years and
covering property having an initial cost in excess of $250,000 other than
automobiles, trucks, trailers, tractors, other vehicles (including without
limitation aircraft and ships), office, garage and warehouse space and office
equipment (including without limitation computers).
"Special Record Date" for the payment of any Defaulted Interest when used
with respect to any Bond means a date fixed by the Trustee pursuant to Section
2.09 in respect of such Bond.
"Stated Maturity" when used with respect to any Bond or any instalment of
interest thereon, including payment of a coupon appertaining thereto, means the
date specified in such Bond or in such coupon as the fixed date on which the
principal of such Bond or such instalment of interest on such Bond or such
coupon is due and payable.
"Stock" or "Capital Stock" shall include any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
<PAGE> 23
13
and, for such purpose, the interest of patrons or members of Members in the
Company shall be deemed to be "stock".
"Superior Indebtedness" of the Company means all Indebtedness of the
Company other than Capital Term Certificates.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, possessions and other areas
subject to its jurisdiction.
"Vice President" when used with respect to the Company means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
SECTION 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenants compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
<PAGE> 24
14
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to
enable such individual to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, in so
far as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, in so far as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or a Member stating
that the information with respect to such factual matters is in the possession
of the Company or such Member, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Any Opinion of Counsel stated to be based on the opinion of other counsel
shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
<PAGE> 25
15
SECTION 1.04. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 10.01 ) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the certificate of any notary public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or other such officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The amount of Bearer Bonds held by any Person executing any such
instrument or writing as a Bondholder, and the numbers of such Bearer Bonds, and
the date of his holding the same, may be proved by the production of such Bonds
or by a certificate executed, as depository, by any trust company, bank, banker
or member of a national securities exchange (wherever situated), if such
certificate is in form satisfactory to the Trustee, showing that at the date
therein mentioned such Person had on deposit with such depository, or exhibited
to it, the Bearer Bonds therein described; or such facts may be proved by the
certificate or affidavit of the Person executing such instrument or writing as a
Bondholder, if such certificate or affidavit is satisfactory to the Trustee. The
<PAGE> 26
16
Trustee and the Company may assume that such ownership of any Bearer Bond
continues until (1) another certificate bearing a later date issued in respect
of the same Bearer Bond is produced, or (2) such Bearer Bond is produced by some
other Person, or (3) such Bearer Bond is registered as to principal or is
surrendered in exchange for a Registered Bond, or (4) such Bearer Bond is no
longer Outstanding.
(d) The fact and date of execution of any such instrument or writing and
the amount and numbers of Bearer Bonds held by the Person so executing such
instrument or writing may also be proved in any other manner which the Trustee
deems sufficient; and the Trustee may in any instance require further proof with
respect to any of the matters referred to in this Section.
(e) The ownership of Registered Bonds shall be proved by the Bond Register.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Bond shall bind the Holder of every Bond
issued upon the transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such Bond.
(g) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix a record date (which
shall be not more than 60 nor less than five days prior to the date upon which
such solicitation commences) for the determination of Holders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Bonds have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Bonds shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
<PAGE> 27
17
pursuant to the provisions of this Indenture not later than six months after the
record date.
SECTION 1.05. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company for
such purpose.
SECTION 1.06. Notices to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
(1) such notice shall be sufficiently given to Holders of Registered Bonds
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each such Registered Holder, at his address as
it appears in the Bond Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice.
(2) such notice shall be sufficiently given to the Holders of Bearer Bonds
of any series if published in an Authorized Newspaper in each Place of Payment
for such Bonds (hereinafter referred to as "Notice by Publication").
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Registered Holder shall affect the sufficiency of such notice
with respect to other Registered Holders or the sufficiency of any Notice by
<PAGE> 28
18
Publication to Holders of Bearer Bonds, and any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given.
In case, by reason of suspension of publication or any other cause, it
shall be impossible to publish a notice in any Authorized Newspaper or
Authorized Newspapers as provided in any provision of this Indenture, then
(notwithstanding such provision) such other publication or notification as shall
be made with the approval of the Trustee shall constitute sufficient publication
of such notice. Neither failure to give Notice by Publication to Holders of
Bearer Bonds as provided above, nor any defect in any notice so published, shall
affect the sufficiency of any notice mailed to Holders of Registered Bonds as
provided above, or of any effective Notice by Publication given to other Holders
of Bearer Bonds.
SECTION 1.07. Language of Notices, etc.
Except as otherwise expressly provided herein, any request, demand,
authorization, direction, notice, consent, election or waiver required or
permitted under this Indenture shall be in the English language, except that any
published notice may be in an official language of the country of publication.
SECTION 1.08. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
which is deemed to be included in this Indenture by Sections 310 to 317,
inclusive, of the TIA, such deemed included provision shall control.
SECTION 1.09. Effect of Heading and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.10. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.11. Separability Clause.
In case any provision in this Indenture or in the Bonds or coupons shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE> 29
19
SECTION 1.12. Benefits of Indenture.
Nothing in this Indenture or in the Bonds or coupons, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Holders of Bonds and coupons, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.13. Governing Law.
This Indenture shall be construed in accordance with and governed by the
laws of the State of New York.
SECTION 1.14. Legal Holidays.
In any case where any Interest Payment Date or Redemption Date or the
Stated Maturity of any Bond shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Bonds or
coupons) payment of interest or principal (and premium, if any) need not be made
on such date at such Place of Payment, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date or at the Stated Maturity, and
no interest shall accrue on such payment for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
THE BONDS
SECTION 2.01. General Limitations.
The aggregate principal amount of Bonds which may be authenticated and
delivered and Outstanding under this Indenture is not limited, except as
provided in Article Three.
SECTION 2.02. Issuable in Series.
The Bonds may be issued from time to time in such series as shall be
established pursuant to Section 2.03.
The Bonds of all series shall be entitled generally "Collateral Trust
Bonds" of the Company. With respect to the Bonds of any particular series, such
words, letters or figures descriptive thereof may be incorporated in or added to
the general title of such Bonds as may be established therefor pursuant to
indentures supplemental hereto or as provided in Sections 2.03 or 2.04.
<PAGE> 30
20
SECTION 2.03. Terms of Particular Series.
Prior to the authentication and delivery of Bonds of any series, the
Company shall establish, in or pursuant to a Board Resolution or an indenture
supplemental hereto, or in an Officers' Certificate pursuant to a Board
Resolution or an indenture supplemental hereto, the following terms of the Bonds
of any such series:
(1) the title of the Bonds of such series (which shall distinguish the
Bonds of such series from Bonds of any other series);
(2) any limit upon the aggregate principal amount of the Bonds of such
series which may be authenticated and delivered under this Indenture
(except for Bonds authenticated and delivered pursuant to Sections 2.06,
2.07, 2.08, 8.08 or 13.06);
(3) the Persons (without specific identification) to whom interest on
Bonds of such series, or any tranche thereof, shall be payable on any
Interest Payment Date, if other than the Persons in whose names such Bonds
are registered at the close of business on the Regular Record Date for such
interest;
(4) the date or dates on which the principal of the Bonds of such
series, or any tranche thereof, is payable or any formula or other method
or other means by which such date or dates shall be determined, by
reference or otherwise (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(5) the rate or rates at which the Bonds of such series, or any
tranche thereof, shall bear interest, if any (including the rate or rates
at which overdue principal shall bear interest, if different from the rate
or rates at which such Bonds shall bear interest prior to Maturity, and, if
applicable, the rate or rates at which overdue premium or interest shall
bear interest, if any), or any formula or any other method or other means
by which such rate or rates shall be determined, by reference or otherwise;
the date or dates from which such interest shall accrue, the Interest
Payment Dates on which such interest shall be payable and the Regular
Record Date, if any, for the interest payable on such Bonds on any Interest
Payment Date; and the basis of computation of interest;
(6) the place or places at which (i) the principal of, and premium, if
any, and interest, if any, on Bonds of such series, or any tranche thereof,
<PAGE> 31
21
shall be payable, (ii) registration of transfer of Bonds of such series, or
any tranche thereof, may be effected, (iii) exchanges of Bonds of such
series, or any tranche thereof, may be effected and (iv) notices and
demands to or upon the Company in respect of the Bonds of such series, or
any tranche thereof, and this Indenture may be served; the Bond Registrar
for such series; and if such is the case, that the principal of such Bonds
shall be payable without the presentment or surrender thereof;
(7) the period or periods within which or the date or dates on which,
the price or prices at which and the terms and conditions upon which the
Bonds of such series, or any tranche thereof, may be redeemed, in whole or
in part, at the option of the Company, pursuant to any sinking fund or
otherwise;
(8) the obligation or obligations, if any, of the Company to redeem or
purchase the Bonds of such series, or any tranche thereof, pursuant to any
sinking fund or other mandatory redemption provisions or at the option of a
Holder thereof, and the period or the periods within which or the date or
dates on which, the price or prices at which and the terms and conditions
upon which such Bonds shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(9) the denominations in which Bonds of such series, or any tranche
thereof, shall be issuable if other than denominations of $1,000 and any
integral multiple thereof;
(10) the coin or currency, including composite currencies, in which
payment of the principal of and premium, if any, and interest, if any, on
the Bonds of such series, or any tranche thereof, shall be payable (if
other than the coin or currency in which the Bonds of such series, or any
tranche thereof, are denominated);
(11) if the principal of or premium, if any, or interest, if any, on
the Bonds of such series, or any tranche thereof, are to be payable, at the
election of the Company or a Holder thereof, in a coin or currency other
than that in which the Bonds of such series, or any tranche thereof, are
denominated, the period or periods within which, and the terms and
conditions upon which, such election may be made;
(12) if denominated or payable in any coin or currency, including
composite currencies, other than U.S. dollars, the method by which the
<PAGE> 32
22
Bonds of such series, or any tranche thereof, shall be valued, which may be
any reasonable method, against the Bonds of all other series for voting,
distribution and all other purposes hereof;
(13) if the principal of or premium, if any, or interest, if any, on
the Bonds of such series, or any tranche thereof, are to be payable, at the
election of the Company or a Holder thereof, in securities or other
property, the type and amount of such securities or other property, or the
formulary or other method or other means by which such amount shall be
determined, and the periods within which, and the terms and conditions upon
which, any such election may be made;
(14) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Bonds of such series or any tranche
thereof, may be determined with reference to an index or other fact or
event ascertainable outside of this Indenture, the manner in which such
amounts shall be determined;
(15) if other than the principal amount thereof, the portion of the
principal amount of Bonds of such series, or any tranche thereof, which
shall be payable upon declaration of the acceleration of the maturity
thereof pursuant to Section 9.02;
(16) the terms, if any, pursuant to which the Bonds of such series, or
any tranche thereof, may be converted into or exchanged for other
securities of the Company or any other Person;
(17) if the Bonds of such series or any tranche thereof, are to be
issued in global form, (i) the Depositary with respect to such Global Bond
or Bonds, (ii) any limitations on the rights of the Holder or Holders of
such Global Bond or Bonds to transfer or exchange the same or to obtain the
registration of transfer thereof, (iii) any limitations on the rights of
the Holder or Holders thereof to obtain certificates therefore in
definitive form in lieu of temporary form, and (iv) any and all other
matters incidental to such Global Bond or Bonds;
(18) if the Bonds of any such series, or any tranche thereof, are to
be issuable as bearer securities, any and all matters incidental thereto;
(19) to the extent not established pursuant to clause (16) of this
Section, any limitations on the rights of the Holder or Holders of such
bonds to transfer or exchange the same or to obtain the registration of
<PAGE> 33
23
transfer thereof; and if a service charge will be made for the registration
of transfer or exchange of the same, the amount or terms thereof;
(20) the right, if any, of the Company to limit or discharge the
Indenture as to the Bonds of any such series or any tranche thereof
pursuant to Section 14.02;
(21) whether and under what circumstances the Company will pay
additional amounts on the Bonds of such series, or any tranche thereof,
held by a Person who is not a U.S. person in respect of any tax, assessment
or governmental charge withheld or deducted and, if so, whether and on what
terms the Company will have the option to redeem such Bonds rather than pay
such additional amounts; and
(22) any other terms of the Bonds of such series, or any tranche
thereof (which terms shall conform to any applicable requirements of the
TIA, and shall not materially adversely affect the rights of the Holders of
Bonds then outstanding).
SECTION 2.04. Form and Denominations.
The Bonds of each series shall be either Registered Bonds or Bearer Bonds,
or both, and such Bonds (and the related coupons, if any) shall be in such form
as shall be established by or pursuant to a Board Resolution or the supplemental
indenture creating such series, with such omissions, variations and insertions
as are permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements printed, lithographed
or engraved thereon, as may be required to comply with the rules of any
securities exchange or to conform to any usage in respect thereof, or as may,
consistently herewith, be prescribed by the Board of Directors or by the
officers executing such Bonds and coupons, such determination by said officers
to be evidenced by their signing the Bonds and coupons. The Bonds of each series
and coupons appertaining thereto, if any, shall be distinguished from the Bonds
and coupons of other series in such manner as may be prescribed in or pursuant
to the Board Resolution or supplemental indenture creating or authorizing the
creation of such series.
The definitive Bonds and coupons shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any
<PAGE> 34
24
securities exchange, all as determined by the officers executing such Bonds or
coupons, as evidenced by their execution of such Bonds or coupons.
The Bonds of each series shall be issued in such denominations as shall be
provided in or pursuant to the Board Resolution or supplemental indenture
creating or authorizing the creation of such series or as the Board of Directors
may determine. In the absence of any such provision with respect to the Bonds of
any particular series, the Bonds of such series shall be of the denominations of
$1,000 or multiples thereof.
SECTION 2.05. Execution, Authentication and Delivery and Dating.
The Bonds shall be executed on behalf of the Company by its Governor, its
Chief Executive Officer, its Chairman of the Board, its President or one of its
Vice Presidents under its corporate seal reproduced thereon and attested by its
Treasurer, its Secretary or one of its Assistant Treasurers or its Assistant
Secretaries. The signature of any of these officers on the Bonds may be manual
or facsimile. The coupons shall bear the facsimile signature of the Treasurer or
an Assistant Treasurer of the Company.
Bonds and coupons bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Bonds and coupons or
did not hold such offices at the date of such Bonds and coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Bonds with coupons, if any, appertaining
thereto executed by the Company to the Trustee for authentication; and the
Trustee shall authenticate and deliver such Bonds as in this Indenture provided
and not otherwise.
All Registered Bonds shall be dated the date of their authentication. All
Bearer Bonds of each series shall be dated as of a single date specified in or
pursuant to the Board Resolution or supplemental indenture or indentures
creating or authorizing the creation of such series of Bearer Bonds.
No Bond or coupon appertaining thereto shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose, unless there
appears on such Bond a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Bond shall be conclusive evidence, and the only evidence,
<PAGE> 35
25
that such Bond has been duly authenticated and delivered hereunder. Except as
permitted by Sections 2.08 or 2.09, the Trustee shall not authenticate and
deliver any Bearer Bond unless all appurtenant coupons for interest then matured
and duly provided for or paid have been detached and cancelled.
If the Company shall establish pursuant to Section 2.03 that the Bonds of a
series are to be issued in the form of one or more Global Bonds, then the
Company shall execute and the Trustee shall in accordance with this Section
authenticate and deliver one or more Global Bonds that (i) shall represent and
shall be denominated in an amount equal to the aggregate principal amount of all
of the Bonds of such series issued and not yet canceled, (ii) shall be
registered in the name of the Depositary for such Global Bond or Bonds or the
nominee of such Depositary, (iii) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions and (iv) shall bear a
legend substantially to the following effect (or such other legend as such
Depositary may require): "Unless this certificate is presented by an authorized
representative of the Depositary to the Company or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of the nominee of the Depositary or in such other name as is requested by
an authorized representative of the Depositary (and any payment made to the
nominee of the Depositary or to such other entity as is requested by an
authorized representative of the Depositary), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, inasmuch as the
registered owner hereof, the nominee of the Depositary, has an interest herein."
Each Depositary designated pursuant to Section 2.03 for a Global Bond in
registered form shall, at the time of its designation and at all times while it
serves as Depositary, be a clearing agency registered under the Securities
Exchange Act of 1934, as amended.
SECTION 2.06. Temporary Bonds.
Pending the preparation of definitive Bonds of any series, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Bonds which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any denomination, substantially of the tenor of the
definitive Bonds in lieu of which they are issued, in bearer or registered form,
with one or more coupons or without coupons, and with such appropriate
<PAGE> 36
26
insertions, omissions, substitutions and other variations as the officers
executing such Bonds may determine, as evidenced by their execution of such
Bonds.
If temporary Bonds of any series are issued, the Company will cause
definitive Bonds of such series to be prepared without unreasonable delay. After
the preparation of definitive Bonds, the temporary Bonds shall be exchangeable
for definitive Bonds upon surrender of the temporary Bonds at the office or
agency of the Company in any Place of Payment for Bonds of such series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Bonds (accompanied by any unmatured coupons appertaining thereto) the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like aggregate principal amount of definitive Bonds of the same
series of authorized denominations. Until so exchanged such temporary Bonds
shall in all respects be entitled to the same benefits under this Indenture as
definitive Bonds, and interest thereon, when and as payable, shall be paid to
the bearers of temporary Bonds upon presentation thereof for notation of such
payment thereon, unless such temporary Bonds shall be Registered Bonds or shall
bear coupons for such interest.
Anything in this Section 2.06 to the contrary notwithstanding, the Board
Resolution or supplemental indenture creating a series of Bonds may establish or
provide for establishing the requirements (which may vary from those set forth
in this Section 2.06 ) concerning the form of temporary Bonds and procedures for
exchanging them for definitive Bonds.
SECTION 2.07. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (herein sometimes referred to as the "Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Registered Bonds and of transfers of
Registered Bonds. The Trustee is hereby appointed "Bond Registrar" for the
purpose of registering Registered Bonds and transfers of Registered Bonds as
herein provided.
Upon surrender for transfer of any Registered Bond of any series (except
any series of Global Bonds to the extent set forth in this Section) at the
office or agency of the Company in any Place of Payment for Registered Bonds of
such series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new
<PAGE> 37
27
Registered Bonds of the same series of any authorized denominations, of a like
aggregate principal amount.
At the option of the Holders, Registered Bonds may be exchanged for other
Registered Bonds of the same series of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Registered Bonds to be
exchanged at such office or agency. Whenever any Registered Bonds are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Bonds which the Bondholder making the
exchange is entitled to receive.
Bearer Bonds and coupons appertaining thereto shall be transferable by
delivery.
At the option of the Holder, Bearer Bonds of any series (except any series
of Global Bonds to the extent set forth in this Section) may be exchanged for
Registered Bonds of the same series of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Bearer Bonds to be exchanged
at any office or agency of the Company maintained for such purpose with all
unmatured coupons and all matured coupons in default appertaining thereto. If
the Holder of a Bearer Bond is unable to produce any such unmatured coupon or
coupons or matured coupon or coupons in default, such exchange may be effected
if the Bearer Bonds are accompanied by payment of funds acceptable to the
Company in an amount equal to the face amount of such missing coupon or coupons,
or the surrender of such missing coupon or coupons may be waived by the Company
and the Trustee if there be furnished to them such security or indemnity as they
may require to save each of them and any Paying Agent harmless. If thereafter
the Holder of such Bond shall surrender to any Paying Agent any such missing
coupon in respect of which such a payment shall have been made, such Holder
shall be entitled to receive the amount of such payment; provided, however,
that, except as otherwise provided in Section 7.02 or in or pursuant to the
supplemental indenture or Board Resolution creating the series of Bonds to which
they relate, interest represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency located
outside the United States. Notwithstanding the foregoing, in case a Bearer Bond
of any series is surrendered at any such office or agency in exchange for a
Registered Bond of the same series after the close of business at such office or
agency on (i) any Regular Record Date and before the opening of business at such
office or agency on the relevant Interest Payment Date, or (ii) any Special
<PAGE> 38
28
Record Date and before the opening of business at such office or agency on the
related date for payment of Defaulted Interest, such Bearer Bond shall be
surrendered without the coupon relating to such Interest Payment Date or such
date for payment of Default Interest, as the case may be. Whenever any Bearer
Bonds are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Bonds which the Holder making the
exchange is entitled to receive.
All Bonds and coupons, if any, issued upon any transfer or exchange of
Bonds, and coupons, if any, shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Bonds and coupons, if any, surrendered upon such transfer or
exchange.
Every Registered Bond presented or surrendered for transfer or exchange
shall (if so required by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Bond Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any transfer or exchange of Bonds, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Bonds, other than exchanges pursuant to Section 2.06 or 13.06 not
involving any transfer. The Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
The Company shall not be required (i) to issue, transfer or exchange any
Bond of any series during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of Bonds of such series
selected for redemption under Section 8.04 and ending at the close of business
on the day of such mailing, or (ii) to transfer or exchange any Bond so selected
for redemption in whole or in part, or (iii) to exchange any Bearer Bond so
selected for redemption except that such a Bearer Bond may be exchanged for a
Registered Bond of that series, provided that such Registered Bond shall be
immediately surrendered for redemption.
Registered Bonds may not be exchanged for Bearer Bonds.
Notwithstanding any other provisions of this Section 2.07, unless and until
it is exchanged in whole or in part for Bonds in definitive registered form, a
<PAGE> 39
29
Global Bond representing all or a portion of the Bonds of a series may not be
transferred except as a whole by the Depositary for such series to a nominee of
such Depositary or by a nominee of such Depositary or by such Depositary or any
such nominee to a successor Depositary for such series or a nominee of such
successor Depositary.
If at any time the Depositary for any Bonds of a series represented by one
or more Global Bonds notifies the Company that it is unwilling or unable to
continue as Depositary for such Bonds, the Company shall appoint a successor
Depositary with respect to such Bonds. If a successor Depositary for such Bonds
is not appointed by the Company within 90 days after the Company receives such
notice, the Company's election pursuant to Section 2.03 that such Bonds be
represented by one or more Global Bonds shall no longer be effective and the
Company will execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of definitive Bonds of such series, will
authenticate and deliver, Bonds of such series in definitive registered form
without coupons, in any authorized denominations in an aggregate principal
amount equal to the principal amount of the Global Bond or Bonds representing
such Bonds in exchange for such Global Bond or Bonds.
The Company may at any time and in its sole discretion determine that the
Bonds of any series issued in the form of one or more Global Bonds shall no
longer be represented by a Global Bond or Bonds. In such event the Company will
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of the definitive Bonds of such series, will authenticate and
deliver, Bonds of such series in definitive registered form without coupons, in
any authorized denominations, in an aggregate principal amount equal to the
principal amount of the Global Bond or Bonds representing such Bonds, in
exchange for such Global Bond or Bonds.
If an Event of Default shall have occurred and be continuing with respect
to the Global Bonds of any series or under any other circumstances specified by
the Company pursuant to Section 2.03 with respect to the Global Bonds of such
series the Depositary for such Global Bond may surrender such Global Bond in
exchange in whole or in part for Bonds of the same series in definitive
registered form on such terms as are acceptable to the Company and such
Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge,
<PAGE> 40
30
(i) to the Person specified by such Depositary a new Bond or Bonds of
the same series, of any authorized denominations as requested by such
Person, in an aggregate principal amount equal to and in exchange for such
Person's beneficial interest in the Global Bond; and
(ii) to such Depositary a new Global Bond in a denomination equal to
the difference, if any, between the principal amount of the surrendered
Global Bond and the aggregate principal amount of Bonds authenticated and
delivered pursuant to clause (i) above.
SECTION 2.08. Mutilated, Destroyed, Lost and Stolen Bonds.
If (i) any mutilated Bond or a Bond with a mutilated coupon appertaining to
it is surrendered to the Trustee, or the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any Bond or
coupon, and (ii) there is delivered to the Company and the Trustee such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company or the Trustee that such Bond or coupon has
been acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange therefor or in
lieu thereof or in exchange for the Bond to which a destroyed, lost or stolen
coupon appertains (with all appurtenant coupons not destroyed, lost or stolen),
a new Bond of like tenor and principal amount, bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to the surrendered, destroyed, lost or stolen Bond or to the
Bond to which such mutilated, destroyed, lost or stolen coupon appertains.
In case any such mutilated, destroyed, lost or stolen Bond or coupon has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Bond or coupon, pay such Bond or coupon.
Upon the issuance of any new Bond under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith.
Every new Bond with its coupons, if any, issued pursuant to this Section in
lieu of any destroyed, lost or stolen Bond or in exchange for a Bond to which a
destroyed, lost or stolen coupon appertains, shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Bond with its coupons, if any, or the destroyed, lost or stolen
coupon, shall
<PAGE> 41
31
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Bonds and
coupons duly issued hereunder.
Except as otherwise provided in or pursuant to a supplemental indenture or
Board Resolution creating a series of Bonds, any Bearer Bond issued under this
Section may only be delivered to the Person entitled thereto outside the United
States.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds or coupons.
SECTION 2.09. Payment of Interest; Interest Rights Preserved.
Interest on any Registered Bond of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Registered Bonds of such series shall be paid to the Person in whose name that
Bond (or one or more Predecessor Bonds) is registered at the close of business
on the Regular Record Date for such interest in respect of Registered Bonds of
such series. In case a Bearer Bond of any series is surrendered in exchange for
a Registered Bond of such series after the close of business (at an office or
agency maintained by the Company for such purpose for such series) on any
Regular Record Date and before the opening of business (at such office or
agency) on the next succeeding Interest Payment Date, such Bearer Bond shall be
surrendered without the coupon relating to such Interest Payment Date and
interest will not be payable on such Interest Payment Date in respect of the
Registered Bond issued in exchange for such Bearer Bond, but will be payable
only to the Holder of such coupon when due in accordance with the provisions of
this Indenture.
Any interest on any Registered Bond which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Bonds of such series
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such Holder;
and such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in paragraph (1) or paragraph (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Bonds of the series in respect of
which interest is in default (or their respective Predecessor
<PAGE> 42
32
Bonds) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Registered Bond
and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in
this paragraph provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not more
than 15 nor less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first class postage prepaid,
to each holder of a Registered Bond of such series at his address as it
appears in the Bond Register, not less than 10 days prior to such Special
Record Date. The Trustee may, in its discretion, in the name and at the
expense of the Company, cause a similar notice to be published at least
once in an Authorized Newspaper in each Place of Payment for Registered
Bonds of such series, but such publication shall not be a condition
precedent to the establishment of such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Persons in whose names the Registered Bonds of such series (or
their respective Predecessor Bonds) are registered on such Special Record
Date and shall no longer be payable pursuant to the following paragraph
(2). In case a Bearer Bond of any series is surrendered at the office or
agency in a Place of Payment for such series in exchange for a Registered
Bond of such series after the close of business at such office or agency on
any Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Bond shall be surrendered without the coupon relating to such
proposed date of payment and Defaulted Interest will not be payable on
<PAGE> 43
33
such proposed date of payment in respect of the Registered Bond issued in
exchange for such Bearer Bond, but will be payable only to the Holder of
such coupon when due in accordance with the provision of this Indenture.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Bonds of the series in respect of which
interest is in default may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this paragraph, such payment
shall be deemed practicable by the Trustee.
Any Defaulted Interest payable in respect of any Bearer Bond shall be
payable pursuant to such procedures as may be satisfactory to the Trustee in
such manner as may reasonably minimize any discrimination as between the Holders
of Registered Bonds and Bearer Bonds of the same series, and notice of the
payment date therefor shall be given by the Trustee, in the name and at the
expense of the Company, in the manner set forth in Section 1.06.
Subject to the foregoing provisions of this Section, each Bond delivered
under this Indenture upon transfer of or in exchange for or in lieu of any other
Bond shall carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Bond.
SECTION 2.10. Persons Deemed Owners.
Prior to due presentment of a Registered Bond for transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name any Registered Bond is registered as the owner of such Registered
Bond for the purpose of receiving payment of principal of (and premium, if any),
and (subject to Section 2.09) interest on, such Bond and for all other purposes
whatsoever, whether or not such Bond be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the bearer of any Bearer Bond and the bearer of any coupon as the absolute
owner of such Bond or coupon for the purpose of receiving payment thereof or on
account thereof and for all other purposes, whether or not such Bond or coupon
be overdue, and neither the Company, the Trustee, nor any such agent shall be
affected by notice to the contrary.
<PAGE> 44
34
No holder of any beneficial interest in any Global Bond held on its behalf
by a Depositary shall have any rights under this Indenture with respect to such
Global Bond, and such Depositary may be treated by the Company, the Trustee, and
any agent of the Company or the Trustee as the owner of such Global Bond for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall impair,
as between a Depositary and such holders of beneficial interests, the operation
of customary practices governing the exercise of the rights of the Depositary as
Holder of any Bond.
SECTION 2.11. Cancellation.
All Bonds and coupons surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee for cancellation. The Company may at any time deliver
to the Trustee for cancellation any Bonds previously authenticated and delivered
hereunder, together with all unpaid coupons appertaining thereto which the
Company may have acquired in any manner whatsoever, and all Bonds so delivered
shall be promptly cancelled by the Trustee. No Bonds shall be authenticated in
lieu of or in exchange for any Bonds cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Bonds and coupons
held by the Trustee shall be destroyed or disposed of in accordance with the
Trustee's customary practices.
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 3.01. Authentication and Delivery of Bonds on Basis of Eligible
Collateral.
(a) At any time and from time to time Bonds of any series authorized by or
pursuant to Board Resolution or an indenture supplemental hereto and coupons
appertaining thereto may be executed by the Company and delivered to the Trustee
for authentication, and shall thereupon be authenticated and delivered by the
Trustee as directed by Company Order and upon delivery of the instruments
specified in Subsection (b) of this Section; provided, however, that, as shown
by the Certificate of Available Eligible Collateral furnished to the Trustee
pursuant to Subsection (b)(2) of this Section,
(1) the Allowable Amount of Eligible Collateral certified in such
Certificate as being pledged under the Indenture after all withdrawals
shall
<PAGE> 45
35
at least equal the aggregate principal amount of Bonds to be Outstanding
immediately after the authentication and delivery of such Bonds,
(2) each Eligible Mortgage Note included in the Eligible Collateral so
certified is an Eligible Mortgage Note of a Member having an Equity Ratio
of at least 20% and an Average Coverage Ratio of at least 1.35, and
(3) the aggregate Allowable Amount of all Eligible Mortgage Notes of
any one Member so certified shall not exceed 10% of the aggregate Allowable
Amount of all Eligible Collateral so certified.
(b) Prior to the authentication and delivery of any Bonds of any series
pursuant to this Section the Trustee shall be furnished with the following
instruments:
(1) A Board Resolution requesting or authorizing the authentication
and delivery of a specified aggregate principal amount of Bonds of the
series.
(2) A Certificate of Available Eligible Collateral, dated not more
than 30 days prior to such authentication and delivery, which shall be an
Officers' Certificate and, unless one of the officers signing the same is
an Accountant and shall so state, shall also be signed by an Accountant in
respect of items 1 through 16 thereof, in substantially the following form:
<PAGE> 46
36
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION
INDENTURE DATED AS OF , 199
------------------------
CERTIFICATE OF AVAILABLE ELIGIBLE COLLATERAL FILED WITH
FIRST BANK NATIONAL ASSOCIATION, Trustee
------------------------
, Governor (or Chief Executive Officer or
Chairman of the Board or Vice Chairman of the Board or President or Finance
Officer or Vice President) and , [Assistant]
Treasurer (or , [Assistant] Secretary), respectively, of
National Rural Utilities Cooperative Finance Corporation, of whom the latter
[former] is an Accountant [and , an [Independent]
Accountant selected by the Company], hereby certify to the Trustee under the
above-mentioned Indenture [as supplemented to the date hereof] (herein called
the "Indenture") as follows:
<TABLE>
<C> <S> <C>
1. The Allowable Amount of Eligible Collateral
shown in item 8 in the most recent Certificate
of Available Eligible Collateral dated
delivered to the Trustee
is.............................................. $
2. The increase (or decrease) in the Allowable
Amount of such Eligible Collateral and the
Allowable Amount of any Mortgage Notes (which
are Eligible Mortgage Notes at the date hereof)
substituted for other Mortgage Notes pursuant to
Section 4.05 of the Indenture, remaining on
deposit with the Trustee, as shown on Schedule A
hereto, is...................................... $
3. The Allowable Amount, as at the date of such
most recent Certificate of Available Eligible
Collateral, of Eligible Collateral which has,
since such date, been withdrawn or substituted
for pursuant to Section 4.05 (including Eligi-
ble Mortgage Notes fully paid) by the Company or
ceased to be Eligible Collateral, as shown on
Schedule A hereto, is........................... $
</TABLE>
<PAGE> 47
37
<TABLE>
<C> <S> <C>
4. The present Allowable Amount of Eligible
Collateral certified to the Trustee in the most
recent Certificate of Available Eligible
Collateral (item 1 plus (or minus, if decrease)
item 2, and minus item 3) is.................... $
5. The Allowable Amount of Eligible Collateral
certified hereby, including the Eligible
Collateral deposited herewith, which was not
certified in the most recent Certificate of
Available Eligible Collateral, all as shown on
Schedule B hereto, is........................... $
6. The Allowable Amount of Eligible Collateral held
by the Trustee on the date hereof and included
in this Certificate before any withdrawals (item
4 plus item 5) is............................... $
7. The Allowable Amount of Eligible Collateral the
withdrawal of which is hereby requested, if any,
as shown on Schedule C hereto (the Eligible
Collateral made the basis of such withdrawal
being designated on Schedule A and/or Schedule B
hereto) is...................................... $
8. The Allowable Amount of Eligible Collateral held
by the Trustee on the date hereof and included
in this Certificate after any withdrawals (item
6 minus item 7) is.............................. $
9. The aggregate principal amount of Bonds
Outstanding at the date hereof is............... $
10. The aggregate amount by which such Allowable
Amount of Eligible Collateral exceeds Bonds
Outstanding (item 8 minus item 9) is............ $
11. The principal amount of Bonds the authentication
and delivery of which is now being requested, if
any (an amount not greater than the amount shown
in item 10) (the Eligible Collateral made the
basis of such authentication and delivery being
designated on Schedule A and/or Schedule B
hereto) is...................................... $
12. Each Eligible Mortgage Note the Allowable Amount
of which is included in item 8 is an Eligible
Mortgage Note of a Member which has an Equity
Ratio of at least 20% and an Average Coverage
Ratio of not less than 1.35.
13. The aggregate Allowable Amount of all Eligible
Mortgage Notes of any one Member included in
item 8 of this Certificate does not exceed 10%
of the aggregate Allowable Amount of Eligible
Collateral shown in such item 8.
14. In the opinion of the undersigned, the
respective Equity Ratios and Average Coverage
Ratios of Members whose
</TABLE>
<PAGE> 48
38
<TABLE>
<C> <S> <C>
Eligible Mortgage Notes are listed on Schedules
A and B are not less than those appearing on
said Schedules.
15. None of the Eligible Collateral certified in
this Certificate includes any cash or Permitted
Investments held for any payment upon particular
Bonds.
16. All computations of Equity Ratios and Average
Coverage Ratios shown on Schedules A and B are
based upon financial statements furnished the
Company in accordance with Section 7.05 of the
Indenture.
17. So far as is known to the undersigned (i) no
Event of Default under the Indenture, and no
event which, with notice or lapse of time or
both, would result in such an Event of Default,
has occurred which has not been remedied and
(ii) no default specified in clause (i) of the
definition in the Indenture of Eligible Mortgage
Notes which has not been remedied or waived,
consented to or approved to the extent permitted
by said clause and no event of default which
shall have resulted in the exercise of any right
or remedy referred to in clause (ii) of said
definition has occurred with respect to any of
the Mortgage Notes listed on Schedules A and B
hereto or any of the Mortgages securing said
Mortgage Notes.
18. The undersigned have read all conditions
precedent provided for in the Indenture
(including any covenants compliance with which
constitutes a condition precedent) and
definitions therein which relate to the action
the Trustee is being requested to take, have
examined certain corporate and financial records
of the Company and in the opinion of the
undersigned have made such examination or
investigation as is necessary to enable the
undersigned to express an informed opinion as to
whether or not such conditions and covenants
have been complied with; in the opinion of the
undersigned, such conditions and covenants have
been complied with.
</TABLE>
<PAGE> 49
39
All terms which are defined in the Indenture are used herein as so defined.
Dated:
................................
................................
OF NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
[ ..............................
Accountant
Signing in respect of items
1 through 16]
[and certifying that (s)he is
"Independent" as defined in the
Indenture]
<PAGE> 50
40
ELIGIBLE COLLATERAL ON DEPOSIT
SCHEDULE A TO OFFICERS' CERTIFICATE
DATED
<TABLE>
<CAPTION>
INCREASE
ALLOWABLE (DECREASE)
AMOUNT IN SUCH
AVERAGE INCLUDED IN ALLOWABLE CURRENT
EQUITY COVERAGE CERTIFICATE AMOUNT ALLOWABLE
NAME OF RATIO OF RATIO OF LAST PREVIOUSLY (ITEMS 2 AMOUNT
ELIGIBLE COLLATERAL MEMBER MEMBER MEMBER FILED (ITEM 1) AND 3) (ITEM 4)
- ------------------------------ -------- --------- --------- ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash.......................... -- -- --
Permitted Investments
(Here List)................. -- -- --
Mortgage Notes
(Here List Notes)...........
</TABLE>
[NOTE: The Eligible Collateral, if any, made the basis of the action by the
Trustee requested in the application is to be designated by asterisks or
otherwise.]
<PAGE> 51
41
ELIGIBLE COLLATERAL BEING DEPOSITED
SCHEDULE B TO OFFICERS' CERTIFICATE
DATED
<TABLE>
<CAPTION>
EQUITY AVERAGE
RATIO COVERAGE ALLOWABLE
NAME OF OF RATIO OF AMOUNT
ELIGIBLE COLLATERAL MEMBER MEMBER MEMBER (ITEM 5)
- --------------------------------------- -------- ------- --------- ----------
<S> <C> <C> <C> <C>
Cash................................... -- -- --
Permitted Investments (Here List)...... -- -- --
Mortgage Notes
(Here List Notes)....................
</TABLE>
[NOTE: The Eligible Collateral, if any, made the basis of the action by the
Trustee requested in the application is to be designated by asterisks or
otherwise.]
The Trustee shall be under no obligation to recompute, verify, reclassify
or recalculate any information supplied to it in any such Certificate.
If such Certificate is being delivered to the Trustee in connection with
the authentication and delivery of Bonds and the aggregate principal amount of
Bonds then being applied for plus the aggregate principal amount of Bonds
authenticated and delivered since the commencement of the then current calendar
year (other than Bonds with respect to which such a Certificate signed by an
Independent Accountant has been previously furnished) is 10% or more of the
aggregate principal amount of the Bonds at the time Outstanding, the Accountant
signing such Certificate shall be an Independent Accountant; provided, however,
that such Certificate need not be signed by an Independent Accountant as to
dates or periods not covered by annual reports required to be filed by the
Company, in the case of any matter which depends upon a state of facts as of a
date or dates or for a period or periods different from that required to be
covered by such annual reports.
The Company may include in any Certificate of Available Eligible Collateral
any cash, Permitted Investments or Eligible Mortgage Notes without also
including any other cash, Permitted Investments or Eligible Mortgage Notes on
deposit with the Trustee, and by so doing it shall not lose the right later to
file a further Certificate of Available Eligible Collateral including such other
cash, Permitted Investments or Eligible Mortgage Notes.
<PAGE> 52
42
(3) A certificate of an Appraiser, dated not more than 30 days prior
to such authentication and delivery, as to the aggregate fair value to the
Company as of the date of such Certificate of the Permitted Investments and
Eligible Mortgage Notes made the basis for such authentication and delivery
of Bonds (namely, those designated as such on Schedule A and/or Schedule B
to the Certificate of Available Eligible Collateral provided for in the
foregoing paragraph (2)). If the aggregate fair value to the Company of
such Permitted Investments and Eligible Mortgage Notes and of all other
Permitted Investments and Eligible Mortgage Notes deposited with the
Trustee since the commencement of the then current calendar year and made
the basis of the authentication and delivery of Bonds, withdrawal of cash
or the release of property or securities is 10% or more of the aggregate
principal amount of Bonds then Outstanding, such certificate shall be made
by an Independent Appraiser and, in case the certificate is being made in
connection with the authentication and delivery of Bonds, shall also cover
the aggregate fair value to the Company of all other securities deposited
with the Trustee since the commencement of the then current calendar year
as to which a certificate of an Independent Appraiser shall not previously
have been furnished; but the certificate provided for in this paragraph
need not be made by an Independent Appraiser if the aggregate fair value to
the Company of the Permitted Investments and Eligible Mortgage Notes as set
forth in such certificate of an Appraiser is less than $25,000 or less than
1% of the aggregate principal amount of Bonds at the time Outstanding.
However, notwithstanding that such certificate of an Appraiser or
Independent Appraiser, as the case may be, may show that the aggregate fair
value to the Company of such Permitted Investments and Eligible Mortgage
Notes is less than the Allowable Amount thereof, subject to Section 10.01
the Trustee shall nevertheless authenticate and deliver Bonds so long as
the Allowable Amount of Eligible Collateral thereof exceeds the principal
amount of Bonds Outstanding.
(4) An Opinion of Counsel for the Company dated the date of the
authentication and delivery of said Bonds and complying with Section 1.02
substantially to the effect that:
(i) the instruments which have been or are therewith delivered to
the Trustee conform to the requirements of this Indenture, and all
conditions precedent provided for in this Indenture (including any
<PAGE> 53
43
covenants compliance with which constitutes a condition precedent)
which relate to the authentication and delivery of the Bonds applied
for have been complied with;
(ii) the certificate or other evidence specified therein, if any,
will be sufficient to show or provide for the compliance with the
requirements, if any, of any mortgage recording tax law or other tax
law applicable to the issuance of the Bonds then applied for;
(iii) the certificate or other evidence specified therein, if
any, will be sufficient to show the authorization, approval or consent
of or to the issuance by the Company of the Bonds then applied for, by
any Federal, State or other governmental regulatory agency at the time
having jurisdiction in the premises;
(iv) the Company is duly authorized by law and by the terms of
this Indenture to issue such Bonds, and the execution, authentication
and delivery of such Bonds have been duly authorized by all requisite
corporate action on the part of the Company;
(v) such Bonds, when executed by the Company, authenticated and
delivered by the Trustee and issued, will constitute legal, valid and
binding obligations of the Company enforceable in accordance with
their terms and the terms of this Indenture, subject to such matters
as shall be specified therein, and will be entitled to the benefits of
this Indenture;
(vi) each Loan Agreement (if any), pursuant to which a Mortgage
Note included in item 5 of the Certificate of Available Eligible
Collateral furnished pursuant to the foregoing paragraph (2) was
issued, has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company;
(vii) each Mortgage Note and Permitted Investment included in
item 5 of said Certificate of Available Eligible Collateral has been
duly endorsed or assigned to the Trustee;
(viii) each Mortgage securing a Mortgage Note included in item 5
of said Certificate of Available Eligible Collateral complies as
<PAGE> 54
44
to form with the requirements of this Indenture and the interest of
the Company therein (if any) has been duly assigned to the Trustee;
(ix) a financing statement with respect to said Mortgage Notes
and the proceeds of said Mortgage Notes has been properly filed so as
to make effective the lien or pledge intended to be created thereby or
thereon or stating that no such financing statement is required to be
filed, and stating that a financing statement with respect to the
assignment of such interest as the Company has in said Mortgages has
been properly filed in the jurisdictions where the Company keeps its
records and in which its principal place of business is located (but
such opinion need not state the legal effect of such latter filing);
(x) the certificate or other evidence specified therein, if any,
will be sufficient to show the authorization, approval or consent of
or to the pledge and assignment of said Mortgage Notes and of such
interest as the Company has in said Mortgages to the Trustee by any
Federal, State or other governmental regulatory agency at the time
having jurisdiction in the premises; and
(xi) the creation, execution, delivery and issuance of the Bonds,
the endorsement or assignment to the Trustee of the Mortgage Notes,
Permitted Investments and interest in Mortgages referred to above and
the execution and delivery of the supplemental indenture, if any,
hereinafter referred to in paragraph (8) of this Subsection, will not
violate any provision of the charter or by-laws of the Company or, to
the knowledge of such counsel, result in the breach of, or constitute
a default under, any agreement, indenture or other instrument to which
the Company is a party or by which it is bound.
In the event that any Mortgage Note included in item 5 of the
Certificate of Available Eligible Collateral was originally payable to a
wholly-owned subsidiary of the Company, said Opinion of Counsel shall
state, in lieu of what is required by clause (vi) with reference to such
Mortgage Note, that the Loan Agreement (if any) pursuant to which such
Mortgage Note was issued has been duly authorized, executed and delivered
by such wholly-owned subsidiary and constitutes a valid and binding
obligation of such wholly-owned subsidiary, and that the interest of such
wholly-owned subsidiary in such Loan Agreement, such Mortgage
<PAGE> 55
45
Note and the Mortgage securing such Mortgage Note has been duly endorsed or
assigned to the Company free and clear of all liens, charges and
encumbrances. In addition, the statements required by clauses (ix) and (xi)
shall include appropriate references to such wholly-owned subsidiary as
well as to the Company.
(5) An Opinion or Opinions of Counsel (or a true copy or copies
thereof, certified by the Secretary or an Assistant Secretary of the
Company) for each Member a Mortgage Note of which is included in item 5 of
said Certificate of Available Eligible Collateral, addressed to the
Company, stating in substance that as of the date of such Opinion,
(i) such Member is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has
full corporate power to execute and deliver such Mortgage Note, the
Loan Agreement pursuant to which it was issued (if any) and the
Mortgage securing the same, to perform all acts required to be done by
it under such Mortgage Note, Loan Agreement (if any) and Mortgage and
to own, operate and maintain its properties and operate its business
as conducted at the date of such opinion;
(ii) to the extent reasonably required for the maintenance and
operation of its properties and business taken as a whole, such Member
has complied with all requirements of the laws of all States in which
it operates or does business and holds all certificates, licenses,
consents or approvals of governmental authorities required to be
obtained on or prior to the date of such Opinion to enable it to
engage in the business then transacted by it;
(iii) such Mortgage Note, Loan Agreement (if any) and Mortgage
have been duly authorized, executed and delivered by said Member and
constitute the valid and binding obligations of such Member,
enforceable against such Member in accordance with their respective
terms;
(iv) the execution and performance by such Member of such
Mortgage Note, Loan Agreement (if any) and Mortgage, and the
transactions contemplated thereby, will not violate any provisions of
law, the Articles of Incorporation or by-laws of such Member, or
result in the breach of, or constitute a default under, any agreement,
<PAGE> 56
46
indenture or other instrument to which such Member is a party, or by
which it may be bound, known to such Counsel;
(v) no authorization from any regulatory body is required in
connection with the execution and delivery of such Mortgage Note, Loan
Agreement (if any) or Mortgage or that each such authorization so
required has been obtained; and
(vi) such Counsel knows of no litigation pending or threatened
against or affecting such Member or its property which, in the opinion
of such Counsel (or in the opinion of such Member as evidenced by a
certificate of the manager or other responsible officer of such Member
annexed to said Opinion), would have a material adverse effect upon
the business, operations or financial condition of such Member.
In giving the Opinions of Counsel specified in paragraphs (4), (5) and
(8), (i) such Counsel may rely as to matters governed by the law of any
particular jurisdiction upon opinions of counsel in any such jurisdiction
upon whom they believe they and the Trustee are justified in relying, and,
in such event, they shall deliver copies of such opinions to the Trustee,
(ii) such Counsel may include in any such Opinions customary
qualifications, including without limitation qualifications to the effect
that (x) any sale or transfer by the Trustee of any of the Pledged Property
(other than a transfer into the name of the Trustee or a nominee thereof)
may be subject to the provisions of the Securities Act of 1933, other
applicable securities laws and regulations promulgated thereunder, and (y)
the enforceability of certain of the remedies under the Indenture are
subject to equitable requirements of good faith which may render
ineffective any consent by the Company to the sale of Pledged Property at
private sale, and (iii) insofar as any such Opinion relates to the
enforceability of any agreement or instrument, such Counsel may state that
the enforceability thereof may be limited by bankruptcy, insolvency or
other laws of general application relating to or affecting the enforcement
of creditors' rights and that the enforceability thereof may be limited by
laws with respect to or affecting the remedies provided for in said
agreement or instrument (provided that such laws do not in the opinion of
such Counsel make inadequate the remedies afforded thereby for the
realization of the benefits provided for in such agreement or instrument).
<PAGE> 57
47
(6) An Officers' Certificate, dated not more than 10 days prior to the
authentication and delivery of said Bonds, stating that, based upon
information in the Company's files and (to the extent deemed necessary by
the signers) inquiries of the Members,
(i) no litigation is pending or threatened against or affecting
any Member, or the property of any Member, whose Mortgage Notes are
included in item 5 of said Certificate of Available Eligible
Collateral which would have a material adverse effect upon the
business, operations or financial condition of such Member; and
(ii) since the date of the delivery of the Mortgages securing the
Notes referred to in clause (i) above, no transactions have been
entered into by the Members issuing said Mortgage Notes which could
result in any property of such Members, respectively, becoming subject
to any lien or encumbrance other than those contemplated by paragraph
2 under Covenants and Warranties in Schedule I to this Indenture.
(7) The instruments and certificates and other evidence, if any,
specified in the Opinions of Counsel as provided by clauses (ii), (iii) and
(x) of the foregoing paragraph (4).
(8) If such Bonds are of a series not theretofore Outstanding, a Board
Resolution or supplemental indenture creating or authorizing the creation
of such series, together in the latter case with a Board Resolution
authorizing the execution and delivery of such supplemental indenture and
an Opinion of Counsel stating that such supplemental indenture has been
duly authorized, executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, subject to such matters as may be set forth
therein.
Upon delivery to it of the foregoing instruments the Trustee shall
authenticate and deliver such Bonds provided the Certificate delivered
pursuant to Section 3.01(b)(2) evidences compliance with the conditions
provided for in Section 3.01(a).
<PAGE> 58
48
SECTION 3.02. Authentication and Delivery of Bonds on Basis of Refunding
Outstanding Bonds.
(a) At any time and from time to time Bonds and coupons, if any, of any
series may be executed by the Company and delivered to the Trustee for
authentication, and shall thereupon be authenticated and delivered by the
Trustee, as directed by Company Order, on the basis of the retirement of
Outstanding Bonds at their Stated Maturity or by redemption thereof at the
option of the Company.
(b) Prior to the authentication and delivery of any Bonds pursuant to this
Section the Trustee shall be furnished with the following instruments:
(1) A Board Resolution requesting or authorizing the authentication
and delivery of a specified aggregate principal amount of Bonds of a
designated series.
(2) An Officers' Certificate dated not more than 80 days prior to the
authentication and delivery of such Bonds, stating
(a) that specified Bonds in an aggregate principal amount not
less than the aggregate principal amount of Bonds the authentication
and delivery of which is requested have been paid at their Stated
Maturity or defeased pursuant to Article Fourteen or have been or are
to be redeemed at the option of the Company;
(b) that such Bonds have been paid, defeased or redeemed within
60 days prior to the date of such Certificate or are to be paid or
redeemed within 90 days after the date of such Certificate pursuant
(if to be redeemed) to notice of redemption previously or concurrently
mailed to the Holders of the Bonds to be redeemed or pursuant to
notice which the Trustee has been irrevocably authorized to mail and
money in the necessary amount to pay or redeem such Bonds has
therefore been or is concurrently being deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of the Bonds to be redeemed;
(c) that none of said Bonds so paid or redeemed or to be paid or
redeemed has been or is to be redeemed pursuant to any sinking fund
provided for in this Indenture;
<PAGE> 59
49
(d) that none of said Bonds so paid or redeemed or to be paid or
redeemed has previously been made the basis for the authentication and
delivery of any Bonds under this Section; and
(e) that so far as is known to the signers, no Event of Default,
and no event which, with notice or lapse of time or both, would result
in an Event of Default, has occurred which has not been remedied.
(3) An Opinion of Counsel covering the applicable matters specified in
clauses (i) through (v) and (xi) of paragraph (4) of Section 3.01(b).
(4) The applicable certificates or other evidence, if any, specified
in the Opinion of Counsel pursuant to the foregoing paragraph (3).
(5) If the Bonds to be authenticated and delivered are of a series not
theretofore Outstanding, a Board Resolution or a supplemental indenture
creating or authorizing the creation of such series, together in the latter
case with a Board Resolution authorizing the execution and delivery of such
supplemental indenture and an Opinion of Counsel stating that such
supplemental indenture has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
SECTION 3.03. Authentication and Delivery of Bonds on Basis of Cancelling
Bonds Not Issued by the Company.
(a) At any time and from time to time Bonds of any series may be executed
by the Company and delivered to the Trustee for authentication, and shall
thereupon be authenticated and delivered by the Trustee, as directed by Company
Order, in lieu of or in exchange for any Bonds surrendered by the Company for
cancellation as provided in Section 2.11, provided such Bonds, although
executed, authenticated and delivered, have not been issued by the Company.
(b) Prior to the authentication and delivery of any Bonds pursuant to this
Section the Trustee shall be furnished with the following instruments:
(1) A Company Order requesting the authentication and delivery of a
specified aggregate principal amount of Bonds of a designated series.
(2) An Officers' Certificate stating
<PAGE> 60
50
(a) that specified Bonds executed, authenticated and delivered by
the Trustee but not issued by the Company, in an aggregate principal
amount not less than the aggregate principal amount of Bonds the
authentication and delivery of which is requested, have been
surrendered for cancellation by the Company pursuant to Section 2.11;
(b) that none of said Bonds so surrendered for cancellation has
previously been made the basis for the authentication and delivery of
any Bonds under this Section; and
(c) that so far as is known to the signers, no Event of Default,
and no event which, with notice or lapse of time or both, would result
in an Event of Default, has occurred which has not been remedied.
(3) An Opinion of Counsel covering the applicable matters specified in
clauses (i) through (v) and (xi) of paragraph (4) of Section 3.01(b).
(4) The applicable certificates or other evidence, if any, specified
in the Opinion of Counsel pursuant to the foregoing paragraph (3).
(5) If the Bonds to be authenticated and delivered are of a series not
theretofore Outstanding, a Board Resolution or supplemental indenture
creating or authorizing the creation of such series, together in the latter
case with a Board Resolution authorizing the execution and delivery of such
supplemental indenture and an Opinion of Counsel stating that such
supplemental indenture has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
SECTION 3.04 Other Authentication and Delivery of Bonds.
Notwithstanding anything herein to the contrary, at any time and from time
to time Bonds of any series may be executed by the Company and delivered to the
Trustee for authentication, and shall thereupon be authenticated and delivered
by the Trustee, as directed by Company Order and upon delivery of the
instruments specified in Subsection (b) of Sections 3.01, 3.02 or 3.03, provided
that such instruments shall be delivered prior only to the first issuance of
such Bonds of any series, except that a new Certificate of Available Eligible
Collateral shall be required if such a certificate dated not more than 90 days
prior to such authentication and delivery has not previously been provided to
the Trustee.
<PAGE> 61
51
ARTICLE FOUR
PROVISIONS AS TO PLEDGED PROPERTY
SECTION 4.01. Holding of Pledged Securities.
All Mortgage Notes, shares of stock and other securities pledged with the
Trustee as part of the Pledged Property pursuant to any provision of this
Indenture shall be endorsed in blank for transfer or be accompanied by proper
instruments of assignment satisfactory to the Trustee, duly executed by any
holder thereof other than the Trustee, unless and until an Event of Default
shall have occurred and be continuing, in which case the Trustee may (to the
extent a register is maintained therefor) cause the same to be registered in its
name, as Trustee, or in the name of its nominee; provided that all such
securities that may be held in book entry form only shall be at all times held
in the name of the Trustee, as such, or its nominee. The Company will delivery
promptly to the Trustee all such documents, certificates and opinions as are
specified in any instruments delivering, assigning or pledging securities to the
Trustee as part of the Pledged Property, in connection with subjection of any
securities to the lien of this Indenture to the extent contemplated hereby.
So long as no Event of Default shall have occurred and be continuing, the
Trustee shall take all actions specified in a Company Request for the purposes
of maintaining, preserving, renewing or extending the existence of any
corporation the stock of which may be Pledged Property, and, for any such
purposes, from time to time, may sell, assign or transfer and deliver so many
shares of the stock of any such corporation as may be necessary to qualify
persons to act as directors of, or in any other official relation to, any such
corporation.
SECTION 4.02. Disposition of Payments on Pledged Property.
Unless and until an Event of Default shall have occurred and be continuing,
the Company shall be entitled to receive all principal (premium, if any) and
interest paid in respect of any Mortgage Note and other indebtedness which may
be part of the Pledged Property; and the Company shall also be entitled to
receive dividends (except dividends payable in shares of stock of the issuing
corporation) out of earnings, income or earned surplus on all shares of stock
which may be part of the Pledged Property, and from time to time upon Company
Request the Trustee shall deliver to the Company any coupons for such interest
then in its possession in order that the Company may receive
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payment thereof or may cause the same to be cancelled; and on like Company
Request the Trustee shall deliver to the Company suitable orders in favor of the
Company, or its nominee, for the payment of such principal (premium, if any) and
interest and of such dividends, and the Company may collect such coupons,
principal (premium, if any) and interest and dividends and the Trustee shall
upon Company Request pay over to the Company any such principal (premium, if
any) and interest and dividends which may be collected or be received by the
Trustee; provided, however, that except as in this Indenture otherwise expressly
provided:
(1) the Company shall not be entitled to collect any stock dividends
that may be declared on any shares of capital stock that may be part of the
Pledged Property, and in case stock dividends are so declared the
certificates therefor shall be endorsed for transfer and delivered to the
Trustee; and
(2) the Company shall not be entitled to collect any dividends on or
other distributions in respect of any stock which is at any time part of
the Pledged Property which shall in any way be chargeable to or payable out
of the capital (including any paid-in or capital surplus or equity of
members or patrons of Members) of the corporation issuing the same.
Subject to the provisions of Section 10.01 hereof, until a Responsible
Officer shall have actual notice to the contrary the Trustee shall be entitled
to assume that any such dividend (except a dividend payable in shares of the
issuing company) is payable out of earnings, income or earned surplus.
In case any corporation whose shares of stock are part of the Pledged
Property shall issue to the holders of such shares rights to purchase any
securities or other property, the Company shall be entitled to receive and
exercise such rights or sell such rights for cash as in its discretion it shall
determine.
In case default shall be made in the payment of the principal of or
interest on any part of the Pledged Property, or in the due performance of any
covenant contained in any obligation or instrument evidencing or securing the
same, or pursuant to which it is issued, then and in any such case (without
prejudice, however, to any right to claim a default under this Indenture or to
assert any right consequent upon such default and without prejudice to any right
of the Trustee, to exercise any rights to which it may be entitled as such
holder), the Trustee, upon Company Request, shall, subject to Section 10.01,
cause, or join
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with other owners of like obligations and as specified therein to cause,
proceedings to be instituted and prosecuted to enforce such payment or
performance.
In case any payment or other distribution shall be received by the Company
or the Trustee on account of any part of the Pledged Property, which the Company
is not entitled to receive under the provisions of this Article, or after an
Event of Default shall have occurred and be continuing, then, in any such case,
any such payment or other distribution shall be delivered to the Trustee (if not
received by it) and held by the Trustee as part of the Pledged Property. For all
purposes of this Article Four, the Trustee shall have no obligation to take any
action with respect to any Event of Default until a Responsible Officer has
actual notice of such Event of Default and the Trustee shall have no liability
for any action or inaction taken, suffered or omitted in respect of any Event of
Default by it prior to such time as a Responsible Officer has actual notice of
such Event of Default or its continuance.
SECTION 4.03. Voting; Consents.
Unless and until an Event of Default shall have occurred and be continuing,
the Company shall have the right to vote or give consents or waivers, for all
purposes not contrary to Section 7.12 or any other covenants herein contained or
otherwise inconsistent with the provisions of this Indenture, upon and in
respect of all shares of stock and other securities which are part of the
Pledged Property or in respect of any instrument evidencing or securing the
same, or pursuant to which it is issued (and with the same force and effect as
if such shares or other securities were not part of the Pledged Property), and
from time to time, upon Company Request, the Trustee forthwith shall make and
deliver, or shall cause to be made and delivered to the Company or to its
nominees, such powers of attorney or proxies to vote any shares of stock or
other securities which have been transferred into the name of the Trustee or its
nominee, or to give consent or waiver in respect thereof, as shall be specified
in such Company Request. It is hereby understood that the Trustee is not
included within the definition of "mortgagee" in any Mortgage and that, so long
as no Event of Default shall have occurred and be continuing, the Trustee shall
have no duties or responsibilities with regard to any Mortgage which is part of
the Pledged Property or the value of the property subject thereto, except as
specifically provided herein, and it shall not be necessary to obtain any
consent from the Trustee with regard to any
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action taken pursuant to any Mortgage or any action omitted to be taken
thereunder, in either case by any party thereto. Without limiting the generality
of the foregoing, the Company, unless and until any Event of Default shall have
occurred and be continuing, shall have the right to consent to the sale or other
transfer of any property of the mortgagor under any Mortgage and to execute any
release of such property, and the Trustee shall execute any release or consent
requested by Company Request to confirm any action taken by the Company pursuant
to this Section. In executing any such power of attorney, proxy, release or
consent, the Trustee shall be entitled to receive and rely upon an Officers'
Certificate and an Opinion of Counsel each stating that the Company was
authorized by this Indenture to take the action taken by it and that the
execution of such power of attorney, proxy, release or consent is authorized or
permitted hereunder.
The Company covenants that it will not vote any such shares of stock or
other securities or give consents or waivers with respect to any such
instrument, under any power of attorney or proxy executed and delivered to it
under the provisions of this Section for any purpose contrary to or inconsistent
with the provisions or purposes of this Indenture.
SECTION 4.04. Certain Actions in Case of Judicial Proceedings.
The Trustee, upon Company Request and as specified therein, shall join in
any plan of reorganization in respect of any part of the Pledged Property and
may accept new securities, including in that term stock, issued in exchange
therefor under such plan.
In case an Event of Default shall have occurred and be continuing, the
Trustee shall be entitled to take such steps without the request or consent of
the Company.
In case all or any part of the property of any Person, all or part of whose
outstanding stock, Mortgage Notes, bonds, indebtedness or obligations are part
of the Pledged Property, shall be sold at any judicial or other involuntary sale
and the Trustee shall receive any portion of the proceeds of such sale accruing
on the securities held as part of the Pledged Property (subject, however, to the
pledge thereof under any mortgage or other instrument prior in lien to this
Indenture if required by the terms of such mortgage or other instrument), and
such proceeds shall be held as part of the Pledged Property.
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SECTION 4.05. Renewal; Extension; Substitution
Unless and until an Event of Default shall have occurred and be continuing,
the Company may at any time renew or extend, subject to the continuing lien of
this Indenture, any Mortgage Notes, bonds, obligations or indebtedness forming
part of the Pledged Property upon any terms or may accept in place of and in
substitution for any such Mortgage Notes, bonds, obligations or indebtedness,
other Mortgage Notes, bonds, obligations or indebtedness of the same issuer or
of any successor thereto for at least the same unpaid principal amounts and at
any rate of interest, and, in case of Mortgage Notes, secured by a Mortgage
covering substantially the same property and having substantially the same
terms, all as evidenced by an Officers' Certificate delivered to the Trustee;
provided, however, that in case of any substitution, Mortgage Notes, bonds,
obligations or indebtedness substituted as aforesaid shall be subject to the
lien of this Indenture as part of the Pledged Property and be held in the same
manner as those for which they shall be substituted and in the case of each
substituted Mortgage Note the Company shall deliver to the Trustee an Opinion or
Opinions of Counsel (or a true copy or copies thereof, certified by the
Secretary or an Assistant Secretary of the Company) complying with paragraphs
(vii), (viii), (ix) and (x) of Section 3.01(b)(4) and paragraphs (iii), (iv) and
(v) of Section 3.01(b)(5) omitting any statements concerning the Mortgage
securing such Mortgage Note if the Mortgage Note substituted for was secured by
the same Mortgage which shall not have been amended or supplemented since the
pledge of the Mortgage Note substituted for, provided that the Opinion of
Counsel complying with said paragraphs Section 3.01(b)(5) shall state that no
amendment or supplement to said Mortgage or any additional recording or filing
thereof is required in order to cause said substituted Mortgage Note to be
secured by said Mortgage to the same extent as the Mortgage Note substituted
for.
So long as no Event of Default shall have occurred and be continuing, the
Trustee, upon Company Request stating that no such Event of Default shall have
occurred and be continuing, shall execute such consent to any such renewal,
extension or substitution as shall be specified in such Company Request and in
doing so the Trustee is entitled to receive and rely upon an Officers'
Certificate and an Opinion of Counsel to the effect that the execution of such
consent is authorized or permitted by this Indenture.
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SECTION 4.06. Certain Rights in Respect of Stock.
Unless and until an Event of Default shall have occurred and be continuing,
the Company shall have the right to vote or give consent, in respect of all or
any part of the shares of stock of any corporation at the time forming part of
the Pledged Property and having a par value, to the change thereof into shares
having a higher or lower par value per share, or into shares having no par
value, or shares having no par value into shares having a par value, and may
consent at any time that the shares of stock of any corporation at the time
forming part of the Pledged Property may be classified or reclassified in any
manner permitted by law; provided, however, that all of such stock forming part
of the Pledged Property shall be and remain fully paid and all new shares
substituted shall be subject to the lien of this Indenture as part of the
Pledged Property and be held in the same manner as those for which they were
substituted.
Unless and until an Event of Default shall have occurred and be continuing,
the Company shall have the right to vote and give consent or waiver in respect
of the increase or reduction of the capital stock or the dissolution of any
corporation, shares of the stock of which form part of the Pledged Property, if
the Board of Directors determines (as evidenced by a Board Resolution) that such
increase or reduction or dissolution is desirable and not detrimental to the
interest of the Bondholders, subject to the provisions of Section 4.02 hereof
with respect to dividends in such cases being paid to the Trustee.
SECTION 4.07. Consolidation, Merger, etc., of Issuing Corporations.
Nothing contained in this Indenture shall prevent or restrict:
(1) any corporation all or any part of whose capital stock or other
securities may be part of the Pledged Property from consolidating with or
merging into, or conveying in any manner all or any part of its assets to
any other corporation, whether or not affiliated with such other
corporation, provided that any capital stock of such other corporation
which is issued for or in lieu of stock which is part of the Pledged
Property shall become part of the Pledged Property and any such other
securities shall continue to be part of the Pledged Property;
(2) any corporation, all or any part of whose capital stock or other
securities may be part of the Pledged Property, from merging into itself,
or taking a conveyance of, all or any part of the property of any other
corporation, whether or not affiliated with such other corporation,
provided
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that capital or other securities shall continue to be part of the Pledged
Property; or
(3) any corporation, all or any part of whose capital stock or other
securities may be part of the Pledged Property, whether or not affiliated
with the Company, from consolidating with or merging into, or conveying in
any manner all or any part of its assets to, the Company, subject, however,
to the provisions of Article Twelve;
provided, however, that in each such case if such corporation has issued a
Mortgage Note which is part of the Pledged Property, the terms of such merger,
consolidation or conveyance shall comply with the requirements of the Mortgage
securing said Mortgage Note.
SECTION 4.08. Certain Voting and Other Powers of the Trustee.
The Trustee shall vote or permit to be voted any shares of stock forming
part of the Pledged Property and take other actions to effect the purposes of
Sections 4.06 and 4.07; and, in connection with any transaction authorized
thereby, the Trustee shall make or permit any necessary exchange, cancellation,
substitution or surrender of bonds, obligations, indebtedness or stocks, or
shall transfer, in whole or in part, into the name of the Company or, of the
nominee or nominees of the Company, any shares of any corporation about to be
merged or consolidated. So long as no Event of Default shall have occurred and
be continuing, such action shall be taken only upon Company Request.
In connection with any such exchange, cancellation, substitution, surrender
or release of bonds, obligations, indebtedness or stocks, in accordance with the
provisions of Section 4.06 or 4.07, the Trustee shall be entitled to receive and
rely upon an Officers' Certificate as to any matters pertinent to any action
taken or contemplated in connection therewith and also an Opinion of Counsel as
to the legality and validity of any such action and to the effect that such
action is authorized or permitted hereunder.
SECTION 4.09. Rights of Trustee and Company After Event of Default.
Whenever in this Article it is provided that any right in respect of any
part of the Pledged Property or in any obligation evidencing or securing the
same or pursuant to which it is issued may be exercised by the Company only
until an Event of Default or other default shall have occurred and be
continuing, such right, nevertheless, shall be exercised by the Company for the
benefit of the
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Bondholders in case such an Event of Default or other default shall have
occurred and be continuing, except to the extent, if any, that the Trustee shall
in writing to the Company limit such exercise.
ARTICLE FIVE
APPLICATION OF MONEYS INCLUDED IN PLEDGED PROPERTY;
PERMITTED INVESTMENTS
SECTION 5.01. Cash Held by Trustee Treated as a Deposit.
Any and all cash held by the Trustee under any provision of this Indenture
may be treated by the Trustee, until required to be paid out pursuant hereto, as
a deposit, in trust, without any liability for interest. Nevertheless, at the
election of the Company evidenced by a Company Request, any and all such money,
in whole or in part, shall, from time to time (unless an Event of Default shall
have occurred and shall be continuing), be deposited by the Trustee, in its
corporate name as Trustee, with such other depositary or depositaries as shall
be designated pursuant to such Company Request, to be held at all times subject
to withdrawal by the Trustee when required for the purposes of this Indenture or
when requested by a Company Request. Every such depositary shall be a bank or
trust company within the continental United States and having a capital and
surplus aggregating at least $100,000,000 (determined from its most recent
report of condition, if it publishes such reports at least annually pursuant to
law or the requirements of Federal or State examining or supervisory authority).
All sums deposited with any such depositary shall nevertheless for all purposes
of this Indenture be deemed to be held by and deposited with the Trustee. The
Trustee shall have no liability for the loss of any sums so deposited with any
such depositary, but the Company shall be obligated to promptly make up any such
loss. Such depositary shall not be under any obligation to see to the
application of any sums withdrawn from it or to inquire into the authority of
the Trustee to make any such withdrawal.
SECTION 5.02. Use of Moneys for Payment, Redemption or Purchase of Bonds.
Subject to the provisions of Section 5.04, any moneys held by the Trustee
as part of the Pledged Property (other than moneys at the time held for any
payment on particular Bonds) shall, upon Company Request from time to time,
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such request to be accompanied by an Officer's Certificate stating that the
Allowable Amount of Eligible Collateral on deposit with the Trustee will exceed
the principal amount of Bonds Outstanding after giving effect to the action
requested,
(1) be applied by the Trustee to the redemption of Bonds then
Outstanding of any one or more series specified in such Company Request,
including the redemption of any Bonds for any sinking or analogous fund
established for Bonds of any series, or to the payment of any Bonds at
Maturity; or
(2) be applied by the Trustee to the purchase of Bonds then
Outstanding of any one or more series specified in such Company Request,
upon tender or in the open market or at a private sale or upon any
securities exchange or in any one or more of said ways specified in such
Company Request; provided, however, that no Bond shall be purchased at a
price (excluding brokerage fees) exceeding the lower of the principal
amount thereof and accrued interest thereon or the maximum price (excluding
brokerage fees) stated in such Company Request.
Whenever the Trustee shall purchase Bonds under the foregoing paragraph
(2), the Company shall promptly reimburse the Trustee for all brokerage fees and
all interest on such Bonds to the date of purchase, and any moneys so reimbursed
shall thereafter be held as part of the Pledged Property.
SECTION 5.03. Investment of Moneys by Trustee.
Any moneys held by the Trustee as part of the Pledged Property (other than
moneys held for the payment of principal of or premium (if any) or interest on
particular Bonds at Maturity except as specifically provided herein) shall, upon
Company Request and as stated therein, be invested or reinvested by the Trustee
until required to be paid out by the Trustee as provided in this Indenture, in
any one or more of the following (herein called "Permitted Investments"):
(1) obligations of or guaranteed by the United States of America or
any agency thereof for which the full faith and credit of the obligor shall
be pledged and which shall mature (except in the case of obligations
guaranteed by REA) not more than 2 years after the purchase thereof;
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(2) obligations of any state or municipality, or subdivision or agency
of either thereof, which shall mature not more than 2 years after the
purchase thereof and are rated AA (or equivalent) or better by at least two
nationally recognized statistical rating organizations or having a
comparable rating in the event of any future change in the rating system of
such agencies;
(3) certificates of deposit issued by, or time deposits of, any bank
or trust company (including the Trustee) organized under the laws of the
United States of America or any State thereof having capital and surplus of
not less than $500,000,000 (determined from its most recent report of
condition, if it publishes such reports at least annually pursuant to law
or the requirements of Federal or State examining or supervisory authority)
and maturing not more than 2 years after the purchase thereof; and
(4) commercial paper of bank holding companies or of other issuers
(excluding the Company) generally rated in the highest category by at least
two nationally recognized statistical rating organizations and maturing not
more than one year after the purchase thereof.
Unless an Event of Default shall have occurred and be continuing, any interest
received by the Trustee on any such investments which shall exceed the amount of
accrued interest, if any, paid by the Trustee on the purchase thereof, and any
profit which may be realized from any sale, redemption or maturity of such
investments, shall be paid to the Company. Such investments shall be held by the
Trustee as a part of the Pledged Property, but upon Company Request the Trustee
shall sell all or any designated part of the same, and the proceeds of such sale
shall be held by the Trustee subject to the same provisions hereof as the cash
used by it to purchase the investments so sold. In case the net proceeds
realized upon any sale, redemption or maturity shall amount to less than the
purchase price paid by the Trustee in the purchase of the investments so sold,
the Trustee shall notify the Company in writing thereof, and the Company shall
pay to the Trustee the amount of the difference between such purchase price and
the amount so realized, and the amount so paid shall be held by the Trustee in
like manner and subject to the same conditions as the proceeds realized upon
such sale. The Company will reimburse the Trustee for any brokerage commissions
or other expenses incurred by the Trustee in connection with the purchase or
sale of such investments. The Trustee may aggregate such costs and expenses of
and such receipts from such investments on a monthly basis (or such other
periodic
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basis as the Company and the Trustee may agree in writing from time to time) so
as to net each against the other during such period and pay to the Company
amounts due to it or notify the Company of amounts due from it on a net basis
for such period.
The Company may at any time deposit with the Trustee Permitted Investments
to be held by the Trustee as part of the Pledged Property, provided that no such
Permitted Investment shall be subject to any reservation, limitation or
condition referred to in granting clause second.
SECTION 5.04. Trustee to Retain Moneys if Event of Default Exists.
If an Event of Default shall have occurred and be continuing to the actual
knowledge of a Responsible Officer, moneys held by the Trustee as a part of the
Pledged Property shall not be paid over to the Company or upon Company Request
except pursuant to Section 9.13.
ARTICLE SIX
WITHDRAWAL OF COLLATERAL
SECTION 6.01. Withdrawal of Collateral.
(a) Unless and until an Event of Default shall have occurred and be
continuing, any part of the Pledged Property may be withdrawn by the Company and
shall be delivered by the Trustee upon Company Order at any time and from time
to time, whenever the Allowable Amount of Eligible Collateral remaining after
such withdrawal shall at least equal the aggregate principal amount of Bonds to
be Outstanding after such withdrawal, as shown by the Certificate of Available
Eligible Collateral furnished to the Trustee pursuant to Subsection (b)(1) of
this Section.
(b) Prior to any such withdrawal the Trustee shall be furnished with the
following instruments:
(1) a Certificate of Available Eligible Collateral, dated not more
than 30 days prior to such withdrawal, showing that immediately after such
withdrawal the requirements of Subsection (a) of this Section and
Subsections (a)(2) and (3) of Section 3.01 will be satisfied;
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(2) a certificate of an Appraiser (or Independent Appraiser), dated
not more than 30 days prior to such withdrawal, as specified in Subsection
(b)(3) of Section 3.01, as to the aggregate fair value to the Company as of
the date of such certificate of the Permitted Investments and Eligible
Mortgage Notes made the basis for such withdrawal (namely, those designated
as such on Schedule A and/or Schedule B to the Certificate of Available
Eligible Collateral provided for in the foregoing paragraph (1)) (although
notwithstanding that such Certificate may show that the aggregate fair
value to the Company of such Permitted Investments and Eligible Mortgage
Notes is less than the Allowable Amount thereof, subject to Section 10.01,
the Trustee shall nevertheless permit such withdrawal if the Allowable
Amount of remaining Eligible Collateral will exceed the amount of Bonds
Outstanding after such withdrawal);
(3) an Opinion of Counsel as specified in Subsection (b)(4) of Section
3.01, dated not more than 30 days prior to such withdrawal, omitting
therefrom the statements required by clauses (i) through (v) of said
Subsection (b)(4) but stating that all conditions precedent provided for in
this Indenture (including any covenants, compliance with which constitutes
a condition precedent) which relate to such withdrawal and to the Trustee's
execution and delivery of any instruments of transfer and assignment in
connection therewith have been complied with;
(4) an Opinion or Opinions of Counsel (or a true copy or copies
thereof, certified by the Secretary or an Assistant Secretary of the
Company) for each Member a Mortgage Note of whom is included in item 5 of
said Certificate of Available Eligible Collateral (or a confirmation of an
Opinion previously given), complying with the provisions of Subsection
(b)(5) of Section 3.01;
(5) an Officers' Certificate, dated not more than 10 days prior to
such withdrawal, complying with the provisions of Subsection (b)(6) of
Section 3.01 and certifying that so far as is known to the signers no Event
of Default has occurred which has not been remedied; and
(6) the instruments and certificates and other evidence specified in
Subsection (b)(7) of Section 3.01 (to the extent applicable).
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Upon any such withdrawal, the Trustee shall execute any instruments of
transfer or assignment specified in a Company Request as necessary to vest in
the Company any part of the Pledged Property withdrawn.
Prior to such delivery by the Trustee, the Trustee shall be furnished with
the certificate of an Appraiser as to the fair value of any part of the Pledged
Property to be withdrawn, which certificate shall state that in the opinion of
such Appraiser the proposed withdrawal will not impair the security under this
Indenture in contravention of the provisions hereof. Such certificate shall be
made by an Independent Appraiser if the fair value of such part of the Pledged
Property and of all other Pledged Property released since the commencement of
the then current calendar year, as set forth in the certificates required by
this Section, is 10% or more of the aggregate principal amount of the Bonds at
the time outstanding; but such a certificate of an Independent Appraiser shall
not be required in the case of any withdrawal of any part of the Pledged
Property if the fair value thereof as set forth in the certificate required by
this Section is less than $25,000 or less than 1% of the aggregate principal
amount of the Bonds at the time outstanding. However, notwithstanding that such
certificate of an Appraiser or Independent Appraiser, as the case may be, may
show that the fair value of such Permitted Investments, Mortgage Notes or other
securities is more than the Allowable Amount thereof, subject to Section 10.01
the Trustee shall nevertheless permit such withdrawal if the Allowable Amount of
Eligible Collateral remaining after such withdrawal will exceed the amount of
Bonds Outstanding.
In case an Event of Default shall have occurred and be continuing, the
Company shall not withdraw any part of the Pledged Property except that,
notwithstanding Section 4.05, any Mortgage Notes (and the Mortgages securing
such Mortgage Notes) may be withdrawn upon the deposit with the Trustee of an
Allowable Amount of cash and/or Permitted Investments at least equal to the
Allowable Amount (at the time of such withdrawal) of the Mortgage Notes so
withdrawn and the delivery to the Trustee of the instruments referred to in
Subsections (b)(1) and (2) of this Section and a Company Request. The Trustee
shall have no liability in respect of any withdrawal made when an Event of
Default shall have occurred and be continuing unless a Responsible Officer has
actual notice of such Event of Default and its continuance.
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SECTION 6.02. Reassignment of Mortgage Notes upon Payment.
Upon receipt of
(1) an Officers' Certificate stating that all payments of principal,
premium (if any) and interest have been made upon any Mortgage Note held by
the Trustee other than payment of an amount (if any) specified in said
certificate required fully to discharge all obligations on said Mortgage
Note, and
(2) cash in the amount (if any) so specified fully to discharge said
Mortgage Note,
the Trustee shall deliver to the Company upon Company Request said Mortgage
Note, together with the Mortgage securing such Mortgage Note and any instrument
of transfer or assignment necessary to reassign to the Company said Mortgage
Note and the interest of the Company in the Mortgage specified in such Company
Request.
ARTICLE SEVEN
PARTICULAR COVENANTS OF THE COMPANY
SECTION 7.01. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Bonds in accordance with the terms of the Bonds, the
coupons appertaining thereto, if any, and this Indenture. Any interest due on
Bearer Bonds on or before Maturity, other than premiums, if any, shall be
payable only upon presentation and surrender of the several coupons for such
interest Instalments as are evidenced thereby as they severally mature.
SECTION 7.02. Maintenance of Offices or Agencies.
The Company will maintain (1) in the Borough of Manhattan, The City of New
York, an office or agency where Registered Bonds may be presented or surrendered
for payment, where Bonds may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Company in respect of the
Bonds and coupons and this Indenture may be served, and (2) outside of the
United States an office or agency where Bearer Bonds and coupons may be
presented and surrendered for payment.
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The Company will give prompt written notice to the Trustee of the location,
and of any change in the location, of each such office or agency. If at any time
the Company shall fail to maintain any such office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
SECTION 7.03. Money for Bond Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent for any series
of Bonds and any coupons appertaining thereto, it will, on or before each due
date of the principal of (and premium, if any) or interest on, any of the Bonds
of such series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
in writing of its action or failure so to act.
All moneys deposited with the Trustee or with any Paying Agent for the
purpose of paying the principal of or premium or interest on Bonds shall be
deposited and held in trust for the benefit of the Holders entitled to such
principal, premium or interest, subject to the provisions of this Section.
Moneys so deposited and held in trust shall not be part of the Pledged Property
but shall constitute a separate trust fund for the benefit of the Holders
entitled to such principal, premium or interest.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Bonds in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Bonds or coupons) in the making of any such payment
of principal (and premium, if any) or interest; and
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or direct any
paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Bond and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Bond or relevant coupon
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper in
each Place of Payment of such Bond, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 7.04. Maintenance of Corporate Existence.
Subject to the provisions of Article Twelve, the Company, at its own cost
and expense, will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises,
except as otherwise specifically permitted in this Indenture; provided, however,
that the Company shall not be required to preserve any right or franchise if the
Board of Directors shall determine (as evidenced by a Board Resolution) that the
preservation thereof is no longer desirable in the conduct of the business of
the
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Company and that the loss thereof is not disadvantageous in any material respect
to the Holders of Bonds or any coupons.
SECTION 7.05. Maintenance of Books of Record and Account; Financial
Statements of Company and Members.
The Company will keep proper books of record and account in which full and
correct entries will be made of its transactions in accordance with generally
accepted accounting principles.
The Company will deliver to the Trustee within 120 days after the
expiration of each fiscal year of the Company, an operating statement for such
fiscal year and a balance sheet of the Company as of the last day of such fiscal
year. Such operating statements and balance sheets shall set forth in reasonable
detail the results of operations and the financial condition of the Company and
shall be accompanied by the report of the Independent Accountants who have
audited the books of the Company for such fiscal year.
The Company will cause to be furnished to it, within 120 days after the
expiration of each calendar year, similar financial statements of each such
Member whose Mortgage Notes are then pledged hereunder, which shall be prepared
in accordance with the Uniform System of Accounts prescribed by REA for such
year (unless such Member is not required to maintain its accounts in accordance
with such Uniform System of Accounts), together with the latest similar
financial statements of such Member which have been audited (if not previously
furnished) by the Independent Accountants who have audited said statements. The
Company will also cause each such Member to furnish to it any additional
financial information as may be required at any time to enable a computation to
be made of the Equity Ratio and the Average Coverage Ratio of such Member,
accompanied by a certificate of an Accountant as to the correctness of such
financial information.
SECTION 7.06. Warranty of Title and Authority to Pledge.
The Company warrants that, at the date of the subjection to the lien
hereof, it owns and is possessed of all the Pledged Property pledged by it
hereunder free and clear of all mortgages, pledges, liens, charges and
encumbrances, except the lien of this Indenture and any liens referred to in the
second granting clause hereof, and that it has full power and lawful authority
to pledge, assign, transfer and deliver such Pledged Property in the manner and
form aforesaid or to cause
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such Pledged Property so to be pledged, assigned, transferred and delivered. Any
Mortgage Note pledged hereunder will, at the time of delivery to the Trustee, be
a genuine and validly outstanding Mortgage Note of the Member issuing the same,
according to the tenor and purport thereof. The Company hereby does and will
forever warrant and defend the title of the Trustee to Pledged Property pledged
by the Company for the benefit of the Holders for the time being of the Bonds
and coupons appertaining thereto, if any, against the lawful claims and demands
of all persons whomsoever.
SECTION 7.07. Protection of Title; Payment of Taxes; Liens, etc.
The Company will:
(1) duly and promptly pay and discharge, or cause to be paid and
discharged, before they become delinquent, all taxes, assessments,
governmental and other charges lawfully levied, assessed or imposed upon or
against any of the Pledged Property, including the income or profits
therefrom and the interests of the Trustee and Bondholders in such Pledged
Property;
(2) duly observe and conform to all valid requirements of any
governmental authority imposed upon the Company relative to any of the
Pledged Property, and all covenants, terms and conditions under or upon
which any part thereof is held;
(3) cause to be paid and discharged all lawful claims (including,
without limitation, income taxes) which, if unpaid, might become a lien or
charge upon Pledged Property; and
(4) do all things and take all actions necessary to keep the lien of
this Indenture a first and prior lien upon the Pledged Property and protect
its title to the Pledged Property against loss by reason of any foreclosure
or other proceeding to enforce any lien prior to or pari passu with the
lien of this Indenture.
Nothing contained in this Section shall require the payment of any such
tax, assessment, claim, lien or charge or the compliance with any such
requirement so long as the validity, application or amount thereof shall be
contested in good faith; provided, however, that the Company shall have set
aside on its books such reserves (segregated to the extent required by generally
accepted accounting principles) as shall be deemed adequate with respect
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thereto as determined by the Board of Directors as evidenced by a Board
Resolution.
SECTION 7.08. Recordation; Opinions of Counsel.
The Company will cause this Indenture, all financing and continuation
statements with respect thereto and all supplemental indentures to be kept
recorded and filed in such manner and in such places, if any, as may in the
opinion of counsel for the Company be required by law in order to preserve and
protect the rights of the Holders of Bonds and any coupons and the Company and
will pay all taxes and fees incidental thereto. The Company will furnish to the
Trustee:
(1) promptly after the execution and delivery of this Indenture and
the execution and delivery of each supplemental indenture, an Opinion of
Counsel,
(i) that in the opinion of such Counsel this Indenture and such
supplemental indenture, as the case may be, have been properly
recorded and filed so as to make effective the lien intended to be
created hereby and thereby, and reciting the details of such action,
or that in the opinion of such Counsel no such action is necessary to
make effective such lien, and
(ii) that any other action required to be taken so as to make
such lien so effective has been taken, and reciting the details of
such action, or that in the opinion of such Counsel no such other
action is necessary to make such lien so effective; and
(2) on May 15, 1995 and each May 15 thereafter, so long as any Bonds
are outstanding, an Opinion of Counsel either stating that in the opinion
of such Counsel such action has been taken with respect to the recording,
filing, re-recording, and re-filing of this Indenture as is necessary to
maintain the lien of this Indenture, and reciting the details of such
action, or stating that in the opinion of such Counsel no such action is
necessary to maintain such lien.
The Company will also cause each Mortgage pledged with the Trustee to be
kept, recorded and filed in such manner and in such places as may in the opinion
of counsel for the Company or such Member be required by law in order to protect
and preserve the rights of the Company, and on or before May 15 of each
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year, commencing with 1995, will furnish to the Trustee an Opinion or Opinions
of Counsel (which may be based on opinions of local counsel accompanying said
Opinion, certificates of officers of Members as to factual matters and such
other information deemed by such Counsel to be reliable) stating that such
action has been taken with respect to the recording, filing, re-recording and
re-filing of each Mortgage securing a Mortgage Note certified in the most recent
Certificate of Available Eligible Collateral and still held by the Trustee as
part of the Pledged Property as is necessary to maintain the lien thereof, and
reciting the details of such action, or stating that in the opinion of such
counsel no such action is necessary to maintain such lien. Nothing herein shall
be deemed to create any obligation on the part of the Company or the Trustee
(subject to Section 10.01) to take any further recording or filing steps with
respect to the rights of the Trustee in or to the Mortgages, including any
recording or filing of the assignment to the Trustee of any Mortgage, except
that the Company shall be obligated to file a financing statement with respect
to the assignment of its interest in each Mortgage pledged with the Trustee in
the jurisdictions in which the Company keeps its records and in which its
principal place of business is located. The Opinion or Opinions of Counsel
hereinabove referred to in this paragraph shall be accompanied by an Officers'
Certificate stating that no instrument of satisfaction of any Mortgage which is
then part of the Pledged Property with the Trustee has been executed by the
Company.
SECTION 7.09. Further Assurances.
The Company will execute and deliver, or cause to be executed and
delivered, all such additional instruments and do, or cause to be done, all such
additional acts as (a) may be necessary or proper, consistently with the
Granting Clauses hereof, to carry out the purposes of this Indenture and to make
subject to the lien hereof any property intended so to be subject, or (b) may be
necessary or proper to transfer to any successor trustee the estate, powers,
instruments and funds held in trust hereunder and to confirm the lien of this
Indenture with respect to any series of Bonds. The Company will also cause to be
filed, registered or recorded any instruments of conveyance, transfer,
assignment or further assurance in all offices in which such filing, registering
or recording is necessary to the validity thereof or to give notice thereof.
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SECTION 7.10. Advances by Trustee.
If the Company shall fail to perform any of its covenants contained in this
Indenture, the Trustee may (but shall not be obligated to) make advances to
perform the same on behalf of the Company, and the Company will repay upon
demand all sums so advanced, with interest after demand at the highest rate of
interest borne by any Bond then Outstanding. All sums so advanced, with interest
as aforesaid, shall be secured by this Indenture and have priority to the
indebtedness evidenced by the Bonds. No such advance shall be deemed to relieve
the Company from any default or Event of Default hereunder.
SECTION 7.11. Restriction on Indebtedness.
The Company will not incur any Superior Indebtedness, or make any optional
prepayment on any Capital Term Certificate, if, after giving effect thereto, (x)
on the date of such incurrence or making of optional prepayment (the
determination date) the aggregate principal amount of Superior Indebtedness then
outstanding, less a principal amount of Superior Indebtedness equal to the
principal amount of Government or Government Insured Obligations held by the
Company (whether or not pledged with the Trustee), exceeds 20 times the sum of
(i) the aggregate principal amount of Capital Term Certificates outstanding on
the determination date and (ii) the aggregate amount of Members' equity in the
Company, other than Capital Term Certificates, on the determination date or (y)
on any given future date the aggregate principal amount of Superior Indebtedness
outstanding on the determination date which will remain outstanding on such
given future date, less a principal amount of Superior Indebtedness equal to the
principal amount of Government or Government Insured Obligations held by the
Company on the determination date which will remain outstanding on such given
future date, will exceed 20 times the sum of (i) the aggregate principal amount
of Capital Term Certificates outstanding on the determination date which will
remain outstanding on such given future date and (ii) the aggregate amount of
Members' equity in the Company, other than Capital Term Certificates, on the
determination date. The respective principal amounts of Superior Indebtedness,
Capital Term Certificates and Government or Government Insured Obligations to be
outstanding on such given future date shall be determined after giving effect to
mandatory sinking fund payments, other mandatory prepayments and serial and
other maturity payments required to be made on or prior to said given future
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date by the terms of such Superior Indebtedness, Capital Term Certificates and
Government or Government Insured Obligations or any indenture or other
instrument pursuant to which they are respectively issued. For the purposes of
this Section "Government or Government Insured Obligations" shall mean (A)
obligations of the United States of America or any agency thereof issued to
promote the purposes of the Rural Electrification Act of 1936, as from time to
time in effect, or any similar Act hereafter enacted by the Congress of the
United States of America and (B) obligations of Members which are guaranteed or
insured by the United States of America or any agency thereof.
SECTION 7.12. Restriction on Amendment of Certain Instruments.
The Company will not enter into any agreement providing for, or consent to,
any modification, alteration, supplement or amendment of any Mortgage Note or
Mortgage, except as provided in this Section, Section 4.05, Section 13.01(b) or
Section 13.02(b) and except that this provision shall not prevent any
modification, alteration, supplement or amendment of any Mortgage so long as
thereafter such Mortgage will continue to comply with the requirements set forth
in Schedule I to this Indenture. To the extent permitted by the preceding
sentence, the Company may waive compliance with provisions in said instruments,
either before or after the time when such compliance was required, but no such
waiver shall extend to or affect such provisions except to the extent expressly
waived.
SECTION 7.13. Maintenance of Eligible Collateral.
The Company shall cause the Allowable Amount of Eligible Collateral held by
the Trustee as Pledged Property at all times to be not less than 100% of the
aggregate principal amount of the Outstanding Bonds.
On July 1 in each calendar year, beginning with 1994, the Company will
deliver to the Trustee a Certificate of Available Eligible Collateral, dated not
more than 30 days prior to such delivery, showing that the requirements of the
preceding paragraph and Subsections (a)(2) and (3) of Section 3.01 are
satisfied; provided, however, that no such Certificate need be delivered to the
Trustee on any July 1 if a Certificate of Available Eligible Collateral shall
have been delivered in connection with the authentication and delivery of Bonds
or the withdrawal of any part of the Pledged Property since the preceding
January 1.
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SECTION 7.14. Restriction on Assignments of Mortgage and Loan Agreements.
Except as specifically provided therein, the Company will not assign,
transfer or otherwise dispose of its interest (or any part thereof) in any
Mortgage securing any Mortgage Note then held by the Trustee or in any Loan
Agreement pursuant to which such Mortgage Note was issued.
SECTION 7.15. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company, a brief certificate signed by the principal
executive officer, principal financial officer or principal accounting officer,
as to his or her knowledge of the Company's compliance with all the conditions
and covenants under this Indenture (without regard to any period of grace or
requirement of notice provided under this Indenture).
The Company will promptly deliver to the Trustee an Officers' Certificate
specifying the nature, status and period of existence of any Event of Default or
any event which with notice or lapse of time would become an Event of Default.
SECTION 7.16 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition set forth in Sections 7.04, 7.07(1), (2) and (3), 7.11, 7.12, 7.13
and 7.14, if before or after the time for such compliance the Holders of at
least a majority in principal amount of the Bonds at the time Outstanding shall,
by Act of such Bondholders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company in respect of any such covenant or condition shall remain in full
force and effect.
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ARTICLE EIGHT
REDEMPTION OF BONDS
SECTION 8.01. Right of Redemption.
The Bonds of each series shall be redeemable as set forth in or pursuant to
the supplemental indenture or Board Resolution creating such series.
SECTION 8.02. Applicability of Article.
Redemption of Bonds at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture or any supplemental
indenture, shall be made in accordance with such provision and this Article.
SECTION 8.03. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Bonds shall be evidenced by a
Board Resolution. In case of any redemption at the election of the Company of
less than all of the Bonds of any series, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Bonds of such series to be
redeemed.
SECTION 8.04. Selection by Trustee of Bonds to be Redeemed.
If less than all the Bonds of any series are to be redeemed, the particular
Bonds to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Bonds of such series not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions of the principal of Bonds of a denomination larger than $1,000. The
portions of the principal of Bonds so selected for partial redemption shall be
equal to $1,000 or the smallest authorized denomination of the Bonds of such
series, whichever is greater, or a multiple thereof.
The Trustee shall promptly notify the Company in writing of the Bonds
selected for redemption and, in the case of any Bond selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Bonds shall relate, in the case of
any
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Bond redeemed or to be redeemed only in part, to the portion of the principal of
such Bond which has been or is to be redeemed.
SECTION 8.05. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 1.06
(i) to Holders of Registered Bonds to be redeemed, once not less than 30 nor
more than 60 days prior to the Redemption Date; and (ii) to Holders of Bearer
Bonds to be redeemed, once not less than 30 nor more than 60 days prior to the
Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any,
(3) If less than all Outstanding Bonds of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
respective principal amounts) of the Bonds to be redeemed,
(4) that on the Redemption Date the Redemption Price and accrued
interest, if any, will become due and payable upon each such Bond, and that
interest thereon shall cease to accrue from and after said date, and
(5) the place where such Bonds, together in the case of Bearer Bonds
with all coupons appertaining thereto, if any, maturing after the
Redemption Date, are to be surrendered for payment of the Redemption Price
and accrued interest, if any, which shall be the office or agency of the
Company in the Place of Payment for the Bonds of the series being redeemed.
Notice of redemption of Bonds to be redeemed shall be given by the Company
or, upon a Company Request, by the Trustee in the name and at the expense of the
Company.
SECTION 8.06. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 7.03) an amount of
money sufficient to pay the Redemption Price and accrued interest, if any, of
all the Bonds which are to be redeemed on that date.
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SECTION 8.07. Bonds Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Bonds so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price and accrued interest, if any, therein specified and from and after such
date (unless the Company shall default in the payment of the Redemption Price
and such accrued interest) such Bonds shall cease to bear interest and the
coupons for such interest appertaining to any Bearer Bonds so to be redeemed,
except to the extent provided below, shall be void. Upon surrender of such Bonds
for redemption, together with all coupons, if any, appertaining thereto maturing
after the Redemption Date, in accordance with said notice, such Bonds shall be
paid by the Company at the Redemption Price and accrued interest, if any,
exclusive, however, of instalments of interest maturing on the Redemption Date
payment of which shall have been made or duly provided for to the Holders of
such Bonds registered as such on the relevant Record Dates, or otherwise,
according to their terms and the provisions of Section 2.09 ; provided, however,
that instalments of interest on Bearer Bonds with a Stated Maturity on or before
the Redemption Date shall be payable only upon presentation and surrender of
coupons for such interest at an office or agency located outside the United
States.
If any Bond called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Bond.
If any Bearer Bond surrendered for redemption shall not be accompanied by
all appurtenant coupons maturing after the Redemption Date, the surrender of
such missing coupon or coupons may be waived by the Company and the Trustee, if
there be furnished to them such security or indemnity as they may require to
save each of them harmless. If thereafter the Holder of such Bearer Bond shall
surrender to any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder shall be
entitled to receive the amount to be deducted; provided, however, that interest
represented by coupons shall be payable only as provided in Section 7.02.
SECTION 8.08. Bonds Redeemed in Part.
Any Registered Bond of any series which is to be redeemed only in part
shall be surrendered at the Place of Payment for Bonds of such series (with, if
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the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing) and
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Bond a new Registered Bond or Bonds of the same series, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Bond so surrendered; provided, that if a Global Bond is so surrendered, such
new Bond so issued shall be a new Global Bond in a denomination equal to the
unredeemed portion of the principal of the Global Bond so surrendered.
ARTICLE NINE
REMEDIES
SECTION 9.01. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law pursuant to a
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Bond when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Bond at its Maturity; or
(3) default in the making of any sinking fund payment provided for,
with respect of Bonds of any series, in or pursuant to any supplemental
indenture; or
(4) default in the performance, or breach, of any covenant of the
Company contained in Section 7.11, 7.12, 7.13 or 7.14 and continuance of
such default or breach for a period of 60 days after such default has
become known to an officer of the Company; or
(5) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or
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warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Bonds, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Bankruptcy Code or
any other applicable Federal or State law or law of the District of
Columbia, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(7) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Bankruptcy Code or any other applicable Federal or State law or law of the
District of Columbia, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
Upon receipt by the Trustee of any Notice of Default pursuant to this
Section 9.01, (i) with respect to Bonds of a series all or part of which is
represented by a Global Bond or Bonds, the Trustee shall establish a record
date, which record date shall be at the close of business on the day the Trustee
receives such Notice of Default, and (ii) with respect to any other series of
Bonds issued hereunder, the Trustee may, but shall not be obligated to,
establish
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a record date, in each case for the purpose of determining Holders of
Outstanding Bonds of such series entitled to join in such Notice of Default. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such Notice of Default, whether or not
such Holders remain Holders after such record date; provided, that unless
Holders of at least the requisite principal amount (which amount is 25% in the
case of subclause (5) of this Section) of the Outstanding Bonds of such series,
or their proxies, shall have joined in such Notice of Default prior to the day
which is 90 days after such record date, such Notice of Default and the Act of
Holders, or their proxies, joining in such Notice of Default shall automatically
and without further action by any Holders be cancelled and of no effect. Nothing
in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
(i) after expiration of such 90-day period, a new Notice of Default to the same
effect as that cancelled pursuant to the proviso to the preceding sentence, or
(ii) during any such 90-day period in respect of any Notice of Default with
respect to a prospective Event of Default with respect to Bonds of such series,
an additional Notice of Default with respect to any other prospective Event of
Default (other than a prospective Event of Default as to which such a 90-day
period has not expired) with respect to Bonds of such series, in either of which
events a new record date shall or may, as the case may be, be established
pursuant to the provisions of this Section 9.01 in respect of such new or
additional Notice of Default.
SECTION 9.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Bonds Outstanding may declare the principal of all the Bonds to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Bondholders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided and before any sale of the
Pledged Property, or any part thereof, shall have been made pursuant to any
power of sale as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Bonds Outstanding, by written notice, to the Company
and the Trustee, may rescind and annul such declaration and its consequences if
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue instalments of interest on all Bonds,
(B) the principal of (and premium, if any, on) any Bonds which
have become due otherwise than by such declaration of acceleration and
interest thereon at the respective rates borne by the Bonds,
(C) to the extent that payment of such interest is lawful,
interest upon overdue instalments of interest at the respective rates
borne by the Bonds, and
(D) all sums due to the Trustee pursuant to Section 10.07;
and
(2) all Events of Default, other than the non-payment of the principal
of Bonds which have become due solely by such acceleration, have been cured
or waived as provided in Section 7.16 or 9.09.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Trustee of any written notice declaring such an
acceleration, or rescission and annulment thereof, (i) with respect to Bonds of
a series all or part of which is represented by a Global Bond or Bonds, the
Trustee shall establish a record date, which record date shall be at the close
of business on the day the Trustee receives such notice, and (ii) with respect
to any other series of Bonds issued under this Indenture, the Trustee may, but
shall not be obligated to, establish a record date, in each case for the purpose
of determining Holders of Outstanding Bonds of such series entitled to join in
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided, that unless such
declaration of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, and the Act of Holders, or their proxies, joining in such notice shall
automatically and without further action by any Holders be cancelled and of no
effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a
Holder, of Bonds of any series
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from giving, (i) after expiration of such 90-day period a new written notice of
declaration of acceleration, or rescission and annulment thereof, as the case
may be, to the same effect as that cancelled pursuant to the proviso to the
preceding sentence, or (ii) during any such 90-day period in respect of any
written notice of declaration of acceleration or rescission and annulment
thereof, as the case may be, with respect to any Event of Default with respect
to Bonds of such series, an additional written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, with
respect to any other Event of Default (other than an Event of Default as to
which such a 90-day period has not expired) with respect to Bonds of such
series, in either of which events a new record date shall or may, as the case
may be, be established pursuant to the provisions of this Section 9.02 in
respect of such new or additional written notice.
SECTION 9.03. Trustee's Power of Sale of Pledged Property; Notice
Required; Power to Bring Suit.
If an Event of Default shall have occurred and be continuing for a period
of 30 days after the Trustee shall have given the Company written notice
requiring such Event of Default to be remedied, and subject to the provisions of
Sections 9.07 and 9.08, the Trustee, by such officer or agent as it may appoint,
may:
(1) sell, to the extent permitted by law, without recourse, for cash,
or credit or for other property, for immediate or future delivery, and for
such price or prices and on such terms as the Trustee in its discretion may
determine, the Pledged Property as an entirety, or in any such portions as
the Trustee in its discretion shall deem expedient in the interest of the
Bondholders, (i) at private sale after at least 30 days' written notice to
the Company, or as otherwise required by law, or (ii) at public sale at
some convenient place in the Borough of Manhattan, City and State of New
York, or at such other place or places as may be required by law, after
publishing notice of such public sale in an Authorized Newspaper in such
Borough and in such place or places as may be required by law, at least
once in each of two successive calendar weeks preceding such public sale
(which notice shall state that such public sale will be subject to all
necessary governmental or statutory approvals and consents), and may from
time to time adjourn such public sale by announcement at the time and place
fixed for such sale or for such adjourned sale or sales without further
notice except such as may be required by law; and/or
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(2) proceed by one or more suits, actions or proceedings at law or in
equity or otherwise or by any other appropriate remedy, to enforce payment
of the Bonds and related coupons or Mortgage Notes which are part of the
Pledged Property or to realize on any collateral security for such Mortgage
Notes, or to foreclose this Indenture or to sell the Pledged Property under
a judgment or decree of a court or courts of competent jurisdiction, or by
the enforcement of any such other appropriate legal or equitable remedy, as
the Trustee in its discretion shall deem most effectual to protect and
enforce any of its rights or powers or any of the rights or powers of the
Bondholders.
In the event that the Trustee shall deem it advisable to sell any of or all
the Pledged Property in accordance with the provisions of this Section, the
Company agrees that if registration of any such Pledged Property shall be
required, in the opinion of counsel for the Trustee, under the Securities Act of
1933 or other applicable law, and regulations promulgated thereunder, and if the
Company shall not effect, or cause to be effected, such registration promptly,
the Trustee may sell any such Pledged Property at a private sale, and the
Company and the Bondholders shall not attempt to maintain that the prices at
which such Pledged Property is to be sold are inadequate by reason of the
failure to sell at public sale, or hold the Trustee liable therefor.
SECTION 9.04. Incidents of Sale of Pledged Property.
Upon any sale of all or any part of the Pledged Property made either under
the power of sale given under this Indenture or under judgement or decree in any
judicial proceedings for foreclosure or otherwise for the enforcement of this
Indenture, the following shall be applicable:
(1) Bonds Due and Payable. The principal of, and premium, if any, and
accrued interest on, the Bonds, if not previously due, shall immediately
become and be due and payable.
(2) Trustee Appointed Attorney of Company to Make Conveyances. The
Trustee is hereby irrevocably appointed the true and lawful attorney of the
Company, in its name and stead, to make all necessary deeds, bills of sale
and instruments of assignment, transfer or conveyance of the property thus
sold; and for that purpose the Trustee may execute all such documents and
instruments and may substitute one or more persons with like power; and the
Company hereby ratifies and confirms all that its said attorneys, or such
substitute or substitutes, shall lawfully do by virtue hereof.
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(3) Company to Confirm Sales and Conveyances. If so requested by the
Trustee or by any purchaser, the Company shall ratify and confirm any such
sale or transfer by executing and delivering to the Trustee or to such
purchaser or purchasers all proper deeds, bills of sale, instruments of
assignment, conveyance or transfer and releases as may be designated in any
such request.
(4) Bondholders and Trustee May Purchase Pledged Property. Any
Bondholder or Holder of a related coupon or the Trustee may bid for and
purchase any of the Pledged Property, and upon compliance with the terms of
sale, may hold, retain, possess and dispose of such Pledged Property in
their or its or his own absolute right without further accountability.
(5) Purchaser at Sale May Apply Bonds or Coupons to Purchase
Price. Any purchaser at any such sale may, in paying the purchase price,
deliver any of the Bonds or related coupons then Outstanding in lieu of
cash and apply to the purchase price the amount which shall, upon
distribution of the net proceeds of such sale, after application to the
costs of the action and any other sums which the Trustee is authorized to
deduct under this Indenture, be payable on such Bonds or related coupons so
delivered in respect of principal, premium, if any, and interest. In case
the amount so payable on such Bonds or coupons shall be less than the
amount due thereon, duly executed and authenticated Bonds or coupons shall
be delivered to the Holder thereof for the balance of the amount due on
such Bonds or coupons so delivered by such Holder in exchange therefor.
(6) Receipt of Trustee Shall Discharge Purchaser. The receipt of the
Trustee or of the officer making such sale under judicial proceedings shall
be a sufficient discharge to any purchaser for his purchase money, and,
after paying such purchase money and receiving such receipt, such purchaser
or his personal representative or assigns shall not be obliged to see to
the application of such purchase money, or be in any way answerable for any
loss, misapplication or non-application thereof.
(7) Sale to Divest Company's Rights in Property Sold. Any such sale
shall operate to divest the Company of all right, title, interest, claim
and demand whatsoever, either at law or in equity or otherwise, in and to
the Pledged Property so sold, and shall be a perpetual bar both at law and
in equity or otherwise against the Company, and its successors and assigns,
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and any and all persons claiming or who may claim the Pledged Property sold
or any part thereof from, through or under the Company, or its successors
and assigns.
(8) Application of Moneys Received upon Sale. Any moneys collected by
the Trustee upon any sale made either under the power of sale given by this
Indenture or under judgment or decree in any judicial proceedings for
foreclosure or otherwise for the enforcement of this Indenture, shall be
applied as provided in Section 9.13.
SECTION 9.05. Upon Default Company Will Pay Principal and Interest
upon Demand of Trustee.
In case
(1) default is made in the payment of any instalment of interest on
any Bond when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Bond at the Maturity thereof,
then in any such event, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the Holders of the Bonds and coupons, the whole
amount then due and payable on all Bonds and coupons, for principal, premium, if
any, and interest, or any of them, as the case may be, with interest at the
rates specified in the respective Bonds on the overdue principal and premium, if
any, and (to the extent that payment of such interest is legally enforceable) on
the overdue Instalments of interest. In addition thereto, the Company will pay
to the Trustee all amounts due to it pursuant to Section 10.07.
SECTION 9.06. Judicial Proceedings Instituted by Trustee.
(a) Trustee May Bring Suit. In case the Company shall fail to pay promptly
the amounts required to be paid pursuant to Section 9.05 upon demand of the
Trustee, then the Trustee in its own name, and as trustee of an express trust,
shall be entitled and empowered to institute any suits, actions or proceedings
at law, in equity or otherwise, to recover judgment against the Company or any
other obligor on the Bonds and coupons for the whole amount due and unpaid, and
may prosecute any such claim or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the
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Company or any such other obligor and collect the moneys adjudged or decreed to
be payable in any manner provided by law, whether before or after or during the
pendency of any proceedings for the enforcement of the lien of this Indenture,
or of any of the Trustee's rights or the rights of the Holders of Bonds and
coupons under this Indenture, and such power of the Trustee shall not be
affected by any sale hereunder or by the exercise of any other right, power or
remedy for the enforcement of the provisions of this Indenture or for the
foreclosure of the lien hereof.
(b) Trustee May Recover Unpaid Indebtedness after Sale of Pledged
Property. In the case of a sale of the Pledged Property and of the application
of the proceeds of such sale to the payment of the indebtedness secured by this
Indenture, the Trustee in its owns name, and as trustee of an express trust,
shall be entitled and empowered, by any appropriate means, legal, equitable or
otherwise, to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, all or any of the Bonds or coupons, for the benefit of the
Holders thereof, and upon any other portion of the indebtedness remaining
unpaid, with interest as provided in Section 9.05.
(c) Recovery of Judgment Does Not Affect Lien of this Indenture or Other
Rights. No recovery of any such judgment or final decree by the Trustee and no
levy of any execution under any such judgment upon any of the Pledged Property,
or upon any other property, shall in any manner or to any extent affect the lien
of this Indenture upon any of the Pledged Property, or any rights, powers or
remedies of the Trustee, or any liens, rights, powers or remedies of the Holders
of Bonds and coupons, but all such liens, rights, powers and remedies shall
continue unimpaired as before.
(d) Trustee May File Proofs of Claim; Appointment of Trustee as
Attorney-in-Fact in Judicial Proceedings. The Trustee in its own name, or as
trustee of an express trust, or as attorney-in-fact for the Holders of Bonds and
coupons, or in any one or more of such capacities (irrespective of whether the
principal of the Bonds shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal, premium (if any)
or interest), shall be entitled and empowered to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Holders of Bonds and coupons (whether such
claims be based upon the provisions of the Bonds, the coupons, or this
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Indenture) allowed in any equity receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial proceedings
relative to the Company, or any obligor on the Bonds or coupons, the creditors
of the Company or any such other obligor, any Member, the Pledged Property or
any other property of the Company or any such other obligor and any receiver,
assignee, trustee, liquidator, sequestrator (or other similar official) in any
such judicial proceeding is hereby authorized by each Holder of Bonds and
coupons to make such payments to the Trustee and in the event that the Trustee
shall consent to the making of such payments directly to the Holders of Bonds
and coupons, to pay to the Trustee any amount due to it pursuant to Section
10.07. The Trustee is hereby irrevocably appointed (and the successive
respective Holders of the Bonds and coupons, by taking and holding the same,
shall be conclusively deemed to have so appointed the Trustee) the true and
lawful attorney-in-fact of the respective Bondholders, with authority to (i)
make and file in the respective names of the Holders of Bonds and coupons
(subject to deduction from any such claims of the amounts of any claims filed by
any of the Holders of Bonds and coupons themselves), any claim, proof of claim
or amendment thereof, debt, proof of debt or amendment thereof, petition or
other document in any such proceedings and to receive payment of any amounts
distributable on account thereof, (ii) execute any such other papers and
documents and to do and perform any and all such acts and things for and on
behalf of such Holders of Bonds and coupons, as may be necessary or advisable in
order to have the respective claims of the Trustee and of the Holders of Bonds
and coupons against the Company or any such other obligor, the Members, the
Pledged Property or any other property of the Company or any such other obligor
allowed in any such proceeding and (iii) receive payment of or on account of
such claims and debt; provided, however, that nothing contained in this
Indenture shall be deemed to give to the Trustee any right to accept or consent
to any plan or reorganization or otherwise by action of any character in any
such proceeding to waive or change in any way any right of any Holders of Bonds
and coupons. Any moneys collected by the Trustee under this Section shall be
applied as provided in Section 9.13.
(e) Trustee Need Not Have Possession of Bonds or Coupons. All rights of
action and of asserting claims under this Indenture or under any of the Bonds
and coupons enforceable by the Trustee may be enforced by the Trustee without
possession of any of such Bonds and coupons or the production thereof on the
trial or other proceedings relative thereto.
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(f) Suit To Be Brought for Ratable Benefit of Holders of Bonds and
Coupons. Any suit, action or other proceeding at law, in equity or otherwise
which shall be instituted by the Trustee under any of the provisions of this
Indenture shall be for the equal, ratable and common benefit of all the Holders
of Bonds and coupons, subject to the provisions of this Indenture.
(g) Trustee May Be Restored to Former Position and Rights in Certain
Circumstances. In case the Trustee shall have proceeded to enforce any right
under this Indenture by suit, foreclosure or otherwise and such proceedings
shall have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Trustee, then in every such case, the Company, the
Members, any other obligor on the Bonds or coupons and the Trustee shall be
restored without further act to their respective former positions and rights
hereunder, and all rights, remedies and powers of the Trustee shall continue as
though no such proceedings had been taken.
SECTION 9.07. Bondholders May Demand Enforcement of Rights by Trustee.
If an Event of Default shall have occurred and shall be continuing, the
Trustee shall, upon the written request of the holders of a majority in
aggregate principal amount of the Bonds then Outstanding and upon the offering
of indemnity as provided in Section 10.03(e), proceed to institute one or more
suits, actions or proceedings at law, in equity or otherwise, or take any other
appropriate remedy, to enforce payment of the principal of, or premium, if any,
or interest on, the Bonds or coupons or Mortgage Notes which are part of the
Pledged Property or to realize on any collateral security for such Mortgage
Notes, or to foreclose this Indenture or to sell the Pledged Property under a
judgment or decree of a court or courts of competent jurisdiction or under the
power of sale herein granted, or take such other appropriate legal, equitable or
other remedy, as the Trustee, being advised by counsel, shall deem effectual to
protect and enforce any of the rights or powers of the Trustee or the Holders of
Bonds and coupons, or, in case such Bondholders shall have requested a specific
method of enforcement permitted hereunder, in the manner requested, provided
that such action shall not be otherwise than in accordance with law and the
provisions of this Indenture, and the Trustee, subject to such indemnity
provisions, shall have the right to decline to follow any such request if the
Trustee in good faith shall determine that the suit, proceeding or exercise of
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other remedy so requested would involve the Trustee in personal liability or
expense.
SECTION 9.08. Control by Bondholders.
Subject to Section 11.03(e), the Holders of a majority in principal amount
of the Outstanding Bonds shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, be unduly prejudicial to Holders not joining in such
request or involve the Trustee in personal liability or expense (but the
Trustee shall not be obligated to make any determination with respect to
such conflict, prejudice or liability), and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, (i) with respect to Bonds of a series all or part of which is
represented by a Global Bond or Bonds, the Trustee shall establish a record
date, which record date shall be at the close of business on the day the Trustee
receives such notice, and (ii) with respect to any other series of Bonds issued
under this Indenture, the Trustee may, but shall not be obligated to, establish
a record date, in each case for the purpose of determining Holders of
Outstanding Bonds of such series entitled to join in such notice. The Holders on
such record date, or their duly designated proxies, and only such Persons, shall
be entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, that unless the Holders of a majority in
principal amount of the Outstanding Bonds of such series shall have joined in
such notice prior to the date which is 90 days after such record date, such
notice and the Act of Holders, or their proxies, joining in such notice shall
automatically and without further action by any Holders be cancelled and of no
effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a
Holder, from giving, (i) after expiration of such 90-day period, a new notice to
the same effect as that cancelled pursuant to the proviso to the preceding
sentence, or (ii) during any such 90-day period in respect of any notice, a new
notice giving directions contrary to or otherwise different from such notice in
either of which events a new record date shall or
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may, as the case may be, be established pursuant to the provisions of this
Section 9.08 in respect of such new notice.
SECTION 9.09. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Bonds may on behalf of the Holders of all the Bonds and related
coupons waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Bonds, or
(2) in respect of a covenant or provision hereof which under Article
Thirteen cannot be modified or amended without the consent of the Holder of
each Outstanding Bond affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 9.10. Holder May Not Bring Suit Except Under Certain Conditions.
A Holder of any Bond of any series or any related coupon shall not have the
right to institute any suit, action or proceeding at law or in equity or
otherwise for the foreclosure of this Indenture, for the appointment of a
receiver or for the enforcement of any other remedy under or upon this
Indenture, unless:
(1) such Holder previously shall have given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Bonds then Outstanding shall have requested the Trustee in writing to
institute such action, suit or proceeding and shall have offered to the
Trustee indemnity as provided in Section 10.03(e);
(3) the Trustee shall have refused or neglected to institute any such
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
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(4) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of Outstanding Bonds.
It is understood and intended that no one or more of the Holders of Bonds
or coupons shall have any right in any manner whatever hereunder or under the
Bonds or coupons to (i) surrender, impair, waive, affect, disturb or prejudice
the lien of this Indenture on any Pledged Property or the rights of the Holders
of any other Bonds or coupons, (ii) obtain or seek to obtain priority over or
preference to any other such Holder or (iii) enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all the Holders of Bonds or coupons subject to the provisions
of this Indenture.
SECTION 9.11. Undertaking To Pay Court Costs.
All parties to this Indenture, and each Holder of any Bond or coupon by his
acceptance thereof, shall be deemed to have agreed that any court may in its
discretion require, in any suit, action or proceeding for the enforcement of any
right or remedy under this Indenture, or in any suit, action or proceeding
against the Trustee for any action taken or omitted by it as Trustee hereunder,
the filing by any party litigant in such suit, action or proceeding of an
undertaking to pay the costs of such suit, action or proceeding, and that such
court may, in its discretion, assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, action or proceeding,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided, however, that the provisions of this Section
shall not apply to (a) any suit, action or proceeding instituted by the Trustee,
(b) any suit, action or proceeding instituted by any Bondholder or group of
Bondholders holding in the aggregate more than 10% in aggregate principal amount
of the Bonds then Outstanding or (c) any suit, action or proceeding instituted
by any Holder for the enforcement of the payment of the principal of, or
premium, if any, or interest on, any of the Bonds or coupons, on or after the
respective due dates expressed therein.
SECTION 9.12. Right of Holders To Receive Payment Not To Be Impaired.
Anything in this Indenture to the contrary notwithstanding, the right of
any Holder of any Bond or coupon to receive payment of the principal of, and
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premium, if any, and interest on, such Bond or payment of such coupon, on or
after the respective due dates expressed in such Bond or coupon (or, in case of
redemption, on the Redemption Date fixed for such Bond), or to institute suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 9.13. Application of Moneys Collected by Trustee.
Any moneys collected or to be applied by the Trustee pursuant to this
Article, together with any other moneys which may then be held by the Trustee
under any of the provisions of this Indenture as security for the Bonds and
coupons (other than moneys at the time required to be held for the payment of
specific Bonds or coupons at Maturity or at a time fixed for the redemption
thereof) shall be applied in the following order from time to time, on the date
or dates fixed by the Trustee and, in the case of a distribution of such moneys
on account of principal, premium, if any, or interest, upon presentation of the
several Outstanding Bonds or coupons, and stamping thereon of payment, if only
partially paid, and upon surrender thereof, if fully paid:
FIRST: to the payment of all taxes, assessments or liens prior to
the lien of this Indenture, except those subject to which any sale
shall have been made, all costs and expenses of collection, including
the costs and expenses of handling the Pledged Property and of any
sale thereof pursuant to the provisions of this Article and of the
enforcement of any remedies hereunder or under any Mortgage, and to
the payment of reasonable compensation to the Trustee, its agents,
attorneys and counsel, and all expenses, liabilities and advances
incurred or made by the Trustee, or through the Trustee by any Holder
or Holders and all other amounts due the Trustee under Section 10.07;
SECOND: in case the principal of the Bonds or any of them shall
not have become due, to the payment of any interest in default, in the
order of the maturity of the instalments of such interest, with
interest at the rates specified in the respective Bonds (to the extent
that payment of such interest shall be legally enforceable) on the
overdue instalments thereof;
THIRD: in case the principal of any of but not all the Bonds
shall have become due, by declaration, upon redemption or otherwise,
first to the payment of accrued interest in the order of the maturity
of the
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instalments thereof with interest at the respective rates specified in
the Bonds on overdue principal, premium, if any, and (to the extent
that payment of such interest shall be legally enforceable) on overdue
instalments of interest, and next to the payment of the principal of
all Bonds then due;
FOURTH: in case the principal of all the Bonds shall have become
due, by declaration, upon redemption or otherwise, to the payment of
the whole amount then due and unpaid upon the Bonds then Outstanding
and the related coupons for principal, premium, if any, and interest,
at the rate specified in the respective Bonds on overdue principal,
premium, if any, and (to the extent that payment of such interest
shall be legally enforceable) on overdue instalments of interest, and,
in case such proceeds shall be insufficient to pay in full the whole
amount so due and unpaid, then to the payment of such principal,
premium, if any, and interest ratably, without discrimination or
preference; and
FIFTH: in case the principal of all the Bonds shall have become
due, by declaration, upon redemption or otherwise, and all of such
Bonds shall have been fully paid together with all interest (including
any interest on overdue payments) and premium, if any, thereon, any
surplus then remaining shall be paid to the Company, its successors or
assigns, or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct;
provided, however, that all payments to be made pursuant to this Section
shall be made ratably to the persons entitled thereto, without
discrimination or preference.
SECTION 9.14. Bonds or Coupons Held by Company Not To Share in
Distribution.
Any Bonds or coupons owned or held by, or for the account or benefit of,
the Company shall not be entitled to share in any payment or distribution
provided for in this Article, provided that the Trustee shall have no liability
in respect of such payment or distribution made to any Person entitled thereto
pursuant to Section 2.10 other than the Company unless a Responsible Officer
shall have
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actual knowledge that any such Person holds Bonds or coupons for the account or
benefit of the Company.
SECTION 9.15. Waiver of Appraisement, Valuation, Stay, Right to
Marshalling.
To the extent it may lawfully do so, the Company, for itself and for any
person who may claim through or under it, hereby:
(1) agrees that neither it nor any such person will set up, plead,
claim or in any manner whatsoever take advantage of, any appraisement,
valuation, stay, extension or redemption laws, now or hereafter in force in
any jurisdiction, which may delay, prevent or otherwise hinder (i) the
performance or enforcement or foreclosure of this Indenture, (ii) the sale
of any of the Pledged Property, or (iii) the putting of the purchaser or
purchasers thereof into possession of such property immediately after the
sale thereof;
(2) waives all benefit or advantage of any such laws;
(3) waives and releases all rights to have the Pledged Property
marshalled upon any foreclosure, sale or other enforcement of this
Indenture; and
(4) consents and agrees that all the Pledged Property may at any such
sale be sold by the Trustee as an entirety.
SECTION 9.16. Remedies Cumulative; Delay or Omission Not a Waiver.
Every remedy given hereunder to the Trustee or to any of the Holders of
Bonds or coupons shall not be exclusive of any other remedy or remedies, and
every such remedy shall be cumulative and in addition to every other remedy
given hereunder or now or hereafter given by statute, law, equity or otherwise.
The Trustee may (but shall not be obligated to, except pursuant to Section 9.07
or 9.08) exercise all or any of the powers, rights or remedies given to it
hereunder or which may be now or hereafter given by statute, law or equity or
otherwise, in its absolute discretion. No course of dealing between the Company
and the Trustee or the Holders of Bonds or coupons or any delay or omission of
the Trustee or of any such Holder to exercise any right, remedy or power
accruing upon any Event of Default shall impair any right, remedy or power or
shall be construed to be a waiver of any such Event of Default or of any right
of the
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Trustee or of the Holders of Bonds and coupons or acquiescence therein, and,
subject to the provisions of Section 9.10, every right, remedy and power given
by this Article to the Trustee or to the Holders of Bonds and coupons may be
exercised from time to time and as often as may be deemed expedient by the
Trustee or by such Holders.
ARTICLE TEN
THE TRUSTEE
SECTION 10.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee (other than with
respect to the Opinions of Counsel referred to in Section 3.01(b)(5)), the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
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(2) the Trustee shall not be liable for any error of judgement made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding Bonds
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 10.02. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder, the Trustee
shall transmit by mail to all Bondholders entitled to receive reports pursuant
to Section 11.03, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of the principal of (or premium, if any) or
interest on any Bond or in the payment of any sinking fund instalment, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Bondholders; and provided,
further, that in the case of any default of the character specified in Section
9.01(5) no such notice to Bondholders shall be given until at least 60 days
after the occurrence thereof. For the purpose of this Section the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
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SECTION 10.03. Certain Rights of Trustee.
Except as otherwise provided in Section 10.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders of any Bonds or of any related coupons pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
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(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) Except with respect to Section 7.01, the Trustee shall have no duty to
inquire as to the performance of the Company's covenants in Article 7 hereof. In
addition, the Trustee shall not be deemed to have knowledge of any Event of
Default or event which with notice or lapse of time or both will become an Event
of Default (a "Default") except (i) any Event of Default occurring pursuant to
Sections 9.01(1), 9.01(2) and 7.01, or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
SECTION 10.04. Not Responsible for Recitals or Issuance of Bonds.
The recitals contained herein and in the Bonds and in any coupons, except
the certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture, the Bonds, the coupons or the lien of this Indenture in respect of
Pledged Property. The Trustee shall not be accountable for the use or
application by the Company of Bonds or the proceeds thereof.
SECTION 10.05. May Hold Bonds.
The Trustee, any Paying Agent, Bond Registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Bonds and coupons may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent, Bond
Registrar or such other agent.
SECTION 10.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall have no
liability to pay interest on or invest (except as herein expressly provided) any
such moneys.
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SECTION 10.07. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except to the extent any such
expense, disbursement or advance may be attributable to its negligence or
bad faith; and
(3) to indemnify the Trustee for, and to defend and hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent such loss, liability or
expense may be attributable to its negligence or bad faith.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Bonds and any coupons
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Bonds. "Trustee" for purposes of this Section shall
include any predecessor trustee but the negligence or bad faith of any such
Trustee shall not affect the rights under this Section of any other such
Trustee.
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SECTION 10.08. Disqualification; Conflicting Interests.
Reference is made to TIA Section 310(b); for purposes of TIA Section
310(b)(1), no conflicting interest shall be deemed to arise by being Trustee
hereunder for Bonds of more than one series.
SECTION 10.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by Federal or State authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. Neither the Company nor any Person
directly or indirectly controlling, controlled by or under common control with
the Company shall serve as Trustee hereunder. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 10.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 10.11.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Bonds, delivered to the Trustee
and to the Company.
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(d) If at any time:
(1) the Trustee shall fail to comply with TIA Section 310(b),
(2) the Trustee shall cease to be eligible under Section 10.09 and
shall fail to resign after written request therefor by the Company or by
any bona fide Holder of a Bond for at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 9.11, any Bondholder who has been a bona
fide Holder of a Bond for at least 6 months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within 1
year after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Bonds delivered to the Company
and the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Bondholders and
accepted appointment in the manner hereinafter provided, any Bondholder who has
been a bona fide Holder of a Bond for at least 6 months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Registered Bonds as their names and addresses appear in the Bond Register and to
the Holders of Bearer Bonds in the manner set forth in Section 1.06. Each
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notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 10.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its lien, if any, provided for in
Section 10.07. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified under TIA Section
310(b) and eligible under Section 10.09 hereof.
SECTION 10.12. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified under TIA Section 310(b)
and eligible under Section 10.09 hereof without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case any
Bonds shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Bonds so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Bonds.
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SECTION 10.13. Preferential Collection of Claims against Company.
Reference is made to TIA Section 311, for the purposes of which:
(1) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within 7 days after delivery
of the goods or securities in currency or in checks or other orders drawn
upon banks or bankers and payable upon demand.
(2) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
SECTION 10.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Bonds which shall be authorized to act on behalf of the
Trustee to authenticate Bonds of such series issued upon original issue or upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 2.08, and Bonds so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Bonds by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation having a
combined capital and surplus of not less than the equivalent of $50,000,000 and
subject to supervision or examination by Federal or State authority or the
equivalent foreign authority, in the case of an Authenticating Agent who is not
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia. If
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such Authenticating Agent publishes reports of conditions at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of such Authenticating Agent, shall continue to be an
Authenticating Agent; provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or such Authenticating Agent.
An Authenticating agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Registered Bonds, if any, of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the Bond
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 10.07.
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If an appointment with respect to one or more series is made pursuant to
this Section, the Bonds of such series may have endorsed thereon, in addition to
the Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Bonds of the series designated therein issued under the
within-mentioned Indenture.
[full name of Trustee]
-----------------------------------
As Trustee
By
--------------------------------
As Authenticating Agent
By
---------------------------------
Authorized [Officer] [Signatory]
If all of the Bonds of a series may not be originally issued at one time,
and if the Trustee does not have an office capable of authenticating Bonds upon
original issuance located in a Place of Payment or other place where the Company
wishes to have Bonds of such series authenticated upon original issuance, the
Trustee, if so requested by the Company in writing (which writing need not
comply with Section 1.02 and need not be accompanied by an Opinion of Counsel),
shall appoint in accordance with this Section an Authenticating Agent (which may
be an Affiliate of the Company if eligible to be appointed as an Authenticating
Agent hereunder) having an office in such Place of Payment or other place
designated by the Company with respect to such series of Bonds.
ARTICLE ELEVEN
BONDHOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 11.01. Company to Furnish Trustee Names and Addresses of
Bondholders.
The Company will furnish or cause to be furnished to the Trustee
semiannually, between January 15 and January 30, inclusive, and between
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July 15 and July 30, inclusive, in each year, and at such other times as the
Trustee may request in writing, within 30 days after receipt by the Company of
any such request, a list, in such form as the Trustee may reasonably require, of
the names and address of the Holders of Bonds, in each case as of a date not
more than 15 days prior to the time such list is furnished; provided, however,
that so long as the Trustee is the Bond Registrar, no such list need be
furnished with respect to the Holders of Registered Bonds.
SECTION 11.02. Preservation of Information; Communications to Bondholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Bonds (i) contained in the
most recent list furnished to the Trustee as provided in Section 11.01, (ii)
received by the Trustee in its capacity as Bond Registrar (if it is then serving
as such); and (iii) filed with it within the two preceding years for the purpose
of receiving reports pursuant to Section 11.03. The Trustee may destroy any list
furnished to it as provided in Section 11.01 upon receipt of a new list so
furnished, and may destroy any information filed with it for the purpose of
receiving reports pursuant to Section 11.03 two years after such filing.
(b) If 3 or more Holders of Bonds (hereinafter referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Bond for a period of at least 6 months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders of Bonds with respect to
their rights under this Indenture or under the Bonds and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within 5 business days after the receipt of
such application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 11.02(a), or
(ii) inform such applicants as to the approximate number of Holders of
Bonds whose names and addresses appear in the information preserved at the
time by the Trustee in accordance with Section 11.02(a), and as to the
approximate cost of mailing to such Bondholders the form of proxy or other
communication, if any, specified in such application.
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If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Bondholder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 11.02(a), a copy
of the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within 5 days after such tender, the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interests of the Holders
of Bonds or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If the Commission, after opportunity
for a hearing upon the objections specified in the written statement so filed,
shall enter an order refusing to sustain any of such objections or if, after the
entry of an order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Bondholders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Bonds or coupons, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Holders of Bonds in accordance with Section
11.02(b), regardless of the source from which such information was derived, and
that the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 11.02(b).
SECTION 11.03. Reports by Trustee.
The Trustee shall transmit any reports required pursuant to TIA Section
313(a) within 60 days after each May 15, commencing May 15, 1994, dated as of
such May 15. Reference is made to TIA Section 313(d); the Company will notify
the Trustee in writing when any Bonds are listed on any stock exchange.
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SECTION 11.04. Reports by Company.
The Company will
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it will file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to all Bondholders, within 30 days after the
filing thereof with the Trustee, in the manner and to the extent provided
in TIA Section 313(c) with respect to reports pursuant to Section 11.03
hereof, such summaries of any information, documents and reports required
to be filed by the Company pursuant to paragraphs (1) and (2) of this
Section 11.04 as may be required by rules and regulations prescribed from
time to time by the Commission.
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ARTICLE TWELVE
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 12.01. Company May Consolidate, etc., only on Certain Terms.
The Company shall not consolidate with or merge into any other corporation
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless:
(1) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Company substantially as an entirety shall
be a corporation organized and existing under the laws of the United States
of America or any State or the District of Columbia, and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of (and premium, if any) and interest on all the Bonds and
the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 12.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in accordance
with Section 12.01, the successor corporation formed by such consolidation or
into which the Company is merged or to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein; provided, however, that no
such conveyance or transfer shall have the effect of releasing
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the Person named as the "Company" in the first paragraph of this instrument or
any successor corporation which shall theretofore have become such in the manner
prescribed in this Article from its liability as obligor and maker on any of the
Bonds.
SECTION 12.03. Limitation on Lease of Properties as Entirety.
The Company shall not lease its properties and assets substantially as an
entirety to any Person.
ARTICLE THIRTEEN
SUPPLEMENTAL INDENTURES;
AMENDMENT OF PLEDGED PROPERTY
SECTION 13.01. Supplemental Indentures and Amendments of Certain Pledged
Property Without Consent of Bondholders.
(a) Without the consent of the Holders of any Bonds or coupons, the
Company, when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company
herein and in the Bonds contained; or
(2) to add to the covenants of the Company, for the benefit of the
Holders of the Bonds or any coupons, or to surrender any right or power
herein conferred upon the Company; or
(3) to add to or change any of the provisions of this Indenture to
provide that Bearer Bonds may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal on Registered Bonds
or of principal or any interest on Bearer Bonds or on the delivery of
Bearer Bonds, or to permit Registered Bonds to be exchanged for Bearer
Bonds, provided any such action shall not adversely affect the interest of
the Holders of Bonds of any series or any related coupons in any material
respect; or
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(4) to convey, transfer and assign to the Trustee, and to subject to
the lien of this Indenture, with the same force and effect as though
included in the Granting Clauses hereof, additional properties of the
Company, and to correct or amplify the description of any property at any
time subject to the lien of this Indenture; or
(5) to provide for the creation of any series of Bonds as provided in
Article Two; or
(6) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to facilitate the issuance of Bonds in
bearer form, registrable or not registrable as to principal, and with or
without interest coupons; to change or eliminate any restrictions on the
manner or place of payment of principal of or any premium or interest on
Bearer Bonds, to permit Bearer Bonds to be issued in exchange for
Registered Bonds, to permit Bearer Bonds to be issued in exchange for
Bearer Bonds of other authorized denominations (to the extent permitted by
law); provided that any such addition or change shall not adversely affect
the interests of the Holders of Bonds of any series or any related coupons
in any material respect; or
(7) to provide for the issuance of uncertificated Bonds, original
issue discount Bonds, and Bonds payable in foreign currencies of one or
more series; or
(8) if allowed under applicable laws and regulations to permit payment
in the United States of America (including any of the states and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction, of principal, premium or interest on Bearer
Bonds or coupons, if any; or
(9) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to continue the qualification of this
Indenture (including any supplemental indenture) under the TIA, or under
any similar federal statute hereafter enacted, and to add to this Indenture
such other provisions as may be expressly permitted by the TIA, excluding,
however, the provisions referred to in Section 316(a)(2) of the TIA as in
effect at the date as of which this instrument was executed or any
corresponding provision in any similar federal statute hereafter enacted;
or
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(10) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such action shall not
adversely affect the interest of the Holders of the Bonds of any series or
any related coupons in any material respect; or
(11) to provide for Mortgage Notes, Mortgages and/or Loan Agreements
to be deposited with a depositary or an agency and/or to permit the
addition to and withdrawal from the Pledged Property of such Mortgage
Notes, Mortgages and/or Loan Agreements to be evidenced by a "book-entry"
or other notation not requiring physical delivery of such instruments.
(b) Without the consent of the Holders of any Bonds or coupons, the parties
to any Mortgage Note, Mortgage or Loan Agreement may, at any time and from time
to time, modify, alter, supplement or amend such Mortgage Note, Mortgage or Loan
Agreement in any of the following respects:
(1) to add to the covenants and agreements of the Member contained in
any such instrument, other covenants and agreements thereafter to be
observed, or to surrender any right or power therein reserved to or
conferred upon any such Member; or
(2) to cure any ambiguity, to correct or supplement any provision
therein which may be inconsistent with any other provision therein, or to
make any other provisions with respect to matters or questions arising
under any such instrument, provided such action shall not adversely affect
the interest of the Holders of the Bonds or any related coupon in any
material respect; or
(3) to give effect to the provisions of Section 4.05; or
(4) to amend or supplement any Mortgage, so long as thereafter such
Mortgage will comply with the requirements of Schedule I annexed hereto as
such Schedule may be amended in accordance with Section 13.02(b) , or amend
or supplement any Mortgage Note or Loan Agreement in any manner not
inconsistent with the provisions of this Indenture; or
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(5) to amend or supplement any Mortgage to secure the evidence of a
loan from a lender or lenders other than the Company in accordance with a
provision in such Mortgage.
It shall not be necessary to obtain any consent from the Trustee with
regard to any action taken pursuant to this Subsection. The Trustee shall
execute any instrument requested in a Company Request for the purpose of
confirming such action, upon receipt by the Trustee of an Officers' Certificate
and an Opinion of Counsel each stating that the action taken was authorized by
this Indenture and that the execution of such instrument is appropriate to
confirm such action.
SECTION 13.02. Supplemental Indentures and Amendments of Certain Pledged
Property With Consent of Bondholders.
(a) With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Bonds, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of the Bonds and any related coupons under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Bond or coupon affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment
of interest on, any Bond or coupon, or reduce the principal amount thereof
or the interest thereon or any premium payable upon the redemption thereof,
or change the coin or currency in which any Bond or coupon or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption date), or
(2) permit the creation of any lien prior to or pari passu with the
lien of this Indenture with respect to any of the Pledged Property, or
terminate the lien of this Indenture on any Pledged Property (except in
each case as permitted by, and pursuant to, this Indenture) or deprive any
Holder of any Bond or any related coupon of the security afforded by the
lien of this Indenture (except as in this Indenture permitted), or
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(3) reduce the percentage in principal amount of the Outstanding
Bonds, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(4) modify any of the provisions of this Section, Section 7.16 or
Section 9.09, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Bond or coupon affected thereby.
(b) With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Bonds, by Act of said Holders delivered to
the Company and the Trustee, the parties to any Mortgage Note or Mortgage
(including the Trustee as assignee thereof) or Loan Agreement may, at any time
and from time to time, modify, alter, supplement or amend any such Mortgage
Note, Mortgage or Loan Agreement (including Schedule I hereto annexed as applied
to any Mortgage used or to be used in a particular instance) in any manner or in
any respect; provided, however, that no such modification, alteration,
supplement or amendment shall, without the consent of the Holder of each
Outstanding Bond or coupon affected thereby,
(1) reduce the principal amount of any Mortgage Note or impair the
right to institute suit for the enforcement of payment of such principal
amount on or after the maturity thereof, or
(2) permit the creation of any lien prior to or pari passu with the
lien of this Indenture with respect to any of the Pledged Property or
terminate the lien of this Indenture on any Pledged Property (except in
each case as permitted by, and pursuant to, the terms of this Indenture) or
deprive any Holder of any Bond or related coupon of the security afforded
by the lien of this Indenture (except as in this Indenture permitted), or
(3) reduce the percentage and principal amount of Outstanding Bonds,
the consent of whose Holders is required for any such modification,
alteration, supplement or amendment.
Upon receipt by the Trustee of a Company Request, Board Resolution,
Officers' Certificate and Opinion of Counsel to the effects set forth in the
last paragraph of Section 13.01(b) and evidence of the Act of said Holders, the
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Trustee shall join in the execution of such supplemental indenture or other
instrument, as the case may be, subject to the provisions of Section 13.03.
It shall not be necessary for any Act of Bondholders under this Section to
approve the particular form of any proposed supplemental indenture or of any
proposed modification of the instruments referred to in the foregoing Subsection
(b), but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 13.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, or in executing any instrument modifying
Mortgage Notes, Mortgages or Loan Agreements pursuant to Sections 13.01(b) or
13.02(b) the Trustee shall be entitled to receive, and (subject to Section
10.01) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture or instrument, as the case may
be, is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture or any such
instrument which affects the Trustee's own rights, duties, obligations or
immunities under this Indenture or otherwise.
SECTION 13.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Bonds theretofore or thereafter authenticated and delivered hereunder and of
any coupon appertaining thereto shall be bound thereby (except to the extent
otherwise expressed therein).
SECTION 13.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect.
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SECTION 13.06. Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Bonds so
modified as to conform, in the opinion of the Trustee and the Board of Directors
(as evidenced by Board Resolution), to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Bonds.
ARTICLE FOURTEEN
DEFEASANCE
SECTION 14.01. Payment of Indebtedness; Satisfaction.
If the Company shall pay and discharge the entire indebtedness on all Bonds
and coupons appertaining thereto hereby secured (or provide therefor) in any one
or more of the following ways, to wit:
(1) by paying or causing to be paid the principal of (including
redemption premium, if any) and interest on Bonds and coupons appertaining
thereto hereby secured, as and when the same become due and payable; and/or
(2) by depositing with the Trustee, in trust, at or before maturity,
either (i) moneys in the necessary amount or (ii) U.S. Government
Obligations, the principal of and the interest on which when due, and
without any regard to the reinvestment thereof, will in the opinion of an
Independent Accountant or other independent financial expert delivered to
the Trustee provide moneys which, together with the moneys, if any,
deposited with or held by the Trustee, shall be sufficient to pay or redeem
the principal of or premium, if any, and interest to the date of such
deposit (in the case of Bonds and coupons appertaining thereto which have
become due and payable) or to the Stated Maturity or Redemption Date (as
irrevocably set to the satisfaction of the Trustee), as the case may be, of
the Bonds hereby secured, with irrevocable direction to apply the same to
such payment or redemption;
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and if the Company shall also pay or cause to be paid or provided for all other
sums payable hereunder by the Company, then, upon Company Request authorized by
a Board Resolution, accompanied by an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent to the satisfaction and discharge
of this Indenture have been complied with, this Indenture and the lien, rights
and interests hereby granted shall cease, determine and become null and void
(except as to the rights of registration of transfer and exchange and
replacement of Bonds and coupons, if applicable, and rights to receive payments
provided for in the Bonds and coupons, if any), and the Trustee shall forthwith
cause such satisfaction and discharge of this Indenture to be entered upon the
record at the expense of the Company, and shall execute and deliver such
instruments of satisfaction as may be necessary in the opinion of the Company as
specified in a Company Request, and forthwith the estate, right, title and
interest of the Trustee in and to the Pledged Property, any securities, cash
(except cash deposited under this Section) and other property held by it under
this Indenture as a part of the Pledged Property shall thereupon cease,
determine and become null and void, and the Trustee shall in such case transfer,
deliver and pay the same to the Company or upon Company Order; provided that in
the case of redemption the notice requisite to the validity of such redemption
shall have been given or arrangements shall have been made to the satisfaction
of the Trustee that such notice will be given; and provided, further, that the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that Holders of the Bonds and coupons, if any, of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of the
Company's exercise of its option under this Section 14.01 and will be subject to
Federal income tax in the same amount, in the same manner and at the same times
as would have been the case if such option had not been exercised.
In the absence of a Company Request authorized by a Board Resolution as
aforesaid, the payment and discharge of all indebtedness secured by this
Indenture shall not render this Indenture inoperative or prevent the Company
from issuing Bonds and coupons hereunder from time to time thereafter as herein
provided.
All money deposited with the Trustee pursuant to Section 14.01 shall be
held in trust and applied by it, in accordance with the provisions of the Bonds,
the coupons and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
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Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee; but such money need not be segregated from other funds except
to the extent required by law.
For the purposes of this Article, the Company and the Trustee shall not
treat as a Bond or coupon hereby secured, and the Company shall not be required
to pay or provide for the payment of, any Bond or coupon in lieu of which
another Bond or coupon has been authenticated and delivered under Section 2.08,
if
(i) such Bond or coupon has not been presented to the Trustee with a
claim of ownership and enforceability by the Holder thereof, prior to the
Company Request for the satisfaction and discharge of this Indenture, or
(ii) the enforceability of such Bond or coupon, if contested by the
Company, has been determined adversely against such Holder by a court of
competent jurisdiction or other competent tribunal.
The rights, duties, obligations and immunities of the Trustee, including
without limitation its rights under Section 10.07 against the Company, shall
survive the satisfaction and discharge of this Indenture.
SECTION 14.02. Satisfaction, Discharge and Defeasance of Bonds of Any
Series.
If this Section is specified, as contemplated by Section 2.03, to be
applicable to Bonds and coupons, if any, of any series, at the Company's option,
either
(a) the Company will be deemed to have been Discharged (as defined
below) from its obligations with respect to Bonds and coupons, if any, of
such series or
(b) the Company will cease to be under any obligation to comply with
any term, provisions or condition set forth in (x) Sections 7.11, 12.01 and
12.02 or (y) the instrument or instruments setting forth the terms,
provisions or conditions of such series pursuant to Section 2.03 (provided
in case of this subclause (y) that such instrument or instruments specify
which terms, provisions or conditions, if any, are subject to this clause
(b); provided further, however, that no such instrument may specify that
the
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Company may cease to comply with any obligations as to which it may not be
Discharged pursuant to the definition of "Discharged");
in each case (a) and (b) with respect to the Bonds and coupons, if any, of such
series, on the 91st day after the applicable conditions set forth below in (p)
and either (q) or (r) have been satisfied:
(p)(1) the Company has paid or caused to be paid all other sums
payable with respect to the Outstanding Bonds and coupons, if any, of such
series (in addition to any sums required under (q) or (r)); and
(2) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel as contemplated by Section 1.02 and each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of the entire indebtedness on all Outstanding
Bonds and coupons, if any, of any such series have been complied with;
(q)(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as a trust fund specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Bonds and coupons, if any, of such series (i) money in an amount (in such
currency, currencies or currency unit or units in which any Outstanding
Bonds and coupons, if any, of such series are payable) or (ii) in the case
of Bonds and coupons, if any, denominated in Dollars, U.S. Government
Obligations (as defined below) or, in the case of Bonds and coupons, if
any, denominated in a Foreign Currency, Foreign Government Securities (as
defined below), which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than
one day before the due date of any payment of principal (including any
premium) and interest, if any, under the Bonds and coupons, if any, of such
series, money in an amount (or (iii) a combination of (i) and (ii))
sufficient (in the opinion with respect to (ii) and (iii) of an Independent
Accountant expressed in a written certification thereof delivered to the
Trustee) to pay and discharge or redeem each installment of principal of
and premium, if any, and interest, if any, on, the Outstanding Bonds and
coupons, if any, of such series on the dates such installments of interest
or principal are due, in the currency, currencies or currency unit or
units, in which such Bonds and coupons, if any, are payable; provided,
however, that the Company shall not make or cause to be made the deposit
provided by this clause (1) unless the
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Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that there will not occur any violation of the Investment Company
Act of 1940, as amended, on the part of the Company, the trust funds
representing such deposit or the Trustee as a result of such deposit and
the related exercise of the Company's option under this Section 14.02.
(2)(i) no Event of Default or event (including such deposit) which
with notice or lapse of time or both would become an Event of Default with
respect to the Bonds of such series shall have occurred and be continuing
on the date of such deposit, (ii) no Event of Default as defined in clause
(6) or (7) of Section 9.01, or event which with notice or lapse of time or
both would become an Event of Default under either such clause, shall have
occurred within 90 days after the date of such deposit and (iii) such
deposit and the related intended consequence under (a) or (b) will not
result in any default or event of default under any material indenture,
agreement or other instrument binding upon the Company or any of its
properties; and
(3) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that Holders of the Bonds and coupons, if any, of
such series will not recognize income, gain or loss for Federal income tax
purposes as a result of the Company's exercise of its option under this
Section 14.02 and will be subject to Federal income tax in the same amount,
in the same manner and at the same times as would have been the case if
such option had not been exercised;
(r) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified, as contemplated by Section
2.03, to be applicable to the Bonds and coupons, if any, of such series.
Any deposits with the Trustee referred to in clause (q)(1) above will be
made under the terms of an escrow trust agreement in from and substance
satisfactory to the Trustee. If any Outstanding Bonds and coupons, if any, of
such series are to be redeemed prior to their Stated Maturity, whether pursuant
to any mandatory redemption provisions or in accordance with any mandatory
sinking fund requirement, the applicable escrow trust agreement will provide
therefor and the Company will make arrangements for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
(c) The Trustee shall deliver or pay to the Company from time to time upon
Company Request any U.S. Government Obligations, Foreign Govern-
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ment Securities or money held by it as provided in Section 14.01 or this Section
14.02 which, in the opinion of an Independent Accountant expressed in a written
certification thereof delivered to the Trustee, are then in excess of the amount
thereof which then would have been required to be deposited for the purpose for
which such obligations or money were deposited or received. The Trustee shall
also deliver or pay to the Company from time to time upon Company Request any
U.S. Government Obligations, Foreign Government Securities or money held by it
as provided in Section 14.01 or this Section 14.02, in exchange for other U.S.
Government Obligations, Foreign Government Securities or money, upon the
following conditions:
(1) such exchange shall occur simultaneously;
(2) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the exchange contemplated by paragraph (c)
of this Section 14.02 have been complied with; and
(3) in the opinion of an Independent Accountant expressed in a written
certification thereof delivered to the Trustee, immediately after such
exchange the U.S. Government Obligations, Foreign Government Securities or
money then held by the Trustee as provided in Section 14.01 or this Section
14.02 shall be in such amount as then would have been required to be
deposited in order to comply with Sections 14.01(1) and 14.02(q)(1) hereof,
as the case may be.
SECTION 14.03. Reinstatement.
If the Trustee is unable to apply any money, U.S. Government Obligations or
Foreign Government Securities in accordance with Section 14.01 or 14.02 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Bonds
and coupons, if any, of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 14.01 or 14.02 until such time as the
Trustee is permitted to apply all such money, U.S. Government Obligations or
Foreign Government Securities in accordance with Section 14.01 or 14.02;
provided, however, that if the Company has made any payment of interest on or
principal of (and premium, if any) on any Bonds and coupons, if any, of such
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series because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such series of Bonds and coupons, if
any, to receive such payment from the money, U.S. Government Obligations or
Foreign Government Securities held by the Trustee.
SECTION 14.04. Definitions.
The following terms, as used in this Article Fourteen, shall have the
following meanings:
"Discharged" means that the Company will be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under,
the Bonds and coupons, if any, of the series as to which Section 14.02 is
specified as applicable as aforesaid and all provisions of this Indenture
relating to the Bonds and coupons, if any, of such series shall no longer
be deemed in effect (and the Trustee, at the expense of the Company, will
execute proper instruments acknowledging the same), except as to (A) the
rights of Holders thereof to receive, from the trust fund described in
clause (q)(1) of Section 14.01 above, payment of the principal of and the
interest, if any, on such Bonds and coupons, if any, when such payments are
due, (B) the Company's obligations with respect to such Bonds and coupons,
if any under Sections 2.07 and 2.08 (insofar as applicable to Bonds of such
series), 7.02, 7.03 (last paragraph only) and 14.02 and the Company's
obligations to the Trustee under Sections 10.07 and 10.10, (C) the rights
of Holders of Bonds of any series with respect to the currency or currency
units in which they are to receive payments of principal, premium, if any,
and interest and (D) the rights, powers, trusts, duties and immunities of
the Trustee hereunder, will survive such discharge. The Company will
reimburse the trust fund for any loss suffered by it as a result of any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or Foreign Government Securities, as the case may
be, or any principal or interest paid on such obligations, and, subject to
the provisions of Section 10.07, will indemnify the Trustee against any
claims made against the Trustee in connection with any such loss.
"Foreign Government Securities" means, with respect to Bonds and
coupons, if any, of any series that are denominated in a Foreign Currency,
securities that are (i) direct obligations of the government that issued or
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caused to be issued such currency for the payment of which obligations its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of such
government the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by such government, which, in either case
under clauses (i) or (ii), are not callable or redeemable at the option of
the issuer thereof.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally guaranteed
as a full faith and credit obligation of the United States of America,
which in either case under clauses (i) or (ii) are not callable or
redeemable at the option of the issuer thereof, and will also include a
depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a specified payment of
interest on or principal of any such U.S. Government Obligation held by
such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized
to make any deduction from the amount received by the custodian in respect
of the U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such depository
receipt.
ARTICLE FIFTEEN
SUNDRY PROVISIONS
SECTION 15.01. Exercise of Rights and Powers Under Mortgage Notes and
Mortgages.
With respect to any Mortgage, the rights and powers of the Company and the
holders of Mortgage Notes under such Mortgage Notes and such Mortgage shall,
notwithstanding any other provision in this Indenture, be exercised exclusively
by the holders of such Mortgage Notes or the Company unless and until an Event
of Default occurs and is continuing. The Trustee shall not be deemed to have any
responsibility with respect to the occurrence or continuance
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of any Event of Default unless a Responsible Officer has actual knowledge
thereof. For such purpose, "the holders of Mortgage Notes" shall not be deemed
to include the Trustee or any other pledgee of Mortgage Notes. The provisions of
this Section shall not be deemed to affect the definition of Mortgage herein.
SECTION 15.02. Execution in Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE> 134
124
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By
------------------------------
Governor
[SEAL]
Attest:
- -------------------------------------
Assistant Secretary
FIRST BANK NATIONAL
ASSOCIATION
By
-------------------------------
Vice President
[SEAL]
Attest:
- --------------------------------------
Assistant Secretary
<PAGE> 135
125
SCHEDULE I
SUMMARY OF TERMS OF MORTGAGE
The Mortgage shall include the provisions summarized below or other
provisions substantially as protective or more protective to the mortgagee or
mortgagees. The Mortgage may be made to one or more parties as mortgagees
(provided the notes or bonds or other obligations secured thereby (the "Mortgage
Notes") are secured equally and ratably) or to a trustee or trustees under a
trust indenture. The term "mortgagees", as used below, includes the trustee or
trustees under a trust indenture and a single mortgagee if there is only one. In
any case where the Mortgage provides that consents or approvals may be given by
a percentage (at least a majority) in principal amount of the holders of
outstanding notes or bonds (exclusive, if so provided, of notes or bonds held or
owned by the mortgagor), the references below to "consent" or "approval" of the
mortgagees include any consent or approval given by such percentage in principal
amount of such holders or by a trustee or trustees under the Mortgage pursuant
to such consent or approval.
The granting clauses shall convey all property (including all permits,
licenses, privileges and similar property) then owned or thereafter acquired by
the mortgagor, subject to usual exceptions in utility mortgages, which
exceptions may include (without limitation) cash, bills, notes and accounts
receivable; choses in action and judgments; shares of stock, bonds, notes and
other securities; contracts and operating agreements; goods, wares, materials,
merchandise and supplies acquired for purpose of sale in the ordinary course of
business; fuel, fissionable and other materials and supplies and other personal
property which are consumable (otherwise than by ordinary wear and tear) in
their use in the operation of the business; office furniture, equipment and
supplies; automobiles, trucks, trailers, tractors and similar vehicles;
airplanes, airplane engines and other flight equipment; ships or marine
equipment; the last day of the term of each leasehold estate held by the
mortgagor; coal, ore, gas, oil, and other minerals on, in or under the property
of the mortgagor; all electric energy, gas, steam, water and other products
generated, produced or purchased; any leasehold interests, permits, licenses,
franchises and other rights which cannot be assigned, mortgaged or granted
without the consent of other parties; and any other property which has
theretofore been released or which is not useful to the mortgagor in the
business of generating, manufacturing, storing,
<PAGE> 136
126
transmitting, distributing, utilizing, purchasing or disposing of electricity
for heat, light, power, refrigeration or other uses.
The Mortgage may permit mergers, consolidations or sales of all or
substantially all the property of the mortgagor, provided either they are
approved by the mortgagees or the successor corporation assumes the due and
punctual payment of the Mortgage Notes and the due and punctual performance of
the covenants contained in the Mortgage. The Mortgage may contain provisions to
the effect that in the event of any consolidation or merger or sale of all or
substantially all of the business to another corporation and provided a
supplemental indenture is executed specifying that no additional Mortgage Notes
may be issued thereunder and that no further advances may be made on any
outstanding Mortgage Notes, the lien of the Mortgage shall not extend to
property of the successor or thereafter acquired except the property then
subject to the lien of the Mortgage and extensions, improvements, substitutions
and alterations to, upon, or of such property.
Covenants and Warranties
1. The execution and delivery of the Mortgage and the Mortgage Notes issued
to the Company (or to a wholly-owned subsidiary of the Company) have been duly
authorized by the mortgagor in accordance with law, and the Mortgage and such
Mortgage Notes are valid and enforceable.
2. The mortgagor has the right and authority to mortgage the property
described in the granting clauses. The mortgaged property is free and clear of
any equal or prior mortgage, lien, charge or encumbrance, with usual exceptions
in utility mortgages, which exceptions may include (without limitation) liens
for taxes, assessments or governmental charges for the current year and taxes,
assessments or governmental charges not due and delinquent; liens for workmen's
compensation awards and similar obligations not then delinquent; mechanics',
laborers', materialmen's and similar liens not then delinquent; and any of such
liens, whether or not delinquent, whose validity is at the time being contested
in good faith; liens and charges incidental to construction or current operation
which have not been filed or asserted or the payment of which has been
adequately secured or which, in the opinion of counsel, are insignificant in
amount; liens, securing obligations not assumed by the mortgagor and on account
of which it does not pay and does not expect to pay interest, existing upon real
estate (or rights in or relating to real estate) over or in respect of which
<PAGE> 137
127
the mortgagor has a right-of-way or other easement for substation, transmission,
distribution or other right-of-way purposes; any right which the United States
of America or any state or municipality or governmental body or agency may have
by virtue of any franchise, license, contract or statute to purchase, or
designate a purchaser of, or order the sale of, any property of the mortgagor
upon payment of reasonable compensation therefor, or upon reasonable
compensation or conditions to terminate any franchise, license or other rights
before the expiration date thereof or to regulate the property and business of
the mortgagor; attachment or judgment liens covered by insurance, or upon appeal
and covered by bond; deposits or pledges to secure payment of workmen's
compensation, unemployment insurance, old age pensions or other social security;
deposits or pledges to secure performance of bids, tenders, contracts (other
than contracts for the payment of borrowed money), leases, public or statutory
obligations; surety or appeal bonds; and other deposits or pledges for purposes
of like general nature in the ordinary course of business; easements or
reservations in respect to any property for the purpose of transmission and
distribution lines and rights-of-way and similar purposes, zoning ordinances,
regulations, reservations, restrictions, covenants, party-wall agreements,
conditions of record and other encumbrances (other than to secure the payment of
money), none of which in the opinion of counsel is such as to interfere with the
proper operation of the property affected thereby; the burdens of any law or
governmental organization or permit requiring the mortgagor to maintain certain
facilities or perform certain acts as a condition of its occupancy of or
interference with any public land or any river, stream or other waters or
relating to environmental matters; any lien or encumbrance for the discharge of
which moneys have been deposited in trust with a proper depository to apply such
moneys to the discharge of such lien or encumbrance; any exceptions,
reservations and other matters referred to in the description of the mortgaged
property and, with respect to any property which the mortgagor may hereafter
acquire, any terms, conditions, agreements, covenants, exceptions and
reservations expressed or provided in the deeds or other instruments under which
the mortgagor shall hereafter acquire the same, none of which in the opinion of
counsel materially adversely affects or will affect the property to which the
same relates or the operation thereof by the mortgagor; any lien reserved as
security for rent or compliance with other provisions of the lease in case of
any leasehold estate; and purchase money mortgages and liens, charges and
encumbrances upon property existing at the time of acquisition thereof by the
mortgagor. The mortgagor will maintain and preserve the priority
<PAGE> 138
128
of lien of the Mortgage, subject to exceptions usual in utility mortgages
including (without limitation) those mentioned above.
3. The mortgagor will punctually pay the principal of and interest on the
Mortgage Notes.
4. The mortgagor will, subject to usual provisions in utility mortgages,
preserve its corporate existence and will, to the extent reasonably required for
the maintenance and operation of its properties and business taken as a whole,
preserve and renew all franchises, permits and licenses held by it and comply
with all valid laws and regulations applicable to it or its property.
Events of Default
1. Default in the payment of interest on the Mortgage Notes continued for
30 days.
2. Default in the payment of principal of the Mortgage Notes continued for
30 days.
3. Default in the performance of any of the covenants in the Mortgage Notes
or the Mortgage continued for 60 days after written notice.
4. Falsity in any material respect of any representation or warranty by the
mortgagor in the Mortgage.
5. Loss of corporate charter or franchises, permits, easements and licenses
required to carry on any material portion of the mortgagor's business, continued
for 30 days after notice of such default.
6. Usual events of insolvency or bankruptcy contained in utility mortgages.
Acceleration
Upon the expiration of 30 days after an event of default still continuing,
the principal of the Mortgage Notes may be accelerated.
Miscellaneous
The Mortgage shall also contain other customary provisions as to
enforcement, including entry, foreclosure and sale, which may be limited if the
Mortgage provides for one or more mortgagees or trustees to exercise remedies on
behalf of the noteholders.
<PAGE> 139
129
In the event that the mortgagor is a governmental entity or public body or
an agency of a governmental entity or public body (including any public
authority or corporation owned or controlled by a governmental entity, public
body or agency), the granting clauses, in lieu of mortgaging property, may
mortgage the revenues of the electric generating, distribution and/or
transmission facilities operated by such governmental entity, public body or
agency, and, in such event, the covenants and warranties mentioned above shall
be modified to relate to such revenues instead of property and such other
revisions may be made as are appropriate for a mortgage made by a governmental
entity, public body or agency as distinguished from a private corporation.
<PAGE> 1
[MILBANK LETTERHEAD]
February 14, 1994
National Rural Utilities Cooperative
Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, VA 22071-3025
Dear Sirs:
We have acted as counsel for National Rural Utilities Cooperative Finance
Corporation (the "Company") in connection with the registration of Collateral
Trust Bonds (the "Collateral Trust Bonds") of the Company to be issued under an
Indenture dated as of February 15, 1994 (the "Indenture") between the Company
and First Bank National Association, as Trustee, as contemplated in the
Company's Post-Effective Amendment No. 1 to Registration Statement on Form S-3
(registration No. 1 33-35261) filed on the date hereof, pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Registration Statement").
We submit this opinion for use as Exhibit 5 to the Registration Statement and
hereby consent to the use of this opinion in the Registration Statement and to
the use of our name under the caption "Legal Opinions" in the prospectus
contained therein (the "Prospectus").
We have investigated the corporate status of the Company and have examined
the corporate proceedings authorizing the creation and issuance of the
Collateral Trust Bonds.
We are of the opinion that the Collateral Trust Bonds when executed by the
Company and authenticated by or on behalf of the Trustee purusant to the terms
of the Indenture and such corporate proceedings, and issued for value, will be
the validly issued, binding obligations of the Company.
<PAGE> 2
Page 2
In our opinion, the discussion under the caption "United States Taxation"
in the Prospectus is correct in all material respects.
Very truly yours,
MILBANK, TWEED, HADLEY & MCCLOY
MLW:RBO
<PAGE> 1
EXHIBIT 12
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPUTATION OF RATIO OF MARGINS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 AND THE
YEARS ENDED MAY 31, 1993, 1992, 1991, 1990 AND 1989
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
-------------------- --------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net margins before
extraordinary loss........... $ 25,619 $ 19,557 $ 41,648 $ 45,553 $ 48,305 $ 39,273 $ 38,848
Add: Fixed charges............. 127,579 135,283 265,412 314,863 349,954 354,010 321,133
-------- -------- -------- -------- -------- -------- --------
Margins available for fixed
charges...................... $153,198 $154,840 $307,060 $360,416 $398,259 $393,283 $359,981
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Fixed charges:
Interest on all debt
(including amortization of
discount and issuance
costs)..................... $127,519 $135,283 $265,412 $314,863 $349,954 $354,010 $321,133
-------- -------- -------- -------- -------- -------- --------
Total fixed charges... $127,519 $135,283 $265,412 $314,863 $349,954 $354,010 $321,133
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratio of margins to fixed
charges...................... 1.20 1.14 1.16 1.14 1.14 1.11 1.12
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated July 16, 1993
included in National Rural Utilities Cooperative Finance Corporation's Form 10-K
for the year ended May 31, 1993 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN & CO.
Washington, D.C.
February 15, 1994
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C>
United States 41-0256895
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
District of Columbia 52-089-1669
(State of Incorporation) (I.R.S. Employer
Identification No.)
2201 Cooperative Way
Herndon, Virginia 22071
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
COLLATERAL TRUST BONDS
(Title of the Indenture Securities)
<PAGE> 2
GENERAL
1. General Information Furnish the following information as to
the Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification. Each of the exhibits listed
below is incorporated by reference from a previous registration.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 4th day of
February, 1994.
<TABLE>
<S> <C>
FIRST BANK NATIONAL ASSOCIATION
[SEAL]
/s/ Frank P. Leslie III
----------------------------
Frank P. Leslie III
Assistant Vice President
/s/ Christina M. Hatfield
- -------------------------
Christina M. Hatfield
Assistant Secretary
</TABLE>
<PAGE> 4
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, FIRST BANK NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
<TABLE>
<S> <C> <C>
Dated: February 4, 1994
FIRST BANK NATIONAL ASSOCIATION
/s/ Frank P. Leslie III
-----------------------
Frank P. Leslie III
Assistant Vice President
</TABLE>
