NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/, S-3, 1995-11-14

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/
S-3, 1995-11-14
MISCELLANEOUS BUSINESS CREDIT INSTITUTION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1995

REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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 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/

IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. / /

IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT OF 1933, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /

IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. / /

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE PROPOSED MAXIMUM AMOUNT OF REGISTRATION
REGISTERED AGGREGATE OFFERING PRICE* FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Debt Securities............................ $250,000,000 $50,000
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>

* Estimated solely for the purpose of calculating the registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION, OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.

PRELIMINARY, SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1995

PROSPECTUS

$250,000,000

NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
DEBT SECURITIES

------------------------

National Rural Utilities Cooperative Finance Corporation ("CFC" or the
"Company") intends to issue in one or more series from time to time up to
$250,000,000 aggregate principal amount of debt securities (the "Debt
Securities"). The Debt Securities of each series will be offered to the public
on terms determined by market conditions at the time of sale. The Company may
sell Debt Securities (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 specific designation, aggregate principal amount, authorized
denominations, purchase price, maturity, premium, if any, 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 Debt Securities
in respect of which this Prospectus is being delivered ("Offered Debt
Securities") are set forth in the accompanying Prospectus Supplement or in a
supplement thereto relating to the specific Offered Debt Securities (together,
the "Prospectus Supplement"), together with the terms of offering of the Offered
Debt Securities.

The Prospectus Supplement relating to the Offered Debt Securities will also
contain information concerning certain U.S. federal income tax considerations,
if applicable to the Offered Debt Securities.

------------------------

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 Debt Securities
unless accompanied by a Prospectus Supplement.

------------------------

The date of this Prospectus is , 1995
<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 DEBT SECURITIES 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 public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, DC 20549, as well as at the
Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New
York, NY 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661-2511. 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, 20 Broad
Street, 7th Floor, New York, NY 10005.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus.

1. The Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995.

2. The Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995.

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 Debt Securities, 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, Senior Vice President 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 (the "Company" or
"CFC") was incorporated as a private, not-for-profit cooperative association
under the laws of the District of Columbia in April 1969. The principal purpose
of CFC is to provide its members with a source of financing to supplement the
loan programs of the Rural Utilities Service ("RUS") 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 1,049 members as of August 31, 1995, included 902 rural electric
utility members, virtually all of which are consumer-owned cooperatives, 73
service members and 74 associate members. The Utility Members included 837
distribution systems and 65 generation and transmission ("Power Supply") systems
operating in 46 states and U.S. territories. At December 31, 1993, CFC's member
rural electric systems provided service to about 70% of the contiguous
continental land territory of the United States, serving approximately 12.4
million consumers, representing an estimated 32.5 million ultimate users of
electricity, and owned approximately $62.6 billion (before depreciation of $17.9
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 RUS loans and are
generally secured ratably with RUS'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 RUS) on the system's property or, in the
case of a lease transaction, on the leased property. Holders of $1.2 billion of
the guaranteed pollution control debt (at May 31, 1995) 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, 1995, the allowance was $205.6 million.
At May 31, 1995, CFC's ten largest borrowers, which were all Power Supply
members, had outstanding loans totaling $381.8 million (excluding $380.0 million
of loans guaranteed by RUS), which represented approximately 5.5% of CFC's total
loans outstanding. As of May 31, 1995, outstanding CFC guarantees for these same
ten largest borrowers totaled $2,051.8 million, which represented 79.3% of CFC's
total

3
<PAGE> 5

guarantees outstanding, including guarantees of the maximum amounts of lease
obligations at such date. On that date, no 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, 1995, loans
outstanding to Deseret accounted for 1.9% of total loans outstanding (excluding
loans guaranteed by RUS) and guarantees outstanding to Deseret accounted for
12.5% of total guarantees outstanding. Total loans and guarantees outstanding to
Deseret equaled 26.6% 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 May
31, 1995, 1994 and 1993, and the weighted average interest rates thereon and
loans committed but unadvanced to borrowers at May 31, 1995.

<TABLE>
<CAPTION>
LOANS OUTSTANDING AND WEIGHTED AVERAGE INTEREST LOANS COMMITTED
RATES THEREON AT MAY 31, BUT UNADVANCED AT
-------------------------------------------------------------------- MAY 31, 1995
1995 1994 1993 (A)(B)
---------- ---------- ---------- -----------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term fixed rate secured
loans(C):
Distribution Systems(D)...... $1,645,551 7.68% $1,502,454 7.69% $1,604,275 8.14% $ 10,389
Power Supply Systems(D)...... 253,208 7.68% 273,186 7.56% 179,384 7.80% 1,214
Service Organizations
(D)(E)..................... 81,521 9.27% 94,104 9.53% 90,090 9.85% 2,600
Associate Members............ 1,569 10.25% 1,606 10.25% 1,628 10.25% --
Telecommunication
Organizations.............. 141,144 8.98% 119,600 9.16% 130,552 9.33% --
---------- ---------- ---------- ---------
Total long-term fixed
rate secured loans..... 2,122,993 7.83% 1,990,950 7.85% 2,005,929 8.27% 14,203
---------- ---------- ---------- ---------
Long-term variable rate secured
loans(F):
Distribution Systems......... 2,553,590 6.50% 2,172,799 4.65% 1,975,784 4.63% 730,453
Power Supply Systems......... 191,967 6.50% 170,683 4.65% 178,095 4.63% 512,598
Service Organizations(E)..... 53,332 6.50% 39,487 4.65% 43,014 4.63% 67,887
Associate Members............ 42,561 6.20% 29,089 4.45% 26,098 4.38% 39,959
Telecommunication
Organizations.............. 704,427 6.64% 499,506 4.92% 288,234 4.75% 130,627
---------- ---------- ---------- ---------
Total long-term variable
rate secured loans..... 3,545,877 6.52% 2,911,564 4.69% 2,511,225 4.64% 1,481,524
---------- ---------- ---------- ---------
Refinancing variable rate loans
guaranteed by RUS:
Power Supply Systems......... 429,129 7.27% 533,545 4.87% 297,724 3.94% --
---------- ---------- ---------- ---------
Intermediate-term secured loans:
Distribution Systems......... 4,176 6.85% 4,112 4.90% 320 4.75% 2,300
Power Supply Systems......... 40,237 6.85% 21,316 4.90% 28,496 4.75% 158,759
Service Organizations........ 11,429 6.85% 2,099 4.90% 496 4.75% 3,705
Telecommunication
Organizations.............. -- -- -- -- -- -- --
---------- ---------- ---------- ---------
Total intermediate-term
secured loans.......... 55,842 6.85% 27,527 4.90% 29,312 4.75% 164,764
---------- ---------- ---------- ---------
Intermediate-term unsecured
loans:
Distribution Systems......... 11,392 6.50% 13,046 4.90% 10,873 4.75% 17,693
Power Supply Systems......... 47,443 6.50% 84,515 4.90% -- -- 3,856
Service Organizations........ -- -- -- -- 11 4.75% --
Telecommunication
Organizations.............. 3,255 7.54% 1,265 5.05% -- -- 2,370
---------- ---------- ---------- ---------
Total intermediate-term
unsecured loans........ 62,090 6.56% 98,826 4.90% 10,884 4.75% 23,919
---------- ---------- ---------- ---------
Short-term loans(G):
Distribution Systems......... 445,962 6.85% 276,373 4.90% 151,941 4.75% 2,032,220
Power Supply Systems......... 10,267 6.85% 14,048 4.90% 14,157 4.75% 1,042,205
Service Organizations........ 25,653 6.85% 11,812 4.90% 11,873 4.75% 46,787
Associate Members............ 7,651 6.85% 3,084 4.90% 1,856 4.75% 13,524
Telecommunication
Organizations.............. 34,637 7.60% 31,176 5.65% 21,370 5.50% 198,636
---------- ---------- ---------- ---------
Total short-term loans... 524,170 6.90% 336,493 4.97% 201,197 4.83% 3,333,372
---------- ---------- ---------- ---------
Nonperforming loans(H):
Distribution Systems......... 1,830 7.21% 1,933 8.27% 11,164 10.20% --
Power Supply Systems......... 25,811 6.57% 27,948 4.75% 29,584 4.75% --
Associate Members............ -- -- 12,961 9.00% 12,963 9.00% --
Telecommunication
Organizations.............. -- -- 2,098 6.13% 2,117 9.00% --
---------- ---------- ---------- ---------
Total nonperforming
loans.................. 27,641 6.61% 44,940 6.19% 55,828 6.99% --
---------- ---------- ---------- ---------
</TABLE>

5
<PAGE> 7

LOANS OUTSTANDING AND WEIGHTED AVERAGE INTEREST LOANS COMMITTED
RATES THEREON AT MAY 31, BUT UNADVANCED AT
----------------------------------------------------------------------- MAY 31, 1995
1995 1994 1993 (A)(B)
--------------------- --------------------- --------------------- -----------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Restructured loans(I):
Distribution Systems......... $ 2,654 18.37% $ 2,667 18.37% $ -- -- $ --
Power Supply Systems......... 180,521 9.01% 160,873 8.32% 149,685 7.86% 20,000
Service Organizations........ 1,803 6.50% 1,833 4.62% 2,000 4.63% --
Associate Members............ -- -- -- -- 2,666 4.46% --
Telecommunication
Organizations.............. -- -- -- -- 18,592 4.77% --
---------- ----- ---------- ----- ---------- ----- ---------
Total restructured
loans.................. 184,978 9.12% 165,373 8.44% 172,943 7.43% 20,000
---------- ----- ---------- ----- ---------- ----- ---------
Total loans.............. 6,952,720 7.01% 6,109,218 5.87% 5,285,042 6.10% 5,037,782
---------- ----- ---------- ----- ---------- ----- ---------
Less: Allowance for loan and
guarantee losses............... 205,596 188,196 172,571 --
---------- ---------- ---------- ---------
Net loans.................... $6,747,124 $5,921,022 $5,112,471 $ 5,037,782
========== ========== ========== =========
</TABLE>

- ----------

<TABLE>
<S> <C>
(A) The interest rates in effect at November 1, 1995, for loans to electric members were
6.90% for long-term loans with a seven-year fixed rate term, 6.25% on variable rate
long-term loans and 6.40% on intermediate- and short-term loans. The rates in effect at
November 1, 1995, on loans to associate members were 7.30% for long-term loans with a
seven-year fixed rate term loans, 6.25% on long-term variable rate loans and 6.40% on
short-term loans. The rates in effect at November 1, 1995, on loans to
telecommunication organizations were 7.40% for long-term loans with a seven-year fixed
rate term, 6.40% on long-term variable rate loans, 6.65% on intermediate-term loans and
6.95% on short-term loans.
(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. Long-term unadvanced loan commitments that do not have an interest rate
associated with the commitment have been listed under the variable rate. Rates, fixed
or variable, will be set at the time of advance, on the amount of the advance.
(C) Included in long-term fixed rate secured loans are $30.4 million of unsecured loans at
May 31, 1995.
(D) During calendar year 1996, $134.5 million of such outstanding fixed rate loans, which
currently have a weighted average interest rate of 7.96% per annum, will become subject
to rate adjustment. During the first quarter of calendar year 1995, long-term fixed
rate loans totaling $26.2 million had their interest rates adjusted. These loans will
be eligible to readjust their interest rate again during the first quarter of calendar
year 1996 to the lowest long-term fixed rate offered during 1995 for the term selected.
At January 1 and May 31, 1995, the seven-year long-term fixed rate was 8.80% and 7.20%,
respectively.
(E) CFC had loans outstanding to NCSC in each of the periods shown. Long-term fixed rate
loans outstanding to NCSC as of May 31, 1995, 1994 and 1993, were $48.5 million, $47.8
million and $49.0 million, respectively. In addition, as of May 31, 1995 and 1994, CFC
had unadvanced long-term fixed rate and long-term variable rate loan commitments to
NCSC in the amounts of $12.3 million and $14.7 million, respectively.
(F) Included in long-term variable rate secured loans are $41.4 million, $3.5 million, and
$2.5 million of unsecured loans at May 31, 1995, 1994 and 1993.
(G) All short-term loans are unsecured, except for $30.9 million, $18.2 million and $31.6
million of loans outstanding at May 31, 1995, 1994 and 1993 that are secured.
(H) The rates on nonperforming loans are the weighted average of the stated rates on such
loans as of the dates shown and do not necessarily relate to the interest recognized by
CFC from such loans.
(I) The rates on restructured loans are the weighted average of the 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.
</TABLE>

6
<PAGE> 8

Set forth below is a table showing CFC's guarantees as of the dates
indicated. Substantially all guarantees have been provided on behalf of Power
Supply members.

CFC MEMBER GUARANTEES

<TABLE>
<CAPTION>
MAY 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Long-term tax exempt bonds............................. $1,496,930* $1,494,200* $1,576,230*
Debt portions of leveraged lease transactions.......... 568,622 646,472 700,841
Indemnifications of tax benefit transfers.............. 389,755 414,512 436,860
Other guarantees....................................... 119,575 100,643 99,800
---------- ---------- ----------
Total................................... $2,574,922 $2,655,827 $2,813,731
========== ========== ==========
</TABLE>

- ----------

* Includes $1,200.1 million, $1,214.6 million and $1,120.8 million at May 31,
1995, 1994 and 1993, 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 $376.7 million, $382.9 million and $358.6 million of
such bonds outstanding at May 31, 1995, 1994 and 1993, respectively, at any
time on seven days' notice, in the case of $254.5 million, $289.5 million and
$233.2 million outstanding at May 31, 1995, 1994 and 1993, respectively, at
any time on a minimum of one day's notice and in the case of the remainder on
a five-week or semiannual basis). CFC has agreed to purchase any such bonds
that cannot be remarketed. Since the inception of the program CFC has not been
required to purchase any such bonds.

Set forth below are the weighted average interest rates earned by CFC
(recognized in the case of nonperforming and restructured loans) on all loans
outstanding during the fiscal years ended May 31.

INTEREST RATES EARNED ON LOANS

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Long-term fixed rate............................... 8.63% 8.63% 9.15%
Long-term variable rate............................ 5.90% 4.08% 4.99%
Telecommunication Organizations.................... 6.70% 5.58% 6.32%
Refinancing loans guaranteed by RUS................ 6.07% 4.01% 4.09%
Intermediate-term.................................. 6.19% 4.41% 4.93%
Short-term......................................... 6.29% 4.38% 5.08%
Associate Members.................................. 5.40% 4.21% 4.74%
Nonperforming...................................... 1.56% 1.19% 1.26%
Restructured....................................... 1.92% 2.33% 1.92%
All loans..................................... 6.72% 5.66% 6.54%
</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 weighted
average interest rates thereon as of the dates shown:

CFC BORROWINGS

<TABLE>
<CAPTION>
AMOUNTS OUTSTANDING AT MAY 31,
----------------------------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Long- and intermediate-term debt:(A)
9 3/8% Series Q Bonds, Due 1995(B)... $ -- $ -- $ 149,800
9 5/8% Series R Bonds, Due 1996(B)... -- -- 99,600
9.85% Series S Bonds, Due 1996(B).... -- -- 99,700
9 1/2% Series T Bonds, Due 1997...... 150,000 150,000 149,800
8 1/2% Series U Bonds, Due 1998...... 149,800 149,800 149,800
7.40% Series A Bonds, Due 2007(B).... -- 2,819 6,319
Floating Rate Series E-2 Bonds, Due
2010............................... 2,189 2,253 2,279
9% Series O Bonds, Due 2016.......... 82,289 87,400 91,600
9% Series V Bonds, Due 2021.......... 150,000 150,000 149,800
Floating Rate Series 1994A, Due
1996............................... 150,000 -- --
Medium-Term Notes and weighted
average interest rates............. 573,637 (7.23%) 472,208 (6.99%) 456,538 (7.29%)
---------- ---------- ----------
Total long- and intermediate-term
debt and weighted average
interest rates(C)................ 1,257,915(D) (7.90%) 1,014,480 (8.06%) 1,355,236 (8.56%)
Members' Subordinated Certificates,
including advance payments and
weighted average interest rates
(E).................................. 1,096,466 (4.36%) 1,086,529 (4.46%) 1,066,755 (4.58%)
---------- ---------- ----------
Total long- and intermediate-term
debt and Members' Subordinated
Certificates and weighted average
interest rates................... 2,354,381 (6.25%) 2,101,009 (6.20%) 2,421,991 (6.81%)
---------- ---------- ----------
Short-term debt(F) and weighted average
interest rates(G).................... 4,242,570 (6.11%) 3,637,975 (4.23%) 2,533,624 (3.14%)
---------- ---------- ----------
Total debt and weighted average
interest rates at May 31......... $6,596,951 (6.16%) $5,738,984 (4.95%) $4,955,615 (4.93%)
========== ========== ==========
</TABLE>

- ----------

<TABLE>
<S> <C>
(A) Net of $1.1 million, $0.2 million and $1.5 million principal amount of bonds held in
treasury at May 31, 1995, 1994 and 1993, respectively, all of which were purchased in
connection with CFC's deferred compensation program.
(B) The Series Q Collateral Trust Bonds were called on June 16, 1993, at par. The Series R
Collateral Trust Bonds were called on February 2, 1994, at par. The Series S Collateral
Trust Bonds were called on April 18, 1994, at par. The Series A Collateral Trust Bonds
were called on December 1, 1994, at par.
(C) Excludes $2,430.0 million, $2,030.0 million and $2,030.0 million of Commercial Paper
classified as long-term debt as of May 31, 1995, 1994 and 1993, respectively.
(D) Total long- and intermediate-term debt includes $262.7 million which will be due or is
expected to be redeemed during fiscal year 1996.
(E) Excluding $114.1 million, $107.1 million and $116.5 million of Debt Service Reserve
Certificates, and $24.3 million, $29.3 million and $32.4 million of subscribed but
unissued Subordinated Certificates as of May 31, 1995, 1994 and 1993, respectively,
since such funds are not generally available for investing in earning assets.
(F) Net of discount; includes $2,430.0 million, $2,030.0 million and $2,030.0 million of
Commercial Paper classified as long-term debt as of May 31, 1995, 1994 and 1993,
respectively. Includes $350.0 million, $209.0 million and $335.0 million of Bank Bid
Notes at May 31, 1995, 1994 and 1993, respectively.
(G) Average interest rates are weighted on the basis of amounts of outstanding borrowings
without adjustment for bank credit compensation arrangements for short-term borrowings.
</TABLE>

8
<PAGE> 10

Set forth below are the weighted average costs incurred by CFC on its
short-term borrowings (Commercial Paper and Bank Bid Notes) and on its long-term
borrowings (Collateral Trust Bonds, Medium-Term Notes and interest rate swaps)
for the period shown.

INTEREST COSTS ON CFC BORROWINGS

<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Short-term borrowings.................................. 5.59% 3.67% 3.61%
Long-term borrowings................................... 8.15% 8.63% 8.92%
Total short- and long-term borrowings............. 6.15% 5.14% 5.80%
</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 Debt Securities 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.

SUMMARY FINANCIAL INFORMATION

The following is a summary of selected financial data for each of the five
years ended May 31, 1995.

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
For the year ended May 31:
Operating income.................... $ 440,109 $ 324,682 $ 336,387 $ 402,255 $ 428,974
========== ========== ========== ========== ==========
Operating margin.................... $ 41,803 $ 29,159 $ 38,352 $ 42,809 $ 28,564
Nonoperating income................. 3,409 4,029 3,296 2,744 3,883
Gain on sale of building............ -- -- -- -- 15,858
Extraordinary loss(A)............... -- -- (3,161) (1,398) (2,800)
---------- ---------- ---------- ---------- ----------
Net margins......................... $ 45,212 $ 33,188 $ 38,487 $ 44,155 $ 45,505
========== ========== ========== ========== ==========
Fixed charge coverage ratio(A)...... 1.13 1.13 1.16 1.14 1.14
==== ==== ==== ==== ====

As of May 31:
Assets.............................. $7,080,789 $6,224,296 $5,464,144 $5,401,473 $5,139,624
========== ========== ========== ========== ==========
Long-term debt(B)................... $3,423,031 $2,841,220 $3,095,488 $2,971,074 $3,204,357
========== ========== ========== ========== ==========
Members' subordinated
certificates...................... $1,234,715 $1,222,858 $1,215,547 $1,221,095 $1,181,010
========== ========== ========== ========== ==========
Members' equity..................... $ 270,221 $ 260,968 $ 258,299 $ 246,320 $ 243,491
========== ========== ========== ========== ==========
Leverage ratio(C)................... 5.13 4.63 4.41 4.44 4.43
==== ==== ==== ==== ====

</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.

9
<PAGE> 11

(B) Includes commercial paper reclassified as long-term debt and excludes $262.7
million, $200.8 million, $286.8 million, $494.5 million and $109.6 million
in long-term debt that comes due, matures and/or will be redeemed early
during fiscal years 1996, 1995, 1994, 1993 and 1992, respectively.

(C) In accordance with CFC's revolving credit agreements, 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 $128.3 million for the year ended May 31, 1995.

The Company does not have outstanding any common stock and does not pay
dividends. Under current policies, CFC retires 70% of each year's Patronage
Capital Certificates, which represent allocations of CFC's net margins, during
the following year and expects to retire the remaining 30% after 15 years with
due regard for CFC's financial condition.

CAPITALIZATION

The following table shows the capitalization of the Company as of May 31,
1995.

<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
SENIOR DEBT:
Short-term Indebtedness(A)................................................. $1,812,570
Long-term Debt(A).......................................................... 3,685,682
----------
Total Senior Debt(B).................................................. 5,498,252
SUBORDINATED DEBT AND MEMBERS' EQUITY:
Members' Subordinated Certificates(C)...................................... 1,234,715
Members' Equity(D)......................................................... 270,221
----------
Total Capitalization.................................................. $7,003,188
</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 May 31, 1995 bank revolving credit agreements providing for
borrowings aggregating up to $4,050,000,000. 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 $1,345,000,000 increased each
fiscal year after 1994 by 90% of net margins not distributed to Members, an
average fixed charge coverage ratio over the six most recent fiscal quarters
of at least 1.025 and that the Company has no material contingent or other
liability or material litigation that was not disclosed by or reserved
against in its most recent annual financial statements (other than loan and
guaranty commitments issued in the ordinary course of business). The
revolving credit agreements also require a fixed charge coverage ratio of
1.05 for the preceding fiscal year as a condition to the retirement of
patronage capital and prohibit the Company from pledging collateral in
excess of 150% of the principal amount of collateral trust bonds
outstanding. Commercial paper in the amount of $2,430,000,000, 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. The outstanding collateral trust bonds
have been issued under a separate indenture and are secured by a separate
pool of collateral.

(B) At May 31, 1995, the Company had outstanding guarantees of tax-exempt
securities issued on behalf of members in the aggregate amount of
$1,496,930,000. Guaranteed tax-exempt securities include $1,200,100,000 of
long-term adjustable or floating/fixed rate pollution control bonds which
are required to

10
<PAGE> 12

be remarketed at the option of the holders. The Company has agreed to
purchase any such bonds that cannot be remarketed. At May 31, 1995, the
Company had guaranteed its members' obligations in connection with certain
lease transactions and other debt in the amount of $1,077,992,000.

(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
($637,129,000 at May 31, 1995) 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 among its members in proportion to
interest earned by the Company from such members within various loan pools.
The Company intends to return 70% of the amounts so allocated to its members
in the following year and the remaining 30% after 15 years with due regard
for the Company's financial condition. The current policy of RTFC is to
retire 50% of current year's margins within 8 1/2 months of the end of the
fiscal year with the remainder to be retired at the discretion of RTFC's
Board of Directors. The current policy of Guaranty Funding Cooperative, a
controlled affiliate of the Company, is to retire 100% of current year's
margins shortly after the end of the fiscal year.

THE RURAL ELECTRIC SYSTEMS

GENERAL

CFC's 903 rural electric Utility Members as of May 31, 1995, were drawn
from the approximately 930 (at December 31, 1993) rural electric utility systems
(the "systems") which were eligible for RUS 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 RUS ("RUS 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, 1993, and for the year then ended, CFC's members accounted for
approximately 98% of the total utility plant, 93% of the total equity, 97% of
the net margins and 93% of the total number of systems covered by RUS 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
RUS 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 RUS PROGRAM

Since the enactment of the Rural Electrification Act of 1936, RUS 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 RUS 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 and its territories. They account for
approximately 8% of total sales of electricity and about 7% of energy generation
and generating capacity.

In 1949, the Act was amended to allow RUS to lend for the purpose of
furnishing and improving rural telephone service. At December 31, 1993, 883 of
RUS's 940 telephone borrowers provided service to 5.6 million subscribers
throughout the United States and its territories (reporting information was not
available for the remaining 57 borrowers).

11
<PAGE> 13

The Rural Electrification Act provides for RUS to make insured loans and to
provide other forms of financial assistance to borrowers. RUS is authorized to
make direct loans at below-market rates to systems which are eligible to borrow
from it. RUS 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 FFB). For telephone borrowers, RUS also provides
financing through the Rural Telephone Bank ("RTB"). The RTB is a government
corporation providing financing at rates reflecting its cost of capital. RUS
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 $590 million
for the RUS insured loan program for electric borrowers for fiscal year 1995 and
$370 million for telephone borrowers through RUS and the RTB. In addition,
funding of $300 million was proposed for the RUS guaranteed electric loan
program and funding of $120 million was proposed for the RUS guaranteed
telephone loan program.

Legislation has been enacted which allows RUS electric borrowers to prepay
their loans to RUS at a discount based on the government's cost of funds at the
time of prepayment. If a borrower chooses to prepay its notes, it becomes
ineligible for future RUS lending for a period of ten years, except in certain
specified instances. Regulations regarding the note buy-out, relating to
computation of discount and certain issues concerning potential taxes on gains,
were adopted on March 22, 1994. As of May 31, 1995, 34 borrowers had either
fully prepaid or partially prepaid their RUS notes, under provisions adopted in
1994, in the total amount of $437.3 million.

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, 1993, the
approximate number of consumers served by RUS electric borrowers was 12.4
million, representing an estimated 32.5 million ultimate users. Aggregate
operating revenues of the distribution systems from sales of electric energy for
the year ended December 31, 1993, totaled $15.1 billion, of which 66% was
derived from the sales of electricity to residential consumers (farm and
non-farm), 30% 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 2.54 in
1993 from 2.19 in 1992. The composite DSC ratio increased to 2.44 in 1993 from
2.07 in 1992. Composite equity as a percent of total assets for member
distribution systems increased from 39.44% at December 31, 1992 to 40.83% at
December 31, 1993.

The cost of purchased wholesale power in 1993 amounted to 65.95% of the
total revenues of the distribution systems. Information from RUS concerning the
amount of energy generated and purchased by RUS borrowers including distribution
systems during the 12 months ended December 31, 1993 (1994 data are not yet
available) indicates that 20.1% was purchased from power companies including
investor-owned utilities and industrial and manufacturing corporations, 52.8%
from rural electric power supply systems and other distribution systems having
generating facilities, 19.4% from Federal agencies and 7.7% 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 RUS-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 permit the Power
Supply system, subject to RUS approval, and, in certain circumstances,
regulatory agencies, 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

12
<PAGE> 14

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 and Power Supply systems
which do not borrow from RUS generally have rates subject to regulation by the
Federal Energy Regulatory Commission ("FERC"). 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 62 operating power supply systems financed in
whole or in part by RUS or CFC at December 31, 1994, 61 were cooperatives owned
directly or indirectly by groups of distribution systems and one was government
owned. Of this number, 39 had generating capacity of at least 100,000 kilowatts,
and eight had no generating capacity. Six of the eight systems with no
generating capacity operated transmission lines to supply certain distribution
systems, one has applied for RUS financing for its first transmission facility
and one is currently building its first transmission facility. Certain other
Power Supply systems had been formed but did not yet own generating or
transmission facilities. At December 31, 1994, the 55 Power Supply systems
reporting to RUS owned 145 generating plants with a total generating capacity of
approximately 29,597,000 kilowatts, or approximately 4.3% of the nation's
estimated electric generating capacity, and served 716 RUS distribution system
borrowers (representing an average for the year of approximately 8.5 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, 1994, 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%. RUS loans and loan guarantees as of December 31, 1994, 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 1,279,000
kilowatts have officially been canceled, or 3.8% of the total.

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 RUS 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 RUS, 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 were intended to
commence.

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. Due to changes in power demands of

13
<PAGE> 15

Deseret's distribution system members and the resulting reduction in power
available for sale at higher prices to nonmembers as well as inability, so far,
to complete the intended power sales, Deseret's cash flow projections have
undergone revision since the closing of the ARO. As a result of these changes,
Deseret is expected to be unable to satisfy its payment obligations under the
ARO and the ARO is expected to be amended sometime in the future. If the parties
cannot agree on an amendment, the ARO could be terminated and Deseret's
creditors would be free to pursue remedies on their defaulted obligations.

Under the ARO, CFC expected to fund Deseret's cash flow shortfalls totaling
$117 million and expected a maximum exposure of $439 million in 1996. At August
31, 1995, CFC had funded $132.3 million of the shortfall. CFC's current exposure
of $464.7 million is greater than the expected maximum from the ARO because it
loaned Deseret funds for the early redemption, at a premium, of two high
interest rate bond issues.

Deseret has sought proposals from other parties regarding asset and/or
power purchases from Deseret. CFC continues to evaluate these proposals and
Deseret's plan to address the anticipated payment default under the ARO.

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 debt.

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 if the available annual cash flows were
to exceed the debt repayment requirements as defined in the ARO (i.e., CFC is no
longer required to fund a shortfall).

As of August 31, 1995, CFC had approximately $464.7 million in current
credit exposure on behalf of Deseret consisting of $149.9 million in secured
loans and $314.8 million for guarantees by CFC of various direct and indirect
obligations of Deseret. CFC's guarantees include $8.5 million in tax-benefit
indemnifications and $27.3 million relating to mining equipment for a coal
supplier of Deseret. The remainder of CFC's guarantee is for semiannual debt
service payments on $279.0 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 senior secured line of credit. At
August 31, 1995, there was no balance outstanding under this line of credit
which expires in January 1996. CFC has no plans to renew this facility.

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.

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 16 states (in which there are approximately 248 systems).
Distribution systems in these states account for approximately 28% of the total
operating revenues and patronage capital of all distribution systems nationwide.
State agencies, principally public utility commissions, of 19 states regulate
those states' 276 systems as to the issuance of long-term debt securities. In
five states (in which there are 51 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 RUS. However, rural electric
cooperatives that pay off their RUS debt or never incur RUS debt may be
regulated by FERC with respect to financing and/or rates. At present, four Power
Supply systems and one distribution system are regulated by FERC.

14
<PAGE> 16

Varying degrees of territorial protection against competing utility systems
are provided to distribution systems in 41 states (in which over 92% of the
distribution systems are located). Changes in administrative or legislative
policy in several states or federal regulation 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
quality standards.

On November 15, 1990, amendments to the Clean Air Act of 1970 (the
"Amendments"), designed to cause utilities and others to reduce emissions,
became law. The Amendments contain a range of compliance options and a phase-in
period which will help mitigate the immediate costs of implementation. 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.

FERC has released notice of proposed rulemaking (the "MegaNOPR") to solicit
comments on pending policy changes aimed at increasing access to the nation's
electric transmission lines. The proposed changes would require utilities with
power transmission lines to grant access at a set fee to anyone seeking to use
those lines. The avowed purpose of this initiative is to promote competition in
bulk power markets.

The impact of such regulations, if adopted, on the rural electric systems
would depend upon the final rules regarding many issues, including (1) the
pricing of the tariffs filed by FERC regulated public utilities, and the
pancaking (adding of tariffs for systems crossed) effect of wheeling over
several systems; (2) the handling of existing contracts; (3) the definition and
recoverability of "stranded costs" imposed on departing customers; (4) practical
limits placed on access; (5) the owner's obligation to upgrade its transmission
system to accommodate service and RUS interpretation of Rural Electrification
Act beneficiary use of the cooperative's facilities; and (6) reciprocity
requirements (i.e., to offer service as a condition of requesting service), and
affiliated organization issues (the extension of a Power Supply system's
obligation to its distribution members).

Section 211 of the Federal Power Act as amended by the Energy Policy Act of
1992 classifies any cooperative with significant transmission assets as a
"transmitting utility". Under the provisions of this Act, FERC has the authority
to order such cooperatives to wheel power for unaffiliated entities. Under
sections 205 and 206 of the Federal Power Act, cooperatives that pay off their
RUS debt are treated as "public utilities". FERC is proceeding under the legal
theory that, under these sections, it can order "public utilities" to provide
open access.

All telephone systems are regulated by the Federal Communications
Commission with respect to long distance access rates. Most states also regulate
local rates.

FINANCIAL INFORMATION

The systems differ from investor-owned utilities in that the vast majority
are cooperative, non-profit organizations operating under policies which provide
that rates should be established so as to minimize rates over the long-term.
Revenues in excess of operating costs and expenses are referred to as "net
margins and patronage

15
<PAGE> 17

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 RUS 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 RUS, the systems capitalize as a cost of
construction the interest charges on borrowed funds ("interest 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, RUS 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, 1993, and their respective composite balance
sheets as at the end of each such year. This information has been derived from
the RUS 1993 Statistical Report, Rural Electric Borrowers (Information
Publication 201-1).
- ----------
NOTE: Statistical information in RUS 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 RUS. The RUS Reports are based upon
financial statements submitted to RUS, subject to year-end audit adjustments, by
reporting RUS borrowers and do not, with minor exceptions, take into account
current data for certain systems, primarily those which are not active RUS
borrowers. As of December 31, 1993, 163 RUS borrowers had repaid their RUS loans
in full and were accordingly not subject to RUS 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 RUS or to
CFC by CFC Member Distribution Systems

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenues and patronage
capital............................... $15,072,400 $13,921,515 $13,446,544 $12,819,204 $12,303,951
Operating deductions.................... 13,566,718 12,628,989 12,194,103 11,570,307 11,185,808
----------- ----------- ----------- ----------- -----------
Utility operating margins............... 1,505,682 1,292,526 1,252,441 1,248,897 1,118,143
Non-operating margins and capital
credits(1)............................ 384,862 377,550 377,701 365,378 337,577
Interest on long-term debt and other
deductions(2)......................... (766,722) (777,435) (782,023) (764,072) (712,134)
----------- ----------- ----------- ----------- -----------
Net margins and patronage capital....... $ 1,123,822 $ 892,641 $ 848,119 $ 850,203 $ 743,586
============ ============ ============ ============ ============
TIER(3)................................. 2.54 2.19 2.11 2.15 2.07
DSC(4).................................. 2.44 2.07 2.13 2.16 2.09
MDSC(5)................................. 2.21 1.99 2.06 2.05 2.03
Number of systems included.............. 825 821 819 820 822
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Net utility plant................... $21,877,902 $20,721,332 $19,649,754 $18,662,477 $17,525,582
Other assets........................ 7,410,799 6,980,758 6,695,615 6,440,000 5,997,422
----------- ----------- ----------- ----------- -----------
Total assets and other
debits....................... $29,288,701 $27,702,090 $26,345,369 $25,102,477 $23,523,004
============ ============ ============ ============ ============
Liabilities and other credits:
Total net worth..................... $11,959,962 $10,925,009 $10,059,342 $ 9,367,448 $ 8,549,697
Other liabilities and credits....... 17,328,739 16,777,081 16,286,027 15,735,029 14,973,307
----------- ----------- ----------- ----------- -----------
Total liabilities and other
credits...................... $29,288,701 $27,702,090 $26,345,369 $25,102,477 $23,523,004
============ ============ ============ ============ ============
Equity percentage....................... 40.8% 39.4% 38.2% 37.3% 36.4%
Number of systems included.............. 825 821 819 820 822
</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
RUS 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 RUS 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.

(5) The new DSC (also called the "Modified DSC" or "MDSC") calculation is the
ratio of (x) operating margins and patronage capital plus interest on
long-term debt (including all interest charged to construction) plus
depreciation and amortization expense plus non-operating margins-interest
plus cash received in respect of

17
<PAGE> 19

generation and transmission and other capital credits to (y) long-term debt
service obligations.

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 RUS or to
CFC by CFC Member Power Supply Systems

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenue and patronage
capital............................... $ 9,976,560 $ 9,111,434 $ 8,615,165 $ 8,553,618 $ 8,589,575
Operating deductions.................... 8,091,101 7,375,988 6,986,912 6,824,168 6,796,491
----------- ----------- ----------- ----------- -----------
Utility operating margins............... 1,885,459 1,735,446 1,628,253 1,729,450 1,793,084
Non-operating margins and capital
credits(1)............................ 376,796 311,581 357,824 340,801 324,326
Interest on long-term debt and other
deductions(2)......................... (2,199,696) (2,213,283) (2,041,969) (2,172,079) (2,170,511)
----------- ----------- ----------- ----------- -----------
Net margins and patronage capital....... $ 62,559 $ (166,256) $ (55,892) $ (101,828) $ (53,101)
============ ============ ============ ============ ============
TIER(3)................................. .98 .92 .97 .95 .97
DSC(4).................................. 1.03 1.05 1.06 1.05 1.08
Number of systems included(5)........... 50 50 49 50 51
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Net utility plant................... $23,774,280 $23,715,910 $22,558,712 $23,084,888 $24,391,780
Other assets........................ 11,256,222 8,539,061 7,929,750 8,432,676 8,485,903
----------- ----------- ----------- ----------- -----------
Total assets and other
debits....................... $35,030,502 $32,254,971 $30,488,462 $31,517,564 $32,877,683
============ ============ ============ ============ ============
Liabilities and other credits:
Total net worth..................... $ 432,347 $ 316,039 $ 593,749 $ 545,122 $ 690,729
Other liabilities and credits....... 34,598,155 31,938,932 29,894,713 30,972,442 32,186,954
----------- ----------- ----------- ----------- -----------
Total liabilities and other
credits...................... $35,030,502 $32,254,971 $30,488,462 $31,517,564 $32,877,683
============ ============ ============ ============ ============
Number of systems included(5)........... 50 50 49 50 51
</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 RUS accounting practices. Cash
distributions of this credit have rarely been made by the selling Power
Supply systems to their members. This item also includes 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 RUS 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 RUS, interest charged to construction and
allowance for funds used during construction for CFC power supply members
in the years 1989-1993 were as follows:

<TABLE>
<CAPTION>
ALLOWANCE FOR
FUNDS USED
DURING
INTEREST CHARGED CONSTRUCTION
TO CONSTRUCTION ------------------ TOTAL
---------------- (DOLLAR AMOUNTS IN ------------------
THOUSANDS)
<S> <C> <C> <C>
1993 $ 49,237 $8,621 $ 57,858
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
</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). The TIER calculation includes the
operating results of six systems which currently fail to make debt service
payments or are operating under a Debt Restructure Agreement, without which
the composite TIER would have been 1.20, 1.15, 1.15, 1.08 and 1.10 for the
years ended December 31, 1993, 1992, 1991, 1990 and 1989, 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
(including all interest charged to construction). The DSC calculation
includes the operating results of six systems which currently fail to make
debt service payments or are operating under a Debt Restructure Agreement.
Without these systems, the composite DSC would have been 1.21, 1.22, 1.26,
1.21 and 1.21 for the years ended December 31, 1993, 1992, 1991, 1990 and
1989, respectively.

(5) Thirteen CFC Power Supply system members are not required to report to RUS
since they are not currently borrowers from RUS. 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, RUS has determined not to include data for Wabash Valley Power
Association ("Wabash") and Colorado-Ute in their composite statements due
to Wabash's ongoing bankruptcy and the liquidation of Colorado-Ute.

DESCRIPTION OF DEBT SECURITIES

GENERAL

The Debt Securities may be issued in one or more new series under an
Indenture or Indentures (the "Indenture") between CFC and Mellon Bank, N.A., or
other trustee to be named, as Trustee (each, a "Trustee"). The statements herein
concerning (i) the Indenture, (ii) one or more supplemental indentures, board
resolutions or officer's certificates establishing the Debt Securities and (iii)
the Debt Securities (the forms of each of which are filed, or will be filed, as
exhibits to the Registration Statement of which this Prospectus forms a part, or
as an exhibit to a Current Report on Form 8-K to be incorporated by reference in
this Prospectus) are merely an outline and do not purport to be complete. Such
statements make use of the terms defined in the Indenture and are qualified in
their entirety by express reference to the sections of the Indenture cited
herein. The Debt Securities will be unsecured and subordinated obligations of
CFC.

Reference is made to the Prospectus Supplement relating to any particular
issue of Offered Debt Securities for the following terms: (1) the title of such
Debt Securities; (2) any limit on the aggregate principal amount of such Debt
Securities or the series of which they are a part; (3) the date or dates on
which the principal of any of such Debt Securities will be payable; (4) the rate
or rates (which may be fixed or variable) and/or the method of determination of
such rate or rates at which any of such Debt Securities will bear interest, if
any, the date or dates from which any such interest will accrue, the Interest
Payment Dates on which any such interest will be payable and the Regular Record
Date for any such interest payable on any Interest Payment Date; (5) the place
or places

19
<PAGE> 21

where (i) the principal of, premium, if any, and interest on any of such Debt
Securities will be payable, (ii) registration of transfer of such Debt
Securities may be effected, (iii) exchanges of such Debt Securities may be
effected and (iv) notices and demands to or upon CFC in respect of such Debt
Securities may be served; the Security Registrar for such Debt Securities and,
if such is the case, that the principal of such Debt Securities shall be payable
without presentment or surrender thereof; (6) 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 any of such Debt Securities may be redeemed, in whole
or in part, at the option of CFC; (7) the obligation or obligations, if any, of
CFC to redeem or purchase any of such Debt Securities pursuant to any sinking
fund or other mandatory redemption provisions or at the option of the Holder
thereof, and 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 any of such
Debt Securities shall be redeemed or purchased, in whole or in part, pursuant to
such obligation, and applicable exceptions to the requirements of a notice of
redemption in the case of mandatory redemption or redemption at the option of
the Holder; (8) the denominations in which any of such Debt Securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof; (9) if the amount payable in respect of principal of or any premium or
interest on any of such Debt Securities may be determined with reference to an
index or other fact or event ascertainable outside the Indenture, the manner in
which such amounts will be determined; (10) if other than the currency of the
United States, the currency or currencies, including composite currencies in
which the principal of or any premium or interest on any of such Debt Securities
will be payable; (11) if the principal of or any premium or interest on any of
such Debt Securities is to be payable, at the election of CFC or the Holder
thereof, in a coin or currency other than in which such Debt Securities are
stated to be payable, the period or periods within which and the terms and
conditions upon which, such election is to be made; (12) if other than the
principal amount thereof, the portion of the principal amount of any of such
Debt Securities which shall be payable upon declaration of acceleration of the
Maturity thereof; (13) if the principal of or premium or interest on such Debt
Securities are to be payable, or are to be payable at the election of CFC 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 period or periods within which,
and the terms and conditions upon which, any such election may be made; (14) the
terms, if any, pursuant to which such Debt Securities may be converted into or
exchanged for securities of CFC or any other Person; (15) the obligations or
instruments, if any, which shall be considered to be Eligible Obligations in
respect of such Debt Securities denominated in a currency other than Dollars or
in a composite currency, and any additional or alternative provisions for the
reinstatement of CFC's indebtedness in respect of such Debt Securities after the
satisfaction and discharge thereof; (16) if such Debt Securities are to be
issued in global form, (i) any limitations on the rights of the Holder or
Holders of such Debt Securities to transfer or exchange the same or to obtain
the registration of transfer thereof, (ii) any limitations on the rights of the
Holder or Holders thereof to obtain certificates therefor in definitive form in
lieu of temporary form and (iii) any and all other matters incidental to such
Debt Securities; (17) if such Debt Securities are to be issuable as bearer
securities; (18) any limitations on the rights of the Holders of such Debt
Securities to transfer or exchange such Debt Securities or to obtain the
registration of transfer thereof, and if a service charge will be made for the
registration of transfer or exchange of such Debt Securities, the amount or
terms thereof; (19) any exceptions to the provisions governing payments due on
legal holidays or any variations in the definition of Business Day with respect
to such Debt Securities; (20) any addition to the Events of Default applicable
to any of such Debt Securities and any addition to the covenants of CFC for the
benefit of the Holders of such Debt Securities; and (21) any other terms of such
Debt Securities of such series, or any Tranche thereof, not inconsistent with
the provisions of the Indenture. (Section 301)

Debt Securities may be sold at a substantial discount below their principal
amount. Certain special United States federal income tax considerations (if any)
applicable to Debt Securities sold at an original issue discount may be
described in the applicable Prospectus Supplement. In addition, certain special
United States federal income tax or other considerations (if any) applicable to
any Debt Securities which are denominated in a currency or currency unit other
than Dollars may be described in the applicable Prospectus Supplement.

Except as may otherwise be described in the Prospectus Supplement, the
covenants contained in the Indenture would not afford Holders of Debt Securities
protection in the event of a highly-leveraged transaction involving CFC.

20
<PAGE> 22

SUBORDINATION

The Debt Securities will be subordinate and junior in right of payment to
all Senior Indebtedness of CFC.

No payment of principal of (including redemption and sinking fund
payments), premium, if any, or interest on, the Debt Securities may be made if
any Senior Indebtedness is not paid when due, or a default (other than a payment
default) has occurred with respect to the Senior Indebtedness permitting the
holders to accelerate the maturity thereof and such default has not been cured
or waived and has not ceased to exist. Upon (i) any acceleration of the
principal amount due on the Debt Securities or (ii) any distribution of assets
of CFC to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before the Holders of the Debt Securities are entitled to receive or retain any
payment. (Article 15) The rights of the Holders of the Debt Securities will be
subrogated to the rights of the Holders of Senior Indebtedness to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on the Debt Securities are paid in full. (Article 15)

The term "Senior Indebtedness" is defined in the Indenture to mean (a) all
indebtedness heretofore or hereafter incurred by CFC for money borrowed unless
by its terms it is provided that such indebtedness is not Senior Indebtedness,
(b) all other indebtedness hereafter incurred by the CFC which by its terms
provides that such indebtedness is Senior Indebtedness, (c) all guarantees,
endorsements and other contingent obligations in respect of, or obligations to
purchase or otherwise acquire or service, indebtedness or obligations of others,
and (d) any amendments, modifications, deferrals, renewals or extensions of any
such Senior Indebtedness heretofore or hereafter issued in evidence of or
exchange of such Senior Indebtedness.

The Indenture does not limit the aggregate amount of Senior Indebtedness
that CFC may issue. As of August 31, 1995, outstanding Senior Indebtedness of
CFC aggregated approximately $8.6 billion, including contingent guarantees of
$2.6 billion.

FORM, EXCHANGE AND TRANSFER

Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of each series will be issuable only in fully registered form
without coupons and in denominations of $1,000 and any integral multiple
thereof. (Sections 201 and 302)

At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to global securities, Debt Securities of any series will
be exchangeable for other Debt Securities of the same series, of any authorized
denomination and of like tenor and aggregate principal amount. (Section 305)

Subject to the terms of the Indenture and the limitations applicable to
global securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or accompanied by a duly
executed instrument of transfer) at the office of the Security Registrar or at
the office of any transfer agent designated by CFC for such purpose. CFC may
designate itself the Security Registrar. No service charge will be made for any
registration of transfer or exchange of Debt Securities, but CFC may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Such transfer or exchange will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity or the person making the
request. (Section 305) Any transfer agent (in addition to the Security
Registrar) initially designated by CFC for any Debt Securities will be named in
the applicable Prospectus Supplement. CFC may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that CFC will
be required to maintain a transfer agent in each Place of Payment for the Debt
Securities of each series. (Section 602)

CFC will not be required to (i) issue, register the transfer of, or
exchange any Debt Security or any Tranche thereof during a period beginning at
the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security called for redemption and ending at the
close of business on the day of such mailing or (ii) register the transfer of or
exchange any Debt Security so selected for redemption, in whole or in part,
except the unredeemed portion of any such Debt Security being redeemed in part.
(Section 305)

21
<PAGE> 23

PAYMENT AND PAYING AGENTS

Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
person in whose name such Debt Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest. (Section 307)

Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
CFC may designate for such purpose from time to time. Unless otherwise indicated
in the applicable Prospectus Supplement, the corporate trust office of the
Trustee in New York City will be designated as CFC's sole Paying Agent for
payments with respect to Debt Securities of each series. Any other Paying Agents
initially designated by CFC for the Debt Securities of a particular series will
be named in the applicable Prospectus Supplement. CFC may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
CFC will be required to maintain a Paying Agent in each Place of Payment for the
Debt Securities of a particular series. (Section 602)

All moneys paid by CFC to a Paying Agent for the payment of the principal
of or any premium or interest on any Debt Security which remain unclaimed at the
end of two years after such principal, premium or interest has become due and
payable will be repaid to CFC, and the Holder of such Debt Security thereafter
may look only to CFC for payment thereof. (Section 603)

REDEMPTION

Any terms for the optional or mandatory redemption of Debt Securities will
be set forth in the applicable Prospectus Supplement or a supplement thereto.
Except as shall otherwise be provided in the applicable Prospectus Supplement
with respect to Debt Securities that are redeemable at the option of the Holder,
Debt Securities will be redeemable only upon notice by mail not less than 30 nor
more than 60 days prior to the date fixed for redemption, and, if less than all
the Debt Securities of a series, or any Tranche thereof, are to be redeemed, the
particular Debt Securities to be redeemed will be selected by such method as
shall be provided for any particular series, or in the absence of any such
provision, by such method of random selection as the Security Registrar deems
fair and appropriate. (Section 403 and 404)

Any notice of redemption at the option of CFC may state that such
redemption will be conditional upon receipt by the Paying Agent or Agents, on or
prior to the dated fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Debt Securities
and that if such money has not been so received, such notice will be of no force
and effect and CFC will not be required to redeem such Debt Securities. (Section
404)

CONSOLIDATION, MERGER, AND SALE OF ASSETS

CFC may not consolidate with or merge into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless (i) the corporation formed by such consolidation or into which
CFC is merged or the Person which acquires by conveyance or transfer, or which
leases, the property and assets of CFC substantially as an entirety shall be a
Person organized and validly existing under the laws of any domestic
jurisdiction and such Person expressly assumes CFC's obligations on the Debt
Securities and under the Indenture, (ii) immediately after giving effect to the
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 occurred and be
continuing, and (iii) CFC will have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel as provided in the Indenture. (Section
1101)

EVENTS OF DEFAULT

Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay any
interest on any Debt Securities of such series within 60 days after the same
becomes due and payable; (b) failure to pay principal or premium, if any, on any
Debt Security of such

22
<PAGE> 24

series within three Business Days after the same becomes due and payable; (c)
failure to perform or breach of any other covenant or warranty of CFC in the
Indenture (other than a covenant or warranty of CFC in the indenture solely for
the benefit of one or more series of Debt Securities other than such series) for
60 days after written notice to CFC by the Trustee, or to CFC and the Trustee by
the Holders of at least 33% in principal amount of the Debt Securities of such
series outstanding under the Indenture as provided in the Indenture; (d) certain
events of bankruptcy, insolvency or reorganization; and (e) any other Event of
Default specified in the applicable Prospectus Supplement with respect to Debt
Securities of particular series. (Section 801)

No Event of Default with respect to the Debt Securities necessarily
constitutes an Event of Default with respect to the Debt Securities of any other
series issued under the Indenture.

If an Event of Default with respect to any series of Debt Securities occurs
and is continuing, then either the Trustee or the Holders of not less than 33%
in principal amount of the Outstanding Debt Securities of such series may
declare the principal amount (or if the Debt Securities of such series are
discount notes or similar Debt Securities, such portion of the principal amount
may be specified in the applicable Prospectus Supplement) of all of the Debt
Securities of such series to be due and payable immediately; provided, however,
that if an Event of Default occurs and is continuing with respect to more than
one series of Debt Securities, the Trustee or the Holders of not less than 33%
in aggregate principal amount of the Outstanding Debt Securities of all such
series, considered as one class, may make such declaration of acceleration and
not the Holders of the Debt Securities of any one of such series.

At any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the Event or Events of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if

(a) CFC has paid or deposited with the Trustee a sum sufficient to pay

(1) all overdue interest on all Debt Securities of such series;

(2) the principal of and premium, if any, on any Debt Securities of
such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed
therefor in such Debt Securities;

(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Debt Securities, to the extent that payment of such
interest is lawful; and

(4) all amounts due to the Trustee under the Indenture;

(b) any other Event or Events of Default with respect to the Debt
Securities of such series, other than the nonpayment of the principal of
the Debt Securities of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture. (Section 802)

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
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 903) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
will 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, with respect to the Debt Securities of that
series. (Section 812)

No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of such series, (ii) the Holders
of not less than 33 1/3% in aggregate principal amount of the Outstanding Debt
Securities of such series have made written request to the Trustee, and such
Holder or Holders

23
<PAGE> 25

have offered reasonable indemnity to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding, and has
not received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 807)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for the enforcement of payment of the principal of or any premium
or interest on such Debt Security on or after the applicable due date specified
in such Debt Security. (Section 808)

CFC will be required to furnish to the Trustee annually a statement by an
appropriate officer as to such officer's knowledge of CFC's compliance with all
conditions and covenants under the Indenture, such compliance to be determined
without regard to any period of grace or requirement of notice under the
Indenture. (Section 605)

MODIFICATION AND WAIVER

Without the consent of any Holder of Debt Securities, CFC and the Trustee
may enter into one or more supplemental indentures for any of the following
purposes: (a) to evidence the assumption by any permitted successor to CFC of
the covenants of CFC in the Indenture and the Debt Securities; or (b) to add one
or more covenants of CFC or other provisions for the benefit of the Holders of
all or any series of Outstanding Debt Securities or to surrender any right or
power conferred upon CFC by the Indenture; or (c) to add any additional Events
of Default with respect to all or any series of Outstanding Debt Securities; or
(d) to change or eliminate any provision of the Indenture or to add any new
provision to the Indenture, provided that if such change, elimination or
addition will adversely affect the interests of the Holders of Debt Securities
of any series in any material respect, such change, elimination or addition will
become effective with respect to such series only when there is no Debt Security
of such series remaining Outstanding under the Indenture; or (e) to provide
collateral security for the Debt Securities; or (f) to establish the form or
terms of Debt Securities of any series as permitted by the Indenture; or (g) to
evidence and provide for the acceptance of appointment of a successor Trustee
under the Indenture with respect to the Debt Securities of one or more series
and to add to or change any of the provisions of the Indenture as shall be
necessary to provide for or to facilitate the administration of the trusts under
the Indenture by more than one trustee; or (h) to provide for the procedures
required to permit the utilization of a noncertificated system of registration
for any series of Debt Securities; or (i) to change any place where (1) the
principal of and premium, if any, and interest, if any, on any Debt Securities
shall be payable, (2) any Debt Securities may be surrendered for registration of
transfer or exchange and (3) notices and demands to or upon CFC in respect of
Debt Securities and the Indenture may be served; or (j) to cure any ambiguity or
inconsistency or to make or change any other provisions with respect to matters
and questions arising under the Indenture, provided such changes or additions
shall not adversely affect the interests of the Holders of Debt Securities of
any series in any material respect. (Section 1201)

The Holders of not less than a majority in aggregate principal amount of
the Outstanding Debt Securities of any series may waive compliance by CFC with
certain restrictive provisions of the Indenture. (Section 606) The Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
may waive any past default under the Indenture, except a default in the payment
of principal, premium or interest and certain covenants and provisions of the
Indenture that cannot be modified or be amended without the consent of the
Holder of each Outstanding Debt Security of such series affected. (Section 813)

Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is amended after the date
of the Indenture in such a way as to require changes to the Indenture or the
incorporation therein of additional provisions or so as to permit changes to, or
the elimination of, provisions which, at the date of the Indenture or at any
time thereafter, were required by the Trust Indenture Act to be contained in the
Indenture, the Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and CFC and the Trustee
may, without the consent of any Holders, enter into one or more supplemental
indentures to evidence or effect such amendment. (Section 1201)

Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Debt Securities of all series then
Outstanding, considered as one class, is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the Indenture

24
<PAGE> 26

pursuant to one or more supplemental indentures; provided, however, that if less
than all of the series of Debt Securities Outstanding are directly affected by a
proposed supplemental indenture, then the consent only of the Holders of a
majority in aggregate principal amount of Outstanding Debt Securities of all
series so directly affected, considered as one class, will be required; and
provided, further, that if the Debt Securities of any series have been issued in
more than one Tranche and if the proposed supplemental indenture directly
affects the rights of the Holders of one or more, but less than all, such
Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of all Tranches so directly
affected, considered as one class, will be required; and provided further, that
no such amendment or modification may (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security, or reduce the principal amount thereof or the rate of interest thereon
(or the amount of any installment of interest thereon) or change the method of
calculating such rate or reduce any premium payable upon the redemption thereof,
or reduce the amount of the principal of any Discount Security that would be due
and payable upon a declaration of acceleration of Maturity or change the coin or
currency (or other property) in which any Debt Security or any premium 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 of any Debt
Security (or, in the case of redemption, on or after the redemption date)
without, in any such case, the consent of the Holder of such Debt Security, (b)
reduce the percentage in principal amount of the Outstanding Debt Securities of
any series, or any Tranche thereof, the consent of the Holders of which is
required for any such supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with any provision of the
Indenture or any default thereunder and its consequences, or reduce the
requirements for quorum or voting, without, in any such case, the consent of the
Holder of each Outstanding Debt Security of such series or Tranche, or (c)
modify certain of the provisions of the Indenture relating to supplemental
indentures, waivers of certain covenants and waivers of past defaults with
respect to the Debt Securities of any series, or any Tranche thereof, without
the consent of the Holder of each Outstanding Debt Security affected thereby. A
supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture which has expressly been included solely for the
benefit of one or more particular series of Debt Securities or one or more
Tranches thereof, or modifies the rights of the Holders of Debt Securities of
such series or Tranches with respect to such covenant or other provision, will
be deemed not to affect the rights under the Indenture of the Holders of the
Debt Securities of any other series or Tranche. (See Section 1202)

The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the Indenture
as of any date, (i) Debt Securities owned by CFC or any other obligor upon the
securities or any Affiliate of CFC or of such other obligor (unless CFC, such
Affiliate or such obligor owns all Securities Outstanding under the Indenture,
or all Outstanding Securities of each such series and each such Tranche, as the
case may be, determined without regard to this clause (i)) shall be disregarded
and deemed not to be Outstanding; (ii) the principal amount of a Discount
Security that shall be deemed to be Outstanding for such purposes shall be the
amount of the principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the Maturity thereof as
provided in the Indenture; and (iii) the principal amount of a Debt Security
denominated in one or more foreign currencies or a composite currency that will
be deemed to be Outstanding will be the Dollar equivalent, determined as of such
date in the manner prescribed for such Debt Security, of the principal amount of
such Debt Security (or, in the case of a Debt Security described in clause (ii)
above, of the amount described in such clause). (Section 101)

If CFC shall solicit from Holders any request, demand, authorization,
direction, notice, consent, election, waiver or other Act, CFC may, at its
option, by Board Resolution, fix in advance a record date for the determination
of Holders entitled to give such request, demand, authorization, direction,
notice, consent, election, waiver or other Act, but CFC shall have no obligation
to do so. If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, election, 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 the record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of the Outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the
Outstanding Securities shall be computed as of the record date. Any request,
demand, authorization, direction, notice, consent, election, waiver or other Act
of a Holder shall bind

25
<PAGE> 27

every future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted 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 Security. (Section 104)

DEFEASANCE

Unless otherwise indicated in the applicable Prospectus Supplement, any
Debt Security, or any portion of the principal amount thereof, will be deemed to
have been paid for purposes of the Indenture, and, at CFC's election, the entire
indebtedness of CFC in respect thereof will be deemed to have been satisfied and
discharged, if there has been irrevocably deposited with the Trustee or any
Paying Agent (other than CFC), in trust: (a) money in an amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepayment thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which,
together with money, if any, deposited with or held by the Trustee or such
Paying Agent, will be sufficient, or (c) a combination of (a) and (b) which will
be sufficient, to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Debt Security or Securities or
portions thereof. (Section 701) For this purpose, unless otherwise indicated in
the applicable Prospectus Supplement, Eligible Obligations include direct
obligations of, or obligations unconditionally guaranteed by, the United States,
entitled to the benefit of the full faith and credit thereof, and certificates,
depositary receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or principal payments
due in respect thereof. Among the conditions to CFC's making the election to
have its entire indebtedness deemed satisfied and discharged, CFC 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 Debt Securities 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.

RESIGNATION OF TRUSTEE

The Trustee may resign at any time by giving written notice thereof to CFC
or may be removed at any time by Act of the Holders of a majority in principal
amount of Debt Securities then Outstanding delivered to the Trustee and CFC. No
resignation or removal of the Trustee and no appointment of a successor trustee
will become effective until the acceptance of appointment by a successor trustee
in accordance with the requirements of the Indenture. So long as no Event of
Default or event which, after notice or lapse of time, or both, would become an
Event of Default has occurred and is continuing and except with respect to a
Trustee appointed by Act of the Holders, if CFC has delivered to the Trustee a
resolution of its Board of Directors appointing a successor trustee and such
successor has accepted such appointment in accordance with the terms of the
Indenture, the Trustee will be deemed to have resigned and the successor will be
deemed to have been appointed as trustee in accordance with the Indenture.
(Section 910)

NOTICES

Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Section
106)

TITLE

CFC, the Trustee and any agent of CFC or the Trustee may treat the Person
in whose name a Debt Security is registered as the absolute owner thereof
(whether or not such Debt Security may be overdue) for the purpose of making
payment and for all other purposes. (Section 308)

GOVERNING LAW

The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112)

26
<PAGE> 28

REGARDING THE TRUSTEE

The Trustee under the Indenture is Mellon Bank, N.A.

GLOBAL SECURITIES

The Depository Trust Company ("DTC") may act as securities depository for
some or all of the Debt Securities of any series. These Debt Securities will be
issued in fully-registered form in the name of Cede & Co. (DTC's partnership
nominee). One or more fully-registered certificates will be issued as Global
Securities for the Debt Securities in the aggregate principal amount of the Debt
Securities, and will be deposited with, or held for the benefit of, DTC.

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants" and
together with Direct Participants, "Participants"). The Rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.

Purchases of the Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt Securities
on DTC's records. The ownership interest of each actual purchaser of the Debt
Securities ("Beneficial Owner") is in turn to be recorded on the Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the Debt
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Debt Securities,
except in the event that use of the book-entry system for the Debt Securities is
discontinued.

To facilitate subsequent transfers, all the Debt Securities deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of the Debt Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Debt Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Debt Securities are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.

Neither DTC nor Cede & Co. will consent or vote with respect to the Debt
Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to CFC
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Debt Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).

Principal and interest payments on the Debt Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date in
accordance with their respective holdings shown on DTC's

27
<PAGE> 29

records unless DTC has reason to believe that it will not receive payment on the
payable date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participant and not of DTC, CFC or
the Trustee, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of CFC or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners shall be the responsibility of Participants.

DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to CFC or
the Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, the Debt Securities certificates are required to be
printed and delivered.

CFC may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, the Debt
Securities certificates will be printed and delivered.

The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that CFC believes to be reliable (including DTC),
but CFC takes no responsibility for the accuracy thereof.

Neither CFC, the Trustee nor any Underwriter (as defined herein) will have
any responsibility or obligation to Participants, or the persons for whom they
act as nominees, with respect to the accuracy of the records of DTC, its nominee
or any Participant with respect to any ownership interest in the Debt
Securities, or payments to, or the providing of notice for, Participants or
Beneficial Owners.

PLAN OF DISTRIBUTION

Debt Securities 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"). The Underwriters with respect to an
underwritten offering of Debt Securities will be named in the Prospectus
Supplement relating to such offering. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the Underwriters to purchase Debt
Securities will be subject to certain conditions precedent and each of the
Underwriters with respect to a sale of Debt Securities will be obligated to
purchase all of its Debt Securities 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 Debt Securities in respect
of which this Prospectus is delivered will be set forth in the Prospectus
Supplement.

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 Debt Securities 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, 1995, incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, 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.

28
<PAGE> 30

PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the issuance and distribution of the
securities covered hereby, other than underwriting commissions, are, subject to
further contingencies, estimated as follows:

<TABLE>
<S> <C>
Registration Statement Filing Fee................................. $ 50,000
Printing.......................................................... 50,000
Legal Fees and Expenses........................................... 310,000
Blue Sky Fees and Expenses........................................ 10,000
Accounting Fees................................................... 35,000
Fees of Trustee................................................... 10,000
Fees of Rating Agencies........................................... 150,000
Miscellaneous..................................................... 24,000
--------
Total................................................... $639,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 29-1104(9) of the District of Columbia Cooperative Association Act
provides that an association such as the Registrant shall have the capacity "to
exercise . . . any power granted to ordinary business corporations, save those
powers inconsistent with this chapter." Section 29-304(16) of the District of
Columbia Business Corporation Act permits any corporation:

To indemnify any and all of its directors or officers or former
directors or officers or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor against expenses actually and
necessarily incurred by them in connection with the defense of any action,
suit, or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a
director or officer of the corporation, or of such other corporation,
except in relation to matters as to which any such director or officer or
former director or officer or person shall be adjudged in such action,
suit, or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled, under any
bylaw, agreement, vote of stockholders, or otherwise.

The Board of Directors of CFC has resolved to indemnify all CFC directors,
officers and employees in accordance with the terms of the first sentence of
Section 29-304(16). The Bylaws of CFC also provide for indemnification of all
CFC directors, officers and employees as set forth above.

ITEM 16. LIST OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement to be used in connection with Debt Securities.
4.1 -- Form of Indenture relating to Debt Securities.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy.
12.1 -- Statement re: computation of Ratio of Margins to Fixed Charges for the five years
ended May 31, 1995 (incorporated herein by reference to Exhibit 12 to CFC's 1995
Annual Report on Form 10-K).
12.2 -- Statement re: computation of Ratio of Margins to Fixed Charges for the quarters
ended August 31, 1995 and 1994.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit 5.
24 -- Power of Attorney (included on signature pages of this Registration Statement).
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939 of Mellon Bank, N.A., as Trustee.
</TABLE>

II-1
<PAGE> 31

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 this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(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 this registration
statement;

provided, however, that the undertakings set forth in paragraphs (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by these paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
this 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 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 this registration statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(5) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.

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 foregoing provisions, 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 the 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.

II-2
<PAGE> 32

THE REGISTRANT AND EACH PERSON WHOSE ORIGINAL SIGNATURE APPEARS BELOW
HEREBY AUTHORIZES EACH OF SHELDON C. PETERSEN, STEVEN L. LILLY AND JOHN JAY LIST
(THE "AGENTS") TO FILE ONE OR MORE AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THE REGISTRATION STATEMENT AND ANY REGISTRATION STATEMENT OF THE
REGISTRANT RELATING TO DEBT SECURITIES FILED AFTER THE DATE HEREOF PURSUANT TO
RULE 462(B) UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WHICH AMENDMENTS AND
REGISTRATION STATEMENT 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 AND ANY SUCH
ADDITIONAL 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 14TH
DAY OF NOVEMBER, 1995.

NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION

By: /s/ SHELDON C. PETERSEN
-------------------------------------
SHELDON C. PETERSEN
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
- ---------------------------------------- -------------------------- --------------------
<C> <C> <S>
/s/ SHELDON C. PETERSEN Governor and Chief
- ---------------------------------------- Executive Officer
SHELDON C. PETERSEN

/s/ STEVEN L. LILLY Senior Vice President and
- ---------------------------------------- Chief Financial Officer
STEVEN L. LILLY

/s/ ANGELO M. SALERA Controller (Principal
- ---------------------------------------- Accounting Officer)
ANGELO M. SALERA

/s/ J. CHRIS CARIKER President and Director
- ----------------------------------------
J. CHRIS CARIKER

/s/ GARRY BYE Vice President and November 14, 1995
- ---------------------------------------- Director
GARRY BYE

/s/ RALPH L. LOVELESS Secretary-Treasurer and
- ---------------------------------------- Director
RALPH L. LOVELESS

/s/ JOHN C. ANDERSON Director
- ----------------------------------------
JOHN C. ANDERSON

/s/ ROBERT J. BAUMAN Director
- ----------------------------------------
ROBERT J. BAUMAN

/s/ BILL BERTRAM Director
- ----------------------------------------
BILL BERTRAM

/s/ HAROLD I. DYCUS Director
- ----------------------------------------
HAROLD I. DYCUS

Director
- ----------------------------------------
GLENN ENGLISH
</TABLE>

II-3
<PAGE> 33

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------- --------------------
<C> <C> <S>
/s/ NADINE GRIFFIN Director
- ----------------------------------------
NADINE GRIFFIN

/s/ BENSON HAM Director
- ----------------------------------------
BENSON HAM

/s/ RALPH HARMEYER Director
- ----------------------------------------
RALPH HARMEYER

/s/ GORDON J. HUDSON Director
- ----------------------------------------
GORDON J. HUDSON

/s/ DAVID HUTCHENS Director
- ----------------------------------------
DAVID HUTCHENS

/s/ GEORGE W. KLINE Director
- ----------------------------------------
GEORGE W. KLINE

/s/ PAUL J. LIESS Director November 14, 1995
- ----------------------------------------
PAUL J. LIESS

Director
- ----------------------------------------
ROBERT MCCLURG

Director
- ----------------------------------------
R. LAYNE MORRILL

/s/ GERARD PAOLUCCI Director
- ----------------------------------------
GERARD PAOLUCCI

/s/ TERRY PITCHFORD Director
- ----------------------------------------
TERRY PITCHFORD

Director
- ----------------------------------------
HENRY UMSCHEID

/s/ ROBERT O. WILLIAMS Director
- ----------------------------------------
ROBERT O. WILLIAMS

/s/ ELDWIN WIXSON Director
- ----------------------------------------
ELDWIN WIXSON
</TABLE>

II-4
<PAGE> 34

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- ----------------------------------------------------------------------- ------------
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement to be used in connection with Debt
Securities.............................................................
4.1 -- Form of Indenture relating to Debt Securities..........................
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy.................
12.1 -- Statement re: computation of Ratio of Margins to Fixed Charges for the
five years ended May 31, 1995 (incorporated herein by reference to
Exhibit 12 to CFC's 1995 Annual Report on Form 10-K)...................
12.2 -- Statement re: computation of Ratio of Margins to Fixed Charges for the
quarters ended August 31, 1995 and 1994................................
23.1 -- Consent of Arthur Andersen LLP.........................................
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy. Included as part of Exhibit
5......................................................................
24 -- Power of Attorney (included on signature pages of this Registration
Statement).............................................................
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Mellon Bank, N.A., as Trustee.................
</TABLE>

<PAGE> 1
EXHIBIT 1
[COMFORMED COPY]

$[ ]

NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION

[TITLE OF DEBT SECURITIES]

Underwriting Agreement

[DATE]

LEHMAN BROTHERS INC.
As Representatives of the several Underwriters
In care of Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285

Dear Sirs:

National Rural Utilities Cooperative Finance Corporation, a
District of Columbia cooperative association (the "Company"), proposes to issue
$[ ] principal amount of its [TITLE OF DEBT SECURITIES] (the "Debt
Securities"), to be issued under and secured by an Indenture dated as of
November __, 1995, between the Company and Mellon Bank, N.A. (the "Trustee").
Such Indenture, as it may be amended from time to time, is hereinafter called
the "Indenture." The Debt Securities are more fully described in the
Registration Statement and in the Prospectus hereinafter mentioned. The Debt
Securities will be issued in fully registered form only, in denominations of
$[ ] and any integral multiple thereof.

You have advised us (i) that you and the other firms and
corporations named in Schedule I attached hereto (you and such firms and
corporations being hereinafter called the Underwriters, which term shall also
include any underwriter substituted as provided in Section 11 hereof), acting
severally and not jointly, are willing to purchase, on the terms and conditions
hereinafter set forth, the respective principal amounts of the Debt Securities,
aggregating $[ ] principal amount thereof, specified in such Schedule
I, and (ii) that you are
<PAGE> 2
2

authorized, on behalf of yourselves and the other Underwriters, to enter into
this Agreement.

1. Certain Representations and Warranties by the Company.
The Company represents and warrants to each Underwriter as follows:

(a) Registration Statement and Prospectus. The Company
has filed with the Securities and Exchange Commission (the "Commission")
Registration Statement No. 33-_____, for the registration under the Securities
Act of 1933 (the "Securities Act"), of the Debt Securities (including a
prospectus relating thereto) and may have filed one or more amendments thereto
(including one or more amended or supplemental prospectuses) and such
registration statement and any such amendment has become effective. A
prospectus supplement relating to the Debt Securities, including a prospectus
(together, the "Prospectus"), has been prepared and will be filed pursuant to
Rule 424 under the Securities Act. The Company will not file any other
amendment of such registration statement or such prospectus or any supplement
to such prospectus on or after the date of this Agreement and prior to the date
and time of delivery of and payment for the Debt Securities referred to in
Section 3 hereof (the "Closing Date"), except with your approval. Such
registration statement, including financial statements and exhibits, at the
time it became effective, is hereinafter called the Registration Statement.
Any reference in this Agreement to the Prospectus as amended or supplemented
shall include, without limitation, any prospectus filed with the Commission
pursuant to Rule 424 of the Commission under the Securities Act which amends or
supplements the Prospectus. Any reference herein to the Registration Statement
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities Exchange Act of 1934 (the "Exchange Act"), on or
before the effective date of the Registration Statement or the date of such
Prospectus, as the case may be; and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the effective date of the Registration Statement,
or the date of any Prospectus, as the case may be, and deemed to be
incorporated therein by reference.
<PAGE> 3
3

(b) Accuracy of Registration Statement. At all times
subsequent to the date of this Agreement up to and including the Closing Date,
and when any post-effective amendment thereof shall become effective, the
Registration Statement (and the Registration Statement as amended if any
post-effective amendment thereof shall have become effective) will comply in
all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact and will not omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and, at all times subsequent to the date of
this Agreement up to and including the Closing Date, the Prospectus (and the
Prospectus as amended or supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) will fully comply with
the provisions of the Securities Act and the Exchange Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact and will not omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that none of the representations and warranties in this
paragraph (b) shall apply to (i) that part of the Registration Statement which
shall constitute the Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939 (the "Trust Indenture Act"), of the
Trustee or (ii) statements in, or omissions from, the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto made in reliance
upon and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of any Underwriter through
you for use in connection with the preparation of the Registration Statement or
the Prospectus or any such amendment or supplement.

(c) Accountants. The accountants who have certified or shall
certify the financial statements filed and to be filed with the Commission as
parts of the Registration Statement and the Prospectus are independent with
respect to the Company as required by the Securities Act and rules and
regulations of the Commission thereunder.

(d) Due Incorporation. The Company has been duly
incorporated and is now, and on the Closing Date will be, a validly existing
cooperative association in good standing
<PAGE> 4
4

under the laws of the District of Columbia, duly qualified and in good standing
in each jurisdiction in which the ownership or leasing of properties or the
conduct of its business requires it to be qualified (or the failure to be so
qualified will not have a material adverse effect upon the business or
condition of the Company), and the Company has the corporate power and holds
all valid permits and other required authorizations from governmental
authorities necessary to carry on its business as now conducted and as to be
conducted on the Closing Date and as contemplated by the Prospectus.

(e) Material Changes. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as set forth therein, there has not been any material adverse change in
the condition, financial or other, or the results of operations of the Company,
whether or not arising from transactions in the ordinary course of business.

(f) Litigation. On the date hereof, except as set forth in
the Prospectus, the Company does not have any litigation pending of a character
which in the opinion of counsel for the Company referred to in Section 10(c)
hereof could result in a judgment or decree having a material adverse effect on
the condition, financial or other, or the results of operations of the Company.

(g) Legality. On the Closing Date, the Debt Securities will
be duly and validly authorized, and no further authorization, consent or
approval of the members and no further authorization or approval of the Board
of Directors of the Company or any committee thereof will be required for the
issuance and sale of the Debt Securities as contemplated herein; and neither
such issuance or sale of the Debt Securities nor the consummation of any other
of the transactions herein contemplated will result in a breach by the Company
of any terms of, or constitute a default under, any other agreement or
undertaking of the Company.

(h) No Stop Order. The Commission has not issued and, to the
best knowledge of the Company, is not threatening to issue any order preventing
or suspending the use of the Prospectus (as amended or supplemented, if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto).
<PAGE> 5
5

(i) Regulation. The Company is not required to be registered
as an investment company under the Investment Company Act of 1940 and is not
subject to regulation under the Public Utility Holding Company Act of 1935.

2. Agreement to Purchase. Subject to the terms and
conditions and upon the representations and warranties herein set forth, the
Company agrees to sell to you and the other Underwriters, severally and not
jointly, and you and such other Underwriters, severally and not jointly, agree
to purchase from the Company, at [ . ]% of the principal amount thereof,
plus interest accrued thereon, if any, from [DATE], to the Closing Date, the
respective principal amounts of the Debt Securities set forth opposite the
names of the respective Underwriters in Schedule I hereto, aggregating $[
] principal amount thereof.

3. Closing. Delivery of and payment for the Debt Securities
shall be made at the office of Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, at 9:30 A.M., New York City time, on [CLOSING
DATE], or such later date (not later than [CLOSING DATE + 7]) as you, as
Representatives of the Underwriters, shall designate, which date and time may
be postponed by agreement between you, as such Representatives, and the Company
or as provided in Section 11 hereof. Delivery of the Debt Securities shall be
made to you, for the respective accounts of the several Underwriters, against
payment by the several Underwriters through you of the purchase price thereof,
to or upon the order of the Company by certified or official bank check or
checks payable, or wire transfers, in immediately available funds. The Debt
Securities shall be delivered in definitive global form through the facilities
of Depository Trust Company.

4. Prospectuses. The Company has caused to be delivered to
you, as Representatives of the Underwriters, copies of the Prospectus and has
consented to the use of such copies for the purposes permitted by the
Securities Act. The Company agrees to deliver to you, as Representatives of
the Underwriters, without charge, from time to time during such period as in
the opinion of Cravath, Swaine & Moore, counsel for the Underwriters, the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, as many copies of the Prospectus (and, in the event of
any amendment of or supplement to the Prospectus, of such amended or
supplemented Prospectus) as you, as Representatives of the
<PAGE> 6
6

Underwriters, may reasonably request. If, at any time during the period in
which the Company is required to deliver copies of the Prospectus, as provided
in this Section 4, any event known to the Company relating to or affecting the
Company shall occur which should be set forth in an amendment of or supplement
to the Prospectus in order to make the statements in the Prospectus not
misleading in the light of the circumstances at the time it is delivered to the
purchaser, or it shall be necessary to amend or supplement the Prospectus to
comply with law or with the rules and regulations of the Commission, the
Company, at its expense, will forthwith prepare and furnish to you for
distribution to the Underwriters and dealers a reasonable number of copies of
an amendment or amendments of or a supplement or supplements to the Prospectus
which will so amend or supplement the Prospectus that, as amended or
supplemented, it will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements in the Prospectus not misleading in the light of
the circumstances when it is delivered to a purchaser, and will comply with law
and with such rules and regulations. The Company authorizes the Underwriters
and all dealers effecting sales of the Debt Securities to use the Prospectus,
as from time to time amended or supplemented, in connection with the sale of
the Debt Securities in accordance with applicable provisions of the Securities
Act and the applicable rules and regulations thereunder for the period during
which the Company is required to deliver copies of the Prospectus as provided
in this Section 4.

5. Commission Proceedings as to Registration Statement. The
Company agrees to advise you promptly, as Representatives of the Underwriters,
and to confirm such advice in writing, (a) when any post-effective amendment of
the Registration Statement shall have become effective and when any further
amendment of or supplement to the Prospectus shall be filed with the
Commission, (b) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for additional information and (c)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the initiation of any
proceedings for that purpose. The Company will use every reasonable effort to
prevent the issuance of such a stop order and, if any such order shall at any
time be issued, to obtain the withdrawal thereof at the earliest possible
moment.
<PAGE> 7
7

6. Blue Sky. The Company will diligently endeavor, when and
as requested by you, to qualify the Debt Securities, or such portion thereof as
you may request, for offering and sale under the securities or blue sky laws of
any jurisdictions which you shall designate.

7. Earnings Statement. The Company agrees to make generally
available to its security holders, in accordance with Section 11(a) of the
Securities Act and Rule 158 thereunder, an earnings statement of the Company
(which need not be audited) in reasonable detail and covering a period of at
least twelve months beginning after the effective date of the Registration
Statement.

8. Expenses. The Company agrees to pay all fees and expenses
in connection with (a) the preparation, printing and filing of the Registration
Statement (including all exhibits to the Registration Statement), the
Prospectus and any amendments thereof and supplements thereto, and the
furnishing of copies of each thereof to the Underwriters (including costs of
mailing and shipment), (b) the issuance of the Debt Securities, (c) the rating
of the Debt Securities by rating agencies, (d) the delivery of the Debt
Securities to you in New York City for the respective accounts of the several
Underwriters and (e) the qualifying of the Debt Securities as provided in
Section 6 hereof and the determination of the eligibility of the Debt
Securities for investment under the laws of such jurisdictions as you may
designate (including fees and disbursements of counsel for the Underwriters in
connection therewith).

9. Indemnities.

(a) By the Company. The Company agrees to indemnify and hold
harmless each Underwriter and each person who controls any Underwriter within
the meaning of Section 15 of the Securities Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or any other
statute or common law, and to reimburse the Underwriters and such controlling
persons, as incurred, for any legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment
thereof, or the omission or
<PAGE> 8

alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or supplemented, if the Company shall have filed with
the Commission any amendment thereof or supplement thereto), if used within the
period during which the Underwriters are authorized to use the Prospectus as
provided in Section 4 hereof, or the omission or alleged omission to state
therein (if so used) a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
indemnity agreement contained in this Section 9(a) shall not apply to any such
losses, claims, damages, liabilities or actions arising out of, or based upon,
any such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon and
in conformity with information furnished as herein stated in Section 12 or
otherwise furnished in writing to the Company by or on behalf of any
Underwriter through you for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, or was contained in that part of the Registration Statement
constituting the Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of the Trustee; provided, further, that, with respect
to any untrue statement or alleged untrue statement made in, or omission or
alleged omission from, the Prospectus, the indemnity agreement contained in
this Section 9(a) with respect to the Prospectus shall not inure to the benefit
of any Underwriter (or the benefit of any person controlling such Underwriter)
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Debt Securities which are the subject thereof, if such person did
not receive a copy of the Prospectus (or the Prospectus as amended or
supplemented if the Company shall have made any amendments thereof or
supplements thereto which shall have been furnished to you, as Representatives
of the Underwriters, or to such Underwriter prior to the time of the
below-written confirmation), excluding the documents incorporated therein by
reference, at or prior to the written confirmation of the sale of such Debt
Securities to such person in any case where delivery of the Prospectus is
required under the Securities Act and the rules and regulations of the
Commission thereunder and any untrue statement or alleged untrue statement or
omission or alleged omission was corrected in the Prospectus (or the
Prospectus as amended or supplemented).
<PAGE> 9
9

(b) By the Underwriters. Each Underwriter agrees, in the
manner and to the same extent as set forth in Section 9(a) hereof, to indemnify
and hold harmless the Company, each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, the directors of the
Company and those officers of the Company who shall have signed the
Registration Statement, with respect to any statement in or omission from the
Registration Statement or any post-effective amendment thereof or the
Prospectus (as amended or supplemented, if so amended or supplemented), if such
statement or omission was made in reliance upon and in conformity with
information furnished as herein stated in Section 12 or otherwise furnished in
writing to the Company through you on behalf of such Underwriter for use in
connection with the preparation of the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto.

(c) General. Each indemnified party will, within ten days
after the receipt of notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from an
indemnifying party on account of an indemnity agreement contained in this
Section 9, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party so to notify an indemnifying
party of any such action shall not relieve the indemnifying party from any
liability which it may have to such indemnified party on account of the
indemnity agreement contained in this Section 9 or otherwise. Except as
provided in the next succeeding sentence, in case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice in writing
from such indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Such indemnified party
shall have the right to employ its own counsel in any such action, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel has been authorized in writing by
<PAGE> 10
10

the indemnifying party in connection with the defense of such action, (ii) such
indemnified party shall have been advised by such counsel that there are
material legal defenses available to it which are different from or additional
to those available to the indemnifying party (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of such indemnified party) or (iii) the indemnifying party shall not have
assumed the defense of such action and employed counsel therefor satisfactory
to such indemnified party within a reasonable time after notice of commencement
of such action, in any of which events such fees and expenses shall be borne by
the indemnifying party. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out
of such action or claim and (ii) does not include any statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party. No indemnified party shall effect the settlement or
compromise of, or consent to the entry of any judgement with respect to, any
pending or threatened action or claim in respect of which indemnification may
be sought hereunder without the consent of the indemnifying party (which
consent shall not be unreasonably withheld).

(d) Contribution. If the indemnification provided for in
this Section 9 shall for any reason be unavailable to an indemnified party
under Section 9(a) or 9(b) hereof in respect of any loss, claim, damage or
liability or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Debt Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the
<PAGE> 11
11

Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Debt Securities (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions
received by the Underwriters with respect to such offering, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 9(d) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 9(d) shall be
deemed to include, for purposes of this Section 9(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Debt
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 9(d) are several in proportion to their respective
underwriting obligations and not joint.

(e) Survival of Indemnities. The respective indemnity and
contribution agreements of the Company and the Underwriters contained in this
Section 9, and the
<PAGE> 12
12

representations and warranties of the Company set forth in Section 1 hereof,
shall remain operative and in full force and effect, regardless of any
termination or cancelation of this Agreement or any investigation made by or on
behalf of any Underwriter or any such controlling person or the Company or any
such controlling person, director or officer, and shall survive the delivery of
the Debt Securities, and any successor of any Underwriter or of any such
controlling person or of the Company, and any legal representative of any such
controlling person, director or officer, as the case may be, shall be entitled
to the benefit of the respective indemnity and contribution agreements.

10. Conditions to Underwriters' Obligations. The several
obligations of the Underwriters hereunder are subject to the accuracy of and
compliance with the representations and warranties of the Company contained in
Section 1 hereof, as of the date hereof and as of the Closing Date, and to the
following further conditions:

(a) Effectiveness of Registration Statement. No stop order
suspending the effectiveness of the Registration Statement or
qualification of the Indenture shall be in effect on the Closing Date,
and no proceedings for the issuance of such an order shall be pending
or, to the knowledge of the Company or you, threatened by the
Commission on the Closing Date.

(b) Opinion of Counsel for the Underwriters. The form and
validity of the Indenture, the form and validity of the Debt
Securities, the legality and sufficiency of the authorization of the
issuance and sale of the Debt Securities hereunder, and all corporate
proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (other than
financial statements and other financial data), shall have been
approved as of the Closing Date by Cravath, Swaine & Moore, counsel
for the Underwriters.

(c) Opinion of Counsel for the Company. The Company shall
have furnished to you, as Representatives of the Underwriters, on the
Closing Date, the opinion, addressed to the Underwriters and dated the
Closing Date, of Milbank, Tweed, Hadley & McCloy, counsel for
<PAGE> 13
13

the Company, which opinion shall be satisfactory in form and scope to
counsel for the Underwriters, to the following effect:

(i) the Company has been duly incorporated and is
validly existing as a cooperative association in good standing
under the laws of the District of Columbia with corporate
power to conduct its business as described in the Registration
Statement;

(ii) the issuance and sale of the Debt Securities by
the Company pursuant to this Agreement have been duly and
validly authorized by all necessary corporate action; and no
authorization, consent, order or approval of, or filing or
registration with, or exemption by, any government or public
body or authority (including, without limitation, the Rural
Utilities Service) of the United States or of the State of New
York or any department or subdivision thereof or to the best
of such counsel's knowledge any court, other than such as may
be required under State securities or blue sky laws and other
than registration of the Debt Securities under the Securities
Act and qualification of the Indenture under the Trust
Indenture Act, is required for the validity of the Debt
Securities or for the issuance, sale and delivery of the Debt
Securities by the Company pursuant to this Agreement or for
the execution and delivery of this Agreement by the Company;

(iii) the Indenture has been duly authorized by the
Company, has been duly qualified under the Trust Indenture
Act, constitutes an instrument valid and binding on the
Company and enforceable in accordance with its terms;

(iv) the Debt Securities are in the forms provided
for in the Indenture, and, assuming due execution of the Debt
Securities on behalf of the Company and authentication thereof
by the Trustee, the Debt Securities constitute valid and
binding obligations of the Company enforceable in accordance
with their terms and are entitled to the benefits of the
Indenture;
<PAGE> 14
14

(v) this Agreement has been duly authorized, executed
and delivered by the Company and the performance of this
Agreement and the consummation of the transactions herein
contemplated will not result in a breach of any terms or
provisions of, or constitute a default under, the Articles of
Incorporation or By-laws of the Company or any indenture, deed
of trust, note, note agreement or other agreement or
instrument known to such counsel, after due inquiry, to which
the Company is a party or by which the Company or any of its
properties is bound or affected;

(vi) the Debt Securities and the Indenture conform in
all material respects to the descriptions thereof contained in
the Registration Statement;

(vii) the Registration Statement (and any
post-effective amendment thereof) has become and is effective
under the Securities Act and the Debt Securities have become
registered under the Securities Act, and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated, and the Registration Statement
(and any post-effective amendment thereof), the Prospectus and
each amendment thereof or supplement thereof (except for the
financial statements and other financial data included therein
as to which such counsel need express no opinion) when they
became effective or were filed with the Securities and
Exchange Commission complied as to form in all material
respects with the requirements of the Securities Act, the
Exchange Act, the Trust Indenture Act and the rules and
regulations issued thereunder;

(viii) based upon such counsel's participation in the
preparation of the Registration Statement, the Prospectus and
documents incorporated by reference therein, such counsel's
discussions with certain officers and employees of the
Company, such counsel's conferences with representatives of
the Company's independent Certified Public Accountants and
such counsel's representation of
<PAGE> 15
15

the Company, and while such counsel does not pass on or assume
any responsibility for the accuracy, completeness or fairness
thereof, nothing has come to such counsel's attention that
causes it to believe that either the Registration Statement
(or any post-effective amendment thereof) as of the date it
became effective, or the Prospectus and each supplement
thereto as of the Closing Date (except in each case for the
financial or statistical data included therein, as to which
such counsel expresses no view) contains an untrue statement
of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading and such counsel does not know of any
litigation or any governmental proceeding instituted or
threatened against the Company required to be disclosed in the
Registration Statement or Prospectus and which is not
disclosed therein;

(ix) the Company is not required to be registered as
an investment company under the Investment Company Act of
1940;

(x) the Company is not subject to regulation under
the Public Utility Holding Company Act of 1935; and

(xi) the Company is not a public utility as defined
in the Federal Power Act and is not a natural gas company as
defined in the Natural Gas Act.

The foregoing opinion may contain qualifications to the effect
that, insofar as such opinion relates to the enforceability of the
Debt Securities and the Indenture, the enforceability thereof may be
limited by bankruptcy, reorganization, insolvency, moratorium or other
laws of general application relating to or affecting the enforcement
of creditors' rights and by general principals of equity (regardless
of whether considered in a proceeding in equity or at law), including
without limitation (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
In addition, the Company's obligations and
<PAGE> 16
16

the rights and remedies of the Trustee and the holders of the Debt
Securities may be subject to possible limitations on the exercise of
remedial or procedural provisions contained in the Indenture (provided
that such limitations do not, in the opinion of such counsel, make
inadequate the remedies afforded thereby for the practical realization
of the substantive benefits provided for in the Debt Securities and
the Indenture).

In rendering the foregoing opinion, Milbank, Tweed, Hadley &
McCloy may rely as to matters of the law of the District of Columbia
upon the opinion of John Jay List, Esq., General Counsel of the
Company, addressed to the Underwriters and dated the Closing Date,
satisfactory in form and scope to counsel for the Underwriters. If
Milbank, Tweed, Hadley & McCloy shall so rely upon the opinion of John
Jay List, Esq., (i) copies of the opinion so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to
counsel for the Underwriters and (ii) the opinion required by this
Section 10(c) shall also state that Milbank, Tweed, Hadley & McCloy
has made an independent investigation of the matters in its opinion
covered by the opinion so relied upon and that the Underwriters are
justified in relying upon such opinion.

(d) Accountants' Letter. Arthur Andersen LLP shall have
furnished to you, as Representatives of the Underwriters, at or prior
to the Closing Date, a letter, addressed to the Underwriters and dated
the Closing Date, confirming that they are independent public
accountants with respect to the Company within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission; and stating, as of the date of such
letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information
is given in the Prospectus, as of a date not more than five days prior
to the date of such letter), the conclusions and findings of such firm
with respect to the financial information and other matters covered by
its letter delivered to you, as Representatives of the Underwriters,
concurrently with the execution of this Agreement and confirming in
all material respects the
<PAGE> 17
17

conclusions and findings set forth in such prior letter or, if no such
letter shall have been delivered to you, the conclusions and findings
of such firm, in form and substance satisfactory to you, as
Representatives of the Underwriters, with respect to such financial
information and other matters as you, as Representatives of the
Underwriters, shall reasonably request.

(e) Officer's Certificate. You shall have received, on the
Closing Date, a certificate of the Company dated the Closing Date,
signed on its behalf by the President, the Governor or a Vice
President of the Company, to the effect that the signer of such
certificate has examined the Registration Statement and the Prospectus
and that (i) in his opinion, as of the effective date of the
Registration Statement, the Registration Statement did not contain an
untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Prospectus did not contain
an untrue statement of a material fact and did not omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, (ii)
since the effective date of the Registration Statement no event has
occurred which should have been set forth in an amendment or
supplement to the Prospectus but which has not been so set forth,
(iii) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or other, or
earnings of the Company, whether or not arising from transactions in
the ordinary course of business, other than changes which the
Registration Statement and the Prospectus indicate might occur after
the effective date of the Registration Statement, (iv) the Company has
no material contingent obligations which are required to be disclosed
in the Registration Statement and the Prospectus and are not disclosed
therein, (v) no stop order suspending the effectiveness of the
Registration Statement is in effect on the Closing Date and no
proceedings for the issuance of such an order have been taken or to
the knowledge of the Company are contemplated by the Commission at or
prior to the Closing Date, (vi) there are no material legal
proceedings to which the Company is a party or of
<PAGE> 18
18

which property of the Company is the subject which are required to be
disclosed and which are not disclosed in the Registration Statement
and the Prospectus, (vii) there are no material contracts to which the
Company is a party which are required to be disclosed and which are
not disclosed in the Registration Statement or the Prospectus and
(viii) the representations and warranties of the Company herein are
true and correct as of the Closing Date.

(f) (i) The Company shall not have sustained since the date
of the latest audited financial statements included or incorporated by
reference in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus or (ii) since such date there shall not have been
any change in the members' equity or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, member's equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in your judgment, so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Debt Securities on the terms
and in the manner contemplated in the Prospectus.

(g) On or after the date hereof: (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities by
any "nationally recognized statistical rating organization", as that
term is defined by the Commission for purposes of Rule 436(g)(2) of
the Rules and Regulations and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's
debt securities.

(h) On or after the date hereof, there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock
Exchange, (ii) a
<PAGE> 19
19

banking moratorium on commercial banking activities in New York
declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) such a material adverse change in general economic,
political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be
such) the effect of which, in any such case described in clause (iii)
or (iv), is, in your reasonable judgment, to make it impracticable or
inadvisable to proceed with the public offering or delivery of the
Debt Securities on the terms and in the manner contemplated in the
Prospectus.

(i) Miscellaneous. The Company shall have taken, on or prior
to the Closing Date, all other action, if any, which it is stated in
the Registration Statement (or any post-effective amendment thereof)
or the Prospectus (as amended or supplemented, if so amended or
supplemented) that the Company will take prior to or concurrently with
the issuance and delivery of the Debt Securities, and all agreements
herein contained to be performed on the part of the Company on or
prior to the Closing Date shall have been so performed.

(j) Other Documents. The Company shall have furnished to you
and to Cravath, Swaine & Moore, counsel for the Underwriters, such
further certificates and documents as you or they may have reasonably
requested prior to the Closing Date.

If any of the conditions specified in this Section 10 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Underwriters hereunder may be canceled on,
or at any time prior to, the Closing Date by you, as Representatives of the
Underwriters. Notice of such cancelation shall be given to the Company in
writing, or by telegraph, telephone or telex confirmed in writing.

11. Substitution of Underwriters. If any one or more of the
Underwriters shall fail or refuse on the Closing Date to purchase and pay for
the Debt Securities which it or they have agreed to purchase hereunder, then
(a) if the aggregate principal amount of the Debt Securities which the
<PAGE> 20
20

defaulting Underwriter or Underwriters so agreed to purchase shall not exceed
$10,000,000, the nondefaulting Underwriters of shall be obligated to purchase
the Debt Securities from the Company, in proportion to their respective
obligations hereunder and upon the terms herein set forth, or (b) if the
aggregate principal amount of the Debt Securities which the defaulting
Underwriter or Underwriters so agreed to purchase shall exceed $10,000,000,
either you, as Representatives of the Underwriters, or the Company shall have
the right at any time prior to 9:30 A.M., New York City time, on the next
business day after the Closing Date to procure one or more of the other
Underwriters, or any others, to purchase such Debt Securities from the Company,
in such amounts as may be agreed upon and upon the terms herein set forth. If
within such specified time neither you, as such representative, nor the Company
shall have procured such other Underwriters or any others to purchase the Debt
Securities agreed to be purchased by the defaulting Underwriter or
Underwriters, this Agreement shall terminate without liability on the part of
any nondefaulting Underwriter or of the Company. In the event of a default by
any Underwriter or Underwriters, as set forth in this Section 11, the Closing
Date may be postponed for such period, not exceeding seven days, as you, as
such representative, shall determine in order that any required changes in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken or termination of this
Agreement under this Section 11 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.

12. Information Furnished by Underwriters. The statement set
forth in the last paragraph on the cover of, in the last paragraph on page 2
of, and under the heading "Underwriting" in, the prospectus supplement portion
of the Prospectus, and under the heading "Plan of Distribution" in the
Prospectus, constitute the only information furnished in writing by you, on
behalf of the Underwriters, for inclusion therein, and you, as Representatives
of the Underwriters, confirm that such statements are correct.

13. Termination. This Agreement shall be subject to
termination by you, by notice given to the Company prior to delivery of and
payment for the Debt Securities, if prior to such time any of the events
described in Sections 10(f), 10(g) or 10(h) occurs.
<PAGE> 21
21

14. Miscellaneous.

(a) Except as otherwise expressly provided in this Agreement,
(i) whenever notice is required by all the provisions of this Agreement to be
given to the Company, such notice shall be in writing addressed to the Company
at its office, Woodland Park, 2201 Cooperative Way, Herndon, Virginia 22071,
attention of the Governor, and (ii) whenever notice is required by the
provisions of this Agreement to be given to you, as Representatives of the
Underwriters or of any of them, such notice shall be in writing addressed to
you at your office, Three World Financial Center, New York, New York 10285.

(b) The Company agrees to furnish to you and to Cravath,
Swaine & Moore, without charge, a signed copy of the Registration Statement and
each amendment thereof, including all financial statements and all exhibits
thereto (except such financial statements and exhibits as are incorporated
therein by reference and which shall have been previously furnished to you),
and to furnish to each of the other Underwriters, without charge, a copy of the
Registration Statement and each amendment thereof, including all financial
statements (except such financial statements as are incorporated therein by
reference) but without exhibits.

(c) This Agreement is made solely for the benefit of the
several Underwriters and the Company and their respective successors and
assigns, and, to the extent provided in Section 9 hereof, any controlling
person referred to in such Section 9 and the directors of the Company and those
officers of the Company who shall have signed the Registration Statement, and
their respective legal representatives, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successor" or the term "successors and assigns" as used in this
Agreement shall not include any purchaser, as such purchaser, from any of the
Underwriters of the Debt Securities.

(d) If this Agreement shall be canceled or terminated by the
Underwriters on any of the grounds referred to or specified in Section 10
hereof or because of any failure or refusal on the part of the Company to
comply with any of the terms or to fulfill any of the conditions of this
Agreement, the Company will reimburse the Underwriters severally for all their
out-of-pocket expenses (including
<PAGE> 22
22

the fees and disbursements of their counsel) reasonably incurred by them in
connection with the subject matter of this Agreement.

(e) The term "business day" as used in this Agreement shall
mean any day on which the New York Stock Exchange, Inc., is open for trading.

(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

(g) Section headings have been inserted in this Agreement as
a matter of convenience of reference only and it is agreed that such section
headings are not a part of this Agreement and will not be used in the
interpretation of any provision of this Agreement.

Please confirm that you are acting on behalf of yourself and
the other several Underwriters and that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.

Very truly yours,

NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION,

------------------
Name:
Title:
<PAGE> 23
23

Acting on behalf of ourselves and
the other several Underwriters named
in Schedule I attached to the
foregoing letter, we hereby confirm
as of the date thereof that such letter
correctly sets forth the agreement between
the Company and the several Underwriters:

LEHMAN BROTHERS INC.,

------------------
Name:
Title:
<PAGE> 24
SCHEDULE I

Underwriting Agreement dated [DATE]

NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION

[TITLE OF DEBT SECURITIES]

<TABLE>
<CAPTION>
Principal Amount of
Debt Securities
Underwriter to be Purchased
- ----------- ---------------
<S> <C>
Lehman Brothers Inc. . . . . . . . . . . . . . . $

------------------
Total . . . . . . . . . . . . . . . $
==================
</TABLE>

<PAGE> 1
EXHIBIT 4.1
[CONFORMED COPY]
-------------------------------

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

MELLON BANK, N.A.

Trustee

---------

INDENTURE
(FOR UNSECURED SUBORDINATED DEBT SECURITIES)

DATED AS OF _____________, 1995

-------------------------------
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C>
ARTICLE ONE

Definitions and Other Provisions of General Application . . . . . . . . . . 1

SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . 10
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . 11
SECTION 104. Acts of Holders. . . . . . . . . . . . . . . . . . . . . 12
SECTION 105. Notices, Etc. to Trustee and Company. . . . . . . . . . . 14
SECTION 106. Notice to Holders of Securities; Waiver. . . . . . . . . 15
SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . . . 16
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . 16
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . 16
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . 16
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . 16
SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . 17
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE TWO

Security Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . 17
SECTION 202. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE THREE

The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 301. Amount Unlimited; Issuable in Series. . . . . . . . . . . 18
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 303. Execution, Authentication, Delivery and
Dating. . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . 27
SECTION 305. Registration, Registration of Transfer and
Exchange. . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 307. Payment of Interest; Interest Rights
Preserved. . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . 32
SECTION 309. Cancellation by Security Registrar. . . . . . . . . . . . 32
SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . 33
SECTION 311. Payment to Be in Proper Currency. . . . . . . . . . . . . 33
SECTION 312. Extension of Interest Payment. . . . . . . . . . . . . . 33
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE FOUR

Redemption of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 34

SECTION 401. Applicability of Article. . . . . . . . . . . . . . . . . 34
SECTION 402. Election to Redeem; Notice to Trustee. . . . . . . . . . 34
SECTION 403. Selection of Securities to Be Redeemed. . . . . . . . . . 34
SECTION 404. Notice of Redemption. . . . . . . . . . . . . . . . . . . 35
SECTION 405. Securities Payable on Redemption Date. . . . . . . . . . 37
SECTION 406. Securities Redeemed in Part. . . . . . . . . . . . . . . 37

ARTICLE FIVE

Sinking Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

SECTION 501. Applicability of Article. . . . . . . . . . . . . . . . . 38
SECTION 502. Satisfaction of Sinking Fund Payments with
Securities. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 503. Redemption of Securities for Sinking
Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . 39

ARTICLE SIX

Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SECTION 601. Payment of Principal, Premium and
Interest. . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 602. Maintenance of Office or Agency. . . . . . . . . . . . . 40
SECTION 603. Money for Securities Payments to Be Held
in Trust. . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 604. Corporate Existence. . . . . . . . . . . . . . . . . . . 43
SECTION 605. Annual Officer's Certificate as to
Compliance. . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 606. Waiver of Certain Covenants. . . . . . . . . . . . . . . 43

ARTICLE SEVEN

Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . 44

SECTION 701. Satisfaction and Discharge of Securities. . . . . . . . . 44
SECTION 702. Satisfaction and Discharge of Indenture. . . . . . . . . 47
SECTION 703. Application of Trust Money. . . . . . . . . . . . . . . . 48

ARTICLE EIGHT

Events of Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 49

SECTION 801. Events of Default. . . . . . . . . . . . . . . . . . . . 49
SECTION 802. Acceleration of Maturity; Rescission and
Annulment. . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 803. Collection of Indebtedness and Suits for
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Enforcement by Trustee. . . . . . . . . . . . . . . . . . 52
SECTION 804. Trustee May File Proofs of Claim. . . . . . . . . . . . . 53
SECTION 805. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . . 54
SECTION 806. Application of Money Collected . . . . . . . . . . . . . 54
SECTION 807. Limitation on Suits . . . . . . . . . . . . . . . . . . . 54
SECTION 808. Unconditional Right of Holders to Receive
Principal, Premium and Interest . . . . . . . . . . . . . 55
SECTION 809. Restoration of Rights and Remedies . . . . . . . . . . . 56
SECTION 810. Rights and Remedies Cumulative . . . . . . . . . . . . . 56
SECTION 811. Delay or Omission Not Waiver . . . . . . . . . . . . . . 56
SECTION 812. Control by Holders of Securities . . . . . . . . . . . . 57
SECTION 813. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 57
SECTION 814. Undertaking for Costs . . . . . . . . . . . . . . . . . . 58
SECTION 815. Waiver of Stay or Extension Laws . . . . . . . . . . . . 58

ARTICLE NINE

The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

SECTION 901. Certain Duties and Responsibilities . . . . . . . . . . . 59
SECTION 902. Notice of Defaults . . . . . . . . . . . . . . . . . . . 60
SECTION 903. Certain Rights of Trustee . . . . . . . . . . . . . . . . 61
SECTION 904. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 905. May Hold Securities . . . . . . . . . . . . . . . . . . . 62
SECTION 906. Money Held in Trust . . . . . . . . . . . . . . . . . . . 63
SECTION 907. Compensation and Reimbursement . . . . . . . . . . . . . 63
SECTION 908. Disqualification; Conflicting Interests . . . . . . . . . 64
SECTION 909. Corporate Trustee Required; Eligibility . . . . . . . . . 64
SECTION 910. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 911. Acceptance of Appointment by Successor . . . . . . . . . 67
SECTION 912. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . . 69
SECTION 913. Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 914. Co-trustees and Separate Trustees . . . . . . . . . . . . 70
SECTION 915. Appointment of Authenticating Agent. . . . . . . . . . . 72

ARTICLE TEN

Holders' Lists and Reports by Trustee and Company . . . . . . . . . . . . . 75

SECTION 1001. Lists of Holders . . . . . . . . . . . . . . . . . . . . 75
SECTION 1002. Reports by Trustee and Company . . . . . . . . . . . . . 75

ARTICLE ELEVEN

Consolidation, Merger, Conveyance or Other Transfer . . . . . . . . . . . . 76
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 1101. Company May Consolidate, Etc., Only on Certain Terms . 76
SECTION 1102. Successor Corporation Substituted . . . . . . . . . . . 77

ARTICLE TWELVE

Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . 77

SECTION 1201. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 1202. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1203. Execution of Supplemental Indentures . . . . . . . . . . 82
SECTION 1204. Effect of Supplemental Indentures . . . . . . . . . . . 82
SECTION 1205. Conformity With Trust Indenture Act . . . . . . . . . . 82
SECTION 1206. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 1207. Modification Without Supplemental
Indenture . . . . . . . . . . . . . . . . . . . . . . . 83

ARTICLE THIRTEEN

Meetings of Holders; Action Without Meeting . . . . . . . . . . . . . . . . 83

SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 1302. Call, Notice and Place of Meetings . . . . . . . . . . . 83
SECTION 1303. Persons Entitled to Vote at Meetings . . . . . . . . . . 84
SECTION 1304. Quorum; Action . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1305. Attendance at Meetings; Determination of
Voting Rights; Conduct and Adjournment
of Meetings . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1306. Counting Votes and Recording Action of
Meetings . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1307. Action Without Meeting . . . . . . . . . . . . . . . . . 88

ARTICLE FOURTEEN

Immunity of Incorporators, Stockholders, Officers and Directors . . . . . . 88

SECTION 1401. Liability Solely Corporate . . . . . . . . . . . . . . . 88

ARTICLE FIFTEEN

Subordination of Securities . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
<PAGE> 6
INDENTURE, dated as of , between NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION, District of Columbia cooperative
association (herein called the "Company"), having its principal office at 2201
Cooperative Way, Herndon, VA 22071 and Mellon Bank, N.A., a national banking
association organized and existing under the laws of the United States of
America, having its principal corporate trust office at Pittsburgh,
Pennsylvania, as Trustee (herein called the "Trustee").

RECITAL OF THE COMPANY

The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the "Securities"), to be issued in one or more series as contemplated
herein; and all acts necessary to make this Indenture a valid agreement of the
Company have been performed.

For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires, capitalized terms used
herein shall have the meanings assigned to them in Article One of this
Indenture.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

(b) all terms used herein without definition which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
<PAGE> 7
-2-

(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States at
the date of such computation or, at the election of the Company from time
to time, at the date of the execution and delivery of this Indenture;
provided, however, that in determining generally accepted accounting
principles applicable to the Company, the Company shall, to the extent
required, conform to any order, rule or regulation of any administrative
agency, regulatory authority or other governmental body having
jurisdiction over the Company; and

(d) 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 Nine, are defined in that
Article.

"ACT", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.

"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.

"AUTHENTICATING AGENT" means any Person (other than the Company or an
Affiliate of the Company) authorized by the Trustee to act on behalf of the
Trustee to authenticate one or more series of Securities.

"AUTHORIZED OFFICER" means the Governor, the President, any Vice
President, the Assistant Secretary-Treasurer or any other duly authorized
officer of the Company.
<PAGE> 8
-3-

"BOARD OF DIRECTORS" means either the board of directors of the
Company or any committee thereof duly authorized to act in respect of matters
relating to this Indenture.

"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary-Treasurer 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.

"BUSINESS DAY", when used with respect to a Place of Payment or any
other particular location specified in the Securities or this Indenture, means
any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other location are
generally authorized or required by law, regulation or executive order to
remain closed, except as may be otherwise specified as contemplated by Section
301.

"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 date of execution and delivery of this Indenture
such Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body, if any, performing such duties at
such time.

"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.

"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by an Authorized Officer and delivered to the
Trustee.

"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
Indenture is located at Two Mellon Bank Center, Room 325, Pittsburgh, PA
15259.

"CORPORATION" means a corporation, association, company, joint stock
company or business trust.
<PAGE> 9
-4-

"DEFAULTED INTEREST" has the meaning specified in Section 307.

"DISCOUNT SECURITY" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 802. "Interest"
with respect to a Discount Security means interest, if any, borne by such
Security at a Stated Interest Rate.

"DOLLAR" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.

"ELIGIBLE OBLIGATIONS" means:

(a) with respect to Securities denominated in Dollars, Government
Obligations; or

(b) with respect to Securities denominated in a currency other than
Dollars or in a composite currency, such other obligations or instruments
as shall be specified with respect to such Securities, as contemplated by
Section 301.

"EVENT OF DEFAULT" has the meaning specified in Section 801.

"GOVERNMENTAL AUTHORITY" means the government of the United States or
of any State or Territory thereof or of the District of Columbia or of any
county, municipality or other political subdivision of any thereof, or any
department, agency, authority or other instrumentality of any of the foregoing.

"GOVERNMENT OBLIGATIONS" means:

(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United
States entitled to the benefit of the full faith and credit thereof;
and

(b) certificates, depositary receipts or other instruments which
evidence a direct ownership interest in obligations described in
clause (a) above or in any specific interest or principal payments
due in respect thereof; provided, however, that the custodian of such
<PAGE> 10
-5-

obligations or specific interest or principal payments shall be a
bank or trust company (which may include the Trustee or any Paying
Agent) subject to Federal or state supervision or examination with a
combined capital and surplus of at least $50,000,000; and provided,
further, that except as may be otherwise required by law, such
custodian shall be obligated to pay to the holders of such
certificates, depositary receipts or other instruments the full
amount received by such custodian in respect of such obligations or
specific payments and shall not be permitted to make any deduction
therefrom.

"HOLDER" means a Person in whose name a Security is registered in the
Security Register.

"INDENTURE" means this instrument as originally executed and
delivered and as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of
Securities established as contemplated by Section 301.

"INTEREST PAYMENT DATE", when used with respect to any Security,
means the Stated Maturity of an installment of interest on such Security.

"MATURITY", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as provided in such Security or in this Indenture, whether at the
Stated Maturity, by declaration of acceleration, upon call for redemption or
otherwise.

"OFFICER'S CERTIFICATE" means a certificate signed by an Authorized
Officer and delivered to the Trustee.

"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company, or other counsel acceptable to the Trustee.

"OUTSTANDING", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
<PAGE> 11
-6-

(a) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;

(b) Securities deemed to have been paid in accordance with
Section 701; and

(c) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it and the Company
that such Securities are held by a bona fide purchaser or purchasers
in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether or not the Holders of the
requisite principal amount of the Securities Outstanding under this Indenture,
or the Outstanding Securities of any series or Tranche, have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or
whether or not a quorum is present at a meeting of Holders of Securities,

(x) Securities owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other
obligor (unless the Company, such Affiliate or such obligor owns all
Securities Outstanding under this Indenture, or all Outstanding
Securities of each such series and each such Tranche, as the case may
be, determined without regard to this clause (x)) 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 or upon any such determination as to the presence of a
quorum, only Securities which the Trustee knows to be so owned shall
be so disregarded; provided, however, that securities so owned which
have been pledged in good faith may 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 Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor;
<PAGE> 12
-7-

(y) the principal amount of a Discount Security that shall be
deemed to be Outstanding for such purpose shall be the amount of the
principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the Maturity
thereof pursuant to Section 802; and

(z) the principal amount of any Security which is denominated in
a currency other than Dollars or in composite currency that shall be
deemed to be Outstanding for such purposes shall be the amount of
Dollars which could have been purchased by the principal amount (or,
in the case of a Discount Security, the Dollar equivalent on the date
determined as set forth below of the amount determined as provided in
(y) above) of such currency or composite currency evidenced by such
Security, in each such case certified to the Trustee in an Officer's
Certificate, based (i) on the average of the mean of the buying and
selling spot rates quoted by three banks which are members of the New
York Clearing House Association selected by the Company in effect at
11:00 A.M. (New York time) in The City of New York on the fifth
Business Day preceding any such determination or (ii) if on such
fifth Business Day it shall not be possible or practicable to obtain
such quotations from such three banks, on such other quotations or
alternative methods of determination which shall be as consistent as
practicable with the method set forth in (i) above;

provided, further, that, in the case of any Security the principal of which is
payable from time to time without presentment or surrender, the principal
amount of such Security that shall be deemed to be Outstanding at any time for
all purposes of this Indenture shall be the original principal amount thereof
less the aggregate amount of principal thereof theretofore paid.

"PAYING AGENT" means any Person, including the Company, authorized by
the Company to pay the principal of and premium, if any, or interest, if any,
on any Securities on behalf of the Company.

"PERIODIC OFFERING" means an offering of Securities of a series from
time to time any or all of the specific terms of
<PAGE> 13
-8-

which Securities, including without limitation the rate or rates of interest,
if any, thereon, the Stated Maturity or Maturities thereof and the redemption
provisions, if any, with respect thereto, are to be determined by the Company
or its agents upon the issuance of such Securities.

"PERSON" means any individual, corporation, partnership, joint
venture, trust or unincorporated organization or any Governmental Authority.

"PLACE OF PAYMENT", when used with respect to the Securities of any
series, or tranche thereof, means the place or places, specified as
contemplated by Section 301, at which, subject to Section 602, principal of and
premium, if any, and interest, if any, on the Securities of such series or
tranche are payable.

"PREDECESSOR SECURITY" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed (to the extent lawful) to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.

"REDEMPTION DATE", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

"REDEMPTION PRICE", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.

"REGULAR RECORD DATE" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 301.

"REQUIRED CURRENCY" has the meaning specified in Section 311.

"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any officer of the Trustee assigned by the Trustee to administer its corporate
trust matters.
<PAGE> 14
-9-

"SECURITIES" has the meaning stated in the first recital of this
Indenture and more particularly means any securities authenticated and
delivered under this Indenture.

"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 305.

"SENIOR INDEBTEDNESS" means (a) all indebtedness heretofore or
hereafter incurred by the Corporation for money borrowed unless by its terms it
is provided that such indebtedness is not Senior Indebtedness, (b) all other
indebtedness hereafter incurred by the Company which by its terms provides that
such indebtedness is Senior Indebtedness, (c) all guaranties, endorsements and
other contingent obligations in respect of, or obligations to purchase or
otherwise acquire or service, indebtedness or obligations of others, and (d)
any amendments, modifications, deferrals, renewals or extensions of any such
Senior Indebtedness, or debentures, notes or evidences of indebtedness
heretofore or hereafter issued in evidence of or exchange of such Senior
Indebtedness.

"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on
the Securities of any series means a date fixed by the Trustee pursuant to
Section 307.

"STATED INTEREST RATE" means a rate (whether fixed or variable) at
which an obligation by its terms is stated to bear simple interest. Any
calculation or other determination to be made under this Indenture by reference
to the Stated Interest Rate on a Security shall be made without regard to the
effective interest cost to the Company of such Security and without regard to
the Stated Interest Rate on, or the effective cost to the Company of, any other
indebtedness the Company's obligations in respect of which are evidenced or
secured in whole or in part by such Security.

"STATED MATURITY", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date on which
the principal of such obligation or such installment of principal or interest
is stated to be due and payable (without regard to any provisions for
redemption, prepayment, acceleration, purchase or extension).

"TRANCHE" means a group of Securities which (a) are of the same
series and (b) have identical terms except as to principal amount and/or date
of issuance.
<PAGE> 15
-10-

"TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act
of 1939, or any successor statute, as in effect at such time.

"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
with respect to one or more series of Securities pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall means the Trustee with respect to Securities of that series.

"UNITED STATES" means the United States of America, its Territories,
its possessions and other areas subject to its political jurisdiction.

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall, if requested by the
Trustee, furnish to the Trustee an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture 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:

(a) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;

(b) 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;
<PAGE> 16
-11-

(c) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant
or condition has been complied with; and

(d) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.

SECTION 103. 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,
insofar 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 such officer's certificate or opinion
are based are erroneous. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the Company stating that
the information with respect to such factual matters is in the possession of
the Company, 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.

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.

Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel
<PAGE> 17
-12-

or other document or instrument, a clerical, typographical or other inadvertent
or unintentional error or omission shall be discovered therein, a new document
or instrument may be substituted therefor in corrected form with the same force
and effect as if originally filed in the corrected form and, irrespective of
the date or dates of the actual execution and/or delivery thereof, such
substitute document or instrument shall be deemed to have been executed and/or
delivered as of the date or dates required with respect to the document or
instrument for which it is substituted. Anything in this Indenture to the
contrary notwithstanding, if any such corrective document or instrument
indicates that action has been taken by or at the request of the Company which
could not have been taken had the original document or instrument not contained
such error or omission, the action so taken shall not be invalidated or
otherwise rendered ineffective but shall be and remain in full force and
effect, except to the extent that such action was a result of willful
misconduct or bad faith. Without limiting the generality of the foregoing, any
Securities issued under the authority of such defective document or instrument
shall nevertheless be the valid obligations of the Company entitled to the
benefits of this Indenture equally and ratably with all other Outstanding
Securities, except as aforesaid.

SECTION 104. ACTS OF HOLDERS.

(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made,
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 an agent duly appointed in writing or, alternatively, may be
embodied in and evidenced by the record of Holders voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders duly called and held in accordance with the provisions
of Article Thirteen, or a combination of such instruments and any such
record. Except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments or record or both are
delivered to the Trustee and, where it is hereby expressly required, to
the Company. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments and so voting at any such meeting. Proof of execution of any
such instrument or of a
<PAGE> 18
-13-

writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and
(subject to Section 901) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section. The record of any
meeting of Holders shall be proved in the manner provided in Section 1306.

(b) The Act and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof, or may be proved in any other manner which the Trustee
and the Company deem sufficient. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his authority.

(c) The principal amount (except as otherwise contemplated in
clause (y) of the proviso to the definition of Outstanding) and serial
numbers of Securities held by any Person, and the date of holding the
same, shall be proved by the Security Register.

(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted 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 Security.

(e) Until such time as written instruments shall have been delivered
to the Trustee with respect to the requisite percentage of principal
amount of Securities for the action contemplated by such instruments, any
such instrument executed and delivered by or on behalf of a Holder may be
revoked with respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in which such
instrument was proven.
<PAGE> 19
-14-

(f) Securities of any series, or any Tranche thereof, authenticated
and delivered after any Act of Holders may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to any action
taken by such Act of Holders. If the Company shall so determine, new
Securities of any series, or any Tranche thereof, so modified as to
conform, in the opinion of the Trustee and the Company, to such action may
be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series or
Tranche.

(g) If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by Board Resolution, fix in advance a record
date 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 the record date
shall be deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of the Outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the
Outstanding Securities shall be computed as of the record date.

SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY.

Any request, demand, authorization, direction, notice, consent,
election, 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 the
Trustee by any Holder or by the Company, or the Company by the Trustee or by
any Holder, shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and delivered personally to an officer
or other responsible employee of the addressee, or transmitted by facsimile
transmission, telex or other direct written electronic means to such telephone
number or other electronic communications address as the parties hereto shall
from time to time designate, or transmitted by registered mail, charges
prepaid, to the applicable address set opposite such
<PAGE> 20
-15-

party's name below or to such other address as either party hereto may from
time to time designate:

If to the Trustee, to:

Mellon Bank, N.A.
Corporate Trust Group
Two Mellon Bank Center, Rm. 325
Pittsburgh, PA 15259

Attention: Ted Kravits
Telephone: (412) 234-2203
Telecopy: (412) 234-9196

If to the Company, to:

National Rural Utilities Cooperative
Finance Corporation
2201 Cooperative Way
Herndon, VA 22071

Attention:
Telephone: (703) 709-6700
Telecopy:

Any communication contemplated herein shall be deemed to have been
made, given, furnished and filed if personally delivered, on the date of
delivery, if transmitted by facsimile transmission, telex or other direct
written electronic means, on the date of transmission, and if transmitted by
registered mail, on the date of receipt.

SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.

Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given, and shall be deemed given, to Holders if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at the
address of such Holder as it appears in the Security Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice.

In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders by mail, then such notification as
<PAGE> 21
-16-

shall be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder. 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 Holder shall affect the sufficiency of
such notice with respect to other Holders.

Any notice required by this Indenture may be waived in writing by the
Person entitled to receive such notice, either before or after the event
otherwise to be specified therein, 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.

SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.

If any provision of this Indenture limits, qualifies or conflicts
with another provision hereof which is required or deemed to be included in
this Indenture by, or is otherwise governed by, any of the provisions of the
Trust Indenture Act, such other provision shall control; and if any provision
hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture
Act shall control.

SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings in this Indenture and the Table of
Contents are for convenience only and shall not affect the construction hereof.

SECTION 109. 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 110. SEPARABILITY CLAUSE.

In case any provision in this Indenture or the Securities 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.

SECTION 111. BENEFITS OF INDENTURE.
<PAGE> 22
-17-

Nothing in this Indenture or the Securities, express or implied,
shall give to any Person, other than the parties hereto, their successors
hereunder, the Holders, and so long as there is Senior Indebtedness
outstanding, the holders thereof, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

SECTION 112. GOVERNING LAW.

This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, except to the extent that
the law of any other jurisdiction shall be mandatorily applicable.

SECTION 113. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities other than a provision in Securities of any series, or any Tranche
thereof, or in the Board Resolution or Officer's Certificate which establishes
the terms of the Securities of such series or Tranche, which specifically
states that such provision shall apply in lieu of this Section) payment of
interest or principal and premium, if any, need not be made at such Place of
Payment on such date, but may be made on the next succeeding Business Day at
such Place of Payment, except that if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day in each case with the same force and effect as if made
on the Interest Payment Date or Redemption Date, or at the Stated Maturity,
and, if such payment is made or duly provided for on such Business Day, no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to such Business Day.

ARTICLE TWO

SECURITY FORMS

SECTION 201. FORMS GENERALLY.

The definitive Securities of each series shall be in substantially
the form or forms thereof established in the indenture supplemental hereto
establishing such series or in a
<PAGE> 23
-18-

Board Resolution establishing such series, or in an Officer's Certificate
pursuant to such supplemental indenture or Board Resolution, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. If the form or
forms of Securities of any series are established in a Board Resolution or in
an Officer's Certificate pursuant to a Board Resolution, such Board Resolution
and Officer's Certificate, if any, shall be delivered to the Trustee at or
prior to the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.

Unless otherwise specified as contemplated by Section 301, the
Securities of each series shall be issuable in registered form without coupons.
The definitive Securities shall be produced in such manner as shall be
determined by the officers executing such Securities, as evidenced by their
execution thereof.

SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificate of authentication shall be in substantially
the form set forth below:

This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Mellon Bank, N.A.
as Trustee

By:
--------------------------
Authorized Officer

ARTICLE THREE

THE SECURITIES

SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
<PAGE> 24
-19-

The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. Subject to the
last paragraph of this Section, prior to the authentication and delivery of
Securities of any series there shall be established by specification in a
supplemental indenture or in a Board Resolution, or in an Officer's Certificate
pursuant to a supplemental indenture or a Board Resolution:

(a) the title of the Securities of such series (which shall
distinguish the Securities of such series from Securities of all other
series);

(b) any limit upon the aggregate principal amount of the Securities
of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 406 or 1206
and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);

(c) the Person or Persons (without specific identification) to whom
interest on Securities of such series, or any Tranche thereof, shall be
payable on any Interest Payment Date, if other than the Persons in whose
names such Securities (or one or more Predecessor Securities) are
registered at the close of business on the Regular Record Date for such
interest;

(d) the date or dates on which the principal of the Securities of
such series or any Tranche thereof is payable or any formulary 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);

(e) the rate or rates at which the Securities 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 Securities 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
<PAGE> 25
-20-

formulary or 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 Securities on any Interest Payment Date; the
right of the Company, if any, to extend the interest payment periods and
the duration of any such extension as contemplated by Section 312 and the
basis of computation of interest, if other than as provided in Section
310;

(f) the place or places at which or methods by which (1) the
principal of and premium, if any, and interest, if any, on Securities of
such series, or any Tranche thereof, shall be payable, (2) registration of
transfer of Securities of such series, or any Tranche thereof, may be
effected, (3) exchanges of Securities of such series, or any Tranche
thereof, may be effected and (4) notices and demands to or upon the
Company in respect of the Securities of such series, or any Tranche
thereof, and this Indenture may be served; the Security Registrar for such
series; and if such is the case, that the principal of such Securities
shall be payable without presentment or surrender thereof;

(g) 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 Securities of such series, or any Tranche thereof, may be
redeemed, in whole or in part, at the option of the Company and any
restrictions on such redemptions, including but not limited to a
restriction on a partial redemption by the Company of the Securities of
any series, or any Tranche thereof, resulting in delisting of such
Securities from any national exchange;

(h) the obligation or obligations, if any, of the Company to redeem
or purchase the Securities 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 periods within which
or the date or dates on which, the price or prices at which and the terms
and conditions upon which such Securities shall be redeemed or purchased,
in whole or in part, pursuant to such obligation, and applicable
exceptions to the requirements of Section 404 in the case of mandatory
redemption or redemption at the option of the Holder;
<PAGE> 26
-21-

(i) the denominations in which Securities of such series, or any
Tranche thereof, shall be issuable if other than denominations of $1,000
and any integral multiple thereof;

(j) the currency or currencies, including composite currencies, in
which payment of the principal of and premium, if any, and interest, if
any, on the Securities of such series, or any Tranche thereof, shall be
payable (if other than in Dollars);

(k) if the principal of or premium, if any, or interest, if any, on
the Securities 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 Securities are stated to be payable, the
period or periods within which and the terms and conditions upon which
such election may be made;

(l) if the principal of or premium, if any, or interest on the
Securities of such series, or any Tranche thereof, are to be payable, or
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 period or periods within which,
and the terms and conditions upon which, any such election may be made;

(m) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Securities of such series, or any Tranche
thereof, may be determined with reference to an index or other fact or
event ascertainable outside this Indenture, the manner in which such
amounts shall be determined to the extent not established pursuant to
clause (e) of this paragraph;

(n) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 802;

(o) any Events of Default, in addition to those specified in Section
801, with respect to the Securities of such series, and any covenants of
the Company for the
<PAGE> 27
-22-

benefit of the Holders of the Securities of such series, or any Tranche
thereof, in addition to those set forth in Article Six;

(p) the terms, if any, pursuant to which the Securities of such
series, or any Tranche thereof, may be converted into or exchanged for
shares of capital stock or other securities of the Company or any other
Person;

(q) the obligations or instruments, if any, which shall be
considered to be Eligible Obligations in respect of the Securities of such
series, or any Tranche thereof, denominated in a currency other than
Dollars or in a composite currency, and any additional or alternative
provisions for the reinstatement of the Company's indebtedness in respect
of such Securities after the satisfaction and discharge thereof as
provided in Section 701;

(r) if the Securities of such series, or any Tranche thereof, are to
be issued in global form, (i) any limitations on the rights of the Holder
or Holders of such Securities to transfer or exchange the same or to
obtain the registration of transfer thereof, (ii) any limitations on the
rights of the Holder or Holders thereof to obtain certificates therefor in
definitive form in lieu of temporary form and (iii) any and all other
matters incidental to such Securities;

(s) if the Securities of such series, or any Tranche thereof, are to
be issuable as bearer securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental indenture as
contemplated by clause (g) of Section 1201;

(t) to the extent not established pursuant to clause (r) of this
paragraph, any limitations on the rights of the Holders of the Securities
of such Series, or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer thereof; and if a
service charge will be made for the registration of transfer or exchange
of Securities of such series, or any Tranche thereof, the amount or terms
thereof;
<PAGE> 28
-23-

(u) any exceptions to Section 113, or variation in the definition of
Business Day, with respect to the Securities of such series, or any
Tranche thereof; and

(v) any other terms of the Securities of such series, or any Tranche
thereof, not inconsistent with the provisions of this Indenture.

The Securities of each series, or any Tranche thereof, shall be
subordinated in the right of payment to Senior Indebtedness as provided in
Article Fifteen.

With respect to Securities of a series subject to a Periodic
Offering, the indenture supplemental hereto or the Board Resolution which
establishes such series, or the Officer's Certificate pursuant to such
supplemental indenture or Board Resolution, as the case may be, may provide
general terms or parameters for Securities of such series and provide either
that the specific terms of Securities of such series, or any Tranche thereof,
shall be specified in a Company Order or that such terms shall be determined by
the Company or its agents in accordance with procedures specified in a Company
Order as contemplated by the clause (b) of the third paragraph of Section 303.

SECTION 302. DENOMINATIONS.

Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities of each
series shall be issuable in denominations of $1,000 and any integral multiple
thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities shall be
executed on behalf of the Company by an Authorized Officer and may have the
corporate seal of the Company affixed thereto or reproduced thereon attested by
any other Authorized Officer. The signature of any or all of these officers on
the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals
who were at the time of execution Authorized 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
<PAGE> 29
-24-

Securities or did not hold such offices at the date of such Securities.

The Trustee shall authenticate and deliver Securities of a series,
for original issue, at one time or from time to time in accordance with the
Company Order referred to below, upon receipt by the Trustee of:

(a) the instrument or instruments establishing the form or forms and
terms of such series, as provided in Sections 201 and 301;

(b) a Company Order requesting the authentication and delivery of
such Securities and, to the extent that the terms of such Securities shall
not have been established in an indenture supplemental hereto or in a
Board Resolution, or in an Officer's Certificate pursuant to a
supplemental indenture or Board Resolution, all as contemplated by
Sections 201 and 301, either (i) establishing such terms or (ii) in the
case of Securities of a series subject to a Periodic Offering, specifying
procedures, acceptable to the Trustee, by which such terms are to be
established (which procedures may provide, to the extent acceptable to the
Trustee, for authentication and delivery pursuant to oral or electronic
instructions from the Company or any agent or agents thereof, which oral
instructions are to be promptly confirmed electronically or in writing),
in either case in accordance with the instrument or instruments delivered
pursuant to clause (a) above;

(d) an Opinion of Counsel to the effect that:

(i) the form or forms of such Securities have been duly authorized
by the Company and have been established in conformity with the
provisions of this Indenture;

(ii) the terms of such Securities have been duly authorized by the
Company and have been established in conformity with the provisions
of this Indenture; and

(iii) such Securities, when authenticated and delivered by the
Trustee and issued and delivered by the Company
<PAGE> 30
-25-

in the manner and subject to any conditions specified in such Opinion
of Counsel, will have been duly issued under this Indenture and will
constitute valid and legally binding obligations of the Company,
entitled to the benefits provided by this Indenture, and enforceable
in accordance with their terms, subject, as to enforcement, to laws
relating to or affecting generally the enforcement of creditors'
rights, including, without limitation, bankruptcy and insolvency laws
and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);

provided, however, that, with respect to Securities of a series subject to a
Periodic Offering, the Trustee shall be entitled to receive such Opinion of
Counsel only once at or prior to the time of the first authentication of such
Securities (provided that such Opinion of Counsel addresses the authentication
and delivery of all Securities of such series) and that in lieu of the opinions
described in clauses (ii) and (iii) above Counsel may opine that:

(x) when the terms of such Securities shall have been
established pursuant to a Company Order or Orders or pursuant to such
procedures (acceptable to the Trustee) as may be specified from time
to time by a Company Order or Orders, all as contemplated by and in
accordance with the instrument or instruments delivered pursuant to
clause (a) above, such terms will have been duly authorized by the
Company and will have been established in conformity with the
provisions of this Indenture; and

(y) such Securities, when authenticated and delivered by the
Trustee in accordance with this Indenture and the Company Order or
Orders or specified procedures referred to in paragraph (x) above and
issued and delivered by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and legally
binding obligations of the Company, entitled to the benefits provided
by the Indenture, and enforceable in accordance with their terms,
subject, as to enforcement, to laws relating to or affecting
generally
<PAGE> 31
-26-

the enforcement of creditors' rights, including, without limitation,
bankruptcy and insolvency laws and to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).

With respect to Securities of a series subject to a Periodic
Offering, the Trustee may conclusively rely, as to the authorization by the
Company of any of such Securities, the form and terms thereof and the legality,
validity, binding effect and enforceability thereof, upon the Opinion of
Counsel and other documents delivered pursuant to Sections 201 and 301 and this
Section, as applicable, at or prior to the time of the first authentication of
Securities of such series unless and until such opinion or other documents have
been superseded or revoked or expire by their terms. In connection with the
authentication and delivery of Securities of a series subject to a Periodic
Offering, the Trustee shall be entitled to assume that the Company's
instructions to authenticate and deliver such Securities do not violate any
rules, regulations or orders of any Governmental Authority having jurisdiction
over the Company.

If the form or terms of the Securities of any series have been
established by or pursuant to a Board Resolution or an Officer's Certificate as
permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance of such Securities pursuant to
this Indenture will affect the Trustee's own rights, duties or immunities under
the Securities and this Indenture in a manner which is not reasonably
acceptable to the Trustee.

Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, or any Tranche thereof, each Security
shall be dated the date of its authentication.

Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, or any Tranche thereof, no Security shall
be entitled to any benefit under this Indenture or be valid or obligatory for
any purpose unless there appears on such Security a certificate of
authentication substantially in the form provided for herein executed by the
Trustee or its agent by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this
<PAGE> 32
-27-

Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder to the Company, or any Person acting on
its behalf, but shall never have been issued and sold by the Company, and the
Company shall deliver such Security to the Trustee for cancellation as provided
in Section 309 together with a written statement (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel) stating that
such Security has never been issued and sold by the Company, for all purposes
of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits hereof.

SECTION 304. TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any series, or
any Tranche thereof, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive
Securities in lieu of which they are issued, with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities;
provided, however, that temporary Securities need not recite specific
redemption, sinking fund, conversion or exchange provisions.

Unless otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, after the
preparation of definitive Securities of such series or Tranche, the temporary
Securities of such series or Tranche shall be exchangeable, without charge to
the Holder thereof, for definitive Securities of such series or Tranche upon
surrender of such temporary Securities at the office or agency of the Company
maintained pursuant to Section 602 in a Place of Payment for such Securities.
Upon such surrender of temporary Securities, the Company shall, except as
aforesaid, execute and the Trustee shall authenticate and deliver in exchange
therefor definitive Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount.

Until exchanged in full as hereinabove provided, temporary Securities
shall in all respects be entitled to the
<PAGE> 33
-28-

same benefits under this Indenture as definitive Securities of the same series
and Tranche and of like tenor authenticated and delivered hereunder.

SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept in each office designated pursuant
to Section 602, with respect to the Securities of each series or any Tranche
thereof, a register (all registers kept in accordance with this Section being
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities of such series or Tranche and the registration of
transfer thereof. The Company shall designate one Person to maintain the
Security Register for the Securities of each series on a consolidated basis,
and such Person is referred to herein, with respect to such series, as the
"Security Registrar". Anything herein to the contrary notwithstanding, the
Company may designate one or more of its offices as an office in which a
register with respect to the Securities of one or more series, or any Tranche
or Tranches thereof, shall be maintained, and the Company may designate itself
the Security Registrar with respect to one or more of such series. The Security
Register shall be open for inspection by the Trustee and the Company at all
reasonable times.

Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, upon surrender
for registration of transfer of any Security of such series or Tranche at the
office or agency of the Company maintained pursuant to Section 602 in a Place
of Payment for such series or Tranche, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of the same series and
Tranche, of authorized denominations and of like tenor and aggregate principal
amount.

Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, any Security
of such series or Tranche may be exchanged at the option of the Holder for one
or more new Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount, upon surrender
of the Securities to be exchanged at any such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall
<PAGE> 34
-29-

authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.

All Securities delivered upon any registration of transfer or
exchange of Securities shall be valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Trustee or the
Security Registrar) be duly endorsed or shall be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Trustee or the
Security Registrar, as the case may be, duly executed by the Holder thereof or
his attorney duly authorized in writing.

Unless otherwise specified as contemplated by Section 301 with
respect to Securities of any series, or any Tranche thereof, no service charge
shall be made for any registration of transfer or exchange of Securities, 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 registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
304, 406 or 1206 not involving any transfer.

The Company shall not be required to execute or to provide for the
registration of transfer of or the exchange of (a) Securities of any series, or
any Tranche thereof, during a period of 15 days immediately preceding the date
notice is to be given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series, and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the ownership of
<PAGE> 35
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and the destruction, loss or theft of any Security and (b) such security or
indemnity as may be reasonably required by them to save each of them and any
agent of either of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security is held by a Person purporting to be the
owner of such Security, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and Tranche, and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.

Notwithstanding the foregoing, in case any such mutilated, destroyed,
lost or stolen Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security, pay such
Security.

Upon the issuance of any new Security 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
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.

Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone other than
the Holder of such new Security, and any such new Security shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Securities of such series duly issued hereunder.

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 Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Unless otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, interest on
any Security which is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
<PAGE> 36
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Subject to Section 312, any interest on any Security of any series
which is payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Holder on the related 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 clause (a) or (b) below:

(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a date (herein called 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 Security of such series 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 clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not 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 promptly 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 Securities of
such series at the address of such Holder as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date.
<PAGE> 37
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(b) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities 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 clause, such manner of payment shall be deemed
practicable by the Trustee.

Subject to the foregoing provisions of this Section and Section 305,
each Security delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.

SECTION 308. PERSONS DEEMED OWNERS.

The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the absolute
owner of such Security for the purpose of receiving payment of principal of and
premium, if any, and (subject to Sections 305 and 307) interest, if any, on
such Security and for all other purposes whatsoever, whether or not such
Security 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.

SECTION 309. CANCELLATION BY SECURITY REGISTRAR.

All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Security Registrar, be delivered to the Security Registrar and, if not
theretofore canceled, shall be promptly canceled by the Security Registrar. The
Company may at any time deliver to the Security Registrar for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever or which the Company shall not have
issued and sold, and all Securities so delivered shall be promptly canceled by
the Security Registrar. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Security Registrar shall be disposed of in accordance with a Company Order
delivered to the Security Registrar and the Trustee, and the Security Registrar
shall promptly deliver a certificate of disposition to the Trustee and the
Company unless,
<PAGE> 38
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by a Company Order, similarly delivered, the Company shall direct that canceled
Securities be returned to it. The Security Registrar shall promptly deliver
evidence of any cancellation of a Security in accordance with this Section 309
to the Trustee and the Company.

SECTION 310. COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by Section 301 for
Securities of any series, or any Tranche thereof, interest on the Securities of
each series shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and on the basis of the actual number of days elapsed
within any month in relation to the deemed 30 days of such month.

SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.

In the case of the Securities of any series, or any Tranche thereof,
denominated in any currency other than Dollars or in a composite currency (the
"Required Currency"), except as otherwise specified with respect to such
Securities as contemplated by Section 301, the obligation of the Company to
make any payment of the principal thereof, or the premium or interest thereon,
shall not be discharged or satisfied by any tender by the Company, or recovery
by the Trustee, in any currency other than the Required Currency, except to the
extent that such tender or recovery shall result in the Trustee timely holding
the full amount of the Required Currency then due and payable. If any such
tender or recovery is in a currency other than the Required Currency, the
Trustee may take such actions as it considers appropriate to exchange such
currency for the Required Currency. The costs and risks of any such exchange,
including without limitation the risks of delay and exchange rate fluctuation,
shall be borne by the Company, the Company shall remain fully liable for any
shortfall or delinquency in the full amount of Required Currency then due and
payable, and in no circumstances shall the Trustee be liable therefor except in
the case of its negligence or willful misconduct.

SECTION 312. EXTENSION OF INTEREST PAYMENT.

The Company shall have the right at any time, so long as the Company
is not in default in the payment of interest on the Securities of any series
hereunder, to extend interest payment periods on all Securities of one or more
series, or Tranches thereof, if so specified as contemplated by Section 301
<PAGE> 39
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with respect to such Securities and upon such terms as may be specified as
contemplated by Section 301 with respect to such Securities.

ARTICLE FOUR

REDEMPTION OF SECURITIES

SECTION 401. APPLICABILITY OF ARTICLE.

Securities of any series, or any Tranche thereof, which are
redeemable before their Stated Maturity shall be redeemable in accordance with
their terms and (except as otherwise specified as contemplated by Section 301
for Securities of such series or Tranche) in accordance with this Article.

SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or an Officer's Certificate. 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 such Securities
to be redeemed. In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of such
Securities, the Company shall furnish the Trustee with an Officer's Certificate
evidencing compliance with such restriction or condition.

SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.

If less than all the Securities of any series, or any Tranche
thereof, are to be redeemed, the particular Securities to be redeemed shall be
selected by the Security Registrar from the Outstanding Securities of such
series or Tranche not previously called for redemption, by such method as shall
be provided for any particular series, or, in the absence of any such
provision, by such method of random selection as the Security Registrar shall
deem fair and appropriate and which may, in any case, provide for the selection
for redemption of portions (equal to the minimum authorized denomination for
Securities of such series or Tranche or any integral multiple thereof) of the
principal
<PAGE> 40
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amount of Securities of such series or Tranche of a denomination larger than
the minimum authorized denomination for Securities of such series or Tranche;
provided, however, that if, as indicated in an Officer's Certificate, the
Company shall have offered to purchase all or any principal amount of the
Securities then Outstanding of any series, or any Tranche thereof, and less
than all of such Securities as to which such offer was made shall have been
tendered to the Company for such purchase, the Security Registrar, if so
directed by Company Order, shall select for redemption all or any principal
amount of such Securities which have not been so tendered.

The Security Registrar shall promptly notify the Company and the
Trustee in writing of the Securities selected for redemption and, in the case
of any Securities selected to be redeemed in part, 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 Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.

SECTION 404. NOTICE OF REDEMPTION.

Notice of redemption shall be given in the manner provided in Section
106 to the Holders of the Securities to be redeemed not less than 30 nor more
than 60 days prior to the Redemption Date.

All notices of redemption shall state:

(a) the Redemption Date,

(b) the Redemption Price,

(c) if less than all the Securities of any series or Tranche are to
be redeemed, the identification of the particular Securities to be
redeemed and the portion of the principal amount of any Security to be
redeemed in part,

(d) that on the Redemption Date the Redemption Price, together with
accrued interest, if any, to the Redemption Date, will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
<PAGE> 41
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(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, unless
it shall have been specified as contemplated by Section 301 with respect
to such Securities that such surrender shall not be required,

(f) that the redemption is for a sinking or other fund, if such is
the case, and

(g) such other matters as the Company shall deem desirable or
appropriate.

Unless otherwise specified with respect to any Securities in
accordance with Section 301, with respect to any notice of redemption of
Securities at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in accordance with
Section 701, such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such Securities, on or prior
to the date fixed for such redemption, of money sufficient to pay the principal
of and premium, if any, and interest, if any, on such Securities and that if
such money shall not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money
is not so received, the redemption shall not be made and within a reasonable
time thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Paying Agent or Agents for the Securities
otherwise to have been redeemed shall promptly return to the Holders thereof
any of such Securities which had been surrendered for payment upon such
redemption.

Notice of redemption of Securities to be redeemed at the election of
the Company, and any notice of non-satisfaction of a condition for redemption
as aforesaid, shall be given by the Company or, at the Company's request, by
the Security Registrar in the name and at the expense of the Company. Notice of
mandatory redemption of Securities shall be given by the Security Registrar in
the name and at the expense of the Company.
<PAGE> 42
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SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities or portions thereof so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified, and from and
after such date (unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price and accrued
interest, if any) such Securities or portions thereof, if interest-bearing,
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with such notice, such Security or portion thereof
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that no such
surrender shall be a condition to such payment if so specified as contemplated
by Section 301 with respect to such Security; and provided, further, that
except as otherwise specified as contemplated by Section 301 with respect to
such Security, any installment of interest on any Security the Stated Maturity
of which installment is on or prior to the Redemption Date shall be payable to
the Holder of such Security, or one or more Predecessor Securities, registered
as such at the close of business on the related Regular Record Date according
to the terms of such Security and subject to the provisions of Section 307.

SECTION 406. SECURITIES REDEEMED IN PART.

Upon the surrender of any Security which is to be redeemed only in
part at a Place of Payment therefor (with, if 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), the Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Security,
without service charge, a new Security or Securities of the same series and
Tranche, of any authorized denomination requested by such Holder and of like
tenor and in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
<PAGE> 43
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ARTICLE FIVE

SINKING FUNDS

SECTION 501. APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to any sinking
fund for the retirement of the Securities of any series, or any Tranche
thereof, except as otherwise specified as contemplated by Section 301 for
Securities of such series or Tranche.

The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series, or any Tranche thereof, is herein referred
to as a "mandatory sinking fund payment", and any payment in excess of such
minimum amount provided for by the terms of Securities of any series, or any
Tranche thereof, is herein referred to as an "optional sinking fund payment".
If provided for by the terms of Securities of any series, or any Tranche
thereof, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 502. Each sinking fund payment shall be
applied to the redemption of Securities of the series or Tranche in respect of
which it was made as provided for by the terms of such Securities.

SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES.

The Company (a) may deliver to the Trustee Outstanding Securities
(other than any previously called for redemption) of a series or Tranche in
respect of which a mandatory sinking fund payment is to be made and (b) may
apply as a credit Securities of such series or Tranche which have been redeemed
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund payments pursuant
to the terms of such Securities, in each case in satisfaction of all or any
part of such mandatory sinking fund payment; provided, however, that no
Securities shall be applied in satisfaction of a mandatory sinking fund payment
if such Securities shall have been previously so applied. Securities so applied
shall be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such mandatory sinking fund payment shall
be reduced accordingly.
<PAGE> 44
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SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 45 days prior to each sinking fund payment date for the
Securities of any series, or any Tranche thereof, the Company shall deliver to
the Trustee an Officer's Certificate specifying:

(a) the amount of the next succeeding mandatory sinking fund payment
for such series or Tranche;

(b) the amount, if any, of the optional sinking fund payment to be
made together with such mandatory sinking fund payment;

(d) the portion, if any, of such aggregate sinking fund payment
which is to be satisfied by the payment of cash;

(e) the portion, if any, of such aggregate sinking fund payment
which is to be satisfied by delivering and crediting Securities of such
series or Tranche pursuant to Section 502 and stating the basis for such
credit and that such Securities have not previously been so credited, and
the Company shall also deliver to the Trustee any Securities to be so
delivered. If the Company shall not deliver such Officer's Certificate,
the next succeeding sinking fund payment for such series or Tranche shall
be made entirely in cash in the amount of the mandatory sinking fund
payment. Not less than 30 days before each such sinking fund payment date
the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 403 and cause notice
of the redemption thereof to be given in the name of and at the expense of
the Company in the manner provided in Section 404. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 405 and 406.
<PAGE> 45
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ARTICLE SIX

COVENANTS

SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

The Company shall pay the principal of and premium, if any, and
interest, if any, on the Securities of each series in accordance with the terms
of such Securities and this Indenture.

SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.

The Company shall maintain in each Place of Payment for the
Securities of each series, or any Tranche thereof, an office or agency where
payment of such Securities shall be made, where the registration of transfer or
exchange of such Securities may be effected and where notices and demands to or
upon the Company in respect of such Securities and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of each such office or agency and
prompt notice to the Holders of any such change in the manner specified in
Section 106. If at any time the Company shall fail to maintain any such
required office or agency in respect of Securities of any series, or any
Tranche thereof, or shall fail to furnish the Trustee with the address thereof,
payment of such Securities shall be made, registration of transfer or exchange
thereof may be effected and notices and demands in respect thereof may be
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent for all such purposes in any such event.

The Company may also from time to time designate one or more other
offices or agencies with respect to the Securities of one or more series, or
any Tranche thereof, for any or all of the foregoing purposes and may from time
to time rescind such designations; provided, however, that, unless otherwise
specified as contemplated by Section 301 with respect to the Securities of such
series or Tranche, no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency for such
purposes in each Place of Payment for such Securities in accordance with the
requirements set forth above. The Company shall give prompt written notice to
the Trustee, and prompt notice to the Holders in the manner specified in
Section 106, of any such designation or rescission and of any change in the
location of any such other office or agency.
<PAGE> 46
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Anything herein to the contrary notwithstanding, any office or agency
required by this Section may be maintained at an office of the Company, in
which event the Company shall perform all functions to be performed at such
office or agency.

SECTION 603. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent with
respect to the Securities of any series, or any Tranche thereof, it shall, on
or before each due date of the principal of and premium, if any, and interest,
if any, on any of such Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal and
premium or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided. The Company shall promptly
notify the Trustee of any failure by the Company (or any other obligor on such
Securities) to make any payment of principal of or premium, if any, or
interest, if any, on such Securities.

Whenever the Company shall have one or more Paying Agents for the
Securities of any series, or any Tranche thereof, it shall, on or before each
due date of the principal of and premium, if any, and interest, if any, on such
Securities, deposit with such Paying Agents sums sufficient (without
duplication) to pay the principal and premium or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company shall promptly notify the Trustee of any failure by it so to act.

The Company shall cause each Paying Agent for the Securities of any
series, or any Tranche thereof, other than the Company or 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 shall:

(a) hold all sums held by it for the payment of the principal of and
premium, if any, or interest, if any, on such Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;

(b) give the Trustee notice of any failure by the Company (or any
other obligor upon such Securities) to make
<PAGE> 47
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any payment of principal of or premium, if any, or interest, if any, on
such Securities; and

(c) 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 and furnish to the Trustee such
information as it possesses regarding the names and addresses of the
Persons entitled to such sums.

The Company may at any time pay, or by Company Order 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,
if so stated in a Company Order delivered to the Trustee, in accordance with
the provisions of Article Seven; 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, if any, on any Security 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, upon such payment or
discharge, the Holder of such Security shall, as an unsecured general creditor
and not as a Holder of an Outstanding Security, look only to the Company for
payment of the amount so due and payable and remaining unpaid, 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 payment to the Company, may at the expense of the Company
cause to be mailed, on one occasion only, notice to such Holder 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 mailing, any unclaimed balance of such
money then remaining will be paid to the Company.

SECTION 604. CORPORATE EXISTENCE.

Subject to the rights of the Company under Article Eleven, the
Company shall do or cause to be done all things

<PAGE> 48
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necessary to preserve and keep in full force and effect its corporate existence.

SECTION 605. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.

Not later than _______________ in each year, commencing
_______________, the Company shall deliver to the Trustee an Officer's
Certificate which need not comply with Section 102, executed by the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, as to such officer's knowledge of the Company's
compliance with all conditions and covenants under this Indenture, such
compliance to be determined without regard to any period of grace or
requirement of notice under this Indenture.

SECTION 606. WAIVER OF CERTAIN COVENANTS.

The Company may omit in any particular instance to comply with any
term, provision or condition set forth in (a) Section 602 or any additional
covenant or restriction specified with respect to the Securities of any series,
or any Tranche thereof, as contemplated by Section 301 if before the time for
such compliance the Holders of at least a majority in aggregate principal
amount of the Outstanding Securities of all series and Tranches with respect to
which compliance with Section 602 or such additional covenant or restriction is
to be omitted, considered as one class, shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
term, provision or condition and (b) Section 604 or 605 or Article Eleven if
before the time for such compliance the Holders of at least a majority in
principal amount of Securities Outstanding under this Indenture shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such term, provision or condition; but, in the case of
(a) or (b), no such waiver shall extend to or affect such term, provision or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in
full force and effect.

ARTICLE SEVEN

SATISFACTION AND DISCHARGE
<PAGE> 49
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SECTION 701. SATISFACTION AND DISCHARGE OF SECURITIES.

Any Security or Securities, or any portion of the principal amount
thereof, shall be deemed to have been paid for all purposes of this Indenture,
and the entire indebtedness of the Company in respect thereof shall be deemed
to have been satisfied and discharged, if there shall have been irrevocably
deposited with the Trustee or any Paying Agent (other than the Company), in
trust:

(a) money in an amount which shall be sufficient, or

(b) in the case of a deposit made prior to the Maturity of such
Securities or portions thereof, Eligible Obligations, which shall not
contain provisions permitting the redemption or other prepayment thereof
at the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will provide
moneys which, together with the money, if any, deposited with or held by
the Trustee or such Paying Agent, shall be sufficient, or

to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Securities or portions thereof on or prior to
Maturity; provided, however, that in the case of the provision for payment or
redemption of less than all the Securities of any series or Tranche, such
Securities or portions thereof shall have been selected by the Security
Registrar as provided herein and, in the case of a redemption, the notice
requisite to the validity of such redemption shall have been given or
irrevocable authority shall have been given by the Company to the Trustee to
give such notice, under arrangements satisfactory to the Trustee; and provided,
further, that the Company shall have delivered to the Trustee and such Paying
Agent:

(w) if such deposit shall have been made prior to the Maturity
of such Securities, a Company Order stating that the money and
Eligible Obligations deposited in accordance with this Section shall
be held in trust, as provided in Section 703;
<PAGE> 50
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(x) if Eligible Obligations shall have been deposited, an
Opinion of Counsel that the obligations so deposited constitute
Eligible Obligations and do not contain provisions permitting the
redemption or other prepayment at the option of the issuer thereof,
and an opinion of an independent public accountant of nationally
recognized standing, selected by the Company, to the effect that the
requirements set forth in clause (b) above have been satisfied;

(y) if such deposit shall have been made prior to the Maturity
of such Securities, an Officer's Certificate stating the Company's
intention that, upon delivery of such Officer's Certificate, its
indebtedness in respect of such Securities or portions thereof will
have been satisfied and discharged as contemplated in this Section;
and

(z) if the Officer's Certificate required under clause (y)
above is provided, an Opinion of Counsel to the effect that the
Holders of such Securities 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 deposit 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 deposit has not been made.

Upon the deposit of money or Eligible Obligations, or both, in
accordance with this Section, together with the documents required by clauses
(w), (x), (y) and (z) above, the Trustee shall, upon receipt of a Company
Request, acknowledge in writing that the Security or Securities or portions
thereof with respect to which such deposit was made are deemed to have been
paid for all purposes of this Indenture and that the entire indebtedness of
the Company in respect thereof has been satisfied and discharged as
contemplated in this Section. In the event that all of the conditions set forth
in the preceding paragraph shall have been satisfied in respect of any
Securities or portions thereof except that, for any reason, the Officer's
Certificate specified in clause (y) shall not have been delivered, such
Securities or portions thereof shall nevertheless be deemed to have been paid
for all purposes of this Indenture, and the Holders of such Securities or
portions thereof shall nevertheless be no longer entitled to the benefits of
this Indenture or of any of the covenants of the Company under Article Six
(except the covenants contained in Sections 602 and 603) or any other covenants
made in
<PAGE> 51
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respect of such Securities or portions thereof as contemplated by Section 301,
but the indebtedness of the Company in respect of such Securities or portions
thereof shall not be deemed to have been satisfied and discharged prior to
Maturity for any other purpose, and the Holders of such Securities or portions
thereof shall continue to be entitled to look to the Company for payment of the
indebtedness represented thereby; and, upon Company Request, the Trustee shall
acknowledge in writing that such Securities or portions thereof are deemed to
have been paid for all purposes of this Indenture.

If payment at Stated Maturity of less than all of the Securities of
any series, or any Tranche thereof, is to be provided for in the manner and
with the effect provided in this Section, the Security Registrar shall select
such Securities, or portions of principal amount thereof, in the manner
specified by Section 403 for selection for redemption of less than all the
Securities of a series or Tranche.

In the event that Securities which shall be deemed to have been paid
for purposes of this Indenture, and, if such is the case, in respect of which
the Company's indebtedness shall have been satisfied and discharged, all as
provided in this Section, do not mature and are not to be redeemed within the
60 day period commencing with the date of the deposit of moneys or Eligible
Obligations, as aforesaid, the Company shall, as promptly as practicable, give
a notice, in the same manner as a notice of redemption with respect to such
Securities, to the Holders of such Securities to the effect that such deposit
has been made and the effect thereof.

Notwithstanding that any Securities shall be deemed to have been paid
for purposes of this Indenture, as aforesaid, the obligations of the Company
and the Trustee in respect of such Securities under Sections 304, 305, 306,
404, 503 (as to notice of redemption), 602, 603, 907 and 914 and this Article
Seven shall survive.

The Company shall pay, and shall indemnify the Trustee or any Paying
Agent with which Eligible Obligations shall have been deposited as provided in
this Section against, any tax, fee or other charge imposed on or assessed
against such Eligible Obligations or the principal or interest received in
respect of such Eligible Obligations, including, but not limited to, any such
tax payable by any entity deemed, for tax purposes, to have been created as a
result of such deposit.
<PAGE> 52
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Anything herein to the contrary notwithstanding, (a) if, at any time
after a Security would be deemed to have been paid for purposes of this
Indenture, and, if such is the case, the Company's indebtedness in respect
thereof would be deemed to have been satisfied or discharged, pursuant to this
Section (without regard to the provisions of this paragraph), the Trustee or
any Paying Agent, as the case may be, shall be required to return the money or
Eligible Obligations, or combination thereof, deposited with it as aforesaid to
the Company or its representative under any applicable Federal or State
bankruptcy, insolvency or other similar law, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction and discharge
of the Company's indebtedness in respect thereof shall retroactively be deemed
not to have been effected, and such Security shall be deemed to remain
Outstanding and (b) any satisfaction and discharge of the Company's
indebtedness in respect of any Security shall be subject to the provisions of
the last paragraph of Section 603.

SECTION 702. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon Company Request cease to be of further
effect (except as hereinafter expressly provided), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when

(a) no Securities remain Outstanding hereunder; and

(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;

provided, however, that if, in accordance with the last paragraph of Section
701, any Security, previously deemed to have been paid for purposes of this
Indenture, shall be deemed retroactively not to have been so paid, this
Indenture shall thereupon be deemed retroactively not to have been satisfied
and discharged, as aforesaid, and to remain in full force and effect, and the
Company shall execute and deliver such instruments as the Trustee shall
reasonably request to evidence and acknowledge the same.

Notwithstanding the satisfaction and discharge of this Indenture as
aforesaid, the obligations of the Company and the Trustee under Sections 304,
305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 914 and this
Article Seven shall survive.
<PAGE> 53
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Upon satisfaction and discharge of this Indenture as provided in this
Section, the Trustee shall assign, transfer and turn over to the Company,
subject to the lien provided by Section 907, any and all money, securities and
other property then held by the Trustee for the benefit of the Holders of the
Securities other than money and Eligible Obligations held by the Trustee
pursuant to Section 703.

SECTION 703. APPLICATION OF TRUST MONEY.

Neither the Eligible Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Eligible
Obligations, shall be withdrawn or used for any purpose other than, and shall
be held in trust for, the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to the provisions
of Section 603; provided, however, that, so long as there shall not have
occurred and be continuing an Event of Default any cash received from such
principal or interest payments on such Eligible Obligations, if not then needed
for such purpose, shall, to the extent practicable, be invested in Eligible
Obligations of the type described in clause (b) in the first paragraph of
Section 701 maturing at such times and in such amounts as shall be sufficient
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Securities or portions thereof on and prior to the
Maturity thereof, and interest earned from such reinvestment shall be paid over
to the Company as received, free and clear of any trust, lien or pledge under
this Indenture except the lien provided by Section 907; and provided, further,
that, so long as there shall not have occurred and be continuing an Event of
Default, any moneys held in accordance with this Section on the Maturity of all
such Securities in excess of the amount required to pay the principal of and
premium, if any, and interest, if any, then due on such Securities shall be
paid over to the Company free and clear of any trust, lien or pledge under this
Indenture except the lien provided by Section 907; and provided, further, that
if an Event of Default shall have occurred and be continuing, moneys to be paid
over to the Company pursuant to this Section shall be held until such Event of
Default shall have been waived or cured.
<PAGE> 54
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ARTICLE EIGHT

EVENTS OF DEFAULT; REMEDIES

SECTION 801. EVENTS OF DEFAULT.

"Event of Default", wherever used herein with respect to Securities
of any series, means any one of the following events:

(a) failure to pay interest, if any, on any Security of such series
within 60 days after the same becomes due and payable (whether or not
payment is prohibited by the provisions of Article Fifteen hereof);
provided, however, that a valid extension of the interest payment period
by the Company as contemplated in Section 312 of this Indenture shall not
constitute a failure to pay interest for this purpose; or

(b) failure to pay the principal of or premium, if any, on any
Security of such series within three Business Days after its Maturity
(whether or not payment is prohibited by the provisions of Article Fifteen
hereof); or

(c) failure to perform or breach of any covenant or warranty of the
Company in this Indenture (other than a covenant or warranty a default in
the performance of which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of one or more series of Securities other
than such series) 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 33% in principal amount
of the Outstanding Securities of such series, 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, unless the Trustee, or the
Trustee and the Holders of a principal amount of Securities of such series
not less than the principal amount of Securities the Holders of which gave
such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Trustee,
or the Trustee and the Holders of such principal amount of Securities of
such series, as the case may be, shall be deemed to have agreed to an
extension of such period if
<PAGE> 55
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corrective action is initiated by the Company within such period and is
being diligently pursued; or

(d) the entry by a court having jurisdiction in the premises of (I)
a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (2) a decree or order
adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition by one or more Persons other than the Company seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official for the Company or for any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
any such decree or order for relief or any such other decree or order
shall have remained unstayed and in effect for a period of 90 consecutive
days; or

(e) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in a case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
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 authorization of such action by
the Board of Directors; or

(f) any other Event of Default specified with respect to Securities
of such series.
<PAGE> 56
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SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default shall have occurred and be continuing with
respect to Securities of any series at the time Outstanding, then in every such
case the Trustee or the Holders of not less than 33% in principal amount of the
Outstanding Securities of such series may declare the principal amount (or, if
any of the Securities of such series are Discount Securities, such portion of
the principal amount of such Securities as may be specified in the terms
thereof as contemplated by Section 301) of all of the Securities of such series
to be due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and upon receipt by the Company of notice
of such declaration such principal amount (or specified amount) shall become
immediately due and payable (provided that the payment of principal of such
securities shall remain subordinated to the extent provided in Article Fifteen
hereof); provided, however, that if an Event of Default shall have occurred and
be continuing with respect to more than one series of Securities, the Trustee
or the Holders of not less than 33% in aggregate principal amount of the
Outstanding Securities of all such series, considered as one class, may make
such declaration of acceleration, and not the Holders of the Securities of any
one of such series.

At any time after such a declaration of acceleration with respect to
Securities of any series shall have been made and before a judgment or decree
for payment of the money due shall have been obtained by the Trustee as
hereinafter in this Article provided, the Event or Events of Default giving
rise to such declaration of acceleration shall, without further act, be deemed
to have been waived, and such declaration and its consequences shall, without
further act, be deemed to have been rescinded and annulled, if

(a) the Company shall have paid or deposited with the Trustee a sum
sufficient to pay

(1) all overdue interest on all Securities of such series;

(2) the principal of and premium, if any, on any Securities of
such series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities;
<PAGE> 57
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(3) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities;

(4) all amounts due to the Trustee under Section 907;

and

(b) any other Event or Events of Default with respect to Securities
of such series, other than the non-payment of the principal of Securities
of such series which shall have become due solely by such declaration of
acceleration, shall have been cured or waived as provided in Section 813.

No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.

SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.

If an Event of Default described in clause (a) or (b) of Section 801
shall have occurred and be continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of the Securities of the
series with respect to which such Event of Default shall have occurred, the
whole amount then due and payable on such Securities for principal and premium,
if any, and interest, if any, and, to the extent permitted by law, interest on
premium, if any, and on any overdue principal and interest, at the rate or
rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover any amounts due to the Trustee
under Section 907.

If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon such Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon such
Securities, wherever situated.

If an Event of Default with respect to Securities of any series shall
have occurred and be continuing, the Trustee may
<PAGE> 58
-53-

in its discretion proceed to protect and enforce its rights and the rights of
the Holders of Securities of such series by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.

SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
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 or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,

(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for amounts due to the Trustee under Section 907) and of the Holders
allowed in such judicial proceeding, and

(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder 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,
to pay to the Trustee any amounts due it under Section 907.

Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights
<PAGE> 59
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of any Holder thereof or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.

SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.

All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders in respect of which such judgment has
been recovered.

SECTION 806. APPLICATION OF MONEY COLLECTED.

Subject to the provisions of Article Fifteen, any money collected by
the Trustee pursuant to this Article shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal or premium, if any, or interest, if any,
upon presentation of the Securities in respect of which or for the benefit of
which such money shall have been collected and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section
907;

SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal of and premium, if any, and interest, if any, in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal, premium,
if any, and interest, if any, respectively; and

THIRD: To the Company.

SECTION 807. LIMITATION ON SUITS.

No Holder shall have any right to institute any proceeding, judicial
or otherwise, with respect to this
<PAGE> 60
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Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:

(a) such Holder shall have previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of
such series;

(b) the Holders of not less than 33 1/3% in aggregate principal
amount of the Outstanding Securities of all series in respect of which an
Event of Default shall have occurred and be continuing, considered as one
class, shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;

(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;

(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such
proceeding; and

(e) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
all series in respect of which an Event of Default shall have occurred and
be continuing, considered as one class;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.

SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.

Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and (subject to
Sections 307 and 312)
<PAGE> 61
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interest, if any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.

SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company, the Trustee and
such Holder shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holder shall continue as though no such proceeding had been instituted.

SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 811. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
<PAGE> 62
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SECTION 812. CONTROL BY HOLDERS OF SECURITIES.

If an Event of Default shall have occurred and be continuing in
respect of a series of Securities, the Holders of a majority in principal
amount of the Outstanding Securities of such series 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, with respect to the Securities of such series; provided, however, that
if an Event of Default shall have occurred and be continuing with respect to
more than one series of Securities, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all such series, considered
as one class, shall have the right to make such direction, and not the Holders
of the Securities of any one of such series; and provided, further, that

(a) such direction shall not be in conflict with any rule of law or
with this Indenture, and could not involve the Trustee in personal
liability in circumstances where indemnity would not, in the Trustee's
sole discretion, be adequate, and

(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.

SECTION 813. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default

(a) in the payment of the principal of or premium, if any, or
interest, if any, on any Security of such series, or

(b) in respect of a covenant or provision hereof which under Section
1202 cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.

Upon any such waiver, such default shall cease to exist, and any
and all Events of Default arising therefrom shall be deemed to have been cured,
for every purpose of this
<PAGE> 63
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Indenture; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.

SECTION 814. UNDERTAKING FOR COSTS.

The Company and the Trustee agree, and each Holder by his acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the Outstanding Securities of all series in
respect of which such suit may be brought, considered as one class, or to any
suit instituted by any Holder for the enforcement of the payment of the
principal of or premium, if any, or interest, if any, on any Security on or
after the Stated Maturity or Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date).

SECTION 815. WAIVER OF STAY OR EXTENSION LAWS.

The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
<PAGE> 64
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ARTICLE NINE

THE TRUSTEE

SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.

(a) Except during the continuance of an Event of Default with
respect to Securities of any series,

(1) the Trustee undertakes to perform, with respect to
Securities of such series, 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,
with respect to Securities of such series, 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, 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 with respect to Securities of any
series shall have occurred and be continuing, the Trustee shall exercise,
with respect to Securities of such series, 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;
<PAGE> 65
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(2) the Trustee shall not be liable for any error of judgment
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 Securities of any one or more series, as provided herein,
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 with respect
to the Securities of such series; 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 902. NOTICE OF DEFAULTS.

The Trustee shall give the Holders notice of any default hereunder
with respect to the Securities of any series to the Holders of Securities of
such series in the manner and to the extent required to do so by the Trust
Indenture Act, unless such default shall have been cured or waived; provided,
however, that in the case of any default of the character specified in Section
801(c), no such notice to Holders shall be given until at least 75 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.
<PAGE> 66
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SECTION 903. CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 901 and to the applicable
provisions of the Trust Indenture Act:

(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, note, other evidence of indebtedness 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, or as
otherwise expressly provided herein, 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 Officer's Certificate;

(d) the Trustee may consult with counsel and the written 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 Holder pursuant to this Indenture, unless such Holder
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, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may
<PAGE> 67
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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 (subject to applicable legal
requirements) be entitled to examine, during normal business hours, the
books, records and premises of the Company, personally or by agent or
attorney;

(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 as otherwise provided in Section 801, the Trustee shall
not be charged with knowledge of any Event of Default with respect to the
Securities of any series for which it is acting as Trustee unless either
(1) a Responsible Officer of the Trustee shall have actual knowledge of
the Event of Default or (2) written notice of such Event of Default shall
have been given to the Trustee by the Company, any other obligor on such
Securities or by any Holder of such Securities.

SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.

The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.

SECTION 905. MAY HOLD SECURITIES.

Each of the Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 908 and 913, may otherwise deal with the Company with the same rights
it
<PAGE> 68
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would have if it were not the Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.

SECTION 906. 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 be
under no liability for interest on investment of any money received by it
hereunder except as expressly provided herein or otherwise agreed with, and for
the sole benefit of, the Company.

SECTION 907. COMPENSATION AND REIMBURSEMENT.

The Company shall

(a) 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);

(b) except as otherwise expressly provided herein, reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances reasonably 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 that any such expense, disbursement or advance may be attributable
to its negligence, wilful misconduct or bad faith; and

(c) indemnify the Trustee and hold it harmless from and against any
loss, liability or expense reasonably incurred by it arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder 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 any such loss, liability or expense may be
attributable to its negligence, wilful misconduct or bad faith.

As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien
<PAGE> 69
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prior to the Securities upon all property and funds held or collected by the
Trustee as such other than property and funds held in trust under Section 703
(except as otherwise provided in Section 703). "Trustee" for purposes of this
Section shall include any predecessor Trustee; provided, however, that the
negligence, wilful misconduct or bad faith of any Trustee hereunder shall not
affect the rights of any other Trustee hereunder.

SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.

If the Trustee shall have or acquire any conflicting interest within
the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign to the extent, in the manner and with the
effect, and subject to the conditions, provided in the Trust Indenture Act and
this Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act
and to the extent permitted thereby, the Trustee, in its capacity as trustee in
respect of the Securities of any series, shall not be deemed to have a
conflicting interest arising from its capacity as trustee in respect of the
Securities of any other series.

SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be a Trustee hereunder which shall be

(a) a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or State authority, or

(b) if and to the extent permitted by the Commission by rule,
regulation or order upon application, a corporation or other Person
organized and doing business under the laws of a foreign government,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or the Dollar
equivalent of the applicable foreign currency and subject to supervision
or examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees.
<PAGE> 70
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and, in either case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such 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. 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 910. 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 in accordance with
the applicable requirements of Section 911.

(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required
by Section 911 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 with respect to the Securities of such series.

(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the
Trustee and to the Company.

(d) If at any time:

(1) the Trustee shall fail to comply with Section 908 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder for at least six months, or

(2) the Trustee shall cease to be eligible under Section 909
and shall fail to resign after written
<PAGE> 71
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request therefor by the Company or by any such Holder, 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, (x) the Company by a Board Resolution may remove the
Trustee with respect to all Securities or (y) subject to Section 814, any
Holder who has been a bona fide Holder for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.

(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
(other than as contemplated in clause (y) in subsection (d) of this
Section), with respect to the Securities of one or more series, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee
or Trustees with respect to the Securities of that or those series (it
being understood that any such successor Trustee may be appointed with
respect to the Securities of one or more or all of such series and that at
any time there shall be only one Trustee with respect to the Securities of
any particular series) and shall comply with the applicable requirements
of Section 911. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment in accordance with the applicable requirements of Section
911, become the successor Trustee with respect to the Securities of such
series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by
<PAGE> 72
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Section 911, any Holder who has been a bona fide Holder of a Security of
such series for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the Securities
of such series.

(f) So long as no event which is, or after notice or lapse of time,
or both, would become, an Event of Default shall have occurred and be
continuing, and except with respect to a Trustee appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
pursuant to subsection (e) of this Section, if the Company shall have
delivered to the Trustee (i) a Board Resolution appointing a successor
Trustee, effective as of a date specified therein, and (ii) an instrument
of acceptance of such appointment, effective as of such date, by such
successor Trustee in accordance with Section 911, the Trustee shall be
deemed to have resigned as contemplated in subsection (b) of this Section,
the successor Trustee shall be deemed to have been appointed by the
Company pursuant to subsection (e) of this Section and such appointment
shall be deemed to have been accepted as contemplated in Section 911, all
as of such date, and all other provisions of this Section and Section 911
shall be applicable to such resignation, appointment and acceptance except
to the extent inconsistent with this subsection (f).

(g) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities,of any series and
each appointment of a successor Trustee with respect to the Securities of
any series by mailing written notice of such event by first-class mail,
postage prepaid, to all Holders of Securities of such series as their
names and addresses appear in the Security Register. Each notice shall
include the name of the successor Trustee with respect to the Securities
of such series and the address of its corporate trust office.

SECTION 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of all series, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment,
<PAGE> 73
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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 the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of all sums
owed to it, 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.

(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to
the Securities of one or more series shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as to which
the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee;
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to
the extent provided therein and each 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 with respect to the
Securities of that or
<PAGE> 74
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those series to which the appointment of such successor Trustee relates;
but, on request of the Company or any successor Trustee, such retiring
Trustee, upon payment of all sums owed to it, shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.

(c) Upon request of any such successor Trustee, the Company shall
execute any instruments which fully vest in and confirm to such successor
Trustee all such rights, powers and trusts referred to in subsection (a)
or (b) of this Section, as the case may be.

(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.

SECTION 912. 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 the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities 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 Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

SECTION 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If the Trustee shall be or become a creditor of the Company or any
other obligor upon the Securities (other than by reason of a relationship
described in Section 311(b) of the Trust Indenture Act), the Trustee shall be
subject to any and all applicable provisions of the Trust Indenture Act
regarding the
<PAGE> 75
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collection of claims against the Company or such other obligor. For purposes of
Section 311(b) of the Trust Indenture Act:

(a) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven 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;

(b) 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 914. CO-TRUSTEES AND SEPARATE TRUSTEES.

At any time or times, for the purpose of meeting the legal
requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the
Holders of 33% in principal amount of the Securities then Outstanding, the
Company shall for such purpose join with the Trustee in the execution and
delivery of all instruments and agreements necessary or proper to appoint, one
or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, or to act as separate trustee, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons, in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions of this
Section. If the Company does not join in such appointment within 15 days after
the receipt by it of a request so to do, or if an Event of Default shall have
occurred and be continuing, the Trustee alone shall have power to make such
appointment.

Should any written instrument or instruments from the Company be
required by any co-trustee or separate trustee so
<PAGE> 76
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appointed to more fully confirm to such co-trustee or separate trustee such
property, title, right or power, any and all such instruments shall, on
request, be executed, acknowledged and delivered by the Company.

Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following
conditions:

(a) the Securities shall be authenticated and delivered, and all
rights, powers, duties and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised
solely, by the Trustee;

(b) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
either by the Trustee or by the Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of
any jurisdiction in which any particular act is to be performed, the
Trustee shall be incompetent or unqualified to perform such act, in which
event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee;

(c) the Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company, may accept the resignation of or
remove any co-trustee or separate trustee appointed under this Section,
and, if an Event of Default shall have occurred and be continuing, the
Trustee shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Company.
Upon the written request of the Trustee, the Company shall join with the
Trustee in the execution and delivery of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section;
<PAGE> 77
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(d) no co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder; and

(e) any Act of Holders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.

SECTION 915. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or Agents with
respect to the Securities of one or more series, or any Tranche thereof, which
shall be authorized to act on behalf of the Trustee to authenticate Securities
of such series or Tranche issued upon original issuance, exchange, registration
of transfer or partial redemption thereof or pursuant to Section 306, and
Securities 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 Securities 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 organized and doing business
under the laws of the United States, any State or territory thereof or the
District of Columbia or the Commonwealth of Puerto Rico, authorized under such
laws to act as Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or examination by Federal
or State authority. If such Authenticating Agent publishes reports of condition
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
<PAGE> 78
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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 an 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 the 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. 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, in accordance
with and subject to the provisions of Section 907.

The provisions of Sections 308, 904 and 905 shall be applicable to
each Authenticating Agent.

If an appointment with respect to the Securities of one or more
series, or any Tranche thereof, shall be made pursuant to this Section, the
Securities of such series or Tranche may have endorsed thereon, in addition to
the Trustee's certificate of authentication, an alternate certificate of
authentication substantially in the following form:
<PAGE> 79
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This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Mellon Bank, N.A.

As Trustee

By
---------------------------
As Authenticating
Agent

By
---------------------------
Authorized Signatory
<PAGE> 80
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If all of the Securities of a series may not be originally issued at
one time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing (which writing
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel), shall appoint, in accordance with this Section and in accordance with
such procedures as shall be acceptable to the Trustee, an Authenticating Agent
having an office in a Place of Payment designated by the Company with respect
to such series of Securities.

ARTICLE TEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 1001. LISTS OF HOLDERS.

Semiannually, not later than _______________, and _________________
in each year, commencing , and at such other times as the Trustee
may request in writing, the Company shall furnish or cause to be furnished to
the Trustee information as to the names and addresses of the Holders, and the
Trustee shall preserve such information and similar information received by it
in any other capacity and afford to the Holders access to information so
preserved by it, all to such extent, if any, and in such manner as shall be
required by the Trust Indenture Act; provided, however, that no such list need
be furnished so long as the Trustee shall be the Security Registrar.

SECTION 1002. REPORTS BY TRUSTEE AND COMPANY.

Not later than in each year, commencing _____________ the
Trustee shall transmit to the Holders and the Commission a report, dated as of
the next preceding , with respect to any events and other matters
described in Section 313(a) of the Trust Indenture Act, in such manner and to
the extent required by the Trust Indenture Act. The Trustee shall transmit to
the Holders and the Commission, and the Company shall file with the Trustee
(within 30 days after filing with the Commission in the case of reports which
pursuant to the Trust
<PAGE> 81
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Indenture Act must be filed with the Commission and furnished to the Trustee)
and transmit to the Holders, such other information, reports and other
documents, if any, at such times and in such manner, as shall be required by
the Trust Indenture Act.

ARTICLE ELEVEN

CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER

SECTION 1101. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.

The Company shall not consolidate with or merge into any other
corporation, or convey or otherwise transfer or lease its properties and assets
substantially as an entirety to any Person, unless

(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Company substantially as
an entirety shall be a Person organized and existing under the laws of the
United States, any State thereof 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, if
any, on all Outstanding Securities and the performance of every covenant
of this Indenture on the part of the Company to be performed or observed;

(b) immediately after giving effect to such transaction and treating
any indebtedness for borrowed money which becomes an obligation of the
Company as a result of such transaction as having been incurred by the
Company at the time of 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 occurred and be continuing; and

(c) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, or other transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent
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herein provided for relating to such transactions have been complied with.

SECTION 1102. SUCCESSOR CORPORATION SUBSTITUTED.

Upon any consolidation by the Company with or merger by the Company
into any other corporation or any conveyance, or other transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 1101, the successor corporation formed by such consolidation or
into which the Company is merged or the Person to which such conveyance,
transfer or lease 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 Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities Outstanding hereunder.

ARTICLE TWELVE

SUPPLEMENTAL INDENTURES

SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company 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:

(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Securities, all as provided in Article Eleven; or

(b) to add one or more covenants of the Company or other provisions
for the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Securities of
one or more specified series, or one or more specified Tranches thereof,
or to surrender any right or power herein conferred upon the Company; or
<PAGE> 83
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(d) to change or eliminate any provision of this Indenture or to add
any new provision to this Indenture; provided, however, that if such
change, elimination or addition shall adversely affect the interests of
the Holders of Securities of any series or Tranche Outstanding on the date
of such indenture supplemental hereto in any material respect, such
change, elimination or addition shall become effective with respect to
such series or Tranche only pursuant to the provisions of Section 1202
hereof or when no Security of such series or Tranche remains Outstanding;
or

(e) to provide collateral security for the Securities; or

(f) to establish the form or terms of Securities of any series or
Tranche as contemplated by Sections 201 and 301; or

(g) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and
replacement thereof and for the giving of notice to, and the solicitation
of the vote or consent of, the holders thereof, and for any and all other
matters incidental thereto; or

(h) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the
Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or

(i) to provide for the procedures required to permit the Company to
utilize, at its option, a non-certificated system of registration for all,
or any series or Tranche of, the Securities; or to provide for the
authentication and delivery of bearer securities and coupons appertaining
thereto representing interest, if any, thereon and for the procedures for
the registration, exchange and replacement thereof and for the giving of
notice to, and the
<PAGE> 84
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solicitation of the vote or consent of, the holders thereof, and for any
and all other matters incidental thereto; or

(j) to change any place or places where (1) the principal of and
premium, if any, and interest, if any, on all or any series of Securities,
or any Tranche thereof, shall be payable, (2) all or any series of
Securities, or any Tranche thereof, may be surrendered for registration of
transfer, (3) all or any series of Securities, or any Tranche thereof, may
be surrendered for exchange and (4) notices and demands to or upon the
Company in respect of all or any series of Securities, or any Tranche
thereof, and this Indenture may be served; provided, however, that any
such place is located in New York, New York, Chicago, Illinois or Los
Angeles, California or in any other city located in the United States
which has a population of at least 1,000,000 inhabitants; or

(k) 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 changes to the provisions hereof or to add
other provisions with respect to matters or questions arising under this
Indenture, provided that such other changes or additions shall not
adversely affect the interests of the Holders of Securities of any series
or Tranche in any material respect.

Without limiting the generality of the foregoing, if the Trust
Indenture Act as in effect at the date of the execution and delivery of this
Indenture or at any time thereafter shall be amended and

(x) if any such amendment shall require one or more changes to
any provisions hereof or the inclusion herein of any additional
provisions, or shall by operation of law be deemed to effect such
changes or incorporate such provisions by reference or otherwise,
this Indenture shall be deemed to have been amended so as to conform
to such amendment to the Trust Indenture Act, and the Company and the
Trustee may, without the consent of any Holders, enter into an
indenture supplemental hereto to effect or evidence such changes or
additional provisions; or

(y) if any such amendment shall permit one or more changes to,
or the elimination of, any provisions
<PAGE> 85
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hereof which, at the date of the execution and delivery hereof or at
any time thereafter, are required by the Trust Indenture Act to be
contained herein, this Indenture shall be deemed to have been amended
to effect such changes or elimination, and the Company and the
Trustee may, without the consent of any Holders, enter into an
indenture supplemental hereto to evidence such amendment hereof.

SECTION 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities of all series then Outstanding
under this Indenture, considered as one class, 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; provided,
however, that if there shall be Securities of more than one series Outstanding
hereunder and if a proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
series, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series so directly
affected, considered as one class, shall be required; and provided, further,
that if the Securities of any series shall have been issued in more than one
Tranche and if the proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all Tranches so directly
affected, considered as one class, shall be required; and provided, further,
that no such supplemental indenture shall:

(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on (except as provided in Section
312 hereof), any Security, or reduce the principal amount thereof or the
rate of interest thereon (or the amount of any installment of interest
thereon) or change the method of calculating such rate or reduce any
premium payable upon the redemption thereof, or reduce the amount of the
principal of a Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
802, or change the coin or
<PAGE> 86
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currency (or other property), in which any Security or any premium 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 of any
Security (or, in the case of redemption, on or after the Redemption Date),
without, in any such case, the consent of the Holder of such Security, or

(b) reduce the percentage in principal amount of the Outstanding
Securities of any series or any Tranche thereof, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with any provision of this Indenture or of any default hereunder and its
consequences, or reduce the requirements of Section 1304 for quorum or
voting, without, in any such case, the consent of the Holders of each
Outstanding Security of such series or Tranche, or

(c) modify any of the provisions of this Section, Section 606 or
Section 813 with respect to the Securities of any series, or any Tranche
thereof, or except to increase the percentages in principal amount
referred to in this Section or such other Sections or to provide that
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 911(b) and
1201(h).

A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or of one or more
Tranches thereof, or which modifies the rights of the Holders of Securities of
such series or Tranches with respect to such covenant or other provision, shall
be deemed not to affect the rights under this Indenture of the Holders of
Securities of any other series or Tranche.

It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof. A waiver
by a Holder of such
<PAGE> 87
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Holder's right to consent under this Section shall be deemed to be a consent of
such Holder.

SECTION 1203. 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, the Trustee shall be entitled to
receive, and (subject to Section 901) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture or
otherwise.

SECTION 1204. 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 Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby. Any supplemental indenture permitted by this
Article may restate this Indenture in its entirety, and, upon the execution and
delivery thereof, any such restatement shall supersede this Indenture as
theretofore in effect for all purposes.

SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.

SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

Securities of any series, or any Tranche thereof, 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 Securities of any series, or
any Tranche thereof, so modified as to conform, in
<PAGE> 88
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the opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series or Tranche.

SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.

If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate pursuant to a
Board Resolution as contemplated by Section 301, and not in an indenture
supplemental hereto, additions to, changes in or the elimination of any of such
terms may be effected by means of a supplemental Board Resolution or Officer's
Certificate, as the case may be, delivered to, and accepted by, the Trustee;
provided, however, that such supplemental Board Resolution or Officer's
Certificate shall not be accepted by the Trustee or otherwise be effective
unless all conditions set forth in this Indenture which would be required to be
satisfied if such additions, changes or elimination were contained in a
supplemental indenture shall have been appropriately satisfied. Upon the
acceptance thereof by the Trustee, any such supplemental Board Resolution or
Officer's Certificate shall be deemed to be a "supplemental indenture" for
purposes of Section 1204 and 1206.

ARTICLE THIRTEEN

MEETINGS OF HOLDERS; ACTION WITHOUT MEETING

SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.

A meeting of Holders of Securities of one or more, or all, series, or
any Tranche or Tranches thereof, may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series or Tranches.

SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.

(a) The Trustee may at any time call a meeting of Holders of
Securities of one or more, or all, series, or any Tranche or Tranches
thereof, for any purpose specified in Section 1301, to be held at such
time and at such place in the Borough of Manhattan, The City of New York,
as the
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Trustee shall determine, or, with the approval of the Company, at any
other place. Notice of every such meeting, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be given, in the manner provided in Section 106,
not less than 21 nor more than 180 days prior to the date fixed for the
meeting.

(b) If the Trustee shall have been requested to call a meeting of
the Holders of Securities of one or more, or all, series, or any Tranche
or Tranches thereof, by the Company or by the Holders of 33% in aggregate
principal amount of all of such series and Tranches, considered as one
class, for any purpose specified in Section 1301, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Securities of such series and Tranches in the
amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York, or in such other
place as shall be determined or approved by the Company, for such meeting
and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.

(c) Any meeting of Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, shall be valid without notice
if the Holders of all Outstanding Securities of such series or Tranches
are present in person or by proxy and if representatives of the Company
and the Trustee are present, or if notice is waived in writing before or
after the meeting by the Holders of all Outstanding Securities of such
series, or by such of them as are not present at the meeting in person or
by proxy, and by the Company and the Trustee.

SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.

To be entitled to vote at any meeting of Holders of Securities of one
or more, or all, series, or any Tranche or Tranches thereof, a Person shall be
(a) a Holder of one or more Outstanding Securities of such series or Tranches,
or (b) a Person appointed by an instrument in writing as proxy for a
<PAGE> 90
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Holder or Holders of one or more Outstanding Securities of such series or
Tranches by such Holder or Holders. The only Persons who shall be entitled to
attend any meeting of Holders of Securities of any series or Tranche shall be
the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

SECTION 1304. QUORUM; ACTION.

The Persons entitled to vote a majority in aggregate principal amount
of the Outstanding Securities of the series and Tranches with respect to which
a meeting shall have been called as hereinbefore provided, considered as one
class, shall constitute a quorum for a meeting of Holders of Securities of such
series and Tranches; provided, however, that if any action is to be taken at
such meeting which this Indenture expressly provides may be taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Securities of such series and Tranches, considered as
one class, the Persons entitle to vote such specified percentage in principal
amount of the Outstanding Securities of such series and Tranches, considered as
one class, shall constitute a quorum. In the absence of a quorum within one
hour of the time appointed for any such meeting, the meeting shall, if convened
at the request of Holders of Securities of such series and Tranches, be
dissolved. In any other case the meeting may be adjourned for such period as
may be determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for such period as may be determined
by the chairman of the meeting prior to the adjournment of such adjourned
meeting. Except as provided by Section 1305(e), notice of the reconvening of
any meeting adjourned for more than 30 days shall be given as provided in
Section 1302(a) not less than ten days prior to the date on which the meeting
is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Securities of such series and Tranches
which shall constitute a quorum.

Except as limited by Section 1202, any resolution presented to a
meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of the
series and
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Tranches with respect to which such meeting shall have been called, considered
as one class; provided, however, that, except as so limited, any resolution
with respect to any action which this Indenture expressly provides may be taken
by the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of such series and Tranches,
considered as one class, may be adopted at a meeting or an adjourned meeting
duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in Outstanding
Securities of such series and class.

Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all
the Holders of Securities of the series and Tranches with respect to which such
meeting shall have been held, whether or not present or represented at the
meeting.

SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING
RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.

(a) Attendance at meetings of Holders of Securities may be in person
or by proxy; and, to the extent permitted by law, any such proxy shall
remain in effect and be binding upon any future Holder of the Securities
with respect to which it was given unless and until specifically revoked
by the Holder or future Holder of such Securities before being voted.

(b) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities in regard to proof of the holding of
such Securities and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to
vote, and such other matters concerning the conduct of the meeting as it
shall deem appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section 104 or
other proof.
<PAGE> 92
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(c) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 1302(b), in
which case the Company or the Holders of Securities of the series and
Tranches calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Persons entitled
to vote a majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class.

(d) At any meeting each Holder or proxy shall be entitled to one
vote for each $ 1 principal amount of Securities held or represented by
him; provided, however, that no vote shall be cast or counted at any
meeting in respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Security or
proxy.

(e) Any meeting duly called pursuant to Section 1302 at which a
quorum is present may be adjourned from time to time by Persons entitled
to vote a majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class; and the meeting may be held as so adjourned
without further notice.

SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.

The vote upon any resolution submitted to any meeting of Holders
shall be by written ballots on which shall be subscribed the signatures of the
Holders or of their representatives by proxy and the principal amounts and
serial numbers of the Outstanding Securities, of the series and Tranches with
respect to which the meeting shall have been called, held or represented by
them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports of all votes cast at the meeting. A record of the
proceedings of each meeting of Holders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any
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vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.

SECTION 1307. ACTION WITHOUT MEETING.

In lieu of a vote of Holders at a meeting as hereinbefore
contemplated in this Article, any request, demand, authorization, direction,
notice, consent, waiver or other action may be made, given or taken by Holders
by written instruments as provided in Section 104.

ARTICLE FOURTEEN

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 1401. LIABILITY SOLELY CORPORATE.

No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, or any part thereof,
or for any claim based thereon or otherwise in respect thereof, or of the
indebtedness represented thereby, or upon any obligation, covenant or agreement
under this Indenture, against any incorporator, member, stockholder, officer,
employee or director, as such, past, present or future of the Company or of any
predecessor or successor corporation (either directly or through the Company or
a predecessor or successor corporation), whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly agreed and understood
that this Indenture and all the Securities are solely corporate obligations,
and that no personal liability whatsoever shall attach to, or be incurred by,
any incorporator, member, stockholder, officer, employee or director, past,
present or future, of the Company or of any predecessor or successor
corporation, either directly or indirectly through the Company or any
predecessor or successor corporation, because of the indebtedness hereby
authorized or under or by reason of any
<PAGE> 94
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of the obligations, covenants or agreements contained in this Indenture or in
any of the Securities or to be implied herefrom or therefrom, and that any such
personal liability is hereby expressly waived and released as a condition of,
and as part of the consideration for, the execution of this Indenture and the
issuance of the Securities.

ARTICLE FIFTEEN

SUBORDINATION OF SECURITIES

The Securities, and the payment of principal thereof and premium and
interest thereon, shall, to the extent and in the manner hereinafter set forth,
be subordinate and subject in right of payment to the prior payment in full of
Senior Indebtedness; and by acceptance thereof, the holder thereof agrees,
expressly for the benefit of present and future holders of Senior Indebtedness,
to be bound by the provisions of this Article Fifteen. No payment on account
of principal of or premium or interest on any Security shall be made unless
full payment of amounts then due for principal of or premium, if any, sinking
funds and interest on Senior Indebtedness has been made or fully provided for
in money or money's worth. No payment on account of principal of or premium or
interest on any Security shall be made if, at the time of such payment or
immediately after giving effect thereto, (i) there shall exist a default in the
payment of principal or mandatory prepayments of or premium, if any, sinking
funds or interest on any Senior Indebtedness or (ii) there shall have occurred
an event of default (other than a default in the payment of principal, premium,
if any, mandatory prepayments, sinking funds or interest) with respect to any
Senior Indebtedness or in the instrument under which the same is outstanding
permitting the holders thereof (or of the indebtedness secured thereby) to
accelerate the maturity thereof (or of the indebtedness secured thereby), and
such event of default shall not have been cured or waived and shall not have
ceased to exist. Upon (i) any acceleration of the principal amount due on any
Security or (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding-up or total or partial liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of and premium, if any, and
interest due or to become due upon all Senior Indebtedness shall first be paid
in full, or payment thereof provided for in money or money's worth, before any
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payment is made on account of the principal of or interest on the indebtedness
evidenced by such Security, and upon any such dissolution or winding-up or
liquidation or reorganization any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities
(other than securities of the Company or any other corporation provided for by
a plan of reorganization or readjustment, the payment of which is subordinated,
at least to the extent provided in this Article Fifteen, to the payment in full
of all Senior Indebtedness, provided the rights of the holders of Senior
Indebtedness are not altered by such reorganization or readjustment) to which
the holder thereof would be entitled, except for the provisions hereof, shall
be paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, or by the
holder of any Security if received by it, directly to the holders of Senior
Indebtedness (pro rata to each such holder on the basis of the respective
amounts of Senior Indebtedness held by such holder) or their representatives,
to the extent necessary to pay all Senior Indebtedness in full in money or
money's worth after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness. In the event that any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, not permitted by the foregoing shall be received
by the holder of any Security before all Senior Indebtedness is paid in full,
or provision made for such payment, in accordance with its terms, such payment
or distribution shall be held for the benefit of, and shall be paid over or
delivered to, the holders of such Senior Indebtedness or their representative
or representatives or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Senior Indebtedness may have
been issued or under which such instruments are issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all such Senior Indebtedness in
full in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness. The
provisions of this Article Fifteen are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one hand and the
holders of Securities on the other hand, and nothing herein shall impair, as
between the Company and such holders, the obligation of the Company, which is
unconditional and absolute, to pay to the holders the principal thereof and the
interest thereon in accordance with the terms thereof, nor shall anything
herein prevent the holder
<PAGE> 96
-91-

thereof from exercising all remedies otherwise permitted by applicable law or
hereunder upon default hereunder, all subject to the rights, if any, under this
Article Fifteen of holders of Senior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to the holders of Securities. Each
such holder by its acceptance thereof acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired before or after the issuance of
such Securities, to acquire and/or continue to hold such Senior Indebtedness,
and such holder of Senior Indebtedness shall be deemed conclusively to have
relied on such subordination provisions in acquiring and/or continuing to hold
such Senior Indebtedness. Subject to the payment in full of all Senior
Indebtedness, the holders of Securities shall be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until such
Securities shall be paid in full, and no such payments or distributions to the
holders of Senior Indebtedness shall, as between the Company, its creditors
other than the holders of Senior Indebtedness and the holders of Securities, be
deemed to be a payment by the Company to or on account of any Security. Upon
any payment or distribution of assets of the Company referred to in this
Article Fifteen, the holder of any Security and the Trustee shall be entitled
to rely upon a certificate of the liquidating trustee or agent or other person
making any distribution to the holder of such Security or the Trustee for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Fifteen. The holder of any Security, by its acceptance hereof, authorizes and
directs the Company in its behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Article Fifteen
and appoints the Company its attorney in fact for any and all such purposes.

---------------

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> 97
-92-

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:
---------------------------

[SEAL]

ATTEST:

- --------------------------

Mellon Bank, N.A., Trustee

By:
--------------------------

[SEAL]

ATTEST:

- ---------------------------
<PAGE> 98
-93-

STATE OF___________________)
) ss.:
COUNTY OF__________________)

On the ____day of __________, 1995, before me personally came
__________________________, to me known, who, being by me duly sworn, did
depose and say that he is the _____________________ of National Rural Utilities
Cooperative Finance Corporation, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.

-----------------------------
Notary Public
[Notarial Seal]

COMMONWEALTH OF PENNSYLVANIA)
) ss.:
COUNTY OF ALLEGHENY )

On the _____ day of ___________, 1995, before me personally came
______________________, to me known, who, being by me duly sworn, did depose
and say that he is an assistant Vice President of Mellon Bank, N.A., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.

-----------------------------
Notary Public
[Notarial Seal]

<PAGE> 1
EXHIBIT 5

MILBANK, TWEED, HADLEY & MCCLOY
1 CHASE MANHATTAN PLAZA
NEW YORK, NY 10005

November 14, 1995

National Rural Utilities Cooperative
Finance Corporation
2201 Cooperative Way
Herndon, Virginia 22071

Dear Sirs:

We have acted as counsel for National Rural Utilities
Cooperative Finance Corporation (the "Company") in connection with the proposed
issuance in one or more Series from time to time, directly to purchasers or
through agents or underwriters to be designated from time to time, of Debt
Securities (the "Debt Securities"), such Debt Securities to be issued under an
Indenture (the "Indenture"), between the Company and Mellon Bank, N.A., as
Trustee, as contemplated in the Company's Registration Statement filed on Form
S-3 on the date hereof pursuant to Rule 415 under the Securities Act of 1933
(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.

We have investigated the corporate status of the Company and
have examined the corporate proceedings authorizing the creation and issuance
of the Debt Securities.

Based upon the foregoing, and having regard to legal
considerations that we deem relevant, we are of the opinion that the Debt
Securities, when duly authorized and executed by the Company and authenticated
by or on behalf of the Trustee pursuant to the terms of the Indenture, and
issued for value in accordance with the terms of the Indenture and applicable
resolutions of the Board of Directors of the Company, will be the validly
issued, binding obligations of the Company.

Very truly yours,

Milbank, Tweed, Hadley & McCloy

MLW/BK
M&A\37655

<PAGE> 1
EXHIBIT 12.2

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

Computation of Ratio of Margins to Fixed Charges
(Dollar Amounts in Thousands)

For the Quarters Ended August 31, 1995 and 1994

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net margins before extraordinary loss.................. $ 12,388 $14,451
Add: Fixed charges..................................... 103,169 78,487
-------- -------
Margins available for fixed charges.................... $115,557 $92,938
======== =======

Fixed charges:
Interest on all debt (including amortization
of discount and issuance costs).................... $103,169 $78,487
-------- -------
Total fixed charges..................... $103,169 $78,487
======== =======

Ratio of margins to fixed charges 1.12 1.18
==== ====
</TABLE>

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report,
dated July 19, 1995 included in the National Rural Utilities Cooperative
Finance Corporation's Form 10-K for the year ended May 31, 1995, which is
incorporated by reference in this Registration Statement and to all references
to our Firm included in or made a part of this Registration Statement.

ARTHUR ANDERSON LLP

November 14, 1995

<PAGE> 1
EXHIBIT 25
[CONFORMED COPY]

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------

FORM T-1

------------------

STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE

Check if an application to determine eligibility of
a Trustee pursuant to Section 305(b)(2) / /

MELLON BANK, N.A.
(Name of Trustee)

25-0659306 U.S.
(I.R.S. Employer Identification No.) (Jurisdiction of incorporation)

One Mellon Bank Center
Pittsburgh, PA 15258-0001
(Address of Principal Executive Office)

ELAINE D. RENN
Assistant Vice President
MELLON BANK, N.A.
ONE MELLON BANK CENTER
PITTSBURGH, PENNSYLVANIA 15258-0001
(412) 234-4694
(Name, Address and Telephone Number of Agent for Service)

--------------------

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
(Name of Obligor)

DISTRICT OF COLUMBIA
(State or Other Jurisdiction of Incorporation or Organization)

52-0891669
(I.R.S. Employer Identification No.)

2201 COOPERATIVE WAY, HERNDON, VIRGINIA 22071
(Address of Principal Executive Offices)

UNSECURED SUBORDINATED DEBT SECURITIES
(Title of Indenture Securities)
<PAGE> 2

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.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.

(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

The trustee is authorized to exercise corporate trust powers.

2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.

The obligor is not an affiliate of the trustee.

ITEMS 3-15 ARE NOT APPLICABLE SINCE THE OBLIGOR IS NOT IN DEFAULT ON
SECURITIES ISSUED UNDER INDENTURES UNDER WHICH THE APPLICANT IS TRUSTEE.

16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY.

<TABLE>
<S> <C> <C>
Exhibit 1 - Copy of articles of association of the trustee as now in
effect, filed as Exhibit 1 to trustee's statement of
eligibility and qualification, Registration No. 33-46990, and
incorporated herein by reference.

Exhibit 2 - Copy of certificate of the authority of the trustee to commence
business, copy of certificate of consolidation with the Union
Trust Company of Pittsburgh and copy of certificate approving
merger of Mellon National Bank and Trust Company into Mellon
Bank, N.A. filed as Exhibit T1A(b) to trustee's statement of
eligibility and qualification, Registration No. 33-13020, and
incorporated herein by reference.

Exhibit 3 - Copy of certificate as to authority of the trustee to exercise
corporate trust powers, filed as Exhibit T1A(c) to trustee's
statement of eligibility and qualification, Registration No.
33-13020, and incorporated herein by reference.

Exhibit 4 - Copy of existing by-laws of the trustee, filed as Exhibit 4 to
trustee's statement of eligibility and qualification,
Registration No. 33-46990, and incorporated herein by
reference.

Exhibit 5 - Copy of each indenture referred to in Item 4, if the obligor is
in default. Not Applicable.

Exhibit 6 - Consent of the trustee required by Section 321(b) of the Act,
filed as Exhibit T1D to trustee's statement of eligibility and
qualification, Registration No. 33-13020, and incorporated
herein by reference.

Exhibit 7 - Copy of the latest report of condition of the trustee
transmitted electronically pursuant to law or the requirements
of its supervising or examining authority.
</TABLE>

<PAGE> 3

SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE
TRUSTEE, MELLON BANK, N.A., A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF PITTSBURGH, AND COMMONWEALTH OF
PENNSYLVANIA, ON THE 3RD DAY OF NOVEMBER 1995.

MELLON BANK, N.A.
TRUSTEE

By: Elaine D. Renn
--------------------------
Elaine D. Renn
Assistant Vice President

2
<PAGE> 4

EXHIBIT 7

REPORT OF CONDITION
CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF
MELLON BANK, N.A.
FOR JUNE 30, 1995

IN THE COMMONWEALTH OF PENNSYLVANIA, AT THE CLOSE OF BUSINESS ON JUNE 30,
1995; TRANSMITTED ELECTRONICALLY IN RESPONSE TO CALL MADE BY COMPTROLLER OF
THE CURRENCY, UNDER TITLE 12, UNITED STATES CODE, SECTION 161.

CHARTER NO. 6301 NORTHEASTERN DISTRICT

STATEMENT OF RESOURCES AND LIABILITIES
(in thousands)
<TABLE>
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . $ 2,064,905
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . 1,295,128
Securities:
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . 2,916,066
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . 1,903,479
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,564
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . $ 22,945,571
LESS: Allowance for loan and lease losses . . . . . . . . . 392,872
Loans and leases, net of unearned income, allowance, and reserve . . . . . . 22,552,699
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . 503,092
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . 462,332
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,075
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . 248,411
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849,113
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,339,251

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . 34,577,115

LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,895,046
Noninterest-bearing . . . . . . . . . . . . . . . . . . 5,174,886
Interest-bearing . . . . . . . . . . . . . . . . . . . . 14,720,160
In foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . 3,474,360
Noninterest-bearing . . . . . . . . . . . . . . . . . . 12,639
Interest-bearing . . . . . . . . . . . . . . . . . . . . 3,461,721
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . 3,549,011
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . 306,661
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . 800,000
Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468,684
Other borrowed money:
With original maturity of one year or less . . . . . . . . . . . . . . . . . 1,395,704
With original maturity of more than one year . . . . . . . . . . . . . . . . 287,098
Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . 1,227
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . 248,411
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . 398,088
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627,366
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . 31,451,656
EQUITY CAPITAL
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,285
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . 1,027,567
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . 1,963,156
Net unrealized holding gains (losses) on available-for-sale securities . . . . . (25,447)
Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . (7,102)
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . 3,125,459
TOTAL LIABILITIES, LIMITED-LIFE
PREFERRED STOCK, AND EQUITY CAPITAL . . . . . . . . . . . 34,577,115
</TABLE>

<PAGE> 5

I, Michael K. Hughey, Senior Vice President and Corporate Controller
of the above-named bank, do hereby declare that this Report of Condition is true
and correct to the best of my knowledge and belief.

Michael K. Hughey
August 8, 1995

We, the undersigned directors, attest to the correctness of this
Statement of Resources and Liabilities. We declare that it has been examined by
us, and to the best of our knowledge and belief has been prepared in conformance
with the instructions and is true and correct.

FRANK V. CAHOUET
W. KEITH SMITH
CHARLES A. CORRY