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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in charter)
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<S> <C>
DISTRICT OF COLUMBIA 52-089-1669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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2201 COOPERATIVE WAY
HERNDON, VIRGINIA 20171-3025
(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 20171-3025
(703) 709-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
MARK L. WEISSLER THOMAS R. BROME
MILBANK, TWEED, HADLEY & MCCLOY LLP CRAVATH, SWAINE & MOORE
1 CHASE MANHATTAN PLAZA 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
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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, 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, 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
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PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
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Securities............................ $2,000,000,000 100% $2,000,000,000 $556,000
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(1) Expressed as the principal amount of Securities, or in the case of Original
Issue Discount Securities, the offering price thereof.
(2) Estimated solely for purposes 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 the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PURSUANT TO RULE 429 OF THE COMMISSION UNDER THE SECURITIES ACT OF 1933,
THE WITHIN PROSPECTUS RELATES TO DEBT SECURITIES REGISTERED HEREBY AND TO DEBT
SECURITIES PREVIOUSLY REGISTERED BY REGISTRATION STATEMENT NO. 333-53819.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION, MAY 20, 1999
[CFC LOGO]
National Rural Utilities
Cooperative Finance Corporation
$2,143,929,000
Securities
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We plan to issue from time to time up to $2,143,929,000 of securities. We will
provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplements carefully.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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This prospectus may not be used to consummate the sale of securities unless
accompanied by a prospectus supplement.
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THE DATE OF THIS PROSPECTUS IS , 1999
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WHERE YOU CAN FIND MORE INFORMATION ABOUT
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
National Rural Utilities Cooperative Finance Corporation ("CFC") files
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any document CFC files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. CFC's SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows the incorporation by reference of information filed in other
documents into this prospectus, which means that CFC can disclose information
important to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus, and
later information filed with the SEC will update and supersede this information.
CFC incorporates by reference the documents listed below and any future filings
made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until this offering is completed:
(a) Annual Report on Form 10-K for the year ended May 31, 1998;
(b) Quarterly Reports on Form 10-Q for the quarters ended August 31,
1998, November 30, 1998 and February 28, 1999;
(c) Current Reports on Form 8-K dated June 22, 1998, August 28, 1998,
September 25, 1998, October 7, 1998, November 5, 1998, December 7, 1998,
January 12, 1999 and March 22, 1999.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the following address:
Steven L. Lilly
Senior Vice President and Chief Financial Officer
National Rural Utilities Cooperative Finance Corporation
Woodland Park, 2201 Cooperative Way
Herndon, VA 20171-3025
(703) 709-6700
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE AUTHORIZED NO
ONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THE DOCUMENT.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED.
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CFC
CFC was incorporated as a private, not-for-profit cooperative association
under the laws of the District of Columbia in 1969. CFC's principal purpose is
to provide its members with a source of financing to supplement the loan program
of the Rural Utilities Service ("RUS") (formerly the Rural Electrification
Administration) of the United States Department of Agriculture. CFC makes loans
primarily to its rural utility system members to enable them to acquire,
construct and operate electric distribution, generation, transmission and
related facilities. CFC also makes loans to service organization 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 in connection with
certain lease transactions of its members. Also, through Rural Telephone Finance
Cooperative, 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, a controlled
affiliate of CFC established in 1991, CFC provides financing for members to
refinance their debt to the Federal Financing Bank of the United States
Treasury. CFC's offices are located at Woodland Park, 2201 Cooperative Way,
Herndon, VA 20171-3025 and its telephone number is (703) 709-6700.
CFC's 1,052 members as of May 31, 1998 included 903 rural utility system
members, virtually all of which are consumer-owned cooperatives, 75 service
organization members and 74 associate members. The rural utility system members
included 835 distribution systems and 68 generation and transmission systems
operating in 46 states and U.S. territories.
CFC's long-term loans to rural utility system members generally have
35-year maturities. Loans are made directly to members or in conjunction with
concurrent RUS loans. Loans made to members that do not also have RUS loans are
generally secured by a mortgage or substantially all the rural utility system
member's property (including revenues). Loans made to members that also have RUS
loans are generally secured ratably with RUS's loans by a common mortgage on
substantially all the rural utility system member's property (including
revenues). Interest rates on these loans are either fixed or variable. Fixed
rates are offered weekly based on the overall cost of long-term funds and may be
obtained for any period from one to 35 years. Variable rates are adjusted
monthly in line with changes in the cost of short-term funds.
CFC makes short-term line-of-credit loans and intermediate-term loans with
up to five-year maturities. These loans are made on either a secured or an
unsecured basis. Rates on these loans may be adjusted semi-monthly in line with
changes in the 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 Rural Telephone
Finance Cooperative. These loans are long-term fixed or variable rate loans with
maturities not exceeding 15 years and short-term loans.
At February 28, 1999, CFC had a total of $13,325.9 million of loans
outstanding and $1,728.1 million of guarantees outstanding.
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 required 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 $992.2 million of the
guaranteed pollution control debt (at February 28, 1999) had 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 losses at a level believed
to be adequate in relation to the quality and size of its loans and guarantees
outstanding. At February 28, 1999, the allowance was $264.0 million. At February
28, 1999, CFC's ten largest borrowers, which were primarily power supply
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members, had outstanding loans totaling $1,967.6 million, which represented
approximately 14.7% of CFC's total loans outstanding. As of February 28, 1999,
outstanding guarantees for these same ten largest borrowers totaled $707.9
million, which represented 41.0% of CFC's total 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 operating under a restructuring agreement. At February 28,
1999, Deseret (excluding loans guaranteed by RUS) accounted for 4.4% of loans
outstanding. Guarantees outstanding for Deseret accounted for 3.1% of total
guarantees outstanding. Total loans and guarantees outstanding to and for
Deseret accounted for 35.7% of total Members' Equity, Members' Subordinated
Certificates and the allowance for loan losses.
CFC's fixed charge coverage ratio was as follows for the periods indicated:
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NINE MONTHS ENDED
FEBRUARY 28, YEAR ENDED MAY 31,
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1999 1998 1998 1997 1996 1995 1994
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1.12 1.12 1.12 1.12 1.12 1.13 1.13
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Margins used to compute the fixed charge coverage ratio represent net
margins before extraordinary loss resulting from redemption premiums on bonds
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.
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, CFC will add the net
proceeds from the sale of the securities to the general funds, which will be
used to make loans to members, repay short-term borrowings, refinance existing
long-term debt and for other corporate purposes. CFC 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.
DESCRIPTION OF SECURITIES
The following description summarizes the general terms and provisions that
may apply to the securities. Each prospectus supplement will state the
particular terms of the securities and the extent, if any, to which the general
provisions may apply to the securities included in the supplement.
The securities will be issued under an Indenture dated as of December 15,
1987, as supplemented by a First Supplemental Indenture dated as of October 1,
1990 between CFC and Harris Trust and Savings Bank, as successor Trustee (as so
supplemented, the "Indenture"). The Indenture does not limit the aggregate
principal amount of securities which may be issued thereunder.
The following summary of certain provisions of the Indenture is not
complete. You should refer to the applicable provisions of the following
documents for more detailed information:
- the Indenture, which is incorporated by reference to Exhibit 4.1 to
Amendment No. 1 to Registration Statement No. 33-34927, filed with the
SEC on October 12, 1990, and
- the First Supplemental Indenture, which is incorporated by reference to
Exhibit 4.2 to Registration Statement No. 33-58445, filed with the SEC on
April 5, 1995.
Some of the capitalized terms used in the following discussion are defined in
the Indenture, and their definitions are incorporated by reference into this
prospectus. Section references below are to the sections in the Indenture.
GENERAL
The securities will be issued in fully registered form without coupons
unless the applicable prospectus supplement provides for an issuance to be in a
form registered as to principal only with or without coupons or in bearer form
with or without coupons or any combination thereof. Securities may also be
issued in
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temporary or definitive global bearer form. Unless specified otherwise in the
applicable prospectus supplement securities denominated in U.S. dollars in
denominations of $1,000 or multiples of $1,000 for registered securities and in
denominations of $5,000 or multiples of $5,000 for bearer securities.
The securities will be direct, unsecured obligations of CFC.
If any of the securities are offered for any foreign currency or currency
unit or if principal of, any premium or any interest on any of the securities is
payable in any foreign currency or currency unit, the applicable prospectus
supplement will describe the restrictions, elections, tax consequences, specific
terms and other information relative to those securities.
CFC may issue securities in one or more series with the same or various
maturities at or above par or with an original issue discount. Original issue
discount securities bearing no interest or interest at a rate which at the time
of issuance is below market rates will be sold at a discount (which may be
substantial) below their stated principal amount. See "United States
Taxation--U.S. Holders--Original Issue Discount" for a discussion of certain
Federal income tax considerations with respect to any original issue discount
securities.
The prospectus supplement relating to the particular series of securities
being offered will specify the amounts, prices and terms of those securities.
These terms may include:
- the title and the limit on the aggregate principal amount of securities;
- the percentage of their principal amount at which the securities will be
sold;
- the date or dates on which the securities will mature;
- the annual rate or rates (which may be fixed or variable) or the method
of determining any rate or rates at which the securities will bear
interest;
- the date or dates from which such interest shall accrue and the date or
dates at which interest will be payable;
- the place where payments may be made on the securities;
- any redemption or sinking fund terms;
- the principal amount of original issue discount securities payable upon
acceleration;
- the means of satisfaction and discharge of the Indenture with respect to
the securities;
- any changes to the events of default or covenants described in this
prospectus;
- the currency, currencies or currency unit or units for which the
securities may be purchased and the currency, currencies or currency unit
or units in which the payment of principal of (and premium) and interest
on such securities will be made;
- either CFC or the holders of securities may elect payment in a currency,
currencies or currency unit or units other than that in which the
securities are stated to be payable, then the period or periods within
which, and the terms upon which, the election may be made and, if the
amount of those payments may be determined with reference to an index
based on a currency, currencies or currency unit or units, other than
that in which the securities are stated to be payable, then the manner in
which such amounts shall be determined;
- whether the securities will be issued as registered securities, in a form
registered as to principal only with or without coupons, or as bearer
securities including temporary and definitive global form, or any
combination thereof and applicable exchange provisions;
- whether CFC will pay additional amounts to any holder of securities who
is not a United States person (as defined under "United States Taxation")
in respect of any tax, assessment or governmental charge required to be
withheld or deducted and whether CFC will have the option to redeem the
applicable securities rather than pay additional amounts;
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- whether the covenants described below under "Restriction on Indebtedness"
will apply to the securities; and
- any other terms of the securities not inconsistent with the Indenture.
(Section 301)
EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement,
registered securities of any series that are not global securities will be
exchangeable for other registered securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if securities of any series are issuable as both registered securities
and bearer securities, the holder may choose, upon written request and subject
to the terms of the Indenture, to exchange bearer securities and the appropriate
related coupons of that series into registered securities of the same series of
any authorized denominations and of a like aggregate principal amount and tenor.
Bearer securities with attached coupons surrendered in exchange for registered
securities between a regular record date or a special record date and the
relevant date for payment of interest must be surrendered without the coupon
relating to the interest payment date. Interest will not be payable in respect
of the registered security issued in exchange for that bearer security. The
interest will be payable only to the holder of that coupon when due in
accordance with the terms of the Indenture. Bearer securities will not be issued
in exchange for registered securities. No service charge will be made for any
registration of transfer or exchange of the securities, but CFC may require
payment of a sum sufficient to cover any applicable tax. (Section 305)
You may present securities for exchange as provided above. In addition, you
may present registered securities for registration of transfer together with the
duly executed form of transfer at the office of the security registrar or at the
office of any transfer agent designated by CFC for that purpose with respect to
any series of securities and referred to in an applicable prospectus supplement.
The security registrar or the transfer agent will effect the transfer or
exchange upon being satisfied with the documents of title and identity of the
person making the request. CFC has appointed Bank of Montreal Trust Company as
security registrar. (Section 305) If a prospectus supplement refers to any
transfer agents (in addition to the security registrar) initially designated by
CFC with respect to any series of securities, CFC may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts. However, if securities of a series
are issuable solely as registered securities, CFC will be required to maintain a
transfer agent in each place of payment for such series and, if securities of a
series are issuable as bearer securities, CFC will be required to maintain (in
addition to the security registrar) a transfer agent in a place of payment for
such series. CFC may at any time designate additional transfer agents with
respect to any series of securities. (Section 1002)
In the event of any redemption in part, CFC will not be required to:
- issue, register the transfer of or exchange securities of any series
during a period beginning at the opening of business 15 days before any
selection of securities of that series to be redeemed and ending at the
close of business on:
- if securities of the series are issuable only as registered
securities, the day of mailing of the relevant notice of redemption;
- if securities of the series are issuable only as bearer securities,
the day of the first publication of the relevant notice of redemption;
or
- if securities of the series are also issuable as registered securities
and bearer securities and there is no publication of the relevant
notice of redemption, the day of mailing of the relevant notice of
redemption;
- register the transfer of or exchange any registered security, or
portion thereof, called for redemption, except the unredeemed portion
of any registered security being redeemed in part; or
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- exchange any bearer security called for redemption, except to exchange
such bearer security for a registered security of that series and like
tenor which is simultaneously surrendered for redemption. (Section
305)
PAYMENT AND PAYING AGENTS
Unless otherwise specified in an applicable prospectus supplement, payment
of principal of, any premium and any interest on registered securities will be
made at the office of the paying agent or paying agents that CFC may designate
at various times. However, CFC may also make interest payments by check mailed
to the address, as it appears in the security register, of the person entitled
to the payments. (Section 301) Unless otherwise specified in an applicable
prospectus supplement, CFC will make payment of any installment of interest on
registered securities to the person in whose name that registered security is
registered at the close of business on the regular record date for such
interest. (Section 307)
Unless otherwise specified in an applicable prospectus supplement, the
office of Bank of Montreal Trust Company in the Borough of Manhattan, The City
of New York will be designated as sole paying agent for payments with respect to
securities that are issuable solely as registered securities and as CFC's paying
agent in the Borough of Manhattan, The City of New York, for payments with
respect to securities. Any paying agents outside the United States and any other
paying agents in the United States initially designated by CFC for the
securities will be named in an 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.
However, unless otherwise specified in an applicable prospectus supplement, if
securities of a series are issuable solely as registered securities, CFC will be
required to maintain a paying agent in each place of payment for such series. If
securities of a series are issuable as bearer securities, CFC will be required
to maintain (i) a paying agent in the Borough of Manhattan, The City of New
York, for payments with respect to any registered securities of the series and
for payments with respect to bearer securities of the series in certain
circumstances and (ii) a paying agent in a place of payment located outside the
United States where bearer securities of such series and any coupons may be
presented and surrendered for payment. (Section 1002)
All moneys paid by CFC to a paying agent for the payment of principal,
premium, or interest on any security or coupon that remains unclaimed at the end
of two years after becoming due and payable will be repaid to CFC. After that
time, the holder of the security or coupon will, as an unsecured general
creditor, look only to CFC for payment out of those repaid amounts. (Section
1003)
RESTRICTION ON INDEBTEDNESS
CFC may not incur any superior indebtedness or make any optional prepayment
on any capital term certificate if, as a result, the principal amount of
superior indebtedness outstanding, less the principal amount of government or
government insured obligations held by CFC, on any future date would exceed 20
times the sum of the members' equity in CFC at the time of determination plus
the principal amount of capital term certificates outstanding at the time of
determination or at the given future date. The principal amounts of superior
indebtedness and capital term certificates to be outstanding on any future given
date will be computed after giving effect to maturities and sinking fund
requirements. (Section 1007) "Superior indebtedness" means all indebtedness of
CFC (including all guarantees by CFC of indebtedness of others) except capital
term certificates. A "capital term certificate" is defined as a note of CFC
substantially in the form of the capital term certificates of CFC outstanding on
the date of the Indenture and any other indebtedness having substantially
similar provisions as to subordination. As of February 28, 1999, CFC had
$13,164.4 million outstanding of superior indebtedness. Within the restrictions
of the Indenture, CFC was permitted to have outstanding an additional $25,311.6
million of superior indebtedness.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
CFC may not consolidate with or merge into any other corporation or
transfer its assets substantially as an entirety to any person unless:
- the successor is a corporation organized under the laws of any domestic
jurisdiction;
- the successor corporation assumes CFC's obligations under the Indenture
and the securities issued under the Indenture;
- immediately after giving effect to the transaction, no event of default
and no event that, after notice or lapse of time, or both, would become
an event of default, has occurred and is continuing; and
- certain other conditions are met. (Section 801)
MODIFICATION OF THE INDENTURE
Any actions that CFC or the Trustee may take toward adding to CFC's
covenants, adding additional events of default, establishing the form or terms
of securities of any series, changing or eliminating any restriction on the
manner or place of payment of principal of or interest on bearer securities will
not require the approval of any holder of debt securities. In addition, CFC or
the Trustee may cure ambiguities or inconsistencies in the Indenture or make
other provisions as long as no holders' interests are materially and adversely
affected. (Section 901)
Under the Indenture, CFC's rights and obligations and the rights of the
holders may be modified with the consent of the holders of at least a majority
in principal amount of the then outstanding securities of all affected series.
None of the following modifications, however, is effective against any holders
without the consent of the holders of all the affected outstanding securities:
- changing the maturity, installment or interest rate of any of the
securities;
- reducing the principal amount, any premium or the interest rate of any of
the securities;
- reducing the amount of the principal of original issue discount
securities payable on any acceleration of maturity;
- changing the currency, currencies or currency unit or units in which any
principal, premium or interest of any of the securities is payable;
- changing any of CFC's obligations to maintain an office or agency in the
places and for the purposes required by the Indenture;
- impairing any right to take legal action for an overdue payment;
- reducing the percentage required for modifications to or waivers of
compliance with the Indenture; or
- with certain exceptions, modifying the provisions for the waivers of
certain covenants and defaults and any of the foregoing provisions.
(Section 902)
WAIVER OF CERTAIN COVENANTS
Under the Indenture CFC will not be required to comply with certain
restrictive covenants (including that described above under "Restriction on
Indebtedness") if the holders of at least a majority in principal amount of all
series of outstanding securities affected waive compliance with the restrictive
covenants. (Section 1009)
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EVENTS OF DEFAULT, NOTICE AND WAIVER
An event of default in respect of any series of securities (unless it is
either inapplicable to a particular series or has been modified or deleted with
respect to any particular series) is defined in the Indenture to be:
- failure to pay interest on any security for 30 days after the security
becomes due;
- failure to pay the principal of or any premium on any of the securities
when due;
- failure to deposit any sinking fund payment when the payment becomes due;
- failure to perform or breach of the covenant described above under
"Restrictions on Indebtedness" that continues for 60 days after the
default becomes known to an officer of CFC;
- failure to perform or breach of any other covenants or warranties in the
Indenture that continues for 60 days after notice from the Trustee or the
holders of at least 25% in principal amount of the outstanding securities
of the series;
- certain events of bankruptcy, insolvency or reorganization of CFC; and
- such other events as may be specified for each series. (Section 501)
The Indenture provides that if an event of default has happened and is
continuing, either the Trustee or the holders of at least 25% in principal
amount of the outstanding securities of such series may declare the principal
(or, if the securities are original issue discount securities, such portion of
the principal amount as may be specified by the terms of such securities) of all
of the outstanding securities of that series to be immediately due and payable.
(Section 502)
The Indenture provides that the holders of at least a majority in principal
amount of the outstanding securities of any series may 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 that series. The Trustee may act in any way that is consistent
with these directions and may decline to act if any such direction is contrary
to law or to the Indenture or would involve the Trustee in personal liability.
(Section 507)
The Indenture provides that the holders of at least a majority in principal
amount of the outstanding securities of any series may on behalf of the holders
of all of the outstanding securities of the series waive any past default with
respect to such series and its consequences, except a default:
- in the payment of the principal of or any premium or any interest on any
of the securities of the series or;
- in respect of a covenant or provision which, under the terms of the
Indenture, cannot be modified or amended without the consent of the
holders of all of the outstanding securities of the series affected.
(Section 508)
The Indenture contains provisions entitling the Trustee, subject to the
duty during an event of default in respect of any series of securities to act
with the required standard of care, to be indemnified by the holders of the
securities of the relevant series before proceeding to exercise any right or
power at the request of those holders. (Sections 601 and 603)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Securities, give to the
holders of the securities of that series notice of all uncured and unwaived
defaults known to it. However, except in the case of a default in the payment of
the principal of or any premium or any interest on, or any sinking fund or
purchase fund installment with respect to, any of the securities of that series,
the Trustee will be protected in withholding this notice if it in good faith
determines that the withholding of such notice is in the interest of those
holders. The above notice shall not be given until at least 60 days after the
occurrence of an event of default regarding the performance or breach of any
covenant or warranty other than for the payment of the principal of or premium
or any interest on, or any sinking fund installment with respect to, any of the
securities of such series. The term default for the
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purpose of this provision only means any event that is, or after notice or lapse
of time, or both, would become, an event of default with respect to the
securities of that series. (Section 602)
The Indenture requires CFC to file annually with the Trustee a certificate,
executed by two officers of CFC, indicating whether CFC is in default under the
Indenture. (Section 1008)
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
securities of a series if securities of that series are issuable as Bearer
Securities. (Section 1201) A meeting may be called at any time by the Trustee,
and also, upon request, by CFC or the holders of at least 10% in principal
amount of the outstanding securities of such series, upon notice given in
accordance with "Notices" below. (Section 1202) Persons entitled to vote a
majority in principal amount of the outstanding securities of a series shall
constitute a quorum at a meeting of holders of securities of the series.
However, that in the absence of a quorum, a meeting, called by CFC or the
Trustee shall be adjourned for a period of at least 10 days, and in the absence
of a quorum at the adjourned meeting, the meeting shall be further adjourned for
a period of at least 10 days, at which further adjourned meeting persons
entitled to vote 25% in aggregate principal amount of the outstanding securities
of that series shall constitute a quorum. Except for any consent which must be
given by the holder of each outstanding security affected thereby, as described
above under "Modification of the Indenture", and subject to the provisions
described in the last sentence under this subheading, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the lesser of (i) the holders of a
majority in principal amount of the outstanding securities of that series and
(ii) 66 2/3% in aggregate principal amount of outstanding securities of such
series represented and voting at the meeting. However, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of
outstanding securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the lesser of (i) the holders of such specified percentage in principal amount
of the outstanding securities of that series and (ii) a majority in principal
amount of outstanding securities of such series represented and voting at the
meeting. Any resolution passed or decision taken at any meeting of holders of
securities of any series duly held in accordance with the Indenture will be
binding on all holders of securities of that series and the related coupons.
With respect to any consent, waiver or other action which the Indenture
expressly provides may be given by the holders of a specified percentage of
outstanding securities of all series affected (acting as one class), only the
principal amount of outstanding securities of any series represented at a
meeting or adjourned meeting duly reconvened at which a quorum is present as
described above and voting in favor of such action shall be counted for purposes
of calculating the aggregate principal amount of outstanding securities of all
series affected favoring such action. (Section 1204)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of bearer
securities will be given by publication at least once in a daily newspaper in
The City of New York and London and in such other city or cities as may be
specified in the bearer securities and will be mailed to the persons whose names
and addresses were previously filed with the Trustee, within the time prescribed
for the giving of such notice. Notices to holders of registered securities will
be given by mail to the address of those holders as they appear in the security
register. (Section 106)
TITLE
Title to any bearer security (including any bearer security in temporary or
definitive global bearer form) and any coupons will pass by delivery. CFC, the
Trustee and any agent of CFC or the Trustee may treat the bearer of any Bearer
Security and the bearer of any coupon and the registered owner of any registered
security as the absolute owner thereof (whether or not such security or coupon
is overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes. (Section 308)
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REPLACEMENT OF SECURITIES AND COUPONS
CFC will replace any mutilated security and any security with a mutilated
coupon at the expense of the holder upon surrender of such mutilated security or
security with a mutilated coupon to the Trustee. CFC will replace securities or
coupons that become destroyed, stolen or lost at the expense of the holder upon
delivery to the Trustee of evidence of the destruction, loss or theft thereof
satisfactory to CFC and the Trustee. In the case of any coupon which becomes
destroyed, stolen or lost, that coupon will be replaced upon surrender to the
Trustee of the security with all related coupons not destroyed, stolen or lost
by issuance of a new security in exchange for the security to which such coupon
relates. In the case of a destroyed, lost or stolen security or coupon an
indemnity satisfactory to the Trustee and CFC may be required at the expense of
the holder of such security or coupon before a replacement security will be
issued. (Section 306)
SATISFACTION AND DISCHARGE; DEFEASANCE
At CFC's request, the Indenture will cease to be in effect as to CFC
(except for certain obligations to register the transfer or exchange of
securities and hold moneys for payment in trust) with respect to the securities
when:
- all the securities have been cancelled by the Trustee, or;
- in the case of securities and coupons not delivered to the Trustee for
cancellation;
- the securities or coupons have become due and payable, will become due
and payable at their stated maturity within one year, or are to be called
for redemption within one year, and, in each case, CFC has deposited with
the Trustee, in trust, money, and, in the case of securities and coupons
denominated in U.S. dollars, U.S. government obligations or, in the case
of securities and coupons denominated in a foreign currency, foreign
government securities, which through the payment of interest and
principal in accordance with their terms will provide money in an amount
sufficient to pay in the currency, currencies or currency units or units
in which the offered securities are payable all the principal of, and
interest on, the offered securities on the dates such payments are due in
accordance with the terms of the offered securities, or;
- the securities or coupons are deemed paid and discharged in the manner
described in the next paragraph. (Section 401)
Unless the prospectus supplement relating to the offered securities
provides otherwise, CFC at its option:
- will be discharged from any and all obligations in respect of the offered
securities (except for certain obligations to register the transfer or
exchange of securities, replace stolen, lost or mutilated securities and
coupons, maintain paying agencies and hold moneys for payment in trust)
or;
- need not comply with certain restrictive covenants of the Indenture
(including those described above under "Restriction on Indebtedness"), in
each case after CFC deposits with the Trustee, in trust, money, and, in
the case of securities and coupons denominated in U.S. dollars, U.S.
government obligations or, in the case of securities and coupons
denominated in a foreign currency, foreign government securities, which
through the payment of interest and principal in accordance with their
terms will provide money in an amount sufficient to pay in the currency,
currencies or currency unit or units in which the offered securities are
payable all the principal of, and interest on, the offered securities on
the dates such payments are due in accordance with the terms of the
offered securities.
Among the conditions to CFC's exercising any such option, 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 offered 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
the deposit and related defeasance has not occurred. (Section 403)
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At CFC's request, the Trustee will deliver or pay to CFC any U.S.
government obligations, foreign government securities or money deposited, for
the purposes described in the preceding two paragraphs, with the Trustee by CFC
and which, in the opinion of a nationally-recognized firm of independent public
accountants, are in excess of the amount which would then have been required to
be deposited for such purposes. In addition, the Trustee, in exchange for,
simultaneously, other U.S. government obligations, foreign government securities
or money, will deliver or pay to CFC, at CFC's request, U.S. government
obligations, foreign government securities or money deposited with the Trustee
for the purposes described in the preceding two paragraphs, if, in the opinion
of a nationally-recognized firm of independent public accountants, immediately
after such exchange the obligations, securities or money then held by the
Trustee will be in the amount then required to be deposited with the Trustee for
such purposes. (Section 403)
GOVERNING LAW
The Indenture, the securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 113)
THE TRUSTEE
Harris Trust and Savings Bank, Chicago, Illinois is the Trustee under the
Indenture.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Under U.S. federal tax laws, certain limitations on offers, sales and
delivery apply to bearer securities. CFC will set forth these limitations, as
well as additional information regarding the U.S. federal income tax
consequences in respect of a bearer security, in any prospectus supplement
providing for the issuance of bearer securities.
UNITED STATES TAXATION
The following is a summary of the principal U.S. federal income tax
consequences of the acquisition, ownership and disposition of registered
securities. The summary reflects present law, which is subject to prospective
and retroactive changes. It is not intended as tax advice, and it does not
describe all of the tax considerations that may be relevant to a prospective
purchaser. The summary addresses only original purchasers of the securities that
hold the securities as capital assets. It does not address U.S. federal income
tax issues relevant to purchasers subject to special rules, such as banks,
securities dealers, life insurance companies, controlled foreign corporations,
persons holding securities in connection with a hedge or as a position in a
"straddle" or persons having a functional currency other than the U.S. dollar.
The summary does not consider the tax consequences of securities with terms
other than those described in this prospectus. PROSPECTIVE PURCHASERS ARE URGED
TO CONSULT THEIR TAX ADVISERS ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE
SECURITIES UNDER THE LAWS OF THE UNITED STATES AND OTHER JURISDICTIONS WHERE
PURCHASERS ARE SUBJECT TO TAXATION.
For the purposes of this discussion, "U.S. holder" means (i) a beneficial
owner of the securities that is a citizen or resident of the United States, a
corporation organized in or under the laws of the United States or any political
subdivision thereof, a trust subject to the control of a United States person
and the primary supervision of a United States Court, or an estate the income of
which is subject to U.S. federal income taxation regardless of its source or
(ii) any other beneficial owner as to which income from the securities is
effectively connected with the conduct of a trade or business within the United
States. The term "Non-U.S. holder" refers to any beneficial owner of the
securities other than a U.S. holder.
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U.S. HOLDERS
Payments of Interest
Interest on a security generally will be taxable to a U.S. holder as
ordinary interest income at the time of receipt or accrual in accordance with
the U.S. holder's method of accounting for U.S. federal income tax purposes.
Special rules for the interest on securities with original issue discount are
described below.
Original Issue Discount
The following is a summary of the U.S. federal income tax consequences to
U.S. Holders of the purchase, ownership and disposition of securities issued
with original issue discount ("OID"). The following summary is based on sections
1271 through 1273 and section 1275 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), and on certain final regulations of the U.S. Department of
Treasury (the "OID Regulations") interpreting these provisions.
General. A U.S. holder of a security issued at a discount with a maturity
of more than one year after the date of issue must include OID in income over
the term of the security. The U.S. holder generally must include in gross income
for the taxable year the sum of the daily portions of OID that accrue on the
security for each day during the year on which such holder held the security.
Accordingly, a U.S. holder will be required to include amounts attributable to
OID in income before receiving cash attributable to that income.
A security has OID for U.S. federal income tax purposes to the extent that
the security's stated redemption price at maturity exceeds its issue price. The
issue price of a security is the initial offering price at which a substantial
amount of the securities is sold to the public (excluding bond houses, brokers
or similar persons). The stated redemption price of a security is the total of
all payments due on the security other than payments of "qualified stated
interest." A security is not treated as issued with OID, however, if the
difference between the stated redemption price at maturity and the issue price
of the security is less than 1/4 of 1 percent of the security's stated
redemption price at maturity multiplied by the number of complete years to
maturity ("de minimis original issue discount"). If a security bears interest
for any accrual period at a rate below the rate for the remaining term of the
security (e.g., a security with a "teaser rate") the security's stated
redemption price at maturity, for purposes of determining whether the security
has de minimis original issue discount, is treated as equal to the security's
issue price plus the greater of the amount of foregone interest on such security
or any "true" discount on such security (i.e., the excess of the security's
stored principal amount over its issue price).
Qualified stated interest is interest that is payable unconditionally in
cash or in property (other than debt of the issuer) at least annually at either
(a) a single fixed rate that appropriately takes into account the length of the
interval between payments or (b) certain variable rates.
To determine the daily portions of original issue discount, original issue
discount accruing during an accrual period is divided by the number of days in
the period. Except as described below under "variable rate securities," the
amount of original discount accruing during an accrual period is determined by
using a constant yield to maturity method. The accrued amount for any period is
the excess of (i) the product of the security's adjusted issue price at the
beginning of the accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted for the length of the accrual period) over (ii) the amount of any
qualified stated interest payments allocable to the accrual period. The adjusted
issue price of a security at the beginning of any accrual period generally
equals the issue price of the security increased by the aggregate amount of
original issue discount that accrued on that security in all prior accrual
periods and reduced by the amount of payments in prior accrual periods other
than payments of qualified stated interest.
A U.S. holder of a security issued at a discount that purchases the
security for more than the security's adjusted issue price but less than or
equal to the security's stated redemption price at maturity may reduce the daily
portions of original issue discount includible in gross income by daily portions
of the acquisition premium paid for the security.
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Variable Rate Securities. Special rules apply to the U.S. holder of a
security that bears interest at certain types of variable rates (a "variable
rate security"). For these purposes, a variable rate security is one that bears
interest at the current values of (i) one or more "qualified floating rates,"
(ii) a single fixed rate followed by one or more qualified floating rates, (iii)
a single "objective rate" or (iv) a single fixed rate and an objective rate that
is a qualified inverse floating rate. A qualified floating rate is any floating
rate the variations in which reasonably can be expected to measure
contemporaneous variations in the cost of newly-borrowed funds (e.g., LIBOR).
Although a multiple of a qualified floating rate will generally not itself
constitute a qualified floating rate, a variable rate is a qualified floating
rate if it is equal to either (i) the product of a qualified floating rate and a
fixed multiple rate that is greater than 0.65 but not more than 1.35 or (ii) the
product of a qualified floating rate and a fixed multiple rate that is greater
than 0.65 but not more than 1.35, increased or decreased by a fixed rate. In
addition, under the OID regulations, two or more qualified floating rates with
values within 25 basis points of each other (as determined on the variable rate
security's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute a
qualified floating rate but which is subject to one or more restrictions such as
a maximum or minimum numerical limitation (i.e., a cap or floor) may, under
certain circumstances, fail to be treated as a qualified floating rate under the
OID regulations unless such cap or floor is fixed throughout the term of the
security. An objective rate is a rate, other than a qualified floating rate,
that is determined using a single fixed formula and that is based on objective
financial or economic information outside of the issuer's control. A rate will
not be considered an objective rate, however, if it is reasonably expected that
the average value of the rate during the first half of the security's term will
be either significantly less than or significantly greater than the average
value of the rate during the final half of the security's term. A qualified
inverse floating rate is a fixed rate minus a qualified floating rate whose
variations can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds. A fixed rate for an initial
period of one year or less followed by a qualified floating rate or an objective
rate together constitute a single qualified floating objective rate if the value
of the qualified floating rate or objective rate on the issue date is intended
to approximate the fixed rate.
In general, to compute the accrual of OID on a variable rate security, the
OID regulations convert the variable rate security into a fixed rate debt
instrument and then apply the general rules discussed above to the deemed fixed
rate debt instrument. If a variable rate security provides for stated interest
at either a single qualified floating rate or objective rate that is
unconditionally payable at least annually, (a) all stated interest with respect
to the variable rate security is treated as qualified stated interest and (b)
the amount of OID, if any, is determined under the rules applicable to fixed
rate debt instruments discussed above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value, as of the issue date of the variable rate
security, of the qualified floating rate or the qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the variable rate security.
If the variable rate security does not provide for stated interest as
described in the preceding paragraph, to determine the amounts of interest and
OID accruals, an "equivalent fixed rate debt instrument" must be constructed.
The equivalent fixed rate debt instrument has terms that are identical to those
provided under the variable rate security, except that the equivalent fixed rate
debt instrument provides for fixed rate substitutes in lieu of the qualified
floating rates or objective rate provided under the variable rate security. The
fixed rate substitute (a) for each qualified floating rate is the value of each
such rate as of the issue date of the variable rate security (with appropriate
adjustment for any differences in intervals between interest adjustment dates),
(b) for a qualified inverse floating rate is the value of the qualified inverse
floating rate as of the issue date of the variable rate security and (c) for an
objective rate (other than a qualified inverse floating rate) is a fixed rate
that reflects the yield that is reasonably expected for the variable rate
security. The amounts of qualified stated interest and OID, if any, are
determined for the equivalent fixed rate debt instrument under the rules
applicable to fixed rate debt instruments as described above and are taken into
account as if the holder of the security held the equivalent fixed rate debt
instrument. Qualified stated interest or OID allocable to an accrual period is
increased (or decreased) if the interest actually accrued or paid during an
accrual period exceeds (or is less than) the interest assumed to be accrued or
paid during the accrual period under the equivalent fixed rate debt instrument.
This increase or decrease is an adjustment to
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qualified stated interest of the accrual period if the equivalent fixed rate
debt instrument provides for qualified stated interest and the increase or
decrease is reflected in the amount actually paid during the accrual period.
Otherwise, this increase or decrease is an adjustment to OID for the accrual
period. If the variable rate security provides for interest at a qualified
floating rate or qualified inverse floating rate and also provides for stated
interest at a single fixed rate (other than a single fixed rate for an initial
period of one year or less that is intended to approximate the value of the
qualified floating or objective rate), in constructing the equivalent fixed rate
debt instrument, such a variable rate security is treated as if it provided for
a qualified floating rate (or qualified inverse floating rate, as the case may
be) instead of the fixed rate, which qualified floating (or inverse floating)
rate is such that the variable rate security would have a fair market value as
of its issue date that is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or the qualified inverse floating rate rather than the fixed rate.
The foregoing rules do not apply, and a security is treated as a contingent
payment security, if its issue price exceeds the total of noncontingent
principal payments by more than the lesser of (i) the product of .015, the total
noncontingent principal payments and the number of complete years to maturity
(or a lesser amount if principal is payable in installments) and (ii) 15 percent
of the total noncontingent principal payments.
Optional Redemption. For purposes of determining the yield and maturity of
a security, CFC will be presumed to exercise any right to redeem a security
before its stated maturity or to extend the maturity of a security if exercise
would reduce the yield on the security. Likewise, the holder will be presumed to
exercise any right to require the redemption of a security or to extend the
maturity of the security if exercise would increase the yield on the security.
If the security is not actually redeemed on the date when the option was
presumed to have been exercised, the security will be treated only for purposes
of determining yield as having been reissued at a price equal to that security's
adjusted issue price on that date.
Short-Term Securities. U.S. holders that do not use the accrual method of
accounting for tax purposes generally will not be required to recognize original
issue discount on securities maturing within one year of original issuance until
they receive payments on the securities. Taxpayers on the accrual method,
regulated investment companies, common trust funds, and certain others, however,
must accrue original issue discount on such short-term securities on a
straight-line basis unless they elect to accrue the discount on a constant yield
basis with daily compounding. The original issue discount on a short-term
security is the amount by which the total principal and interest payments on the
security exceed its issue price. U.S. holders may elect to include discount on
such short-term securities into income based on acquisition discount rather than
original issue discount. Acquisition discount is the excess of a security's
stated redemption price at maturity over the U.S. holder's basis in the
security.
Gain recognized on the sale or exchange of a short-term security by a U.S.
holder that has not accrued discount on the security will be ordinary income to
the extent attributable to accrued interest and original issue discount. Such a
holder also must defer deductions for net interest expense on any borrowing
attributable to the short-term security to the extent that the expense does not
exceed accrued but unrecognized interest and original issue discount (or
acquisition discount) on the security. A recent proposal by the Clinton
Administration, if enacted, would require banks that are holders of short-term
securities to currently accrue interest on all such securities that it either
acquires or originates.
Anti-Abuse Rule
The Internal Revenue Service can apply or depart from the rules contained
in the OID regulations as necessary or appropriate to achieve a reasonable
result where a principal purpose in structuring a security or applying the
otherwise applicable rules is to achieve a result that is unreasonable in light
of the purposes of the applicable statutes (which generally are intended to
achieve the clear reflection of income for both sellers and purchasers of the
securities).
Market Discount
A U.S. holder that purchases a security at a market discount generally will
be required to treat payments other than qualified stated interest payments as
ordinary income to the extent of the accrued market discount
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and to treat gain on the sale of the security as ordinary income to the extent
of the accrued market discount not previously included in income. See "Sale or
Exchange of Securities" below. Market discount is the amount by which the stated
redemption price at maturity (or, in the case of a security with OID, the
revised issue price) exceeds the purchaser's basis in the security immediately
after acquisition. A security is not treated as purchased at a market discount,
however, if the discount is less than 1/4 of 1 percent of the stated redemption
price at maturity (or the revised issue price) multiplied by the number of
complete years remaining to maturity ("de minimis market discount"). (The
revised issue price of a security is its initial issue price increased by the
amount of OID includible in the gross income of previous holders.) Market
discount on a security will accrue, at the election of the holder, either
ratably or at a constant yield to maturity. The U.S. holder may elect to take
market discount into income as it accrues. Such election applies to all debt
instruments acquired in the tax year the election is made and thereafter, and
may not be revoked without the consent of the Internal Revenue Service. Under
certain circumstances, the U.S. holder may be required to defer deductions for
interest expense attributable to debt incurred or continued to purchase a
security with market discount.
Premium
A U.S. holder that purchases a security for more than its stated redemption
price at maturity may elect to amortize the bond premium. If a U.S. holder makes
such an election, the amount of interest on the security otherwise to be
included in the U.S. holder's income will be reduced each year by the amount of
amortizable bond premium allocable to such year on a constant yield to maturity
basis (except to the extent regulations may provide otherwise). Amortized bond
premium will reduce the U.S. holder's basis in the security. If the security may
be optionally redeemed after the U.S. holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some premium until later in the term
of the security. An election to amortize bond premium will apply to certain
other debt instruments that the U.S. holder acquired at a premium, and the
election may have different tax consequences depending on when the debt
instruments were issued or acquired.
Interest Election
A U.S. holder may elect, in the taxable year in which the U.S. holder
acquires a security, to treat all interest on any security as OID and calculate
the amount includible in gross income under the constant yield method described
above. For purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a U.S. holder makes this election for a security with
market discount or amortizable bond premium, the election is treated as an
election under the market discount or amortizable bond premium provisions,
described above, and the electing U.S. holder will be required to amortize bond
premium or include market discount in income currently for all of its other debt
instruments with market discount or amortizable bond premium acquired during
such tax year and in any subsequent tax year. The election, once made, may not
be revoked without the consent of the Internal Revenue Service. U.S. holders
should consult with their own tax advisers before making this election.
Sale or Exchange of Securities
Except to the extent that gain or loss is attributable to accrued but
unpaid interest or accrued market discount, a U.S. holder generally will
recognize capital gain or loss upon a sale, exchange or complete retirement of a
security equal to the difference between the amount realized and the U.S.
holder's adjusted basis in the security. The gain or loss generally will be
long-term if the security has been held for more than one year. The adjusted
basis of a security generally will equal its initial cost increased by any
original issue discount, market discount or acquisition discount with respect to
the security previously included in the U.S. holder's gross income and reduced
by the payments previously received on the security, other than payments of
qualified stated interest, and by any amortized premium.
The tax consequences of the partial redemption of a security will depend
upon the price at which the U.S. holder purchased the security. A U.S. holder
that purchased a security at a de minimis market discount
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or purchased a security for more than its revised issue price, but less than its
principal amount, will recognize capital gain equal to the difference between
the principal prepayment and the U.S. holder's adjusted basis in the prepaid
portion of the security. If a U.S. holder purchased a security at a market
discount, (i) the principal prepayment will be included in ordinary income to
the extent of the accrued market discount (and it is possible that amounts
allocable to unaccrued market discount will be recognized as capital gain) and
(ii) any principal prepayment exceeding the revised issue price allocable to the
prepaid portion of the security will be capital gain. If a U.S. holder purchased
a security for more than its stated principal amount and has not elected to
amortize bond premium, the U.S. holder will recognize a capital loss equal to
any amount by which the U.S. holder's adjusted basis in the prepaid portion of
the security exceeds the amount of the principal prepayment. If the U.S. holder
has elected to amortize bond premium, all or part of such excess might be
deductible as amortizable bond premium rather than as capital loss. Any capital
gain or loss will be long-term if the security has been held for more than one
year. It is possible that capital gain realized by holders of one or more
classes of Securities could be considered gain realized upon the disposition of
property that was part of a "conversion transaction." A "conversion transaction"
is any transaction in which substantially all of the expected return is
attributable to the time value of the U.S. holder's net investment, if (i) the
U.S. holder entered the contract to sell the security substantially
contemporaneously with acquiring the security, (ii) the security is part of a
straddle, (iii) the security is marketed or sold as producing capital gains, or
(iv) the transaction is specified in certain Treasury regulations. If the sale
or other disposition of the security is part of a conversion transaction, all or
any portion of the gain realized upon the sale or other disposition of the
securities would be treated as ordinary income instead of capital gain.
Foreign Currency Securities
The tax treatment of securities the interest or principal on which may be
determined by reference to one or more foreign currencies will depend on the
application of special rules to the particular terms of the securities. The tax
considerations relevant to such securities will be described in an applicable
prospectus supplement, and each prospective purchaser should consult its tax
adviser about such matters.
Contingent Payment Securities
The OID regulations contain special rules for determining the timing and
amount of OID to be accrued in respect of securities providing for one or more
contingent payments ("Contingent Payment Securities"). For this purpose, a
security is not a contingent payment security if it (i) is a variable rate
security, (ii) provides for alternate payment schedules upon the occurrence of
contingencies if certain other requirements are met or (iii) is a foreign
currency debt instrument. Under the OID regulations, U.S. holders generally
would be required to take contingent interest payments on contingent payment
securities into income on a yield to maturity basis in accordance with a
schedule of projected payments provided by CFC to U.S. holders and would make
annual adjustments to income to account for the difference between actual
payments received and projected payment amounts accrued. Additional disclosure
will be provided for in a prospectus supplement in connection with any offering
of contingent payment securities. Prospective purchasers should consult their
own tax advisers regarding the OID regulations in connection with ownership of a
security that provides for contingent payments.
NON-U.S. HOLDERS
Interest received by a non-U.S. holder is exempt from U.S. federal income
tax unless the holder actually or constructively owns at least 10% of the total
combined voting power of the issuer's stock or the holder is for U.S. income tax
purposes a controlled foreign corporation related to the issuer through stock
ownership or is a bank receiving interest described in Section 881(c)(3)(A) of
the Code. However, "contingent interest" paid to a non-U.S. holder will be
subject to a 30% tax (unless an applicable tax treaty eliminates or reduces the
rate of the tax and the non-U.S. holder complies with the requirements for
obtaining that reduction or elimination of the tax). For this purpose,
contingent interest is an amount of interest determined by reference to (i)
receipts, sales, or other cash flows of CFC or a related person, (ii) income or
profits of CFC or a related person, (iii) any change in the value of any
property of CFC or a related person, or (iv) any
17
<PAGE> 19
dividend, partnership distribution, or similar payment made by CFC or a related
person. To qualify for that exemption, a non-U.S. holder must provide a
statement signed under penalties of perjury certifying that the holder is not a
U.S. person for U.S. tax purposes and providing the holder's name and address.
This statement may be made on IRS form W-8BEN or a substantially similar form
and the beneficial owner must inform the withholding agent of any change of the
information on the statement within 30 days of the change. In addition, the
Treasury Department has recently issued regulations regarding the withholding
and information reporting rules. In general, the new regulations do not alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards.
However, the regulations would require in the case of securities held by a
foreign partnership that the certification requirement described above be
provided by the partners rather than by the foreign partnership unless the
partnership meets certain requirements and is authorized as a "withholding
foreign partnership" by the IRS. A look-through rule would apply in the case of
tiered partnerships. The regulations also generally require a non-U.S. holder to
provide a taxpayer identification number in order to claim a reduced rate of
withholding pursuant to a treaty. The regulations are generally effective for
payments made after December 31, 2000, subject to certain transition rules. Gain
from the sale or other disposition of a security by a non-U.S. holder is not
subject to U.S. federal income tax unless the non-U.S. holder is an individual
who is present in the United States for at least 183 days during the taxable
year of the disposition and certain other conditions are met.
Securities held by a non-U.S. holder will not be subject to the U.S.
federal estate tax unless the holder actually or constructively owns at least
10% of the total combined voting power of the issuer's stock.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A 31% backup withholding of federal income tax and certain information
reporting requirements may apply to certain payments made on the securities and
to the proceeds from the disposition of a security if the holder is not a
corporation, a financial institution or otherwise entitled to an exemption. U.S.
holders that provide a correct taxpayer identification number and non-U.S.
holders that provide the statement described above to establish an exemption
from withholding tax generally are exempt from backup withholding. Amounts
withheld under the backup withholding rules can be claimed as a refund or taken
as a credit against the holder's U.S. federal income tax liability on a properly
filed annual income tax return.
PLAN OF DISTRIBUTION
CFC may sell the securities being offered hereby (i) directly to
purchasers, (ii) through agents or (iii) through underwriters or dealers which
may include Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc.
and Banc of America Securities LLC.
CFC may sell securities directly or through agents designated by CFC from
time to time. Unless otherwise indicated in the prospectus supplement, any such
agent will be acting on a reasonable best-efforts basis for the period of its
appointment.
If underwriters are utilized in the sale, CFC will enter into an
underwriting agreement with those underwriters and the names of the underwriters
and the terms of the transaction will be set forth in the supplement, which will
be used by the underwriters to make resales of the securities or warrants in
respect of which this prospectus is delivered to the public.
If a dealer is utilized in the sale of any of the securities, CFC will sell
those securities to the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale.
The agents and underwriters may be deemed to be underwriters and any
discounts, commissions or concessions received by them from CFC or any profit on
the resale of offered securities or warrants by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Any
such
18
<PAGE> 20
person who may be deemed to be an underwriter and any such compensation received
from CFC will be described in the prospectus supplement.
Under agreements entered into with CFC, agents and underwriters who
participate in the distribution of offered securities may be entitled to
indemnification by CFC against certain civil liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the agents or underwriters may be required to make.
If indicated in the prospectus supplement, CFC will authorize agents and
underwriters to solicit offers by certain institutions to purchase offered
securities from CFC at the public offering price set forth in the prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on the date stated in the prospectus supplement. Each contract will be
for an amount not less than, and unless CFC otherwise agrees the aggregate
principal amount of offered securities sold pursuant to contracts will be not
less nor more than, the respective amounts stated in the prospectus supplement.
Institutions with whom contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions, but
will in all cases be subject to CFC's approval. Contracts will not be subject to
any conditions except that the purchase by an institution of the offered
securities covered by its contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject. A commission indicated in the prospectus supplement will
be granted to agents and underwriters soliciting purchases of offered securities
pursuant to contract accepted by CFC. Agents and underwriters will have no
responsibility in respect of the delivery or performance of contracts.
The place and time of delivery for the offered securities in respect of
which this prospectus is delivered are set forth in the supplement.
Each underwriter, dealer and agent participating in the distribution of any
offered securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, offered securities in bearer
form in the United States or its possessions or to United States persons (other
than qualifying financial institutions) in connection with the original issuance
of the offered securities. See "Limitations on Issuance of Bearer Securities".
The offered securities may not be offered or sold directly or indirectly in
Great Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
prospectus and any prospectus supplement or any other offering material relating
to the offered securities may not be distributed in or from Great Britain other
than to persons whose business involves the acquisition and disposal, or the
holding, of securities whether as principal or as agent.
All offered securities will be a new issue of securities with no
established trading market. Any underwriters to whom offered securities are sold
by CFC for public offering and sale may make a market in such offered
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any offered securities.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for CFC in the ordinary course of
business.
In connection with the offering made hereby, the agents may purchase and
sell the securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the agents in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the securities, and short
positions created by the agents involve the sale by the agents of a greater
aggregate principal amount of securities than they are required to purchase from
CFC. The agents also may impose a penalty bid, whereby selling concessions
allowed to broker-dealers in respect of the securities sold in the offering may
be reclaimed by the agents if such securities are repurchased by the agents in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the securities, which may be higher
19
<PAGE> 21
than the price that might otherwise prevail in the open market. These
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the over-the-counter market or otherwise.
LEGAL OPINIONS
The validity of the securities offered hereby will be passed upon for CFC
by Milbank, Tweed, Hadley & McCloy LLP, 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 CFC's Annual Report on Form
10-K for the year ended May 31, 1998 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 by reference in reliance upon the authority of said firm as
experts in giving said reports.
20
<PAGE> 22
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 to be as follows:
<TABLE>
<S> <C>
Registration Statement Filing Fee........................... $556,000
Printing.................................................... 50,000
Legal Fees and Expenses..................................... 100,000
Blue Sky Fees and Expenses.................................. 15,000
Accounting Fees............................................. 13,000
Fees of Trustee............................................. 45,000
Fees of Rating Agencies..................................... 100,000
Miscellaneous............................................... 10,000
--------
Total............................................. $889,000
========
</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 the
above Section. The Bylaws of CFC also provide for indemnification of all CFC
directors, officers and employees as set forth above.
II-1
<PAGE> 23
ITEM 16. LIST OF EXHIBITS
<TABLE>
<S> <C> <C>
1.1 -- Securities Underwriting Agreement Basic Provisions has been
filed as exhibit 1.1 to Post-Effective Amendment No. 1 to
Registration No. 33-2194 filed December 18, 1987 and is
incorporated herein by reference. An Underwriting Agreement
with respect to each particular offering of securities
registered hereunder will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by
reference.
1.2 -- Form of Agency Agreement between CFC and the agents named
therein, relating to distribution of CFC's Medium-Term
Notes, Series C, within the United States.
1.3 -- A form of Placement Agency Agreement between CFC and the
agents named therein relating to the distribution, if any,
of CFC's Medium-Term Notes outside the United States will be
filed as an exhibit to a current report on Form 8-K and
incorporated herein by reference prior to the use of such
agreement.
4.1 -- Indenture between CFC and Chemical Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to Amendment No. 1
to Registration Statement on Form S-3 filed on October 12,
1990 (Registration No. 33-34927).
4.2 -- First Supplemental Indenture between CFC and Chemical Bank,
as Trustee. Incorporated by reference to Exhibit 4.2 to
Registration Statement on Form S-3 filed on April 5, 1995
(Registration No. 33-58445).
4.3 -- Instrument of Resignation, Appointment and Acceptance among
CFC, Chemical Bank, Harris Trust and Savings Bank and Harris
Trust Company of New York dated as of October 1, 1993.
Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-3 filed on October 1, 1993 (Registration
No. 33-50463).
4.4 -- A form of Fixed Rate Medium-Term Note (for offerings within
the United States) has been filed as Exhibit 4.4 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference.
4.5 -- A form of Floating Rate Medium-Term Note (for offerings
within the United States) has been filed as Exhibit 4.5 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference.
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such Note.
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such Note.
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note.
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy LLP.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed
charges.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank, as Trustee has
been filed as Exhibit 25 to Registration Statement No.
33-58445 filed on April 5, 1995 and is incorporated herein
by reference.
</TABLE>
II-2
<PAGE> 24
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (other than
as provided in the proviso and instructions to Item 512(a) of Regulation
S-K):
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE> 25
THE REGISTRANT AND EACH PERSON WHOSE 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 WHICH AMENDMENTS MAY MAKE SUCH CHANGES IN THE
REGISTRATION STATEMENT AS SUCH AGENT DEEMS APPROPRIATE AND THE REGISTRANT AND
EACH SUCH PERSON HEREBY APPOINTS EACH SUCH AGENT AS ATTORNEY-IN-FACT TO EXECUTE
IN THE NAME AND ON BEHALF OF THE REGISTRANT AND EACH SUCH PERSON, INDIVIDUALLY
AND IN EACH CAPACITY STATED BELOW, ANY SUCH AMENDMENTS TO THE REGISTRATION
STATEMENT.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX, COMMONWEALTH OF VIRGINIA, ON THE 20TH
DAY OF MAY, 1999.
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 REPORT HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ 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 (Principal Financial Officer)
/s/ STEVEN L. SLEPIAN Controller (Principal
- ------------------------------------------------ Accounting Officer) May 20, 1999
STEVEN L. SLEPIAN
/s/ BENSON HAM President and Director
- ------------------------------------------------
BENSON HAM
/s/ R.B. SLOAN Vice President and
- ------------------------------------------------ Director
R.B. SLOAN
/s/ WADE R. HENSEL Secretary-Treasurer and Director
- ------------------------------------------------
WADE R. HENSEL
</TABLE>
II-4
<PAGE> 26
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. ANDREW Director
- ------------------------------------------------
JAMES M. ANDREW
/s/ ROBERT A. CAUDLE Director
- ------------------------------------------------
ROBERT A. CAUDLE
Director
- ------------------------------------------------
GLENN ENGLISH
Director
- ------------------------------------------------
ALDEN J. FLAKOLL
/s/ JAMES A. HUDELSON Director
- ------------------------------------------------
JAMES A. HUDELSON
/s/ KENNETH KRUEGER Director
- ------------------------------------------------
KENNETH KRUEGER
/s/ STEPHEN R. LOUDER Director
- ------------------------------------------------
STEPHEN R. LOUDER
/s/ EUGENE MEIER Director
- ------------------------------------------------
EUGENE MEIER
/s/ R. LAYNE MORRILL Director May 20, 1999
- ------------------------------------------------
R. LAYNE MORRILL
/s/ ROBERT J. OCCHI Director
- ------------------------------------------------
ROBERT J. OCCHI
/s/ MICHAEL PIGOTT Director
- ------------------------------------------------
MICHAEL PIGOTT
/s/ TIMOTHY REEVES Director
- ------------------------------------------------
TIMOTHY REEVES
/s/ BRIAN SCHLAGEL Director
- ------------------------------------------------
BRIAN SCHLAGEL
/s/ THOMAS W. STEVENSON Director
- ------------------------------------------------
THOMAS W. STEVENSON
/s/ CLIFFORD G. STEWART Director
- ------------------------------------------------
CLIFFORD G. STEWART
/s/ ROBERT STROUP Director
- ------------------------------------------------
ROBERT STROUP
/s/ ROBERT C. WADE Director
- ------------------------------------------------
ROBERT C. WADE
/s/ ROBERT O. WILLIAMS Director
- ------------------------------------------------
ROBERT O. WILLIAMS
/s/ ELDWIN WIXSON Director
- ------------------------------------------------
ELDWIN WIXSON
</TABLE>
II-5
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- -------- ------------
<C> <S> <C> <C>
1.1 -- Securities Underwriting Agreement Basic Provisions has been
filed as exhibit 1.1 to Post-Effective Amendment No. 1 to
Registration No. 33-2194 filed December 18, 1987 and is
incorporated herein by reference. An Underwriting Agreement
with respect to each particular offering of Securities
registered hereunder will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by
reference. .................................................
1.2 -- Form of Agency Agreement between CFC and the agents named
therein, relating to distribution of CFC's Medium-Term
Notes, Series C, within the United States. .................
1.3 -- A form of Placement Agency Agreement between CFC and the
agents named therein relating to the distribution, if any,
of CFC's Medium-Term Notes outside the United States will be
filed as an exhibit to a current report on Form 8-K and
incorporated herein by reference prior to the use of such
agreement. .................................................
4.1 -- Indenture between CFC and Chemical Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to Amendment No. 1
to Registration Statement on Form S-3 filed on October 12,
1990 (Registration No. 33-34927). ..........................
4.2 -- First Supplemental Indenture between CFC and Chemical Bank,
as Trustee. Incorporated by reference to Exhibit 4.2 to
Registration Statement on Form S-3 filed on April 5, 1995
(Registration No. 33-58445). ...............................
4.3 -- Instrument of Resignation, Appointment and Acceptance among
CFC, Chemical Bank, Harris Trust and Savings Bank and Harris
Trust Company of New York dated as of October 1, 1993.
Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-3 filed on October 1, 1993 (Registration
No. 33-50463). .............................................
4.4 -- A form of Fixed Rate Medium-Term Note (for offerings within
the United States) has been filed as Exhibit 4.4 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference. ...................
4.5 -- A form of Floating Rate Medium-Term Note (for offerings
within the United States) has been filed as Exhibit 4.5 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference. ...................
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such
Note. ......................................................
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such
Note. ......................................................
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note. ..........................................
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note. ..........................................
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy
LLP. .......................................................
8 -- Opinion of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5. .........................................
12 -- Schedule of computation of ratio of margins to fixed
charges. ...................................................
23.1 -- Consent of Arthur Andersen LLP. ............................
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5. .........................................
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- -------- ------------
<C> <S> <C> <C>
24 -- Power of Attorney (included on signature pages). ...........
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank, as Trustee has
been filed as Exhibit 25 to Registration Statement No.
33-58445 filed on April 5, 1995 and is incorporated herein
by reference. ..............................................
</TABLE>
<PAGE> 1
1
U.S. $ */
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
Medium-Term Notes, Series C
AGENCY AGREEMENT
, 1999
Lehman Brothers Inc.
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
J.P. Morgan Securities Inc.
Banc of America Securities LLC
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Dear Sirs:
National Rural Utilities Cooperative Finance Corporation, a District of
Columbia cooperative association (the "Company"), confirms its agreement with
each of you (individually, an "Agent" and, collectively, the "Agents") with
respect to the issue and sale by the Company of up to U.S. $ */ aggregate
principal amount of its Medium-Term Notes, Series C (such Medium-Term Notes,
Series C, together with such additional Medium-Term Notes of the Company as are
added to this Agreement pursuant to an Amendment, the "Securities"). The
Securities are to be issued from time to time pursuant to an Indenture, dated as
of December 15, 1987 (as supplemented by a First Supplemental Indenture dated as
of October 1, 1990, and as it may be supplemented or amended from time to time,
the "Indenture"), between the Company and Harris Trust and Savings Bank, as
successor trustee (the "Trustee").
- --------
*/ Or the U.S. dollar equivalent in certain specified foreign currencies or
currency units.
<PAGE> 2
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Subject to the terms and conditions stated herein and subject
to the reservation by the Company of the right to sell Securities directly on
its own behalf at any time, and to any person, and to designate or select
additional agents, the Company hereby appoints the Agents as the exclusive
agents of the Company for the purpose of soliciting or receiving offers to
purchase the Securities from the Company by others. This Agreement shall only
apply to sales of the Securities on original issuance and not to sales of any
other securities or evidences of indebtedness of the Company and only on the
specific terms set forth herein.
SECTION 1. Representations and Warranties. The Company
represents and warrants to each Agent as of the date hereof, as of each Closing
Date (as defined in Section 2(f) hereof), as of each settlement date in respect
of any principal purchase (whether pursuant to a Purchase Agreement or
otherwise) and as of the times referred to in Sections 6(a) and 6(b) hereof
(each Closing Date, each settlement date and each such time being hereinafter
sometimes referred to as a "Representation Date"), as follows:
(a) Registration Statement and Prospectus. The Company has
filed with the Securities and Exchange Commission (the "Commission")
Registration Statements on Form S-3 Nos. 333-53819 and 333- (and any
registration statements referred to in any Amendment (as defined in Section 12
hereof)) for the registration under the Securities Act of 1933 (the "Act") of
the Securities (including a prospectus relating to the registration statements)
and has filed and may file one or more amendments thereto (including one or more
amended or supplemental prospectuses) and such registration statements and any
such amendments have become effective. Each such registration statement,
including financial statements and exhibits, at the time it became effective
under the Act, as amended and supplemented (including all documents incorporated
therein by reference), is hereinafter referred to as a "Registration Statement".
A prospectus supplement dated , 1999, relating to the Securities and to
Registration Statement Nos. 333-53819 and 333- , including a prospectus, has
been prepared and will be filed pursuant to Rule 424 of the rules and
regulations of the Commission (the "Rules and Regulations") under the Act (such
prospectus and prospectus supplement (or, in the case of any
<PAGE> 3
3
Amendment, the prospectus and prospectus supplement referred to therein) are
herein referred to as the "Prospectus"). 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 Rules and
Regulations which amends or supplements the Prospectus. Any reference herein to
a 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 such Registration Statement
or the date of the Prospectus, as the case may be; and any reference herein to
the terms "amend", "amendment" or "supplement" with respect to a 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 such
Registration Statement, or the date of the Prospectus, as the case may be, and
deemed to be incorporated therein by reference.
(b) Accuracy of Registration Statements. Each Registration
Statement (and such Registration Statement as amended if any post-effective
amendment thereof shall have become effective) complies in all material respects
with the provisions of the Act and the Exchange Act and the Rules and
Regulations and does not contain an untrue statement of a material fact and does
not omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and the Prospectus (and the
Prospectus as amended or supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) fully complies with the
provisions of the Act and the Exchange Act and the Rules and Regulations and
does not contain any untrue statement of a material fact or 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 any Registration Statement
which shall constitute the Statement of Eligibility (Form T-1) under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee or
(ii) statements in, or omissions from, any Registration Statement or the
Prospectus or any amendment thereof or supplement thereto made in reliance upon
and in conformity with information
<PAGE> 4
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furnished in writing to the Company by or on behalf of an Agent for use in
connection with the preparation of such 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 any Registration Statement and the Prospectus are independent with
respect to the Company as required by the Act and the Rules and Regulations.
(d) Due Incorporation. The Company has been duly incorporated
and is a validly existing cooperative association in good standing 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 any Representation Date, and as contemplated by the Prospectus.
(e) Material Changes. Since the respective dates as of which
information is given in each Registration Statement and the Prospectus, and
except as set forth in the Prospectus, 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. 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 5(f) 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. The Securities and the Indenture are 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
<PAGE> 5
5
Company or any committee thereof is required for the issuance and sale of the
Securities as contemplated herein; and neither such issuance or sale of
Securities nor the consummation of any other of the transactions herein
contemplated will conflict with, result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Company or 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; and except as required by the
Act, the Trust Indenture Act, the Exchange Act and applicable state securities
laws, no consent, authorization or order of, or filing or registration with, any
court or governmental agency is required for the execution, delivery and
performance by the Company of the transactions contemplated by this Agreement,
each applicable Purchase Agreement (as defined in Section 11), if any, or the
Indenture. The Securities and the Indenture conform in all material respects to
the descriptions thereof contained in the Prospectus. Each Security delivered or
sold hereunder will constitute, as of such delivery or sale, the legal, valid
and binding obligation of the Company enforceable in accordance with its terms
and will be entitled to the benefits of the Indenture and the terms of such
Security will have been approved by the Governor or the Chief Financial Officer
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).
(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.
SECTION 2. Solicitations as Agent. (a) On the basis of the
representations and warranties contained herein, but subject to the terms and
conditions herein set forth, each Agent agrees, as an agent of the Company, to
use its reasonable best efforts to solicit offers to purchase the Securities
upon the terms and conditions set forth in the Prospectus. No Agent shall
otherwise employ, pay or compensate any other person to solicit offers to
purchase the Securities or to perform any of its functions as Agent
<PAGE> 6
6
without the prior written consent of the Company, which consent shall not be
unreasonably withheld.
(b) The Company reserves the right, in its sole discretion, to
suspend solicitation by the Agents in their capacities as Agents of offers to
purchase the Securities from the Company commencing at any time for any period
of time or permanently. Upon receipt of at least one business day's prior notice
from the Company, the Agents will forth with suspend solicitation of offers to
purchase Securities from the Company until such time as the Company has advised
the Agents that such solicitation may be resumed.
(c) Promptly upon the closing of the sale of any Securities
sold by the Company as a result of a solicitation made by an Agent, the Company
agrees to pay such Agent a commission in accordance with the schedule set forth
in Exhibit A hereto, or such other fee as is mutually agreed upon by the Company
and such Agent.
(d) The Agents are authorized to solicit offers to purchase
the Securities only in denominations of U.S. $1,000 **/ or any amount in excess
thereof which is an integral multiple thereof, at a purchase price equal to 100%
of the principal amount thereof or such other amount as shall be specified by
the Company. Each Agent shall communicate to the Company, in accordance with the
Procedures (as defined below), each reasonable offer to purchase Securities
received by it as an Agent other than those rejected by such Agent. The Company
shall have the sole right to accept offers to purchase the Securities and may
reject any such offer in whole or in part. Each Agent shall have the right, in
its discretion reasonably exercised without advising the Company, to reject any
offer to purchase the Securities received by it, in whole or in part, and any
such rejection shall not be deemed a breach of its agreement contained herein.
(e) Administrative procedures respecting the sale of
Securities (the "Procedures") shall be agreed upon from
- --------
**/ Or the equivalent in the relevant foreign currency or currency unit
(rounded down to an integral multiple of units of the denomination specified in
the relevant supplement to the Prospectus), or such larger amount in integral
multiples of such units.
<PAGE> 7
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time to time by the appropriate representatives of each Agent and the Company.
The Procedures initially shall include those procedures set forth in Exhibit B
hereto. Each Agent and the Company agree to perform the respective duties and
obligations specifically provided to be performed by each of them herein and in
the Procedures.
(f) The documents initially required to be delivered by
Section 5 hereof and the documents required to be delivered by Section 5 hereof
in connection with each Amendment shall be delivered at the office of Milbank,
Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, New York 10005, not
later than 10:00 A.M., New York City time, on the date of this Agreement, or
such Amendment, or at such later time as may be mutually agreed upon by the
Company and the Agents (each a "Closing Date").
SECTION 3. Covenants of the Company. The Company covenants and
agrees:
(a) to furnish promptly to each Agent and to its counsel,
without charge, a signed copy of each Registration Statement as filed with the
Commission and each amendment or supplement thereto, and a copy of each
Prospectus thereafter filed with the Commission, including all supplements
thereto and, upon request of such Agent, all documents incorporated therein by
reference and all consents and exhibits filed therewith;
(b) to deliver promptly to the Agents such number of the
following documents as they may request:
(i) conformed copies of each Registration Statement (excluding
exhibits other than the computation of the ratio of earnings to fixed
charges, the Indenture and this Agreement);
(ii) each Prospectus; and
(iii) any documents incorporated by reference in the
Prospectus;
and the Company authorizes each Agent to use such documents during the period
referred to in (c) below (subject to the limitations set forth therein) in
connection with the sale of the Securities in accordance with the applicable
provisions of the Act and the Rules and Regulations;
<PAGE> 8
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(c) if, during any period in which, in the opinion of counsel
for the Agents (provided, if the Agents are no longer soliciting (or have been
instructed to stop soliciting) purchases of Securities, such opinion is known to
the Company), a prospectus relating to the Securities is required to be
delivered under the Act, any event known to the Company occurs as a result of
which the Prospectus would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary at any time to amend the Prospectus to comply with the Act or the
Rules and Regulations, to notify the Agents promptly to suspend solicitation of
purchases of the Securities (and the Agents will do so); and if the Company
shall decide to amend or supplement a Registration Statement or the Prospectus
for purposes of offering the Securities, to promptly advise the Agents by
telephone (with confirmation in writing) and, except as otherwise provided in
any relevant Purchase Agreement, to promptly prepare and file with the
Commission an amendment or supplement, whether by filing such documents pursuant
to the Act or the Exchange Act, as may be necessary to correct such untrue
statement or omission or to make such Registration Statement or the Prospectus
comply with such requirements and to prepare and furnish to the Agents at its
own expense such amendment or supplement to such Registration Statement or the
Prospectus as will correct such Registration Statement or the Prospectus;
provided, however, that the Company shall in any event promptly prepare, file
and furnish an Agent with such an amendment or supplement if such Agent shall
then hold any Securities acquired from the Company as principal (other than such
Securities as such Agent shall have held for a period of six months or more);
(d) to timely file with the Commission during the period
referred to in the proviso to (c) above and during any time the Agents are
permitted to solicit offers as Agents as provided hereunder (i) any amendment or
supplement to a Registration Statement or any Prospectus that may, in the
judgment of the Company, be required by the Act or requested by the Commission
and (ii) all documents (and any amendments to previously filed documents)
required to be filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act;
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(e) prior to filing with the Commission, during the period
referred to in the proviso to (c) above and during any time the Agents are
permitted to solicit offers as Agents as provided hereunder, (i) any amendment
or supplement to a Registration Statement, (ii) any amendment or supplement to
the Prospectus or (iii) upon request of any Agent, any document incorporated by
reference in any Registration Statement or any amendment of or supplement to any
such incorporated document, to furnish a copy thereof to the Agents and counsel
for the Agents;
(f) to advise the Agents immediately (i) when any
post-effective amendment to any Registration Statement relating to or covering
the Securities becomes effective and when any further amendment of or supplement
to the Prospectus shall be filed with the Commission, (ii) of any request or
proposed request by the Commission for an amendment or supplement to any
Registration Statement, to the Prospectus, to any document incorporated by
reference in any of the foregoing or for any additional information, (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
any Registration Statement or any order directed to the Prospectus or any
document incorporated therein by reference or the initiation or threat of any
stop order proceeding or of any challenge to the accuracy or adequacy of any
document incorporated by reference in the Prospectus, (iv) of receipt by the
Company of any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or threat of
any proceeding for that purpose and (v) of the happening of any event which
makes untrue any statement of a material fact made in any Registration Statement
or the Prospectus as amended or supplemented or which requires the making of a
change in any such Registration Statement or the Prospectus as amended or
supplemented in order to make any material statement therein not misleading;
(g) if, during the period referred to in the proviso to (c)
above and during any time the Agents are permitted to solicit offers as Agents
as provided hereunder, the Commission shall issue a stop order suspending the
effectiveness of a Registration Statement, to make every reasonable effort to
obtain the lifting of that order at the earliest possible time;
<PAGE> 10
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(h) as soon as practicable, but not later than 18 months,
after the date of each acceptance by the Company of an offer to purchase
Securities hereunder, to make generally available to its security holders an
earnings statement covering a period of at least 12 months beginning after the
later of (i) the effective date of the most recent Registration Statement, (ii)
the effective date of the most recent post-effective amendment to the most
recent Registration Statement to become effective prior to the date of such
acceptance and (iii) the date of the Company's most recent Annual Report on Form
10-K filed with the Commission prior to the date of such acceptance which will
satisfy the provisions of Section 11(a) of the Act (including, at the option of
the Company, Rule 158 of the Rules and Regulations under the Act);
(i) so long as any of the Securities are outstanding, to make
available to the Agents, not later than the time the Company makes the same
available to others, copies of all public reports or releases and all reports
and financial statements furnished by the Company to any securities exchange on
which the Securities are listed pursuant to requirements of or agreements with
such exchange or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder;
(j) on or prior to the date on which the Company shall release
to the general public interim financial information, if any, with respect to
each of the first three quarters of any fiscal year, to make available such
information to each Agent and, except as otherwise provided in any relevant
Purchase Agreement, to cause the Prospectus to be amended or supplemented to set
forth or incorporate by reference such information, as well as such other
information and explanations as shall be necessary for an understanding of such
amounts or as shall be required by the Act or the Rules and Regulations;
provided, however, that if on the date of such release the Agents shall not be
engaged or shall have been instructed not to engage in solicitation of purchases
of the Securities as Agents of the Company, and shall not then hold any
Securities acquired from the Company as principal (other than such Securities as
shall have been held for a period of six months or more), the Company shall not
be obligated so to amend or supplement the Prospectus until such time as
solicitation of purchases of the Securities shall with the Company's consent be
resumed or
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the Company shall subsequently enter into a new Purchase Agreement with one of
you;
(k) on or prior to the date on which the Company shall release
to the general public financial information included in or derived from the
audited financial statements of the Company for the preceding fiscal year, to
make available such information to each Agent and to cause each Registration
Statement and the Prospectus to be amended or supplemented, initially to set
forth capsule financial information with respect to the results of operations of
the Company for such year and corresponding information for the prior year, as
well as such other information and explanations as shall be necessary for an
understanding of such amounts or as shall be required by the Act or the Rules
and Regulations, and, on or before the date that the Company's Annual Report on
Form 10-K is filed with the Commission, to cause each Registration Statement and
the Prospectus to be amended to set forth or incorporate such audited financial
statements and the report or reports of independent accountants with respect
thereto, as well as such other information and explanations as shall be
necessary for an understanding of such financial statements or as shall be
required by the Act or the Rules and Regulations; provided, however, that if on
the date of such release the Agents shall not be engaged or shall have been
instructed not to engage in solicitation of purchases of the Securities as
Agents of the Company, and shall not then hold any Securities acquired from the
Company as principal (other than such Securities as shall have been held for a
period of six months or more), the Company shall not be obligated so to amend or
supplement the Prospectus until such time as solicitation of purchases of the
Securities shall with the Company's consent be resumed or the Company shall
subsequently enter into a new Purchase Agreement with one of you; and
(l) to endeavor, in cooperation with the Agents, to qualify
the Securities for offering and sale under the securities laws of such
jurisdictions as any Agent may designate, and to maintain such qualifications in
effect for as long as may be required for the distribution of the Securities;
and to file such statements and reports as may be required by the laws of each
jurisdiction in which the Securities have been qualified as above provided;
provided that the Company shall not be required to register or qualify as a
foreign corporation nor, except as to matters
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relating to the offer and sale of the Securities, take any action which would
subject it to service of process generally in any jurisdiction.
SECTION 4. Payment of Expenses. The Company will pay (i) the
costs incident to the authorization, issuance and delivery of the Securities and
any taxes (other than transfer taxes) payable in that connection, (ii) the costs
incident to the preparation, printing and filing under the Act of each
Registration Statement and any amendments and exhibits thereto, (iii) the costs
incident to the preparation, printing and filing of any document and any
amendments and exhibits thereto required to be filed by the Company under the
Exchange Act, (iv) the costs of preparing, printing and mailing of the
Prospectus and any amendment or supplement to the Prospectus, (v) the costs of
distributing each Registration Statement, as originally filed, and each
amendment and post-effective amendment thereof (including exhibits), the
Prospectus, any supplement or amendment to the Prospectus and any documents
incorporated by reference in any of the foregoing documents, (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the costs and fees in
connection with the listing of the Securities on any securities exchange, (viii)
the cost of any filings with the National Association of Securities Dealers,
Inc., (ix) the fees and disbursements of counsel to the Company, (x) the fees
paid to rating agencies in connection with the rating of the Securities, (xi)
the fees and expenses of qualifying the Securities under the securities laws of
the several jurisdictions as provided in Section 3(l) hereof and of preparing
and printing a Blue Sky Memorandum and a memorandum concerning the legality of
the Securities as an investment (including fees and expenses of counsel for the
Agents in connection therewith), (xii) the cost of the "tombstone" advertisement
and such other advertising expenses agreed to by the Company and Agents in
connection with the solicitation of offers to purchase Securities, and (xiii)
all other costs and expenses incident to the performance of the Company's
obligations under this Agreement (including any Purchase Agreement). In
addition, subject to the provisions of Section 7, the Company agrees to
reimburse the Agents for the fees and disbursements of their legal counsel
(except that the Company shall not be liable for the fees and disbursements of
more than one separate firm of attorneys).
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Except as specifically provided in this Section and herein,
the Agents agree to pay all their costs and expenses.
SECTION 5. Conditions of Obligations. The obligation of the
Agents, as agents of the Company, under this Agreement to solicit offers to
purchase the Securities, as well as the obligation of each Agent to purchase
Securities pursuant to any Purchase Agreement or otherwise, is subject to the
accuracy, on each Representation Date, of the representations and warranties of
the Company contained herein, to the accuracy of the statements of the Company's
officers made in any certificate furnished pursuant to the provisions hereof to
the extent then relevant, to the performance by the Company in all material
respects of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) No stop order suspending the effectiveness of any
Registration Statement, or any part thereof, nor any order directed to any
document incorporated by reference in the Prospectus shall have been issued and
no stop order proceeding shall have been initiated or threatened by the
Commission and no challenge by the Commission shall be pending to the accuracy
or adequacy of any document incorporated by reference in the Prospectus; any
request of the Commission for inclusion of additional information in any
Registration Statement or the Prospectus or otherwise shall have been withdrawn
or complied with; and after the date of any Purchase Agreement (and prior to the
closing date for the Securities referred to therein) the Company shall not have
filed with the Commission any amendment or supplement to any Registration
Statement or the Prospectus (or any document incorporated by reference therein)
without the consent of the Agent or Agents party thereto.
(b) No order suspending the sale of the Securities in any
jurisdiction designated by an Agent pursuant to Section 3(l) hereof shall have
been issued, and no proceeding for that purpose shall have been initiated or
threatened.
(c) The Agents shall not have discovered and disclosed to the
Company that any Registration Statement or the Prospectus, as amended or
supplemented, contains an untrue statement of a fact which, in the opinion of
counsel for the Agents, is material or omits to state a fact which,
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in the opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(d) At each Closing Date, the Agents shall have received from
Cravath, Swaine & Moore, counsel for the Agents, such opinion and letter, dated
such Closing Date, with respect to the issuance and sale of the Securities, the
Indenture, each Registration Statement and the Prospectus, as amended or
supplemented, and other related matters as the Agents may reasonably require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(e) At each Closing Date, the Agents shall have received the
opinion, addressed to the Agents and dated such Closing Date, of John Jay List,
Esq., General Counsel of the Company, in form and scope satisfactory to the
Agents and their counsel, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a cooperative association under the laws of the District of
Columbia with corporate power to conduct its business as described in
each Registration Statement;
(ii) the issuance and sale of the Securities by the Company
pursuant to this Agreement (and, if the opinion is being given pursuant
to Section 6(c) hereof on account of the Company having entered into a
Purchase Agreement, the applicable Purchase Agreement) have been duly
and validly authorized by all necessary corporate action (subject to
the approval of the terms of each Security by the Governor or the Chief
Financial Officer of the Company); and no authorization, consent, order
or approval of, or filing or registration with, or exemption by, any
government or public body or authority of the District of Columbia or
any department or subdivision thereof is required for the validity of
the Securities or for the issuance, sale and delivery of the Securities
by the Company pursuant to this Agreement and any Purchase Agreement or
for the execution and delivery of this Agreement, any Purchase
Agreement and the Indenture by the Company (except that such counsel
need not express an opinion as to whether offers or sales by Agents
require qualification or
<PAGE> 15
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registration under the securities laws of the District of Columbia);
(iii) the Indenture has been duly authorized by the Company
and constitutes an instrument valid and binding on the Company and
enforceable in accordance with its terms;
(iv) the Securities, assuming they are in a form conforming to
the specimens thereof examined by such counsel, and assuming due
execution of the Securities on behalf of the Company and authentication
thereof by the Trustee and issuance thereof in accordance with the
terms of the Indenture and delivery thereof against payment therefor in
accordance with the terms of this Agreement (and any Purchase
Agreement) and subject to the approval of the terms of each Security by
the Governor or the Chief Financial Officer of the Company, will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms and will be entitled to the benefits of the
Indenture;
(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) no consent, approval, authorization or order of any court
or governmental agency, authority or body of the District of Columbia
is required for the consummation of the transactions contemplated in
this Agreement (including any Purchase Agreement) (except that such
counsel need not express an opinion as to whether offers or sales by
Agents require qualification or registration under the securities laws
of the District of Columbia); and
(vii) there is no tax of the District of Columbia or the
Commonwealth of Virginia applicable to the execution of the Indenture.
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Such counsel shall state that nothing has come to the
attention of such counsel causing him to believe, based upon such counsel's
participation in the preparation of each Registration Statement or otherwise,
that any Registration Statement (or any post-effective amendment thereof), at
the time such Registration Statement became effective and at the effective time
of any such amendment or supplement, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make statements therein not misleading, or that the Prospectus
(as amended or supplemented, if amended or supplemented), as of the Closing
Date, 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, in light of the circumstances under which they were made, 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 any Registration Statement or the Prospectus and which is not disclosed
therein.
Insofar as such opinion relates to the enforceability of the
Securities and the Indenture, such counsel may state that the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally
and may be limited by general principles 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, and by laws with respect to or affecting the remedies
provided for in the Securities and the Indenture (provided that such laws do
not, in the opinion of such counsel, make inadequate the remedies afforded
thereby for the realization of the benefits provided for in the Securities and
the Indenture).
(f) At each Closing Date, the Agents shall have received the
opinion, addressed to the Agents and dated such Closing Date, of Milbank, Tweed,
Hadley & McCloy, counsel to the Company, in form and scope satisfactory to the
Agents and their counsel, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a cooperative association in good
<PAGE> 17
17
standing under the laws of the District of Columbia with corporate
power to conduct its business as described in the Prospectus;
(ii) the issuance and sale of the Securities by the Company
pursuant to this Agreement (and, if the opinion is being given pursuant
to Section 6(c) hereof on account of the Company having entered into a
Purchase Agreement, the applicable Purchase Agreement) have been duly
and validly authorized by all necessary corporate action (subject to
the approval of the terms of each Security by the Governor or the Chief
Financial Officer of the Company); and no authorization, consent, order
or approval of, or filing or registration with, or exemption by, any
governmental 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 knowledge of such counsel, any court, other than such as may be
required under State securities or blue sky laws and other than
registration of the Securities under the Act and qualification of the
Indenture under the Trust Indenture Act, is required for the validity
of the Securities or for the issuance, sale and delivery of the
Securities by the Company pursuant to this Agreement (including any
Purchase Agreement) or for the execution and delivery of this Agreement
(including any Purchase Agreement) and the Indenture by the Company;
(iii) the Indenture has been duly authorized by the Company,
has been duly qualified under the Trust Indenture Act and constitutes
an instrument valid and binding on the Company and enforceable in
accordance with its terms;
(iv) the Securities, assuming they are in a form conforming to
the specimens thereof examined by such counsel, and assuming due
execution of the Securities on behalf of the Company and authentication
thereof by the Trustee and issuance thereof in accordance with the
terms of the Indenture and delivery thereof against payment therefor in
accordance with the terms of this Agreement (and any Purchase
Agreement) and subject to the approval of the terms each Security by
the Governor or the Chief Financial Officer of the Company, will
constitute valid and binding obligations of the Company
<PAGE> 18
18
enforceable in accordance with their terms and will be entitled to the
benefits of the Indenture;
(v) this Agreement (including any Purchase Agreement) has been
duly authorized, executed and delivered by the Company and the
performance of this Agreement (including any Purchase 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 Securities and the Indenture conform in all material
respects to the descriptions thereof contained in each Registration
Statement; and the statements made in the Prospectus under the caption
"Description of Securities" and in the prospectus supplement dated ,
1999, under the caption "Description of the Medium-Term Notes" (and the
comparable provisions of any supplement to the Prospectus approved by
the Agents), insofar as they purport to summarize the provisions of
documents or agreements specifically referred to therein, fairly
present the information called for with respect thereto by Form S-3;
(vii) each Registration Statement (and any post effective
amendment thereof) has become and is effective under the Act and the
Securities have become registered under the Act, and, to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated, and each Registration Statement (and any post-effective
amendment thereof) and the Prospectus and each amendment thereof or
supplement thereto (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
<PAGE> 19
19
the Act, the Exchange Act, the Trust Indenture Act and the rules and
regulations issued thereunder;
(viii) the Company is not required to be registered as an
investment company under the Investment Company Act of 1940;
(ix) the Company is not subject to regulation under the Public
Utility Holding Company Act of 1935; and
(x) the Company is not a public utility as defined in the
Federal Power Act.
Such counsel shall state that based upon such counsel's
participation in the preparation of each 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 the Company, nothing has come to the attention
of such counsel causing it to believe that such Registration Statement (or any
post-effective amendment thereof), at the time such Registration Statement
became effective and at the effective time of any such amendment or supplement,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make statements therein not
misleading, or that the Prospectus (as amended or supplemented, if amended or
supplemented), as of the Closing Date, 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, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion concerning financial or statistical data included therein)
and such counsel does not know of any litigation or any governmental proceeding
instituted or threatened against the Company required to be disclosed in any
Registration Statement or the Prospectus and which is not disclosed therein.
Such counsel shall also state that to the best knowledge of
such counsel, no order directed to any document incorporated by reference in the
Prospectus has been issued and no challenge has been made by any regulatory
agency to the accuracy or adequacy of any such document.
<PAGE> 20
20
Insofar as such opinion relates to the enforceability of the
Securities and the Indenture, such counsel may state that the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally
and may be limited by general principles 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, and by laws with respect to or affecting the remedies
provided for in the Securities and the Indenture (provided that such laws do
not, in the opinion of such counsel, make inadequate the remedies afforded
thereby for the realization of the benefits provided for in the 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
Agents and dated such Closing Date, satisfactory in form and scope to counsel
for the Agents. If Milbank, Tweed, Hadley & McCloy shall so rely upon the
opinion of John Jay List, Esq., (i) copies of the opinion so relied upon (to the
extent such opinion is different than the opinion required by Section 5(e))
shall be delivered to you and to counsel for the Agents and (ii) the opinion
required by this Section 5(f) 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 Agents are justified in
relying upon such opinion.
(g) The Company shall have furnished to the Agents on each
Closing Date a certificate, dated such Closing Date, of its President, Governor,
Vice President or Chief Financial Officer stating that: (i) the representations,
warranties and agreements of the Company in Section 1 hereof are true and
correct as of such Closing Date; the Company has complied in all material
respects with all its agreements contained herein; and the conditions set forth
in Sections 5(a) and 5(b) hereof have been fulfilled, (ii) in his opinion, as of
the effective date of each Registration Statement, such 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
<PAGE> 21
21
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and, as of the effective date of the most
recent Registration Statement, the Prospectus 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 in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, (iii)
since the effective date of the most recent 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, (iv) since the respective dates
as of which information is given in the most recent Registration Statement and
the Prospectus, as amended or supplemented, 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, (v)
the Company has no material contingent obligations which are required to be
disclosed in any Registration Statement or the Prospectus and are not disclosed
therein, (vi) no stop order suspending the effectiveness of any Registration
Statement is in effect on such 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 on or prior to such Closing Date, (vii) there are
no material legal proceedings to which the Company is a party or of which
property of the Company is the subject which are required to be disclosed in any
Registration Statement or the Prospectus and are not disclosed therein and
(viii) there are no material contracts to which the Company is a party which are
required to be disclosed in the Registration Statement or the Prospectus and are
not disclosed therein.
(h) Arthur Andersen LLP (or successor independent public
accountants with respect to the Company within the meaning of the Act and the
Rules and Regulations) shall have furnished to the Agents, at or prior to each
Closing Date, a letter, addressed to the Agents and dated such Closing Date,
confirming that they are independent public accountants with respect to the
Company within the meaning of the 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
<PAGE> 22
22
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 the Agents concurrently with the
execution of this Agreement and confirming in all material respects the
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 the Agents with respect to such financial
information and other matters as the Agents shall reasonably request.
(i) There shall not have occurred (i) any suspension or
material limitation in trading in securities generally on the New York Stock
Exchange or any establishment of minimum prices on such exchange, (ii) any
banking moratorium declared by either Federal or New York State authorities or
(iii) any outbreak of hostilities involving the United States or escalation of
hostilities involving the United States or a declaration of a national emergency
or war by the United States.
(j) Prior to each Closing Date, the Company shall have
furnished to the Agents and to Cravath, Swaine & Moore, counsel to the Agents,
such further certificates and documents as the Agents or counsel to the Agents
may have reasonably requested prior to such Closing Date.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Agents hereunder may be canceled on, or at
any time prior to, any Closing Date by the Agents. Notice of such cancelation
shall be given to the Company in writing, or by facsimile, telephone or telex
confirmed in writing.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are on the date of delivery in the form and
scope satisfactory to counsel for the Agents.
In the event that any Agent purchases Securities as a
principal (whether pursuant to a Purchase Agreement or otherwise), the
conditions of Section 3 of the Purchase
<PAGE> 23
23
Agreement set forth in Exhibit C hereto shall also apply to such purchase.
SECTION 6. Additional Covenants of the Company.
The Company covenants and agrees that:
(a) Each acceptance by it of an offer for the purchase of
Securities shall be deemed to be an affirmation to the Agent which procured the
offer that the representations and warranties of the Company contained in this
Agreement and in any certificate theretofore given to the Agents pursuant hereto
(to the extent relevant to such purchase) are true and correct at the time of
such acceptance, and an undertaking that such representations and warranties
will be true and correct at the time for delivery to the purchaser or his agent
of the Securities relating to such acceptance as though made at and as of each
such time (and it is understood that such representations and warranties shall
relate to each Registration Statement and the Prospectus as amended or
supplemented to each such time).
(b) Each time that any Registration Statement or the
Prospectus shall be amended or supplemented (other than by an amendment or
supplement providing solely for a change in the interest rates or maturities of
the Securities or a change in the principal amount of Securities remaining to be
sold or similar changes) or the Company files with the Commission any document
incorporated by reference into the Prospectus (except in all cases by filing a
report on Form 8-K, pursuant to the Exchange Act, solely to add exhibits to
documents previously filed), the Company shall, concurrently with such
amendment, supplement or filing, furnish the Agents with a certificate of the
President, Governor or Chief Financial Officer of the Company in form
satisfactory to the Agents to the effect that the statements contained in the
certificate referred to in Section 5(g) hereof which was last furnished to the
Agents are true and correct at the time of such amendment, supplement or filing,
as the case may be, as though made at and as of such time (except that such
statements shall be deemed to relate to such Registration Statement and the
Prospectus as amended and supplemented to such time) or, in lieu of such
certificate, a certificate of the same tenor as the certificate referred to in
said Section 5(g) modified as necessary to relate to such Registration Statement
and the Prospectus as amended and supplemented to the time of
<PAGE> 24
24
delivery of such certificate; provided, that, except if the Agents shall then
hold any Securities acquired from the Company as principal (other than such
Securities as shall have been held for a period of six months or more), no
certificate need be given during any period in which the Agents have been
instructed to or have suspended the solicitation and receipt of offers to
purchase Securities but shall be required to be given before the Agents shall
again be obligated to solicit offers to purchase the Securities.
(c) Each time that any Registration Statement or the
Prospectus shall be amended or supplemented (other than by an amendment or
supplement providing solely for a change in the interest rates or maturities of
the Securities or a change in the principal amount of Securities remaining to be
sold or similar changes) or the Company files with the Commission any document
incorporated by reference into the Prospectus (except in all cases by filing a
report on Form 8-K, pursuant to the Exchange Act, solely to add exhibits to
documents previously filed), the Company shall, concurrently with such
amendment, supplement or filing, furnish the Agents and their counsel with
written opinions of (i) the General Counsel of the Company and (ii) Milbank,
Tweed, Hadley & McCloy, counsel to the Company, addressed to the Agents and
dated the date of delivery of such opinions, in form satisfactory to the Agents,
of the same tenor as the respective opinions referred to in Sections 5(e) and
5(f) hereof, but modified, as necessary, to relate to such Registration
Statement and the Prospectus as amended or supplemented to the time of delivery
of such opinions; provided, however, that in lieu of such opinions, either of
such counsel may furnish the Agents with letters to the effect that the Agents
may rely on such prior opinions to the same extent as though they were dated the
date of such letter authorizing reliance (except that statements in such prior
opinions shall be deemed to relate to such Registration Statement and the
Prospectus as amended or supplemented to the time of delivery of such letters
authorizing reliance); provided further, that, except if the Agents shall then
hold any Securities acquired from the Company as principal (other than such
Securities as each Agent shall have held for a period of six months or more), no
opinion need be given during any period in which the Agents have been instructed
to or have suspended the solicitation and receipt of offers to purchase
Securities but shall be required to be given before the Agents shall
<PAGE> 25
25
again be obligated to solicit offers to purchase the Securities.
(d) Each time that any Registration Statement or the
Prospectus shall be amended or supplemented to include additional financial
information with respect to the Company or the Company files with the Commission
any document incorporated by reference into the Prospectus which contains
additional financial information the Company shall cause Arthur Andersen LLP (or
successor independent public accountants with respect to the Company within the
meaning of the Act and the Rules and Regulations) to furnish the Agents,
concurrently with such amendment, supplement or filing, a letter, addressed
jointly to the Company and the Agents and dated the date of delivery of such
letter, in form and substance reasonably satisfactory to the Agents, of the same
tenor as the letter referred to in Section 5(h) hereof but modified to relate to
such Registration Statement and the Prospectus, as amended and supplemented to
the date of such letter, with such changes as may be necessary to reflect
changes in the financial statements and other information derived from the
accounting records of the Company; provided, however, that if any Registration
Statement or the Prospectus is amended or supplemented solely to include
financial information with respect to the Company as of and for a fiscal
quarter, Arthur Andersen LLP (or successor independent public accountants with
respect to the Company within the meaning of the Act and the Rules and
Regulations) may limit the scope of such letter to the unaudited financial
statements included in such amendment or supplement unless there is contained
therein any other accounting, financial or statistical information with respect
to the Company that, in the reasonable judgment of the Agents, should be covered
by such letter, in which event such letter shall also cover such other
information; provided further that, except if the Agents shall then hold any
Securities acquired from the Company as principal (other than such Securities as
shall have been held for a period of six months or more), no letter need be
given during any period in which the Agents have been instructed to or have
suspended the solicitation and receipt of offers to purchase Securities but
shall be required to be given before the Agents shall again be obligated to
solicit offers to purchase the Securities.
(e) On request from time to time by any Agent, the Company
will advise the Agents of the amount of
<PAGE> 26
26
Securities sold (which for this purpose shall include medium-term notes having
terms substantially similar to the terms of the Securities but constituting one
or more separate series of securities for purposes of the Indenture and sold
outside the United States pursuant to any other agreement), and the amount
remaining registered under the Securities Act and authorized for issuance and
sale hereunder.
SECTION 7. Indemnification and Contribution. (a) The Company
shall indemnify and hold harmless the Agents (for purposes of this Section 7,
the "Agents" shall be deemed to include the Agents and all subsidiaries and
affiliates of the Agents to the extent such subsidiaries and affiliates are
agents of the Company in accordance with the provisions of Section 2(a)) and
each person, if any, who controls an Agent within the meaning of the Act from
and against any loss, claim, damage or liability, joint or several, to which
such Agent or controlling person may become subject, under the Act, the Exchange
Act or other federal or state statutory law or regulation or common law, and to
reimburse the Agents and such controlling persons for any legal or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or any
post-effective amendment thereof or 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 Agent claiming
indemnification is authorized to use the Prospectus as provided hereunder, or
arises out of, or is based upon, the omission or alleged omission to state
therein (if so used, in the case of such Prospectus) a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or any post-effective
amendment thereof or the Prospectus (as amended and supplemented) in reliance
upon and in conformity with written information furnished to the Company by the
Agent claiming indemnification specifically for inclusion therein or contained
in that part of such Registration
<PAGE> 27
27
Statement constituting the Statement of Eligibility (Form T-1) under the Trust
Indenture Act of the Trustee; and provided further that as to any Prospectus (as
amended and supplemented) this indemnity agreement shall not inure to the
benefit of an Agent or any person controlling such Agent on account of any loss,
claim, damage, liability or action arising from the sale of Securities to any
person by such Agent if such Agent failed to send or give 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 such Agent prior to the time of the below-written confirmation) to
that person at or prior to the time written confirmation of the sale of such
Securities was sent to such person, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in such Prospectus was corrected in such amendment or supplement, unless
such failure resulted from non-compliance by the Company with Section 3(b)
hereof. For purposes of the second proviso to the immediately preceding
sentence, the term "Prospectus (or the Prospectus as amended or supplemented if
the Company shall have made any amendments thereof or supplements thereto)"
shall not be deemed to include the documents incorporated therein by reference
and under no circumstances shall any Agent be obligated to send or give any
document incorporated by reference or any supplement or amendment to any
document incorporated by reference in the Prospectus to any person. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to an Agent or controlling person.
(b) Each Agent shall indemnify and hold harmless the Company,
each of its directors, each of its officers who signed any Registration
Statement and any person who controls the Company within the meaning of the Act
from and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Act, the Exchange Act or
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or any post-effective amendment thereof
or the Prospectus (or any amendment thereof or supplement thereto), or arises
out of,
<PAGE> 28
28
or is based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Agent specifically for inclusion therein, and shall reimburse the Company or any
such director, officer or controlling person for any legal and other expenses
reasonably incurred by such indemnified party in investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action.
The foregoing indemnity agreement is in addition to any liability which an Agent
may otherwise have to the Company or any of its directors, officers or
controlling persons. The information with respect to the manner of distribution
of the Securities by the Agents and with respect to the Agents set forth in any
Prospectus Supplement as expressly specified in writing by the Agents at the
Closing Date constitutes the only information furnished in writing by the Agents
for inclusion in the Registration Statements and the Prospectus, and the Agents
confirm that such information is correct.
(c) Each indemnified party will, promptly 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 7, 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 (to the extent not prejudiced by such
delay) which it may have to such indemnified party on account of the indemnity
agreement contained in this Section 7 or otherwise; provided, however, that,
notwithstanding any prejudice caused by such delay, the indemnifying party's
liability with respect to contribution as set forth in Section 7(d) shall not be
relieved. 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
<PAGE> 29
29
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 7 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 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, provided that (x) the indemnifying party shall not, in
connection with any one such action, or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses with respect
to any period during the pendency of such action or similar or related actions
of more than one separate firm of attorneys (except where local counsel is
necessary in connection with such action or similar or related actions) for all
indemnified parties so named, designated in writing by such Agent or the Agents
if the indemnifying party is the Company or by the Company if the indemnifying
party is an Agent or the Agents, and (y) the firm of attorneys so designated may
be changed from time to time with respect to different periods during the
pendency of such action or similar or related actions. The indemnifying party
shall not be liable for any settlement of any action or claim effected without
its consent, which consent shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 7
shall for any reason be unavailable to, or insufficient to hold harmless, an
indemnified party under Section 7(a) or 7(b) hereof in respect of any loss,
claim,
<PAGE> 30
30
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 indemnified or indemnifying
Agent or Agents on the other from the offering of the 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 indemnified or indemnifying Agent or Agents 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 Company on the
one hand and an Agent 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
Securities (before deducting expenses) received by the Company bears to the
total commissions received by such Agent with respect to such offering. The
relative fault shall be determined by reference to 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 such Agent, 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 Agents agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation 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 7(d) shall be deemed to include, for
purposes of this Section 7(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 7(d), no Agent
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold through such Agent and distributed to
the public were offered to the public exceeds the amount
<PAGE> 31
31
of any damages which such Agent 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 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such person's consent, which consent shall
not be unreasonably withheld.
SECTION 8. Status of Each Agent. In soliciting offers to
purchase the Securities from the Company pursuant to this Agreement (other than
offers to purchase pursuant to Section 11), each Agent is acting solely as agent
for the Company and not as principal. Each Agent will make reasonable efforts to
assist the Company in obtaining performance by each purchaser whose offer to
purchase Securities from the Company has been solicited by such Agent and
accepted by the Company but such Agent shall have no liability to the Company in
the event any such purchase is not consummated for any reason. If the Company
shall default (which default shall include, but is not limited to, the Company
having told an Agent not to settle any order which the Company has accepted) in
its obligations to deliver Securities to a purchaser whose offer it has
accepted, the Company shall hold each Agent harmless against any loss, claim or
damage arising from or as a result of such default by the Company, provided such
default is not attributable to the fault of such Agent.
SECTION 9. Representations and Warranties to Survive Delivery.
All representations and warranties of the Company contained in this Agreement,
or contained in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of the
termination or cancellation of this Agreement or any investigation made by or on
behalf of an Agent or any person controlling such Agent or by or on behalf of
the Company, and shall survive each delivery of and payment for any of the
Securities.
SECTION 10. Termination. This Agreement may be terminated for
any reason, at any time, by any party hereto upon the giving of one day's
written notice of such termination to the other parties hereto, provided,
however,
<PAGE> 32
32
if such terminating party is an Agent, such termination shall be effective only
with respect to such terminating party. The provisions of Sections 3(c), 3(h),
4, 7, 8, 9, 13 and 14 hereof shall survive any such termination.
SECTION 11. Purchases as Principal. From time to time an Agent
may agree with the Company to purchase Securities from the Company as principal,
in which case such purchase shall be made in accordance with the terms of a
separate agreement (a "Purchase Agreement") to be entered into between such
Agent and the Company in the form attached hereto as Exhibit C. A Purchase
Agreement, to the extent set forth therein, may incorporate by reference
specified provisions of this Agreement.
SECTION 12. Amendments to Add Securities. From time to time,
the Company and the Agents may enter into amendments to this Agreement (any such
amendment shall be herein referred to as an "Amendment") for the purpose of
increasing the aggregate principal amount of Securities to which this Agreement
shall relate. Such Amendment may be in the form attached hereto as Exhibit D.
SECTION 13. Notices. Except as otherwise provided herein, all
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if received or transmitted by any standard form
of telecommunication.
Notices to the Agents shall be directed to them as follows:
Lehman Brothers Inc.
3 World Financial Center, 12th Floor
New York, New York 10285
Attention: Medium Term Note Department
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention:
<PAGE> 33
33
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Headquarters
World Financial Center
North Tower, 23rd Floor
New York, New York 10281
Attention: Product Management-Medium Term Notes
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention: Medium-Term Note Desk
Banc of America Securities LLC
NC1-007-07-01
100 North Tryon Street
Charlotte, NC 28255
Attention: Product Management-Medium Term Notes
Notices to the Company shall be directed to it as follows:
National Rural Utilities Cooperative
Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, Virginia 20171
Attention: Chief Financial Officer
SECTION 14. Binding Effect; Benefits. This Agreement shall be
binding upon each Agent, the Company and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (a) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of any entity or entities deemed to be an "Agent" for the
purposes of Section 7 and the person or persons, if any, who control an Agent
within the meaning of Section 15 of the Act, and (b) the indemnity agreements of
the Agents contained in Section 7 hereof shall be deemed to be for the benefit
of directors of the Company, officers of the Company who have signed a
Registration Statement and any persons controlling
<PAGE> 34
34
the Company. Nothing in this Agreement is intended or shall be construed to give
any person, other than the persons referred to in this Section, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein. No purchaser of Securities shall be deemed to be a
successor by reason merely of such purchase.
SECTION 15. Miscellaneous. (a) The term "business day" as used
in this Agreement shall mean any day which is not a Saturday or Sunday, which in
New York City is not a day on which banking institutions are generally
authorized or obligated by law to close and on which the New York Stock
Exchange, Inc. is open for trading.
(b) 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.
SECTION 16. Governing Law; Counterparts. This Agreement shall
be governed by and construed in accordance with the laws of New York. This
Agreement may be executed
<PAGE> 35
35
in counterparts and the executed counterparts shall together constitute a single
instrument.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance hereof in the space provided for that purpose below.
Very truly yours,
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION,
by
---------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
LEHMAN BROTHERS INC.,
by
---------------------
Name:
Title:
GOLDMAN, SACHS & CO.,
by
---------------------
Name:
Title:
<PAGE> 36
36
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by
---------------------
Name:
Title:
J.P. MORGAN SECURITIES INC.,
by
---------------------
Name:
Title:
BANC OF AMERICA SECURITIES LLC,
by
---------------------
Name:
Title:
<PAGE> 37
1
EXHIBIT A
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
Medium-Term Notes, Series C
Schedule of Payments
The Company agrees to pay each Agent a commission equal to the
following percentage of the aggregate principal amount of Securities or
percentage of the aggregate Dollar Equivalent of the Foreign Currency or Dollar
Equivalent of the Currency Unit (as defined in the Indenture) of the principal
amount of Securities placed by such Agent, as the case may be, or such other fee
as is mutually agreed upon by the Company and such Agent:
<TABLE>
<CAPTION>
Term Commission Rate
---- ---------------
<S> <C>
9 months to less than 1 year 0.125%
1 year to less than 18 months 0.150%
18 months to less than 2 years 0.200%
2 years to less than 3 years 0.250%
3 years to less than 4 years 0.350%
4 years to less than 5 years 0.450%
5 years to less than 7 years 0.500%
7 years to less than 10 years 0.550%
10 years to less than 15 years 0.600%
15 years to less than 30 years 0.625%
30 years or more To be
negotiated
at time of
sale
</TABLE>
<PAGE> 38
1
EXHIBIT B
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
Medium-Term Notes, Series C
Administrative Procedures
Medium-Term Notes, Series C, with maturities of nine months or
more from date of issue (the "Notes") are to be offered on a continuing basis by
National Rural Utilities Cooperative Finance Corporation (the "Company"). Lehman
Brothers Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc. and Nationsbanc Montgomery Securities
LLC, as agents (each an "Agent" and, collectively, the "Agents"), have agreed to
use their best efforts to solicit offers to purchase the Notes. The Notes are
being sold pursuant to an Agency Agreement between the Company and the Agents
dated , 1999 (as it may be supplemented or amended from time to time, the
"Agency Agreement"), to which these administrative procedures are attached as an
exhibit. The Company has also reserved the right to sell Notes directly on its
own behalf. The Notes will be issued pursuant to an Indenture, dated as of
December 15, 1987 (as supplemented by a First Supplemental Indenture dated as of
October 1, 1990 and as it may be supplemented or amended from time to time, the
"Indenture"), between the Company and Harris Trust and Savings Bank, as
successor trustee (the "Trustee"). The Notes will rank equally with all other
unsecured and unsubordinated indebtedness of the Company and will have been
registered with the Securities and Exchange Commission (the "Commission").
Unless otherwise defined herein, terms defined in the Agency Agreement or
Indenture shall have the same meaning when used in this exhibit.
Each Note will be represented by either a Global Security (as
defined hereinafter) delivered to the Trustee as agent for The Depository Trust
Company ("DTC"), and recorded in the book-entry system maintained by DTC (a
"Book-Entry Note") or a certificate delivered to the Holder thereof or a Person
designated by such Holder (a "Certificated Note"). Only Notes denominated and
payable in U.S. dollars may be issued as Book-Entry Notes. Owners of beneficial
interests in Book-Entry Notes will be entitled to delivery of Certificated Notes
only under the limited circumstances described in the Indenture.
<PAGE> 39
2
Administrative responsibilities, document control and
record-keeping functions to be performed by the Company will be performed by its
Treasurer or Chief Financial Officer. Administrative procedures for the offering
are explained below.
Book-Entry Notes will be issued in accordance with the
administrative procedures set forth in Part II and Part III hereof and the
Letter of Representations of the Company and the Trustee to DTC dated ,
1999, as amended or supplemented from time to time (the "Letter of
Representations"), and Certificated Notes will be issued in accordance with the
administrative procedures set forth in Part I and Part III hereof. Notes for
which interest is calculated on the basis of a fixed interest rate, which may be
zero, are referred to herein as "Fixed Rate Notes." Notes for which interest is
calculated on the basis of a floating interest rate are referred to herein as
"Floating Rate Notes." To the extent the procedures set forth below conflict
with the provisions of the Notes, the Indenture, the Letter of Representations
or the Agency Agreement, the relevant provisions of the Notes, the Indenture,
the Letter of Representations and the Agency Agreement shall control.
PART I
Administrative Procedures for Certificated Notes
Price to Public
Each Certificated Note will be issued at 100% of principal
amount, unless otherwise determined by the Company.
Date of Issuance
Each Certificated Note will be dated and issued as of the date
of its authentication by the Trustee.
Maturities
Each Certificated Note will mature on a Business Day (as
defined in Part III below) selected by the purchaser and agreed upon by the
Company, with maturities of nine months or more from the date of issuance.
<PAGE> 40
3
Registration
Certificated Notes will be issued only in fully registered
form. Bank of Montreal Trust Company (the "Paying Agent") will serve as
registrar and transfer agent in connection with the Certificated Notes.
Denominations
The Certificated Notes will be issued and payable in U.S.
dollars in the denomination of $1,000 or any integral multiple thereof unless
otherwise determined by the Company.
The Company may determine, upon agreement with a purchaser of
Certificated Notes, that such Certificated Notes will be denominated and payable
in a foreign currency or currency unit to be specified in a supplement to the
Prospectus ("Specified Currency"). In such case, unless otherwise specified in
such supplement, the authorized denominations of such Certificated Notes will be
the equivalent, as determined by the noon (New York City time) buying rate for
such Specified Currency for cable transfers quoted in New York City as certified
for customs purposes by the Federal Reserve Bank of New York (the "Market
Exchange Rate") on the Business Day immediately preceding the Settlement Date
(as defined below) for such Certificated Notes, of U.S. $1,000 (rounded down to
an integral multiple of units of specified denominations of such Specified
Currency). If such rates are not available for any reason, the Market Exchange
Rate will be determined in accordance with the alternative provision for
determining the Market Exchange Rate pursuant to Section 311(i) of the
Indenture.
Interest Payments
Each Fixed Rate Certificated Note will bear interest from its
issue date (the "Original Issue Date") at the annual rate stated on the face
thereof, payable on January 15 and July 15 of each year (the "Interest Payment
Dates"), commencing (unless otherwise specified in the applicable supplement to
the Prospectus) on the first Interest Payment Date after issuance, and at Stated
Maturity or upon redemption, if applicable. Interest on each Certificated Note
will be calculated and paid on the basis of a 360-day year of twelve 30-day
months (unless otherwise specified in the applicable supplement to the
Prospectus).
<PAGE> 41
4
Interest will be payable to the Person in whose name such Certificated Note is
registered at the close of business on the January 1 or July 1 (the "Regular
Record Dates") next preceding the respective Interest Payment Date; provided,
however, that (i) if an Original Issue Date falls between a Regular Record Date
and an Interest Payment Date, the first payment of interest will occur on the
Interest Payment Date following the next Regular Record Date and (ii) interest
payable at Maturity will be payable to the Person to whom principal shall be
payable (whether or not such Maturity is an Interest Payment Date). Any payment
of principal and interest on such Certificated Note required to be paid on an
Interest Payment Date or at Stated Maturity or upon redemption, if applicable,
which is not a Business Day shall be postponed to the next day which is a
Business Day. All interest payments (excluding interest payments made at Stated
Maturity or upon redemption, if applicable) will be made by check mailed to the
Person entitled thereto as provided above. Notwithstanding the foregoing, a
holder of $10,000,000 or more in aggregate principal amount of Certificated
Notes of like tenor and terms shall be entitled to receive such payments of
interest by wire transfer in immediately available funds, but only if
appropriate instructions have been received in writing by the Paying Agent on or
prior to the applicable Regular Record Date for any such payment of interest.
On the fifth Business Day immediately preceding each Interest
Payment Date, the Trustee will furnish the Company with the total amount (to the
extent known to the Trustee on such date) of the interest payments to be made on
such Interest Payment Date. The Trustee (or any duly selected paying agent) will
provide monthly to the Company's finance department a list of the principal and
interest to be paid on Certificated Notes maturing in the next succeeding month.
To the extent provided in the Indenture, the Company will provide to the Paying
Agent not later than the payment date sufficient moneys to pay in full all
principal and interest payments due on such payment date. The Paying Agent will
assume responsibility for withholding taxes on interest paid as required by law.
For special provisions relating to the Floating Rate Notes,
see Appendix A hereto. Special provisions relating to Certificated Notes
denominated in a Specified Currency may be agreed upon by the Company and the
Agents at a later time (the "Specified Currency Provisions").
<PAGE> 42
5
Settlement
The receipt of immediately available funds in U.S. dollars by
the Company in payment for a Certificated Note (less the applicable commission)
and the authentication and issuance of such Certificated Note shall, with
respect to such Certificated Note, constitute "Settlement" and the date thereof
shall be referred to as the "Settlement Date". All offers to purchase
Certificated Notes accepted by the Company will be settled from one to five
Business Days, or one to three Business Days, should the U.S. Securities and
Exchange Commission so require, from the date of acceptance by the Company
pursuant to the timetable for Settlement set forth below unless the Company and
the purchaser agree to Settlement on a different date; provided, however, that
the Company will so notify the Trustee (which notice with respect to a
Certificated Note denominated in a Specified Currency will not be less than five
Business Days prior to the Settlement Date) of any such different date on or
before the Business Day immediately prior to the Settlement Date.
Settlement Procedures
In the event of a purchase of Certificated Notes by an Agent,
as principal, appropriate Settlement details will be set forth in the applicable
Purchase Agreement to be entered into between such Agent and the Company
pursuant to the Agency Agreement.
Settlement procedures with regard to each Certificated Note
sold through an Agent, as agent (the "Presenting Agent"), shall be as follows:
A. The Presenting Agent will advise the Company, and after the
Company has accepted the offer, the Trustee, in writing by telex,
facsimile or other electronic transmission, of the following Settlement
information:
1. Exact name in which Certificated Note is to
be registered ("Registered Owner").
2. Exact address of the Registered Owner and
address for payment of principal and
interest, if any.
<PAGE> 43
6
3. Taxpayer identification number of the
Registered Owner.
4. Principal amount of the Certificated Note
(and, if multiple Certificated Notes are to
be issued, denominations thereof).
5. If the Certificated Notes are to be
denominated in a Specified Currency, whether
principal and interest is to be paid in U.S.
dollars or the Specified Currency.
6. Settlement Date.
7. Date of Maturity.
8. Interest rate:
(a) Fixed Rate Notes:
i) Interest Rate
ii) Interest Reset Dates
(b) Floating Rate Notes:
i) Interest Rate Basis
ii) Initial Interest Rate
iii) Spread or Spread Multiplier, if any
iv) Interest Reset Periods and Interest
Reset Dates
v) Index Maturity
vi) Maximum and Minimum Interest Rates,
if any
vii) Calculation Agent
viii) Calculation Date
ix) Interest Determination Dates
(c) Interest Payment Periods and Interest
Payment Dates
(d) Regular Record Date.
<PAGE> 44
7
9. If applicable, the date on or after which
the Certificated Notes are redeemable at the
option of the Company.
10. Wire transfer information (including
overseas bank account of the country of the
Specified Currency, if any).
11. Presenting Agent's commission (to be paid in
the form of a discount from the proceeds
remitted to the Company upon Settlement).
12. Trade Date
13. Net Proceeds to Company
14. Extension of Maturity Option (including the
basis or formula, of any, for the setting of
the Interest Rate or Spread and/or Spread
Multiplier, as applicable).
15. Renewal of Note Provisions.
B. The Company will confirm to the Trustee (i) by telephone,
telex, facsimile or other electronic transmission, the above Settlement
information and (ii) by facsimile in the form attached as Appendix B,
that the terms of the Notes have been approved by the Governor or the
Chief Financial Officer of the Company, and the Trustee will assign a
Certificated Note number to the transaction. If the Company rejects an
offer, the Company will promptly notify the Presenting Agent by
telephone, telex, facsimile or other electronic transmission.
C. The exchange rate agent, if any, appointed by the Company
will notify the Company, the Trustee and the Presenting Agent of the
Market Exchange Rate and the denominations of Certificated Notes which
are to be denominated and payable in a Specified Currency.
D. The Trustee will complete the preprinted 4-ply Certificated
Note packet, the form of which was previously approved by the Company,
the Agents and the Trustee.
<PAGE> 45
8
E. The Trustee will authenticate and deliver the Certificated
Note (with the attached white confirmation) and the yellow and blue
stubs to the Presenting Agent. The Presenting Agent will acknowledge
receipt of the Certificated Note by completing the yellow stub and
returning it to the Trustee.
F. The Presenting Agent will cause to be wire transferred to a
bank account designated by the Company immediately available funds in
U.S. dollars in the amount of the principal amount of the Certificated
Note, less the applicable commission.
G. The Presenting Agent will deliver the Certificated Note
(with the attached white confirmation) to the purchaser against payment
in immediately available funds in the amount of the principal amount of
the Certificated Note. The Presenting Agent will deliver to the
purchaser a copy of the most recent Prospectus applicable to the
Certificated Note with or prior to delivery of the Certificated Note
and the confirmation and payment by the purchaser for the Certificated
Note. If instructed by the purchaser to deliver the Certificated Note
and confirmation to different locations, the Certificated Note and the
confirmation will each be accompanied or preceded by the Prospectus
applicable to the Certificated Note being delivered.
H. The Presenting Agent will obtain the acknowledgement of
receipt for the Certificated Note and Prospectus by the purchaser
through the purchaser's completion of the blue stub.
I. The Trustee will mail the pink stub to the Company's Chief
Financial Officer or other appropriate official.
Settlement Procedures Timetable
For offers accepted by the Company, Settlement procedures "A"
through "I" set forth above shall be completed on or before the respective times
set forth below:
<PAGE> 46
9
Settlement
Procedure Time (New York)
--------- ---------------
A 4 P.M. on date of order (2 P.M. on
date of order in the case of
Certificated Notes with a
Settlement Date on the
Business Day after the date of
order)
B 5 P.M. on date of order (3 P.M. on
date of order in the case of
Certificated Notes with a
Settlement Date on the
Business Day after the date of
order)
C 10 A.M. on the Settlement Date
D-E 12:30 P.M. on the Settlement Date (1 P.M.
on the Settlement Date in the
case of Certificated Notes
denominated in a Specified
Currency)
F 2 P.M. on the Settlement Date
G-H 3 P.M. on the Settlement Date
I 5 P.M. on the Business Day after the
Settlement Date
Fails
In the event that a purchaser of a Certificated Note shall
either fail to accept delivery of or make payment for Certificated Note on the
date fixed by the Company for Settlement, the Presenting Agent will immediately
notify the Trustee and the Company's Chief Financial Officer or other
appropriate official by telephone, confirmed in writing, of such failure and
return the Certificated Note to the Trustee. Upon the Trustee's receipt of the
Certificated Note from the Presenting Agent, the Company will promptly return to
the Presenting Agent an amount of immediately available funds in U.S. dollars
equal to any amount previously transferred to the Company in respect of the
Certificated Note pursuant to advances made by such Agent. Such
<PAGE> 47
10
returns will be made on the Settlement Date, if possible, and in any event not
later than 12 noon (New York City time) on the Business Day following the
Settlement Date. The Company will reimburse the Presenting Agent on an equitable
basis for its loss of the use of the funds during the period when the funds were
credited to the account of the Company. Upon receipt of the Certificated Note in
respect of which the default occurred, the Trustee will mark the Certificated
Note "cancelled", make appropriate entries in its records and deliver the
Certificated Note to the Company with an appropriate debit advice. The
Presenting Agent will not be entitled to any commission with respect to any
Certificated Note which the purchaser does not accept or make payment for.
Redemption
Except as otherwise specified in an applicable supplement to
the Prospectus and on the Certificated Notes, the Certificated Notes will not be
redeemable prior to their Stated Maturity. If so specified in such a supplement
and on the Certificated Note, such Certificated Note will be subject to
redemption by the Company, at one or more redemption prices (expressed as a
percentage of the principal amount of such Certificated Note) applicable during
one or more redemption periods, together with interest accrued thereon on the
date fixed for redemption.
Notice of redemption shall be given in accordance with Section
1104 of the Indenture. In the event of redemption in part of any Certificated
Note, a new Certificated Note for the amount of the unredeemed portion shall be
issued in the name of the Holder upon cancellation of the redeemed Certificated
Note.
Maturity
Upon presentation of each Certificated Note at Stated Maturity
(unless the Company has exercised its option to extend the Stated Maturity of a
Certificated Note) or upon redemption the Trustee (or any duly appointed Paying
Agent) will pay the principal amount or redemption price thereof, together with
accrued interest due at Stated Maturity or the date of redemption. Such payment
shall be made in immediately available funds in U.S. dollars (except as provided
in any Specified Currency Provisions), provided that the Certificated Note is
presented to the Trustee (or
<PAGE> 48
11
any such Paying Agent) in time for the Trustee (or such Paying Agent) to make
payments in such funds in accordance with its normal procedures. To the extent
provided in the Indenture, the Company will provide the Trustee (and any such
Paying Agent) with funds available for immediate use for such purpose.
Certificated Notes presented at Stated Maturity or upon redemption will be
cancelled by the Trustee as provided in the Indenture.
PART II
Administrative Procedures for
Book-Entry Notes
In connection with the qualification of the Book-Entry Notes
for eligibility in the book-entry system maintained by DTC, the Trustee will
perform the custodial, document control and administrative functions described
below, in accordance with its obligations under the Letter of Representations
and a Medium-Term Note Certificate Agreement between the Trustee and DTC dated
as of October 18, 1989 (the "Medium-Term Note Certificate Agreement"), a copy of
which is attached hereto, and its obligations as a participant in DTC, including
DTC's Same-Day Funds Settlement System ("SDFS").
Price to Public
Each Book-Entry Note will be issued at 100% of principal
amount, unless otherwise determined by the Company.
Date of Issuance
On any Settlement Date (as defined under "Settlement" below)
for one or more Book-Entry Notes, the Company will issue a single global
security in fully registered form without coupons (a "Global Security")
representing up to $200,000,000 principal amount of all such Book-Entry Notes
that have the same terms. Each Global Security will be dated and issued as of
the date of its authentication by the Trustee. Each Global Security will bear an
original issue date, which will be (i) with respect to an original Global
Security (or any portion thereof), the original issue date specified in such
Global Security and (ii) following a
<PAGE> 49
12
consolidation of Global Securities, with respect to the Global Security
resulting from such consolidation, the most recent Interest Payment Date (as
defined in the Indenture) to which interest has been paid or duly provided for
on the predecessor Global Securities, regardless of the date of authentication
of such resulting Global Security. No Global Security will represent (i) both
Fixed Rate Book-Entry Notes and Floating Rate Book-Entry Notes or (ii) any
Certificated Note.
Identification Numbers
The Company has arranged with the CUSIP Service Bureau of
Standard & Poor's Corporation (the "CUSIP Service Bureau") for the reservation
of a series of CUSIP numbers, which series consists of approximately 900 CUSIP
numbers and relates to Global Securities representing Book-Entry Notes and
book-entry medium-term notes issued by the Company with other series
designations. The Company has obtained from the CUSIP Service Bureau a written
list of such reserved CUSIP numbers and has provided a copy of such list to DTC
and the Trustee. The Company will assign CUSIP numbers to Global Securities as
described below under Settlement Procedure "B". DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers that the Company has assigned
to Global Securities. The Trustee will notify the Company at any time when fewer
than 100 of the reserved CUSIP numbers remain unassigned to Global Securities,
and, if it deems necessary, the Company will reserve additional CUSIP numbers
for assignment to Global Securities. Upon obtaining such additional CUSIP
numbers, the Company shall deliver a list of such addition CUSIP numbers to the
Trustee and DTC.
Registration
Global Securities will be issued only in fully registered form
without coupons. Each Global Security will be registered in the name of CEDE &
CO., as nominee for DTC, on the securities register for the Notes maintained
under the Indenture. The beneficial owner of a Book-Entry Note (or one or more
indirect participants in DTC designated by such owner) will designate one or
more participants in DTC (with respect to such Book-Entry Note, the
"Participants") to act as agent or agents for such owner in connection with the
book-entry system maintained by DTC, and DTC will record in book-entry form, in
accordance with instructions provided
<PAGE> 50
13
by such Participants, a credit balance with respect to such beneficial owner in
such Book-Entry Note in the account of such Participants. The ownership interest
of such beneficial owner (or such indirect participant in DTC) in such Book-
Entry Note will be recorded through the records of such Participants or through
the separate records of such Participants and one or more indirect participants
in DTC.
Transfers
Transfers of a Book-Entry Note will be accomplished by book
entries made by DTC and, in turn, by Participants (and in certain cases, one or
more indirect participants in DTC) acting on behalf of beneficial transferors
and transferees of such Note.
Exchanges
The Trustee may deliver to DTC and the CUSIP Service Bureau at
any time a written notice of consolidation specifying (i) the CUSIP numbers of
two or more outstanding Global Securities that represent (A) Fixed Rate
Book-Entry Notes having the same terms and for which interest has been paid to
the same date or (B) Floating Rate Book-Entry Notes having the same terms and
for which interest has been paid to the same date, (ii) a date, occurring at
least thirty days after such written notice is delivered and at least thirty
days before the next Interest Payment Date for such Book-Entry Notes, on which
such Global Securities shall be exchanged for a single replacement Global
Security and (iii) a new CUSIP number, obtained from the Company, to be assigned
to such replacement Global Security. Upon receipt of such a notice, DTC will
send to its participants (including the Trustee) a written reorganization notice
to the effect that such exchange will occur on such date. Prior to the specified
exchange date, the Trustee will deliver to the CUSIP Service Bureau a written
notice setting forth such exchange date and such new CUSIP number and stating
that, as of such exchange date, the CUSIP numbers of the Global Securities to be
exchanged will no longer be valid. On the specified exchange date, the Trustee
will exchange such Global Securities for a single Global Security bearing the
new CUSIP number and the CUSIP Numbers of the exchanged Global Securities will,
in accordance with CUSIP Service Bureau procedures, be canceled and not
immediately reassigned. Notwithstanding the foregoing, if the Global Securities
to be exchanged exceed $200,000,000 in aggregate
<PAGE> 51
14
principal amount, one Global Security will be authenticated and issued to
represent each $200,000,000 of principal amount of the exchanged Global
Securities and an additional Global Security will be authenticated and issued to
represent any remaining principal amount of such Global Securities (see
"Denominations" below).
Maturity
Each Book-Entry Note will mature on a date nine months or more
after the Settlement date for such Note.
Denominations
Book-Entry Notes will be issued in principal amounts of $1,000
or any integral multiple thereof. Global Securities will be denominated in
principal amounts not in excess of $200,000,000. If one or more Book-Entry Notes
having an aggregate principal amount in excess of $200,000,000 would, but for
the preceding sentence, be represented by a single Global Security, then one
Global Security will be authenticated and issued to represent each $200,000,000
principal amount of such Book-Entry Note or Notes and an additional Global
Security will be authenticated and issued to represent any remaining principal
amount of such Book-Entry Note or Notes. In such a case, each of the Global
Securities representing such Book-Entry Note or Notes shall be assigned the same
CUSIP number.
Interest
Interest, if any, on each Fixed Rate Book-Entry Note will
accrue from the original issue date for the first interest period or the last
date to which interest has been paid, if any, for each subsequent interest
period, on the Global Security representing such Book-Entry Note, and will be
calculated and paid in the manner described in such Book-Entry Note. Unless
otherwise specified therein, each payment of interest on a Fixed Rate Book-Entry
Note will include interest accrued to but excluding the Interest Payment Date or
to but excluding the date of Maturity. Interest on Fixed Rate Book-Entry Notes
(including interest for partial periods) will be calculated on the basis of a
360-day year of twelve 30-day months.
<PAGE> 52
15
Interest payable at the date of Maturity of a Book-Entry Note
will be payable to the Person to whom the principal of such Note is payable.
Standard & Poor's Ratings Group may use the information received in the pending
deposit message described under Settlement Procedure "C" below in order to
include the amount of any inter est payable and certain other information
regarding the related Global Security in the appropriate (daily or weekly) bond
report published by Standard & Poor's Ratings Group.
For special provisions relating to the Floating Rate Notes,
see Appendix A hereto.
Payments of Interest
Promptly after each Regular Record Date, the Paying Agent will
deliver to the Company and DTC a written notice setting forth, by CUSIP number,
the amount of interest to be paid on each Global Security on such Interest
Payment Date (other than an Interest Payment Date coinciding with Maturity) and
the total of such amounts. DTC will confirm the amount payable on each Global
Security on such Interest Payment Date by reference to the appropriate (daily or
weekly) bond reports published by Standard & Poor's Corporation. The Company
will pay to the Paying Agent the total amount of interest due on such Interest
Payment Date (other than at Maturity), and the Paying Agent will pay such amount
to DTC, at the times and in the manner set forth below under "Manner of
Payment." If any Interest Payment Date for a Book-Entry Note is not a Business
Day, the payment due on such day shall be made on the next succeeding Business
Day and no interest shall accrue on such payment for the period from and after
such Interest Payment Date.
Payment at Maturity
On or about the first Business Day of each month, the Paying
Agent will deliver to the Company and DTC a written list of principal and
interest to be paid on each Global Security maturing in the following month
(excluding principal on a Book-Entry Note where the Company has exercised its
option to extend the Stated Maturity). The Company and DTC will confirm the
amounts of such principal and interest payments with respect to each such Global
Security on or about the fifth Business Day preceding the Maturity of such
Global Security. On or before Maturity, the Company will pay to the Paying
Agent, the principal
<PAGE> 53
16
amount of such Global Security, together with interest due at such Maturity. The
Paying Agent will pay such amount to DTC at the times and in the manner set
forth below under "Manner of Payment." If any Maturity of a Global Security
representing Book-Entry Notes is not a Business Day, the payment due on such day
shall be made on the next succeeding Business Day and no interest shall accrue
on such payment for the period from and after such Maturity. Promptly after
payment to DTC of the principal and interest due at Maturity of such Global
Security, the Paying Agent will cancel such Global Security in accordance with
the Indenture and so advise the Company.
Manner of Payment
The total amount of any principal and interest due on Global
Securities on any Interest Payment Date or at Maturity shall be paid by the
Company to the Paying Agent in immediately available funds no later than 9:30
A.M. (New York City time) on such date. The Company will make such payment on
such Global Securities by instructing the Paying Agent to withdraw funds from an
account maintained by the Company at the Paying Agent or by wire transfer to the
Paying Agent. The Company will confirm any such instructions in writing to the
Paying Agent. Prior to 10 A.M. (New York City time) on the date of Maturity or
as soon as possible thereafter, the Paying Agent will pay by separate wire
transfer (using Fedwire message entry instructions in a form previously
specified by DTC) to an account at the Federal Reserve Bank of New York
previously specified by DTC, in funds available for immediate use by DTC, each
payment of principal (together with interest thereon) due on a Global Security
on such date. On each Interest Payment Date (other than at Maturity), interest
payments shall be made to DTC, in funds available for immediate use by DTC, in
accordance with existing arrangements between the Paying Agent and DTC. On each
such date, DTC will pay, in accordance with its SDFS operating procedures then
in effect, such amounts in funds available for immediate use to the respective
Participants in whose names the Book-Entry Notes represented by such Global
Securities are recorded in the book-entry system maintained by DTC. Neither the
Company (as issuer) nor the Paying Agent (as trustee, security registrar or
paying agent) shall have any direct responsibility or liability for the payment
by DTC to such Participants of the principal of and interest on the Book-Entry
Notes.
<PAGE> 54
17
Withholding Taxes
The amount of any taxes required under applicable law to be
withheld from any interest payment on a Book-Entry Note will be determined and
withheld by the Participant, indirect participant in DTC or other Person
responsible for forwarding payments and materials directly to the beneficial
owner of such Note.
Settlement
The receipt by the Company of immediately available funds in
payment for a Book-Entry Note and the authentication and issuance of the Global
Security representing such Book-Entry Note shall constitute "Settlement" with
respect to such Book-Entry Note and the date thereof shall be referred to as the
"Settlement Date". All orders for Book-Entry Notes accepted by the Company will
be settled on the fifth Business Day, or the third Business Day, should the U.S.
Securities and Exchange Commission so require, following the date of acceptance
by the Company pursuant to the timetable for Settlement set forth below unless
the Company and the purchaser agree to Settlement on another day which shall be
no earlier than the next Business Day following the date of acceptance.
Settlement Procedures
In the event of a purchase of Book-Entry Notes by an Agent, as
principal, appropriate Settlement details will be set forth in the applicable
Purchase Agreement to be entered into between such Agent and the Company
pursuant to the Agency Agreement.
Settlement Procedures with regard to each Book-Entry Note sold
by the Company through an Agent, as agent (the "Presenting Agent"), shall be as
follows:
A. The Presenting Agent will advise the Company by telephone
of the following Settlement information:
1. Principal amount.
2. Settlement Date.
3. Date of Maturity.
<PAGE> 55
18
4. Interest rate:
(a) Fixed Rate Notes:
i) Interest Rate
ii) Interest Reset Dates
(b) Floating Rate Notes:
i) Interest Rate Basis
ii) Initial Interest Rate
iii) Spread or Spread Multiplier, if any
iv) Interest Reset Periods and Interest
Reset Dates
v) Index Maturity
vi) Maximum and Minimum Interest Rates,
if any
vii) Calculation Agent
viii) Calculation Date
ix) Interest Determination Dates
(c) Interest Payment Periods and Interest
Payment Dates.
(d) Regular Record Date.
5. If applicable, the date on or after which
the Book-Entry Notes are redeemable at the
option of the Company.
6. Presenting Agent's commission (to be paid in
the form of a discount from the proceeds
remitted to the Company upon Settlement).
7. Trade Date.
8. Net Proceeds to Company.
9. Extension of Maturity Option (including the
basis or formula, if any, for the setting of
the Interest Rate, or the Spread and/or
Spread Multiplier, as applicable).
10. Renewal of Note Provisions.
<PAGE> 56
19
B. The Company will assign a CUSIP number to the Global
Security representing such Book-Entry Note and then advise the Trustee
by telephone (confirmed in writing at any time on the same date) or
electronic transmission of the information set forth in Settlement
Procedure "A" above, such CUSIP number and the name of the Presenting
Agent. The Company will confirm to the Trustee, by facsimile in the
form attached as Appendix B, that the terms of the Notes have been
approved by the Governor or the Chief Financial Officer of the Company.
The Company will also notify the Presenting Agent by telephone of such
CUSIP number as soon as practicable.
C. The Trustee will enter a pending deposit message through
DTC's Participant Terminal System providing the following Settlement
information to DTC (which shall route such information to Standard &
Poor's Ratings Group and Interactive Data Corporation)
and the Presenting Agent:
1. The information set forth in Settlement
Procedure "A".
2. Identification as a Fixed Rate Book-Entry
Note or a Floating Rate Book-Entry Note.
3. Initial Interest Payment Date for such
Book-Entry Note, number of days by which
such date succeeds the related Regular
Record Date (which, in the case of Floating
Rate Book-Entry Notes that reset weekly,
shall be the DTC Record Date, which is the
date five calendar days immediately
preceding the applicable Interest Payment
Date and, in the case of all other
Book-Entry Notes, shall be the Regular
Record Date as defined in the Indenture) and
amount of interest payable on such Interest
Payment Date.
4. The interest payment period.
5. CUSIP number of the Global Security
representing such Book-Entry Note.
<PAGE> 57
20
6. Whether such Global Security will represent
any other Book-Entry Note (to the extent
known at such time).
7. Numbers of the participant accounts
maintained by DTC on behalf of the Trustee
and the Presenting Agent.
D. To the extent the Company has not already done so, the
Company will deliver to the Trustee a Global Security in a form that
has been approved by the Company, the Agents and the Trustee.
E. The Trustee will complete such Book-Entry Note, stamp the
appropriate legend, as instructed by DTC, if not already set forth
thereon, and authenticate the Global Security representing such
Book-Entry Note.
F. DTC will credit such Book-Entry Note to the Trustee's
participant account at DTC.
G. The Trustee will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC to (i) debit such
Book-Entry Note to the Trustee's participant account and credit such
Book-Entry Note to the Presenting Agent's participant account and (ii)
debit the Presenting Agent's Settlement account and credit the
Trustee's Settlement account for an amount equal to the principal
amount of such Book-Entry Note less the Presenting Agent's commission.
The entry of such a deliver order shall constitute a representation and
warranty by the Trustee to DTC that (i) the Global Security
representing such Book-Entry Note has been issued and authenticated and
(ii) the Trustee is holding such Global Security pursuant to the
Medium-Term Note Certificate Agreement.
H. The Presenting Agent will enter an SDFS deliver order
through DTC's Participant Terminal System instructing DTC (i) to debit
such Book-Entry Note to the Presenting Agent's participant account and
credit such Book-Entry Note to the participant accounts of the
Participants with respect to such Book-Entry Note and (ii) to debit the
Settlement accounts of such Participants and credit the Settlement
account of the Presenting Agent for an amount equal to the principal
amount of such Book-Entry Note.
<PAGE> 58
21
I. Transfers of funds in accordance with SDFS deliver orders
described in Settlement Procedures "G" and "H" will be settled in
accordance with SDFS operating procedures in effect on the Settlement
date.
J. The Trustee will, upon receipt of funds from the Agent in
accordance with Settlement Procedure "G", credit to an account of the
Company maintained at the Trustee funds available for immediate use in
the amount transferred to the Trustee in accordance with Settlement
Procedure "G".
K. The Trustee will send a copy of the Book-Entry Note by
first-class mail to the Company.
L. The Presenting Agent will confirm the purchase of such
Book-Entry Note to the purchaser either by transmitting to the
Participants with respect to such Book-Entry Note a confirmation order
or orders through DTC's institutional delivery system or by mailing a
written confirmation to such purchaser.
Settlement Procedures Timetable
For orders of Book-Entry Notes solicited by any Agent and
accepted by the Company for Settlement on the first Business Day after such
acceptance, Settlement Procedures "A" through "K" set forth above shall be
completed as soon as possible but not later than the respective times set forth
below:
Settlement
Procedure Time (New York)
--------- ---------------
A 11 A.M. on date of order
B 12 P.M. on date of order
C 2 P.M. on date of order
D 3 P.M. on date of order
E 9 A.M. on Settlement Date
F 10 A.M. on Settlement Date
G-H 2 P.M. on Settlement Date
I 4:45 P.M. on Settlement Date
J-K 5 P.M. on Settlement Date
If an order is to be settled more than one Business Day after
acceptance by the Company, Settlement Procedures "A", "B" and "C" may be
completed not later than
<PAGE> 59
22
11:00 A.M., 12:00 Noon and 2:00 P.M., respectively, on the Business Day after
the date of acceptance. If the initial interest rate for a Floating Rate
Book-Entry Note has not been determined at the time that Settlement Procedure
"A" is completed, Settlement Procedures "B" and "C" shall be completed as soon
as such rate has been determined but not later than 12:00 Noon and 2:00 P.M.,
respectively, on the Business Day after the date of acceptance. Settlement
Procedure "I" is subject to extension in accordance with any extension of
Fedwire closing deadlines and in the other events specified in SDFS operating
procedures in effect on the Settlement Date.
If Settlement of a Book-Entry Note is rescheduled or canceled,
the Company will advise the Trustee and the Trustee will deliver to DTC, through
DTC's Participant Terminal System, a cancelation message to such effect by no
later than 2:00 P.M. on the Business Day immediately preceding the scheduled
Settlement Date.
Failure to Settle
If the Trustee fails to enter an SDFS deliver order with
respect to a Book-Entry Note pursuant to Settlement Procedure "G", the Trustee
may deliver to DTC, through DTC's Participant Terminal System, as soon as
practicable, a withdrawal message instructing DTC to debit such Book-Entry Note
to the Trustee's participant account. DTC will process the withdrawal message,
provided that the Trustee's participant account contains a principal amount of
the Global Security representing such Book-Entry Note that is at least equal to
the principal amount to be debited. If a withdrawal message is processed with
respect to all the Book- Entry Notes represented by a Global Security, the
Trustee will cancel such Global Security in accordance with the Indenture and so
advise the Company. The CUSIP number assigned to such Global Security shall, in
accordance with CUSIP Service Bureau procedures, be canceled and not immediately
reassigned. If a withdrawal message is processed with respect to one or more,
but not all, of the Book-Entry Notes represented by a Global Security, the
Trustee will exchange such Book-Entry Note for two Global Securities, one of
which shall represent such Book-Entry Notes and shall be canceled immediately
after issuance and the other of which shall represent the other Book-Entry Notes
previously represented by the surrendered Global Security and shall bear the
CUSIP number of the surrendered Global Security.
<PAGE> 60
23
If the purchase price for any Book-Entry Note is not timely
paid to the Participants with respect to such Note by the beneficial purchaser
thereof (or a Person, including an indirect participant in DTC, acting on behalf
of such purchaser), such Participants and, in turn, the Presenting Agent may
enter SDFS deliver orders through DTC's Participant Terminal System reversing
the orders entered pursuant to Settlement Procedures "H" and "G", respectively.
Thereafter, the Trustee will deliver the withdrawal message and take the related
actions described in the preceding paragraph. The Company will reimburse the
Presenting Agent and the Trustee, as applicable, on an equitable basis for their
loss of the use of the funds during the period when the funds were credited to
the account of the Company (except that the Company shall not be required to
reimburse a party if such party's default hereunder or under the Agency
Agreement shall have caused such failure by the beneficial purchaser to make
timely payment of the purchase price),
Notwithstanding the foregoing, upon any failure to settle with
respect to a Book-Entry Note, DTC may take any actions in accordance with its
SDFS operating procedures then in effect. In the event of a failure to settle
with respect to one or more, but not all, of the Book-Entry Notes to have been
represented by a Global Security, the Trustee will provide, in accordance with
Settlement Procedure "E", for the authentication and issuance of a Global
Security representing the other Book-Entry Notes to have been represented by
such Global Security and will make appropriate entries in its records.
Trustee Not to Risk Funds
Nothing herein shall be deemed to require the Trustee to risk
or expend its own funds in connection with any payment to the Company, DTC, the
Agents or the purchaser, it being understood by all parties that payments made
by the Trustee to the Company, DTC, the Agents or the purchaser shall be made
only to the extent that funds are provided to the Trustee for such purpose.
<PAGE> 61
24
PART III
Administrative Procedures for Book-Entry Notes
and Certificated Notes
Procedures for Establishing the Terms of the Notes
The Company and the Agents will discuss from time to time the
rates to be borne by the Notes that may be sold as a result of the solicitation
of offers by the Agents. Once an Agent has recorded any indication of interest
in Notes upon certain terms, and communicated with the Company, if the Company
plans to accept an offer to purchase Notes upon such terms, it will prepare a
sticker reflecting the terms of such Notes (if the interest rate, Stated
Maturity or other terms have changed) and, after approval from such Agent, will
arrange to have such sticker (together with the Prospectus if amended or
supplemented), electronically filed or transmitted by a means reasonably
calculated to result in filing with the Commission by the second Business Day
after the Company has accepted such offer (or by the Business Day prior to the
Settlement Date in the event the Settlement Date is the first or second Business
Day after such acceptance) and pursuant to Rule 424(b) of the Rules and
Regulations, and will supply an appropriate number of copies of the Prospectus,
as then amended or supplemented, and bearing such sticker, to the Agent that
presented such offer. No Settlements with respect to Notes upon such terms may
occur prior to such filing or such transmission and the Agents will not, prior
to such filing or such transmission, mail confirmations to customers who have
offered to purchase Notes upon such terms. After such filing or such
transmission, sales, mailing of confirmations and Settlements may occur with
respect to Notes upon such terms, subject to the provisions of "Delivery of
Prospectus" below.
If the Company decides to post rates and a decision has been
reached to change interest rates, the Company will promptly so notify each
Agent. Each Agent will forthwith suspend solicitation of purchases. At that
time, the Agents will recommend and the Company will establish rates to be so
posted. Following establishment of posted rates and prior to the filing or
transmission described in the following sentence, the Agents may record
indications of interest in purchasing Notes only at the posted rates. Once an
Agent has recorded any indication of interest in Notes at the posted rates and
communicated with the Company, if the
<PAGE> 62
25
Company plans to accept an offer at the posted rate, it will prepare a sticker
reflecting such posted rates and, after approval from such Agent, will arrange
to have such sticker (together with the Prospectus if amended or supplemented),
electronically filed or transmitted by a means reasonably calculated to result
in filing with the Commission by the second Business Day after the Company has
accepted such offer (or by the Business Day prior to the Settlement Date in the
event the Settlement Date is the first or second Business Day after such
acceptance) and pursuant to Rule 424(b) of the Rules and Regulations, and will
supply an appropriate number of copies of the Prospectus, as then amended or
supplemented, to the Agent who presented such offer. No Settlements at the
posted rates may occur prior to such filing or such transmission and the Agents
will not, prior to such filing or such transmission, mail confirmations to
customers who have offered to purchase Notes at the posted rates. After such
filing or such transmission, sales, mailing of confirmations and Settlements may
resume, subject to the provisions of "Delivery of Prospectus" below.
Acceptance and Rejection of Offers
The Company shall have the sole right to accept offers to
purchase Notes from the Company and may reject any such offer in whole or in
part. Each Agent shall promptly communicate to the appropriate official of the
Company, orally or in writing, each reasonable offer to purchase Notes from the
Company received by it other than those rejected by such Agent. Each Agent shall
have the right, in its discretion reasonably exercised without advising the
Company, to reject any offers in whole or in part.
Suspension of Solicitation; Amendment or Supplement
If, during any period in which, in the opinion of counsel for
the Agents (provided, if the Agents are no longer soliciting (or have been
instructed not to solicit) purchases of Securities from the Company such opinion
is known to the Company), a prospectus relating to the Notes is required to be
delivered under the Act, any event known to the Company occurs as a result of
which the Prospectus would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary at any time to amend the Prospectus to comply with the Act or the
Rules
<PAGE> 63
26
and Regulations, the Company will notify the Agents promptly to suspend
solicitation of purchases of the Notes and the Agents shall suspend their
solicitations of purchases of Notes; and if the Company shall decide to amend or
supplement the Registration Statement or the Prospectus for purposes of offering
the Securities, it will promptly advise the Agents by telephone (with
confirmation in writing) and, except as otherwise provided in any relevant
Purchase Agreement, will promptly prepare and file with the Commission an
amendment or supplement which will correct such statement or omission or an
amendment, whether by filing such documents pursuant to the Act or the Exchange
Act, as may be necessary to correct such untrue statement or omission or to make
the Registration Statement or the Prospectus comply with such requirements and
to prepare and furnish to the Agents at its own expense such amendment or
supplement to the Registration Statement or the Prospectus as will correct such
Registration Statement or Prospectus; provided, however, that the Company shall
in any event promptly prepare, file and furnish an Agent with such an amendment
or supplement if such Agent shall then hold any Securities acquired from the
Company as principal (other than such Securities as such Agent shall have held
for a period of six months or more). Upon the Agents' receipt of such amendment
or supplement and advice from the Company that solicitations may be resumed, the
Agents will resume solicitations of purchases of the Notes.
In addition, the Company may instruct the Agents to suspend
solicitation of offers to purchase at any time. Upon receipt of such
instructions the Agents will forthwith (but in any event within one Business
Day) suspend solicitation of offers to purchase from the Company until such time
as the Company has advised it that solicitation of offers to purchase may be
resumed and the Company has complied with Section 6 of the Agency Agreement to
the extent then required. If the Company decides to amend or supplement the
Registration Statement or the Prospectus relating to the Notes (other than to
change interest rates or maturities or similar changes and except in all cases
by filing a report on Form 8-K, pursuant to the Exchange Act, solely to add
exhibits to documents previously filed), it will promptly advise the Agents and
the Trustee and will furnish the Agents and the Trustee with copies of the
proposed amendment or supplement.
<PAGE> 64
27
In the event that at the time the Agents, at the direction of
the Company, suspend solicitation of offers to purchase from the Company there
shall be any orders outstanding which have not been settled, the Company will
promptly advise the Agents and the Trustee whether such orders may be settled
and whether copies of the Prospectus as theretofore amended and/or supplemented
as in effect at the time of the suspension may be delivered in connection with
the Settlement of such orders. The Company will have the sole responsibility for
such decision and for any arrangements which may be made in the event that the
Company determines that such orders may not be settled or that copies of such
Prospectus may not be so delivered.
Delivery of Prospectus
A copy of the Prospectus as most recently amended or
supplemented on the date of delivery thereof must be delivered to a purchaser
prior to or together with the earliest of (i) any written offer of such Note,
(ii) confirmation of the purchase of such Note and (iii) payment for such Note
by its purchaser. The Company shall ensure that an Agent receives copies of the
Prospectus and each amendment or supplement thereto (including appropriate
pricing stickers as described in the section entitled "Procedures for
Establishing the Terms of the Notes" above) in such quantities and within such
time limits as will enable such Agent to deliver such confirmation or Note to a
purchaser as contemplated by these procedures and in compliance with the
preceding sentence. If, since the date of acceptance of a purchaser's offer, the
Prospectus shall have been supplemented solely to reflect any sale of Notes on
terms different from those agreed to between the Company and such purchaser or a
change in posted rates not applicable to such purchaser, such purchaser shall
not receive the Prospectus as supplemented by such new supplement, but shall
receive the Prospectus as supplemented to reflect the terms of the Notes being
purchased by such purchaser and otherwise as most recently amended or
supplemented on the date of delivery of the Prospectus. The Trustee will make
all such deliveries with respect to all Notes sold directly by the Company.
Confirmation
For each order to purchase a Note solicited by any Agent and
accepted by the Company, the Presenting Agent will
<PAGE> 65
28
issue a confirmation to the purchaser (with a copy to the Company), including
delivery and payment instructions.
Advertising Costs
The Company will determine with the Agents the amount and
nature of advertising that may be appropriate in offering the Notes. The
"tombstone" advertisement and such other expenses agreed to by the Company and
Agents in connection with solicitation of offers to purchase Notes from the
Company will be paid by the Company.
Business Day
"Business Day" shall mean, for all purposes of these
Administrative Procedures, any day which is not a Saturday or Sunday and which
is not a day on which banking institutions are generally authorized or obligated
by law or executive order to close (i) in New York City, (ii) in the case of
Notes denominated in a Specified Currency, in the city designated in an
applicable supplement to the Prospectus as the principal financial center of the
country of such Specified Currency, (iii) in the case of Notes denominated in
ECU, in Brussels and (iv) in the case of LIBOR Notes (as defined in Appendix A),
in New York City and London.
<PAGE> 66
1
EXHIBIT C
PURCHASE AGREEMENT
, 199
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
Woodland Park
2201 Cooperative Way
Herndon, Virginia 20171
Attention: Chief Financial Officer
1. The undersigned agrees to purchase the following principal
amount of the Securities described in the Agency Agreement dated ,
1999 (as it may be supplemented or amended from time to time, the "Agency
Agreement"):
Principal Amount: [$]
Currency:
Interest Rate: %
Discount: % of Principal Amount
Aggregate Price to
be paid to Company
(in immediately
available funds): [$]
Settlement Date:
Other Terms:
2. In the case of Securities issued in a foreign currency or
currency unit, unless otherwise specified below, settlement and payments of
principal and interest will be in U.S. dollars based on the highest bid
quotation in the City of New York received by the Exchange Rate Agent (as
defined in the Indenture dated as of December 15, 1987, as supplemented by the
First Supplemental Indenture dated as of October 1, 1990, between National Rural
Utilities Cooperative Finance Corporation (the "Company") and Harris
<PAGE> 67
2
Trust and Savings Bank, as successor trustee) at approximately 11:00 A.M. New
York City time, on the second Business Day (as defined in the Procedures)
preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on such
payment date in the aggregate amount of the Specified Currency payable to all
holders of Securities denominated in such Specified Currency electing to receive
U.S. dollar payments and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in the
Specified Currency.
3. Our obligation to purchase Securities hereunder is subject
to the continued accuracy on the above Settlement Date as if made on the
Settlement Date of your representations and warranties contained in the Agency
Agreement and to your performance and observance in all material respects of all
applicable covenants and agreements contained therein, including, without
limitation, your obligations pursuant to Section 7 thereof. Our obligation
hereunder is subject to the further conditions that:
(a) we shall receive (i) the opinions required to be delivered
pursuant to Sections 5(e) and 5(f) of the Agency Agreement, (ii) the certificate
required to be delivered pursuant to Section 5(g) of the Agency Agreement and
(iii) the letter required to be delivered pursuant to 5(h) of the Agency
Agreement, in each case dated as of the above Settlement Date;
(b) 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; and
(c) on or after the date hereof, there shall not
have occurred any of the following: (i) a suspension or
<PAGE> 68
3
material limitation in trading in securities generally on the New York Stock
Exchange, (ii) a banking moratorium on commercial banking activities in New York
declared by Federal or state authorities or (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 the effect of which, in any
such case described in clause (iii), is, in our reasonable judgment, to make it
impracticable or inadvisable to proceed with the purchase of the Securities.
4. In further consideration of our agreement hereunder, you
agree that between the date hereof and the above Settlement Date, you will not
offer or sell, or enter into any agreement to sell, except to your members, any
debt securities of the Company of substantially the form of the Securities.
5. We may terminate this Agreement, immediately upon notice to
you, at any time prior to the above Settlement Date, if prior thereto any of the
events described in clauses (b) or (c) of paragraph 3 occurs. In the event of
such termination, no party shall have any liability to the other party hereto,
except as provided in Sections 4, 7 and 13 of the Agency Agreement.
6. Except as expressly designated, capitalized terms used
herein are defined in the Agency Agreement (including the exhibits thereto).
<PAGE> 69
4
7. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK.
8. This Agreement may be executed in counterparts and the
executed counterparts shall together constitute a single instrument.
[Insert Name of Agent],
By ____________________
Title:
Accepted: _________ __, 199_
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By __________________________
Chief Financial Officer
<PAGE> 70
1
EXHIBIT D
FORM OF AMENDMENT
AMENDMENT dated as of [ ] to
the Agency Agreement dated [ ],
1999, [and amended as of [ ], among
National Rural Utilities Cooperative Finance
Corporation (the "Company"), a District of
Columbia cooperative association, Lehman
Brothers Inc. (an "Agent"), Goldman,
Sachs & Co. (an "Agent"), Merrill Lynch,
Pierce, Fenner & Smith Incorporated (an
"Agent"), J.P. Morgan Securities Inc. (an
"Agent") and Nationsbanc Montgomery
Securities LLC (an "Agent") (such Agency
Agreement [, as amended,] the "Agreement").
WHEREAS, the parties hereto have entered into the
Agreement;
WHEREAS, the Agreement initially contemplated the issuance and
sale by the Company from time to time of up to $[ ] aggregate principal
amount of its Medium-Term Notes, Series C (the "Securities");
[WHEREAS, the Agreement was amended as of [ ], to
increase the aggregate principal amount of the Securities permitted to be issued
and sold by the Company thereunder to $[ ] and the aggregate principal
amount of the Securities permitted to be sold on and after the date of such
amendment to $[ ];]
WHEREAS, the Company has issued and sold approximately
$[ ] aggregate principal amount of Securities pursuant to the Agreement and
the Indenture on and after [ ];
WHEREAS, immediately prior to this Amendment taking effect,
the Company's Registration Statement No. [ ] remains effective under the
Act relating to the Securities, with $[ ] aggregate principal amount of
Securities remaining unissued and unsold under such Registration Statement;
WHEREAS, the parties hereto desire to amend the
Agreement;
<PAGE> 71
2
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
1. The Agreement is hereby amended to include in the
definition of "Registration Statement", as contemplated therein in Section 1(a),
Registration Statement No. [ ], previously filed with the Commission and
effective as of [ ], relating to the registration of $[ ] in
aggregate principal amount of Securities, and to revise the definition of
"Prospectus" to mean the prospectus supplement dated [ ], relating to the
Securities covered by the Agreement as amended by this Amendment, together with
the prospectus contained in such Registration Statement.
2. The Agreement is hereby amended to increase the aggregate
principal amount of Securities which may be issued and sold from time to time by
the Company thereunder to $[ ] and the aggregate principal amount of
Securities which may be issued and sold from time to time thereunder on or after
the date hereof to $[ ].
[3. The Agreement is hereby amended to delete from the
definition of "Registration Statement", Registration Statement No. [ ],
and all amendments thereto and supplements thereof, all of the Securities
registrated thereby having been issued by the Company.]
4. This Amendment shall become effective only on the
satisfaction (or waiver by the Agents) of the conditions in Section 5 of the
Agreement with respect to the Closing Date for this Amendment.
Except as expressly amended hereby, the Agreement shall
continue in full force and effect in accordance with the provisions thereof as
in existence on the date hereof.
All capitalized terms not defined herein have the meanings
assigned to them in the Agreement.
<PAGE> 72
3
IN WITNESS WHEREOF, the parties hereto have each caused this
Amendment to be fully executed as of the date first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
by
--------------------------
Name:
Title:
LEHMAN BROTHERS INC.,
by
--------------------------
Name:
Title:
GOLDMAN, SACHS & CO.,
by
--------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by
--------------------------
Name:
Title:
<PAGE> 73
4
J.P. MORGAN SECURITIES INC.,
by
--------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC,
by
--------------------------
Name:
Title:
<PAGE> 74
1
APPENDIX A
Special Provisions Relating
to Floating Rate Notes
----------------------
Interest Rate: Interest on Floating Rate Notes will be determined by
reference to an "Interest Rate Basis", which shall be
the "Commercial Paper Rate" ("Commercial Paper Rate
Notes"), "LIBOR" ("LIBOR Notes"), the "Treasury Rate"
("Treasury Rate Notes"), the "Federal Funds Effective
Rate" ("Fed Funds Notes"), the "CD Rate" ("CD Rate
Notes"), the "Prime Rate" ("Prime Rate Notes") or
such other interest rate formula as may be designated
by the Company, based upon the Index Maturity and
adjusted by a Spread or Spread Multiplier, if any, as
specified in the applicable pricing supplement to the
Prospectus setting forth the terms of each issuance
of Notes (the "Pricing Supplement"). The "Index
Maturity" is the particular maturity of the type of
instrument or obligation from which the Interest Rate
Basis is calculated (e.g., in the case of commercial
paper, 30-day rather than 90-day commercial paper).
The "Spread" is the number of basis points (100 basis
points equals one percent) above or below the
Interest Rate Basis applicable, to such Floating Rate
Note, and the "Spread Multiplier" is the percentage
of the Interest Rate Basis applicable to the interest
rate for such Floating Rate Note. The Spread, Spread
Multiplier, Index Maturity and other variable terms
as described below are subject to change by the
Company from time to time, but no such change will
affect any Floating Rate Note theretofore issued or
as to which an offer has been accepted by the
Company. A Floating Rate Note may also have either or
both of the following: (i) a maximum limit, or
ceiling ("Maximum Interest Rate"), on the rate of
interest which may apply during any Interest
<PAGE> 75
2
Period (as defined below); and (ii) a minimum limit,
or floor ("Minimum Interest Rate"), on the rate of
interest which may apply during any Interest Period.
In addition to any Maximum Interest Rate which may be
applicable to any Floating Rate Note pursuant to the
above provisions, the interest rate on the Floating
Rate Notes will in no event be higher than the
maximum rate permitted by New York law, as the same
may be modified by United States law of general
application. Under present New York law, the maximum
rate of interest is 25% per annum on a simple
interest basis. The limit may not apply to Floating
Rate Notes in which $2,500,000 or more has been
invested.
The Calculation Agent appointed by the Company (the
"Calculation Agent") (initially Lehman Brothers Inc.)
will, upon request of a holder of Floating Rate
Notes, provide the interest rate then in effect and,
if determined, the interest rate which will become
effective as a result of a determination made with
respect to the most recent Interest Determination
Date (as defined below) with respect to such Floating
Rate Notes. The applicable Pricing Supplement will
specify for each Floating Rate Note the following
terms: Interest Rate Basis, rate of interest for the
initial Interest Period (the "Initial Interest
Rate"), date of issue, Interest Determination Dates,
Interest Reset Dates (as defined below), Interest
Payment Dates (as defined below), Regular Record Date
(as defined below), Index Maturity, maturity date,
Maximum Interest Rate and Minimum Interest Rate, if
any, and the Spread or Spread Multiplier, if any.
<PAGE> 76
3
Interest Payment Except as set forth in the applicable Pricing
Dates: Supplement and except as provided below, interest
will be payable in the case of Floating Rate Notes
with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of
each year, as specified in the applicable Pricing
Supplement; in the case of Floating Rate Notes with a
quarterly Interest Reset Date, on the third Wednesday
of March, June, September and December of each year;
in the case of Floating Rate Notes with a semi-annual
Interest Reset Date, on the third Wednesday of two
months of each year, as specified in the applicable
Pricing Supplement; and in the case of Floating Rate
Notes with an annual Interest Reset Date, on the
third Wednesday of one month of each year, as
specified in the applicable Pricing Supplement. If
any Interest Payment Date for any Floating Rate Note
would otherwise be a day that is not a Business Day
(as defined below) for such Floating Rate Note, the
Interest Payment Date for such Floating Rate Note
shall be postponed to the next day that is a Business
Day for such Floating Rate Note, except that in the
case of a LIBOR Note, if such day falls in the next
calendar month, such Interest Payment Date shall be
the preceding day that is a London Business Day (as
defined below) with respect to such Note. Each date
on which interest is payable on a Floating Rate Note
is referred to herein as an "Interest Payment Date."
Interest Reset The rate of interest on each Floating Rate Note will
Dates: be reset daily, weekly, monthly, quarterly,
semi-annually or
<PAGE> 77
4
annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement.
Except as set forth in the applicable Pricing
Supplement, the Interest Reset Date will be, in the
case of Floating Rate Notes which reset daily, each
Business Day; in the case of Floating Rate Notes
(other than Treasury Rate Notes) which reset weekly,
the Wednesday of each week; in the case of Treasury
Rate Notes which reset weekly, the Tuesday of each
week; in the case of Floating Rate Notes which reset
monthly, the third Wednesday of each month; in the
case of Floating Rate Notes which reset quarterly,
the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which
reset semiannually, the third Wednesday of two months
of each year, as specified in the applicable Pricing
Supplement; and in the case of Floating Rate Notes
which reset annually, the third Wednesday of one
month of each year, as specified in the applicable
Pricing Supplement; provided, however, that (i) the
interest rate in effect from the date of issue to the
first Interest Reset Date with respect to a Floating
Rate Note will be the Initial Interest Rate (as set
forth in the applicable Pricing Supplement) and (ii)
unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the ten
calendar days immediately prior to maturity or
redemption, if applicable, will be that in effect on
the tenth calendar day preceding such maturity or
redemption. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is
not a Business Day for such Floating Rate Note, the
Interest Reset Date for such Floating Rate Note shall
<PAGE> 78
5
be postponed to the next day that is a Business Day
for such Floating Rate Note, except that in the case
of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
Interest Determi- Except as set forth in the applicable Pricing
nation Dates: Supplement, the "Interest Determination Date"
pertaining to an Interest Reset Date for a Commercial
Paper Rate Note (the "Commercial Paper Interest
Determination Date"), a Fed Funds Note (the "Fed
Funds Interest Determination Date"), a CD Rate Note
(the "CD Interest Determination Date") or a Prime
Rate Note (the "Prime Interest Determination Date")
will be the second Business Day preceding such
Interest Reset Date. The "Interest Determination
Date" pertaining to an Interest Reset Date for a
LIBOR Note (the "LIBOR Interest Determination Date")
will be the second London Business Day preceding such
Interest Reset Date. The "Interest Determination
Date" pertaining to an Interest Reset Date for a
Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in
which such Interest Reset Date falls on which
Treasury bills would normally be auctioned. Treasury
bills are usually sold at auction on Monday of each
week, unless that day is a legal holiday, in which
case the auction is usually held on the following
Tuesday, except that such auction may be held on the
preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding
Friday, such Friday will be the Treasury Interest
Determination Date pertaining to the
<PAGE> 79
6
Interest Reset Date occurring in the next succeeding
week. If an auction date for Treasury bills shall
fall on any Interest Reset Date for a Treasury Rate
Note, then such Interest Reset Date shall instead be
the first Business Day immediately following such
auction date.
Calculation Dates: The Calculation Date, where applicable, pertaining to
any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest
Determination Date or if any such day is not a
Business Day, the next succeeding Business Day or
(ii) the Business Day preceding the applicable
Interest Payment Date or maturity, as the case may
be.
All percentages resulting from any calculation on
Floating Rate Notes will be rounded to the nearest
one hundred-thousandth of a percentage point, with
five one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation on
Floating Rate Notes will be rounded to the nearest
cent or, in the case of Notes denominated other than
in United States dollars, the nearest unit (with
one-half cent or unit being rounded upward).
Commercial Paper Unless otherwise indicated in the applicable Pricing
Rate: Supplement, the "Commercial Paper Rate" for each such
Interest Reset Date will be determined as of the
Commercial Paper Interest Determination Date and will
be the Money Market Yield (as defined below) on such
date of the rate for commercial paper having the
Index Maturity specified in
<PAGE> 80
7
the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest
Rates" or any successor publication selected by the
Calculation Agent ("H.15(519)") under the heading
"Commercial Paper". In the event that such rate is
not published prior to 9:00 A.M., New York City time,
on the Calculation Date pertaining to such Commercial
Paper Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield
on such Commercial Paper Interest Determination Date
of the rate for commercial paper of the specified
Index Maturity as published by the Federal Reserve
Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government
Securities", or any successor publication selected by
the Calculation Agent ("Composite Quotations") under
the heading "Commercial Paper". If by 3:00 P.M., New
York City time, on such Calculation Date such rate is
not published in either H.15(519) or Composite
Quotations, the Commercial Paper Rate for that
Commercial Paper Interest Determination Date shall be
calculated by the Calculation Agent and shall be the
Money Market Yield of the arithmetic mean of the
offered rates as of 11:00 A.M., New York City time,
on that Commercial Paper Interest Determination Date,
of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent
for commercial paper of the specified Index Maturity
placed for an industrial issuer whose bond rating is
"AA", or the equivalent, from a nationally recognized
securities rating
<PAGE> 81
8
agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the
Commercial Paper Rate with respect to such Commercial
Paper Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial
Paper Interest Determination Date.
Money Market Yield: "Money Market Yield" shall be a yield (expressed as a
percentage rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point)
calculated in accordance with the following formula:
Money Market Yield = D x 360 x 100
-----------
360 - (DxM)
where "D" refers to the per annum rate for commercial
paper quoted on a bank discount basis and expressed
as a decimal, and "M" refers to the actual number of
days in the interest period for which interest is
being calculated.
LIBOR: Each LIBOR Note will bear interest at the interest
rate (calculated with reference to LIBOR and the
Spread and/or Spread Multiplier, if any) specified in
such LIBOR Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing
Supplement, "LIBOR" will be determined by the
Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination
Date, LIBOR will be, as specified in the applicable
Pricing
<PAGE> 82
9
Supplement, either: (a) the arithmetic mean of the
offered rates for deposits in the U.S. dollars having
the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second day on
which dealings in deposits in U.S. dollars are
transacted in the London interbank market ("London
Business Day") immediately following such LIBOR
Interest Determination Date, that appear on the
Reuters Screen LIBO Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date, if
at least two such offered rates appear on the Reuters
Screen LIBO Page ("LIBOR Reuters"), or (b) the rate
for deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business
Day immediately following such LIBOR Interest
Determination Date, that appears on Telerate Page
3750 as of 11:00 A.M., London Time, on such LIBOR
Interest Determination Date ("LIBOR Telerate").
"Reuters Screen LIBO Page" means the display
designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may
replace page LIBO on that service for the purpose of
displaying London interbank offered rates of major
banks). "Telerate Page 3750" means the display
designated as page "3750" on the Telerate Service (or
such other page as may replace the 3750 page on that
service or such other service or services as may be
nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates
for U.S. dollar deposits). If neither LIBOR Reuters
nor LIBOR Telerate is specified in the applicable
Pricing Supplement, LIBOR will be
<PAGE> 83
10
determined as if LIBOR Telerate had been specified.
If fewer than two offered rates appear on the Reuters
Screen LIBO Page, or if no rate appears on Telerate
Page 3750, as applicable, LIBOR in respect of such
LIBOR Interest Determination Date will be determined
as if the parties had specified the rate described in
(ii) below.
(ii) With respect to a LIBOR Interest Determination
Date on which fewer than two offered rates appear on
the Reuters Screen LIBO Page, as specified in (i) (a)
above, or on which no rate appears on Telerate Page
3750, as specified in (i) (b) above, as applicable,
LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing
Supplement are offered at approximately 11:00 A.M.,
London time, on such LIBOR Interest Determination
Date by four major banks in the London interbank
market selected by the Calculation Agent (the
"Reference Banks") to prime banks in the London
interbank market, commencing on the second London
Business Day immediately following such LIBOR
Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that
is representative for a single transaction in such
market at such time. The Calculation Agent will
request the principal London office of each of the
Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, LIBOR
in respect of such LIBOR Interest Determination Date
will be the arithmetic mean of such quotations. If
fewer than two quotations are provided,
<PAGE> 84
11
LIBOR in respect of such LIBOR Interest Determination
Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., New York City time, on
such LIBOR Interest Determination Date by three major
banks in The City of New York selected by the
Calculation Agent for loans in U.S. dollars to
leading European banks having the Index Maturity
designated in the applicable Pricing Supplement,
commencing on the second London Business Day
immediately following such LIBOR Interest
Determination Date and in a principal amount equal to
an amount of not less than $1,000,000 that is
representative for a single transaction in such
market at such time; provided, however, that if the
banks selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, LIBOR
with respect to such LIBOR Interest Determination
Date will be the interest rate otherwise in effect on
such LIBOR Interest Determination Date.
Treasury Rate: Unless otherwise indicated in the applicable Pricing
Supplement, the "Treasury Rate" for each such
Interest Reset Date will be determined as of the
Treasury Interest Determination Date and will be the
rate applicable to the most recent auction of direct
obligations of the United States ("Treasury bills")
having the Index Maturity specified in the applicable
Pricing Supplement, as such rate is published in
H.15(519) under the heading "U.S. Government
Securities--Treasury Bills--Auction Average
(Investment)" or, if not so published by 9:00 A.M.,
New York City time, on the Calculation Date
pertaining to such Treasury Interest Determination
<PAGE> 85
12
Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) as
otherwise announced by the United States Department
of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index
Maturity are not reported as provided by 3:00 P.M.,
New York City time, on such Calculation Date, or if
no such auction is held in a particular week, then
the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary United
States government securities dealers, selected by the
Calculation Agent, for the issue of Treasury bills
with a remaining maturity closest to the applicable
Index Maturity; provided, however, that if the
dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence,
the Treasury Rate with respect to such Treasury
Interest Determination Date will be the Treasury Rate
in effect on such Treasury Interest Determination
Date.
Fed Funds Rate: Unless otherwise indicated in the applicable Pricing
Supplement, "Fed Funds Rate" means, with respect to
any Fed Funds Interest Determination Date, the rate
on such date for Federal Funds as such rate shall be
published in H.15(519) under the heading "Federal
<PAGE> 86
13
Funds (Effective)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date
pertaining to such Fed Funds Interest Determination
Date, the Fed Funds Rate will be the rate on such Fed
Funds Interest Determination Date as published in
Composite Quotations under the heading "Federal
Funds/Effective Rate". If such rate is not published
by 3:00 P.M., New York City time, on such Calculation
Date, then the Fed Funds Rate on such Fed Funds
Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of
the rates as of 9:00 A.M., New York City time, on
such Fed Funds Interest Determination Date for the
last transaction in overnight Federal Funds arranged
by three leading brokers of Federal Funds
transactions in The City of New York selected by the
Calculation Agent; provided, however, that if the
brokers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence,
the Fed Funds Rate with respect to such Fed Funds
Interest Determination Date will be the Fed Funds
Rate in effect on such Fed Funds Interest
Determination Date.
CD Rate: Unless otherwise indicated in the applicable Pricing
Supplement, the "CD Rate" for each such Interest
Reset Date will be determined as of the CD Interest
Determination Date and will be the rate on such date
for negotiable certificates of deposit having the
Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519) under the
heading "CDs (Secondary Market)" or, if not so
published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such CD
<PAGE> 87
14
Interest Determination Date, the CD Rate will be the
rate on such CD Interest Determination Date for
negotiable certificates of deposit of the Index
Maturity designated in the applicable Pricing
Supplement as published in Composite Quotations under
the heading "Certificates of Deposit". If such rate
is not published by 3:00 P.M., New York City time, on
such Calculation Date, then the CD Rate on such CD
Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of the opening
of business, New York City time, on such CD Interest
Determination Date, of three leading nonbank dealers
in negotiable U.S. dollar certificates of deposit in
The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major
United States money market banks (in the market for
negotiable certificates of deposit) with a remaining
maturity closest to the Index Maturity designated in
the Pricing Supplement in a denomination of
$5,000,000 or if greater, an amount that is
representative for a single transaction in the
relevant market at the time; provided, however, that
if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate with respect to such CD
Interest Determination Date will be the CD Rate in
effect on such CD Interest Determination Date.
Prime Rate: Each Prime Rate Note will bear interest at the
interest rate (calculated with reference to the Prime
Rate and the Spread and/or Spread Multiplier, if any)
<PAGE> 88
15
specified in such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any
Prime Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank
Prime Loan," or, if not so published by 9:00 A.M.,
New York City time, on the Calculation Date
pertaining to such Prime Interest Determination Date,
the Prime Rate will be calculated by the Calculation
Agent and will be the arithmetic mean of the rates of
interest publicly announced by each bank named on the
Reuters Screen NYMF Page as such bank's prime rate or
base lending rate as in effect for such Prime
Interest Determination Date as quoted on the Reuters
Screen NYMF Page on such Prime Interest Determination
Date, or, if fewer than four such rates appear on the
Reuters Screen NYMF Page for such Prime Interest
Determination Date, the rate shall be the arithmetic
mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as
of the close of business on such Prime Interest
Determination Date by at least two of the three major
money center banks in The City of New York selected
by the Calculation Agent from which quotations are
requested. If fewer than two quotations are quoted as
aforesaid, the Prime Rate for such Prime Interest
Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic means
of the prime rates quoted in The City of New York on
such date by the appropriate number of substitute
banks or trust companies organized and doing business
under the
<PAGE> 89
16
laws of the Untied States, or any State thereof,
having total equity capital of at least $500 million
and being subject to supervision or examination by a
federal or State authority, selected by the
Calculation Agent to quote such rate or rates;
provided, however, that if the Prime Rate is not
published in H.15(519) and the banks or trust
companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate with
respect to such Prime Interest Determination Date
will be the interest rate otherwise in effect on such
Prime Interest Determination Date. "Reuters Screen
NYMF Page" means the display designated as page
"NYMF" on the Reuters Monitor Money Rates Service (or
such other page as may replace page NYMF on that
service for the purpose of displaying prime rates or
base lending rates of major United States banks).
Record Dates: Interest payments on Floating Rate Notes will be made
on each Interest Payment Date to the registered
owners at the close of business on the date 15
calendar days prior to such Interest Payment Date
(the "Regular Record Date"). If a Note is issued
between a Regular Record Date and an Interest Payment
Date, the first payment of Interest will occur on the
Interest Payment Date following the next Regular
Record Date to the registered holder on such next
succeeding Regular Record Date. Interest payable at
maturity or upon redemption (whether or not such
maturity or redemption date is an Interest Payment
Date) will be paid to the same person to whom
principal is payable. Interest will begin to accrue
on the issue date of a Note for the first interest
period and from and
<PAGE> 90
17
including the most recent Interest Payment Date to
which interest has been paid for all subsequent
interest periods. Each payment of interest shall
include interest accrued from and including the most
recent date in respect of which interest has been
paid or duly provided for, or from and including the
date of issue, through the day before the Interest
Payment Date (or maturity date) (an "Interest
Period"). In the case of Floating Rate Notes on which
the interest rate is reset daily or weekly, the
interest payments shall include interest accrued from
but excluding the most recent Regular Record Date in
respect of which interest has been paid or duly
provided for, or from and including the date of
issue, to and including the Regular Record Date next
preceding the applicable Interest Payment Date,
except that the interest payment at the maturity date
will include interest accrued to such date.
Accrued Interest: Unless otherwise indicated in the applicable Pricing
Supplement, interest payments for Floating Rate Notes
will include interest accrued from and including the
most recent date in respect of which interest has
been paid or duly provided for, or from and including
the date of issuance to but excluding the next
Interest Payment Date (or maturity date); provided,
however, that if the Interest Reset Dates with
respect to such Note are daily or weekly, interest
payable on any Interest Payment Date, other than
interest payable on any date on which principal for
such Note is payable, will include interest accrued
from but excluding the most recent Regular Record
Date in respect of which interest has been paid
<PAGE> 91
18
or duly provided for, or from and including the date
of issue, to and including the next preceding Regular
Record Date. Interest payments on Floating Rate Notes
made at maturity will include interest accrued to but
excluding the date of maturity. Accrued interest from
the date of issue or from the last date to which
interest has been paid is calculated by multiplying
the face amount of a Note by an accrued interest
factor. This accrued interest factor is computed by
adding the interest factors calculated for each day
in the period for which accrued interest is being
calculated. The interest factor for each such day is
computed by dividing the interest rate applicable to
such date by 360, in the case of Commercial Paper
Rate Notes, LIBOR Notes, Fed Funds Notes, CD Rate
Notes and Prime Rate Notes, or by the actual number
of days in the year, in the case of Treasury Rate
Notes.
<PAGE> 1
EXHIBIT 5
May 20, 1999
National Rural Utilities Cooperative
Finance Corporation
2201 Cooperative Way
Herndon, Virginia 20171-3025
Dear Sirs:
We have acted as counsel for National Rural Utilities Cooperative Finance
Corporation ("CFC") in connection with the proposed public offering from time to
time, directly to purchasers or through agents or underwriters to be designated
from time to time, of securities (the "Securities") of CFC, such Securities to
be issued under an Indenture dated as of December 15, 1987, as supplemented by a
First Supplemental Indenture dated as of October 1, 1990 (as so supplemented,
the "Indenture"), between CFC and Harris Trust and Savings Bank, as successor
Trustee, as contemplated in the CFC'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 Exhibits 5 and 8 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 CFC and have examined the
corporate proceedings authorizing the creation and issuance of the Securities.
Based upon the foregoing, and having regard to legal considerations that we
deem relevant, we are of the opinion that the Securities, when duly authorized
and executed by CFC 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 CFC, will
be the validly issued, binding obligations of CFC.
In our opinion, the discussions under the caption "United States Taxation"
in the prospectus included as part of the Registration Statement are correct in
all material respects.
Very truly yours,
Milbank, Tweed, Hadley & McCloy LLP
<PAGE> 1
EXHIBIT 12
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPUTATION OF RATIO OF MARGINS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED
--------------------------------------------------------------------------
FEBRUARY 28, MAY 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net margins before
extraordinary loss........... $ 56,714 $ 45,631 $ 62,216 $ 54,736 $ 50,621 $ 45,212 $ 33,188
Add: Fixed charges............. 483,200 396,446 540,535 475,729 426,079 361,338 263,230
-------- -------- -------- -------- -------- -------- --------
Margins available for fixed
charges...................... $539,914 $442,077 $602,751 $530,465 $476,700 $406,550 $296,418
======== ======== ======== ======== ======== ======== ========
Fixed charges:
Interest on all debt
(including amortization of
discount and issuance
costs)..................... $483,200 $396,446 $540,535 $475,729 $426,079 $361,338 $483,200
-------- -------- -------- -------- -------- -------- --------
Total fixed charges... $483,200 $396,446 $540,535 $475,729 $426,079 $361,338 $263,230
======== ======== ======== ======== ======== ======== ========
Ratio of margins to fixed
charges...................... 1.12 1.12 1.12 1.12 1.12 1.13 1.13
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated July 14, 1998
included in National Rural Utilities Cooperative Finance Corporation's Form 10-K
for the year ended May 31, 1998 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
May 20, 1999
