sept1908_pledgeagrmt.htm


    


     

    


    
      	
               

              THE
      UNITED STATES OF AMERICA

              acting
      through the Rural Utilities Service

              NATIONAL
      RURAL UTILITIES

              COOPERATIVE
      FINANCE CORPORATION

              U.S.
      BANK TRUST NATIONAL ASSOCIATION

              _______________________________

               

              PLEDGE
      AGREEMENT

              _______________________________

              Dated
      as of

              September
      19, 2008

               

            


    

    



    
      
        
           

           

        

         


      

      
         


        
          

        

      

      
         


        
           

        

      

    

     

    

      
        	
                TABLE
      OF CONTENTS

              
	 
      	
                Page

              
	 
      
	
                ARTICLE
      I

              
	 
      
	
                Definitions
      and Other Provisions of General Application

              
	 
      	 
      	 
      
	
                Section
      1.01.

              	
                Definitions

              	
                2

              
	 
      
	
                ARTICLE
      II

              
	 
      
	
                Application
      of this Pledge Agreement

              
	 
      	 
      	 
      
	
                Section
      2.01.

              	
                Application
      of the Lien of this Pledge Agreement

              	
                5

              
	
                Section
      2.02.

              	
                Delivery
      of Certificates of Available Securities

              	
                5

              
	
                Section
      2.03.

              	
                Maintenance
      of Available Securities

              	
                6

              
	
                Section
      2.04.

              	
                Existence
      of Trigger Event

              	
                6

              
	
                Section
      2.05.

              	
                UCC
      Filings                                  

              	
                6

              
	
                Section
      2.06.

              	
                APPLICATION
      OF ARTICLES III, IV AND V OF THIS PLEDGE

              	 
      
	 
      	
                AGREEMENT

              	
                6

              
	 
      
	 
      
	
                ARTICLE
      III

              
	 
      
	
                Provisions
      as to Pledged Collateral

              
	 
      
	
                Section
      3.01.

              	
                Pledged
      Securities

              	
                7

              
	
                Section
      3.02.

              	
                Holding
      of Pledged Securities

              	
                7

              
	
                Section
      3.03.

              	
                Withdrawal
      and Substitution of Pledged Collateral

              	
                7

              
	
                Section
      3.04.

              	
                Reassignment
      of Pledged Securities upon Payment

              	
                8

              
	
                Section
      3.05.

              	
                Addition
      of Pledged Collateral

              	
                8

              
	
                Section
      3.06.

              	
                Accompanying
      Documentation

              	
                8

              
	
                Section
      3.07.

              	
                Renewal;
      Extension; Substitution

              	
                9

              
	
                Section
      3.08.

              	
                Voting
      Rights; Interest and Principal

              	
                9

              
	
                Section
      3.09.

              	
                Protection
      of Title; Payment of Taxes; Liens, etc

              	
                10

              
	
                Section
      3.10.

              	
                Maintenance
      of Pledged Collateral

              	
                11

              
	
                Section
      3.11.

              	
                Representations,
      Warranties and Covenants

              	
                11

              
	
                Section
      3.12.

              	
                Further
      Assurances

              	
                12

              
	 
      
	 
      
	
                ARTICLE
      IV

              
	 
      
	
                Application
      of Moneys Included in Pledged Collateral

              
	 
      
	
                Section
      4.01.

              	
                Investment
      of Moneys by Collateral Agent

              	
                12

              
	Section
      4.02    	Collateral
      Agent To Retain Moneys during Event of Default	     13


      

      



      
        
           


        

        
          -i-

          
            

          

        

        
           


        

      


      


      
        	
                TABLE
      OF CONTENTS

                (continued)

              
	 
      	
                Page

              
	
                ARTICLE
      V

              
	 
      
	
                Remedies

              
	 
      	 
      	 
      
	
                Section
      5.01.

              	
                Events
      of Default

              	
                14

              
	
                Section
      5.02.

              	
                Remedies
      Upon Default

              	
                14

              
	
                Section
      5.03.

              	
                Application
      of Proceeds

              	
                16

              
	
                Section
      5.04.

              	
                Securities
      Act

              	
                16

              
	 
      
	 
      
	
                ARTICLE
      VI

              
	 
      
	
                The
      Collateral Agent

              
	 
      
	
                Section
      6.01.

              	
                Certain
      Duties and Responsibilities

              	
                17

              
	
                Section
      6.02.

              	
                Certain
      Rights of Collateral Agent

              	
                18

              
	
                Section
      6.03.

              	
                Money
      Held by Collateral Agent

              	
                20

              
	
                Section
      6.04.

              	
                Compensation
      and Reimbursement

              	
                20

              
	
                Section
      6.05.

              	
                Corporate
      Collateral Agent Required; Eligibility

              	
                20

              
	
                Section
      6.06.

              	
                Resignation
      and Removal; Appointment of Successor

              	
                21

              
	
                Section
      6.07.

              	
                Acceptance
      of Appointment by Successor

              	
                21

              
	
                Section
      6.08.

              	
                Merger,
      Conversion, Consolidation or Succession to Business

              	
                22

              
	 
      
	 
      
	
                ARTICLE
      VII

              
	 
      
	
                Miscellaneous

              
	 
      	 
      	 
      
	
                Section
      7.01.

              	
                Notices

              	
                22

              
	
                Section
      7.02.

              	
                Waivers;
      Amendment

              	
                23

              
	
                Section
      7.03.

              	
                Successors
      and Assigns

              	
                23

              
	
                Section
      7.04.

              	
                Counterparts;
      Effectiveness

              	
                23

              
	
                Section
      7.05.

              	
                Severability

              	
                23

              
	
                Section
      7.06.

              	
                GOVERNING
      LAW

              	
                23

              
	
                Section
      7.07.

              	
                WAIVER
      OF JURY TRIAL

              	
                24

              
	
                Section
      7.08.

              	
                Headings

              	
                24

              
	
                Section
      7.09

              	
                Security
      Interest Absolute

              	
                24

              
	
                Section
      7.10

              	
                Termination
      or Release

              	
                24

              
	
                Section
      7.11

              	
                Collateral
      Agent Appointed Attorney-in-Fact

              	
                25

              
	 
      
	
                Schedule
      I – Form of Certificate of Available Securities

              
	
                Schedule
      II – Form of Certificate of Pledged Collateral

              
	
                Schedule
      III – Addresses for Notices

              	 
      


      

      

        
          
            
               

            

             


          

          
            -ii-

            
              

            

          

          
             


          

        



    

    PLEDGE
AGREEMENT, dated as of September 19, 2008, among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association
and its successors and assigns (hereinafter called the “Borrower”), having
its principal executive office and mailing address at 2201 Cooperative Way,
Herndon, VA 20171-3025, the UNITED STATES OF AMERICA, acting through the Rural
Utilities Service, a Rural Development agency of the United States Department of
Agriculture and its successors and assigns (“RUS”), and U.S. BANK
TRUST NATIONAL ASSOCIATION, a national association and its successors and
assigns (hereinafter called the “Collateral Agent”),
having its corporate office at 100 Wall Street, Suite 1600, New York,
NY 10005-3701.

     

    RECITALS
OF THE BORROWER

     

    WHEREAS
the Borrower has issued a bond to the Federal Financing Bank to represent a loan
therefrom in the aggregate principal amount of up to $500,000,000 hereinafter
called the “Series C Bond”);
and the Series C Bond has been guaranteed by RUS pursuant to the
Series C Bond Guarantee Agreement dated as of September 19, 2008, between
the Borrower and RUS (the “Series C Bond Guarantee
Agreement”; and

     

    WHEREAS,
the Borrower is required pursuant to the terms of the Series C Bond Guarantee
Agreement to pledge certain property to the Collateral Agent for the benefit of
RUS if a Rating Trigger Event or a Financial Expert Trigger Event
exists.

     

    NOW,
THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of
the certain Obligations contained in the Series C Bond Guarantee Agreement, the
Reimbursement Note and herein, for the
duration of any Trigger Event, the Borrower assigns and pledges to the
Collateral Agent, its successors and assigns, for the benefit of RUS, and grants
to the Collateral Agent, its successors and assigns, for the benefit of RUS, a
security interest in the following (collectively referred to as the “Pledged Collateral”)
in each case with effect from and after the occurrence of a Trigger Event and as
otherwise provided in Article II: (a)(i) the Pledged Securities and the
certificates representing the Pledged Securities; (ii) subject to Section
3.08, all payments of principal or interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of, in exchange for, and all other Proceeds received in respect of, the
Pledged Securities pledged hereunder; (iii) subject to Section
3.08, all rights and privileges of the Borrower with respect to the Pledged
Securities pledged hereunder; (iv) all Proceeds of any of the foregoing
above; and (b) any property, including cash and Permitted Investments, that
may, on the date hereof or from time to time hereafter, be subject to the Lien
hereof by the Borrower by delivery, assignment or pledge thereof to the
Collateral Agent hereunder and the Collateral Agent is authorized to receive the
same as additional security hereunder (subject to

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

     any
reservations, limitations or conditions agreed to in writing by the Borrower and
RUS respecting the scope or priority of such security or the use and disposition
of such property or the Proceeds thereof).

     

    TO HAVE
AND TO HOLD the Pledged Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of RUS, forever;
subject, however, to the
terms, covenants and conditions hereinafter set forth.

     

    ARTICLE
I

     

    Definitions and Other
Provisions of General Application

     

    SECTION
1.01. Definitions.  For
all purposes of this Pledge Agreement, except as otherwise expressly provided or
unless the context otherwise requires:

     

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

     

    (ii) all
accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with generally accepted accounting principles;

     

    (iii) all
reference in this instrument to designated “Articles”, “Sections” and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this instrument; and

     

    (iv) the
words “herein”, “hereof” and “hereunder” and other words of similar import refer
to this Pledge Agreement as a whole and not to any particular Article, Section
or other subdivision.

     

    “Allowable Amount” on
any date, means:

     

    (a) with
respect to cash, 100% thereof;

     

    (b) with
respect to Eligible Securities, the aggregate principal amount of such Eligible
Securities theretofore advanced thereon which remains unpaid on such date;
and

     

    (c) with
respect to Permitted Investments, the cost to the Borrower thereof (exclusive of
accrued interest or brokerage commissions) except that with respect to any
Permitted Investments which are traded on any national securities exchange or
over-the-counter market, Allowable Amount on any date shall mean the fair market
value thereof (as determined by the Borrower).

     

    “Available Securities”
means the Eligible Securities specified in Schedule A of the Certificate of
Available Securities most recently delivered to the Collateral Agent and
RUS.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

     “Borrower” means the
Person named as the “Borrower” in the
first paragraph of this instrument.

     

    “Borrower Notice” and
“Borrower
Order” mean, respectively, a written notice or order signed in the name
of the Borrower by either its Governor or its Chief Financial Officer, and by
any Vice President of the Borrower, and delivered to the Collateral Agent and
RUS.

     

    “Certificate of Available
Securities” means a certificate delivered to the Collateral Agent and RUS
substantially in the form of Schedule I attached hereto.

     

    “Certificate of Pledged
Collateral” means a certificate delivered to the Collateral Agent and RUS
substantially in the form of Schedule II attached hereto.

     

    “Collateral Agent”
means the Person named as the “Collateral Agent” in
the first paragraph of this instrument.

     

    “Eligible Security”
means a note or bond of any Person payable or registered to, or to the order of,
the Borrower, the Rural Telephone Finance Cooperative or the National
Cooperative Services Corporation, and in respect of which (i) no default
has occurred in the payment of principal or interest in accordance with the
terms of such note or bond that is continuing beyond the contractual grace
period (if any) provided in such note or bond for such payment; (ii) no
“event of default” as defined in such note or bond (or in any instrument
creating a security interest in favor of the Borrower, the Rural Telephone
Finance Cooperative or the National Cooperative Services Corporation in respect
of such note or bond), shall exist that has resulted in the exercise of any
right or remedy described in such note or bond (or in any such instrument);
(iii) such note or bond is not classified by the Borrower as a
non-performing loan under generally accepted accounting principles in the United
States; and (iv) such note or bond is free and clear of all liens other than the
Lien created by this Pledge Agreement.

     

    “Event of Default” has
the meaning set forth in Section 5.01.

     

    “Financial Expert Trigger
Event” has the meaning given to that term in the Series C Bond Guarantee
Agreement.

     

    “Lien” means any lien,
pledge, charge, mortgage, encumbrance, debenture, hypothecation or other similar
security interest attaching to any part of the Pledged Collateral.

     

    “Lien of this Pledge
Agreement” or “Lien hereof” means
the Lien created by these presents.

     

    “Obligations” means
the due and punctual performance of the obligations of the Borrower to make
payment under Sections 4.1, 9.4 and 10.3 of the Series C Bond Guarantee
Agreement and, without duplication, under the Reimbursement Note.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    “Officers’
Certificate” means a certificate signed by either the Governor or the
Chief Financial Officer of the Borrower, and by any Vice President of the
Borrower, and delivered to RUS and/or the Collateral Agent, as
applicable.

     

    “Permitted Investment”
has the meaning given to that term in Section 4.01.

     

    “Person” means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or govern­ment or any agency or
political subdivision thereof.

     

    “Pledge Agreement”
means this Pledge Agreement, as originally executed and as it may from time to
time be supplemented, restated or amended entered into pursuant to the
applicable provisions hereof.

     

    “Pledged Collateral”
has the meaning set forth in the Granting Clause.

     

    “Pledged Securities”
means has the meaning set forth in Section 3.01.

     

    “Proceeds” has the
meaning specified in Section 9-102 of the Uniform Commercial
Code.

     

    “Rating Trigger Event”
has the meaning given to that term in the Series C Bond Guarantee
Agreement.

     

    “Reimbursement Note”
has the meaning given to that term in the Series C Bond Guarantee
Agreement.

     

    “RUS” means the Person
named as “RUS”
in the first paragraph of this instrument.

     

    “RUS Notice” and
“RUS Order”
mean, respectively, a written notice or order signed by the Secretary and
delivered to the Collateral Agent and the Borrower.

     

    “RUS Notice of
Default” has the meaning given to that term in Section 5.02.

     

    “Secretary” shall mean
the Secretary of Agriculture acting through the Administrator of
RUS.

     

    “Series C Bond” has
the meaning given to that term in the recitals.

     

    “Series C Bond Guarantee
Agreement” has the meaning given that term in the recitals.

     

    “Trigger Event” means
a Rating Trigger Event or a Financial Expert Trigger Event.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    “Uniform Commercial
Code” means the Uniform Commercial Code as from time to time in effect in
the District of Columbia.

     

    “United States” means
the United States of America, its territories, possessions and other areas
subject to its jurisdiction.

     

    “Vice President” means
any vice president of the Borrower, whether or not designated by a number or a
word or words added before or after the title “vice president”.

     

    ARTICLE
II

     

    Application of this Pledge
Agreement

     

    SECTION
2.01. Application of the Lien of
this Pledge Agreement.  Notwithstanding any other provision of
this Pledge Agreement, and in accordance with the Granting Clause
hereof:

     

    (a) no Lien
shall attach to the Available Securities in favor of the Collateral Agent, for
the benefit of RUS, prior to the occurrence of a Trigger Event;

     

    (b) the Lien
hereof shall automatically, and without further act, attach and apply to the
Available Securities upon the occurrence of a Trigger Event subject to the
terms, covenants and conditions set forth in this Pledge Agreement;
and

     

    (c) upon
cessation of all the Trigger Events, the Lien hereof shall be automatically
released and the Collateral Agent shall execute and deliver to the Borrower, at
the Borrower’s expense, all documents that the Borrower shall reasonably request
to evidence such release.  Any execution and delivery of documents
pursuant to this paragraph (c) shall be without recourse to or warranty by
the Collateral Agent.

     

    SECTION
2.02. Delivery of Certificates of
Available Securities.  Each time money is advanced under the
Series C Bond prior to the existence of a Trigger Event, the Borrower shall
deliver, and from time to time prior to the existence of a Trigger Event the
Borrower may deliver, a Certificate of Available Securities to the Collateral
Agent and RUS, showing that the aggregate principal amount of Eligible
Securities specified in Schedule A thereto that have been delivered to the
Collateral Agent as of the last day of the most recent month ended more than
10 business days before the date thereof shall at least equal the aggregate
principal amount of the Series C Bond outstanding, or to be outstanding after
any such advance, at the date thereof.  At the time of delivery of a
Certificate of Available Securities, the Borrower shall deliver to the
Collateral Agent all Available Securities specified in such certificate that are
not already deposited with the Collateral Agent accompanied by the appropriate
instruments of transfer executed in blank and in a form satisfactory to the
Collateral Agent and by such other instruments and documents as the Collateral
Agent may reasonably request.  All 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    Eligible
Securities deposited with the Collateral Agent that were previously Available
Securities, but are no longer specified in the Certificate of Available
Securities most recently delivered, shall, at the Borrower’s expense and
pursuant to a Borrower Order, be returned by the Collateral Agent to the
Borrower.

     

    SECTION
2.03. Maintenance of Available
Securities.  Prior to the occurrence of a Trigger
Event:

     

    (a) the
Collateral Agent shall hold and segregate the Available Securities in a separate
account;

     

    (b) the
Borrower shall cause the aggregate principal amount of Available Securities at
all times to be not less than 100% of the aggregate principal amount of the
Series C Bond outstanding; and

     

    (c) the
Borrower shall not create, or permit to exist, any Lien that is secured by, or
in any way attaches to, the Available Securities, without the prior written
consent of RUS.

     

    SECTION
2.04. Existence of Trigger
Event.  For the purposes of this Pledge Agreement (but without
affecting whether or not the Lien hereof applies):

     

    (a) the
Collateral Agent shall not be required to recognize that a Trigger Event exists
before such time as the Collateral Agent receives an RUS Notice or Borrower
Notice stipulating the existence of such event; and

     

    (b) the
Collateral Agent shall not be required to recognize that a Trigger Event has
ceased to exist until (i) such time as the Collateral Agent receives an RUS
Notice stipulating that such event has ceased to exist; or
(ii) 30 days after receipt by the Collateral Agent of a Borrower
Notice stipulating that such event has ceased, provided that the
Collateral Agent does not receive an RUS Notice within such timeframe disputing
the cessation of such Trigger Event.  Upon receipt of any such
Borrower Notice under subparagraph (ii) of this Subsection, the Collateral
Agent shall provide a copy of such Borrower Notice to RUS.

     

    SECTION
2.05. UCC
Filings.  The Borrower shall prepare and file in the proper
Uniform Commercial Code filing office in the District of Columbia (i) on or
prior to the Closing Date, a financing statement recording the Collateral
Agent’s interest in the Pledged Collateral; and (ii) from time to time
thereafter, continuation statements or such other filings as are necessary to
maintain the perfection of the Lien hereof on the Pledged
Collateral.

     

    SECTION
2.06. APPLICATION OF ARTICLES III,
IV AND V OF THIS PLEDGE AGREEMENT.  THE PARTIES SHALL HAVE NO
RIGHTS OR OBLIGATIONS UNDER ARTICLES III, IV OR V HEREOF, AND THE PROVISIONS OF
SUCH ARTICLES SHALL NOT APPLY, EXCEPT DURING THE CONTINUANCE OF A TRIGGER
EVENT.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

      Pledge
Agreement

    

     

    ARTICLE
III

     

    Provisions as to Pledged
Collateral

     

    SECTION
3.01. Pledged
Securities.  The “Pledged Securities”
shall mean:

     

    (a) upon and
from the occurrence of a Trigger Event until such time as the first Certificate
of Pledged Collateral is delivered hereunder, the Available Securities as
specified in the most recent Certificate of Available Securities delivered prior
to the occurrence of such Trigger Event; and

     

    (b) upon and
from delivery of the first Certificate of Pledged Collateral until the cessation
of all Trigger Events, the Eligible Securities listed on Schedule A and Schedule
B of the Certificate of Pledged Collateral most recently delivered.

     

    SECTION
3.02. Holding of Pledged
Securities.  After the occurrence of a Trigger Event and unless
and until an Event of Default shall occur, the Collateral Agent, on behalf of
RUS, shall hold the Pledged Securities in the name of the Borrower (or its
nominee), endorsed or assigned in blank or in favor of the Collateral
Agent.  Upon occurrence of an Event of Default, the Collateral Agent,
on behalf of RUS, shall have the right (in its sole and absolute discretion), to
the extent a register is maintained therefor, to register the Pledged Securities
in the Collateral Agent’s own name as pledgee, or in the name of the Collateral
Agent’s nominee (as pledgee or as sub-agent) or to continue to hold the Pledged
Securities in the name of the Borrower, endorsed or assigned in blank or in
favor of the Collateral Agent.  Upon cessation of such Event of
Default, the Collateral Agent shall take such action as is necessary to again
cause the Pledged Securities to be registered in the name of the Borrower (or
its nominee).

     

    SECTION
3.03. Withdrawal and Substitution
of Pledged Collateral.

     

    (a)  Any
part of the Pledged Collateral may be withdrawn by the Borrower or substituted
for cash or other Eligible Securities or Permitted Investments by the Borrower
and shall be delivered to the Borrower by the Collateral Agent upon Borrower
Order at any time and from time to time, together with any other documents or
instruments of transfer or assignment necessary to reassign to the Borrower said
Pledged Collateral and the interest of the Borrower, provided the
aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal
or substitution shall at least equal the aggregate principal amount of the
Series C Bond outstanding after such withdrawal or substitution, as shown by the
Certificate of Pledged Collateral furnished to the Collateral Agent pursuant to
Subsection (b)(i) of this Section.

     

    (b) Prior to
any such withdrawal or substitution, the Collateral Agent shall be furnished
with the following instruments:

     

    (i) a
Certificate of Pledged Collateral, dated not more than 30 days prior to such
withdrawal or substitution, showing that immediately after such withdrawal or
substitution the requirements of Subsection (a) of this Section will be
satisfied; and

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    (ii) an
Officers’ Certificate certifying that no Event of Default has occurred which has
not been remedied.

     

    Upon any
such withdrawal or substitution, the Borrower shall deliver any cash or Eligible
Securities or Permitted Investments to be substituted and the Collateral Agent
shall execute any instruments of transfer or assignment specified in a Borrower
Order as necessary to vest in the Borrower any part of the Pledged Collateral
withdrawn.

     

    In case
an Event of Default shall have occurred and be continuing, the Borrower shall
not withdraw or substitute any part of the Pledged Collateral, provided that any
Pledged Collateral may be withdrawn (a) as provided for in
Section 3.04; or (b) upon the deposit with the Collateral Agent of an
amount of cash at least equal to the Allowable Amount (at the time of such
withdrawal) of the Pledged Securities so withdrawn and the delivery to the
Collateral Agent of the instruments referred to in Subsection (b)(i) of
this Section and a Borrower Order.

     

    SECTION
3.04. Reassignment of Pledged
Securities upon Payment.  Upon receipt of:

     

    (i) an
Officers’ Certificate stating that all payments of principal, premium (if any)
and interest have been made upon any Pledged Securities held by the Collateral
Agent other than payment of an amount (if any) specified in said certificate
required fully to discharge all obligations on said Pledged Securities;
and

     

    (ii) cash in
the amount (if any) so specified fully to discharge said Pledged
Securities,

     

    the
Collateral Agent shall deliver to the Borrower upon Borrower Order said Pledged
Securities, together with any other documents or instruments of transfer or
assignment necessary to reassign to the Borrower said Pledged Securities and the
interest of the Borrower specified in such Borrower Order.

     

    SECTION
3.05. Addition of Pledged
Collateral.  At any time, the Borrower may pledge additional
Eligible Securities, cash or Permitted Investments under this Pledge Agreement
by delivering such Pledged Collateral to the Collateral Agent, accompanied by a
Certificate of Pledged Collateral specifying such additional collateral and
dated not more than 30 days prior thereto, provided that, in the
case of additional Permitted Investments, no such Permitted Investments shall be
subject to any reservations, limitations or conditions referred to in the
Granting Clause hereof.

     

    SECTION
3.06. Accompanying
Documentation.  Where Eligible Securities are delivered to the
Collateral Agent under Section 3.03 or Section 3.05, such securities shall
be accompanied by the appropriate instruments of transfer executed in blank and
in a form satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request.  All other
property delivered to the Collateral Agent under Section 3.03 or Section
3.05 and comprising part of the Pledged Collateral shall be accompanied by
proper instruments of assignment duly 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    executed
by the Borrower and such other instruments or documents as the Collateral Agent
may reasonably request.

     

    SECTION
3.07. Renewal; Extension;
Substitution.  Unless and until an Event of Default shall have
occurred and be continuing, the Borrower may at any time renew or extend,
subject to the Lien of this Pledge Agreement, any Pledged Security upon any
terms or may accept in place of and in substitution for any such
Pledged  Security, another Eligible Security or Securities of the same
issuer or of any successor thereto for at least the same unpaid principal
amount, all as evidenced by a Borrower Order delivered to the Collateral Agent;
provided, however, that in case
of any substitution, Eligible Securities substituted as aforesaid shall be
subject to the Lien of this Pledge Agreement as part of the Pledged Collateral
and be held in the same manner as those for which they shall be substituted, and
in the case of each substituted Eligible Security the Borrower shall provide an
Officers’ Certificate certifying to the Collateral Agent that such substituted
security satisfies the requirements of this Section.  So long as no
Event of Default shall have occurred and be continuing, the Collateral Agent,
upon Borrower Order stating that no Event of Default shall have occurred and be
continuing, shall execute any consent to any such renewal, extension or
substitution as shall be specified in such Borrower Order.

     

    SECTION
3.08. Voting Rights; Interest and
Principal.  (a)  Unless and until an Event of Default
has occurred and is continuing, and RUS delivers to the Collateral Agent an RUS
Notice of Default suspending the Borrower’s rights under this
clause:

     

    (i) The
Borrower shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof provided that such
rights and powers shall not be exercised in any manner inconsistent with the
terms of the Series C Bond Guarantee Agreement or this Pledge
Agreement.

     

    (ii) The
Collateral Agent shall execute and deliver to the Borrower, or cause to be
executed and delivered to the Borrower, all such proxies, powers of attorney and
other instruments as the Borrower may reasonably request for the purpose of
enabling the Borrower to exercise the voting and/or consensual rights and powers
it is entitled to exercise pursuant to subparagraph (i) above.

     

    (iii) The
Borrower shall be entitled to receive and retain any and all interest, principal
and other distributions paid on or distributed in respect of the Pledged
Securities; provided that any
non-cash interest, principal or other distributions that would constitute
Pledged Securities if pledged hereunder, and received in exchange for Pledged
Securities or any part thereof pledged hereunder, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer of Pledged Securities may be a party or otherwise,
shall be and become part of the Pledged Collateral, and, if received by the
Borrower, shall not be commingled by the Borrower with any of its other funds or
property but shall be held separate and 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

      apart
therefrom, shall be held in trust for the benefit of the Collateral Agent and
shall be forthwith delivered to the Collateral Agent in the same form as so
received (with any necessary endorsement).

    

     

    (b) If an
Event of Default shall have occurred and be continuing, then, to the extent such
rights are suspended by the applicable RUS Notice of Default, all rights of the
Borrower to interest, principal or other distributions that the Borrower is
authorized to receive pursuant to paragraph (a)(iii) of this Section 3.08
shall cease, and all such suspended rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority to
receive and retain such interest, principal or other
distributions.  All interest, principal or other distributions
received by the Borrower contrary to the provisions of this Section 3.08
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of the Borrower and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement).  Any and all money and other property paid
over to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in an account to be
established by the Collateral Agent upon receipt of such money or other property
and shall be applied in accordance with the provisions of Section
5.03.  After all Events of Default have ceased, the Collateral Agent
shall promptly repay to the Borrower (without interest) all interest, principal
or other distributions that the Borrower would otherwise be permitted to retain
pursuant to the terms of paragraph (a)(iii) of this Section 3.08 and that
remain in such account.

     

    (c) If an
Event of Default shall have occurred and be continuing, then, to the extent such
rights are suspended by the applicable RUS Notice of Default, all rights of the
Borrower to exercise the voting and consensual rights and powers it is entitled
to exercise pursuant to paragraph (a)(i) of this Section 3.08, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this Section
3.08, shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority to
exercise such voting and consensual rights and powers; provided that the
Collateral Agent shall have the right from time to time during the existence of
such Event of Default to permit the Borrower to exercise such rights and
powers.

     

    SECTION
3.09. Protection of Title; Payment
of Taxes; Liens, etc.  The Borrower will:

     

    (i) duly and
promptly pay and discharge, or cause to be paid and discharged, before they
become delinquent, all taxes, assessments, governmental and other charges
lawfully levied, assessed or imposed upon or against any of the Pledged
Collateral, including the income or profits therefrom and the interests of the
Collateral Agent in such Pledged Collateral;

     

    (ii) duly
observe and conform to all valid requirements of any governmental authority
imposed upon the Borrower relative to any of the Pledged Collateral, and all
covenants, terms and conditions under or upon which any part thereof is
held;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    (iii) cause to
be paid and discharged all lawful claims (including, without limitation, income
taxes) which, if unpaid, might become a lien or charge upon Pledged Collateral;
and

     

    (iv) do all
things and take all actions necessary to keep the Lien of this Pledge Agreement
a first and prior lien upon the Pledged Collateral and protect its title to the
Pledged Collateral against loss by reason of any foreclosure or other proceeding
to enforce any lien prior to or pari passu with the Lien
of this Pledge Agreement.

     

    Nothing
contained in this Section shall require the payment of any such tax, assessment,
claim, lien or charge or the compliance with any such requirement so long as the
validity, application or amount thereof shall be contested in good faith; provided, however, that the
Borrower shall have set aside on its books such reserves (segregated to the
extent required by generally accepted accounting principles) as shall be deemed
adequate with respect thereto as determined by the Board of Directors of the
Borrower (or a committee thereof).

     

    SECTION
3.10. Maintenance of Pledged
Collateral.  The Borrower shall cause the aggregate principal
amount of Pledged Collateral held by the Collateral Agent at all times to be not
less than 100% of the aggregate principal amount of the Series C Bond
outstanding.

     

    SECTION
3.11. Representations, Warranties
and Covenants.  The Borrower represents, warrants and covenants
to the Collateral Agent, for the benefit of RUS, that from the time that they
are pledged hereunder, and for so long as they are required to remain
pledged:

     

    (a) except
for the Lien hereof and any Lien consented to in writing by RUS, the Borrower or
the Rural Telephone Finance Cooperative or the National Cooperative Services
Corporation (i)  is and will continue to be the direct owner, beneficially
and of record, of the Pledged Securities from time to time pledged hereunder,
(ii) holds and will continue to hold the same free and clear of all Liens,
other than Liens created by this Pledge Agreement, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
any security interest in or other Lien on, the Pledged Collateral, other than
Liens created by this Pledge Agreement and (iv) will defend its title or
interest thereto or therein against any and all Liens (other than the Lien
created by this Pledge Agreement), however arising, of all Persons
whomsoever;

     

    (b) except
for restrictions and limitations imposed by the Series C Bond Guarantee
Agreement or securities laws generally, the Pledged Securities are and will
continue to be freely transferable and assignable, and none of the Pledged
Securities are or will be subject to any restriction of any nature that might
prohibit, impair, delay or otherwise affect the pledge of such Pledged
Securities hereunder, the sale or disposition thereof pursuant hereto or the
exercise by the Collateral Agent of rights and remedies hereunder;

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    (c) the
Borrower has the power and authority to pledge the Pledged Collateral pledged by
it hereunder in the manner hereby done or contemplated;

     

    (d) no
consent or approval of any governmental authority, any securities exchange or
any other Person (with the exception RUS) was or is necessary to the validity of
the pledge effected hereby (other than such as have been obtained and are in
full force and effect); and

     

    (e) by virtue
of the execution and delivery by the Borrower of this Pledge Agreement, when any
Pledged Securities are delivered to the Collateral Agent in accordance with this
Pledge Agreement, the Collateral Agent will obtain a legal and valid Lien upon
and security interest in such Pledged Securities as security for the payment and
performance of the Obligations.

     

    SECTION
3.12. Further
Assurances.  The Borrower will execute and deliver, or cause to
be executed and delivered, all such additional instruments and do, or cause to
be done, all such additional acts as (a) may be necessary or proper,
consistent with the Granting Clause hereof, to carry out the purposes of this
Pledge Agreement and to make subject to the Lien hereof any property intended so
to be subject or (b) may be necessary or proper to transfer to any
successor the estate, powers, instruments and funds held hereunder and to
confirm the Lien of this Pledge Agreement.  The Borrower will also
cause to be filed, registered or recorded any instruments of conveyance,
transfer, assignment or further assurance in all offices in which such filing,
registering or recording is necessary to the validity thereof or to give notice
thereof.

     

    ARTICLE
IV

     

    Application of Moneys
Included in Pledged Collateral

     

    SECTION
4.01. Investment of Moneys by
Collateral Agent.  Any moneys held by the Collateral Agent as
part of the Pledged Collateral shall, upon Borrower Order and as stated therein,
be invested or reinvested by the Collateral Agent until required to be paid out
by the Collateral Agent as provided in this Pledge Agreement, in any one or more
of the following (herein called “Permitted
Investments”):

     

    (i) obligations
of or guaranteed by the United States of America or any agency thereof for which
the full faith and credit of the United States of America or such agency shall
be pledged;

     

    (ii) obligations
of any state or municipality, or subdivision or agency of either thereof, which
are rated AA (or equivalent) or better by at least two nationally recognized
statistical rating organizations or having a comparable rating in the event of
any future change in the rating system of such agencies;

     

    (iii) certificates
of deposit issued by, or time deposits of, any bank or trust company (including
the Collateral Agent) organized under the laws of the United States of America
or any State thereof having capital and surplus of not 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    less than
$500,000,000 (determined from its most recent report of condition, if it
publishes such reports at least annually pursuant to law or the requirements of
Federal or State examining or supervisory authority); and

     

    (iv) commercial
paper of bank holding companies or of other issuers (excluding the Borrower)
generally rated in the highest category by at least two nationally recognized
statistical rating organizations and maturing not more than one year after the
purchase thereof.

     

    Unless
and until an Event of Default shall have occurred and be continuing, any
interest received by the Collateral Agent on any such investments which shall
exceed the amount of accrued interest, if any, paid by the Collateral Agent on
the purchase thereof, and any profit which may be realized from any sale,
redemption or maturity of such investments, shall be paid to the
Borrower.  Such investments shall be held by the Collateral Agent as a
part of the Pledged Collateral, but upon Borrower Order the Collateral Agent
shall sell all or any designated part of the same, and the proceeds of such sale
shall be held by the Collateral Agent subject to the same provisions hereof as
the cash used by it to purchase the investments so sold.  In case the
net proceeds realized upon any sale, redemption or maturity shall amount to less
than the purchase price paid by the Collateral Agent for the purchase of the
investments so sold, the Collateral Agent shall notify the Borrower in writing
thereof, and the Borrower shall pay to the Collateral Agent the amount of the
difference between such purchase price and the amount so realized, and the
amount so paid shall be held by the Collateral Agent in like manner and subject
to the same conditions as the proceeds realized upon such sale.  The
Borrower will reimburse the Collateral Agent for any brokerage
commissions or other expenses incurred by the Collateral Agent in connection
with the purchase or sale of such investments. The Collateral Agent may
aggregate such costs and expenses of and such receipts from such investments on
a monthly basis (or such other periodic basis as the Borrower and the Collateral
Agent may agree in writing from time to time) so as to net each against the
other during such period and pay to the Borrower amounts due to it or notify the
Borrower of amounts due from it on a net basis for such period.

     

    SECTION
4.02. Collateral Agent To Retain
Moneys during Event of Default.  If an Event of Default shall
have occurred and be continuing, moneys held by the Collateral Agent as a part
of the Pledged Collateral shall not be paid over to the Borrower upon Borrower
Order except pursuant to section 5.03.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

      Pledge
Agreement

    

     

    ARTICLE
V

     

    Remedies

     

    SECTION
5.01. Events of
Default.  “Event of Default”,
wherever used herein, means any “Event of Default” as defined in
Sections 10.1(a) and 10.1(c) of the Series C Bond Guarantee Agreement,
provided that,
for the purposes of this Pledge Agreement:

     

    (a) the
Collateral Agent shall not be required to recognize that an Event of Default
exists before such time as the Collateral Agent receives an RUS Notice or
Borrower Notice stating that an Event of Default exists and specifying the
particulars of such default in reasonable detail; and

     

    (b) the
Collateral Agent shall not be required to recognize that an Event of Default has
ceased until (i) such time as the Collateral Agent receives an RUS Notice
stipulating that such event has ceased to exist; or (ii) 30 days after
receipt by the Collateral Agent of a Borrower Notice stipulating that such event
has ceased to exist, provided that the
Collateral Agent does not receive an RUS Notice within such timeframe disputing
the cessation of such Event of Default, and further provided that
no additional RUS Notice of Default shall have been received in respect of any
other subsisting Event(s) of Default.  Upon receipt of any Borrower
Notice under subparagraph (ii) of this Subsection, the Collateral Agent
shall provide a copy of such Borrower Notice to RUS.

     

    SECTION
5.02. Remedies Upon
Default.  If an Event of Default shall have occurred and be
continuing, RUS may issue a notice (an “RUS Notice of
Default”), which may be combined with the notice provided under Section
5.01(b), suspending the rights of the Borrower under Section 3.08 in part
without suspending all such rights (as specified by RUS in its sole and absolute
discretion) without waiving or otherwise affecting RUS’ rights to give
additional RUS Notices of Default from time to time suspending other rights
under Section 3.08 so long as an Event of
Default has occurred and is continuing.  Subject to paragraph (b)
of this Section 5.02, upon cessation of an Event of Default, all rights of the
Borrower suspended under the applicable RUS Notice of Default shall revest in
the Borrower.

     

    (a) Upon the
occurrence of an Event of Default, the Collateral Agent shall, for the benefit
and at the direction of RUS, have the right to exercise any and all rights
afforded to a secured party under the Uniform Commercial Code or other
applicable law.  Without limiting the generality of the foregoing, the
Borrower agrees that the Collateral Agent shall have the right, but only if so
instructed by an RUS Order and subject to the requirements of applicable law and
the Collateral Agent’s right (in its sole and absolute discretion) to receive
indemnification or other reasonable assurances that its costs and expenses in
connection therewith will be paid, to sell or otherwise dispose of all or any
part of the Pledged Collateral at a public or private sale or at any broker’s
board or on any securities exchange, for cash, upon credit or for future
delivery as the Collateral Agent shall deem appropriate.  The
Collateral Agent shall be authorized 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    at any
such sale of securities (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Pledged Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Pledged Collateral so
sold.  Each such purchaser at any sale of Pledged Collateral shall
hold the property sold absolutely, free from any claim or right on the part of
the Borrower, and the Borrower hereby waives (to the extent permitted by law)
all rights of redemption, stay and appraisal which the Borrower now has or may
at any time in the future have under any rule of law or statute now existing or
hereafter enacted.

     

    (b) The
Collateral Agent shall give the Borrower 10 days’ written notice (which the
Borrower agrees is reasonable notice within the meaning of Section 9-611 of
the Uniform Commercial Code or its equivalent in other jurisdictions) of the
Collateral Agent’s intention to make any sale of Pledged
Collateral.  Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker’s board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange.  Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix and state in the notice (if
any) of such sale.  At any such sale, the Pledged Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine.  The Collateral Agent shall not be obligated to make any
sale of any Pledged Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of such Pledged Collateral shall have been
given.  The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of all or any part of the Pledged
Collateral is made on credit or for future delivery, the Pledged Collateral so
sold may be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice.  At any public
(or, to the extent permitted by law, private) sale made pursuant to this Pledge
Agreement, RUS may bid for or purchase, free (to the extent permitted by law)
from any right of redemption, stay, valuation or appraisal on the part of the
Borrower (all said rights being also hereby waived and released to the extent
permitted by law), the Pledged Collateral or any part thereof offered for sale
and may make payment on account thereof by using any claim then due and payable
to RUS from the Borrower as a credit against the purchase price, and RUS may,
upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to Pledged Collateral
therefor.  For purposes hereof, a written agreement to purchase the
Pledged Collateral or any portion thereof shall be treated as a sale thereof;
the Collateral Agent shall be free to carry out such sale pursuant to such
agreement and the Borrower shall not be entitled to the return of the Pledged
Collateral or any portion thereof subject thereto, notwithstanding the fact that


     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    after
the Collateral Agent shall have entered into such an agreement all Events of
Default shall have been remedied and the Obligations paid in full.  As
an alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Pledge Agreement and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.  Any sale
pursuant to the provisions of this Section 5.02 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-610(b) of
the Uniform Commercial Code or its equivalent in other
jurisdictions.

     

    SECTION
5.03. Application of
Proceeds.  The Collateral Agent shall apply the proceeds of any
collection or sale of Pledged Collateral, including any Pledged Collateral
consisting of cash, as follows:

     

    FIRST, to the
payment of all reasonable costs and expenses incurred by the Collateral Agent in
connection with or reasonably related or reasonably incidental to such
collection or sale or otherwise in connection with or related or incidental to
this Pledge Agreement or any of the Obligations, including all court costs and
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Collateral Agent (in its sole discretion) hereunder
on behalf of the Borrower and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;

     

    SECOND, to the
payment to RUS in full of the Obligations; such payment to be for an
amount certified in a RUS Notice delivered to the Collateral Agent as being the
amount due and owing to RUS under the Obligations; and

     

    THIRD, to the
Borrower, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.

     

    Upon any
sale of the Pledged Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Pledged Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of
any part of the purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.

     

    SECTION
5.04. Securities
Act.  In view of the position of the Borrower in relation to
the Pledged Collateral, or because of other current or future circumstances, a
question may arise under the Securities Act of 1933, as now or hereafter in
effect, or any similar statute hereafter enacted analogous in purpose or effect
(such Act and any such similar statute as from time to time in effect being
called the “Federal
Securities Laws”) with respect to any disposition of the Pledged
Collateral permitted hereunder.  The Borrower understands that
compliance with the Federal Securities Laws might very strictly limit the course
of conduct of the Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Pledged Collateral, and might also limit the


     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

      Pledge
Agreement 

       

    

    extent to
which or the manner in which any subsequent transferee of any Pledged Collateral
could dispose of the same.  Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in any attempt to
dispose of all or part of the Pledged Collateral under applicable Blue Sky or
other state securities laws or similar laws analogous in purpose or
effect.  The Borrower recognizes that in light of such restrictions
and limitations the Collateral Agent may, with respect to any sale of the
Pledged Collateral, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Collateral for their own account, for
investment, and not with a view to the distribution or resale
thereof.  The Borrower acknowledges and agrees that in light of such
restrictions and limitations, the Collateral Agent, in its sole and absolute
discretion (a) may proceed to make such a sale whether or not a
registration statement for the purpose of registering such Pledged Collateral or
part thereof shall have been filed under the Federal Securities Laws and
(b) may approach and negotiate with a single potential purchaser to effect
such sale.  The Borrower acknowledges and agrees that any such sale
might result in prices and other terms less favorable to the seller than if such
sale were a public sale without such restrictions.  In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached.  The provisions of this Section 5.04 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.

     

    ARTICLE
VI

     

    The Collateral
Agent

     

    SECTION
6.01. Certain Duties and
Responsibilities.  (a)  At all times under this
Pledge Agreement:

     

    (i) the
Collateral Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Pledge Agreement, and no implied covenants or
obligations shall be read into this Pledge Agreement against the Collateral
Agent; and

     

    (ii) in the
absence of bad faith on its part, the Collateral Agent may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Collateral Agent and
substantially conforming to the requirements of this Pledge Agreement; but in
the case of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Collateral Agent the Collateral
Agent shall be under a duty to examine the same to determine whether or not they
substantially conform to the requirements of this Pledge Agreement.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    (b) No
provision of this Pledge Agreement shall be construed to relieve the Collateral
Agent from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except
that:

     

    (i) this
Subsection shall not be construed to limit the effect of Subsection (a) of this
Section;

     

    (ii) the
Collateral Agent shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Collateral Agent was grossly negligent
in ascertaining the pertinent facts; and

     

    (iii) no
provision of this Pledge Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

     

    (c) Whether
or not therein expressly so provided, every provision of this Pledge Agreement
relating to the conduct or affecting the liability of or affording protection to
the Collateral Agent shall be subject to the provisions of this
Section.

     

    SECTION
6.02. Certain Rights of Collateral
Agent.  Except as otherwise provided in Section
6.01:

     

    (a) the
Collateral Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;

     

    (b) any
request or direction of the Borrower mentioned herein shall be sufficiently
evidenced by a Borrower Notice or Borrower Order;

     

    (c) any
request or direction of RUS mentioned herein shall be sufficiently evidenced by
an RUS Notice or RUS Order;

     

    (d) whenever
in the administration of this Pledge Agreement the Collateral Agent shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Collateral Agent (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers’ Certificate in the case of the Borrower, and a
certificate signed by the Secretary in the case of RUS;

     

    (e) the
Collateral Agent may consult with counsel and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    (f) the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Pledge Agreement at the request or direction of
either the Borrower or RUS pursuant to this Pledge Agreement, unless such party
shall have offered to the Collateral Agent reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;

     

    (g) the
Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, or to recompute, verify, reclassify or recalculate any
information contained therein, but the Collateral Agent, in its sole and
absolute discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Collateral Agent shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Borrower, personally or by agent or
attorney;

     

    (h) the
Collateral Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Collateral Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;

     

    (i) unless
explicitly stated herein to the contrary, the Collateral Agent shall have no
duty to inquire as to the performance of any Borrower’s covenants
herein.  In addition, the Collateral Agent shall not be deemed to have
knowledge of any Trigger Event, or Event of Default, unless the Collateral Agent
has received an RUS Notice in accordance with Sectuib 2.04(a) or
Section 5.01(a) (as applicable), and shall not be deemed to have knowledge
of the cessation of the same until such time as it receives a Borrower Notice in
accordance with Section 2.04(b) or Section 5.01(b) (as applicable);
and

     

    (j) unless
explicitly stated herein to the contrary, the Collateral Agent shall have no
obligation to take any action with respect to any Trigger Event or Event of
Default until it has received the an RUS Notice applicable to such event in
accordance with Section 2.04(a) or Section 5.01(a) (as
applicable), and the Collateral Agent shall have no liability for any action or
inaction taken, suffered or omitted in respect of any such event by it prior to
such time as the applicable RUS Notice is delivered.  Similarly, the
Collateral Agent shall have no obligation to take any action with respect to the
cessation of a Trigger Event or Event of Default until it has received a
Borrower Notice applicable to such event in accordance in accordance with
Section 2.04(b) or Section 5.01(b) (as applicable), and the Collateral Agent
shall have no liability for any action or inaction taken, suffered or omitted in
respect of any such event by it prior to such time as the applicable Borrower
Notice is delivered.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    SECTION
6.03. Money Held by Collateral
Agent.  Money held by the Collateral Agent hereunder need not
be segregated from other funds except to the extent required by
law.  The Collateral Agent shall have no liability to pay interest on
or (except as expressly provided herein) invest any such moneys.

     

    SECTION
6.04. Compensation and
Reimbursement.  (a)  The Borrower
agrees:

     

    (i) to pay to
the Collateral Agent from time to time reasonable compensation for all services
rendered by it hereunder;

     

    (ii) except as
otherwise expressly provided herein, to reimburse the Collateral Agent upon its
request for all reasonable expenses, out-of-pocket costs, disbursements and
advances incurred or made by the Collateral Agent in accordance with any
provision of this Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the extent
any such expense, disbursement or advance may be attributable to its gross
negligence or bad faith; and

     

    (iii) to
indemnify the Collateral Agent for, and to defend and hold it harmless against,
any loss, liability or expense incurred without gross negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Pledge Agreement or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent such loss, liability or expense may be
attributable to its gross negligence or bad faith; provided, however, that the
Borrower shall have no liability under this clause for any settlement of any
litigation or other dispute effected without the prior written consent of the
Borrower (such consent not to be unreasonably withheld).

     

    (b) Any such
amounts payable as provided hereunder shall be additional Obligations secured by
the Lien hereof.  The provisions of this Section 6.04 shall remain
operative and in full force and effect regardless of the termination of this
Pledge Agreement or the Series C Bond Guarantee Agreement, the consummation of
the transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this Pledge
Agreement or the Series C Bond Guarantee Agreement, or any investigation made by
or on behalf of the Collateral Agent or RUS.  All amounts due under
this Section 6.04 shall be payable on written demand therefor.

     

    SECTION
6.05. Corporate Collateral Agent
Required; Eligibility.  There shall at all times be a
Collateral Agent hereunder which shall be a corporation or association organized
and doing business under the laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority.  If such corporation
publishes reports of 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

      Pledge
Agreement

    

     

    condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.  Neither the Borrower nor any Person directly or
indirectly controlling, controlled by or under common control with the Borrower
shall serve as Collateral Agent hereunder.  If at any time the
Collateral Agent shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.

     

    SECTION
6.06. Resignation and Removal;
Appointment of Successor.  (a)  No resignation or
removal of the Collateral Agent and no appointment of a successor Collateral
Agent pursuant to this Article shall become effective until the acceptance of
appointment by the successor Collateral Agent under Section 6.07.

     

    (b) The
Collateral Agent may resign at any time by giving written notice thereof to the
Borrower.  If an instrument of acceptance by a successor Collateral
Agent shall not have been delivered to the Collateral Agent within 30 days
after the giving of such notice of resignation, the resigning Collateral Agent
may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent.

     

    (c) If at any
time:

     

    (i) except if
an Event of Default has occurred and is continuing, the Borrower, in its sole
and absolute discretion, elects to remove the Collateral Agent; or

     

    (ii) the
Collateral Agent shall cease to be eligible under Section 6.05 or shall become
incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver
of the Collateral Agent or of its property shall be appointed or any public
officer shall take charge or control of the Collateral Agent or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation,

     

    then, in
any such case, the Borrower may remove the Collateral Agent by delivery of a
Borrower Order to that effect.

     

    (d) If the
Collateral Agent shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Collateral Agent for any cause, the
Borrower shall promptly appoint a successor Collateral Agent by delivering a
Borrower Notice to the retiring Collateral Agent, the successor Collateral Agent
and RUS to such effect.

     

    SECTION
6.07. Acceptance of Appointment by
Successor.  Every successor Collateral Agent appointed
hereunder shall execute, acknowledge and deliver to the Borrower, RUS and to the
retiring Collateral Agent an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Collateral Agent shall
become effective and such successor Collateral Agent, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

      Pledge
Agreement

    

     

    retiring
Collateral Agent; but, on request of the Borrower, RUS or the successor
Collateral Agent, such retiring Collateral Agent shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Collateral Agent all the rights, powers and trusts of the retiring Collateral
Agent, and shall duly assign, transfer and deliver to such successor Collateral
Agent all property and money held by such retiring Collateral Agent hereunder,
subject nevertheless to its Lien, if any, provided for in Section
6.04.  Upon request of any such successor Collateral Agent, the
Borrower shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Collateral Agent all such rights,
powers and trusts.

     

    No
successor Collateral Agent shall accept its appointment unless at the time of
such acceptance such successor Collateral Agent shall be eligible under Section
6.05 hereof.

     

    SECTION
6.08. Merger, Conversion,
Consolidation or Succession to Business.  Any corporation into
which the Collateral Agent may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Collateral Agent, shall be the successor of the Collateral Agent hereunder,
provided such corporation shall be eligible under Section 6.05 hereof without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.

     

    ARTICLE
VII

     

    Miscellaneous

     

    SECTION
7.01. Notices.  All
notices and other communications hereunder to be made to any party shall be in
writing and shall be addressed as specified in Schedule III attached hereto
as appropriate.  The address, telephone number, or facsimile number
for any party may be changed at any time and from time to time upon written
notice given by such changing party to the other parties hereto. A properly
addressed notice or other communication to the Borrower shall be deemed to have
been delivered at the time it is sent by facsimile (fax) transmission. A
properly addressed notice or other communication to the Collateral Agent shall
be deemed to have been delivered at the time it is sent by facsimile (fax)
transmission.  A properly addressed notice or other communication to
RUS shall be deemed to have been delivered at the time it is sent by facsimile
(fax) transmission, provided that the original of such faxed notice or other
communication shall have been received by RUS within five Business
Days.

     

    (a) All
Borrower Notices and Borrower Orders delivered to the Collateral Agent shall be
contemporaneously copied to RUS by the Borrower, and all RUS Notices and RUS
Orders delivered to the Collateral Agent shall be contemporaneously copied by
RUS to the Borrower, and all Collateral Agent notices delivered to either the
Borrower or RUS shall be contemporaneously copied to the other such party by the
Collateral Agent.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

      Pledge
Agreement

    

     

    SECTION
7.02. Waivers;
Amendment.  (a)  No failure or delay by a party in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies that such party would
otherwise have.  No waiver of any provision of this Pledge Agreement
or consent to any departure by any party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this
Section 7.02, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  No notice or
demand on any party in any case shall entitle any party to any other or further
notice or demand in similar or other circumstances.

     

    (b) Neither
this Pledge Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower, the Collateral Agent and RUS.

     

    SECTION
7.03. Successors and
Assigns.  Whenever in this Pledge Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrower, the Collateral Agent or RUS that are contained in this
Pledge Agreement shall bind and inure to the benefit of their respective
successors and assigns.

     

    SECTION
7.04. Counterparts;
Effectiveness.  This Pledge Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract.  Delivery of an
executed signature page to this Pledge Agreement by facsimile transmission shall
be as effective as delivery of a manually signed counterpart of this Pledge
Agreement.

     

    SECTION
7.05. Severability.  Any
provision of this Pledge Agreement held to be invalid, illegal or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions hereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.  The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

     

    SECTION
7.06. GOVERNING
LAW.  THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO
THE EXTENT APPLICABLE, AND OTHERWISE THE LAWS OF THE STATE OF NEW
YORK.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

      Pledge
Agreement

       

    

    SECTION
7.07. WAIVER OF JURY
TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.07.

     

    SECTION
7.08. Headings.  Article
and Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Pledge Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Pledge Agreement.

     

    SECTION
7.09. Security Interest
Absolute.  All rights of the Collateral Agent and/or RUS
hereunder, the grant of a security interest in the Pledged Collateral and all
obligations of the Borrower hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Series C
Bond Guarantee Agreement, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the foregoing,
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to any departure from the Series C Bond Guarantee Agreement or any
other agreement or instrument, (c) any exchange, release or non-perfection
of any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Borrower in respect of
the Obligations or this Pledge Agreement.

     

    SECTION
7.10. Termination or
Release.  (a)  This Pledge Agreement shall terminate
on the date when the Collateral Agent receives an RUS Notice to the effect that
all of the Obligations have been indefeasibly paid in full and the Federal
Financing Bank has no further commitment to lend under the Series C Bond, and if
applicable at such time the Lien hereof shall be released.

     

    (b) Upon any
withdrawal, substitution or other disposal by the Borrower of any Pledged
Collateral that is permitted by the terms of this Pledge Agreement, or upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Pledged Collateral, the Lien hereof securing such Pledged
Collateral shall be automatically released.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        
Pledge Agreement

    

     

    (c) In
connection with any termination or release pursuant to paragraph (a) or (b)
the Collateral Agent shall deliver to the Borrower the Pledged Collateral and
shall execute and deliver to the Borrower, at the Borrower’s expense, all
documents that the Borrower shall reasonably request to evidence such
termination or release.  Any execution and delivery of documents
pursuant to this Section 7.10 shall be without recourse to or warranty by the
Collateral Agent.

     

    SECTION
7.11. Collateral Agent Appointed
Attorney-in-Fact.  The Borrower hereby appoints the Collateral
Agent the attorney-in-fact of the Borrower for the purpose of, upon the
occurrence and during the continuance of an Event of Default, carrying out the
provisions of this Pledge Agreement with respect to the Pledged Collateral and
taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest but is subject nevertheless to the
terms and conditions of this Pledge Agreement.  Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent’s name or in the name of the
Borrower (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Pledged Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or
any of the Pledged Collateral; (c) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Pledged
Collateral or to enforce any rights in respect of any Pledged Collateral;
(d) to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Pledged Collateral; (e) to
notify, or to require the Borrower to notify, obligors under Pledged Securities
to make payment directly to the Collateral Agent; and (f) to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Pledged Collateral, and to do all other acts and things
necessary to carry out the purposes of this Pledge Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Pledged
Collateral for all purposes; provided that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby.  The Collateral Agent and RUS
shall be accountable only for amounts actually received as a result of the
exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees or agents shall be responsible to the Borrower
for any act or failure to act hereunder, except for their own gross negligence
or willful misconduct.

     


    
      
         


      

      
        25

        
          

        

      

      
         


      

    


    Pledge
Agreement

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.

    
      
         

        

          
            	
                    
                      National
      Rural Utilities 

                      Cooperative
      Finance Corporation,

                    

                  
	 
	
                    by

                  
	 
      	 /s/
      SHELDON C. PETERSEN  
	 
      	
                    Name:
      Sheldon C. Petersen

                  
	 
      	
                    Title:
      Governor and CEO

                  


          

        

      

      


      
        	
                UNITED
      STATES OF AMERICA, acting 

                through
      the Administrator of the Rural Utilities 

                Service,

              
	 
	
                by

              
	 
      	  
      
	 
      	
                Name:

              
	 
      	
                Title:
      Administrator of the Rural Utilities
Service

              


      

      


      


      
        	
                U.S.
      BANK TRUST NATIONAL ASSOCIATION

              
	 
	
                by

              
	 
      	 /s/
      BEVERLY A. FREENEY 
	 
      	
                Name:
      Beverly A. Freeney

              
	 
      	
                Title:
      Vice President

              


      




    
      
        
        

      

      
        
          [Signature
Page to Pledge Agreement]

        

        
          

        

      

      
        
        

      

    

    
       

      Pledge
Agreement

       

      IN
WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly
executed, all as of the day and year first above written.

    

     

    
      

        
          	
                  
                    National
      Rural Utilities 

                    Cooperative
      Finance Corporation,

                  

                
	 
	
                  by

                
	 
      	
                   

                
	 
      	
                  Name:
      

                
	 
      	
                  Title:
      

                


        

      

      


      
        	
                UNITED
      STATES OF AMERICA, acting 

                through
      the Administrator of the Rural Utilities 

                Service,

              
	 
	
                by

              
	 
      	 /s/
      JAMES M. ANDREW         
	 
      	
                Name:
      

              
	 
      	
                Title:
      Administrator of the Rural Utilities
Service

              


      

    

     

    
      


      
        	
                U.S.
      BANK TRUST NATIONAL ASSOCIATION

              
	 
	
                by

              
	 
      	 
	 
      	
                Name:
      

              
	 
      	
                Title:
      

              


      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      SCHEDULE I

      TO

      PLEDGE
AGREEMENT

       

    

     

    NATIONAL
RURAL UTILITIES

     

    COOPERATIVE
FINANCE CORPORATION

     

    PLEDGE
AGREEMENT DATED AS OF SEPTEMBER 19, 2008

     

    CERTIFICATE
OF AVAILABLE SECURITIES FILED WITH

     

    U.S. BANK
TRUST NATIONAL ASSOCIATION, Collateral Agent

     

    ________________,
Governor (or Chief Financial Officer) and ____________________, Vice-President,
respectively, of National Rural Utilities Cooperative Finance Corporation,
hereby certify to RUS and the Collateral Agent under the above-mentioned Pledge
Agreement as amended to the date hereof (herein called the “Pledge Agreement”)
as follows:

     

    
      	
              1.

            	
              The
      Allowable Amount of Available Securities certified 

              hereby,
      all as shown on Schedule A hereto, is

            	
              $

            
	
              2.

            	
              The
      aggregate principal amount of the Series C Bond 

              outstanding
      at the date hereof is

            	
              $

            
	
              3.

            	
              The
      aggregate amount, if any, of the Advance to be made 

              on
      the basis of this Certificate is

            	
              $

            
	
              4.

            	
              The
      sum of the amounts in items 2 and 3 is

            	
              $

            
	
              5.

            	
              The
      aggregate amount by which the Allowable Amount of 

              Available
      Securities exceeds the aggregate principal 

              amount
      of the Series C Bond outstanding plus the amount 

              of
      any Advance in item 3 (item 1 minus item 4) is

            	
              $

            
	
              6.

            	
              So
      far as is known to the undersigned no Trigger Event 

              exists.

            	 
      


    

    


            All terms which are
defined in the Pledge Agreement are used herein as so 

    defined.

     

            Dated:

                                                                    

      
        	 
      
	 
      
	
                OF
      NATIONAL RURAL UTILITIES

                COOPERATIVE
      FINANCE CORPORATION

              


      
 

     

    
      	 
      
	 
      
	
            


    


    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE I

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    
      AVAILABLE
SECURITIES

      SCHEDULE
A TO OFFICERS’ CERTIFICATE

      DATED

       

      


      
        	
                
                  Eligible
      Securities

                

              	
                
                  Name
      of Issuer

                

              	
                
                  Current
      Allowable Amount (Item 1)

                

              
	
                Available
      Securities

                (Here
      List
      Securities)................................................

              	 
      	 
      


      

    

     

     


     

    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE II

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    NATIONAL
RURAL UTILITIES

    COOPERATIVE
FINANCE CORPORATION

     

    PLEDGE
AGREEMENT DATED AS OF SEPTEMBER 19, 2008

     

    CERTIFICATE
OF PLEDGED COLLATERAL FILED WITH

    U.S. BANK
TRUST NATIONAL ASSOCIATION, Collateral Agent

     

    ________________,
Governor (or Chief Financial Officer) and ____________________, Vice-President,
respectively, of National Rural Utilities Cooperative Finance Corporation,
hereby certify to RUS and the Collateral Agent under the above-mentioned Pledge
Agreement as amended to the date hereof (herein called the “Pledge Agreement”)
as follows:

     

    
      	
              1.

            	
              The
      Allowable Amount of Pledged Collateral shown 

              in
      item 8 in the most recent Certificate of Pledged Collateral
      

              dated
      ______________ delivered to the Collateral Agent is

            	
              $

            
	
              2.

            	
              The
      increase (or decrease) in the Allowable Amount of 

              such
      Pledged Collateral and the Allowable Amount of any 

              Eligible
      Securities substituted for other Pledged Securities pursuant 

              to Section
      3.07 of the Pledge Agreement, 

              remaining
      on deposit with the Collateral Agent, as shown 

              on
      Schedule A hereto, is

            	
              $

            
	
              3.

            	
              The
      Allowable Amount, as at the date of such most recent 

              Certificate
      of Pledged Collateral, of Pledged Collateral 

              which
      has, since such date, been withdrawn or substituted 

              for
      pursuant to Section 3.07 (including Pledged Securities
      

              fully
      paid) by the Borrower or ceased to be Pledged 

              Collateral,
      as shown on Schedule A hereto, is

            	
              $

            
	
              4.

            	
              The
      present Allowable Amount of Pledged Collateral 

              ertified
      to the Collateral Agent in the most recent 

              Certificate
      of Pledged Collateral (item 1 plus (or minus, if 

              decrease)
      item 2, and minus item 3) is

            	
              $

            
	
              5.

            	
              The
      Allowable Amount of Pledged Collateral certified 

              hereby,
      including the Pledged Collateral deposited 

              herewith,
      which were not certified in the most recent 

              Certificate
      of Pledged Collateral, all as shown on 

              Schedule B
      hereto, is

            	
              $

            


    

     

    
      
        

      

    

    
      
        SCHEDULE II

        TO

        PLEDGE
AGREEMENT

         

        


      

    

     

    
      	
              6.

            	
              The
      Allowable Amount of Pledged Collateral held by the 

              Collateral
      Agent on the date hereof and included in this 

              Certificate
      before any withdrawals (item 4 plus item 5) is

            	
              $

            
	
              7.

            	
              The
      Allowable Amount of Pledged Collateral the 

              withdrawal
      of which is hereby requested, if any, as shown 

              on
      Schedule C hereto (the Pledged Collateral made the 

              basis
      of such withdrawal being designated on Schedule A 

              and/or
      Schedule B hereto) is

            	
              $

            
	
              8.

            	
              The
      Allowable Amount of Pledged Collateral held by the 

              Collateral
      Agent on the date hereof and included in this 

              Certificate
      after any withdrawals (item 6 minus item 7) is

            	
              $

            
	
              9.

            	
              The
      aggregate principal amount of the Series C Bond 

              outstanding
      at the date hereof is

            	
              $

            
	
              10.

            	
              The
      aggregate amount by which such Allowable Amount of

              Pledged
      Securities exceeds the aggregate principal 

              amount
      of the Series C Bond outstanding (item 8 minus item 9) is

            	
              $

            


    

    


    All terms
which are defined in the Pledge Agreement are used herein as so defined.

     

    Dated:

     

    
      	 
      
	 
      
	
              OF
      NATIONAL RURAL UTILITIES

              COOPERATIVE
      FINANCE CORPORATION

            


    

     


    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE II

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    PLEDGED
COLLATERAL ON DEPOSIT 

    SCHEDULE
A TO OFFICER'S CERTIFICATE

    DATED

     

    


    
      	
              
                Pledged
      Collateral

              

            	
              
                Name
      of Issuer

              

            	
              
                Allowable
      

                Amount
      included in 

                Certificate
      last 

                previously
      filed 

                (Item
      1)

              

            	
              
                Increase
      

                (Decrease)

                in
      such 

                Allowable
      

                Amount
      (Items 2 

                and
      3)

              

            	
              
                Current
      

                Allowable
      

                Amount
      (Item 4)

              

            
	
              Cash

            	 
      	 
      	 
      	 
      
	
              Permitted
      Investments

                
      (Here List)

            	 
      	 
      	 
      	 
      
	
              Pledged
      Securities

                
      (Here List Securities)

            	 
      	 
      	 
      	 
      


    

    



    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE II

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    PLEDGED
COLLATERAL BEING DEPOSITED

    
      SCHEDULE B
TO OFFICER'S CERTIFICATE

      DATED

    

     

     

    
      	
              
                Pledged
      Collateral

              

            	
              
                Name
      of Issuer

              

            	
              
                Allowable
      Amount

                (Item
      5)

              

            
	
              Cash

            	 
      	 
      
	
              Permitted
      Investments

                
      (Here List)

            	 
      	 
      
	
              Pledged
      Securities

                
      (Here List Securities)

            	 
      	 
      


    

    



    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE II

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    PLEDGED
COLLATERAL BEING WITHDRAWN

    
      
        SCHEDULE C
TO OFFICER'S CERTIFICATE

        DATED

      

    

     

    


    
      	
              
                Pledged
      Collateral

              

            	
              
                Name
      of Issuer

              

            	
              
                Allowable
      Amount

                (Item
      7)

              

            
	
              Cash

            	 
      	 
      
	
              Permitted
      Investments

                
      (Here List)

            	 
      	 
      
	
              Pledged
      Securities

                
      (Here List Securities)

            	 
      	 
      


    

    



    
      
         


      

      
         


        
          

        

      

      
         


        
          SCHEDULE III

          TO

          PLEDGE
AGREEMENT

           

          


        

      

    


    Addresses for
Notices

     

    
      	
              1.  

            	
              The
      addresses referred to in Section 7.01 hereof, for purposes of delivering
      

              communications
      and notices, are as follows:

            


    

     

    If to
RUS:

     

    Rural
Utilities Service

    United
States Department of Agriculture

    1400
Independence Avenue, SW

    Washington,
DC 20250

    Fax:  202-720-1725

    Attention
of: The Administrator

    Subject:  REDLG
Program

    


    


    If to the
Borrower:

     

    National
Rural Utilities Cooperative Finance Corporation

    2201
Cooperative Way

    Herndon,
VA 20171-3025

    Telephone:  703-709-6718

    Fax:  703-709-6819

    Attention
of: Steven L. Lilly, Chief Financial Officer

     

    With a
copy to:

     

    National
Rural Utilities Cooperative Finance Corporation

    2201
Cooperative Way

    Herndon,
VA 20171-3025

    Telephone:  703-709-6712

    Fax:  703-709-6811

    Attention
of: John J. List, Esq., General Counsel

    


    


    If to the
Collateral Agent:

     

    U.S. Bank
Trust National Association

    100 Wall
Street

    Suite
1600

    New York,
NY 10005-3701

    Fax:  212-509-3384

    Attention
of: Beverly A. Freeney