Document:

Exhibit 10.40

EXECUTION VERSION

 

 

FARMER MAC MORTGAGE SECURITIES CORPORATION

as Note Purchaser

NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

as Borrower

FEDERAL AGRICULTURAL MORTGAGE CORPORATION

as Guarantor

NOTE PURCHASE AGREEMENT

 

Dated as of January 11, 2011

  

  

 

 

TABLE OF CONTENTS

 

	  	
Page

	 	 
	
RECITALS

	
1

	  	  
	
ARTICLE I DEFINITIONS

	
1

	
SECTION 1.01. Definitions

	
1

	
SECTION 1.02. Principles of Construction

	
4

	  	  
	
ARTICLE II PURCHASE OF NOTES

	
4

	
SECTION 2.01. Purchase of Notes; Minimum Denominations

	
4

	
SECTION 2.02. Interest Rates and Payment

	
5

	
SECTION 2.03. Maturity

	
6

	  	  
	
ARTICLE III CONDITIONS PRECEDENT

	
6

	
SECTION 3.01. Conditions Precedent to the Purchase of Each Note

	
6

	
SECTION 3.02. Certificate of Pledged Collateral

	
8

	  	  
	
ARTICLE IV REPORTING REQUIREMENTS

	
8

	
SECTION 4.01. Annual Reporting Requirements

	
8

	
SECTION 4.02. Additional Reporting Requirements

	
8

	
SECTION 4.03. Default Notices

	
9

	  	  
	
ARTICLE V REPRESENTATIONS OF THE PARTIES

	
9

	
SECTION 5.01. Representations of Farmer Mac and the Purchaser

	
9

	
SECTION 5.02. Representations of National Rural.

	
10

	  	  
	
ARTICLE VI SECURITY AND COLLATERAL

	
12

	
SECTION 6.01. Security and Collateral

	
12

	  	  
	
ARTICLE VII EVENTS OF DEFAULT

	
12

	
SECTION 7.01. Events of Default

	
12

	
SECTION 7.02. Acceleration

	
13

	
SECTION 7.03. Remedies Not Exclusive

	
13

	  	  
	
ARTICLE VIII MISCELLANEOUS

	
13

	
SECTION 8.01. GOVERNING LAW

	
13

	
SECTION 8.02. WAIVER OF JURY TRIAL

	
13

	
SECTION 8.03. Notices

	
14

	
SECTION 8.04. Benefit of Agreement

	
14

	
SECTION 8.05. Entire Agreement

	
14

	
SECTION 8.06. Amendments and Waivers

	
14

	
SECTION 8.07. Counterparts

	
14

	
SECTION 8.08. Termination of Agreement

	
15

	
SECTION 8.09. Survival

	
15

	
SECTION 8.10. Severability

	
15

 

  

  

 

	
ARTICLE IX GUARANTEE

	
15

	
SECTION 9.01. Guarantee.

	
15

	
SECTION 9.02. Control by the Guarantor.

	
16

Schedule I – Addresses for Notices

Schedule II – [Reserved.]

Schedule III – Form of Pricing Agreement

Annex A-1 – Form of Fixed Rate Note

Annex A-2 – Form of Floating Rate Note

Annex B – Opinion of Counsel to National Rural

Annex C – Officers’ Certificate

Annex D – Form of Securities Purchase Agreement

Annex E – Form of Quarterly Report on Pledged Collateral

Annex F – Form of Annual Report on Pledged Collateral

  

  

 

NOTE PURCHASE AGREEMENT

 

NOTE PURCHASE AGREEMENT, dated as of January 11, 2011, among FARMER MAC MORTGAGE SECURITIES CORPORATION (the “Purchaser”), a wholly owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered instrumentality of the United States and an institution of the Farm Credit System (“Farmer Mac” or the “Guarantor”); NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a cooperative association existing under the laws of the District of Columbia (“National Rural”); and Farmer Mac, as
Guarantor.

 

RECITALS

 

WHEREAS National Rural wishes from time to time to issue and sell Notes to the Purchaser, and the Purchaser wishes from time to time to purchase such Notes from National Rural, all on the terms and subject to the conditions herein provided; and

 

WHEREAS Farmer Mac is an instrumentality of the United States formed to provide for a secondary market for agricultural real estate mortgages and rural utilities loans; National Rural is a non-profit cooperative and Farmer Mac, the Purchaser and National Rural have agreed that the Notes will be secured by the pledge of notes for borrowings from National Rural by members of National Rural, as provided herein.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, Farmer Mac, the Purchaser and National Rural agree as follows:

 

ARTICLE I

DEFINITIONS

SECTION 1.01.           Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

“Agreement” means this Note Purchase Agreement, as the same may be amended from time to time.

 

“Applicable Margin” means the Applicable Margin (Fixed), the Applicable Margin (Floating), or both, as the context may require.

 

“Applicable Margin (Fixed)” means the margin to be added to the Fixed Index to determine the rate of interest payable on a Fixed Rate Note.  The Applicable Margin (Fixed) shall be communicated in writing or via email by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof.  The Applicable Margin (Fixed) for any Fixed Rate Note shall be set forth in the applicable Pricing Agreement.

 

“Applicable Margin (Floating)” means the margin to be added to the Floating Index to determine the rate of interest payable on a Floating Rate Note from time to time.  The Applicable Margin (Floating) shall be communicated in writing or via email by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof.  The Applicable Margin (Floating) for any Floating Rate Note shall be set forth in the applicable Pricing Agreement.

  

  

 

 “Business Day” means any day other than a Saturday, a Sunday, or a day on which any of the Federal Reserve Bank of New York, Farmer Mac’s office in Washington, DC or National Rural’s office in Virginia is not open for business.

 

“Certificate of Pledged Collateral” has the meaning given to that term in the Pledge Agreement.

 

“Closing Date” means the date of the funding of each issuance of one or more Notes hereunder, which date shall be set forth in the applicable Pricing Agreement.

 

“Collateral Agent” means U.S. Bank National Association, or its successor, as collateral agent under the Pledge Agreement.

 

“Control Party” means (i) the Guarantor, so long as no Guarantor Default has occurred and is continuing, or (ii) the holders of the Notes for so long as a Guarantor Default has occurred and is continuing.

 

“Dollar” or “$” means the lawful money of the United States of America.

 

“Draw Period” means the date that is five (5) years from the date hereof; provided, however, on each anniversary hereof, the Draw Period shall be deemed automatically extended for one (1) additional year without further action, unless at least sixty (60) days prior to any such anniversary date, Farmer Mac provides National Rural with written notice that the Draw Period will not be extended beyond the then-remaining term.

 

“Eligible Member” has the meaning given to that term in the Pledge Agreement.

 

“Eligible Security” has the meaning given to that term in the Pledge Agreement.

 

“Event of Default” has the meaning given to that term in Section 7.01.

 

“Farmer Mac Series C Preferred Stock” means shares of Non-Voting Cumulative Preferred Stock, Series C issued by Farmer Mac.

 

“Financial Statements”, in respect of a Fiscal Year, means the consolidated financial statements (including footnotes) of National Rural for that Fiscal Year as audited by independent certified public accountants selected by National Rural.

 

“Fiscal Year” means the fiscal year of National Rural, as such may be changed from time to time, which at the date hereof commences on June 1 of each calendar year and ends on May 31 of the following calendar year.

 

“Fixed Index” means an established and published fixed index rate.  The Fixed Index shall be communicated in writing by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof, in the form of Schedule II hereof.  The Fixed Index for any Fixed Rate Note shall be set forth in the applicable Pricing Agreement.

  

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“Fixed Rate Note” means a fixed rate note of National Rural payable to the Purchaser, having the terms provided for in Article II of this Agreement and otherwise in the form of Annex A-1 attached hereto, except to the extent the parties may have approved changes therein in the applicable Pricing Agreement.

 

“Floating Index” means, for any Interest Period, an established and published variable index rate.  The Floating Index shall be communicated in writing by Farmer Mac to National Rural in accordance with Section 2.02(d) hereof, in the form of Schedule II hereof.  The Floating Index for any Floating Rate Note shall be set forth in the applicable Pricing Agreement.

 

“Floating Rate Note” means a floating rate note of National Rural payable to the Purchaser, having the terms provided for in Article II of this Agreement and otherwise in the form of Annex A-2 attached hereto, except to the extent the parties may have approved changes therein in the applicable Pricing Agreement.

 

“Guarantor Default” means a default by the Guarantor under its obligations pursuant to Article IX which is existing and continuing.

 

“Interest Payment Date” means the date set forth in a Pricing Agreement as the interest payment date for the Note or Notes described therein; provided, however, that if any such date is not a Business Day, such Interest Payment Date that would otherwise be such date will be the next Business Day following such date.

 

“Interest Period” means, with respect to any Floating Rate Note, until all outstanding principal of such Floating Rate Note and interest accrued thereon have been paid in full, each 3-month period determined as set forth in the applicable Pricing Agreement unless a different period is agreed by the parties hereto and set forth in such Pricing Agreement; provided, that the initial Interest Period means the period from and including the date of issuance to and excluding the first Interest Payment Date following the date of issuance; provided, further,

that if any Interest Period would end on a day other than a Business Day, then such Interest Period shall be extended to and include the next succeeding Business Day and the next Interest Period shall commence on the next succeeding day.

 

“Maturity Date” means the maturity date of a Note, as agreed to by the parties and set forth in the applicable Pricing Agreement.

 

“Member” shall mean any Person who is member of National Rural.

 

“National Rural Notice” has the meaning given to that term in the Pledge Agreement.

 

“Note” means a Fixed Rate Note or a Floating Rate Note, or any one or more of them as the context may require.

 

“Note Documents” means the Notes, this Agreement, and the Pledge Agreement.

 

“Notice of Borrowing” has the meaning set forth in Section 2.01 hereof.

  

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“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Pledge Agreement” means the Pledge Agreement dated as of the date hereof, among National Rural, the Purchaser, Farmer Mac and the Collateral Agent.

 

“Pledged Collateral” has the meaning given to that term in the Pledge Agreement.

 

“Pledged Securities” has the meaning given to that term in the Pledge Agreement.

 

“Pricing Agreement” means the Pricing Agreement for each issuance of one or more Notes among Farmer Mac, the Purchaser and National Rural in the form of Schedule III attached hereto.

 

“Securities Purchase Agreement” means the Series C Preferred Stock Purchase Agreement, a form of which is attached hereto as Annex D.

 

SECTION 1.02.           Principles of Construction.  Unless the context shall otherwise indicate, the terms defined in Section 1.01 hereof include the plural as well as the singular and the singular as well as the plural.  The words “hereafter”, “herein”, “hereof”, “hereto” and “hereunder”, and words of similar import, refer to this Agreement as a whole.  The descriptive headings of the various articles and sections of this Agreement were formulated and inserted for convenience only and shall not be deemed to affect the
meaning or construction of the provisions hereof.

 

ARTICLE II

PURCHASE OF NOTES

SECTION 2.01.           Purchase of Notes; Minimum Denominations.  The Purchaser agrees to purchase Notes, at 100% of their principal amount, from time to time during the Draw Period, as requested by National Rural by written notice (each, a “Notice of Borrowing”) to Farmer Mac in an aggregate principal amount, for all Notes outstanding hereunder at any one time, not in excess of $1.5 billion, subject to satisfaction of the conditions set forth herein.  National Rural may borrow, repay (subject to the terms of the
applicable Note being repaid) and reborrow funds at any time or from time to time during the Draw Period.  Each advance under this Agreement shall be disbursed in a minimum amount of $50 million and additional increments of $5 million in excess thereof or such other amounts as agreed to in the applicable Pricing Agreement.  Each advance shall price within three (3) Business Days of National Rural providing a Notice of Borrowing to Farmer Mac and shall close and fund within three (3) Business Days of pricing, subject to satisfaction of the conditions set forth herein and in accordance with the procedures set forth in Section 2.02(d) hereof, unless otherwise agreed by the parties hereto and set forth in the applicable Pricing Agreement.

  

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SECTION 2.02.           Interest Rates and Payment

  

(a)  Floating Rate Notes.  Each Floating Rate Note shall bear interest, payable quarterly in arrears unless otherwise agreed by the parties hereto and set forth in the applicable Pricing Agreement, on the outstanding principal amount thereof (computed on the basis of a 360-day year and the actual number of days elapsed) from its date of issuance until final payment on the Maturity Date thereof or as otherwise provided herein or in the Note, at a variable rate per annum equal to the Floating Index for each Interest Period plus the Applicable Margin (Floating).  The Floating Index shall reset as of the first day of each Interest Period.  The
Floating Index and Applicable Margin (Floating) for the term of each Floating Rate Note shall be specified in the applicable Pricing Agreement.  Interest only shall be payable on each Interest Payment Date.  The Interest Payment Dates shall be set forth in the applicable Pricing Agreement.  The principal amount of each Floating Rate Note, together with any accrued but unpaid interest, shall be due and payable on the Maturity Date for such Note.

 

(b)  Fixed Rate Notes.  Each Fixed Rate Note shall bear interest, payable semi-annually in arrears unless otherwise agreed by the parties hereto and set forth in the applicable Pricing Agreement, on the outstanding principal amount thereof (computed on the basis of a 30-day month and a 360-day year) from its date of issuance until final payment on the Maturity Date thereof or as otherwise provided herein or in the Note, at a fixed rate per annum equal to the Fixed Index plus the Applicable Margin (Fixed), in each case as specified for the term of each Fixed Rate Note in the applicable Pricing Agreement.  Interest only shall be payable on each Interest

Payment Date.  The Interest Payment Dates shall be set forth in the applicable Pricing Agreement.  The principal amount of each Fixed Rate Note, together with any accrued but unpaid interest, shall be due and payable on the applicable Maturity Date for such Note.

 

(c)  Default Interest.  To the extent any payment of interest or principal is not paid when due, interest shall continue to accrue thereon at the applicable rate per annum determined as provided above plus one percent.

 

(d)  Notice of Borrowing; Determination of Applicable Margin; Procedure for Pricing. (i)  Each Notice of Borrowing shall indicate the amount of the Note and the desired maturity date of such Note that National Rural requests to be advanced.  A Notice of Borrowing may request preliminary pricing indications for more than one type of Note, with the understanding that only one type of Note will be issued on any particular Closing Date, unless otherwise agreed by the parties hereto in a Pricing Agreement.  Each Notice of Borrowing shall also provide name,
telephone and email contact information of an authorized representative of National Rural.

  

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(ii) Upon receipt of a Notice of Borrowing from National Rural, Farmer Mac shall, within two (2) Business Days, provide to National Rural a preliminary indication of (A) the Applicable Margin (Fixed) and Fixed Index, (B) the Applicable Margin (Floating) and Floating Index, or (C) both, as applicable to any Notice of Borrowing; provided that Farmer Mac shall not be obligated to provide an indication of pricing if Farmer Mac uses its best efforts to obtain and provide such preliminary indication, but determines in its sole discretion reasonably exercised after consultation with National Rural that market conditions are unfavorable for the issuance of debt to fund the Note or Notes with the terms set forth in the Notice of Borrowing.  Upon

an acceptance of such preliminary indication of pricing by National Rural, the applicable Note will price within one (1) Business Day (and may price on the day of the preliminary pricing if the parties so agree) thereafter by execution of a Pricing Agreement, unless the parties otherwise agree to a longer period of time as set forth in the applicable Pricing Agreement.  Farmer Mac shall provide National Rural with written notice of (A) the Applicable Margin (Fixed) and Fixed Index, (B) the Applicable Margin (Floating) and Floating Index, or (C) both, no later than the time of pricing of each advance.  National Rural shall be deemed to approve of such pricing so long as the Applicable Margin shall not exceed the preliminary indication by more than 5 basis points (0.05%).  If the final pricing does exceed the preliminary indication by more than 5 basis points (0.05%), an authorized representative of National Rural must agree via email confirmation prior to
or simultaneously with the pricing to accept such margin.

 

(e)  Payments and Prepayments.  Each Note shall not be prepayable during the term of such Note unless otherwise agreed by the Purchaser, Farmer Mac and National Rural and set forth in the applicable Pricing Agreement.

 

(f)  Payment Notice.  Farmer Mac shall send to National Rural, not later than the fifth Business Day prior to an Interest Payment Date for any Note, a notice setting forth the amount of principal and interest, as applicable, due and owing on the next Interest Payment Date for such Note.

 

SECTION 2.03.           Maturity.  Each Note shall mature on the applicable Maturity Date.

 

ARTICLE III

CONDITIONS PRECEDENT

SECTION 3.01.           Conditions Precedent to the Purchase of Each Note.  On each Closing Date, the Purchaser shall be under no obligation to purchase any Note unless and until the following conditions have been satisfied:

 

(a)  The Note.  Farmer Mac shall have received the original of such Note, duly executed on behalf of National Rural, in the applicable form attached as Annex A-1 or A-2 hereto, or otherwise in a form agreed by the parties.

  

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(b)  The Pledge Agreement.  Farmer Mac shall have received an original of the Pledge Agreement duly executed on behalf of National Rural and the Collateral Agent.

 

(c)  Opinion of Counsel.  Farmer Mac shall have received an opinion of counsel to National Rural substantially in the form of Annex B, attached hereto.

 

(d)  Financial and Other Information.  National Rural shall have provided Farmer Mac with its most recent Financial Statements and such other information concerning National Rural as Farmer Mac shall have reasonably requested.

 

(e)  No Material Adverse Change.  National Rural shall have certified to Farmer Mac (in the manner specified in paragraph (i) of this Section 3.01), and Farmer Mac shall be satisfied, that no material adverse change shall have occurred in the financial condition or business of National Rural between the end of National Rural’s most recently completed Fiscal Year for which Financial Statements have been made publicly available and the date of the purchase of such Note, which has not been set forth in documents, certificates or financial information furnished to Farmer Mac or publicly filed.

 

(f)  UCC Filing.  National Rural shall have provided Farmer Mac with evidence that National Rural has filed the financing statement required pursuant to Section 2.02(i) of the Pledge Agreement.

 

(g)  No Event of Default.  National Rural shall have certified to Farmer Mac and Farmer Mac shall be satisfied that no Event of Default shall have occurred and be continuing.

 

(h)  Invest to Participate.  If required by the terms of the applicable Pricing Agreement, National Rural shall have entered into a Securities Purchase Agreement to purchase Farmer Mac Series C Preferred Stock in an amount equal to four percent (4%) of the principal amount of the applicable Note or Notes; provided, however, that (i) National Rural shall not be required to purchase Farmer Mac Series C Preferred Stock in connection with any advance the purpose of which is to refinance an advance for which Farmer Mac did not initially require the purchase of Farmer Mac Series C Preferred Stock, and (ii) National Rural shall not be required to purchase Series C
Preferred Stock to the extent National Rural shall own or agreed to have purchased Series C Preferred Stock in an amount equal to at least 4% of the aggregate principal amount of all Notes issued hereunder (unless not required by the applicable Pricing Agreement) and all promissory notes issued under any of the Note Purchase Agreements among the parties dated as of December 15, 2008, February 5, 2009, or May 22, 2009, including the principal amount of the Note issued on the Closing Date.

  

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(i)  Certification of Senior Management.  National Rural shall have provided Farmer Mac a certification by any vice president of National Rural, substantially in the form of Annex C attached hereto, as to the following: (i) that National Rural is a lending institution organized as a private, not-for-profit, cooperative association with the appropriate expertise, experience and qualifications to make loans to its Members for rural electrification and related purposes; (ii) the matters to be certified under paragraphs (e) and (g) of this Section 3.01; and (iii) the representations and warranties of National Rural.

 

SECTION 3.02.           Certificate of Pledged Collateral.  No later than three (3) Business Days after each advance hereunder, National Rural shall provide Farmer Mac and the Collateral Agent a copy of a Certificate of Pledged Collateral, dated as of the last day of the calendar month most recently ended at least ten (10) Business Days prior to such authentication and delivery, or a more recent date, at National Rural’s option, in accordance with the terms of the Pledge Agreement.

 

ARTICLE IV

REPORTING REQUIREMENTS

SECTION 4.01.           Annual Reporting Requirements.  So long as any Notes remain outstanding, National Rural shall provide Farmer Mac with the following items within ninety (90) days of the end of each Fiscal Year, in each case, in form and substance satisfactory to Farmer Mac:

 

(a)  the Financial Statements for such Fiscal Year;

 

(b)  a Certificate of Pledged Collateral;

 

(c)  a receipt from the Collateral Agent, or such other evidence as is satisfactory to Farmer Mac, as to the Pledged Collateral held by the Collateral Agent at the end of such Fiscal Year; and

 

(d)  such other information concerning National Rural or the Pledged Collateral as is reasonably requested by Farmer Mac.

 

SECTION 4.02.           Additional Reporting Requirements.  So long as any Note remains outstanding, National Rural shall provide Farmer Mac with the following items, which items may be included on a consolidated report of other loans serviced by National Rural on behalf of Farmer Mac:

 

(a)  within thirty (30) days of the end of each calendar quarter ending March 31st, June 30th, September 30th, and December 31st, a report substantially in the form of Annex E hereto that identifies each Eligible Security that constitutes Pledged Collateral, which report shall include the outstanding principal balance of such Eligible Security, the related facility rating assigned by National Rural and the related borrower rating assigned by National Rural, in each case as of the end of such quarter;

  

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(b)  as soon as practicable, but in any event no later than thirty (30) days following each September 30th, a report substantially in the form of Annex F hereto that identifies each Eligible Security that constitutes Pledged Collateral, which report shall include the appropriate financial data from unaudited financial statements, which may be on a Form 7 (the financial and statistical report used by National Rural for a distribution system Member) for the prior calendar year ending December 31st, as reasonably requested by Farmer Mac, consistent with past practice and industry standards at the time of such request; and

 

(c)  as soon as practicable, but in any event no later than thirty (30) days following each November 30th, a report substantially in the form of Annex F hereto that identifies each Eligible Security that constitutes Pledged Collateral, which report shall include the appropriate financial data from unaudited financial statements, which may be on a Form 12 (the financial and statistical report used by National Rural for a power supply Member) for the prior calendar year ending December 31st, as reasonably requested by Farmer Mac, consistent with past practice and industry standards at the time of such request.

 

SECTION 4.03.           Default Notices.  If an action, occurrence or event shall happen that is, or with notice and the passage of time would become, an Event of Default, National Rural shall deliver a National Rural Notice of such action, occurrence or event to Farmer Mac before 4:00 p.m. (District of Columbia time) on the Business Day following the date National Rural becomes aware of such action, occurrence or event, and, if such Event of Default should occur, shall submit to Farmer Mac, within five days thereafter, a report setting forth its views as to the reasons for the Event of Default,
the anticipated duration of the Event of Default and what corrective actions National Rural is taking to cure such Event of Default.

 

ARTICLE V

REPRESENTATIONS OF THE PARTIES

SECTION 5.01.           Representations of Farmer Mac and the Purchaser.  Each of Farmer Mac and the Purchaser jointly and severally represent to National Rural that on the date hereof and on each date on which the Purchaser purchases a Note from National Rural:

 

(a)  it has all necessary authority and has taken all necessary corporate action, and obtained all necessary approvals, in order for it to execute and deliver all Note Documents to which it is a party and for its obligations and agreements under the Note Documents to constitute valid and binding obligations of Farmer Mac and the Purchaser; and in particular the terms of the transaction, and the actions taken by Farmer Mac and the Purchaser, are in compliance with and in satisfaction of the requirements of the Farm Credit Administration, as amended or waived by the Farm Credit Administration; and

 

(b)  The Purchaser is purchasing the Notes for its own account and not with a view to the distribution thereof, provided that the disposition by Farmer Mac or the Purchaser of their property shall at all times be within their control.  Farmer Mac and the Purchaser each understands that the Notes have not been registered under the Securities Act of 1933, as amended, and may be resold only if an exemption from registration is available.

  

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SECTION 5.02.           Representations of National Rural.  National Rural hereby represents to Farmer Mac and the Purchaser that on the date hereof and on each date on which the Purchaser purchases a Note from National Rural:

 

(a)  National Rural has been duly organized and is validly existing and in good standing as a cooperative association under the laws of the District of Columbia;

 

(b)  National Rural has the corporate power and authority to execute and deliver this Agreement, each of the other Note Documents and the applicable Pricing Agreement and Securities Purchase Agreement, if any, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder;

 

(c)  National Rural has taken all necessary corporate and other action to authorize the execution and delivery of this Agreement, each of the other Note Documents and the applicable Pricing Agreement and Securities Purchase Agreement, if any, the consummation by National Rural of the transactions contemplated hereby and thereby and the performance by National Rural of its obligations hereunder and thereunder;

 

(d)  this Agreement, each of the other Note Documents and the applicable Pricing Agreement and Securities Purchase Agreement, if any, have been duly authorized, executed and delivered by National Rural and constitute the legal, valid and binding obligations of National Rural, enforceable against National Rural in accordance with their respective terms, subject to: (i) applicable bankruptcy, reorganization, insolvency, moratorium and other laws of general applicability relating to or affecting creditors’ rights generally; and (ii) the application of general principles of equity regardless of whether such enforceability is considered in a proceeding in equity or at law;

 

(e)  no approval, consent, authorization, order, waiver, exemption, variance, registration, filing, notification, qualification, license, permit or other action is now, or under existing law in the future will be, required to be obtained, given, made or taken, as the case may be, with, from or by any regulatory body, administrative agency or governmental authority having jurisdiction over National Rural or any third party under any agreement to which National Rural is a party to authorize the execution and delivery by National Rural of this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any, or the consummation by National Rural of the transactions contemplated
hereby or thereby or the performance by National Rural of its obligations hereunder or thereunder;

  

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(f)  neither the execution or delivery by National Rural of this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any, nor the consummation by National Rural of any of the transactions contemplated hereby or thereby nor the performance by National Rural of its obligations hereunder or thereunder, including, without limitation, the pledge of the Pledged Securities (as such term is defined in the Pledge Agreement) to Farmer Mac, conflicts with or will conflict with, violates or will violate, results in or will result in a breach of, constitutes or will constitute a default under, or results in or will result in the imposition of any lien or encumbrance pursuant to any
term or provision of the articles of incorporation or the bylaws of National Rural or any provision of any existing law or any rule or regulation currently applicable to National Rural or any judgment, order or decree of any court or any regulatory body, administrative agency or governmental authority having jurisdiction over National Rural or the terms of any mortgage, indenture, contract or other agreement to which National Rural is a party or by which National Rural or any of its properties is bound;

 

(g)  there is no action, suit, proceeding or investigation before or by any court or any regulatory body, administrative agency or governmental authority presently pending or, to the knowledge of National Rural, threatened with respect to National Rural, this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any, challenging the validity or enforceability of this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any, or seeking to restrain, enjoin or otherwise prevent National Rural from engaging in its business as currently conducted or the consummation by National Rural of the transactions contemplated

by this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any, or which, if adversely determined, would have a material adverse effect on National Rural’s financial condition or its ability to perform its obligations under this Agreement, any of the other Note Documents or the applicable Pricing Agreement and Securities Purchase Agreement, if any;

 

(h)  National Rural is a lending institution organized as a private, not-for-profit, cooperative association with the appropriate expertise, experience and qualifications to make loans to its Members for rural electrification purposes; and

 

(i)  no material adverse change has occurred in the financial condition or business of National Rural between the end of National Rural’s most recently completed Fiscal Year for which Financial Statements have been made publicly available and the date this representation is given which has not been set forth in documents, certificates or financial information furnished to Farmer Mac or publicly filed.

  

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ARTICLE VI

SECURITY AND COLLATERAL

SECTION 6.01.           Security and Collateral.

 

(a)  National Rural shall cause the Allowable Amount of the Pledged Collateral (as such terms are defined in the Pledge Agreement) to be at all times not less than 100% of the aggregate outstanding principal amount of the Notes.

 

(b)  National Rural shall not create, or permit to exist, any pledge, lien, charge, mortgage, encumbrance, debenture, hypothecation or other similar security instrument that secures, or in any way attaches to, such Pledged Collateral, other than the lien of the Pledge Agreement, without the prior written consent of Farmer Mac.

 

(c)  The Pledged Securities will at all times be notes issued to National Rural by Eligible Members (as defined in the Pledge Agreement).

 

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01.           Events of Default.  Each of the following actions, occurrences or events shall, but only (except in the case of subsections (a), (d) and (e) below) if National Rural does not cure such action, occurrence or event within 30 days of notice from Farmer Mac requesting that it be cured, constitute an “Event of Default” under the terms of this Agreement:

 

(a)  a failure by National Rural to make a payment of principal or interest on any Note for more than ten days after the same becomes due and payable;

 

(b)  a material representation by National Rural to Farmer Mac in connection with this Agreement, any Note or the Pledge Agreement, or any material information reported pursuant to Article V, shall prove to be incorrect or untrue in any material respect when made or deemed made;

 

(c)  a failure by National Rural to comply with any other material covenant or provision contained in this Agreement or any of the other Note Documents;

 

(d)  the entry of a decree or order by a court having jurisdiction in the premises adjudging National Rural a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of National Rural under the Federal Bankruptcy Act or any other applicable Federal or State law or law of the District of Columbia, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of National Rural or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or

  

Page 12

 

(e)  the commencement by National Rural of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Act or any other applicable Federal or State law or law of the District of Columbia, or the consent by it to the filing of any such petition or to the appointment of receiver, liquidator, assignee, trustee, sequestrator (or similar official) of National Rural or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts

generally as they become due, or the taking of corporate action by National Rural in furtherance of any such action.

 

SECTION 7.02.           Acceleration.  Upon the occurrence, and during the continuance, of an Event of Default, Farmer Mac may, upon notice to that effect to National Rural, declare the entire principal amount of, and accrued interest on, the Notes at the time outstanding to be immediately due and payable.

 

SECTION 7.03.           Remedies Not Exclusive.  Upon the occurrence, and during the continuance, of an Event of Default, Farmer Mac shall be entitled to take such other action as is provided for by law, in this Agreement, or in any of the other Note Documents, including injunctive or other equitable relief.

 

ARTICLE VIII

MISCELLANEOUS

SECTION 8.01.           GOVERNING LAW.  EXCEPT AS SET FORTH IN SECTION 9.01 HEREOF, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, FEDERAL LAW.  TO THE EXTENT FEDERAL LAW INCORPORATES STATE LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN.

 

SECTION 8.02.           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 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 AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.02.

  

Page 13

 

SECTION 8.03.           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 I attached hereto as appropriate except as otherwise provided herein.  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 shall be deemed to have been delivered at the time it is sent by facsimile (fax) transmission to

the party or parties to which it is given.

 

SECTION 8.04.           Benefit of Agreement.  This Agreement shall become effective when it shall have been executed by Farmer Mac, the Purchaser and National Rural, and thereafter shall be binding upon and inure to the respective benefit of the parties and their permitted successors and assigns.

 

SECTION 8.05.           Entire Agreement.  This Agreement, including the Schedules and Annexes hereto, and the other Note Documents, constitute the entire agreement between the parties hereto concerning the matters contained herein and supersede all prior oral and written agreements and understandings between the parties.

 

SECTION 8.06.           Amendments and Waivers.

 

(a)  Except as otherwise provided herein, no provision of this Agreement may be amended or modified except pursuant to an agreement in writing entered into by Farmer Mac, the Purchaser and National Rural.  No provision of this Agreement may be waived except in writing by the party or parties receiving the benefit of and under such provision.

 

(b)  No failure or delay of Farmer Mac, the Purchaser or National Rural in exercising any power or right 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.  No waiver of any provision of this Agreement or consent to any departure by National Rural therefrom shall in any event be effective unless the same shall be authorized as provided in paragraph (a) of this Section 8.06, 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 National Rural in any case shall entitle National Rural to any other or further notice or demand in similar or other circumstances.

 

SECTION 8.07.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.

  

Page 14

 

SECTION 8.08.           Termination of Agreement.  Subject to Section 2.01 above, this Agreement shall terminate upon the later of the last day of the Draw Period or the indefeasible payment in full of all amounts payable hereunder and under the Notes.

 

SECTION 8.09.           Survival.  The representations and warranties of each of the parties hereto contained in this Agreement and contained in each of the other Note Documents, and the parties’ obligations under any and all thereof, shall survive and shall continue in effect following the execution and delivery of this Agreement, any disposition of the Notes and the expiration or other termination of any of the other Note Documents, but, in the case of each Note Document, shall not survive the expiration or the earlier termination of such Note Document, except to the extent expressly set forth

in such Note Document.

 

SECTION 8.10.           Severability.  If any term or provision of this Agreement or any Note Document or the application thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or such provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any remaining terms or provisions of such Note Document or the application of such term or provision to circumstances other than those as to which it is held invalid or unenforceable.

 

ARTICLE IX

GUARANTEE

SECTION 9.01.           Guarantee.

 

(a)  The Guarantor agrees to pay in full to the holder of each Note, the principal of, and interest on, the Notes when due, whether at maturity, upon redemption or otherwise (the “Guaranteed Obligations”), on the applicable due date for such payment.

 

(b)  The Guarantor’s obligations hereunder shall inure to the benefit of and shall be enforceable by any holder of a Note if, for reason beyond the control of such holder, such holder shall have failed to receive the interest or principal, as applicable, payable to such holder any payment date, redemption date or stated maturity date.  The Guarantor hereby irrevocably agrees that its obligations hereunder shall be unconditional, irrespective of the validity, legality or enforceability of, or any change in or amendment to, this Agreement, the Pledge Agreement or any Note, the absence of any action to enforce the same, the waiver or consent by the holder of any Note or by the Collateral Agent with respect to any
provisions of this Agreement or the Pledge Agreement, or any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a guarantor.  The Guarantor hereby waives diligence, presentment, demand of payment, protest or notice with respect to each Note or the interest represented thereby, and all demands whatsoever, and covenants that the guarantee will not be discharged except upon complete irrevocable payment of the principal and interest obligations represented by the Notes.

  

Page 15

 

(c)  The Guarantor shall be subrogated to and is hereby assigned all rights of the holder of the Notes against National Rural and the proceeds of the Pledged Collateral, all in respect of any amounts paid by the Guarantor pursuant to the provisions of the guarantee contained in this Article IX.  Each holder shall execute and deliver to the Guarantor in each holder’s name such instruments and documents as the Guarantor may reasonably request in writing confirming or evidencing such subrogation and assignment.

 

(d)  No reference herein shall alter or impair the guarantee, which is absolute and unconditional, of the due and punctual payment of principal of, and interest on, the Notes, on the dates such payments are due.

 

(e)  The guarantee is not an obligation of, and is not a guarantee as to principal or interest by the Farm Credit Administration, the United States or any other agency or instrumentality of the United States (other than the Guarantor).

 

(f)  The guarantee shall be governed by, and construed in accordance with, Federal law.  To the extent Federal law incorporates state law, that state law shall be the laws of the District of Columbia applicable to contracts made and performed therein.

 

SECTION 9.02.           Control by the Guarantor. If the Guarantor is the Control Party, the Guarantor shall be considered the holder of all Notes outstanding for all purposes under the Pledge Agreement and shall be permitted to take any and all actions permitted to be taken by the holder thereunder.  The Control Party will have the sole right to direct the time, method and place of conducting any proceeding for any remedy available to the Collateral Agent or any holder with respect to the Notes or exercising any power conferred on the Collateral Agent with respect to the Notes provided that:

 

(i) such direction shall not be in conflict with any rule of law or with the Pledge Agreement;

 

(ii) the Collateral Agent shall have been provided with indemnity from the Control Party reasonably satisfactory to it; and

 

(iii) the Collateral Agent may take any other action deemed proper by such Collateral Agent that is not inconsistent with such direction, provided, however, that the Collateral Agent need not take any action which it determines might expose it to liability.

 

[SIGNATURE PAGE FOLLOWS]

  

Page 16

  

IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed by an authorized officer as of the day and year first above written.

 

	
FARMER MAC MORTGAGE SECURITIES CORPORATION

	  	  
	
By:

	
/s/ Jerome G. Oslick

	
Name:

	
Jerome G. Oslick

	
Title:

	
Vice President

	
FEDERAL AGRICULTURAL

MORTGAGE CORPORATION

	  	  
	
By:

	
/s/ Timothy L. Buzby

	
Name:

	
Timothy L. Buzby

	
Title:

	
Senior Vice President – Chief Financial

	  	
Officer

	
NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

	  	  
	
By:

	
/s/ R. Larochelle

	
Name:

	
Rich Larochelle

	
Title:

	
Senior Vice President, Corporate

	  	
Relations

  

  

 

SCHEDULE I

TO

NOTE PURCHASE AGREEMENT

Addresses for Notices

 

	
1.

	
The addresses referred to in Section 8.03 hereof, for purposes of delivering communications and notices, are as follows:

 

If to the Purchaser or Farmer Mac:

 

Federal Agricultural Mortgage Corporation

1133 21st Street, N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Timothy L. Buzby, Senior Vice President – Chief Financial Officer

With a copy to:

Federal Agricultural Mortgage Corporation

1133 21st Street, N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Robert Owens, Manager – Capital Markets Group

With a copy also to:

Federal Agricultural Mortgage Corporation

1133 21st Street, N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Stephen P. Mullery, Deputy General Counsel

If to National Rural:

 

National Rural Utilities Cooperative Finance Corporation

2201 Cooperative Way

Herndon, VA 20171-3025

Telephone:  703-709-6718

Fax:  703-709-6779

Attn: Andrew Don, Senior Vice President & Treasurer

With a copy to:

 

National Rural Utilities Cooperative Finance Corporation

2201 Cooperative Way

Herndon, VA 20171-3025

Telephone:  703-709-6748

Fax:  703-709-6779

Attn: John Suter, Vice President, Capital Market Funding

  

  

 

With a copy also to:

 

National Rural Utilities Cooperative Finance Corporation

2201 Cooperative Way

Herndon, VA 20171-3025

Telephone:  703-709-6712

Fax:  703-709-6811

Attn: John J. List, Esq., Senior Vice President & General Counsel

  

  

 

SCHEDULE II

[Reserved.]

  

  

 

SCHEDULE III

TO

NOTE PURCHASE AGREEMENT

FORM OF PRICING AGREEMENT

The Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the United States and an institution of the Farm Credit System (“Farmer Mac”), Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of Farmer Mac (the “Purchaser”) and National Rural Utilities Cooperative Finance Corporation, a cooperative association existing under the laws of the District of Columbia (“National Rural”), agree that, on _______ __, 20__ (the “Closing Date”), the Purchaser will purchase from National Rural and National Rural will sell to the Purchaser a [Fixed Rate Note] [Floating Rate Note] in the aggregate principal amount of $________________ (the “Note”) with the following terms:

 

[Floating Index: _______] or [Fixed Index: ______]

 

[Applicable Margin (Fixed)] or [Applicable Margin (Floating)]:__________

 

Interest Payment Dates: ___________

 

Interest Periods: _____________

 

[The Note may not be prepaid at any time.]

 

[The Note may not be prepaid prior to __________ __, 20__.  On or after _______________, 20__, the Note may be prepaid on the scheduled call dates set forth herein, in whole [only] [or in part], at the option of National Rural, according to the terms of the Note Purchase Agreement (as defined below).][The Note may be prepaid in whole [only] [or in part] at any time.] [National Rural may prepay such Note upon at least _______ (__) Business Days prior written notice to Farmer Mac, which notice shall be received by Farmer Mac on a day that is on or before the ______ Business Day prior to the related call date, but in any event, no later than noon eastern time on the ______ Business Day prior to the related call date.  In the event that any such repayment or prepayment of the principal amount of any

Note is made on a day other than an Interest Payment Date, accrued interest on the principal amount thereof shall be payable through and excluding the call date on which such repayment or prepayment is made.]

 

[Scheduled call dates: __________________]

 

Maturity Date: __________________

 

The issuance and sale of the Note by National Rural to the Purchaser shall occur under the terms and conditions of the Note Purchase Agreement, dated as of January 11, 2011, among Farmer Mac, the Purchaser and National Rural (the “Note Purchase Agreement”).  All of the provisions contained in the Note Purchase Agreement are hereby incorporated by reference in their entirety and shall be deemed to be a part of this Pricing Agreement to the same extent as if such provisions had been set forth in full herein.  Capitalized terms used herein and not defined herein shall have the meanings given to those terms in the Note Purchase Agreement.  This Pricing Agreement may be executed in two or more counterparts.

  

  

 

In the event of any inconsistency between the terms of this Pricing Agreement and the Note Purchase Agreement, the terms of this Pricing Agreement shall apply.

 

Agreed to this __ day of _______, 20__.

 

	
Federal Agricultural Mortgage Corporation

	  
	
By:

	
    

	
Name:  

	
    

	
Title:

	
    

	  
	
Farmer Mac Mortgage Securities

	
Corporation

	  
	
By:

	
    

	
Name:

	
    

	
Title:

	
    

	  
	
National Rural Utilities Cooperative

	
Finance Corporation

	  
	
By:

	
    

	
Name:

	
    

	
Title:

	
    

  

  

 

ANNEX A-1

[FORM OF FIXED RATE NOTE]

 

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

 

__% Fixed Rate Senior Note due _______

 

Washington, D.C.

____________, 20__

 

FOR VALUE RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (“National Rural”), a District of Columbia cooperative association, hereby promises to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary of Farmer Mac (as defined below) (“the Purchaser”), or registered assigns, the principal sum of _______________ MILLION DOLLARS ($___,000,000.00) on __________________, together with interest computed from the date hereof according to the terms of the Note Purchase Agreement (as defined below).

 

Payments of principal and interest on this Note are to be made in lawful money of the United States of America at such place as shall have been designated by written notice to National Rural from the registered holder of this Note as provided in the Note Purchase Agreement referred to below.

 

This Note is issued pursuant to a Note Purchase Agreement, dated as of January 11, 2011, as well as the Pricing Agreement for $__ Fixed Rate Notes dated as of ______ __, 20__ (together, as from time to time amended, the “Note Purchase Agreement”), among National Rural, the Purchaser and Federal Agricultural Mortgage Corporation (“Farmer Mac”), and is entitled to the benefits thereof.  This Note is also entitled to the benefits of the Pledge Agreement, dated as of January 11, 2011, among National Rural, the Purchaser, Farmer Mac and the Collateral Agent named therein.

 

Capitalized terms used herein and not defined herein shall have the meanings given to those terms in the Note Purchase Agreement.

 

This Note is a registered Note and, upon surrender of this Note for registration of transfer or exchange, accompanied by a written instrument of transfer duly executed by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, National Rural may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and National Rural will not be affected by any notice to the contrary.

  

  

 

[This Note may not be prepaid at any time.][This Note may not be prepaid prior to __________ __, 20__.  On or after _____________ __, 20__, this Note may be prepaid at any time, in whole [only] [or in part], at the option of National Rural, according to the terms of the Note Purchase Agreement and provided that, if such optional prepayment is made on a date other than an Interest Payment Date, accrued interest on the principal amount hereof that is being prepaid shall be payable through and excluding the date such optional prepayment is made.][This Note is prepayable at any time by National Rural, in whole [only] [or in part] at the option of National Rural on the terms set forth in the Note Purchase Agreement.] [National Rural may prepay such Note upon at least _______ (__) Business Days prior written
notice to Farmer Mac, which notice shall be received by Farmer Mac on a day that is on or before the ______ Business Day prior to the related call date, but in any event, no later than noon eastern time on the ______ Business Day prior to the related call date.  In the event that any such repayment or prepayment of the principal amount of any Note is made on a day other than an Interest Payment Date, accrued interest on the principal amount thereof shall be payable through and excluding the call date on which such repayment or prepayment is made.]

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared due and payable in the manner, at the price and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of National Rural and the holder hereof shall be governed by, the laws of the District of Columbia, excluding choice-of-law principles of the law of the District of Columbia that would require the application of the laws of another jurisdiction.

 

	 	
NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

	  	  	  
	
    

	
By  

	
    

	  	  	  
	  	  	
Name:

	  	  	
Title:

  

  

  

ANNEX A-2

[FORM OF FLOATING RATE NOTE]

 

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

 

Floating Rate Senior Note due _______

 

Washington, D.C.

____________, 20__

 

FOR VALUE RECEIVED, the undersigned, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (“National Rural”), a District of Columbia cooperative association, hereby promises to pay to FARMER MAC MORTGAGE SECURITIES CORPORATION, a wholly owned subsidiary of Farmer Mac (as defined below)(the “Purchaser”), or registered assigns, the principal sum of _______________ MILLION DOLLARS ($___,000,000.00) on __________________, together with interest computed from the date hereof according to the terms of the Note Purchase Agreement (as defined below).

 

Payments of principal and interest on this Note are to be made in lawful money of the United States of America at such place as shall have been designated by written notice to National Rural from the registered holder of this Note as provided in the Note Purchase Agreement referred to below.

 

This Note is issued pursuant to a Note Purchase Agreement, dated as of January 11, 2011, as well as the Pricing Agreement for $__ Floating Rate Notes dated as of _________ __, 20__ (together, as from time to time amended, the “Note Purchase Agreement”), among National Rural, the Purchaser and Federal Agricultural Mortgage Corporation (“Farmer Mac”) and is entitled to the benefits thereof.  This Note is also entitled to the benefits of the Pledge Agreement, dated as of January 11, 2011, among National Rural, Farmer Mac, the Purchaser and the Collateral Agent named therein.

 

Capitalized terms used herein and not defined herein shall have the meanings given to those terms in the Note Purchase Agreement.

 

This Note is a registered Note and, upon surrender of this Note for registration of transfer or exchange, accompanied by a written instrument of transfer duly executed by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, National Rural may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and National Rural will not be affected by any notice to the contrary.

  

  

 

[This Note may not be prepaid at any time.][This Note may not be prepaid prior to __________ __, 20__.  On or after _____________ __, 20__, this Note may be prepaid at any time, in whole [only] [or in part], at the option of National Rural, according to the terms of the Note Purchase Agreement and provided that, if such optional prepayment is made on a date other than an Interest Payment Date, accrued interest on the principal amount hereof that is being prepaid shall be payable through and excluding the date such optional prepayment is made.][This Note is prepayable at any time by National Rural, in whole [only] [or in part] at the option of National Rural on the terms set forth in the Note Purchase Agreement.] [National Rural may prepay such Note upon at least _______ (__) Business Days prior written
notice to Farmer Mac, which notice shall be received by Farmer Mac on a day that is on or before the ______ Business Day prior to the related call date, but in any event, no later than noon eastern time on the ______ Business Day prior to the related call date.  In the event that any such repayment or prepayment of the principal amount of any Note is made on a day other than an Interest Payment Date, accrued interest on the principal amount thereof shall be payable through and excluding the call date on which such repayment or prepayment is made.]

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared due and payable in the manner, at the price and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of National Rural and the holder hereof shall be governed by, the laws of the District of Columbia, excluding choice-of-law principles of the law of the District of Columbia that would require the application of the laws of another jurisdiction.

 

	 	
NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

	  	  	  
	
    

	
By  

	
    

	  	  	  
	  	  	
Name:

	  	  	
Title:

  

  

 

ANNEX B

 

[FORM OF OPINION OF COUNSEL TO NATIONAL RURAL]

 

[•]

Federal Agricultural Mortgage Corporation

1133 Twenty-First Street, NW

Suite 600

Washington, DC 20036

Gentlemen:

I am delivering this opinion as general counsel (“Counsel”) of National Rural Utilities Cooperative Finance Corporation, a District of Columbia cooperative association (the “Borrower”), and am familiar with matters pertaining to the loan to Borrower in the principal amount of $1,500,000,000.00, provided for in the Note Purchase Agreement, dated as of January 11, 2011 (“Note Purchase Agreement”), among the Borrower, Farmer Mac Mortgage Securities Corporation (the “Purchaser”) and Federal Agricultural Mortgage Corporation (“Farmer Mac”).

I have examined such corporate records and proceedings of the Borrower, and such other documents as I have deemed necessary as a basis for the opinions hereinafter expressed.

I have also examined the following documents as executed and delivered: (a) the Note Purchase Agreement; (b) the Note dated as of ____________, in the principal amount of $____________ (“Note”), said Note payable to the Purchaser; (c) the Pricing Agreement for $__________ [Fixed] [Floating] Rate Note dated as of ____________ among the Borrower, the Purchaser and Farmer Mac (the “Pricing Agreement”) and (d) the Pledge Agreement, dated as of January 11, 2011, among the Borrower, the Purchaser, Farmer Mac and U.S. Bank National Association (the “Pledge Agreement”).  The documents described in items (a) through (d) above are collectively referred to herein as the “Note Documents.”

Based on the foregoing, but subject to the assumptions, exceptions, qualifications and limitations hereinafter expressed, I am of the opinion that:

(1)           The Borrower has been duly incorporated and is validly existing as a cooperative association in good standing under the laws of the District of Columbia with corporate power and authority to execute and perform its obligations under the Note Documents.

(2)           The Note Documents have been duly authorized, executed and delivered by the Borrower, and such documents constitute the legal, valid and binding agreements of the Borrower, enforceable against the Borrower in accordance with their respective terms.

  

  

  

(3)           Neither the execution nor the delivery by the Borrower of any of the Note Documents nor the consummation by the Borrower of any of the transactions contemplated therein, including, without limitation, the pledge of the Pledged Securities (as such term is defined in the Pledge Agreement) to Farmer Mac, nor the fulfillment by the Borrower of the terms of any of the Note Documents will conflict with or violate, result in a breach of or constitute a default under any term or provision of the Articles of Incorporation or By-laws of the Borrower or any law or any regulation or any order known to Counsel currently applicable to the Borrower of any court, regulatory body, administrative agency or governmental body having jurisdiction over the
Borrower or the terms of any indenture, deed of trust, note, note agreement or instrument to which the Borrower is a party or by which the Borrower or any of its properties is bound.

(4)           No approval, authorization, consent, order, registration, filing, qualification, license or permit of or with any state or Federal court or governmental agency or body having jurisdiction over the Borrower is required for any consummation by the Borrower of the transactions contemplated by the Note Documents; provided, however, no opinion is expressed as to the applicability of any Federal or state securities law to any sale, transfer or other disposition of the Note after the date hereof.

(5)           Except as set forth in writing and previously delivered to Farmer Mac or attached hereto as Exhibit A, there is no pending or, to Counsel’s knowledge, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator with respect to the Borrower, or any of the Note Documents, which, if adversely determined, would have a material adverse effect on the Borrower’s financial condition or its ability to perform its obligations under any of the Note Documents.

(6)           With respect to the Pledged Securities in the Certificate of Pledged Collateral (as such term is defined in the Pledge Agreement), (x) all action with respect to the recording, registering or filing of financing statements in the jurisdiction of organization of National Rural has been taken as is necessary to perfect the security interest intended to be created in such items under the Uniform Commercial Code and (y) in the case of each Eligible Security (as such term is defined in the Pledge Agreement) constituting a certificated security or instrument under the Uniform Commercial Code, such Eligible Security has been delivered to the Collateral Agent such that the taking and retention of the possession by the Collateral Agent of such Eligible

Security is sufficient to perfect the security interest to be created under the Uniform Commercial Code.  For purposes of the opinion set forth in this section (6), I have assumed that the Uniform Commercial Code of the District of Columbia is the same as that of the State of New York.

The foregoing opinions are subject to the following assumptions, exceptions, qualifications and limitations:

  

  

 

A.           I am a member of the Bar of the District of Columbia and render no opinion on the laws of any jurisdiction other than the laws of the District of Columbia, the federal laws of the United States of America and the General Corporation Law of the District of Columbia.

B.           My opinions are limited to the present laws and to the facts, as they presently exist.  I assume no obligation to revise or supplement this opinion should the present laws of the jurisdictions referred to in paragraph A above be changed by legislative action, judicial decision or otherwise.

C.           The opinions expressed in paragraph 2 above shall be understood to mean only that if there is a default in performance of an obligation, (i) if a failure to pay or other damage can be shown and (ii) if the defaulting party can be brought into a court which will hear the case and apply the governing law, then, subject to the availability of defenses, and to the exceptions set forth in the next paragraph, the court will provide a money damage (or perhaps injunctive or specific performance) remedy.

D.           My opinions are also subject to the effect of:  (1) bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting creditors’ rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers); and (2) the exercise of judicial discretion and the application of principles of equity, good faith, fair dealing, reasonableness, conscionability and materiality (regardless of whether the applicable agreements are considered in proceeding in equity or at law).

E.           This letter is rendered to you in connection with the Note Documents and the transactions related thereto, and may not be relied upon by any other person or by you in any other context or for any other purpose.

F.           I have assumed with your permission (i) the genuineness of all signatures by each party other than the Borrower, (ii) the authenticity of documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as copies, and (iii) the due execution and delivery, pursuant to due authorization, of the Note Documents by each party other than the Borrower.

Yours sincerely,

John J. List

General Counsel

  

  

 

ANNEX C

 

[FORM OF OFFICERS’ CERTIFICATE]

 

Officers’ Certificate

 

TO:                        Federal Agricultural Mortgage Corporation.

 

We, _________________, _________________, and ________________, _____________________, of National Rural Utilities Cooperative Finance Corporation (“National Rural”), pursuant to the Note Purchase Agreement dated as of January 11, 2011, among National Rural, Farmer Mac Mortgage Securities Corporation, and Federal Agricultural Mortgage Corporation (the “Note Purchase Agreement”), hereby certify on behalf of National Rural that as at the date hereof:

 

(1)           National Rural is a lending institution organized as a private, not-for-profit, cooperative association with the appropriate expertise, experience and qualifications to make loans to its Members for rural electrification and related purposes;

 

(2)           no material adverse change has occurred in the financial condition of National Rural between the date of the end of National Rural’s most recently completed Fiscal Year for which Financial Statements have been made publicly available and the date hereof, which has not been set forth in documents, certificates, or financial information furnished to Farmer Mac or publicly filed;

 

(3)           all of the representations contained in Section 5.02 of the Note Purchase Agreement remain true and correct in all material respects on and as of the date hereof; and

 

(4)           no Event of Default exists.

 

Capitalized terms used in this certificate shall have the meanings given to those terms in the Note Purchase Agreement.

 

DATED as of this _____ day of ______________, _________.

 

	
NATIONAL RURAL UTILITIES

	
COOPERATIVE FINANCE CORPORATION

	  
	
     

	
Name:

	
Title

	  
	
     

	
Name:

	
Title:

  

  

 

ANNEX D

 

[FORM OF SERIES C PREFERRED STOCK PURCHASE AGREEMENT]

  

  

 

ANNEX E

 

SAMPLE

	
Coopid

	 	
Facilityid

	 	
Name

	 	
Class

	 	 	
Facility Risk Rating

	 	 	
Coop Risk Rating

	 	 	
Facility O/s Balance

	 
	
AK002

	 	 	9033	 	
Matanuska Electric Association, Inc.

	 	A	 	 	 	2.5	 	 	 	3	 	 	$	3,250,000.00	 
	
AK002

	 	 	9034	 	
Matanuska Electric Association, Inc.

	 	A	 	 	 	2.5	 	 	 	3	 	 	$	3,350,000.00	 
	
AK002

	 	 	9035	 	
Matanuska Electric Association, Inc.

	 	A	 	 	 	2.5	 	 	 	3	 	 	$	3,470,000.00	 

  

  

 

ANNEX F

 

SAMPLE

	
COOP IDS

	  	
year

	  	
dep_amort_exp

	  	
interest_ltd_exp

	  	
patcap_op_margins

	  	
non_op_margins_interest

	  	
g_and_t_capital_credits

	  	
other_capital_credits_pat_div

	  	
net_utility_plant

	MN048	
  

	
2008

	
  

	
8417985

	
  

	
6310184

	
  

	
-3177921

	
  

	
174637

	
  

	
6333697

	
  

	
993039

	
  

	
192833241

 

	
tot_assets_other_debits

	  	
tot_margins_equities

	  	
tot_ltd

	  	
long_term_lease_rental_tot 

	  	
tot_pmt_ltd_bc

	  	
tot_pmt_ltd_ffb

	  	
tot_pmt_ltd_rus_edl

	  	
tot_pmt_ltd_other1

	  	
tot_pmt_ltd_other2

	
311655261

	
  

	
127968457

	
  

	
112263396

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

 

	
payee_ltd_other4

	  	
payee_ltd_other5

	  	
tot_pmt_ltd_other6

	  	
tot_pmt_ltd_other7

	  	
tot_pmt_ltd_other8

	  	
tot_pmt_ltd_other9

	  	
tot_pmt_ltd_other10

	  	
cfc_bill_debt_service_tot

	  	
rus_bill_debt_service_tot

	  	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	
  

	
11079647Exhibit 10.41

EXECUTION VERSION

  

 

FARMER MAC MORTGAGE

SECURITIES CORPORATION,

As Note Purchaser

NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION,

As Borrower

U.S. BANK NATIONAL ASSOCIATION,

As Collateral Agent

FEDERAL AGRICULTURAL

MORTGAGE CORPORATION,

As Guarantor

PLEDGE AGREEMENT

 

  

Dated as of January 11, 2011

  

  

 

	

ARTICLE I

	 
	

Definitions

	 	 	 
	
Section 1.01.

	
Definitions

	
3

	
Section 1.02.

	
Principles of Construction

	
7

	  	  
	
ARTICLE II

	  
	
Provisions as to Pledged Collateral

	  	  
	
Section 2.01.

	
Holding of Pledged Securities

	
7

	
Section 2.02.

	
UCC Filings

	
8

	
Section 2.03.

	
Withdrawal and Substitution of Pledged Collateral

	
8

	
Section 2.04.

	
[Reserved]

	
9

	
Section 2.05.

	
Addition of Pledged Collateral

	
9

	
Section 2.06.

	
Accompanying Documentation

	
9

	
Section 2.07.

	
Renewal; Extension; Substitution

	
9

	
Section 2.08.

	
Voting Rights; Interest and Principal

	
9

	
Section 2.09.

	
Protection of Title; Payment of Taxes; Liens, etc

	
11

	
Section 2.10.

	
Maintenance of Pledged Collateral

	
12

	
Section 2.11.

	
Representations, Warranties and Covenants

	
12

	
Section 2.12.

	
Further Assurances

	
13

	  	  
	
ARTICLE III

	  
	
[Reserved]

	  
	
ARTICLE IV

	  
	
Remedies

	  	  
	
Section 4.01.

	
Events of Default

	
13

	
Section 4.02.

	
Remedies upon Default

	
13

	
Section 4.03.

	
Application of Proceeds

	
15

	
Section 4.04.

	
Securities Act

	
16

	  	  
	
ARTICLE V

	  
	
The Collateral Agent

	  	  	  
	
Section 5.01.

	
Certain Duties and Responsibilities

	
17

	
Section 5.02.

	
Certain Rights of Collateral Agent

	
18

	
Section 5.03.

	
Money Held by Collateral Agent

	
19

	
Section 5.04.

	
Compensation and Reimbursement

	
19

  

i

 

	
Section 5.05.

	
Corporate Collateral Agent Required; Eligibility

	
20

	
Section 5.06.

	
Resignation and Removal; Appointment of Successor

	
20

	
Section 5.07.

	
Acceptance of Appointment by Successor

	
21

	
Section 5.08.

	
Merger, Conversion, Consolidation or Succession to Business

	
21

	  	  	  
	
ARTICLE VI

	  
	
Miscellaneous

	  	  	  
	
Section 6.01.

	
Notices

	
22

	
Section 6.02.

	
Waivers; Amendment

	
22

	
Section 6.03.

	
Successors and Assigns

	
22

	
Section 6.04.

	
Counterparts; Effectiveness

	
23

	
Section 6.05.

	
Severability

	
23

	
Section 6.06.

	
GOVERNING LAW

	
23

	
Section 6.07.

	
WAIVER OF JURY TRIAL

	
23

	
Section 6.08.

	
Headings

	
23

	
Section 6.09.

	
Security Interest Absolute

	
24

	
Section 6.10.

	
Termination or Release

	
24

	
Section 6.11.

	
Collateral Agent Appointed Attorney-in-Fact

	
25

	  	  	  
	
Schedule I – Additional Criteria for Eligible Securities

	  
	
Schedule II – Addresses for Notices

	  

Annex A – Form of Certificate of Pledged Collateral

  

ii

 

PLEDGE AGREEMENT, dated as of January 11, 2011, among NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a District of Columbia cooperative association and its successors and assigns (hereinafter called “National Rural”), FARMER MAC MORTGAGE SECURITIES CORPORATION, (the “Purchaser”), a wholly owned subsidiary of FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally-chartered instrumentality of the United States and an institution of the Farm Credit System and its successors and assigns (“Farmer Mac”), U.S. BANK NATIONAL ASSOCIATION, a national banking association and its successors and assigns (hereinafter called the “Collateral Agent”), and Farmer Mac, as Guarantor.

 

RECITALS OF NATIONAL RURAL

 

WHEREAS, National Rural may from time to time issue one or more Notes to the Purchaser, and the Purchaser may purchase such Notes, all upon the terms and subject to the conditions set forth in the Note Purchase Agreement; and

 

WHEREAS, National Rural is required pursuant to the terms of the Note Purchase Agreement to pledge certain property to the Collateral Agent for the benefit of the Control Party to secure National Rural’s obligations on the Notes;

 

NOW, THEREFORE, THIS PLEDGE AGREEMENT WITNESSETH that, to secure the performance of the certain Obligations contained in the Notes, the Note Purchase Agreement and herein, National Rural hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Control Party, and grants to the Collateral Agent, its successors and assigns, for the benefit of the Control Party, a security interest in the following (collectively referred to as the “Pledged Collateral”) as provided in Article II: (a)(i) the Pledged Securities and the certificates representing the Pledged Securities; (ii) subject to Section 2.08, 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 2.08, all rights and privileges of National Rural with respect to the Pledged Securities; (iv) all Proceeds of any of the foregoing above; that may, on the date hereof or from time to time hereafter, be subjected to the Lien hereof by National Rural 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 any reservations, limitations or conditions agreed to in writing by National Rural and the Control Party 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 the Control Party, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

ARTICLE I

Definitions

SECTION 1.01.  Definitions.  As used in this Pledge Agreement, the following terms shall have the following meanings:

 

“Accounting Requirements” shall mean any system of accounts prescribed by a federal regulatory authority having jurisdiction over the Member or, in the absence thereof, the requirements of GAAP applicable to businesses similar to that of the Member.

 

“Allowable Amount” on any date, means with respect to Eligible Securities, the aggregate principal amount of such Eligible Securities theretofore advanced thereon which remains unpaid on such date, subject to any limitation on the Allowable Amount applicable through the definition of “Eligible Security”.

 

“Certificate of Pledged Collateral” means a certificate delivered to the Collateral Agent and the Control Party substantially in the form of Annex A attached hereto.

 

“Class A Member” means any Class A Member of National Rural as described in National Rural’s Bylaws currently in effect.

 

“Class B Member” means any Class B Member of National Rural as described in National Rural’s Bylaws currently in effect.

 

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

 

“Control Party” means (i) the Guarantor, so long as no Guarantor Default has occurred and is continuing, or (ii) the holders of the Notes for so long as a Guarantor Default has occurred and is continuing.

 

“Control Party Notice” and “Control Party Order” mean, respectively, a written notice or order signed by any Vice President of the Control Party and delivered to the Collateral Agent and National Rural.

 

“Control Party Notice of Default” has the meaning given to that term in Section 4.02.

  

3

 

“Depreciation and Amortization Expense” shall mean an amount constituting the depreciation and amortization of the Member computed pursuant to Accounting Requirements.

“Eligible Member” means any Class A Member or Class B Member of National Rural as described in National Rural’s Bylaws currently in effect.

“Eligible Security” means a secured note or bond of any Eligible Member payable or registered to, or to the order of, National Rural, (A) in respect of which (i) the outstanding principal amount under such note or bond, together with the outstanding principal amount of all other notes or bonds of such Eligible Member (x) pledged hereunder, (y) pledged to secure any other notes or bonds issued by National Rural to Farmer Mac or any affiliate, or (z) sold by National Rural or any affiliate to Farmer Mac, any affiliate of Farmer Mac, or any trust whose beneficial ownership is owned or controlled by Farmer Mac or an affiliate or that issues pass-through securities guaranteed by Farmer Mac, does not aggregate more than $50 million;
provided, however, that a note or bond in excess of $50 million (considered together with all other notes or bonds of such Eligible Member pledged hereunder, pledged to secure any other notes or bonds issued by National Rural to Farmer Mac or any affiliate, or sold by National Rural or any affiliate to Farmer Mac, any affiliate of Farmer Mac, or any trust whose beneficial ownership is owned or controlled by Farmer Mac or an affiliate or that issues pass-through securities guaranteed by Farmer Mac) may be pledged hereunder but only $50 million of the principal amount of such note or bond shall be counted in the Allowable Amount of such Eligible Security (with the amount of any such excess recorded in Item 7 of the Certificate of Pledged Collateral in the form of Annex A attached hereto), (ii) 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 and (iii) no “event of default” as defined in such note or bond (or in any instrument creating a security interest in favor of National Rural 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); (B) which is not classified by National Rural as a non-performing loan under generally accepted accounting principles in the United States; and (C) which otherwise satisfies the criteria set forth on Schedule I hereto, as such Schedule I may be amended from time to time as mutually agreed upon in writing by Farmer Mac and National Rural, with notice of any such amendment to the Collateral Agent prior to the pledge of such Eligible Security.

 

“Equity” means the aggregate of the Member's equities and margins computed pursuant to Accounting Requirements.

 

“Equity to Total Capitalization Ratio” means (A) the sum of all Total Margins and Equity of all members of a Class B Member, divided by (B) the sum of (i) Total Margins and Equity of such members and (ii) Long-Term Debt for such members, all calculated in accordance with the requirements of the U.S. Department of Agriculture RUS Form 7, or, if such form is unavailable with respect to such member, the National Rural Form 7.

  

4

 

“Event of Default” has the meaning set forth in Section 4.01.

 

“Facility Rating” means the facility rating assigned by National Rural to an Eligible Security from time to time in accordance with National Rural's internal risk rating system.

 

“GAAP” means generally accepted accounting principles in the United States as in effect from time to time.

 

“Guarantor Default” means a default by the Guarantor under its obligations pursuant to Article IX of the Note Purchase Agreement which is existing and continuing.

 

“Interest Expense” means an amount constituting the interest expense with respect to Long-Term Debt of the Member computed pursuant to Accounting Requirements.

 

“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.

 

“Long-Term Debt” is determined in accordance with the Uniform System of Accounts prescribed at the time by RUS or, if such Member is not required to maintain its accounts in accordance with said Uniform System of Accounts, otherwise determined in accordance with GAAP.

 

“Member” shall mean any Person who is member of National Rural.

 

“Modified Debt Service Coverage Ratio—Distribution” shall mean the definition of Coverage Ratio as defined in the Indenture dated October 25, 2007 by and between National Rural Utilities Cooperative Finance Corporation and U.S. Bank National Association for the Collateral Trust Bonds.

 

“Modified Debt Service Coverage Ratio—G&T” shall mean the ratio determined as follows: for any calendar year add (i) Operating Margins, (ii) Non-Operating Margins—Interest, (iii) Interest Expense, (iv) Depreciation and Amortization Expense, and (v) cash received in respect of generation and transmission and other capital credits, and divide the sum so obtained by the sum of all payments of Principal and Interest Expense required to be made during such calendar year; provided, however, that in the event that any amount of Long-Term Debt has been
refinanced during such year, the payments of Principal and Interest Expense required to be made during such year on account of such refinanced amount of Long-Term Debt shall be based (in lieu of actual payments required to be made on such refinanced amount of Long-Term Debt) upon the larger of (i) an annualization of the payments required to be made with respect to the refinancing debt during the portion of such year such refinancing debt is outstanding or (ii) the payment of Principal and Interest Expense required to be made during the following year on account of such refinancing debt.

  

5

 

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

 

“Non-Operating Margins—Interest” means the amount representing the interest component of non-operating margins of the Member computed pursuant to Accounting Requirements.

 

“Note Purchase Agreement” means the Note Purchase Agreement dated the date hereof between National Rural, the Purchaser and Farmer Mac, as the same may be amended from time to time in accordance with the terms thereof.

 

“Notes” means the note or notes issued by National Rural to the Purchaser under the Note Purchase Agreement.

 

“Obligations” means the due and punctual performance of the obligations of National Rural to make payments of principal, and interest on the Notes.

 

“Officers’ Certificate” means a certificate signed by any Vice President of National Rural, and delivered to the Control Party and/or the Collateral Agent, as applicable.

 

“Operating Margins” means the amount of patronage capital and operating margins of the Member computed pursuant to Accounting Requirements.

 

“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 amended pursuant to the applicable provisions hereof.

 

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

 

“Pledged Securities” means at any time the Eligible Securities listed on Schedule A and/or Schedule B to the Certificate of Pledged Collateral most recently delivered.

 

“Principal” means the amount of principal billed on account of Long-Term Debt of the Member computed pursuant to Accounting Requirements.

 

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

  

6

 

“RUS” mean the Rural Utilities Service of the United States Department of Agriculture, acting by and through the Administrator of the Rural Utilities Service, and including any successor agencies or departments.

 

“Total Assets” means an amount constituting the total assets of the Member computed pursuant to Accounting Requirements.

 

“Total Margins and Equity” means the Member’s total margins and equity computed pursuant to Accounting Requirements.

 

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

 

“Vice President” means any vice president of National Rural or Farmer Mac or the Purchaser, as applicable, whether or not designated by a number or a word or words added before or after the title “vice president”.

 

“Whole Loan Sale” means a secured loan by National Rural to an Eligible Member evidenced by a note payable to the order of National Rural, the outstanding principal amount of which has been sold by National Rural or any affiliate to Farmer Mac, any affiliate of Farmer Mac, or any trust whose beneficial ownership is owned or controlled by Farmer Mac or an affiliate or that issues pass-through securities guaranteed by Farmer Mac.

 

SECTION 1.02.  Other Defined Terms; Principles of Construction.  Capitalized terms used but not defined in this Pledge Agreement shall have the meanings given to them in the Note Purchase Agreement.  Unless the context shall otherwise indicate, the terms defined in Section 1.01 hereof include the plural as well as the singular and the singular as well as the plural.  The words “hereafter”, “herein”, “hereof”, “hereto” and “hereunder”, and words of similar import, refer to this Agreement as a whole.  The descriptive headings of the various articles and sections of this Agreement were formulated and inserted for convenience only and shall
not be deemed to affect the meaning or construction of the provisions hereof.

 

ARTICLE II

Provisions as to Pledged Collateral

SECTION 2.01.  Holding of Pledged Securities.

 

(a)  National Rural shall make available to the Control Party, within forty-five (45) days of a pledge of the Pledged Securities in connection with an advance (or for a longer period as National Rural and the Control Party agree), such back-up information as is reasonably necessary in order to allow the Control Party to confirm compliance of such Pledged Securities to the requisite criteria as outlined herein.  Upon receipt of the back-up information, the Control Party shall have ninety (90) days to object in writing to the inclusion of any item of the Pledged Securities as part of the Pledged Collateral.  If the Control Party reasonably determines that any of the Pledged Securities do not meet the criteria for Eligible Securities, then National Rural shall have forty-five (45) days in

which to provide substitute collateral, and the timeline specified above for National Rural to make available back-up material and confirmation shall also apply as to the substituted collateral.

  

7

 

(b)  The Collateral Agent, on behalf of the Control Party, shall hold the Pledged Securities in the name of National Rural (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 the Control Party, 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 National Rural, 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 National Rural (or its nominee).

 

SECTION 2.02.  UCC Filings.  National Rural shall prepare and file in the proper Uniform Commercial Code filing office in the District of Columbia (i) on or prior to the date of the first purchase of a Note under the Note Purchaser Agreement, 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 2.03.  Withdrawal and Substitution of Pledged Collateral.

(a)  Any part of the Pledged Collateral may be withdrawn by National Rural or substituted for other Eligible Securities by National Rural and shall be delivered to National Rural by the Collateral Agent upon National Rural Order at any time and from time to time, together with any other documents or instruments of transfer or assignment necessary to reassign to National Rural said Pledged Collateral and the interest of National Rural, provided the aggregate Allowable Amount of Pledged Collateral remaining after such withdrawal or substitution shall at least equal the aggregate principal amount of the Notes 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 as of the last day of the calendar month most recently ended at least ten (10) Business Days prior to such withdrawal or substitution (or a more recent date, at National Rural’s option), showing that immediately after such withdrawal or substitution the requirements of Subsection (a) of this Section will be satisfied; and

 

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

  

8

 

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

 

In case an Event of Default shall have occurred and be continuing, National Rural shall not withdraw or substitute any part of the Pledged Collateral.

 

SECTION 2.04.  [Reserved.]

 

SECTION 2.05.  Addition of Pledged Collateral.  At any time, National Rural may pledge additional Eligible Securities 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 as of the last day of the calendar month most recently ended at least 10 Business Days prior thereto (or a more recent date at National Rural’s option).

 

SECTION 2.06.  Accompanying Documentation.  Where Eligible Securities are delivered to the Collateral Agent under Section 2.01, 2.03 or Section 2.05, 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 2.01, 2.03 or Section 2.05 and comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by National Rural and such other instruments or documents as the Collateral Agent may reasonably request.

 

SECTION 2.07.  Renewal; Extension; Substitution.  Unless and until an Event of Default shall have occurred and be continuing, National Rural 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 National Rural 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 National Rural 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 National Rural 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 National Rural Order.

 

SECTION 2.08.  Voting Rights; Interest and Principal.  (a)  Unless and until an Event of Default has occurred and is continuing, and the Control Party delivers to the Collateral Agent a Control Party Notice of Default suspending National Rural’s rights under this clause:

  

9

 

(i) National Rural 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 Note Purchase Agreement or this Pledge Agreement.

 

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

 

(iii) National Rural 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 National Rural, shall not be commingled by National Rural with any of its other funds or property but shall

be held separate and 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 Control Party Notice of Default, all rights of National Rural to interest, principal or other distributions that National Rural is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.08 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 National Rural contrary to the provisions of this Section 2.08 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property

or funds of National Rural 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 4.03 to the fullest extent permitted by applicable law.  After all Events of Default have ceased, the Collateral Agent shall promptly repay to National Rural (without interest) all interest, principal or other distributions that National Rural would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.08 and that remain in such account.

  

10

 

(c)  If an Event of Default shall have occurred and be continuing, then, to the extent such rights are suspended by the applicable Control Party Notice of Default, all rights of National Rural to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.08, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.08, 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 National Rural to exercise such rights and powers.

 

SECTION 2.09.  Protection of Title; Payment of Taxes; Liens, etc.  National Rural 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 National Rural relative to any of the Pledged Collateral, and all covenants, terms and conditions under or upon which any part thereof is held;

 

(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 National Rural 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 National Rural (or a committee thereof).

  

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SECTION 2.10.  Maintenance of Pledged Collateral.  National Rural shall cause the Allowable 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 Notes outstanding.

 

SECTION 2.11.  Representations, Warranties and Covenants.  National Rural represents, warrants and covenants to the Collateral Agent, for the benefit of the Control Party, that from the time that Pledged Collateral is pledged hereunder, and for so long as such Pledged Collateral is required to remain pledged:

 

(a) except for the Lien hereof and any Lien consented to in writing by Farmer Mac or the Control Party, National Rural (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 Note Purchase 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;

 

(c) National Rural 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 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).

 

(e) by virtue of the execution and delivery by National Rural 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; and

 

(f) the Allowable Amount of Pledged Collateral from Class B Members under this Pledge Agreement and any other pledge agreement among the parties hereto, in each case excluding Whole Loan Sales, does not exceed $1 billion.

  

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SECTION 2.12.  Further Assurances.  National Rural 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.  National Rural 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 III

[Reserved]

ARTICLE IV

Remedies

SECTION 4.01.  Events of Default.  “Event of Default”, wherever used herein, means any “Event of Default” as defined in Section 7.01(a) of the Note Purchase 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 a Control Party Notice or National Rural 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 a Control Party Notice stipulating that such event has ceased to exist; or (ii) 30 days after receipt by the Collateral Agent of a National Rural Notice stipulating that such event has ceased to exist, provided that the Collateral Agent does not receive a Control Party Notice within such timeframe disputing the cessation of such Event of Default, and further provided that no additional Control Party Notice of Default shall have been received in respect of any other subsisting Event(s) of Default.  Upon receipt of any National
Rural Notice under subparagraph (ii) of this Subsection, the Collateral Agent shall provide a copy of such National Rural Notice to the Control Party.

 

SECTION 4.02.  Remedies upon Default.  If an Event of Default shall have occurred and be continuing, the Control Party may issue a notice (a “Control Party Notice of Default”), which may be combined with the notice provided under Section 4.01(b), suspending the rights of National Rural under Section 2.08 in part without suspending all such rights (as specified by the Control Party in its sole and absolute discretion) without waiving or otherwise affecting the Control Party’s rights to give additional Control Party Notices of Default from time to time suspending other rights under Section 2.08 so long as an Event of Default has occurred and is continuing.  Subject to paragraph (b) of this Section 4.02, upon cessation of an Event of Default, all rights of National Rural suspended under the applicable Control Party Notice of Default shall revest in National Rural.

  

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(a)  Upon the occurrence of an Event of Default, the Collateral Agent shall, for the benefit and at the direction of the Control Party, 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, National Rural agrees that the Collateral Agent shall have the right, but only if so instructed by a the Control Party 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 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 National Rural, and National Rural hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which National Rural now has or may at

any time in the future have under any rule of law or statute now existing or hereafter enacted.

  

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(b)  The Collateral Agent shall give National Rural 10 days’ written notice (which National Rural 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, the Control Party 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 National Rural (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 the Control Party from National Rural as a credit against the purchase price, and the Control Party 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 National Rural shall not be entitled to the return of the Pledged Collateral or any portion thereof subject thereto, notwithstanding the fact that 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 4.02 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 4.03.  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 to the fullest extent permitted by applicable law:

 

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 National Rural and any other reasonable costs or expenses incurred in connection with the exercise of any right or remedy hereunder;

 

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

  

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THIRD, to National Rural, 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 4.04.  Securities Act.  In view of the position of National Rural 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.  National Rural 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 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.  National Rural 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.  National
Rural 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.  National Rural 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 4.04 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.

  

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ARTICLE V

The Collateral Agent

SECTION 5.01.  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.

 

(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.

  

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SECTION 5.02.  Certain Rights of Collateral Agent.  Except as otherwise provided in Section 5.01:

 

(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 National Rural mentioned herein shall be sufficiently evidenced by a National Rural Notice or National Rural Order;

 

(c) any request or direction of the Control Party mentioned herein shall be sufficiently evidenced by a Control Party Notice or Control Party 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 National Rural, and a certificate signed by any Vice President of the Control Party in the case of the Control Party;

 

(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;

 

(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 National Rural or the Control Party 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 National Rural, 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;

  

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(i) unless explicitly stated herein to the contrary, the Collateral Agent shall have no duty to inquire as to the performance of National Rural’s covenants herein.  In addition, the Collateral Agent shall not be deemed to have knowledge of any Event of Default unless the Collateral Agent has received a Control Party Notice in accordance with Section 4.01(a), and shall not be deemed to have knowledge of the cessation of the same until such time as it receives a National Rural Notice in accordance with Section 4.01(b); and

 

(j) unless explicitly stated herein to the contrary, the Collateral Agent shall have no obligation to take any action with respect to any Event of Default until it has received a Control Party Notice applicable to such event in accordance with Section 4.01(a), 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 Control Party Notice is delivered.  Similarly, the Collateral Agent shall have no obligation to take any action with respect to the cessation of an Event of Default until it has received a National Rural Notice applicable to such event in accordance in accordance with Section 4.01(b), 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 National Rural Notice is delivered.

 

SECTION 5.03.  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 5.04.  Compensation and Reimbursement.  (a)   National Rural agrees:

 

(i) to pay to the Collateral Agent from time to time such reasonable compensation for all services rendered by it hereunder as shall have been set forth in an agreement signed by National Rural;

 

(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

  

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(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 National Rural shall have no liability under this clause for any
settlement of any litigation or other dispute effected without the prior written consent of National Rural (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 5.04 shall remain operative and in full force and effect regardless of the termination of this Pledge Agreement or the Note Purchase 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 Note Purchase Agreement, or any investigation made by or on behalf of the Collateral Agent or the Control Party.  All amounts due under this Section 5.04 shall be payable on written demand therefor.

 

SECTION 5.05.  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 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 National Rural nor any Person directly or indirectly controlling, controlled by or under common control with National Rural 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 5.06.  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 5.07.

 

(b)  The Collateral Agent may resign at any time by giving written notice thereof to National Rural.  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.

  

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(c)  If at any time:

 

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

 

(ii) the Collateral Agent shall cease to be eligible under Section 5.05 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, National Rural may remove the Collateral Agent by delivery of a National Rural 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, National Rural shall promptly appoint a successor Collateral Agent by delivering a National Rural Notice to the retiring Collateral Agent, the successor Collateral Agent and the Control Party to such effect.

 

SECTION 5.07.  Acceptance of Appointment by Successor.  Every successor Collateral Agent appointed hereunder shall execute, acknowledge and deliver to National Rural, the Control Party 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 retiring Collateral Agent; but, on request of National Rural, the Control Party 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 5.04.  Upon request of any such successor Collateral Agent, National Rural 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 5.05 hereof.

 

SECTION 5.08.  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 5.05 hereof without the execution or filing of any paper or any further act on the part of any of the parties hereto.

  

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ARTICLE VI

Miscellaneous

SECTION 6.01.  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 II 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 shall be deemed to have been delivered at the time it is sent by facsimile (fax) transmission to the party or parties to which it is given.

 

(a)  All National Rural Notices and National Rural Orders delivered to the Collateral Agent shall be contemporaneously copied to the Control Party by National Rural; all Control Party Notices and Control Party Orders delivered to the Collateral Agent shall be contemporaneously copied by Farmer Mac to National Rural; and all Collateral Agent notices delivered to either National Rural or Farmer Mac shall be contemporaneously copied to the other such party by the Collateral Agent.

 

SECTION 6.02.  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 6.02, 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 National Rural, the Collateral Agent, the Purchaser and Farmer Mac.

 

SECTION 6.03.  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 National Rural, the Collateral Agent, the Purchaser, the Control Party or Farmer Mac that are contained in this Pledge Agreement shall bind and inure to the benefit of their respective successors and assigns.

  

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SECTION 6.04.  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 6.05. 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 6.06.  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.

 

SECTION 6.07.  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 6.07.

 

SECTION 6.08.  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.

  

23

 

SECTION 6.09.  Security Interest Absolute.  All rights of the Collateral Agent and/or the Control Party hereunder, the grant of a security interest in the Pledged Collateral and all obligations of National Rural hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Note Purchase Agreement, any Note, 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 Note Purchase Agreement, any Note 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, National Rural in respect of the Obligations or this Pledge Agreement.

 

SECTION 6.10.  Termination or Release.  (a)  This Pledge Agreement shall terminate on the date when the Obligations have been indefeasibly paid in full, and at such time the Lien hereof shall be released.

 

(b)  Upon any withdrawal, substitution or other disposal by National Rural 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.

 

(c)  In connection with any termination or release pursuant to paragraph (a) or (b) the Collateral Agent shall deliver to National Rural the Pledged Collateral and shall execute and deliver to National Rural, at National Rural’s expense, all documents that National Rural shall reasonably request to evidence such termination or release.  Any execution and delivery of documents pursuant to this Section 6.10 shall be without recourse to or warranty by the Collateral Agent.

  

24

 

SECTION 6.11.  Collateral Agent Appointed Attorney-in-Fact.  National Rural hereby appoints the Collateral Agent the attorney-in-fact of National Rural 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 National Rural (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 National Rural to notify, obligors under
Pledged Securities to make payment directly to the Collateral Agent; and (f) subject to the second sentence of Section 4.02(a), 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 the Control Party 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 National Rural for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

 

[SIGNATURE PAGE FOLLOWS]

  

25

 

 

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.

 

	
FARMER MAC MORTGAGE

	
SECURITIES CORPORATION,

	  
	
By

	  
	  	
/s/ Jerome G. Oslick

	  	
Name:         Jerome G. Oslick

	  	
Title:           Vice President

	  
	
FEDERAL AGRICULTURAL

	
MORTGAGE CORPORATION,

	  
	
By

	  
	  	
/s/ Timothy L. Buzby

	  	
Name:         Timothy L. Buzby

	  	
Title:           Senior Vice President – Chief Financial Officer

	  
	
NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION,

	  	  
	
By

	  
	  	
/s/ R. Larochelle

	  	
Name:         Rich Larochelle

	  	
Title:           Senior Vice President, Corporate Relations

	  
	
U.S. BANK NATIONAL ASSOCIATION,

	  	  
	
By

	  
	  	
/s/ D.L. Reynolds

	  	
Name:         Diane L. Reynolds

	  	
Title:           Vice President

  

 

 

SCHEDULE I

TO

PLEDGE AGREEMENT

ADDITIONAL CRITERIA FOR ELIGIBLE SECURITIES1

Criteria for Eligible Security of Class A Eligible Member:  Each Class A Eligible Member must satisfy the following criteria only on the date of the pledge of such Eligible Security:

	
  

	
·

	
Long-Term Debt to Net Utility Plant Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, does not exceed 90%.

	
  

	
·

	
Modified Debt Service Coverage Ratio—Distribution, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 1.35.

	
  

	
·

	
Equity to Total Assets Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 20%.

	
  

	
·

	
The Eligible Security has a Facility Rating by National Rural of “4.9” or lower.

Criteria for Eligible Security of Class B Eligible Member:  Each Class B Eligible Member must satisfy the following criteria only on the date of the pledge of such Eligible Security:

	
  

	
·

	
Equity to Total Capitalization Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 25%.

	
  

	
·

	
Modified Debt Service Coverage Ratio—G&T, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 1.10.

	
  

	
·

	
Equity to Total Assets Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 10%.

	
  

	
·

	
The Eligible Security has a Facility Rating by National Rural of “4.9” or lower.

   

1Upon notice to the Collateral Agent, the criteria set forth on this Schedule 1 may be modified as mutually agreed upon in writing by Farmer Mac and National Rural.  The criteria set forth on this Schedule I shall be required to be satisfied only as of the date of pledge of (1) any Pledged Securities that is being pledged for a new advance or (2) any Pledged Securities that is being pledged for an existing advance which is in substitution of, or in addition to, existing collateral, and such criteria shall not be required to be satisfied with respect to Eligible Securities after such date.

 

  

 

  

 

SCHEDULE II

TO

PLEDGE AGREEMENT

Addresses for Notices

 

	
  

	
The addresses referred to in Section 6.01 hereof, for purposes of delivering communications and notices, are as follows:

 

If to the Purchaser:

 

Farmer Mac Mortgage Securities Corporation

1133 21st Street N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Jerome G. Oslick, Vice President

If to Farmer Mac:

 

Federal Agricultural Mortgage Corporation

1133 21st Street, N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Timothy L. Buzby, Senior Vice President – CFO

With a copy to:

Federal Agricultural Mortgage Corporation

1133 21st Street, N.W., Suite 600

Washington, DC 20036

Fax:  202-872-7713

Attn: Stephen P. Mullery, Deputy General Counsel

If to National Rural:

National Rural Utilities Cooperative Finance Corporation

2201 Cooperative Way

Herndon, VA 20171-3025

Telephone:  703-709-6718

Fax:  703-709-6779

Attn: Andrew Don, Senior Vice President & Treasurer

 

  

 

 

 

SCHEDULE II

TO

PLEDGE AGREEMENT

 

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

Attn: John J. List, Esq., Senior Vice President & General Counsel

If to the Collateral Agent:

U.S. Bank National Association

100 Wall Street

Suite 1600

New York, NY 10005-3701

Telephone:  (212) 361-2893

Fax:  (212) 509-3384

Attn: Beverly A. Freeney

  

 

 

ANNEX A

TO

PLEDGE AGREEMENT

NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

 

PLEDGE AGREEMENT DATED AS OF JANUARY 11, 2011

 

CERTIFICATE OF PLEDGED COLLATERAL FILED WITH

U.S. BANK NATIONAL ASSOCIATION, Collateral Agent

 

________________, Chief Executive Officer (or Chief Financial Officer, or Controller, or Treasurer) and ____________________, Vice-President, respectively, of National Rural Utilities Cooperative Finance Corporation, hereby certify to the Control Party 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 certified hereby, remaining on deposit with the Collateral Agent, as shown on Schedule A hereto, is

	
$

	  	  	  
	
2.

	
The Allowable Amount of Pledged Collateral certified hereby, being deposited as shown on Schedule B hereto, is

	
$

	  	  	  
	
3.

	
The aggregate principal amount of the Note(s) outstanding at the date hereof is

	
$

	  	  	  
	
4.

	
The aggregate amount, if any, of the Note(s) to be issued on the basis of this Certificate is

	
$

	  	  	  
	
5.

	
The sum of amounts in items 3 and 4 is

	
$

	  	  	  
	
6.

	
The aggregate amount by which the Allowable Amount of Pledged Collateral exceeds the aggregate principal amount of the Note(s) outstanding (the sum of items 1 and 2 minus item 5) is

	
$

	 	 	 
	7.	 
The cumulative amount by which each Eligible Security listed on Schedule A or Schedule B exceeds $50 million1  is

	$

 

1The calculation of said $50 million limitation shall exclude any amounts of any Whole Loan Sales insured by a party other than Farmer Mac or its affiliates.

 

  

 

 

ANNEX A

TO

PLEDGE AGREEMENT

	  	  	  
	
8.

	
The Allowable Amount of Pledged Collateral which is included in items 1 and 2 above from Class B Members, together with all other collateral pledged by such members pursuant to each other pledge agreement between the parties to the Pledge Agreement, in each case excluding Whole Loan Sales, does not exceed $1 billion.

	  
	  	  	  
	
9.

	
To the knowledge of the undersigned, each Eligible Security from a Class A Eligible Member the Allowable Amount of which is included in item 2 satisfies the following criteria on the date of this Certificate:  (1) Long-Term Debt to Net Utility Plant Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, does not exceed 90%; (2) Modified Debt Service Coverage Ratio—Distribution, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 1.35; (3) Equity to Total Assets Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 20%; and (4) the Eligible Security has a
Facility Rating by National Rural of “4.9” or lower.

	  
	  	  	  
	
10.

	
To the knowledge of the undersigned, each Eligible Security from a Class B Eligible Member the Allowable Amount of which is included in item 2 satisfies the following criteria on the date of this Certificate:  (1) Equity to Total Capitalization Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 25%; (2) Modified Debt Service Coverage Ratio—G&T, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 1.10; (3) Equity to Total Assets Ratio, as the average ratio of the most recent three full calendar years for which financial information is available, is greater than or equal to 10%; and (4) the Eligible Security has a
Facility Rating by National Rural of “4.9” or lower.

	  

  

 

  

ANNEX A

TO

PLEDGE AGREEMENT

	
11.

	
So far as is known to the undersigned, no Event of Default exists.

	  
	  	  	  
	
12.

	
To the extent an Eligible Security listed on Schedule A or Schedule B has an outstanding principal amount of more than $50 million2, the Allowable Amount of Pledged Collateral set forth in items 1 and 2 above reflects only $50 million with respect to such Eligible Security (or a lesser amount representing the difference between $50 million and the aggregate amount of any notes or bonds of the same Eligible Member pledged or sold to Farmer Mac or any affiliate in any previous transaction), with any excess above $50 million (or the lesser amount) reflected in item 7 above.

	  
	  	  	  
	
13.

	
Each Eligible Member whose notes are Pledged Securities has received or is eligible to receive a loan or commitment for a loan from RUS or any successor agency.

	  

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

 

Dated:  _____________________

 

	
     

	  
	
     

	  
	
OF NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

  

2The calculation of said $50 million limitation shall exclude any amounts of any Whole Loan Sales insured by a party other than Farmer Mac or its affiliates.

 

  

 

  

ANNEX A

TO

PLEDGE AGREEMENT

PLEDGED SECURITIES ON DEPOSIT

 

SCHEDULE A TO OFFICERS’ CERTIFICATE

DATED

 

	

Eligible Securities

	  	

Name of Issuer

	  	

Allowable Amount (Item 1)

	 	 	 	 	 
	
Pledged Securities (Here List Securities)

	
  

	  	
  

	  

 

  

 

  

ANNEX A

TO

PLEDGE AGREEMENT

PLEDGED SECURITIES BEING DEPOSITED

 

SCHEDULE B TO OFFICERS’ CERTIFICATE

DATED

 

	

Eligible Securities

	  	

Name of Issuer

	  	

Allowable Amount (Item 2)

	 	 	 	 	 
	
Pledged Securities (Here List Securities)

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