Document:

tdoc_Ex_10_1

		
			Exhibit 10.1
		

		
			 
		

		
			EXECUTIVE SEVERANCE AGREEMENT
		

		
			 
		

		
			This Executive Severance Agreement (“Agreement”) is made effective as of June 24, 2019 (“Effective Date”), by and between Teladoc Health, Inc. (the “Company”) and Ms. Mala Murthy, an individual resident in the State of New York (“Executive”).
		

		
			 
		

		
			WHEREAS, Executive is a key employee of the Company and the Company and Executive desire to set forth herein the terms and conditions of Executive’s compensation in the event of a termination of Executive’s employment under certain circumstances.
		

		
			 
		

		
			NOW, THEREFORE, the parties agree as follows:
		

		
			 
		

		
			1.         Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
		

		
			 
		

		
			(a)        “Affiliate” means with respect to any person or entity, any other person or entity that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such person or entity. For purposes of this definition, “control”, when used with respect to any person or entity, means the power to direct the management and policies of such person or entity, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
		

		
			 
		

		
			(b)        “Base Salary” means Executive’s base salary at the rate in effect on the date of Executive’s Qualifying Termination (disregarding any decrease in such base salary that constitutes a Good Reason event).
		

		
			 
		

		
			(c)        “Board” shall mean the Board of Directors of the Company.
		

		
			 
		

		
			(d)        “Cause” shall mean any of the following: (i) Executive’s breach of Executive’s duty of loyalty to the Company or Executive’s willful breach of Executive’s duty of care to the Company; (ii) Executive’s material failure or refusal to comply with reasonable written policies, standards and regulations established by the Board from time to time, which failure or refusal, if curable, is not cured to the reasonable satisfaction of the Board during the fifteen (15) day period following written notice of such failure or refusal from the Board; (iii) Executive’s commission of a felony, an act of theft, embezzlement or misappropriation of funds or the property of the Company or its subsidiaries of material value or an act of fraud involving the Company or its subsidiaries; (iv) Executive’s willful misconduct or gross negligence which causes or reasonably could cause (for example, if it became publicly known) material harm to the Company’s standing, condition or reputation; (v) Executive’s material violation of the Company’s Code of Ethics (or similar written policies concerning ethical behavior) or written policies concerning harassment or discrimination; or (vi) any material breach by Executive of the provisions of the Confidentiality Agreement or a material provision of this Agreement.
		

		
			 
		

		
			(e)        “Change of Control” shall mean (other than an initial public offering of the Company) (i) any transaction or series of related transactions resulting in the consummation of a merger, combination, consolidation or other reorganization of the Company with or into any third party, other than any such merger, combination, consolidation or reorganization following which
		

		
			 
		

		
			
		

		
			

		 

		

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			the holders of capital stock of the Company immediately prior to such merger, combination, consolidation or reorganization continue to hold, solely in respect of their interests in the Company’s capital stock immediately prior to such merger, combination, consolidation or reorganization, at least fifty-five percent (55%) of the voting power of the outstanding capital stock of the Company or the surviving or acquiring entity; (ii) any transaction or series of related transactions resulting in the consummation of the sale, lease, exclusive or irrevocable licensing or other transfer of all or substantially all of the assets of the Company to a third party, other than any such sale, lease, exclusive or irrevocable licensing or transfer following which the holders of capital stock of the Company immediately prior to such sale, lease, exclusive or irrevocable licensing or transfer continue to hold, solely in respect of their interests in the Company’s capital stock immediately prior to such sale, lease, exclusive or irrevocable licensing or transfer, at least fifty-five percent (55%) of the voting power of the outstanding capital stock of the acquiring entity; or (iii) any transaction or series of related transactions resulting in the transfer or issuance, whether by merger, combination, consolidation or otherwise, of Company securities to a person or group if, after such transfer or issuance, such person or group would hold fifty-five percent (55%) of the voting power of the outstanding capital stock of the Company; provided that, with respect to any payments or benefits payable to Executive pursuant to this Agreement that may be considered deferred compensation under Section 409A of the Code, the transaction or event described in clause (i), (ii) or (iii) shall only constitute a Change of Control for purposes of this Agreement if such transaction or event also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
		

		
			 
		

		
			(f)        “Code” shall mean the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other interpretive guidance thereunder.
		

		
			 
		

		
			(g)        “Confidentiality Agreement” shall mean the Employee Confidentiality and Proprietary Rights Agreement between the Company and Executive dated May 24, 2019.
		

		
			 
		

		
			(h)        “Good Reason” shall mean the occurrence of any of the following events or conditions without Executive’s written consent: (i) a material diminution in Executive’s base salary or target annual bonus level; (ii) a material diminution in Executive’s authority, duties or responsibilities, other than as a result of a Change of Control immediately after which Executive holds a position with the Company or its successor (or any other entity that owns substantially all of the Company’s business after such sale) that is substantially equivalent with respect to the Company’s business as Executive held immediately prior to such Change of Control; (iii) a change in the geographic location of Executive’s principal place of employment to any location that is more than twenty-five (25) miles from the location immediately prior to such change, not including any location in the Borough of Manhattan, New York City; or (iv) the failure of the Company to obtain an agreement from any successor to all or substantially all of the business or assets of the Company to assume this Agreement as contemplated in Section 8(a) of this Agreement; provided that Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions within 60 days of the occurrence of such event and such event or condition must remain uncured for 30 days following the Company’s receipt of such written notice. Any voluntary termination for “Good Reason” following such 30-day cure period must occur no later than the date that is 30 days following the expiration of the Company’s cure period.
		

		
			 
		

		
			
		

		
			

		 

		

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			(i)         “Qualifying Termination” means (i) a termination by Executive of Executive’s employment with the Company for Good Reason or (ii) a termination by the Company of Executive’s employment with the Company without Cause.
		

		
			 
		

		
			(j)         “Target Bonus Amount” means Executive’s target annual bonus amount in effect at the time of Executive’s Qualifying Termination (disregarding any decrease in such target annual bonus amount that constitutes a Good Reason event).
		

		
			 
		

		
			2.         Severance.
		

		
			 
		

		
			(a)        Severance Upon Qualifying Termination. If Executive has a Qualifying Termination that does not occur on the date of or within twelve (12) months following a Change of Control, then subject to (x) the requirements of this Section 2, (y) Executive’s continued compliance with the terms of the Confidentiality Agreement and Sections 4 and 5 and (z) the terms of Section 8, Executive shall be entitled to receive the following payments and benefits:
		

		
			 
		

		
			(i)         The Company shall pay to Executive (A) his or her fully earned but unpaid base salary through the date of Executive’s Qualifying Termination, (B) any accrued but unpaid paid time off and (C) any other amounts or benefits, if any, under the Company’s employee benefit plans, programs or arrangements to which Executive may be entitled pursuant to the terms of such plans, programs or arrangements or applicable law, payable in accordance with the terms of such plans, programs or arrangements or as otherwise required by applicable law (collectively, the “Accrued Rights”);
		

		
			 
		

		
			(ii)       Executive shall receive continued payment of the Base Salary for a period of twelve (12) months following the termination date (the “Salary Severance Period”) in accordance with the Company’s ordinary payroll practices;
		

		
			 
		

		
			(iii)      The Company will pay Executive the amount of any earned but unpaid annual bonus for the calendar year immediately prior to the year in which Executive’s Qualifying Termination occurs, as determined by the Board (or an authorized committee) in its good faith discretion, payable in a lump sum at the same time annual bonuses are paid to other Company executives generally but in no event later than December 31 of the year in which Executive’s Qualifying Termination occurs;
		

		
			 
		

		
			(iv)       If Executive timely elects continued coverage under COBRA for Executive and Executive’s covered dependents under the Company’s group health (medical, dental or vision) plans following such Qualifying Termination, then the Company shall pay the COBRA premiums necessary to continue Executive’s and his covered dependents’ health insurance coverage in effect on the termination date until the earliest of (x) twelve (12) months following the effective date of such Qualifying Termination (the “COBRA Severance Period”), (y) the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment (and Executive agrees to promptly notify the Company of such eligibility) and (z) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the Qualifying Termination date through the earlier of (x)-(z), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on
		

		
			 
		

		
			
		

		
			

		 

		

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			Executive’s behalf would result in a violation of applicable law (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act) or an excise tax, then in lieu of paying COBRA premiums pursuant to this Section 2(a)(iv), the Company shall pay Executive on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, such payment to be made without regard to Executive’s payment of COBRA premiums; and
		

		
			 
		

		
			(v)        All unvested equity or equity-based awards granted to Executive under any equity compensation plans of the Company that were scheduled to vest within six (6) months after the date of Executive’s termination or resignation shall become immediately vested as to time, with any such awards that are subject to performance-based vesting conditions remaining eligible to vest to the extent the performance conditions are satisfied during such six- month period (provided that nothing herein shall operate to extend the term, if any, of an award beyond the final expiration date provided in the applicable award agreement or prohibit the award from being treated in substantially the same manner as awards held by Company employees in the context of a Change of Control or other corporate transaction).
		

		
			 
		

		
			(vi)       Any provision of this Section 2(a) to the contrary notwithstanding, in addition to the payments and benefits payable under this Section upon a Qualifying Termination, if a Qualifying Termination occurs prior to August 21, 2019, solely for purposes of applying the vesting set forth in Section 2(v) above, such Qualifying Termination shall be treated as having occurred on August 21, 2019.
		

		
			 
		

		
			(b)        Severance Upon Qualifying Termination Occurring Within 12 Months Following a Change of Control. If Executive has a Qualifying Termination that occurs on the date of or within twelve (12) months following a Change of Control, then subject to (x) the requirements of this Section 2, (y) Executive’s continued compliance with the terms of the Confidentiality Agreement and Sections 4 and 5 and (z) the terms of Section 8, Executive shall be entitled to receive the payments and benefits described in Section 2(a) above; provided that: (i) the Company shall pay Executive an additional amount equal to seventy-five percent (75%) of the Target Bonus Amount, payable in a lump sum on the Company’s first ordinary payroll date occurring after the effective date of Executive’s Qualifying Termination; and (ii) in lieu of the treatment set forth in Section 2(a)(v) above, all unvested equity or equity-based awards granted to Executive under any equity compensation plans of the Company shall become immediately vested as to time and any such awards that are subject to performance-based vesting will remain eligible to vest to the extent the performance conditions are thereafter satisfied (provided that nothing herein shall operate to extend the term, if any, of an award beyond the final expiration date provided in the applicable award agreement or prohibit the award from being treated in substantially the same manner as awards held by Company employees in the context of a Change of Control or other corporate transaction).
		

		
			 
		

		
			(c)        Other Terminations. Upon Executive’s termination of employment for any reason other than as set forth in Section 2(a) and Section 2(b), the Company shall pay to Executive the Accrued Rights and shall have no other or further obligations to Executive under this Agreement. The foregoing shall be in addition to, and not in lieu of, any and all other rights and
		

		
			 
		

		
			
		

		
			

		 

		

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			remedies which may be available to the Company under the circumstances, whether at law or in equity.
		

		
			 
		

		
			(d)        Release. As a condition to Executive’s receipt of any amounts set forth in Section 2(a) or Section 2(b) other than the Accrued Rights, Executive shall, within the 60-day period following the date of Executive’s Qualifying Termination, deliver (without revoking) prior to receipt of such severance benefits, an effective, general release of claims in favor of the Company or its successor, its subsidiaries and their respective directors, officers and stockholders in a form acceptable to the Company or its successor, such form to contain a reaffirmation of Executive’s promises contained in Section 4 of this Agreement and the Confidentiality Agreement and a promise not to disparage the Company, its business, or its employees, officers, directors or stockholders. The form of the general release will be provided to the Executive not later than five
		

		
			(5) days following the date of Executive’s Qualifying Termination.
		

		
			 
		

		
			(e)        Exclusive Remedy; Other Arrangements. Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts (if any) accruing after the termination of Executive’s employment for any reason shall cease upon such termination. In addition, the severance payments provided for in Section 2(a) and Section 2(b) above are intended to be paid in lieu of any severance payments Executive may otherwise be entitled to receive under any other plan, program, policy, contract or agreement with the Company or any of its Affiliates, including for the avoidance of doubt, any employment agreement or offer letter (collectively, “Other Arrangements”). Therefore, in the event Executive becomes entitled to receive the severance payments and benefits provided under Section 2(a) or Section 2(b), Executive shall receive the amounts provided under that Section of this Agreement and shall not be entitled to receive any severance payments or severance benefits pursuant to any Other Arrangements. In addition, to the extent any Other Arrangement that was entered into prior to the date of this Agreement provides for Executive to receive any payments or benefits upon a termination or a resignation of employment for any reason (such agreement a “Prior Agreement”), Executive hereby agrees that such termination pay and benefit provisions of such Prior Agreement shall be and hereby are superseded by this Agreement and from and after the date of this Agreement, such termination pay and benefit provisions of the Prior Agreement shall be and are null and void and of no further force or effect. For the avoidance of doubt, except as may otherwise be agreed in writing between Executive and the Company or one of its Affiliates after the date of this Agreement, it is intended that the other terms and conditions of any Prior Agreement that do not provide for termination pay or benefits, including any non-competition, non-solicitation, non-disparagement, confidentiality, or assignment of inventions covenants and other similar covenants contained therein, shall remain in effect in accordance with their terms for the periods set forth in the Prior Agreement.
		

		
			 
		

		
			(f)        Parachute Payments.
		

		
			 
		

		
			(i)         Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefits under Section 2(a) or Section 2(b) hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”),
		

		
			 
		

		
			
		

		
			

		 

		

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			then the Total Payments shall be reduced (in the order provided in Section 2(f)(ii)) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (1) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (2) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of the Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
		

		
			 
		

		
			(ii)       The Total Payments shall be reduced in the following order: (1) reduction on a pro-rata basis of any cash severance payments that are exempt from Section 409A of the Code, (2) reduction on a pro-rata basis of any non-cash severance payments or benefits that are exempt from Section 409A of the Code, (3) reduction on a pro-rata basis of any other payments or benefits that are exempt from Section 409A of the Code and (4) reduction of any payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code; provided, in the case of clauses (2), (3) and (4), that reduction of any payments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time.
		

		
			 
		

		
			(iii)      All determinations regarding the application of this Section 2(f) shall be made by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selected by the Company (the “Independent Advisors”). For purposes of determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Independent Advisors, (1) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (2) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation. The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company.
		

		
			 
		

		
			(iv)       In the event it is later determined that a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 2(f), the excess amount shall be returned immediately by Executive to the Company.
		

		
			 
		

		
			(g)        Withholding. All compensation and benefits to Executive hereunder shall be reduced by all federal, state, local and other withholdings and similar taxes and payments required by applicable law.
		

		
			 
		

		
			3.         Condition to Severance Obligations. The Company shall be entitled to cease all severance payments and benefits to Executive in the event of Executive’s breach of Sections 4 or 5, or any of the provisions of the Confidentiality Agreement or of any other non-competition, non-solicitation, non-disparagement, confidentiality, or assignment of inventions covenants contained
		

		
			 
		

		
			
		

		
			

		 

		

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			in any other agreement between Executive and the Company, which other covenants are hereby incorporated by reference into this Agreement.
		

		
			 
		

		
			4.         Restrictive Covenants.
		

		
			 
		

		
			(a)        Non-Solicitation and Non-Competition.
		

		
			 
		

		
			(i)         Non-Solicitation. Executive agrees that, for a period of twelve (12) months from and after any termination of Executive’s employment with the Company, voluntary or involuntary, for any reason or no reason (the “Non-Compete Period”), Executive shall not (directly or indirectly, on behalf of Executive or any third party) (a) solicit, induce, recruit or encourage, or take any other action which is intended to induce or encourage or facilitate or has the effect of inducing or encouraging any of the Company’s employees to leave their employment with the Company or otherwise facilitates the hiring of any such employees by any person outside the Company; or (b) solicit, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company and any of its actual or prospective customers, suppliers, employees or stockholders, within the Geographic Area (as defined below), other than on behalf of the Company or any of its subsidiaries, directly or indirectly, without the prior written consent of the Company.
		

		
			 
		

		
			(ii)       Non-Competition. In addition, during the Non-Compete Period, Executive shall not, directly or indirectly, (a) engage in (whether as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director or otherwise), (b) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934), or (c) participate in the financing, operation, management or control of, any firm, partnership, corporation, entity or business, that engages or participates in a “competing business purpose.” The term “competing business purpose” shall mean the Company’s business, including without limitation telephone- and/or internet-based physician or therapist consultation, expert second-opinion physician services and/or platform software licensing for the facilitation of same, as conducted or planned to be conducted by the Company at any time during the course of Executive’s employment with the Company (including without limitation products and services under development as of the date of termination).
		

		
			 
		

		
			(iii)      “Geographic Area” means any city, county or state, or any similar subdivision thereof, in each of: (i) North America; (ii) South America; (iii) Europe; or (iv) Australia.
		

		
			 
		

		
			(iv)       Separate Covenants. The covenants contained in Section 4(a)(i) and 4(a)(ii) shall be construed as a series of separate covenants, one for each city, county, state, or any similar subdivision in any Geographic Area and are in addition to (and not in lieu of) and may be enforced separately from, any prior non-compete, non-solicitation or other similar restrictive covenant or agreement between the Company, it affiliates or subsidiaries and Executive. These covenants shall also be construed as a series of separate and successive covenants, one for each month of the Non-Compete Period. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenants contained in Section 4(a)(i) and 4(a)(ii) above. If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any of such separate
		

		
			 
		

		
			
		

		
			

		 

		

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			covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event that the provisions of Section 4(a)(i) and 4(a)(ii) above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law. In the event that the applicable court or arbitrator does not exercise the power granted to it in the prior sentence, Executive and the Company agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term. The existence or assertion of any claim by Executive against the Company, whether based on this Agreement or otherwise, shall not operate as a defense to the Company’s enforcement of the promises and covenants in the Confidentiality Agreement and this Section 4. An alleged or actual breach of the Agreement by the Company will not be a defense to enforcement of any such promise or covenant in this Section 4 or the Confidentiality Agreement.
		

		
			 
		

		
			(v)        Acknowledgements. Executive acknowledges that the nature of  the Company’s business is such that if Executive were to become employed by, or substantially involved in, the business of a competitor of the Company within the Non-Compete Period, it will be difficult for Executive not to rely on or use the Company’s trade secrets and confidential information. Therefore, Executive has agreed to enter into this Agreement to reduce the likelihood of disclosure of the Company’s trade secrets and confidential information. Executive therefore acknowledges and agrees that the promises in Section 4(a) are ancillary to an otherwise enforceable agreement contained in this Agreement and the Confidentiality Agreement. Executive also acknowledges that the limitations of time, geography, and scope of activity agreed to above are reasonable because, among other things: (a) the Company is engaged in a highly competitive industry; (b) Executive will have continued and unique access to the trade secrets and know-how of the Company, including without limitation the plans and strategy (and in particular the competitive strategy) of the Company; (c) Executive is receiving significant severance payments and benefits in connection with Executive’s termination of employment; (d) these non-competition and non-solicitation agreements will not impose an undue hardship on Executive, and Executive acknowledges that Executive will be able to obtain suitable and satisfactory employment in Executive’s chosen profession without violation of these covenants; and (e) these covenants provide no more protection than is reasonable and necessary to protect the trade secrets, confidential information, customer contacts and relationships, and goodwill of the Company.
		

		
			 
		

		
			(vi)       Resignation on Termination. On termination of Executive’s employment, Executive shall immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any of its affiliates, unless otherwise requested by the Board.
		

		
			 
		

		
			(vii)     Tolling of Non-Compete Period.  The Non-Compete Period will not include any period(s) of violation of such promises in this Section 4 or the Confidentiality Agreement, it being understood that the extension of time provided in this Section 4 may not exceed two (2) years.
		

		
			 
		

		
			5.         Non-disparagement.    Upon termination of employment by the Company or resignation of employment by Executive for any reason, Executive shall not, directly, or through
		

		
			 
		

		
			
		

		
			

		 

		

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			any other person or entity, make any public or private statements that are disparaging of the Company, its business or its employees, officers, directors, or stockholders; and the Company shall not, directly or through any other person or entity, make any public or private statements that are disparaging of Executive.
		

		
			 
		

		
			6.         Agreement to Arbitrate. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by binding arbitration in Purchase, New York or any subsequent location where the principal offices of the Company are located. Such arbitration shall be conducted in accordance with the then prevailing JAMS Streamlined Arbitration Rules & Procedures, with the following exceptions if in conflict: (a) one arbitrator shall be chosen by JAMS; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator, unless otherwise required to enforce this Section 6; and (c) arbitration may proceed in the absence of any party if written notice (pursuant to the JAMS’ rules and regulations) of the proceedings has been given to such party. Each party shall bear its own attorneys’ fees and expenses. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this Section shall be construed as precluding the bringing of an action in a court of competent jurisdiction to enforce the Confidentiality Agreement or any other non-competition, non-solicitation, non-disparagement, confidentiality, or assignment of inventions covenants or other intellectual property related covenants contained in any other agreement between Executive and the Company.
		

		
			 
		

		
			7.         At-Will Employment Relationship. Executive’s employment with the Company is at-will and not for any specified period and may be terminated at any time, with or without Cause or advance notice, by either Executive or the Company. Any change to the at-will employment relationship must be by specific, written agreement signed by Executive and an authorized representative of the Company. Nothing in this Agreement is intended to or should be construed to contradict, modify or alter this at-will relationship.
		

		
			 
		

		
			8.         General Provisions.
		

		
			 
		

		
			(a)        Successors and Assigns. The rights of the Company under this Agreement may, without the consent of Executive, be assigned by the Company to any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of the Company or to any of its Affiliates. The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company to assume this Agreement. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
		

		
			 
		

		
			(b)        Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted
		

		
			 
		

		
			
		

		
			

		 

		

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			by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
		

		
			 
		

		
			(c)        Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing the Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
		

		
			 
		

		
			(d)        Governing Law and Venue. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of New York applicable to contracts made and to be performed wholly therein, and without regard to the conflicts of laws principles that would result in the application of the laws of another jurisdiction. Any suit brought hereon shall be brought in the state or federal courts sitting in Westchester County, New York the parties hereby waiving any claim or defense that such forum is not convenient or proper. Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by New York law.
		

		
			 
		

		
			(e)        Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to Executive at the most recent address for Executive set forth in the Company’s personnel files and to the Company at its principal place of business, or such other address as either party may specify in writing.
		

		
			 
		

		
			(f)        Survival. Sections 2 (“Severance”), 3 (“Condition to Severance Obligations”), 4 (“Restrictive Covenants”), 5 (“Non-disparagement”), 6 (“Agreement to Arbitrate”) and 8 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment with the Company.
		

		
			 
		

		
			(g)        Entire Agreement. This Agreement and any covenants and agreements incorporated herein by reference as set forth in Section 3 together constitute the entire agreement between the parties in respect of the subject matter contained herein and therein and supersede all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral, provided, however, that for the avoidance of doubt, all Other Arrangements (as such Other Arrangements may be amended, modified or terminated from time to time) shall remain in effect in accordance with their terms, subject to Section 2(e) hereof. This Agreement may be amended or modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
		

		
			 
		

		
			
		

		
			

		 

		

			Page 10 of 12

		

		

		
			 
		

		
			(h)        Code Section 409A.
		

		
			 
		

		
			(i)         The intent of the parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.
		

		
			 
		

		
			(ii)       Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the 60th day following Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the 60 day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First Payment Date and the remaining payments shall be made as provided in this Agreement.
		

		
			 
		

		
			(iii)      Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death. Upon the first business day following the expiration of  the  applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.
		

		
			 
		

		
			(iv)       Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.
		

		
			 
		

		
			(i)         Consultation with Legal and Financial Advisors. By executing this Agreement, Executive acknowledges that this Agreement confers significant legal rights, and may also involve the waiver of rights under other agreements; that the Company has encouraged Executive to consult with Executive’s personal legal and financial advisors; and that Executive has had adequate time to consult with Executive’s advisors before executing this Agreement.
		

		
			 
		

		
			(j)         Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
		

		
			 
		

		
			
		

		
			

		 

		

			Page 11 of 12

		

		

		
			 
		

		
			THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
		

		
			 
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						TELADOC HEALTH, INC.

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						/s/ Adam C. Vandervoort

				
	
					
						 

					
					
						Name:

					
					
						Adam C. Vandervoort

				
	
					
						 

					
					
						Title:

					
					
						Chief Legal Officer

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						EXECUTIVE

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						/s/ Mala Murthy

				
	
					
						 

					
					
						Ms. Mala Murthy

				

		
			 
		

		 

		

			Page 12 of 12Exhibit

 DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
Description of the 5.500% Subordinated Notes due 2064 (Subordinated Deferrable Interest Notes)
The following description is a summary of the 5.500% Subordinated Notes due 2064 (Subordinated Deferrable Interest Notes) (the “Notes”) of National Rural Utilities Cooperative Finance Corporation (the “Company,” “CFC,” “we,” “us” and “our”). The following summary of specified provisions of the 1996 Indenture (defined below) and the Notes is subject to, and qualified in its entirety by reference to, the actual provisions of the 1996 Indenture and the Notes. 
General
On May 6, 2019, we issued $250,000,000 aggregate principal amount of the Notes. The Notes were issued as a series of subordinated debt securities under that certain indenture dated as of October 15, 1996 (the “1996 Indenture”), between us and U.S. Bank National Association, as successor trustee (the “Notes Trustee”). The Notes were issued in registered form and only in denominations of $25.00 and integral multiples in excess thereof. There is no limit on the amount of additional securities similar to the Notes that may be issued under the 1996 Indenture. The Notes are traded on the New York Stock Exchange under the symbol “NRUC.”
Maturity
The Notes will mature on May 15, 2064. If that day is not a business day, payment of principal and interest will be postponed to the next business day and no interest will accrue as a result of that postponement.
Interest Rate and Interest Payment Dates
The Notes bear interest at the annual rate of 5.500%, and we will pay accrued interest quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, beginning on August 15, 2019 subject to our rights and obligations under “Option to Extend Interest Payment Period.” Interest payments will be made to the persons or entities in whose names the Notes are registered at the close of business on February 1, May 1, August 1 or November 1 (whether or not a business day), as the case may be, immediately preceding the relevant interest payment date. The amount of interest payable for any interest period will be computed on the basis of a 360-day year consisting of twelve 30-day months. In the event that any interest payment date falls on a day that is not a business day, the interest payment due on that date will be postponed to the next day that is a business day, and no additional interest will accrue as a result of that postponement.
“Business day” means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed, or (iii) a day on which the corporate trust office of the Notes Trustee is closed for business.
Option to Extend Interest Payment Period
So long as there is no event of default under the 1996 Indenture with respect to the Notes that is continuing, we may at any time and from time to time during the term of the Notes extend the interest payment period (such a period being referred to as an “extension period”) for a period not exceeding forty (40) consecutive quarterly periods, except that we may not extend the interest payment period beyond the maturity date, any earlier accelerated maturity date arising from an event of default or any other earlier redemption of the Notes. During an extension period, interest will continue to accrue on the Notes at the interest rate on the Notes and accrued interest on the Notes will bear additional interest at the interest rate on the Notes, compounded on each interest payment date, subject to applicable law. At the end of an extension period, unless further extended in accordance with the requirements below, we must pay all accrued and unpaid interest (and interest thereon). 

During any extension period we may not declare or pay any dividend or interest on, or principal of, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our members’ subordinated certificates. Before the termination of any extension period, we may further extend the interest payment period, so long as the extension period, together with all previous and further extensions, would not exceed forty (40) consecutive quarterly periods or extend beyond the maturity of the Notes. No extension period (including as extended) may end on a day other than the last day of an interest payment period.
Upon the termination of an extension period and the payment of all amounts then due (including interest on unpaid interest), we may select a new extension period, subject to the above requirements. No interest during an extension period, except at the end thereof, shall be due and payable. We shall give the holders of the Notes and the Notes Trustee notice of our election of extension of an extension period at least ten business days prior to the earlier of (i) the next interest payment date and (ii) the date upon which we are required to give notice to any applicable self-regulatory organization or to holders of the Notes of such next succeeding record or payment date for such interest payment.
Optional Redemption
We may redeem the Notes at any time, prior to May 15, 2024, in whole or in part, at a “make-whole” redemption price equal to the greater of   (1) 100% of the principal amount being redeemed or (2) the sum of the present values of the remaining scheduled payments of the principal and interest (other than accrued interest) on the Notes being redeemed that would be due if such Notes matured on May 15, 2024, discounted to the redemption date on a quarterly basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points for the Notes plus in each of  (1) and (2) above, accrued interest to, but excluding, the redemption date.
At any time on or after May 15, 2024, we may redeem the Notes, at our option, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes then outstanding to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the date of redemption.
For purposes of these redemption provisions, the following terms have the following meanings:
“Comparable Treasury Issue” means the United States Treasury security selected by an Quotation Agent as having a maturity comparable to the remaining term of the Notes being redeemed (assuming, for this purpose, that the Notes matured on May 15, 2024) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.
“Comparable Treasury Price” means with respect to any redemption date, (A) the average of the Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations for that redemption date, or (B) if we obtain fewer than four Reference Treasury Dealer Quotations, the average of all the Reference Treasury Dealer Quotations obtained.
“Quotation Agent” means one of the Reference Treasury Dealers appointed by CFC.
 “Reference Treasury Dealer” means (1) each of J.P. Morgan Securities LLC and RBC Capital Markets, LLC, or their respective affiliates or successors; provided, however, that if any of them ceases to be a primary U.S. Government securities dealer in the United States, CFC will appoint another primary U.S. Government securities dealer as a substitute and (2) any other U.S. Government securities dealers selected by CFC.
“Reference Treasury Dealer Quotations” means, for each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and ask prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by the Reference Treasury Dealer at 5:00 p.m. New York City time on the third business day preceding the redemption date for the Notes being redeemed.

“Treasury Rate” means, for any redemption date, the rate per annum equal to the quarterly equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date.
Redemption Following a Tax Event
We will have the right to redeem the Notes, at any time before May 15, 2024, in whole but not in part, at any time within 90 days following the occurrence and continuation of a Tax Event at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, thereon to, but not including, the redemption date.
A “Tax Event” means that the Company has received an opinion of nationally recognized independent tax counsel experienced in such matters at any time after the occurrence of any of the events set forth below to the effect that:
		
	(i)
	there is more than an insubstantial risk that the Company would lose its status as a 501(c)(4) tax-exempt entity pursuant to the Internal Revenue Code as a result of:

		
	•
	any amendment to or change or announced proposed change in the laws or regulations of the United States or any of its political subdivisions or taxing authorities affecting taxation;

		
	•
	any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority; or

		
	•
	any official administrative interpretation or official administrative pronouncement that provides for a position with respect to those laws or regulations that differs from the generally accepted position on the date the Notes are issued;

which amendment or change becomes effective or proposed change, pronouncement, interpretation, action or decision is announced on or after April 29, 2019; and

		
	(ii)
	there is more than an insubstantial risk that interest payable on the Notes is not or within 90 days of the date of the opinion would not be currently deductible as such interest accrues, in whole or in part, by the Company for United States federal income tax purposes as a result of:

		
	•
	any amendment to or change or announced proposed change in the laws or regulations of the United States or any of its political subdivisions or taxing authorities affecting taxation;

		
	•
	any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority; or

		
	•
	any official administrative interpretation or official administrative pronouncement that provides for a position with respect to those laws or regulations that differs from the generally accepted position on the date the Notes are issued;

​which amendment or change becomes effective or proposed change, pronouncement, interpretation, action or decision is announced on or after April 29, 2019.
Our right to redeem the Notes due to a Tax Event is subject to the condition that, if we have the opportunity to eliminate a Tax Event, within 90 days following the occurrence and continuation of such Tax Event, by taking some ministerial action (a “ministerial action”), such as filing a form or making an election, or pursuing some other similar reasonable measure that will have no adverse effect on us or the holders of the Notes and will involve no material cost, we will pursue such measures in lieu of redemption. We cannot redeem the Notes while we are pursuing any such ministerial action.

Redemption Following a Rating Agency Event
We will have the right to redeem the Notes, at any time before May 15, 2024, in whole but not in part, at any time within 90 days following the conclusion of any review or appeal process instituted by us at any time following the occurrence and continuation of a Rating Agency Event, at a redemption price equal to 102% of the principal amount of the Notes, plus any accrued unpaid interest, if any, thereon to, but not including, the redemption date.
“Rating Agency Event” means a change in the methodology published by any nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act (sometimes referred to as a “rating agency”) that currently publishes a rating for us in assigning equity credit to securities such as the Notes, as such methodology is in effect on April 29, 2019 (the “current criteria”), which change results in (i) any shortening of the length of time for which equity credit pertaining to the Notes would have been in effect had the current methodology not been changed or (ii) a lower equity credit being assigned by such rating agency to the Notes as of the date of such change than the equity credit that would have been assigned to the Notes as of the date of such change by such rating agency pursuant to its current criteria.
Redemption Procedures
We will provide not less than 30 nor more than 60 days’ notice mailed to each registered holder of the Notes to be redeemed. If the redemption notice is given and funds deposited as required, then interest will cease to accrue from and after the redemption date on the Notes or portions of such Notes called for redemption. In the event that any redemption date is not a business day, we will pay the redemption price on the next business day without any interest or other payment due to the delay.
Ranking
The Notes are unsecured subordinated debt securities and are subordinated and junior in right of payment to all senior indebtedness of CFC.
No payment of principal of, including redemption and sinking fund payments, or premium or interest on, the subordinated debt securities may be made if any senior indebtedness is not paid when due, or a default has occurred with respect to the senior indebtedness permitting the holders to accelerate its maturity and the default has not been cured or waived and has not ceased to exist. Upon any acceleration of the principal amount due on the subordinated debt securities or any payment or distribution of assets of CFC to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due on, all senior indebtedness must be paid in full before the holders of the subordinated debt securities are entitled to receive or retain any payment. The holders of the subordinated debt securities will be subrogated to the rights of the holders of senior indebtedness to receive payments or distributions until all amounts owing on the senior indebtedness are paid in full. 
The term “senior indebtedness” is defined in the 1996 Indenture to mean:
		
	•
	all indebtedness heretofore or hereafter incurred by us for money borrowed unless by its terms it is provided that such indebtedness is not senior indebtedness;

		
	•
	all other indebtedness hereafter incurred by us which by its terms provides that such indebtedness is senior indebtedness;

		
	•
	all guarantees, endorsements and other contingent obligations in respect of, or obligations to purchase or otherwise acquire or service, indebtedness or obligations of others; and

		
	•
	any amendments, modifications, deferrals, renewals or extensions of any such senior indebtedness, or debentures, notes or evidences of indebtedness heretofore or hereafter issued in evidence of or exchange of such senior indebtedness.

The Notes rank equal in right of payment and upon liquidation to our outstanding subordinated debt.
The Notes are senior to our members’ subordinated certificates.
Events of Default
The following “events of default” are applicable to the Notes:
		
	•
	failure to pay interest on the Notes within 60 days after such interest is due (provided, however, that a failure to pay interest during a valid optional extension period will not constitute an event of default, as described above under “Option to Extend Interest Payment Period”);

		
	•
	failure to pay principal of or any premium on the Notes when due; and

		
	•
	certain bankruptcy, insolvency or reorganization events with respect to CFC.

No event of default with respect to one series of subordinated debt securities necessarily constitutes an event of default with respect to another series of subordinated debt securities.
With respect to the Notes, a failure to comply with the other covenants under the 1996 Indenture does not constitute an event of default.
Modification of the 1996 Indenture
Without the consent of any holder of the Notes, we and the Notes Trustee may enter into one or more supplemental indentures to the 1996 Indenture for any of the following purposes:
		
	•
	to evidence the assumption by any permitted successor to CFC of the covenants of CFC in the 1996 Indenture and the subordinated debt securities;

		
	•
	to add one or more covenants of CFC or other provisions for the benefit of the holders of all or any series of the subordinated debt securities or to surrender any right or power conferred upon CFC by the 1996 Indenture;

		
	•
	to add any additional events of default with respect to all or any series of outstanding subordinated debt securities;

		
	•
	to change or eliminate any provision of the 1996 Indenture or to add any new provision to the 1996 Indenture, but if the change, elimination or addition will adversely affect the interests of the holders of subordinated debt securities of any series in any material respect, the change, elimination or addition will not become effective with respect to the series;

		
	•
	to provide collateral security for the subordinated debt securities;

		
	•
	to establish the form or terms of subordinated debt securities of any series as permitted by the 1996 Indenture;

		
	•
	to provide for the acceptance of appointment by a successor trustee with respect to the subordinated debt securities of one or more series and to add to or change any of the provisions of the 1996 Indenture as necessary to provide for or facilitate the administration of the trusts under the 1996 Indenture by more than one trustee;

		
	•
	to provide for the procedures required to permit the utilization of a non-certificated system of registration for any series of subordinated debt securities;

		
	•
	to change any place where:

		
	◦
	the principal of and premium, if any, and interest, if any, on any subordinated debt securities is payable;

		
	◦
	any subordinated debt securities may be surrendered for registration of transfer or exchange;

		
	◦
	notices and demands to or upon CFC in respect of subordinated debt securities and the 1996 Indenture may be served; or

		
	◦
	to cure any ambiguity or inconsistency or to make or change any other provisions with respect to matters and questions arising under the 1996 Indenture, so long as such changes or additions do not adversely affect the interests of the holders of subordinated debt securities of any series in any material respect. 

​    If the Trust Indenture Act is amended after the date of the 1996 Indenture to require changes to the 1996 Indenture or the incorporation of additional provisions or to permit changes to, or the elimination of, provisions which, at the date of the 1996 Indenture, were required by the Trust Indenture Act to be contained in the 1996 Indenture, the 1996 Indenture will be deemed amended so as to conform to the amendment or to effect the changes or elimination. CFC and the trustee may, without the consent of any holders, enter into one or more supplemental 1996 Indentures to evidence or effect the amendment. 
Except as provided above, the consent of the holders of not less than a majority in aggregate principal amount of the subordinated debt securities of all series then outstanding, considered as one class, is required to add any provisions to, or change in any manner, or eliminate any of the provisions of, the 1996 Indenture. However, if less than all of the series of subordinated debt securities outstanding are directly affected by a proposed supplemental indenture, then the consent only of the holders of a majority in aggregate principal amount of outstanding subordinated debt securities of all series so directly affected, considered as one class, will be required. If the subordinated debt securities of any series have been issued in more than one tranche and if the proposed supplemental indenture directly affects the rights of the holders of one or more, but less than all, tranches, the consent only of the holders of a majority in aggregate principal amount of the outstanding subordinated debt securities of all tranches directly affected, considered as one class, will be required. However, no supplemental indenture may, without the consent of the holders of all of the affected outstanding subordinated debt securities:
		
	•
	change the stated maturity, installment or interest rate of any of the subordinated debt securities;

		
	•
	reduce the principal amount, any premium or the interest rate on any of the subordinated debt securities;

		
	•
	reduce the amount of the principal of original issue discount subordinated debt securities payable on acceleration of maturity;

		
	•
	change the coin or currency or other property in which any principal, premium or interest of any of the subordinated debt securities is payable;

		
	•
	impair any right to take legal action for an overdue payment;

		
	•
	reduce the percentage required for modifications to or waivers of compliance with the 1996 Indenture;

		
	•
	reduce the requirements for quorum or voting; or

		
	•
	with certain exceptions, modify the provisions for the waivers of certain covenants and defaults and any of the foregoing provisions. 

​A supplemental indenture that changes or eliminates any provision of the 1996 Indenture expressly included solely for the benefit of a particular series of subordinated debt securities or tranches, or modifies the rights of the holders of subordinated debt securities of the series or tranches with respect to the provision, will be deemed not to affect the rights under the 1996 Indenture of the holders of the subordinated debt securities of any other series or tranche. 
The 1996 Indenture provides that in determining whether the holders of the requisite principal amount of the outstanding subordinated debt securities have given or taken any direction, notice, consent, waiver or other action under the 1996 Indenture as of any date:

		
	•
	subordinated debt securities owned by CFC or any other obligor upon the securities or any affiliate of CFC or of the other obligor unless CFC, the affiliate or obligor owns all securities outstanding under the 1996 Indenture, or all outstanding subordinated debt securities of each the series and the tranche, as the case may be, determined without regard to this bullet point shall be disregarded and deemed not outstanding;

		
	•
	the principal amount of a discount subordinated debt security deemed outstanding shall be the amount of the principal that would be due and payable as of the date of determination upon a declaration of acceleration of the maturity as provided in the 1996 Indenture; and

		
	•
	the principal amount of a subordinated debt security denominated in foreign currencies or a composite currency deemed outstanding will be the dollar equivalent, determined as of that date in the manner prescribed for that subordinated debt security, of the principal amount of that subordinated debt security, or, in the case of a subordinated debt security described in the second bullet point above, of the amount described in that bullet point. 

​    If CFC solicits from holders of subordinated debt securities any request, demand, authorization, direction, notice, consent, election, waiver or other act, CFC may, at its option, by board resolution, fix in advance a record date for the determination of holders of subordinated debt securities entitled to give such request, demand, authorization, direction, notice, consent, election, waiver or other act, but CFC shall have no obligation to do so. If a record date is fixed, the request, demand, authorization, direction, notice, consent, election, waiver or other act may be given before or after the record date, but only the holders of record at the close of business on the record date shall be deemed holders for the purposes of determining whether holders of the requisite proportion of the outstanding subordinated debt securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other act, and for that purpose the outstanding subordinated debt securities shall be computed as of the record date. Any request, demand, authorization, direction, notice, consent, election, waiver or other act of a holder shall bind every future holder of the same security and the holder of every security issued upon the registration of transfer or in exchange or in lieu of the security in respect of anything done, omitted or suffered to be done by the trustee or CFC in reliance thereon, whether or not notation is made upon security. 
Agreement by Holders of Certain Tax Treatment
Each holder of the Notes, by accepting the Notes or a beneficial interest therein, is deemed to have agreed that the holder intends that the Notes constitute indebtedness and will treat the Notes as indebtedness for all United States federal, state and local tax purposes.
Denomination
The Notes are issued only in denominations of  $25.00 and integral multiples in excess thereof.
Governing Law
The 1996 Indenture and the Notes are governed by, and construed in accordance with, the laws of the State of New York, without regard to its principles of conflicts of laws.
Paying Agent and Registrar
U.S. Bank National Association is the paying agent and registrar for the Notes.
Notices
Except as otherwise provided in the 1996 Indenture, notices to holders of the Notes will be sent by mail to the registered holders.

Description of the 7.35% Collateral Trust Bonds due 2026
The following description is a summary of our 7.35% Collateral Trust Bonds due 2026 (the “Bonds”). The following summary of specified provisions of the 1994 Indenture (defined below) and the Bonds is subject to, and qualified in its entirety by reference to, the actual provisions of the 1994 Indenture and the Bonds.
General
On [November 6], 1996, we issued $100,000,000 aggregate principal amount of the Bonds. The Bonds were issued under that certain indenture dated as of February 15, 1994 (the “1994 Indenture”), between us and First Bank National Association, as trustee (the “Bonds Trustee”). The Bonds are traded on the New York Stock Exchange under the symbol “NRUC 26.”
Maturity Date
The Bonds will mature on November 1, 2026.
Interest Rate and Interest Payment Dates
The Bonds bear interest at a rate of 7.35% per annum. Interest is payable semiannually on May 1 and November 1 to the persons in whose names the Bonds are registered at the close of business on the preceding April 15 and October 15, respectively, commencing May 1, 1997.
Sinking Fund
CFC is required to make mandatory sinking fund payments sufficient to redeem, on November 1 of each of the years 2007 through 2025 inclusive, $5,000,000 in principal amount of the Bonds at 100% of the principal amount thereof plus accrued interest to the redemption date, to be applied on a pro rata basis to holders of the Bonds. Such mandatory sinking fund payments are calculated to retire 95% of the principal amount of the issue prior to maturity.
Redemption
Except as provided under “Sinking Fund” above, the Bonds may not be redeemed prior to maturity.
Security
The Bonds are secured under the 1994 Indenture, equally with outstanding bonds issued under the 1994 Indenture, by the pledge with the Bonds Trustee of “eligible collateral” having an “allowable amount” at least equal to the aggregate principal amount of bonds outstanding.
The 1994 Indenture provides that “eligible collateral” will consist of cash, eligible mortgage notes of distribution system members and permitted investments. The allowable amount of cash is 100% thereof, the allowable amount of eligible mortgage notes is the amount advanced and not repaid and the allowable amount of permitted investments is their cost to CFC (exclusive of accrued interest and brokerage commissions). However, the allowable amount of permitted investments traded on a national securities exchange or in any over-the-counter market is their fair market value as determined by CFC. For purposes of the 1994 Indenture and as used in describing the Bonds herein, a “member” is any person which is a member of CFC, and a “distribution system member” is a member 50% or more of whose gross operating revenues are derived from sales of electricity to end users, as determined as of the end of the last completed calendar year. 
Events of Default
The following “events of default” are applicable to the Bonds:

		
	•
	failure to pay interest on any bonds for 30 days after the interest becomes due;

		
	•
	failure to pay principal or any premium on any bonds at their maturity or upon redemption;

		
	•
	default in the making of any sinking fund payment;

		
	•
	default in the performance or breach of specified covenants in the indenture for 60 days after such default is known to any officer of CFC, including the covenant to maintain eligible collateral outlined above;

		
	•
	failure to perform any other covenant or warranty in the indenture for 60 days after notice from the trustee to CFC or from holders of at least 25% in principal amount of the then outstanding bonds to CFC and the trustee; and

		
	•
	specified events of bankruptcy, reorganization or insolvency.

   In case an event of default should occur and be continuing, the Bonds Trustee or the holders of at least 25% in principal amount of the Bonds then outstanding may declare the principal of the Bonds to be due and payable. Each declaration may, under certain circumstances, be rescinded by the holders of a majority in principal amount of the Bonds at the time outstanding. 
Modification of the 1994 Indenture
Modifications of the provisions of the 1994 Indenture may be made with the consent of the holders of not less than a majority in aggregate principal amount of the then outstanding Bonds, but, without the consent of the holder of each Bond affected thereby, no such modification shall (i) effect a reduction, or an extension of the stated time of payment, of the principal of or interest on any Bond or of any premium payable on redemption, (ii) permit the creation of any prior or equal lien on the securities or other property pledged under the Indenture (except as expressly permitted) or deprive the holder of any Bond (except as expressly permitted) of the lien created by the 1994 Indenture or (iii) reduce the above-stated percentage of holders of Bonds whose consent is required to modify the 1994 Indenture or the percentage of holders of Bonds whose consent is required for any waiver under the 1994 Indenture.
The 1994 Indenture provides that the Company and the Bonds Trustee may, without the consent of any holders of Bonds, enter into supplemental indentures for the purposes, among other things, of adding to the Company's covenants, establishing the form or terms of bonds of any series, changing or eliminating any restriction on the manner or place of payment of principal of or interest on bonds or, provided such action shall not adversely affect the interests of the holders of the Bonds in any material respect, curing ambiguities or inconsistencies in the 1994 Indenture or making other provisions with respect to matters arising under the 1994 Indenture.

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