I
LOAN AGREEMENT
AGREEMENT, dated March 30, 1993 , between CAP ROCK ELECTRIC
COOPERATIVE, INC., ("Borrower"), a corporation organized and existing under the
laws of the State of Texas (the "State") and NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION ("CFC"), a corporation organized and existing
under the laws of the District of Columbia.
RECITALS
WHEREAS, the Borrower has applied to CFC for four loans to finance, in
part, the Project and to purchase LCTCs and CFC is willing to make such a loan
to the Borrower on the terms and conditions stated herein; and
WHEREAS, the Borrower four (4) Secured Promissory to evidence an
indebtedness Commitment; and has agreed to enter into four loans and to execute
Notes (each representing a separate loan with CFC) in the aggregate principle
amount of the CFC
WHEREAS, the Borrower is the surviving entity in a merger with Hunt-Collin
Electric Cooperative, Inc; and
WHEREAS, the Borrower will use the proceeds hereunder to finance its
1993-1994 workplan and prepay Hunt-Collin Electric Cooperative Inc.'s REA debt;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree and bind
themselves as follows:
ARTICLE I
DEFINITIONS
"Adjustment Date" shall mean the date determined by CFC approximately
seven years after the first Advance.
"Advance" or "Advances" shall mean advances by CFC to Borrower pursuant to
the. terms and conditions of this Agreement.
"Amortization Basis Date" shall mean the earlier of (a) two years from
the date hereof or (b) the date on which the CFC Commitment has been fully
advanced.
"Business Day" shall mean any day that CFC is open for business.
"CFC Commitment" shall have the meaning as defined in Schedule 1
hereto.
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"CFC Fixed Rate" shall mean such other
fixed rate as is then available for
loans similarly classified pursuant
to CFC's policies and procedures
-then in effect.
"CFC Fixed Rate Term" shall mean the specific period of time that
either a CFC Fixed Rate or the CFC Standard Seven Year Fixed Rate is in effect,
"CFC Standard Seven Year Fixed Rate" shall mean the CFC long-term rate
at the time of each Advance for loans similarly classified pursuant to the
long-term loan programs established by CFC from time to time.
"CFC Variable Rate" shall mean the rates established by CFC for
variable interest rate long-term loan programs established by CFC from time to
time.
"Conversion Request" shall mean a request of the Borrower's President,
General Manager or Board of Directors, in form and substance satisfactory to
CFC, that requests an interest rate conversion.
"DSC" or "Debt Service Coverage Ratio" shall mean the ratio determined
as follows: for each calendar year add (I) Patronage Capital or Margins of the
Borrower, (ii) Interest Expense (as computed in accordance with the principles
set forth in the definition of Times Interest Earned Ratio herein) of the
Borrower and (iii) Depreciation and Amortization Expense of the Borrower, and
divide the total so obtained by an amount equal to the sum of all payments of
principal and interest required to be made on account of Total Long-Term Debt
during such calendar year; provided, however, that in the event that any
Long-Term Debt (being any amount included in Total Long-Term Debt computed as
provided above) has been refinanced during such year the payments of principal
and interest required to be made during such year on account of such Long-Term
Debt shall be based (in lieu of actual payments required to be made on such
refinanced 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 required to be made during the following year on account of such
refinancing debt, (Capitalized terms used herein are defined in the Mortgage.)
"Equity" shall mean the aggregate of Mortgagor's Equities and Margins
as computed pursuant to Generally Accepted Accounting Principles
"LCTC" or "LCTCs" shall mean the Loan Capital Term Certificate(s) as
described in Section S.D. hereto.
"Maturity Date" shall have the meaning as defined in each Note.
"Mortgage" shall have the meaning as described in Schedule 1 hereto.
"Mortgaged Property" shall have the meaning as defined in the
Mortgage.
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"Note" or "Notes" shall mean promissory notes executed by the Borrower
in the form of Exhibits A hereto and each in the principal amounts as set forth
in Schedule 1 hereto.
"Payment Date" shall mean the last day of each of the months referred
to in Schedule 1 hereto.
"Payment Notice" shall mean a notice furnished by CFC to Borrower that
indicates the precise amount of each payment of principal and interest and the
total amount of each payment.
"Project" shall mean the facility being financed by this loan as
described in Schedule 1 hereto.
"REA" shall mean the Rural Electrification Administration of the
United States of America, Department of Agriculture.
"Termination Date" shall mean a date four years after the date hereof.
"TIER" or "Time Interest Earned Ratio" shall mean the ratio determined
as follows: for each calendar year: add (i) Patronage Capital or Margins of the
Borrower (ii) Interest Expense on Total Long-Term Debt of the Borrower and (iii)
taxes paid, if any, based upon income during the year and divide the total so
obtained by Interest Expense of the Borrower, provided, however, that in
computing Interest Expense, there shall be added, to the extent not otherwise
included, an amount equal to 33-1/3% of the excess of Restricted Rentals paid by
the Borrower over 2% of the Borrower's Equities and Margins.
(Capitalized terms used herein are defined in the Mortgage.)
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. The Borrower represents and warrants that:
A. Good Standing. The Borrower is a corporation duly incorporated and
validly existing and in good corporate standing under the laws of the State, is
duly qualified in those states in which it is required to be qualified to
conduct its business and has corporate power to make and perform this Agreement,
to borrow hereunder and to give security as provided for herein.
B. Authority. The execution, delivery and performance by the Borrower of
this Agreement, each Note (as hereinafter defined) and the Mortgage (as defined
in Schedule 1 hereto) and the performance of the transactions contemplated
thereby have been duly authorized by all necessary corporate action and will not
violate any provision of law or of the Articles of Incorporation or By-Laws of
the Borrower or result in a breach of, or constitute a default under, any
agreement, indenture or other instrument to which the Borrower is a party or by
which it may be bound.
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C. Litigation. There are no suits or proceedings pending or to the
knowledge of the Borrower threatened against or affecting the Borrower or its
properties which, if adversely determined, would have a material adverse effect
upon the financial condition or the business of the Borrower. The Borrower is
not, to its knowledge, in default with respect to any judgment, order, rule or
regulation of any court, governmental agency or other instrumentality which
would have a material adverse effect on the Borrower.
D. Financial Statements. The balance sheet of the Borrower as at the
date identified in Schedule 1 hereto, and the statement of operations of the
Borrower for the period ending on said date, heretofore furnished to CFC, are
complete and correct. Said balance sheet fairly presents the financial condition
of the Borrower as at said date and said statement of operations fairly reflects
its operations for the period ending on said date. The Borrower has no
contingent obligation or unusual forward or long-term commitments except as
specifically stated in said balance sheet or herein. There has been no material
adverse change in the financial condition or operations of the Borrower from
that set forth in said financial statements except changes disclosed in writing
to CFC.
B. Location of Office. The principal place of business of the Borrower and
the office where its records concerning accounts and contract rights are kept is
identified in Schedule 1 hereto.
F. Location of Properties. All property owned by the Borrower is located in
the counties identified in Schedule 1 hereto.
C. No Other Liens. As to property which is presently included in the
description of Mortgaged Property (as that term is defined in the Mortgage), the
Borrower has not, without the prior written approval of CFC, signed any security
agreement or filed or permitted to be filed any financing statement with respect
to assets owned by it, other than security agreements and financing statements
running in favor of CFC, except as disclosed in writing to CFC prior to the date
hereof.
H. Required Approvals. No license, consent or approval of any governmental
agency or authority is required to enable the Borrower to enter into this
Agreement or to perform any of its obligations provided for herein except as
disclosed in Schedule 1 hereto.
I. Survival. All representations and warranties made by the Borrower herein
or made in any certificate delivered pursuant hereto shall survive the making of
the Advances and the execution and delivery to CFC of the Note.
ARTICLE III
LOAN
Section 3.1. Advances. CFC agrees to make, and the Borrower agrees to
request, on the terms and conditions of this Agreement, Advances from time to
time at the main office of CFC, or at such other place as may be mutually
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agreed upon, in an aggregate principal amount not to exceed the CFC Commitment.
On the Termination Date, CFC may stop advancing funds and limit the
CFC Commitment to the amount advanced. The obligation of the Borrower to repay
the Advances shall be evidenced by the Note in the principal amount of the
unpaid principal amount of the Advances from time to time outstanding. The
Borrower shall give CFC written notice of the date on which each Advance is to
be made. Advances made by CFC pursuant to this Agreement shall be endorsed by
CFC on the reverse side of the appropriate Note on or before any assignment or
transfer thereof by CFC.
Section 3.2. Application of Advances. The Borrower shall give CFC
prior written notice of the date on which an Advance is to be made. Prior to an
Advance, Borrower shall notify CFC in writing how the Advance is to be applied
with respect to each Note. In the event Borrower fails to provide CFC with said
notice, the Advance shall be applied sequentially to each Note in the order they
are listed in Schedule 1 attached hereto.
Section 3.3. Interest Rate and Payment. Each Note shall be payable and bear
interest as follows:
A. Payments and Amortization. The Borrower, upon receipt of an invoice
relating to an Advance, shall promptly pay interest only on each Payment Date
until the first Payment Date of the first full quarter following the
Amortization Basis Date.
Thereafter, quarterly or monthly installments, as determined by CFC, of
principal and interest in the amounts shown in the Payment Notice, shall be paid
on each Payment Date; except that if not sooner paid, any amount due on account
of the unpaid principal, interest accrued thereon or fees shall be due and
payable on the Maturity Date. On or after the Amortization Basis Date, and
thereafter at least quarterly, CFC will furnish to the Borrower a Payment
Notice, Such Payment Notice shall be sent to the Borrower at least ten (10) days
before the next ensuing Payment Date.
Principal will be amortized in accordance with the method stated in Schedule 1
hereto. The amortization of the principal outstanding will be calculated by CFC
using one of the following types of interest rates which corresponds--to the
interest rate selected by Borrower:
(i) the CFC Standard Seven Year Fixed Rate in effect on the date of such
Advance;
(ii) a CFC Fixed Rate in effect on the date of such Advance; or
(iii) the CFC Variable Rate in effect on the first day of the first
quarter in which principal is due.
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No provision of this Agreement or each Note shall require the
payment, or permit the collection, of interest in excess of
the highest rate permitted by applicable law.
3. Application of Payments. Each payment shall be applied first to any
charges then due on the appropriate Note, second to interest accrued on the
principal amount to the due date of such payment on the appropriate Note (or, at
the election of the holder of such Note, to the date of such payment if the same
is not paid on its due date); and the balance to the reduction of principal
against the appropriate Note according to an amortization schedule provided to
Borrower from CFC.
C. Election of Interest Rate. For each loan and prior to the first
Advance or as appropriate after the first Advance, the Borrower must select in
writing one of the following interest rates: (i) the CFC Standard Seven Year
Fixed Rate; (ii) a CFC Fixed Rate; or (iii) the CFC Variable Rate. In the event
the Borrower does not select an interest rate in writing when the CFC Standard
Seven Year Fixed Rate or a CFC Fixed Rate is subject to repricing, then Advances
shall bear interest according to CFC's then available interest rate repricing
policies.
Interest shall be computed for the actual number of days elapsed on the basis of
a year of 365 days, until the first day of the complete calendar quarter
following the Amortization Basis Date. Thereafter, if the loan bears interest at
either the CFC Standard Seven Year Fixed Interest Rate or a CFC Fixed Rate,
interest shall be computed on the basis of a 30-day month and 360-day year. If
the loan bears interest at the CFC Variable Rate, interest shall be computed for
the actual number of days elapsed on the basis of a year of 365 days.
(i) Fixed Rate. If the Borrower elects a fixed rate, the rate shall
equal either (x) the CFC Standard Seven Year Fixed Rate or (y) a CFC Fixed Rate.
In the event the Borrower selects either the CFC Standard Seven Year Fixed Rate
or a CFC Fixed Rate, such rate shall be in effect for a CFC Fixed Rate Term.
During the CFC Fixed Rate Term, all Advances shall bear interest at the rate
then in effect associated with such CFC Fixed Rate Term.
(a) Repricing of CFC Standard Seven Year Fixed Rate.
The CFC Standard Seven Year Fixed Rate shall apply until an
Adjustment- Date. CFC shall provide Borrower with at least 60 days
prior written notice of an Adjustment Date. After an Adjustment Date,
the CFC Standard Seven Year Fixed Rate shall be computed in like
manner and fixed by CFC from time to time. CFC will not change the CFC
Standard Seven Year Fixed Rate without giving the Borrower prior
written notice.
(b) Repricing of a CFC Fixed Rate. CFC shall provide
the Borrower with at least 60 days prior written notice of the date
on which a CFC Fixed Rate is no longer in effect. Pursuant to CFC's
policies of general application for such repricing, the Borrower may
choose any of the interest rate options then available for similarly
classified borrowers repricing from a CFC Fixed Rate.
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(ii) CFC Variable Rate. If the Borrower elects a CFC
Variable Rate, such CFC Variable Rate shall apply until the Maturity
Date of the appropriate Note unless the Borrower elects to convert to
the CFC Standard Seven Year Fixed Rate or a CFC Fixed Rate pursuant
to the terms hereof, In the event Borrower selects a CFC Variable
Rate, such rate shall be applicable to the entire amount advanced or
to be advanced on that loan.
Section 3.4, Conversion of Interest Rates.
A. CFC Variable Rate to CFC Standard Seven Year Fixed Rate or a CFC Fixed
Rate. For each loan, the Borrower may at any time request to convert from
the CFC Variable Rate to the CFC Standard Seven Year Fixed Rate or a CFC
Fixed Rate by submitting to CFC a Conversion Request. Each rate shall be
equal to the rate of interest offered by CFC in effect on the date of the
Conversion Request and communicated to its borrowers. The effective date of
the new interest rate (whether it be the CFC Standard Seven Year Fixed Rate
or a CFC Fixed Rate) shall be a date determined by CFC pursuant to its
policies of general application following receipt of the Conversion
Request. Prior to the time when either the CFC Standard Seven Year Fixed
Rate or the CFC Fixed Rate is no longer applicable, the Borrower may select
the CFC Variable Rate, the CFC Standard Seven Year Fixed Rate or a CFC
Fixed Rate. CFC agrees that its long-term loan policies will include a
fixed interest rate option until the Maturity Date, provided, however, that
the Borrower may not select a CFC Fixed Rate with a CFC Fixed Rate Term
that extends beyond the Maturity Date.
B. CFC Standard Seven Year Fixed Rate or CFC Fixed Rate to CFC
Variable Rate. For each loan, the Borrower may at its option at any time convert
from the CFC Standard Seven Year Fixed Rate or, at the discretion of CFC, a CFC
Fixed Rate to the CFC Variable Rate, if the Borrower: (i) submits a Conversion
Request requesting that the CFC Variable Rate apply to any outstanding loan
balance on the appropriate Secured Promissory Note and future Advances pursuant
thereto; and (ii) pays to CFC promptly upon receipt of an invoice a conversion
fee calculated pursuant to CFC's long-term loan policies as established from
time to time for similarly classified long-term loans. The effective date of the
CFC Variable Rate shall be the beginning of the next full billing cycle
following receipt of the Conversion Request.
C. CFC Standard Seven Year Fixed Rate to CFC Fixed Rate and
Vice-Versa. For each loan, the Borrower may at its option at any time convert
any amount outstanding on the Note from the CFC Standard Seven Year Fixed Rate
to a CFC Fixed Rate or, at the discretion of CFC, from a CFC Fixed Rate to the
CFC Standard Seven Year Fixed Rate if the Borrower (i) submits a Conversion
Request requesting that a CFC Fixed Rate or the CFC Standard Seven Year Fixed
Rate apply to any outstanding loan balance on the Note and (ii) pays to CFC
promptly upon receipt of an invoice a conversion fee calculated pursuant to
CFC's long-term loan policies as established from time to time for similarly
classified long-term loans. The effective date of the new interest rate (whether
it be the CFC Standard Seven Year Fixed Rate or a CFC Fixed Rate) shall be a
date determined by CFC pursuant to its policies of general application following
receipt of the Conversion Request. Prior to the time when either the CFC
Standard Seven Year Fixed Rate or the CFC Fixed Rate is no
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longer applicable, the Borrower may select the CFC Variable Rate, the CFC
Standard Seven Year Fixed Rate or a CFC Fixed Rate. CFC agrees that its
long-term loan policies will include a fixed interest rate option until the
Maturity Date, provided, however, that the Borrower may not select a CFC Fixed
Rate with a CFC Fixed Rate Term that extends beyond the Maturity Date.
Section 3.5. Prepayment. Subject to the terms of the Mortgage and
provided the interest rate on the loan is at the CFC Variable Rate or a fixed
rate in effect for seven years or less, the Borrower may at any time, on not
less than 30 days' written notice to CFC, prepay each Note, in whole or in part,
together with the interest accrued to the date of prepayment and any prepayment
premium that CFC may from time to time prescribe. CFC will permit a prepayment
if required under the Mortgage.
ARTICLE IV
CONDITIONS OF LENDING
Section 4. The obligation of CFC to make any Advance hereunder is
subject to satisfaction of the following conditions:
A. Legal Matters. All legal matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory to counsel for CFC and,
as to all matters of local law, to such local counsel as counsel for CFC may
retain.
B, Documents. CFC shall have been furnished with executed copies,
satisfactory to CFC, of this Agreement, each Note and the Mortgage and certified
copies, satisfactory to CFC, of all such corporate documents and proceedings of
the Borrower authorizing the transactions hereby contemplated as CFC or its
counsel shall require. CFC shall have received an opinion of counsel for the
Borrower: (i) substantially in the form of Exhibit B hereto; and (ii) addressing
such other legal matters as CFC or its counsel shall reasonably require.
C. Government Approvals. The Borrower shall have furnished to CFC true and
correct copies of all certificates, authorizations and consents, including
without limitation the consents referred to in Section 2,H. hereof, necessary
for the execution, delivery or performance by the Borrower of this Agreement,
each Note and the Mortgage
D. Representations and Warranties, The representations and warranties
contained in Article II shall (except as affected by the transactions
contemplated by this Agreement) be true on the date of the making of each
Advance hereunder with the same effect as though such representations and
warranties had been made on such date; no Event of Default specified in Article
VI and no event which, with the lapse of time or the notice and lapse of time
specified in Article VI would become such an Event of Default, shall have
occurred and be continuing or will have occurred after giving effect to the
Advance on the books of the Borrower; there shall have occurred no material
adverse change in the business or condition, financial or otherwise,
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of the Borrower; and nothing shall have occurred which in the opinion of CFC
materially and adversely affects the Borrower's ability to meet its obligations
hereunder.
K. Mortgage Filing. The Mortgage shall have been duly recorded as a
mortgage on real property and duly filed, recorded or indexed as a security
interest in personal property wherever CFC shall have requested, all in
accordance with applicable law, and the Borrower shall have caused satisfactory
evidence thereof to be furnished to CFC.
F. Special Conditions. The Borrower shall have complied with any special
conditions listed in Schedule 1 hereto.
G. Requisitions. The Borrower will requisition all Advances by submitting
its requisition to CFC in form and substance satisfactory to CFC. Requisitions
shall be made only for the purpose of paying the costs associated with the
Project. The Borrower agrees to apply the proceeds of the Advances in accordance
with its loan application with such modifications as may be mutually agreed.
H. Selection of Maturity Date. Prior to the first Advance, Borrower
shall select a Maturity Date for each Note, said date not to exceed thirty-five
(35) years from the date hereof. The date for each Note selected by the Borrower
shall be selected in writing and must be in form and content satisfactory to
CFC. In the event Borrower fails to select a Maturity Date for any Note prior to
the first Advance, the Maturity Date for such Note shall be thirty-five (35)
years from the date hereof.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5. After the date hereof and until payment in full of each
Note and performance of all obligations of the Borrower hereunder, the Borrower
agrees that it will:
A. Membership. Remain a member in good standing of CFC,
B. Financial Ratios. The Borrower, subject to events in the j~rdgxnent
of CFC to be beyond the control of the Borrower, shall so operate and manage its
business as to achieve a TIER of not less than 1.5, and a DSC of not less than
1.25, each of said ratios being determined by averaging the two highest annual
ratios during the most recent three calendar years. The Borrower shall design
its rates so that such TIER and DSC ratios will be achieved. The Borrower shall
not decrease its rates if it is failing on an actual historical basis to meet
the ratios set forth in this section for the calendar year prior to such
reduction.
C. Annual Certificate. Within 60 days after the close of each calendar
year, commencing with the year following the year in which the initial Advance
hereunder shall have been made, deliver to CFC a written
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statement signed by its General Manager, stating that to the best of said
person's knowledge, the Borrower has fulfilled all of its obligations under this
Agreement, each Note, and the Mortgage throughout such year or, if there has
been a default in the fulfillment of any such obligations, specifying each such
default known to said person and the nature and status thereof.
D. Loan Certificate Purchase. The Borrower will purchase a LCTC for
each Note from CFC in an amount equal to the amount(s) identified in Schedule 1
hereto at a purchase price of 100% of the principal amount thereof. Unless
otherwise requested in writing by the Borrower prior to the initial Advance
(which request must comply with CFC's then current policy relating to the
purchase of LCTC's), the Borrower agrees that the initial Advance hereunder
shall at least equal the amount of such LCTC and the Borrower will apply a
portion of the proceeds of such Advance to the purchase of such LCTC. If the
Borrower elects to pay for such LCTC other than from loan funds, the amount of
the CFC Commitment will be correspondingly reduced by said amount when the LCTC
is fully paid. If the Borrower obtains Advances hereunder other than for the
purpose of purchasing an LCTC and fails to pay for the LCTC, then CFC may make
loan Advances for the account of the Borrower to purchase the LCTC. CFC agrees
to deliver the LCTC within ninety days following the date on which the LCTC has
been paid for in full.
E. Limitations on: System Extensions and Additions; Operations and
Maintenance Contracts; Power Purchase Contracts; Power Sales Contracts. Unless
the Borrower shall at the time have an Equity of at least 40% or shall have
achieved a TIER of at least 1.5 for each of the last two calendar years, the
Borrower will not, without the prior written consent of CFC (a) construct, make,
lease, purchase or otherwise acquire any extensions or additions to its system
which provide direct service to any ultimate consumer having an anticipated or
contract demand in excess of twenty-five (25) percent of the Borrower's maximum
system electrical demand recorded during the past twelve months; (b) enter into
any contract or contracts for the sale to the ultimate consumer of electric
power and energy in excess of twenty-five (25) percent of the Borrower's maximum
system demand; (c) subject to the terms of the Mortgage, enter into any contract
or contracts for the use by others of all or a substantial part of its property;
and (d) enter into any contract or contracts for the purchase of electric power
or energy which would alter the source of more than 25% of the Borrower's source
of wholesale power or for any transmission, interconnection or pooling
arrangements. ---
F. Financial Books; Financial Reports; Right of Inspection. The
Borrower will at all times keep, and safely preserve, proper books, records and
accounts in which full and true entries will be made of all of the dealings,
business and affairs of the Borrower, in accordance with Cenerally Acceptable
Accounting Principles. The Borrower will prepare and furnish CFC from time to
time hereunder not later than the last day of each month, or at less frequent
intervals when specified by CFC, financial and statistical reports on its
condition and operations for the previous month, Such reports shall be in such
form and include such information as may be specified by CFC, including without
limitation an analysis of Borrower's revenues, expenses and consumer accounts.
The Borrower will cause to be prepared and furnished to
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CFC from time to time hereunder, at least once during each 12-month period
during the term hereof, a full and complete report of its financial condition
and of its operations as of the end of the calendar year in form and substance
satisfactory to CFC, audited and certified by independent certified public
accountants nationally recognized or otherwise satisfactory to CFC and
accompanied by a report of such audit in form and substance satisfactory to CFC.
Such report shall be furnished within 120 days of the end of the such calendar
year. CFC, through its representatives, shall at all times during reasonable
business hours and upon prior notice have access to, and the right to inspect
and make copies of, any or all books, records and accounts, and any or all
invoices, contracts, leases, payrolls, canceled checks, statements and other
documents and papers of every kind belonging to or in the possession of the
Borrower or in anywise pertaining to its property or business.
G. Special Affirmative Covenants. Comply with any and all special
affirmative covenants as listed in Schedule 1 hereto.
ARTICLE VI
EVENTS OF DEFAULT
Section 6. The following shall be Events of Default under this Agreement:
A. Representations and Warranties. Any representation or warranty made by
the Borrower in Article II hereof or any certificate furnished to CFC hereunder
shall prove to have been incorrect in any material respect at the time made and
shall at the time in question be untrue or incorrect in any material respect and
remain uncured;
B. Payment. Default shall be made in the payment of or on account of
interest on or principal of any of the Note when and as the same shall be due
and payable, whether by acceleration or otherwise, which shall remain
unsatisfied for S Business Days;
C . Other Covenants. Default by the Borrower in the observance or
performance of any other covenant or agreement contained in this Loan Agreement,
in, any of the Notes or the Mortgage, which shall remain unremedied for 30
calendar days after written notice thereof shall have been given'io the Borrower
by CFC;
D. Corporate Existence. The Borrower shall forfeit or otherwise be deprived
of its corporate charter, franchises, permits, easements, consents or licenses
required to carry on any material portion of its business;
E. Other Obligations. Default by the Borrower in the payment of any
obligation, whether direct or contingent, for borrowed money or in the
performance or observance of the terms of any instrument pursuant to which such
obligation was created or securing such obligation;
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F. Bankruptcy. A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower in an -involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official, or ordering the winding up or
liquidation of its affairs, and such decree or order shall remain unstayed and
in effect for a period of 90 consecutive days or the Borrower shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian or trustee,
of a substantial part of its property, or make any general assignment for the
benefit of creditors; or
C. Dissolution or Liquidation. Other than as provided in subsection R.
above, the dissolution or liquidation of the Borrower, or failure by the
Borrower promptly to forestall or remove any execution, garnishment or
-attachment of such consequence as will impair its ability to continue its
business or fulfill its obligations and such execution, garnishment or
attachment shall not be vacated within 30 days. The term "dissolution or
liquidation of the Borrower", as used in this subsection, shall not be construed
to include the cessation of the corporate existence of the Borrower resulting
either from a merger or consolidation of the Borrower into or with another
corporation following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions.
ARTICLE VII
REMEDIES
Section 7. If any of the Events of Default listed in Section 6 hereof
shall occur after the date of this Agreement and shall not have been remedied,
then CFC may pursue all rights and remedies available to CFC that are
contemplated by the Mortgage in the manner, upon the conditions, and with the
effect provided in the Mortgage, including, but not limited to, a suit for
specific performance, injunctive relief or damages. Nothing herein shall limit
the right of CFC to pursue all rights and remedies available to a creditor
following the occurrence of an Event of Default listed in Section 6 hereof. Each
right, power and remedy of CFC shall be cumulative and concurrent, and recourse
to one or more rights or remedies shall not constitute a waiver of any other
right, power or remedy.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices. All notices, requests and other communications
provided for herein including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement shall be given or made in
writing (including, without limitation, by telecopy) and delivered to the
intended recipient at the "Address for Notices" specified below; or, as to any
party, at such other address as shall be designated by
<PAGE>
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly-given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as provided for herein.
The Address for Notices of the respective parties are as follows:
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071
Attention: Loan Officer
The Borrower: The address set forth in Schedule 1 hereto
Section 8.2. Expenses. The Borrower will pay all costs and expenses of
CFC, including reasonable fees of counsel, incurred in connection with the
enforcement of this Agreement, each Note, the Mortgage and the other instruments
provided for herein or with the preparation for such enforcement if CFC has
reasonable grounds to believe that such enforcement may be necessary.
Section 8.3. Late Payments. If payment of any principal and/or
interest due under the terms of each Note is not received at CFC's office in
Herndon, Virginia, or such other location as CFC may designate to the Borrower
within five Business Days after the due date thereof or such other time period
as CFC may prescribe from time to time in its policies of general application in
connection with any late payment charge (such unpaid amount of principal and/or
interest being herein called the "delinquent amount", and the period beginning
after such due date until payment of the delinquent amount being herein called
the "late-payment period"), the Borrower will pay to CFC, in addition to all
other amounts due under the terms of each Note, the Mortgage and this Agreement,
any late-payment charge as may be fixed by CFC from time to time on the
delinquent amount for the late-payment period.
Section 8.4. Filing Fees. To the extent permitted by law, the Borrower
agrees to pay alt expenses of CFC (including the fees and expenses of its
counsel) in connection with the filing or recordation of all financing
statements and instruments as may be required by CFC in connection with this
Agreement, including, without limitation, all documentary stamps, recordation
and transfer taxes and other costs and taxes incident to recordation of any
document or instrument in connection herewith. Borrower agrees to save harmless
and indemnify CFC from and against any liability resulting from the failure to
pay any required documentary stamps, recordation and transfer taxes, recording
costs, or any other expenses incurred by CFC in connection with this Agreement.
The provisions of this subsection shall survive the execution and delivery of
this Agreement and the payment of all other amounts due hereunder.
<PAGE>
Section 8.5. No Waiver. No failure on the part of CFC to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver-thereof
nor shall any single or partial exercise by CFC of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right.
SECTION 8.6. GOVERNING LAW . THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
Section 8.7. Holiday Payments. If any payment to be made by the
Borrower hereunder shall become due on a Saturday, Sunday or business holiday of
CFC, such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing any interest in respect of such
payment.
Section 8.8. Rescission Fee. The Borrower may elect not to borrow all
or any portion of the CFC Commitment in which event CFC shall release the
Borrower from its obligations hereunder, provided the Borrower complies with
such terms and conditions as CFC may impose for such release including, without
limitation, payment of any rescission fee that CFC may from time to time
prescribe.
Section 8.9. Modifications. No modification or waiver of any provision
of this Agreement or each Note, and no consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
by the party granting such modification, waiver or consent.
Section 8.10. Merger and Integration. This Agreement and the attached
exhibits and matters incorporated by reference contain the entire agreement of
the parties hereto with respect to the matters covered and the transactions
contemplated hereby. Section 8.11. Headings. The headings and sub-headings
contained in the titling of this Agreement are intended to be used for
convenience only and do not constitute part of this Agreement.
Section 8.12. Severability. If any term, provision or condition, or
any part thereof, of this Agreement, each Note or the Mortgage shall for any
reason be found or held invalid or unenforceable by any governmental agency or
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the remainder of such term, provision or condition nor any other term,
provision or condition, and this Agreement, each Note, and the Mortgage shall
survive and be construed as if such invalid or unenforceable term, provision or
condition had not been contained therein.
Section 8.13. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, CFC is hereby authorized at any time and
from time to time, without prior notice to the Borrower, to exercise rights of
setoff or recoupment and apply any and all amounts held, or hereafter held, by
CFC or owed to the Borrower or for the credit or account of the Borrower
<PAGE>
against any and all of the obligations of the Borrower now or hereafter existing
hereunder or under the Note. CFC agrees to notify the Borrower -promptly after
any such setoff or recoupment and the application thereof, provided that the
failure to give such notice shall not affect the validity of such setoff,
recoupment or application. The rights of CFC under this section are in addition
to any other rights and remedies (including other rights of setoff or
recoupment) which CFC may have.
Section 8.14. Schedule 1. Schedule 1 attached hereto is an integral part of
this Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
By:
-------------------------
Chairman
Attest:
--------------------------------------------
Secretary
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
(SEAL)
By:
--------------------------------------------
Governor
Attest:
--------------------------------------------
Assistant Secretary
<PAGE>
SCHEDULE 1
1. The Project consists of financing approximately 86% of Borrower's 1993-
1994 construction workplan and prepaying, at a discount, Hunt-Collin Electric
Cooperative, Inc.'s REA debt.
2. The Mortgage shall mean the Restated Mortgage and Security Agreement,
dated as of even date herewith, between the Borrower and CFC, as it
may have been or shall be supplemented, amended, consolidated, or
restated from time to time.
3. The date of the Borrower's balance sheet referred to in Section 2.D. is
March 31, 1992.
4. The principal place of business of the Borrower referred to in Section
2.E. is West Loop 214, Stanton, TX 79782-0700.
5. All of the property of the Borrower is located in the counties of
Andrews, Borden, Dawson, Ector, Glasscock, Howard, Irion, Martin,
Midland, Mitchell, Nolan, Reagan, Sterling, Tom Green and Upton in the
State of Texas.
6. The governmental authority referred to in Section 2.H. is N/A
7. The CFC Commitment is $17,074,468.00 as evidenced by four Notes in the
principal amounts set forth herein below:
The Borrower selects four Notes (each representing a separate loan
with CFC with the Loan Designation noted below). The amount of each
Note is set forth below. In addition, the amount of the LCTC referred
to in Section S.D. hereof shall be approximately 6% of each Note and
as set-forth below, provided, however, that the exact purchase price
for a LCTC will be recalculated by CFC after the first Advance on each
Note.
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
Loan Note- Amount LCTC --Amount
Designation -
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
A-9034 $4,268,617.00 $256,117.00
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
A-9035 $4,268,617.00 $256,117.00
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
A-9036 $4,268,617.00 $256,117.00
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
A-9037 $4,268,617.00 $256,117.00
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8. The months relating to the Payment Date are February, May, August and
November.
9. Amortization of Advances shall be based upon the Borrower's selection
in writting, prior to the first Advance or as appropriate after the
first Advance, of either of the methods indicated below:
level principal
level debt service
10. The special condition(s) referred to in Section 4.R. is (are):
A. In the event the Borrower requests a loan term for any of
these loans (9034, 9035, 9036 or 9037) of less than
thirty--five years, then prior to the first Advance for such
loan, Borrower shall provide CFC with a financial forecast
which indicates its ability to repay such loan within the
requested loan term.
B. Advances dedicated to the prepayment of Hunt-Collins Electric
Cooperative, Inc.'s REA debt shall be made by CFC directly to
REA. Borrower shall provide CFC with a written statement from
REA stating that Hunt-Collin Electric Cooperative, Inc.'s REA
debt has been paid in full and that REA's lien on Hunt-Collin
Electric Cooperative, Inc.'s facilities has been released.
C. Advances may be withheld anytime CFC determines, in its sole
judgement, that appropriate action has not been taken by the
Borrower to implement retail rates adequate to achieve the
financial ratios required in the CFC loan agreement and/or
mortgage.
11. The special affirmative covenant(s) referred to in Section 5.G is (are)
as follows: N/A
12. The address of the Borrower referred to in Section 8.1. is
West Loop 214
P.O. Box 700
Stanton, TX 79782-0700
<PAGE>
Exhibit A-1
SECURED PROMISSORY NOTE
$4,268,617.00 , 19
CAP ROCK ELECTRIC COOPERATIVE, INC. , a Texas corporation ("Borrower"), for
value received promises to pay, without setoff, deduction, recoupment or
counterclaim, to the order of NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION ("Payee") at the Payee's main office or such other place as
designated by the Payee, in lawful money of the United States, the sum of the
aggregate unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan Agreement"), on the dates
provided in the Loan Agreement (except that if not sooner paid, any balance
shall be due and payable on a date not to exceed thirty-five years after the
date hereof or such date selected by Borrower pursuant to Section 4.1-1 of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the respective dates of each Advance (as defined in
the Loan Agreement) hereunder, at the rate or rates and payable at the times
provided in said Loan Agreement.
All Advances made by the Payee pursuant to said Loan Agreement shall
be endorsed by the Payee on the reverse side hereof on or before any assignment
or transfer hereof by the Payee.
This Note is secured under a Restated Mortgage and Security Agreement
dated as of even date herewith, between the Borrower and the Payee, as it may
have been or shall be supplemented, amended, consolidated or restated from time
to time ("Mortgage"). This Note is the Note referred to in, and has been
executed and delivered pursuant to, the Loan Agreement.
Upon the occurrence of an event of default under the Mortgage, the
principal hereof and interest accrued thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.
The Borrower waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and notice of non-payment of
this Note. WITNESS WHEREOF the Borrower has caused this Note to be
signed in its
corporate name and its corporate seal to be hereunto affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.
CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
By: _______________________
(President)
Attest:_____________________
(Secretary)
Exhibit A-2
SECURED PROMISSORY NOTE
$4,268,617.00 , 19
CAP ROCK ELECTRIC COOPERATIVE, INC. , a Texas corporation ("Borrower"), for
value received promises to pay, without setoff, deduction, recoupment or
counterclaim, to the order of NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION ("Payee") at the Payee's main office or such other place as
designated by the Payee, in lawful money of the United States, the sum of the
aggregate unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan Agreement"), on the dates
provided in the Loan Agreement (except that if not sooner paid, any balance
shall be due and payable on a date not to exceed thirty-five years after the
date hereof or such date selected by Borrower pursuant to Section 4.H of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the respective dates of each Advance (as defined in
the Loan Agreement) hereunder, at the rate or rates and payable at the times
provided in said Loan Agreement.
All Advances made by the Payee pursuant to said Loan Agreement shall
be endorsed by the Payee on the reverse side hereof on or before any assignment
or transfer hereof by the Payee.
This Note is secured under a Restated Mortgage and Security Agreement
dated as of even date herewith, between the Borrower and the Payee, as it may
have been or shall be supplemented, amended, consolidated or restated from time
to time ("Mortgage"). This Note is the Note referred to in, and has been
executed and delivered pursuant to, the Loan Agreement.
Upon the occurrence of an event of default under the Mortgage, the
principal hereof and interest accrued thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.
The Borrower waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and notice of non-payment of
this Note. --IN WITNESS WHEREOF the Borrower has caused this Note to
be signed in its
corporate name and its corporate seal to be hereunto affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.
CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
By: _____________________
(President)
Attest: ___________________
(Secretary)
Exhibit A-3
SECURED PROMISSORY NOTE
$4,268,617.00 , 19
CAP ROCK ELECTRIC COOPERATIVE, INC., a Texas corporation ("Borrower"), for value
received promises to pay, without setoff, deduction, recoupment or counterclaim,
to the order of NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
("Payee") at the Payee's main office or such other place as designated by the
Payee, in lawful money of the United States, the sum of the aggregate unpaid
principal amount of all Advances made by the Payee pursuant to the Loan
Agreement, dated as of even date herewith, between the Borrower and the Payee as
may be amended from time to time (the "Loan Agreement"), on the dates provided
in the Loan Agreement (except that if not sooner paid, any balance shall be due
and payable on a date not to exceed thirty-five years after the date hereof or
such date selected by Borrower pursuant to Section 4.H of the Loan Agreement,
the earlier of such date being the Maturity Date), with interest thereon in like
money from the respective dates of each Advance (as defined in the Loan
Agreement) hereunder, at the rate or rates and payable at the times provided in
said Loan Agreement.
All Advances made by the Payee pursuant to said Loan Agreement shall
be endorsed by the Payee on the reverse side hereof on or before any assignment
or transfer hereof by the Payee.
This Note is secured under a Restated Mortgage and Security Agreement
dated as of even date herewith, between the Borrower and the Payee, as it may
have been or shall be supplemented, amended, consolidated or restated from time
to time ("Mortgage"). This Note is the Note referred to in, and has been
executed and delivered pursuant to, the Loan Agreement.
Upon the occurrence of an event of default under the Mortgage, the
principal hereof and interest accrued thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.
The Borrower waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and notice of non-payment of this
Note.
WITNESS WHEREOF the Borrower has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.
CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
By: ____________________
(President)
Attest:___________________
(Secretary)
<PAGE>
Exhibit A-4
SECURED PROMISSORY NOTE
$4,268,617.00 , 19
CAP ROCK ELECTRIC COOPERATIVE, INC. , a Texas corporation ("Borrower"), for
value received promises to pay, without setoff, deduction, recoupment or
counterclaim, to the order of NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION ("Payee") at the Payee's main office or such other place as
designated by the Payee, in lawful money of the United States, the sum of the
aggregate unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan Agreement"), on the dates
provided in the Loan Agreement (except that if not sooner paid, any balance
shall be due and payable on a date not to exceed thirty-five years after the
date hereof or such date selected by Borrower pursuant to Section 4.H of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the respective dates of each Advance (as defined in
the Loan Agreement) hereunder, at the rate or rates and payable at the times
provided in said Loan Agreement.
All Advances made by the Payee pursuant to said Loan Agreement shall
be endorsed by the Payee on the reverse side hereof on or before any assignment
or transfer hereof by the Payee.
This Note is secured under a Restated Mortgage and Security Agreement
dated as of even date herewith, between the Borrower and the Payee, as it may
have been or shall be supplemented, amended, consolidated or restated from time
to time ("Mortgage"). This Note is the Note referred to in, and has been
executed and delivered pursuant to, the Loan Agreement.
Upon the occurrence of an event of default under the Mortgage, the
principal hereof and interest accrued thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.
The Borrower waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and notice of non-payment of
this Note. --IN WITNESS WHEREOF the Borrower has caused this Note to
be signed in its
corporate name and its corporate seal to be hereunto affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.
CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
By: ___________ _____________
(President)
Attest: __________________
(Secretary)
Exhibit B
Date: ____________________
Governor
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071
Re: _____________________________
Dear Sir:
I am counsel for ________________________________ , organized under the laws of
the State of _________ ("Borrower"), and render this opinion to you in
connection with the four long-term secured loans which in the aggregate equal
the principal amount of $__________ provided for in the loan agreement ("CFC
Loan Agreement"), dated as of __________________ , 19 , made by and between the
Borrower and National Rural Utilities Cooperative Finance Corporation ("CFC").
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: (1) the
CFC Loan Agreement, (2) the four (4) Secured Promissory Notes ("CFC Note"), each
dated -- , 19 , which in the Aggregate equal the principal amount of
$___________ , payable to the order of CFC, and (3) the ________________
Mortgage and Security Agreement ("Mortgage"), dated as of made by and between
the Borrower and CFC as it may have been supplemented, amended, consolidated or
restated from time to time,
I have also examined, or caused to be examined by competent and trustworthy
persons, the records and files of all offices in which there might be recorded,
filed or indexed evidence of the Borrower's title, and any liens of any nature
whatsoever affecting the title, to any real or personal property of the Borrower
other than easements or rights of way relating to the electric lines of the
Borrower.
I have supervised, examined, or caused to be examined by competent and
trustworthy persons, the recordation of the Mortgage as a mortgage of
<PAGE>
Based upon the foregoing, I am of the opinion that:
(i) the Borrower is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction of its organization, and the
Borrower has full corporate power (a) to execute and deliver the CFC Note, the
CFC Loan Agreement and the Mortgage; (b) to perform all acts required to be done
by it under the CFC Note, the CFC Loan Agreement and the Mortgage; and (c) to
own, operate and maintain its properties and operate its business as conducted
at the date of this Opinion;
(ii) to the extent reasonably required for the maintenance and
operation of its properties and business taken as a whole, the Borrower has
complied with all requirements of the laws of all states in which it operates or
does business and holds all certificates, licenses, consents or approvals of
governmental authorities required to be obtained on or prior to the date of this
Opinion to enable it to engage in the business then transacted by it;
(iii) the CFC Notes, the Mortgage and CFC Loan Agreement have been
duly authorized, executed and delivered by the Borrower to CFC and constitute
the valid and binding obligations of the Borrower, enforceable against the
Borrower, in accordance with their respective terms provided, however, that
enforceability may be limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights and
that the enforcement thereof may be limited by laws with respect to or affecting
the remedies provided for in said agreement or instrument; provided further,
however, that such laws do not in my opinion make inadequate the remedies
afforded thereby for the realization of the benefits provided for in such
agreement or instrument;
(iv) the execution and performance by the Borrower of the CFC Note,
the CFC Loan Agreement and the Mortgage, and the transactions contemplated
thereby will not violate any provision of law, the articles of incorporation, or
bylaws* of the Borrower, or result in the breach of, or constitute a default
under, any agreement, indenture or other instrument to which the Borrower is a
party, or by which it may be bound, known to counsel;
(v) the Mortgage has been duly recorded and filed, in such manner and
to such extent as specified in paragraph "7" under Covenants and Warranties
contained in Attachment B to this Opinion, to constitute the Mortgage a-validly
recorded and filed mortgage lien upon the real and personal property of the
Borrower therein described, subject and subordinate only to liens and
encumbrances, if any, permitted by paragraph "2" of Covenants and Warranties
contained in Attachment B to this Opinion;
*NOTE: As used herein, "articles of incorporation" includes "certificate of
incorporation", "articles of association" or "charter"; and "bylaws" includes
"code of regulations".
<PAGE>
(vi) all authorizations, if any, from regulatory bodies required in
connection with the execution and delivery of the CFC Note, the CFC Loan
-Agreement, and the Mortgage have been obtained and a copy thereof is attached
hereto; and
(vii) I know of no litigation pending or threatened against or
affecting the Borrower or its property which, in my opinion, would have a
material adverse effect upon the business, operations or financial condition of
the Borrower.
I also wish to advise you that nothing has occurred since the date of the
opinion of counsel of ______________________ , 19 , heretofore delivered to you,
which in any manner changes the effect or application of such opinion with
reference to the matters therein set forth, and I confirm that said opinion is
true and correct as of the date hereof.
This Opinion (or a true copy thereof) may be relied upon by Manufacturers
Hanover Trust Company, as Trustee under the CFC Indenture dated as of December
1, 1972, as amended and supplemented, as if this Opinion were addressed to it. I
have read the conditions contained in paragraph (5) of Section 3.01(b) of said
Indenture and the definitions in Article I of said Indenture relating thereto*;
in my opinion I have made such examination or investigation as is necessary to
enable me to express an informed opinion as to whether or not said conditions
will be complied with upon delivery of this Opinion (or a true copy thereof) to
said Trustee; and in my opinion, such conditions will be complied with upon such
delivery.
Sincerely,
*NOTE: The conditions and definitions referred to are attached to this
Opinion as Attachment A and Attachment B,
<PAGE>
ATTACHMENT A
I. Conditions contained in Section 3.01(b), paragraph (5) of the
Indenture, dated as of December 1, 1972, made by and between CFC and
Manufacturers Hanover Trust Company, Trustee, relating to the
requirements that Opinions of Counsel for a member state in substance
that as of the date of such Opinion:
(i) such Member is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and
has full corporate power to execute and deliver such Mortgage Note,
the Loan Agreement pursuant to which it was issued (if any) and the
Mortgage securing the same, to perform all acts required to be done by
it under such Mortgage Note, Loan Agreement (if any) and Mortgage and
to own, operate and maintain its properties and operate its business
as conducted at the date of such opinion;
(ii) to the extent reasonably required for the maintenance and
operation of its properties and business taken as a whole, such Member
has complied with all requirements of the laws of all States in which
it operates or does business and holds all certificates, licenses,
consents or approvals of governmental authorities required to be
obtained on or prior to the date of such Opinion to enable it to
engage in the business then transacted by it;
(iii) such Mortgage Note, Loan Agreement (if any) and Mortgage
have been duly authorized, executed and delivered by said Member and
constitute the valid and binding obligations of such Member,
enforceable against such Member in accordance with their respective
terms;
(iv) the execution and performance by such Member of such
Mortgage Note, Loan Agreement (if any) and Mortgage, and the
transactions contemplated thereby, will not violate any provisions of
law, the Articles of Incorporation or by-laws of such Member, or result
in the breach of, or constitute a default under, any agreement,
indenture or other instrument to which such Member is a party, or by
which it may be bound, known to such Counsel;
(v) such Mortgage has been duly recorded and filed (in such
manner and to such extent, as shown by such Opinion, as specified in
paragraph 7 under Covenants and Warranties in Schedule I to this
Indenture)* to constitute such Mortgage a validly recorded and filed
lien upon the real and personal property of such Member therein
described, shown by such Opinion to be subject and subordinate only to
liens and encumbrances, if any, permitted by paragraph 2 under said
Covenants and Warranties;*
*NOTE Provisions of paragraphs 2 and 7 under Covenants and Warranties in
Schedule 1 of the Indenture are attached as Attachment B,
<PAGE>
ATTACHMENT A
Page 2
(vi) no authorization from any regulatory body is required in
connection with the execution and delivery of such Mortgage Note, Loan
Agreement (if any) or Mortgage or that each such authorization so
required has been obtained; and
(vii) such Counsel knows of no litigation pending or
threatened against or affecting such Member or its property which, in
the opinion of such Counsel (or in the opinion of such Member as
evidenced by a certificate of the manager or other responsible officer
of such Member annexed to said Opinion), would have a material adverse
effect upon the business, operations or financial condition of such
Member.
II. Definitions, contained in Article I of the Indenture, relating to the
foregoing conditions:
Company - means National Rural Utilities Cooperative Finance
Corporation until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor corporation.
Distribution System Member - means a Member 50% or more of
whose gross operating revenues are derived from sales of electricity
to ultimate consumers, determined as of the end of the last Completed
Calendar Year.
Indenture - means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
Loan Agreement - means a loan agreement (if any) between a
Member and the Company (or between a Member and a wholly-owned
subsidiary of the Company whose interest has been assigned to the
Company) providing for the issuance of Mortgage Notes.
Member - means any Person which is a member or patron of
the-Company, or any Person which at any time has been or is eligible
to borrow from REA under the Rural Electrification Act of 1936, as
from time to time in effect.
Mortgage - means a mortgage or deed of trust or pledge of
revenues securing one or more Mortgage Notes (i) which complies with
the requirements set forth in Schedule 1 hereto annexed and made a
part hereof, or, in the case of a change in the status of a
Distribution System Member to a Power System Member, or vice versa,
which complies with the requirements set forth in Schedule 1 either
with respect to mortgages or deeds of trust or pledges of revenues of
Power System Members or with respect to mortgages or deeds of trust or
pledges of revenues of Distribution System Members, as said Schedule
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ATTACHMENT A
Page 3
1 shall have been amended from time to time in accordance with the
provisions hereof; (ii) which was made to the Company (or to a
wholly-owned subsidiary of the Company whose interest has been
assigned to the Company) or to a Trustee or Trustees under a trust
indenture; (iii) as to which the interest of the Company (if any) has
been assigned to the Trustee; and (iv) an executed or true copy of
which has been delivered to the Trustee.
Mortgage Note - means a note or bond of a Member payable to
the Company (or a wholly-owned subsidiary of the Company whose
interest has been assigned to the Company) and pledged with the
Trustee.
Opinion of Counsel - means a written opinion of counsel, who
may (except as otherwise expressly provided in this Indenture) be
counsel for the Company or for a Member.
Person - means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
Power System Member - means a Member, other than a Distribution
<PAGE>
ATTACHMENT B
Schedule I. to Indenture dated as of December 1, 1972. between CFC and
Manufacturers Hanover Trust Company
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Covenants and Warranties:
2. The mortgagor has the right and authority to mortgage the property
described in the granting clauses. The mortgaged property is free and clear of
any equal or prior mortgage, lien, charge or encumbrance, with usual exceptions
in utility mortgages, which exceptions may include (without limitation) liens
for taxes, assessments or governmental charges for the current year and taxes,
assessments or governmental charges not due and delinquent; liens for workmen's
compensation awards and similar obligations not then delinquent; mechanics' ,
laborers', materialmen's and similar liens not then delinquent; and any of such
liens, whether or not delinquent, whose validity is at the time being contested
in good faith; liens and charges incidental to construction or current operation
which have not been filed or asserted or the payment of which has been
adequately secured or which, in the opinion of counsel, are insignificant in
amount, liens, securing obligations not assumed by the mortgagor and on account
of which it does not pay and does not expect to pay interest, existing upon real
estate (or rights in or relating to real estate) over or in respect of which the
mortgagor has a right-of-way or other easement for substation, transmission,
distribution or other right-of-way purposes; any right which the United States
of America or any state or municipality or governmental body or agency may have
by virtue of any franchise, license, contract or statute to purchase, or
designate a purchaser of, or order the sale of, any property of the mortgagor
upon payment of reasonable compensation therefore, or upon reasonable
compensation or conditions to terminate any franchise, license or other rights
before the expiration date thereof or to regulate the property and business of
the mortgagor; attachment or judgment liens covered by insurance, or upon appeal
and covered by bond; deposits or pledges to secure payment of workmen's
compensation, unemployment insurance, old age pensions or other social security;
deposits or pledges to secure performance of bids, tenders, contracts (other
than contracts for the payment of borrowed money), leases, public or statutory
obligations; surety or appeal bonds; and other deposits or pledges for purposes
of like general nature in the ordinary course of business; easements or
reservations in respect to any property for the purpose of transmission and
distribution lines and rights-of-way and similar purposes, zoning ordinances,
regulations, reservations, restrictions, covenants, party wall agreements,
conditions of record and other encumbrances (other than to secure the payment of
money) , none of which in the opinion of counsel is such as to interfere with
the proper operation of the property affected thereby; the burdens of any law or
governmental organization or permit requiring the mortgagor to maintain certain
facilities or perform certain acts as a condition of its occupancy of or
interference with any public land or any river, stream or other waters or
relating to environmental matters; any lien or encumbrance for the discharge of
which moneys have been deposited in trust with a proper depository to apply such
moneys to the discharge of such lien or encumbrance; any exceptions,
reservations and other matters referred to in the description of the mortgaged
property and with respect to any property which
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ATTACHMENT B
Page2
the mortgagor may hereafter acquire, any terms, conditions, agreements,
covenants, exceptions and reservations expressed or provided in the deeds or
other instruments under which the mortgagor shall hereafter acquire the same,
none of which in the opinion of counsel materially adversely affects or will
affect the property to which the same relates or the operation thereof by the
mortgagor; any lien reserved as security for rent or compliance with other
provisions of the lease in case of any leasehold estate; and purchase money
mortgages and liens, charges and encumbrances upon property existing at the time
of acquisition thereof by the mortgagor. The mortgagor will maintain and
preserve the priority of lien of the Mortgage, subject to exceptions usual in
utility mortgages including (without limitation) those mentioned above.
7. The mortgagor will upon written demand of the mortgagees execute
such instruments of further assurance as may be reasonably requested and will
cause the Mortgage, each supplemental indenture, financing statement and other
instrument of further assurance to be duly recorded, filed, re-recorded and
refiled as may be required by law to perfect and maintain the superior lien of
the Mortgage, except as otherwise consented to by the mortgagees (but no such
consent shall permit the lien of the Mortgage to remain unprotected in respect
of any property other than property deemed by the mortgagees to be of minor
importance to the operation of the properties of the mortgagor taken as a
whole).
<PAGE>
