<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From To
Commission File Number 1-7102
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
DISTRICT OF COLUMBIA 52-0891669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Woodland Park, 2201 Cooperative Way, Herndon, VA 20171-3025
(Address of principal executive offices)
Registrant's telephone number, including the area code (703)709-6700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Page 1 of 23
<PAGE> 2
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED BALANCE SHEETS
(Dollar Amounts In Thousands)
A S S E T S
(Unaudited)
November 30, 1996 May 31, 1996
<S> <C> <C>
Cash $ 21,338 $ 31,368
Certificates of Deposit 20,000 25,000
Debt Service Investments 115,906 40,907
Loans To Members, net 8,598,799 7,728,271
Receivables 114,802 84,600
Fixed Assets, net 33,221 33,576
Debt Service Reserve Funds 102,512 102,512
Other Assets 13,528 7,855
Total Assets $ 9,020,106 $ 8,054,089
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 2
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED BALANCE SHEETS
(Dollar Amounts In Thousands)
L I A B I L I T I E S A N D M E M B E R S' E Q U I T Y
(Unaudited)
November 30, 1996 May 31, 1996
<S> <C> <C>
Notes Payable, due within one year $ 3,280,235 $ 2,471,552
Accounts Payable 18,813 16,591
Accrued Interest Payable 49,721 40,819
Long-Term Debt 4,055,916 4,033,881
Other Liabilities 12,182 13,921
Quarterly Income Capital Securities 125,000 -
Commitments, Guarantees and Contingencies
Members' Subordinated Certificates:
Membership subscription certificates 645,449 638,440
Loan & guarantee certificates 585,849 569,244
Total Members' Subordinated Certificates 1,231,298 1,207,684
Members' Equity 246,941 269,641
Total Members' Subordinated Certificates
& Members' Equity 1,478,239 1,477,325
Total Liabilities and Members' Equity $ 9,020,106 $ 8,054,089
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 3
<TABLE>
<CAPTION>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF INCOME, EXPENSES AND NET MARGINS
(Dollar Amounts in Thousands)
For the Quarters and Six Months Ended November 30, 1996 and 1995
Quarters Ended Six Months Ended
November 30, November 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Income-Interest on loans to members $140,233 $124,880 $274,500 $246,928
Less-cost of funds allocated 118,822 106,408 229,749 209,577
Gross operating margin 21,411 18,472 44,751 37,351
Expenses:
General, administrative and loan processing 5,241 4,844 9,661 8,539
Provision for loan and guarantee losses 3,185 2,065 10,000 5,680
Total expenses 8,426 6,909 19,661 14,219
Operating margin 12,985 11,563 25,090 23,132
Nonoperating Income 672 928 1,333 1,747
Net Margins $ 13,657 $ 12,491 $ 26,423 $ 24,879
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 5
<TABLE>
<CAPTION>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(Dollar Amounts in Thousands)
For the Quarters Ended November 30, 1996 and 1995
Patronage Capital
Allocated
Educa- Unal- General
Member- tional located Reserve
Total ships Fund Margins Fund Other
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended November 30, 1996
Balance at August 31, 1996 $233,260 $ 1,433 $ 534 $ 15,055 $ 366 $215,872
Retirement of patronage capital - - - - - -
Net Margins 13,657 - - 13,657 - -
Other 24 15 - - - 9
Balance at November 30, 1996 $246,941 $ 1,448 $ 534 $ 28,712 $ 366 $215,881
Quarter Ended November 30, 1995
Balance at August 31, 1995 $237,927 $ 1,397 $ 429 $ 14,677 $ 346 $221,078
Retirement of patronage capital (2,402) - - - - (2,402)
Net Margins 12,491 - - 12,491 - -
Other 5 5 - - - -
Balance at November 30, 1995 $248,021 $ 1,402 $ 429 $ 27,168 $ 346 $218,676
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 6
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(Dollar Amounts in Thousands)
For the Six Months Ended November 30, 1996 and 1995
Patronage Capital
Allocated
Educa- Unal- General
Member- tional located Reserve
Total ships Fund Margins Fund Other
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended November 30, 1996
Balance at May 31, 1996 $269,641 $ 1,424 $ 476 $ 2,289 $ 501 $264,951
Retirement of patronage capital (50,963) - - - (135) (50,828)
Net Margins 26,423 - - 26,423 - -
Other 1,840 24 58 - - 1,758
Balance at November 30, 1996 $246,941 $ 1,448 $ 534 $ 28,712 $ 366 $215,881
Six Months Ended November 30, 1995
Balance at May 31, 1995 $270,221 $ 1,383 $ 375 $ 2,289 $ 498 $265,676
Retirement of patronage capital (48,313) - - - (152) (48,161)
Net Margins 24,879 - - 24,879 - -
Other 1,234 19 54 - - 1,161
Balance at November 30, 1995 $248,021 $ 1,402 $ 429 $ 27,168 $ 346 $218,676
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 7
<TABLE>
<CAPTION>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(Dollar Amounts In Thousands)
For the Six Months Ended November 30, 1996 and 1995
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Accrual basis net margins $ 26,423 $ 24,879
Add (deduct):
Provision for loan and guarantee losses 10,000 5,680
Depreciation 564 629
Amortization of deferred income (5,308) (4,802)
Amortization of bond issuance costs 813 680
Add (deduct) changes in accrual accounts:
Receivables (23,721) 2,915
Accounts payable 2,222 (1,122)
Accrued interest payable 8,902 3,251
Other (6,513) 76
Net cash flows provided by operating activities 13,382 32,186
Cash Flows From Investing Activities:
Advances made on loans (2,035,600) (1,918,757)
Principal collected on loans 1,155,072 1,419,759
Investments in fixed assets (209) (327)
Net cash flows used in investing activities (880,737) (499,325)
Cash Flows From Financing Activities:
Notes payable, Net 396,174 269,050
Certificates of Deposit, Net 5,000 1,000
Debt service Investments, Net (74,999) (1,132)
Proceeds from issuance of Long-Term Debt 90,662 348,346
Payments for retirement of Long-Term Debt 468,828 (111,394)
Proceeds from issuance of Members' Subordinated
Certificates 17,398 10,837
Payments for retirement of Members' Subordinated
Certificates (389) (13,441)
Payments for retirement of patronage capital (45,349) (46,152)
Net cash flows provided by financing activities 857,325 457,114
Net Cash Flows (10,030) (10,025)
Beginning Cash and Cash Equivalents 31,368 26,309
Ending Cash and Cash Equivalents $ 21,338 $ 16,284
Supplemental Disclosure of Cash Flow Information:
Cash paid during six months for Interest Expense $ 223,535 $ 207,955
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 8
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Notes to Combined Financial Statements
1. General Information
National Rural Utilities Cooperative Finance Corporation ("CFC") is a private,
not-for-profit cooperative association which provides supplemental financing
and related financial service programs for the benefit of its members.
Membership is limited to certain cooperatives, not-for-profit corporations,
public bodies and related service organizations, as defined in CFC's Bylaws.
CFC is exempt from the payment of Federal income taxes under Section 501(c)(4)
of the Internal Revenue Code.
CFC's 1,053 members as of November 30, 1996, included 906 rural electric
utility system members ("Utility Members"), virtually all of which are
consumer-owned cooperatives, 74 service members and 73 associate members.
The Utility Members included 841 distribution systems and 65 generation and
transmission systems operating in 46 states and U.S. territories. At December
31, 1995, CFC's member systems served approximately 11.5 million consumers,
representing service to an estimated 27.7 million ultimate users of
electricity.
Rural Telephone Finance Cooperative ("RTFC") was incorporated as a private
cooperative association in the State of South Dakota in September 1987.
RTFC is a controlled affiliate of CFC and was created for the purpose of
providing, securing and arranging financing for its rural telecommunication
members and affiliates. RTFC's results of operations and financial condition
have been combined with those of CFC in the accompanying financial statements.
As of November 30, 1996, RTFC had 446 members. RTFC is a taxable entity under
Subchapter T of the Internal Revenue Code and accordingly takes tax deductions
for allocations of net margins to its patrons.
Guaranty Funding Cooperative ("GFC") was incorporated as a private cooperative
association in the state of South Dakota in December 1991. GFC is a
controlled affiliate of CFC and was created for the purpose of providing and
servicing loans to its members to fund the refinancing of loans guaranteed
by the Rural Utilities Service ("RUS"). GFC's results of operations and
statements of financial condition have been combined with those of CFC and
RTFC in the accompanying financial statements. Loans held by GFC were
transferred to GFC by CFC and are guaranteed by the RUS. GFC had four
members other than CFC at November 30, 1996. GFC is a taxable entity under
Subchapter T of the Internal Revenue Code and accordingly takes deductions
for allocations of net margins to its patrons.
In the opinion of management, the accompanying unaudited combined financial
statements contain all adjustments (which consist only of normal recurring
accruals) necessary to present fairly the combined financial position of CFC,
RTFC and GFC as of November 30, 1996 and May 31, 1996, and the combined
results of operations, cash flows and changes in members' equity for the
six months ended November 30, 1996 and 1995.
The Notes to Combined Financial Statements for the years ended May 31, 1996
and 1995 should be read in conjunction with the accompanying financial
statements. (See CFC's Form 10-K for the year ended May 31, 1996, filed on
August 27, 1996).
In May 1993, the Financial Accounting Standards Board (the "FASB") released
Statement No. 114 "Accounting by Creditors for Impairment of a Loan." The
statement requires that impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest
rate, observable market value or, in the case of collateral dependent loans,
the fair value of the collateral. In October 1994, the FASB released Statement
No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures". The statement amends FASB Statement No. 114 by eliminating
the interest income recognition provisions and changing the disclosure
requirements. Both statements are required to be implemented in fiscal
years beginning after December 15, 1994 and will apply to loans that are,
or become impaired, based on the provisions of FASB Statement No. 114, or
that have certain restructuring agreements executed on, or after the
implementation date. CFC has implemented these statements. The
implementation of these statements did not have a material impact on
CFC's financial statements.
<PAGE> 9
CFC has implemented FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The CFC investments covered
by this statement, at November 30, 1996, include the certificates of deposit
and the debt service investments. These items have been recorded at
amortized cost, due to the Company's intent and ability to hold all
investments to maturity. The implementation of this statement did not
have a material impact on CFC's financial statements.
In October 1994, the FASB released Statement No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments."
This statement requires disclosure about the amounts, nature and terms of
derivative financial instruments. The statement must be implemented for
fiscal years ending after December 15, 1994. CFC uses interest rate exchange
agreements to help manage its interest rate risk and is neither a dealer nor
a trader in derivative financial instruments. The implementation of this
statement did not have a material impact on these financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the assets, liabilities, revenues and expenses
reported in the financial statements, as well as amounts included in the
notes thereto, including discussion and disclosure of contingent liabilities.
While the Company uses its best estimates and judgments based on the known
facts at the date of the financial statements, actual results could differ
from these estimates as future events occur.
CFC does not believe it is vulnerable to the risk of a near term severe
impact as a result of any concentrations of its activities.
Principles of Combination
The accompanying financial statements include the combined accounts of CFC,
RTFC and GFC, after elimination of all material intercompany accounts and
transactions. CFC has a $1,000 membership interest in RTFC and GFC. CFC
exercises control over RTFC and GFC through majority representation on their
Boards of Directors. CFC manages the affairs of RTFC through a long-term
management agreement. CFC services the loans for GFC for which it collects
a servicing fee. As of November 30, 1996, CFC had committed to lend RTFC up
to $2,600.0 million to fund loans to its members and their affiliates.
RTFC had outstanding loans and unadvanced loan commitments totaling $1,728.4
million and $1,465.5 million as of November 30, 1996 and May 31, 1996,
respectively. RTFC's net margins are allocated to RTFC's borrowers.
Summary financial information relating to RTFC is presented below:
<TABLE>
<CAPTION>
(Uuaudited)
At November 30, At May 31,
(Dollar Amounts In Thousands) 1996 1996
<S> <C> <C>
Outstanding loans to members and their affiliates $1,066,277 $ 975,269
Total assets 1,176,112 1,079,920
Notes payable to CFC 1,051,739 966,690
Total liabilities 1,066,692 981,790
Members' Equity and Subordinated Certificates 109,420 98,130
(Unaudited)
For the Six Months Ended November 30,
(Dollar Amounts In Thousands) 1996 1995
<S> <C> <C>
Operating income $ 35,198 $ 31,842
Net margins 1,381 1,380
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Summary financial information relating to GFC is
presented below: (Unaudited)
At November 30, At May 31,
(Dollar Amounts In Thousands) 1996 1996
<S> <C> <C>
Outstanding loans to members $ 402,271 $ 411,373
Total assets 415,451 429,177
Notes payable to CFC 404,011 415,414
Total liabilities 414,375 427,079
Members' Equity 1,076 2,098
(Unaudited)
For the Six Months Ended November 30,
(Dollar Amounts In Thousands) 1996 1995
<S> <C> <C>
Operating income $ 13,029 $ 14,637
Net margins 983 1,081
</TABLE>
Unless stated otherwise, references to CFC relate to CFC, RTFC and GFC
on a combined basis.
2. Debt Service Account
A provision of the 1972 Indenture between CFC and Chase Manhattan Bank as
trustee ("1972 Indenture") requires monthly deposits into a debt service
account held by the trustee, generally in amounts equal to one-twelfth of
the total annual interest payments, annual sinking fund payments and the
principal amount of bonds maturing within one year. These deposits may be
invested in permitted investments, as defined in the indenture (generally
bank certificates of deposit and prime rated commercial paper).
On February 15, 1994, CFC completed a new Collateral Trust Bond Indenture
("1994 Indenture") with First Bank National Association as trustee. This
indenture does not require the maintenance of a debt service account. All
future Collateral Trust Bonds will be issued under the 1994 Indenture.
3. Loans Pledged as Collateral to Secure Collateral Trust Bonds
As of November 30, 1996 and May 31, 1996, mortgage notes representing
approximately $1,494.9 million and $1,094.2 million, respectively, related
to outstanding long-term loans to members, were pledged as collateral to
secure Collateral Trust Bonds. Both the 1972 Indenture and the 1994
Indenture require that CFC pledge eligible mortgage notes (or other
permitted assets) as collateral that at least equal the outstanding balance
of Collateral Trust Bonds. Under CFC's revolving credit agreement (See Note
6), CFC cannot pledge mortgage notes in excess of 150% of Collateral Trust
Bonds outstanding.
Collateral Trust Bonds outstanding at November 30, 1996 and May 31, 1996 were
$1,299.1 million and $999.6 million, respectively.
4. Allowance for Loan and Guarantee Losses
CFC maintains an allowance for loan and guarantee losses at a level
considered to be adequate in relation to the quality and size of its loan
and guarantee portfolio. CFC makes regular additions to the allowance for
loan and guarantee losses. These additions are required to maintain the
allowance at an adequate level based on the current year to date increase to
loans outstanding and the estimated loan growth for the next twelve months.
On a quarterly basis, CFC reviews the adequacy of the loan and guarantee
loss allowance and estimates the amount of future provisions that will be
required to maintain the allowance at an adequate level based on estimated
loan growth.
The allowance is based on estimates, and accordingly, actual loan and
guarantee losses may differ from the allowance amount.
<PAGE> 11
Activity in the allowance account is summarized as follows for the six months
ended November 30, 1996 and the year ended May 31, 1996.
<TABLE>
<CAPTION>
November 30, May 31,
(Dollar Amounts in Thousands) 1996 1996
<S> <C> <C>
Beginning Balance $218,047 $205,596
Provision for loan and guarantee losses 10,000 12,451
Ending Balance $228,047 $218,047
</TABLE>
<TABLE>
<CAPTION>
Total Loan and Guarantee Loss Allowance
As a Percentage of:
<S> <C> <C>
Total Loans 2.58% 2.74%
Total Loans and Guarantees 2.09% 2.14%
Total Nonperforming and Restructured Loans 58.7% 92.9%
</TABLE>
5. Members' Subordinated Certificates
Members' Subordinated Certificates are subordinated obligations purchased by
members as a condition of membership and in connection with CFC's extension
of long-term loans and guarantees to them. Those issued as a condition of
membership (Subscription Capital Term Certificates) generally mature 100 years
from issuance date and bear interest at 5% per annum. Those issued as a
condition of receiving a loan or guarantee generally either mature 46 to 50
years from issuance or amortize proportionately based on the principal balance
of the credit extended, and either are non-interest-bearing or bear interest
at varying rates.
The proceeds from certain non-interest-bearing Subordinated Certificates
issued in connection with CFC's guarantees of tax-exempt bonds are pledged
by CFC to the debt service reserve fund established in connection with the
bond issue, and any earnings from the investment of the fund inure solely to
the benefit of the member.
6. Credit Arrangements
As of November 30, 1996, CFC had three revolving credit agreements totaling
$4,835.0 million which are used principally to provide liquidity support for
CFC's outstanding commercial paper, CFC's guaranteed commercial paper issued
by the National Cooperative Services Corporation ("NCSC") and the adjustable
or floating/fixed rate bonds which CFC has guaranteed and is standby purchaser
for the benefit of its members.
Two of these credit agreements, totaling a combined $4,335.0 million were
executed with 49 banks, with J.P. Morgan Securities, Inc. and The Bank of
Nova Scotia as Co-Syndication Agents and Morgan Guaranty Trust Company of
New York as Administrative Agent. Under these agreements, CFC can borrow up
to $2,167.5 million until November 26, 2001 (the "five-year facility"), and
$2,167.5 million until November 25, 1997 (the "364-day facility"). Any
amounts outstanding under these facilities will be due on the respective
maturity dates. A third revolving credit agreement for $500.0 million was
executed on November 27, 1997 with ten banks, including the Bank of Nova
Scotia as Administrative and Syndication Agent (the "BNS facility"). This
agreement has a 364-day revolving credit period which terminates November 26,
1996 during which CFC can borrow and such borrowings may be converted to a
1-year term loan at the end of the revolving credit period.
In connection with the five-year facility, CFC pays a per annum facility fee
of .09 of 1%. The per annum facility fee for both agreements with a 364-day
maturity is .065 of 1%. There is no commitment fee for any of the revolving
credit facilities. If CFC's long-term ratings decline, the facility fees may
be increased by no more than .035 of 1%. Generally, pricing options are the
same under all three agreements and will be at one or more rates as defined
in the agreements, as selected by CFC.
The revolving credit agreements require CFC, among other things to maintain
Members' Equity and Members' Subordinated Certificates of at least $1,346.3
million (increased each fiscal year by 90% of net margins not distributed to
members), an average fixed charge coverage ratio over the six most recent
fiscal quarters of at
<PAGE> 12
least 1.025 and prohibits the retirement of patronage capital unless CFC has
achieved a fixed charge coverage ratio of at least 1.05 for the preceding
fiscal year. The credit agreements prohibits CFC from incurring senior debt
(including guarantees but excluding indebtedness incurred to fund RUS
guaranteed loans) in an amount in excess of ten times the sum of Members'
Equity, Members' Subordinated Certificates and Quarterly Income Capital
Securities and restricts, with certain exceptions, the creation by CFC of
liens on its assets and certain other conditions to borrowing. The agreements
also prohibit CFC from pledging collateral in excess of 150% of the principal
amount of Collateral Trust Bonds outstanding. Provided that CFC is in
compliance with these financial covenants (including that CFC has no material
contingent or other liability or material litigation that was not disclosed
by or reserved against in its most recent annual financial statements) and
is not in default, CFC may borrow under the agreements until the termination
dates. As of November 30, 1996 and May 31, 1996, CFC was in compliance with
all covenants and conditions under its revolving credit agreements and there
were no borrowings outstanding under such agreements.
Based on the ability to borrow under the five year facility, at November 30,
1996 and May 31, 1996, CFC classified $2,167.5 million and $2,730.0 million,
respectively, of its notes payable outstanding as long-term debt. CFC expects
to maintain more than $2,167.5 million of notes payable during the next twelve
months. If necessary, CFC can refinance such notes payable on a long-term
basis by borrowing under the five-year facility, subject to the conditions
herein.
7. Unadvanced Loan Commitments
As of November 30, 1996 and May 31, 1996, CFC had unadvanced loan commitments,
summarized by type of loan, as follows:
<TABLE>
<CAPTION>
(Dollar Amounts In Thousands) November 30, 1996 May 31, 1996
<S> <C> <C>
Long-term $1,709,157 $1,578,658
Intermediate-term 353,807 288,570
Short-term 3,182,898 3,199,364
Telecommunications 662,097 490,283
Associate Member 33,666 54,664
Total unadvanced loan commitments $5,941,625 $5,611,539
</TABLE>
Unadvanced commitments include loans approved by CFC for which loan contracts
have not yet been executed and for which loan contracts have been executed but
funds have not been advanced. CFC may require additional information to assure
itself that all conditions for advance of funds have been fully met and that
there has been no material change in the member's condition as represented
in the documents supplied to CFC. Since commitments may expire without being
fully drawn upon, the total amounts reported as commitments do not necessarily
represent future cash requirements. Collateral and security requirements for
loan commitments are identical to those for advanced loans.
8. Retirement of Patronage Capital
CFC patronage capital in the amount of $50.7 million was retired in August
1996, representing one-sixth of the total allocations for fiscal years 1988,
1989 and 1990 and 70% of the allocation for fiscal year 1996. GFC retired
patronage capital in August 1996 in the amount of $2.0 million representing
100% of the allocation for fiscal year 1996. RTFC will retire 70% of their
FY 1996 allocation by January 31, 1997. Future retirements of patronage
capital allocated to patrons may be made annually as determined by CFC's
Board of Directors with due regard for CFC's financial condition.
9. Guarantees
As of November 30, 1996 and May 31, 1996, CFC had guaranteed the following
contractual obligations of its members:
<PAGE> 13
<TABLE>
<CAPTION>
(Dollar Amounts In Thousands) November 30, 1996 May 31, 1996
<S> <C> <C>
Long-term tax-exempt bonds (A) $1,200,995 $1,317,655
Debt portions of leveraged lease transactions (B) 420,576 432,516
Indemnifications of tax benefit transfers (C) 351,390 363,702
Other guarantees (D) 134,665 135,567
Total guarantees $2,107,626 $2,249,440
</TABLE>
(A) CFC has unconditionally guaranteed to the holders or to trustees for the
benefit of holders of these bonds the full principal, premium (if any)
and interest payments on each bond when due. In the event of default,
the bonds cannot be accelerated as long as CFC makes the scheduled debt
service payments. In addition, CFC has agreed to make up, at certain
times, deficiencies in the debt service reserve funds for some of these
issues of bonds. Of the amounts shown, $1,055.4 million and $1,168.9
million as of November 30, 1996 and May 31, 1996, respectively, are
adjustable or floating/fixed rate bonds. The interest rate on such bonds
may be converted to a fixed rate as specified in the indenture for each
bond offering. During the variable rate period (including at the time of
conversion to a fixed rate), CFC has unconditionally agreed to purchase
bonds tendered or called for redemption if such bonds are not sold to
other purchasers by the remarketing agents.
(B) CFC has unconditionally guaranteed the repayment of debt raised by NCSC
for leveraged lease transactions.
(C) CFC has unconditionally guaranteed to lessors certain indemnity payments
which may be required to be made by the lessees in connection with tax
benefit transfers. The amounts of such guarantees reach a maximum and
then decrease over the life of the lease.
(D) At November 30, 1996 and May 31, 1996, CFC had unconditionally guaranteed
commercial paper, along with the related interest rate exchange
agreement, issued by NCSC of $33.8 million and $34.7 million,
respectively.
10. Interest Rate Exchange Agreements
The following table lists the notional principal amounts of CFC's interest
rate exchange agreements at November 30, 1996 and May 31, 1996:
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
Notional Principal Amount
Maturity Date November 30, 1996 May 31, 1996
<S> <C> <C>
August 1996 (1) $ 0 $ 30,000
September 1996 (2) 0 150,000
February 1997 (1) 35,000 35,000
February 1997 (1) 40,000 40,000
February 1997 (1) 25,000 25,000
February 1998 (2) 50,000 50,000
November 1999 (2) 50,000 0
November 1999 (2) 50,000 0
November 1999 (2) 50,000 0
January 2000 (1) 52,851 0
January 2001 (1) 42,749 0
October 2004 (1) 45,600 45,600
April 2006 (1) 25,000 25,000
April 2006 (1) 25,000 25,000
April 2006 (1) 25,000 25,000
April 2006 (1) 25,000 25,000
Total $541,200 $475,600
</TABLE>
(1) Under these agreements, CFC pays a fixed rate of interest and receives
interest based on a variable rate.
(2) Under these agreements, CFC pays a variable rate of interest and receives
a variable rate of interest.
<PAGE> 14
CFC's objective in using interest rate exchange agreements in which it pays
a fixed rate of interest and receives a variable rate of interest is to fix
the interest rate on a portion of its commercial paper. CFC then uses
commercial paper, in an amount equal to the notional principal value of the
interest rate exchange agreements, to fund a portion of its long-term fixed
rate loan portfolio. The net difference between the rate paid by CFC and the
rate received is included in the cost of funds.
CFC's objective in using interest rate exchange agreements in which it pays
and receives a variable rate of interest is to change the variable rate on a
notional amount of debt from a LIBOR rate index to a commercial paper rate
index. The variable rate Collateral Trust Bonds and Medium-Term Notes are
issued based on a LIBOR rate index, while CFC sets its variable rate loan
interest rates based on a commercial paper rate. The net difference between
the rate paid by CFC and the rate received is included in the cost of funds.
CFC is exposed on these interest rate exchange agreements to interest rate
risk if the counterparty to the agreement does not perform to the agreement's
terms. CFC does have a policy intended to limit counterparty credit risk
by maintaining long-term interest rate exchange agreements only with
financial institutions with at least an AA long-term credit rating, and
short-term interest rate exchange agreements only with financial institutions
with at least an A long-term credit rating.
11. Contingencies
(A) At November 30, 1996 and May 31, 1996, nonperforming loans in the
amount of $24.2 million and $25.3 million, respectively, were on a
nonaccrual basis with respect to the recognition of interest income.
At November 30, 1996 and May 31, 1996, the total amount of
restructured debt was $364.2 million and $209.4 million, respectively.
CFC elected to apply all principal and interest payments received
against principal outstanding on restructured debt of $360.1 million
and $157.1 million, respectively.
(B) Of the $388.4 million and $234.7 million of loans described in
footnote 11(A) at November 30, 1996 and May 31, 1996, respectively,
CFC has classified $384.3 million and $230.4 million as impaired
with respect to the provisions of FASB Statements No. 114 and 118.
At those dates CFC had allocated $155.4 million and $160.9 million
of the loan and guarantee loss allowance to such impaired loans. At
November 30, 1996 and May 31, 1996, 6% and 32% respectively, of the
loans classified as impaired were collateral dependent. Loans are
collateral dependent when there are no reliable future payment
schedules and the amount expected to be collected is directly related
to the value of the assets and future revenues that represent the
underlying security for the loan. The amount of loan and guarantee
loss allowance allocated to such loans was based on a comparison of
the recorded investment in the loan to the estimated value of the
collateral. CFC recognized no interest income on loans classified
as impaired during the six months ended November 30, 1996. All
payments received were applied as a reduction of principal. The
average recorded investment in impaired loans for the six months
ended November 30, 1996 was $291.9 million.
(C) On August 7, 1991, the Bankruptcy Court confirmed WVPA's
reorganization plan pending approval of rates as contemplated in the
plan. As of November 30, 1996, RUS' final opportunity to petition
for rehearing expired. RUS, CFC and Wabash have since proceeded to
implement the Wabash Plan.
As of November 30, 1996, CFC had $17.7 million of loans outstanding
to Wabash. All loans to Wabash were classified as nonperforming and
were on a nonaccrual status with respect to the recognition of
interest income.
On December 31, 1996, CFC received $4.9 million of cash payments
under the various components of the Wabash Plan. CFC also offset
$9.9 million of maturing commercial paper investments held in escrow,
Subordinated Certificates and patronage capital, for a cash total of
$14.8 million. CFC also received a combination of secured and
unsecured promissory notes at market rates totaling $12.5 million.
The cash and notes received by CFC will be used to repay the $17.7
million loan. The notes will be classified as performing and will
accrue interest income at the stated rates.
CFC and RUS entered into a separate agreement in May 1988, under
which they have agreed to allocate among themselves all post-
petition, pre-confirmation payments by Wabash on debt secured by
the joint RUS/CFC mortgage. CFC and RUS are currently in the process
of determining the amount of payment, if any, due to either party.
<PAGE> 15
Based on the WVPA plan, management believes that CFC has adequately
reserved for any potential loss.
(D) Deseret failed to make the payments required under the ARO during
1995. The creditors were unable to agree on the terms of a
negotiated settlement and thus the ARO was terminated as of February
29, 1996. CFC filed a foreclosure action against the owner of the
Bonanza Plant in State Court in Utah on March 21, 1996. In this
action, CFC has not terminated the lease or sought removal of Deseret
as the plant operator. One of the defendants in the foreclosure
action has recently filed amended counterclaims against CFC. These
amended counterclaims allege breaches of contract and fiduciary
duties, fraudulent concealment, tortuous interference with contract
and conspiracy. These amended counterclaims also seek recision or
equitable subordination of CFC's interest in the Bonanza Plant. No
trial date has been set.
On October 16, 1996, Deseret and CFC entered into an Obligations
Restructuring Agreement (the "ORA") for the purpose of restructuring
Deseret's debt with CFC. Pursuant to the terms of the ORA, Deseret
is required to make quarterly minimum payments to CFC through
December 31, 2025. In addition to the quarterly minimum payments,
Deseret is required to pay to CFC certain percentages of its excess
cash flow and proceeds from the disposition of assets, as detailed in
the ORA. If Deseret performs all of its obligations under the ORA
and no event of default occurs thereunder, then on December 31, 2025,
CFC has agreed to forgive any amounts owed by Deseret to CFC.
In connection with the ORA, on October, 16, 1996, CFC acquired all of
Deseret's indebtedness in the outstanding principal amount of $740
million from RUS for the sum of $238.5 million (the "RUS Debt"). As
a result of the purchase, CFC holds a majority of Deseret's out-
standing secured debt. Pursuant to a participation agreement dated
October 16, 1996, the member systems of Deseret purchased from CFC,
for $55 million, a participation interest in the RUS Debt. CFC
provided long term financing to the members of Deseret as follows:
(i) $32.5 million in the aggregate to finance the buyout by the
members of their respective RUS debt (the "Note Buyout Loans"), and
(ii) $55.0 million in the aggregate to finance the members' purchase
of participation interests in the RUS Debt acquired by CFC (the
"Participation Loans"). The Note Buyout Loans and the Participation
Loans are secured by the assets and revenues of the member systems.
Under the participation agreement the Deseret members will receive a
share of the minimum quarterly payments that Deseret makes to CFC
which the members will use to service their Participation Loans.
Each member of Deseret has the option to put its Participation Loan
back to CFC after twelve years, provided that no event of default
exists under the ORA and under such member's Participation Loan.
From January 1, 1989 through November 30, 1996, CFC has funded $159.0
million in cashflow shortfalls related to Deseret's debt service and
rental obligations. All cashflow shortfalls funded by CFC represent
an increase to the restructured loan to Deseret. They also serve to
reduce CFC's guarantee exposure to Deseret. As of November 30, 1996,
CFC had approximately $653.8 million in current credit exposure to
Deseret consisting of $360.1 million in secured loans and $293.7
million in guarantees by CFC of various direct and indirect
obligations of Deseret. The secured loans to Deseret are on
nonaccrual status with respect to the recognition of interest income.
All payments received from Deseret are applied against principal
outstanding. CFC's guarantees include $6.0 million in tax-benefit
indemnifications and $23.9 million relating to mining equipment for
a coal supplier of Deseret. The remainder of CFC's guarantee is for
semi-annual debt service payments on $263.8 million of bonds issued
in a $655 million leveraged lease financing of the Bonanza Plant in
1985. RUS is now responsible for the repayment of $177.4 million of
Deseret loans held by grantor trusts and serviced by CFC. CFC holds
$5.3 million of the grantor trust certificates which are currently in
the variable rate mode.
CFC believes that given its analysis of Deseret's cashflow
projections, it has adequately reserved for any potential loss
on its loans and guarantees to Deseret.
(E) On September 13, 1996, CFC advanced $235.0 million to Soyland for the
purpose of repaying its RUS obligations at a significant discount.
This loan will amortize over a five year term. As a condition to
this advance, the distribution members of Soyland agreed to guarantee
repayment to CFC of $117.5 million. RUS is also responsible for the
repayment of $617.8 million of Soyland loans held by grantor trusts
and serviced by CFC. CFC holds $267.1 million of the grantor trust
certificates which are currently in the variable rate mode.
<PAGE> 16
As of November 30, 1996, CFC had $297.8 million of loans outstanding
to Soyland. All of these loans have been classified as performing
and are on full accrual status with respect to the recognition of
interest income. On November 1, 1996, the $47.1 million loan to
Soyland that had previously been classified as restructured was
reclassified as performing and placed on accrual status with respect
to the recognition of interest income.
CFC believes that it is adequately reserved for any potential loss
on its loans to Soyland.
12. Loans Guaranteed by RUS
At November 30, 1996 and May 31, 1996, CFC held $407.5 million and $416.6
million in Trust Certificates related to the refinancings of Federal
Financing Bank loans. These Trust Certificates are supported by payments
from certain CFC Power Supply members whose payments are guaranteed by
RUS.
<PAGE> 17
Part I. Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(all dollar amounts in millions)
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the assets, liabilities, revenues and expenses reported in the
financial statements, as well as amounts included in the notes thereto,
including discussion and disclosure of contingent liabilities. While the
Company uses its best estimates and judgments based on the known facts at
the date of the financial statements, actual results could differ from these
estimates as future events occur.
CFC does not believe it is vulnerable to the risk of a near term severe
impact as a result of any concentrations of its activities.
Changes in Financial Condition
During the six months ended November 30, 1996, CFC's total assets increased
by $966.0 or 12.0% to $9,020.1 from $8,054.1 at May 31, 1996, primarily due
to an increase of $870.5 in net loans outstanding and an increase of $75.0
in the debt service account. Changes to the loan portfolio included increases
of $467.6 in long-term loans, $53.4 in short-term loans, $154.8 in
restructured loans and $214.8 in intermediate-term loans offset by a
decrease of $9.1 on FFB refinancing loans. Long-term loan activity consisted
primarily of $301.6 in advances and $43.6 in principal repayments. The debt
service account increase was due to the mandatory sinking fund requirements
for bonds that are scheduled to mature during the year. The cash balance
decreased due to the increase in the debt service account.
Net loans to members represented 95% of total assets at November 30, 1996
and 96% at May 31, 1996. Long-term loans represented 85% of gross loans at
November 30, 1996 and 86% at May 31, 1996. Fixed rate loans represented 37%
of gross loans at November 30, 1996 and 38% at May 31, while the remaining
loans carry a variable rate that may be adjusted monthly or semi-monthly.
At November 30, 1996, $846.0 or 9.6 % of gross loans were unsecured,
compared to $767.1 or 9.7% at May 31, 1996. The $846.0 of unsecured loans
at November 30, 1996 includes $331.3 in temporarily unsecured loans for RUS
note buyouts. This amount represents the first portion of the buyout from
RUS. CFC will be advancing the remaining portion prior to the end of fiscal
year 1997, at which time the full amount advanced by CFC will be secured by
all assets and future revenues of the borrower. All other loans were secured
pro-rata with other lenders (primarily RUS), by all assets and future revenues
of the borrower.
At November 30, 1996 CFC had provided $2,107.6 in guarantees, a decrease of
$141.8 from the $2,249.4 at May 31, 1996. The decrease to guarantees was
primarily due to replacement of the $102.0 pollution control guarantee for
Tri-State and regularly scheduled principal payments. These guarantees relate
primarily to tax-exempt financed pollution control equipment and to leveraged
lease transactions for plant and equipment. All guarantees are secured on a
pro-rata basis with other creditors on all assets and future revenues of the
borrower or by the underlying financed assets.
Also at November 30, CFC had unadvanced loan commitments of $5,941.6, an
increase of $330.1 from the $5,611.5 committed at May 31, 1996. Most
unadvanced loan commitments contain a material adverse change clause that
would relieve CFC from its obligation to lend if the borrower's financial
condition had changed materially from the time the loan was approved. Many
of these commitments are provided for operational back-up liquidity. CFC does
not anticipate funding the majority of the commitments outstanding during the
next twelve to eighteen months.
During the six months ended November 30, 1996, CFC's total liabilities and
Members' Equity increased by $966.0 or 12.0% to $9,020.1 from $8,054.1 at
May 31, 1996. The increase was primarily due to increases of $808.7 in notes
payable, $22.0 in long-term debt, $8.9 in interest payable, $0.9 in Members'
Equity and Certificates and the issuance of $125.0 of Quarterly Income
Capital Securities.
The notes payable increase was due to increases of $363.0 in Dealer
Commercial Paper and $53.7 in Member Commercial Paper outstanding. The
Member Commercial paper balance at November 30, 1996 represents a 4.3%
increase over the May 31, 1996 balance. The increase to long-term debt
was due to a net increase in medium-term notes outstanding. This fiscal
year, CFC has averaged about $17.6 in Medium-Term Note sales to members
each month. The increase in Members' Equity and certificates was due to
the issuance of Subordinated Certificates on new loans and the year to date
net margin offset by
<PAGE> 18
the retirement of patronage capital. The increases to notes payable and
long-term debt were required to fund the increase in loans outstanding. The
increase in interest payable was due to the increase in funds outstanding.
At November 30, 1996, CFC had loans outstanding in the amount of $24.2
classified as nonperforming and $364.2 classified as restructured. All
nonperforming loans and $360.1 of restructured loans were on a nonaccrual
basis with respect to the recognition of interest income. As of November
30, 1996, CFC has classified $384.3 of loans outstanding as impaired with
respect to the provisions of FASB Statement No. 114. At November 30, 1996,
CFC has allocated $155.4 of the loan and guarantee loss allowance to such
impaired loans. During the six months ended November 30, 1996, the amount of
loans classified as impaired increased by $153.9. This increase was due to
the purchase of the RUS claims against Deseret for $183.5, the resolution of
the uncertainty related to the $47.1 loan Soyland which was reclassified
as performing, advances of $24.1 related to CFC's guarantee of Deseret's
obligations and $6.6 of payments received on loans classified as impaired.
While the balance of loans classified as impaired increased, the amount of
the loan and guarantee loss reserve allocated to these loans decreased from
$160.9 at May 31, 1996 to $155.4 at November 30, 1996. This decrease was
due to the release of the loan and guarantee loss reserve for Soyland, which
was larger than the required additions for other impaired loans based on the
provisions of FASB Statement No. 114. CFC has applied all payments received
on impaired loans as a reduction to principal outstanding.
The allowance for loan and guarantee losses increased by $10.0 to $228.0 at
November 30, 1996 from $218.0 at May 31, 1996. At November 30, 1996, the
loan and guarantee loss allowance represented 2.58% of gross loans, 2.09%
of gross loans and guarantees, 58.70% of nonperforming and restructured
loans, and 942.15% of nonperforming loans compared to 2.74%, 2.14%, 92.88%
and 862.05% at May 31, 1996, respectively. CFC makes regular additions to
the allowance for loan and guarantee losses. These additions are required
to maintain the allowance at an adequate level based on the current year to
date increase to loans outstanding and the estimated loan growth for the
next twelve months. On a quarterly basis, CFC reviews the adequacy of the
loan and guarantee loss allowance and estimates the amount of future provision
that will be required to maintain the allowance at an adequate level based on
estimated loan growth. In performing this assessment, management considers
various factors including an analysis of the financial strength of CFC's
borrowers, delinquencies, loan charge-off history, underlying collateral and
economic and industry conditions. As of November 30, 1996, management
believes that the allowance for loan and guarantee losses is adequate to
cover any portfolio losses which have occurred or may occur.
As of November 30, 1996, CFC had advanced $1,151.0 to 75 members for the
prepayment of RUS loans. CFC estimates that this amount represented 89% of
the total RUS prepayments. Other lenders have lent 7% of the total and the
remaining 4% was prepaid out of the members' internally generated funds. As
of November 30, 1996 CFC had approved loan applications for an additional
$65.3 from 11 members for the purpose of prepaying their RUS notes. In
addition, there were $59.8 in loan prepayment applications pending at RUS.
As of December 31, 1996, RTFC had approved approximately $200.0 of loans for
the purpose of financing Personal Communication Services ("PCS") systems.
These loans will carry guarantees in the aggregate amount of 65% of principal
from the equipment vendors and sponsoring telcos. It is anticipated that
these loans will begin closing during the third and fourth quarters of fiscal
year 1997.
On October 16, 1996, Deseret and CFC entered into an ORA for the purpose of
restructuring Deseret's debt with CFC. Pursuant to the terms of the ORA,
Deseret is required to make quarterly minimum payments to CFC through December
31, 2025. In addition to the quarterly minimum payments, Deseret is required
to pay to CFC certain percentages of its excess cash flow and proceeds from
the disposition of assets, as detailed in the ORA. If Deseret performs all
of its obligations under the ORA and no event of default occurs thereunder,
then on December 31, 2025, CFC has agreed to forgive any amounts owed by
Deseret to CFC.
In connection with the ORA, on October, 16, 1996, CFC acquired all of
Deseret's indebtedness in the outstanding principal amount of $740 from
the RUS for the sum of $238.5. As a result of the purchase, CFC is the
primary creditor of Deseret. Pursuant to a participation agreement dated
October 16, 1996, the member systems of Deseret purchased from CFC, for $55,
a participation interest in the RUS Debt. CFC provided a total of $87.5 long-
term financing to the members of Deseret to finance the purchase of the
participation interest in the RUS Debt and the buyout by the members of
their respective debt to RUS. These loans are secured by the assets and
revenues of the member systems. Each member of Deseret has the option to
put its participation loan back to CFC after twelve years, provided that no
event of default exists under the ORA and under such member's participation
loan.
As of November 30, 1996, CFC had $653.8 in current credit exposure to
Deseret, consisting of $360.1 in secured loans and $293.7 for guarantees
of various direct and indirect obligations of Deseret. All loans to Deseret
are on a nonaccrual status
<PAGE> 19
with respect to the recognition of interest income. All payments received
from Deseret have been and will continue to be applied as a reduction to
principal outstanding, at least until the uncertainty of the foreclosure
trial has been resolved.
On December 31, 1996, CFC received $4.9 in cash payments under the various
components of the Wabash Plan. CFC also offset $9.9 in maturing commercial
paper investments held in escrow, Subordinated Certificates and patronage
capital, for a cash total of $14.8. Under the Wabash Plan, CFC also received
a combination of secured and unsecured promissory notes at market rates
totaling $12.5. The cash and notes received will be used to repay the $17.7
loan. The notes will be classified as performing and will accrue interest
at the stated rates.
CFC and RUS entered into a separate agreement in May 1988, under which they
have agreed to allocate among themselves all post-petition, pre-confirmation
payments by Wabash on debt secured by the joint RUS/CFC mortgage. CFC and
RUS are currently in the process of determining the amount of payment, if
any, due to either party.
On September 13, 1996, CFC advanced $235.0 to Soyland for the purpose of
repaying its RUS obligations at a significant discount. This loan will
amortize over a 5 year term. As a condition to this advance, the
distribution members of Soyland agreed to guarantee repayment to CFC of
$117.5. In addition, RUS is also responsible for the repayment of $617.8
of Soyland loans held by grantor trusts and serviced by CFC. RUS is also
responsible for the repayment of $617.8 of Soyland loans held by grantor
trusts and serviced by CFC. CFC holds $267.1 of the grantor trust
certificates which are currently in the variable rate mode.
As of November 30, 1996, CFC had $297.8 of loans outstanding to Soyland.
All of these loans have been classified as performing and are on full accrual
status with respect to the recognition of interest income. On November 1,
1996, the $47.1 loan that had previously been classified as restructured was
reclassified as performing.
CFC believes that, given the value of the collateral and cashflow projections
underlying the loans to Deseret, Wabash and Soyland, it is adequately reserved
for any potential losses.
Changes in the Results of Operations
CFC's net margins are subject to change as interest rates change. Therefore,
CFC uses an interest coverage ratio, instead of the dollar amount of gross or
net margins, as a primary performance indicator. During the six months ended
November 30, 1996, CFC achieved a Times Interest Earned Ratio (TIER) of 1.12.
This was the same as the 1.12 TIER for the six months ended November 30, 1995.
Management has established a 1.10 TIER as its operating target.
Operating income for the six months ended November 30, 1996, was $274.5, an
increase of $27.6 from the prior year period. The increase in operating
income was due to a positive volume variance of $40.5 offset by a negative
rate variance of $12.9. Average loans outstanding increased by $1,138.6 while
the average yield decreased by 29 basis points from the prior year period.
For the six months ended November 30, 1996, average loans outstanding were
$8,348.4 and the average yield was 6.56%, compared to average loans
outstanding of $7,209.8 and an average yield of 6.85% for the six months
ended November 30, 1995. CFC sets the interest rates on its loans to cover
the cost of funds, general and administrative expenses, a provision for loan
and guarantee losses and a reasonable TIER. As a result, the yield earned
on the loan portfolio will move in conjunction with the rates in the capital
markets.
CFC's cost of funds for the six months ended November 30, 1996, totaled
$229.7, an increase of $20.1 from the prior year. The increase was due to
a positive volume variance of $35.2 offset by a negative rate variance of
$15.1. The average interest rate on funds used by CFC at November 30, 1996,
was 5.49%, a decrease of 32 basis points compared to the average rate of
5.81% at November 30, 1995. Included in the cost of funds is interest
expense on CFC's Subordinated Certificates and other instruments offset by
income from the overnight investments of excess cash and the interest
earnings on debt service investments. CFC's average cost of funding is
expected to increase due to the large volume of fixed rate debt issued
towards the end of the second quarter.
For the six months ended November 30, 1996 and November 30, 1995, general
and administrative expenses totaled $9.7 and $8.5, respectively. General
and administrative expenses represented 23 basis points of average loan
volume for the six months ended November 30, 1996, which is a decrease of
1 basis point from 24 basis points for the prior year period.
The provision for loan and guarantee losses for the six months ended
November 30, 1996, totaled $10.0 or 24 basis points, compared to the
prior year total of $5.7 or 15 basis points. During fiscal year 1997,
CFC may continue its practice of
<PAGE> 20
making a special provision to the loan and guarantee loss allowance equal to
the net margins earned in excess of the amount required to achieve a 1.12
TIER on a monthly basis. During the six months ended November 30, 1996,
this resulted in additional provisions totaling $5.0, an increase of $1.9
over the $3.1 of additional provision for prior year period. These additions
are intended to maintain the allowance at an adequate level based on current
and expected future loan growth. CFC has maintained the provision for loan
and guarantee losses in line with management's assessment of the size and
quality of the loan portfolio.
Overall, CFC's net margins for the six months ended November 30, 1996, totaled
$26.4, an increase of $1.5 from the prior year period total of $24.9.
Liquidity and Capital Resources
CFC is subject to liquidity risk to the extent cash repayments on its assets
or other sources of funds are insufficient to cover the cash requirements on
maturing liabilities. For the most part, CFC funds its long-term loans with
much shorter term maturity debt instruments, however, CFC's long-term loans
typically are repriced monthly or on a multiple number of years basis, and
as such, CFC will match the loan repricing periods with similarly repriced
sources of funding, thus minimizing interest rate risk.
With regard to liquidity risk, CFC manages its liquidity risk by ensuring
that other sources of funding are available to make debt maturity payments.
CFC accomplishes this in five ways. First, CFC maintains revolving credit
agreements which (subject to certain conditions) allow CFC to borrow funds
on terms of up to five years. Second, CFC has maintained investment grade
ratings, facilitating access to the capital markets. Third, CFC maintains
SEC shelf registrations for its Collateral Trust Bonds, Medium-Term Notes and
other debt securities, which (absent market disruptions and assuming CFC
maintains investment grade ratings) could be issued at fixed or variable
rates in sufficient amounts to fund the next 18 to 24 months funding require-
ments. Fourth, CFC maintains SEC registrations for the Grantor Trust
Certificates which permit public issuance of certificates to private
investors to replace the of variable rate certificates currently held by
CFC. Fifth, CFC obtains much of its funding directly from its members and
believes this funding is more stable than funding obtained from outside
sources.
At November 30, 1996, CFC had $4,835.0 in available bank credit, $2,167.5 of
which is available through November 27, 2001, $2,167.5 is available through
November 25, 1997 and $500.0 is available through November 26, 1997. As of
November 30, 1996 CFC was in compliance with all covenants and conditions to
borrowing and there were no amounts outstanding under such agreements.
As of November 30, 1996, CFC had shelf registrations for Collateral Trust
Bonds and Medium-Term Notes of $200.0 and $392.8, respectively. As of
November 30, 1996, CFC also had shelf registrations for Grantor Trust
Certificates of $121.8 and $125.0 for Quarterly Income Capital Securities.
Member invested funds, including the loan and guarantee loss allowance, at
November 30, 1996 and May 31, 1996, were $3,270.5 and $3,204.3 or 36.3% and
39.1% of CFC's total capitalization, respectively (long- and short-term debt
outstanding, Members' Certificates and Equity and the loan and guarantee loss
allowance).
CFC's leverage ratio was 5.69 at November 30, 1996, and May 31, 1996. CFC
calculates leverage as the ratio of total assets, less Members' Equity, less
Members' Subordinated Certificates, less Quarterly Income Capital Securities,
less funding for loans guaranteed by RUS, plus guarantees divided by the sum
of Members' Equity, Members' Subordinated Certificates and Quarterly Income
Capital Securities. CFC's current leverage ratio is well below the limit
authorized by its Board of Directors and revolving credit agreements.
<PAGE> 21
The following chart schedules the maturities of CFC's fixed rate loans and
fixed rate funding. The chart is a useful tool to identify gaps in the
matching of fixed rate loans with fixed rate funds.
<TABLE>
<CAPTION>
Interest-Rate Gap Analysis
(Fixed Assets/Liabilities)
As of November 30, 1996
FY 97 FY 98-99 FY 00-01 FY 02-06 FY 07-16 FY 17+ Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loan Amortization
and repricing $ 174.7 $ 713.2 $ 578.2 $ 895.6 $ 597.8 $ 132.1 $3,091.6
Total Assets $ 174.7 $ 713.2 $ 578.2 $ 895.6 $ 597.8 $ 132.1 $3,091.6
Liabilities and Equity:
Long-Term Debt $ 306.7 $ 432.8 $ 290.7 $ 526.6 $ 152.2 $ 375.0 $2,084.0
Subordinated Certificates 2.5 205.2 192.5 359.3 107.3 78.4 945.2
Equity - 75.2 95.0 - 26.6 - 196.8
Total Liabilities and Equity $ 309.2 $ 713.2 $ 578.2 $ 885.9 $ 286.1 $ 453.4 $3,226.0
Gap * $(134.5) $ 0.0 $ 0.0 $ 9.7 $ 311.7 $(321.3) $ (134.4)
Cumulative Gap $(134.5) $(134.5) $(134.5) $(124.8) $ 186.9 $(134.4)
Cumulative Gap as a %
of Total Assets 1.49% 1.49% 1.49% 1.38% 2.07% 1.49%
</TABLE>
* Loan amortization/repricing over/(under) debt maturities
CFC is subject to interest rate risk to the extent CFC's loans are subject
to interest rate adjustment at different times than the liabilities which
fund those assets. Therefore, CFC's interest rate risk management policy
involves the close matching of asset and liability repricing terms within a
range of 5% of total assets. CFC measures the matching of funds to assets
by comparing the amount of fixed rate assets repricing or amortizing to the
total fixed rate debt maturing over the periods listed in the above table.
At November 30, 1996, CFC had $174.7 in fixed rate assets amortizing or
repricing and $309.2 in fixed rate liabilities maturing during the remainder
of fiscal year 1997. The difference, $134.5, represents the amount of CFC's
assets that are not considered match-funded as to interest rate. CFC's
difference of $134.5 at November 30, 1996 represents 1.49% of total assets.
Variable rate loans are repriced monthly and are funded with variable rate
liabilities that are also priced monthly and as such are considered to be
match-funded with respect to interest rate repricings.
<PAGE> 22
Part II
Item 1, Legal Proceedings.
None.
Item 2, Changes in Securities.
None.
Item 3, Defaults upon Senior Securities.
None.
Item 4, Submission of Matters to a Vote of Security Holders.
None.
Item 5, Other Information.
None.
Item 6,
A. Exhibits
27 - Financial Data Schedules.
10.1 Revolving Credit Agreement maturing November 25, 1997.
10.2 Revolving Credit Agreement maturing November 26, 2001.
10.3 Revolving Credit Agreement maturing November 26, 1997.
99 Update to RUS information filed with May 31, 1996 Form 10K.
B. Reports on Form 8-K.
Item 5 on September 19, 1996 - Filing of Underwriting Agreement
for Bond Issue.
Item 5 on October 17, 1996`- Filing of Underwriting Agreement for
Bond Issue.
Item 5 on October 30, 1996 - Filing of Underwriting Agreement for
Quarterly Income Capital Securites.
Item 5 on November 13, 1996 - Filing of Underwriting Agreement for
Bond Issue.
<PAGE> 23
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
/s/ Steven L. Lilly
Chief Financial Officer
January 14, 1997
/s/ Angelo M. Salera
Controller (Principal Accounting Officer)
January 14, 1997
<PAGE> 1
Exhibit 10.1
364-DAY
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of
February 28, 1995
and
amended and restated as of
November 26, 1996
among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
J.P. MORGAN SECURITIES INC.
and
THE BANK OF NOVA SCOTIA,
as CO-SYNDICATION AGENTS
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as ADMINISTRATIVE AGENT
Arranged by
J.P. MORGAN SECURITIES INC.
<PAGE> 2
TABLE OF CONTENTS1
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 14
SECTION 1.03. Types of Borrowings 15
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend 15
SECTION 2.02. Notice of Committed Borrowings 16
SECTION 2.03. Money Market Borrowings 17
SECTION 2.04. Notice to Banks; Funding of Loans 21
SECTION 2.05. Notes 22
SECTION 2.06. Maturity of Loans 23
SECTION 2.07. Interest Rates 23
SECTION 2.08. Fees 27
SECTION 2.09. Optional Termination or Reduction of Commitments 27
SECTION 2.10. Mandatory Termination of Commitments 27
SECTION 2.11. Optional Prepayments 27
SECTION 2.12. General Provisions as to Payments 28
SECTION 2.13. Funding Losses. 29
SECTION 2.14. Computation of Interest and Fees 29
SECTION 2.15. Withholding Tax Exemption. 29
SECTION 2.16. Increase of Commitments. 30
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness 31
SECTION 3.02. Borrowings 33
1 The Table of Contents is not a part of this Agreement.
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Page
SECTION 4.01. Corporate Existence, Power and Authority 34
SECTION 4.02. Financial Statements 35
SECTION 4.03. Litigation 36
SECTION 4.04. Governmental Authorizations 36
SECTION 4.05. Capital Term Certificates 36
SECTION 4.06. No Violation of Agreements 37
SECTION 4.07. No Event of Default under the Indentures 37
SECTION 4.08. Compliance with ERISA 38
SECTION 4.09. Compliance with Other Laws 38
SECTION 4.10. Tax Status 38
SECTION 4.11. Investment Company Act 38
SECTION 4.12. Public Utility Holding Company Act 38
SECTION 4.13. Disclosure 38
SECTION 4.14. Subsidiaries 39
SECTION 4.15. Environmental Matters 39
ARTICLE V
COVENANTS
SECTION 5.01. Corporate Existence 40
SECTION 5.02. Disposition of Assets; Merger; Character of
Business; etc. 40
SECTION 5.03. Financial Information 40
SECTION 5.04. Default Certificates 42
SECTION 5.05. Notice of Litigation, Legislative
Developments and Defaults 43
SECTION 5.06. ERISA 44
SECTION 5.07. Payment of Charges 44
SECTION 5.08. Inspection of Books and Assets 44
SECTION 5.09. Indebtedness 45
SECTION 5.10. Liens 46
SECTION 5.11. Maintenance of Insurance 46
SECTION 5.12. Subsidiaries and Joint Ventures 47
SECTION 5.13. Minimum Net Worth 47
SECTION 5.14. Minimum TIER 47
SECTION 5.15. Retirement of Patronage Capital 47
SECTION 5.16. Use of Proceeds 47
<PAGE> 4
ARTICLE VI
DEFAULTS
Page
SECTION 6.01. Events of Default 48
SECTION 6.02. Notice of Default 50
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization 51
SECTION 7.02. Agent and Affiliates 51
SECTION 7.03. Action by Agent 51
SECTION 7.04. Consultation with Experts 51
SECTION 7.05. Liability of Agent 51
SECTION 7.06. Indemnification 52
SECTION 7.07. Credit Decision 52
SECTION 7.08. Successor Agent 52
SECTION 7.09. Co-Syndication Agents Not Liable 53
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 53
SECTION 8.02. Illegality 54
SECTION 8.03. Increased Cost and Reduced Return 54
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans 56
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices 57
SECTION 9.02. No Waivers 57
SECTION 9.03. Expenses; Documentary Taxes; Indemnification 58
<PAGE> 5
Page
SECTION 9.04. Sharing of Set-Offs 58
SECTION 9.05. Amendments and Waivers 59
SECTION 9.06. Successors and Assigns 59
SECTION 9.07. Collateral 61
SECTION 9.08. Managing Agents; Co-Agents 61
SECTION 9.09. Governing Law 61
SECTION 9.10. Counterparts; Integration 61
SECTION 9.11. Several Obligations 62
SECTION 9.12. Severability 62
Pricing Schedule
Schedule I - Agent Schedule
Exhibit A - Note
Exhibit B - RUS Guarantee
Exhibit C - Money Market Quote Request
Exhibit D - Invitation for Money Market Quotes
Exhibit E - Money Market Quote
Exhibit F - Opinion of General Counsel for the Borrower
Annex A to Exhibit F - Subsidiaries and
Joint Ventures
Exhibit G - Opinion of Special Counsel for the Borrower
Exhibit H - Opinion of Special Counsel for the Agent
Exhibit I - Extension Agreement
Exhibit J - Assignment and Assumption Agreement
<PAGE> 6
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of February 28,1995 and amended and
restated as of November 26, 1996 among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a not-for-profit cooperative association
incorporated under the laws of the District of Columbia, as Borrower, the
BANKS listed on the signature pages hereof, J.P. MORGAN SECURITIES INC.
and THE BANK OF NOVA SCOTIA, as Co-Syndication Agents, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Administrative Questionnaire" means, with respect to each Bank, the
administrative questionnaire in the form submitted to such Bank by the
Agent and submitted to the Agent (with a copy to the Borrower) duly
completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its capacity
as administrative agent for the Banks hereunder, and its successors in
such capacity.
"Agreement" means the Original Agreement, as amended by the Amended
Agreement and as the same may be further amended from time to time.
"Amended Agreement" means this Amended and Restated Revolving Credit
Agreement dated as of February 28, 1995 and amended and restated as of
November 26, 1996.
<PAGE> 7
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the
case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Bonds" means any bonds issued pursuant to either Indenture or both, as
the context may require.
"Borrower" means the National Rural Utilities Cooperative Finance
Corporation, a not-for-profit cooperative association incorporated under
the laws of the District of Columbia, and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Capital Term Certificate" means a note of the Borrower substantially in
the form of the membership subscription certificates and the loan and
guarantee certificates outstanding on the date of the execution and
delivery of this Agreement and any other Indebtedness of the Borrower
having substantially similar provisions as to subordination as those
contained in said outstanding membership subscription certificates and
loan and guarantee certificates.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
<PAGE> 8
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in the Pricing Schedule.
"CD Reference Banks" means The Bank of Nova Scotia, SunBank, National
Association and Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 2.09 and
2.10.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be combined or consolidated with
those of the Borrower in its combined or consolidated financial state-
ments if such statements were prepared as of such date.
"Co-Syndication Agents" means J.P. Morgan Securities Inc. and The Bank
of Nova Scotia, each in its capacity as co-syndication agent for the
Banks hereunder, and their successors in such capacity.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both (as
specified in Section 6.01) would, unless cured or waived, become an Event
of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap trans-
action, currency option or any other similar transaction (including any
option with respect to any of the foregoing transactions) or any
combination of the foregoing transactions.
"Determination Date" shall have the meaning provided in Section 5.09.
<PAGE> 9
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or
such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent; provided that any
Bank may so designate separate Domestic Lending Offices for its Base Rate
Loans, on the one hand, and its CD Loans, on the other hand, in which
case all references herein to the Domestic Lending Office of such Bank
shall be deemed to refer to either or both of such offices, as the
context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judg-
ments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to
the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower
or any Subsidiary, are treated as a single employer under Section 414 of
the Internal Revenue Code.
<PAGE> 10
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each
Bank, its office, branch or affiliate located at its address
set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Euro-Dollar
Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be
made by a Bank as a Euro-Dollar Loan in accordance with the
applicable Notice of Committed Borrowing.
"Euro-Dollar Margin" has the meaning set forth in the
Pricing Schedule.
"Euro-Dollar Reference Banks" means the principal London
offices of The Bank of Nova Scotia, SunBank, National
Association and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set
forth in Section 2.07(c).
"Event of Default" has the meaning set forth in Section
6.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upward, if necessary, to the nearest 1/100th
of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding
Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day,
the Federal Funds Rate for such day shall be the average
rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans
or Money Market Loans (excluding Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to
Section 8.01(a)) or any combination of the foregoing.
<PAGE> 11
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Indebtedness or lease
payments of any other Person or otherwise in any
manner assuring the holder of any Indebtedness of, or
the obligee under any lease of, any other Person
through an agreement, contingent or otherwise, to
purchase Indebtedness or the property subject to such
lease, or to purchase goods, supplies or services
primarily for the purpose of enabling the debtor or
obligor to make payment of the Indebtedness or under such
lease or of assuring such Person against loss, or to
supply funds to or in any other manner invest in the
debtor or obligor, or otherwise; provided that the term
Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term
"Guarantee" when used as a verb has a correlative meaning.
"Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, including
petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indebtedness" with respect to any Person means:
(1) all indebtedness which would appear as
indebtedness on a balance sheet of such Person
prepared in accordance with generally accepted
accounting principles (i) for money borrowed,
(ii) which is evidenced by securities sold for
money or (iii) which constitutes purchase money
indebtedness;
(2) all indebtedness of others Guaranteed by
such Person;
(3) all indebtedness secured by any Lien upon
property owned by such Person, even though such
Person has not assumed or become liable for the
payment of such indebtedness; and
(4) all indebtedness of such Person created or
arising under any conditional sale or other title
retention agreement (including any lease in the
nature of a title retention agreement) with respect
to property acquired by such Person (even though the
rights and remedies of the seller or lender under
such agreement in the event of default are limited
to repossession of such property), but only if such
property is included as an asset on the balance sheet
of such Person;
<PAGE> 12
provided that, in computing the "Indebtedness" of such
Person, there shall be excluded any particular indebtedness
if, upon or prior to the maturity thereof, there shall have
been deposited with the proper depositary in trust money
(or evidences of such indebtedness) in the amount necessary
to pay, redeem or satisfy such indebtedness, and thereafter
such money and evidences of indebtedness so deposited shall
not be included in any computation of the assets of such
Person; and provided further that no provision of this
definition shall be construed to include as "Indebtedness"
of the Borrower any indebtedness by virtue of any agreement
by the Borrower to advance or supply funds to Members.
"Indenture" means either the 1972 Indenture or the 1994
Indenture, and "Indentures" means both such Indentures.
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date of
such Borrowing and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end
on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each CD Borrowing, the period
commencing on the date of such Borrowing and ending 30,
60, 90 or 180 days thereafter, as the Borrower may elect
in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business Day;
and
<PAGE> 13
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Base Rate Borrowing, the
period commencing on the date of such Borrowing and ending
30 days thereafter; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date;
(4) with respect to each Money Market LIBOR Borrowing,
the period commencing on the date of such Borrowing and
ending any whole number of months thereafter (but not less
than one month) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month,
in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the
last Euro-Dollar Business Day of a calendar month
(or on a day for which there is no numerically
corresponding day in the calendar month at the end
of such Interest Period) shall, subject to clause
(c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date;
and
(5) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such
Borrowing and ending such number of days thereafter
(but not less than 30 days) as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
<Page 14>
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, or any successor statute.
"Joint Venture" means any corporation, partnership,
association, joint venture or other entity in which the
Borrower, directly or indirectly through Subsidiaries or
Joint Ventures, has an equity interest at the time of 10%
or more but which is not a Subsidiary; provided that no
Person whose only assets are RUS Guaranteed Loans and
investments incidental thereto shall be deemed a Joint
Venture.
"LIBOR Auction" means a solicitation of Money Market
Quotes setting forth Money Market Margins based on the
London Interbank Offered Rate pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset. For the purposes of
this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or
a Money Market Loan and "Loans" means Domestic Loans or
Euro-Dollar Loans or Money Market Loans or any combination
of the foregoing.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.07(c).
"Member" means any Person which is a member or a
patron of the Borrower.
"Minimum Required Net Worth" shall initially be
$1,346,291,939; provided that on each date after the
Effective Date upon which annual financial statements
are required to be delivered pursuant to Section 5.03(ii),
the Minimum Required Net Worth shall be permanently
increased by an amount, if positive, equal to ninety percent
(90%) of (i) the aggregate amount of Net Margins for the
prior fiscal year minus (ii) the aggregate amount of
<PAGE> 15
retirements of Patronage Capital Certificates made by
the Borrower to Members in the prior fiscal year. In the event that
in any year the amount specified in clause (ii) above is equal to or
greater than the amount specified in clause (i) above, the Minimum
Required Net Worth shall remain the same for that year.
"Money Market Absolute Rate" has the meaning set
forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be
made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each
Bank, its Domestic Lending Office or such other office,
branch or affiliate of such Bank as it may hereafter
designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may
from time to time by notice to the Borrower and the Agent
designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which
case all references herein to the Money Market Lending
Office of such Bank shall be deemed to refer to either or
both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by
a Bank pursuant to a LIBOR Auction (including such a
loan bearing interest at the Prime Rate pursuant to
Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR
Loan or a Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in
Section 2.03(d).
"Money Market Quote" means an offer by a Bank to
make a Money Market Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc.,
and its successors.
"Net Margins" means operating and non-operating
income of the Borrower and its Subsidiaries determined
on a combined or consolidated basis (excluding income on
Guaranteed Portions of RUS Guaranteed Loans) less, without
duplication, operating and non-operating costs and expenses
of the Borrower and its Subsidiaries determined on a
combined or consolidated basis (excluding costs and
expenses relating to Guaranteed Portions of RUS Guaranteed
Loans).
<PAGE> 16
"Net Worth" means the sum of (i) all accounts which
constitute Members' equity in the Borrower, (ii) all
Indebtedness of the Borrower shown in its balance sheet
dated as of May 31, 1996 as "Members' Subordinated
Certificates" and any other Indebtedness of the Borrower
incurred after May 31, 1996 having substantially similar
provisions as to subordination as those contained in said
outstanding certificates and (iii) any amounts reflected
in the financial statements of the Borrower as a reserve
for loan losses.
"1994 Indenture" means the Indenture dated as of
February 15, 1994 between the Borrower and First Bank
National Association, as trustee, as amended and
supplemented from time to time, providing for the
issuance in series of certain collateral trust bonds
of the Borrower.
"1972 Indenture" means the Seventeenth Supplemental
Indenture dated as of March 1, 1987, amending and
restating in full the Indenture dated as of
December 1, 1972, by and between the Borrower and
Chemical Bank (as successor by merger to Manufacturers
Hanover Trust Company), as trustee.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto,
evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory
notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed
Borrowing (as defined in Section 2.02) or a Notice of
Money Market Borrowing (as defined in Section 2.03(f)).
"Original Agreement" means the $1,620,000,000
Revolving Credit Agreement dated as of February 28, 1995
among the Borrower, the Banks listed therein, J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as
Co-Syndication Agents, and Morgan Guaranty Trust Company
of New York, as Administrative Agent.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section
9.06(b).
"Patronage Capital Certificates" means those
certificates that evidence the allocation of Net Margins
by the Borrower among its Members in proportion to
interest earned by the Borrower from such Members.
<PAGE> 17
"PBGC" means the Pension Benefit Guaranty Corporation
or any entity succeeding to any or all of its functions
under ERISA.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity
or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means any multiemployer plan or single
employer plan, as defined in Section 4001 and subject
to Title IV of ERISA, which is maintained, or at any
time during the five calendar years preceding the date
of this Agreement was maintained, for employees of the
Borrower or a Subsidiary of the Borrower or any member
of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York
in New York City from time to time as its Prime Rate.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference
Banks.
"Refunding Borrowing" means a Committed Borrowing
which, after application of the proceeds thereof, results
in no net increase in the outstanding principal amount of
Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Regulation X" means Regulation X of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Reportable Event" means an event described in Section
4043(c) of ERISA or regulations promulgated by the
Department of Labor thereunder (with respect to which
the 30 day notice requirement has not been waived by the
PBGC).
"Required Banks" means at any time Banks having at least
60% of the aggregate amount of the Commitments or, if the
Commitments shall have been terminated, holding Notes
evidencing at least 60% of the aggregate unpaid principal
amount of the Loans.
<PAGE> 18
"Revolving Credit Period" means the period from and
including the Effective Date to but excluding the
Termination Date.
"RUS" means the Rural Utilities Service of the
Department of Agriculture of the United States of
America (as successor to the Rural Electrification
Administration of the Department of Agriculture of the
United States of America) or any other regulatory body
which succeeds to its functions.
"RUS Guaranteed Loan" means any loan made by any
Person, which loan (x) bears interest at least equal
to such Person's cost of funds and (y) is guaranteed,
in whole or in part, as to principal and interest by the
United States of America through the RUS pursuant to a
guarantee, which guarantee contains provisions no less
favorable to the holder thereof than the provisions set forth
in the form of Exhibit B hereto; and "Guaranteed Portion" of any RUS
Guaranteed Loan means that portion of principal of, and interest on,
such RUS Guaranteed Loan which is guaranteed by the United States of
America through the RUS as provided in clause (y).
"S&P" means Standard and Poor's Rating Services, a
division of The McGraw-Hill Companies, Inc., and its
successors.
"Subsidiary" of any Person means (i) any corporation
more than 50% of whose stock of any class or classes
having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency)
is at the time owned by such Person directly or indirectly
through its Subsidiaries, and (ii) any other Person in which
such Person directly or indirectly through Subsidiaries has more
than a 50% voting and equity interest, provided that no Person
whose only assets are RUS Guaranteed Loans and investments
incidental thereto shall be deemed a Subsidiary.
Neither the Rural Telephone Finance Cooperative nor the
Guaranty Funding Cooperative is on the date of this
Agreement a "Subsidiary", except that the Rural Telephone
Finance Cooperative and, but only so long as the Borrower
maintains control of the Board of Directors of the Guaranty
Funding Cooperative (including, without limitation, the
ability to appoint a majority of such Board of Directors),
the Guaranty Funding Cooperative shall each be considered a
"Subsidiary" for purposes of the definitions of "Net
Margins" and "TIER".
<PAGE> 19
"Superior Indebtedness" means all Indebtedness of the Borrower (other
than Capital Term Certificates) and its Subsidiaries determined on a combined
or consolidated basis, but excluding Indebtedness of the Borrower or any of
its Subsidiaries to the extent that the proceeds of such Indebtedness are
used to fund Guaranteed Portions of RUS Guaranteed Loans.
"Termination Date" means November 25, 1997 or such later date to which
this Agreement shall have been extended pursuant to Section 2.01(b), or, if
either such day is not a Euro-Dollar Business Day, the next preceding
Euro-Dollar Business Day.
"TIER" means, for any period, the ratio of (x) Net Margins plus interest
on Indebtedness of the Borrower or its Subsidiaries determined on a combined
or consolidated basis (but excluding Indebtedness of the Borrower or any of
its Subsidiaries to the extent that the proceeds of such Indebtedness are
used to fund Guaranteed Portions of RUS Guaranteed Loans) plus amortization
of bond discount and amortization of bond issuance costs of the Borrower
and its Subsidiaries determined on a combined or consolidated basis for such
period (but excluding such amortization of discount and issuance costs with
respect to Indebtedness referred to in the preceding parenthetical phrase)
to (y) interest on Indebtedness of the Borrower or its Subsidiaries
determined on a combined or consolidated basis (but excluding Indebtedness
of the Borrower or any of its Subsidiaries to the extent that the proceeds
of such Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed
Loans) plus amortization of bond discount and amortization of bond issuance
costs of the Borrower and its Subsidiaries determined on a combined or
consolidated basis for such period (but excluding such amortization of
discount and issuance costs with respect to Indebtedness referred to in the
preceding parenthetical phrase).
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made and all financial statements required
to be delivered hereunder shall be prepared in accordance with generally
accepted accounting principles as in effect from time to time, applied on a
basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited combined
financial statements of the Borrower and its Consolidated Subsidiaries
delivered to the Banks.
<PAGE> 20
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article II on a single date and for a single Interest Period. Borrowings
are classified for purposes of this Agreement either by reference to the
pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the
provisions of Article II under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which
all Banks participate in proportion to their Commitments, while a "Money
Market Borrowing" is a Borrowing under Section 2.03 in which the Bank
participants are determined on the basis of their bids in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to this Section from
time to time in amounts such that the aggregate principal amount of Committed
Loans by such Bank at any one time outstanding shall not exceed the amount of
its Commitment. Each Borrowing shall be in an aggregate principal amount of
$25,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the maximum aggregate amount available in accordance
with Section 3.02(c) or (d)) and shall be made from the several Banks ratably
in proportion to their respective Commitments. Within the foregoing limits,
the Borrower may borrow under this Section, repay or, to the extent permitted
by Section 2.11, prepay Loans and reborrow at any time during the Revolving
Credit Period under this Section.
(b) Extension of Commitments. The Termination Date may be extended
from time to time in the manner set forth in this subsection (b), in each
case for a period of up to 364 days from the date on which Banks having 100%
of the Commitments shall have notified the Agent of their agreement so to
extend. If the Borrower wishes to request an extension of the Termination
Date, it shall give written notice to that effect (such notice to state the
date to which the Termination Date then in effect is requested to be
extended, subject to the provisions of the preceding sentence) to the
Agent not less than 60 nor more than 90 days prior to the Termination Date
then in effect, whereupon
<PAGE> 21
the Agent shall promptly notify each of the Banks of such request and
send a copy of the Extension Agreement referred to below to each Bank.
Each Bank will use its best efforts to respond to such request,
whether affirmatively or negatively, as it may elect in its discretion,
within 30 days of such notice to the Agent. If less than all Banks respond
affirmatively to such request within 30 days, then the Borrower may request
the Banks that do not elect to extend the Termination Date to assign their
Commitments in their entirety, no later than 15 days prior to the Termination
Date then in effect, to one or more Assignees pursuant to Section 9.06(c)
which Assignees will agree to extend the Termination Date. If all Banks
(including such Assignees and excluding their respective transferor Banks)
respond affirmatively, then, subject to receipt by the Agent of counterparts
of an Extension Agreement in substantially the form of Exhibit I hereto duly
completed and signed by all of the parties thereto, the Termination Date
shall be extended for the period specified above.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the
second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Notwithstanding the foregoing, no more than 10 Fixed Rate Borrowings shall be
outstanding at any one time, and any Borrowing which would exceed such
limitation shall be made as a Base Rate Borrowing.
<PAGE> 22
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this
Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to
the Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit C hereto so as to be received no later
than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business
Day prior to the date of Borrowing proposed therein, in the case of a LIBOR
Auction or (y) the Domestic Business Day next preceding the date of Borrowing
proposed therein, in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date
of the Money Market Quote Request for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in the
case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $25,000,000
or any larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market
Quote Request shall be given within five Euro-Dollar Business Days (or such
other number of days as the Borrower and the Agent may agree) of any other
Money Market Quote Request.
<PAGE> 23
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit D hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the
Money Market Loans to which such Money Market Quote Request relates in
accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d)
and must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:00 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified
to the Banks not later than the date of the Money Market Quote Request for
the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective); provided that Money Market Quotes submitted by the Agent (or
any affiliate of the Agent) in the capacity of a Bank may be submitted, and
may only be submitted, if the Agent or such affiliate notifies the Borrower
of the terms of the offer or offers contained therein not later than (x) 1:00
P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 8:45 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction. Subject to Articles III and VI, any Money Market
Quote so made shall be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which
each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x)
must be
<PAGE> 24
$1,000,000 or any larger multiple thereof, (y) may not exceed the
principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to
principal amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin") offered
for each such Money Market Loan, expressed as a percentage (rounded to the
nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute
Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or
does not specify all of the information required by subsection (d)(ii),
(B) contains qualifying, conditional or similar language,
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes, or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank
that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous
Money Market Quote submitted by such Bank with respect to the same Money
Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Agent unless such subsequent Money Market Quote is
submitted
<PAGE> 25
solely to correct a manifest error in such former Money Market Quote.
The Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been
received for each Interest Period specified in the related Money
Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal
amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to
the proposed date of Borrowing, in the case of a LIBOR Auction or (y)
the proposed date of Borrowing, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as the Borrower and the
Agent shall have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective), the Borrower shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection
(e). In the case of acceptance, such notice (a "Notice of Money Market
Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any
Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in
the related Money Market Quote Request,
(ii) the aggregate principal amount of each Money Market Borrowing
must be $25,000,000 or any larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as
the case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more
Banks with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal
amount than the amount in respect of which such offers are
accepted for the related
<PAGE> 26
Interest Period, the principal amount of Money Market Loans in
respect of which such offers are accepted shall be allocated by
the Agent among such Banks as nearly as possible (in such
multiples, not greater than $100,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amounts
of such offers. Determinations by the Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest
error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any)
of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing,
in Federal or other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section 9.01. Unless the
Agent determines that any applicable condition specified in Article III has
not been satisfied, the Agent will make the funds so received from the Banks
available to the Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (b), or remitted by the Borrower to the
Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have been notified by any Bank prior
to the date of Borrowing (or prior to 1:00 P.M. (New York City time) on the
date of Borrowing in the case of a Base Rate Borrowing) that such Bank does
not intend to make available to the Agent such Bank's portion of the
Borrowing to be made on such date, the Agent may assume that such Bank has
made such amount available to the Agent on such date and the Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount, subject to the provisions of subsection (c). If such corresponding
amount is not in fact made available to the Agent by such Bank, the Agent
shall be entitled to
<PAGE> 27
recover such corresponding amount on demand from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower and the Borrower
shall promptly pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from such Bank or the Borrower interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal
to (x) in the case of a Bank, the Federal Funds Rate for each such day and
(y) in the case of the Borrower, the then applicable rate for Base Rate Loans,
CD Loans, Euro-Dollar Loans or Money Market Loans, as appropriate. Nothing
herein shall be deemed to relieve any Bank from its obligation to fulfill
its Commitment hereunder or to prejudice any rights which the Borrower may
have against any Bank as a result of any default by such Bank hereunder. For
purposes of this subsection (d), no amount paid to the Agent hereunder shall
be considered to have been recovered by the Agent on the date of payment
unless such amount shall have been received by the Agent by 2:30 P.M.
(New York City time) on such date.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request that
its Loans of a particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely
Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the
Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer
or enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect
<PAGE> 28
the obligations of the Borrower hereunder or under the Notes. Each Bank
is hereby irrevocably authorized by the Borrower so to endorse its Note
and to attach to and make a part of its Note a continuation of any such
schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on
the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin plus the applicable Adjusted
CD Rate; provided that if any CD Loan shall, as a result of clause (2)(b)
of the definition of Interest Period, have an Interest Period of less than
30 days, such Loan shall bear interest during such Interest Period at the
rate applicable to Base Rate Loans during such period. Such interest
shall be payable for each Interest Period on the last day thereof and, if
such Interest Period is longer than 90 days, 90 days after the first day
thereof. Any overdue principal of or interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the higher of (i) the sum of the CD Margin
plus the Adjusted CD Rate applicable to such Loan and (ii) the rate
applicable to Base Rate Loans for such day.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
<PAGE> 29
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate
of deposit dealers of recognized standing for the purchase at face value from
each CD Reference Bank of its certificates of deposit in an amount comparable
to the unpaid principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of new non-personal time deposits in dollars in New York City
having a maturity comparable to the related Interest Period and in an amount
of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically
on and as of the effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect
on such day which is payable by a member of the Bank Insurance Fund classified
as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and
as of the effective date of any change in the Assessment Rate.
<PAGE> 30
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the sum of the Euro-Dollar Margin plus the
applicable Adjusted London Interbank Offered Rate. Such interest shall be
payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, three months after the first
day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing
(i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-
Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business
Days before the first day of such Interest Period in an amount approximately
equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar
Reference Bank to which such Interest Period is to apply and for a period of
time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of "Eurocurrency liabilities" (or in respect of any other category
of liabilities which includes deposits by reference to which the interest
rate on Euro-Dollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including
the date payment thereof was due to but excluding the date of actual
payment, at a rate per annum equal to the sum of 2% plus the higher of
(i) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank
<PAGE> 31
Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the
quotient obtained (rounded upwards, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than six months as the Agent
may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered
to such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-
Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of
2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if each Euro-Dollar Reference Bank
were to participate in the related Money Market LIBOR Borrowing
ratably in proportion to its Commitment) plus (or minus) the Money
Market Margin quoted by the Bank making such Loan in accordance with
Section 2.03. Each Money Market Absolute Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance
with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer
than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan
shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the Prime Rate for such day.
(f) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks by telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any
Reference Bank does not furnish
<PAGE> 32
a timely quotation, the Agent shall determine the relevant interest
rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall
apply.
SECTION 2.08. Fees.
(a) Facility Fee. The Borrower shall pay to the Agent for the account of
the Banks ratably in proportion to their Commitments a facility fee at the
Facility Fee Rate (determined daily in accordance with the Pricing
Schedule). Such facility fee shall accrue from and including the Effective
Date to but excluding the Termination Date (or such earlier date as the
Commitments shall be terminated) on the aggregate amount of the Commitments
in existence on each such day (whether used or unused).
(b) Agents' Fees. The Borrower shall pay to the Agent and the Co-Syndi-
cation Agents, each for its own account, one or more fees in such amounts
and at such times as has been previously agreed between the Borrower and
each of them.
(c) Payments. Accrued fees under subsection (a) of this Section 2.08
shall be payable quarterly in arrears on each January 1, April 1, July 1
and October 1, commencing on the first such date after the Effective Date,
and upon the date of termination of the Commitments in their entirety.
SECTION 2.09. Optional Termination or Reduction of Commitments. During the
Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Agent (which notice the Agent will promptly
deliver to the Banks), (i) terminate the Commitments at any time, if no Loans
are outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $25,000,000 or any larger multiple of $1,000,000, the
aggregate amount of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
SECTION 2.10. Mandatory Termination of Commitments. The Commitments shall
terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least
one Domestic Business Day's notice to the Agent, prepay any Base Rate
Borrowing (or any
<PAGE> 33
Money Market Borrowing bearing interest at the Base Rate pursuant to Section
8.01(a)) in whole at any time, or from time to time in part in amounts
aggregating [$25,000,000] or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not prepay all or
any portion of the principal amount of any Fixed Rate Loan prior to the
maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 1:00 P.M. (New York City time) on the date when
due, in Federal or other funds immediately available in New York City, to
the Agent at its address referred to in Section 9.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment received by the
Agent for the account of the Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due on a day which is not
a Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of,
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and
<PAGE> 34
the Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such Bank.
If and to the extent that the Borrower shall not have so made such payment,
each Bank shall repay to the Agent forthwith on demand such amount distributed
to such Bank together with interest thereon, for each day from the date such
amount is distributed to such Bank until the date such Bank repays such amount
to the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal
with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or other-
wise) on any day other than the last day of the Interest Period applicable
thereto, or the end of an applicable period fixed pursuant to Section 2.07(d),
or if the Borrower fails to borrow any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.04(a), the Borrower shall
reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or failure to borrow, provided
that such Bank shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime
Rate and fees hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.15. Withholding Tax Exemption. At least five Domestic Business
Days prior to the first date on which interest or fees are payable hereunder
for the account of any Bank, each Bank that is not incorporated under the
laws of the United States of America or a state thereof agrees that it will
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Bank is entitled to receive payments under this Agreement and
its Note without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Agent two additional copies
<PAGE> 35
of such form (or a successor form) on or before the date that such form expires
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the Borrower
or the Agent, in each case certifying that such Bank is entitled to receive
payments under this Agreement and its Note without deduction or withholding
of any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Borrower and the Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax.
SECTION 2.16. Increase of Commitments. Upon at least 45 days' prior notice
to the Agent (which notice the Agent shall promptly transmit to each of the
Banks), the Borrower shall have the right, subject to the terms and conditions
set forth below and with the consent of the Banks as set forth below, to
increase the aggregate amount of the Commitments in multiples of $5,000,000.
Any such increase shall apply, at the option of the Borrower, (x) to the
Commitment of one or more Banks, provided that (i) the Required Banks
(including each Bank whose Commitment is to be increased) shall consent to
such increase, (ii) the amount set forth on the signature pages hereof
opposite the name of each Bank the Commitment of which is being so increased
shall be amended to reflect the increased Commitment of such Bank and (iii)
if any Committed Loans are outstanding at the time of such an increase, the
Borrower will, notwithstanding anything to the contrary contained in this
Agreement, on the date of such increase incur and repay or prepay one or more
Committed Loans from the Banks in such amounts so that after giving effect
thereto, the Committed Loans shall be outstanding on a pro rata basis (based
on the Commitments of the Banks after giving effect to the changes made
pursuant hereto on such date) from all the Banks or (y) to the creation of a
new Commitment of an institution not then a Bank hereunder, provided that
(i) such institution becomes a party to this Agreement as a Bank by execution
and delivery to the Borrower and the Agent of counterparts of this Agreement,
(ii) the Required Banks shall consent to the creation of such Commitment of
such Bank, (iii) the signature pages hereof shall be amended to reflect the
Commitment of such new Bank, (iv) the Borrower shall issue a Note to such new
Bank in conformity with the provisions of
<PAGE> 36
Section 2.05, (v) if any Committed Loans are outstanding at the time of the
creation of such Commitment of such Bank, the Borrower will, notwithstanding
anything to the contrary contained in this Agreement, on the date of the
creation of such Commitment incur and repay or prepay one or more Committed
Loans from the Banks in such amounts so that after giving effect thereto, the
Committed Loans shall be outstanding on a pro rata basis (based on the
Commitments of the Banks after giving effect to the changes made pursuant
hereto on such date) from all the Banks and (vi) if such institution is
neither a banking institution nor an affiliate of a Bank, such institution
must be consented to by the Agent; provided further that any such increase
or creation may apply, at the option of the Borrower, as set forth in clause
(x) or (y) above but without the consent of the Required Banks so long as the
amount of such increase or the amount of such new Commitment so created, as
the case may be, when added to the aggregate amount of all such prior
increases in the Commitments and all such prior creations of new
Commitments, in each case created after the Effective Date, does not exceed
$300,000,000. It is understood that any increase in the amount of the
Commitments pursuant to this Section 2.16 shall not constitute an amendment
of this Agreement or the Notes.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended Agreement shall become effective
on the date (the "Effective Date") on which the Agent shall have received the
following documents or other items, each dated the Effective Date unless
otherwise indicated:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly executed
Note dated on or before the Effective Date complying with the provisions
of Section 2.05;
(c) receipt by the Agent of an opinion of John Jay List, Esq., General
Counsel of the Borrower,
<PAGE> 37
substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request, such opinion to be in form
and substance satisfactory to the Agent;
(d) receipt by the Agent of an opinion of Milbank, Tweed, Hadley & McCloy,
special counsel for the Borrower, substantially in the form of Exhibit
G hereto and covering such additional matters relating to the trans-
actions contemplated hereby as the Required Banks may reasonably request,
such opinion to be in form and substance satisfactory to the Agent;
(e) receipt by the Agent of an opinion of Davis Polk & Wardwell, special
counsel for the Agent, substantially in the form of Exhibit H hereto and
covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request, such
opinion to be in form and substance satisfactory to the Agent;
(f) receipt by the Agent of a certificate signed by the Chief Financial
Officer or the Governor and an Assistant Secretary-Treasurer or the
Controller of the Borrower to the effect set forth in clauses (c) through
(g), inclusive, of Section 3.02 and, in the case of clauses (c), (e) and
(g), setting forth in reasonable detail the calculations required to
establish such compliance;
(g) receipt by the Agent, for the account of the Banks, of all facility fees
accrued to but excluding the Effective Date pursuant to Section 2.08(a)
of the Original Agreement; and
(h) receipt by the Agent of all documents the Required Banks may reasonably
request relating to the existence of the Borrower, the corporate authority
for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the
Agent.
On the Effective Date the Original Agreement will be automatically amended and
restated in its entirety to read as set forth herein. On and after the
Effective Date the rights and obligations of the parties hereto shall be
governed by this Amended Agreement; provided that rights and obligations of
the parties hereto with respect to the period prior to the Effective Date
shall continue to be governed by the provisions of the Original Agreement.
With effect from
<PAGE> 38
and including the Effective Date, each Person listed on the signatures pages
hereof which is not a party to the Original Agreement shall become a Bank
party to this Agreement and the Commitment of each Bank shall be the amount
set forth opposite the name of such Bank on the signature pages hereof, as
such amount may be reduced from time to time pursuant to Section 2.09 or
2.10 hereof. All references to "the date hereof" or "the date of this
Agreement" contained in this Agreement shall mean references to November
26, 1996. Any Bank whose Commitment is changed to zero shall upon the
Effective Date cease to be a Bank party to this Agreement; provided that the
provisions of Sections 8.03 and 9.03 thereof shall continue to inure to the
benefit of each such Bank. The Agent shall promptly notify the Borrower and
the Banks of the Effective Date, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) the fact that the Effective Date shall have occurred prior to December
15, 1996.
(b) receipt by the Agent of a Notice of Borrowing as required by Section
2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the Borrower is in
compliance with Section 7.12(a) of the 1972 Indenture and Section 7.11
of the 1994 Indenture, as each Indenture is in effect as of the date
hereof;
(d) the fact that, immediately after such Borrowing, the aggregate out-
standing principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(e) the fact that, immediately after such Borrowing, if such Borrowing is
not a Refunding Borrowing, no Default shall have occurred and be
continuing or, if such Borrowing is a Refunding Borrowing, no Event of
Default shall have occurred and be continuing;
(f) the fact that the representations and warranties of the Borrower
contained in this Agreement (except, in the case of a Refunding
Borrowing, the representations and warranties set forth in Section
4.03, the second sentence of Section 4.06, and the
<PAGE> 39
first sentence of Section 4.07) shall be true on and as of the date of
such Borrowing (it being understood and agreed that the representation
and warranty set forth in Section 4.13 shall be true and correct as to
all information furnished prior to the making of the respective Loan);
and
(g) the fact that, at the time of such Borrowing, (i) there shall be no
collateral securing Bonds issued pursuant to either Indenture of a type
other than the types of collateral permitted to secure Bonds issued
pursuant to such Indenture as of the date hereof and (ii) the Allowable
Amount of Eligible Collateral then pledged under either Indenture shall
not exceed 150% of the aggregate principal amount of Bonds then
Outstanding under such Indenture and no collateral shall secure Bonds
other than the Eligible Collateral under such Indenture, the Allowable
Amount of which is included within the prior computation or collateral
previously so pledged which ceases to be such Eligible Collateral not as
a result of any acts or omissions to act of the Borrower (other than the
declaration of an "event of default" as defined in a Mortgage which
results in the exercise of any right or remedy described in such
Mortgage); each defined term used in this clause (g) shall have the
meaning assigned thereto in the applicable Indenture.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (c), (d), (e), (f) and (g) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower makes the following representations, warranties and agreements,
which shall survive the execution and delivery of this Agreement and the Notes
and the making of the Loans:
SECTION 4.01. Corporate Existence, Power and Authority. The Borrower is a
cooperative association duly incorporated, validly existing and in good
standing under the laws of the District of Columbia and has the corporate
power and authority and all material governmental licenses, authorizations,
consents and approvals required to own its property and assets and to transact
the business in which it is engaged. The Borrower is duly qualified or
licensed as a
<PAGE> 40
foreign corporation in good standing in every jurisdiction in which the
nature of the business in which it is engaged makes such qualification or
licensing necessary, except in those jurisdictions in which the failure to
be so qualified or licensed would not (after qualification, assuming that
the Borrower could so qualify without the payment of any fee or penalty and
retain the rights as they existed prior to such qualification all to an
extent so that any fees or penalties required to be so paid or any rights
not so retained would not, individually or in the aggregate, have a material
adverse effect on the business or financial condition of the Borrower),
individually or in the aggregate, have a material adverse effect upon the
business or financial condition of the Borrower. The Borrower has the
corporate power and authority to execute, deliver and carry out the terms
and provisions of this Agreement and the Notes. This Agreement has been,
and the Notes when executed and delivered will have been, duly and validly
authorized, executed and delivered by the Borrower, and this Agreement
constitutes a legal, valid and binding agreement of the Borrower, and the
Notes, when executed and delivered by the Borrower in accordance with this
Agreement, will constitute legal, valid and binding obligations of the
Borrower, in each case enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 4.02. Financial Statements. (a) The combined balance sheets of the
Borrower and its Consolidated Subsidiaries as at May 31, 1996 and the related
combined statements of income, expenses and net margins, changes in Members'
equity and cash flows for the fiscal year ended May 31, 1996, including the
related notes, accompanied by the opinion and report thereon of Arthur
Andersen & Co., certified public accountants, heretofore delivered to the
Banks, present fairly in accordance with generally accepted accounting
principles (i) the combined financial position of the Borrower and its
Consolidated Subsidiaries as at the date of said balance sheets and (ii) the
combined results of the operations of the Borrower and its Consolidated
Subsidiaries for said fiscal year. The Borrower has no material liabilities
(contingent or otherwise) which are not disclosed by or reserved against in
the most recent audited financial statements or in the notes thereto other
than (i) Indebtedness incurred and (ii) loan and guarantee commitments issued
in each case by the Borrower in the ordinary course of business since the
date of such financial statements. All such financial statements have been
prepared in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods,
<PAGE> 41
except as disclosed therein. The same representations as are set forth in
this Section 4.02 shall be deemed to have been made by the Borrower in respect
of the most recent annual and quarterly financial statements of the Borrower
and its Consolidated Subsidiaries (except that the opinion and report of
Arthur Andersen & Co. may be replaced by an opinion and report of another
nationally recognized firm of independent certified public accountants)
furnished or required to be furnished to the Banks prior to or at the time
of the making of each Loan hereunder, at the time the same are furnished or
required to be furnished.
(b) The unaudited combined balance sheets of the Borrower and its
Consolidated Subsidiaries as of August 31, 1996 and the related unaudited
combined statements of income, expenses and net margins, changes in Members'
equity and cash flows for the three months then ended, heretofore delivered
to the Banks, present fairly in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements
referred to in subsection (a) of this Section 4.02, the combined financial
position of the Borrower and its Consolidated Subsidiaries as of such date
and their combined results of operations and changes in financial position
for such three-month period (subject to normal year-end adjustments). The
Borrower has no material liabilities (contingent or otherwise) which are not
disclosed by or reserved against in such financial statements for such three-
month period other than Indebtedness incurred and loan and guarantee commit-
ments issued by the Borrower in the ordinary course of business since the
date of such financial statements.
SECTION 4.03. Litigation. There are no actions, suits, proceedings or
investigations pending or, to the Borrower's knowledge, threatened by or
before any court or any governmental authority, body or agency or any
arbitration board which are reasonably likely to materially adversely affect
the business, property, assets, financial position or results of operations
of the Borrower or the authority or ability of the Borrower to perform its
obligations under this Agreement or the Notes.
SECTION 4.04. Governmental Authorizations. No authorization, consent,
approval or license of, or declaration, filing or registration with or
exemption by, any governmental authority, body or agency is required in
connection with the execution, delivery or performance by the Borrower of
this Agreement or the Notes.
SECTION 4.05. Capital Term Certificates. The holders of the Borrower's
Capital Term Certificates are not
<PAGE> 42
and will not be entitled to receive any payments with respect to the principal
thereof or interest thereon solely because of withdrawing or being expelled
from membership in the Borrower.
SECTION 4.06. No Violation of Agreements. Neither the Borrower nor any
Subsidiary is in default in any material respect under any material agreement
or other instrument to which it is a party or by which it is bound or its
property or assets may be affected. No event or condition exists which
constitutes, or with the giving of notice or lapse of time or both would
constitute, such a default under any such agreement or other instrument.
Neither the execution and delivery of this Agreement or the Notes, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or thereof, will contravene
any provision of law, statute, rule or regulation to which the Borrower is
subject or any judgment, decree, award, franchise, order or permit applicable
to the Borrower, or will conflict or be inconsistent with, or will result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute (or with the giving of notice or lapse of time, or both, would
constitute) a default under (or condition or event entitling any Person to
require, whether by purchase, redemption, acceleration or otherwise, the
Borrower to perform any obligations prior to the scheduled maturity thereof),
or result in the creation or imposition of any Lien upon any of the property
or assets of the Borrower pursuant to the terms of, any indenture, mortgage,
deed of trust, agreement or other instrument to which it may be subject, or
violate any provision of the certificate of incorporation or by-laws of the
Borrower. Without limiting the generality of the foregoing, the Borrower is
not a party to, or otherwise subject to any provision contained in, any
instrument evidencing Indebtedness of the Borrower, any agreement or indenture
relating thereto or any other contract or agreement (including its certificate
of incorporation and by-laws), which would be violated by the incurring of the
Indebtedness to be evidenced by the Notes.
SECTION 4.07. No Event of Default under the Indentures. The Borrower has
complied fully with all of the material provisions of each Indenture. No
Event of Default (within the meaning of such term as defined in each
Indenture) and no event, act or condition (except for possible noncompliance
by the Borrower with any immaterial provision of such Indenture which in
itself is not such an Event of Default under such Indenture) which with
notice or lapse of time, or both, would constitute such an Event of
<PAGE> 43
Default has occurred and is continuing under such Indenture. The Borrowings
by the Borrower contemplated by this Agreement will not cause such an Event
of Default under, or the violation of any covenant contained in, either
Indenture.
SECTION 4.08. Compliance with ERISA. The Plans are in substantial
compliance with ERISA, no Plan is insolvent or in reorganization, no Plan
has an accumulated or waived funding deficiency within the meaning of Section
412 of the Internal Revenue Code, neither the Borrower nor a Subsidiary of
the Borrower nor any member of the ERISA Group has incurred any material
liability (including any material contingent liability) to or on account of
a Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA, no
proceedings have been instituted to terminate any Plan, and no condition
exists which presents a material risk to the Borrower or a Subsidiary of
the Borrower of incurring a liability to or on account of a Plan pursuant
to any of the foregoing Sections of ERISA.
SECTION 4.09. Compliance with Other Laws. The Borrower and each Subsidiary
is in compliance, in all material respects, with all applicable requirements
of law and all applicable rules and regulations of each Federal, State,
municipal or other governmental department, agency or authority, domestic or
foreign.
SECTION 4.10. Tax Status. The Borrower is exempt from payment of Federal
income tax under Section 501(c)(4) of the Internal Revenue Code.
SECTION 4.11. Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 4.12. Public Utility Holding Company Act. The Borrower is not a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.
SECTION 4.13. Disclosure. To the best of the Borrower's knowledge,
information and belief, neither this Agreement nor any document, certificate
or financial statement furnished to any Bank by or on behalf of the Borrower
in connection herewith (all such documents, certificates and financial
statements, taken as a whole) contains any untrue statement of a material
fact or omits to
<PAGE> 44
state any material fact necessary in order to make the statements contained
herein and therein not misleading. There is no fact (other than facts of a
general economic or political nature) known to the Borrower which in its
judgment materially adversely affects or in the future is likely to (so far
as is now known to the Borrower) have a material adverse effect upon the
business, operations, prospects, property, assets or financial condition of
the Borrower which has not been set forth in this Agreement or in other
documents, certificates or financial statements furnished to the Banks by or
on behalf of the Borrower in connection with the transactions contemplated
hereby.
SECTION 4.14. Subsidiaries. Each of the Borrower's corporate Subsidiaries
is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.15. Environmental Matters. In the ordinary course of its business,
the Borrower conducts reviews, to the extent appropriate given the nature of
its business operations, of the effect of Environmental Laws on the business,
operations and properties of the Borrower and its Subsidiaries, in the course
of which it identifies and evaluates associated liabilities and costs
(including, without limitation, any capital or operating expenditures
required for clean-up or closure of properties presently or previously
owned, any capital or operating expenditures required to achieve or maintain
compliance with environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the cost of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
<PAGE> 45
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder or
any amount payable under any Note or any fee payable pursuant to Section 2.08
or any other amount then due and payable hereunder remains unpaid:
SECTION 5.01. Corporate Existence. The Borrower, at its own cost and
expense, will, and will cause each Subsidiary to, do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, material rights and franchises; provided, however, that
neither the Borrower nor any Subsidiary shall be required to preserve any
right or franchise or, in the case of a Subsidiary, its corporate existence,
if its Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower or such
Subsidiary (provided that the termination of the corporate existence of a
Subsidiary shall be permitted if the Board of Directors of the Borrower shall
determine that its existence is not desirable in the conduct of the business
of the Borrower) and that the loss thereof is not disadvantageous in any
material respect to the Banks.
SECTION 5.02. Disposition of Assets; Merger; Character of Business; etc.
The Borrower will not wind up or liquidate its business or sell, lease,
transfer or otherwise dispose of all or substantially all of its assets as
an entirety or in a series of related transactions and will not consolidate
with or merge with or into any other Person other than a merger with a
Subsidiary in which the Borrower is the surviving Person. The Borrower
will not engage in any business other than the business contemplated by its
certificate of incorporation and by-laws, each as in effect on the Effective
Date.
SECTION 5.03. Financial Information. The Borrower will, and will cause each
Subsidiary to, keep its books of account in accordance with generally accepted
accounting principles and the Borrower will furnish to the Banks (i) as soon
as available and in any event within 60 days after the close of each of the
first three quarters of each fiscal year of the Borrower, as at the end of,
and for the period commencing at the end of the previous fiscal year and
ending with, such quarter, unaudited combined balance sheets of the Borrower
and its Consolidated Subsidiaries and the related unaudited combined state-
ments of income, expenses and net margins, changes in Members' equity and
cash flow of the Borrower and its Consolidated Subsidiaries
<PAGE> 46
for such quarter and for the portion of the Borrower's fiscal year ended at
the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
Borrower's previous fiscal year, all in reasonable detail and certified
(subject to normal year-end adjustments) as to fairness of presentation in
accordance with generally accepted accounting principles and consistency
(except for changes concurred in by the Borrower's independent certified
public accountants) by the Chief Financial Officer, the Governor, an Assistant
Secretary-Treasurer or the Controller of the Borrower; (ii) as soon as
practicable and in any event within 90 days after the close of each fiscal
year of the Borrower, as at the end of and for the fiscal year just closed,
combined balance sheets of the Borrower and its Consolidated Subsidiaries and
the related combined statements of income, expenses and net margins, changes
in Members' equity and cash flow for such fiscal year for the Borrower and
its Consolidated Subsidiaries, all in reasonable detail and fully certified
(without any qualification as to the scope of the audit) by Arthur Andersen
& Co. or other independent certified public accountants of nationally
recognized standing selected by the Borrower, who shall have audited the
books and accounts of the Borrower for such fiscal year; (iii) together with
the financial statements referred to in clauses (i) and (ii) above, a
certificate signed by the Governor, the Chief Financial Officer, an Assistant
Secretary-Treasurer or the Controller of the Borrower, in such detail as shall
be reasonably satisfactory to the Required Banks, (x) identifying (A) all
Indebtedness outstanding as at the end of the fiscal period covered by such
financial statements extended by the Borrower or by any other Person and
Guaranteed by the Borrower to any of the forty Members with the largest
amount of Indebtedness to (or Guaranteed by) the Borrower outstanding as at
the end of the fiscal period covered by such financial statements (the
"Largest Members") as to which, to the knowledge and information of the
Borrower, the Member is in default (whether in the payment of the principal
thereof or interest thereon or with respect to any material covenant or
agreement contained in any instrument, mortgage or agreement evidencing or
relating to such Indebtedness) and specifying whether such default has been
waived by the Borrower or such other Person and the nature and status of each
such default not so waived and (B) the aggregate amount of all Indebtedness
outstanding as of the end of the fiscal period covered by such financial
statements as to which, to the knowledge and information of the Borrower,
Members other than the Largest Members are in default (whether in the payment
of the principal thereof or interest thereon or with respect to any material
covenant or
<PAGE> 47
agreement contained in any instrument, mortgage or agreement evidencing or
relating to such Indebtedness), (y) identifying the ten Members with the
largest amount of Indebtedness to (or Guaranteed by) the Borrower outstanding
as of the end of the fiscal period covered by such financial statements,
together with the principal amount of such Indebtedness outstanding with
respect to each such Member as of the end of such fiscal period and (z)
identifying all loans which are RUS Guaranteed Loans and are outstanding
as of the end of the fiscal period covered by such financial statements,
together with (a) the principal amount of each such RUS Guaranteed Loan as
of the end of such fiscal period, (b) the total amount of Indebtedness
incurred by the Borrower and Subsidiaries of the Borrower in order to fund
such RUS Guaranteed Loan, (c) the total interest expense incurred during
such fiscal period by the Borrower and Subsidiaries of the Borrower in
connection with the Indebtedness referred to in preceding clause (b) and
(d) the amount of the Guaranteed Portion of such RUS Guaranteed Loan; (iv)
with reasonable promptness, copies of all regular and periodical financial
statements or other financial reports and documents which the Borrower may
make available to its Members or bondholders or file with the Securities and
Exchange Commission; (v) promptly after obtaining knowledge or receiving
notice of a change (whether an increase or decrease) in any rating issued by
S&P or Moody's pertaining to any securities of, or guaranteed by, the Borrower
or any of its Subsidiaries or affiliates, a notice setting forth such change;
and (vi) with reasonable promptness, such other information respecting the
business, operations, prospects and financial condition of the Borrower or
any of its Subsidiaries or any Joint Venture as any Bank may, from time to
time, reasonably request, including, without limitation, with respect to the
performance and observance by the Borrower of the covenants and conditions
contained in this Agreement.
SECTION 5.04. Default Certificates. Concurrently with each financial state-
ment delivered to the Banks pursuant to clauses (i) and (ii) of Section 5.03,
the Borrower will furnish to the Banks a certificate signed by the Governor,
the Chief Financial Officer, an Assistant Secretary-Treasurer or the Controller
of the Borrower to the effect that the review of the activities of the Borrower
during such year or the portion thereof covered by such financial statement and
of the performance of the Borrower under this Agreement has been made under his
supervision and that to the best of his knowledge, based on such review, there
exists no event which constitutes a Default or an Event of Default under this
Agreement or, if any such event exists, specifying the nature thereof, the
period of its
<PAGE> 48
existence and what action the Borrower has taken and proposes to take with
respect thereto, which certificate shall set forth the calculations or other
data required to establish compliance with the provisions of Section 5.09
and Sections 5.12 through 5.15, inclusive, at the end of such fiscal quarter
or fiscal year, as the case may be. The Borrower further covenants that upon
any such officer of the Borrower obtaining knowledge of any Default or Event
of Default under this Agreement, it will forthwith, and in no event later
than the close of business on the Business Day immediately after the day
such knowledge is obtained, deliver to the Banks a statement of any officer
referred to above specifying the nature and the period of existence thereof
and what action the Borrower has taken and proposes to take with respect
thereto.
SECTION 5.05. Notice of Litigation, Legislative Developments and Defaults.
The Borrower will promptly give written notice to each of the Banks of (i)
any action, proceeding or claim of which the Borrower may have notice, which
may be commenced or asserted against the Borrower or any Subsidiary in which
the amount involved is $1,000,000 or more and is not covered in full by
insurance or as to which any insurer has disclaimed liability; (ii) any
dispute which may exist between the Borrower or any Subsidiary and any
governmental body, which is likely to materially and adversely affect the
normal business operation of the Borrower or the Borrower and its Subsidiaries
taken as a whole or any of the material properties and assets of the Borrower
or the Borrower and its Subsidiaries taken as a whole; (iii) any legislation
enacted by any governmental body and any rulings and regulations promulgated
by any governmental or regulatory bodies, known or which should be known to
the Borrower, affecting the Borrower or any Subsidiary or generally affecting
the Borrower's Members which is likely to materially and adversely affect the
present or future operations of the Borrower, the Borrower and its
Subsidiaries taken as a whole or the Borrower's Members; and (iv) any
default by the Borrower or any Subsidiary or event or condition known or
which should be known to the Borrower which with the giving of notice or
lapse of time, or both, would constitute a default, with respect to any
payment or payments in respect of Indebtedness of the Borrower or such
Subsidiary aggregating in excess of $15,000,000 (whether in payment of
principal thereof or interest thereon or with respect to any material
covenant or agreement contained in any instrument, mortgage, deed of trust
or agreement evidencing or relating to such Indebtedness or otherwise).
<PAGE> 49
SECTION 5.06. ERISA. As soon as possible and, in any event, within 10 days
after the Borrower or a Subsidiary of the Borrower knows or has reason to
know that a Reportable Event has occurred, that an accumulated funding
deficiency has been incurred or an application may be or has been made to
the Secretary of the Treasury for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code with respect to a Plan, that
a Plan has been or may be terminated, that proceedings may be or have been
instituted to terminate a Plan, or that the Borrower, a Subsidiary of the
Borrower or any member of the ERISA Group will or may incur any liability to
or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA,
the Borrower will deliver to each of the Banks a certificate of the Chief
Financial Officer of the Borrower setting forth details as to such occurrence
and action, if any, which the Borrower or such Subsidiary is required or
proposes to take, together with any notices required to be filed with or by
the Borrower, such Subsidiary, such member of the ERISA Group, the PBGC or
the plan administrator with respect thereto. Upon the request of any Bank,
the Borrower will furnish to such Bank a copy of the annual report of each
Plan (Form 5500) required to be filed with the Internal Revenue Service.
Copies of annual reports or any notices required to be delivered to the Banks
hereunder shall be delivered no later than 10 days after the later of the
date such report or notice has been filed with the Internal Revenue Service
or the PBGC or received by the Borrower or a Subsidiary of the Borrower.
SECTION 5.07. Payment of Charges. The Borrower will, and will cause each
Subsidiary to, duly pay and discharge (i) all taxes, assessments and govern-
mental charges or levies imposed upon or against it or its property or assets,
prior to the date on which penalties attach thereto, unless and to the extent
only that such taxes, assessments and governmental charges or levies are being
contested in good faith by appropriate proceedings; and (ii) all lawful
claims, including, without limitation, claims for labor, materials, supplies
or services, which might or could, if unpaid, become a Lien upon such property
or assets, unless and to the extent only that the validity of the amount
thereof is being contested in good faith by appropriate proceedings.
SECTION 5.08. Inspection of Books and Assets. The Borrower will, and will
cause each Subsidiary to, permit any representative of any Bank (or any agent
or nominee of such Bank) to visit and inspect any of the property of the
Borrower or such Subsidiary, to examine the books of record and account of
the Borrower or such Subsidiary and to
<PAGE> 50
discuss the affairs, finances and accounts of the Borrower or such Subsidiary
with the officers and independent public accountants of the Borrower or such
Subsidiary, all at such reasonable times and as often as such Bank may
reasonably request.
SECTION 5.09. Indebtedness. (a) The Borrower will not, and will not permit
any of its Subsidiaries to, incur, assume or Guarantee any Superior
Indebtedness, or make any optional prepayment on any Capital Term Certificate,
provided that (i) subject to the provisions of Section 5.12, any Subsidiary
may incur Superior Indebtedness owing to the Borrower or assume or Guarantee
Indebtedness of any Person (other than the Borrower or any of its Subsidiaries)
owing to the Borrower and (ii) the Borrower may incur, assume or Guarantee
Superior Indebtedness or make optional prepayments on Capital Term
Certificates if, after giving effect to any such action specified above in
this clause (ii), (x) on the date of such incurrence, assumption or Guarantee
or making of such optional prepayment (the "Determination Date") the aggregate
principal amount of Superior Indebtedness then outstanding would not exceed
ten times the sum of (a) the aggregate principal amount of Capital Term
Certificates outstanding on the Determination Date and (b) the aggregate
amount of Members' equity in the Borrower, other than Capital Term Certifi-
cates, on the Determination Date and (y) on no given future date would the
aggregate principal amount of Superior Indebtedness outstanding on the
Determination Date which will remain outstanding on such given future date
exceed ten times the sum of (a) the aggregate principal amount of Capital
Term Certificates outstanding on the Determination Date which will remain
outstanding on such given future date and (b) the aggregate amount of Members'
equity in the Borrower, other than Capital Term Certificates, on the
Determination Date. The respective principal amounts of Superior Indebted-
ness and Capital Term Certificates to be outstanding on such given future
date shall be determined after giving effect to mandatory sinking fund
payments, other mandatory prepayments and serial and other maturity payments
required to be made on or prior to said given future date by the terms of
such Superior Indebtedness and Capital Term Certificates or any indenture or
other instrument pursuant to which they are respectively issued.
(b) If any Loan is outstanding hereunder, the Borrower will not take any
action which would prevent it from then complying, or fail to take any action
which would enable it then to comply, with the provisions of Section 3.02(g),
assuming for this purpose only that the Borrower
<PAGE> 51
then intended to borrow from one or more of the Banks hereunder.
SECTION 5.10. Liens. The Borrower will not create or permit to exist any
Lien on or with respect to any Indebtedness of any Member which is an asset
of the Borrower, now existing or hereafter created, or any collateral securing
any such Indebtedness, and the Borrower will not permit any Subsidiary to
create or permit to exist any Lien on or with respect to any of such
Subsidiary's assets, except Liens (i) granted by the Borrower to the trustee
pursuant to either Indenture, (ii) on any such Indebtedness granted by the
Borrower to secure any borrowing for the purpose of making loans to Member
power supply systems or loans to Members for bulk power supply projects or
loans to Members for the purpose of providing financing to telephone and
related systems eligible to borrow from the RUS, which borrowing or borrowings
are on terms (except as to terms of interest, premium, if any, and
amortization) not materially more disadvantageous to the Borrower's unsecured
creditors than the borrowings under either Indenture (it being understood
that the Borrower can not pledge such assets to an extent greater than 150%
of the aggregate principal amount of such Indebtedness) and which Liens
secure amounts not exceeding $500,000,000 in the aggregate at any one time
outstanding, (iii) of current taxes not delinquent or a security for taxes
being contested in good faith, (iv) other than in favor of the PBGC, created
by or resulting from any legal proceedings (including legal proceedings
instituted by the Borrower or any Subsidiary) which are being contested in
good faith by appropriate proceedings, including appeals of judgments as to
which a stay of execution shall have been issued, and adequate reserves shall
have been established, (v) created by the Borrower to secure Guarantees by
the Borrower of Indebtedness, the interest on which is excludable from the
gross income of the recipient thereof for Federal income tax purposes as
provided in Section 103(a) of the Internal Revenue Code or Section 103(a) of
the Internal Revenue Code of 1954, as amended, (x) of a Member which is a
state or political subdivision thereof or (y) of a state or political sub-
division thereof incurred to benefit a Member for one of the purposes
provided in Section 142(a)(2), (4), (5), (6), (8), (9), (10) or (12) of the
Internal Revenue Code or Section 103(b)(4)(D), (E), (F), (G), (H) or (J) of
the Internal Revenue Code of 1954, as amended, and (vi) granted by any Sub-
sidiary to the Borrower.
SECTION 5.11. Maintenance of Insurance. The Borrower will maintain, and will
cause each Subsidiary to maintain, insurance in such amounts, on such forms
and with
<PAGE> 52
such companies as is necessary or appropriate for its business.
SECTION 5.12. Subsidiaries and Joint Ventures. The sum of the amount of
Indebtedness owing to the Borrower by all of its Subsidiaries and Joint
Ventures plus the amount paid by the Borrower in respect of the stock,
obligations or securities of or any other interest in such Subsidiaries and
Joint Ventures plus any capital contributions by the Borrower to such Sub-
sidiaries and Joint Ventures plus the amount of assets otherwise sold or
transferred by the Borrower to such Subsidiaries and Joint Ventures (other
than sales at fair market value) shall not exceed at any time 10% of the sum
of (i) all accounts which, in accordance with generally accepted accounting
principles, constitute Members' equity in the Borrower at such time and (ii)
all Indebtedness of the Borrower shown in its balance sheet dated as of May
31, 1996 as "Members' Subordinated Certificates" as such Indebtedness shall
be reduced from time to time and any other Indebtedness of the Borrower
incurred after May 31, 1996 having substantially similar provisions as to
subordination as those contained in said outstanding certificates as such
other Indebtedness shall be reduced from time to time, in each case at such
time.
SECTION 5.13. Minimum Net Worth. The Borrower will not at any time permit
its Net Worth to be less than the Minimum Required Net Worth as in effect
from time to time.
SECTION 5.14. Minimum TIER. The Borrower shall at no time permit the average
of the TIERs for the six (6) immediately preceding fiscal quarters of the
Borrower to be less than 1.025:1.00.
SECTION 5.15. Retirement of Patronage Capital. The Borrower shall not make,
or permit any Subsidiaries of the Borrower to make, any payments to Members in
respect of Patronage Capital Certificates unless (i) the TIER for the
immediately preceding fiscal year equals or exceeds 1.05:1.00 and (ii) there
exists (and would exist after giving effect to any such payment) no Default
or Event of Default under this Agreement.
SECTION 5.16. Use of Proceeds. The proceeds of the Loans made hereunder may
be used by the Borrower for general corporate purposes. None of such proceeds
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock", within the
meaning of Regulation U. Neither the Borrower nor any agent acting on its
behalf has taken or
<PAGE> 53
will take any action which might cause this Agreement or the Notes to violate
Regulation U or Regulation X.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) Principal and Interest. The Borrower shall (i) fail to pay when due
(whether upon stated maturity, by acceleration or otherwise) any
principal of the Notes or (ii) fail, and such failure shall continue
uncured for one or more Business Days, to pay when due (whether upon
stated maturity, by acceleration or otherwise) any interest on the Notes;
(b) Other Amounts. The Borrower shall fail to pay when due any fee or other
amount payable under this Agreement and such failure remains uncured for
five (5) days after the due date thereof;
(c) Covenants Without Notice. The Borrower shall fail to observe or perform
any covenant or agreement on its part to be observed or performed which
is set forth in Section 5.01, 5.02, 5.09, 5.10, 5.12, 5.13, 5.14, 5.15 or
5.16;
(d) Covenants With 10 Days Grace. The Borrower shall fail to observe or
perform any covenant or agreement on its part to be observed or
performed, which is set forth in Section 5.05, 5.06, 5.07 or 5.08, and
such non-observance or non-performance shall continue unremedied for a
period of more than 10 days;
(e) Other Covenants. The Borrower shall fail to observe or perform any
covenant, condition or agreement on its part to be observed or performed,
other than as referred to in subsections (a), (b), (c) and (d) above, for
a period of 30 days after written notice specifying such failure and
requesting that it be remedied is given by any Bank to the Borrower and
the other Banks; provided that, if the failure be such that it cannot be
corrected within the applicable period, but can be corrected within a
reasonable period of time thereafter, it shall not constitute a default
if corrective action is instituted by the Borrower within the applicable
period and diligently pursued until the failure is corrected;
<PAGE> 54
(f) Representations. Any representation, warranty, certification or
statement made or deemed to be made by the Borrower in this Agreement or
in any certificate, financial statement or other document delivered pursuant
to this Agreement shall prove to have been incorrect in any material respect
when made or deemed to be made;
(g) Non-Payments of Indebtedness and/or Derivatives Obligations. The
Borrower or any Subsidiary of the Borrower shall fail to make any payment
or payments aggregating for the Borrower and its Subsidiaries in excess of
$15,000,000 in respect of Indebtedness and/or Derivatives Obligations of
the Borrower or any Subsidiary (other than the Notes or any Indebtedness
under this Agreement) when due (whether upon stated maturity, by
acceleration or otherwise) or within any applicable grace period;
(h) Defaults Under Other Agreements. The Borrower or any Subsidiary
shall fail to observe or perform within any applicable grace period any
covenant or agreement contained in any agreement or instrument relating
to any Indebtedness of the Borrower or any Subsidiary, aggregating for
the Borrower and its Subsidiaries in excess of $15,000,000 if the effect
of such failure is to accelerate, or to permit the holder of such
Indebtedness or any other Person to accelerate, the maturity of such
Indebtedness;
(i) Bankruptcy. The Borrower or any Subsidiary shall generally not pay
its debts as they become due, or shall admit in writing its inability to
pay its debts generally or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Borrower or any Subsidiary seeking to adjudicate it bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, conservation or proceeding in the nature thereof, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors, or
seeking the entry of an order for relief or the appointment of a receiver
(including state regulatory authorities acting in a similar capacity),
trustee, custodian or other similar official for it or for any substantial
part of its property, and, in the case of any such proceeding instituted
against it (but not instituted by it) shall remain undismissed or unstayed
for a period of 60 days; or the Borrower or any Subsidiary shall take any
action to authorize any of the actions set forth above in this subsection
(i);
<PAGE> 55
(j) ERISA. A Plan shall fail to maintain the minimum funding standard
required by Section 412 of the Internal Revenue Code for any plan year or
a waiver of such standard is sought or granted under Section 412(d), or a
Plan is, shall have been or is likely to be terminated or the subject of
termination proceedings under ERISA, or the Borrower or a Subsidiary of the
Borrower or any member of the ERISA Group has incurred or is likely to incur
a liability to or on account of a Plan under Section 4062, 4063, 4064, 4201
or 4204 of ERISA, and there shall result from any such event or events either
a liability or a material risk of incurring a liability to the PBGC or a
Plan, which in the opinion of the Required Banks, will have a material
adverse effect upon the business, operations or the financial condition of
the Borrower or a Subsidiary of the Borrower; or
(k) Money Judgment. A final judgment or order for the payment of money in
excess of $15,000,000 shall be rendered against the Borrower or any
Subsidiary and such judgment or order shall continue unsatisfied and in
effect for a period of 45 days during which execution shall not be
effectively stayed or deferred (whether by action of a court, by agreement or
otherwise); then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Agent, upon the request of
the Required Banks, shall by notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent, any Bank or
the holder of any Note to enforce its claims against the Borrower:
(a) declare the Commitments terminated, whereupon the Commitment of each
Bank shall forthwith terminate immediately and any fee payable pursuant to
Section 2.08(a) shall forthwith become due and payable without any other
notice of any kind; or (b) declare the principal of and accrued interest on
the Loans, and all other obligations owing hereunder, to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that, if an Event of Default specified in subsection (i)
shall occur, the result which would occur upon the giving of written notice
by the Agent to the Borrower, as specified in clauses (a) and (b) above,
shall occur automatically without the giving of any such notice.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(e) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
<PAGE> 56
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New
York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were
not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with
respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for the Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance with the advice of
such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the
Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items
<PAGE> 57
required to be delivered to the Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) reasonably
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by
the Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitee's gross negligence or willful misconduct)
that such indemnitees may suffer or incur in connection with this Agreement
or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.
Each Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 15 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder
<PAGE> 58
as Agent, the provisions of this Article shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Co-Syndication Agents Not Liable. Nothing in this Agreement
shall impose upon any Co-Syndication Agent, in such capacity, any duties or
responsibilities whatsoever.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more
of the aggregate amount of the Commitments advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the
case may be, as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the
Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended. Unless the Borrower notifies the Agent at least two Domestic
Business Days before the date of any Fixed Rate Borrowing for which a Notice
of Borrowing has previously been given that it elects not to borrow on such
date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if
such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money
Market LIBOR Loans comprising such Borrowing shall bear interest for each
day from and including the first day to but excluding the last day of the
Interest Period applicable thereto at the Base Rate for such day.
<PAGE> 59
SECTION 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Euro-
Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make Euro-
Dollar Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may
not lawfully continue to maintain and fund any of its outstanding Euro-
Dollar Loans to maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding principal amount of
each such Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and such Bank shall make
such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the
case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with
<PAGE> 60
respect to its Fixed Rate Loans, its Notes or its obligation to make
Fixed Rate Loans, or shall change the basis of taxation of payments
to any Bank (or its Applicable Lending Office) of the principal of or
interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the overall
net income of such Bank or its Applicable Lending Office imposed by
the jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (A) with
respect to any CD Loan, any such requirement included in an
applicable Domestic Reserve Percentage and (B) with respect to any
Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance
assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Applicable Lending Office)
or shall impose on any Bank (or its Applicable Lending Office) or on
the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans,
its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed
Rate Loan, or to reduce the amount of any sum received or receivable by
such Bank (or its Applicable Lending Office) under this Agreement or
under its Note with respect thereto, by an amount deemed by such Bank to
be material, then, within 15 days after demand by such Bank (with a copy to
the Agent), the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost or reduction
(including any amount or amounts equal to any taxes on the overall net
income of such Bank payable by such Bank with respect to the amount of
payments required to be made pursuant to this Section 8.03(a)).
(b) If any Bank determines that the adoption of any applicable law,
rule, regulation, guideline or request concerning capital adequacy, or
any
<PAGE> 61
change therein, or any change in interpretation or administration
thereof by any governmental authority, central bank or comparable
agency (including, without limitation, any such adoption or change the
effect of which would be, for purposes of capital adequacy
requirements, to treat the Commitments hereunder as not constituting
commitments with an original maturity of one year or less), occurring
after the date hereof, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank based on the
existence of such Bank's Commitment hereunder or its obligations
hereunder, it will notify the Borrower. This determination will be made
on a Bank by Bank basis. The Borrower will pay to each Bank on demand
such additional amounts as are necessary to compensate for the increased
cost to such Bank as a result of the event described in the first
sentence of this Section 8.03(b). In determining such amount, such Bank
will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, and such Bank will pass such
costs on to the Borrower only if such costs are passed on in a similar
manner by such Bank to similarly situated borrowers (which are parties
to credit or loan documentation containing a provision similar to this
Section 8.03(b)), as determined by such Bank in its reasonable
discretion. Each Bank's determination of compensation shall be
conclusive if made in accordance with this provision. Each Bank, upon
determining that any increased costs will be payable pursuant to this
Section 8.03(b), will give prompt written notice thereof to the Borrower,
which notice shall show the basis for calculation of such increased costs,
although the failure to give any such notice shall not release or diminish
any of the Borrower's obligations to pay increased costs pursuant to this
Section 8.03(b).
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A Bank claiming compensation under this Section shall furnish a
certificate to the Borrower setting forth the additional amount or amounts
to be paid to it hereunder, which shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans.
If (i) the obligation of any
<PAGE> 62
Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02
or (ii) any Bank has demanded compensation under Section 8.03(a) and the
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to
such Bank through the Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies
the Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as CD Loans or
Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate
Loans (on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may be,
has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests, directions, consents,
approvals and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party: (x) in the case of the Borrower
or the Agent, at its address or telex or telecopier number set forth on
the signature pages hereof, (y) in the case of any Bank, at its address
or telex or telecopier number set forth in its Administrative Questionnaire
or (z) in the case of any other party, such other address or telex or
telecopier number as such party may hereafter specify for the purpose by
notice to the Agent and the Borrower. Each such notice, request, direction,
consent, approval or other communication shall be effective (i) if given
by telex, when such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received or (ii) if given by
any other means, when delivered or received at the address specified in this
Section; provided that notices to the Agent under Article II or Article VIII
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in
exercising any right, power or
<PAGE> 63
privilege hereunder or under any Note shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent,
including reasonable fees and disbursements of special counsel for the
Agent, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable out-of-
pocket expenses incurred by the Agent or any Bank, including reasonable
fees and disbursements incurred by counsel or in-house counsel, in
connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom. The
Borrower shall indemnify each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason
of the execution and delivery of this Agreement or the Notes and any and all
liabilities with respect to or resulting from any delay or omission
(unless solely attributable to such Bank) to pay such taxes.
(b) The Borrower agrees to indemnify each Bank, their respective
affiliates and the respective directors, officers, agents and employees
of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by
any Indemnitee (or by the Agent in connection with its actions as Agent
hereunder) in connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be designated
a party thereto) relating to or arising out of this Agreement or any
actual or proposed use of proceeds of Loans hereunder; provided that no
Indemnitee shall have the right to be indemnified hereunder for its own
gross negligence, willful misconduct or unlawful conduct as determined
by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest
then due with respect to any Note held by it which is greater than
the proportion received by any other Bank in
<PAGE> 64
respect of the aggregate amount of principal and interest due with
respect to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the
Notes held by the other Banks, and such other adjustments shall be made, as
may be required so that all such payments of principal and interest with
respect to the Notes held by the Banks shall be shared by the Banks pro
rata; provided that nothing in this Section shall impair the right of any
Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor of the Borrower
in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if
the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on
any Loan or any fees hereunder, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder or
for any reduction or termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of
this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its
Commitment or any or all of
<PAGE> 65
its Loans. In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower
and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement
pursuant to which any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and responsibility
to enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or
(iii) of Section 9.05 without the consent of the Participant. Subject to
the provisions of subsection (e), the Borrower agrees that each
Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits, and be bound by the obligations, of
Article VIII with respect to its participating interest. An assignment
or other transfer which is not permitted by subsection (c) or (d) below
shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (but not
in any case in an amount less than $10,000,000) of all, of its rights
and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit J hereto
executed by such Assignee and such transferor Bank, with (and subject to)
the subscribed consent of the Borrower and the Agent, such consents not to
be unreasonably withheld; provided that if an Assignee is another Bank or
an affiliate of such transferor Bank, no such consent shall be required;
and provided further that such assignment may, but need not, include the
rights of the transferor Bank in respect of outstanding Money Market
Loans. Upon execution and delivery of such an instrument and payment
by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee,
such Assignee shall be a Bank party to this Agreement and shall have all
the rights and obligations of a Bank with a Commitment as set forth in
such instrument of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent, and no further
consent or action by
<PAGE> 66
any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required,
a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative
fee for processing such assignment in the amount of $2,500. If the
Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to the
Borrower and the Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance
with Section 2.15.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02 or 8.03
requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension
or maintenance of the credit provided for in this Agreement.
SECTION 9.08. Managing Agents; Co-Agents. Each Bank listed on Schedule
I hereto under the heading "Managing Agent" shall be a Managing Agent
hereunder. Each Bank listed on Schedule I hereto under the heading
"Co-Agent" shall be a Co-Agent hereunder. Nothing in this Agreement
shall impose upon any Managing Agent or Co-Agent, each in such capacity,
any duties or responsibilities whatsoever.
SECTION 9.09. Governing Law. This Agreement and each Note shall be
governed by and construed in accordance with the laws of the State of
New York.
SECTION 9.10. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each
<PAGE> 67
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement
constitutes the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.11. Several Obligations. The obligations of the Banks
hereunder are several. Neither the failure of any Bank to carry out its
obligations hereunder nor of this Agreement to be duly authorized, executed
and delivery by any Bank shall relieve any other Bank of its obligations
hereunder (or affect the rights hereunder of such other Bank).
No Bank shall be responsible for the obligations of, or any action taken
or omitted by, any other Bank hereunder.
SECTION 9.12. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By /s/ Steven L. Lilly
Title: Chief Financial Officer
Address: Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071-3025
Attention: Steven L. Lilly
Title: Sr. Vice President &
Chief Financial Officer
Telephone No.: (703) 709-6700
Telecopier No.: (703) 709-6779
<PAGE> 69
Commitments
$125,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sanjeanette Harris
Title: Vice President
$120,000,000 THE BANK OF NOVA SCOTIA
By /s/ J.R. Trimble
Title: Senior Relationship
Manager
$110,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Richard J. Salmon
Title: Vice President
$110,000,000 THE CHASE MANHATTAN BANK
By /s/ Thomas L. Casey
Title: Vice President
$110,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Richard Waldman
Title: Authorized Agent
$110,000,000 NATIONSBANK, N.A.
By /s/ Paula Z. Kramp
Title: Vice President
<PAGE> 70
$ 90,000,000 ABN-AMRO BANK N.V.
By /s/ Frances OR Logan
Title: Vice President
By /s/ Thomas T. Rogers
Title: Assistant Vice President
$ 90,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Mary E. Collier
Title: Vice President
$ 90,000,000 THE TORONTO-DOMINION BANK
By /s/ Jorge A. Garcia
Title: Manager Credit
Administration
$ 90,000,000 UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By /s/ Paul R. Morrison
Title: Vice President
By /s/ Karen L. Roth
Title: Assistant Vice President
$ 85,000,000 RABOBANK NEDERLAND
By /s/ Mark S. Laponte
Title: Vice President
By /s/ Ian Reece
Title: Vice President & Manager
<PAGE> 71
$ 70,000,000 BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By /s/ J. Andrew Don
Title: Vice President & Manager
$ 55,000,000 CIBC INC.
By /s/ Margaret E. McTigue
Title: Authorized Signatory
$ 50,000,000 THE YASUDA TRUST & BANKING COMPANY LTD.
By /s/ Rohn M. Laudenschlager
Title: Senior Vice President
$ 47,500,000 COMERICA BANK
By /s/ Tamara J. Gurne
Title: Account Officer
$ 42,500,000 THE INDUSTRIAL BANK OF JAPAN
By /s/ Robert W. Ramage, Jr.
Title: Senior Vice President
$ 42,500,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Thomas A. Majeski
Title: Assistant Vice President
$ 37,500,000 DRESDNER BANK AG
By /s/ Lawrence E. Jones
Title: Vice President
By /s/ John D. Padilla
Title: Assistant Vice President
<PAGE> 72
$ 30,000,000 FIRST BANK NATIONAL ASSOCIATION
By /s/ Christopher H. Patton
Title: Commercial Banking Officer
$ 30,000,000 THE FUJI BANK, LIMITED
By /s/ Masanobu Kodayashi
Title: Vice President &
Manager
$ 30,000,000 KREDIETBANK N.V.
By /s/ Robert Snauffer
Title: Vice President
By /s/ Thomas R. Lalli
Title: Vice President
$ 30,000,000 BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
By /s/ S. M. Sondak
Title: First Vice President &
Deputy General Manager
By /s/ Brian R. Landy
Title: Vice President
$ 30,000,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE
New York Branch and/or Cayman Island Branch
By /s/ S. K. Hunter
Title: Senior Vice President
By /s/ S. Hoevermann
Title: Vice President
<PAGE> 73
$ 25,000,000 BANCO BILBAO VIZCAYA, S.A.
By /s/ Alejandro Lorca
Title: Vice President
By /s/ John Carreras
Title: Vice President
$ 25,000,000 BANKERS TRUST COMPANY
By /s/ Dana Klein
Title: Vice President
$ 25,000,000 BAYERISCHE LANDESBANK GIROZENTRALE
By /s/ Bert von Stuelpnagel
Title: Executive Vice President
By /s/ Peter Obermann
Title: Senior Vice President &
Manager Lending Division
$ 25,000,000 BANQUE NATIONALE DE PARIS
By /s/ Phil Truesdale
Title: Vice President
By /s/ Veronique Marcus
Title: Assistant Vice President
$ 25,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By /s/ Michael G. Haggarty
Title: Vice President
$ 25,000,000 CRESTAR BANK
By /s/ William F. Lindlaw
Title: Vice President
<PAGE> 74
$ 25,000,000 FLEET NATIONAL BANK
By /s/ Thomas L. Rose
Title: Vice President
$ 25,000,000 HARRIS TRUST AND SAVINGS BANK
By /s/ Michael W. Lewis
Title: Senior Vice President
$ 25,000,000 MELLON BANK N.A.
By /s/ Scott Hennessee
Title: Assistant Vice President
$ 25,000,000 THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., NEW YORK BRANCH
By /s/ Masanori Shoji
Title: Deputy General Manager
$ 25,000,000 THE SAKURA BANK, LTD
By /s/ Yasumasa Kikuchi
Title: Senior Vice President
$ 25,000,000 THE TOKAI BANK, LTD
By /s/ Shinichi Kondo
Title: Deputy General Manager
<PAGE> 75
$ 22,500,000 COMMERZBANK AG, NEW YORK BRANCH
By /s/ Subash R. Viswanathan
Title: Vice President
By /s/ Andrew R. Campbell
Title: Assistant Cashier
$ 22,500,000 NATIONAL WESTMINSTER BANK PLC
New York Branch
By /s/ Stephen L. Cowan
Title: Vice President
NATIONAL WESTMINSTER BANK PLC
Nassau Branch
By /s/ Stephen L. Cowan
Title: Vice President
$ 22,500,000 ROYAL BANK OF CANADA
By /s/ Terry L. Grant
Title: Manager
$ 20,000,000 BANCA CASSA DI RISPARMIO DI TORINO S.p.A.
By /s/ J. Slade Carter, Jr.
Title: Vice President
$ 20,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Stephanie R. Rogers
Title: Vice President
$ 20,000,000 UNITED STATES NATIONAL BANK OF OREGON
By /s/ Douglas A. Rich
Title: Vice President
<PAGE> 76
$ 17,500,000 BANK AUSTRIA AG
By /s/ J. Anthony Seay
Title: Vice President
By /s/ W. Scott Harwood
Title: Assistant Vice President
$ 17,500,000 SUNTRUST BANK, CENTRAL FLORIDA, NA
By /s/ Janet R. Sammons
Title: Vice President
$ 15,000,000 THE TOYO TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH
By /s/ Kazuhiko Yamauchi
Title: Vice President
$ 15,000,000 BANCO DI NAPOLI, S.p.A.
By /s/ Claude P. Mapes
Title: First Vice President
By /s/ Lucio Passarello
Title: First Vice President
$ 12,500,000 BANK OF MONTREAL
By /s/ John L. Smith
Title: Director
$ 12,500,000 THE SANWA BANK, LIMITED
By /s/ William M. Plough
Title: Vice President
By /s/ Andrew N. Hammond
Title: Vice President
<PAGE> 77
$ 12,500,000 SIGNET BANK
By /s/ Linwood White
Title: Senior Vice President
$ 12,500,000 UNION BANK OF CALIFORNIA, N.A.
By /s/ Alison A. Mason
Title: Vice President
$ -0- BANK ONE, ARIZONA, NA
By /s/ Craig Hoskins
Title: Vice President
$ -0- BARCLAYS BANK PLC
By /s/ Sydney G. Dennis
Title: Director
$ -0- CREDIT SUISSE
By /s/ Christopher J. Eldin
Title: Member of Senior
Management
By /s/ Thomas G. Muoio
Title: Associate
$ -0- DEUTSCHE BANK AG
By /s/ Rosemary R. Kelley
Title: Vice President
By /s/ Julia E. Gallagher
Title: Associate
<PAGE> 78
$ -0- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
By /s/ John L. Dean
Title: Senior Vice President
By /s/ Wolfgang Bollmann
Title: Senior Vice President
$ -0- LLOYDS BANK PLC
By /s/ Paul D. Briamonte
Title: Vice President
By /s/ Stephen J. Attree
Title: Assistant Vice President
$ -0- NATIONAL CITY BANK
By /s/ Jeffrey L. Hawthorne
Title: Vice President &
Regional Director
$ -0- THE NORTHERN TRUST COMPANY
By /s/ David L. Love
Title: Commercial Banking Officer
$ -0- SOCIETE GENERALE
By /s/ Gordon Eadon
Title: Vice President
$ -0- THE SUMITOMO BANK, LTD
By /s/ John C. Kissinger
Title: Joint General Manager
<PAGE> 79
$ -0- WELLS FARGO, N.A.
By /s/ Kathleen Barnes
Title: Vice President
$ -0- WESTDEUTSCHE LANDESBANK GIROZENTRALE
By /s/ Karen E. Hoplock
Title: Vice President
By /s/ Thomas Lee
Title: Associate
____________________
Total Commitments
$ 2,167,500,000
====================
<PAGE> 80
J.P. MORGAN SECURITIES INC.,
as Arranger and Co-Syndication Agent
By /s/ Suzanne Waltman
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Co-Syndication Agent
By /s/ J.R. Trimble
Title: Senior Realtionship Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By /s/ Sanjeanetta Harris
Title: Vice President
Address:
60 Wall Street
New York, New York 10260
Attention: Loan Department
Telex number: 420230
<PAGE> 81
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any
day are the respective percentages set forth below in the applicable row
under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level
Status I II III
<C> <C> <C> <C>
Euro-Dollar 0.185% 0.22% 0.25%
Margin
If Utiliza-
tion is
equal to or
less than
50%
If Utiliza- 0.185% 0.345% 0.375%
tion exceeds
50%
CD Margin 0.315% 0.345% 0.375%
If Utiliza-
tion is
equal to or
less than
50%
If Utiliza- 0.315% 0.47% 0.5%
tion exceeds
50%
Facility Fee 0.065% 0.08% 0.1%
Rate
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Borrower
has outstanding senior unsecured long-term debt and such debt, without
third party enhancement, is rated (or, if on such date the Borrower has
no outstanding
<PAGE> 82
senior unsecured long-term debt, evidence satisfactory to the Agent is
provided to the effect that the rating of senior unsecured long-term
debt of the Borrower, assuming that it had outstanding senior unsecured
long-term debt, would be rated) at least AA- (or any equivalent rating
which is used in lieu thereof) by S&P or Aa3 (or any equivalent rating
which is used in lieu thereof) by Moody's.
"Level II Status" exists at any date, if at such date, the Borrower
has outstanding senior unsecured long-term debt and such debt, without third
party enhancement, is rated (or, if on such date the Borrower has no
outstanding senior unsecured long-term debt, evidence satisfactory to the
Agent is provided to the effect that the rating of senior unsecured long-
term debt of the Borrower, assuming that it had outstanding senior
unsecured long-term debt, would be rated) at least A+ (or any equivalent
rating which is used in lieu thereof) or higher by S&P or A1 (or any
equivalent rating which is used in lieu thereof) or higher by Moody's
and Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date, neither of
Level I Status nor Level II Status exists.
"Status" refers to the determination of which of Level I Status,
Level II Status or Level III Status exists at any date.
"Utilization" means at any date the percentage equivalent of a
fraction (i) the numerator of which is the aggregate outstanding principal
amount of the Loans at such date, after giving effect to any borrowing or
payment on such date, and (ii) the denominator of which is the aggregate
amount of the Commitments at such date, after giving effect to any
reduction of the Commitments on such date. For purposes of this Schedule,
if for any reason any Loans remain outstanding after termination of the
Commitments, the Utilization for each date on or after the date of such
termination shall be deemed to be greater than 50%.
The credit ratings to be utilized for purposes of this Pricing
Schedule shall be, so long as the Borrower's unsecured Medium Term Notes
are rated by either S&P or Moody's, those assigned to the Borrower's
unsecured Medium Term Notes. The rating in effect at any date is that in
effect at the close of business on such date.
<PAGE> 83
EXHIBIT A
NOTE
New York, New York , 19
For value received, National Rural Utilities Cooperative Finance
Corporation, a not-for-profit cooperative association incorporated under
the laws of the District of Columbia (the "Borrower"), promises to pay to
the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Revolving Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates
and at the rate or rates provided for in the Revolving Credit Agreement.
All such payments of principal and interest shall be made in lawful money
of the United States in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall Street,
New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding
may be endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement
shall not affect the obligations of the Borrower hereunder or under the
Revolving Credit Agreement.
This note is one of the Notes referred to in the 364-Day Revolving
Credit Agreement dated as of February 28, 1995 and amended and restated as
of November 26, 1996 among the Borrower, the banks listed on the signature
pages thereof, J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Syndication Agents, and Morgan Guaranty Trust Company of New York, as
Administrative Agent (as the same
<PAGE> 84
may be amended from time to time, the "Revolving Credit Agreement"). Terms
defined in the Revolving Credit Agreement are used herein with the same
meanings. Reference is made to the Revolving Credit Agreement for
provisions for the prepayment hereof and the acceleration of the
maturity hereof.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE> 85
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Type of Principal Maturity Notation EXHIBIT B
Date Loan Loan Repaid Date Made By
<C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 86
EXHIBIT B
Form of RUS Guarantee
The United States of America acting through the Administrator of the
Rural Utilities Service ("RUS") hereby unconditionally guarantees to
[name of Payee] the making of [__%] of the payments of principal and
interest when and as due on this Note of _________ (the "Cooperative") in
accordance with the terms hereof and of the Loan Agreement referred to in
this Note, until such principal and interest shall be indefeasibly paid in
full (which includes interest accruing on such principal between the date of
default under this Note and the payment in full of this Guarantee),
irrespective of receipt by RUS of any sums or property from its enforcement
of its remedies for the Cooperative default. This Guarantee shall be
incontestable except for fraud or misrepresentation of which the holder had
actual knowledge at the time it became a holder. RUS hereby waives
diligence, presentment, demand, protest and notice of any kind, as well as
any requirement that [name of Payee] exhaust any right or take any action
against the Cooperative.
This Guarantee is issued pursuant to Title III of the Rural
Electrification Act of 1936, as amended (7 U.S.C. {{ 901, et seq.), and the
Loan Guarantee and Servicing Agreement among RUS, the Cooperative, The
First National Bank of Chicago and National Rural Utilities Cooperative
Finance Corporation dated ___________, 19__.
UNITED STATES OF AMERICA
Date___________, 19__ By_______________________
Administrator of Rural
Electrification
Administration
<PAGE>87
EXHIBIT C
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: National Rural Utilities
Cooperative Finance Corporation (the "Borrower")
Re: 364-Day Revolving Credit Agreement (the "Revolving Credit Agreement")
dated as of February 28, 1995 and amended and restated as of
November 26, 1996 among the Borrower, the Banks listed on the
signature pages thereof, J.P. Morgan Securities Inc. and The Bank
of Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust
Company of New York, as Administrative Agent
We hereby give notice pursuant to Section 2.03 of the Revolving
Credit Agreement that we request Money Market Quotes for the following
proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount2 Interest Period3
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the
Revolving Credit Agreement.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By________________________
Title:
- ---------------------------
2 Amount must be $25,000,000 or a large multiple of $1,000,000.
3 Any number of whole months (but not less than one month) (LIBOR
Auction) or not less than 30 days Absolute Rate Auction), subject to the
provisions of the definition of Interest Period.
<PAGE> 88
EXHIBIT D
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to the National Rural Utilities Cooperative
Finance Corporation (the "Borrower")
Pursuant to Section 2.03 of the 364-Day Revolving Credit
Agreement dated as of February 28, 1995 and amended and restated as of
November 26, 1996 among the Borrower, the Banks party thereto, J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as Co-Syndication Agents, and
the undersigned, as Administrative Agent, we are pleased on behalf of the
Borrower to invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank
Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[9:00 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE> 89
EXHIBIT E
Form of Money Market Quote
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
60 Wall Street
New York, New York 10260
Attention:
Re: Money Market Quote to
National Rural Utilities Cooperative
Finance Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower
dated _____________, 19__, we hereby make the following Money Market Quote
on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not
exceed $____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the
sum of the individual offers exceeds the amount the Bank is willing
to lend. Bids must be made for $1,000,000 or a larger multiple
thereof.
(notes continued on following page)
<PAGE> 90
We understand and agree that the offer(s) set forth above, subject
to the satisfaction of the applicable conditions set forth in the 364-Day
Revolving Credit Agreement dated as of February 28, 1995 and amended and
restated as of November 26, 1996 among the Borrower, the Banks listed on the
signature pages thereof, J.P. Morgan Securities Inc. and The Bank of
Nova Scotia, as Co-Syndication Agents, and yourselves, as Administrative
Agent, irrevocably obligates us to make the Money Market Loan(s) for which
any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Any number of whole months (but not less than one month) or not less
than 30 days, as specified in the related Invitation. No more than five
bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (rounded to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (rounded to the nearest 1/10,000th
of 1%).
<PAGE> 91
EXHIBIT F
OPINION OF JOHN JAY LIST, ESQ.,
GENERAL COUNSEL OF THE BORROWER
November 26, 1996
I am General Counsel of the National Rural Utilities Cooperative
Finance Corporation (the "Borrower") and am delivering this opinion pursuant
to the 364-Day Revolving Credit Agreement (the "Agreement") dated as of
February 28, 1995 and amended and restated as of November 26, 1996 among the
Borrower, the banks listed on the signature pages thereof, J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as Co-Syndication Agents, and
Morgan Guaranty Trust Company of New York, as Administrative Agent.
Terms defined in the Agreement are used herein as therein defined.
This opinion is being rendered to you at the request of my client, the
Borrower, pursuant to Section 3.01(c) of the Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as I have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a cooperative association duly incorporated,
validly existing and in good standing under the laws of the District of
Columbia and has the corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
own its property and assets and to transact the business in which it is
engaged. The Borrower is duly qualified or licensed as a foreign
corporation in good standing in every jurisdiction in which the nature of
the business in which it is engaged makes such qualification or licensing
necessary, except in those jurisdictions in which the failure to be so
qualified or licensed would not (after qualification, assuming that the
Borrower could so qualify without the payment of any fee or penalty and
retain its rights as they existed prior to such qualification all to an
extent so that any fees or penalties required to be so paid or any rights
not so retained would not, individually or in the aggregate, have a
<PAGE> 92
material adverse effect on the business or financial condition of the
Borrower), individually or in the aggregate, have a material adverse effect
upon the business or financial condition of the Borrower. The Borrower has
the corporate power and authority to execute, deliver and carry out the
terms and provisions of the Agreement and the Notes. The Agreement and the
Notes have been duly and validly authorized, executed and delivered by the
Borrower, and the Agreement constitutes a legal, valid and binding agreement
of the Borrower, and the Notes constitute legal, valid and binding
obligations of the Borrower, in each case enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general
principles of equity.
2. There are no actions, suits, proceedings or investigations
pending or, to my knowledge, threatened against or affecting the Borrower
by or before any court or any governmental authority, body or agency or any
arbitration board which are reasonably likely to materially adversely affect
the business, property, assets, financial position or results of operations
of the Borrower or the authority or ability of the Borrower to perform its
obligations under the Agreement or the Notes.
3. No authorization, consent, approval or license of, or
declaration, filing or registration with or exemption by, any governmental
authority, body or agency is required in connection with the execution,
delivery or performance by the Borrower of the Agreement or the Notes.
4. The holders of the Borrower's Capital Term Certificates are
not and will not be entitled to receive any payments with respect to the
principal thereof or interest thereon solely because of withdrawing or
being expelled from membership in the Borrower.
5. Neither the Borrower nor any Subsidiary is in default in any
material respect under any material agreement or other instrument to which
it is a party or by which it is bound or its property or assets may be
affected. No event or condition exists which constitutes, or with the
giving of notice or lapse of time or both would constitute, such a default
under any such agreement or other instrument. Neither the execution and
delivery of the Agreement or the Notes, nor the consummation of any of the
transactions therein contemplated, nor compliance with the terms and
provisions thereof, will contravene any provision of law, statute, rule
or regulation to which the Borrower is subject or any judgment, decree,
award, franchise, order or permit
<PAGE> 93
applicable to the Borrower, or will conflict or be inconsistent with, or
will result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute (or with the giving of notice or lapse of
time, or both, would constitute) a default under (or condition or event
entitling any Person to require, whether by purchase, redemption,
acceleration or otherwise, the Borrower to perform any obligations prior
to the scheduled maturity thereof), or result in the creation or
imposition of any Lien upon any of the property or assets of the
Borrower pursuant to the terms of, any indenture, mortgage, deed of
trust, agreement or other instrument to which it may be subject, or
violate any provision of the certificate of incorporation or by-laws
of the Borrower. Without limiting the generality of the foregoing, the
Borrower is not a party to, or otherwise subject to any provision contained
in, any instrument evidencing Indebtedness of the Borrower, any agreement
or indenture relating thereto or any other contract or agreement (including
its certificate of incorporation and by-laws), which would be violated by
the incurring of the Indebtedness to be evidenced by the Notes.
6. The Borrower has complied fully with all of the material
provisions of each Indenture. No Event of Default (within the meaning of
such term as defined in either Indenture) and no event, act or condition
(except for possible non-compliance by the Borrower with any immaterial
provision of such Indenture which in itself is not such an Event of Default
under such Indenture) which with notice or lapse of time, or both, would
constitute such an Event of Default has occurred and is continuing under
such Indenture. The borrowings by the Borrower contemplated by the
Agreement will not cause such an Event of Default under, or the violation of
any covenant contained in, either Indenture.
7. Set forth on Annex A attached hereto is a true, correct and
complete list of all of the Borrower's Subsidiaries and Joint Ventures, the
jurisdiction of incorporation or organization of each such Subsidiary and
Joint Venture and the nature and percentage of the Borrower's ownership of
each such Subsidiary and Joint Venture.
<PAGE> 94
EXHIBIT G
OPINION OF MILBANK, TWEED, HADLEY & McCLOY,
SPECIAL COUNSEL FOR THE BORROWER
November 26, 1996
We have acted as special counsel to National Rural Utilities
Cooperative Finance Corporation (the "Borrower") in connection with the
364-Day Revolving Credit Agreement dated as of February 28, 1995 and
amended and restated as of November 26, 1996 (the "Agreement") among the
Borrower, the Banks party thereto, J.P. Morgan Securities Inc. and The
Bank of Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust
Company of New York, in its capacity as Administrative Agent (the "Agent").
All capitalized terms used but not defined herein have the respective
meanings given to such terms in the Agreement.
In rendering the opinions expressed below, we have examined:
(i) the Agreement;
(ii) the Notes; and
(iii) such corporate records of the Borrower and such
other documents as we have deemed necessary as a
basis for the opinions expressed below.
In our examination, we have assumed the genuineness of all signatures
(other than the Borrower's), the authenticity of all documents submitted
to us as originals and the conformity with authentic original documents of
all documents submitted to us as copies. When relevant facts were not
independently established, we have relied upon statements of
governmental officials and upon representations made in or pursuant to
the Agreement and certificates of appropriate representatives of the
Borrower.
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter (except
as provided below), that:
<PAGE> 95
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid,
binding and enforceable obligations of, all of the parties
(except the Borrower) to such documents;
(ii) all signatures (except signatures of officers of the
Borrower) to such documents have been duly authorized; and
(iii) all of the parties to such documents (except the Borrower)
are duly organized and validly existing and have the power
and authority (corporate and other) to execute, deliver and
perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. The Borrower is a cooperative association duly incorporated,
validly existing and in good standing under the laws of the District of
Columbia and has the corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
own its property and assets and to transact the business in which it is
engaged. The Borrower has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Agreement and the
Notes. The Agreement and the Notes have been duly and validly authorized,
executed and delivered by the Borrower, and the Agreement constitutes a
legal, valid and binding agreement of the Borrower, and the Notes
constitute legal, valid and binding obligations of the Borrower, in each
case enforceable against the Borrower in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally and except as the enforceability of the
Agreement and the Notes is subject to the application of general principles
of equity (regardless of whether considered in a proceeding in equity or at
law), including, without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and
(b) concepts of materiality, reasonableness, good faith and fair dealing.
<PAGE> 96
2. To our best knowledge, there are no actions, suits, proceedings
or investigations pending or threatened against the Borrower by or before
any court or any governmental authority, body or agency or any arbitration
board which in our view are reasonably likely to materially adversely affect
the business, property, assets, financial position or results of operations
of the Borrower or the authority or ability of the Borrower to perform its
obligations under the Agreement or the Notes.
3. No authorization, consent, approval or license of, or declaration,
filing or registration with or exemption by, any governmental authority,
body or agency is required in connection with the execution, delivery or
performance by the Borrower of the Agreement or the Notes.
4. The holders of the Borrower's Capital Term Certificates are not
and will not be entitled to receive any payments with respect to the
principal thereof or interest thereon solely because of withdrawing or
being expelled from membership in the Borrower.
5. Neither the execution and delivery of the Agreement or the Notes,
nor the consummation of any of the transactions therein contemplated, nor
compliance with the terms and provisions thereof, will contravene any
provision of law, statute, rule or regulation to which the Borrower is
subject or any judgment, decree, award, franchise, order or permit known to
us applicable to the Borrower, or will conflict or be inconsistent with, or
will result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute (or with the giving of notice or lapse of time,
or both, would constitute) a default under (or condition or event entitling
any Person to require, whether by purchase, redemption, acceleration or
otherwise, the Borrower to perform any obligations prior to the scheduled
maturity thereof), or result in the creation or imposition of any Lien upon
any of the property or assets of the Borrower pursuant to the terms of, any
indenture, mortgage, deed of trust, agreement or other instrument known to
us to which it may be subject, or violate any provision of the certificate of
incorporation or by-laws of the Borrower. Without limiting the generality
of the foregoing, to our best knowledge the Borrower is not a party to, or
otherwise subject to any provision contained in, any instrument evidencing
Indebtedness of the Borrower, any agreement or indenture relating thereto
or any other contract or agreement (including its certificate of
incorporation and by-laws), which would be violated by the incurring of the
Indebtedness to be evidenced by the Notes.
<PAGE> 97
6. The Borrower has received a ruling from the Internal Revenue
Service to the effect that it is exempt from payment of Federal income tax
under Section 501(c)(4) of the Internal Revenue Code of 1986, and nothing
has come to our attention that leads us to believe that the Borrower is not
so exempt.
7. The Borrower is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
8. The Borrower is not a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended.
The foregoing opinions are subject to the following qualifications:
We express no opinion as to the effect of the laws of any
jurisdiction in which any Bank is located (other than New York) that limit
the interest, fees or other charges such Bank may impose.
We express no opinion concerning any law other than the law of New
York, the District of Columbia and the federal law of the United States.
Insofar as this opinion pertains to matters of District of Columbia law, we
have relied on the opinion of John Jay List, Esq. being delivered to you
contemporaneously herewith.
This opinion letter is, pursuant to Section 3.01(d) of the
Agreement, provided to you by us in our capacity as special counsel to the
Borrower and at its request and may not be relied upon by any Person or for
any purpose other than in connection with the transactions contemplated by
the Agreement without, in each instance, our prior written consent.
Very truly yours,
<PAGE> 98
EXHIBIT H
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
November 26, 1996
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Revolving
Credit Agreement dated as of February 28, 1995 and amended and restated
(the "Credit Agreement") among the National Rural Utilities Cooperative
Finance Corporation, a not-for-profit cooperative association incorporated
under the laws of the District of Columbia (the "Borrower"), the banks
listed on the signature pages thereof (the "Banks"), J.P. Morgan Securities
Inc. and The Bank of Nova Scotia, as Co-Syndication Agents, and Morgan
Guaranty Trust Company of New York, as Administrative Agent (the "Agent"),
and have acted as special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(e) of the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as we have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers
and have been duly authorized by all necessary corporate action.
<PAGE> 99
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes constitute valid and binding obligations of the
Borrower, in each case enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
In giving the foregoing opinion, (i) we express no opinion as to
the effect (if any) of any law of any jurisdiction (except the State of New
York) in which any Bank is located which limits the rate of interest that
such Bank may charge or collect and (ii) we have relied, without independent
investigation, as to all matters governed by the laws of the District of
Columbia, upon the opinion of John Jay List, Esq., General Counsel of the
Borrower, dated the date hereof, a copy of which has been delivered to you.
Very truly yours,
<PAGE> 100
EXHIBIT I
EXTENSION AGREEMENT
[Date]
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, VA 22071-3025
Morgan Guaranty Trust Company
of New York, as Administrative Agent
under the Credit Agreement
referred to below
60 Wall Street
New York, NY 10260
Gentlemen:
Effective as of [effective date], the undersigned hereby agree to
extend the Termination Date as now in effect under the 364-Day Credit
Agreement dated as of February 28, 1995 and amended and restated as of
November 26, 1996, as further amended and supplemented from time to time
(the "Credit Agreement"), among National Rural Utilities Cooperative
Finance Corporation, the Banks listed therein, J.P. Morgan Securities
Inc. and The Bank of Nova Scotia, as Co-Syndication Agents, and Morgan
Guaranty Trust Company of New York, as Administrative Agent, to [Date].
Terms defined in the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with
and governed by the law of the State of New York.
[NAME OF BANK]
By____________________________
Title:
<PAGE> 101
[NAME OF BANK]
By____________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By____________________________
Title:
Agreed and accepted:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE> 102
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION (the "Borrower") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the 364-Day Credit Agreement dated as of
February 28, 1995 and amended and restated as of November 26, 1996 (the
"Credit Agreement") among the Borrower, the Assignor and the other Banks
party thereto, as Banks, J.P. Morgan Securities Inc. and The Bank of Nova
Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust Company of New
York, as Administrative Agent (the "Agent");
WHEREAS, as provided under the Credit Agreement, the Assignor
has Commitment to make Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
<PAGE> 103
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of
the principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, the Borrower and the Agent and the payment
of the amounts specified in Section 3 required to be paid on the date
hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned
Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have
been assumed by the Assignee. The assignment provided for herein shall be
without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.
It is understood that commitment and/or facility fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of
the Assignor and the Assignee hereby agrees that if it receives any amount
under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to
the extent of such other party's interest therein and shall promptly pay
the same to such other party.
SECTION 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to
Section 9.06(c) of the Credit Agreement. The execution of this Agreement
by the Borrower and the Agent is evidence of this consent. Pursuant to
Section 9.06(c) of the Credit Agreement the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection
<PAGE> 104
with, and shall have no responsibility with respect to, the solvency,
financial condition, or statements of the Borrower, or the validity and
enforceability of the obligations of the Borrower in respect of the Credit
Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By__________________________
Title:
<PAGE> 105
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By__________________________
Title:
<PAGE 1>
Exhibit 10.2
FIVE-YEAR
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of
February 28, 1995
and
amended and restated as of
November 26, 1996
among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
J.P. MORGAN SECURITIES INC.
and
THE BANK OF NOVA SCOTIA,
as CO-SYNDICATION AGENTS
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as ADMINISTRATIVE AGENT
Arranged by
J.P. MORGAN SECURITIES INC.
<PAGE> 2
TABLE OF CONTENTS1
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 15
SECTION 1.03. Types of Borrowings 15
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend 15
SECTION 2.02. Notice of Committed Borrowings 16
SECTION 2.03. Money Market Borrowings 17
SECTION 2.04. Notice to Banks; Funding of Loans 21
SECTION 2.05. Notes 22
SECTION 2.06. Maturity of Loans 23
SECTION 2.07. Interest Rates 23
SECTION 2.08. Fees 27
SECTION 2.09. Optional Termination or Reduction of Commitments 27
SECTION 2.10. Mandatory Termination of Commitments 28
SECTION 2.11. Optional Prepayments 28
SECTION 2.12. General Provisions as to Payments 28
SECTION 2.13. Funding Losses. 29
SECTION 2.14. Computation of Interest and Fees 29
SECTION 2.15. Withholding Tax Exemption. 29
SECTION 2.16. Increase of Commitments. 30
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness 31
SECTION 3.02. Borrowings 33
- ---------------------------
1The Table of Contents is not a part of this Agreement.
<PAGE> 2
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence, Power and Authority 35
SECTION 4.02. Financial Statements 35
SECTION 4.03. Litigation 36
SECTION 4.04. Governmental Authorizations 37
SECTION 4.05. Capital Term Certificates 37
SECTION 4.06. No Violation of Agreements 37
SECTION 4.07. No Event of Default under the Indentures 38
SECTION 4.08. Compliance with ERISA 38
SECTION 4.09. Compliance with Other Laws 38
SECTION 4.10. Tax Status 38
SECTION 4.11. Investment Company Act 38
SECTION 4.12. Public Utility Holding Company Act 39
SECTION 4.13. Disclosure 39
SECTION 4.14. Subsidiaries 39
SECTION 4.15. Environmental Matters 39
ARTICLE V
COVENANTS
SECTION 5.01. Corporate Existence 40
SECTION 5.02. Disposition of Assets; Merger; Character of Business; etc. 40
SECTION 5.03. Financial Information 41
SECTION 5.04. Default Certificates 43
SECTION 5.05. Notice of Litigation, Legislative Developments and Defaults 43
SECTION 5.06. ERISA 44
SECTION 5.07. Payment of Charges 44
SECTION 5.08. Inspection of Books and Assets 45
SECTION 5.09. Indebtedness 45
SECTION 5.10. Liens 46
SECTION 5.11. Maintenance of Insurance 47
SECTION 5.12. Subsidiaries and Joint Ventures 47
SECTION 5.13. Minimum Net Worth 47
SECTION 5.14. Minimum TIER 47
SECTION 5.15. Retirement of Patronage Capital 48
SECTION 5.16. Use of Proceeds 48
<PAGE> 4
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default 48
SECTION 6.02. Notice of Default 51
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization 51
SECTION 7.02. Agent and Affiliates 51
SECTION 7.03. Action by Agent 51
SECTION 7.04. Consultation with Experts 51
SECTION 7.05. Liability of Agent 52
SECTION 7.06. Indemnification 52
SECTION 7.07. Credit Decision 52
SECTION 7.08. Successor Agent 52
SECTION 7.09. Co-Syndication Agents Not Liable 53
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair 53
SECTION 8.02. Illegality 54
SECTION 8.03. Increased Cost and Reduced Return 54
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 57
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices 57
SECTION 9.02. No Waivers 58
SECTION 9.03. Expenses; Documentary Taxes; Indemnification 58
SECTION 9.04. Sharing of Set-Offs 59
<PAGE> 5
SECTION 9.05. Amendments and Waivers 59
SECTION 9.06. Successors and Assigns 60
SECTION 9.07. Collateral 61
SECTION 9.08. Managing Agents; Co-Agents 61
SECTION 9.09. Governing Law 61
SECTION 9.10. Counterparts; Integration 62
SECTION 9.11. Several Obligations 62
SECTION 9.12. Severability 62
Pricing Schedule
Schedule I - Agent Schedule
Exhibit A - Note
Exhibit B - RUS Guarantee
Exhibit C - Money Market Quote Request
Exhibit D - Invitation for Money Market Quotes
Exhibit E - Money Market Quote
Exhibit F - Opinion of General Counsel for the Borrower
Annex A to Exhibit F - Subsidiaries and Joint Ventures
Exhibit G - Opinion of Special Counsel for the Borrower
Exhibit H - Opinion of Special Counsel for the Agent
Exhibit I - Extension Agreement
Exhibit J - Assignment and Assumption Agreement
<PAGE> 6
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of February 28, 1995 and
amended and restated as of November 26, 1996 among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a not-for-profit cooperative association
incorporated under the laws of the District of Columbia, as Borrower, the
BANKS listed on the signature pages hereof, J.P. MORGAN SECURITIES INC. and
THE BANK OF NOVA SCOTIA, as Co-Syndication Agents, and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section
2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.07(c).
"Administrative Questionnaire" means, with respect to each Bank,
the administrative questionnaire in the form submitted to such Bank by the
Agent and submitted to the Agent (with a copy to the Borrower) duly completed
by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as administrative agent for the Banks hereunder, and its successors
in such capacity.
"Agreement" means the Original Agreement, as amended by the
Amended Agreement and as the same may be further amended from time to time.
<PAGE> 6
"Amended Agreement" means this Amended and Restated Revolving
Credit Agreement dated as of February 28, 1995 and amended and restated as of
November 26, 1996.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii)
in the case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section
2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank
as a Base Rate Loan in accordance with the applicable Notice of Committed
Borrowing or pursuant to Article VIII.
"Bonds" means any bonds issued pursuant to either Indenture
or both, as the context may require.
"Borrower" means the National Rural Utilities Cooperative
Finance Corporation, a not-for-profit cooperative association incorporated
under the laws of the District of Columbia, and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Capital Term Certificate" means a note of the Borrower
substantially in the form of the membership subscription certificates and the
loan and guarantee certificates outstanding on the date of the execution and
delivery of this Agreement and any other Indebtedness of the Borrower having
substantially similar provisions as to subordination as those contained in
said outstanding membership subscription certificates and loan and guarantee
certificates.
<PAGE> 7
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a
CD Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in the Pricing Schedule.
"CD Reference Banks" means The Bank of Nova Scotia, SunBank,
National Association and Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 2.09 and 2.10.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.01.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be combined or consolidated with
those of the Borrower in its combined or consolidated financial statements if
such statements were prepared as of such date.
"Co-Syndication Agents" means J.P. Morgan Securities Inc. and
The Bank of Nova Scotia, each in its capacity as co-syndication agent for the
Banks hereunder, and their successors in such capacity.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
(as specified in Section 6.01) would, unless cured or waived, become an Event
of Default.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions) or any combination of the
foregoing transactions.
<PAGE> 8
"Determination Date" shall have the meaning provided in
Section 5.09.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent; provided that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all
references herein to the Domestic Lending Office of such Bank shall be deemed
to refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.07(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
<PAGE> 9
Borrower or any Subsidiary, are treated as a single employer under Section
414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in the Pricing
Schedule.
"Euro-Dollar Reference Banks" means the principal London
offices of The Bank of Nova Scotia, SunBank, National Association and Morgan
Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Agent.
<PAGE> 10
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or
Money Market Loans (excluding Money Market LIBOR Loans bearing interest at
the Base Rate pursuant to Section 8.01(a)) or any combination of the
foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or lease payments of any other Person or otherwise in any manner assuring the
holder of any Indebtedness of, or the obligee under any lease of, any other
Person through an agreement, contingent or otherwise, to purchase Indebtedness
or the property subject to such lease, or to purchase goods, supplies or
services primarily for the purpose of enabling the debtor or obligor to make
payment of the Indebtedness or under such lease or of assuring such Person
against loss, or to supply funds to or in any other manner invest in the
debtor or obligor, or otherwise; provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" when used as a verb has a correlative meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indebtedness" with respect to any Person means:
(1) all indebtedness which would appear as indebtedness
on a balance sheet of such Person prepared in accordance with generally
accepted accounting principles (i) for money borrowed, (ii) which is evidenced
by securities sold for money or (iii) which constitutes purchase money
indebtedness;
(2) all indebtedness of others Guaranteed by such Person;
(3) all indebtedness secured by any Lien upon property
owned by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness; and
(4) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement (including any
lease in the nature of a title retention agreement) with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
<PAGE> 11
repossession of such property), but only if such property is included as an
asset on the balance sheet of such Person; provided that, in computing the
"Indebtedness" of such Person, there shall be excluded any particular
indebtedness if, upon or prior to the maturity thereof, there shall have
been deposited with the proper depositary in trust money (or
evidences of such indebtedness) in the amount necessary to pay, redeem or
satisfy such indebtedness, and thereafter such money and evidences of
indebtedness so deposited shall not be included in any computation of the
assets of such Person; and provided further that no provision of this
definition shall be construed to include as "Indebtedness" of the Borrower
any indebtedness by virtue of any agreement by the Borrower to advance or
supply funds to Members.
"Indenture" means either the 1972 Indenture or the 1994
Indenture, and "Indentures" means both such Indentures.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-
Dollar Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last Euro-
Dollar Business Day of a calendar month; and
(c) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on the
Termination Date;
(2) with respect to each CD Borrowing, the period commencing on the date
of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
<PAGE> 12
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date shall
end on the Termination Date;
(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days
thereafter; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date shall
end on the Termination Date;
(4) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending any whole number of
months thereafter (but not less than one month) as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such Interest Period shall
end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-
Dollar Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date shall end
on the Termination Date; and
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
<PAGE> 13
thereafter (but not less than 30 days) as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date shall
end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Joint Venture" means any corporation, partnership,
association, joint venture or other entity in which the Borrower, directly
or indirectly through Subsidiaries or Joint Ventures, has an equity interest
at the time of 10% or more but which is not a Subsidiary; provided that no
Person whose only assets are RUS Guaranteed Loans and investments
incidental thereto shall be deemed a Joint Venture.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Member" means any Person which is a member or a patron of
the Borrower.
"Minimum Required Net Worth" shall initially be
$1,346,291,939; provided that on each date after the Effective Date upon
<PAGE> 14
which annual financial statements are required to be delivered pursuant to
Section 5.03(ii), the Minimum Required Net Worth shall be permanently
increased by an amount, if positive, equal to ninety percent (90%) of (i) the
aggregate amount of Net Margins for the prior fiscal year minus (ii) the
aggregate amount of retirements of Patronage Capital Certificates made by the
Borrower to Members in the prior fiscal year. In the event that in any year
the amount specified in clause (ii) above is equal to or greater than the
amount specified in clause (i) above, the Minimum Required Net Worth shall
remain the same for that year.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by
a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may from time to time by
notice to the Borrower and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which case all references
herein to the Money Market Lending Office of such Bank shall be deemed to
refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Prime Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a
Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Net Margins" means operating and non-operating income of the
Borrower and its Subsidiaries determined on a combined or consolidated basis
<PAGE> 15
(excluding income on Guaranteed Portions of RUS Guaranteed Loans) less,
without duplication, operating and non-operating costs and expenses of the
Borrower and its Subsidiaries determined on a combined or consolidated basis
(excluding costs and expenses relating to Guaranteed Portions of RUS
Guaranteed Loans).
"Net Worth" means the sum of (i) all accounts which
constitute Members' equity in the Borrower, (ii) all Indebtedness of the
Borrower shown in its balance sheet dated as of May 31, 1996 as "Members'
Subordinated Certificates" and any other Indebtedness of the Borrower
incurred after May 31, 1996 having substantially similar provisions as to
subordination as those contained in said outstanding certificates and (iii)
any amounts reflected in the financial statements of the Borrower as a
reserve for loan losses.
"1994 Indenture" means the Indenture dated as of February 15,
1994 between the Borrower and First Bank National Association, as trustee, as
amended and supplemented from time to time, providing for the issuance in
series of certain collateral trust bonds of the Borrower.
"1972 Indenture" means the Seventeenth Supplemental Indenture
dated as of March 1, 1987, amending and restating in full the Indenture dated
as of December 1, 1972, by and between the Borrower and Chemical Bank (as
successor by merger to Manufacturers Hanover Trust Company), as trustee.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing
(as defined in Section 2.02) or a Notice of Money Market Borrowing (as
defined in Section 2.03(f)).
"Original Agreement" means the $2,430,000,000 Revolving
Credit Agreement dated as of February 28, 1995 among the Borrower, the Banks
listed therein, J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Syndication Agents, and Morgan Guaranty Trust Company of New York, as
Administrative Agent.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
<PAGE> 16
"Participant" has the meaning set forth in Section 9.06(b).
"Patronage Capital Certificates" means those certificates
that evidence the allocation of Net Margins by the Borrower among its Members
in proportion to interest earned by the Borrower from such Members.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means any multiemployer plan or single employer plan,
as defined in Section 4001 and subject to Title IV of ERISA, which is
maintained, or at any time during the five calendar years preceding the date
of this Agreement was maintained, for employees of the Borrower or a
Subsidiary of the Borrower or any member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York in New York City from time to
time as its Prime Rate.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and "Reference Bank"
means any one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
<PAGE> 17
"Reportable Event" means an event described in Section 4043(c)
of ERISA or regulations promulgated by the Department of Labor thereunder
(with respect to which the 30 day notice requirement has not been waived by
the PBGC).
"Required Banks" means at any time Banks having at least 60%
of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 60% of the aggregate
unpaid principal amount of the Loans.
"Revolving Credit Period" means the period from and including
the Effective Date to but excluding the Termination Date.
"RUS" means the Rural Utilities Service of the Department of
Agriculture of the United States of America (as successor to the Rural
Electrification Administration of the Department of Agriculture of the
United States of America) or any other regulatory body which succeeds to its
functions.
"RUS Guaranteed Loan" means any loan made by any Person, which
loan (x) bears interest at least equal to such Person's cost of funds and (y)
is guaranteed, in whole or in part, as to principal and interest by the
United States of America through the RUS pursuant to a guarantee, which
guarantee contains provisions no less favorable to the holder thereof than
the provisions set forth in the form of Exhibit B hereto; and "Guaranteed
Portion" of any RUS Guaranteed Loan means that portion of principal of, and
interest on, such RUS Guaranteed Loan which is guaranteed by the United
States of America through the RUS as provided in clause (y).
"S&P" means Standard and Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., and its successors.
"Subsidiary" of any Person means (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through its Subsidiaries, and (ii) any other Person
in which such Person directly or indirectly through Subsidiaries has more
than a 50% voting and equity interest, provided that no Person whose only
assets are RUS Guaranteed Loans and investments incidental thereto shall be
<PAGE> 18
deemed a Subsidiary. Neither the Rural Telephone Finance Cooperative nor the
Guaranty Funding Cooperative is on the date of this Agreement a "Subsidiary",
except that the Rural Telephone Finance Cooperative and, but only so long as
the Borrower maintains control of the Board of Directors of the Guaranty
Funding Cooperative (including, without limitation, the ability to appoint a
majority of such Board of Directors), the Guaranty Funding Cooperative shall
each be considered a "Subsidiary" for purposes of the definitions of
"Net Margins" and "TIER".
"Superior Indebtedness" means all Indebtedness of the
Borrower (other than Capital Term Certificates) and its Subsidiaries
determined on a combined or consolidated basis, but excluding Indebtedness of
the Borrower or any of its Subsidiaries to the extent that the proceeds of
such Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed
Loans.
"Termination Date" means November 26, 2001 or such later date
to which this Agreement shall have been extended pursuant to Section 2.01(b),
or, if either such day is not a Euro-Dollar Business Day, the next preceding
Euro-Dollar Business Day.
"TIER" means, for any period, the ratio of (x) Net Margins
plus interest on Indebtedness of the Borrower or its Subsidiaries determined
on a combined or consolidated basis (but excluding Indebtedness of the
Borrower or any of its Subsidiaries to the extent that the proceeds of such
Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed Loans)
plus amortization of bond discount and amortization of bond issuance costs of
the Borrower and its Subsidiaries determined on a combined or consolidated
basis for such period (but excluding such amortization of discount and
issuance costs with respect to Indebtedness referred to in the preceding
parenthetical phrase) to (y) interest on Indebtedness of the Borrower or its
Subsidiaries determined on a combined or consolidated basis (but excluding
Indebtedness of the Borrower or any of its Subsidiaries to the extent that
the proceeds of such Indebtedness are used to fund Guaranteed Portions of
RUS Guaranteed Loans) plus amortization of bond discount and amortization of
bond issuance costs of the Borrower and its Subsidiaries determined on a
combined or consolidated basis for such period (but excluding such
amortization of discount and issuance costs with respect to Indebtedness
referred to in the preceding parenthetical phrase).
<PAGE> 19
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants) with the most recent
audited combined financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the
Borrower pursuant to Article II on a single date and for a single Interest
Period. Borrowings are classified for purposes of this Agreement either by
reference to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article II under which participation therein
is determined (i.e., a "Committed Borrowing" is a Borrowing under Section
2.01 in which all Banks participate in proportion to their Commitments,
while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which
the Bank participants are determined on the basis of their bids in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) During the
Revolving Credit Period each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make loans to the Borrower
pursuant to this Section from time to time in amounts such that the aggregate
principal amount of Committed Loans by such Bank at any one time outstanding
shall not exceed the amount of its Commitment. Each Borrowing shall be in an
aggregate principal amount of $25,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the maximum aggregate
amount available in accordance with Section 3.02(c) or (d)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Within the foregoing limits, the Borrower may borrow under this Section,
repay or, to the extent permitted by Section 2.11, prepay Loans and reborrow
at any time during the Revolving Credit Period under this Section.
<PAGE> 20
(b) Extension of Commitments. The Termination Date may be
extended one time in the manner set forth in this subsection (b), for a
period of up to one year from the date on which Banks having 100% of the
Commitments shall have notified the Agent of their agreement so to extend.
If the Borrower wishes to request an extension of the Termination Date, it
shall give written notice to that effect (such notice to state the date to
which the Termination Date then in effect is requested to be extended,
subject to the provisions of the preceding sentence) to the Agent not less
than 60 nor more than 90 days prior to the Termination Date then in effect,
whereupon the Agent shall promptly notify each of the Banks of such request
and send a copy of the Extension Agreement referred to below to each Bank.
Each Bank will use its best efforts to respond to such request, whether
affirmatively or negatively, as it may elect in its discretion, within 30
days of such notice to the Agent. If less than all Banks respond
affirmatively to such request within 30 days, then the Borrower may request
the Banks that do not elect to extend the Termination Date to assign their
Commitments in their entirety, no later than 15 days prior to the Termination
Date then in effect, to one or more Assignees pursuant to Section 9.06(c)
which Assignees will agree to extend the Termination Date. If all Banks
(including such Assignees and excluding their respective transferor Banks)
respond affirmatively, then, subject to receipt by the Agent of counterparts
of an Extension Agreement in substantially the form of Exhibit I hereto duly
completed and signed by all of the parties thereto, the Termination Date
shall be extended for the period specified above.
SECTION 2.02. Notice of Committed Borrowings. The Borrower
shall give the Agent notice (a "Notice of Committed Borrowing") not later
than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be
CD Loans, Base Rate Loans or Euro-Dollar Loans, and
<PAGE> 21
(d) in the case of a Fixed Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Notwithstanding the foregoing, no more than 10 Fixed Rate Borrowings shall be
outstanding at any one time, and any Borrowing which would exceed such
limitation shall be made as a Base Rate Borrowing.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed
Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this
Section, request the Banks during the Revolving Credit Period to make offers
to make Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this
Section.
(b) Money Market Quote Request. When the Borrower wishes
to request offers to make Money Market Loans under this Section, it shall
transmit to the Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit C hereto so as to be received no
later than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in the case of
a LIBOR Auction or (y) the Domestic Business Day next preceding the date of
Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date
of the Money Market Quote Request for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-
Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$25,000,000 or any larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
<PAGE> 22
(iv) whether the Money Market Quotes requested are to set forth
a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market
Quote Request shall be given within five Euro-Dollar Business Days (or such
other number of days as the Borrower and the Agent may agree) of any other
Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Agent shall send to the Banks
by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit D hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i)
Each Bank may submit a Money Market Quote containing an offer or offers to
make Money Market Loans in response to any Invitation for Money Market
Quotes. Each Money Market Quote must comply with the requirements of this
subsection (d) and must be submitted to the Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.01 not
later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar
Business Day prior to the proposed date of Borrowing, in the case of a LIBOR
Auction or (y) 9:00 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed
and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective); provided that Money Market Quotes
submitted by the Agent (or any affiliate of the Agent) in the capacity of a
Bank may be submitted, and may only be submitted, if the Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) 1:00 P.M. (New York City time) on the fourth Euro-
Dollar Business Day prior to the proposed date of Borrowing, in the case of
a LIBOR Auction or (y) 8:45 A.M. (New York City time) on the proposed date
of Borrowing, in the case of an Absolute Rate Auction. Subject to Articles
III and VI, any Money Market Quote so made shall be irrevocable except with
the written consent of the Agent given on the instructions of the Borrower.
<PAGE> 23
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x) must be
$1,000,000 or any larger multiple thereof, (y) may not exceed the principal
amount of Money Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to principal amount of Money Market
Loans for which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a percentage
(rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from
such base rate,
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (rounded to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E
hereto or does not specify all of the information required by subsection
(d)(ii),
(B) contains qualifying, conditional or similar language,
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Money Market Quotes, or
(D) arrives after the time set forth in subsection
(d)(i).
<PAGE> 24
(e) Notice to Borrower. The Agent shall promptly notify
the Borrower of the terms (x) of any Money Market Quote submitted by a Bank
that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same Money Marke
t Quote Request. Any such subsequent Money Market Quote shall be disregarded
by the Agent unless such subsequent Money Market Quote is submitted solely
to correct a manifest error in such former Money Market Quote. The Agent'
s notice to the Borrower shall specify (A) the aggregate principal amount of
Money Market Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for
which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than
10:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR Auction or
(y) the proposed date of Borrowing, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as the Borrower and the Agent
shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction
or Absolute Rate Auction for which such change is to be effective), the
Borrower shall notify the Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall specify
the aggregate principal amount of offers for each Interest Period that are
accepted. The Borrower may accept any Money Market Quote in whole or in
part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request,
(ii) the aggregate principal amount of each Money Market
Borrowing must be $25,000,000 or any larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be, and
<PAGE> 25
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amoun
t in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in such multiples, not greater than $100,000, as the
Agent may deem appropriate) in proportion to the aggregate principal amounts
of such offers. Determinations by the Agent of the amounts of Money Market
Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank's
share (if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the
date of each Borrowing, each Bank participating therein shall (except as
provided in subsection (c) of this Section) make available its share of such
Borrowing, in Federal or other funds immediately available in New York City,
to the Agent at its address specified in or pursuant to Section 9.01.
Unless the Agent determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make the funds so received
from the Banks available to the Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on
which the Borrower is to repay all or any part of an outstanding Loan from
such Bank, such Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the
amount being borrowed and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (b), or remitted by the
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have been notified by any
Bank prior to the date of Borrowing (or prior to 1:00 P.M. (New York City
<PAGE> 26
time) on the date of Borrowing in the case of a Base Rate Borrowing) that
such Bank does not intend to make available to the Agent such Bank's portion
of the Borrowing to be made on such date, the Agent may assume that such
Bank has made such amount available to the Agent on such date and the Agent
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount, subject to the provisions of subsection (c). If such
corresponding amount is not in fact made available to the Agent by such Bank,
the Agent shall be entitled to recover such corresponding amount on demand
from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly notify
the Borrower and the Borrower shall promptly pay such corresponding amount
to the Agent. The Agent shall also be entitled to recover from such Bank or
the Borrower interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the Agent to
the Borrower to the date such corresponding amount is recovered by the Agent,
at a rate per annum equal to (x) in the case of a Bank, the Federal Funds
Rate for each such day and (y) in the case of the Borrower, the then
applicable rate for Base Rate Loans, CD Loans, Euro-Dollar Loans or Money
Market Loans, as appropriate. Nothing herein shall be deemed to relieve any
Bank from its obligation to fulfill its Commitment hereunder or to prejudice
any rights which the Borrower may have against any Bank as a result of any
default by such Bank hereunder. For purposes of this subsection (d), no
amount paid to the Agent hereunder shall be considered to have been recovered
by the Agent on the date of payment unless such amount shall have been
received by the Agent by 2:30 P.M. (New York City time) on such date.
SECTION 2.05. Notes. (a) The Loans of each Bank shall
be evidenced by a single Note payable to the order of such Bank for the
account of its Applicable Lending Office in an amount equal to the aggregate
unpaid principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such
Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
<PAGE> 27
(c) Upon receipt of each Bank's Note pursuant to Section
3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it and the
date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Bank so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as
and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in
any Borrowing shall mature, and the principal amount thereof shall be due
and payable, on the last day of the Interest Period applicable to such
Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan
shall bear interest on the outstanding principal amount thereof, for each
day from the date such Loan is made until it becomes due, at a rate per
annum equal to the Base Rate for such day. Such interest shall be payable
for each Interest Period on the last day thereof. Any overdue principal
of or interest on any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 2% plus the
rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin plus the applicable Adjusted
CD Rate; provided that if any CD Loan shall, as a result of clause (2)(b) of
the definition of Interest Period, have an Interest Period of less than 30
days, such Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, 90 days after the first day thereof.
Any overdue principal of or interest on any CD Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
sum of 2% plus the higher of (i) the sum of the CD Margin plus the Adjusted
CD Rate applicable to such Loan and (ii) the rate applicable to Base Rate
Loans for such day.
<PAGE> 28
The "Adjusted CD Rate" applicable to any Interest Period
means a rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing
rates per annum bid at 10:00 A.M. (New York City time) (or as soon
thereafter as practicable) on the first day of such Interest Period by
two or more New York certificate of deposit dealers of recognized
standing for the purchase at face value from each CD Reference Bank of
its certificates of deposit in an amount comparable to the unpaid
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) for a member bank
of the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of new non-personal time deposits in dollars in
New York City having a maturity comparable to the related Interest Period and
in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"Assessment Rate" means for any day the annual assessment
rate in effect on such day which is payable by a member of the Bank Insurance
Fund classified as adequately capitalized and within supervisory subgroup
"A" (or a comparable successor assessment risk classification) within the
<PAGE> 29
meaning of 12 C.F.R. Section 327.3(e) (or any successor provision) to the
Federal Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring time deposits at offices of
such institution in the United States. The Adjusted CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus
the applicable Adjusted London Interbank Offered Rate. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, three months after the first day
thereof.
The "Adjusted London Interbank Offered Rate" applicable to
any Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing
(i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-
Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Interest Period means the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which deposits in
dollars are offered to each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and for
a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank
of the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents). The Adjusted London
<PAGE> 30
Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-
Dollar Loan shall bear interest, payable on demand, for each day from and
including the date payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the sum of 2% plus the higher
of (i) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank
Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the
quotient obtained (rounded upwards, if necessary, to the next higher 1/100
of 1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than six months as the Agent
may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-
Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of
2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR
Loan shall bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal to the sum
of the London Interbank Offered Rate for such Interest Period (determined
in accordance with Section 2.07(c) as if each Euro-Dollar Reference Bank were
to participate in the related Money Market LIBOR Borrowing ratably in
proportion to its Commitment) plus (or minus) the Money Market Margin quoted
by the Bank making such Loan in accordance with Section 2.03. Each Money
Market Absolute Rate Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per
annum equal to the Money Market Absolute Rate quoted by the Bank making such
Loan in accordance with Section 2.03. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the Prime Rate for such day.
<PAGE> 31
(f) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give prompt notice to the
Borrower and the participating Banks by telex or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in
the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts
to furnish quotations to the Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Agent shall determine
the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Fees.
(a) Facility Fee. The Borrower shall pay to the Agent
for the account of the Banks ratably in proportion to their Commitments a
facility fee at the Facility Fee Rate (determined daily in accordance with
the Pricing Schedule). Such facility fee shall accrue from and including the
Effective Date to but excluding the Termination Date (or such earlier date
as the Commitments shall be terminated) on the aggregate amount of the
Commitments in existence on each such day (whether used or unused).
(b) Agents' Fees. The Borrower shall pay to the Agent
and the Co-Syndication Agents, each for its own account one or more fees in
such amounts and at such times as has been previously agreed between the
Borrower and each of them.
(c) Payments. Accrued fees under subsection (a) of this
Section 2.08 shall be payable quarterly in arrears on each January 1,
April 1, July 1 and October 1, commencing on the first such date after the
Effective Date, and upon the date of termination of the Commitments in their
entirety.
SECTION 2.09. Optional Termination or Reduction of
Commitments. During the Revolving Credit Period, the Borrower may, upon at
least three Domestic Business Days' notice to the Agent (which notice the
Agent will promptly deliver to the Banks), (i) terminate the Commitments at
any time, if no Loans are outstanding at such time or (ii) ratably reduce
from time to time by an aggregate amount of $25,000,000 or any larger
multiple of $1,000,000, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans.
<PAGE> 32
SECTION 2.10. Mandatory Termination of Commitments. The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may,
upon at least one Domestic Business Day's notice to the Agent, prepay any
Base Rate Borrowing (or any Money Market Borrowing bearing interest at the
Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to
time in part in amounts aggregating $25,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Except as provided in Section 8.02, the Borrower may
not prepay all or any portion of the principal amount of any Fixed Rate Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to
this Section, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share (if any) of such prepayment and
such notice shall not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of fees hereunder, not later than 1:00 P.M. (New York City time) on the
date when due, in Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section 9.01. The Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees shall be due on
a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall be
due on a day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-
Dollar Business Day. Whenever any payment of principal of, or interest on,
the Money Market Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
<PAGE> 33
succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the Agent
may assume that the Borrower has made such payment in full to the Agent on
such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then
due such Bank. If and to the extent that the Borrower shall not have so made
such payment, each Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to
Article VI or VIII or otherwise) on any day other than the last day of the
Interest Period applicable thereto, or the end of an applicable period fixed
pursuant to Section 2.07(d), or if the Borrower fails to borrow any Fixed
Rate Loans after notice has been given to any Bank in accordance with Section
2.04(a), the Borrower shall reimburse each Bank within 15 days after demand
for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment
or failure to borrow, provided that such Bank shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest
based on the Prime Rate and fees hereunder shall be computed on the basis of
a year of 365 days (or 366 days in a leap year) and paid for the actual
number of days elapsed (including the first day but excluding the last day).
All other interest shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
SECTION 2.15. Withholding Tax Exemption. At least five
Domestic Business Days prior to the first date on which interest or fees are
payable hereunder for the account of any Bank, each Bank that is not
<PAGE> 34
incorporated under the laws of the United States of America or a state
thereof agrees that it will deliver to each of the Borrower and the Agent
two duly completed copies of United States Internal Revenue Service Form 1001
or 4224, certifying in either case that such Bank is entitled to receive
payments under this Agreement and its Note without deduction or withholding
of any United States federal income taxes. Each Bank which so delivers a
Form 1001 or 4224 further undertakes to deliver to each of the Borrower and
the Agent two additional copies of such form (or a successor form) on or
before the date that such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent, in each
case certifying that such Bank is entitled to receive payments under this
Agreement and its Note without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the
Borrower and the Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax.
SECTION 2.16. Increase of Commitments. Upon at least 45
days' prior notice to the Agent (which notice the Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, subject
to the terms and conditions set forth below and with the consent of the Banks
as set forth below, to increase the aggregate amount of the Commitments in
multiples of $5,000,000. Any such increase shall apply, at the option of
the Borrower, (x) to the Commitment of one or more Banks, provided that (i)
the Required Banks (including each Bank whose Commitment is to be increased)
shall consent to such increase, (ii) the amount set forth on the signature
pages hereof opposite the name of each Bank the Commitment of which is being
so increased shall be amended to reflect the increased Commitment of such
Bank and (iii) if any Committed Loans are outstanding at the time of such an
increase, the Borrower will, notwithstanding anything to the contrary
contained in this Agreement, on the date of such increase incur and repay or
prepay one or more Committed Loans from the Banks in such amounts so that
after giving effect thereto, the Committed Loans shall be outstanding on a
pro rata basis (based on the Commitments of the Banks after giving effect to
the changes made pursuant hereto on such date) from all the Banks or (y) to
<PAGE> 35
the creation of a new Commitment of an institution not then a Bank hereunder,
provided that (i) such institution becomes a party to this Agreement as a
Bank by execution and delivery to the Borrower and the Agent of counterparts
of this Agreement, (ii) the Required Banks shall consent to the creation of
such Commitment of such Bank, (iii) the signature pages hereof shall be
amended to reflect the Commitment of such new Bank, (iv) the Borrower shall
issue a Note to such new Bank in conformity with the provisions of Section
2.05, (v) if any Committed Loans are outstanding at the time of the creation
of such Commitment of such Bank, the Borrower will, notwithstanding anything
to the contrary contained in this Agreement, on the date of the creation of
such Commitment incur and repay or prepay one or more Committed Loans from
the Banks in such amounts so that after giving effect thereto, the Committed
Loans shall be outstanding on a pro rata basis (based on the Commitments of
the Banks after giving effect to the changes made pursuant hereto on such
date) from all the Banks and (vi) if such institution is neither a banking
institution nor an affiliate of a Bank, such institution must be consented to
by the Agent; provided further that any such increase or creation may apply,
at the option of the Borrower, as set forth in clause (x) or (y) above but
without the consent of the Required Banks so long as the amount of such
increase or the amount of such new Commitment so created, as the case may be,
when added to the aggregate amount of all such prior increases in the
Commitments and all such prior creations of new Commitments, in each case
created after the Effective Date, does not exceed $300,000,000. It is
understood that any increase in the amount of the Commitments pursuant to
this Section 2.16 shall not constitute an amendment of this Agreement or the
Notes.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended Agreement shall
become effective on the date (the "Effective Date") on which the Agent shall
have received the following documents or other items, each dated the
Effective Date unless otherwise indicated:
(a) receipt by the Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the Agent in
form satisfactory to it of telegraphic, telex or other written confirmation
<PAGE> 36
from such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of
a duly executed Note dated on or before the Effective Date complying with
the provisions of Section 2.05;
(c) receipt by the Agent of an opinion of John Jay List,
Esq., General Counsel of the Borrower, substantially in the form of Exhibit
F hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request, such
opinion to be in form and substance satisfactory to the Agent;
(d) receipt by the Agent of an opinion of Milbank, Tweed,
Hadley & McCloy, special counsel for the Borrower, substantially in the form
of Exhibit G hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request, such opinion to be in form and substance satisfactory to the Agent;
<PAGE> 37
(e) receipt by the Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Agent, substantially in the form of Exhibit
H hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request, such
opinion to be in form and substance satisfactory to the Agent;
(f) receipt by the Agent of a certificate signed by the
Chief Financial Officer or the Governor and an Assistant Secretary-Treasurer
or the Controller of the Borrower to the effect set forth in clauses (c)
through (g), inclusive, of Section 3.02 and, in the case of clauses (c), (e)
and (g), setting forth in reasonable detail the calculations required to
establish such compliance;
(g) receipt by the Agent, for the account of the Banks,
of all commitment fees and facility fees accrued to but excluding the
Effective Date pursuant to Sections 2.08(a) and (b) of the Original
Agreement; and
(h) receipt by the Agent of all documents the Required
Banks may reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the Notes,
<PAGE> 38
and any other matters relevant hereto, all in form and substance satisfactory
to the Agent.
On the Effective Date the Original Agreement will be automatically amended
and restated in its entirety to read as set forth herein. On and after the
Effective Date the rights and obligations of the parties hereto shall be
governed by this Amended Agreement; provided that rights and obligations of
the parties hereto with respect to the period prior to the Effective Date
shall continue to be governed by the provisions of the Original Agreement.
With effect from and including the Effective Date, each Person listed on the
signatures pages hereof which is not a party to the Original Agreement shall
become a Bank party to this Agreement and the Commitment of each Bank shall
be the amount set forth opposite the name of such Bank on the signature pages
hereof, as such amount may be reduced from time to time pursuant to Section
2.09 or 2.10 hereof. All references to "the date hereof" or "the date of
this Agreement" contained in this Agreement shall mean references to November
26, 1996. Any Bank whose Commitment is changed to zero shall upon the
Effective Date cease to be a Bank party to this Agreement; provided that the
provisions of Sections 8.03 and 9.03 thereof shall continue to inure to the
benefit of each Bank. The Agent shall promptly notify the Borrower and the
Banks of the Effective Date, and such notice shall be conclusive and binding
on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to
make a Loan on the occasion of any Borrowing is subject to the satisfaction
of the following conditions:
(a) the fact that the Effective Date shall have occurred
prior to December 15, 1996.
(b) receipt by the Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the
Borrower is in compliance with Section 7.12(a) of the 1972 Indenture and
Section 7.11 of the 1994 Indenture, as each Indenture is in effect as of the
date hereof;
(d) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
<PAGE> 39
(e) the fact that, immediately after such Borrowing, if
such Borrowing is not a Refunding Borrowing, no Default shall have occurred
and be continuing or, if such Borrowing is a Refunding Borrowing, no Event
of Default shall have occurred and be continuing;
(f) the fact that the representations and warranties of
the Borrower contained in this Agreement (except, in the case of a Refunding
Borrowing, the representations and warranties set forth in Section 4.03, the
second sentence of Section 4.06, and the first sentence of Section 4.07
) shall be true on and as of the date of such Borrowing (it being understood
and agreed that the representation and warranty set forth in Section 4.13
shall be true and correct as to all information furnished prior to the making
of the respective Loan); and
(g) the fact that, at the time of such Borrowing, (i)
there shall be no collateral securing Bonds issued pursuant to either
Indenture of a type other than the types of collateral permitted to secure
Bonds issued pursuant to such Indenture as of the date hereof and (ii) the
Allowable Amount of Eligible Collateral then pledged under either Indenture
shall not exceed 150% of the aggregate principal amount of Bonds then
Outstanding under such Indenture and no collateral shall secure Bonds other
than the Eligible Collateral under such Indenture, the Allowable Amount of
which is included within the prior computation or collateral previously so
pledged which ceases to be such Eligible Collateral not as a result of any
acts or omissions to act of the Borrower (other than the declaration of an
"event of default" as defined in a Mortgage which results in the exercise of
any right or remedy described in such Mortgage); each defined term used in
this clause (g) shall have the meaning assigned thereto in the applicable
Indenture.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (c), (d), (e), (f) and (g) of this Section.
<PAGE> 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower makes the following representations, warranties
and agreements, which shall survive the execution and delivery of this
Agreement and the Notes and the making of the Loans:
SECTION 4.01. Corporate Existence, Power and Authority.
The Borrower is a cooperative association duly incorporated, validly
existing and in good standing under the laws of the District of Columbia and
has the corporate power and authority and all material governmental licenses,
authorizations, consents and approvals required to own its property and
assets and to transact the business in which it is engaged. The Borrower is
duly qualified or licensed as a foreign corporation in good standing in
every jurisdiction in which the nature of the business in which it is engaged
makes such qualification or licensing necessary, except in those
jurisdictions in which the failure to be so qualified or licensed would not
(after qualification, assuming that the Borrower could so qualify without the
payment of any fee or penalty and retain the rights as they existed prior to
such qualification all to an extent so that any fees or penalties required
to be so paid or any rights not so retained would not, individually or in the
aggregate, have a material adverse effect on the business or financial
condition of the Borrower), individually or in the aggregate, have a material
adverse effect upon the business or financial condition of the Borrower.
The Borrower has the corporate power and authority to execute, deliver and
carry out the terms and provisions of this Agreement and the Notes. This
Agreement has been, and the Notes when executed and delivered will have been,
duly and validly authorized, executed and delivered by the Borrower, and this
Agreement constitutes a legal, valid and binding agreement of the Borrower,
and the Notes, when executed and delivered by the Borrower in accordance with
this Agreement, will constitute legal, valid and binding obligations of the
Borrower, in each case enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 4.02. Financial Statements. (a) The combined
balance sheets of the Borrower and its Consolidated Subsidiaries as at May
31, 1996 and the related combined statements of income, expenses and net
margins, changes in Members' equity and cash flows for the fiscal year ended
May 31, 1996, including the related notes, accompanied by the opinion and
<PAGE> 41
report thereon of Arthur Andersen & Co., certified public accountants,
heretofore delivered to the Banks, present fairly in accordance with
generally accepted accounting principles (i) the combined financial position
of the Borrower and its Consolidated Subsidiaries as at the date of said
balance sheets and (ii) the combined results of the operations of the
Borrower and its Consolidated Subsidiaries for said fiscal year. The
Borrower has no material liabilities (contingent or otherwise) which are not
disclosed by or reserved against in the most recent audited financial
statements or in the notes thereto other than (i) Indebtedness incurred and
(ii) loan and guarantee commitments issued in each case by the Borrower in
the ordinary course of business since the date of such financial statements.
All such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with prior periods, except as disclosed therein. The same representations
as are set forth in this Section 4.02 shall be deemed to have been made by
the Borrower in respect of the most recent annual and quarterly financial
statements of the Borrower and its Consolidated Subsidiaries (except that
the opinion and report of Athur Andersen & Co. may be replaced by an
opinion and report of another nationally recognized frim of independent
certified public accountants) furnished or required to be furnished to
the Banks prior to or at the time of the making of each Loan herunder,
at the time the same are furnished or required to be furnished.
(b) The unaudited combined balance sheets of the Borrower
and its Consolidated Subsidiaries as of August 31, 1996 and the related
unaudited combined statements of income, expenses and net margins, changes in
Members' equity and cash flows for the three months then ended, heretofore
delivered to the Banks, present fairly in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
ty and cash flows for the three months then ended, heretofore
delivered to the Banks, present fairly in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section 4.02, the combined
financial position of the Borrower and its Consolidated Subsidiaries as of
such date and their combined results of operations and changes in financial
position for such three-month period (subject to normal year-end adjustments).
The Borrower has no material liabilities (contingent or otherwise) which are
not disclosed by or reserved against in such financial statements for such
three-month period other than Indebtedness incurred and loan and guarantee
commitments issued by the Borrower in the ordinary course of business since
the date of such financial statements.
SECTION 4.03. Litigation. There are no actions, suits,
proceedings or investigations pending or, to the Borrower's knowledge,
<PAGE> 42
threatened by or before any court or any governmental authority, body or
agency or any arbitration board which are reasonably likely to materially
adversely affect the business, property, assets, financial position or
results of operations of the Borrower or the authority or ability of the
Borrower to perform its obligations under this Agreement or the Notes.
SECTION 4.04. Governmental Authorizations. No
authorization, consent, approval or license of, or declaration, filing or
registration with or exemption by, any governmental authority, body or
agency is required in connection with the execution, delivery or performance
by the Borrower of this Agreement or the Notes.
SECTION 4.05. Capital Term Certificates. The holders of
the Borrower's Capital Term Certificates are not and will not be entitled to
receive any payments with respect to the principal thereof or interest
thereon solely because of withdrawing or being expelled from membership in
the Borrower.
SECTION 4.06. No Violation of Agreements. Neither the
Borrower nor any Subsidiary is in default in any material respect under any
material agreement or other instrument to which it is a party or by which it
is bound or its property or assets may be affected. No event or condition
exists which constitutes, or with the giving of notice or lapse of time or
both would constitute, such a default under any such agreement or other
instrument. Neither the execution and delivery of this Agreement or the
Notes, nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or thereof,
will contravene any provision of law, statute, rule or regulation to which
the Borrower is subject or any judgment, decree, award, franchise, order or
permit applicable to the Borrower, or will conflict or be inconsistent with,
or will result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute (or with the giving of notice or lapse of time,
or both, would constitute) a default under (or condition or event entitling
any Person to require, whether by purchase, redemption, acceleration or
otherwise, the Borrower to perform any obligations prior to the scheduled
maturity thereof), or result in the creation or imposition of any Lien upon
any of the property or assets of the Borrower pursuant to the terms of, any
indenture, mortgage, deed of trust, agreement or other instrument to which
it may be subject, or violate any provision of the certificate of
incorporation or by-laws of the Borrower. Without limiting the generality
of the foregoing, the Borrower is not a party to, or otherwise subject to
<PAGE> 43
any provision contained in, any instrument evidencing Indebtedness of the
Borrower, any agreement or indenture relating thereto or any other contract
or agreement (including its certificate of incorporation and by-laws), which
would be violated by the incurring of the Indebtedness to be evidenced by
the Notes.
SECTION 4.07. No Event of Default under the Indentures.
The Borrower has complied fully with all of the material provisions of each
Indenture. No Event of Default (within the meaning of such term as defined
in each Indenture) and no event, act or condition (except for possible non-
compliance by the Borrower with any immaterial provision of such Indenture
which in itself is not such an Event of Default under such Indenture) which
with notice or lapse of time, or both, would constitute such an Event of
Default has occurred and is continuing under such Indenture. The Borrowings
by the Borrower contemplated by this Agreement will not cause such an Event
of Default under, or the violation of any covenant contained in, either
Indenture.
SECTION 4.08. Compliance with ERISA. The Plans are in
substantial compliance with ERISA, no Plan is insolvent or in reorganization,
no Plan has an accumulated or waived funding deficiency within the meaning of
Section 412 of the Internal Revenue Code, neither the Borrower nor a
Subsidiary of the Borrower nor any member of the ERISA Group has incurred any
material liability (including any material contingent liability) to or on
account of a Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA,
no proceedings have been instituted to terminate any Plan, and no condition
exists which presents a material risk to the Borrower or a Subsidiary of the
Borrower of incurring a liability to or on account of a Plan pursuant to any
of the foregoing Sections of ERISA.
SECTION 4.09. Compliance with Other Laws. The Borrower and
each Subsidiary is in compliance, in all material respects, with all
applicable requirements of law and all applicable rules and regulations of
each Federal, State, municipal or other governmental department, agency or
authority, domestic or foreign.
SECTION 4.10. Tax Status. The Borrower is exempt from
payment of Federal income tax under Section 501(c)(4) of the Internal Revenue
Code.
SECTION 4.11. Investment Company Act. The Borrower is not
an "investment company" or a company "controlled" by an "investment company",
<PAGE> 44
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.12. Public Utility Holding Company Act. The
Borrower is not a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended.
SECTION 4.13. Disclosure. To the best of the Borrower's
knowledge, information and belief, neither this Agreement nor any document,
certificate or financial statement furnished to any Bank by or on behalf of
the Borrower in connection herewith (all such documents, certificates and
financial statements, taken as a whole) contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements contained herein and therein not misleading. There is no fact
(other than facts of a general economic or political nature) known to the
Borrower which in its judgment materially adversely affects or in the future
is likely to (so far as is now known to the Borrower) have a material adverse
effect upon the business, operations, prospects, property, assets or
financial condition of the Borrower which has not been set forth in this
Agreement or in other documents, certificates or financial statements
furnished to the Banks by or on behalf of the Borrower in connection with
the transactions contemplated hereby.
SECTION 4.14. Subsidiaries. Each of the Borrower's
corporate Subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted.
SECTION 4.15. Environmental Matters. In the ordinary
course of its business, the Borrower conducts reviews, to the extent
appropriate given the nature of its business operations, of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital
or operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures required
to achieve or maintain compliance with environmental protection standards
imposed by law or as a condition of any license, permit or contract, any
<PAGE> 45
related constraints on operating activities, including any periodic or
permanent shutdown of any facility or reduction in the level of or change in
the nature of operations conducted thereat, any costs or liabilities in
connection with off-site disposal of wastes or Hazardous Substances, and any
actual or potential liabilities to third parties, including employees, and
any related costs and expenses). On the basis of this review, the Borrower
has reasonably concluded that such associated liabilities and costs,
including the cost of compliance with Environmental Laws, are unlikely to
have a material adverse effect on the business, financial condition, results
of operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note or any fee payable
pursuant to Section 2.08 or any other amount then due and payable hereunde
r remains unpaid:
SECTION 5.01. Corporate Existence. The Borrower, at its
own cost and expense, will, and will cause each Subsidiary to, do or cause to
be done all things necessary to preserve and keep in full force and effect
its corporate existence, material rights and franchises; provided, however,
that neither the Borrower nor any Subsidiary shall be required to preserve
any right or franchise or, in the case of a Subsidiary, its corporate
existence, if its Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Borrower
or such Subsidiary (provided that the termination of the corporate existence
of a Subsidiary shall be permitted if the Board of Directors of the Borrower
shall determine that its existence is not desirable in the conduct of the
business of the Borrower) and that the loss thereof is not disadvantageous
in any material respect to the Banks.
SECTION 5.02. Disposition of Assets; Merger; Character of
Business; etc. The Borrower will not wind up or liquidate its business or
sell, lease, transfer or otherwise dispose of all or substantially all of its
assets as an entirety or in a series of related transactions and will not
consolidate with or merge with or into any other Person other than a merger
with a Subsidiary in which the Borrower is the surviving Person. The
Borrower will not engage in any business other than the business contemplated
<PAGE> 46
by its certificate of incorporation and by-laws, each as in effect on the
Effective Date.
SECTION 5.03. Financial Information. The Borrower will,
and will cause each Subsidiary to, keep its books of account in accordance
with generally accepted accounting principles and the Borrower will furnish
to the Banks (i) as soon as available and in any event within 60 days after
the close of each of the first three quarters of each fiscal year of the
Borrower, as at the end of, and for the period commencing at the end of the
previous fiscal year and ending with, such quarter, unaudited combined
balance sheets of the Borrower and its Consolidated Subsidiaries and the
related unaudited combined statements of income, expenses and net margins,
changes in Members' equity and cash flow of the Borrower and its Consolidated
Subsidiaries for such quarter and for the portion of the Borrower's fiscal
year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all in
reasonable detail and certified (subject to normal year-end adjustments) as
to fairness of presentation in accordance with generally accepted accounting
principles and consistency (except for changes concurred in by the Borrower's
independent certified public accountants) by the Chief Financial Officer,
the Governor, an Assistant Secretary-Treasurer or the Controller of the
Borrower; (ii) as soon as practicable and in any event within 90 days after
the close of each fiscal year of the Borrower, as at the end of and for the
fiscal year just closed, combined balance sheets of the Borrower and its
Consolidated Subsidiaries and the related combined statements of income,
expenses and net margins, changes in Members' equity and cash flow for such
fiscal year for the Borrower and its Consolidated Subsidiaries, all in
reasonable detail and fully certified (without any qualification as to the
scope of the audit) by Arthur Andersen & Co. or other independent certified
public accountants of nationally recognized standing selected by the
Borrower, who shall have audited the books and accounts of the Borrower for
such fiscal year; (iii) together with the financial statements referred to
in clauses (i) and (ii) above, a certificate signed by the Governor, the
Chief Financial Officer, an Assistant Secretary-Treasurer or the Controller
of the Borrower, in such detail as shall be reasonably satisfactory to the
Required Banks, (x) identifying (A) all Indebtedness outstanding as at the
end of the fiscal period covered by such financial statements extended by the
Borrower or by any other Person and Guaranteed by the Borrower to any of the
forty Members with the largest amount of Indebtedness to (or Guaranteed by)
<PAGE> 47
the Borrower outstanding as at the end of the fiscal period covered by such
financial statements (the "Largest Members") as to which, to the knowledge
and information of the Borrower, the Member is in default (whether in the
payment of the principal thereof or interest thereon or with respect to any
material covenant or agreement contained in any instrument, mortgage or
agreement evidencing or relating to such Indebtedness) and specifying whether
such default has been waived by the Borrower or such other Person and the
nature and status of each such default not so waived and (B) the aggregate
amount of all Indebtedness outstanding as of the end of the fiscal period
covered by such financial statements as to which, to the knowledge and
information of the Borrower, Members other than the Largest Members are in
default (whether in the payment of the principal thereof or interest thereon
or with respect to any material covenant or agreement contained in any
instrument, mortgage or agreement evidencing or relating to such
Indebtedness), (y) identifying the ten Members with the largest amount of
Indebtedness to (or Guaranteed by) the Borrower outstanding as of the end of
the fiscal period covered by such financial statements, together with the
principal amount of such Indebtedness outstanding with respect to each such
Member as of the end of such fiscal period and (z) identifying all loans
which are RUS Guaranteed Loans and are outstanding as of the end of the
fiscal period covered by such financial statements, together with (a) the
principal amount of each such RUS Guaranteed Loan as of the end of such
fiscal period, (b) the total amount of Indebtedness incurred by the Borrower
and Subsidiaries of the Borrower in order to fund such RUS Guaranteed Loan,
(c) the total interest expense incurred during such fiscal period by the
Borrower and Subsidiaries of the Borrower in connection with the Indebtedness
referred to in preceding clause (b) and (d) the amount of the Guaranteed
Portion of such RUS Guaranteed Loan; (iv) with reasonable promptness, copies
of all regular and periodical financial statements or other financial reports
and documents which the Borrower may make available to its Members or
bondholders or file with the Securities and Exchange Commission; (v) promptly
after obtaining knowledge or receiving notice of a change (whether an
increase or decrease) in any rating issued by S&P or Moody's pertaining to
any securities of, or guaranteed by, the Borrower or any of its Subsidiaries
or affiliates, a notice setting forth such change; and (vi) with reasonable
promptness, such other information respecting the business, operations,
prospects and financial condition of the Borrower or any of its Subsidiaries
or any Joint Venture as any Bank may, from time to time, reasonably request,
<PAGE> 48
including, without limitation, with respect to the performance and observance
by the Borrower of the covenants and conditions contained in this Agreement.
SECTION 5.04. Default Certificates. Concurrently with each
financial statement delivered to the Banks pursuant to clauses (i) and (ii)
of Section 5.03, the Borrower will furnish to the Banks a certificate signed
by the Governor, the Chief Financial Officer, an Assistant Secretary-Treasurer
or the Controller of the Borrower to the effect that the review of the
activities of the Borrower during such year or the portion thereof covered by
such financial statement and of the performance of the Borrower under this
Agreement has been made under his supervision and that to the best of his
knowledge, based on such review, there exists no event which constitutes a
Default or an Event of Default under this Agreement or, if any such event
exists, specifying the nature thereof, the period of its existence and what
action the Borrower has taken and proposes to take with respect thereto,
which certificate shall set forth the calculations or other data required to
establish compliance with the provisions of Section 5.09 and Sections 5.12
through 5.15, inclusive, at the end of such fiscal quarter or fiscal year, as
the case may be. The Borrower further covenants that upon any such officer
of the Borrower obtaining knowledge of any Default or Event of Default under
this Agreement, it will forthwith, and in no event later than the close of
business on the Business Day immediately after the day such knowledge is
obtained, deliver to the Banks a statement of any officer referred to above
specifying the nature and the period of existence thereof and what action the
Borrower has taken and proposes to take with respect thereto.
SECTION 5.05. Notice of Litigation, Legislative Developments
and Defaults. The Borrower will promptly give written notice to each of the
Banks of (i) any action, proceeding or claim of which the Borrower may have
notice, which may be commenced or asserted against the Borrower or any
Subsidiary in which the amount involved is $1,000,000 or more and is not
covered in full by insurance or as to which any insurer has disclaimed
liability; (ii) any dispute which may exist between the Borrower or any
Subsidiary and any governmental body, which is likely to materially and
adversely affect the normal business operation of the Borrower or the Borrower
and its Subsidiaries taken as a whole or any of the material properties and
assets of the Borrower or the Borrower and its Subsidiaries taken as a whole;
(iii) any legislation enacted by any governmental body and any rulings and
regulations promulgated by any governmental or regulatory bodies, known or
which should be known to the Borrower, affecting the Borrower or any
Subsidiary or generally affecting the Borrower's Members which is likely to
<PAGE> 49
materially and adversely affect the present or future operations of the
Borrower, the Borrower and its Subsidiaries taken as a whole or the Borrower's
Members; and (iv) any default by the Borrower or any Subsidiary or event or
condition known or which should be known to the Borrower which with the
giving of notice or lapse of time, or both, would constitute a default, with
respect to any payment or payments in respect of Indebtedness of the Borrower
or such Subsidiary aggregating in excess of $15,000,000 (whether in payment
of principal thereof or interest thereon or with respect to any material
covenant or agreement contained in any instrument, mortgage, deed of trust or
agreement evidencing or relating to such Indebtedness or otherwise).
SECTION 5.06. ERISA. As soon as possible and, in any event,
within 10 days after the Borrower or a Subsidiary of the Borrower knows or
has reason to know that a Reportable Event has occurred, that an accumulated
funding deficiency has been incurred or an application may be or has been
made to the Secretary of the Treasury for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code with respect to a
Plan, that a Plan has been or may be terminated, that proceedings may be or
have been instituted to terminate a Plan, or that the Borrower, a Subsidiary
of the Borrower or any member of the ERISA Group will or may incur any
liability to or on account of a Plan under Section 4062, 4063, 4064, 4201 or
4204 of ERISA, the Borrower will deliver to each of the Banks a certificate
of the Chief Financial Officer of the Borrower setting forth details as to
such occurrence and action, if any, which the Borrower or such Subsidiary is
required or proposes to take, together with any notices required to be filed
with or by the Borrower, such Subsidiary, such member of the ERISA Group, the
PBGC or the plan administrator with respect thereto. Upon the request of any
Bank, the Borrower will furnish to such Bank a copy of the annual report of
each Plan (Form 5500) required to be filed with the Internal Revenue Service.
Copies of annual reports or any notices required to be delivered to the
Banks hereunder shall be delivered no later than 10 days after the later
of the date such report or notice has been filed with the Internal Revenue
Service or the PBGC or received by the Borrower or a Subsidiary of the
Borrower.
SECTION 5.07. Payment of Charges. The Borrower will, and
will cause each Subsidiary to, duly pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon or against it or
its property or assets, prior to the date on which penalties attach thereto,
<PAGE> 50
unless and to the extent only that such taxes, assessments and governmental
charges or levies are being contested in good faith by appropriate
proceedings; and (ii) all lawful claims, including, without limitation,
claims for labor, materials, supplies or services, which might or could, if
unpaid, become a Lien upon such property or assets, unless and to the extent
only that the validity of the amount thereof is being contested in good faith
by appropriate proceedings.
SECTION 5.08. Inspection of Books and Assets. The Borrower
will, and will cause each Subsidiary to, permit any representative of any
Bank (or any agent or nominee of such Bank) to visit and inspect any of the
property of the Borrower or such Subsidiary, to examine the books of record
and account of the Borrower or such Subsidiary and to discuss the affairs,
finances and accounts of the Borrower or such Subsidiary with the officers
and independent public accountants of the Borrower or such Subsidiary, all at
such reasonable times and as often as such Bank may reasonably request.
SECTION 5.09. Indebtedness. (a) The Borrower will not,
and will not permit any of its Subsidiaries to, incur, assume or Guarantee
any Superior Indebtedness, or make any optional prepayment on any Capital
Term Certificate, provided that (i) subject to the provisions of Section 5.12,
any Subsidiary may incur Superior Indebtedness owing to the Borrower or
assume or Guarantee Indebtedness of any Person (other than the Borrower or
any of its Subsidiaries) owing to the Borrower and (ii) the Borrower may
incur, assume or Guarantee Superior Indebtedness or make optional prepayments
on Capital Term Certificates if, after giving effect to any such action
specified above in this clause (ii), (x) on the date of such incurrence,
assumption or Guarantee or making of such optional prepayment (the
"Determination Date") the aggregate principal amount of Superior Indebtedness
then outstanding would not exceed ten times the sum of (a) the aggregate
principal amount of Capital Term Certificates outstanding on the
Determination Date and (b) the aggregate amount of Members' equity in the
Borrower, other than Capital Term Certificates, on the Determination Date
and (y) on no given future date would the aggregate principal amount of
Superior Indebtedness outstanding on the Determination Date which will remain
outstanding on such given future date exceed ten times the sum of (a) the
aggregate principal amount of Capital Term Certificates outstanding on the
Determination Date which will remain outstanding on such given future date
and (b) the aggregate amount of Members' equity in the Borrower, other than
Capital Term Certificates, on the Determination Date. The respective
<PAGE> 51
principal amounts of Superior Indebtedness and Capital Term Certificates to
be outstanding on such given future date shall be determined after giving
effect to mandatory sinking fund payments, other mandatory prepayments and
serial and other maturity payments required to be made on or prior to sai
d given future date by the terms of such Superior Indebtedness and Capital
Term Certificates or any indenture or other instrument pursuant to which they
are respectively issued.
(b) If any Loan is outstanding hereunder, the Borrower
will not take any action which would prevent it from then complying, or fail
to take any action which would enable it then to comply, with the provisions
of Section 3.02(g), assuming for this purpose only that the Borrower then
intended to borrow from one or more of the Banks hereunder.
SECTION 5.10. Liens. The Borrower will not create or
permit to exist any Lien on or with respect to any Indebtedness of any Member
which is an asset of the Borrower, now existing or hereafter created, or any
collateral securing any such Indebtedness, and the Borrower will not permit
any Subsidiary to create or permit to exist any Lien on or with respect to
any of such Subsidiary's assets, except Liens (i) granted by the Borrower to
the trustee pursuant to either Indenture, (ii) on any such Indebtedness
granted by the Borrower to secure any borrowing for the purpose of making
loans to Member power supply systems or loans to Members for bulk power
supply projects or loans to Members for the purpose of providing financing
to telephone and related systems eligible to borrow from the RUS, which
borrowing or borrowings are on terms (except as to terms of interest,
premium, if any, and amortization) not materially more disadvantageous to
the Borrower's unsecured creditors than the borrowings under either Indenture
(it being understood that the Borrower can not pledge such assets to an
extent greater than 150% of the aggregate principal amount of such
Indebtedness) and which Liens secure amounts not exceeding $500,000,000 in
the aggregate at any one time outstanding, (iii) of current taxes not
delinquent or a security for taxes being contested in good faith, (iv) other
than in favor of the PBGC, created by or resulting from any legal proceedings
(including legal proceedings instituted by the Borrower or any Subsidiary)
which are being contested in good faith by appropriate proceedings, including
appeals of judgments as to which a stay of execution shall have been issued,
and adequate reserves shall have been established, (v) created by the Borrower
to secure Guarantees by the Borrower of Indebtedness, the interest on which
<PAGE> 52
is excludable from the gross income of the recipient thereof for Federal
income tax purposes as provided in Section 103(a) of the Internal Revenue
Code or Section 103(a) of the Internal Revenue Code of 1954, as amended, (x)
of a Member which is a state or political subdivision thereof or (y) of a
state or political subdivision thereof incurred to benefit a Member for one
of the purposes provided in Section 142(a)(2), (4), (5), (6), (8), (9), (10)
or (12) of the Internal Revenue Code or Section 103(b)(4)(D), (E), (F), (G),
(H) or (J) of the Internal Revenue Code of 1954, as amended, and (vi) granted
by any Subsidiary to the Borrower.
SECTION 5.11. Maintenance of Insurance. The Borrower will
maintain, and will cause each Subsidiary to maintain, insurance in such
amounts, on such forms and with such companies as is necessary or appropriate
for its business.
SECTION 5.12. Subsidiaries and Joint Ventures. The sum of
the amount of Indebtedness owing to the Borrower by all of its Subsidiaries
and Joint Ventures plus the amount paid by the Borrower in respect of the
stock, obligations or securities of or any other interest in such Subsidiaries
and Joint Ventures plus any capital contributions by the Borrower to such
Subsidiaries and Joint Ventures plus the amount of assets otherwise sold or
transferred by the Borrower to such Subsidiaries and Joint Ventures (other
than sales at fair market value) shall not exceed at any time 10% of the sum
of (i) all accounts which, in accordance with generally accepted accounting
principles, constitute Members' equity in the Borrower at such time and (ii)
all Indebtedness of the Borrower shown in its balance sheet dated as of May
31, 1996 as "Members' Subordinated Certificates" as such Indebtedness shall
be reduced from time to time and any other Indebtedness of the Borrower
incurred after May 31, 1996 having substantially similar provisions as to
subordination as those contained in said outstanding certificates as such
other Indebtedness shall be reduced from time to time, in each case at such
time.
SECTION 5.13. Minimum Net Worth. The Borrower will not at
any time permit its Net Worth to be less than the Minimum Required Net Worth
as in effect from time to time.
SECTION 5.14. Minimum TIER. The Borrower shall at no time
permit the average of the TIERs for the six (6) immediately preceding fiscal
quarters of the Borrower to be less than 1.025:1.00.
SECTION 5.15. Retirement of Patronage Capital. The
Borrower shall not make, or permit any Subsidiaries of the Borrower to make,
any payments to Members in respect of Patronage Capital Certificates unless
(i) the TIER for the immediately preceding fiscal year equals or exceeds
<PAGE> 53
1.05:1.00 and (ii) there exists (and would exist after giving effect to any
such payment) no Default or Event of Default under this Agreement.
SECTION 5.16. Use of Proceeds. The proceeds of the Loans
made hereunder may be used by the Borrower for general corporate purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock", within the meaning of Regulation U. Neither the Borrower nor any
agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation U or Regulation X.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) Principal and Interest. The Borrower shall (i) fail
to pay when due (whether upon stated maturity, by acceleration or otherwise)
any principal of the Notes or (ii) fail, and such failure shall continue
uncured for one or more Business Days, to pay when due (whether upon stated
maturity, by acceleration or otherwise) any interest on the Notes;
(b) Other Amounts. The Borrower shall fail to pay when
due any fee or other amount payable under this Agreement and such failure
remains uncured for five (5) days after the due date thereof;
(c) Covenants Without Notice. The Borrower shall fail
to observe or perform any covenant or agreement on its part to be observed
or performed which is set forth in Section 5.01, 5.02, 5.09, 5.10, 5.12, 5.13,
5.14, 5.15 or 5.16;
(d) Covenants With 10 Days Grace. The Borrower shall
fail to observe or perform any covenant or agreement on its part to be
observed or performed, which is set forth in Section 5.05, 5.06, 5.07 or 5.08,
<PAGE> 54
and such non-observance or non-performance shall continue unremedied for a
period of more than 10 days;
(e) Other Covenants. The Borrower shall fail to observe
or perform any covenant, condition or agreement on its part to be observed or
performed, other than as referred to in subsections (a), (b), (c) and (d)
above, for a period of 30 days after written notice specifying such failure
and requesting that it be remedied is given by any Bank to the Borrower and
the other Banks; provided that, if the failure be such that it cannot be
corrected within the applicable period, but can be corrected within a
reasonable period of time thereafter, it shall not constitute a default if
corrective action is instituted by the Borrower within the applicable period
and diligently pursued until the failure is corrected;
(f) Representations. Any representation, warranty,
certification or statement made or deemed to be made by the Borrower in this
Agreement or in any certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have been incorrect in
any material respect when made or deemed to be made;
(g) Non-Payments of Indebtedness and/or Derivatives
Obligations. The Borrower or any Subsidiary of the Borrower shall fail to
make any payment or payments aggregating for the Borrower and its
Subsidiaries in excess of $15,000,000 in respect of Indebtedness and/or
Derivatives Obligations of the Borrower or any Subsidiary (other than the
Notes or any Indebtedness under this Agreement) when due (whether upon stated
maturity, by acceleration or otherwise) or within any applicable grace
period;
(h) Defaults Under Other Agreements. The Borrower or any
Subsidiary shall fail to observe or perform within any applicable grace
period any covenant or agreement contained in any agreement or instrument
relating to any Indebtedness of the Borrower or any Subsidiary, aggregating
for the Borrower and its Subsidiaries in excess of $15,000,000 if the effect
of such failure is to accelerate, or to permit the holder of such
Indebtedness or any other Person to accelerate, the maturity of such
Indebtedness;
(i) Bankruptcy. The Borrower or any Subsidiary shall
generally not pay its debts as they become due, or shall admit in writing
its inability to pay its debts generally or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any Subsidiary seeking to adjudicate it bankrupt or
<PAGE> 55
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, conservation or proceeding in the nature thereof,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors, or seeking
the entry of an order for relief or the appointment of a receiver (including
state regulatory authorities acting in a similar capacity), trustee,
custodian or other similar official for it or for any substantial part of its
property, and, in the case of any such proceeding instituted against it (but
not instituted by it) shall remain undismissed or unstayed for a period of 60
days; or the Borrower or any Subsidiary shall take any action to authorize
any of the actions set forth above in this subsection (i);
(j) ERISA. A Plan shall fail to maintain the minimum
funding standard required by Section 412 of the Internal Revenue Code for
any plan year or a waiver of such standard is sought or granted under Section
412(d), or a Plan is, shall have been or is likely to be terminated or the
subject of termination proceedings under ERISA, or the Borrower or a
Subsidiary of the Borrower or any member of the ERISA Group has incurred or
is likely to incur a liability to or on account of a Plan under Section 4062,
4063, 4064, 4201 or 4204 of ERISA, and there shall result from any such
event or events either a liability or a material risk of incurring a
liability to the PBGC or a Plan, which in the opinion of the Required Banks,
will have a material adverse effect upon the business, operations or the
financial condition of the Borrower or a Subsidiary of the Borrower; or
(k) Money Judgment. A final judgment or order for the
payment of money in excess of $15,000,000 shall be rendered against the
Borrower or any Subsidiary and such judgment or order shall continue
unsatisfied and in effect for a period of 45 days during which execution
shall not be effectively stayed or deferred (whether by action of a court,
by agreement or otherwise); then, and in any such event, and at any time
thereafter, if any Event of Default shall then be continuing, the Agent,
upon the request of the Required Banks, shall by notice to the Borrower,
take any or all of the following actions, without prejudice to the rights of
the Agent, any Bank or the holder of any Note to enforce its claims against
the Borrower: (a) declare the Commitments terminated, whereupon the
Commitment of each Bank shall forthwith terminate immediately and any fee
payable pursuant to Section 2.08(a) shall forthwith become due and payable
without any other notice of any kind; or (b) declare the principal of and
<PAGE> 56
accrued interest on the Loans, and all other obligations owing hereunder, to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that, if an Event of Default
specified in subsection (i) shall occur, the result which would occur upon
the giving of written notice by the Agent to the Borrower, as specified in
clauses (a) and (b) above, shall occur automatically without the giving of
any such notice.
SECTION 6.02. Notice of Default. The Agent shall give
notice to the Borrower under Section 6.01(e) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes
as are delegated to the Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not the Agent, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary
or affiliate of the Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the
Agent hereunder are only those expressly set forth herein. Without limiting
the generality of the foregoing, the Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article
VI.
SECTION 7.04. Consultation with Experts. The Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
<PAGE> 57
SECTION 7.05. Liability of Agent. Neither the Agent nor
any of its affiliates nor any of their respective directors, officers,
agents, or employees shall be liable for any action taken or not taken by it
in connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness
of this Agreement, the Notes or any other instrument or writing furnished
in connection herewith. The Agent shall not incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) reasonably
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably
in accordance with its Commitment, indemnify the Agent, its affiliates and
their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except
such as result from such indemnitee's gross negligence or willful misconduct)
that such indemnitees may suffer or incur in connection with this Agreement
or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking any action under
this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at
any time by giving written notice thereof to the Banks and the Borrower.
Upon any such resignation, the Required Banks shall have the right to appoint
<PAGE> 58
a successor Agent. If no successor Agent shall have been so appointed by
the Required Banks, and shall have accepted such appointment, within 15 days
after the retiring Agent gives notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of
at least $500,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent.
SECTION 7.09. Co-Syndication Agents Not Liable. Nothing in
this Agreement shall impose upon any Co-Syndication Agent, in such capacity,
any duties or responsibilities whatsoever.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any Interest
Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having
50% or more of the aggregate amount of the Commitments advise the Agent that
the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the
case may be, as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to
<PAGE> 59
make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended.
Unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if
such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate
Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans
comprising such Borrowing shall bear interest for each day from and including
the first day to but excluding the last day of the Interest Period applicable
thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of
this Agreement, the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank
or comparable agency shall make it unlawful or impossible for any Bank (or
its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar
Loans and such Bank shall so notify the Agent, the Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make Euro-
Dollar Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. If such Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity and
shall so specify in such notice, the Borrower shall immediately prepay in
full the then outstanding principal amount of each such Euro-Dollar Loan,
together with accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal
principal amount from such Bank (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return.
(a) If on or after (x) the date hereof, in the case of any Committed Loan
<PAGE> 60
or any obligation to make Committed Loans or (y) the date of the related
Money Market Quote, in the case of any Money Market Loan, the adoption of
any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its Fixed Rate Loans,
its Notes or its obligation to make Fixed Rate Loans, or shall change the
basis of taxation of payments to any Bank (or its Applicable Lending Office)
of the principal of or interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate Loans or its obligation
to make Fixed Rate Loans (except for changes in the rate of tax on the
overall net income of such Bank or its Applicable Lending Office imposed by
the jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (A) with respect to
any CD Loan, any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar Loan any such requirement
included in an applicable Euro-Dollar Reserve Percentage), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on
any Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Notes or its obligation to
make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank
(or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or receivable by such Bank
<PAGE> 61
(or its Applicable Lending Office) under this Agreement or under its Note
with respect thereto, by an amount deemed by such Bank to be material, then,
within 15 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction (including any
amount or amounts equal to any taxes on the overall net income of such Bank
payable by such Bank with respect to the amount of payments required to be
made pursuant to this Section 8.03(a)).
(b) If any Bank determines that the adoption of any
applicable law, rule, regulation, guideline or request concerning capital
adequacy, or any change therein, or any change in interpretation or
administration thereof by any governmental authority, central bank or
comparable agency occurring after the date hereof, will have the effect of
increasing the amount of capital required or expected to be maintained by
such Bank based on the existence of such Bank's Commitment hereunder or its
obligations hereunder, it will notify the Borrower. This determination will
be made on a Bank by Bank basis. The Borrower will pay to each Bank on
demand such additional amounts as are necessary to compensate for the
increased cost to such Bank as a result of the event described in the first
sentence of this Section 8.03(b). In determining such amount, such Bank
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, and such Bank will pass such costs on to the
Borrower only if such costs are passed on in a similar manner by such Bank
to similarly situated borrowers (which are parties to credit or loan
documentation containing a provision similar to this Section 8.03(b)), as
determined by such Bank in its reasonable discretion. Each Bank's
determination of compensation shall be conclusive if made in accordance with
this provision. Each Bank, upon determining that any increased costs will
be payable pursuant to this Section 8.03(b), will give prompt written notice
thereof to the Borrower, which notice shall show the basis for calculation
of such increased costs, although the failure to give any such notice shall
not release or diminish any of the Borrower's obligations to pay increased
costs pursuant to this Section 8.03(b).
(c) Each Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be otherwise
<PAGE> 62
disadvantageous to such Bank. A Bank claiming compensation under this
Section shall furnish a certificate to the Borrower setting forth the
additional amount or amounts to be paid to it hereunder, which shall be
conclusive in the absence of manifest error. In determining such amount,
such Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar
Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03(a) and the Borrower shall, by at
least five Euro-Dollar Business Days' prior notice to such Bank through the
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) all Loans which would otherwise be made by such Bank as
CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which would otherwise
be applied to repay such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests, directions,
consents, approvals and other communications to any party hereunder shall be
in writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party: (x) in the case of the Borrower
or the Agent, at its address or telex or telecopier number set forth on the
signature pages hereof, (y) in the case of any Bank, at its address or telex
or telecopier number set forth in its Administrative Questionnaire or (z) in
the case of any other party, such other address or telex or telecopier number
as such party may hereafter specify for the purpose by notice to the Agent
and the Borrower. Each such notice, request, direction, consent, approval or
other communication shall be effective (i) if given by telex, when such telex
<PAGE> 63
is transmitted to the telex number specified in this Section and the
appropriate answerback is received or (ii) if given by any other means, when
delivered or received at the address specified in this Section; provided that
notices to the Agent under Article II or Article VIII shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or under
any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the
Agent, including reasonable fees and disbursements of special counsel for the
Agent, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Agent or any Bank, including reasonable fees and
disbursements incurred by counsel or in-house counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. The Borrower shall indemnify
each Bank against any transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of this Agreement or the Notes and any and all liabilities with
respect to or resulting from any delay or omission (unless solely
attributable to such Bank) to pay such taxes.
(b) The Borrower agrees to indemnify each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs
and expenses of any kind, including, without limitation, the reasonable fees
and disbursements of counsel, which may be incurred by any Indemnitee (or by
the Agent in connection with its actions as Agent hereunder) in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) relating to or arising
out of this Agreement or any actual or proposed use of proceeds of Loans
hereunder; provided that no Indemnitee shall have the right to be indemnified
hereunder for its own gross negligence, willful misconduct or unlawful
<PAGE> 64
conduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that
if it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest then due with respect to any Note held by it which is greater than
the proportion received by any other Bank in respect of the aggregate amount
of principal and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment shall purchase
such participations in the Notes held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment
of indebtedness of the Borrower other than its indebtedness under the Notes.
The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of set-
off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of
this Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of
any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan or any fees hereunder, (iii) postpone the
date fixed for any payment of principal of or interest on any Loan or any
fees hereunder or for any reduction or termination of any Commitment or (iv)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Banks, which shall be required for the
Banks or any of them to take any action under this Section or any other
provision of this Agreement.
<PAGE> 65
SECTION 9.06. Successors and Assigns. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks
or other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon notice
to the Borrower and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation, the
right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that
such Bank will not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the
consent of the Participant. Subject to the provisions of subsection (e),
the Borrower agrees that each Participant shall, to the extent provided in
its participation agreement, be entitled to the benefits, and be bound by
the obligations, of Article VIII with respect to its participating interest.
An assignment or other transfer which is not permitted by subsection (c) or
(d) below shall be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with this subsection
(b).
(c) Any Bank may at any time assign to one or more banks
or other institutions (each an "Assignee") all, or a proportionate part (but
not in any case in an amount less than $10,000,000) of all, of its rights
and obligations under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment and Assumption
Agreement in substantially the form of Exhibit J hereto executed by such
Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower and the Agent, such consents not to be unreasonably
withheld; provided that if an Assignee is another Bank or an affiliate of
such transferor Bank, no such consent shall be required; and provided further
that such assignment may, but need not, include the rights of the transferor
<PAGE> 66
Bank in respect of outstanding Money Market Loans. Upon execution and
delivery of such an instrument and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with
a Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be required.
Upon the consummation of any assignment pursuant to this subsection (c),
the transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee.
In connection with any such assignment, the transferor Bank shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$2,500. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the first date on
which interest or fees are payable hereunder for its account, deliver to the
Borrower and the Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with
Section 2.15.
(d) Any Bank may at any time assign all or any portion
of its rights under this Agreement and its Note to a Federal Reserve Bank.
No such assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment under Section
8.03 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02 or 8.03
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not relying
upon any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 9.08. Managing Agents; Co-Agents. Each Bank
listed on Schedule I hereto under the heading "Managing Agent" shall be a
Managing Agent hereunder. Each Bank listed on Schedule I hereto under the
heading "Co-Agent" shall be a Co-Agent hereunder. Nothing in this Agreement
shall impose upon any Managing Agent or Co-Agent, each in such capacity, any
<PAGE> 67
duties or responsibilities whatsoever.
SECTION 9.09. Governing Law. This Agreement and each Note
shall be governed by and construed in accordance with the laws of the State
of New York.
SECTION 9.10. Counterparts; Integration. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
SECTION 9.11. Several Obligations. The obligations of the
Banks hereunder are several. Neither the failure of any Bank to carry out
its obligations hereunder nor of this Agreement to be duly authorized,
executed and delivery by any Bank shall relieve any other Bank of its
obligations hereunder (or affect the rights hereunder of such other Bank).
No Bank shall be responsible for the obligations of, or any action taken or
omitted by, any other Bank hereunder.
SECTION 9.12. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By /s/ Steven L. Lilly
Title: Chief Financial Officer
Address: Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071-3025
Attention: Steven L. Lilly
Title: Sr. Vice President &
Chief Financial Officer
Telephone No.: (703) 709-6700
Telecopier No.: (703) 709-6779
<PAGE> 69
Commitments
$125,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sanjeanette Harris
Title: Vice President
$120,000,000 THE BANK OF NOVA SCOTIA
By /s/ J. R. Trimble
Title: Senior Relationship
Manager
$110,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Richard J. Salmon
Title: Vice President
$110,000,000 THE CHASE MANHATTAN BANK
By /s/ Thomas L. Casey
Title: Vice President
$110,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Richard Waldman
Title: Authorized Agent
$110,000,000 NATIONSBANK, N.A.
By /s/ Paula Z. Kramp
Title: Vice President
<PAGE> 70
$ 90,000,000 ABN-AMRO BANK N.V.
By /s/ Frances OR Logan
Title: Vice President
By /s/ Thomas T. Rogers
Title: Assistant Vice President
$ 90,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Mary E. Collier
Title: Vice President
$ 90,000,000 THE TORONTO-DOMINION BANK
By /s/ Jorge A. Garcia
Title: Manager Credit
Administration
$ 90,000,000 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ Paul R. Morrison
Title: Vice President
By /s/ Karen L. Roth
Title: Assistant Vice President
$ 85,000,000 RABOBANK NEDERLAND
By /s/ Mark S. Laponte
Title: Vice President
By /s/ Ian Reece
Title: Vice President & Manager
<PAGE> 71
$ 70,000,000 BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By /s/ J. Andrew Don
Title: Vice President & Manager
$ 55,000,000 CIBC INC.
By /s/ Margaret E. McTigue
Title: Authorized Signatory
$ 50,000,000 THE YASUDA TRUST & BANKING
COMPANY LTD.
By /s/ Rohn M. Laudenschlager
Title: Senior Vice President
$ 47,500,000 COMERICA BANK
By /s/ Tamara J. Gurne
Title: Account Officer
$ 42,500,000 THE INDUSTRIAL BANK OF JAPAN
By /s/ Robert W. Ramage, Jr.
Title: Senior Vice President
$ 42,500,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Thomas A. Majeski
Title: Assistant Vice President
$ 37,500,000 DRESDNER BANK AG
By /s/ Lawrence E. Jones
Title: Vice President
By /s/ John D. Padilla
Title: Assistant Vice President
<PAGE> 72
$ 30,000,000 FIRST BANK NATIONAL ASSOCIATION
By /s/ Christopher H. Patton
Title: Commercial Banking Officer
$ 30,000,000 THE FUJI BANK, LIMITED
By /s/ Masanobu Kodayashi
Title: Vice President &
Manager
$ 30,000,000 KREDIETBANK N.V.
By /s/ Robert Snauffer
Title: Vice President
By /s/ Thomas R. Lalli
Title: Vice President
$ 30,000,000 BANCA MONTE DEI PASCHI DI
SIENA, S.p.A.
By /s/ S. M. Sondak
Title: First Vice President &
Deputy General Manager
By /s/ Brian R. Landy
Title: Vice President
$ 30,000,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE
New York Branch and/or Cayman
Island Branch
By /s/ S. K. Hunter
Title: Senior Vice President
By /s/ S. Hoevermann
Title: Vice President
<PAGE> 73
$ 25,000,000 BANCO BILBAO VIZCAYA, S.A.
By /s/ Alejandro Lorca
Title: Vice President
By /s/ John Carreras
Title: Vice President
$ 25,000,000 BANKERS TRUST COMPANY
By /s/ Dana Klein
Title: Vice President
$ 25,000,000 BAYERISCHE LANDESBANK GIROZENTRALE
By /s/ Bert von Stuelpnagel
Title: Executive Vice President
By /s/ Peter Obermann
Title: Senior Vice President &
Manager Lending Division
$ 25,000,000 BANQUE NATIONALE DE PARIS
By /s/ Phil Truesdale
Title: Vice President
By /s/ Veronique Marcus
Title: Assistant Vice President
$ 25,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By /s/ Michael G. Haggarty
Title: Vice President
$ 25,000,000 CRESTAR BANK
By /s/ William F. Lindlaw
Title: Vice President
<PAGE> 74
$ 25,000,000 FLEET NATIONAL BANK
By /s/ Thomas L. Rose
Title: Vice President
$ 25,000,000 HARRIS TRUST AND SAVINGS BANK
By /s/ Michael W. Lewis
Title: Senior Vice President
$ 25,000,000 MELLON BANK N.A.
By /s/ Scott Hennessee
Title: Assistant Vice President
$ 25,000,000 THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., NEW YORK BRANCH
By /s/ Masanori Shoji
Title: Deputy General Manager
$ 25,000,000 THE SAKURA BANK, LTD
By /s/ Yasumasa Kikuchi
Title: Senior Vice President
$ 25,000,000 THE TOKAI BANK, LTD
By /s/ Shinichi Kondo
Title: Deputy General Manager
<PAGE> 75
$ 22,500,000 COMMERZBANK AG, NEW YORK BRANCH
By /s/ Subash R. Viswanathan
Title: Vice President
By /s/ Andrew R. Campbell
Title: Assistant Cashier
$ 22,500,000 NATIONAL WESTMINSTER BANK PLC
New York Branch
By /s/ Stephen L. Cowan
Title: Vice President
NATIONAL WESTMINSTER BANK PLC
Nassau Branch
By /s/ Stephen L. Cowan
Title: Vice President
$ 22,500,000 ROYAL BANK OF CANADA
By /s/ Terry L. Grant
Title: Manager
$ 20,000,000 BANCA CASSA DI RISPARMIO DI
TORINO S.p.A.
By /s/ J. Slade Carter, Jr.
Title: Vice President
$ 20,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Stephanie R. Rogers
Title: Vice President
$ 20,000,000 UNITED STATES NATIONAL BANK OF OREGON
By /s/ Douglas A. Rich
Title: Vice President
<PAGE> 76
$ 17,500,000 BANK AUSTRIA AG
By /s/ J. Anthony Seay
Title: Vice President
By /s/ W. Scott Harwood
Title: Assistant Vice President
$ 17,500,000 SUNTRUST BANK, CENTRAL FLORIDA, NA
By /s/ Janet P. Sammons
Title: Vice President
$ 15,000,000 THE TOYO TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH
By /s/ Kazuhiko Yamauchi
Title: Vice President
$ 15,000,000 BANCO DI NAPOLI, S.p.A.
By /s/ Claude P. Mapes
Title: First Vice President
By /s/ Lucio Passarello
Title: First Vice President
$ 12,500,000 BANK OF MONTREAL
By /s/ John L. Smith
Title: Director
$ 12,500,000 THE SANWA BANK, LIMITED
By /s/ William M. Plough
Title: Vice President
By /s/ Andrew N. Hammond
Title: Vice President
<PAGE> 77
$ 12,500,000 SIGNET BANK
By /s/ Linwood White
Title: Senior Vice President
$ 12,500,000 UNION BANK OF CALIFORNIA, N.A.
By /s/ Alison A. Mason
Title: Vice President
$ -0- BANK ONE, ARIZONA, NA
By /s/ Craig Hoskins
Title: Vice President
$ -0- BARCLAYS BANK PLC
By /s/ Sydney G. Dennis
Title: Director
$ -0- CREDIT SUISSE
By /s/ Christopher J. Eldin
Title: Member of Senior
Management
By /s/ Thomas G. Muoio
Title: Associate
$ -0- DEUTSCHE BANK AG
By /s/ Rosemary R. Kelley
Title: Vice President
By /s/ Julia E. Gallagher
Title: Associate
<PAGE> 78
$ -0- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
By /s/ John L. Dean
Title: Senior Vice President
By /s/ Wolfgang Bollmann
Title: Senior Vice President
$ -0- LLOYDS BANK PLC
By /s/ Paul D. Briamonte
Title: Vice President
By /s/ Stephen J. Attree
Title: Assistant Vice President
$ -0- NATIONAL CITY BANK
By /s/ Jeffrey L. Hawthorne
Title: Vice President &
Regional Director
$ -0- THE NORTHERN TRUST COMPANY
By /s/ David L. Love
Title: Commercial Banking Officer
$ -0- SOCIETE GENERALE
By /s/ Gordon Eadon
Title: Vice President
$ -0- THE SUMITOMO BANK, LTD
By /s/ John C. Kissinger
Title: Joint General Manager
<PAGE> 79
$ -0- WELLS FARGO, N.A.
By /s/ Kathleen Barnes
Title: Vice President
$ -0- WESTDEUTSCHE LANDESBANK GIROZENTRALE
By /s/ Karen E. Hoplock
Title: Vice President
By /s/ Thomas Lee
Title: Associate
____________________
Total Commitments
$ 2,167,500,000
====================
<PAGE> 80
J.P. MORGAN SECURITIES INC.,
as Arranger and Co-Syndication Agent
By /s/ Suzanne Waltman
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Co-Syndication Agent
By /s/ J.R. Trimble
Title: Senior Relationship
Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative
Agent
By /s/ Sanjeanetta Harris
Title: Vice President
Address:
60 Wall Street
New York, New York 10260
Attention: Loan Department
Telex number: 420230
<PAGE> 81
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate"
for any day are the respective percentages set forth below in the applicable
row under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level
Status I II III
<C> <C> <C> <C>
Euro-Dollar 0.16 0.2% 0.225%
Margin
If Utiliza-
tion is equal to or
less than
50%
If Utiliza- 0.16 0.325% 0.35%
tion exceeds
50%
CD Margin 0.285% 0.325% 0.35%
If Utiliza-
tion is
equal to or
less than
50%
If Utiliza- 0.285 0.45% 0.475%
tion exceeds
50%
Facility Fee 0.09% 0.1% 0.125%
Rate
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Borrower has
outstanding senior unsecured long-term debt and such debt, without third
party enhancement, is rated (or, if on such date the Borrower has no
<PAGE> 82
outstanding senior unsecured long-term debt, evidence satisfactory to the
Agent is provided to the effect that the rating of senior unsecured
long-term debt of the Borrower, assuming that it had outstanding senior
unsecured long-term debt, would be rated) at least AA- (or any equivalent
rating which is used in lieu thereof) by S&P or Aa3 (or any equivalent
rating which is used in lieu thereof) by Moody's.
"Level II Status" exists at any date, if at such date, the
Borrower has outstanding senior unsecured long-term debt and such debt,
without third party enhancement, is rated (or, if on such date the Borrower
has no outstanding senior unsecured long-term debt, evidence satisfactory to
the Agent is provided to the effect that the rating of senior unsecured
long-term debt of the Borrower, assuming that it had outstanding senior
unsecured long-term debt, would be rated) at least A+ (or any equivalent
rating which is used in lieu thereof) or higher by S&P or A1 (or any
equivalent rating which is used in lieu thereof) or higher by Moody's and
Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date,
neither Level I Status nor Level II Status exists.
"Status" refers to the determination of which of Level I
Status, Level II Status or Level III Status exists at any date.
"Utilization" means at any date the percentage equivalent
of a fraction (i) the numerator of which is the aggregate outstanding
principal amount of the Loans at such date, after giving effect to any
borrowing or payment on such date, and (ii) the denominator of which is the
aggregate amount of the Commitments at such date, after giving effect to any
reduction of the Commitments on such date. For purposes of this Schedule,
if for any reason any Loans remain outstanding after termination of the
Commitments, the Utilization for each date on or after the date of such
termination shall be deemed to be greater than 50%.
The credit ratings to be utilized for purposes of this
Pricing Schedule shall be, so long as the Borrower's unsecured Medium Term
Notes are rated by either S&P or Moody's, those assigned to the Borrower's
unsecured Medium Term Notes. The rating in effect at any date is that in
effect at the close of business on such date.
<PAGE> 83
EXHIBIT A
NOTE
New York, New York
, 19
For value received, National Rural Utilities Cooperative
Finance Corporation, a not-for-profit cooperative association incorporated
under the laws of the District of Columbia (the "Borrower"), promises to pay
to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Revolving Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and
at the rate or rates provided for in the Revolving Credit Agreement. All
such payments of principal and interest shall be made in lawful money of
the United States in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be
recorded by the Bank and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such
Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Revolving Credit Agreement.
This note is one of the Notes referred to in the Five-Year
Revolving Credit Agreement dated as of February 28, 1995 and amended and
restated as of November 26, 1996 among the Borrower, the banks listed on
the signature pages thereof, J.P. Morgan Securities Inc. and The Bank of
Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust Company of
New York, as Administrative Agent (as the same may be amended from time to
time, the "Revolving Credit Agreement").
<PAGE> 84
Terms defined in the Revolving Credit Agreement are used herein with the
same meanings. Reference is made to the Revolving Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE> 85
Note (cont'd)
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Amount of Type of Principal Maturity Notation Made
Date Loan Loan Repaid Date By
<C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 86
EXHIBIT B
Form of RUS Guarantee
The United States of America acting through the Administrator
of the Rural Utilities Service ("RUS") hereby unconditionally guarantees to
[name of Payee] the making of [__%] of the payments of principal and
interest when and as due on this Note of _________ (the "Cooperative") in
accordance with the terms hereof and of the Loan Agreement referred to in
this Note, until such principal and interest shall be indefeasibly paid in
full (which includes interest accruing on such principal between the date of
default under this Note and the payment in full of this Guarantee),
irrespective of receipt by RUS of any sums or property from its enforcement
of its remedies for the Cooperative default. This Guarantee shall be
incontestable except for fraud or misrepresentation of which the holder had
actual knowledge at the time it became a holder. RUS hereby waives diligence,
presentment, demand, protest and notice of any kind, as well as any
requirement that [name of Payee] exhaust any right or take any action against
the Cooperative.
This Guarantee is issued pursuant to Title III of the Rural
Electrification Act of 1936, as amended (7 U.S.C. {{ 901, et seq.), and the
Loan Guarantee and Servicing Agreement among RUS, the Cooperative, The First
National Bank of Chicago and National Rural Utilities Cooperative Finance
Corporation dated ___________, 19__.
UNITED STATES OF AMERICA
Date___________, 19__ By_______________________
Administrator of Rural
Electrification
Administration
<PAGE> 87
EXHIBIT C
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: National Rural Utilities
Cooperative Finance Corporation (the "Borrower")
Re: Five-Year Revolving Credit Agreement (the "Revolving Credit
Agreement") dated as of February 28, 1995 and amended and restated
as of November 26, 1996 among the Borrower, the Banks listed on the
signature pages thereof, J.P. Morgan Securities Inc. and The Bank of
Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust
Company of New York, as Administrative Agent
We hereby give notice pursuant to Section 2.03 of the
Revolving Credit Agreement that we request Money Market Quotes for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount2 Interest Period3
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the London
Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the
Revolving Credit Agreement.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By________________________
Title:
2 Amount must be $25,000,000 or a larger multiple of $1,000,000.
3 Any number of whole months (but not less than one month) (LIBOR
Auction) or not less than 30 days (Absolute Rate Auction), subject to
the provisions of the definition of Interest Period.
<PAGE> 88
EXHIBIT D
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to the National Rural Utilities Cooperative
Finance Corporation (the "Borrower")
Pursuant to Section 2.03 of the Five-Year Revolving Credit
Agreement dated as of February 28, 1995 and amended and
restated as of November 26, 1996 among the Borrower, the
Banks party thereto, J.P. Morgan Securities Inc. and The
Bank of Nova Scotia, as Co-Syndication Agents, and the
undersigned, as Administrative Agent, we are pleased on
behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the London
Interbank Offered Rate.]
Please respond to this invitation by no later than
[2:00 P.M.] [9:00 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE> 89
EXHIBIT E
Form of Money Market Quote
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
60 Wall Street
New York, New York 10260
Attention:
Re: Money Market Quote to
National Rural Utilities Cooperative
Finance Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower
dated _____________, 19__, we hereby make the following Money Market Quote
on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the following
rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the sum
of the individual offers exceeds the amount the Bank is willing to
lend. Bids must be made for $1,000,000 or a larger multiple thereof.
(notes continued on following page)
<PAGE> 90
We understand and agree that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions set forth in
the Five-Year Revolving Credit Agreement dated as of February 28, 1995 and
amended and restated as of November 26, 1996 among the Borrower, the Banks
listed on the signature pages thereof, J.P. Morgan Securities Inc. and The
Bank of Nova Scotia, as Co-Syndication Agents, and yourselves, as
Administrative Agent, irrevocably obligates us to make the Money Market
Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Any number of whole months (but not less than one month) or not less
than 30 days, as specified in the related Invitation. No more than five
bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (rounded to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (rounded to the nearest 1/10,000th
of 1%).
<PAGE> 91
EXHIBIT F
OPINION OF JOHN JAY LIST, ESQ.,
GENERAL COUNSEL OF THE BORROWER
November __, 1996
I am General Counsel of the National Rural Utilities
Cooperative Finance Corporation (the "Borrower") and am delivering this
opinion pursuant to the Five-Year Revolving Credit Agreement (the
"Agreement") dated as of February 28, 1995 and amended and restated as of
November 26, 1996 among the Borrower, the banks listed on the signature
pages thereof, J.P. Morgan Securities Inc. and The Bank of Nova Scotia, as
Co-Syndication Agents, and Morgan Guaranty Trust Company of New York, as
Administrative Agent. Terms defined in the Agreement are used herein as
therein defined. This opinion is being rendered to you at the request of
my client, the Borrower, pursuant to Section 3.01(c) of the Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as I have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a cooperative association duly
incorporated, validly existing and in good standing under the laws of the
District of Columbia and has the corporate power and authority and all
material governmental licenses, authorizations, consents and approvals
required to own its property and assets and to transact the business in
which it is engaged. The Borrower is duly qualified or licensed as a
foreign corporation in good standing in every jurisdiction in which the
nature of the business in which it is engaged makes such qualification or
licensing necessary, except in those jurisdictions in which the failure to
be so qualified or licensed would not (after qualification, assuming that
the Borrower could so qualify without the payment of any fee or penalty and
retain its rights as they existed prior to such qualification all to an
extent so that any fees or penalties required to be so paid or any rights
not so retained would not, individually or in the aggregate, have a material
adverse effect on the business or financial condition of the Borrower),
<PAGE> 92
individually or in the aggregate, have a material adverse effect upon the
business or financial condition of the Borrower. The Borrower has the
corporate power and authority to execute, deliver and carry out the terms
and provisions of the Agreement and the Notes. The Agreement and the Notes
have been duly and validly authorized, executed and delivered by the
Borrower, and the Agreement constitutes a legal, valid and binding agreement
of the Borrower, and the Notes constitute legal, valid and binding
obligations of the Borrower, in each case enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general
principles of equity.
2. There are no actions, suits, proceedings or
investigations pending or, to my knowledge, threatened against or affecting
the Borrower by or before any court or any governmental authority, body or
agency or any arbitration board which are reasonably likely to materially
adversely affect the business, property, assets, financial position or
results of operations of the Borrower or the authority or ability of the
Borrower to perform its obligations under the Agreement or the Notes.
3. No authorization, consent, approval or license of, or
declaration, filing or registration with or exemption by, any governmental
authority, body or agency is required in connection with the execution,
delivery or performance by the Borrower of the Agreement or the Notes.
4. The holders of the Borrower's Capital Term Certificates
are not and will not be entitled to receive any payments with respect to the
principal thereof or interest thereon solely because of withdrawing or being
expelled from membership in the Borrower.
5. Neither the Borrower nor any Subsidiary is in default in
any material respect under any material agreement or other instrument to
which it is a party or by which it is bound or its property or assets may be
affected. No event or condition exists which constitutes, or with the
giving of notice or lapse of time or both would constitute, such a default
under any such agreement or other instrument. Neither the execution and
delivery of the Agreement or the Notes, nor the consummation of any of the
transactions therein contemplated, nor compliance with the terms and
provisions thereof, will contravene any provision of law, statute, rule or
regulation to which the Borrower is subject or any judgment, decree, award,
franchise, order or permit applicable to the Borrower, or will conflict or
be inconsistent with, or will result in any breach of, any of the terms,
<PAGE> 93
covenants, conditions or provisions of, or constitute (or with the giving of
notice or lapse of time, or both, would constitute) a default under (or
condition or event entitling any Person to require, whether by purchase,
redemption, acceleration or otherwise, the Borrower to perform any
obligations prior to the scheduled maturity thereof), or result in the
creation or imposition of any Lien upon any of the property or assets of the
Borrower pursuant to the terms of, any indenture, mortgage, deed of trust,
agreement or other instrument to which it may be subject, or violate any
provision of the certificate of incorporation or by-laws of the Borrower.
Without limiting the generality of the foregoing, the Borrower is not a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Borrower, any agreement or indenture relating
thereto or any other contract or agreement (including its certificate of
incorporation and by-laws), which would be violated by the incurring of the
Indebtedness to be evidenced by the Notes.
6. The Borrower has complied fully with all of the material
provisions of each Indenture. No Event of Default (within the meaning of
such term as defined in either Indenture) and no event, act or condition
(except for possible non-compliance by the Borrower with any immaterial
provision of such Indenture which in itself is not such an Event of Default
under such Indenture) which with notice or lapse of time, or both, would
constitute such an Event of Default has occurred and is continuing under
such Indenture. The borrowings by the Borrower contemplated by the Agreement
will not cause such an Event of Default under, or the violation of any
covenant contained in, either Indenture.
7. Set forth on Annex A attached hereto is a true, correct
and complete list of all of the Borrower's Subsidiaries and Joint Ventures,
the jurisdiction of incorporation or organization of each such Subsidiary
and Joint Venture and the nature and percentage of the Borrower's ownership
of each such Subsidiary and Joint Venture.
<PAGE> 94
EXHIBIT G
OPINION OF MILBANK, TWEED, HADLEY & McCLOY,
SPECIAL COUNSEL FOR THE BORROWER
November 26, 1996
We have acted as special counsel to National Rural Utilities
Cooperative Finance Corporation (the "Borrower") in connection with the
Five-Year Revolving Credit Agreement dated as of February 28, 1995 and
amended and restated as of November 26, 1996 (the "Agreement") among the
Borrower, the Banks party thereto, J.P. Morgan Securities Inc. and The Bank
of Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust Company
of New York, in its capacity as Administrative Agent (the "Agent"). All
capitalized terms used but not defined herein have the respective meanings
given to such terms in the Agreement.
In rendering the opinions expressed below, we have examined:
(i) the Agreement;
(ii) the Notes; and
(iii) such corporate records of the Borrower and such
other documents as we have deemed necessary as a basis for
the opinions expressed below.
In our examination, we have assumed the genuineness of all signatures
(other than the Borrower's), the authenticity of all documents submitted
to us as originals and the conformity with authentic original documents of
all documents submitted to us as copies. When relevant facts were not
independently established, we have relied upon statements of governmental
officials and upon representations made in or pursuant to the Agreement and
certificates of appropriate representatives of the Borrower.
In rendering the opinions expressed below, we have assumed,
with respect to all of the documents referred to in this opinion letter
(except as provided below), that:
<PAGE> 95
(i) such documents have been duly authorized by, have
been duly executed and delivered by, and constitute legal, valid, binding
and enforceable obligations of, all of the parties (except the Borrower)
to such documents;
(ii) all signatures (except signatures of officers of
the Borrower) to such documents have been duly authorized;
and
(iii) all of the parties to such documents (except the
Borrower) are duly organized and validly existing and have the
power and authority (corporate and other) to execute, deliver
and perform such documents.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. The Borrower is a cooperative association duly
incorporated, validly existing and in good standing under the laws of the
District of Columbia and has the corporate power and authority and all
material governmental licenses, authorizations, consents and approvals
required to own its property and assets and to transact the business in which
it is engaged. The Borrower has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the Agreement
and the Notes. The Agreement and the Notes have been duly and validly
authorized, executed and delivered by the Borrower, and the Agreement
constitutes a legal, valid and binding agreement of the Borrower, and the
Notes constitute legal, valid and binding obligations of the Borrower, in
each case enforceable against the Borrower in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as the enforceability
of the Agreement and the Notes is subject to the application of general
principles of equity (regardless of whether considered in a proceeding in
equity or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or any other
equitable remedy and (b) concepts of materiality, reasonableness, good faith
and fair dealing.
<PAGE> 96
2. To our best knowledge, there are no actions, suits,
proceedings or investigations pending or threatened against the Borrower by
or before any court or any governmental authority, body or agency or any
arbitration board which in our view are reasonably likely to materially
adversely affect the business, property, assets, financial position or
results of operations of the Borrower or the authority or ability of the
Borrower to perform its obligations under the Agreement or the Notes.
3. No authorization, consent, approval or license of, or
declaration, filing or registration with or exemption by, any governmental
authority, body or agency is required in connection with the execution,
delivery or performance by the Borrower of the Agreement or the Notes.
4. The holders of the Borrower's Capital Term Certificates
are not and will not be entitled to receive any payments with respect to the
principal thereof or interest thereon solely because of withdrawing or being
expelled from membership in the Borrower.
5. Neither the execution and delivery of the Agreement or
the Notes, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene any provision of law, statute, rule or regulation to which the
Borrower is subject or any judgment, decree, award, franchise, order or
permit known to us applicable to the Borrower, or will conflict or be
inconsistent with, or will result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute (or with the giving
of notice or lapse of time, or both, would constitute) a default under
(or condition or event entitling any Person to require, whether by purchase,
redemption, acceleration or otherwise, the Borrower to perform any
obligations prior to the scheduled maturity thereof), or result in the
creation or imposition of any Lien upon any of the property or assets of the
Borrower pursuant to the terms of, any indenture, mortgage, deed of trust,
agreement or other instrument known to us to which it may be subject, or
violate any provision of the certificate of incorporation or by-laws of the
Borrower. Without limiting the generality of the foregoing, to our best
knowledge the Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of the
Borrower, any agreement or indenture relating thereto or any other contract
or agreement (including its certificate of incorporation and by-laws), which
would be violated by the incurring of the Indebtedness to be evidenced by
the Notes.
<PAGE> 97
6. The Borrower has received a ruling from the Internal
Revenue Service to the effect that it is exempt from payment of Federal
income tax under Section 501(c)(4) of the Internal Revenue Code of 1986,
and nothing has come to our attention that leads us to believe that the
Borrower is not so exempt.
7. The Borrower is not an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
8. The Borrower is not a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended.
The foregoing opinions are subject to the following
qualifications:
We express no opinion as to the effect of the laws of any
jurisdiction in which any Bank is located (other than New York) that limit
the interest, fees or other charges such Bank may impose.
We express no opinion concerning any law other than the law
of New York, the District of Columbia and the federal law of the United
States. Insofar as this opinion pertains to matters of District of Columbia
law, we have relied on the opinion of John Jay List, Esq. being delivered to
you contemporaneously herewith.
This opinion letter is, pursuant to Section 3.01(d) of the
Agreement, provided to you by us in our capacity as special counsel to the
Borrower and at its request and may not be relied upon by any Person or for
any purpose other than in connection with the transactions contemplated by
the Agreement without, in each instance, our prior written consent.
Very truly yours,
<PAGE> 98
EXHIBIT H
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
November 26, 1996
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Five- Year
Revolving Credit Agreement dated as of February 28, 1995 and amended and
restated (the "Credit Agreement") among the National Rural Utilities
Cooperative Finance Corporation, a not-for-profit cooperative association
incorporated under the laws of the District of Columbia (the "Borrower"),
the banks listed on the signature pages thereof (the "Banks"), J.P. Morgan
Securities Inc. and The Bank of Nova Scotia, as Co-Syndication Agents, and
Morgan Guaranty Trust Company of New York, as Administrative Agent (the
"Agent"), and have acted as special counsel for the Agent for the purpose
of rendering this opinion pursuant to Section 3.01(e) of the Credit
Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducte
d such other investigations of fact and law as we have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower
of the Credit Agreement and the Notes are within the Borrower's corporate
powers and have been duly authorized by all necessary corporate action.
<PAGE> 99
2. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and the Notes constitute valid and binding
obligations of the Borrower, in each case enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general principles
of equity.
In giving the foregoing opinion, (i) we express no opinion
as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect and (ii) we have relied,
without independent investigation, as to all matters governed by the laws
of the District of Columbia, upon the opinion of John Jay List, Esq.,
General Counsel of the Borrower, dated the date hereof, a copy of which
has been delivered to you.
Very truly yours,
<PAGE> 100
EXHIBIT I
EXTENSION AGREEMENT
[Date]
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, VA 22071-3025
Morgan Guaranty Trust Company
of New York, as Administrative Agent
under the Credit Agreement
referred to below
60 Wall Street
New York, NY 10260
Gentlemen:
Effective as of [effective date], the undersigned hereby agree to
extend the Termination Date as now in effect under the Five-Year Credit
Agreement dated as of February 28, 1995 and amended and restated as of
November 26, 1996, as further amended and supplemented from time to time
(the "Credit Agreement"), among National Rural Utilities Cooperative
Finance Corporation, the Banks listed therein, J.P. Morgan Securities Inc.
and The Bank of Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty
Trust Company of New York, as Administrative Agent, to [Date].
Terms defined in the Credit Agreement are used herein as therein
defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York.
[NAME OF BANK]
By____________________________
Title:
<PAGE> 101
[NAME OF BANK]
By____________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By____________________________
Title:
Agreed and accepted:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE> 102
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION (the "Borrower") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Five-Year Credit Agreement dated as of
February 28, 1995 and amended and restated as of November 26, 1996
(the "Credit Agreement") among the Borrower, the Assignor and the other
Banks party thereto, as Banks, J.P. Morgan Securities Inc. and The Bank
of Nova Scotia, as Co-Syndication Agents, and Morgan Guaranty Trust Company
of New York, as Administrative Agent (the "Agent");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrower in an aggregate principal amount
at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the
Credit Agreement.
<PAGE> 103
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement
to the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of
the principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by
the Assignor, the Assignee, the Borrower and the Agent and the payment of
the amounts specified in Section 3 required to be paid on the date hereof
(i) the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by
a like amount and the Assignor released from its obligations under the
Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to
the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.
It is understood that commitment and/or facility fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount
under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to
the extent of such other party's interest therein and shall promptly pay
the same to such other party.
SECTION 4. Consent of the Borrower and the Agent. This Agreement
is conditioned upon the consent of the Borrower and the Agent pursuant to
Section 9.06(c) of the Credit Agreement. The execution of this Agreement
by the Borrower and the Agent is evidence of this consent. Pursuant to
Section 9.06(c) of the Credit Agreement the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower
<PAGE> 104
in respect of the Credit Agreement or any Note. The Assignee acknowledges
that it has, independently and without reliance on the Assignor, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and
will continue to be responsible for making its own independent appraisal
of the business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By__________________________
Title:
<PAGE> 105
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By__________________________
Title:
<PAGE> 1
Exhibit 10.3
FIRST AMENDMENT TO
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
THIS FIRST AMENDMENT, dated as of November 27, 1996 (this "Amendment"),
to the Original Agreement (as defined below) is entered into among NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a not-for-profit cooperative
association incorporated under the laws of the District of Columbia, as
Borrower, the BANKS listed on the signature pages hereof, and THE BANK OF
NOVA SCOTIA, as Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent have
heretofore entered into a Revolving Credit and Term Loan agreement, dated
as of April 30, 1996 (the "Original Agreement"); and
WHEREAS, the Borrower has requested the Banks and the Agent
to amend the Original Agreement in certain respects as set forth below; and
WHEREAS, the Banks and the Agent are willing, on the terms
and conditions set forth below, to amend the Original Agreement in certain
respects as provided below.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Borrower, the Banks and the Agent
hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain Definitions. The following terms when used in this
Amendment shall have the following meanings (such meanings to be equally
applicable to the singular and plural form thereof):
"Amendment" is defined in the preamble.
"Original Agreement" is defined in the first recital.
SECTION 1.2. Other Definitions. Terms for which meanings
are provided in the Original Agreement are, unless otherwise defined herein
or the context otherwise requires, used in this Amendment with such meanings.
<PAGE> 2
ARTICLE II
AMENDMENTS TO
ORIGINAL AGREEMENT
Effective on (and subject to the occurrence of) the First
Amendment Effective Date, the Original Agreement is hereby amended in
accordance with Sections 2.1 and 2.2. Except as so amended or modified by
this Amendment, the Original Agreement shall continue in full force and effect.
SECTION 2.1 Amendments to Article I. Article I of the
Original Agreement is hereby amended in accordance with Sections 2.1.1
and 2.1.2.
SECTION 2.1.1. Section 1.01 of the Original Agreement is
hereby amended by inserting the following definitions in the appropriate
alphabetical order:
"First Amendment" means the First Amendment, dated as of
November 27, 1996, to this Agreement, among the Borrower, the Banks parties
thereto and the Agent.
"First Amendment Effective Date" is defined in Section 3.1 of
the First Amendment.
SECTION 2.1.2 Section 1.01 of the Original Agreement is
hereby further amended as follows:
(a) The definition of "Minimum Required Net Worth" is hereby amended
in its entirety to read as follows:
"Minimum Required Net Worth" shall initially be
$1,346,291,939; provided that on each date after the First Amendment
Effective Date upon which annual financial statements are required to be
delivered pursuant to Section 5.03(ii), the Minimum Required Net Worth shall
be permanently increased by an amount, if positive, equal to ninety percent
(90%) of (i) the aggregate amount of Net Margins for the prior fiscal year
minus (ii) the aggregate amount of retirements of Patronage Capital
Certificates made by the Borrower to Members in the prior fiscal year.
In the event that in any year the amount specified in clause (ii) above is
equal to or greater than the amount specified in clause (i) above, the
Minimum Required Net Worth shall remain the same for that year.
the definition of "Net Worth" is hereby amended in its entirety to read as
follows:
"Net Worth" means the sum of (i) all accounts which constitute
Members' equity in the Borrower, (ii) all Indebtedness of the Borrower shown
in its balance sheet dated as of May 31, 1996 as "Members' Subordinated
Certificates" and any other Indebtedness of the Borrower incurred after
May 31, 1996 having substantially similar provisions as to subordination as
<PAGE> 3
those contained in said outstanding certificates and (iii) any amounts
reflected in the financial statements of the Borrower as a reserve for loan
losses.
(c) the definition of "Revolving Credit Period" is hereby amended in
its entirety to read as follows:
"Revolving Credit Period" means the period from and including
the First Amendment Effective Date to but excluding the Revolving Credit
Period Termination Date.
(d) the definition of "Revolving Credit Period Termination Date" is
hereby amended in its entirety to read as follows:
"Revolving Credit Period Termination Date" means November 26,
1997, or such later date to which the Revolving Credit Period shall have been
extended pursuant to Section 2.01(b), or, if either such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
(e) the definition of "S&P" is hereby amended in its entirety to read
as follows:
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, and its successors.
SECTION 2.2. Amendment to Pricing Schedule. The Pricing
Schedule attached to the Original Agreement is hereby deleted and replaced
with the Pricing Schedule attached hereto as Exhibit A. All references to
the Pricing Schedule in the Original Agreement shall be deemed to refer to
the Pricing Schedule attached hereto as Exhibit A.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Effectiveness. This Amendment shall become
effective on the date (the "First Amendment Effective Date") on which the
Agent shall have received the following documents, each dated the First
Amendment Effective Date unless otherwise indicated:
(a) receipt by the Agent of counterparts hereof signed by each
of the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
<PAGE> 4
(b) receipt by the Agent of all documents the Required
Banks may reasonably request relating to the existence of the Borrower,
the corporate authority for and the validity of this Amendment, the
Original Agreement (as amended hereby) and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(c) receipt by the Agent, for the account of the Banks, of
all fees accrued to but excluding the First Amendment Effective Date for the
account of the Agent pursuant to Section 2.08(b) of the Original Agreement.
The Agent shall promptly notify the Borrower and the Banks of the First
Amendment Effective Date, and such notice shall be conclusive and binding
on all parties hereto. On and after the First Amendment Effective Date, the
rights and obligations of the parties hereto shall be governed by the Original
Agreement, as amended by this Amendment; provided, that rights and obligations
of the parties hereto with respect to the period prior to the First Amendment
Effective Date shall continue to be governed by the provisions of the Original
Agreement; and provided further, that (i) the term "Commitment" as used in
the Original Agreement shall mean, with respect to each Bank, the amount set
forth opposite the name of such bank on the signature pages hereof (as such
amount may be reduced from time to time pursuant to the Original Agreement),
in each case created as of the First Amendment Effective Date, and (ii) all
references to "the date hereof" or "the date of this Agreement" contained in
the Original Agreement shall be deemed to refer to the First Amendment
Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby reaffirms, as of the date hereof, the
representations, warranties and agreements set forth in Article IV of the
Original Agreement, and hereby makes the following additional representations,
warranties and agreements, each of which shall survive the execution and
delivery of this Amendment:
SECTION 4.1. Corporate Power and Authority. The Borrower
has the corporate power and authority to execute, deliver and carry out the
terms and provisions of this Amendment, the Original Agreement (as amended
hereby) and the Notes. This Amendment, the Original Agreement and the Notes
have been duly and validly authorized, executed and delivered by the Borrower,
and this Amendment and the Original Agreement (as amended hereby) each
constitutes a legal, valid and binding agreement of the Borrower, and the
<PAGE> 5
Notes constitute legal, valid and binding obligations of the Borrower, in each
case enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 4.2. No Violation of Agreements. Neither the
execution and delivery of this Amendment, the Original Agreement (as amended
hereby) or the Notes, nor the consummation of any of the transactions herein
or therein contemplated, nor compliance with the terms and provisions hereof
or thereof, will contravene any provision of law, statute, rule or regulation
to which the Borrower is subject or any judgment, decree, award, franchise,
order or permit applicable to the Borrower, or will conflict or be
inconsistent with, or will result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute (or with the giving of
notice or lapse of time, or both, would constitute) a default under (or
condition or event entitling any Person to require, whether by purchase,
redemption, acceleration or otherwise, the Borrower to perform any obligations
prior to the scheduled maturity thereof), or result in the creation or
imposition of any Lien upon any of the property or assets of the Borrower
pursuant to the terms of, any indenture, mortgage, deed of trust, agreement
or other instrument to which it may be subject, or violate any provision of
the certificate of incorporation or by-laws of the Borrower.
SECTION 4.3 No Default. No Default or Event of Default has
occurred and is continuing under the Original Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 5.2 Counterparts; Integration. This Amendment may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Amendment and the Original Agreement (as amended
hereby) constitute the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral
or written, relating to the subject matter hereof.
SECTION 5.3. Several Obligations. The obligations of the
Banks hereunder and under the Original Agreement (as amended hereby) are
several. Neither the failure of any Bank to carry out its obligations
hereunder or under the Original Agreement (as amended hereby) nor of this
Amendment or the Original Agreement (as amended hereby) to be duly authorized,
<PAGE> 6
executed and delivered by any Bank shall relieve any other Bank of its
obligations hereunder or thereunder (or affect the rights hereunder or
thereunder of such other Bank). No Bank shall be responsible for the
obligations of, or any action taken or omitted by, any other Bank hereunder
or thereunder.
SECTION 5.4. Severability. In case any provision in or
obligation under this Amendment or the Original Agreement (as amended hereby)
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way
be affected or impaired thereby.
SECTION 5.5. Forum Selection and Consent to Jurisdiction.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AMENDMENT OR THE ORIGINAL AGREEMENT (AS AMENDED HEREBY), OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF THE AGENT, THE BANKS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE
BANKS, THE AGENT AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR
THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE BANKS, THE AGENT AND THE BORROWER IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BANKS, THE AGENT AND THE
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO
THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY BANK, THE AGENT OR THE BORROWER
HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AMENDMENT AND THE ORIGINAL AGREEMENT (AS AMENDED
HEREBY).
SECTION 5.6. Waiver of Jury Trial. THE AGENT, THE BANKS AND
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT AND THE
ORIGINAL AGREEMENT (AS AMENDED HEREBY), OR ANY COURSE OF CONDUCT, COURSE OF
<PAGE> 7
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
BANKS OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE BANKS ENTERING INTO
THIS AMENDMENT AND THE ORIGINAL AGREEMENT (AS AMENDED HEREBY).
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of
the day and year first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By /s/ Steven L. Lilly
Title: Chief Financial Officer
Address: Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071-3025
Attention: Richard K. Eisenberg
Telephone No.: (703) 709-6700
Telecopier No.: (703) 709-6779
<PAGE> 9
Commitments
$50,000,000 ABN AMRO BANK N.V.
NEW YORK BRANCH
By /s/ Frances O'Logan
Title: Vice President
By /s/ Thomas T. Rogers
Title: Assistant
$50,000,000 BANK OF AMERICA ILLINOIS
By /s/ Richard J. Salmon
Title: Vice President
$50,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Mary E. Collier
Title: Vice President
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sanjeanetta Harris
Title: Vice President
$50,000,000 NATIONSBANK, N.A.
By /s/ Paula Z. Kramp
Title: Vice President
<PAGE> 10
$50,000,000 RABOBANK NEDERLAND,
NEW YORK BRANCH
By /s/ Mark L. Laponte
Title: Vice President
By /s/ Ian Reece
Title: Vice President & Manager
$50,000,000 THE BANK OF NOVA SCOTIA
By /s/ J.R. Trimble
Title: Senior Relationship Manager
$50,000,000 THE CHASE MANHATTAN BANK
By /s/ Thomas L. Casey
Title: Vice President
$50,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Richard Waldman
Title: Authorized Agent
$50,000,000 THE TORONTO-DOMINION BANK
By /s/ Jorge A. Garcia
Title: Mgr. Cr. Admin.
Total Commitments
$ 500,000,000
<PAGE> 11
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ J.R. Trimble
Title: Senior Relationship Manager
<PAGE> 12
EXHIBIT A
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate"
for any day are the respective percentages set forth below in the applicable
row under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Status Level Level Level
I II III
<C> <C> <C> <C>
Euro-DollarMargin 0.185% 0.22% 0.25%
If Utiliza-
tion is equal
to or less than 50%
If Utiliza- 0.185% 0.345% 0.375%
tion exceeds50%
CD Margin
If Utiliza- 0.315% 0.345% 0.375%
tion is
equal to or
less than 50%
If Utiliza- 0.315% 0.47% 0.5%
tion exceeds
50%
Facility Fee Rate 0.065% 0.08% 0.1%
<1TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Borrower has
outstanding senior unsecured long-term debt and such debt, without third party
enhancement, is rated (or, if on such date the Borrower has no outstanding
senior unsecured long-term debt, evidence satisfactory to the Agent is
provided to the effect that the rating of senior unsecured long-term debt of
<PAGE> 13
the Borrower, assuming that it had outstanding senior unsecured long-term
debt, would be rated) at least AA- (or any equivalent rating which is used in
lieu thereof) by S&P or Aa3 (or any equivalent rating which is used in lieu
thereof) by Moody's.
"Level II Status" exists at any date, if at such date, the
Borrower has outstanding senior unsecured long-term debt and such debt,
without third party enhancement, is rated (or, if on such date the Borrower
has no outstanding senior unsecured long-term debt, evidence satisfactory to
the Agent is provided to the effect that the rating of senior unsecured
long-term debt of the Borrower, assuming that it had outstanding senior
unsecured long-term debt, would be rated) at least A+ (or any equivalent
rating which is used in lieu thereof) or higher by S&P or A1 (or any
equivalent rating which is used in lieu thereof) or higher by Moody's and
Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date, neither
Level I Status nor Level II Status exists.
"Status" refers to the determination of which of Level I
Status, Level II Status or Level III Status exists at any date.
"Utilization" means at any date the percentage equivalent of a
fraction (i) the numerator of which is the aggregate outstanding principal
amount of the Loans at such date, after giving effect to any borrowing or
payment on such date, and (ii) the denominator of which is the aggregate amount
of the Commitments at such date, after giving effect to any reduction of the
Commitments on such date. For purposes of this Schedule, if for any reason
any Loans remain outstanding after termination of the Commitments, the
Utilization for each date on or after the date of such termination shall be
deemed to be greater than 50%.
The credit ratings to be utilized for purposes of this Pricing
Schedule shall be, so long as the Borrower's unsecured Medium Term Notes are
rated by either S&P or Moody's, those assigned to the Borrower's unsecured
Medium Term Notes. The rating in effect at any date is that in effect at the
close of business on such date.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
November30, 1996, Form 10-Q and is qualified in its entirety by reference to
such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> NOV-30-1996
<CASH> 21,338
<SECURITIES> 20,000
<RECEIVABLES> 114,802
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,870,745
<PP&E> 41,634
<DEPRECIATION> 8,413
<TOTAL-ASSETS> 9,020,106
<CURRENT-LIABILITIES> 3,360,951
<BONDS> 4,055,916
0
0
<COMMON> 0
<OTHER-SE> 1,478,239
<TOTAL-LIABILITY-AND-EQUITY> 9,020,106
<SALES> 140,233
<TOTAL-REVENUES> 140,905
<CGS> 118,822
<TOTAL-COSTS> 118,822
<OTHER-EXPENSES> 5,241
<LOSS-PROVISION> 3,185
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,657
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,657
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99
THE RURAL ELECTRIC AND TELEPHONE SYSTEMS
General
The majority of the reporting RUS systems at December 31, 1995, are members
of CFC and information regarding these systems is available in the Annual
Statistical Reports of RUS (the "RUS Reports"), therefore commentary in this
section is based on information about the systems generally, rather than CFC
members alone (see Note on page 5). However, the Composite Financial State-
ments on pages 6 to 10 relate only to CFC Utility Members. At December 31,
1995 and for the year then ended, CFC's members accounted for approximately
98% of the total utility plant, 97% of the total equity, 98% of the net
margins and 97% of the total number of systems covered by RUS Reports, and
CFC believes that its members are representative of the systems as a whole.
Although generally stable retail rates have been the historical pattern for
RUS borrowers, in the 1970's and early 1980's rising costs of fuel, material,
labor, capital and wholesale power required rate increases by most of the
distribution systems. Increases in costs have also resulted in rate increases
by the power supply systems. Virtually all power contracts between power
supply systems and their member distribution systems provide for rate
increases to cover increased costs of supplying power, although in certain
cases such increases must be approved by regulatory agencies. During the
last five years, costs and rates have generally been stable.
The RUS Program
Since the enactment of the Rural Electrification Act in 1936 (the "Act"), RUS
has financed the construction of electric generating plants, transmission
facilities and distribution systems in order to provide electricity to persons
in rural areas who were without central station service. Principally through
the organization of systems under the RUS loan program in 46 states and U.S.
territories, the percentage of farms and residences in rural areas of the
United States receiving central station electric service increased from 11%
in 1934 to almost 99% currently. Rural electric systems serve 11% of all
consumers of electricity in the United States and its territories. They
account for approximately 8% of total sales of electricity and about 7% of
energy generation and generating capacity.
In 1949, the Act was amended to allow RUS to lend for the purpose of
furnishing and improving rural telephone service. At December 31, 1994,
695 of RUS's 919 telephone borrowers provided service to 4.4 million
subscribers throughout the United States and its territories (reporting
information was not available for the remaining 224 borrowers).
The Act provides for RUS to make insured loans and to provide other forms
of financial assistance to borrowers. RUS is authorized to make direct
loans, at below market rates, to systems which are eligible to borrow from
it. RUS is also authorized to guarantee loans which have been used mainly
to provide financing for construction of Bulk Power Supply Projects.
Guaranteed loans bear interest at a rate agreed upon by the borrower and
the lender (which generally has been the FFB). For telephone borrowers, RUS
also provides financing through the RTB. The RTB is a government corporation
providing financing at rates reflecting its cost of capital. RUS exercises
a high degree of financial and technical supervision over borrowers'
operations. Its loans and guarantees are generally secured by a mortgage
on substantially all of the system's property and revenues.
For fiscal year 1997, both the House and Senate Agriculture Appropriation
Committees have approved RUS electric insured loan levels of $524 million,
of which $69 million would be at the 5% rate, and $455 million would be at
municipal rates. An additional $300 million is available in loan guarantees.
Legislation enacted in 1994 allows RUS electric borrowers to prepay their
loans to RUS at a discount based on the government's cost of funds at the
time of prepayment. If a borrower chooses to prepay its notes, it becomes
ineligible for future RUS loans for a period of ten years, but remains
eligible for RUS loan guarantees. As of July 31, 1996, 77 borrowers had
either fully prepaid or partially prepaid their RUS notes, under these
<PAGE> 2
provisions, in the total amount of $1,177.9 million. A total of 59 of these
borrowers have selected CFC to refinance a total of $1,005.8 million of this
amount.
Distribution Systems
Distribution systems are local utilities distributing electric power,
generally purchased from wholesale sources, to consumers in their service
areas. Virtually all are locally-managed cooperative, non-profit
associations, and most have been in operation for at least 40 years. At
December 31, 1995, the approximate number of consumers served by RUS electric
borrowers was 11.5 million, representing an estimated 27.7 million ultimate
users. Aggregate operating revenues of the distribution systems from sales
of electric energy for the year ended December 31, 1995, totaled $15.0
billion, of which 66% was derived from the sales of electricity to
residential consumers (farm and non-farm), 31% from such sales to commercial
and industrial consumers and the remainder from sales to various other
consumers.
The composite TIER of CFC member distribution systems increased from 2.40 in
1994 to 2.42 in 1995. The composite DSC ratio increased from 2.26 in 1994 to
2.40 in 1995. The composite MDSC ratio increased from 2.09 in 1994 to 2.28
in 1995. Composite equity as a percent of total assets for member
distribution systems increased from 41.53% at December 31, 1994 to 41.75%
at December 31, 1995.
Wholesale power supply contracts ordinarily guarantee neither an un-
interrupted supply nor a constant cost of power. Contracts with RUS-
financed power supply systems (which generally require the distribution
system to purchase all its power requirements from the power supply system)
provide for rate increases to pass along increases in sellers' costs. The
wholesale power contracts permit the power supply system, subject to approval
by RUS and, in certain circumstances, regulatory agencies, to establish rates
to its members so as to produce revenues sufficient, with revenues from all
other sources, to meet the costs of operation and maintenance (including,
without limitation, replacements, insurance, taxes and administrative and
general overhead expenses) of all generating, transmission and related
facilities, to pay the cost of any power and energy purchased for resale,
to pay the costs of generation and transmission, to make all payments on
account of all indebtedness and leases of the power supply system and to
provide for the establishment and maintenance of reasonable reserves. The
rates under the wholesale power contracts are required to be reviewed by the
Board of Directors of the power supply system at least annually.
Power contracts with investor-owned utilities and power supply systems which
do not borrow from RUS generally have rates subject to regulation by the
Federal Energy Regulatory Commission. Contracts with Federal agencies
generally permit rate changes by the selling agency (subject, in some cases,
to Federal regulatory approval). In the case of many distribution systems,
only one power supplier is within a feasible distance to provide wholesale
electricity.
Power Supply Systems
Power supply systems are utilities which purchase or generate electric power
and provide it wholesale to distribution systems for delivery to the ultimate
retail consumer. Of the 63 operating power supply systems financed in whole
or in part by RUS or CFC at December 31, 1995, 62 were cooperatives owned
directly or indirectly by groups of distribution systems and one was govern-
ment owned. Of this number, 39 had generating capacity of at least 100
megawatts, and nine had no generating capacity. Seven of the nine systems
with no generating capacity operated transmission lines to supply certain
distribution systems, and one is currently building its first transmission
facilities. Certain other power supply systems had been formed but did not
yet own generating or transmission facilities. At December 31, 1995, the 55
power supply systems reporting to RUS owned interests in 145 generating plants
representing generating capacity of approximately 29,597 megawatts, or
approximately 4.3% of the nation's estimated electric generating capacity,
and served 716 RUS distribution system borrowers (representing an average for
the year of approximately 8.5 million consumers). Certain of the power supply
systems which own generating plants lease these facilities to others and
purchase their power requirements from the lessee-operators. Of the power
supply systems' total generating capacity in place as of December 31, 1995,
steam plants accounted for 94.2% (including nuclear capacity representing
approximately 10.1% of such total generating capacity), internal combustion
plants
<PAGE> 3
accounted for 5.5% and hydroelectric plants accounted for 0.3%. RUS loans and
loan guarantees as of December 31, 1995, have provided funds for the
installation of over 34,031 megawatts (including nuclear capacity of
approximately 3,806 megawatts, or 11.2% of the total) of which 1,279 megawatts
or 3.8% of the total have officially been canceled.
The high level of growth in demand for electricity experienced in the 1970's
was not expected to decline in the 1980's and the power supply systems
continued their construction programs in anticipation of continued growth
in demand. During the 1980's, however, slower growth in power requirements
of the systems reduced the need for additional generating capacity in most
areas of the country. Thus, many areas are now experiencing a surplus of
generating capacity and, as a result, some power supply systems have signi-
ficant amounts of fixed costs for power plant investment not fully supported
by increased revenues (see Note 10 to Combined Financial Statements for
further information concerning certain CFC members experiencing this problem).
While the level of funds needed for new generating units is expected to be low
over the next few years, the need for transmission and capital additions will
continue to generate substantial long-term capital requirements. The power
supply systems are expected to continue to seek to satisfy these requirements
primarily through the RUS loan guarantee program.
Telephone Systems
As of December 31, 1994 (complete data at December 31, 1995 was not yet
available), there were 919 telephone systems that were RUS borrowers, (RUS
had collected financial data on 695). The 695 telephone systems included
199 cooperative not-for-profit organizations and 496 commercial for-profit
organizations. These organizations provided telephone service to
approximately 4.4 million consumers and owned approximately 725,430 miles
of telephone lines. Total assets at December 31, 1994 were $10.8 billion,
with a composite TIER of 4.49 and composite equity ratio of 46.8%. The
telephone systems operate in all fifty states and seven U.S. territories.
The RTB was created by a 1971 amendment to the Act to serve as a source of
supplemental financing for rural telephone systems. To initially capitalize
the RTB, between 1971 and 1991 the government purchased $592 million in Class
A stock of the RTB. RTB borrowers, who are required to purchase class B
stock in an amount equal to five percent of the amount of each loan, have,
as of June 30, 1995, invested $524 million. In addition, borrowers and other
eligible entities have purchased $112 million in Class C stock of the RTB.
The Act provides that the RTB is to redeem and retire the government's Class
A stock as soon as practicable after September 30, 1995, but not to the
extent that the bank's board determines that such retirement would impair
the operation of the RTB. The minimum amount of Class A stock to be retired
each year after September 30, 1995 is the amount of the Class B stock that
is issued during that year. Language in the United States Government Fiscal
Year 1996 House Agriculture Appropriation limits the amount of Class A stock
that can be redeemed in fiscal year 1996 to five percent of the amount of
Class A stock outstanding. Similar language is expected to be included in
the fiscal year 1997 Appropriations Bill.
Regulation and Competition
The degree of regulation of rural electric systems by state authorities
varies from state to state. The retail rates of rural electric systems are
regulated in 16 states (in which there are 250 systems). Distribution systems
in these states account for 35% of the total operating revenues and patronage
capital of all distribution systems nationwide. State agencies, principally
public utility commissions, of 19 states regulate those states' 289 systems
as to the issuance of long-term debt securities. In five states (in which
there are 52 systems) state agencies regulate, to varying degrees, the
issuance of short-term debt securities. Since 1967, the Federal Power
Commission and its successor, the Federal Energy Regulatory Commission
("FERC"), which regulates interstate sales of energy at wholesale, has
taken the position that it lacks jurisdiction to regulate cooperative rural
electric systems which are current borrowers from RUS. However, rural
electric cooperatives that pay off their RUS debt or never incur RUS debt
may be regulated by FERC with respect to financing and/or rates.
<PAGE> 4
Varying degrees of territorial protection against competing utility systems
are provided to distribution systems in 41 states (in which over 92% of the
distribution systems are located). Changes in administrative or legislative
policy in several states, or Federal legislation, may result in more or in
less territorial protection for the distribution systems.
In addition to competition from other utility systems, some distribution
systems have expressed increasing concern about the loss of desirable
suburban service areas as a result of annexation by expanding municipal
or franchised investor-owned utility systems, regardless of the degree of
territorial protection otherwise provided by applicable law. The systems are
also subject to competition from alternate sources of energy such as bottled
gas, natural gas, fuel oil, diesel generation, wood stoves and self-generation.
The systems, in common with the electric power industry generally, may incur
substantial capital expenditures and increases in operating costs in order
to meet the requirements of both present and future Federal, state and local
standards relating to safety and environmental quality control. These include
possible requirements for burying distribution lines and meeting air and water
quality standards.
The 1990 amendments to the Clean Air Act of 1970 (the "Amendments"), required
utilities and others to reduce emissions. The Amendments contain a range of
compliance options and a phase-in period which will help mitigate the immediate
costs of implementation. Many of CFC's member systems already comply with the
provisions of the Amendments. CFC is currently monitoring the overall impact
of the Amendments on individual member systems, which must implement compliance
plans and operating or equipment modifications for Phase II of the Act (2000).
Compliance plans for member systems with units affected in Phase I primarily
involved fuel switching to low-sulfur coal. The trading of emission
allowances may also be an economical alternative in Phase II. Some member
systems originally believed to be affected by the Amendments have developed
strategies designed to minimize the Amendments' impact. At this time, it is
not anticipated that the Amendments will have a material adverse impact on
the quality of CFC's loan portfolio.
In March 1995, the FERC published a Notice of Proposed Rulemaking ("NOPR")
to solicit comments regarding pending policy changes aimed at opening whole-
sale power sales to competition. This NOPR would require jurisdictional
public utilities (including investor-owned electric utilities and cooperatives
that are not RUS borrowers) that own, control, or operate transmission
facilities to file non-discriminatory open access transmission tariffs that
provide others with the same transmission services they provide themselves.
On April 24, 1996, the FERC issued orders 888 and 889 incorporating its
findings during the rulemaking process. Order 888 provides for competitive
wholesale power sales by requiring jurisdictional public utilities that own,
control, or operate transmission facilities to file non-discriminatory open
access transmission tariffs that provide others with transmission service
comparable to the service they provide themselves. The reciprocity provision
associated with Order 888 also provides comparable access to transmission
facilities of non-jurisdictional utilities (including RUS borrowers and
municipal and other publicly owned electric utilities) that use jurisdictional
utilities' transmission systems. The order further provides for the recovery
of stranded costs from departing wholesale customers with agreements dated
prior to July 11, 1994. After that date, stranded costs must be agreed upon
in the service agreement. Order 889 provides for a real time electronic
information system referred to as the Open Access Same-Time Information
System ("OASIS"). It also addresses standards of conduct to ensure that
transmission owners and their affiliates do not have an unfair competitive
advantage by using transmission to sell power. Presently, many of the issues
surrounding the implementation of Orders 888 and 889 remain unresolved.
These issues are anticipated to be resolved in part by litigation on a case
by case basis before the FERC and through the appellate process. Due to the
uncertainty of this litigation, CFC is unable to estimate the ultimate impact
of these orders on its member systems, however open access transmission as a
national policy has long been sought by electric cooperatives so that
investor-owned utilities cannot use their ownership of transmission to the
disadvantage of the cooperatives.
Section 211 of the Federal Power Act as amended by the Energy Policy Act
of 1992 classifies any cooperative with significant transmission assets as
a "transmitting utility" for purposes of this section. Under the provisions
of this Act, FERC has the authority to order such cooperatives to provide
open access for unaffiliated entities. This provision also authorizes FERC
to require investor-owned and other utilities to provide the same open
<PAGE> 5
access transmission for the benefit of cooperatives. Electric cooperatives
have strongly supported section 211 for this reason. Under sections 205 and
206 of the Federal Power Act, cooperatives that pay off their RUS debt are
treated as "jurisdictional public utilities". FERC is proceeding under the
legal theory that, under these sections, it can order "jurisdictional public
utilities" to provide open access.
All telephone systems are regulated by the Federal Communications Commission
with respect to long distance access rates. Most states also regulate local
rates.
Financial Information
The systems differ from investor-owned utilities in that the vast majority
are cooperative, non-profit organizations operating under policies which
provide that rates should be established so as to minimize rates over the
long term. Revenues in excess of operating costs and expenses are referred
to as "net margins and patronage capital" and are treated as equity capital
furnished by the systems' consumers. This "capital" is transferred to a
balance sheet account designated as "patronage capital", and is usually
allocated to consumers in proportion to their patronage. Such capital is
not refunded to them for a period of years during which time it is available
to the system to be used for proper corporate purposes. Subject to their
applicable contractual obligations, the systems may refund such capital to
their members when doing so will not impair the systems' financial condition.
In the terminology of the Uniform System of Accounts prescribed by RUS for
its borrowers, "operating revenues and patronage capital" refers to all
utility operating income received during a given period.
Similar to the practice followed by investor-owned utilities pursuant to FERC
procedures and as prescribed by RUS, the systems capitalize as a cost of
construction, the interest charges on borrowed funds ("interest charged to
construction") and the estimated unearned interest attributable to internally-
generated funds ("allowance for funds used during construction") used in the
construction of generation, and to a lesser extent transmission and
distribution facilities. This accounting policy, which increases net
margins by the amounts of these actual and imputed interest charges, is
based on the premise that the cost of financing construction is an
expenditure serving to increase the productive capacity and value of the
utility's assets and thus should be included in the cost of the assets
constructed and recovered over the life of the assets. In the case of power
supply systems, RUS has included in its direct loans and guarantees of loans
amounts sufficient to meet the estimated interest charges during construction.
If the foregoing accounting policy were not followed, utilities would
presumably request regulatory permission, if applicable, to increase their
rates to cover such costs. The amounts of interest charged to construction
and allowance for funds used during construction capitalized by distribution
systems are relatively insignificant. Because power supply systems generally
expend substantial amounts on long-term construction projects, the application
of this accounting policy may result in substantially lower interest expense
and in substantially higher net margins for such systems during construction
than would be the case if such a policy were not followed.
On the following pages are tables providing composite statements of revenues,
expenses and patronage capital from the RUS Reports of distribution systems
which were members of CFC and power supply systems which were members of CFC
during the five years ended December 31, 1995, and their respective composite
balance sheets at the end of each such year.
NOTE: Statistical information in the RUS Reports has not been examined by
CFC's independent public accountants, and the number and geographical
dispersion of the systems have made impractical an independent investigation
by CFC of the statistical information available from RUS. The RUS Reports
are based upon financial statements submitted to RUS, subject to year-end
audit adjustments, by reporting RUS borrowers and do not, with minor
exceptions, take into account current data for certain systems, primarily
those which are not active RUS borrowers.
<PAGE> 6
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPOSITE STATEMENTS OF REVENUES, EXPENSES AND PATRONAGE CAPITAL
AS REPORTED BY CFC MEMBER DISTRIBUTION SYSTEMS
The following are unaudited figures which are based
upon financial statements submitted to RUS or to
CFC by CFC Member Distribution Systems
Years Ended December 31,
(Dollar Amounts In Thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operating revenues and patronage capital $16,253,957 $16,163,578 $15,072,400 $13,921,515 $13,446,544
Operating deductions:
Cost of power (1) 10,486,773 10,174,716 9,882,450 9,211,421 8,979,920
Distribution expense (operations) 412,058 386,235 366,148 346,183 327,787
Distribution expense (maintenance) 752,659 699,253 643,390 589,722 558,291
Administrative and general expense (2) 1,584,099 1,506,729 1,398,749 1,287,224 1,215,158
Depreciation and amortization expense 1,000,017 942,435 879,957 828,966 775,049
Taxes 436,563 417,471 396,024 365,473 337,898
Total 14,672,169 14,126,839 13,566,718 12,628,989 12,194,103
Utility operating margins 1,581,788 2,036,739 1,505,682 1,292,526 1,252,441
Non-operating margins 172,118 135,347 110,612 157,912 175,993
Power supply capital credits (3) 254,839 260,335 274,250 219,638 201,708
Total 2,008,745 2,432,421 1,890,544 1,670,076 1,630,142
Interest on long-term debt (4) 833,110 752,749 730,078 749,594 763,070
Other deductions 46,859 52,574 36,644 27,841 18,953
Total 879,969 805,323 766,722 777,435 782,023
Net margins and patronage capital $1,128,776 $1,627,098 $1,123,822 $ 892,641 $ 848,119
TIER (5) 2.42 2.40 2.54 2.19 2.11
DSC (6) 2.40 2.26 2.44 2.07 2.13
MDSC (7) 2.28 2.09 2.21 1.99 2.06
Number of systems included 824 828 825 821 819
</TABLE>
(1) Includes cost of purchased power, power production and transmission
expense, separately listed in the applicable RUS report.
(2) Includes sales expenses, consumer accounts and customer service and
informational expense as well as other administrative and general
expenses, separately listed in the applicable RUS report.
(3) Represents net margins of power supply systems and other associated
organizations allocated to their member distribution systems and added
in determining net margins and patronage capital of distribution systems
under RUS accounting practices. Cash distributions of this credit have
rarely been made by the power supply systems and such other organizations
to their members.
(4) Interest on long-term debt is net of interest charged to construction,
which is stated separately as a credit in RUS Reports. For a description
of the reasons for, and the effect on net margins and patronage capital
of, the accounting policies governing interest charged to construction
and allowance for funds used during construction, see "Financial
Information". CFC believes that amounts incurred by distribution systems
for interest charged to construction and allowance for funds used during
construction are immaterial relative to their total interest on long-term
debt and net margins and patronage capital.
(5) The ratio of (x) interest on long-term debt (in each year including all
interest charged to construction) and net margins and patronage capital
to (y) interest on long-term debt (in each year including all interest
charged to construction).
(6) The ratio of (x) net margins and patronage capital plus interest on long-
term debt (including all interest charged to construction) plus
depreciation and amortization to (y) long-term debt service obligations.
(7) Modified DSC ("MDSC") is the ratio of (x) operating margins and patronage
capital plus interest on long-term debt (including all interest charged
to construction) plus depreciation and amortization expense plus Non-
operating Margins-Interest plus cash received in respect of generation
and transmission and other capital credits to (y) long-term debt service
obligations.
<PAGE> 7
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPOSITE BALANCE SHEETS
AS REPORTED BY CFC MEMBER DISTRIBUTION SYSTEMS
The following are unaudited figures which are based
upon financial statements submitted to RUS or to
CFC by CFC Member Distribution Systems
At December 31,
(Dollar Amounts In Thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Utility plant:
Utility plant in service $33,118,001 $31,162,069 $29,172,898 $27,502,596 $25,846,550
Construction work in progress 881,171 799,327 697,329 619,764 615,425
Total utility plant 33,999,172 31,961,396 29,870,227 28,122,360 26,461,975
Less: accumulated provision for
depreciation and amortization 9,221,378 8,631,903 7,992,325 7,401,028 6,812,221
Net utility plant 24,777,794 23,329,493 21,877,902 20,721,332 19,649,754
Investments in associated organizations (1) 3,207,671 3,051,840 2,847,260 2,585,621 2,405,290
Current and accrued assets 3,980,052 3,789,699 3,733,893 3,611,874 3,624,025
Other property and investments 496,105 456,923 366,452 343,734 323,445
Deferred debits 511,977 472,536 463,194 439,529 342,855
Total assets and other debits 32,973,599 $31,100,491 $29,288,701 $27,702,090 $26,345,369
Liabilities and other credits:
Net worth:
Memberships $ 127,749 $ 114,080 $ 100,689 $ 98,450 $ 93,207
Patronage capital and other equities (2) 13,633,993 12,804,404 11,859,273 10,826,559 9,966,135
Total net worth 13,761,742 12,918,484 11,959,962 10,925,009 10,059,342
Long-term debt (3) 15,718,979 15,020,664 14,569,363 14,303,024 13,958,473
Current and accrued liabilities 2,418,230 2,260,514 2,066,601 1,898,868 1,755,336
Deferred credits 786,455 714,083 598,997 555,618 554,149
Miscellaneous operating reserves 288,193 186,746 93,778 19,571 18,069
Total liabilities and other credits $32,973,599 $31,100,491 $29,288,701 $27,702,090 $26,345,369
Equity Percentage (4) 41.7% 41.5% 40.8% 39.4% 38.2%
Number of systems included 824 828 825 821 819
</TABLE>
(1) Includes investments in service organizations, power supply capital
credits and investments in CFC.
(2) Includes non-refundable donations or contributions in cash, services or
property from states, municipalities, other government agencies,
individuals and others for construction purposes separately listed in
the applicable RUS Report.
(3) Principally debt to RUS and includes $4,824,491, $3,989,914, $3,607,159,
$3,536,794 and $3,435,994 for the years 1995, 1994, 1993, 1992 and 1991,
respectively, due to CFC.
(4) Determined by dividing total net worth by total assets and other debits.
<PAGE> 8
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPOSITE STATEMENTS OF REVENUES, EXPENSES AND PATRONAGE CAPITAL
AS REPORTED BY CFC MEMBER POWER SUPPLY SYSTEMS
The following are unaudited figures which are based
upon financial statements submitted to RUS or to
CFC by CFC Member Power Supply Systems
Years Ended December 31,
(Dollar Amounts In Thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
Operating revenues and patronage capital $10,182,928 $9,972,873 $9,976,560 $ 9,111,434 $ 8,615,165
Operating deductions:
Cost of power (1) 6,984,648 6,760,543 6,606,419 5,855,131 5,541,332
Distribution expense (operations) 16,019 14,668 14,391 12,959 11,445
Distribution expense (maintenance) 15,950 14,703 11,081 11,300 11,315
Administrative and general expense (2) 483,030 431,645 433,278 390,521 363,646
Depreciation and amortization expense 956,889 930,483 902,810 872,657 819,586
Taxes 246,700 241,775 223,122 233,420 239,588
Total 8,703,236 8,393,817 8,191,101 7,375,988 6,986,912
Utility operating margins 1,479,692 1,579,056 1,785,459 1,735,446 1,628,253
Non-operating margins 253,883 221,003 328,958 280,810 329,419
Power supply capital credits (3) 48,981 32,531 47,838 30,771 28,405
Total 1,782,556 1,832,590 2,162,255 2,047,027 1,986,077
Interest on long-term debt (4) 1,476,062 1,857,644 2,014,794 2,075,939 1,999,107
Other deductions 89,784 129,794 184,902 137,344 42,862
Total 1,565,846 1,987,438 2,199,696 2,213,283 2,041,969
Net margins and patronage $ 216,710 $ (154,848) $ (37,441) $ (166,256) $ (55,892)
TIER (5) 1.15 .93 .98 .92 .97
DSC (6) 1.02 1.01 1.03 1.05 1.06
Number of systems included (7) 53 53 50 50 49
</TABLE>
(1) Includes cost of purchased power, power production and transmission
expense, separately listed in the applicable RUS Report.
(2) Includes sales expenses and consumer accounts expense and consumer
service and informational expense as well as other administrative and
general expenses, separately listed in the applicable RUS Report.
(3) Certain power supply systems purchase wholesale power from other power
supply systems of which they are members. Power supply capital credits
represent net margins of power supply systems allocated to member power
supply systems on the books of the selling power supply systems. This
item has been added in determining net margins and patronage capital of
the purchasing power supply systems under RUS accounting practices. Cash
distributions of this credit have rarely been made by the selling power
supply systems to their members. This item also includes net margins of
associated organizations allocated to CFC power supply members and added
in determining net margins and patronage capital of the CFC member systems
under RUS accounting practices.
(4) Interest on long-term debt is net of interest charged to construction.
Allowance for funds used during construction has been included in non-
operating margins. For a description of the reasons for, and the effect
on net margins and patronage capital of, the accounting policies
governing interest charged to construction and allowance for funds used
during construction, see "Financial Information". According to un-
published information furnished by RUS, interest charged to construction
and allowance for funds used during construction for CFC power supply
members in the years 1991-1995 were as follows:
<PAGE> 9
<TABLE>
<CAPTION>
Allowance for
Interest Charged Funds used
to Construction During Construction Total
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C>
1995 $ 68,400 $ 11,018 $ 79,418
1994 46,773 8,913 55,686
1993 49,237 8,621 57,858
1992 54,093 4,396 58,489
1991 49,495 5,241 54,736
</TABLE>
(5) The ratio of (x) interest on long-term debt (in each year including all
interest charged to construction) and net margins and patronage capital
to (y) interest on long-term debt (in each year including all interest
charged to construction). The TIER calculation includes the operating
results of six systems which failed to make debt service payments or are
operating under a debt restructure agreement, without which the composite
TIER would have been 1.23, 1.31, 1.20, 1.15 and 1.15 for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991, respectively.
(6) The ratio of (x) net margins and patronage capital plus interest on
long-term debt (including all interest charged to construction) plus
depreciation and amortization to (y) long-term debt service obligations
(including all interest charged to construction). The DSC calculation
includes the operating results of six systems which failed to make debt
service payments or are operating under a debt restructure agreement.
Without these systems, the composite DSC would have been 1.22, 1.24,
1.21, 1.22, and 1.26 for the years ended December 31, 1995, 1994, 1993,
1992 and 1991, respectively.
(7) Thirteen CFC power supply system members are not required to report to
RUS since they are not currently borrowers from RUS. These systems,
with the exception of Old Dominion Electric Cooperative, are either in
the developmental stage or act as coordinating agents for their members.
Their inclusion would not have a material effect on this data.
<PAGE> 10
<TABLE>
<CAPTION>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPOSITE BALANCE SHEETS
AS REPORTED BY CFC MEMBER POWER SUPPLY SYSTEMS
The following are unaudited figures which are based
upon financial statements submitted to RUS or to
CFC by CFC Member Power Supply Systems
At December 31,
(Dollar Amounts In Thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Assets and other debits:
Utility plant:
Utility plant in service $34,182,352 $32,934,304 $32,240,926 $31,375,391 $29,433,524
Construction work in progress 931,397 1,624,978 1,469,882 1,324,432 911,262
Total utility plant 35,113,748 34,559,282 33,710,808 32,699,823 30,344,786
Less: accumulated provision for
depreciation and amortization 11,586,462 10,777,786 9,936,528 8,983,913 7,786,074
Net utility plant 23,527,287 23,781,496 23,774,280 23,715,910 22,558,712
Investments in associated organizations(1) 1,049,409 248,677 992,921 865,162 740,554
Current and accrued assets 4,211,004 3,997,466 4,284,613 4,076,841 4,239,802
Other property and investments 1,656,563 2,483,232 1,899,809 1,717,451 1,503,526
Deferred debits 4,391,800 4,366,377 4,078,879 1,879,607 1,445,868
Total assets and other debits $34,836,063 $34,877,248 $35,030,502 $32,254,971 $30,488,462
Liabilities and other credits:
Net worth:
Memberships $ 250 $ 322 $ 252 $ 246 $ 244
Patronage capital and other equities 497,756 246,262 432,095 315,793 593,505
Total net worth 498,006 246,584 432,347 316,039 593,749
Long-term debt (2) 28,372,321 28,779,577 28,528,640 28,838,255 27,060,357
Current and accrued liabilities 1,848,755 2,747,022 1,185,182 1,531,722 1,391,762
Deferred credits 1,309,860 1,206,488 1,849,906 1,071,393 1,344,641
Miscellaneous operating reserves 2,807,121 1,897,577 3,034,427 497,562 97,953
Total liabilities and other credits $34,836,063 $34,877,248 $35,030,502 $32,254,971 $30,488,462
Number of systems included (3) 53 53 50 50 49
</TABLE>
(1) Includes investments in service organizations, power supply capital
credits and investments in CFC.
(2) Principally debt to RUS or debt guaranteed by RUS and loaned by FFB
and includes $875,725, $881,278, $876,084, $633,105 and $526,513 for
the years 1995, 1994, 1993, 1992 and 1991, respectively, due to CFC.
(3) Thirteen CFC power supply system members are not required to report to
RUS since they are not currently borrowers from RUS. These systems, with
the exception of Old Dominion Electric Cooperative, are either in
developmental stages or act as coordinating agents for their members.
Their inclusion would not have a material effect on these data.
