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 August 31, 1999
OR
o 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 31
<PAGE>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED BALANCE SHEETS
(Dollar Amounts In Thousands)
A S S E T S
(Unaudited)
August 31, 1999 May 31, 1999
CASH AND CASH EQUIVALENTS $ 110,803 $ 74,403
DEBT SERVICE INVESTMENTS 26,382 22,969
LOANS TO MEMBERS, NET 14,146,227 13,491,199
RECEIVABLES 153,951 161,523
FIXED ASSETS, NET 43,032 38,683
DEBT SERVICE RESERVE FUNDS 98,870 98,870
OTHER ASSETS 37,195 37,605
TOTAL ASSETS $14,616,460 $13,925,252
The accompanying notes are an integral part of these combined
financial statements.
2
<PAGE>
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)
August 31, 1999 May 31, 1999
NOTES PAYABLE, due within one year $ 5,666,212 $ 4,976,706
ACCOUNTS PAYABLE 19,651 16,707
ACCRUED INTEREST PAYABLE 123,432 95,741
LONG-TERM DEBT 6,881,573 6,891,122
OTHER LIABILITIES 16,733 10,207
QUARTERLY INCOME CAPITAL SECURITIES 400,000 400,000
MEMBERS' SUBORDINATED CERTIFICATES:
Membership subordinated certificates 641,985 641,937
Loan & guarantee subordinated certificates 615,895 597,879
Total members' subordinated certificates 1,257,880 1,239,816
MEMBERS' EQUITY 250,979 294,953
Total members' subordinated certificates &
members' equity 1,508,859 1,534,769
TOTAL LIABILITIES AND MEMBERS' EQUITY $14,616,460 $13,925,252
The accompanying notes are an integral part of these combined
financial statements.
3
<PAGE>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF INCOME, EXPENSES AND NET MARGINS
(Dollar Amounts in Thousands)
For the Three Months Ended August 31, 1999 and 1998
Quarters Ended
August 31,
1999 1998
OPERATING INCOME-Interest on loans to members $226,405 $180,143
Less: cost of funds 190,840 151,969
Gross operating margin 35,565 28,174
EXPENSES:
General and administrative 5,371 5,540
Provision for loan losses 8,765 5,886
Total expenses 14,136 11,426
Operating margin 21,429 16,748
NON-OPERATING INCOME 538 745
NET MARGINS $ 21,967 $ 17,493
The accompanying notes are an integral part of these combined
financial statements.
4
<PAGE>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(Dollar Amounts in Thousands)
For the Three Months Ended August 31, 1999 and 1998
<TABLE>
<CAPTION>
Patronage Capital
Allocated
Unal- General
Education located Reserve
Total Memberships Fund Margins Fund Other
<S> <C> <C> <C> <C> <C> <C>
Quarter ended August 31, 1999
Balance at May 31, 1999 $294,953 $1,535 $ 543 $ 2,289 $ 503 $290,083
Retirement of patronage capital (66,445) - - - - (66,445)
Net margins 21,967 - - 21,967 - -
Other 504 (4) (43) - - 551
Balance at August 31, 1999 $250,979 $1,531 $ 500 $ 24,256 $ 503 $224,189
Quarter ended August 31, 1998
Balance at May 31, 1998 $279,278 $1,491 $ 676 $ 2,289 $ 500 $274,322
Retirement of patronage capital (57,364) - - - - (57,364)
Net margins 17,493 - - 17,493 - -
Other 549 13 (41) - - 577
Balance at August 31, 1998 $239,956 $1,504 $ 635 $ 19,782 $ 500 $217,535
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
5
<PAGE>
(UNAUDITED)
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(Dollar Amounts In Thousands)
For the Three Months Ended August 31, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins $ 21,967 $ 17,493
Add (deduct):
Provision for loan losses 8,765 5,886
Depreciation 322 372
Amortization of deferred income (605) (178)
Amortization of issuance costs and
deferred charges 1,330 734
Receivables 6,052 (1,115)
Accounts payable 2,944 1,857
Accrued interest payable 27,691 10,067
Other (3,818) (6,685)
Net cash flows provided by operating activities 64,648 28,431
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances made on loans (1,778,612) (1,728,970)
Principal collected on loans 1,114,833 1,239,233
Investments in fixed assets (4,671) (1,399)
Net cash flows used in investing activities (668,450) (491,136)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable, net 722,849 (106,060)
Debt service investments, net (3,413) (3,415)
Proceeds from issuance of long-term debt 894,325 569,212
Payments for retirement of long-term debt (937,409) (95,533)
Proceeds from issuance of quarterly
income capital securities - 200,000
Proceeds from issuance of members'
subordinated certificates 19,532 12,974
Payments for retirement of members'
subordinated certificates 52 (3)
Payments for retirement of
patronage capital (55,734) (50,985)
Net cash flows provided by financing activities 640,202 526,190
NET INCREASE IN CASH & CASH EQUIVALENTS 36,400 63,485
BEGINNING CASH AND CASH EQUIVALENTS 74,403 65,274
ENDING CASH AND CASH EQUIVALENTS $ 110,803 $ 128,759
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during three months for interest $ 164,102 $ 142,681
The accompanying notes are an integral part of these combined
financial statements.
6
<PAGE>
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
Notes to Combined Financial Statements
(1) General Information and Accounting Policies
(a) 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 1,050 members as of August 31, 1999, included 903 rural electric
utility system members, virtually all of which are consumer-owned
cooperatives, 74 service members and 73 associate members. The utility
members systems included 834 distribution systems and 69 generation and
transmission systems operating in 48 states and four U.S. territories.
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 August 31, 1999, RTFC had 532 members other than CFC.
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 two members other than CFC at August 31, 1999. 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 August 31, 1999 and May 31, 1999, and the combined results
of operations, cash flows and changes in members' equity for the three months
ended August 31, 1999 and 1998.
The Notes to Combined Financial Statements for the years ended May 31, 1999
and 1998 should be read in conjunction with the accompanying financial
statements. (See CFC's Form 10-K for the year ended May 31, 1999, filed on
August 27, 1999).
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 CFC
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.
7
<PAGE>
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.
(b) 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 permanent majority representation
on their Boards of Directors. CFC manages the affairs of RTFC and GFC
through long-term management agreements. CFC services the loans for GFC for
which it collects a servicing fee. As of August 31, 1999, CFC had committed
to lend RTFC up to $7.0 billion to fund loans to its members and their
affiliates.
RTFC had outstanding loans and unadvanced loan commitments totaling $3,961.8
million and $3,809.6 million as of August 31, 1999 and May 31, 1999,
respectively. RTFC's net margins are allocated to RTFC's borrowers. Summary
financial information relating to RTFC is presented below:
(Unaudited)
At August 31, At May 31,
(Dollar amounts in thousands) 1999 1999
Outstanding loans to members and their affiliates $2,898,227 $2,710,339
Total assets 3,097,920 2,893,810
Notes payable to CFC 2,868,036 2,693,675
Total liabilities 2,914,760 2,729,102
Members' equity and subordinated certificates 183,160 164,708
(Unaudited)
For the Three Months Ended August 31,
(Dollar amounts in thousands) 1999 1998
Operating income $48,677 $30,098
Net margin 912 1,075
Summary financial information relating to GFC is presented below:
(Unaudited)
At August 31, At May 31,
(Dollar amounts in thousands) 1999 1999
Outstanding loans to members $130,940 $130,940
Total assets 134,627 133,091
Notes payable to CFC 130,940 130,940
Total liabilities 134,431 132,861
Members' equity 196 230
(Unaudited)
For the Three Months Ended August 31,
(Dollar amounts in thousands) 1999 1998
Operating income $1,925 $2,115
Net margin 178 200
Unless stated otherwise, references to CFC relate to CFC, RTFC and GFC on a
combined basis.
8
<PAGE>
(c) Derivative Financial Instruments
CFC is neither a dealer nor a trader in derivative financial instruments.
CFC uses interest rate and currency exchange agreements to manage its
interest rate risk and foreign exchange risk. CFC accounts for these
agreements on an accrual basis. CFC does not value the interest rate
exchange agreements on its balance sheet, but values the underlying hedged
debt at cost. CFC does not recognize a gain or loss on these agreements,
but includes the difference between the interest rate paid and interest rate
received in the overall cost of funding. In the event that an agreement were
terminated early, CFC would record the fee paid or received due to the early
termination as part of the overall cost of funding.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that all derivatives be recognized as an asset or
liability in the statement of financial position and recorded at fair value.
The statement was originally effective for all fiscal years beginning after
June 15, 1999. The FASB has amended the statement to be effective for all
fiscal years beginning after June 15, 2000. CFC will be required to
implement this statement as of June 1, 2001. CFC has not yet determined
the impact of implementing this statement on its overall financial position.
(d) Segment Information
CFC has adopted SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information". This statement establishes standards for reporting
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in
interim financial reports issued to shareholders. This statement also
establishes standards for related disclosures about products and services,
geographic areas and major customers. CFC operates in two business
segments - rural electric lending and rural telecommunications lending.
The segment disclosure has been included in Note 13. CFC uses the same
accounting principles in both segments.
(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
collateral trust bonds issued since that date and all future collateral trust
bonds will be issued under this new Indenture.
(3) Loans Pledged as Collateral to Secure Collateral Trust Bonds
As of August 31, 1999 and May 31, 1999, mortgage notes representing
approximately $3,012.1 million and $3,016.9 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 Footnote 6), CFC cannot pledge mortgage notes in excess of 150% of
collateral trust bonds outstanding.
Collateral trust bonds outstanding at August 31, 1999 and May 31, 1999 were
$2,996.4 million and $2,996.3 million, respectively.
9
<PAGE>
(4) Allowance for Loan Losses
CFC maintains an allowance for loan 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 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 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 losses may differ from the allowance
amount.
Activity in the allowance account is summarized as follows for the three
months ended August 31, 1999 and the year ended May 31, 1999.
August 31, May 31,
(Dollar amounts in thousands) 1999 1999
Beginning balance $212,203 $250,131
Provision for loan losses 8,765 23,866
Charge-offs, net of recoveries - (61,794)
Ending balance $220,968 $212,203
Total loan loss allowance as a percentage of:
Total loans 1.54% 1.55%
Total loans and guarantees 1.37% 1.38%
Total nonperforming and restructured loans 38.11% 36.69%
(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. 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 mature 46 to 50 years
from issuance or amortize proportionately based on the principal balance of
the credit extended, and 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 member's 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 August 31, 1999, CFC had three revolving credit agreements totaling
$4,792.5 million which are used principally to provide liquidity support for
CFC's outstanding commercial paper, commercial paper issued by the National
Cooperative Services Corporation ("NCSC") and guaranteed by CFC 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 agreements are with 53 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 the five-year
agreement, executed in November 1996, CFC can borrow up to $2,402.5 million
until November 26, 2001. On November 24, 1998, the 364-day agreement was
renewed with J.P. Morgan Securities Inc. and The Bank of Nova Scotia as
Co-Lead Arrangers and Co-Syndication Agents, Morgan Guaranty Trust Company
of New York as Administrative Agent, and Banc of America and the First
National Bank of Chicago as Co-Documentation Agents. Under this 364-day
agreement, CFC can borrow up to $1,940.0 million until November 23, 1999.
Any amounts outstanding under these facilities will be due on the respective
maturity dates.
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A third revolving credit agreement for $450.0 million was executed on
November 25, 1998 with nine banks, including the Bank of Nova Scotia as
Lead Arranger and Administrative Agent (the "BNS facility") and the Chase
Manhattan Bank, N.A. as Documentation Agent. This agreement has a 364-day
revolving credit period which terminates November 24, 1999 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 .090 of 1%. The per annum facility fee for both agreements with a 364-day
maturity is .085 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 $1,373.9
million at May 31, 1999 (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 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 prohibit 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 August 31, 1999 and May 31, 1999, 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 August 31,
1999 and May 31, 1999, CFC classified $2,402.5 million, of its notes payable
outstanding as long-term debt. CFC expects to maintain more than $2,402.5
million of notes payable outstanding 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 therein.
(7) Unadvanced Loan Commitments
As of August 31, 1999 and May 31, 1999, CFC had unadvanced loan commitments,
summarized by type of loan, as follows:
(Dollar amounts in thousands) August 31, 1999 May 31, 1999
Long-term $ 7,211,349 $ 7,004,692
Intermediate-term 251,378 299,659
Short-term 4,506,582 4,392,012
Telecommunications 1,063,557 1,111,741
Total unadvanced loan commitments $13,032,866 $12,808,104
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.
11
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(8) Retirement of Patronage Capital
CFC patronage capital in the amount of $66.2 million was retired in August
1999, representing 70% of the allocation for fiscal year 1999 and one-sixth
of the total allocations for fiscal years 1989, 1990 and 1991. The $66.2
million includes $10.5 million retired to RTFC. GFC retired patronage
capital in the amount of $0.2 million representing 100% of the allocation for
fiscal year 1999. RTFC will retire 70% of their fiscal year 1999 allocation
later this fiscal year. Future retirements of patronage capital allocated
to patrons may be made annually as determined by CFC's, RTFC's and GFC's
Boards of Directors with due regard for CFC's, RTFC's and GFC's financial
condition.
(9) Guarantees
As of August 31, 1999 and May 31, 1999, CFC had guaranteed the following
contractual obligations of its members:
(Dollar amounts in thousands) August 31, 1999 May 31, 1999
Long-term tax-exempt bonds (A) $1,056,440 $1,062,185
Debt portions of leveraged lease transactions (B) 173,008 174,961
Indemnifications of tax benefit transfers (C) 276,899 285,169
Other guarantees (D) 217,257 162,150
Total guarantees $1,723,604 $1,684,465
(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, $943.2 million and $947.3 million
as of August 31, 1999 and May 31, 1999, 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 August 31, 1999 and May 31, 1999, CFC had unconditionally guaranteed
commercial paper, along with a related interest rate exchange
agreement, issued by NCSC of $81.2 million and $63.7 million,
respectively.
(10) Derivative Financial Instruments
At August 31, 1999 and May 31, 1999, CFC was a party to interest rate
exchange agreements with notional amounts totaling $3,856.9 million and
$2,796.0 million, respectively. CFC uses interest rate exchange agreements
as part of its overall interest rate matching strategy. Interest rate
exchange agreements are used when they provide CFC a lower cost of funding
option or minimize interest rate risk. CFC will only enter interest rate
exchange agreements with highly rated financial institutions. At August
31, 1999 and May 31, 1999, CFC was using interest rate exchange agreements
to fix the interest rate on $2,106.3 million and $1,996.0 million,
respectively, of its variable rate commercial paper. At August 31, 1999
and May 31, 1999, CFC was also using interest rate exchange agreements at
both dates to minimize the variance between the three month LIBOR rate at
which $1,750.6 million and $800.0 million of collateral trust bonds and
medium-term notes were issued and CFC's variable commercial paper rate.
All of CFC's derivative financial instruments were held for purposes other
than trading. CFC has not invested in derivative financial instruments
for trading purposes in the past and does not anticipate doing so in the
future.
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The following table lists the notional principal amounts of CFC's interest
rate exchange agreements at August 31, 1999 and May 31, 1999:
<TABLE>
<CAPTION>
Notional Principal Amount Notional Principal Amount
Maturity Date August 31, 1999 May 31, 1999 Maturity Date August 31, 1999 May 31, 1999
(Dollar amounts in thousands) (Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
June 1999 (1) $ - $ 50,000 August 2003 (3) $ 25,000 $ 25,000
September 1999 (2) 75,000 75,000 September 2003 (3) 16,600 16,600
September 1999 (2) 75,000 75,000 September 2003 (3) 17,845 17,844
September 1999 (2) 75,000 75,000 September 2003 (3) 28,000 28,000
September 1999 (2) 75,000 75,000 September 2003 (3) 28,785 28,785
November 1999 (2) 50,000 50,000 October 2003 (3) 32,533 32,533
November 1999 (2) 50,000 50,000 October 2003 (3) 32,533 32,533
November 1999 (2) 50,000 50,000 October 2003 (3) 25,480 25,480
November 1999 (2) 75,000 75,000 September 2004 (3) 17,650 17,650
November 1999 (2) 75,000 75,000 October 2004 (3) 38,000 38,000
November 1999 (2) 75,000 75,000 November 2004 (3) 61,000 61,000
November 1999 (2) 75,000 75,000 November 2004 (3) 61,000 61,000
January 2000 (3) 52,851 52,851 January 2005 (3) 8,000 8,000
June 2000 (2) 250,000 - April 2006 (3) 25,000 25,000
June 2000 (2) 200,000 - April 2006 (3) 25,000 25,000
June 2000 (2) 150,000 - April 2006 (3) 25,000 25,000
June 2000 (2) 75,000 - April 2006 (3) 25,000 25,000
July 2000 (2) 50,000 - January 2008 (3) 14,000 14,000
July 2000 (2) 100,000 - July 2008 (3) 40,400 40,400
July 2000 (2) 26,363 - September 2008 (3) 26,235 26,235
July 2000 (2) 100,000 - September 2008 (3) 10,425 10,425
July 2000 (2) 25,000 - September 2008 (3) 10,300 10,300
August 2000 (2) 24,225 - September 2008 (3) 20,600 20,600
August 2000 (3) 110,000 110,000 October 2008 (3) 33,512 33,512
August 2000 (3) 110,000 110,000 April 2009 (3) 33,000 33,000
September 2000 (3) 7,450 7,450 September 2010 (3) 43,000 -
September 2000 (3) 13,355 13,355 January 2012 (3) 13,000 13,000
October 2000 (3) 20,000 20,000 February 2012 (3) 9,500 10,000
January 2001 (3) 42,749 42,749 December 2013 (3) 65,000 65,000
January 2001 (3) 23,000 23,000 December 2013 (3) 65,000 65,000
February 2001 (3) 75,000 75,000 December 2013 (3) 45,100 45,100
February 2001 (3) 75,000 75,000 June 2014 (3) - 18,250
February 2001 (3) 75,000 75,000 June 2018 (3) 5,000 5,000
February 2001 (3) 75,000 75,000 September 2020 (3) 43,000 -
September 2001 (3) 34,810 34,810 December 2026 (3) 48,185 48,185
January 2003 (3) 10,000 10,000 September 2028 (3) 60,000 60,000
January 2003 (3) 12,375 12,375 September 2028 (3) 60,000 60,000
June 2003 (3) 48,000 48,000 April 2029 (3) 66,000 66,000
August 2003 (3) 25,000 25,000 September 2030 (3) 43,000 -
August 2003 (3) 50,000 50,000 $3,856,861 $2,796,022
</TABLE>
(1) Under these agreements, CFC pays a variable rate of interest and
receives fixed rate of interest.
(2) Under these agreements, CFC pays a variable rate of interest
and receives a variable rate of interest.
(3) Under these agreements, CFC pays a fixed rate of interest and receives
interest based on a variable rate.
13
<PAGE>
CFC does not value the interest rate exchange agreements on its balance
sheet, but rather values the underlying hedged debt instruments at historical
cost. All amounts that CFC pays and receives related to the interest rate
exchange agreements and the underlying hedged debt instruments are included
in CFC's cost of funding for the period. In all interest rate exchange
agreements, CFC receives the amount required to service the debt outstanding
to its investors, from the counter party to the agreement. The estimated
fair value of CFC's interest rate exchange agreements is presented in the
footnotes to the financial statements of CFC's Form 10-K for the year ended
May 31, 1999.
CFC closely matches the terms of its interest rate exchange agreements with
the terms of the underlying debt instruments. Therefore, it is unlikely
that CFC would prepay debt that is hedged or have hedged debt mature prior
to the maturity of the interest rate exchange agreement. However,
circumstances may arise that cause either CFC or the counter party to the
agreement to exit such agreement. In the event of such actions, CFC would
record a gain or loss from the termination of the interest rate exchange
agreement.
During the three months ended August 31, 1999, CFC has issued medium-term
notes to European investors in foreign currencies. The following chart
provides details of the foreign-currency swaps that CFC has outstanding at
August 31, 1999:
(Dollar amounts in thousands)
Type of U.S. Foreign
Debt(1) Date Dollars Currency (2) Rate
MTN Issue February 24, 1999 390,250 350,000 EU 1.115
Maturity February 24, 2006 390,250 350,000 EU 1.115
Issue July 14, 1999 23,363 15,000 GBP 1.558
Maturity July 14, 2000 23,363 15,000 GBP 1.558
(1) MTN - CFC medium-term notes
(2) EU - Euros, GBP - British Pound Sterling
CFC enters into a swap to sell the amount of foreign currency received from
the investor for U.S. Dollars on the issuance date, and to buy the amount
of foreign currency required to repay the investor principal and interest
due through or on the maturity date. By locking in the exchange rates at
the time of issuance, CFC has eliminated the possibility of any currency
gain or loss which might otherwise have been produced by the foreign currency
borrowing. CFC includes the difference between the amount of U.S. Dollars
received at issuance and the amount of U.S. Dollars required to purchase
the foreign currency at the interest payment dates and at maturity as
interest expense.
Principal and interest is paid at maturity, which will range from 1 day to
270 days on CFC commercial paper investments. Interest is paid annually on
foreign currency denominated medium-term notes with maturities longer than
one year. CFC will consider the cost of all related foreign-currency swaps
as part of the total cost of debt issuance when deciding on whether to issue
debt in the U.S. or foreign capital markets and whether to issue the debt
denominated in U.S. or foreign currencies.
(11) Contingencies
(a) At August 31, 1999 and May 31, 1999, CFC had nonperforming loans in the
amount of $1.6 million and restructured loans in the amount of $578.3
million and $576.7 million, respectively. At both dates all loans
classified as nonperforming were on a nonaccrual status with respect to the
recognition of interest income and all loans classified as restructured
were on an accrual status with respect to the recognition of interest income.
A total of $5.6 million of interest was accrued on restructured loans for
the three months ended August 31, 1999.
(b) CFC classified $579.9 million and $578.3 million of the amount
described in footnote 11(a) as impaired with respect to the provisions
of FASB Statements No. 114 and 118 at August 31, 1999 and May 31, 1999,
respectively. CFC had allocated $101.0 million of the loan loss allowance
for such impaired loans at both dates. The amount of loan loss allowance
allocated for such loans was based on a comparison of the present value
of the expected future cashflow associated with the loan and/or the
estimated fair value of the collateral securing the loan to the recorded
investment in the loan. CFC accrued interest income totaling $5.6 million
on loans classified as impaired during the
14
<PAGE>
three months ended August 31, 1999. The average recorded investment in
impaired loans for the three months ended August 31, 1999 was $579.3
million compared to $460.1 million for the year ended May 31, 1999.
(c) Deseret Generation & Transmission Co-operative ("Deseret") is a
power supply member of CFC located in Utah. Deseret owns and operates
the Bonanza generating plant ("Bonanza") and owns a 25% interest in the
Hunter generating plant along with a system of transmission lines.
Deseret also owns and operates a coal mine, through its Blue Mountain
Energy subsidiary. Due to large anticipated demands for electricity,
the Bonanza site was designed for two plants and Deseret built the
infrastructure to support two plants (only one plant has been built
to date). When the large increases in demand never materialized, Deseret
was unable to make the debt payment obligations on the Bonanza plant and
debt service payments to RUS. As a consequence, Deseret and its creditors
entered into several restructuring agreements.
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, CFC agreed to
(i) forbear from exercising any remedy to collect the CFC Debt (as defined
in the ORA) and (ii) pay and perform on all of the CFC Guarantees (as
defined in the ORA) in consideration for Deseret agreeing 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, CFC has agreed to forgive any remaining CFC Debt on December
31, 2025. To date, Deseret has made all required payments under the ORA.
Certain creditors did not participate in the ORA which resulted in
litigation.
In connection with the ORA, on October 16, 1996, CFC acquired all of
Deseret's indebtedness in the outstanding principal amount of $740.0 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 outstanding secured debt.
Pursuant to a participation agreement dated October 16, 1996, the member
systems of Deseret purchased from CFC, for $55.0 million, a participation
interest in the RUS Debt. The members' purchase of participation interests
in the RUS Debt acquired by CFC ("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 had the option to put its
Participation Loan back to CFC at any time after twelve years, provided that
no event of default existed under the ORA and under such member's
Participation Loan. The ORA was subsequently amended to allow the Deseret
member distribution systems to put the participation loans back to CFC
unconditionally on December 31, 2019.
On December 4, 1998, CFC, Deseret, the Deseret member systems, and all other
parties involved in the ongoing litigation entered into a settlement
arrangement. On December 14, 1998, CFC effected the redemption of the
Bonanza Secured Lease Obligation Bonds. The amount advanced to redeem the
bonds, $265.9 million ($255.1 million principal and $10.8 million of accrued
interest), became part of the outstanding loan balance to Deseret and is
secured by CFC's mortgage claim on all of Deseret's assets and future
revenues. This amount will be repaid through the annual ORA minimum and
excess cashflow payments Deseret is required to make to CFC through December
31, 2025.
In July 1999, Deseret, Riverside and CFC reached an agreement with respect
to the settlement of the Riverside FERC and Utah state litigation. Under
the terms of the agreement, Deseret and Riverside agreed to amend the Power
Service Agreement ("PSA") with respect to rates, terms and conditions for
service thereunder. On July 29, 1999, Riverside paid Deseret $25.1 million
to buy down the rate Deseret charges Riverside for power commencing in July
2002. In order to facilitate the settlement, CFC issued an irrevocable
letter of credit to Riverside for the account of Deseret in the amount of
$25.1 million, which may be drawn upon by Riverside upon the occurrence of
certain events more particularly described therein, including Deseret's
failure to perform certain obligations under the PSA and the FERC's failure
to approve the settlement. Any draw under the letter of credit converts to
a long-term loan to Deseret which is repayable upon the terms set forth in a
reimbursement agreement.
Deseret and Riverside filed the amended PSA and a Settlement Agreement to
which CFC is a party with the FERC on July 28, 1999, together with an
Uncontested Motion for Interim Rate Approval. FERC approved the Motion on
August 3, 1999. On August 20, 1999, the administrative law judge certified
the Settlement Agreement and amended PSA to the FERC for approval. The
Commission is expected to act in early calendar year 2000.
15
<PAGE>
On March 24, 1998, the City of Anaheim, CA ("Anaheim") commenced an action
against Deseret that was consolidated with the Riverside proceeding. Anaheim
also filed a complaint with the FERC. In January 1999, Deseret and Anaheim
agreed to a settlement of the FERC and civil actions. The settlement will
not significantly impact the revenue received by Deseret over the life of
the contract with Anaheim.
On June 30, 1999, Deseret made a payment of $8.6 million to CFC. A total of
$34.6 million is due from Deseret for minimum payments during calendar year
1999. As of August 31, 1999 and May 31, 1999, all loans to Deseret were on
an accrual status at a rate of 3.90%. The rate at which interest accrues
will be adjusted from time to time as events require to reflect the current
estimate of the amount CFC will receive through December 31, 2025.
At August 31, 1999 and May 31, 1999, CFC had the following exposure to
Deseret:
(Dollar amounts in millions) August 31, 1999 May 31, 1999
Loans outstanding (1) $578.3 $576.7
Guarantees outstanding:
Tax-exempt bonds 3.2 3.2
Mine equipment leases 49.9 51.6
Other (2) 37.7 12.6
Total guarantees 90.8 67.4
Total exposure $669.1 $644.1
________________________
(1) As of August 31, 1999, the loan balance of $578.3 million to Deseret is
comprised of $180.5 million of cashflow shortfalls related to Deseret's debt
service and rental obligations guaranteed by CFC, $265.9 million related to
the redemption of the Bonanza secured lease obligation bonds, $103.8 million
related to the purchase of RUS loans, $17.7 million related to the original
CFC loan to Deseret and $10.4 million related to the settlement of the
foreclosure litigation.
(2) Other guarantees includes irrevocable letters of credit and a guarantee
of certain operations and maintenance expenses.
Subsequent to the end of the quarter, on September 30, 1999 Deseret made a
payment of $8.6 million. To date, during calendar year 1999, CFC has
received a total of $25.7 million.
Based on its analysis, CFC believes that it has adequately reserved for any
potential loss on its loans and guarantees to Deseret.
(d) At August 31, 1999 and May 31, 1999, one other borrower was in payment
default to CFC on a secured loan totaling $1.6 million.
(12) Loans Guaranteed by RUS
At August 31, 1999 and May 31, 1999, CFC held $130.9 million, respectively,
in trust certificates related to the refinancing of Federal Financing Bank
loans. These trust certificates are supported by payments from certain CFC
power supply members whose payments are guaranteed by RUS.
(13) Segment Information
CFC operates in two business segments - rural electric lending and rural
telecommunications lending. Summary financial information relating to
each segment is presented below.
The information reviewed by management on a regular basis are the combined
financial statements and the stand-alone RTFC financial statements. The
information presented below includes the stand-alone RTFC financial
statements for the telecommunications systems, the combined financial
statements as the total and the difference between the RTFC and the combined
is presented for the electric systems. All activity is with electric or
telecommunications systems.
16
<PAGE>
RTFC is an associate member of CFC and CFC is the sole funding source for
RTFC. RTFC borrows from CFC and then relends to the telecommunications
systems. RTFC pays an administrative fee to CFC for work performed by
CFC staff as part of the interest rate on the loans from CFC. RTFC does
not maintain a loan loss allowance, but CFC maintains a loss allowance
on its loans to RTFC.
(Dollar amounts in thousands)
For the three months ended August 31, 1999
<TABLE>
<CAPTION>
Electric Systems Telecommunications Systems Total Combined
Income statement:
<S> <C> <C> <C>
Income from loans $ 177,729 $ 48,676 $ 226,405
Cost of funds 143,115 47,725 190,840
Gross margin 34,614 951 35,565
Operating expenses 5,294 77 5,371
Loan loss provision 8,765 - 8,765
Total expenses 14,059 77 14,136
Other income 500 38 538
Net margin $ 21,055 $ 912 $ 21,967
Assets:
Loans outstanding, net (1) $ 11,292,575 $2,853,652 $14,146,227
Other assets 270,540 199,693 470,233
Total assets $ 11,563,115 $3,053,345 $14,616,460
</TABLE>
____________________________________________________
(1) Net loans are calculated by prorating the loan loss allowance and
subtracting this allowance from gross loans outstanding.
(Dollar amounts in thousands)
For the three months ended August 31, 1998
<TABLE>
<CAPTION>
Electric Systems Telecommunications Systems Total Combined
Income statement:
<S> <C> <C> <C>
Income from loans $ 150,045 $ 30,098 $ 180,143
Cost of funds 122,950 29,019 151,969
Gross margin 27,095 1,079 28,174
Operating expenses 5,513 27 5,540
Loan loss provision 5,886 - 5,886
Total expenses 11,399 27 11,426
Other income 722 23 745
Net margin $ 16,418 $ 1,075 $ 17,493
Assets:
Loans outstanding, net (1) $9,137,434 $1,675,762 $10,813,196
Other assets 297,917 128,672 426,589
Total assets $9,435,351 $1,804,434 $11,239,785
</TABLE>
______________________________
(1) Net loans are calculated by prorating the loan loss allowance and
subtracting this allowance from gross loans outstanding.
17
<PAGE>
Part I. Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(Dollar amounts in millions)
The management discussion and analysis contains statements that may be
considered forward looking. In making these statements, CFC has made an
evaluation of estimates and assumptions discussed in this presentation, which
could cause the actual results to differ materially.
The following discussion and analysis is designed to provide a better
understanding of the CFC's combined financial condition and results of
operations and as such should be read in conjunction with the Combined
Financial Statements, including the notes thereto.
Financial Condition
At August 31, 1999, CFC had $14,616 in total assets an increase of $691 or
5.0% over May 31, 1999. Net loans outstanding to members totaled $14,146
at August 31, 1999 an increase of $655 compared to a total of $13,491 at
May 31, 1999. Net loans represented 96.8% and 96.9% of total assets at
August 31, 1999 and May 31, 1999, respectively. The remaining assets
$470 and $434 at August 31, 1999 and May 31, 1999, respectively, consisted
of other assets to support CFC's operations. Except as required for
the debt service account and unless excess cash is invested overnight,
generally CFC does not use funds to invest in debt or equity securities.
Loans outstanding at:
August 31, 1999 May 31, 1999 Increase
Long-term loans:
Electric $ 9,472.7 $ 9,132.7 $340.0
Telephone 2,539.7 2,354.8 184.9
Total long-term loans 12,012.4 11,487.5 524.9
Intermediate-term loans:
Electric 328.3 301.1 27.2
Telephone 13.8 13.5 0.3
Total intermediate-term loans 342.1 314.6 27.5
Short-term loans:
Electric 957.2 850.0 107.2
Telephone 344.7 342.1 2.6
Total short-term loans 1,301.9 1,192.1 109.8
RUS guaranteed loans 130.9 130.9 -
Non-performing loans 1.6 1.6 -
Restructured loans 578.3 576.7 1.6
Total loans 14,367.2 13,703.4 663.8
Loan loss allowance 221.0 212.2 8.8
Net loans $14,146.2 $13,491.2 $655.0
Percentage of loans with a
fixed interest rate 61% 63%
Percentage of loans with a
variable interest rate 39% 37%
18
<PAGE>
There were a number of reasons underlying the increased demand for CFC loan
advances, including (1) the strong economy, which has spurred construction
and business development; (2) RUS waiting periods are at an all time high,
which caused more borrowers to buyout their RUS debt and/or make greater use
of CFC 100% loan funds; (3) a large number of systems have bought out their
RUS debt over the last few years, requiring them to seek non-RUS financing;
(4) some borrowers have begun to expand and diversify their operations
through acquisitions and mergers; and (5) growth in demand for both existing
and new telecommunications technologies.
Long-term loans (excluding loans guaranteed by RUS) represented 88% of loans
outstanding at August 31, 1999 and May 31, 1999. Long-term fixed rate loans
represented 61% and 63% of the total loans at August 31, 1999 and May 31,
1999, respectively. Loans converting from a variable rate to a fixed rate
for the three months ended August 31, 1999 totaled $13, a decrease from the
$185 that converted for the three months ended August 31, 1998. Offsetting
the conversions to the fixed rate were $3 and $0 of loans that converted
from the fixed rate to the variable for the three months ended August 31,
1999 and 1998, respectively. This resulted in a net conversion of $10 from
the variable rate to a fixed rate for the three months ended August 31, 1999
compared to a net conversion of $185 for the year ended August 31, 1998.
Guarantees outstanding:
August 31, 1999 May 31, 1999 Inc / (Dec)
Tax exempt bonds $1,056.4 $1,062.2 $(5.8)
Lease transactions 173.0 175.0 (2.0)
Indemnifications of
Tax Benefit Transfers 276.9 285.2 (8.3)
Other guarantees 217.3 162.1 55.2
Total $1,723.6 $1,684.5 $39.1
The increase in guarantees outstanding for the three months ended
August 31, 1999, was primarily due to the increase in other guarantees.
This increase was due to the issuance of irrevocable letters of credit
related to Deseret and an increase to the balance of NCSC commercial paper
guaranteed by CFC.
At August 31, 1999, CFC had unadvanced commitments totaling $13,032.9, an
increase of $224.8 over the balance of $12,808.1 at May 31, 1999.
Unadvanced commitments include loans approved by CFC for which loan
contracts have not yet been executed or for which contracts have been
executed, but funds have not been advanced. The majority of the short-term
unadvanced commitments provide backup liquidity to CFC borrowers, and
therefore CFC does not anticipate funding most of such commitments.
Approximately 39% of the outstanding commitments at August 31, 1999 were
for short-term or line of credit loans. To qualify for the advance of
funds under all commitments, a borrower must assure CFC that there has
been no material change since the loan was approved. The increase to
commitments during the three months ended August 31, 1999, was due to the
power vision program. Power vision is a program under which CFC performed
a review of its borrowers and pre-approved additional loan funds for a
number of borrowers.
Total credit committed at:
August 31, 1999 May 31, 1999 Inc / (Dec)
Loans $14,367.2 $13,703.4 $663.8
Unadvanced commitments 13,032.9 12,808.1 224.8
Guarantees 1,723.6 1,684.5 39.1
Total $29,123.7 $28,196.0 $927.7
At August 31, 1999, total credit commitments outstanding represented an
increase of 3% over the total at May 31, 1999.
Liabilities and members' equity totaled $14,616 at August 31, 1999 an
increase of $691 or 5% over the balance of $13,925 at May 31, 1999.
The increase to total liabilities and members' equity for the three months
ended August 31, 1999 was primarily due to increases in short-term debt
required to fund the increase in loans outstanding. Total debt outstanding
at August 31, 1999 was $12,948 an increase of $680 over the May 31, 1999
balance of $12,268.
19
<PAGE>
Debt outstanding at:
August 31, 1999 May 31, 1999 Inc / (Dec)
Notes payable:
Commercial paper $ 5,347.5 $ 5,871.2 $ (523.7)
Bank bid notes 221.0 375.0 (154.0)
Long-term debt 2,500.2 1,133.0 1,367.2
Commercial paper
reclassified as L/T (2,402.5) (2,402.5) -
Total notes payable 5,666.2 4,976.7 689.5
Long-term debt:
Collateral trust bonds 2,846.5 2,846.3 0.2
Medium-term notes 1,632.6 1,642.3 (9.7)
Commercial paper
reclassified as L/T 2,402.5 2,402.5 -
Total long-term debt 6,881.6 6,891.1 (9.5)
QUICS 400.0 400.0 -
Total debt outstanding $ 12,947.8 $ 12,267.8 $ 680.0
Percentage of
short-term debt 44% 41% 3%
Percentage of
long-term debt 56% 59% (3%)
Percentage of
fixed rate debt (1) 56% 58% (2%)
Percentage of
variable rate debt (2) 44% 42% 2%
___________________________________
(1) Includes fixed rate collateral trust bonds, medium-term notes and
QUICS plus commercial paper with rates fixed through interest rate
exchange agreements.
(2) The rate on commercial paper notes does not change once the note has been
issued. However, the rates on new commercial paper notes change daily
and commercial paper notes generally have maturities of less than 90
days. Therefore, commercial paper notes are considered to be variable
rate debt by CFC. Also included are variable rate collateral trust bonds
and medium-term notes.
Members' subordinated certificates and members' equity outstanding at:
August 31, 1999 May 31, 1999 Inc / (Dec)
Subordinated certificates:
Membership certificates $ 642.0 $ 641.9 $ 0.1
Loan certificates 440.8 422.8 18.0
Guarantee certificates 175.1 175.1 -
Total certificates 1,257.9 1,239.8 18.1
Equity:
Memberships 1.5 1.5 -
Allocated margins 224.7 290.7 (66.0)
Education fund 0.5 0.5 -
Year-to-date unallocated
margins 24.3 2.3 22.0
Total equity 251.0 295.0 (44.0)
Total equity and certificates $1,508.9 $1,534.8 $ (25.9)
Membership certificates are required to be purchased as a condition of
becoming a CFC member. The majority of membership certificates outstanding
and all new membership certificates have a maturity of 100 years and pay
interest at 5%. A small portion of membership certificates have a maturity
of 50 years and pay interest at a rate of 3%. Members are required to
purchase certificates with each new loan and guarantee, depending on the
borrower's internal leverage ratio with CFC. Subordinated certificates are
junior to all debt issued by CFC. Cooperatives are required to pay a
one-time fee to become a member. The fee varies from two hundred dollars
to a thousand dollars depending on the membership class. CFC maintains
current year net margins as unallocated through the end of its fiscal year.
All net margins earned for the year are allocated back to the members.
20
<PAGE>
A small portion of annual net margins is placed in the education fund,
which is distributed to the statewide cooperatives to assist with the
teaching of cooperative principles. CFC immediately retires 70% of the
allocated net margins for the prior year and holds the remaining 30% as
allocated margins, which are currently retired after 15 years. All
retirements of allocated margins are subject to approval by the board of
directors. CFC does not pay interest on the allocated but unretired margins.
The decrease to members' subordinated certificates and equity for the three
months ended August 31, 1999 is due to the retirement of patronage capital
offset by the issuance of new loan certificates related to loan advances
and current year net margins.
CFC's leverage ratio increased to 7.49 during the three months ended August
31, 1999 from 7.00 at May 31, 1999. The ratio is calculated after excluding
from debt the quarterly income capital securities and all debt associated
with the funding of the RUS 100% guaranteed loans. Members' subordinated
certificates and quarterly income capital securities are treated as equity
in the calculation of the leverage ratio. CFC contemplates that its
leverage ratio will continue to increase modestly as it obtains external
capital to accommodate its loan growth. CFC will retain the flexibility to
further amend its capital retention policies to retain members' investments
in CFC consistent with maintaining acceptable financial ratios.
CFC's debt/equity ratio increased from 5.52 at May 31, 1999, to 5.91 at
August 31, 1999. The ratio is calculated by dividing debt outstanding,
excluding quarterly income capital securities and debt used to fund loans
guaranteed by RUS, by the total of members' subordinated certificates,
members' equity, the loan loss allowance and quarterly income capital
securities.
Margin Analysis
CFC uses an interest coverage ratio instead of the dollar amount of gross or
net margins as its primary performance indicator, since CFC's net margins are
subject to fluctuation as interest rates change. Management has established
a 1.10 Times Interest Earned Ratio ("TIER") as its minimum operating
objective. CFC has earned a TIER of 1.12 for the three months ended
August 31, 1999 and 1998. TIER is a measure of CFC's ability to cover the
interest expense on funding.
Results for three months ended August 31, 1999 versus August 31, 1998
Net margins for the three months ended August 31, 1999, were $22.0, an
increase of $4.5 over the $17.5 earned the prior year.
Net margins for the three months ended:
August 31, 1999 August 31, 1998 Inc / (Dec)
Interest income $ 226.4 $ 180.1 $ 46.3
Cost of funds 190.8 151.9 38.9
Gross margin 35.6 28.2 7.4
General & administrative
expenses 5.3 5.5 (0.2)
Loan loss provision 8.8 5.9 2.9
Total expenses 14.1 11.4 2.7
Operating margin 21.5 16.8 4.7
Non-operating income 0.5 0.7 (0.2)
Net margin $ 22.0 $ 17.5 $ 4.5
TIER 1.12 1.12
21
<PAGE>
Net margins expressed as a percentage of average loans outstanding for the
three months ended:
August 31, 1999 August 31, 1998 Inc / (Dec)
Interest income 6.37% 6.59% (0.22)%
Cost of funds 5.37% 5.56% (0.19)%
Gross margin 1.00% 1.03% (0.03)%
General & administrative
expenses 0.15% 0.20% (0.05)%
Loan loss provision 0.25% 0.22% 0.03 %
Total expenses 0.40% 0.42% (0.02)%
Operating margin 0.60% 0.61% (0.01)%
Non-operating income 0.02% 0.03% (0.01)%
Net margin 0.62% 0.64% (0.02)%
Average loan volume for the three months ended August 31, 1999 totaled
$14,104.7, an increase of $3,261.3 or 30% over the average loan balance of
$10,843.4 for the prior year period. The increase to net margins for the
three month period ended August 31, 1999 was due to the increase in loan
volume as compared to the prior year period. The average yield earned on
the loan portfolio has decreased slightly as did the average cost of funds.
Both reductions were due to a lower cost of borrowing that CFC passed on to
its members in the form of lower interest rates on loans during the three
months ended August 31, 1999. The total dollar amount of operating expenses
decreased slightly for the three months ended August 31, 1999 compared to
the prior year; however, when presented as a percentage of average loan
volume, operating expenses decreased by 5 basis points or 25% from the prior
year. The provision for loan losses increased by $2.9 or 49% due to the
significant increase in loans outstanding during the last twelve to
eighteen months.
Loan and Guarantee Portfolio Assessment
Portfolio Diversity
CFC and its combined affiliates make loans and provide financial guarantees
to their qualified members. The combined memberships include rural electric
distribution systems, rural electric generation and transmission systems,
telecommunication systems, statewide rural electric and telecommunication
associations, and associate organizations.
The following chart summarizes loans and guarantees outstanding by member
class at August 31, 1999 and May 31, 1999.
August 31, 1999 May 31, 1999
Amount % of Amount % of
Outstanding Total Outstanding Total
Electric systems:
Distribution $ 9,056.4 56.3% $ 8,719.3 56.7%
Power supply 3,673.2 22.8% 3,538.8 23.0%
Service
organizations 358.6 2.2% 315.9 2.0%
Associate members 104.4 0.7% 103.6 0.7%
Subtotal electric
systems $13,192.6 82.0% $12,677.6 82.4%
Telecommunication
systems:
Local exchange
carrier $ 1,906.0 11.8% $ 1,688.2 11.0%
Cable 143.5 0.9% 128.9 0.8%
Cellular 273.9 1.7% 272.0 1.8%
Personal communications
systems 339.5 2.1% 303.5 2.0%
Other 235.3 1.5% 317.7 2.0%
Subtotal
telecommunications
systems 2,898.2 18.0% 2,710.3 17.6%
Total $16,090.8 100.0% $15,387.9 100.0%
22
<PAGE>
Credit Concentration
In addition to the geographic diversity of the portfolio, CFC limits its
exposure to any one borrower. At August 31, 1999, the total exposure
outstanding to any one borrower (excluding loans guaranteed by RUS) did
not exceed 4.2% of total loans and guarantees outstanding. At August 31,
1999 and May 31, 1999, CFC had $2,336 and $2,242, respectively, in loans
outstanding, excluding loans guaranteed by RUS, and $732 and $703,
respectively, in guarantees outstanding to its largest 10 borrowers.
The amounts outstanding to the largest 10 borrowers at August 31, 1999
and May 31, 1999, represented 16% of total loans outstanding and 42% of
total guarantees outstanding. Total credit exposure to the largest 10
borrowers represented 19% of total credit exposure at August 31, 1999 and
May 31, 1999. At August 31, 1999, the largest 10 borrowers included 4
distribution systems, 5 power supply systems and 1 telephone system.
Security Provisions
Except when providing lines of credit, CFC typically lends to its members
on a secured basis. At August 31, 1999, a total of $1,238 of loans were
unsecured representing 8.6% of total loans and 7.7% of total loans and
guarantees. At May 31, 1999, a total of $1,231 of loans were unsecured
representing 9.1% of total loans and 8.1% of total loans and guarantees.
As of August 31, 1999 and May 31, 1999, approximately $131 or 11% and $163
or 13.2%, respectively, of the unsecured loans represent obligations of
distribution borrowers for the initial phase(s) of RUS note buyouts.
Upon completion of a borrower's buyout from RUS, CFC receives first lien
security on all assets and future revenues. As of August 31, 1999 and
May 31, 1999, the unsecured loans would represent 7.7% and 7.8%,
respectively, of total loans and 6.9% of total loans and guarantees if
these partial note buyout obligations were excluded. CFC's long-term loans
are typically secured, pro-rata with any other secured lenders
(primarily RUS) by all assets and future revenues of the borrower.
Short-term loans are generally unsecured lines of credit. Guarantees
are secured on a pro-rata basis with other secured creditors by all assets
and future revenues of the borrower or by the underlying financed asset.
In addition to the collateral received, CFC also requires that its borrowers
set rates designed to achieve certain financial ratios.
Nonperforming and Restructured Loans
CFC classifies a borrower as nonperforming when any one of the following
criteria are met: (1) principal or interest payments on any loan to the
borrower are past due 90 days or more, (2) as a result of court proceedings,
repayment with the original terms is not anticipated, or (3) for some other
reason, management does not expect the timely repayment of principal or
interest. Once a borrower is classified as nonperforming, interest on its
loans is recognized on a cash basis. Alternatively, CFC may choose to apply
all cash received to the reduction of principal, thereby foregoing interest
income recognition. At August 31, 1999, all nonperforming loans were on
non-accrual status with respect to the recognition of interest income. At
August 31, 1999 and May 31, 1999, nonperforming loans totaled $1.6.
Loans classified as restructured are loans for which agreements have been
executed that change the original terms of the loan, generally a change to
the originally scheduled cashflows. At August 31, 1999, restructured loans
totaled $578.3, an increase of $1.6 from May 31, 1999. The increase was due
to CFC's performance on a guarantee relating to one borrower
(see Footnote 11). At August 31, 1999 and May 31, 1999, all restructured
loans were on accrual status with respect to the recognition of interest
income at a rate of 3.90%.
NONPERFORMING AND RESTRUCTURED ASSETS
August 31, 1999 May 31, 1999
Nonperforming loans $ 1.6 $ 1.6
Percent of loans and guarantees outstanding 0.01% 0.01%
Restructured loans $ 578.3 $ 576.7
Percent of loans and guarantees outstanding 3.59% 3.80%
Total nonperforming and restructured loans $ 579.9 $ 578.3
Percent of loans and guarantees outstanding 3.60% 3.81%
23
<PAGE>
Allowance for Loan Losses
CFC maintains an allowance for potential loan losses which is periodically
reviewed by management for adequacy. 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.
Since its inception in 1969, CFC has charged-off loan balances in the total
amount of $78.8 net of recoveries. Management believes that the allowance
for loan losses is adequate to cover any portfolio losses which may occur.
The following chart presents a summary of the allowance for loan losses at
August 31, 1999 and May 31, 1999.
August 31, 1999 May 31, 1999
Beginning balance $212.2 $250.1
Provision for loan losses 8.8 23.9
Charge-offs, net of recoveries - (61.8)
Ending balance $221.0 $212.2
As a percentage of gross loans
outstanding 1.54% 1.55%
As a percentage of gross loans and
guarantees outstanding 1.37% 1.38%
As a percentage of total nonperforming
and restructured loans outstanding 38.1% 36.7%
Asset/Liability Management
A key element of CFC's funding operations is the monitoring and management
of interest rate and liquidity risk. This process involves controlling
asset and liability volumes, repricing terms and maturity schedules to
stabilize gross operating margins and retain liquidity.
Match Funding Policy
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 next year. It is CFC's policy to manage asset and
liability repricing terms within a range of 5% of total assets. At
August 31, 1999, CFC had $527.0 in fixed rate assets amortizing or
repricing and $250.7 in fixed rate liabilities maturing during the next
12 months. The difference, $276.3, represents the fixed rate assets in
excess of the fixed rate debt maturing during the next 12 months. This
difference of $276.3 at August 31, 1999 represents 1.89% of total assets.
CFC funds variable rate assets which reprice monthly with short-term
liabilities, primarily commercial paper and bank bid notes, both of which
are issued primarily with original maturities under 90 days. CFC funds
fixed rate loans with fixed rate collateral trust bonds, medium-term notes,
quarterly income capital securities, members' subordinated certificates and
members' equity. With the exception of members' subordinated certificates,
which are generally issued at rates below CFC's long-term cost of funding
and with extended maturities and commercial paper, CFC's liabilities have
average maturities that closely match the repricing terms of CFC's fixed
interest rate loans. CFC also uses commercial paper supported by interest
rate exchange agreements to fund its portfolio of fixed rate loans.
Certain of CFC's collateral trust bonds and medium-term notes were issued
with early redemption provisions. To the extent borrowers are allowed to
convert their fixed rate loans to a variable interest rate and to the extent
it is beneficial, CFC takes advantage of these early redemption privileges.
However, because conversions can take place at different intervals from
early redemptions, CFC charges conversion fees designed to compensate for
any additional interest rate risk assumed by CFC.
CFC makes use of an interest rate analysis in the funding of its long-term
fixed rate loan portfolio. The analysis compares the scheduled fixed rate
loan amortizations and repricings against the scheduled fixed rate debt and
members' subordinated certificate amortizations to determine the fixed rate
funding gap for each individual year and for the portfolio as a whole.
There are no scheduled maturities for the members' equity, primarily
unretired
24
<PAGE>
patronage capital allocations. The balance of members' equity is assumed to
remain relatively stable since annual retirements are approximately equal to
the annual allocation of net margins. The non-amortizing members'
subordinated certificates either mature at the time of the related loan or
guarantee or 100 years from issuance, (50 years in the case of a small
portion of certificates). Accordingly, it is assumed in the funding analysis
that non-amortizing members' subordinated certificates and members' equity
are first used to "fill" any fixed rate funding gaps. The remaining gap
represents the amount of excess fixed rate funding due in that year or the
amount of fixed rate assets that are assumed funded by short-term variable
rate debt, primarily commercial paper. The interest rate associated with
the assets and debt maturing or equity and certificates is used to calculate
a TIER for each year and for the portfolio as a whole. The schedule allows
CFC to analyze the impact on the over all TIER of issuing a certain amount
of debt at a fixed rate for various maturities, prior to issuance of the
debt. The following chart shows the scheduled amortization and maturity of
fixed rate asset and liabilities outstanding at August 31, 1999.
INTEREST RATE GAP ANALYSIS
(Fixed Assets/Liabilities)
As of August 31, 1999
<TABLE>
<CAPTION>
Over 1 yr. Over 3 yrs. Over 5 yrs. Over 10 yrs.
Less than but less but less but less but less Over
1 year than 3 yrs. than 5 yrs. than 10 yrs. than 20 yrs. 20 yrs. Total
<S>
Assets: <C> <C> <C> <C> <C> <C> <C>
Loan amortization
and repricing $ 527.0 $1,460.1 $1,387.4 $2,484.1 $1,589.6 $ 696.0 $8,144.2
Total assets $ 527.0 $1,460.1 $1,387.4 $2,484.1 $1,589.6 $ 696.0 $8,144.2
Liabilities and equity:
Long-term debt $ 246.9 $1,374.8 $1,522.9 $2,368.8 $ 682.5 $ 307.2 $6,503.1
Subordinated
certificates 2.9 31.9 34.8 30.8 370.9 371.5 842.8
Members' equity 0.9 - - 73.5 525.5 28.1 628.0
Total liabilities and
equity $ 250.7 $1,406.7 $1,557.7 $2,473.1 $1,578.9 $ 706.8 $7,973.9
Gap * $(276.3) $ (53.4) $ 170.3 $ (11.0) $ (10.7) $ 10.8 $ (170.3)
Cumulative gap $(276.3) $ (329.7) $ (159.4) $ (170.4) $ (181.1) $(170.3)
Cumulative gap as a %
of total assets (1.89%) (2.26%) (1.09%) (1.17%) (1.24%) (1.17%)
</TABLE>
* Loan amortization/repricing over/(under) debt maturities
Derivative and Financial Instruments
At August 31, 1999 and May 31, 1999, CFC was a party to interest rate
exchange agreements totaling $3,856.9 and $2,796.0, respectively. CFC uses
interest rate exchange agreements as part of its overall interest rate
matching strategy. Interest rate exchange agreements are used when they
provide CFC a lower cost of funding option or minimize interest rate risk.
CFC will only enter interest rate exchange agreements with highly rated
financial institutions. At both of the above dates, CFC was using interest
rate exchange agreements to fix the interest rate on $2,106.3 as of
August 31, 1999 and $1,996.0 as of May 31, 1999 of its variable rate
commercial paper. CFC was also using interest rate exchange agreements
at both dates to minimize the variance between the three month LIBOR rate
at which $1,750.6 and $800.0 of collateral trust bonds and medium-term
notes, respectively, were issued and CFC's variable commercial paper rate.
All of CFC's derivative financial instruments were held for purposes other
than trading. CFC has not invested in derivative financial instruments for
trading purposes in the past and does not anticipate doing so in the future.
25
<PAGE>
At August 31, 1999, CFC had two foreign denominated medium-term notes
outstanding for $390.3 in Euros and $23.4 in British Pound Sterling. CFC has
entered into currency exchange agreements that will fix the exchange rate in
U.S. Dollars for all payments of principal and interest related to these
medium-term notes.
The following chart provides details of the related foreign-currency
exchange agreement that CFC had outstanding at August 31,1999:
Type of U.S. Foreign
Debt (1) Date Dollars Currency (2) Rate
MTN
Issue February 24, 1999 $390.3 350.0 EU 1.115
Maturity February 24, 2006 390.3 350.0 EU 1.115
Issue July 14, 1999 23.4 15.0 GBP 1.558
Maturity July 14, 2000 23.4 15.0 GBP 1.558
__________________________________________________
(1) MTN - CFC medium-term notes
(2) EU - Euros, GBP - British Pound Sterling
CFC enters into an exchange agreement to sell the amount of foreign-currency
received from the investor for U.S. Dollars on the issuance date, and to buy
the amount of foreign-currency required to repay the investor principal and
interest due through or on the maturity date. By locking in the exchange
rates at the time of issuance, CFC has eliminated the possibility of any
currency gain or loss which might otherwise have been produced by the
foreign-currency borrowing. CFC includes the difference between the amount
of U.S. Dollars received at issuance and the amount of U.S. Dollars required
to purchase the foreign-currency at the interest payment dates and at
maturity as interest expense.
Market Risk
CFC's primary market risk exposure is interest rate risk. A secondary risk
exposure is liquidity risk. CFC is also exposed to counterparty risk related
to the interest rate exchange agreements it has entered.
The interest rate risk exposure is related to the funding of the fixed rate
loan portfolio. CFC does not match fund the majority of its fixed rate
loans with a specific debt issuance at the time the loan is advanced. CFC
aggregates fixed rate loans until the volume reaches a level that will allow
an economically efficient issuance of debt. CFC uses fixed rate collateral
trust bonds, medium-term notes, quarterly income capital securities, members'
subordinated certificates, members' equity and variable rate debt to fund
fixed rate loans. CFC allows borrowers flexibility in the selection of the
period for which a fixed interest rate will be in effect. Long-term loans
typically have a 15 to 35 year maturity. Borrowers may select fixed interest
rates for periods of one year through the life of the loan. To mitigate
interest rate risk related to the funding of fixed rate loans, CFC performs
a monthly gap analysis, a comparison of fixed rate assets repricing or
maturing by year to fixed rate liabilities and equity maturing by year
(see chart on page 25). The analysis will indicate the total amount of
fixed rate loans maturing by year and in aggregate that are assumed to be
funded by variable rate debt. CFC's funding objective is to limit the total
amount of fixed rate loans that are funded by variable rate debt to 5% or
less of total assets. At August 31, 1999 and May 31, 1999 fixed rate loans
funded by variable rate debt represented 1.2% and 1.4%, respectively, of
total assets.
The interest rate risk is minimal on variable rate loans, since the loans
are priced monthly based on the cost of the debt used to fund the loans.
CFC uses variable rate debt, non-interest bearing members' subordinated
certificates and members' equity to fund variable rate loans. At
August 31, 1999 and May 31, 1999, 39% and 37%, respectively, of loans
carry a variable interest rate.
CFC faces liquidity risk in the funding of its variable rate loans and in
being able to obtain the funds required to meet the loan requests of its
members or conversely, having funds to repay debt obligations when
they are due. CFC offers variable rate loans with maturities of up to 35
years. These loans are funded by variable rate commercial paper, bank bid
notes, collateral trust bonds and medium-term notes; non-interest bearing
members'
26
<PAGE>
subordinated certificates and members' equity. The average maturity of
commercial paper and bank bid notes is typically about 30 to 35 days. The
collateral trust bonds and medium-term notes are issued for longer periods
than commercial paper, but typically much shorter than the maturity of the
loans. Loan subordinated certificates are issued for the same period as
the related loan. Thus CFC is at risk if it is unable to continually roll
over its commercial paper balances or issue other forms of variable rate debt
to support its variable rate loans. To mitigate liquidity risk, CFC
maintains back-up liquidity through revolving credit agreements with domestic
and foreign banks. At August 31, 1999 and May 31, 1999, CFC had a total of
$4,792.5 in revolving credit agreements and bank lines of credit. Subsequent
to the end of the quarter, CFC entered into two revolving credit agreements
dated as of September 29, 1999 and effective as of September 30, 1999, at the
same pricing level, increasing the total of revolving credit
agreements and bank lines of credit to $5,492.5 as of September 30, 1999.
To facilitate entry into the debt markets, CFC maintains high credit ratings
on all of its debt issuances from three credit rating agencies (see chart
below). CFC also maintains shelf registrations with the SEC for its
collateral trust bonds, medium-term notes and quarterly income capital
securities. At August 31, 1999 and May 31, 1999, CFC had active shelf
registrations totaling $700 related to collateral trust bonds, $897 and
$144 related to medium-term notes and $100 related to quarterly income
capital securities. All of the registrations allow for issuance of the
related debt at both variable and fixed interest rates. CFC also has
commercial paper and medium-term note issuance programs in Europe. At
August 31, 1999 and May 31, 1999, CFC had $0 and $50 of commercial paper
and $685 and $735 of medium-term notes, respectively, outstanding to
European investors. As of August 31, 1999, CFC has issuance authority of
$1,000 related to commercial paper and $2,000 related to medium-term notes
under these programs. Subsequent to the end of the quarter, CFC registered
an additional $3,000 of medium-term notes with the SEC.
CFC is exposed to counterparty risk related to the performance of the parties
with which it has entered into interest rate exchange agreements. To
mitigate this risk, CFC only enters into interest rate exchange agreements
with highly rated counterparties. At August 31, 1999 and May 31, 1999, CFC
was a party to $3,856.9 and $2,796.0, respectively, of interest rate
exchange agreements. To date, CFC has not experienced a failure of a
counterparty to perform as required under the interest rate exchange
agreement. At August 31, 1999, CFC's interest rate exchange agreement
counter parties had credit ratings ranging from A to AAA as assigned by
Standard & Poor's Corporation.
Credit Ratings
CFC's long- and short-term debt and guarantees are rated by three of the
major credit rating agencies, Moody's Investors Service ("Moody's"), Standard
& Poor's Corporation ("S&P") and Fitch Investors Service ("Fitch"). The
following table presents CFC's credit ratings at August 31, 1999.
Moody's Standard & Poor's Fitch
Investors Service Corporation Investors Service
Direct
Collateral trust
bonds Aa3 AA AA
Domestic and european
medium-term notes A1 AA- AA-
Quarterly income
capital securities A2 A A+
Domestic and european
commercial paper P1 A-1+ F-1+
Guarantees
Leveraged lease debt A1 AA- AA-
Pooled bonds Aa3 AA- AA-
Other bonds A1 AA- AA-
Short-term P1 A-1+ F-1+
The ratings listed above have the meaning as defined by each of the
respective rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by the
rating organizations.
27
<PAGE>
Member Investments
At August 31, 1999 and May 31, 1999, CFC's members provided 20.0% and 20.4%
of total capitalization as follows:
MEMBERSHIP CONTRIBUTIONS TO TOTAL CAPITALIZATION
August 31, % May 31, %
1999 of Total (1) 1999 of Total (1)
Commercial paper $1,132 21.2% $1,063 18.1%
Medium-term notes 245 6.2% 211 3.1%
Members' subordinated
certificates 1,258 100.0% 1,240 100.0%
Members' equity 251 100.0% 295 100.0%
Total $2,886 $2,809
________________________
(1) Represents the percentage of each line item outstanding to CFC members.
The total amount of member investments increased slightly at August 31, 1999,
compared to May 31, 1999. Total member investment as a percentage of total
capitalization decreased due to the increase in nonmember debt required to
fund the growth in loans. Total capitalization at August 31, 1999 was
$14,457, an increase of $654 over the total capitalization of $13,803 at
May 31, 1999. When the loan loss allowance is added to both membership
contributions and total capitalization, the percentages of membership
investments to total capitalization are 21.2% and 21.6% at August 31, 1999
and May 31, 1999, respectively. Due to recent policy changes that have
reduced members' subordinated certificate purchase requirements and
accelerated patronage capital retirements, CFC expects the percentage of
capitalization provided by its members to continue to decline.
Year 2000 Compliance
CFC has appointed a year 2000 project coordinator and assembled a team of
individuals from all areas of the company to assist in the development of a
year 2000 compliance plan and the testing of all business essential
applications. CFC's year 2000 plan includes the following activities:
* Identification of at risk applications and equipment,
* Obtain certification from vendors,
* Review the results of step 2,
* Develop plans to address items that will not be compliant,
* Implement solutions,
* Testing of all applications and equipment,
* Final corrections.
CFC has completed all of the above activities.
CFC has completed the testing of its business critical applications and
computer systems. All software and hardware components have successfully
passed year 2000 testing.
CFC does not anticipate any significant impact on internal operations due to
the year 2000 problem. Each business application owner has developed a
contingency plan. The contingency plans and test results will be maintained
as part of the remediation effort documentation. In addition, CFC's
information systems and all business critical application owners/users will
be at CFC on January 2, 2000 to test these applications. The first business
day for CFC will be January 4, 2000, which allows three days to work on any
problems that may occur.
CFC depends on the federal wire system to advance loan funds and to collect
debt service payments on loans. CFC also depends on the capital markets for
the bulk of its loan funding. Serious disruptions in these areas could
impact CFC's operations. In 1994, CFC decided to move from a mainframe
computer system to a client server computer system. This change to a client
server system was initiated solely for business purposes. The client server
platform allows
28
<PAGE>
CFC staff and members access to data that was not possible with the
mainframe. Along with the change in computer platform, CFC moved from
internal development of all software applications to a mixture of externally
developed software solutions and internal development with tools such as
Java, Power Builder and Lotus Notes. Some of the initial client server
components have been upgraded due to the demand for more processing power and
memory. As a result of the decision to migrate to a client server system and
the subsequent upgrades, CFC's year 2000 problems have been mitigated.
To date CFC's remediation cost has been insignificant. CFC does not
anticipate that the overall cost of remediating its year 2000 problem,
cost to date plus any additional amounts required before or after
January 1, 2000, will adversely impact operations. CFC has performed
all work related to the year 2000 compliance plan internally. The cost of
migrating to a client server system and upgrading client server components
for additional power and memory is not considered a year 2000 remediation
cost.
While CFC does not anticipate any operational problems, its borrowers'
ability to make debt service payments depends on their ability to generate
and deliver electric power and to deliver telecommunications services to
their customers. Disruptions to these services could impact the borrowers'
ability to make debt service payments to CFC. Factors mitigating the
potential impact of service disruptions include:
* borrowers have cash balances and the ability to draw down on lines of
credit to temporarily cover debt service payments,
* electric power was generated and transmitted to customers prior to the
present level of computer automation, thus manual operation of plants and
distribution systems is possible, and
* CFC maintains a revolving credit facility and bank lines of credit, which
could be drawn upon to meet debt obligations in the event that borrowers
experience temporary difficulty in making their debt service payments.
CFC required its long-term borrowers to provide details of their compliance
effort as of December 31, 1998. Responses have come as statements or
copies of their individual year 2000 plans. To date CFC has received
over 1,000 responses. About 97% of the responses have been considered to be
"satisfactory"- cooperative states that they are aware of and addressing the
potential year 2000 problem and taking the necessary steps to become year
2000 compliant; that they have adequate resources to perform the work; and
they are testing systems, validating vital components and have created
contingency plans. The remainder has been classified as "unable to assess"
- - cooperative statement lacks enough information or is vague. CFC is trying
to follow up with these cooperatives to get more information. CFC has not
received any responses that would be classified as "unsatisfactory"
- - cooperative states they are unable or unwilling to address the potential
year 2000 problem, they don't expect to be year 2000 ready or offer no
statement at all. Approximately 92% of total loans and guarantees are
outstanding to members whose response has been considered satisfactory.
Year 2000 activities will continue to be documented in detail to reflect
that CFC demonstrated all reasonable effort, that all risks were fully
assessed and that a detailed plan was fully executed.
29
<PAGE>
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
4.1 - Revolving Credit Agreement totaling $2,540 million
dated September 29, 1999.
4.2 - Revolving Credit Agreement totaling $550 million
dated September 29, 1999.
27 - Financial Data Schedule
B. Reports on Form 8-K.
Item 7 on June 10, 1999 - Filing of Agency Agreement and Calculation
Agent Agreement relating to the distribution of CFC's Medium-Term
Notes, Series C, within the United States.
30
<PAGE>
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
October 13, 1999
/s/ Steven L. Slepian
Controller (Principal Accounting Officer)
October 13, 1999
31
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
August 31, 1999, Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> May-31-2000
<PERIOD-END> Aug-31-1999
<CASH> 110,803
<SECURITIES> 0
<RECEIVABLES> 153,951
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,437,363
<PP&E> 52,736
<DEPRECIATION> 9,704
<TOTAL-ASSETS> 14,616,460
<CURRENT-LIABILITIES> 8,211,795
<BONDS> 4,879,073
0
0
<COMMON> 0
<OTHER-SE> 1,508,859
<TOTAL-LIABILITY-AND-EQUITY> 14,616,460
<SALES> 226,405
<TOTAL-REVENUES> 226,405
<CGS> 190,840
<TOTAL-COSTS> 190,840
<OTHER-EXPENSES> 5,371
<LOSS-PROVISION> 8,765
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,967
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
REVOLVING CREDIT AGREEMENT
dated as of
September 29, 1999
among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
THE BANK OF NOVA SCOTIA
and
BANK ONE, N.A.
as CO-DOCUMENTATION AGENTS,
BANK OF AMERICA, N.A.
as SYNDICATION AGENT
and
THE CHASE MANHATTAN BANK
as ADMINISTRATIVE AGENT
Arranged by
CHASE SECURITIES INC.
and
BANC OF AMERICA SECURITIES LLC
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TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.01. Definitions 1
Section 1.02. Accounting Terms and Determinations 15
Section 1.03. Types of Borrowings 15
ARTICLE 2
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. Method of Electing Interest Rates 27
Section 2.09. Fees 29
Section 2.10. Optional Termination or Reduction of Commitments 30
Section 2.11. Mandatory Termination of Commitments 30
Section 2.12. Optional Prepayments 30
Section 2.13. General Provisions as to Payments 31
Section 2.14. Funding Losses 32
Section 2.15. Computation of Interest and Fees 32
Section 2.16. Withholding Tax Exemption 32
Section 2.17. Increase of Commitments 33
ARTICLE 3
Conditions
Section 3.01. Effectiveness 34
Section 3.02. Borrowings 35
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence, Power and Authority 37
Section 4.02. Financial Statements 37
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Page
Section 4.03. Litigations 38
Section 4.04. Governmental Authorizations 38
Section 4.05. Capital Term Certificates 39
Section 4.06. No Violation of Agreements 39
Section 4.07. No Event of Default under the Indentures 39
Section 4.08. Compliance with ERISA 40
Section 4.09. Compliance with Other Laws 40
Section 4.10. Tax Status 40
Section 4.11. Investment Company Act 40
Section 4.12. Public Utility Holding Company Act 40
Section 4.13. Disclosure 40
Section 4.14. Subsidiaries 41
Section 4.15. Environmental Matters 41
Section 4.16. Year 2000 41
ARTICLE 5
Covenants
Section 5.01. Corporate Existence 42
Section 5.02. Disposition of Assets; Merger,
Character of Business; etc 42
Section 5.03. Financial Information 43
Section 5.04. Default Certificates 44
Section 5.05. Notice of Litigation, Legislative Developments
and Defaults 45
Section 5.06. ERISA 45
Section 5.07. Payment of Charges 46
Section 5.08. Inspection of Books and Assets 46
Section 5.09. Indebtedness 46
Section 5.10. Liens 47
Section 5.11. Maintenance of Insurance 48
Section 5.12. Subsidiaries and Joint Ventures 48
Section 5.13. Minimum TIER 49
Section 5.14. Retirement of Patronage Capital 49
Section 5.15. Use of Proceeds 49
ARTICLE 6
Defaults
Section 6.01. Events of Defaults 49
Section 6.02. Notice of Default 52
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Page
ARTICLE 7
The Agent
Section 7.01. Appointment and Authorization 52
Section 7.02. Agent and Affiliates 52
Section 7.03. Action by Agent 52
Section 7.04. Consultation with Experts 52
Section 7.05. Liability of Agent 52
Section 7.06. Indemnification 53
Section 7.07. Credit Decision 53
Section 7.08. Successor Agent 53
Section 7.09. Co-Documentation Agents and
Syndication Agent Not Liable 54
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 54
Section 8.02. Illegality 55
Section 8.03. Increased Cost and Reduced Return 55
Section 8.04. Base Rate Loans Substituted for
Affected Fixed Rate Loans 57
ARTICLE 9
Miscellaneous
Section 9.01. Notices 58
Section 9.02. No Waivers 58
Section 9.03. Expenses; Documentary Taxes; Indemnification 58
Section 9.04. Sharing of Set-offs 59
Section 9.05. Amendments and Waivers 60
Section 9.06. Successors and Assigns 60
Section 9.07. Collateral 61
Section 9.08. Managing Agents; Co-Agents 62
Section 9.09. Governing Law 62
Section 9.10. Counterparts; Integration 62
Section 9.11. Several Obligations 62
Section 9.12. Severability 62
Section 9.13. Waiver/Appointment Notice 62
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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
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REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of September 29, 1999 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,
THE BANK OF NOVA SCOTIA and THE FIRST NATIONAL BANK ONE, N.A., as
Co-Documentation Agents, BANK OF AMERICA, N.A., as Syndication Agent, and
THE CHASE MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
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 The Chase Manhattan Bank in its capacity as administrative
agent for the Banks hereunder, and its successors in such capacity.
"Agreement" means this Revolving Credit Agreement, as the same may be
amended from time to time.
"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
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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 that bears interest at the Base Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the last sentence of Section 2.08(a) or Article 8.
"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).
"CD Loan" means a Committed Loan that bears interest at a CD Rate pursuant
to the applicable Notice of Committed Borrowing or Notice of Interest Rate
Election.
"CD Margin" means .290%.
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"CD Reference Banks" means The Chase Manhattan Bank and Bank of
America, N.A.
"Commitment" means (i) with respect to each Bank listed on the signature
pages hereof, the amount set forth opposite the name of such Bank on the
signature pages hereof and (ii) with respect to any Assignee that becomes a
Bank pursuant to Section 9.06(c), the amount of the transferor Bank's
Commitment assigned to it pursuant to Section 9.06(c), in each case as such
amount may be reduced from time to time pursuant to Sections 2.10 and 2.11;
provided that, if the context so requires, the term "Commitment" means the
obligation of a Bank to extend credit up to such amount to the Borrower
hereunder.
"Committed Loan" means a Revolving Loan or a Term Loan; provided that, if
any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term "Committed Loan"
shall refer to the combined principal amount resulting from such combination
or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Commitment Termination Date" means September 27, 2000 or such later date to
which this Agreement shall have been extended pursuant to Section 2.01(c),
or, if either such day is not a Euro-Dollar Business Day, the next preceding
Euro-Dollar Business Day.
"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-Documentation Agents" means The Bank of Nova Scotia and Bank One, N.A.,
each in its capacity as co-documentation 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
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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.
"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.
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"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.
"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 that bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing
or Notice of Interest Rate Election.
"Euro-Dollar Margin" means .165%.
"Euro-Dollar Reference Banks" means the principal London offices of The
Chase Manhattan Bank and Bank of America, N.A.
"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
The Chase Manhattan Bank on such day on such transactions as determined
by the Agent.
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"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.
"Group of Loans" means, at any time, a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar Loans having the same Interest Period at such time or (iii)
all CD Loans having the same Interest Period at such time; provided that,
if a Committed Loan of any particular Bank is converted to or made as a
Base Rate Loan pursuant to Article8, such Loan shall be included in the
same Group or Groups of Loans from time to time as it would have been in
if it had not been so converted or made.
"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
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(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; 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;
(c) any Interest Period which begins before the Commitment Termination
Date and would otherwise end after the Commitment Termination Date shall
end on the Commitment Termination Date; and
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(d) Interest Period which begins before the first anniversary of
the Commitment Termination Date and would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment 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;
(b) any Interest Period which begins before the Commitment Termination
Date and would otherwise end after the Commitment Termination Date shall end
on the Commitment Termination Date; and
(c) any Interest Period which begins before the first anniversary of
the Commitment Termination Date and would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment 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;
(b) any Interest Period which begins before the Commitment Termination
Date and would otherwise end after the Commitment Termination Date shall
end on the Commitment Termination Date; and
(c) any Interest Period which begins before the first anniversary of
the Commitment Termination Date and would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment Termination Date;
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(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;
(c) any Interest Period which begins before the Commitment Termination
Date and would otherwise end after the Commitment Termination Date shall
end on the Commitment Termination Date; and
(d) any Interest Period which begins before the first anniversary of the
Commitment Termination Date and would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment Termination Date;
(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 be extended to the next succeeding
Euro-Dollar Business Day;
(b) any Interest Period which begins before the Commitment Termination
Date and would otherwise end after the Commitment Termination Date shall
end on the Commitment Termination Date; and
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(c) any Interest Period which begins before the first anniversary of
the Commitment Termination Date and would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment 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.
"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.
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"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).
"1994 Indenture" means the Indenture dated as of February 15, 1994 and as
amended as of September 16, 1999 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.
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"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)).
"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.
"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.
"Prime Rate" means the rate of interest publicly announced by The Chase
Manhattan Bank in New York City from time to time as its Prime Rate.
"Prior Credit Agreement" means the Revolving Credit Agreement dated as of
February 28, 1995, as amended and restated as of November 26, 1996, as
further amended and restated as of November 25, 1997, as further amended
and restated as of November 24, 1998, and as further amended to the date
hereof, 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.
"Qualified Subordinated Indebtedness" means the Borrower's (i) 8% Quarterly
Income Capital Securities (Subordinated Deferrable Interest Debentures
Due 2045) and (ii) any
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other Indebtedness of the Borrower having substantially similar terms as
those contained in the instruments and documents relating to the foregoing
Indebtedness.
"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.
"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 51% of the sum of
the aggregate amount of the unused Commitments and the aggregate principal
outstanding amount of the Loans.
"Revolving Credit Period" means the period from and including the Effective
Date to but excluding the Commitment Termination Date.
"Revolving Loan" means a loan made by a Bank pursuant to Section2.01(a).
"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-1 or Exhibit B-2 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).
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"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".
"Superior Indebtedness" means all Indebtedness of the Borrower (other
than Capital Term Certificates and Qualified Subordinated Indebtedness)
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.
"Syndication Agent" means Bank of America, N.A. in its capacity as
Syndication Agent for the Banks hereunder, and its successors in such
capacity.
"Term Loan" means a loan made pursuant to Section 2.01(b).
"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
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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.
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 2 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 2 under which participation
therein is determined (i.e., a "Revolving Borrowing" is a Borrowing
under Section 2.01(a) 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 2
The Credits
Section 2.01. Commitments to Lend. (a) Revolving Loans. 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 Revolving 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 $10,000,000 or
any larger multiple of $1,000,000 (except that any such Borrowing may be
in the maximum
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aggregate amount available in accordance with Section 3.02(c) or 3.02(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
2.12, prepay Loans and reborrow at any time during the Revolving Credit
Period under this Section.
(b) Term Loans. Each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to make a Term Loan to the Borrower on the
Commitment Termination Date in an amount up to but not exceeding the amount
of its Commitment, as then in effect.
(c) Extension of Commitments. The Commitment Termination Date
may be extended from time to time in the manner set forth in this
subsection (c), in each case for a period of up to 364 days from
the date on which Banks having 51% of the Commitments shall have
notified the Agent of their agreement so to extend. If the Borrower
wishes to request an extension of the Commitment Termination Date,
it shall give written notice to that effect (such notice to state
the date to which the Commitment 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 Commitment 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 Commitment Termination Date to assign their
Commitments in their entirety, no later than 15 days prior to the
Commitment Termination Date then in effect, to one or more Assignees
pursuant to Section 9.06(c) which Assignees will agree to extend
the Commitment Termination Date. If Banks having at least 51% of
the Commitments (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 Commitment Termination
Date shall be extended for the period specified above. The
Commitment of any Bank that elects not to extend the Commitment
Termination Date shall terminate on the Commitment Termination Date
in effect immediately prior to giving effect to any such extension.
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
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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 bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, 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 15 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) 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,
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(ii) the aggregate amount of such Borrowing, which shall be $10,000,000
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.
(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
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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 3 and 6, 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 $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,
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(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 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 $10,000,000 or any larger multiple of $1,000,000,
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(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 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 3 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 2.13, 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 1:00P.M. (New York City time) on the date of
Borrowing in the
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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.
(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,
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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. (a) The Revolving Loans shall mature,
and the principal amount thereof shall be due and payable, on the last day
of the Revolving Credit Period.
(b) Each Money Market Loan shall mature, and the principal amount
thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
(c) The Term Loans shall mature on the first anniversary of the
Commitment Termination Date.
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 and, with respect to the principal amount
of any Base Rate Loan that is prepaid or converted to a CD Loan or
Euro-Dollar Loan, on the date of such prepayment or conversion. 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 and, with respect to the principal amount of any CD
Loan that is prepaid or converted to a Base Rate Loan or Euro-Dollar Loan,
on the date of such prepayment or conversion. 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
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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
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.
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"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 327.4(a) (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 and, with
respect to the principal amount of any Euro-Dollar Loan that is prepaid or
converted to a Base Rate Loan or CD Loan, on the date of such prepayment or
conversion.
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
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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 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
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participating Banks 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. Method of Electing Interest Rates. (a) The Loans included in
each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue
the type of interest rate borne by each Group of Loans (subject to Section
2.08(d) and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to convert
such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar
Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert such
Loans to Base Rate Loans as of any Domestic Business Day, or convert such
Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day or continue
such Loans as CD Loans, as of the end of any Interest Period applicable
thereto, for an additional Interest Period, subject to Section 2.14 if any
such conversion is effective on any day other than the last day of an
Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day, or
convert such Loans to CD Loans as of any Euro-Dollar Business Day or may
elect to continue such Loans as Euro-Dollar Loans, as of the end of any
Interest Period applicable thereto, for an additional Interest Period,
subject to Section 2.14 if any such conversion is effective on any day other
than the last day of an Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Administrative Agent not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective
(unless the relevant Loans are to be converted from Domestic Loans of one
type to Domestic Loans of the other type or are CD Loans to be continued as
CD Loans for an additional Interest Period, in which case such notice shall
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be delivered to the Agent not later than 10:30 A.M. (New York City time) on
the second Domestic Business Day before such conversion or continuation is
to be effective). A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Group of Loans; provided that (i) such portion is allocated ratably
among the Loans comprising such Group and (ii) the portion to which such
Notice applies, and the remaining portion to which it does not apply, are
each at least $10,000,000 (unless such portion is comprised of Base Rate
Loans). If no such notice is timely received before the end of an Interest
Period for any Group of CD Loans or Euro-Dollar Loans, the Borrower shall be
deemed to have elected that such Group of Loans be converted to Base Rate
Loans at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
Section 2.08(a);
(iii) if the Loans comprising such Group are to be converted, the new Type
of Loans and, if the Loans resulting from such conversion are to be CD Loans
or Euro-Dollar Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans
for an additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to Section 2.08(a), the Agent shall notify each Bank of
the contents thereof and such notice shall not thereafter be revocable by
the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Committed
Loans to, or continue any Committed Loans for an additional Interest Period
as, CD Loans or Euro-Dollar Loans if (i) the aggregate principal amount of
any Group of CD Loans or Euro-Dollar Loans created or continued as a result
of such
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election would be less than $10,000,000 or (ii) a Default shall have occurred
and be continuing when the Borrower delivers notice of such election to the
Agent.
(e) If any Committed Loan is converted to a different type of Loan, the
Borrower shall pay, on the date of such conversion, the interest accrued to
such date on the principal amount being converted.
Section 2.09. Fees.
(a) Facility Fees. The Borrower shall pay to the Agent for the account
of each Bank facility fees on the daily average amount of such Bank's
Commitment (whether used or unused), for the period from the Effective Date
to but excluding the earlier of the date the Commitments are terminated or
the Commitment Termination Date, at a rate of 0.085% per annum; provided
that, if such Bank continues to have any Committed Loans outstanding after
its Commitment terminates, then such facility fee shall continue to accrue
on the daily outstanding principal amount of such Bank's Committed Loans
from and including the date on which its Commitment terminates to but
excluding the date on which such Bank ceases to have any Committed Loans
outstanding. Accrued facility fees shall be payable on each January 1,
April 1, July 1, and October 1 and on the date the Commitments are terminated
(and, if later, on the date the Loans shall be repaid in their entirety);
provided that any facility fees accruing after the first anniversary of the
Commitment Termination Date shall be payable on demand.
(b) Utilization Fees. (i) During any period when the aggregate
outstanding principal amount of the Loans exceeds 50% of the aggregate
amount of the Commitments or the Commitments have been terminated but Loans
are outstanding, the Borrower shall, unless Minimum Rating Status exists,
pay to the Agent for the account of each Bank utilization fees at a rate of
0.125% per annum. Such utilization fee shall accrue on the average daily
aggregate outstanding principal amount of such Bank's Loans and shall be
payable on each January 1, April 1, July 1, and October 1 and on the date
the Commitments are terminated (and, if later, on the date the Loans shall
be repaid in their entirety); provided that any utilization fees accruing
after the first anniversary of the Commitment Termination Date shall be
payable on demand.
(ii) For purposes of this Section, "Minimum Rating 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
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unsecured long-term debt, would be rated) at least AA- (or any equivalent
rating which is used in lieu thereof) or higher by S&P or Aa3 (or any
equivalent rating which is used in lieu thereof) or higher by Moody's.
(c) 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.
Section 2.10. 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 $10,000,000 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 2.11. Mandatory Termination of Commitments. The Commitments shall
terminate on the Commitment Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
Section 2.12. Optional Prepayments. (a) Subject in the case of Fixed Rate
Loans to Section 2.14, the Borrower may (i) upon at least one Domestic
Business Day's notice to the Agent, prepay any Group of Domestic Loans (or
any Money Market Borrowing bearing interest at the Base Rate pursuant to
Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business Days'
notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in
whole at any time, or from time to time in part in amounts aggregating
$10,000,000 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 Group of Loans (or
such Money Market Borrowing).
(b) Except as provided in Section 2.12(a), the Borrower may not prepay
all or any portion of the principal amount of any Money Market 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.
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Section 2.13. 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 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 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a different type of Loan (whether such payment or conversion is
pursuant to Article 2, 6 or 8 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,
prepay, convert or continue any Fixed Rate Loans after notice has been given
to any Bank in accordance with Section 2.04(a), 2.08(c) or 2.12(c) the
Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an
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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 conversion or failure to borrow, prepay, convert
or continue; 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 2.15. 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 2.16. 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 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 2.17. Increase of Commitments. Upon at least 15 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
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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 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 (i) 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 $800,000,000 and (ii)
after giving effect to such increase or new Commitment, the amount of the
Commitment of any Bank shall not exceed 17.5% of the aggregate amount of the
Commitments (excluding, for purposes of this clause (ii), any increase
resulting solely from the merger or the acquisition of one Bank into or by
another Bank). It is understood that any increase in the amount of the
Commitments pursuant to this Section 2.17 shall not constitute an amendment
of this Agreement or the Notes.
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ARTICLE 3
Conditions
Section 3.01. Effectiveness. This 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, 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;
(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;
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(g) receipt by the Agent, with a copy for each Bank, of a certificate of
an officer of the Borrower acceptable to the Agent stating that all consents,
authorizations, notices and filings required or advisable in connection with
this Agreement are in full force and effect, and the Agent shall have
received evidence thereof reasonably satisfactory to it;
(h) evidence satisfactory to the Required Banks that the Commitments, as
defined in the Prior Credit Agreement, have been terminated (except that
Sections 2.13, 7.05, 7.06, 8.03 and 9.03 (and Section 2.12 and Article 9
insofar as such Section or Article relates to such Sections 2.13, 7.05, 7.06,
8.03 and 9.03, as applicable)) of the Prior Credit Agreement shall survive
the termination of such Commitments and shall remain in full force and
effect) and all amounts owed under the Prior Credit Agreement have been paid
in full; and
(i) 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.
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 October
15, 1999;
(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;
(e) the fact that, immediately after such Borrowing, no Default shall
have occurred and be continuing;
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(f) the fact that the representations and warranties of the Borrower
contained in this Agreement 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 4
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
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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, 1999 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, 1999, 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, 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.
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(b) The unaudited combined balance sheets of the Borrower and its
Consolidated Subsidiaries as of August 31, 1999 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
commitments issued by the Borrower in the ordinary course of business since
the date of such financial statements.
Section 4.03. Litigations. 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 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
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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 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 (other than Plans consisting
of mulitemployer plans (as defined in Section 4001 of ERISA)) are in
substantial compliance with ERISA, no such Plan is insolvent or in
reorganization, and no such Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Internal Revenue Code.
No Plan consisting of a multiemployer plan (as defined in Section 4001 of
ERISA) is in reorganization. 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 material liability to or on account of a Plan
pursuant to any of the foregoing Sections of ERISA.
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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 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
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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.
Section 4.16. Year 2000. The cost to the Borrower and its Subsidiaries of
any reprogramming required to permit the proper functioning, in and following
the year 2000, of (i) the computer systems of the Borrower and its
Subsidiaries and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrower's
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, and of the reasonably foreseeable consequences of year 2000 to
the Borrower and its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) would
not reasonably be expected to result in a Default or Event of Default or
have a material adverse effect on the operations, business, properties or
condition (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole. To the knowledge of the Borrower, except for such of the
reprogramming referred to in the preceding sentence as may be necessary,
which reprogramming the Borrower expects to complete in a timely fashion,
the computer and management information systems of the Borrower and its
Subsidiaries are and, with ordinary course upgrading and maintenance and
planned systems conversions and/or upgrades, will continue to be, sufficient
to permit the Borrower to conduct its businesses without a material adverse
effect on the operations, business, properties or condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole.
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ARTICLE 5
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
2.09 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
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
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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 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
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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
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 5.14, 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
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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).
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.
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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, 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, (b) the aggregate amount of Members' equity in the
Borrower, other than Capital Term Certificates, on the Determination Date
and (c) the aggregate principal amount of Qualified Subordinated Indebtedness
outstanding 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, (b) the aggregate amount of Members'
equity in the Borrower, other than Capital Term Certificates, on the
Determination Date and (c)
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the aggregate principal amount of Qualified Subordinated Indebtedness
outstanding on the Determination Date which will remain outstanding on such
given future date. The respective principal amounts of Superior
Indebtedness, Capital Term Certificates and Qualified Subordinated
Indebtedness 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,
Capital Term Certificates, Qualified Subordinated Indebtedness 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 Indent
ure (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
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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, (ii)
all Indebtedness of the Borrower shown in its balance sheet dated as of May
31, 1999 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, 1999 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 and (iii) all Qualified Subordinated Indebtedness outstanding at such
time.
Section 5.13. 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 5.14. 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 5.15. 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
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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 6
Defaults
Section 6.01. Events of Defaults. 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 or
5.15;
(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;
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(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
$25,000,000 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 $25,000,000 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);
(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
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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 $25,000,000 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 2.09 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(b) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
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.
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Section 7.02. Agent and Affiliates. The Chase Manhattan Bank 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 The Chase Manhattan Bank 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 6.
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 3, 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
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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 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-Documentation Agents and Syndication Agent Not Liable.
Nothing in this Agreement shall impose upon any Co-Documentation Agent or
the Syndication Agent, each in such capacity, any duties or responsibilities
whatsoever.
ARTICLE 8
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:
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(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, (i) the obligations of the Banks to make CD Loans or Euro-Dollar
Loans, as the case may be, or to continue or convert outstanding Loans as or
into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended
and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be,
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. 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 or to convert outstanding Loans into Euro-Dollar Loans or
continue outstanding Loans as 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
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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 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
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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
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
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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 Bank to make, or to continue or convert
outstanding Loans as or to, 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 9
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
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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 2 or Article 8
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
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
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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.
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
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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 Article8 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 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 $3,500. 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
60
<PAGE>
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 2.16.
(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 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
61
<PAGE>
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.
Section 9.13. Waiver/Appointment Notice. (a) Each Bank party to the Five-
Year Credit Agreement dated as of February 28, 1995 (as amended and restated
as of November 26, 1996 and as further amended to the date hereof the "Five-
Year Credit Agreement") hereby waives the Borrower's obligation to notify
the Agent at least 45 days prior to the creation of any new commitment
pursuant to Section 2.16 of the Five-Year Credit Agreement solely to the
extent necessary to permit any Bank party hereto to provide a commitment
under the Five-Year Credit Agreement effective on the Effective Date.
(b) Each Bank hereby waives the Borrower's obligation to notify the Agent
at least 15 days prior to the creation of a new Commitment pursuant to
Section 2.17 solely to the extent necessary to permit one or more
institutions to provide a new Commitment hereunder effective within thirty
days of the Effective Date.
(c) Morgan Guaranty Trust Company of New York hereby notifies the
Borrower and each Bank party to the Five-Year Credit Agreement of its
resignation as Administrative Agent under the Five-Year Credit Agreement.
Each Bank party to the Five-Year Credit Agreement hereby appoints, pursuant
to Section 7.08 of the Five-Year Credit Agreement, The Chase Manhattan Bank
as successor Administrative Agent under the Five-Year Credit Agreement. The
Chase Manhattan Bank hereby accepts such appointment.
(d) The Borrower hereby notifies each Bank party to the Prior Credit
Agreement of the Borrower's termination of the Commitments (as defined in
the Prior Credit Agreement), such termination to be effective on the
Effective Date. Each Bank party to the Prior Credit Agreement hereby waives
the Borrower's obligation to notify the Administrative Agent under the Prior
Credit Agreement of such termination at least three Domestic Business Days
prior to such termination.
62
<PAGE>
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:____________________________________
Title:
Address: Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071-3025
Attention:
Telephone No.: (703) 709-6700
Telecopier No.: (703) 709-6779
63
<PAGE>
Commitments
$345,000,000 THE CHASE MANHATTAN BANK
By:______________________________
Title:
$230,000,000 BANK OF AMERICA, N.A.
By:______________________________
Title:
$230,000,000 THE BANK OF NOVA SCOTIA
By:______________________________
Title:
$240,000,000 BANK ONE, N.A. (MAIN OFFICE-CHICAGO)
By:______________________________
Title:
$150,000,000 ABN AMRO BANK N.V.
By:______________________________
Title:
By:______________________________
Title:
64
<PAGE>
$150,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Title:
$100,000,000 FIRST UNION NATIONAL BANK
By:_____________________________
Title:
$90,000,000 TORONTO DOMINION (NEW YORK), INC.
By:_____________________________
Title:
$85,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By:_________________________________
Title:
By:_________________________________
Title:
$77,500,000 BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By:_________________________________
Title:
65
<PAGE>
$75,000,000 US BANK NATIONAL ASSOCIATION
By:_______________________________
Title:
$75,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_______________________________
Title:
$65,000,000 PNC BANK, NATIONAL ASSOCIATION
By:_______________________________
Title:
$50,000,000 BARCLAYS BANK PLC
By:_______________________________
Title:
$50,000,000 COMERICA BANK
By:_______________________________
Title:
$50,000,000 FLEET NATIONAL BANK
By:_______________________________
Title:
66
<PAGE>
$50,000,000 STATE STREET BANK AND TRUST CO.
By:________________________________
Title:
$45,000,000 NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK
BRANCH AND/OR CAYMAN ISLAND
BRANCH
By:________________________________
Title:
By:________________________________
Title:
$42,500,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:_________________________________
Title:
$40,000,000 BANQUE NATIONALE DE PARIS
By:________________________________
Title:
By:________________________________
Title:
67
<PAGE>
40,000,000 BANCA MONTE DEI PASCHI DI SIENA,
S.P.A.
By:_________________________________
Title:
By:_________________________________
Title:
$30,000,000 CREDIT AGRICOLE INDOSUEZ
By:_________________________________
Title:
By:_________________________________
Title:
$30,000,000 KBC BANK N.V.
By:_________________________________
Title:
By:_________________________________
Title
68
<PAGE>
$25,000,000 BAYERISCHE LANDESBANK
GIROZENTRALE
By:_________________________________
Title:
By:_________________________________
Title:
$25,000,000 CRESTAR BANK
By:_________________________________
Title:
$25,000,000 HARRIS TRUST AND SAVINGS BANK
By:_________________________________
Title:
$25,000,000 MELLON BANK, N. A.
By:_________________________________
Title:
$25,000,000 WELLS FARGO BANK N. A.
By:_________________________________
Title:
69
<PAGE>
$12,500,000 BANCA DI ROMA
By:__________________________________
Title:
By:__________________________________
Title:
$12,500,000 BANK OF MONTREAL
By:__________________________________
Title:
$50,000,000 BANCO DI NAPOLI, S.p.A.-NEW YORK
BRANCH
By:__________________________________
Title:
By:__________________________________
Title:
Total Commitments
$2,540,000,000
70
<PAGE>
THE BANK OF NOVA SCOTIA,
as Co-Documentation Agent
By:__________________________________
Title:
BANK ONE, N.A. (MAIN OFFICE-CHICAGO),
as Co-Documentation Agent
By:__________________________________
Title:
BANK OF AMERICA, N.A.
as Syndication Agent
By:__________________________________
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:__________________________________
Title:
Address: 270 Park Avenue
New York, New York 10017
Attention:
Telecopy number:
71
<PAGE>
SCHEDULE I
Institution Title
The Chase Manhattan Bank Administrative Agent
Bank of America, N.A. Syndication Agent
The Bank of Nova Scotia Documentation Agent
Bank One, N.A. (Main Office-Chicago) Documentation Agent
ABN AMRO Bank N.V. Managing Agent
Credit Lyonnais New York Branch Managing Agent
First Union National Bank Co-Agent
Toronto Dominion (New York), Inc. Co-Agent
Cooperatieve Centrale Raiffeisen-BoereleenBank
B.A., "Rabobank Nederland", New York Branch Co-Agent
Bank of Tokyo-Mitsubishi Trust Company Co-Agent
US Bank National Association Co-Agent
Morgan Guaranty Trust Company of New York Co-Agent
<PAGE>
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 The Chase
Manhattan Bank, 270 Park Avenue, 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 September 29, 1999 among the Borrower, the banks listed
on the signature pages thereof, The Bank of Nova Scotia and Bank One, N.A.,
as Co-Documentation Agents, Bank of America, N.A., as Syndication Agent, and
The Chase Manhattan Bank, as Administrative Agent (as the same 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>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Date Amount Type Amount of Maturity Notation
of of Principal Date Made
Loan Loan Repaid By
<PAGE>
EXHIBIT B-1
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, Bank One,
N.A. and National Rural Utilities Cooperative Finance Corporation dated
___________, 19__.
UNITED STATES OF AMERICA
Date___________, 19__ By_______________________
Administrator of Rural Electrification
Administration
<PAGE>
EXHIBIT B-2
Form of RUS Guarantee
The United States of America acting through the Administrator of the Rural
Utilities Service ("RUS") hereby unconditionally guarantees to the Payee the
making of the payments of principal and Guaranteed Interest when and as due
on the Note of _______________ (the "Cooperative") dated _____ in the
original principal amount of $ _____ (the "Note"), in accordance with the
terms thereof and of the Loan Agreement and the Master Loan Guarantee and
Servicing Agreement referred to in the Note, until such principal and
Guaranteed Interest shall be indefeasibly paid in full (which includes
interest accruing at the Guaranteed Interest Rate between the date of default
under the 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's 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 (except the "Default Notice" required
pursuant to Section 5.3(a) of the Master Loan Guarantee and Servicing
Agreement), and acknowledges that the Payee does not have any right or
obligation to exercise any right or take any action against the Cooperative.
This Guarantee is issued pursuant to the Rural Electrification Act of 1936,
as amended (7 U.S.C. 901, et seq.) (the "Act"), and the Master Loan
Guarantee and Servicing Agreement between RUS and National Rural Utilities
Cooperative Finance Corporation dated as of February 16, 1999.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT APPLICABLE, AND
OTHERWISE THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
THE UNDERSIGNED, AS [ADMINISTRATOR] OF RUS, DOES HEREBY CERTIFY THAT I AM
AUTHORIZED UNDER THE ACT AND 7 CFR PART 1700 TO DELIVER THIS GUARANTEE.
UNITED STATES OF AMERICA,
by
[Administrator]
of the
Rural Utilities Service
Dated: RUS Loan No.
<PAGE>
EXHIBIT C
Form of Money Market Quote Request
[Date]
To: The Chase Manhattan Bank
(the "Agent")
From: National Rural Utilities
Cooperative Finance Corporation (the "Borrower")
Re: 364-Day Revolving Credit Agreement (the "Revolving Credit Agreement")
dated as of September 29, 1999 among the Borrower, the banks listed
on the signature pages thereof, The Bank of Nova Scotia and Bank One,
N.A., as Co-Documentation Agents, Bank of America, N.A., as
Syndication Agent, and The Chase Manhattan Bank, 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 Amount(1) Interest Period(2)
$
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:
___________________________
(1) Amount must be $10,000,000 or a larger multiple of $1,000,000.
(2) 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>
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 September 29, 1999 among the Borrower, the banks listed
on the signature pages thereof, The Bank of Nova Scotia and Bank One,
N.A., as Co-Documentation Agents, Bank of America, N.A., as
Syndication Agent, and The Chase Manhattan Bank, as Administrative
Agent:
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].
THE CHASE MANHATTAN BANK
By______________________
Authorized Officer
<PAGE>
EXHIBIT E
FORM OF MONEY MARKET QUOTE
THE CHASE MANHATTAN BANK,
as Administrative Agent
270 Park Avenue
New York, New York 10017
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>
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 September 29, 1999 among the Borrower, the
banks listed on the signature pages thereof, The Bank of Nova Scotia and
Bank One, N.A., as Co-Documentation Agents, Bank of America, N.A., as
Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent.
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>
EXHIBIT F
OPINION OF JOHN JAY LIST, ESQ.,
GENERAL COUNSEL OF THE BORROWER
September __, 1999
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 September
29, 1999 among the Borrower, the banks listed on the signature pages thereof,
The Bank of Nova Scotia and Bank One, N.A., as Co-Documentation Agents, Bank
of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, 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), 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
<PAGE>
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, 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.
<PAGE>
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.
8. 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.
<PAGE>
EXHIBIT G
OPINION OF MILBANK, TWEED, HADLEY & McCLOY,
SPECIAL COUNSEL FOR THE BORROWER
September __, 1999
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 September 29, 1999 (the "Agreement") among the
Borrower, the banks listed on the signature pages thereof, The Bank of Nova
Scotia and Bank One, N.A., as Co-Documentation Agents, Bank of America, N.A.,
as Syndication Agent, and The Chase Manhattan Bank, 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:
(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
<PAGE>
(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.
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.
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
<PAGE>
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.
6. 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.
7. 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.
<PAGE>
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>
EXHIBIT H
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
September __, 1999
To the Banks and the Agent
Referred to Below
c/o The Chase Manhattan Bank, as Agent
270 Park Avenue
New York, New York 10017
Dear Sirs:
We have participated in the preparation of the 364-Day Revolving Credit
Agreement dated as of September 29, 1999 (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 Bank of Nova Scotia and Bank One, N.A., as Co-Documentation Agents, Bank
of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, 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 the Credit
Agreement constitutes a valid and binding agreement of the Borrower and the
Notes issued today 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.
<PAGE>
In rendering the foregoing opinion, we have assumed that (i) the Borrower is
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and (ii) the execution, delivery and
performance by the Borrower of the Credit Agreement and the Notes issued by
the Borrower are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene or constitute a default under, any provision of applicable law
or regulation or of the Borrower's certificate of incorporation or by-laws or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any lien
on the assets of the Borrower or any Subsidiary of the Borrower.
We are members of the Bar of the State of New York and the foregoing opinion
is limited to the laws of the State of New York and the federal laws of the
United States of America. In giving the foregoing opinion, 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.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not re relied upon by you for any other purpose or relied
upon by any other Person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT I
EXTENSION AGREEMENT
[Date]
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, VA 22071-3025
The Chase Manhattan Bank,
as Administrative Agent
under the Credit Agreement
referred to below
270 Park Avenue
New York, NY 10017
Gentlemen:
Effective as of [effective date], the undersigned hereby agree to extend the
Commitment Termination Date as now in effect under the 364-Day Credit
Agreement dated as of September 29, 1999 as amended and supplemented from
time to time (the "Credit Agreement"), among National Rural Utilities
Cooperative Finance Corporation, the Banks listed therein, The Bank of Nova
Scotia and Bank One, N.A., as Co-Documentation Agents, Bank of America, N.A.,
as Syndication Agent, and The Chase Manhattan Bank, 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>
[NAME OF BANK]
By____________________________
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By____________________________
Title:
Agreed and accepted:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE>
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 THE CHASE MANHATTAN BANK, 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 September 29, 1999 (the "Credit
Agreement") among the Borrower, the Assignor and the other Banks party
thereto, as Banks, The Bank of Nova Scotia and Bank One, N.A., as
Co-Documentation Agents, Bank of America, N.A., as Syndication Agent, and
The Chase Manhattan Bank, 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.
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
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By__________________________
Title:
REVOLVING CREDIT AGREEMENT
dated as of
September 29, 1999
among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
THE BANK OF NOVA SCOTIA
and
BANK ONE, N.A.
as CO-DOCUMENTATION AGENTS,
BANK OF AMERICA, N.A.
as SYNDICATION AGENT
and
THE CHASE MANHATTAN BANK
as ADMINISTRATIVE AGENT
Arranged by
CHASE SECURITIES INC.
and
BANC OF AMERICA SECURITIES LLC
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
Definitions
Section 1.01. Definitions 1
Section 1.02. Accounting Terms and Determinations 15
Section 1.03. Types of Borrowings 15
ARTICLE 2
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. Method of Electing Interest Rates 27
Section 2.09. Fees 29
Section 2.10. Optional Termination or Reduction of Commitments 30
Section 2.11. Mandatory Termination of Commitments 30
Section 2.12. Optional Prepayments 30
Section 2.13. General Provisions as to Payments 31
Section 2.14. Funding Losses 32
Section 2.15. Computation of Interest and Fees 32
Section 2.16. Withholding Tax Exemption 32
Section 2.17. Increase of Commitments 33
ARTICLE 3
Conditions
Section 3.01. Effectiveness 34
Section 3.02. Borrowings 35
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence, Power and Authority 37
Section 4.02. Financial Statements 37
Section 4.03. Litigations 38
Section 4.04. Governmental Authorizations 38
Section 4.05. Capital Term Certificates 39
Section 4.06. No Violation of Agreements 39
Section 4.07. No Event of Default under the Indentures 39
Section 4.08. Compliance with ERISA 40
Section 4.09. Compliance with Other Laws 40
Section 4.10. Tax Status 40
Section 4.11. Investment Company Act 40
Section 4.12. Public Utility Holding Company Act 40
Section 4.13. Disclosure 40
Section 4.14. Subsidiaries 41
Section 4.15. Environmental Matters 41
<PAGE>
Section 4.16. Year 2000 41
ARTICLE 5
Covenants
Section 5.01. Corporate Existence 42
Section 5.02. Disposition of Assets; Merger, Character of Business; etc 42
Section 5.03. Financial Information 43
Section 5.04. Default Certificates 44
Section 5.05. Notice of Litigation, Legislative Developments and Defaults 45
Section 5.06. ERISA 45
Section 5.07. Payment of Charges 46
Section 5.08. Inspection of Books and Assets 46
Section 5.09. Indebtedness 46
Section 5.10. Liens 47
Section 5.11. Maintenance of Insurance 48
Section 5.12. Subsidiaries and Joint Ventures 48
Section 5.13. Minimum TIER 49
Section 5.14. Retirement of Patronage Capital 49
Section 5.15. Use of Proceeds 49
ARTICLE 6
Defaults
Section 6.01. Events of Defaults 49
Section 6.02. Notice of Default 52
ARTICLE 7
The Agent
Section 7.01. Appointment and Authorization 52
Section 7.02. Agent and Affiliates 52
Section 7.03. Action by Agent 52
Section 7.04. Consultation with Experts 52
Section 7.05. Liability of Agent 52
Section 7.06. Indemnification 53
Section 7.07. Credit Decision 53
Section 7.08. Successor Agent 53
Section 7.09. Co-Documentation Agents and Syndication Agent Not Liable 54
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair 54
Section 8.02. Illegality 55
Section 8.03. Increased Cost and Reduced Return 55
Section 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 57
ARTICLE 9
Miscellaneous
Section 9.01. Notices 58
Section 9.02. No Waivers 58
Section 9.03. Expenses; Documentary Taxes; Indemnification 58
Section 9.04. Sharing of Set-offs 59
<PAGE>
Section 9.05. Amendments and Waivers 60
Section 9.06. Successors and Assigns 60
Section 9.07. Collateral 61
Section 9.08. Managing Agents; Co-Agents 62
Section 9.09. Governing Law 62
Section 9.10. Counterparts; Integration 62
Section 9.11. Several Obligations 62
Section 9.12. Severability 62
Section 9.13. Waiver/Appointment Notice 62
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>
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of September 29, 1999 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,
THE BANK OF NOVA SCOTIA and THE FIRST NATIONAL BANK ONE, N.A., as
Co-Documentation Agents, BANK OF AMERICA, N.A., as Syndication Agent, and
THE CHASE MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
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 The Chase Manhattan Bank in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
"Agreement" means this Revolving Credit Agreement, as the same may
be amended from tie to time.
"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.
1
<PAGE>
"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 that bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice
of Interest Rate Election or the last sentence of Section 2.08(a) or
Article 8.
"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).
"CD Loan" means a Committed Loan that bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election.
"CD Margin" means .290%.
"CD Reference Banks" means The Chase Manhattan Bank and Bank of
America, N.A.
2
<PAGE>
"Commitment" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such Bank
on the signature pages hereof and (ii) with respect to any Assignee that
becomes a Bank pursuant to Section 9.06(c), the amount of the transferor
Bank's Commitment assigned to it pursuant to Section 9.06(c), in each case
as such amount may be reduced from time to time pursuant to Sections 2.10
and 2.11; provided that, if the context so requires, the term "Commitment"
means the obligation of a Bank to extend credit up to such amount to the
Borrower hereunder.
"Committed Loan" means a Revolving Loan or a Term Loan; provided
that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term
"Committed Loan" shall refer to the combined principal amount resulting
from such combination or to each of the separate principal amounts resulting
from such subdivision, as the case may be.
"Commitment Termination Date" means September 27, 2000 or such later
date to which this Agreement shall have been extended pursuant to Section
2.01(c), or, if either such day is not a Euro-Dollar Business Day, the next
preceding Euro-Dollar Business Day.
"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-Documentation Agents" means The Bank of Nova Scotia and Bank One,
N.A., each in its capacity as co-documentation 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.
3
<PAGE>
"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 Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
4
<PAGE>
"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 that bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" means .165%.
"Euro-Dollar Reference Banks" means the principal London offices of
The Chase Manhattan Bank and Bank of America, N.A.
"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 The Chase Manhattan
Bank 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.
"Group of Loans" means, at any time, a group of Loans consisting of
(i) all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar
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Loans having the same Interest Period at such time or (iii) all
CD Loans having the same Interest Period at such time; provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Article8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not
been so converted or made.
"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 an
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;
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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;
(c) any Interest Period which begins before the
Commitment Termination Date and would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date; and
(d) any Interest Period which begins before the first
anniversary of the Commitment Termination Date and would otherwise
end after the first anniversary of the Commitment Termination Date
shall end on the first anniversary of the Commitment Termination
Date;
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(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;
(b) any Interest Period which begins before
the Commitment Termination Date and would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date; and
(c) any Interest Period which begins before the first
anniversary of the Commitment Termination Date and would otherwise
end after the first anniversary of the Commitment Termination Date
shall end on the first anniversary of the Commitment 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;
(b) any Interest Period which begins before the
Commitment Termination Date and would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date; and
(c) any Interest Period which begins before the first
anniversary of the Commitment Termination Date and would otherwise
end after the first anniversary of the Commitment Termination Date
shall end on the first anniversary of the Commitment 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:
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(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;
(c) any Interest Period which begins before the
Commitment Termination Date and would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date; and
(d) any Interest Period which begins before the first
anniversary of the Commitment Termination Date and would otherwise
end after the first anniversary of the Commitment Termination Date
shall end on the first anniversary of the Commitment Termination
Date;
(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 be extended to the
next succeeding Euro-Dollar Business Day;
(b) any Interest Period which begins before the
Commitment Termination Date and would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date; and
(c) any Interest Period which begins before the first
anniversary of the Commitment Termination Date and would otherwise end
after the first anniversary of the Commitment Termination Date shall
end on the first anniversary of the Commitment Termination Date;
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"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.
"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
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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).
"1994 Indenture" means the Indenture dated as of February 15, 1994
and as amended as of September 16, 1999 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.
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"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)).
"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.
"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.
"Prime Rate" means the rate of interest publicly announced by The
Chase Manhattan Bank in New York City from time to time as its Prime Rate.
"Prior Credit Agreement" means the Revolving Credit Agreement dated
as of February 28, 1995, as amended and restated as of November 26, 1996, as
further amended and restated as of November 25, 1997, as further amended and
restated as of November 24, 1998, and as further amended to the date hereof,
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.
"Qualified Subordinated Indebtedness" means the Borrower's (i) 8%
Quarterly Income Capital Securities (Subordinated Deferrable Interest
Debentures Due 2045) and (ii) any other Indebtedness of the Borrower having
substantially similar terms as those contained in the instruments and
documents relating to the foregoing Indebtedness.
"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.
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"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 51% of the
sum of the aggregate amount of the unused Commitments and the aggregate
principal outstanding amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Commitment Termination Date.
"Revolving Loan" means a loan made by a Bank pursuant to Section
2.01(a).
"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-1 or Exhibit B-2 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
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<PAGE>
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".
"Superior Indebtedness" means all Indebtedness of the Borrower (other
than Capital Term Certificates and Qualified Subordinated Indebtedness) 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.
"Syndication Agent" means Bank of America, N.A. in its capacity as
Syndication Agent for the Banks hereunder, and its successors in such
capacity.
"Term Loan" means a loan made pursuant to Section 2.01(b).
"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
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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 2 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 2 under which participation therein is determined
(i.e., a "Revolving Borrowing" is a Borrowing under Section 2.01(a) 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 2
The Credits
Section 2.01. Commitments to Lend. (a) Revolving Loans. 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 Revolving 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 $10,000,000 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 3.02(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 2.12, prepay Loans and
reborrow at any time during the Revolving Credit Period under this Section.
(b) Term Loans. Each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to make a Term Loan to the Borrower on
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the Commitment Termination Date in an amount up to but not exceeding the
amount of its Commitment, as then in effect.
(c) Extension of Commitments. The Commitment Termination Date may be
extended from time to time in the manner set forth in this subsection (c),
in each case for a period of up to 364 days from the date on which Banks
having 51% of the Commitments shall have notified the Agent of their
agreement so to extend. If the Borrower wishes to request an extension of
the Commitment Termination Date, it shall give written notice to that effect
(such notice to state the date to which the Commitment 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 Commitment 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 Commitment Termination Date to assign their Commitments in their
entirety, no later than 15 days prior to the Commitment Termination Date
then in effect, to one or more Assignees pursuant to Section 9.06(c) which
Assignees will agree to extend the Commitment Termination Date. If Banks
having at least 51% of the Commitments (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 Commitment Termination Date shall be extended for
the period specified above. The Commitment of any Bank that elects not to
extend the Commitment Termination Date shall terminate on the Commitment
Termination Date in effect immediately prior to giving effect to any such
extension.
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,
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(c) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, 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 15 Fixed Rate Borrowings
shall be outstaning 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) 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 $10,000,000 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.
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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 3 and 6, 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,
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(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).
(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,
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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 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 $10,000,000 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.
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(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 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 3 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 2.13, 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 1:00P.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 recover such corresponding amount on demand from such
Bank. If such Bank does not pay
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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 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.
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Section 2.06. Maturity of Loans. (a) The Revolving Loans shall
mature, and the principal amount thereof shall be due and payable, on the
last day of the Revolving Credit Period.
(b) Each Money Market Loan shall mature, and the principal amount
thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
(c) The Term Loans shall mature on the first anniversary of the
Commitment Termination Date.
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 and, with respect to the principal amount of
any Base Rate Loan that is prepaid or converted to a CD Loan or Euro-Dollar
Loan, on the date of such prepayment or conversion. 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
and, with respect to the principal amount of any CD Loan that is prepaid or
converted to a Base Rate Loan or Euro-Dollar Loan, on the date of such
prepayment or conversion. 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.
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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 10:00A.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
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327.4(a) (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 and, with
respect to the principal amount of any Euro-Dollar Loan that is prepaid or
converted to a Base Rate Loan or CD Loan, on the date of such prepayment or
conversion.
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.
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(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.
(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 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
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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. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the
type of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change
or continue the type of interest rate borne by each Group of Loans (subject
to Section 2.08(d) and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert such Loans to CD Loans as of any Domestic Business
Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect
to convert such Loans to Base Rate Loans as of any Domestic Business
Day, or convert such Loans to Euro-Dollar Loans as of any Euro-
Dollar Business Day or continue such Loans as CD Loans, as of the end
of any Interest Period applicable thereto, for an additional Interest
Period, subject to Section 2.14 if any such conversion is effective on
any day other than the last day of an Interest Period applicable to
such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans as of any Domestic
Business Day, or convert such Loans to CD Loans as of any Euro-Dollar
Business Day or may elect to continue such Loans as Euro-Dollar Loans,
as of the end of any Interest Period applicable thereto, for an
additional Interest Period, subject to Section 2.14 if any such
conversion is effective on any day other than the last day of an
Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Administrative Agent not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective
(unless the relevant Loans are to be converted from Domestic Loans of one
type to Domestic Loans of the other type or are CD Loans to be continued as
CD Loans for an additional Interest Period, in which case such notice shall
be delivered to the Agent not later than 10:30 A.M. (New York City time) on
the second Domestic Business Day before such conversion or continuation is
to be effective). A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Group of Loans; provided that (i) such portion is allocated ratably
among the Loans comprising such Group and (ii) the
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portion to which such Notice applies, and the remaining portion to which it
does not apply, are each at least $10,000,000 (unless such portion is
comprised of Base Rate Loans). If no such notice is timely received before
the end of an Interest Period for any Group of CD Loans or Euro-Dollar Loans,
the Borrower shall be deemed to have elected that such Group of Loans be
converted to Base Rate Loans at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of Section 2.08(a);
(iii) if the Loans comprising such Group are to be
converted, the new Type of Loans and, if the Loans resulting from such
conversion are to be CD Loans or Euro-Dollar Loans, the duration of
the next succeeding Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-
Dollar Loans for an additional Interest Period, the duration of such
additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election
from the Borrower pursuant to Section 2.08(a), the Agent shall notify each
Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any
Committed Loans to, or continue any Committed Loans for an additional
Interest Period as, CD Loans or Euro-Dollar Loans if (i) the aggregate
principal amount of any Group of CD Loans or Euro-Dollar Loans created or
continued as a result of such election would be less than $10,000,000 or
(ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Agent.
(e) If any Committed Loan is converted to a different type of Loan, the
Borrower shall pay, on the date of such conversion, the interest accrued to
such date on the principal amount being converted.
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Section 2.09. Fees.
(a) Facility Fees. The Borrower shall pay to the Agent for the
account of each Bank facility fees on the daily average amount of such Bank's
Commitment (whether used or unused), for the period from the Effective Date
to but excluding the earlier of the date the Commitments are terminated or
the Commitment Termination Date, at a rate of 0.085% per annum; provided
that, if such Bank continues to have any Committed Loans outstanding after
its Commitment terminates, then such facility fee shall continue to accrue
on the daily outstanding principal amount of such Bank's Committed Loans from
and including the date on which its Commitment terminates to but excluding
the date on which such Bank ceases to have any Committed Loans outstanding.
Accrued facility fees shall be payable on each January 1, April 1, July 1,
and October 1 and on the date the Commitments are terminated (and, if later,
on the date the Loans shall be repaid in their entirety); provided that any
facility fees accruing after the first anniversary of the Commitment
Termination Date shall be payable on demand.
(b) Utilization Fees. (i) During any period when the aggregate
outstanding principal amount of the Loans exceeds 50% of the aggregate amount
of the Commitments or the Commitments have been terminated but Loans are
outstanding, the Borrower shall, unless Minimum Rating Status exists, pay to
the Agent for the account of each Bank utilization fees at a rate of 0.125%
per annum. Such utilization fee shall accrue on the average daily aggregate
outstanding principal amount of such Bank's Loans and shall be payable on
each January 1, April 1, July 1, and October 1 and on the date the
Commitments are terminated (and, if later, on the date the Loans shall be
repaid in their entirety); provided that any utilization fees accruing after
the first anniversary of the Commitment Termination Date shall be payable on
demand.
(ii) For purposes of this Section, "Minimum Rating 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
AA- (or any equivalent rating which is used in lieu thereof) or higher by
S&P or Aa3 (or any equivalent rating which is used in lieu thereof) or higher
by Moody's.
(c) 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
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and at such times as has been previously agreed between the Borrower and each
of them.
Section 2.10. 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 $10,000,000 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 2.11. Mandatory Termination of Commitments. The Commitments
shall terminate on the Commitment Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
Section 2.12. Optional Prepayments. (a) Subject in the case of
Fixed Rate Loans to Section 2.14, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Agent, prepay any Group of Domestic
Loans (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business
Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each
case in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 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 Group of Loans (or
such Money Market Borrowing).
(b) Except as provided in Section 2.12(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market 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 2.13. 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
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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 intereston,
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 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 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a different type of Loan (whether such payment or conversion is
pursuant to Article 2, 6 or 8 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,
prepay, convert or continue any Fixed Rate Loans after notice has been given
to any Bank in accordance with Section 2.04(a), 2.08(c) or 2.12(c) 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
conversion or failure to borrow, prepay, convert or continue; provided that
such Bank shall have delivered to the Borrower a certificate as to the amount
of such
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loss or expense, which certificate shall be conclusive in the absence of
manifest error.
Section 2.15. 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 2.16. 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 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 2.17. Increase of Commitments. Upon at least 15 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
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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 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 (i) 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 $800,000,000 and
(ii) after giving effect to such increase or new Commitment, the amount of
the Commitment of any Bank shall not exceed 17.5% of the aggregate amount of
the Commitments (excluding, for purposes of this clause (ii), any increase
resulting solely from the merger or the acquisition of one Bank into or by
another Bank). It is understood that any increase in the amount of the
Commitments pursuant to this Section 2.17 shall not constitute an amendment
of this Agreement or the Notes.
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ARTICLE 3
Conditions
Section 3.01. Effectiveness. This 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, 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;
(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;
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(g) receipt by the Agent, with a copy for each Bank, of a
certificate of an officer of the Borrower acceptable to the Agent stating
that all consents, authorizations, notices and filings required or advisable
in connection with this Agreement are in full force and effect, and the Agent
shall have received evidence thereof reasonably satisfactory to it;
(h) evidence satisfactory to the Required Banks that the
Commitments, as defined in the Prior Credit Agreement, have been terminated
(except that Sections 2.13, 7.05, 7.06, 8.03 and 9.03 (and Section 2.12 and
Article 9 insofar as such Section or Article relates to such Sections 2.13,
7.05, 7.06, 8.03 and 9.03, as applicable)) of the Prior Credit Agreement
shall survive the termination of such Commitments and shall remain in full
force and effect) and all amounts owed under the Prior Credit Agreement have
been paid in full; and
(i) 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.
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 October 15, 1999;
(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;
(e) the fact that, immediately after such Borrowing, no Default
shall have occurred and be continuing;
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(f) the fact that the representations and warranties of the
Borrower contained in this Agreement 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 4
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
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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, 1999 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, 1999,
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, 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.
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(b) The unaudited combined balance sheets of the Borrower and its
Consolidated Subsidiaries as of August 31, 1999 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
commitments issued by the Borrower in the ordinary course of business since
the date of such financial statements.
Section 4.03. Litigations. 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 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
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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 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 (other than Plans
consisting of mulitemployer plans (as defined in Section 4001 of ERISA)) are
in substantial compliance with ERISA, no such Plan is insolvent or in
reorganization, and no such Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Internal Revenue Code.
No Plan consisting of a multiemployer plan (as defined in Section 4001 of
ERISA) is in reorganization. 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 material liability to or on account of a Plan
pursuant to any of the foregoing Sections of ERISA.
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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 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
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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.
Section 4.16. Year 2000. The cost to the Borrower and its
Subsidiaries of any reprogramming required to permit the proper functioning,
in and following the year 2000, of (i) the computer systems of the Borrower
and its Subsidiaries and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the
Borrower's systems interface) and the testing of all such systems and
equipment, as so reprogrammed, and of the reasonably foreseeable consequences
of year 2000 to the Borrower and its Subsidiaries (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) would not reasonably be expected to result in a Default or Event
of Default or have a material adverse effect on the operations, business,
properties or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole. To the knowledge of the Borrower, except for
such of the reprogramming referred to in the preceding sentence as may be
necessary, which reprogramming the Borrower expects to complete in a timely
fashion, the computer and management information systems of the Borrower and
its Subsidiaries are and, with ordinary course upgrading and maintenance and
planned systems conversions and/or upgrades, will continue to be, sufficient
to permit the Borrower to conduct its businesses without a material adverse
effect on the operations, business, properties or condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole.
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ARTICLE 5
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 2.09
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 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
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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 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
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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 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 5.0 9 and
Sections 5.12 through 5.14, 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
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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 B
orrower, 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.
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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, 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, (b) the
aggregate amount of Members' equity in the Borrower, other than Capital Term
Certificates, on the Determination Date and (c) the aggregate principal
amount of Qualified Subordinated Indebtedness outstanding 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 C
ertificates outstanding on the Determination Date which will remain
outstanding on such given future date, (b) the aggregate amount of Members'
equity in the Borrower, other than Capital Term Certificates, on the
Determination Date and (c)
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the aggregate principal amount of Qualified Subordinated Indebtedness
outstanding on the Determination Date which will remain outstanding on such
given future date. The respective principal amounts of Superior
Indebtedness, Capital Term Certificates and Qualified Subordinated
Indebtedness 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,
Capital Term Certificates, Qualified Subordinated Indebtedness 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 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
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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 1
03(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, (ii)
all Indebtedness of the Borrower shown in its balance sheet dated as of May
31, 1999 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, 1999 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 and (iii) all Qualified Subordinated Indebtedness outstanding at such
time.
Section 5.13. 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 5.14. 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 5.15. 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
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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 6
Defaults
Section 6.01. Events of Defaults. 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 or
5.15;
(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;
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(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
$25,000,000 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 $25,000,000 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);
(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
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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 $25,000,000 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
2.09 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(b) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
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.
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Section 7.02. Agent and Affiliates. The Chase Manhattan Bank 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 The Chase Manhattan Bank 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
6.
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 3, 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
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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 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-Documentation Agents and Syndication Agent Not
Liable. Nothing in this Agreement shall impose upon any Co-Documentation
Agent or the Syndication Agent, each in such capacity, any duties or
responsibilities whatsoever.
ARTICLE 8
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
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(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, (i) the obligations of the Banks to make CD Loans or Euro-Dollar
Loans, as the case may be, or to continue or convert outstanding Loans as or
into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended
and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be,
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. 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 or to
convert outstanding Loans into Euro-Dollar Loans or continue outstanding
Loans as 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
54
<PAGE>
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 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
55
<PAGE>
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 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
56
<PAGE>
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 Bank to make, or to continue or convert
outstanding Loans as or to, 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 9
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;
57
<PAGE>
provided that notices to the Agent under Article 2 or Article 8 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 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
58
<PAGE>
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 anyother
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 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
59
<PAGE>
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 Article8 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 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
$3,500. 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 2.16.
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<PAGE>
(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. 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 9.09. 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 9.10. 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 9.11. 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.
Section 9.12. Notice. The Borrower hereby notifies each Bank party
to the Prior Credit Agreement of the Borrower's termination of the
Commitments (as
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<PAGE>
defined in the Prior Credit Agreement), such termination to be effective on
the Effective Date. Each Bank party to the Prior Credit Agreement hereby
waives the Borrower's obligation to notify the Administrative Agent under
the Prior Credit Agreement of such termination in advance of such
termination.
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<PAGE>
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:____________________________________
Title:
Address: Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071-3025
Attention: Title:
Telephone No.: (703) 709-6700
Telecopier No.: (703) 709-6779
63
<PAGE>
Commitments
$100,000,000 THE BANK OF NOVA SCOTIA
By:______________________________
Title:
$50,000,000 BANK ONE, N.A. (MAIN OFFICE-CHICAGO)
By:______________________________
Title:
$50,000,000 ABN AMRO BANK N.V.
By:______________________________
Title:
By:______________________________
Title:
$50,000,000 BANK OF AMERICA, N.A.
By:______________________________
Title:
64
<PAGE>
$50,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
By:_________________________________
Title:
$50,000,000 THE CHASE MANHATTAN BANK
By:_________________________________
Title:
$50,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Title:
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_______________________________
Title:
$50,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By:_______________________________
Title:
By:_______________________________
Title:
65
<PAGE>
$50,000,000 TORONTO DOMINION (NEW YORK), INC.
By:_____________________________
Title:
Total Commitments
$550,000,000
==============
66
<PAGE>
BANK ONE, N.A. (MAIN OFFICE-CHICAGO),
as Documentation Agent
By:______________________________
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:______________________________
Title:
Address: One Liberty Plaza
165 Broadway
New York, New York 10006
Attention:
Telecopy number:
67
<PAGE>
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 The Bank of Nova Scotia, One Liberty Plaza, 165 Broadway, 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 September 29, 1999 among the Borrower, the banks
listed on the signature pages thereof, Bank One, N.A., as Documentation
Agent, and The Bank of Nova Scotia, as Administrative Agent (as the same 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>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Date Amount Type Amount of Maturity Notation
of of Principal Date Made
Loan Loan Repaid By
<PAGE>
EXHIBIT B-1
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, Bank One,
N.A. and National Rural Utilities Cooperative Finance Corporation dated
___________, 19__.
UNITED STATES OF AMERICA
Date___________, 19__ By_______________________
Administrator of Rural Electrification
Administration
<PAGE>
EXHIBIT B-2
Form of RUS Guarantee
The United States of America acting through the Administrator of the
Rural Utilities Service ("RUS") hereby unconditionally guarantees to the
Payee the making of the payments of principal and Guaranteed Interest when
and as due on the Note of _______________ (the "Cooperative") dated _____ in
the original principal amount of $ _____ (the "Note"), in accordance with the
terms thereof and of the Loan Agreement and the Master Loan Guarantee and
Servicing Agreement referred to in the Note, until such principal and
Guaranteed Interest shall be indefeasibly paid in full (which includes
interest accruing at the Guaranteed Interest Rate between the date of default
under the 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's 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 (except the "Default Notice" required
pursuant to Section 5.3(a) of the Master Loan Guarantee and Servicing
Agreement), and acknowledges that the Payee does not have any right or
obligation to exercise any right or take any action against the Cooperative.
This Guarantee is issued pursuant to the Rural Electrification Act of
1936, as amended (7 U.S.C. 901, et seq.) (the "Act"), and the Master Loan
Guarantee and Servicing Agreement between RUS and National Rural Utilities
Cooperative Finance Corporation dated as of February 16, 1999.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT
APPLICABLE, AND OTHERWISE THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
THE UNDERSIGNED, AS [ADMINISTRATOR] OF RUS, DOES HEREBY CERTIFY THAT
I AM AUTHORIZED UNDER THE ACT AND 7 CFR PART 1700 TO DELIVER THIS GUARANTEE.
UNITED STATES OF AMERICA,
by
[Administrator]
of the
Rural Utilities Service
Dated: RUS Loan No.
<PAGE>
EXHIBIT C
Form of Money Market Quote Request
[Date]
To: The Bank of Nova Scotia
(the "Agent")
From: National Rural Utilities
Cooperative Finance Corporation (the "Borrower")
Re: 364-Day Revolving Credit Agreement (the "Revolving Credit Agreement")
dated as of September 29, 1999 among the Borrower, the banks listed
on the signature pages thereof, Bank One, N.A., as Documentation
Agent, and The Bank of Nova Scotia, as Administrative Agent.
We hereby give notice pursuant to Section of the Revolving Credit
Agreement that we request Money Market Quotes for the following proposed
Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount(1) Interest Period(2)
$
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:
____________________
(1) Amount must be $10,000,000 or a larger multiple of $1,000,000.
(2) Any number of whole months (but not less than one month) (LIBOR
Auctiion) or not less than 30 days (Absolute Rate Auction), subject to the
provisions of the definition of Interest
<PAGE>
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 of the 364-Day Revolving Credit Agreement dated
as of dated as of September 29, 1999 among the Borrower, the banks listed on
the signature pages thereof, Bank One, N.A., as Documentation Agent, and The
Bank of Nova Scotia, as Administrative Agent:
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].
The Bank of Nova Scotia
By______________________
Authorized Officer
<PAGE>
EXHIBIT E
FORM OF MONEY MARKET QUOTE
THE BANK OF NOVA SCOTIA,
as Administrative Agent
One Liberty Plaza
165 Broadway
New York, New York 10006
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>
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 September 29, 1999 among the Borrower,
the banks listed on the signature pages thereof, Bank One, N.A., as
Documentation Agent, and The Bank of Nova Scotia, as Administrative Agent.
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>
EXHIBIT F
OPINION OF JOHN JAY LIST, ESQ.,
GENERAL COUNSEL OF THE BORROWER
September __, 1999
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
September 29, 1999 among the Borrower, the banks listed on the signature
pages thereof, Bank One, N.A., as Documentation Agent, and TheBank of Nova
Scotia, 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), 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
<PAGE>
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, 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.
<PAGE>
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.
8. 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.
<PAGE>
EXHIBIT G
OPINION OF MILBANK, TWEED, HADLEY & McCLOY,
SPECIAL COUNSEL FOR THE BORROWER
September __, 1999
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 September 29, 1999 (the
"Agreement") among the Borrower, the banks listed on the signature pages
thereof, Bank One, N.A., as Documentation Agent, and The Bank of Nova Scotia,
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:
(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
<PAGE>
(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. 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.
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
<PAGE>
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.
6. 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.
7. 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 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>
EXHIBIT H
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
September __, 1999
To the Banks and the Agent
Referred to Below
c/o The Bank of Nova Scotia, as Agent
One Liberty Plaza
165 Broadway
New York, New York 10006
Dear Sirs:
We have participated in the preparation of the 364-Day Revolving
Credit Agreement dated as of September 29, 1999 (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, Bank One, N.A., as Documentation Agents, and The Bank of Nova
Scotia, 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 the Credit
Agreement constitutes a valid and binding agreement of the Borrower and the
Notes issued today 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.
<PAGE>
In rendering the foregoing opinion, we have assumed that (i) the
Borrower is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and (ii) the execution,
delivery and performance by the Borrower of the Credit Agreement and the
Notes issued by the Borrower are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene or constitute a default under, any provision
of applicable law or regulation or of the Borrower's certificate of
incorporation or by-laws or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or result in the
creation or imposition of any lien on the assets of the Borrower or any
Subsidiary of the Borrower.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws
of the United States of America. In giving the foregoing opinion, 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.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not re relied upon by you for any other purpose or
relied upon by any other Person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT I
EXTENSION AGREEMENT
[Date]
National Rural Utilities
Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, VA 22071-3025
The Bank of Nova Scotia,
as Administrative Agent
under the Credit Agreement
referred to below
One Liberty Plaza
165 Broadway
New York, NY 10006
Gentlemen:
Effective as of [effective date], the undersigned hereby agree to extend the
Commitment Termination Date as now in effect under the 364-Day Credit
Agreement dated as of September 29, 1999 as amended and supplemented from
time to time (the "Credit Agreement"), among National Rural Utilities
Cooperative Finance Corporation, the Banks listed therein, Bank One, N.A.,
as Documentation Agent, and The Bank of Nova Scotia, 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>
[NAME OF BANK]
By____________________________
Title:
THE BANK OF NOVA SCOTIA, as Administrative Agent
By____________________________
Title:
Agreed and accepted:
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By_______________________________
Title:
<PAGE>
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 THE BANK OF NOVA SCOTIA,
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 September 29, 1999 (the
"Credit Agreement") among the Borrower, the Assignor and the other Banks
party thereto, as Banks, Bank One, N.A., as Documentation Agent, and The
Bank of Nova Scotia, 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.
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
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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:
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By__________________________
Title:
