[Code of Federal Regulations]
[Title 7 Volume 11]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1718]
[Page 205-246]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1718_LOAN SECURITY DOCUMENTS FOR ELECTRIC BORROWERS--Table of Contents
Subpart A_General
Sec.
1718.1-1718.49 [Reserved]
Subpart B_Mortgage for Distribution Borrowers
1718.50 Definitions.
1718.51 Policy.
1718.52 Existing mortgages.
1718.53 Rights of other mortgagees.
1718.54 Availability of model mortgage.
Appendix A to Subpart B--Model Form of Mortgage for Electric
Distribution Borrowers
Subpart C_Loan Contracts With Distribution Borrowers
1718.100 General.
1718.101 Applicability.
1718.102 Definitions.
1718.103 Loan contract provisions.
1718.104 Availability of model loan contract.
Appendix A to Subpart C--Model Form of Loan Contract for Electric
Distribution Borrowers
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
Subpart A_General
Sec. Sec. 1718.1-1718.49 [Reserved]
Subpart B_Mortgage for Distribution Borrowers
Source: 60 FR 36888, July 18, 1995, unless otherwise noted.
Sec. 1718.50 Definitions.
Unless otherwise indicated, terms used in this subpart are defined
as set forth in 7 CFR 1710.2.
Sec. 1718.51 Policy.
(a) Adequate loan security must be provided for loans made or
guaranteed by RUS. The loans are required to be secured by a first
mortgage lien on most of the borrower's assets substantially in the form
set forth in appendix A of this subpart. At the discretion of RUS, this
model form of mortgage may be adapted to satisfy different legal
requirements among the states and individual differences in lending
circumstances, provided that such adaptations are consistent with the
policies set forth in this subpart.
(b) Some borrowers, such as certain public power districts, may not
be able to provide security in the form of a first mortgage lien on
their assets. In these cases RUS will consider accepting other forms of
security, such as resolutions and pledges of revenues.
(c) RUS may require supplemental and amending mortgages to protect
its security, or in connection with additional loans.
(d) RUS may also require such other security instruments (such as
loan contracts, security agreements, financing statements, guarantees,
and pledges) as it deems appropriate.
(e) All distribution borrowers that receive a loan or loan guarantee
from RUS on or after August 17, 1995 will be required to enter into a
mortgage with RUS that meets the requirements of this subpart. The
concurrence of any other lenders secured under the borrower's existing
mortgage may be required before the borrower can enter into a new
mortgage.
Sec. 1718.52 Existing mortgages.
Nothing contained in this subpart amends, invalidates, terminates or
rescinds any existing mortgage entered into between the borrower and RUS
and any other mortgagees.
Sec. 1718.53 Rights of other mortgagees.
Nothing contained in this subpart is intended to alter or affect any
other mortgagee's rights under an existing mortgage.
Sec. 1718.54 Availability of model mortgage.
Single copies of the model mortgage (RUS Informational Publication
1718 B) are available from the Administrative Services Division, Rural
Utilities Service, United States Department of Agriculture, Washington,
DC 20250-1500. This document may be reproduced.
[[Page 206]]
Appendix A to Subpart B of Part 1718--Model Form of Mortgage for
Electric Distribution Borrowers
RESTATED MORTGAGE AND SECURITY AGREEMENT Made By And Between
________________________________________________________________________
Mortgagor
and UNITED STATES OF AMERICA and
________________________________________________________________________
MORTGAGEE
Dated as of_____________________________________________________________
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS FUTURE ADVANCE PROVISIONS
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
TABLE OF CONTENTS
GRANTING CLAUSES
FIRST
SECOND
THIRD
FOURTH
EXCEPTED PROPERTY
HABENDUM
ARTICLE I--DEFINITIONS & OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 Definitions
SECTION 1.02 General Rules of Construction
SECTION 1.03 Special Rules of Construction if RUS is a Mortgagee
SECTION 1.04 Governing Law
SECTION 1.05 Notices
ARTICLE II--ADDITIONAL NOTES
SECTION 2.01 Additional Notes
SECTION 2.02 Refunding or Refinancing Notes
SECTION 2.03 Other Additional Notes
SECTION 2.04 Additional Lenders Entitled to the Benefits of This
Mortgage
SECTION 2.05 Form of Supplemental Mortgage
ARTICLE III--PARTICULAR COVENANTS OF THE MORTGAGOR
SECTION 3.01 Payment of Debt Service on Notes
SECTION 3.02 Warranty of Title
SECTION 3.03 After-Acquired Property; Further Assurances: Recording
SECTION 3.04 Environmental Requirements and Indemnity
SECTION 3.05 Payment of Taxes
SECTION 3.06 Authority to Execute and Deliver Notes, Loan Agreements and
Mortgage; All Action Taken; Enforceable Obligations
SECTION 3.07 Restrictions on Further Encumbrances on Property
SECTION 3.08 Restrictions on Additional Permitted Debt
SECTION 3.09 Preservation of Corporate Existence and Franchises
SECTION 3.10 Limitations on Consolidations and Mergers
SECTION 3.11 Limitations on Transfers of Property
SECTION 3.12 Maintenance of Mortgaged Property
SECTION 3.13 Insurance; Restoration of Damaged Mortgaged Property
SECTION 3.14 Mortgagee Right to Expend Money to Protect Mortgaged
Property
SECTION 3.15 Time Extensions for Payment of Notes
SECTION 3.16 Application of Proceeds from Condemnation
SECTION 3.17 Compliance with Loan Agreements; Notice of Amendments to
and Defaults under Loan Agreements
SECTION 3.18 Rights of Way, etc., Necessary in Business
SECTION 3.19 Limitations on Providing Free Electric Services
SECTION 3.20 Keeping Books; Inspection by Mortgagee
ARTICLE IV--EVENTS OF DEFAULT AND REMEDIES
SECTION 4.01 Events of Default
SECTION 4.02 Acceleration of Maturity; Rescission and Annulment
SECTION 4.03 Remedies of Mortgagees
SECTION 4.04 Application of Proceeds from Remedial Actions
SECTION 4.05 Remedies Cumulative; No Election
SECTION 4.06 Waiver of Appraisement Rights, Marshaling of Assets Not
Required
SECTION 4.07 Notice of Default
ARTICLE V--POSSESSION UNTIL DEFAULT--DEFEASANCE CLAUSE
SECTION 5.01 Possession Until Default
SECTION 5.02 Defeasance
SECTION 5.03 Special Defeasance
ARTICLE VI--MISCELLANEOUS
SECTION 6.01 Property Deemed Real Property
SECTION 6.02 Mortgage to Bind and Benefit Successors and Assigns
SECTION 6.03 Headings
SECTION 6.04 Severability Clause
SECTION 6.05 Mortgage Deemed Security Agreement
SECTION 6.06 Indemnification by Mortgagor of Mortgagees
[[Page 207]]
Schedule A
Schedule B
Schedule C
Exhibit A--Manager's Certificate
Exhibit B--Form of Supplemental Mortgage
Supplemental Mortgage Schedule A--Maximum Debt Limit and Other
Information
Supplemental Mortgage Schedule B--Property Schedule
Supplemental Mortgage Schedule C--Excepted Property
RESTATED MORTGAGE AND SECURITY AGREEMENT, dated as of --------------
19----, hereinafter sometimes called this ``Mortgage'') is made by and
between
________________________________________________________________________
(hereinafter called the ``Mortgagor''), a corporation existing under the
laws of the State of --------------------, and the UNITED STATES OF
AMERICA acting by and through the Administrator of the Rural Utilities
Service (hereinafter called the ``Government''), ---------------- {
Supplemental Lender{time} , (hereinafter called ``----------------'') a
---------------- existing under the laws of ----------------, and is
intended to confer rights and benefits on both the Government and ------
------------ as well as any and all other lenders pursuant to Article II
of this Mortgage that enter into a supplemental mortgage in accordance
with Section [2.04] of Article II hereof (the Government and any such
other lenders being herein sometimes collectively referred to as the
``Mortgagees'').
RECITALS
WHEREAS, the Mortgagor, the Government and ---------------- are
parties to that certain ---------------- Mortgage and Security Agreement
dated as of ------------------, 19----, as supplemented, amended or
restated (the ``Original Mortgage'' identified in Schedule ``A'' of this
Mortgage) originally entered into between the Mortgagor, the Government
acting by and through the Administrator of the Rural Electrification
Administration, the predecessor of RUS, and ----------------;
WHEREAS, the Mortgagor deems it necessary to borrow money for its
corporate purposes and to issue its promissory notes and other debt
obligations therefor from time to time in one or more series, and to
mortgage and pledge its property hereinafter described or mentioned to
secure the payment of the same;
WHEREAS, the Mortgagor desires to enter into this Mortgage pursuant
to which all secured debt of the Mortgagor hereunder shall be secured on
parity;
WHEREAS, this Mortgage restates and consolidates the Original
Mortgage while preserving the priority of the Lien under the Original
Mortgage securing the payment of Mortgagor's outstanding obligations
secured under the Original Mortgage, which indebtedness is described
more particularly by listing the Original Notes in Schedule ``A''
hereto; and
WHEREAS, all acts necessary to make this Mortgage a valid and
binding legal instrument for the security of such notes and obligations,
subject to the terms of this Mortgage, have been in all respects duly
authorized;
NOW, THEREFORE, THIS MORTGAGE WITNESSETH: That to secure the payment
of the principal of (and premium, if any) and interest on the Original
Notes and all Notes issued hereunder according to their tenor and
effect, and the performance of all provisions therein and herein
contained, and in consideration of the covenants herein contained and
the purchase or guarantee of Notes by the guarantors or holders thereof,
the Mortgagor has mortgaged, pledged and granted a continuing security
interest in, and by these presents does hereby grant, bargain, sell,
alienate, remise, release, convey, assign, transfer, hypothecate,
pledge, set over and confirm, pledge, and grant a continuing security
interest and lien in for the purposes hereinafter expressed [other
language may be required under various state laws], unto the Mortgagees
all property, rights, privileges and franchises of the Mortgagor of
every kind and description, real, personal or mixed, tangible and
intangible, of the kind or nature specifically mentioned herein OR ANY
OTHER KIND OR NATURE, except any Excepted Property, now owned or
hereafter acquired by the Mortgagor (by purchase, consolidation, merger,
donation, construction, erection or in any other way) wherever located,
including (without limitation) all and singular the following:
GRANTING CLAUSE FIRST
A. all of those fee and leasehold interests in real property set
forth in Schedule ``B'' hereto, subject in each case to those matters
set forth in such Schedule;
B. all of the Mortgagor's interest in fixtures, easements, permits,
licenses and rights-of-way comprising real property, and all other
interests in real property, comprising any portion of the Utility System
(as herein defined) located in the Counties listed in Schedule ``B''
hereto;
C. all right, title and interest of the Mortgagor in and to those
contracts of the Mortgagor (i) relating to the ownership, operation or
maintenance of any generation, transmission or distribution facility
owned, whether solely or jointly, by the Mortgagor, (ii) for the
purchase of electric power and energy by the Mortgagor and having an
original term in excess of 3 years, (iii) for the sale of electric power
and energy by the Mortgagor and having an original term in excess of 3
years, and (iv) for the transmission of electric power and energy by or
on behalf of
[[Page 208]]
the Mortgagor and having an original term in excess of 3 years,
including in respect of any of the foregoing, any amendments,
supplements and replacements thereto;
D. all the property, rights, privileges, allowances and franchises
particularly described in the annexed Schedule ``B'' are hereby made a
part of, and deemed to be described in, this Granting Clause as fully as
if set forth in this Granting Clause at length; and
ALSO ALL OTHER PROPERTY, real estate, lands, easements, servitudes,
licenses, permits, allowances, consents, franchises, privileges, rights
of way and other rights in or relating to real estate or the occupancy
of the same; all power sites, storage rights, water rights, water
locations, water appropriations, ditches, flumes, reservoirs, reservoir
sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all
other rights or means for appropriating, conveying, storing and
supplying water; all rights of way and roads; all plants for the
generation of electric and other forms of energy (whether now known or
hereafter developed) by steam, water, sunlight, chemical processes and/
or (without limitation) all other sources of power (whether now known or
hereafter developed); all power houses, gas plants, street lighting
systems, standards and other equipment incidental thereto; all
telephone, radio, television and other communications, image and data
transmission systems, air conditioning systems and equipment incidental
thereto, water wheels, waterworks, water systems, steam and hot water
plants, substations, lines, service and supply systems, bridges,
culverts, tracks, ice or refrigeration plants and equipment, offices,
buildings and other structures and the equipment thereto all machinery,
engines, boilers, dynamos, turbines, electric, gas and other machines,
prime movers, regulators, meters, transformers, generators (including,
but not limited to, engine-driven generators and turbogenerator units),
motors, electrical, gas and mechanical appliances, conduits, cables,
water, steam, gas or other pipes, gas mains and pipes, service pipes,
fittings, valves and connections, pole and transmission lines, towers,
overhead conductors and devices, underground conduits, underground
conductors and devices, wires, cables, tools, implements, apparatus,
storage battery equipment, and all other fixtures and personalty; all
municipal and other franchises, consents, certificates or permits; all
emissions allowances; all lines for the transmission and distribution of
electric current and other forms of energy, gas, steam, water or
communications, images and data for any purpose including towers, poles,
wires, cables, pipes, conduits, ducts and all apparatus for use in
connection therewith, and (except as hereinbefore or hereinafter
expressly excepted) all the right, title and interest of the Mortgagor
in and to all other property of any kind or nature appertaining to and/
or used and/or occupied and/or employed in connection with any property
hereinbefore described, but in all circumstances excluding Excepted
Property;
GRANTING CLAUSE SECOND
All other property, real, personal or mixed, of whatever kind and
description and wheresoever situated, including without limitation
goods, accounts, money held in a trust account pursuant hereto or to a
Loan Agreement, and general intangibles now owned or which may be
hereafter acquired by the Mortgagor, but excluding Excepted Property,
now owned or which may be hereafter acquired by the Mortgagor, it being
the intention hereof that all property, rights, privileges, allowances
and franchisees now owned by the Mortgagor or acquired by the Mortgagor
after the date hereof (other than Excepted Property) shall be as fully
embraced within and subjected to the lien hereof as if such property
were specifically described herein.
GRANTING CLAUSE THIRD
Also any Excepted Property that may, from time to time hereafter, by
delivery or by writing of any kind, be subjected to the lien hereof by
the Mortgagor or by anyone in its behalf; and any Mortgagee is hereby
authorized to receive the same at any time as additional security
hereunder for the benefit of all the Mortgagees. Such subjection to the
lien hereof of any Excepted Property as additional security may be made
subject to any reservations, limitations or conditions which shall be
set forth in a written instrument executed by the Mortgagor or the
person so acting in its behalf or by such Mortgagee respecting the use
and disposition of such property or the proceeds thereof.
GRANTING CLAUSE FOURTH
Together with (subject to the rights of the Mortgagor set forth on
Section [5.01]) all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid
property or any part thereof, with the reversion and reversions,
remainder and remainders and all the tolls, earnings, rents, issues,
profits, revenues and other income, products and proceeds of the
property subjected or required to be subjected to the lien of this
Mortgage, and all other property of any nature appertaining to any of
the plants, systems, business or operations of the Mortgagor, whether or
not affixed to the realty, used in the operation of any of the premises
or plants or the System, or otherwise, which are now owned or acquired
by the Mortgagor, and all the estate, right, title and interest of every
nature whatsoever, at law as well as in equity, of
[[Page 209]]
the Mortgagor in and to the same and every part thereof (other than
Excepted Property with respect to any of the foregoing).
EXCEPTED PROPERTY
There is, however, expressly excepted and excluded from the lien and
operation of this Mortgage the following described property of the
Mortgagor, now owned or hereafter acquired (herein sometimes referred to
as ``Excepted Property''):
A. all shares of stock, securities or other interests of the
Mortgagor in the National Rural Utilities Cooperative Finance
Corporation, the National Bank for Cooperatives and the St. Paul Bank
for Cooperatives other than any stock, securities or other interests
that are specifically described in Subclause D of Granting Clause First
as being subjected to the lien hereof;
B. all rolling stock (except mobile substations), automobiles,
buses, trucks, truck cranes, tractors, trailers and similar vehicles and
movable equipment, and all tools, accessories and supplies used in
connection with any of the foregoing;
C. all vessels, boats, ships, barges and other marine equipment, all
airplanes, airplane engines and other flight equipment, and all tools,
accessories and supplies used in connection with any of the foregoing;
D. all office furniture, equipment and supplies that is not data
processing, accounting or other computer equipment or software;
E. all leasehold interests for office purposes;
F. all leasehold interests of the Mortgagor under leases for an
original term (including any period for which the Mortgagor shall have a
right of renewal) of less than five (5) years;
G. all timber and crops (both growing and harvested) and all coal,
ore, gas, oil and other minerals (both in place or severed);
H. the last day of the term of each leasehold estate (oral or
written) and any agreement therefor, now or hereafter enjoyed by the
Mortgagor and whether falling within a general or specific description
of property herein: PROVIDED, HOWEVER, that the Mortgagor covenants and
agrees that it will hold each such last day in trust for the use and
benefit of all of the Mortgagees and Noteholders and that it will
dispose of each such last day from time to time in accordance with such
written order as the Mortgagee in its discretion may give;
I. all permits, licenses, franchises, contracts, agreements,
contract rights and other rights not specifically subjected or required
to be subjected to the lien hereof by the express provisions of this
Mortgage, whether now owned or hereafter acquired by the Mortgagor,
which by their terms or by reason of applicable law would become void or
voidable if mortgaged or pledged hereunder by the Mortgagor, or which
cannot be granted, conveyed, mortgaged, transferred or assigned by this
Mortgage without the consent of other parties whose consent has been
withheld, or without subjecting any Mortgagee to a liability not
otherwise contemplated by the provisions of this Mortgage, or which
otherwise may not be, hereby lawfully and effectively granted, conveyed,
mortgaged, transferred and assigned by the Mortgagor; and
J. the property identified in Schedule ``C'' hereto.
PROVIDED, HOWEVER, that (i) if, upon the occurrence of an Event of
Default, any Mortgagee, or any receiver appointed pursuant to statutory
provision or order of court, shall have entered into possession of all
or substantially all of the Mortgaged Property, all the Excepted
Property described or referred to in the foregoing Subdivisions A
through H, inclusive, then owned or thereafter acquired by the Mortgagor
shall immediately, and, in the case of any Excepted Property described
or referred to in Subdivisions I through J, inclusive, upon demand of
any Mortgagee or such receiver, become subject to the lien hereof to the
extent permitted by law, and any Mortgagee or such receiver may, to the
extent permitted by law, at the same time likewise take possession
thereof, and (ii) whenever all Events of Default shall have been cured
and the possession of all or substantially all of the Mortgaged Property
shall have been restored to the Mortgagor, such Excepted Property shall
again be excepted and excluded from the lien hereof to the extent and
otherwise as hereinabove set forth.
However, pursuant to Granting Clause Third, the Mortgagor may
subject to the lien of this Mortgage any Excepted Property, whereupon
the same shall cease to be Excepted Property.
HABENDUM
TO HAVE AND TO HOLD all said property, rights, privileges and
franchises of every kind and description, real, personal or mixed,
hereby and hereafter (by supplemental mortgage or otherwise) granted,
bargained, sold, aliened, remised, released, conveyed, assigned,
transferred, mortgaged, encumbered, hypothecated, pledged, setover,
confirmed, or subjected to a continuing security interest and lien as
aforesaid, together with all the appurtenances thereto appertaining
(said properties, rights, privileges and franchises, including any cash
and securities hereafter deposited with any Mortgagee ((other than any
such cash, if any, which is specifically stated herein not to be deemed
part of the Mortgaged Property)), being herein collectively called the
``Mortgaged Property'') unto the Mortgagees and the respective assigns
of the Mortgagees forever, to secure equally and ratably the payment of
the principal of (and premium, if
[[Page 210]]
any) and interest on the Notes, according to their terms, without
preference, priority or distinction as to interest or principal (except
as otherwise specifically provided herein) or as to lien or otherwise of
any Note over any other Note by reason of the priority in time of the
execution, delivery or maturity thereof or of the assignment or
negotiation thereof, or otherwise, and to secure the due performance of
all of the covenants, agreements and provisions herein and in the Loan
Agreements contained, and for the uses and purposes and upon the terms,
conditions, provisos and agreements hereinafter expressed and declared.
SUBJECT, HOWEVER, to Permitted Encumbrances (as defined in Section
1.01).
ARTICLE I
DEFINITIONS & OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. In addition to the terms defined
elsewhere in this Mortgage, the terms defined in this Article I shall
have the meanings specified herein and under the UCC, unless the context
clearly requires otherwise. The terms defined herein include the plural
as well as the singular and the singular as well as the plural.
Accounting Requirements shall mean the requirements of any system of
accounts prescribed by RUS so long as the Government is the holder,
insurer or guarantor of any Notes, or, in the absence thereof, the
requirements of generally accepted accounting principles applicable to
businesses similar to that of the Mortgagor.
Additional Notes shall mean any Notes issued by the Mortgagor to the
Government or any other lender pursuant to Article II of this Mortgage
including any refunding, renewal, or substitute Notes which may from
time to time be executed and delivered by the Mortgagor pursuant to the
terms of Article II.
Board shall mean either the Board of Directors or the Board of
Trustees, as the case may be, of the Mortgagor.
Business Day shall mean any day that the Government is open for
business.
Debt Service Coverage Ratio (``DSC'') shall mean the ratio
determined as follows: for each calendar year add (i) Patronage Capital
or Margins of the Mortgagor, (ii) Interest Expense on Total Long Term
Debt of the Mortgagor (as computed in accordance with the principles set
forth in the definition of TIER) and (iii) Depreciation and Amortization
Expense of the Mortgagor, and divide the total so obtained by an amount
equal to the sum of all payments of principal and interest required to
be made on account of Total Long-Term Debt during such calendar year
increasing said sum by any addition to interest expense on account of
Restricted Rentals as computed with respect to the Times Interest Earned
Ratio herein.
Depreciation and Amortization Expense shall mean an amount
constituting the depreciation and amortization of the Mortgagor as
computed pursuant to Accounting Requirements.
Electric System shall mean, and shall be broadly construed to
encompass and include, all of the Mortgagor's interests in all electric
production, transmission, distribution, conservation, load management,
general plant and other related facilities, equipment or property and in
any mine, well, pipeline, plant, structure or other facility for the
development, production, manufacture, storage, fabrication or processing
of fossil, nuclear or other fuel of any kind or in any facility or
rights with respect to the supply of water, in each case for use, in
whole or in major part, in any of the Mortgagor's generating plants, now
existing or hereafter acquired by lease, contract, purchase or otherwise
or constructed by the Mortgagor, including any interest or participation
of the Mortgagor in any such facilities or any rights to the output or
capacity thereof, together with all additions, betterments, extensions
and improvements to such Electric System or any part thereof hereafter
made and together with all lands, easements and rights-of-way of the
Mortgagor and all other works, property or structures of the Mortgagor
and contract rights and other tangible and intangible assets of the
Mortgagor used or useful in connection with or related to such Electric
System, including without limitation a contract right or other
contractual arrangement referred to in Granting Clause First, Subclause
[(C)] but excluding any excepted property.
Environmental Law and Environmental Laws shall mean all federal,
state, and local laws, regulations, and requirements related to
protection of human health or the environment, including but not limited
to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. 6901 et seq.), the Clean Water Act (33 U.S.C.
1251 et seq.) and the Clean Air Act (42 U.S.C. 7401 et seq.), and any
amendments and implementing regulations of such acts.
Equity shall mean the total margins and equities and margins
computed pursuant to Accounting Requirements, but excluding any
Regulatory Created Assets.
Event of Default shall have the meaning specified in Section [4.01]
hereof.
Excepted Property shall have the meaning stated in the Granting
Clauses.
Government shall mean the United States of America acting by and
through the Administrator of RUS and shall include its successors and
assigns.
[[Page 211]]
Government Notes shall mean the Original Notes, and any Additional
Notes, issued by the Mortgagor to the Government, or guaranteed or
insured as to payment by the Government.
Independent shall mean when used with respect to any specified
person or entity means such a person or entity who (1) is in fact
independent, (2) does not have any direct financial interest or any
material indirect financial interest in the Mortgagor or in any
affiliate of the Mortgagor and (3) is not connected with the Mortgagor
as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
Interest Expense shall mean an amount constituting the interest
expense of the Mortgagor as computed pursuant to Accounting
Requirements.
Lien shall mean any statutory or common law consensual or non-
consensual mortgage, pledge, security interest, encumbrance, lien, right
of set off, claim or charge of any kind, including, without limitation,
any conditional sale or other title retention transaction, any lease
transaction in the nature thereof and any secured transaction under the
UCC.
Loan Agreement shall mean any agreement executed by and between the
Mortgagor and the Government or any other lender in connection with the
execution and delivery of any Notes secured hereby.
Long-Term Debt shall mean any amount included in Total Long-Term
Debt pursuant to Accounting Requirements.
Long-Term Lease shall mean a lease having an unexpired term (taking
into account terms of renewal at the option of the lessor, whether or
not such lease has previously been renewed) of more than 12 months.
Margins shall mean the sum of amounts recorded as operating margins
and non-operating margins as computed in accordance with Accounting
Requirements.
Maximum Debt Limit, if any, shall mean the amount more particularly
described in Schedule ``A'' hereof.
Mortgage shall mean this Restated Mortgage and Security Agreement,
including any amendments or supplements thereto from time to time.
Mortgaged Property shall have the meaning specified as stated in the
Habendum to the Granting Clauses.
MORTGAGEE or MORTGAGEES shall mean the Government, ---------- {the
supplemental lender{time} , ---------- their successors and assigns as
well as any and all other lenders pursuant to Article II of this
Mortgage that enter into a supplemental mortgage in accordance with
Section [2.04] of Article II hereof, their successors and assigns.
Net Utility Plant shall mean the amount constituting the total
utility plant of the Mortgagor less depreciation computed in accordance
with Accounting Requirements.
Note or Notes shall mean one or more of the Government Notes, and
any other Notes which may, from time to time, be secured under this
Mortgage.
Noteholder or Noteholders shall mean one or more of the holders of
Notes secured by this Mortgage; PROVIDED, however, that in the case of
any Notes that have been guaranteed or insured as to payment by RUS, as
to such Notes Noteholder or Noteholders shall mean RUS, exclusively,
regardless of whether such notes are in the possession of RUS.
Original Mortgage means the instrument(s) identified as such in
Schedule ``A'' hereof.
Original Notes shall mean the Notes listed on Schedule ``A'' hereto
as such, such Notes being instruments evidencing outstanding
indebtedness of the Mortgagor (i) to the Government (including
indebtedness which has been issued by the Mortgagor to a third party and
guaranteed or insured as to payment by the Government) and (ii) to each
other Mortgagee on the date of this Mortgage.
Outstanding Notes shall mean as of the date of determination, (i)
all Notes theretofore issued, executed and delivered to any Mortgagee
and (ii) any Notes guaranteed or insured as to payment by the
Government, except (a) Notes referred to in clause (i) or (ii) for which
the principal and interest have been fully paid and which have been
canceled by the Noteholder, and (b) Notes the payment for which has been
provided for pursuant to Section [5.03].
Permitted Debt shall have the meaning specified in Section [3.08].
Permitted Encumbrances shall mean:
(1) as to the property specifically described in Granting Clause
First, the restrictions, exceptions, reservations, conditions,
limitations, interests and other matters which are set forth or referred
to in such descriptions and each of which fits one or more of the
clauses of this definition, PROVIDED, such matters do not in the
aggregate materially detract from the value of the Mortgaged Property
taken as a whole and do not materially impair the use of such property
for the purposes for which it is held by the Mortgagor;
(2) liens for taxes, assessments and other governmental charges
which are not delinquent;
(3) liens for taxes, assessments and other governmental charges
already delinquent which are currently being contested in good faith by
appropriate proceedings; PROVIDED the Mortgagor shall have set aside on
its books adequate reserves with respect thereto;
(4) mechanics', workmen's, repairmen's, materialmen's,
warehousemen's and carriers' liens and other similar liens arising in
the ordinary course of business for charges
[[Page 212]]
which are not delinquent, or which are being contested in good faith and
have not proceeded to judgment; PROVIDED the Mortgagor shall have set
aside on its books adequate reserves with respect thereto;
(5) liens in respect of judgments or awards with respect to which
the Mortgagor shall in good faith currently be prosecuting an appeal or
proceedings for review and with respect to which the Mortgagor shall
have secured a stay of execution pending such appeal or proceedings for
review; PROVIDED the Mortgagor shall have set aside on its books
adequate reserves with respect thereto;
(6) easements and similar rights granted by the Mortgagor over or in
respect of any Mortgaged Property, PROVIDED that in the opinion of the
Board or a duly authorized officer of the Mortgagor such grant will not
impair the usefulness of such property in the conduct of the Mortgagor's
business and will not be prejudicial to the interests of the Mortgagees,
and similar rights granted by any predecessor in title of the Mortgagor;
(7) easements, leases, reservations or other rights of others in any
property of the Mortgagor for streets, roads, bridges, pipes, pipe
lines, railroads, electric transmission and distribution lines,
telegraph and telephone lines, the removal of oil, gas, coal or other
minerals and other similar purposes, flood rights, river control and
development rights, sewage and drainage rights, restrictions against
pollution and zoning laws and minor defects and irregularities in the
record evidence of title, PROVIDED that such easements, leases,
reservations, rights, restrictions, laws, defects and irregularities do
not materially affect the marketability of title to such property and do
not in the aggregate materially impair the use of the Mortgaged Property
taken as a whole for the purposes for which it is held by the Mortgagor;
(8) liens upon lands over which easements or rights of way are
acquired by the Mortgagor for any of the purposes specified in Clause
[(7)] of this definition, securing indebtedness neither created, assumed
nor guaranteed by the Mortgagor nor on account of which it customarily
pays interest, which liens do not materially impair the use of such
easements or rights of way for the purposes for which they are held by
the Mortgagor;
(9) leases existing at the date of this instrument affecting
property owned by the Mortgagor at said date which have been previously
disclosed to the Mortgagees in writing and leases for a term of not more
than two years (including any extensions or renewals) affecting property
acquired by the Mortgagor after said date;
(10) terminable or short term leases or permits for occupancy, which
leases or permits expressly grant to the Mortgagor the right to
terminate them at any time on not more than six months' notice and which
occupancy does not interfere with the operation of the business of the
Mortgagor;
(11) any lien or privilege vested in any lessor, licensor or
permittor for rent to become due or for other obligations or acts to be
performed, the payment of which rent or performance of which other
obligations or acts is required under leases, subleases, licenses or
permits, so long as the payment of such rent or the performance of such
other obligations or acts is not delinquent;
(12) liens or privileges of any employees of the Mortgagor for
salary or wages earned but not yet payable;
(13) the burdens of any law or governmental regulation or permit
requiring the Mortgagor to maintain certain facilities or perform
certain acts as a condition of its occupancy of or interference with any
public lands or any river or stream or navigable waters;
(14) any irregularities in or deficiencies of title to any rights-
of-way for pipe lines, telephone lines, telegraph lines, power lines or
appurtenances thereto, or other improvements thereon, and to any real
estate used or to be used primarily for right-of-way purposes, PROVIDED
that in the opinion of counsel for the Mortgagor, the Mortgagor shall
have obtained from the apparent owner of the lands or estates therein
covered by any such right-of-way a sufficient right, by the terms of the
instrument granting such right-of-way, to the use thereof for the
construction, operation or maintenance of the lines, appurtenances or
improvements for which the same are used or are to be used, or PROVIDED
that in the opinion of counsel for the Mortgagor, the Mortgagor has
power under eminent domain, or similar statutes, to remove such
irregularities or deficiencies;
(15) rights reserved to, or vested in, any municipality or
governmental or other public authority to control or regulate any
property of the Mortgagor, or to use such property in any manner, which
rights do not materially impair the use of such property, for the
purposes for which it is held by the Mortgagor;
(16) any obligations or duties, affecting the property of the
Mortgagor, to any municipality or governmental or other public authority
with respect to any franchise, grant, license or permit;
(17) any right which any municipal or governmental authority may
have by virtue of any franchise, license, contract or statute to
purchase, or designate a purchaser of or order the sale of, any property
of the Mortgagor upon payment of cash or reasonable compensation
therefor or to terminate any franchise, license or other rights or to
regulate the property and business of the Mortgagor; PROVIDED, HOWEVER,
that nothing in this clause 17 is intended to waive any
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claim or rights that the Government may otherwise have under Federal
laws;
(18) as to properties of other operating electric companies acquired
after the date of this Mortgage by the Mortgagor as permitted by Section
[3.10] hereof, reservations and other matters as to which such
properties may be subject as more fully set forth in such Section;
(19) any lien required by law or governmental regulations as a
condition to the transaction of any business or the exercise of any
privilege or license, or to enable the Mortgagor to maintain self-
insurance or to participate in any fund established to cover any
insurance risks or in connection with workmen's compensation,
unemployment insurance, old age pensions or other social security, or to
share in the privileges or benefits required for companies participating
in such arrangements; PROVIDED, HOWEVER, that nothing in this clause 19
is intended to waive any claim or rights that the Government may
otherwise have under Federal laws;
(20) liens arising out of any defeased mortgage or indenture of the
Mortgagor;
(21) the undivided interest of other owners, and liens on such
undivided interests, in property owned jointly with the Mortgagor as
well as the rights of such owners to such property pursuant to the
ownership contracts;
(22) any lien or privilege vested in any lessor, licensor or
permittor for rent to become due or for other obligations or acts to be
performed, the payment of which rent or the performance of which other
obligations or acts is required under leases, subleases, licenses or
permits, so long as the payment of such rent or the performance of such
other obligations or acts is not delinquent;
(23) purchase money mortgages permitted by Section [3.08]; and
(24) the Original Mortgage.
Property Additions shall mean Utility System property as to which
the Mortgagor shall provide Title Evidence and which shall be (or, if
retired, shall have been) subject to the lien of this Mortgage, which
shall be properly chargeable to the Mortgagor's utility plant accounts
under Accounting Requirements (including property constructed or
acquired to replace retired property credited to such accounts) and
which shall be:
(1) acquired (including acquisition by merger, consolidation,
conveyance or transfer) or constructed by the Mortgagor after the date
hereof, including property in the process of construction, insofar as
not reflected on the books of the Mortgagor with respect to periods on
or prior to the date hereof, and
(2) used or useful in the utility business of the Mortgagor
conducted with the properties described in the Granting Clauses of this
Mortgage, even though separate from and not physically connected with
such properties.
``Property Additions'' shall also include:
(3) easements and rights-of-way that are useful for the conduct of
the utility business of the Mortgagor, and
(4) property located or constructed on, over or under public
highways, rivers or other public property if the Mortgagor has the
lawful right under permits, licenses or franchises granted by a
governmental body having jurisdiction in the premises or by the law of
the State in which such property is located to maintain and operate such
property for an unlimited, indeterminate or indefinite period or for the
period, if any, specified in such permit, license or franchise or law
and to remove such property at the expiration of the period covered by
such permit, license or franchise or law, or if the terms of such
permit, license, franchise or law require any public authority having
the right to take over such property to pay fair consideration therefor.
``Property Additions'' shall NOT include:
(a) good will, going concern value, contracts, agreements,
franchises, licenses or permits, whether acquired as such, separate and
distinct from the property operated in connection therewith, or acquired
as an incident thereto, or
(b) any shares of stock or indebtedness or certificates or evidences
of interest therein or other securities, or
(c) any plant or system or other property in which the Mortgagor
shall acquire only a leasehold interest, or any betterments, extensions,
improvements or additions (other than movable physical personal property
which the Mortgagor has the right to remove), of, upon or to any plant
or system or other property in which the Mortgagor shall own only a
leasehold interest unless (i) the term of the leasehold interest in the
property to which such betterment, extension, improvement or addition
relates shall extend for at least 75% of the useful life of such
betterment, extension, improvement or addition and (ii) the lessor shall
have agreed to give the Mortgagee reasonable notice and opportunity to
cure any default by the Mortgagor under such lease and not to disturb
any Mortgagee's possession of such leasehold estate in the event any
Mortgagee succeeds to the Mortgagor's interest in such lease upon any
Mortgagee's exercise of any remedies under this Mortgage so long as
there is no default in the performance of the tenant's covenants
contained therein, or
(d) any property of the Mortgagor subject to the Permitted
Encumbrance described in clause [(23)] of the definition thereof.
Prudent Utility Practice shall mean any of the practices, methods
and acts which, in the exercise of reasonable judgment, in light of the
facts, including, but not limited to, the practices, methods and acts
engaged in or
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approved by a significant portion of the electric utility industry prior
thereto, known at the time the decision was made, would have been
expected to accomplish the desired result consistent with cost-
effectiveness, reliability, safety and expedition. It is recognized that
Prudent Utility Practice is not intended to be limited to optimum
practice, method or act to the exclusion of all others, but rather is a
spectrum of possible practices, methods or acts which could have been
expected to accomplish the desired result at the lowest reasonable cost
consistent with cost-effectiveness, reliability, safety and expedition.
REA shall mean the Rural Electrification Administration of the
United States Department of Agriculture, the predecessor of RUS.
Regulatory Created Assets shall mean the sum of any amounts properly
recordable as unrecovered plant and regulatory study costs or as other
regulatory assets, pursuant to Accounting Requirements.
Restricted Rentals shall mean all rentals required to be paid under
finance leases and charged to income, exclusive of any amounts paid
under any such lease (whether or not designated therein as rental or
additional rental) for maintenance or repairs, insurance, taxes,
assessments, water rates or similar charges. For the purpose of this
definition the term ``finance lease'' shall mean any lease having a
rental term (including the term for which such lease may be renewed or
extended at the option of the lessee) in excess of 3 years and covering
property having an initial cost in excess of $250,000 other than
aircraft, ships, barges, automobiles, trucks, trailers, rolling stock
and vehicles; office, garage and warehouse space; office equipment and
computers.
RUS shall mean the Rural Utilities Service, an agency of the United
States Department of Agriculture, or if at any time after the execution
of this Mortgage RUS is not existing and performing the duties of
administering a program of rural electrification as currently assigned
to it, then the entity performing such duties at such time.
Security Interest shall mean any assignment, transfer, mortgage,
hypothecation or pledge.
Subordinated Indebtedness shall mean secured indebtedness of the
Mortgagor, payment of which shall be subordinated to the prior payment
of the Notes in accordance with the provisions of Section [3.08] hereof
by subordination agreement in form and substance satisfactory to each
Mortgagee which approval will not be unreasonably withheld.
Supplemental Mortgage shall mean an instrument of the type described
in Section [2.04].
Times Interest Earned Ratio (``TIER'') shall mean the ratio
determined as follows: for each calendar year: add (i) patronage capital
or margins of the Mortgagor and (ii) Interest Expense on Total Long-Term
Debt of the Mortgagor and divide the total so obtained by Interest
Expense on Total Long-Term Debt of the Mortgagor, provided, however,
that in computing Interest Expense on Total Long-Term Debt, there shall
be added, to the extent not otherwise included, an amount equal to 33-1/
3% of the excess of Restricted Rentals paid by the Mortgagor over 2% of
the Mortgagor's Equity.
Title Evidence shall mean with respect to any real property:
(1) an opinion of counsel to the effect that the Mortgagor has
title, whether fairly deducible of record or based upon prescriptive
rights (or, as to personal property, based on such evidence as counsel
shall determine to be sufficient), as in the opinion of counsel is
satisfactory for the use thereof in connection with the operations of
the Mortgagor, and counsel in giving such opinion may disregard any
irregularity or deficiency in the record evidence of title which, in the
opinion of such counsel, can be cured by proceedings within the power of
the Mortgagor or does not substantially impair the usefulness of such
property for the purpose of the Mortgagor and may base such opinion upon
counsel's own investigation or upon affidavits, certificates, abstracts
of title, statements or investigations made by persons in whom such
counsel has confidence or upon examination of a certificate or guaranty
of title or policy of title insurance in which counsel has confidence;
or
(2) a mortgagee's policy of title insurance in the amount of the
cost to the Mortgagor of the land included in Property Additions, as
such cost is determined by the Mortgagor in accordance with the
Accounting Requirements, issued in favor of the Mortgagees by an entity
authorized to insure title in the states where the subject property is
located, showing the Mortgagor as the owner of the subject property and
insuring the lien of this Mortgage; and with respect to any personal
property a certificate of the general manage or other duly authorized
officer that the Mortgagor lawfully owns and is possessed of such
property.
Total Assets shall mean an amount constituting total assets of the
Mortgagor as computed pursuant to Accounting Requirements, but excluding
any Regulatory Created Assets.
Total Long-Term Debt shall mean the total outstanding long-term debt
of the Mortgagor as computed pursuant to Accounting Requirements.
Total Utility Plant shall mean the total of all property properly
recorded in the utility plant accounts of the Mortgagor, pursuant to
Accounting Requirements.
Uniform Commercial Code or UCC shall mean the UCC of the state
referred to in Section [1.04], and if Mortgaged Property is located in a
state other than that state, then as to
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such Mortgaged Property UCC refers to the UCC in effect in the state
where such property is located.
Utility System shall mean the Electric System and all of the
Mortgagor's interest in community infrastructure located substantially
within its electric service territory, namely water and waste systems,
solid waste disposal facilities, telecommunications and other electronic
communications systems, and natural gas distribution systems.
SECTION 1.02. General Rules of Construction:
a. Accounting terms not referred to above are used in this Mortgage
in their ordinary sense and any computations relating to such terms
shall be computed in accordance with the Accounting Requirements.
b. Any reference to ``directors'' or ``board of directors'' shall be
deemed to mean ``trustees'' or ``board of trustees,'' as the case may
be.
SECTION 1.03. Special Rules of Construction if RUS is a Mortgagee:
During any period that RUS is a Mortgagee, the following additional
provisions shall apply:
a. In the case of any Notes that have been guaranteed or insured as
to payment by RUS, as to such Notes RUS shall be considered to be the
Noteholder, exclusively, regardless of whether such Notes are in the
possession of RUS.
b. In the case of any prior approval rights conferred upon RUS by
Federal statutes, including (without limitation) Section 7 of the Rural
Electrification Act of 1936, as amended, with respect to the sale or
disposition of property, rights, or franchises of the Mortgagor, all
such statutory rights are reserved except to the extent that they are
expressly modified or waived in this Mortgage.
SECTION 1.04. Governing Law: This Mortgage shall be construed in and
governed by Federal law to the extent applicable, and otherwise by the
laws of the State of --------.
SECTION 1.05 Notices: All demands, notices, reports, approvals,
designations, or directions required or permitted to be given hereunder
shall be in writing and shall be deemed to be properly given if sent by
registered or certified mail, postage prepaid, or delivered by hand, or
sent by facsimile transmission, receipt confirmed, addressed to the
proper party or parties at the following address:
As to the Mortgagor:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
As to the Mortgagee:
Rural Utilities Service,
United States Department of Agriculture,
Washington, DC 20250-1500
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
and as to any other person, firm, corporation or governmental body or
agency having an interest herein by reason of being a Mortgagee, at the
last address designated by such person, firm, corporation, governmental
body or agency to the Mortgagor and the other Mortgagees. Any such party
may from time to time designate to each other a new address to which
demands, notices, reports, approvals, designations or directions may be
addressed, and from and after any such designation the address
designated shall be deemed to be the address of such party in lieu of
the address given above.
ARTICLE II
ADDITIONAL NOTES
SECTION 2.01. Additional Notes: (a) Without the prior consent of any
Mortgagee or any Noteholder, the Mortgagor may issue Additional Notes to
the Government or to another lender or lenders for the purpose of
acquiring, procuring or constructing new or replacement Eligible
Property Additions which Notes will thereupon be secured equally and
ratably with the Notes if each of the following requirements are
satisfied:
(1) As evidenced by a certificate of an Independent certified public
accountant sent to each Mortgagee on or before the first advance of
proceeds from such Additional Notes:
(i) The Mortgagor shall have achieved for each of the two calendar
years immediately preceding the issuance of such Additional Notes, a
TIER of not less than 1.25 and a DSC of not less than 1.25;
(ii) After taking into account the effect of such Additional Notes
on the Total Long Term Debt of the Mortgagor, the ratio of the
Mortgagor's Net Utility Plant to its Total Long Term Debt shall be
greater than or equal to 1.0 on a pro forma basis;
(iii) After taking into account the effect of such Additional Notes
on the Total Assets of such Mortgagor, the Mortgagor shall have Equity
greater than or equal to 27 percent of Total Assets on a pro forma
basis; and
(iv) The sum of the aggregate principal amount of such Additional
Notes (if any) that are not related to the Electric System if added to
the aggregate outstanding principal amount of all the existing Notes (if
any) that are not related to the Electric System will not exceed 30% of
the Mortgagor's Equity on a pro forma basis.
(2) No Event of Default has occurred and is continuing hereunder, or
any event which with the giving of notice or lapse of time or both would
become an Event of Default has occurred and is continuing.
(3) The Eligible Property Additions being constructed, acquired,
procured or replaced are part of the Mortgagor's Utility System.
[[Page 216]]
(4) The Borrower's general manager or other duly authorized officer
shall send to each of the Mortgagees a certificate in substantially the
form attached hereto as [Exhibit A] on or before the date of the first
advance of proceeds from such Additional Notes.
(b) For purposes of this section:
(1) ``Eligible Property Additions'' shall mean Property Additions
acquired or whose construction was completed not more than 5 years prior
to the issuance of the Additional Notes and Property Additions acquired
or whose construction is started and/or completed not more than 4 years
after issuance of the Additional Notes, but shall exclude any Property
Additions financed by any other debt secured under the Mortgage at the
time additional Notes are issued;
(2) Notes are considered to be ``issued'' on, and the date of
``issuance'' shall be, the date on which they are executed by the
Mortgagor; and
(3) For purposes of calculating the pro forma ratios in
subparagraphs (a)(1)(ii) and (iii), the values for Total Long Term Debt
and Total Assets before debt issuance and the values for Equity and Net
Utility Plant shall be the most recently available end-of-month figures
preceding the issuance of the Additional Notes, but in no case for a
month ending more than 180 days preceding such issuance.
SECTION 2.02. Refunding or Refinancing Notes: The Mortgagor shall
also have the right without the consent of any Mortgagee or any
Noteholder to issue Additional Notes for the purpose of refunding or
refinancing any Notes so long as the total amount of outstanding
indebtedness evidenced by such Additional Note or Notes is not greater
than 105% of the then outstanding principal balance of the Note or Notes
being refunded or refinanced. PROVIDED, HOWEVER, that the Mortgagor may
not exercise its rights under this Section if an Event of Default has
occurred and is continuing, or any event which with the giving of notice
or lapse of time or both would become an Event of Default has occurred
and is continuing. On or before the first advance of proceeds from Notes
issued under this section, the Mortgagor shall notify each Mortgagee of
the refunding or refinancing. Additional Notes issued pursuant to this
Section [2.02] will thereupon be secured equally and ratably with the
Notes.
SECTION 2.03. Other Additional Notes.With the prior written consent
of each Mortgagee, the Mortgagor may issue Additional Notes to the
Government or any lender or lenders, which Notes will thereupon be
secured equally and ratably with Notes without regard to whether any of
the requirements of Sections [2.01] or [2.02] are satisfied.
SECTION 2.04. Additional Lenders Entitled to the Benefits of This
Mortgage: Without the prior consent of any Mortgagee or any Noteholder,
each new lender designated as a payee in any Additional Notes issued by
the Mortgagor pursuant to Section [2.01] or [2.02] of this Mortgage
shall become a Mortgagee hereunder upon the execution and delivery by
the Mortgagor and such lender of a supplemental mortgage hereto
designating such lender as a Mortgagee hereunder. Such new lender shall
be entitled to the benefits of this Mortgage without further act or
deed. Each Mortgagee and each person or entity that becomes a lender
pursuant to Section [2.01] or [2.02] of this Mortgage shall, upon the
request of the Mortgagor to do so, execute and deliver a supplement to
this Mortgage in substantially the form set forth in Section [2.05] to
evidence the addition of such new lender as an additional Mortgagee
entitled to the benefits of this Mortgage. The failure of any existing
Mortgagee to enter into such supplemental mortgage shall not deprive the
new lender of its rights under this Mortgage; provided that such
additional indebtedness otherwise conforms in all respects with the
requirements for issuing Additional Notes under this Mortgage.
SECTION 2.05. Form of Supplemental Mortgage: (a) The form of
supplemental mortgage referred to in Section [2.04] is attached to this
Mortgage as Exhibit B and hereby incorporated by reference as if set
forth in full at this point.
(b) In the event that the Mortgagor subsequently issues Additional
Notes pursuant to Sections [2.01] or [2.02] to any existing Mortgagee
and that Mortgagee desires further assurance that such Additional Notes
will be secured by the lien of the Mortgage, an instrument substantially
in the form of the supplemental mortgage attached as Exhibit B may be
used.
(c) In the event that the Mortgagor issues Additional Notes pursuant
to Section [2.03] to either an existing Mortgagee or a new lender, in
either case with the prior written consent of each Mortgagee, then an
instrument substantially in the form of the supplemental mortgage
attached as Exhibit B may also be used.
ARTICLE III--PARTICULAR COVENANTS OF THE MORTGAGOR
SECTION 3.01. Payment of Debt Service on Notes: The Mortgagor will
duly and punctually pay the principal, premium, if any, and interest on
the Notes in accordance with the terms of the Notes, the Loan Contracts,
this Mortgage and any Supplemental Mortgage authorizing such Notes.
SECTION 3.02. Warranty of Title: (a) At the time of the execution
and delivery of this instrument, the Mortgagor has good and marketable
title in fee simple to the real property specifically described in
Granting Clause First as owned in fee and good and marketable title to
the interests in real property specifically described in Granting
[[Page 217]]
Clause [First], subject to no mortgage, lien, charge or encumbrance
except as stated therein, and has full power and lawful authority to
grant, bargain, sell, alien, remise, release, convey, assign, transfer,
encumber, mortgage, pledge, set over and confirm said real property and
interests in real property in the manner and form aforesaid.
(b) At the time of the execution and delivery of this instrument,
the Mortgagor lawfully owns and is possessed of the personal property
specifically described in Granting Clauses [First and Second], subject
to no mortgage, lien, charge or encumbrance except as stated therein,
and has full power and lawful authority to mortgage, assign, transfer,
deliver, pledge and grant a continuing security interest in said
property and, including any proceeds thereof, in the manner and form
aforesaid.
(c) The Mortgagor hereby does and will forever warrant and defend
the title to the property specifically described in Granting Clause
First against the claims and demands of all persons whomsoever, except
Permitted Encumbrances.
SECTION 3.03. After-Acquired Property; Further Assurances;
Recording: (a) All property of every kind, other than Excepted Property,
acquired by the Mortgagor after the date hereof, shall, immediately upon
the acquisition thereof by the Mortgagor, and without any further
mortgage, conveyance or assignment, become subject to the lien of this
Mortgage; SUBJECT, HOWEVER, to Permitted Encumbrances and the
exceptions, if any, to which all of the Mortgagees consent.
Nevertheless, the Mortgagor will do, execute, acknowledge and deliver
all and every such further acts, conveyances, mortgages, financing
statements and assurances as any Mortgagee shall require for
accomplishing the purposes of this Mortgage.
(b) The Mortgagor will cause this Mortgage and all Supplemental
Mortgages and other instruments of further assurance, including all
financing statements covering security interests in personal property,
to be promptly recorded, registered and filed, and will execute and file
such financing statements and cause to be issued and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve and protect the rights of all of the
Mortgagees and Noteholders hereunder to all property comprising the
Mortgaged Property. The Mortgagor will furnish to each Mortgagee:
(1) promptly after the execution and delivery of this instrument and
of each Supplemental Mortgage or other instrument of further assurance,
an Opinion of Counsel stating that, in the opinion of such Counsel, this
instrument and all such Supplemental Mortgages and other instruments of
further assurance have been properly recorded, registered and filed to
the extent necessary to make effective the lien intended to be created
by this Mortgage, and reciting the details of such action or referring
to prior Opinions of Counsel in which such details are given, and
stating that all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect
the rights of all of the Mortgagees and Noteholders hereunder, or
stating that, in the opinion of such Counsel, no such action is
necessary to make the lien effective; and
(2) within 30 days after ---------- in each year beginning with the
year ----, an Opinion of Counsel, dated as of such date, either stating
that, in the opinion of such Counsel, such action has been taken with
respect to the recording, registering, filing, re-recording, re-
registering and re-filing of this instrument and of all Supplemental
Mortgages, financing statements, continuation statements or other
instruments of further assurances as is necessary to maintain the lien
of this Mortgage (including the lien on any property acquired by the
Mortgagor after the execution and delivery of this instrument and owned
by the Mortgagor at the end of preceding calendar year) and reciting the
details of such action or referring to prior Opinions of Counsel in
which such details are given, and stating that all financing statements
and continuation statements have been executed and filed that are
necessary to fully preserve and protect the rights of all of the
Mortgagees and Noteholders hereunder, or stating that, in the opinion of
such Counsel, no such action is necessary to maintain such lien.
SECTION 3.04. Environmental Requirements and Indemnity: (a) The
Mortgagor shall, with respect to all facilities which may be part of the
Mortgaged Property, comply with all Environmental Laws.
(b) The Mortgagor shall defend, indemnify, and hold harmless each
Mortgagee, its successors and assigns, from and against any and all
liabilities, losses, damages, costs, expenses (including but not limited
to reasonable attorneys' fees and expenses), causes of actions,
administrative proceedings, suits, claims, demands, or judgments of any
nature arising out of or in connection with any matter related to the
Mortgage Property and any Environmental Law, including but not limited
to:
(1) the past, present, or future presence of any hazardous
substance, contaminant, pollutant, or hazardous waste on or related to
the Mortgaged Property;
(2) any failure at any time by the undersigned to comply with the
terms of any order related to the Mortgaged Property and issued by any
federal, state, or municipal department or agency (other than RUS)
exercising its authority to enforce any Environmental Law; and
[[Page 218]]
(3) any lien or claim imposed under any Environmental Law related to
clause (1).
(c) Within 10 (ten) business days after receiving knowledge of any
liability, losses, damages, costs, expenses (including but not limited
to reasonable attorneys' fees and expenses), cause of action,
administrative proceeding, suit, claim, demand, judgment, lien,
reportable event including but not limited to the release of a hazardous
substance, or potential or actual violation or non-compliance arising
out of or in connection with the Mortgaged Property and any
Environmental Law, the Mortgagor shall provide each Mortgagee with
written notice of such matter. With respect to any matter upon which it
has provided such notice, the Mortgagor shall immediately take any and
all appropriate actions to remedy, cure, defend, or otherwise
affirmatively respond to the matter.
SECTION 3.05. Payment of Taxes: The Mortgagor will pay or cause to
be paid as they become due and payable all taxes, assessments and other
governmental charges lawfully levied or assessed or imposed upon the
Mortgaged Property or any part thereof or upon any income therefrom, and
also (to the extent that such payment will not be contrary to any
applicable laws) all taxes, assessments and other governmental charges
lawfully levied, assessed or imposed upon the lien or interest of the
Noteholders or of the Mortgagees in the Mortgaged Property, so that (to
the extent aforesaid) the lien of this Mortgage shall at all times be
wholly preserved at the cost of the Mortgagor and without expense to the
Mortgagees or the Noteholders; PROVIDED, HOWEVER, that the Mortgagor
shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment or governmental charge to the extent
that the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and the Mortgagor
shall have established and shall maintain adequate reserves on its books
for the payment of the same.
SECTION 3.06. Authority to Execute and Deliver Notes, Loan
Agreements and Mortgage; All Action Taken; Enforceable Obligations: The
Mortgagor is authorized under its articles of incorporation and bylaws
[or code of regulations] and all applicable laws and by corporate action
to execute and deliver the Notes, any Additional Notes, the Loan
Agreements and this Mortgage. The Notes, the Loan Agreements and this
Mortgage are, and any Additional Notes and Loan Agreements when executed
and delivered will be, the valid and enforceable obligations of the
Mortgagor in accordance with their respective terms.
SECTION 3.07. Restrictions on Further Encumbrances on Property:
Except to secure Additional Notes, the Mortgagor will not, without the
prior written consent of each Mortgagee, create or incur or suffer or
permit to be created or incurred or to exist any Lien, charge,
assignment, pledge, mortgage on any of the Mortgaged Property inferior
to, prior to, or on a parity with the Lien of this Mortgage except for
the Permitted Encumbrances. Subject to the provisions of Section [3.08],
or unless approved by each of the Mortgagees, the Mortgagor will
purchase all materials, equipment and replacements to be incorporated in
or used in connection with the Mortgaged Property outright and not
subject to any conditional sales agreement, chattel mortgage, bailment,
lease or other agreement reserving to the seller any right, title or
Lien.
SECTION 3.08. Restrictions On Additional Permitted Debt: The
Mortgagor shall not incur, assume, guarantee or otherwise become liable
in respect of any debt for borrowed money and Restricted Rentals
(including Subordinated Debt) other than the following: (``Permitted
Debt'')
(1) Additional Notes issued in compliance with Article II hereof;
(2) Purchase money indebtedness in non-Utility System property, in
an amount not exceeding 10% of Net Utility Plant;
(3) Restricted Rentals in an amount not to exceed 5% of Equity
during any 12 consecutive calendar month period;
(4) Unsecured lease obligations incurred in the ordinary course of
business except Restricted Rentals;
(5) Debt represented by dividends declared but not paid; and
(6) Subordinated Indebtedness approved by each Mortgagee.
PROVIDED, However, that the Mortgagor may incur Permitted Debt
without the consent of the Mortgagee only so long as there exists no
Event of Default hereunder and there has been no continuing occurrence
which with the passage of time and giving of notice could become an
Event of Default hereunder.
PROVIDED, FURTHER, by executing this Mortgage any consent of RUS
that the Mortgagor would otherwise be required to obtain under this
Section is hereby deemed to be given or waived by RUS by operation of
law to the extent, but only to the extent, that to impose such a
requirement of RUS consent would clearly violate existing federal laws
or government regulations.
SECTION 3.09. Preservation of Corporate Existence and Franchises:
The Mortgagor will, so long as any Outstanding Notes exist, take or
cause to be taken all such action as from time to time may be necessary
to preserve its corporate existence and to preserve and renew all
franchises, rights of way, easements, permits, and licenses now or
hereafter to be granted or upon it conferred the loss of which would
have a material adverse affect on the Mortgagor's financial condition
[[Page 219]]
or business. The Mortgagor will comply with all laws, ordinances,
regulations, orders, decrees and other legal requirements applicable to
it or its property the violation of which could have a material adverse
affect on the Mortgagor's financial condition or business.
SECTION 3.10. Limitations on Consolidations and Mergers: The
Mortgagor shall not, without the prior written approval of each
Mortgagee, consolidate or merge with any other corporation or convey or
transfer the Mortgaged Property substantially as an entirety unless: (1)
such consolidation, merger, conveyance or transfer shall be on such
terms as shall fully preserve the lien and security hereof and the
rights and powers of the Mortgagees hereunder; (2) the entity formed by
such consolidation or with which the Mortgagor is merged or the
corporation which acquires by conveyance or transfer the Mortgaged
Property substantially as an entirety shall execute and deliver to the
Mortgagees a mortgage supplemental hereto in recordable form and
containing an assumption by such successor entity of the due and
punctual payment of the principal of and interest on all of the
Outstanding Notes and the performance and observance of every covenant
and condition of this Mortgage; (3) immediately after giving effect to
such transaction, no default hereunder shall have occurred and be
continuing; (4) the Mortgagor shall have delivered to the Mortgagees a
certificate of its general manager or other officer, in form and
substance satisfactory to each of the Mortgagees, which shall state that
such consolidation, merger, conveyance or transfer and such supplemental
mortgage comply with this subsection and that all conditions precedent
herein provided for relating to such transaction have been complied
with; (5) the Mortgagor shall have delivered to the Mortgagees an
opinion of counsel in form and substance satisfactory to each of the
Mortgagees; and (6) the entity formed by such consolidation or with
which the Mortgagor is merged or the corporation which acquires by
conveyance or transfer the Mortgaged Property substantially as an
entirety shall be an entity--(A) having Equity equal to at least 27% of
its Total Assets on a pro forma basis after giving effect to such
transaction, (B) having a pro forma TIER of not less than 1.25 and a pro
forma DSC of not less than 1.25 for each of the two preceding calendar
years, and (C) having Net Utility Plant equal to or greater than 1.0
times its Total Long-Term Debt on a pro forma basis. Upon any
consolidation or merger or any conveyance or transfer of the Mortgaged
Property substantially as an entirety in accordance with this
subsection, the successor entity formed by such consolidation or with
which the Mortgagor is merged or to which such conveyance or transfer is
made shall succeed to, and be substituted for, and may exercise every
right and power of, the Mortgagor under this Mortgage with the same
effect as if such successor entity had been named as the Mortgagor
herein.
SECTION 3.11. Limitations on Transfers of Property: The Mortgagor
may not, except as provided in [Section 3.10] above, without the prior
written approval of each Mortgagee, sell, lease or transfer any
Mortgaged Property to any other person or entity (including any
subsidiary or affiliate of the Mortgagor), unless (1) there exists no
Event of Default or occurrence which with the passing of time and the
giving of notice would be an Event of Default, (2) fair market value is
obtained for such property, (3) the aggregate value of assets so sold,
leased or transferred in any 12-month period is less than 10% of Net
Utility Plant, and (4) the proceeds of such sale, lease or transfer,
less ordinary and reasonable expenses incident to such transaction, are
immediately (i) applied as a prepayment of all Notes equally and
ratably, (ii) in the case of dispositions of equipment, materials or
scrap, applied to the purchase of other property useful in the
Mortgagor's utility business, not necessarily of the same kind as the
property disposed of, which shall forthwith become subject to the Lien
of the Mortgage, or (iii) applied to the acquisition or construction of
utility plant.
SECTION 3.12. Maintenance of Mortgaged Property: (a) So long as the
Mortgagor holds title to the Mortgaged Property, the Mortgagor will at
all times maintain and preserve the Mortgaged Property which is used or
useful in the Mortgagor's business and each and every part and parcel
thereof in good repair, working order and condition, ordinary wear and
tear and acts of God excepted, and in compliance with Prudent Utility
Practice and in compliance with all applicable laws, regulations and
orders, and will from time to time make all needed and proper repairs,
renewals and replacements, and useful and proper alterations, additions,
betterments and improvements, and will, subject to contingencies beyond
its reasonable control, at all times use all reasonable diligence to
furnish the consumers served by it through the Mortgaged Property, or
any part thereof, with an adequate supply of electric power and energy.
If any substantial part of the Mortgaged Property is leased by the
Mortgagor to any other party, the lease agreement between the Mortgagor
and the lessee shall obligate the lessee to comply with the provisions
of subsections (a) and (b) of this Section in respect of the leased
facilities and to permit the Mortgagor to operate the leased facilities
in the event of any failure by the lessee to so comply.
(b) If in the sole judgement of any Mortgagee, the Mortgaged
Property is not being maintained and repaired in accordance with
paragraph (a) of this section, such Mortgagee may send to the Mortgagor
a written report
[[Page 220]]
of needed improvements and the Mortgagor will upon receipt of such
written report promptly undertake to accomplish such improvements.
(c) The Mortgagor further agrees that upon reasonable written
request of any Mortgagee, which request together with the requests of
any other Mortgagees shall be made no more frequently than once every
three years, the Mortgagor will supply promptly to each Mortgagee a
certification (hereinafter called the ``Engineer's Certification''), in
form satisfactory to the requestor, prepared by a professional engineer,
who shall be satisfactory to the Mortgagees, as to the condition of the
Mortgaged Property. If in the sole judgment of any Mortgagee the
Engineer's Certification discloses the need for improvements to the
condition of the Mortgaged Property or any other operations of the
Mortgagor, such Mortgagee may send to the Mortgagor a written report of
such improvements and the Mortgagor will upon receipt of such written
report promptly undertake to accomplish such of these improvements as
are required by such Mortgagee.
SECTION 3.13. Insurance; Restoration of Damaged Mortgaged Property:
(a) The Mortgagor will take out, as the respective risks are incurred,
and maintain the classes and amounts of insurance in conformance with
generally accepted utility industry standards for such classes and
amounts of coverages of utilities of the size and character of the
Mortgagor and consistent with Prudent Utility Practice.
(b) The foregoing insurance coverage shall be obtained by means of
bond and policy forms approved by regulatory authorities having
jurisdiction, and, with respect to insurance upon any part of the
Mortgaged Property, shall provide that the insurance shall be payable to
the Mortgagees as their interests may appear by means of the standard
mortgagee clause without contribution. Each policy or other contract for
such insurance shall contain an agreement by the insurer that,
notwithstanding any right of cancellation reserved to such insurer, such
policy or contract shall continue in force for at least 30 days after
written notice to each Mortgagee of cancellation.
(c) In the event of damage to or the destruction or loss of any
portion of the Mortgaged Property which is used or useful in the
Mortgagor's business and which shall be covered by insurance, unless
each Mortgagee shall otherwise agree, the Mortgagor shall replace or
restore such damaged, destroyed or lost portion so that such Mortgaged
Property shall be in substantially the same condition as it was in prior
to such damage, destruction or loss, and shall apply the proceeds of the
insurance for that purpose. The Mortgagor shall replace the lost portion
of such Mortgaged Property or shall commence such restoration promptly
after such damage, destruction or loss shall have occurred and shall
complete such replacement or restoration as expeditiously as
practicable, and shall pay or cause to be paid out of the proceeds of
such insurance all costs and expenses in connection therewith.
(d) Sums recovered under any policy or fidelity bond by the
Mortgagor for a loss of funds advanced under the Notes or recovered by
any Mortgagee or any Noteholder for any loss under such policy or bond
shall, unless applied as provided in the preceding paragraph, be used to
finance construction of utility plant secured or to be secured by this
Mortgage, or unless otherwise directed by the Mortgagees, be applied to
the prepayment of the Notes pro rata according to the unpaid principal
amounts thereof (such prepayments to be applied to such Notes and
installments thereof as may be designated by the respective Mortgagee at
the time of any such prepayment), or be used to construct or acquire
utility plant which will become part of the Mortgaged Property. At the
request of any Mortgagee, the Mortgagor shall exercise such rights and
remedies which they may have under such policy or fidelity bond and
which may be designated by such Mortgagee, and the Mortgagor hereby
irrevocably appoints each Mortgagee as its agent to exercise such rights
and remedies under such policy or bond as such Mortgagee may choose, and
the Mortgagor shall pay all costs and reasonable expenses incurred by
the Mortgagee in connection with such exercise.
SECTION 3.14. Mortgagee Right to Expend Money to Protect Mortgaged
Property: The Mortgagor agrees that any Mortgagee from time to time
hereunder may, in its sole discretion, after having given 5 Business
days prior written notice to Mortgagor, but shall not be obligated to,
advance funds on behalf of Mortgagor, in order to insure the Mortgagor's
compliance with any covenant, warranty, representation or agreement of
the Mortgagor made in or pursuant to this Mortgage or any of the Loan
Agreements, to preserve or protect any right or interest of the
Mortgagees in the Mortgaged Property or under or pursuant to this
Mortgage or any of the Loan Agreements, including without limitation,
the payment of any insurance premiums or taxes and the satisfaction or
discharge of any judgment or any Lien upon the Mortgaged Property or
other property or assets of Mortgagor; provided, however, that the
making of any such advance by or through any Mortgagee shall not
constitute a waiver by any Mortgagee of any Event of Default with
respect to which such advance is made nor relieve the Mortgagor of any
such Event of Default. The Mortgagor shall pay to a Mortgagee upon
demand all such advances made by such Mortgagee with interest thereon at
a rate equal to that on the Note having the highest interest rate but in
[[Page 221]]
no event shall such rate be in excess of the maximum rate permitted by
applicable law. All such advances shall be included in the obligations
and secured by the security interest granted hereunder.
SECTION 3.15. Time Extensions for Payment of Notes: Any Mortgagee
may, at any time or times in succession without notice to or the consent
of the Mortgagor, or any other Mortgagee, and upon such terms as such
Mortgagee may prescribe, grant to any person, firm or corporation who
shall have become obligated to pay all or any part of the principal of
(and premium, if any) or interest on any Note held by or indebtedness
owed to such Mortgagee or who may be affected by the lien hereby
created, an extension of the time for the payment of such principal,
(and premium, if any) or interest, and after any such extension the
Mortgagor will remain liable for the payment of such Note or
indebtedness to the same extent as though it had at the time of such
extension consented thereto in writing.
SECTION 3.16. Application of Proceeds from Condemnation: (a) In the
event that the Mortgaged Property or any part thereof, shall be taken
under the power of eminent domain, all proceeds and avails therefrom may
be used to finance construction of utility plant secured or to be
secured by this Mortgage. Any proceeds not so used shall forthwith be
applied by the Mortgagor: first, to the ratable payment of any
indebtedness secured by this Mortgage other than principal of or
interest on the Notes; second, to the ratable payment of interest which
shall have accrued on the Notes and be unpaid; third, to the ratable
payment of or on account of the unpaid principal of the Notes, to such
installments thereof as may be designated by the respective Mortgagee at
the time of any such payment; and fourth, the balance shall be paid to
whomsoever shall be entitled thereto.
(b) If any part of the Mortgaged Property shall be taken by eminent
domain, each Mortgagee shall release the property so taken from the
Mortgaged Property and shall be fully protected in so doing upon being
furnished with:
(1) A certificate of a duly authorized officer of the Mortgagor
requesting such release, describing the property to be released and
stating that such property has been taken by eminent domain and that all
conditions precedent herein provided or relating to such release have
been complied with; and
(2) an opinion of counsel to the effect that such property has been
lawfully taken by exercise of the right of eminent domain, that the
award for such property so taken has become final and that all
conditions precedent herein provided for relating to such release have
been complied with.
SECTION 3.17. Compliance with Loan Agreements; Notice of Amendments
to and Defaults under Loan Agreements: The Mortgagor will observe and
perform all of the material covenants, agreements, terms and conditions
contained in any Loan Agreement entered into in connection with the
issuance of any of the Notes, as from time to time amended. The
Mortgagor will send promptly to each Mortgagee notice of any default by
the Mortgagor under any Loan Agreement and notice of any amendment to
any Loan Agreement. Upon request of any Mortgagee, the Mortgagor will
furnish to such Mortgagee single copies of such Loan Agreements and
amendments thereto as such Mortgagee may request.
SECTION 3.18. Rights of Way, etc., Necessary in Business: The
Mortgagor will use its best efforts to obtain all such rights of way,
easements from landowners and releases from lienors as shall be
necessary or advisable in the conduct of its business, and, if requested
by any Mortgagee, deliver to such Mortgagee evidence satisfactory to
such Mortgagee of the obtaining of such rights of way, easements or
releases.
SECTION 3.19. Limitations on Providing Free Electric Services. The
Mortgagor will not furnish or supply or cause to be furnished or
supplied any electric power, energy or capacity free of charge to any
person, firm or corporation, public or private, and the Mortgagor will
enforce the payment of any and all amounts owning to the Mortgagor by
reason of the ownership and operation of the Utility System by
discontinuing such use, output, capacity, or service, or by filing suit
therefor within 90 days after any such accounts are due, or by both such
discontinuance and by filing suit.
SECTION 3.20. Keeping Books; Inspection by Mortgagee: The Mortgagor
will keep proper books, records and accounts, in which full and correct
entries shall be made of all dealings or transactions of or in relation
to the Notes and the Utility Systems, properties, business and affairs
of the Mortgagor in accordance with the Accounting Requirements. The
Mortgagor will at any and all times, upon the written request of any
Mortgagee and at the expense of the Mortgagor, permit such Mortgagee by
its representatives to inspect the Utility Systems and properties and
properties, books of account, records, reports and other papers of the
Mortgagor and to take copies and extracts therefrom, and will afford and
procure a reasonable opportunity to make any such inspection, and the
Mortgagor will furnish to each Mortgagee any and all such information as
such Mortgagee may request, with respect to the performance by the
Mortgagor of its covenants under this Mortgage, the Notes and the Loan
Agreements.
[[Page 222]]
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
SECTION 4.01. Events of Default: Each of the following shall be an
``Event of Default'' under this Mortgage:
(a) default shall be made in the payment of any installment of or on
account of interest on or principal of (or premium, if any associated
with) any Note or Notes for more than five (5) Business Days after the
same shall be required to be made;
(b) default shall be made in the due observance or performance of
any other of the covenants, conditions or agreements on the part of the
Mortgagor, in any of the Notes, Loan Agreements or in this Mortgage, and
such default shall continue for a period of thirty (30) days after
written notice specifying such default and requiring the same to be
remedied and stating that such notice is a ``Notice of Default''
hereunder shall have been given to the Mortgagor by any Mortgagee;
PROVIDED, HOWEVER that in the case of a default on the terms of a Note
or Loan Agreement of a particular Mortgagee, the ``Notice of Default''
required under this paragraph may only be given by that Mortgagee;
(c) the Mortgagor shall file a petition in bankruptcy or be
adjudicated a bankrupt or insolvent, or shall make an assignment for the
benefit of its creditors, or shall consent to the appointment of a
receiver of itself or of its property, or shall institute proceedings
for its reorganization or proceedings instituted by others for its
reorganization shall not be dismissed within sixty (60) days after the
institution thereof;
(d) a receiver or liquidator of the Mortgagor or of any substantial
portion of its property shall be appointed and the order appointing such
receiver or liquidator shall not be vacated within sixty (60) days after
the entry thereof;
(e) the Mortgagor shall forfeit or otherwise be deprived of its
corporate charter or franchises, permits, easements, or licenses
required to carry on any material portion of its business;
(f) a final judgment for an amount of more than $---------- shall be
entered against the Mortgagor and shall remain unsatisfied or without a
stay in respect thereof for a period of sixty (60) days; or,
(g) any material representation or warranty made by the Mortgagor
herein, in the Loan Agreements or in any certificate or financial
statement delivered hereunder or thereunder shall prove to be false or
misleading in any material respect at the time made.
SECTION 4.02. Acceleration of Maturity; Rescission and Annulment:
(a) If an Event of Default described in Section [4.01(a)] has
occurred and is continuing, any Mortgagee upon which such default has
occurred may declare the principal of all its Notes secured hereunder to
be due and payable immediately by a notice in writing to the Mortgagor
and to the other Mortgagees (failure to provide said notice to any other
Mortgagee shall not affect the validity of any acceleration of the Note
or Notes by such Mortgagee), and upon such declaration, all unpaid
principal (and premium, if any) and accrued interest so declared shall
become due and payable immediately, anything contained herein or in any
Note or Notes to the contrary notwithstanding.
(b) If any other Event of Default shall have occurred and be
continuing, any Mortgagee may declare the principal of all its Notes
secured hereunder to be due and payable immediately by a notice in
writing to the Mortgagor and to the other Mortgagees (failure to provide
said notice to any other Mortgagee shall not affect the validity of any
acceleration of the Note or Notes by such Mortgagee), and upon such
declaration, all unpaid principal (and premium, if any) and accrued
interest so declared shall become due and payable immediately, anything
contained herein or in any Note or Notes to the contrary
notwithstanding.
(c) Upon receipt of actual knowledge of or any notice of
acceleration by any Mortgagee, any other Mortgagee may declare the
principal of all of its Notes to be due and payable immediately by a
notice in writing to the Mortgagor and upon such declaration, all unpaid
principal (and premium, if any) and accrued interest so declared shall
become due and payable immediately, anything contained herein or in any
Note or Notes or Loan Agreements to the contrary notwithstanding.
(d) If after the unpaid principal of (and premium, if any) and
accrued interest on any of the Notes shall have been so declared to be
due and payable, all payments in respect of principal and interest which
shall have become due and payable by the terms of such Note or Notes
(other than amounts due as a result of the acceleration of the Notes)
shall be paid to the respective Mortgagees, and (i) all other defaults
under the Loan Agreements, the Notes and this Mortgage shall have been
made good or cured to the satisfaction of the Mortgagees representing at
least 80% of the aggregate unpaid principal balance of all of the Notes
then Outstanding, (ii) proceedings to foreclose the lien of this
Mortgage have not been commenced, and (iii) all reasonable expenses paid
or incurred by the Mortgagees in connection with the acceleration shall
have been paid to the respective Mortgagees, then in every such case
such Mortgagees representing at least 80% of the aggregate unpaid
principal balance of all of the Notes then Outstanding may by written
notice to the Mortgagor, for purposes of this Mortgage, annul such
declaration and waive such default and the consequences thereof, but no
such waiver shall extend to
[[Page 223]]
or affect any subsequent default or impair any right consequent thereon.
SECTION 4.03. Remedies of Mortgagees: If one or more of the Events
of Default shall occur and be continuing, any Mortgagee personally or by
attorney, in its or their discretion, may, in so far as not prohibited
by law:
(a) take immediate possession of the Mortgaged Property, collect and
receive all credits, outstanding accounts and bills receivable of the
Mortgagor and all rents, income, revenues, proceeds and profits
pertaining to or arising from the Mortgaged Property, or any part
thereof, whether then past due or accruing thereafter, and issue binding
receipts therefor; and manage, control and operate the Mortgaged
Property as fully as the Mortgagor might do if in possession thereof,
including, without limitation, the making of all repairs or replacements
deemed necessary or advisable by such Mortgagee in possession;
(b) proceed to protect and enforce the rights of all of the
Mortgagees by suits or actions in equity or at law in any court or
courts of competent jurisdiction, whether for specific performance of
any covenant or any agreement contained herein or in aid of the
execution of any power herein granted or for the foreclosure hereof or
hereunder or for the sale of the Mortgaged Property, or any part
thereof, or to collect the debts hereby secured or for the enforcement
of such other or additional appropriate legal or equitable remedies as
may be deemed necessary or advisable to protect and enforce the rights
and remedies herein granted or conferred, and in the event of the
institution of any such action or suit the Mortgagee instituting such
action or suit shall have the right to have appointed a receiver of the
Mortgaged Property and of all proceeds, rents, income, revenues and
profits pertaining thereto or arising therefrom, whether then past due
or accruing after the appointment of such receiver, derived, received or
had from the time of the commencement of such suit or action, and such
receiver shall have all the usual powers and duties of receivers in like
and similar cases, to the fullest extent permitted by law, and if
application shall be made for the appointment of a receiver the
Mortgagor hereby expressly consents that the court to which such
application shall be made may make said appointment; and
(c) sell or cause to be sold all and singular the Mortgaged Property
or any part thereof, and all right, title, interest, claim and demand of
the Mortgagor therein or thereto, at public auction at such place in any
county (or its equivalent locality) in which the property to be sold, or
any part thereof, is located, at such time and upon such terms as may be
specified in a notice of sale, which shall state the time when and the
place where the sale is to be held, shall contain a brief general
description of the property to be sold, and shall be given by mailing a
copy thereof to the Mortgagor at least fifteen (15) days prior to the
date fixed for such sale and by publishing the same once in each week
for two successive calendar weeks prior to the date of such sale in a
newspaper of general circulation published in said locality or, if no
such newspaper is published in such locality, in a newspaper of general
circulation in such locality, the first such publication to be not less
than fifteen (15) days nor more than thirty (30) days prior to the date
fixed for such sale. Any sale to be made under this subparagraph (c) of
this Section [4.03] may be adjourned from time to time by announcement
at the time and place appointed for such sale or for such adjourned sale
or sales, and without further notice or publication the sale may be had
at the time and place to which the same shall be adjourned; provided,
however, that in the event another or different notice of sale or
another or different manner of conducting the same shall be required by
law the notice of sale shall be given or the sale be conducted, as the
case may be, in accordance with the applicable provisions of law. The
expense incurred by any Mortgagee (including, but not limited to,
receiver's fees, counsel fees, cost of advertisement and agents'
compensation) in the exercise of any of the remedies provided in this
Mortgage shall be secured by this Mortgage.
(d) In the event that a Mortgagee proceeds to enforce remedies under
this Section, any other Mortgagee may join in such proceedings. In the
event that the Mortgagees are not in agreement with the method or manner
of enforcement chosen by any other Mortgagee, the Mortgagees
representing a majority of the aggregate unpaid principal balance on the
then Outstanding Notes may direct the method and manner in which
remedial action will proceed.
SECTION 4.04. Application of Proceeds from Remedial Actions: Any
proceeds or funds arising from the exercise of any rights or the
enforcement of any remedies herein provided after the payment or
provision for the payment of any and all costs and expenses in
connection with the exercise of such rights or the enforcement of such
remedies shall be applied first, to the ratable payment of indebtedness
hereby secured other than the principal of or interest on the Notes;
second, to the ratable payment of interest which shall have accrued on
the Notes and which shall be unpaid; third, to the ratable payment of or
on account of the unpaid principal of the Notes; and the balance, if
any, shall be paid to whomsoever shall be entitled thereto.
SECTION 4.05. Remedies Cumulative; No Election: Every right or
remedy herein conferred upon or reserved to the Mortgagees or to the
Noteholders shall be cumulative and shall be in addition to every other
right and
[[Page 224]]
remedy given hereunder or now or hereafter existing at law, or in
equity, or by statute. The pursuit of any right or remedy shall not be
construed as an election.
SECTION 4.06. Waiver of Appraisement Rights; Marshaling of Assets
Not Required: The Mortgagor, for itself and all who may claim through or
under it, covenants that it will not at any time insist upon or plead,
or in any manner whatever claim, or take the benefit or advantage of,
any appraisement, valuation, stay, extension or redemption laws now or
hereafter in force in any locality where any of the Mortgaged Property
may be situated, in order to prevent, delay or hinder the enforcement or
foreclosure of this Mortgage, or the absolute sale of the Mortgaged
Property, or any part thereof, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchaser or
purchasers thereat, and the Mortgagor, for itself and all who may claim
through or under it, hereby waives the benefit of all such laws unless
such waiver shall be forbidden by law. Under no circumstances shall
there be any marshalling of assets upon any foreclosure or to other
enforcement of this Mortgage.
SECTION 4.07. Notice of Default: The Mortgagor covenants that it
will give immediate written notice to each Mortgagee of the occurrence
of any Event of Default or in the event that any right or remedy
described in Sections [4.02] and [4.03] hereof is exercised or enforced
or any action is taken to exercise or enforce any such right or remedy.
ARTICLE V--POSSESSION UNTIL DEFAULT-DEFEASANCE CLAUSE
SECTION 5.01. Possession Until Default: Until some one or more of
the Events of Default shall have happened, the Mortgagor shall be
suffered and permitted to retain actual possession of the Mortgaged
Property, and to manage, operate and use the same and any part thereof,
with the rights and franchises appertaining thereto, and to collect,
receive, take, use and enjoy the rents, revenues, issues, earnings,
income, proceeds, products and profits thereof or therefrom, subject to
the provisions of this Mortgage.
SECTION 5.02. Defeasance: If the Mortgagor shall pay or cause to be
paid the whole amount of the principal of (and premium, if any) and
interest on the Notes at the times and in the manner therein provided,
and shall also pay or cause to be paid all other sums payable by the
Mortgagor hereunder or under any Loan Agreement and shall keep and
perform, all covenants herein required to be kept and performed by it,
then and in that case, all property, rights and interest hereby conveyed
or assigned or pledged shall revert to the Mortgagor and the estate,
right, title and interest of the Mortgagee so paid shall thereupon
cease, determine and become void and such Mortgagee, in such case, on
written demand of the Mortgagor but at the Mortgagor's cost and expense,
shall enter satisfaction of the Mortgage upon the record. In any event,
each Mortgagee, upon payment in full to such Mortgagee by the Mortgagor
of all principal of (and premium, if any) and interest on any Note held
by such Mortgagee and the payment and discharge by the Mortgagor of all
charges due to such Mortgagee hereunder or under any Loan Agreement,
shall execute and deliver to the Mortgagor such instrument of
satisfaction, discharge or release as shall be required by law in the
circumstances.
SECTION 5.03. Special Defeasance: Other than any Notes excluded by
the foregoing Sections 5.01 and 5.02 and Notes which have become due and
payable, the Mortgagor may cause the Lien of this Mortgage to be
defeased with respect to any Note for which it has deposited or caused
to be deposited in trust solely for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Note for principal
(and premium, if any) and interest to the date of maturity thereof;
PROVIDED, HOWEVER, that depository serving as trustee for such trust
must first be accepted as such by the Mortgagee whose Notes are being
defeased under this section. In such event, such a Note will no longer
be considered to be an Outstanding Note for purposes of this Mortgage
and the Mortgagee shall execute and deliver to the Mortgagor such
instrument of satisfaction, discharge or release as shall be required by
law in the circumstances.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Property Deemed Real Property: It is hereby declared
to be the intention of the Mortgagor that any electric generating plant
or plants and facilities and all electric transmission and distribution
lines, or other Electric System or Utility System facilities, embraced
in the Mortgaged Property, including (without limitation) all rights of
way and easements granted or given to the Mortgagor or obtained by it to
use real property in connection with the construction, operation or
maintenance of such plant, lines, facilities or systems, and all other
property physically attached to any of the foregoing, shall be deemed to
be real property.
SECTION 6.02. Mortgage to Bind and Benefit Successors and Assigns:
All of the covenants, stipulations, promises, undertakings and
agreements herein contained by or on behalf of the Mortgagor shall bind
its successors and assigns, whether so specified or not, and all titles,
rights and remedies hereby granted to or conferred upon the Mortgagees
shall pass to and inure to the benefit of the successors and assigns of
the Mortgagees and shall be deemed to be granted or conferred
[[Page 225]]
for the ratable benefit and security of all who shall from time to time
be a Mortgagee. The Mortgagor hereby agrees to execute such consents,
acknowledgements and other instruments as may be reasonably requested by
any Mortgagee in connection with the assignment, transfer, mortgage,
hypothecation or pledge of the rights or interests of such Mortgagee
hereunder or under the Notes or in and to any of the Mortgaged Property.
SECTION 6.03. Headings: The descriptive headings of the various
articles and sections of this Mortgage and also the table of contents
were formulated and inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions
hereof.
SECTION 6.04. Severability Clause: In case any provision of this
Mortgage or in the Notes or in the Loan Agreements shall be invalid or
unenforceable, the validity, legality and enforceability of the
remaining provisions thereof shall not in any way be affected or
impaired, nor shall any invalidity or unenforceability as to any
Mortgagee hereunder affect or impair the rights hereunder of any other
Mortgagee.
SECTION 6.05. Mortgage Deemed Security Agreement: To the extent that
any of the property described or referred to in this Mortgage is
governed by the provisions of the UCC this Mortgage is hereby deemed a
``security agreement'' under the UCC, and, if so elected by any
Mortgagee, a ``financing statement'' under the UCC for said security
agreement. The mailing addresses of the Mortgagor as debtor, and the
Mortgagees as secured parties are as set forth in Section [1.05] hereof.
If any Mortgagee so directs the Mortgagor to do so, the Mortgagor shall
file as a financing statement under the UCC for said security agreement
and for the benefit of all of the Mortgagees, an instrument other than
this Mortgage. In such case, the instrument to be filed shall be in a
form customarily accepted by the filing office as a financing statement.
PROCEEDS OF COLLATERAL ARE COVERED HEREBY.
SECTION 6.06. Indemnification by Mortgagor of Mortgagees: The
Mortgagor agrees to indemnify and save harmless each Mortgagee against
any liability or damages which any of them may incur or sustain in the
exercise and performance of their rightful powers and duties hereunder.
For such reimbursement and indemnity, each Mortgagee shall be secured
under this Mortgage in the same manner as the Notes and all such
reimbursements for expense or damage shall be paid to the Mortgagee
incurring or suffering the same with interest at the rate specified in
Section [3.14] hereof. The Mortgagor's obligation to indemnify the
Mortgagees under this section and under Section [3.04] shall survive the
satisfaction of the Notes, the reconveyance or foreclosure of this
Mortgage, the acceptance of a deed in lieu of foreclosure, or any
transfer or abandonment of the Mortgaged Property.
IN WITNESS WHEREOF, ---------- as Mortgagor, has caused this
Restated Mortgage and Security Agreement to be signed in its name and
its corporate seal to be hereunto affixed and attested by its officers
thereunto duly authorized, and UNITED STATES OF AMERICA, as Mortgagee,
and as Mortgagee, has caused this Restated Mortgage and Security
Agreement to be signed in its name by duly authorized persons, all as of
the day and year first above written.
________________________________________________________________________
(SEAL)
By:_____________________________________________________________________
President
Attest:_________________________________________________________________
Title:__________________________________________________________________
Executed by the Mortgagor in the presence of:
________________________________________________________________________
________________________________________________________________________
Witnesses
UNITED STATES OF AMERICA
By: Director, of the ---------- Rural Utilities Service
Executed by the United States of America, Mortgagee, in the presence
of:
________________________________________________________________________
________________________________________________________________________
Witnesses
By:
(SEAL)
Attest:_________________________________________________________________
Title:__________________________________________________________________
Executed by the above-named Mortgagee in the presence of:
________________________________________________________________________
________________________________________________________________________
Witnesses
Schedule A
1. The Maximum Debt Limit is ----------.
2. The Original Mortgage as described in the [first] WHEREAS clause
above is ----------.
3. The outstanding secured indebtedness described in the [fourth]
WHEREAS clause above as evidenced by the Original Notes is as follows:
[Note this requires computation of principal balances, not merely a
toting up of the original face amounts of the notes. Alternative
approaches may be used by the parties where legally effective and
mutually agreeable.]
[[Page 226]]
Schedule B--Property Schedule
The fee and leasehold interests in real property referred to in
Section Subclause (a) of Granting Clause One are ----------.
The counties referred to in Subclause (B) of Granting Clause One are
----------.
Schedule C--Excepted Property
STATE OF ----------
COUNTY OF ----------
On this ------ day of ----------, 19 ----, before me appeared ------
---- and ---------- personally known, by me and having been duly sworn
by me, did say that they are the President and Secretary, respectively,
of ----------------, a ---------- corporation, and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation,
and that said instrument was signed and sealed in behalf of said
corporation by authority of its Board, and said ---------- and --------
-- acknowledged that the execution of said instrument was a free act and
deed of said corporation.
IN WITNESS whereof, I have hereunto set my hand and official seal
the day and year last above written.
________________________________________________________________________
Notary Public
(Notarial Seal)
My commission expires:
DISTRICT OF COLUMBIA ) SS
The foregoing instrument was acknowledged before me this ----------
---- day of 19----, by ------------------ Director, ----------------
Regional Division of the Rural Utilities Service, acknowledging an
agency of the United States of America, on behalf of the Rural Utilities
Service, United States of America.
________________________________________________________________________
Notary Public
(Notarial Seal)
My Commission expires:
COMMONWEALTH OF VIRGINIA ) SS
BEFORE ME, a Notary Public, in and for the Commonwealth of Virginia,
appeared in person ----------------------, signing for the Governor of
the National Rural Utilities cooperative Finance Corporation, to me
personally known, and known to be the identical person who subscribed
the name of said corporation to the foregoing instrument, being by me
duly sworn, and who stated that she/he is duly authorized to execute the
foregoing instrument on behalf of said corporation, and further stated
and acknowledged that she/he executed the foregoing instrument as a free
and voluntary act and deed of said corporation for the consideration
therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this ---------- day of ----------, 19----.
________________________________________________________________________
Notary Public
(Notarial Seal)
My commission expires:
Exhibit A--Manager's Certificate
Manager's Certificate Required Under Mortgage Section 2.01 for
Additional Notes
On behalf on ---------------------- [Name of Borrower] (the
``Borrower''), I ------------------------ hereby certify as follows:
1. I am the Manager of the Borrower and have been duly authorized to
deliver this certificate in connection with the Additional Note or Notes
to be issued on or about ---------------------- [Date Note or Notes are
to be Signed] pursuant to Section [2.01] of the Mortgage dated --------
--------------.
2. No Event of Default has occurred and is continuing under the
Mortgage, or any event which with the giving of notice or lapse of time
or both would become an Event of Default has occurred and is continuing.
3. The Additional Notes described in paragraph 1 are for the purpose
of funding Property Additions being constructed, acquired, procured or
replaced that are or will become part of the Borrower's Utility System.
4. The Property Additions referred to in paragraph 3 are Eligible
Property Additions, i.e. Property Additions acquired or whose
construction was completed not more than 5 years prior to the issuance
of additional Notes and Property Additions acquired or whose
construction is started and/or completed not more than 4 years after
issuance of the additional Notes, but shall exclude any Property
Additions financed by any other debt secured under the Mortgage at the
time additional Notes are issued.
5. I have reviewed the certificate of the Independent certified
public accountant also being delivered to each of the Mortgagees
pursuant to Section [2.01] in connection with the aforesaid Additional
Note or Notes and concur with the conclusions expressed therein.
6. Capitalized terms that are used in this certificate but are not
defined herein have the meanings defined in the Mortgage.
[Signed]________________________________________________________________
[Dated]_________________________________________________________________
[Name]__________________________________________________________________
[Title]_________________________________________________________________
[Name and Address of Borrower]__________________________________________
________________________________________________________________________
________________________________________________________________________
Exhibit B--Form of Supplemental Mortgage
________________________________________________________________________
Supplemental Mortgage and Security Agreement, dated as of ----------
, ------,
[[Page 227]]
--------, (hereinafter sometimes called this ``Supplemental Mortgage'')
is made by and between ---------- (hereinafter called the
``Mortgagor''), a corporation existing under the laws of the State of --
--------, and the UNITED STATES OF AMERICA acting by and through the
Administrator of the Rural Utilities Service (hereinafter called the
``Government''), ---------- (Supplemental Lender) (hereinafter called --
--------), a ---------- existing under the laws of ----------, and
intended to confer rights and benefits on both the Government and ------
---- and ---------- in accordance with this Supplemental Mortgage and
the Original Mortgage (hereinafter defined) (the Government and the
Supplemental Lenders being herein sometimes collectively referred to as
the ``Mortgagees'').
Recitals
Whereas, the Mortgagor, the Government and ---------- are parties to
that certain Restated Mortgage and Security Agreement, as supplemented,
amended or restated (the ``Original Mortgage'' identified in Schedule
``A'' of this Mortgage) originally entered into between the Mortgagor,
the Government acting by and through the Administrator of the Rural
Utilities Service (hereinafter called ``RUS''), and ----------; and
Whereas, the Mortgagor deems it necessary to borrow money for its
corporate purposes and to issue its promissory notes and other debt
obligations therefor, and to mortgage and pledge its property
hereinafter described or mentioned to secure the payment of the same,
and to enter into this Supplemental Mortgage pursuant to which all
secured debt of the Mortgagor hereunder shall be secured on parity, and
to add ---------- as a secured party hereunder and under the Original
Mortgage (the Supplemental Mortgage and the Original Mortgage, as it may
have been previously amended or supplemented, hereinafter may be called
collectively the ``RUS Mortgage''); and
Whereas, the RUS Mortgage, as supplemented hereby, preserves the
priority of the Original Mortgage for the pro rata benefit of all the
Mortgagees and secures the payment of all of the Mortgagor's outstanding
indebtedness as listed in the Instruments Recital of Schedule ``A''; and
Whereas, all acts necessary to make this Supplemental Mortgage a
valid and binding legal instrument for the security of such notes and
obligations, subject to the terms of the RUS Mortgage, have been in all
respects duly authorized:
Now, Therefore, This Supplemental Mortgage Witnesseth: That to
secure the payment of the principal of (and premium, if any) and
interest on all Notes issued hereunder according to their tenor and
effect, and the performance of all provisions therein and herein
contained, and in consideration of the covenants herein contained and
the purchase or guarantee of Notes by the guarantors or holders thereof,
the Mortgagor has mortgaged, pledged and granted a continuing security
interest in, and by these presents does hereby grant, bargain, sell,
alienate, remise, release, convey, assign, transfer, hypothecate,
pledge, set over and confirm, pledge and grant a continuing security
interest in for the purposes hereinafter expressed [other language may
be required under various state laws], unto the Mortgagees all property,
rights, privileges and franchises of the Mortgagor of every kind and
description, real, personal or mixed, tangible and intangible, of the
kind or nature specifically mentioned herein or any other kind or
nature, except any Excepted Property set forth on Schedule ``C'' hereof
owned or hereafter acquired by the Mortgagor (by purchase,
consolidation, merger, donation, construction, erection or in any other
way) wherever located, including (without limitation) all and singular
the following:
A. All of those fee and leasehold interests in real property set
forth in Schedule ``B'' hereto, subject in each case to those matters
set forth in such Schedule; and
B. All of those fee and leasehold interests in real property set
forth in Schedule ``B'' of the Original Mortgage or in any restatement,
amendment or supplement thereto, subject in each case to those matters
set forth in such Schedule; and
C. All of the kinds, types or items of property, now owned or
hereafter acquired, described as Mortgaged Property in the Original
Mortgage or in any restatement, amendment to supplement thereto as
Mortgaged Property.
It is Further Agreed and Covenanted That the Original Mortgage, as
previously restated, amended or supplemented, and this Supplement shall
constitute one agreement and the parties hereto shall be bound by all of
the terms thereof and, without limiting the foregoing.
1. All capitalized terms not defined herein shall have the meaning
given in Article I of the Original Mortgage.
2. This Supplemental Mortgage is one of the Supplemental Mortgages
contemplated by Article II of the Original Mortgage.
In Witness Whereof, ---------- as Mortgagor.
[ACKNOWLEDGEMENTS]
Supplemental Mortgage Schedule A--Maximum Debt Limit and Other
Information
1. The Maximum Debt Limit is ----------.
2. The Original Mortgage as described in the first WHEREAS clause
above is ----------.
[[Page 228]]
3. The outstanding secured indebtedness described in the third
WHEREAS clause above is ----------.
Supplemental Mortgage Schedule B--Property Schedule
The fee and leasehold interests in real property referred to in
clause A of the granting clause are ----------.
Supplemental Mortgage Schedule C--Excepted Property
[60 FR 36888, July 18, 1995, as amended at 60 FR 67410, Dec. 29, 1995;
65 FR 51749, Aug. 25, 2000]
Subpart C_Loan Contracts With Distribution Borrowers
Source: 60 FR 67410, Dec. 29, 1995, unless otherwise noted.
Sec. 1718.100 General.
(a) Purpose.The purpose of this subpart is to set forth the
policies, requirements, and procedures governing loan contracts entered
into between the Rural Utilities Service (RUS) and distribution
borrowers or, in some cases, other electric borrowers.
(b) Flexibility for individual circumstances.The intent of this
subpart is to provide the flexibility to address the different needs and
different credit risks of individual borrowers, and other special
circumstances of individual lending situations. The model loan contract
contained in Appendix A of this subpart provides an example of what a
loan contract with an ``average'' or ``typical'' distribution borrower
may look like under ``average'' or ``typical'' circumstances. Depending
on the credit risks and other circumstances of individual loans, RUS may
execute loan contracts with provisions that are substantially different
than those set forth in the model. RUS may develop alternative model
loan contract provisions. If it does, such provisions will be made
available to the public.
(c) Resolution of any differences in contractual provisions.If any
provision of the loan contract appears to be in conflict with provisions
of the mortgage, the loan contract shall have precedence with respect to
the contractual relationship between the borrower and RUS with respect
to such provision. If either document is silent on a matter addressed in
the other document, the other document shall have precedence with
respect to the contractual relationship between the borrower and RUS
with respect to such matter.
(d) Certain loan contract provisions subject to subsequent
rulemaking.If a loan contract provision imposes an obligation or
limitation on the borrower whose interpretation or specification is
subject to RUS regulations or the discretion of the Administrator or
RUS, such interpretation or specification shall be subject to subsequent
rulemaking. Such interpretation or specification of the borrower's
obligations or limitations may not exceed the authority granted to the
Administrator or RUS in the loan contract provision.
Sec. 1718.101 Applicability.
(a) Distribution borrowers.The provisions of this subpart apply to
all distribution borrowers that obtain a loan or loan guarantee from RUS
approved on or after January 29, 1996. Distribution borrowers that
obtain a lien accommodation or any other form of financial assistance
from RUS after January 29, 1996, may be required to execute a new loan
contract and new mortgage. Moreover, any distribution borrower may
submit a request to RUS that a new loan contract and new mortgage be
executed. Within the constraints of time and staff resources, RUS will
attempt to honor such requests. Borrowers must first obtain the
concurrence of any other mortgagees on their existing mortgage before a
new mortgage can be executed.
(b) Other borrowers.Borrowers other than distribution borrowers may
also submit requests for execution of a new loan contract pursuant to
this subpart and a new mortgage pursuant to subpart B of this part. RUS
may approve such requests if it determines that such approval is in the
government's financial interest. If other mortgagees are on the
borrower's existing mortgage, their concurrence would be required before
a new mortgage could be executed.
Sec. 1718.102 Definitions.
For the purposes of this subpart:
[[Page 229]]
Borrower means any organization that has an outstanding loan made or
guaranteed by the Rural Utilities Service (RUS) or its predecessor, the
Rural Electrification Administration, for rural electrification, or that
is seeking such financing.
Distribution borrower means a borrower that sells or intends to sell
electric power and energy at retail in rural areas, the latter being
defined in 7 CFR 1710.2.
Loan documents means the mortgage (or other security instrument
acceptable to RUS), the loan contract, and the promissory note entered
into between the borrower and RUS.
Sec. 1718.103 Loan contract provisions.
Loan contracts executed pursuant to this subpart shall contain such
provisions as RUS determines are appropriate to further the purposes of
the RE Act and to ensure that the security for the loan will be
reasonably adequate and that the loan will be repaid according to the
terms of the promissory note. Such loan contracts will contain
provisions addressing, but not necessarily limited to, the following
matters:
(a) Description of the purpose of the loan;
(b) Specification of the interest to be charged on the loan,
including the method for determining the interest rate if it is not
fixed for the entire term of the loan;
(c) Specification of the method for repaying the loan principal,
including the final maturity of the loan;
(d) The conditions under which the loan may be prepaid before its
maturity date, including but not limited to requirements regarding the
prepayment of loans made concurrently by RUS and another secured lender;
(e) The method for making scheduled payments on the loan;
(f) Accounting principles and system of accounts, and RUS authority
to approve the accountant used by the borrower;
(g) The method and time period for advancing loan funds and the
conditions precedent to the advance of funds;
(h) Representations and warranties by the borrower as a condition of
obtaining the loan, including but not limited to: the legal authority of
the borrower to enter into the loan contract and operate its system;
that the loan documents will be a legal, valid and binding obligation of
the borrower enforceable according to their terms; compliance of the
borrower in all material respects with all federal, state, and local
laws, regulations, codes, and orders; existence of any pending or
threatened legal actions that could have a material adverse effect on
the borrower's ability to perform its obligations under the loan
documents; the accuracy and completeness of all information provided by
the borrower in the loan application and with respect to the loan
contract, and the existence of any material adverse change since the
information was provided; and the existence of any material defaults
under other agreements of the borrower;
(i) Representations, warranties, and covenants with respect to
environmental matters;
(j) Reports and notices required to be submitted to RUS, including
but not limited to: annual financial statements; notice of defaults;
notice of litigation; notice of orders or other directives received by
the borrower from regulatory authorities; notice of any matter that has
resulted in or may result in a material adverse change in the condition
or operations of the borrower; and such other information regarding the
condition or operations of the borrower as RUS may reasonably require;
(k) Annual written certification that the borrower is in compliance
with its loan contract, note, mortgage, and any other agreement with
RUS, or if there has been a default in the fulfillment of any obligation
under said agreements, specifying each such default and the nature and
status thereof;
(l) Requirement that the borrower design and implement rates for
utility services to meet certain minimum coverage of interest expense
and/or debt service obligations;
(m) Requirement that the borrower maintain and preserve its
mortgaged property in compliance with prudent utility practice and all
applicable laws,
[[Page 230]]
which may include certain specific actions and certifications set forth
in the borrower's loan contract or mortgage;
(n) Requirement that the borrower plan, design and construct its
electric system according to standards and other requirements
established by RUS, and if directed by the Administrator, that the
borrower follow RUS planning, design and construction standards and
requirements for other utility systems constructed by the borrower;
(o) Limitations on extensions and additions to the borrower's
electric system without approval by RUS;
(p) Limitations on contracts and contract amendments that the
borrower may enter into without approval by RUS;
(q) Limitations of the transfer of mortgaged property by the
borrower;
(r) Limitations on dividends, patronage refunds, and cash
distributions paid by the borrower;
(s) Limitations on investments, loans, and guarantees made by the
borrower;
(t) Authority of RUS to approve a new general manager and to require
that an existing general manager be replaced if the borrower is in
default under its mortgage, loan contract, or any other agreements with
RUS;
(u) Description of events of default under the loan contract and the
remedies available to RUS;
(v) Applicability of state and federal laws;
(w) Severability of the individual provisions of the loan documents;
(x) Matters relating to the assignment of the loan contract;
(y) Requirements relating to federal laws and regulations, including
but not limited to the following matters: area coverage for electric
service; civil rights and equal employment opportunity; access to
buildings and other matters relating to the handicapped; design and
construction standards relating to earthquakes; the National
Environmental Policy Act of 1969 and other environmental laws and
regulations; flood hazard insurance; debarment and suspension from
federal assistance programs; and delinquency on federal debt; and
(z) Special requirements applicable to individual loans, and such
other provisions as RUS may require to ensure loan repayment and
reasonably adequate loan security.
Sec. 1718.104 Availability of model loan contract.
Single copies of the model loan contract (RUS Informational
Publication 1718 C) are available from the Rural Utilities Service,
United States Department of Agriculture, Washington, DC 20250-1533. This
document may be reproduced.
Appendix A to Subpart C of Part 1718--Model Form of Loan Contract for
Electric Distribution Borrowers
LOAN CONTRACT
TABLE OF CONTENTS
RECITALS
ARTICLE I--DEFINITIONS
ARTICLE II--REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties.
ARTICLE III--LOAN
Section 3.1. Advances.
Section 3.2. Interest Rate and Payment.
Section 3.3. Prepayment.
ARTICLE IV--CONDITIONS OF LENDING
Section 4.1. General Conditions.
Section 4.2. Special Conditions.
ARTICLE V--AFFIRMATIVE COVENANTS
Section 5.1. Generally.
Section 5.2. Annual Certificates.
Section 5.3. Simultaneous Prepayment of Contemporaneous Loans.
Section 5.4. Rates to Provide Revenue Sufficient to Meet Coverage
Ratios Requirements.
Section 5.5. Depreciation Rates.
Section 5.6. Property Maintenance.
Section 5.7. Financial Books.
Section 5.8. Rights of Inspection.
Section 5.9. Area Coverage.
Section 5.10. Real Property Acquisition.
Section 5.11. ``Buy American'' Requirements.
Section 5.12. Power Requirements Studies.
Section 5.13. Long Range Engineering Plans and Construction Work
Plans.
Section 5.14. Design Standards, Construction Standards, and List of
Materials.
Section 5.15. Plans and Specifications.
Section 5.16. Standard Forms of Construction Contracts, and
Engineering and Architectural Services Contracts.
Section 5.17. Contract Bidding Requirements.
Section 5.18. Nondiscrimination.
Section 5.19. Financial Reports.
[[Page 231]]
Section 5.20. Miscellaneous Reports and Notices.
Section 5.21 Special Construction Account.
Section 5.22. Additional Affirmative Covenants.
ARTICLE VI--NEGATIVE COVENANTS
Section 6.1. General.
Section 6.2. Limitations on System Extensions and Additions.
Section 6.3. Limitations on Changing Principal Place of Business.
Section 6.4. Limitations on Employment and Retention of Manager.
Section 6.5. Limitations on Certain Types of Contracts.
Section 6.6. Limitations on Mergers and Sale, Lease or Transfer of
Capital Assets.
Section 6.7. Limitations on Using non FDIC-insured Depositories.
Section 6.8. Limitation on Distributions.
Section 6.9. Limitations on Loans, Investments and Other
Obligations.
Section 6.10. Depreciation Rates.
Section 6.11. Historic Preservation.
Section 6.12. Rate Reductions.
Section 6.13. Limitations on Additional Indebtedness.
Section 6.14. Limitations on Issuing Additional Indebtedness Secured
Under the Mortgage.
Section 6.15. Impairment of Contracts Pledged to RUS.
Section 6.16. Additional Negative Covenants.
ARTICLE VII--DEFAULT
Section 7.1. Events of Default.
ARTICLE VIII--REMEDIES
Section 8.1. Generally.
Section 8.2. Suspension of Advances.
ARTICLE IX--MISCELLANEOUS
Section 9.1. Notices.
Section 9.2. Expenses.
Section 9.3. Late Payments.
Section 9.4. Filing Fees.
Section 9.5. No Waiver.
Section 9.6. Governing Law.
Section 9.7. Holiday Payments.
Section 9.8. Rescission.
Section 9.9. Successors and Assigns.
Section 9.10. Complete Agreement; Amendments.
Section 9.11. Headings.
Section 9.12. Severability.
Section 9.13. Right of Setoff.
Section 9.14. Schedules and Exhibits.
Section 9.15. Prior Loan Documents.
Section 9.16. Authority of Representatives of RUS.
Section 9.17. Term.
Schedule 1
Schedule 2--Existing Liens
Schedule 3--Additional Contracts
Exhibit A--Form of Promissory Note
Exhibit B--Equal Opportunity Contract Provisions
Exhibit C-1--Manager's Certificate Required Under Loan Contract
Section 6.14 for Additional Notes
Exhibit C-2--Manager's Certificate Required Under Loan Contract
Section 6.14 for Refinancing Notes
Loan Contract
AGREEMENT, dated --------------------, 199----, between ------------
-------- (``Borrower''), a corporation organized and existing under the
laws of the State of -------------------- (the ``State'') and the UNITED
STATES OF AMERICA acting by and through the Administrator of the Rural
Utilities Service (``RUS'').
Recitals
The Borrower has applied to RUS for a loan for the purpose(s) set
forth in Schedule 1 hereto.
RUS is willing to make such a loan to the Borrower pursuant to the
Rural Electrification Act of 1936, as amended, on the terms and
conditions stated herein.
THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree and bind
themselves as follows:
Article I--Definitions
Capitalized terms that are not defined herein shall have the
meanings as set forth in the Mortgage. The terms defined herein include
the plural as well as the singular and the singular as well as the
plural.
``Act'' shall mean the Rural Electrification Act of 1936, as
amended.
``Advance'' or ``Advances'' shall mean advances by RUS to Borrower
pursuant to the terms and conditions of this Agreement.
``Agreement'' shall mean this Loan Contract together with all
schedules and exhibits and also any subsequent supplements or
amendments.
``Business Day'' shall mean any day that RUS is open for business.
``Contemporaneous Loan'' shall mean any loan which the Borrower has
used to satisfy RUS Regulations or loan conditions requiring that
supplemental financing be obtained in order to obtain a loan from RUS.
Any loan used to refinance or refund a Contemporaneous Loan is also
considered to be a Contemporaneous Loan.
``Coverage Ratios'' shall mean, collectively, the following
financial ratios: (i) TIER of 1.25; (ii) Operating TIER of 1.1; (iii)
DSC of 1.25; and Operating DSC of 1.1.
``Debt Service Coverage Ratio'' (``DSC'') shall have the meaning
provided in the Mortgage.
``Distributions'' shall mean for the Borrower to, in any calendar
year, declare or pay any dividends, or pay or determine to pay any
patronage refunds, or retire any patronage capital or make any other
Cash Distributions, to its members, stockholders or
[[Page 232]]
consumers; provided, however, that for the purposes of this Agreement a
``Cash Distribution'' shall be deemed to include any general
cancellation or abatement of charges for electric energy or services
furnished by the Borrower, but not the repayment of a membership fee
upon termination of a membership or the rebate of an abatement of
wholesale power costs previously incurred pursuant to an order of a
state regulatory authority or a wholesale power cost adjustment clause
or similar power pricing agreement between the Borrower and a power
supplier.
``Electric System'' shall have the meaning as defined in the
Mortgage.
``Equity'' shall mean the Borrower's total margins and equities
computed pursuant to RUS Accounting Requirements but excluding any
Regulatory Created Assets.
``Event of Default'' shall have the meaning as defined in Section
[7.1].
``Independent'' when used with respect to any specified person or
entity means such a person or entity who (1) is in fact independent, (2)
does not have any direct financial interest or any material indirect
financial interest in the Borrower or in any affiliate of the Borrower
and (3) is not connected with the Borrower as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing
similar functions.
``Interest Expense'' shall mean the interest expense of the Borrower
computed pursuant to RUS Accounting Requirements.
``Loan'' shall mean the loan described in Article III which is being
made pursuant to the RUS Commitment in furtherance of the objectives of
the Act.
``Loan Documents'' shall mean, collectively, this Agreement, the
Mortgage and the Note.
``Long-Term Debt'' shall mean the total of all amounts included in
the long-term debt of the Borrower pursuant to RUS Accounting
Requirements.
``Maturity Date'' shall have the meaning as defined in the Note.
``Monthly Payment Date'' shall have the meaning as defined in the
Note.
``Mortgage'' shall have the meaning as described in Schedule 1
hereto.
``Mortgaged Property'' shall have the meaning as defined in the
Mortgage.
``Net Utility Plant'' shall mean the amount constituting the Total
Utility Plant of the Borrower, less depreciation, computed in accordance
with RUS Accounting Requirements.
``Note'' shall mean a promissory note executed by the Borrower in
the form of exhibit A hereto, and any note executed and delivered to RUS
to refund, or in substitution for such a note.
``Operating DSC'' or ``ODSC'' shall mean Operating Debt Service
Coverage calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.004
Where:
All amounts are for the same calendar year and are computed pursuant to
RUS Accounting Requirements and RUS form 7;
A=Depreciation and Amortization Expense of the Electric System;
B=Interest Expense on Total Long-Term Debt of the Electric System,
except that such Interest Expense shall be increased by \1/3\ of the
amount, if any, by which the Restricted Rentals of the Electric System
exceed 2 percent of the Mortgagor's Equity;
C=Patronage capital & operating margins of the Electric System, (which
equals operating revenue and patronage capital of Electric System
operations, less total cost of electric service, including Interest
Expense on Total Long-Term Debt of the Electric System) plus cash
received from the retirement of patronage capital by suppliers of
electric power and by lenders for credit extended for the Electric
System; and
D=Debt service billed which equals the sum of all payments of principal
and interest required to be made on account of Total Long-Term Debt of
the Electric System during the calendar year, plus \1/3\ of the amount,
if any, by which Restricted Rentals of the Electric System exceed 2
percent of the Mortgagor's Equity.
``Operating TIER'' or ``OTIER'' shall mean Operating Times Interest
Earned Ratio calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.005
Where:
All amounts are for the same calendar year and are computed pursuant to
RUS Accounting Requirements and RUS form 7;
A=Interest Expense on Total Long-Term Debt of the Electric System,
except that such Interest Expense shall be increased by 1/3 of the
amount, if any, by which Restricted Rentals of the Electric System
exceed 2 percent of the Mortgagor's Equity; and
B=Patronage capital & operating margins of the Electric System, (which
equals operating revenue and patronage capital of Electric System
operations, less total cost of electric service, including Interest
Expense on Total Long-Term Debt of the Electric System) plus cash
received from the retirement of patronage capital by suppliers of
electric power and by lenders for credit extended for the Electric
System.
[[Page 233]]
``Payment Notice'' shall mean a notice furnished by RUS to Borrower
that indicates the precise amount of each payment of principal and
interest and the total amount of each payment.
``Permitted Debt'' shall have the meaning as defined in section
[6.13].
``Prior Loan Contracts'' shall have the meaning as defined in
section 9.15.
``Regulatory Created Assets'' shall mean the sum of any amounts
properly recordable as unrecovered plant and regulatory study costs or
as other regulatory assets, computed pursuant to RUS Accounting
Requirements.
``RUS Accounting Requirements'' shall mean any system of accounts
prescribed by RUS Regulations as such RUS Accounting Requirements exist
at the date of applicability thereof.
``RUS Commitment'' shall have the meaning as defined in schedule 1
hereto.
``RUS Regulations'' shall mean regulations of general applicability
published by RUS from time to time as they exist at the date of
applicability thereof, and shall also include any regulations of other
Federal entities which RUS is required by law to implement.
``Special Construction Account'' shall have the meaning as defined
in section 5.21.
``Subsidiary'' shall mean a corporation that is a subsidiary of the
Borrower and subject to the Borrower's control, as defined by RUS
Accounting Requirements.
``Termination Date'' shall have the meaning as defined in the Note.
``Times Interest Earned Ratio'' (``TIER'') shall have the meaning
provided in the Mortgage.
``Total Assets'' shall mean an amount constituting the total assets
of the Borrower as computed pursuant to RUS Accounting Requirements, but
excluding any Regulatory Created Assets.
``Total Utility Plant'' shall mean the amount constituting the total
utility plant of the Borrower computed in accordance with RUS Accounting
Requirements.
``Utility System'' shall have the meaning as defined in the
Mortgage.
Article II--Representations and Warranties
Section 2.1. Representations and Warranties.
To induce RUS to make the Loan, and recognizing that RUS is relying
hereon, the Borrower represents and warrants as follows:
(a) Organization; Power, Etc. The Borrower: (i) is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation; (ii) is duly qualified to do business and is in good
standing in each jurisdiction in which the transaction of its business
makes such qualification necessary; (iii) has all requisite corporate
and legal power to own and operate its assets and to carry on its
business and to enter into and perform the Loan Documents; (iv) has duly
and lawfully obtained and maintained all licenses, certificates,
permits, authorizations, approvals, and the like which are material to
the conduct of its business or which may be otherwise required by law;
and (v) is eligible to borrow from RUS.
(b) Authority. The execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents and the
performance of the transactions contemplated thereby have been duly
authorized by all necessary corporate action and shall not violate any
provision of law or of the Articles of Incorporation or By-Laws of the
Borrower or result in a breach of, or constitute a default under, any
agreement, indenture or other instrument to which the Borrower is a
party or by which it may be bound.
(c) Consents. No consent, permission, authorization, order, or
license of any governmental authority is necessary in connection with
the execution, delivery, performance, or enforcement of the Loan
Documents, except (i) such as have been obtained and are in full force
and effect and (ii) such as have been disclosed on Schedule 1 hereto.
(d) Binding Agreement. Each of the Loan Documents is, or when
executed and delivered shall be, the legal, valid, and binding
obligation of the Borrower, enforceable in accordance with its terms,
subject only to limitations on enforceability imposed by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditors' rights generally.
(e) Compliance With Laws. The Borrower is in compliance in all
material respects with all federal, state, and local laws, rules,
regulations, ordinances, codes, and orders (collectively, ``Laws''), the
failure to comply with which could have a material adverse effect on the
condition, financial or otherwise, operations, properties, or business
of the Borrower, or on the ability of the Borrower to perform its
obligations under the Loan Documents, except as the Borrower has
disclosed on Schedule 1 attached hereto.
(f) Litigation. There are no pending legal, arbitration, or
governmental actions or proceedings to which the Borrower is a party or
to which any of its property is subject which, if adversely determined,
could have a material adverse effect on the condition, financial or
otherwise, operations, properties, profits or business of the Borrower,
or on the ability of the Borrower to perform its obligations under the
Loan Documents, and to the best of the Borrower's knowledge, no such
actions or proceedings are threatened or contemplated, except as the
Borrower has disclosed to RUS in writing.
(g) Title to Property. As to property which is presently included in
the description of
[[Page 234]]
Mortgaged Property, the Borrower holds good and marketable title to all
of its real property and owns all of its personal property free and
clear of any Lien except the Liens specifically identified on Schedule 2
attached hereto (the ``Existing Liens''), and Permitted Encumbrances or
Liens permitted under the Mortgage.
(h) Financial Statements; No Material Adverse Change; Etc. All
financial statements submitted to RUS in connection with the application
for the Loan or in connection with this Agreement fairly and fully
present the financial condition of the Borrower and the results of the
Borrower's operations for the periods covered thereby and are prepared
in accordance with RUS Accounting Requirements consistently applied.
Since the dates thereof, there has been no material adverse change in
the financial condition or operations of the Borrower. All budgets,
projections, feasibility studies, and other documentation submitted by
the Borrower to RUS are based upon assumptions that are reasonable and
realistic, and as of the date hereof, no fact has come to light, and no
event or transaction has occurred, which would cause any assumption made
therein not to be reasonable or realistic.
(i) Principal Place of Business; Records. The principal place of
business and chief executive office of the Borrower is at the address of
the Borrower shown on Schedule 1 attached hereto.
(j) Location of Properties. All property owned by the Borrower is
located in the counties identified in Schedule 1 hereto.
(k) Subsidiaries. The Borrower has no subsidiary, except as the
Borrower has disclosed to RUS in writing.
(l) Defaults Under Other Agreements. The Borrower is not in default
under any agreement or instrument to which it is a party or under which
any of its properties are subject that is material to its financial
condition, operations, properties, profits, or business.
(m) Survival. All representations and warranties made by the
Borrower herein or made in any certificate delivered pursuant hereto
shall survive the making of the Advances and the execution and delivery
to RUS of the Note.
Article III--Loan
Section 3.1. Advances
RUS agrees to make, and the Borrower agrees to request, on the terms
and conditions of this Agreement, Advances from time to time in an
aggregate principal amount not to exceed the RUS Commitment. On the
Termination Date, RUS may stop advancing funds and limit the RUS
Commitment to the amount advanced prior to such date. The obligation of
the Borrower to repay the Advances shall be evidenced by the Note in the
principal amount of the unpaid principal amount of the Advances from
time to time outstanding. The Borrower shall give RUS written notice of
the date on which each Advance is to be made.
Section 3.2. Interest Rate and Payment
The Note shall be payable and bear interest as follows:
(a) Payments and Amortization. Principal shall be amortized in
accordance with the method stated in Schedule 1 hereto and more fully
described in the form of Note attached hereto as Exhibit A.
(b) Application of Payments. All payments which the Borrower sends
to RUS on any outstanding obligation owed to RUS shall be applied in the
manner provided in the Borrower's loan documents to which such payments
relate and in a manner consistent with RUS policies, practices, and
procedures for obligations that have been similarly classified by RUS.
(c) Electronic Funds Transfer. Except as otherwise prescribed by
RUS, the Borrower shall make all payments on the Note utilizing
electronic funds transfer procedures as specified by RUS.
(d) Fixed or Variable Rate. The Note shall bear interest at either a
fixed or variable rate in accordance with the method stated in Schedule
1 hereto and as more particularly described in the form of Note attached
hereto as Exhibit A.
Section 3.3. Prepayment
The Borrower has no right to prepay the Note in whole or in part
except such rights, if any, as are expressly provided for in the Note.
However, prepayment of the Note (and any penalties) shall be mandatory
under Section [5.3] hereof if the Borrower has used a Contemporaneous
Loan in order to qualify for the RUS Commitment, and later prepays the
Contemporaneous Loan.
Article IV--Conditions of Lending
Section 4.1. General Conditions
The obligation of RUS to make any Advance hereunder is subject to
satisfaction of each of the following conditions precedent on or before
the date of such Advance:
(a) Legal Matters. All legal matters incident to the consummation of
the transactions hereby contemplated shall be satisfactory to counsel
for RUS.
(b) Loan Documents. That RUS receive duly executed originals of this
Agreement and the other Loan Documents.
(c) Authorization. That RUS receive evidence satisfactory to it that
all corporate documents and proceedings of the Borrower necessary for
duly authorizing the execution, delivery and performance of the Loan
Documents have been obtained and are in full force and effect.
[[Page 235]]
(d) Approvals. That RUS receive evidence satisfactory to it that all
consents and approvals (including without limitation the consents
referred to in Section [2.1(c)] of this Agreement) which are necessary
for, or required as a condition of, the validity and enforceability of
each of the Loan Documents have been obtained and are in full force and
effect.
(e) Event of Default. That no Event of Default specified in Article
VII and no event which, with the lapse of time or the notice and lapse
of time specified in Article VII would become such an Event of Default,
shall have occurred and be continuing, or shall have occurred after
giving effect to the Advance on the books of the Borrower.
(f) Continuing Representations and Warranties. That the
representations and warranties of the Borrower contained in this
Agreement be true and correct on and as of the date of such Advance as
though made on and as of such date.
(g) Opinion of Counsel. That RUS receive an opinion of counsel for
the Borrower (who shall be acceptable to RUS) in form and content
acceptable to RUS.
(h) Mortgage Filing. The Mortgage shall have been duly recorded as a
mortgage on real property, including after-acquired real property, and
duly filed, recorded or indexed as a security interest in personal
property, including after acquired personal property, wherever RUS shall
have requested, all in accordance with applicable law, and the Borrower
shall have caused satisfactory evidence thereof to be furnished to RUS.
(i) Wholesale Power Contract. That the Borrower shall not be in
default under the terms of, or contesting the validity of, any contract
for sales for resale that has been pledged by any entity to RUS as
security for the repayment of any loan made or guaranteed by RUS under
the Act.
(j) Material Adverse Change. That there has occurred no material
adverse change in the business or condition, financial or otherwise, of
the Borrower and nothing has occurred which in the opinion of RUS
materially and adversely affects the Borrower's ability to meet its
obligations hereunder.
(k) Requisitions. That the Borrower shall requisition all Advances
by submitting its requisition to RUS in form and substance satisfactory
to RUS. Requisitions shall be made only for the purpose(s) set forth
herein. The Borrower agrees to apply the proceeds of the Advances in
accordance with its loan application with such modifications as may be
mutually agreed.
(l) Flood Insurance. That for any Advance used in whole or in part
to finance the construction or acquisition of any building in any area
identified by the Secretary of Housing and Urban Development pursuant to
the Flood Disaster Protection Act of 1973 (the ``Flood Insurance Act'')
or any rules, regulations or orders issued to implement the Flood
Insurance Act (``Rules'') as any area having special flood hazards, or
to finance any facilities or materials to be located in any such
building, or in any building owned or occupied by the Borrower and
located in such a flood hazard area, the Borrower has submitted
evidence, in form and substance satisfactory to RUS, or RUS has
otherwise determined, that (i) the community in which such area is
located is then participating in the national flood insurance program,
as required by the Flood Insurance Act and any Rules, and (ii) the
Borrower has obtained flood insurance coverage with respect to such
building and contents as may then be required pursuant to the Flood
Insurance Act and any Rules.
(m) Compliance With Loan Contract and Mortgage. That the Borrower is
in material compliance with all provisions of this Agreement and the
Mortgage.
Section 4.2. Special Conditions
The obligation of RUS to make any Advance hereunder is also subject
to satisfaction, on or before the date of such Advance, of each of the
special conditions, if any, listed in Schedule 1 hereto.
Article V--Affirmative Covenants
Section 5.1. Generally
Unless otherwise agreed to in writing by RUS, while this Agreement
is in effect, whether or not any Advance is outstanding, the Borrower
agrees to duly observe each of the affirmative covenants contained in
this Article:
Section 5.2. Annual Certificates
(a) Performance Under Loan Documents. The Borrower shall duly
observe and perform all of its obligations under each of the Loan
Documents.
(b) Annual Certification. Within ninety (90) days after the close of
each calendar year, commencing with the year following the year in which
the initial Advance hereunder shall have been made, the Borrower shall
deliver to RUS a written statement signed by its General Manager,
stating that during such year the Borrower has fulfilled all of its
obligations under the Loan Documents throughout such year in all
material respects or, if there has been a default in the fulfillment of
any such obligations, specifying each such default known to said person
and the nature and status thereof.
Section 5.3. Simultaneous Prepayment of Contemporaneous Loans
If the Borrower shall at any time prepay in whole or in part the
Contemporaneous Loan described on Schedule 1, the Borrower shall prepay
the RUS Note correspondingly in
[[Page 236]]
order to maintain the ratio that the Contemporaneous Loan bears to the
RUS Commitment. If the RUS Note calls for a prepayment penalty or
premium, such amount shall be paid but shall not be used in computing
the amount needed to be paid to RUS under this section to maintain such
ratio. In the case of Contemporaneous Loans and RUS Notes existing prior
to the date of this Agreement under previous agreements, prepayments
shall be treated as if governed by this section. Provided, however, in
all cases prepayments associated with refinancing or refunding a
Contemporaneous Loan pursuant to Article II of the Mortgage are not
considered to be prepayments for purposes of this Agreement if they
satisfy each of the following requirements:
(a) Principal. The principal amount of such refinancing or refunding
loan is not less than the amount of loan principal being refinanced; and
(b) Weighted Average Life. The weighted average life of the
refinancing or refunding loan is materially equal to the weighted
average remaining life of the loan being refinanced.
Section 5.4 Rates To Provide Revenue Sufficient to Meet Coverage Ratios
Requirements
(a) Prospective Requirement. The Borrower shall design and implement
rates for utility service furnished by it to provide sufficient revenue
(along with other revenue available to the Borrower in the case of TIER
and DSC) (i) to pay all fixed and variable expenses when and as due,
(ii) to provide and maintain reasonable working capital, and (iii) to
maintain, on an annual basis, the Coverage Ratios. In designing and
implementing rates under this paragraph, such rates should be capable of
producing at least enough revenue to meet the requirements of this
paragraph under the assumption that average weather conditions in the
Borrower's service territory shall prevail in the future, including
average Utility System damage and outages due to weather and the related
costs.
(b) The average Coverage Ratios achieved by the Borrower in the 2
best years out of the 3 most recent calendar years must be not less than
any of the following:
TIER=1.25
DSC=1.25
OTIER=1.1
ODSC=1.1
(c) Prospective Notice of Change in Rates. The Borrower shall give
thirty (30) days prior written notice of any proposed change in its
general rate structure to RUS if RUS has requested in writing that it be
notified in advance of such changes.
(d) Routine Reporting of Coverage Ratios. Promptly following the end
of each calendar year, the Borrower shall report, in writing, to RUS the
TIER, Operating TIER, DSC and Operating DSC levels which were achieved
during that calendar year.
(e) Reporting Non-achievement of Retrospective Requirement. If the
Borrower fails to achieve the average levels required by paragraph (b)
of this section, it must promptly notify RUS in writing to that effect.
(f) Corrective Plans. Within 30 days of sending a notice to RUS
under paragraph (e) of this section, or of being notified by RUS,
whichever is earlier, the Borrower in consultation with RUS, shall
provide a written plan satisfactory to RUS setting forth the actions
that shall be taken to achieve the required Coverage Ratios on a timely
basis.
(g) Noncompliance. Failure to design and implement rates pursuant to
paragraph (a) of this section and failure to develop and implement the
plan called for in paragraph (f) of this section shall constitute an
Event of Default under this Agreement in the event that REA so notifies
the Borrower to that effect under section [7.1(d)] of this Agreement.
Section 5.5. Depreciation Rates
The Borrower shall adopt as its depreciation rates only those which
have been previously approved for the Borrower by RUS.
Section 5.6. Property Maintenance
The Borrower shall maintain and preserve its Utility System in
compliance in all material respects with the provisions of the Mortgage,
RUS Regulations and all applicable laws.
Section 5.7. Financial Books
The Borrower shall at all times keep, and safely preserve, proper
books, records and accounts in which full and true entries shall be made
of all of the dealings, business and affairs of the Borrower and its
Subsidiaries, in accordance with any applicable RUS Accounting
Requirements.
Section 5.8. Rights of Inspection
The Borrower shall afford RUS, through its representatives,
reasonable opportunity, at all times during business hours and upon
prior notice, to have access to and the right to inspect the Utility
System, any other property encumbered by the Mortgage, and any or all
books, records, accounts, invoices, contracts, leases, payrolls,
canceled checks, statements and other documents and papers of every kind
belonging to or in the possession of the Borrower or in anyway
pertaining to its property or business, including its Subsidiaries, if
any, and to make copies or extracts therefrom.
Section 5.9. Area Coverage
(a) The Borrower shall make diligent effort to extend electric
service to all unserved persons within the service area of the Borrower
[[Page 237]]
who (i) desire such service and (ii) meet all reasonable requirements
established by the Borrower as a condition of such service.
(b) If economically feasible and reasonable considering the cost of
providing such service and/or the effects on consumers' rates, such
service shall be provided, to the maximum extent practicable, at the
rates and minimum charges established in the Borrower's rate schedules,
without the payment of such persons, other than seasonal or temporary
consumers, of a contribution in aid of construction. A seasonal consumer
is one that demands electric service only during certain seasons of the
year. A temporary consumer is a seasonal or year-round consumer that
demands electric service over a period of less than five years.
(c) The Borrower may assess contributions in aid of construction
provided such assessments are consistent with this section.
Section 5.10. Real Property Acquisition
In acquiring real property, the Borrower shall comply in all
material respects with the provisions of the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970 (the
``Uniform Act''), as amended by the Uniform Relocation Act Amendments of
1987, and 49 CFR part 24, referenced by 7 CFR part 21, to the extent the
Uniform Act is applicable to such acquisition.
Section 5.11. ``Buy American'' Requirements
The Borrower shall use or cause to be used in connection with the
expenditures of funds advanced on account of the Loan only such
unmanufactured articles, materials, and supplies as have been mined or
produced in the United States or any eligible country, and only such
manufactured articles, materials, and supplies as have been manufactured
in the United States or any eligible country substantially all from
articles, materials, and supplies mined, produced or manufactured, as
the case may be, in the United States or any eligible country, except to
the extent RUS shall determine that such use shall be impracticable or
that the cost thereof shall be unreasonable. For purposes of this
section, an ``eligible country'' is any country that applies with
respect to the United States an agreement ensuring reciprocal access for
United States products and services and United States suppliers to the
markets of that country, as determined by the United States Trade
Representative.
Section 5.12. Power Requirements Studies
The Borrower shall prepare and use power requirements studies of its
electric loads and future energy and capacity requirements in
conformance with RUS Regulations.
Section 5.13. Long Range Engineering Plans and Construction Work Plans
The Borrower shall develop, maintain and use up-to-date long-range
engineering plans and construction work plans in conformance with RUS
Regulations.
Section 5.14. Design Standards, Construction Standards, and List of
Materials
The Borrower shall use design standards, construction standards, and
lists of acceptable materials in conformance with RUS Regulations.
Section 5.15. Plans and Specifications
The Borrower shall submit plans and specifications for construction
to RUS for review and approval, in conformance with RUS Regulations, if
the construction will be financed in whole or in part by a loan made or
guaranteed by RUS.
Section 5.16. Standard Forms of Construction Contracts, and Engineering
and Architectural Services Contracts
The Borrower shall use the standard forms of contracts promulgated
by RUS for construction, procurement, engineering services and
architectural services in conformance with RUS Regulations, if the
construction, procurement, or services are being financed in whole or in
part by a loan being made or guaranteed by RUS.
Section 5.17. Contract Bidding Requirements
The Borrower shall follow RUS contract bidding procedures in
conformance with RUS Regulations when contracting for construction or
procurement financed in whole or in part by a loan made or guaranteed by
RUS.
Section 5.18. Nondiscrimination
(a) Equal Opportunity Provisions in Construction Contracts. The
Borrower shall incorporate or cause to be incorporated into any
construction contract, as defined in Executive Order 11246 of September
24, 1965 and implementing regulations, which is paid for in whole or in
part with funds obtained from RUS or borrowed on the credit of the
United States pursuant to a grant, contract, loan, insurance or
guarantee, or undertaken pursuant to any RUS program involving such
grant, contract, loan, insurance or guarantee, the equal opportunity
provisions set forth in Exhibit B hereto entitled Equal Opportunity
Contract Provisions.
(b) Equal Opportunity Contract Provisions Also Bind the Borrower.
The Borrower further agrees that it shall be bound by such equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly
employed by an agency of government.
[[Page 238]]
(c) Sanctions and Penalties. The Borrower agrees that it shall
cooperate actively with RUS and the Secretary of Labor in obtaining the
compliance of contractors and subcontractors with the equal opportunity
clause and the rules, regulations and relevant orders of the Secretary
of Labor, that it shall furnish RUS and the Secretary of Labor such
information as they may require for the supervision of such compliance,
and that it shall otherwise assist the administering agency in the
discharge of RUS's primary responsibility for securing compliance. The
Borrower further agrees that it shall refrain from entering into any
contract or contract modification subject to Executive Order 11246 with
a contractor debarred from, or who has not demonstrated eligibility for,
Government contracts and federally assisted construction contracts
pursuant to Part II, Subpart D of Executive Order 11246 and shall carry
out such sanctions and penalties for violation of the equal opportunity
clause as may be imposed upon contractors and subcontractors by RUS or
the Secretary of Labor pursuant to Part II, Subpart D of Executive Order
11246. In addition, the Borrower agrees that if it fails or refuses to
comply with these undertakings RUS may cancel, terminate or suspend in
whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246
until satisfactory assurance of future compliance has been received from
such Borrower, or may refer the case to the Department of Justice for
appropriate legal proceedings.
Section 5.19. Financial Reports
The Borrower shall cause to be prepared and furnished to RUS a full
and complete annual report of its financial condition and of its
operations in form and substance satisfactory to RUS, audited and
certified by Independent certified public accountants satisfactory to
RUS and accompanied by a report of such audit in form and substance
satisfactory to RUS. The Borrower shall also furnish to RUS from time to
time such other reports concerning the financial condition or operations
of the Borrower, including its Subsidiaries, as RUS may reasonably
request or RUS Regulations require.
Section 5.20. Miscellaneous Reports and Notices
The Borrower shall furnish to RUS:
(a) Notice of Default. Promptly after becoming aware thereof, notice
of: (i) the occurrence of any default; and (ii) the receipt of any
notice given pursuant to the Mortgage with respect to the occurrence of
any event which with the giving of notice or the passage of time, or
both, could become an ``Event of Default'' under the Mortgage.
(b) Notice of Non-Environmental Litigation. Promptly after the
commencement thereof, notice of the commencement of all actions, suits
or proceedings before any court, arbitrator, or governmental department,
commission, board, bureau, agency, or instrumentality affecting the
Borrower which, if adversely determined, could have a material adverse
effect on the condition, financial or otherwise, operations, properties
or business of the Borrower, or on the ability of the Borrower to
perform its obligations under the Loan Documents.
(c) Notice of Environmental Litigation. Without limiting the
provisions of Section [5.20(b)] above, promptly after receipt thereof,
notice of the receipt of all pleadings, orders, complaints, indictments,
or other communications alleging a condition that may require the
Borrower to undertake or to contribute to a cleanup or other response
under laws relating to environmental protection, or which seek
penalties, damages, injunctive relief, or criminal sanctions related to
alleged violations of such laws, or which claim personal injury or
property damage to any person as a result of environmental factors or
conditions for which the Borrower is not fully covered by insurance, or
which, if adversely determined, could have a material adverse effect on
the condition, financial or otherwise, operations, properties or
business of the Borrower, or on the ability of the Borrower to perform
its obligations under the Loan Documents.
(d) Notice of Change of Place of Business. Promptly in writing,
notice of any change in location of its principal place of business or
the office where its records concerning accounts and contract rights are
kept.
(e) Regulatory and Other Notices. Promptly after receipt thereof,
copies of any notices or other communications received from any
governmental authority with respect to any matter or proceeding which
could have a material adverse effect on the condition, financial or
otherwise, operations, properties, or business of the Borrower, or on
the ability of the Borrower to perform its obligations under the Loan
Documents.
(f) Material Adverse Change. Promptly, notice of any matter which
has resulted or may result in a material adverse change in the
condition, financial or otherwise, operations, properties, or business
of the Borrower, or the ability of the Borrower to perform its
obligations under the Loan Documents.
(g) Other Information. Such other information regarding the
condition, financial or otherwise, or operations of the Borrower as RUS
may, from time to time, reasonably request.
Section 5.21. Special Construction Account
The Borrower shall hold all moneys advanced to it by RUS hereunder
in trust for RUS and shall deposit such moneys promptly
[[Page 239]]
after the receipt thereof in a bank or banks which meet the requirements
of Section [6.7] of this Agreement. Any account (hereinafter called
``Special Construction Account'') in which any such moneys shall be
deposited shall be insured by the Federal Deposit Insurance Corporation
or other federal agency acceptable to RUS and shall be designated by the
corporate name of the Borrower followed by the words ``Trustee, Special
Construction Account.'' Moneys in any Special Construction Account shall
be used solely for the construction and operation of the Utility System
and may be withdrawn only upon checks, drafts, or orders signed on
behalf of the Borrower and countersigned by an executive officer
thereof.
Section 5.22. Additional Affirmative Covenants
The Borrower also agrees to comply with any additional affirmative
covenant(s) identified in Schedule 1 hereto.
Article VI--Negative Covenants
Section 6.1. General
Unless otherwise agreed to in writing by RUS, while this Agreement
is in effect, whether or not any Advance is outstanding hereunder, the
Borrower shall duly observe each of the negative covenants set forth in
this Article.
Section 6.2. Limitations on System Extensions and Additions
(a) The Borrower shall not extend or add to its Electric System
either by construction or acquisition without the prior written approval
of RUS if the construction or acquisition is financed or will be
financed, in whole or in part, by a RUS loan or loan guarantee.
(b) The Borrower shall not extend or add to its Electric System with
funds from other sources without prior written approval of RUS in the
case of:
(1) Generating facilities if the combined capacity of the facilities
to be built, procured, or leased, including any future facilities
included in the planned project, will exceed the lesser of 5 Megawatts
or 30 percent of the Borrower's Equity;
(2) Existing electric facilities or systems in service whose
purchase price, or capitalized value in the case of a lease, exceeds ten
percent of the Borrower's Net Utility Plant; and
(3) Any project to serve a customer whose annual Kwh purchases or
maximum annual Kw demand is projected to exceed 25 percent of the
Borrower's total Kwh sales or maximum Kw demand in the year immediately
preceding the acquisition or start of construction of facilities.
Section 6.3. Limitations on Changing Principal Place of Business
The Borrower shall not change its principal place of business or
keep property in a county not shown on a schedule to the Mortgage if the
change would cause the lien in favor of RUS to become unperfected or
fail to become perfected, as the case may be, unless, prior thereto, the
Borrower shall have taken all steps required by law in order to assure
that the lien in favor of RUS remains or becomes perfected, as the case
may be, and, in either event, such lien has the priority accorded by the
Mortgage.
Section 6.4. Limitations on Employment and Retention of Manager
At any time any Event of Default, or any occurrence which with the
passage of time or giving of notice would be an Event of Default, occurs
and is continuing the Borrower shall not employ any general manager of
the Utility System or the Electric System or any person exercising
comparable authority to such a manager unless such employment shall
first have been approved by RUS. If any Event of Default, or any
occurrence which with the passage of time or giving of notice would be
an Event of Default, occurs and is continuing and RUS requests the
Borrower to terminate the employment of any such manager or person
exercising comparable authority, or RUS requests the Borrower to
terminate any contract for operating the Utility System or the Electric
System, the Borrower shall do so within thirty (30) days after the date
of such notice. All contracts in respect of the employment of any such
manager or person exercising comparable authority, or for the operation
of the Utility System or the Electric System, shall contain provisions
to permit compliance with the foregoing covenants.
Section 6.5. Limitations on Certain Types of Contracts
Without the prior approval of RUS in writing, the Borrower shall not
enter into any of the following contracts:
(a) Construction Contracts. Any contract for construction or
procurement or for architectural and engineering services in connection
with its Electric System if the project is financed or will be financed,
in whole or in part, by a RUS loan or loan guarantee;
(b) Large retail power contracts. Any contract to sell electric
power and energy for periods exceeding two (2) years if the kWh sales or
kW demand for any year covered by such contract shall exceed 25 percent
of the Borrower's total kWh sales or maximum kW demand for the year
immediately preceding the execution of such contract;
(c) Wholesale power contracts. Any contract to sell electric power
or energy for resale and any contract to purchase electric power or
[[Page 240]]
energy that, in either case, has a term exceeding two (2) years;
(d) Power supply arrangements. Any interconnection agreement,
interchange agreement, wheeling agreement, pooling agreement or similar
power supply arrangement that has a term exceeding two (2) years;
(e) System management and maintenance contracts. Any contract for
the management and operation of all or substantially all of its Electric
System; or
(f) Other contracts. Any contracts of the type described on Schedule
3.
Section 6.6. Limitations on Mergers and Sale, Lease or Transfer of
Capital Assets
(a) The Borrower shall not consolidate with, or merge, or sell all
or substantially all of its business or assets, to another entity or
person except to the extent it is permitted to do so under the Mortgage.
The exception contained in this paragraph (a) is subject to the
additional limitation set forth in paragraph (b) of this section.
(b) The Borrower shall not, without the written approval of the
Administrator, voluntarily or involuntarily sell, convey or dispose of
any portion of its business or assets (including, without limitation,
any portion of its franchise or service territory) to another entity or
person if such sale, conveyance or disposition could reasonably be
expected to reduce the Borrower's existing or future requirements for
energy or capacity being furnished to the Borrower under any wholesale
power contract which has been pledged as security to RUS.
Section 6.7. Limitations on Using non-FDIC Insured Depositories
Without the prior written approval of RUS, the Borrower shall not
place the proceeds of the Loan or any loan which has been made or
guaranteed by RUS in the custody of any bank or other depository that is
not insured by the Federal Deposit Insurance Corporation or other
federal agency acceptable to RUS.
Section 6.8. Limitation on Distributions
Without the prior written approval of RUS, the Borrower shall not in
any calendar year make any Distributions (exclusive of any Distributions
to the estates of deceased natural patrons) to its members, stockholders
or consumers except as follows:
(a) Equity above 30%. If, after giving effect to any such
Distribution, the Equity of the Borrower shall be greater than or equal
to 30% of its Total Assets; or
(b) Equity above 20%. If, after giving effect to any such
Distribution, the aggregate of all Distributions made during the
calendar year when added to such Distribution shall be less than or
equal to 25% of the prior year's margins.
Provided however, that in no event shall the Borrower make any
Distributions if there is unpaid when due any installment of principal
of (premium, if any) or interest on its Notes, if the Borrower is
otherwise in default hereunder or if, after giving effect to any such
Distribution, the Borrower's current and accrued assets would be less
than its current and accrued liabilities.
Section 6.9. Limitations on Loans, Investments and Other Obligations
The Borrower shall not make any loan or advance to, or make any
investment in, or purchase or make any commitment to purchase any stock,
bonds, notes or other securities of, or guaranty, assume or otherwise
become obligated or liable with respect to the obligations of, any other
person, firm or corporation, except as permitted by the Act and RUS
Regulations.
Section 6.10. Depreciation Rates
The Borrower shall not file with or submit for approval of
regulatory bodies any proposed depreciation rates which are inconsistent
with RUS Regulations.
Section 6.11. Historic Preservation
The Borrower shall not, without approval in writing by RUS, use any
Advance to construct any facilities which shall involve any district,
site, building, structure or object which is included in, or eligible
for inclusion in, the National Register of Historic Places maintained by
the Secretary of the Interior pursuant to the Historic Sites Act of 1935
and the National Historic Preservation Act of 1966.
Section 6.12. Rate Reductions
Without the prior written approval of RUS, the Borrower shall not
decrease its rates if it has failed to achieve all of the Coverage
Ratios for the calendar year prior to such reduction.
Section 6.13. Limitations on Additional Indebtedness
Except as expressly permitted by Article II of the Mortgage and
subject to the further limitations expressed in the next section, the
Borrower shall not incur, assume, guarantee or otherwise become liable
in respect of any debt for borrowed money and Restricted Rentals
(including Subordinated Indebtedness) other than the following:
(``Permitted Debt'')
(a) Additional Notes issued in compliance with Article II of the
Mortgage;
(b) Purchase money indebtedness in non-Utility System property, in
an amount not exceeding 10% of Net Utility Plant;
(c) Restricted Rentals in an amount not to exceed 5% of Equity
during any 12 consecutive calendar month period;
[[Page 241]]
(d) Unsecured lease obligations incurred in the ordinary course of
business except Restricted Rentals;
(e) Unsecured indebtedness for borrowed money, except when the
aggregate amount of such indebtedness exceeds 15% of Net Utility Plant
and after giving effect to such unsecured indebtedness the Borrower's
Equity is less than 30% of its Total Assets;
(f) Debt represented by dividends declared but not paid; and
(g) Subordinated Indebtedness approved by RUS.
PROVIDED, However, that the Borrower may incur Permitted Debt
without the consent of RUS only so long as there exists no Event of
Default hereunder and there has been no continuing occurrence which with
the passage of time and giving of notice could become an Event of
Default hereunder.
PROVIDED, FURTHER, by executing this Agreement any consent of RUS
that the Borrower would otherwise be required to obtain under this
Section is hereby deemed to be given or waived by RUS by operation of
law to the extent, but only to the extent, that to impose such a
requirement of RUS consent would clearly violate federal laws or RUS
Regulations.
Section 6.14. Limitations on Issuing Additional Indebtedness Secured
Under the Mortgage
(a) The Borrower shall not issue any Additional Notes under the
Mortgage to finance Eligible Property Additions without the prior
written consent of RUS unless the following additional requirements are
met in addition to the requirements set forth in the Mortgage for
issuing Additional Notes:
(1) The weighted average life of the loan evidenced by such Notes
does not exceed the weighted average of the expected remaining useful
lives of the assets being financed;
(2) The principal of the loan evidenced by such Notes is amortized
at a rate that shall yield a weighted average life that is not greater
than the weighted average life that would result from level payments of
principal and interest; and
(3) The principal of the loan being evidenced by such Notes has a
maturity of not less than 5 years.
(b) The Borrower shall not issue any Additional Notes under the
Mortgage to refund or refinance Notes without the prior written consent
of RUS unless, in addition to the requirements set forth in the Mortgage
for issuing Refunding or Refinancing Notes, the weighted average life of
any such Refunding or Refinancing Notes is not greater than the weighted
average remaining life of the Notes being refinanced.
(c) Any request for consent from RUS under this section, shall be
accompanied by a certificate of the Borrower's manager substantially in
the form attached to this Agreement as Exhibit C-1 in the case of Notes
being issued under Section [2.01] of the Mortgage and C-2 in the case of
Notes being issued under Section [2.02] of the Mortgage.
Section 6.15. Impairment of Contracts Pledged to RUS
The Borrower shall not materially breach any obligation to be paid
or performed by the Borrower on any contract, or take any action which
is likely to materially impair the value of any contract, which has been
pledged as security to RUS by the Borrower or any other entity.
Section 6.16. Additional Negative Covenants
The Borrower also agrees to comply with any additional negative
covenant(s) identified in Schedule 1 hereto.
Article VII--Default
Section 7.1. Events of Default
The following shall be Events of Default under this Agreement:
(a) Representations and Warranties. Any representation or warranty
made by the Borrower in Article II hereof or any certificate furnished
to RUS hereunder or under the Mortgage shall prove to have been
incorrect in any material respect at the time made and shall at the time
in question be untrue or incorrect in any material respect and remain
uncured;
(b) Payment. Default shall be made in the payment of or on account
of interest on or principal of the Note when and as the same shall be
due and payable, whether by acceleration or otherwise, which shall
remain unsatisfied for five (5) Business Days;
(c) Borrowing Under the Mortgage in Violation of the Loan Contract.
Default by the Borrower in the observance or performance of any covenant
or agreement contained in Section 6.14 of this Agreement.
(d) Other Covenants. Default by the Borrower in the observance or
performance of any other covenant or agreement contained in any of the
Loan Documents, which shall remain unremedied for 30 calendar days after
written notice thereof shall have been given to the Borrower by RUS;
(e) Corporate Existence. The Borrower shall forfeit or otherwise be
deprived of its corporate charter, franchises, permits, easements,
consents or licenses required to carry on any material portion of its
business;
(f) Other Obligations. Default by the Borrower in the payment of any
obligation, whether direct or contingent, for borrowed money or in the
performance or observance of the terms of any instrument pursuant to
which such obligation was created or securing such obligation;
(g) Bankruptcy. A court having jurisdiction in the premises shall
enter a decree or order
[[Page 242]]
for relief in respect of the Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official, or ordering the winding up or
liquidation of its affairs, and such decree or order shall remain
unstayed and in effect for a period of ninety (90) consecutive days or
the Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian or trustee, of
a substantial part of its property, or make any general assignment for
the benefit of creditors; and
(h) Dissolution or Liquidation. Other than as provided in the
immediately preceding subsection, the dissolution or liquidation of the
Borrower, or failure by the Borrower promptly to forestall or remove any
execution, garnishment or attachment of such consequence as shall impair
its ability to continue its business or fulfill its obligations and such
execution, garnishment or attachment shall not be vacated within 30
days. The term ``dissolution or liquidation of the Borrower'', as used
in this subsection, shall not be construed to include the cessation of
the corporate existence of the Borrower resulting either from a merger
or consolidation of the Borrower into or with another corporation
following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions.
Article VIII--Remedies
Section 8.1. Generally
Upon the occurrence of an Event of Default, then RUS may pursue all
rights and remedies available to RUS that are contemplated by this
Agreement or the Mortgage in the manner, upon the conditions, and with
the effect provided in this Agreement or the Mortgage, including, but
not limited to, a suit for specific performance, injunctive relief or
damages. Nothing herein shall limit the right of RUS to pursue all
rights and remedies available to a creditor following the occurrence of
an Event of Default listed in Article VII hereof. Each right, power and
remedy of RUS shall be cumulative and concurrent, and recourse to one or
more rights or remedies shall not constitute a waiver of any other
right, power or remedy.
Section 8.2. Suspension of Advances
In addition to the rights, powers and remedies referred to in the
immediately preceding section, RUS may, in its absolute discretion,
suspend making Advances hereunder if (i) any Event of Default, or any
occurrence which with the passage of time or giving of notice would be
an Event of Default, occurs and is continuing; (ii) there has occurred a
change in the business or condition, financial or otherwise, of the
Borrower which in the opinion of RUS materially and adversely affects
the Borrower's ability to meet its obligations under the Loan Documents,
or (iii) RUS is authorized to do so under RUS Regulations.
Article IX--Miscellaneous
Section 9.1. Notices
All notices, requests and other communications provided for herein
including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement shall be given or made in
writing (including, without limitation, by telecopy) and delivered to
the intended recipient at the ``Address for Notices'' specified below;
or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in
the case of a mailed notice, upon receipt, in each case given or
addressed as provided for herein. The Address for Notices of the
respective parties are as follows:
Rural Utilities Service, United States Department of Agriculture,
Washington, DC 20250-1500
Fax: (202) xxx-xxxx
Attention: [Administrator]
The Borrower:
The address set forth in Schedule 1 hereto
Section 9.2. Expenses
To the extent allowed by law, the Borrower shall pay all costs and
expenses of RUS, including reasonable fees of counsel, incurred in
connection with the enforcement of the Loan Documents or with the
preparation for such enforcement if RUS has reasonable grounds to
believe that such enforcement may be necessary.
Section 9.3. Late Payments
If payment of any amount due hereunder is not received at the United
States Treasury in Washington, DC, or such other location as RUS may
designate to the Borrower within five (5) Business Days after the due
date thereof or such other time period as RUS may prescribe from time to
time in its policies of general application in connection with any late
payment charge (such unpaid amount being herein called the ``delinquent
amount'', and the period beginning after such due date until payment of
the delinquent amount being herein called the ``late-payment period''),
the Borrower shall pay to
[[Page 243]]
RUS, in addition to all other amounts due under the terms of the Note,
the Mortgage and this Agreement, any late-payment charge as may be fixed
by RUS Regulations from time to time on the delinquent amount for the
late-payment period.
Section 9.4. Filing Fees
To the extent permitted by law, the Borrower agrees to pay all
expenses of RUS (including the fees and expenses of its counsel) in
connection with the filing or recordation of all financing statements
and instruments as may be required by RUS in connection with this
Agreement, including, without limitation, all documentary stamps,
recordation and transfer taxes and other costs and taxes incident to
recordation of any document or instrument in connection herewith.
Borrower agrees to save harmless and indemnify RUS from and against any
liability resulting from the failure to pay any required documentary
stamps, recordation and transfer taxes, recording costs, or any other
expenses incurred by RUS in connection with this Agreement. The
provisions of this subsection shall survive the execution and delivery
of this Agreement and the payment of all other amounts due hereunder or
due on the Note.
Section 9.5. No Waiver
No failure on the part of RUS to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise by RUS of any right hereunder
preclude any other or further exercise thereof or the exercise of any
other right.
Section 9.6. Governing Law
EXCEPT TO THE EXTENT GOVERNED BY APPLICABLE FEDERAL LAW, THE LOAN
DOCUMENTS SHALL BE DEEMED TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE [IN WHICH THE BORROWER IS INCORPORATED].
Section 9.7. Holiday Payments
If any payment to be made by the Borrower hereunder shall become due
on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be
included in computing any interest in respect of such payment.
Section 9.8. Rescission
The Borrower may elect not to borrow the RUS Commitment in which
event RUS shall release the Borrower from its obligations hereunder,
provided the Borrower complies with such terms and conditions as RUS may
impose for such release and provided also that if the Borrower has any
remaining obligations to RUS for loans made or guaranteed by RUS under
any Prior Loan Contracts, RUS may, under Section [9.15] of this Loan
Contract, withhold such release until all such obligations have been
satisfied and discharged.
Section 9.9. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
Borrower and RUS and their respective successors and assigns, except
that the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of RUS.
Section 9.10. Complete Agreement; Amendments
Subject to RUS Regulations, this Agreement and the other Loan
Documents are intended by the parties to be a complete and final
expression of their agreement. However, RUS reserves the right to waive
its rights to compliance with any provision of this Agreement and the
other Loan Documents. No amendment, modification, or waiver of any
provision hereof or thereof, and no consent to any departure of the
Borrower herefrom or therefrom, shall be effective unless approved in
writing by RUS in the form of either a RUS Regulation or other writing
signed by or on behalf of RUS, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
Section 9.11. Headings
The headings and sub-headings contained in the titling of this
Agreement are intended to be used for convenience only and do not
constitute part of this Agreement.
Section 9.12. Severability
If any term, provision or condition, or any part thereof, of this
Agreement or the Mortgage shall for any reason be found or held invalid
or unenforceable by any governmental agency or court of competent
jurisdiction, such invalidity or unenforceability shall not affect the
remainder of such term, provision or condition nor any other term,
provision or condition, and this Agreement, the Note, and the Mortgage
shall survive and be construed as if such invalid or unenforceable term,
provision or condition had not been contained therein.
Section 9.13. Right of Setoff
Upon the occurrence and during the continuance of any Event of
Default, RUS is hereby authorized at any time and from time to time,
without prior notice to the Borrower, to exercise rights of setoff or
recoupment and apply any and all amounts held or hereafter held, by RUS
or owed to the Borrower or for the credit or account of the Borrower
against any and all of the obligations of the Borrower now or hereafter
existing hereunder or under the Note. RUS
[[Page 244]]
agrees to notify the Borrower promptly after any such setoff or
recoupment and the application thereof, provided that the failure to
give such notice shall not affect the validity of such setoff,
recoupment or application. The rights of RUS under this section are in
addition to any other rights and remedies (including other rights of
setoff or recoupment) which RUS may have. Borrower waives all rights of
setoff, deduction, recoupment or counterclaim.
Section 9.14. Schedules and Exhibits
Each Schedule and Exhibit attached hereto and referred to herein is
each an integral part of this Agreement.
Section 9.15. Prior Loan Contracts
It is understood and agreed that with respect to all loan agreements
previously entered into by and between RUS and the Borrower (hereinafter
being referred to as ``Prior Loan Contracts'') the Borrower shall be
required, after the date hereof, to meet affirmative and negative
covenants as set forth in this Agreement rather than those set forth in
the Prior Loan Contracts. In addition, any remaining obligation of RUS
to make additional advances on promissory notes of the Borrower that
have been previously delivered to RUS under Prior Loan Contracts shall,
after the date hereof, be subject to the conditions set forth in this
Agreement. In the event of any conflict between any provision set forth
in a Prior Loan Contract and any provision in this Agreement, the
requirements as set forth in this Agreement shall apply. Nothing in this
section shall, however, eliminate or modify any special condition,
special affirmative covenant or special negative covenant, if any,
unless specifically agreed to in writing by RUS.
Section 9.16. Authority of Representatives of RUS
In the case of any consent, approval or waiver from RUS that is
required under this Agreement or any other Loan Document, such consent,
approval or waiver must be in writing and signed by an authorized RUS
representative to be effective. As used in this section, ``authorized
RUS representative'' means the Administrator of RUS, and also means a
person to whom the Administrator has officially delegated specific or
general authority to take the action in question.
Section 9.17. Term
This Agreement shall remain in effect until one of the following two
events has occurred:
(a) The Borrower and RUS replace this Agreement with another written
agreement; or
(b) All of the Borrower's obligations under the prior loan contracts
and this Agreement have been discharged and paid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
________________________________________________________________________
(Name of Borrower)
(SEAL)
By______________________________________________________________________
President
Attest:_________________________________________________________________
Secretary
RURAL UTILITIES SERVICE
By______________________________________________________________________
Administrator
Schedule 1
[citations subject to change]
1. The purpose of this loan is -------------------- and such other
purposes that RUS may agree to in writing in order to carry out the
purposes of the Rural Electrification Act.
2. The Mortgage shall mean the Restated Mortgage and Security
Agreement, dated as of --------------------, between the Borrower and
RUS, as it may have been or shall be supplemented, amended,
consolidated, or restated from time to time.
3. The governmental authority referred to in Section [2.1(c)] is --
------------------.
4. The exception being taken to the representations in Section
[2.1(e)] concerning material compliance with laws is as follows: ------
--------------.
5. The litigation referred to in Section [2.1(f)] is described as
follows: --------------------.
6. The date of the Borrower's financial information referred to in
Section [2.1(h)] is --------------------.
7. The principal place of business of the Borrower referred to in
Section [2.1(i)] is --------------------.
8. All of the property of the Borrower is located in the counties of
--------------------.
9. The subsidiary (or subsidiaries) referred to in Section [2.1(k)]
is (are): --------------------.
10. The Contemporaneous Loan referred to in Section [5.3] is
described as follows: --------------------.
Lender:_________________________________________________________________
Amount:_________________________________________________________________
Year of Final Maturity:_________________________________________________
11. The RUS Commitment referred to in the definitions means a loan
in the principal amount of $---------------- which is being made by RUS
to the Borrower at the ------ Hardship Rate ------ Municipal Rate
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(CHECK ONE) pursuant to the Rural Electrification Act and RUS
Regulations.
12. Amortization of Advance shall be based upon the method indicated
below:
------ level principal
------ level debt service
------ other
13. The SPECIAL condition(s) referred to in Section [4.2] is (are):
--------------------.
14. The additional AFFIRMATIVE covenant(s) referred to in Section
[5.22] is (are) as follows: ----------------. 15. The additional
NEGATIVE covenant(s) referred to in Section [6.16] is (are) as follows:
--------------------.
16. The address of the Borrower referred to in Section [9.1]. is --
------------------.
Schedule 2--Existing Liens
The Existing Liens referred to in Section [2.1(g)] are as follows:
[INSERT DESCRIPTION OF EXISTING LIENS, IF ANY, HERE]
Schedule 3--Additional Contracts
The additional contracts referred to in Section [6.5(f)] are
described as follows:
[INSERT LIST OF ANY ADDITIONAL CONTRACTS HERE]
Exhibit A--Form of Promissory Note
[INSERT EITHER MUNICIPAL or HARDSHIP RATE PROMISSORY NOTE FORM HERE]
Exhibit B--Equal Opportunity Contract Provisions
During the performance of this contract, the contractor agrees as
follows:
(a) The contractor shall not discriminate against any employee or
applicant for employment because of race, color, religion, sex or
national origin. The contractor shall take affirmative action to ensure
that applicants are employed, and that employees are treated during
employment without regard to their race, color, religion, sex or
national origin. Such action shall include, but not be limited to the
following: employment, upgrading, demotion or transfer, recruitment or
recruitment advertising; layoff or termination; rates of pay or other
forms of compensation; and selection for training, including
apprenticeship. The contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be
provided setting forth the provisions of this nondiscrimination clause.
(b) The contractor shall, in all solicitations or advertisements for
employees placed by or on behalf of the contractor, state that all
qualified applicants shall receive consideration for employment without
regard to race, color, religion, sex or national origin.
(c) The contractor shall send to each labor union or representative
of workers with which he has a collective bargaining agreement or other
contract or understanding, a notice to be provided advising the said
labor union or workers' representative of the contractor's commitments
under this section, and shall post copies of the notice in conspicuous
places available to employees and applicants for employment.
(d) The contractor shall comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and
relevant orders of the Secretary of Labor.
(e) The contractor shall furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the
rules, regulations and orders of the Secretary of Labor, or pursuant
thereto, and shall permit access to his books, records and accounts by
the administering agency and the Secretary of Labor for purposes of
investigation to ascertain compliances with such rules, regulations and
orders.
(f) In the event of the contractor's noncompliance with the non-
discrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be cancelled, terminated or
suspended in whole or in part and the contractor may be declared
ineligible for further Government contracts or federally assisted
construction contracts in accordance with procedures authorized in
Executive Order 11246 of September 24, 1965, and such other sanctions
may be imposed and remedies invoked as provided in said Executive Order
or by rule, regulation or order of the Secretary of Labor, or as
otherwise provided by law.
(g) The contractor shall include the provisions of paragraphs (a)
through (g) in every subcontract or purchase order unless exempted by
rules, regulations or orders of the Secretary of Labor issued pursuant
to section 204 of Executive Order 11246, dated September 24, 1965, so
that such provisions shall be binding upon each subcontractor or vendor.
The contractor shall take such action with respect to any subcontract or
purchase order as the administering agency may direct as a means of
enforcing such provisions, including sanctions for noncompliance:
Provided, however, that in the event a contractor becomes involved in,
or is threatened with, litigation with a subcontractor or vendor as a
result of such direction by the agency, the contractor may request the
United States to enter into such litigation to protect the interests of
the United States.
Exhibit C-1--Manager's Certificate Required Under Loan Contract Section
6.14 for Additional Notes
On behalf on -------------------- [Name of Borrower] --------------
------ I hereby certify that the Additional Note or Notes to be
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issued under Section [2.01] of the Mortgage on or about ----------------
---- [Date Note or Notes are to be Signed] -------------------- meet all
of the requirements of Section [6.14] of the Loan Contract, namely:
(a) The weighted average life of the loan evidenced by such Notes
(-------- years) does not exceed the weighted average of the expected
remaining useful lives of the assets being financed (-------- years) as
evidenced by the attached calculation of said weighted average lives.
(b) The principal of the loan evidenced by such Notes shall either
be [check one and provide evidence in the second case]:
------ (1) repaid based on level payments of principal and interest
throughout the life of the loan, or
------ (2) amortized at a rate that shall yield a weighted average
life that is not greater than the weighted average life that would
result from level payments of principal and interest throughout the life
of the loan as evidenced by the attached analysis of said weighted
average lives.
(c) The principal of the loan evidenced by such Notes has a maturity
of not less than 5 years.
[Signed]________________________________________________________________
[Dated]_________________________________________________________________
[Name]__________________________________________________________________
[Title]_________________________________________________________________
[Name and Address of Borrower]__________________________________________
________________________________________________________________________
________________________________________________________________________
Exhibit C-2--Manager's Certificate Required Under Loan Contract Section
6.14 for Refinancing Notes
On behalf on -------------------- [Name of Borrower] --------------
------ I hereby certify that the Additional Note or Notes to be issued
under Section [2.02] of the Mortgage on or about --------------------
[Date Note or Notes are to be Signed] -------------------- meet the
requirement of Section [6.14] of the Loan Contract that the weighted
average life of such Notes is not greater than the weighted average
remaining life of the Notes being refinanced, as evidenced by the
attached calculation of said weighted average lives.
[Signed]________________________________________________________________
[Dated]_________________________________________________________________
[Name]__________________________________________________________________
[Title]_________________________________________________________________
[Name and Address of Borrower]__________________________________________
________________________________________________________________________
________________________________________________________________________
[60 FR 67410, Dec. 29, 1995, as amended at 65 FR 51749, Aug. 25, 2000]