Exhibit 10.188 

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RUS Project Designation:
 
ALASKA 1102-A40
 
 
 
 
BROADBAND INITIATIVES PROGRAM
 
LOAN/GRANT AND SECURITY AGREEMENT
 
dated as of June 1, 2010
 
between
 
UNITED UTILITIES, INC.
 
and
 
THE UNITED STATES OF AMERICA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL UTILITIES SERVICE

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BROADBAND INITIATIVES PROGRAM
LOAN/GRANT AND SECURITY AGREEMENT
 
THIS LOAN/GRANT AND SECURITY AGREEMENT (this "Agreement") dated as of June 1,
2010 is between UNITED UTILITIES, INC. ("Awardee,") a corporation existing under
the laws of Alaska, and the UNITED STATES OF AMERICA, acting through the
Administrator of the Rural Utilities Service ("RUS.").
 
The Awardee has applied for financial assistance ("Application") from RUS to
finance the construction of a broadband infrastructure project to serve areas
that are at least 75% rural.
 
RUS is willing to extend financial assistance, in the form of a loan and grant
to the Awardee, pursuant to the American Recovery and Reinvestment Act of 2009,
Pub. L. 111-5, 123 Stat. 115 (2009) (the "Recovery Act"), the Notice of Funds
Availability published at 74 Fed. Reg. 33104 and Title VI of the Rural
Electrification Act of 1936 (7 U.S.C. 901 et seq.), and all applicable federal
regulations, on the terms and conditions stated herein.
 
The Awardee is willing to secure the loan and grant and its other obligations to
RUS on the terms stated herein.
 
THEREFORE, in consideration of the promises and mutual covenants herein
contained, the parties agree and bind themselves as follows:
 
 
ARTICLE I – DEFINITIONS
 
The terms defined herein include both the plural and the singular. Unless
otherwise specifically provided, all accounting terms not otherwise defined
herein shall have the meanings assigned to them, and all determinations and
computations herein provided for shall be made in accordance with Accounting
Requirements.
 
"Accounting Requirements" shall mean the system of accounting prescribed by RUS
in RUS Regulations.
 
"Advance" or "Advances" shall mean the disbursement of Loan and/or Grant funds
in accordance with this Agreement.
 
"Affiliate" or "Affiliated Company" of any specified person or entity means any
other person or entity directly or indirectly controlling of, controlled by,
under direct or indirect common control with, or related to, such specified
person or entity, or which exists for the sole purpose of providing any service
to one company or exclusively to companies which otherwise meet the definition
of affiliate. This definition includes Variable Interest Entities as described
in Financial Accounting Standards Board Interpretation (FIN) No. 46(R),
Consolidation of Variable Interest Entities. For the purpose of this definition,
"control" means the possession directly or indirectly, of the power to direct or
cause the direction of the management and policies of a company, whether such
power is exercised through one or more intermediary companies, or alone, or in
conjunction with, or pursuant to an agreement with, one or more other companies,
and whether such power is established through a majority or minority ownership
voting of securities, common directors, officers, or stockholders, voting trust,
holding trusts (other than money exchanged) for property or services.
 
"Application" shall have the meaning as defined in the second paragraph hereof.
 
"Award" shall mean the Loan or Loan/Grant Combination described in Article III.
 
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"Awardee" shall mean the Loan or Loan/Grant Combination recipient named in the
first paragraph hereof.
 
"BIP" shall mean the Broadband Initiatives Program, administered by RUS and
created pursuant to the Recovery Act.
 
"BIP Contracting, Work Order and Advance Procedures Guide" shall mean the
procedures for construction and Advances, attached hereto as Attachment 1.
 
"Business Day" shall mean any day that RUS and the Department of Treasury are
both open for business.
 
"Collateral" shall mean any and all property pledged as security for the
Obligations, including, without limitation, security for the Loan, and other
amounts owing to RUS under the Loan-Grant Documents, including, without
limitation, the property described in Article IX and on Schedule 2.
 
"Composite Economic Life" means the weighted (by dollar amount of each class of
facility in the Award) average economic life of all classes of facilities in the
Award, as determined by RUS.
 
"Distribution" shall have the meaning as defined in Section 7.9.
 
"Eligible Purposes" shall mean purposes and expenses which are specified in the
NOFA as being eligible for funding.
 
"Event of Default" shall have the meaning as defined in Article X.
 
"Expiration Date" shall have the meaning as defined in Paragraph (d) of Section
3.1.
 
"Form 481" shall have the meaning as defined in Section 4.3(d).
 
"Grant" shall mean the grant described in Section 3.1.
 
"Interest Expense" shall mean the accrual of interest on all classes of
indebtedness, including capital leases and securities issued by the Awardee and
shall also include the amortization of debt issuance expenses, premiums, and
discounts.
 
"Laws" shall have the meaning as defined in paragraph (e) of Article II.
 
"Loan" shall mean the loan described in Section 3.1.
 
"Loan/Grant Combination" shall mean, collectively, the loan and grant described
in Section 3.1.
 
"Loan-Grant Documents" shall mean, collectively, this Agreement, Security
Documents and the Note(s).
 
"Material Adverse Effect" shall mean a material adverse effect on, or change in,
the condition, financial or otherwise, operations, properties, business or
prospects of the Awardee or on the ability of the Awardee to perform its
obligations under the Loan-Grant Documents as determined by RUS.
 
"Net. Income" or "Net Margins" shall mean the amount equal to the income that
the Awardee has after subtracting costs and expenses from the total revenue.
Costs and expenses include but are not limited to all operations and maintenance
expenses, corporate operations, taxes, interest dividends, depreciation, and
gains and losses on the disposition of property.
 
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"Net Worth" (equity) shall mean total assets less total liabilities of the
Awardee.  Net worth includes the recorded value of capital stock, additional
paid-in capital, treasury stock, retained earnings and other comprehensive
income.
 
"NOFA" shall mean the Notice of Funds Availability, published in the Federal
Register at 74 Fed. Reg. 33104.
 
"Note(s)" shall have the meaning as defined in Paragraph (a) of Section 3.2.
 
"Obligations" shall mean any and all indebtedness, obligations and liabilities
of the Awardee to RUS, of every kind and description, direct or indirect,
secured or unsecured, joint or several, absolute or contingent, due or to become
due, whether for payment or performance, now existing or hereafter arising,
howsoever evidenced or created, including, without limitation, all loans
(including any loan by renewal or extension); all indebtedness, all Notes, all
undertakings to take or refrain from taking any action; and all interest, taxes,
fees, charges, expenses, and attorney's fees chargeable to Awardee or incurred
by RUS under this Agreement or in any other document or instrument delivered
hereunder or as a supplement hereto.
 
"Permitted Encumbrances" shall mean the liens and encumbrances permitted by the
RUS Mortgage.
 
"Pledged Deposit Account" shall have the meaning as defined in Section 5.4.
 
"Prior RUS Loan Contract" shall mean the contract identified on Schedule 1 as it
may have been amended or supplemented from time to time.
 
"Project" shall have the meaning as defined in Paragraph (a) of Section 3.4.
 
"Project Completion" shall mean that all Award funds have been advanced to the
Awardee by RUS.
 
"RE Act" shall mean the Rural Electrification Act of 1936 (7 U.S.C. 901 et
seq.).
 
"RUS Mortgage" shall mean the mortgage identified on Schedule 1 as it may be
amended, supplemented and restated from time to time.
 
"RUS Regulations" shall mean the rules, regulations and bulletins of general
applicability published by RUS from time to time, as such rules, regulations and
bulletins exist at the date of applicability thereof, and shall also include 7
C.F.R. 3015 (and, by adoption, 48 C.F.R. 31.2 of the Federal Acquisition
Regulations), 3016 and 3019 and applicable OMB Circulars, as well as any rule
and regulations of other Federal entities which RUS is required by law to
implement. Any reference to specific RUS Regulations shall mean the version of
and cite to such regulation effective at the date of applicability thereof.
 
"Security Documents" shall mean, collectively, any mortgage, security agreement,
financing statement, deposit account control agreement or other document
providing collateral for the Obligations, including without limitation,
repayment of the Loan.
 
"Service Rates" shall mean the rates charged for data, video, voice or any other
service proposed in the RUS approved Application.
 
"Subsidiaries" shall mean the subsidiaries listed in Schedule 1.
 
"Substantially Complete" shall mean that 67% of Award funds have been advanced
to the Awardee by RUS.
 
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"System Design" shall mean the system as described in the RUS approved
Application.
 
"TIER" shall mean the Awardee's total Net Income or Net Margins plus Interest
Expense payable for any year divided by Interest Expense payable for such year,
as set forth in Section 5.8 hereof.
 
"Timeline" shall mean the detailed schedule describing the Project build out,
submitted with the RUS approved Application, as may be amended from time to time
with prior written RUS consent.
 
"Total Assets" shall mean all property owned by the Awardee. Total assets
include current and noncurrent assets such as cash, receivables, material and
supplies, prepayments, deferred charges, and investments; fixed assets (plant)
such as buildings and equipment, both in service and under construction; as well
as capital leases and intangibles.
 
 
ARTICLE II - REPRESENTATIONS AND WARRANTIES
 
Recognizing that RUS is relying hereon, the Awardee represents and warrants, as
of the date of this Agreement, as follows:
 
(a)  
Organization; Power, Etc. The Awardee: (i) is the type of organization specified
in the first paragraph hereof, duly organized, validly existing, and in good
standing under the laws of the State identified in the first paragraph hereof;
(ii) is duly qualified to do business and is in good standing in each
jurisdiction in which the transaction of its business make such qualification
necessary; (iii) has legal power to own and operate its assets and to carry on
its business and to enter into and perform its obligations under the Loan-Grant
Documents; (iv) has duly and lawfully obtained and maintained all material
licenses, certificates, permits, authorizations and approvals necessary to
conduct its business or required by applicable Laws; and (v) is eligible to
obtain the financial assistance from RUS contemplated by this Agreement.

 
(b)  
Authority. The execution, delivery and performance by the Awardee of this
Agreement and the other Loan-Grant Documents and the performance of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary actions and do not violate any provision of law or any charter,
articles of incorporation, organization documents or bylaws of the Awardee or
result in a breach of, or constitute a default under, any agreement, security
agreement, note or other instrument to which the Awardee is a party or by which
it may be bound. The Awardee has not received any notice from any other party to
any of the foregoing that a default has occurred or that any event or condition
exists that with the giving of notice or lapse of time or both would constitute
such a default.

 
(c)  
Consents. No consent, approval, authorization, order, filing, qualification,
license, or permit of any governmental authority is necessary in connection with
the execution, delivery, performance or enforcement of the Loan-Grant Documents,
except such as have been obtained and are in full force and effect.

 
(d)  
Binding Agreement. Each of the Loan-Grant Documents is, or when executed and
delivered will be, the legal, valid, and binding obligation of the Awardee,
enforceable in accordance with its terms, subject only to limitations on
enforceability imposed in equity or by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally.

 
(e)  
Compliance with Laws. The Awardee is in compliance in all material respects with
all federal, state and local laws, rules, regulations, ordinances, codes and
orders (collectively, "Laws.")

 
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(f)  
Litigation. There are no pending or threatened legal, arbitration or
governmental actions or proceedings to which the Awardee is a party or to which
any of its property is subject which, if adversely determined, could have a
Material Adverse Effect.

 
(g)  
Information Submitted with Application. All information, reports, and other
documents and data submitted to RUS in connection with the Application were, at
the time the same were furnished, complete, and correct in all material
respects. Any financial statements or data submitted to RUS in connection with
the Application present fairly, in all material respects, the financial position
of the Awardee and the results of its operations in conformity with Accounting
Requirements. Since the date thereof, there has been no material adverse change
in the financial condition or operations of the Awardee.

 
(h)  
Principal Place of Business. The principal place of business and chief executive
office of the Awardee is at the address of the Awardee specified in Schedule 1
hereto.

 
(i)  
Organization Number. The Awardee's organization number is correctly identified
in Schedule 1 hereto.

 
(j)  
Subsidiaries and Parent. Any subsidiaries or parent of the Awardee are disclosed
on the attached Schedule 1.

 
(k)  
Defaults Under Other Agreements. No default by the Awardee has occurred under
any agreement or instrument to which the Awardee is a party or to which any of
its property is subject that could have a Material Adverse Effect.

 
(l)  
Title to Property. Except as disclosed in writing in the opinion of counsel, the
Awardee holds good and marketable title to all of the Collateral, free and clear
of any liens, security interests or other encumbrances except for Permitted
Encumbrances.

 
(m)  
RUS Mortgage. The RUS Mortgage is in full force and effect, will secure the
Obligations, including the Note, and creates a valid first lien on the property
pledged thereunder and hereunder.

 
(n)  
Additional Representations and Warranties. The Awardee further represents and
warrants as set forth on Schedule 1.

 
 
ARTICLE III — THE LOAN AND GRANT
 
Section 3.1                      Loan and Grant Amounts, Interest Rate, and
Expiration Date.
 
(a)  
Loan Amounts. RUS agrees to make and the Awardee agrees to accept, on the terms
and conditions stated in this Agreement and subject to 31 U.S.C. 1551 and 1552,
a loan, in the amount specified in Schedule 1 hereto (the "Loan").

 
(b)  
Grant Amount. RUS agrees to make and the Awardee agrees to accept, on the terms
and conditions stated in this Agreement and subject to 31 U.S.C. 1551 and 1552,
a grant, in the amount specified in Schedule 1 hereto (the "Grant").

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(c)  
Interest Rate. The amount of the Loan specified in Schedule 1 hereto will bear
interest on each Advance at the Treasury rate for comparable loans with
comparable maturities.

 
(d)  
Expiration Date. The obligation of RUS to advance the Award, or any portion
thereof, shall expire on a date ("Expiration Date") three (3) years from the
date of this Agreement.

 
Section 3.2                      Loan-Grant Documents
 
(a)  
The debt created by the Loan will be evidenced by a note(s) ("Note(s)") executed
by the Awardee and payable to the United States of America. The Awardee shall
repay the Loan in accordance with the Note(s) which shall be payable and bear
interest in accordance with its (their) terms.

 
(b)  
The Awardee shall execute the Security Documents, in form and substance
satisfactory to RUS, and such other security instruments as required by RUS.

 
Section 3.3                      Payment
 
Except as otherwise prescribed by RUS, the Awardee shall make all payments on
the Note(s) utilizing electronic fund transfer procedures as specified by RUS.
 
Section 3.4                      Project
 
(a)  
Loan and Grant Purpose. The Loan and Grant have been made solely to finance the
broadband infrastructure project specifically described in the RUS approved
Application ("Project.")

 
(b)  
Changes to Project. The Awardee shall obtain the prior written approval of RUS
for any material change to the system design, construction, Timeline, delivery
of services, and/or objective(s) of the Project.

 
Section 3.5                      ACH Payments
 
The Awardee consents to the use of the Automated Clearing House (ACH) Payment
System and to the deposit of award funds directly into the Pledged Deposit
Account.
 
 
ARTICLE IV — CONDITIONS OF FINANCIAL ASSISTANCE
 
Section 4.1                      Conditions Precedent to Closing
 
In connection with the execution and delivery of this Agreement, each of the
following conditions shall be satisfied (all documents, certificates and other
evidence of such conditions are to be satisfactory to RUS in its discretion):
 
(a)  
Legal Matters. All legal matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory to counsel for RUS;

 
(b)  
Loan-Grant Documents. RUS shall receive duly executed originals of the Loan-
Grant Documents;

 
(c)  
Filed and Recorded Security Documents. RUS shall have received executed, filed
and indexed financing statements covering all of the personal property and
fixtures of the Awardee;

 
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(d)  
Articles of Incorporation, Charter, Bylaws and Organizational Documents. With
respect to corporate and cooperative Awardees, RUS shall have received certified
copies of the Awardee's most recent articles of incorporation or charter and
bylaws. With respect to limited liability companies or similar organizations,
RUS shall have received certified copies of the Awardee's most recent
organization documents containing provisions reflecting the obligations of the
Awardee in paragraphs (c) and (d) of Section 7.3;

 
(e)  
Authorizations. RUS shall have received satisfactory evidence that all
Loan-Grant Documents and proceedings of the Awardee necessary for duly
authorizing the execution, delivery and performance of the Loan-Grant Documents
have been obtained and are in full force and effect;

 
(f)  
Approvals. RUS shall have received satisfactory evidence that the Awardee has
duly registered when and where required by law with all state, Federal and other
public authorities and regulatory bodies and obtained all authorizations,
certificates, and approvals necessary for, or required as a condition of, the
validity and enforceability of each of the Loan-Grant Documents;

 
(g)  
Title Evidence. RUS shall have received satisfactory evidence that the Awardee
has good and marketable title to its property, including the Project, and holds
such franchises, permits, leases, easements, rights, privileges, licenses, or
right-of-way instruments, reasonably adequate in form and substance, as may be
required by law for the continued maintenance and operation of the existing
facilities and Project;

 
(h)  
Management, Service, and Operating Agreements. Except as otherwise provided in
Sections 4.2 and/or 4.3 herein, RUS shall have received all management, service,
and operating agreements, in form and substance acceptable to RUS, which shall
be in accordance with fees or rates presented in the pro forma financial
statements submitted to RUS in the RUS approved Application;

 
(i)  
Opinion of Counsel. RUS shall have received an opinion of counsel for the
Awardee (who shall be acceptable to RUS) in form and substance acceptable to RUS
for each state in which the Awardee operates; and

 
(j)  
Additional Conditions. The Awardee has met all additional conditions specified
in Schedule 1 hereto.

 
Section 4.2                      General Conditions Precedent to RUS'
Obligations to Release Funds for Advance
 
The obligations of RUS hereunder are subject to the satisfaction of each of the
following conditions precedent (all documents, certificates and other evidence
of such conditions are to be satisfactory to RUS in its discretion):
 
(a)  
Service Rate Evidence. RUS shall have received satisfactory evidence that the
Awardee has duly adopted Service Rates for all proposed services which are
designed with a view to (i) paying and discharging all taxes, maintenance
expenses, and operating expenses of the Awardee, (ii) making all payments in
respect of principal and interest on the Note(s) when and as the same shall
become due, (iii) providing and maintaining reasonable working capital of the
Awardee, and (iv) producing and maintaining the TIER specified in Section 5.8
hereof;

 
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(b)  
Fidelity Bond or Theft Insurance Coverage. RUS has received copies of the
fidelity bond or theft insurance policy from the Awardee, identifying RUS as a
loss payee, from a surety doing business with the United States listed in 31 CFR
Part 223, in the amount specified in Schedule 1, covering all officers,
employees, or agents of the Awardee authorized to receive, disburse, or receive
and disburse the Loan and Grant. Notwithstanding, for current RUS borrowers, RUS
may waive this fidelity bond coverage requirement, if, after evaluation, RUS has
determined that adequate fidelity bond coverage is already maintained by the
Awardee as a RUS borrower under existing loan or guarantee agreements between
the Awardee and RUS;

 
(c)  
Current Financial Information and Certificate of Authority. RUS has received
from the Awardee: (i) its updated balance sheet, statement of cash flow, and
income statement and (ii) a duly authorized and executed certification, Foim
675, "Certification of Authority," designating an officer, employee, or agent of
the Awardee as the person or persons authorized to execute and submit, on behalf
of the Awardee, RUS Form 481, "Financial Requirement Statement;"

 
(d)  
Deposited Funds. RUS has received from the Awardee evidence, satisfactory to
RUS, verifying that the Awardee has maintained on deposit in an account, funds
sufficient to complete the Project as specified on Schedule 1; and

 
(e)  
Additional Conditions. The Awardee has met all additional conditions specified
in Schedule 1 hereto.

 
Section 4.3                      Conditions to Individual Advances
 
The obligations of RUS to approve any Advance are subject to the satisfaction of
each of the following conditions precedent on or before the date of such Advance
(all documents, certificates and other evidence of such conditions precedent are
to be satisfactory to RUS in its discretion):
 
(a)  
Continuing Representations and Warranties. That the representations and
warranties of the Awardee 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;

 
(b)  
Material Adverse Effect. That no event has occurred which has had or could have
a Material Adverse Effect;

 
(c)  
Event of Default. That no Event of Default and no event which with the passage
of time or giving of notice, or both, would constitute an Event of Default shall
have occurred and be continuing, or shall have occurred after giving effect to
any Advances on the books of the Awardee;

 
(d)  
Requisitions and Supporting Documentation. That RUS shall have received not more
frequently than once a month, unless otherwise agreed to by RUS, a completed RUS
Form 481, "Financial Requirement Statement" (hereinafter " Form 481,") bearing
the original signature of the officer, employee, or agent of the Awardee
authorized to receive, disburse, or receive and disburse the Award, with
supporting documentation from the Awardee in accordance with the BIP
Contracting, Work Order and Advance Procedures Guide. Advances shall be limited
to the minimum amounts required for the Awardee's immediate disbursement needs
and shall be requested by the Awardee only for actual immediate cash
requirements of the Awardee. Such loan/grant advances shall be provided on a
reimbursement basis, or based on unpaid third party invoices for Eligible
Purposes, or contracts approved by RUS, in accordance with the BIP Contracting,
Work Order and Advance Procedures Guide. Grant funds must be advanced
concurrently with Loan funds in the same proportion as the Grant is to the total
Award;

 
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(e)  
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 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 Awardee and located
in such a flood hazard area, the Awardee shall have 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 related
regulations, and (ii) the Awardee 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 related regulations;

 
(f)  
Current Financial Information. That RUS has received from the Awardee: its
current, updated balance sheets, income statements and statements of cash flow;

 
(g)  
Compliance with Timeline. That RUS has received from the Awardee evidence,
satisfactory to RUS, that the Project is being constructed in accordance with
the Timeline;

 
(h)  
Compliance with Loan-Grant Documents. That the Awardee is in material compliance
with the Loan-Grant Documents and the RUS Mortgage;

 
(i)  
Permits, Licenses and Franchises. That RUS shall have received satisfactory
evidence that the Awardee has obtained the permits, licenses, franchises and
other approvals identified on Schedule 1;

 
(j)  
Additional Documents. That the Awardee agrees to provide RUS with such
additional documents as RUS may request; and

 
(k)  
Additional Conditions. That the Awardee has met all additional conditions
specified in Schedule 1 hereto.

 
Section 4.4
First Advance to Pay Off Pre-Application Expenses and Interim Financing;
Restrictions on. Subsequent Advances

 
Funds to pay off certain pre-application expenses, as defined in the NOFA, and
expenditures for Eligible Purposes incurred after submission of the Application
to RUS, if any, will be included in the first Advance. Thereafter no further
Advances will be made unless and until the Awardee has furnished evidence, in
form and content satisfactory to RUS, that such interim financing has been paid
in full and any associated liens have been duly discharged of record.
 
 
ARTICLE V — AFFIRMATIVE COVENANTS
 
Section 5.1                      Generally
 
Unless otherwise agreed to in writing by RUS, while this Agreement is in effect,
the Awardee shall duly observe each of the affirmative covenants contained in
this Article V.
 
Section 5.2                      Use of Advances
 
The Awardee shall expend Award funds only for Eligible Purposes in accordance
with the RUS approved line item Project budget and Form(s) 481 submitted to RUS
prior to the advance of funds.
 

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Section 5.3
Unused and Disallowed Advances

 
(a)  
The Awardee shall return to RUS forthwith all or any advanced portion of the
Loan and Grant not disbursed by the Awardee for the Project or not needed to
complete the Project with any interest earned thereon when deposited in the
Pledged Deposit Account.

 
(b)  
The Awardee shall reimburse RUS for any advanced funds whose original
expenditure has been disallowed by an RUS loan and grant audit. Disallowances
shall be satisfied, as directed by RUS, by either administrative offset against
other approved purposes on Form(s) 481 or repaying the disallowed amount
directly to the United States Treasury. Such disallowed amounts shall accrue
interest payable to RUS from the date RUS delivers to the Awardee a written
demand for payment. Interest shall accrue on disallowed Loan Advances at the
lesser of the following: the interest rate of the disallowed Advance or the then
current United States Treasury rate as prescribed by the Secretary of the
Treasury in the Federal Register and the Treasury Fiscal Requirements Manual
Bulletin. Interest shall accrue on disallowed Grant Advances at the then current
United States Treasury rate as prescribed by the Secretary of the Treasury in
the Federal Register and the Treasury Fiscal Requirements Manual Bulletin.
Closeout of the Loan and Grant will not affect the right of RUS to disallow
expenditures and recover, in full, any amount on the basis of a subsequent audit
or other review or the Awardee's obligation to return any disallowed
expenditures.

 
Section 5.4                      Deposit of Advances into Pledged Deposit
Account
 
(a)  
The Awardee shall open and maintain a deposit account pledged to RUS ("Pledged
Deposit Account,") in a bank or depository whose deposits are insured by the
Federal Deposit Insurance Corporation or other federal agency acceptable to RUS
and shall be identified by the RUS' designation of the Awardee followed by the
words "Pledged Deposit Account." The Awardee shall promptly deposit proceeds
from all Advances, including previously advanced funds whose original
expenditure has been disallowed by an RUS audit into the Pledged Deposit
Account. Moneys in the Pledged Deposit Account shall be used solely for the
purposes for which Advances were made, or for such other purposes as may be
approved in writing by RUS. Deposits and disbursements from the Pledged Deposit
Account shall be made and recorded in accordance with the BIP Contracting, Work
Order and Advance Procedures Guide.

 
(b)  
First Lien on Pledged Deposit Account. The Awardee shall perfect and maintain a
first and prior lien in the Pledged Deposit Account (pursuant to a deposit
account agreement or similar agreement or mechanism for perfecting as provided
by applicable law) in foam acceptable to RUS.

 
Section 5.5                      Additional Project Funding
 
The Awardee shall ensure that adequate funding is in place to complete the
Project and will, after obtaining the prior written approval of RUS, obtain
additional loans or funds or receive binding commitments for supplemental
funding in an amount needed to ensure completion of the Project.
 
Section 5.6                      Miscellaneous Notices
 
The Awardee shall furnish to RUS:
 
(a)  
Notice of Default. Promptly after becoming aware thereof, notice of the
occurrence of any default under the Loan-Grant Documents or the RUS Mortgage or
the receipt of any notice given pursuant to the Loan-Grant Documents or RUS
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
hereunder, the other Loan-Grant Documents or under the RUS Mortgage.

 
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(b)  
Notice of 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 Awardee or any Affiliate which, if adversely
determined, could have a Material Adverse Effect.

 
(c)  
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.

 
(d)  
Material Adverse Effect. Promptly after becoming aware thereof, notice of any
matter which has resulted or may result in a Material Adverse Effect.

 
(e)  
Corporate Document Changes. Thirty (30) days prior to their effectiveness, any
amendments, supplements or modifications to the Awardee's Articles of
Incorporation, Charter, Bylaws, Operating Agreement, Members Agreements or other
Organizational Documents.

 
(f)  
Other Information. Such other information regarding the condition, financial or
otherwise, or operations of the Awardee as RUS may, from time to time,
reasonably request.

 
Section 5.7
Rates and Financial Performance Criteria

 
The Awardee shall design, charge and maintain rates in effect which (i) pay and
discharge all taxes, maintenance expenses and operating expenses of its system
(ii) make all payments in respect of principal of and interest on the Note(s)
when and as the same shall become due, (iii) provide and maintain reasonable
working capital for the Awardee, and (iv) maintain the TIER specified in Section
5.8 hereof.
 
Section 5.8                      TIER
 
The Awardee will maintain the TIER required in the Prior RUS Loan Contract and,
upon the termination of the obligation to maintain such TIER, will maintain a
TIER of 1.0 until the Loan is repaid in full.
 
Section 5.9                      Corrective Action
 
Within thirty (30) days of (i) sending the financial reports required by Section
6.3 hereof that shows the TIER specified in Section 5.8 was not achieved for the
reported fiscal period or (ii) being notified by RUS that the TIER specified in
Section 5.8 was not achieved for the reported fiscal period, whichever is
earlier, the Awardee, in consultation with RUS, shall provide a written plan
satisfactory to RUS setting forth the actions that shall be taken to achieve the
specified TIER on a timely basis and shall promptly implement said plan.
 
Section 5.10                    Service Obligation
 
The Awardee shall provide the broadband service described in the RUS approved
Application commencing from the date the Project is Substantially Complete for
at least as long as the Composite Economic Life of the facilities financed by
the Award as specified on Schedule 1. The Awardee may update its service
offerings upon receipt of RUS' prior written consent.
 
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Section 5.11
Obligations with Respect to the Construction, Operation and Maintenance of the
Project

 
(a)  
Project Management and Operation. The Awardee shall be responsible for the
management of the Project and will operate the Project in an efficient and
economic manner as well as maintaining the Project in good repair.

 
(b)  
Construction in Accordance with System Design and Timeline. The Awardee shall
cause the Project to be constructed and/or built out, and completed in
accordance with the system design submitted with the RUS approved Application,
as such design may be amended with prior RUS consent, and the Timeline.

 
(c)  
General Insurance Requirements. The Awardee shall take out and maintain
insurance on the Project and any other property acquired with the Loan and Grant
in accordance with 7 CFR Section 1788 as well as maintaining the fidelity bond
or theft insurance coverage required in Section 4.2(b) hereof.

 
(d)  
Contracting. The Awardee may, in accordance with the BIP Contracting, Work Order
and Advance Procedures Guide, contract for goods and services to be funded by
the Award, using RUS form contracts or private contracts; provided that private
contracts must comply with equal employment opportunity and civil rights
requirements, as well as the Davis Bacon Act.

 
(e)  
Commencement and Completion of Construction and/or Installation.

 
(1)  
Awardees are required to commence construction and/or installation of the
Project within 180 days from the date hereof, and

 
(2)  
The Project shall be Substantially Complete within two years of the date hereof,
and Project Completion shall occur within three years of the date hereof.

 
Section 5.12                     Preservation of Existence and Rights
 
The Awardee shall take or cause to be taken all such actions as from time to
time may be necessary to preserve its existence and to preserve and renew all
franchises, contracts, rights of way, easements, permits, and licenses now or
hereafter to be granted or conferred upon it, with respect to the Project, the
loss of which would have a Material Adverse Effect.
 
Section 5.13                     Compliance with Laws
 
Awardees shall comply with all applicable federal and state laws, including but
not limited to: (i) The nondiscrimination and equal employment opportunity
requirements of Title VI of the Civil Rights Act of 1964, as amended (42 U.S.C.
§ 2000e et seq., 7 CFR pt. 15); (ii) Section 504 of the Rehabilitation Act (29
U.S.C. § 794 et seq.; 7 CFR pt. 15b); (iii) The Age Discrimination Act of 1975,
as amended (42 U.S.C. § 6101 et seq.; 45 CFR pt. 90); (iv) Executive Order
11375, amending Executive Order 11246, Relating to Equal Employment Opportunity
(3 CFR pt. 102). See 7 CFR pts. 15 and 15b and 45 CFR pt 90, RUS Bulletin 1790-1
("Nondiscrimination among Beneficiaries of RUS Programs"), and RUS Bulletin
20-15:320-15 ("Equal Employment Opportunity in Construction Financed with RUS
Loans"). The RUS Bulletins are available at http://www.broadbandusa.gov.; (v)
The Architectural Barriers Act of 1968, as amended (42 U.S.C. L4151 et seq.);
(vi) The Uniform Federal Accessibility Standards (UFAS) (Appendix A to 41 CFR
subpart 101-19.6); (vii) The Council on Environmental Quality Regulations for
Implementing the Procedural Provisions of NEPA and certain related federal
environmental laws, statutes, regulations, and Executive Orders found in 7
CFR1794; and (viii) The Communications Act of 1934, as amended, (47 U.S.C. § 151
et seq.), the Telecommunications Act of 1996, as amended (Pub. L. 104-104, 110
Stat. 56 (1996), and the Communications Assistance for Law Enforcement Act (47
U.S.C. § 1001 et seq.) (CALEA).
 
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Section 5.14                      Equal Opportunity Requirements
 
(a)  
Equal Opportunity Provisions in Construction Contracts. The Awardee 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 Attachment 2 hereto, entitled Equal
Opportunity Contract Provisions.

 
(b)  
Equal Opportunity Contract Provisions Also Bind the Awardee. The Awardee 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.

 
(c)  
Sanctions and Penalties. The Awardee 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' primary responsibility for securing compliance. The
Awardee 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 Awardee agrees that if it fails or
refuses to comply with these undertakings RUS may cancel, terminate or suspend
in whole or in part this Agreement, 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 the Awardee,
or may refer the case to the Department of Justice for appropriate legal
proceedings.

 
Section 5.15                      Purchases with Award Funds
 
Except as specifically authorized in writing in advance by RUS, all facilities,
materials, equipment, supplies, replacements and all other items purchased with
Award funds shall be purchased 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 5.16                      Awardee to Defend Title and Remove Liens
 
Except for Permitted Encumbrances, the Awardee will maintain and preserve the
lien of this Agreement superior to all other liens affecting the Collateral, and
will forever warrant and defend the title to the Collateral against any and all
claims and demands whatsoever. The Awardee shall make, execute, acknowledge,
deliver, file and record all such mortgages, financing statements, continuation
statements, security agreements, instruments and conveyances as is necessary to
preserve the lien of this Agreement against the Collateral superior to all other
liens. The Awardee shall maintain the Collateral free of all liens except for
Permitted Encumbrances, and will promptly pay or discharge any and all
obligations for or on account of which any such lien or charge might exist or
could be created and any and all lawful taxes, rates, levies, assessments,
liens, claims or other charges imposed upon or accruing upon any of the
Collateral, as and when the same shall become due and payable; and whenever
called upon so to do by RUS will furnish to RUS adequate proof of such payment
or discharge; provided, however that this provision shall not be deemed to
require the payment or discharge of any tax, rate, levy, assessment or other
governmental charge while the Awardee is contesting the validity thereof by
appropriate proceedings in good faith and so long as it shall have set aside on
its books adequate reserves with respect thereto.
 
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Section 5.17                      Further Assurances
 
(a)  
The Awardee shall from time to time upon written demand of RUS make, execute,
acknowledge and deliver or cause to be made, executed, acknowledged and
delivered all such further and supplemental mortgages, financing statements,
continuation statements, security agreements, instruments and conveyances as may
be requested by RUS and take or cause to be taken all such further action as may
reasonably be requested by RUS to provide for the securing and payment of the
principal of, interest on, and any and all other amounts payable hereunder and
under the Note(s) according to the terms thereof and for the purpose of fully
conveying, transferring and confirming the property hereby conveyed, mortgaged
and pledged or intended so to be, whether now owned by the Awardee or hereafter
acquired by it.

 
(b)  
The Awardee shall cause this Agreement, financing statement, continuation
statement and every additional instrument which shall be executed pursuant to
subsection (a) immediately above, to forthwith upon execution to be filed and
recorded and refiled and rerecorded as conveyances and security interests in
real and personal property in such manner and in such places as may be required
by law or requested by RUS in order to fully preserve the security for the
Obligations, including the Loan, and to perfect and maintain the superior lien
of this Agreement and all supplemental security instruments.

 
Section 5.18                      Buy American - General Prohibition and Waiver
 
For Awardees that are States, local governments, or any agency, subdivision,
instrumentality, or political subdivision thereof, pursuant to § 1605 of the
Recovery Act, no Loan or Grant funds may be used for the construction,
alteration, maintenance, or repair of a public building or public work (as such
terms are defined in 2 CFR § 176.140) unless all of the iron, steel, and
manufacturing goods used in the project are produced in the United States,
except as provided in OMB regulations at 75 Fed. Reg. 14323 (Mar. 25, 2010).
Notwithstanding, such Awardees have been granted a general waiver by the
Secretary of Agriculture with respect to certain broadband equipment, as
outlined in the Federal Register at 74 Fed. Reg. 31402 (July 1, 2009). All other
waivers must be requested of RUS pursuant to 2 CFR § 176.60.
 
Section 5.19                      Nondiscrimination and Interconnection
Obligations
 
The Awardee agrees to (i) adhere to the principles contained in the FCC's
Internet Policy Statement (FCC 05-151, adopted August 5, 2005); (ii) not favor
any lawful Internet applications and content over others; (iii) display any
network management policies in a prominent location on the service providers
webpage, provide notice to customers of changes to these policies, such policies
include any business practices or technical mechanisms they employ, other than
standard best efforts Internet delivery, to allocate capacity; differentiate
among applications, providers, or sources, limit usage and manage illegal or
harmful content; (iv) connect to the public Internet directly or indirectly,
such that the project is not an entirely private closed network; and (v) offer
interconnection, where technically feasible without exceeding current or
reasonably anticipated capacity limitations, on reasonable rates and terms to be
negotiated with requesting parties. This includes both the ability to connect to
the public Internet and physical interconnection for the exchange of traffic.
 
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(a)  
Notwithstanding the above, the Awardee may not offer interconnection to anyone
that will provide services that duplicate services provided by projects funded
by outstanding telecommunications loans made under the RE Act. Further,
interconnection may not be used for an ineligible purpose under the Recovery
Act.

 
(b)  
These obligations are subject to the needs of law enforcement and reasonable
network management. As such, the Awardee may employ generally accepted technical
measures to provide acceptable service levels to all customers, such as caching
and application-neutral bandwidth allocation, as well as measures to address
spam, denial of service attacks, illegal content, and other harmful activities.

 
(c)  
In the event the Awardee contracts with another entity to operate the Project,
the Awardee shall require such entity to comply with the terms of this Section,
expressly including this Section in their contractual arrangement.

 
(d)  
These obligations do not apply to the Awardee's existing network.

 
Section 5.20                    Davis-Bacon Wage Requirements
 
The Awardee shall comply with the Davis-Bacon Act, and the guidance found at 29
C.F.R. pts. 1, 3, and 5, such that any covered contract with a contractor or
subcontractor in excess of $2,000 for construction, alteration or repair
(including painting and decorating) shall contain the contract clauses found in
29 C.F.R. 5.5(a), to ensure that all laborers and mechanics employed on the
Project receive payment of not less than the prevailing wage.
 
Section 5.21                    Additional Affirmative Covenants
 
The Awardee shall comply with the additional affirmative covenants set forth in
Schedule 1 hereto.
 
 
ARTICLE VI — ACCOUNTING AND REPORTING
 
Section 6.1                      Financial Records
 
(a)  
Awardees must establish an accounting system satisfactory to RUS in compliance
with Accounting Requirements. Such a system of accounts must account for all
funds advanced under this Agreement separately from all other funds for the
Project, as required by the Recovery Act.

 
(b)  
The Awardee shall maintain, at its premises, such books, documents, papers, or
other records and supporting documents, including, but not limited to, invoices,
receipts, payroll records and bills of sale, adequate to identify the purposes
for which, and the manner in which Loan, Grant, and other funds were expended on
the Project. The Awardee shall at all times keep, and safely preserve, proper
books, records and accounts in which full and true entries shall be made of all
dealings, business, and affairs of the Awardee and its Subsidiaries, in
accordance with its system of accounts complying with Paragraph (a) immediately
above. The Awardee shall maintain copies of all documents submitted to RUS in
connection with the Award until the later of (i) the Loan being paid in full and
all audits have been completed or (ii) three years subsequent to close-out of
the Award.

 
 
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Section 6.2
Rights of Inspection

 
The Awardee shall afford RUS, the Office of the Inspector General of USDA, and
the Government Accountability Office, through their representatives, reasonable
opportunity, at all times during business hours and upon prior notice, to have
access to and right to inspect the Project, any other property encumbered by the
Security Documents, and any and all books, records, accounts, including
electronic books, records, accounts and electronic mail messages, regardless of
the physical form or characteristics, invoices, contracts, leases, payroll
records, canceled checks, statements, and other documents, and papers of every
kind belonging to or in any way pertaining to its property or business,
including its Subsidiaries, if any, and to make copies or extracts therefrom.
 
Section 6.3
Annual Audit

 
Effective after an Advance has been made, one hundred twenty (120) days from the
end of the Awardee's current fiscal year and, thereafter, one hundred twenty
(120) days from the close of each subsequent fiscal year, the Awardee must
submit annual audited financial statements along with a report on compliance and
on internal control over financial reporting, and a management letter in
accordance with the requirements of 7 CFR 1773. The CPA conducting the annual
audit must meet the requirements for a qualified CPA as set forth in 7 CFR §
1773.5. However, if the Awardee is a state, local government, or non-profit
organization that expends $500,000 or more of federal funds during its fiscal
year, an audit must be performed in accordance with OMB Circular A-133, Audits
of States, Local Governments, and Non- Profit Organizations, located at
http://www.whitehouse.gov/omb/circulars/a133/a133.html. Awardees are also
responsible for ensuring that sub-recipient audit reports are received and for
resolving any audit findings.
 
Section 6.4
BIP Reporting

 
(a)  
Quarterly Report. No later than thirty (30) calendar days after the end of each
calendar year quarter the Awardee must submit to RUS utilizing RUS's online
Broadband Collection and Analysis System (BCAS), the following information:
balance sheets, income statements, statements of cash flow, summaries of its
rate packages, the number of customers taking broadband service on a per
community basis, the completion status of the build-out and whether the project
is Substantially Complete. In addition the Awardee must provide RUS with such
other reports concerning the financial condition or operation of the Awardee,
including its Subsidiaries, as RUS may request.

 
(b)  
Annual Report. For the lesser of five years or as long as the Awardee is
required to provide service hereunder, on each January 31st, starting the first
January 31st after Project Completion, the Awardee must submit the following
information to RUS utilizing BCAS:

 
(i)  
Number of households and businesses subscribing to broadband service;

 
(ii)  
Number of households and businesses subscribing to broadband service that
receive improved access; and

 
(iii)  
Number of educational, library, healthcare, and public safety providers
receiving either new or improved access to broadband service.

 
(c)  
Annual Compliance Certificate. Within forty-five (45) days after the close of
each calendar year, or more often if requested in writing by RUS, the Awardee
shall deliver to RUS a written statement signed by its general manager, managing
member, or equivalent corporate official satisfactory to RUS, stating that,
during such year the Awardee has fulfilled its obligations under the Loan-Grant
Documents throughout such year in all material respects or, if there has been a
material default in the fulfillment of such obligations, specifying each such
default known to such official and the nature and status thereof.

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(d)  
Close Out Report. The Awardee shall deliver a close out report to RUS no later
than ninety (90) days after the expiration or termination of the Award, or the
completion of the Project and expenditure of all Award funds. The close out
report shall address: (i) a comparison of actual accomplishments to the
objectives set forth in the Application; (ii) a description of problems, delays,
or adverse conditions that occurred, or which affected the attainment of overall
Project objectives, prevented the meeting of time schedules or objectives, or
precluded the attainment of particular Project work elements during established
time periods; and (iii) a comparison of how funds were spent against the
original general budget submitted with the RUS approved Application.

 
Section 6.5
Recovery Act Reporting

 
No later than ten (10) calendar days after each calendar quarter in which the
Awardee receives the assistance award funded in whole or part with Award funds,
the Awardee shall submit through http://www.federalreporting.gov the information
required by 2 C.F.R. 176. The final report should summarize the Awardee's
quarterly filings and state whether the project's goals have been satisfied.
 
 
ARTICLE VII — NEGATIVE COVENANTS
 
Section 7.1
General

 
Unless otherwise agreed to in writing by RUS, while this Agreement is in effect,
the Awardee shall duly observe each of the negative covenants set forth in this
Article VII.
 
Section 7.2
Merger, Consolidation, Transfer of Property, or Change in Control

 
The Awardee shall not, without the prior written consent of RUS, take or suffer
to be taken any steps to reorganize, consolidate with or merge into any other
corporation, or to sell, lease or transfer (or make any agreement therefore) all
or any substantial part of its property, including, without limitation, the
Project.
 
Section 7.3
Covenants for Limited Liability Companies and Similar Awardees

 
 
Awardees which are limited liability or similar organizations agree that:

 
(a)  
The death, retirement, resignation, expulsion, termination, bankruptcy or
dissolution of any member or the occurrence of any other event that terminates
the continued membership of any member shall not cause the Awardee to be
dissolved or its affairs to be wound up;

 
(b)  
Prior to the date on which any and all obligations owed to RUS, including the
Note evidencing the Loan, are discharged in full, the Awardee shall not be
dissolved or terminated;

 
(c)  
The organizational documents of the Awardee shall contain provisions reflecting
the obligations of the Awardee in paragraphs (a) and (b) immediately above and
such provisions shall not be amended without the prior written consent of RUS;
and

 
(d)  
No direct or indirect addition or issuance of any membership units (or any other
ownership interest) in the Awardee may be made by the Awardee or its members
without the prior written consent of RUS and no transfer, whether individually
or in the aggregate, of any membership units (or any other ownership interest)
in the Awardee which will result in the transfer of more than 49% of the equity
interests (of whatever nature, including voting and non-voting) in the Awardee
may be made by the Awardee or its members without the prior written consent of
RUS.

 
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Section 7.4
Additional Indebtedness

 
The Awardee shall not, without the prior written consent of RUS, incur
additional secured or unsecured indebtedness other than (i) purchase money
security interests, (ii) unsecured trade indebtedness and (iii) other debt
arising in the ordinary course of business. Indebtedness under items (i), (ii),
and (iii) in the aggregate shall not exceed five percent (5%) of the Awardee's
consolidated total assets.
 
Section 7.5                     Negative Pledge
 
The Awardee shall not create, incur or suffer any lien, mortgage, pledge,
assignment, or other encumbrance on, or security interest on its property, other
than Permitted Encumbrances.
 
Section 7.6                     Contracts
 
The Awardee shall not, without the prior written consent of RUS, enter into any
contract or contracts for the operation or management of all or any substantial
part of the Awardee's system, including, without limitation, the Project, and
shall not enter into any contract for the use by others of all or any
substantial part of its system, including, without limitation, the Project.
 
Section 7.7                     Salaries
 
Salaries, wages, and other compensation paid by the Awardee for services, and
directors', members', managers' or trustees' fees, shall be reasonable and in
conformity with the usual practice of entities of the size and nature of the
Awardee.
 
Section 7.8                      Extension of Credit
 
Except as specifically authorized in writing in advance by RUS, the Awardee will
make no advance payments or loans, or in any manner extend its credit, either
directly or indirectly, with or without interest, to any of its directors,
trustees, officers, employees, stockholders, members, managers, Affiliates or
Affiliated companies; provided, however, that the Awardee may make an investment
for any purpose described in section 607(c)(2) of the Rural Development Act of
1972 (including any investment in, or extension of credit, guarantee, or advance
made to an Affiliated Company that is used by such Affiliate for such purpose)
to the extent that, immediately after such investment: (1) the aggregate of such
investments does not exceed one-third of the Net Worth and (2) the Awardee's Net
Worth is at least twenty (20) percent of its Total Assets.
 
Section 7.9                      Distributions or Withdrawals
 
(a)  
The Awardee shall not, without the prior written approval of RUS, make any
membership withdrawal, unit redemptions, or other type of profit allocation to
its members, if it is a limited liability company, nor make any dividend, stock,
capital, capital credit or other distribution in the nature of an investment,
guarantee, extension of credit, loan or advance payment on obligations, if it is
a corporation or cooperative (all such distributions being hereinafter
collectively called "Distributions"); provided, however, the Awardee may make a
Distribution after 75% of the Loan funds have been expended as approved if after
such Distribution, the Awardee's Net Worth is equal to at least twenty percent
(20%) of its Total Assets and the amount of all such Distributions during the
calendar year does not exceed twenty-five percent (25%) of the Awardee's Net
Income or Net Margins for the prior calendar year.

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(b)  
Additional Negative Restrictions. The Awardee shall comply with the additional
negative restrictions on Distributions and Withdrawals set forth in Schedule 1
hereto.

 
Section 7.10
Changing Principal Place of Business, Place of Conducting Business, or Type of
Organization

 
The Awardee shall not change its principal place of business, place of
conducting business, or type of organization without the prior written consent
of RUS.
 
Section 7.11                    Changing Name or. Place of Incorporation or
Organization
 
The Awardee shall not change its legal name or place of incorporation or
organization without giving RUS sixty (60) days prior written notice.
 
Section 7.12                    Historic Preservation
 
The Awardee shall not, without the prior written consent of RUS, use any Advance
to construct any facility 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 7.13                    Affiliated Transactions
 
With regard to the Project, the Awardee shall not enter into any transaction,
contract, or dealing with an Affiliate of the Avvardee or with the Awardee's or
Affiliate's directors, trustees, officers, managers, members (if the Awardee is
a limited liability company), or other corporate officials, without the prior
written consent of RUS. RUS' consent to advance award funds for affiliated
transactions will be limited to an amount which is the lower of cost or market
rate and which is subject to verification by RUS and its representatives having
access to the books and records of the Affiliate.
 
Section 7.14                    Preferred Stock
 
The Awardee shall not issue any new or additional preferred stock without the
prior written approval of RUS, which approval shall not be unreasonably withheld
if such stock issuance, in RUS' sole opinion, would not be considered a debt
instrument under GAAP.
 
Section 7.15                    Restrictions on Transfers of Property
 
(a)  
Except as provided in Paragraph (b), and excluding any property which the
Awardee must sell to customers in the ordinary course of business, the Awardee
shall not sell, lease or transfer any Collateral to any other person or entity
(including any subsidiary or affiliate of the Awardee) without the prior written
consent of the RUS.

 
(b)  
So long as the Awardee is not in default hereunder, the Awardee may, without
obtaining the consent of RUS, sell or otherwise dispose of, free from the lien
hereof, any of its property which is neither necessary to, nor useful for, the
operation of the Awardee's business, or which has become obsolete, worn out,
damaged, or otherwise unsuitable for the purposes of the Awardee; provided,
however, that the Awardee shall to the extent necessary: (1) replace the same
with other property of the same kind and nature, or substitute thereof, which
shall be subject to the lien hereof, free and clear of all prior liens, and
apply the proceeds, if any, derived from the sale or disposition of such
property, which are not needed for the replacement thereof, to the prepayment of
the indebtedness on the outstanding Notes; (2) immediately upon the receipt of
the proceeds of any sale or disposition of said property, apply the entire
amount of such proceeds to the prepayment of the indebtedness evidenced by the
Notes; or (3) deposit all or such part of the proceeds derived from the sale or
disposition of said property into the Pledged Deposit Account , and shall use
the same only for such additions to, or improvements in, the Collateral, on such
terms and conditions as RUS shall specify.

 
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Section 7.16                    Restrictions on Changes to Line Item Budget
 
The Awardee agrees that the budget for the Project is a line item budget and
agrees not to make any revisions to the RUS approved line item Project budget,
including, without limitation, the part of the budget for construction, without
the prior written approval of RUS.
 
Section 7.17                    Additional Negative Covenants
 
The Awardee shall comply with the additional negative covenants set forth in
Schedule 1 hereto.
 
 
ARTICLE VIII - LENDER'S RIGHTS
 
Section 8.1                      Termination of Award Offer
 
RUS, in its sole discretion, may terminate the offer to make the Loan or
Loan/Grant Combination if it does not receive the Loan-Grant Documents, duly
executed on behalf of the Awardee and all conditions in Section 4.1 hereof are
not satisfied within sixty (60) days from the date hereof
 
Section 8.2                      Audits and Compliance Reviews
 
After giving prior notification to the Awardee, RUS has the right to conduct
compliance reviews and audits of the Awardee to assure compliance with the
Loan-Grant Documents, NOFA and the Accounting Requirements.
 
Section 8.3                      Disallowed Expenditures
 
Upon a determination by RUS that the Awardee did not expend Award funds on
Eligible Purposes in accordance with the RUS approved line item Project budget
and the Form(s) 481 approved by RUS prior to the advance of funds, RUS may, in
its sole discretion:
 
(a)  
Disallow all or a part of the expenditures and disbursements of the Award and
require the Awardee to deposit such funds in the Pledged Deposit Account to be
applied toward other approved Project purposes on Form(s) 481 or to reimburse
the Government, as provided in Section 5.3 hereof;

 
(b)  
Suspend making Advances;

 
(c)  
Take any other action RUS determines to be necessary including, without
limitation, exercising any right or remedy available under the Loan-Grant
Documents or law.

 
Section 8.4                      Suspension of Advances
 
RUS may, in its absolute discretion, suspend making Advances on the Award upon
its making a determination that an event has occurred that is likely to have a
Material Adverse Effect. RUS may also suspend making advances of the Award upon
the occurrence of an Event of Default.
 

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Section 8.5                      Payment Extensions
 
RUS may, at any time or times in succession without notice to or the consent of
the Awardee and upon such terms as RUS may prescribe, grant to any person, firm
or entity who shall have become obligated to pay all or any part of the
principal of or interest on any note held by or indebtedness owed to RUS or who
may be affected by the lien created by the Loan-Grant Documents, an extension of
the time for the payment of such principal or interest, and after any such
extension the Awardee 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 8.6                      Right to Expend Money
 
RUS shall have the right (without prejudice to any of its rights with respect to
any Event of Default) to advance or expend moneys for the purpose of procuring
insurance, or for the payment of insurance premiums as required hereunder, or to
advance or expend moneys for the payment of taxes, assessments or other charges,
or to save the Collateral from sale or forfeiture for any unpaid tax or
assessment, or otherwise, or to redeem the same from any tax or other sale, or
to purchase any tax title thereon, or to remove or purchase any mechanics' liens
or other encumbrance thereon, or to make repairs thereon or to comply with any
covenant herein contained or to prosecute and defend any suit in relation to the
Collateral or in any manner to protect the Collateral and the title thereto, and
all sums so advanced for any of the aforesaid purposes with interest thereon at
the highest legal rate, but not in excess of twelve per centum (12%) per annum
shall be deemed a charge upon the Collateral and shall be forthwith paid to RUS
upon demand It shall not be obligatory for RUS in making any such advances or
expenditures to inquire into the validity of any such tax title, or of any such
taxes or assessments or sales therefore, or of any such mechanics' liens or
other encumbrance.
 
Section 8.7                      Right to File Financing Statements
 
RUS shall have the right to file such financing statements and continuation
statements on its behalf, as secured party, and on behalf of the Awardee, as
debtor, as RUS deems necessary to perfect a first lien on the Collateral and to
maintain and preserve such perfected first lien as long as the Loan remains
outstanding. The Awardee shall reimburse RUS for any expenses incurred in the
exercise of this right.
 
 
ARTICLE IX - GRANT OF SECURITY INTEREST
 
To secure the payment and performance of the Obligations, including, without
limitation, the Note(s), the Awardee hereby pledges, assigns, and transfers to
RUS, and grants to RUS a continuing security interest in and to all property,
tangible and intangible, of every kind, nature or description, now owned,
leased, or hereafter acquired by the Awardee, wherever located, including but
not limited to, accounts, chattel paper, documents, instruments, general
intangibles, licenses, (including, without limitation, those granted by the
Federal Communications Commission ("FCC"), subject to the FCC's prior approval
of any assignment or transfer of de jure or de facto control of such licenses),
permits, equipment, goods, proceeds, products, and accessions, as well as its
right, title and interests in fixtures and real property, now owned, leased or
hereafter acquired and wherever located, and the property described in Schedule
2 hereto.
 
 
ARTICLE X - EVENTS OF DEFAULT
 
Section 10.1                      Events of Default
 
The following shall be events of default (each an "Event of Default") under this
Agreement:
 
(a)  
Representations and Warranties. Any representation or warranty made by the
Awardee in Loan-Grant Documents, Form(s) 481 or any certificate furnished to RUS
under the Loan-Grant Documents, or in the Application shall prove to have been
incorrect in any material respect at the time made;

 
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(b)  
Non-Payment. The nonpayment of any required and due installment of interest on,
or principal of, any Note, whether by acceleration or otherwise, which continues
for five (5) Business Days, as such term is herein defined;

 
(c)  
Corrective Actions. Default by the Awardee in the observance or performance of
Section 5.9;

 
(d)  
Limited Liability Companies. Default by the Awardee or its members in the
observance or performance of Section 7.3;

 
(e)  
Improper Expenditures. The Awardee expends Award funds on costs which are not
for Eligible Purposes in accordance with the RUS approved line item Project
budget and the Form(s) 481 approved by RUS prior to the advance of funds;

 
(f)  
Failure to Keep Adequate Records. The Awardee fails to keep adequate records,
including the failure to document Award fund expenditures for Eligible Purposes
as required herein;

 
(g)  
Failure to Build in Accordance with Timeline. The Awardee fails to commence
build out of the Project within 180 days from the date hereof or otherwise fails
to meet or exceed milestones established in the Timeline, as it may be amended
with prior written RUS consent;

 
(h)  
Failure to Comply with Accounting and Reporting Requirements. The Awardee fails
to comply with the accounting and reporting requirements in Article VI;

 
(i)  
Other Covenants. Default by the Awardee in the observance or performance of any
other covenant or agreement contained in any of the Loan-Grant Documents, which
shall remain unremedied for thirty (30) calendar days after written notice
thereof shall have been given to the Awardee by RUS;

 
(j)  
Adverse Effects. The Awardee shall forfeit or otherwise be deprived of its
charter, articles of organization, franchises, permits, easements, consents or
licenses required to carry on any material portion of its business or the
Awardee files for or an event occurs which can reasonably be expected to result
in its dissolution or termination;

 
(k)  
Other Obligations. Default by the Awardee in the payment of any obligation,
whether direct or contingent, for borrowed money in excess of ten thousand
dollars ($10,000.00) or in the performance or observance of the terms of any
instrument pursuant to which such obligation was created or securing such
obligation which default shall have resulted in such obligation becoming or
being declared due and payable prior to the date on which it would otherwise be
due and payable;

 
(l)  
Bankruptcy. A court having jurisdiction in the premises shall enter a decree or
order for relief with respect to the Awardee in an involuntary case under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect: (1) appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official, or (2) ordering the winding up or liquidation
of its affairs; or the Awardee 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;

 
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(m)  
Dissolution or Liquidation. Other than as provided in the immediately preceding
subsection, the dissolution or liquidation of the Awardee, or the filing of such
by the Awardee;

 
(n)  
Impaired Business. The failure by the Awardee to promptly 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 thirty (30) days;

 
(o)  
Payment of Final Judgment. A final judgment in an amount of ten thousand dollars
($10,000.00) or more shall be entered against the Awardee and shall remain
unsatisfied or without a stay in respect thereof for a period of thirty (30)
days; and/or

 
(p)  
Default under RUS Mortgage. An event of default occurs under the RUS Mortgage
and is continuing for thirty (30) days.

 
 
ARTICLE XI – REMEDIES
 
Section 11.1                      Generally
 
(a)  
Upon the occurrence of an Event of Default, RUS may pursue all rights and
remedies available to RUS that are contemplated by the Loan-Grant Documents
and/or the RUS Mortgage in the manner, upon the conditions, and with the effect
provided in such documents, and may pursue such other remedies that are
generally available at law or in equity including, without limitation, 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 X 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.

 
(b)  
RUS and the Awardee acknowledge they are, respectively, mortgagee and mortgagor,
under the RUS Mortgage and agree that the RUS Mortgage secures the Obligations,
including the Note, and that the RUS Mortgage creates or will create a first
lien on the Collateral. RUS and the Awardee further agree than an Event of
Default hereunder shall constitute an event of default under the RUS Mortgage
permitting RUS to exercise rights and remedies thereunder.

 
Section 11.2                      Remedies
 
In addition to the remedies referred to in Section 11.1 hereof, upon the
occurrence of an Event of Default, RUS may:
 
(a)  
Refuse to make any advance or further advance on account of the Award, but any
advance thereafter made by RUS shall not constitute a waiver of such default;

 
(b)  
Declare all unpaid principal of and all interest accrued on the Note(s) to be
immediately due and payable and upon such declaration all such principal and
interest shall become due and payable immediately;

 
(c)  
Terminate the obligation to further advance on account of the Award;

 
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(d)  
Take immediate possession of the Collateral, collect and receive all credits,
outstanding accounts and bills receivable of the Awardee and all rents, income,
revenues and profits pertaining to or arising from the Collateral, or any part
thereof, and issue binding receipts therefor; manage and control and operate the
Collateral as fully as the Awardee might do if in possession thereof; RUS, any
employee or agent of RUS is hereby constituted and appointed as true and lawful
attorney-in-fact of the Awardee with full power to (i) notify or require the
Awardee to notify any and all Customers that the Collateral has been assigned to
RUS and/or that RUS has a security interest in the Collateral; (ii) endorse the
name of the Awardee upon any notes, checks, acceptances, drafts, money orders,
or other instruments or payment (including payments made under any policy of
insurance) that may come into possession of RUS in full or part payment of any
amount owing to RUS; (iii) sign and endorse the name of the Awardee upon any
invoice, freight, or express bill, bill of lading, storage or warehouse receipt,
assignment verification or notice in connection with receivables; (iv) send
requests for verifications of Collateral to customers or account debtors; (v)
sell, assign, sue for, collect, or compromise payment of all any part of the
Collateral in the name of the Awardee or in its own name, or make any other
disposition of Collateral, or any part thereof, which disposition may be for
cash, credit, or any combination thereof, and RUS may purchase all or any part
of the Collateral at public or, if permitted by law, private sale, and in lieu
of actual payment of such purchase price may set off the amount of such price
against the Obligations; granting to RUS, as the attorney-in-fact of the
Awardee, full power of substitution and full power to do any and all things
necessary to be done in and about the premises fully and effectually as the
Awardee might or could do but for this appointment, hereby ratifying all that
said attorney-in-fact shall lawfully do or cause to be done by virtue hereof.
Neither RUS, its employees, nor its agents shall be liable for any act or
omissions or for any error of judgment or mistake of fact or law in its capacity
as such attorney-in-fact. This power of attorney is coupled with an interest and
shall be irrevocable during the term of this Agreement and so long as any
Obligations shall remain outstanding;

 
(e)  
RUS shall have the right to enter and/or remain upon the premises of the Awardee
without any obligation to pay rent to the Awardee or others, or any other place
or places where any of the Collateral is located and kept and: (i) remove the
Collateral therefrom in order to maintain, collect, sell, and/or liquidate the
Collateral or, (ii) use such premises, together with materials, supplies, books,
and records of the Awardee, to maintain possession and/or the condition of the
Collateral, and to prepare the Collateral for sale, liquidation, or collection.
RUS may require the Awardee to assemble the Collateral and make it available to
RUS at a place to be designated by RUS;

 
(f)  
RUS shall have the right, without prior notice to the Awardee, to exercise
rights of setoff or recoupment and apply any and all amounts held or hereafter
held, by RUS or owed to the Awardee or for the credit of the Awardee against any
and all of the Obligations. RUS agrees to notify the Awardee 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. Awardee waives all rights of setoff, deduction, recoupment or
counterclaim; and/or

 
(g)  
RUS shall have, in addition to any other rights and remedies contained in this
Agreement, and in any other agreements, guarantees, notes, mortgages,
instruments, and documents heretofore, now, or at any time or times hereafter
executed by the Awardee and delivered to RUS, all of the rights and remedies of
a secured party under the Uniform Commercial Code in force in the state
identified in the first paragraph hereof; as well as the state where the
Collateral is located, as of the date hereof, all of which rights and remedies
shall be cumulative, and nonexclusive.

 
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ARTICLE XII - MISCELLANEOUS
 
Section 12.1                      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 Addresses for Notices of the respective parties are as
follows:
 
RUS                                                                       Awardee
Rural Utilities
Service                                                               See
Schedule 1
United States Department of Agriculture
1400 Independence Avenue, S.W.
Washington, D.C.20250-1510
Attention: Administrator
Fax: (202) 720-1725
 
With a copy
to:                                                                  With a copy
to:
Rural Utilities
Service                                                               See
Schedule 1
United States Department of Agriculture
1400 Independence Avenue, S.W.
Stop 1599, Room No. 2868
Washington, D.C. 20250-1599
Attention: Kenneth Kuchno
Fax: (202) 690-4389
 
Section 12.2                      Notices of Actions Against Collateral
 
Any notice required to be given by RUS of a sale or other disposition or other
intended action by RUS with respect to any of the Collateral, or otherwise, made
in accordance with this Agreement at least five (5) days prior to such proposed
action, shall constitute fair and reasonable notice to the Awardee of any such
action.
 
Section 12.3                      Application of Proceeds
 
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 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 whosoever shall be entitled thereto.
 
Section 12.4                      Expenses
 
To the extent allowed by law, the Awardee shall pay all costs and expenses of
RUS, including reasonable fees of counsel, incurred in connection with the
enforcement of the Loan-Grant Documents or with the preparation for such
enforcement if RUS has reasonable grounds to believe that such enforcement may
be necessary.
 

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Section 12.5                      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
Awardee 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 Awardee shall pay to RUS, in addition to all other
amounts due under the terms of the Notes, the Mortgage and this Agreement, any
late payment charge as may be fixed from time to time on the delinquent amount
for the late-payment period by regulations adopted by RUS.
 
Section 12.6                      Filing Fees
 
To the extent permitted by law, the Awardee 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.
Awardee 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 section shall survive the
execution and delivery of this Agreement and the payment of all other amounts
due hereunder or due on the Notes.
 
Section 12.7                      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 12.8                      Governing Law
 
This Agreement shall be governed by and construed in accordance with applicable
federal law and, in the absence of controlling federal law, by the laws of the
State identified in the first paragraph herein, except those that would render
such choice of law ineffective.
 
Section 12.9                      Consent to Jurisdiction
 
The Awardee hereby irrevocably submits to the jurisdiction of the U.S. District
Court for the District of Columbia and the US Court of Appeals for the Federal
Circuit (both the "DC Federal Courts") for any action or proceeding arising out
of or relating to this Agreement, and hereby irrevocably agrees that all claims
in respect of such action or proceeding shall be heard and determined in such
federal courts. The Awardee irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Awardee's address set forth in Schedule 1. The Awardee hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement brought in the DC Federal Courts and hereby further
irrevocably waives and agrees not to plead or claim in such court that any such
action or proceeding brought in any such court has been brought in a forum non
conveniens. Nothing herein shall affect the right of the Government to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Awardee in its own jurisdiction.
 
 
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Section 12.10                    Waiver of Jury Trial
 
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, SECURED PARTY, OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
 
Section 12.11                    Holiday Payments
 
If any payment to be made by the Awardee hereunder shall become due on a day
that 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 12.12                    Rescission
 
The Awardee may elect to rescind the Award, in which event RUS shall release the
Awardee from its obligations hereunder, provided the Awardee complies with such
terms and conditions as RUS may impose for such release.
 
Section 12.13                    Successors and Assigns
 
(a)  
This Agreement shall be binding upon and inure to the benefit of the Awardee and
RUS and their respective successors and assigns, except that the Awardee may not
assign or transfer its rights or obligations hereunder without the prior written
consent of RUS.

 
(b)  
Pursuant to federal claims collection laws, RUS' claims hereunder may be
transferred to other agencies of the United States of America; in the event of
such a transfer, all rights and remedies hereby granted or conferred on RUS
shall pass to and inure to the benefit of any such successor agency.

 
Section 12.14                    Complete Agreement; Waivers and Amendments
 
Subject to RUS Regulations, this Agreement and the other Loan-Grant 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-Grant Documents. No
amendment, modification, or waiver of any provision hereof or thereof, and no
consent to any departure of the Awardee 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 12.15                    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 12.16                    Severability
 
If any term, provision, condition, or any part thereof, of this Agreement,
Note(s) or the Security Documents 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 team,
provision, or condition nor any other term, provision, or condition, and this
Agreement, the Note(s), and the Security Documents shall survive and be
construed as if such invalid or unenforceable term, provision or condition had
not been contained therein.
 
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Section 12.17                    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
Awardee, to exercise rights of setoff or recoupment and apply any and all
amounts held or hereafter held, by RUS or owed to the Awardee or for the credit
or account of the Awardee against any and all of the obligations of the Awardee
now or hereafter existing hereunder or under the Note(s). RUS agrees to notify
the Awardee 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. Awardee waives all rights of
setoff, deduction, recoupment or counterclaim.
 
Section 12.18                    Schedules and Attachments
 
Each Schedule and Attachment attached hereto and referred to herein is each an
integral part of this Agreement.
 
Section 12.19                    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-Grant 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 12.20                    Prepayment of Loan
 
In the event the Awardee prepays the entire Loan portion of the Loan within
three (3) years from the date hereof, the Awardee shall, within thirty (30) days
of making such prepayment, execute a standard grant agreement with the RUS.
 
Section 12.22                    Term
 
This Agreement shall remain in effect until one of the following two events has
occurred:
 
(a)  
The Awardee and RUS replace this Agreement with another written agreement;

 
(b)  
All of the Awardee's obligations under this Agreement have been discharged and
paid.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
 
UNITED UTILITIES, INCORPORATED
 
by   /s/ Steve Hamlen__________________
Name: Steve Hamlen
Title: President & CEO
 
(Seal)
 
Attested to by:   /s/ Bonnie J. Paskvan_________
Secretary
 
 
 
UNITED STATES OF AMERICA
 
by   /s/ Jonathan Adelstein______________
Administrator
of the Rural Utilities Service

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SCHEDULE 1
Article I               Definitions
 
1.  
Prior RUS Loan Contract:  LOAN AGREEMENT dated as of November 2, 2007

 
2.  
RUS Mortgage:  RESTATED MORTGAGE, SECURITY AGREEMENT AND FINANCIANG STATEMENT
dated as of November 2, 2007

 
 
Article II
Representations and Warranties

 
1.  
Paragraph (h) Awardee's principal place of business:  5450 A Street

               Anchorage, Alaska 99518
 
2.  
Paragraph (i) Awardee's Organization Number:  16696D

 
3.  
Paragraph (j) Awardee's Subsidiaries:  United-KUC, Inc.

 
4.  
Paragraph (j) Awardee's Parent: GCI Communication Corp.

 
5.  
Paragraph (n) Additional Representations and Warranties:

 
The Awardee represents and warrants that it is primarily engaged in the business
of transmitting communications electrically, electromagnetically, or by light.
 
Article III
The Loan

 
1.  
Section 3.1(a) Loan amount:  $44,158,522

 
2.  
Section 3.1(b) Grant amount:  $43,982,240

 
 
Article IV
Conditions Precedent to Loan Closing

 
1.  
The additional conditions referred to in Section 4.1(j) are as follows:  None

 
 
Conditions Precedent to Release of Funds

 
2.  
Section 4.2(b) amount of fidelity bond coverage:  $13,221,114

 
3.  
Section 4.2(d) funds deposited for Project completion:  None

 
4.  
The additional conditions referred to in Section 4.2(e) are as follows:

 
The obligations of RUS hereunder are subject to the satisfaction of the
following additional conditions ***:
 
a.  
The Awardee has provided RUS with ***of its *** with respect to the ***; and

 
b.  
The *** referred to immediately above in paragraph (a) has concluded.

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c.  
RUS shall have received the following executed agreements, in form and substance
satisfactory to RUS, which incorporate the fees and rates projected for each
respective agreement in the Application:

 
1.  
An agreement with GCI Communication Corporation for design and engineering,
construction management, and other services;

2.  
An agreement with GCI Communications Corporation for operation and maintenance
of the Awardee's system outside the existing LEC service area;

3.  
An agreement with GCI Communication Corporation for space and power in GCI
Communication Corporations facilities.;

4.  
An agreement with Unicom, Inc. for space and power in Unicom's existing
facilities.

 
 
 
Conditions Precedent to Individual Advances

 
5. Section 4.3(i) Required permits, licenses, franchise, and other
approvals:  None
 
6. The additional conditions to advance referred to in Section 4.3(k) are as
follow:  None
 
a.  
No *** that *** or involves ***, until the Awardee has *** from RUS that the ***
in accordance with ***.

 
b.  
No *** until the Awardee provides *** for the site: ***.

 
c.  
No *** for the site: ***.

 
d.  
No *** until the Awardee provides *** or the Awardee provides ***: ***.

 
 
Article V                      Affirmative Covenants
 
1. Section 5.10 Composite Economic Life of RUS financed facilities:  24 years
 
2. The additional affirmative covenants referred to in Section 5.21 are as
follows:  None
 
a.  
Within *** days ***, the Awardee shall provide *** to *** to initiate the *** as
to whether *** will ***.

 
b.  
Within *** days *** the Awardee shall provide *** to *** required by ***, in
accordance with ***, relating to ***.

 
c.  
The Awardee shall insert the following language in all construction contracts:

 
If previously unidentified historic properties (that is, properties listed on or
eligible for listing on the National Register of Historic Places) or
unanticipated effects to historic properties are discovered during Project
construction, the construction contractor shall immediately halt all activity
within a one hundred (100) foot radius of the discovery, notify United
Utilities, Incorporated and law enforcement of the discovery and implement
interim measures to protect the discovery from further impact, especially
looting and vandalism. Construction shall not resume within a 100 foot radius of
the discovery until the construction contractor has received written
instructions to proceed from United Utilities, Incorporated.
 
 
Page 32

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d.  
Immediately upon receipt of notification from the construction contractor that a
discovery of unidentified historic properties (properties listed or eligible for
listing on the National Register of Historic Places) or unanticipated effects to
historic properties are discovered during Project construction, the Awardee
shall:

 
(i)  
Inspect the construction site to determine the scope of the discovery and to
ensure that construction activities have halted;

(ii)  
Clearly mark the area of the discovery;

(iii)  
Implement additional measures, as appropriate, to protect the discovery from
further impact, especially looting and vandalism;

(iv)  
Notify USDA Rural Utilities Service (RUS), Engineering and Environmental Staff,
Federal Preservation Officer at 202-720-9583; and

 
(v)  
If the discovery contains human remains, comply with all applicable state laws,
notify the State Historic Preservation Office(s) and any Indian Tribes or
Hawaiian organizations which might be interested in the discovery.

 
Article VII                      Negative Covenants
 
1.  
The additional negative restrictions on Distributions and Withdrawals referred
to in Section 7.9(b) are as follows:  None

 
2.  
The additional negative covenants referred to in Section 7.17 are as follows:

 
a.  
The Awardee agrees not to *** relating to the Project *** and ***

 
b.  
The Awardee agrees not to *** until the Awardee *** that the ***.

 
c.  
The Awardee agrees not to resume construction or authorize a construction
contractor to resume construction within a 100 foot radius of a discovery of
unidentified historic properties (properties listed or eligible for listing on
the National Register of Historic Places) or unanticipated effects to historic
properties until receipt of written notification from RUS that the requirements
of the National Historic Preservation Act (16 U.S.C. 4700 have been met.

 
 
Article XII                      Miscellaneous
 
1.  
Section 12.1 Awardee's address for purposes of notification:

 
Greg Chapados
Chairman
United Utilities, Inc.
5450 A Street
Anchorage, Alaska 99518
Telephone: (907) 317-0090
 
 
2.  
Section 12.1 Address for Awardee's notification copy: same as above

 

Page 33 
 
 

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SCHEDULE 2
 
COLLATERAL
 
1. Collateral shall include the following:
 
All property, assets, rights, privileges, licenses and franchises of the Awardee
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
now owned or hereafter acquired or arising by the Awardee (by purchase;
consolidation, merger, donation, construction, erection or in any other way)
wherever located, including without limitation all or in part the following
(hereinafter the "Collateral:")
 
I
 
All right, title, and interest of the Awardee in and to the Existing Facilities,
buildings, plants, works, improvements, structures, estates, grants, franchises,
easements, rights, privileges and properties, whether real, personal, or mixed,
tangible or intangible, of every kind or description, now or hereafter owned,
leased, constructed, or acquired by the Awardee, wherever located, and in and to
all extensions, improvements, and additions thereto, including but not limited
to all buildings, plants, works, structures, towers, antennas, fixtures,
apparatus, materials, supplies, machinery, tools, implements, poles, posts,
crossarms, conduits, ducts, lines, wires, cables, whether underground, overhead,
or otherwise, exchanges, switches, including, without limitation, host and
remote switches, desks, testboards, frames, racks, motors, generators,
batteries, and other items of central office equipment, pay stations,
protectors, instruments, connections and appliances, office furniture,
equipment, and any and all other property of every kind, nature, and
description, used, useful, or acquired for use by the Awardee in connection
therewith;
 
II
 
All right, title, and interest of the Awardee in, to, and under any and all
grants, privileges, rights of way and easements now owned, held, leased, enjoyed
or exercised, or which may hereafter be owned, held, leased, acquired, enjoyed
or exercised, by the Awardee for the purposes of, or in connection with, the
construction or operation by, or on behalf of, the Awardee of its properties,
facilities, systems, or businesses, whether underground, overhead, or otherwise,
wherever located;
 
III
 
All right, title, and interest of the Awardee in, to, and under any and all
licenses and permits (including without limitation those granted by the Federal
Communications Commission ("FCC"), subject to the FCC's prior approval of any
assignment or transfer of de jure or de facto control of such licenses),
franchises, ordinances, and privileges, whether heretofore or hereafter granted,
issued, or executed, to it or to its assignors by the Government, or by any
state, county, township, municipality, village, or other political subdivision
thereof, or by any agency, board, commission, or department of any of the
foregoing, authorizing the construction, acquisition, or operation of the
Awardee's properties, facilities, systems, or businesses, insofar as the same
may by law be assigned, granted, bargained, sold, conveyed, transferred,
mortgaged, or pledged;
 
IV
 
All right, title, and interest of the Awardee in, to, and under all personal
property and fixtures of every kind and nature, including without limitation all
goods (such as inventory, equipment and any accessions thereto), instruments
(such as promissory notes or chattel paper, electronic or otherwise), documents,
accounts (such as deposit accounts or trust accounts pursuant hereto or to a
loan agreement), letter-of-credit rights, investment property (such as
certificated and uncertificated securities or security entitlements and
accounts,) software, general intangibles (such as payment intangibles),
supporting obligations, contract rights or rights to the payment of money,
insurance claims, and proceeds (as such teems are presently and hereafter
defined in the UCC; provided, however, that the term "instrument" shall be such
term as defined in Article 9 of the UCC rather than Article 3);
 
 
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V
 
All right, title, and interest of the Awardee in, to, and under any and all
agreements, leases or contracts heretofore or hereafter executed by and between
the Awardee and any person, fu 1, corporation, or other corporate entity
relating to the Collateral (including contracts for the lease, occupancy, or
sale of the Collateral, or any portion thereof);
 
VI
 
All right, title, and interest of the Awardee in, to, and under any and all
books, records and correspondence relating to the Collateral, including, but not
limited to, all records, ledgers, leases, computer and automatic machinery,
software, programs, databases, disc or tape files, print-outs, batches, runs,
and other electronically-prepared information indicating, summarizing,
evidencing, or otherwise necessary or helpful in the collection or realization
on the Collateral;
 
VII
 
Also, all right, title, and interest of the Awardee in, to, and under all other
property, real or personal, tangible or intangible, of every kind, nature, and
description, and wherever situated, now or hereafter owned or leased by the
Awardee, it being the intention hereof that all such property now owned or
leased but not specifically described herein, or acquired or held by the Awardee
after the date hereof, shall be as fully embraced within and subjected to the
lien hereof as if the same were now owned by the Awardee and were specifically
described herein to the extent only, however, that the subjection of such
property to the lien hereof shall not be contrary to law;
 
Together with all rents, income, revenues, proceeds, products, profits and
benefits at any time derived, received, or had from any and all of the
above-described property of the Awardee;
 
Provided, however, no automobiles, trucks, trailers, tractors or other vehicles
(including without limitation aircraft or ships, if any) owned or used by the
Awardee shall be included in the Collateral.
 
 
2.
Additionally, property pledged as Collateral shall also include the following
specifically described property, if any:  None

Page 35 
 
 

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ATTACHMENT 1
 
 
 
BROADBAND INITIATIVES PROGRAM
 
CONTRACTING, WORK ORDER AND ADVANCE PROCEDURES GUIDE
 
 

 
 

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Rural Development
United States Department of Agriculture
 
 
 
 
 
RURAL UTILITIES SERVICE
 
 
 
 
 
 
 
 
Broadband Initiatives Program
Contracting, Work Order and
Advance Procedures Guide
 
 
 
 
 
 
 
 
 
 
 

 
 

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GENERAL
 
This guide implements and explains the provisions of the loan and grant
documents containing the requirements and procedures to be followed by an
Awardee performing work to be financed with RUS Recovery funds. The Awardee
shall maintain accounting and plant records sufficient to document the cost and
location of all construction and to support fund advances and disbursements. The
standard Loan and Grant Documents also contain provisions regarding advances and
disbursement of broadband funds. This document also implements certain
provisions by setting forth requirements and procedures to be followed by the
Awardees in obtaining advances and making disbursements of funds.
 
ABBREVIATIONS
 
For purpose of this guide:
 
C.F.R. stands for Code of Federal Regulations.
 
FRS stands for RUS Form 481, Financial Requirement Statement.
 
GFR stands for RUS general field representative.
 
Pub. L. stands for Public Law.
 
U.S.C. stands for United States Code.
 
DEFINITIONS
 
For purposes of this guide:
 
Advance means transferring funds from RUS to the Awardee's deposit account.
 
Architect means a person registered as an architect in the state where
construction is performed.
 
Award means any broadband award made by RUS.
 
Award documents mean the documents covering an award made by RUS, including the
loan or grant agreement, note, and mortgage or other security documents between
the Awardee and RUS.
 
Award funds means funds provided by RUS through an award.
 
Awardee means any organization that has received financing from RUS.
 
Bid guarantee means a bid bond or certified check required of contractors
bidding on construction work to ensure that the bidder, if successful, will
furnish a performance bond.
 
Buy American Requirement means the requirements as stated in the Recovery Act
and any associated waivers.
 
Broadband Service means the minimum transmission rate as defined in the
applicable NOFA for the Broadband Initiatives Program, under which the award was
made.
 
Closeout documents mean the documents required to certify satisfactory
completion of all obligations under a contract.
 
Contract means the agreement between the Awardee and an independent contractor
covering the purchase and/or installation of equipment or the construction of
facilities to deliver broadband services for an Awardee's system.
 
 

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Contract work means any work performed pursuant to an RUS form contract, or a
Non-Standard Contract.
 
Disbursement means payment by the Awardee out of the deposit account for
approved award purposes.
 
Engineer means a person registered as an engineer in the state where
construction is performed, or a person on the Awardee's staff authorized by RUS
to perform engineering services.
 
In-house engineering means any pre-loan or post-loan engineering services
performed by the Awardee's staff.
 
Interim work means any work that commences after an application has been
submitted to RUS, but prior to release of award funds.
 
Non-Standard Contract means a non-RUS form contract for specific work that is
submitted by the Awardee, which must be approved by RUS before execution, if it
is to be funded.
 
Outside plant means the part of the telecommunications network that is
physically located outside of telecommunication buildings. This includes cable,
conduits, poles and other supporting structures and certain other associated
equipment items.
 
Performance bond means a surety bond in form satisfactory to RUS guaranteeing
the contractor's faithful performance of a contract. (See 7 CFR Part 1788.)
 
Plans and specifications means a copy of the appropriate contract, the
specifications, and such additional information and documents needed to provide
a clear, accurate, and complete understanding of the work to be performed.
 
Pledged Deposit account means an account required by the award agreement into
which all RUS funds are advanced.
 
RUS means the Rural Utilities Service; an agency of the United States Department
of Agriculture and successor to the Rural Electrification Administration.
 
RUS form contract means contracts identified as a RUS form.
 
Subcontract means a secondary contract undertaking some of the obligations of a
primary contract.
 
System design means the system described in the approved Application.
 
Work means any purchase of equipment, software and/or installation, if
applicable; construction of facilities; or professional services.
 
Work order means any work performed by the Awardee's employees, pursuant to its
work order procedure, with the Awardee furnishing all materials, equipment,
tools, and transportation.
 
CONTRACTING PROCEDURES
 
I           GENERAL
 
All work must conform to the Application, as approved by RUS, and shall be
covered by an Environmental Report prepared in accordance with 7 CFR Part 1794
and approved by RUS. No construction and/or installation activities shall
commence until all necessary local, state and federal requirements have been
satisfied.
 

 
 

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All work performed prior to the submission of an application to RUS will not be
eligible for financing. In addition, only new materials and equipment may be
financed with award funds, unless otherwise approved in writing by RUS.
 
A.  
Interim Work

 
Once RUS has received an application, the applicant may proceed with interim
work. However, this should not be construed as a commitment that RUS will
approve the application. To ensure that interim work is eligible for
reimbursement with award funds, the Awardee must comply with all the procedures
in this Guide, including the following requirements:
 
(1)  
Equal employment opportunity requirements in RUS Bulletin 320-15; and

 
(2)  
Environmental requirements contained in 7 CFR 1794;

 
B.
Non-Standard Contracts

 
The Awardee may choose to use a Non-Standard contract to perform work. The
Non-Standard Contract must include a provision that it will not be binding on
the parties, until administrative approval by RUS has been granted. RUS will not
approve use of the Non-Standard Contract if, in RUS' judgment:
 
(1)  
The contract is for work not covered in the approved Application, or is not for
an Eligible Purpose;

 
(2)  
The contract terms and conditions, are vague, inadequate, or unreasonable; or

 
(3)  
The contract presents unacceptable loan security risk to RUS.

 
C.            Contract Amendments
 
The Awardee shall obtain RUS approval before execution of any amendment to an
approved contract if:
 
(1)  
The amendment alters the terms and conditions of the contract or changes the
scope of the project covered by the contract regardless of the amount of the
contract before amendment;

 
(2)  
The amendment by itself (or together with preceding amendments) increases the
original contract price by 20% or more. In this case, a bond extension will be
required to bring the penal sum of the bond to the total amended contract price;
or

 
(3)  
The amendment causes an unbonded contract to require a contractor's performance
bond. This would occur when an amendment increases the contract price to an
amount requiring a performance bond per 7 CFR Part 1788, Subpart C.

 
Once RUS approval to amend the contract has been granted, or for any other
contract amendments not requiring approval, the Awardee must submit an original
executed amendment to RUS.
 
D.            Insurance
 
A performance bond is required for construction of facilities exceeding
$250,000, as indicated in 7 CFR Part 1788, Subpart C, or certain significant
installation, as outlined in the Agency's memorandum found at
http://www.usda.gov/rus/telecom/publications/pdf_files/Contractors-Bond­Requirement7-28-09.pdf.
 
 

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The Awardee is responsible for ensuring that its contractor and engineer comply
with all the insurance and bond requirements of 7 CFR Part 1788, Subpart C.
 
E.  
Title Clearance

 
For any building construction over $250,000, the Awardee shall provide title
evidence satisfactory to RUS, prior to releasing the invitations to bid.
 
F.  
Software License

 
As part of an equipment purchase, the original equipment manufacturer may
require that the Awardee enter into a software license agreement for the use of
the equipment. The Awardee may use RUS Form 390, Software License
Agreement—Special Equipment Contract, or a Non- Standard Contract.
 
G.  
Buy American

 
All iron, steel, or manufactured goods that are purchased with Recovery Act
funds by state or local governments, or an instrumentality thereof, which are
not included in the Agency's waiver covering Broadband Switching Equipment,
Broadband Routing Equipment, Broadband Transport Equipment, Broadband Access
Equipment, Broadband Customer Premises Equipment and End- User Devices, or
Billing/Operations Systems, shall be subject to the Buy American provision of
the Recovery Act, unless a waiver is requested from the RUS. For further details
see 74 Fed. Reg. 31402.
 
H.  
Davis-Bacon Act

 
The Awardee shall comply with The Davis-Bacon Act, and the guidance found at 29
C.F.R pts. 1, 3, and 5, such that any covered contract with a contractor or
subcontractor in excess of $2,000 for construction, alteration or repair
(including painting and decorating) shall contain the contract clauses found in
29 C.F.R. 5.5(a), to ensure that all laborers and mechanics employed on the
Project receive payment of not less than the prevailing wage.
 
I.  
Affiliated Transactions

 
With regard to the Project, the Awardee shall not enter into any transaction,
contract, or dealing with an Affiliate of the Awardee or with the Awardee's or
Affiliate's directors, trustees, officers, managers, members (if the Awardee is
a limited liability company), or other corporate officials, without the prior
written consent of RUS. RUS' consent to advance award funds for affiliated
transactions will be limited to an amount which is the lower of cost or market
rate and which is subject to verification by RUS and its representatives having
access to the books and records of the Affiliate.
 
As defined in the appropriate award document, "Affiliate" or "Affiliated
Company" of any specified person or entity means any other person or entity
directly or indirectly controlling of, controlled by, under direct or indirect
common control with, or related to, such specified person or entity, or which
exists for the sole purpose of providing any service to one company or
exclusively to companies which otherwise meet the definition of affiliate. This
definition includes Variable Interest Entities as described in Financial
Accounting Standards Board Interpretation (FIN) No. 46(R), Consolidation of
Variable Interest Entities. For the purpose of this definition, "control" means
the possession directly or indirectly, of the power to direct or cause the
direction of the management and policies of a company, whether such power is
exercised through one or more intermediary companies, or alone, or in
conjunction with, or pursuant to an agreement with, one or more other companies,
and whether such power is established through a majority or minority ownership
voting of securities, common directors, officers, or stockholders, voting trust,
holding trusts (other than money exchanged) for property or services.
 
 

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J.  
Records

 
Records supporting all assets financed by RUS shall be retained until audited
and approved by RUS.
 
Records must be sufficient to document the cost and location of all expenditures
and to support advances and disbursement of award funds. The support records
must include, but not be limited to, contracts, third party invoices,
timesheets, payroll records, material records, and overhead allocation records
and summary schedules
 
Records related to plant in service must be retained until the facilities are
permanently removed from utility service, all removal and restoration activities
are completed, and all costs are retired from the accounting records unless
accounting adjustments resulting from reclassification and original costs
studies have been approved by RUS or other regulatory body having jurisdiction.
 
Life and mortality study data for depreciation purposes must be retained for 25
years or for 10 years after plant is retired, whichever is longer.
 
II           PROFESSIONAL SERVICES
 
General
 
Awardees shall only obtain professional services from persons or firms not
affiliated with, or that do not represent a contractor, vendor or manufacturer
presently providing labor, materials, or equipment to the Awardee. This does not
include in-house services.
 
A.  
Engineering Services

 
All engineering services required by an Awardee, including inspection and
certification, shall be rendered by an engineer selected by the Awardee and
licensed in the State where the facilities will be located, or by qualified
employees on the Awardee's staff, who after submission of qualifications to RUS,
have been approved to perform such services.
 
(1)  
Outside Consultant. Engineering services performed by an outside consultant may
be covered under RUS Form 217, Postloan Engineering Services Contract -
Telecommunications, RUS Form 245, Engineering Service Contract — Special
Services, or a Non-Standard Contract.

 
(2)  
In-House Engineering. When the proposed work is such that the engineering
involved is within the capabilities of the employees on the Awardee's staff,
Awardees may request RUS approval to provide such services. The request shall
include:

 

 
(i)
A description of services to be performed;

 
(ii)
The names and qualifications of each employee that will be performing the
specific services. In addition, the Awardee shall identify an employee who will
be in charge of the services. Such employee must meet the State experience
requirements for a registered engineer in the State where facilities will be
located. In the absence of specific State experience requirements, this employee
should have at least eight years experience in the design and construction of
telecommunication facilities, with at least two years of the work experience at
a supervisory level. RUS does not require professional registration of this
employee, but this does not relieve the Awardee from compliance with applicable
state registration requirements, which may require a licensed individual to
perform such services; and

 
 

--------------------------------------------------------------------------------

 
 
(iii)
A letter signed by an authorized representative of the Awardee requesting
in-house engineering approval and certifying the supporting information.

 
RUS shall notify the Awardee by letter of approval or disapproval to perform
in-house engineering. The letter shall set forth any conditions associated with
an approval or the reasons for disapproval. RUS approval of in-house engineering
services shall be only for the specific services covered by the approval.
 
B.  
Architectural Services

 
The Awardee shall select an architect licensed in the state where the facility
will be located. The borrower may use either RUS Form 220 or RUS Form 217 when
contracting for architectural services, or a Non-Standard Contract.
 
C.  
Contract and Closeout Documents

 
The Awardee must submit three executed copies of the RUS form contract or the
approved Non- Standard Contract, covering the professional services to be
provided, for final administrative approval. Once all services and obligations
required under the professional services contract have been completed, Awardees
shall submit two copies of RUS Form 288, Final Statement of Architect's Fees
and/or RUS Form 506, Final Statement of Engineering Fees, to close out the
specific RUS Form contract. Awardees using Non-Standard Contracts should provide
a similar certification for Non-Standard Contracts.
 
 
III          PURCHASE AND INSTALLATION OF EQUIPMENT

 
 
General

 
When purchasing any equipment, including installation, that costs more than
$100,000, the Awardee must use a contract for the purchase. Any equipment
purchases for less than $100,000, including installation, can be purchased under
a purchase order and reimbursed after submission of the invoices along with an
RUS Form 771a, following the inspection and reimbursement procedures under Work
Order procedures.
 
A. Equipment Purchased with Contract
 
Awardee may use RUS Form 397, Special Equipment Contract (Including
Installation), RUS Form 398, Special Equipment Contract (Not Including
Installation), or a Non-Standard Contract.
 
The engineer shall prepare the performance requirements, including any
installation requirements, if applicable, prior to releasing them along with the
respective contract to prospective vendors. The Awardee may purchase equipment
using a negotiated purchase, although RUS recommends that the Awardee obtain
quotes from at least three different vendors.
 
Equipment purchased under RUS Form 398 or a Non-Standard Contract that does not
include installation, may be installed by the Awardee using the Work Order
method or RUS Form 773, as outlined in the Work Order procedures below.
 
B. Contract and Closeout Documents
 
Once a vendor has been selected, the Awardee must submit three executed copies
of the RUS form contract or the approved Non-Standard Contract, including the
non-standard performance requirements covering the equipment to be provided, for
final administrative approval. Once all equipment purchased under the contract
has been installed, and tested, and meets the performance requirements, the
Awardee shall proceed with the closeout of the contract and submit a final
contract closeout certification on RUS Form 756 or a similar certification for
Non-Standard Contracts.
 
 

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IV
CONSTRUCTION OF FACILITIES

 
 
General

 
Construction for outside plant facilities, building, and towers may be performed
using the work order method or by an outside contractor. When using an outside
contractor, either RUS Contract Forms 773, 257, or 515, or a Non-Standard
contract may be used.
 
A.  
Outside Contractor

 
If using a standard RUS Contract Form, the Awardee shall use the form without
modifications, and attach any diagrams, sketches, and tabulations necessary to
specify clearly the work to be performed and who shall provide which materials.
 
The engineer shall prepare the construction specifications prior to releasing
them along with the respective contract to prospective contractors. RUS
recommends that Awardees obtain quotes from several contractors before entering
into a contract to ensure obtaining the lowest cost. The Awardee shall ensure
that the contractor selected meets all federal, state, and local licensing
requirements, as well as bonding requirements, and that the contractor maintains
the insurance coverage required by the contract for the duration of the work.
(See 7 C.F.R. Part 1788.)
 
Once a contractor has been selected, the Awardee must submit three executed
copies of the RUS form contract (except RUS Form 773, which shall follow the
procedures below) or the approved Non-Standard Contract, including the
construction specifications for the work to be performed, for final
administrative approval. Once construction has been completed per the
construction specifications and all acceptance tests have been made, the Awardee
shall proceed with the closeout of the contract and submit a final contract
closeout certification on RUS Form 756 or a similar certification for
Non-Standard Contracts.
 
B.  
Work Order Procedures

 
Work order construction shall be performed to all local, state, and Federal
requirements. As work order construction is performed, the Awardee shall keep
daily timesheets and material reports, referenced by the work project number, to
record labor and materials used. Cost accounting system must be in place to meet
the requirements of 7 CFR 3015 (including 48 CFR 31.2), 3016, 3019 as
applicable, to show the source and summary records to support requested and
expended funds.
 
(1)  
Inspection and Certification. Upon completion and prior to closeout, the Awardee
shall obtain the engineer's certification on RUS Form 771a for all construction
completed using RUS Form 773 or the work order method. An authorized official of
the Awardee shall execute the Awardee's certification.

 
(2)  
Reimbursement. To request funds for construction completed under the work order
construction procedures or RUS Form 773 contract construction procedures, the
Awardee shall submit RUS Form 771a, initialed by the GFR, along with a
description of each project, as well RUS Form 481, Financial Requirement
Statement (FRS). RUS Form 771a should be submitted only with the FRS that it
supports. Unless otherwise approved by RUS, the Awardee shall finance all work
order and RUS Form 773 contract construction with non-loan funds and obtain
reimbursement with RUS funds when construction is completed and properly
executed closeout documents have been submitted to RUS.

 
 

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V
ADVANCE AND DISBURSEMENT OF FUNDS

 
 
General

 
The award document contains the provisions regarding advances and disbursement
of funds to the Awardee. This section implements certain provisions by setting
forth requirements and procedures to be followed by the Awardee in obtaining
advances and making withdrawals/disbursements of funds.
 
RUS is under no obligation to make or approve advances of funds unless the
Awardee complies with all terms and conditions of the award documents.
 
    A. Broadband Budget
 
The Awardee will be provided a broadband budget, based on the approved
Application. This budget divides the award into budget categories that are
associated with the proposed projects, such as equipment, outside plant, land
and buildings, professional services, etc. Funds from one budget category may
not be used for a different budget category without prior written approval from
RUS.
 
    B. Budget Adjustments
 
If more funds are required than are available in a budget category, the Awardee
may request RUS' approval of a budget adjustment to use funds from another
budget category. The request shall include an explanation as to why the
adjustment is needed and the affected budget categories. RUS will not approve a
budget adjustment unless the Awardee can demonstrate that all purposes can still
be completed with the requested adjustment. RUS, at its discretion, may make a
budget adjustment without a formal request to encumber funds for a contract,
when funds within the budget category are insufficient, and when it determines
that the budget adjustment is insignificant.
 
    C. Pledged Deposit Account
 
The Awardee shall establish and maintain a pledged deposit account to hold all
Advances deposited by the Agency. The pledged deposit account shall only be
established in a bank or depository whose deposits are insured by the FDIC or
other federal agency acceptable to RUS. Funds in the pledged deposit account
shall be used solely for the purpose approved in the Application and shall be
withdrawn/disbursed for the approved purposed for which they were requested in
the financial requirement statement. All Advances will be deposited into the
pledged deposit account by electronic transfer.
 
RUS may require that other funds be deposited into the pledged deposit account.
These may include equity or general fund contributions to construction, proceeds
from the sale of property, interest received on award funds and similar types of
receipts. Deposit slips for any deposits to the pledged deposit account shall
show the source and amount of funds deposited and be executed by an authorized
representative of the bank. The disbursement of non-award funds deposited into
the pledged deposit account requires the same RUS approval as Advances on the
award.
 
For accounting purposes, all withdrawals/disbursements from the Pledged Deposit
Account must be evidenced by canceled checks or support for other forms of
payment. Disbursements to reimburse the Awardee's general fund account shall be
documented by a reimbursement schedule to be retained in the Awardee's records
that lists the pledged deposit account check number, date, and an explanation of
amounts reimbursed for the Project.

 
 

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D.  
Financial Requirement Statement (FRS)

 
To request Advances the Awardee must submit RUS Form 481, Financial Requirement
Statement ("FRS"), a description of the Advances desired, and other related
information to the transactions as required by RUS.
 
The Awardee must request funds in the first Advance to repay any interim
financing indebtedness, as well as other approved pre-application expenses. RUS
may not make further Advances until the Awardee has submitted evidence, in form
and substance satisfactory to RUS, that: (1) any indebtedness created by the
interim financing and any liens associated therewith have been fully discharged
of record; and (2) the Awardee has satisfied all other conditions on the advance
of additional loan funds.
 
If the source of funds for interim financing is the Awardee's internally
generated funds, the Awardee may request reimbursement of those funds along with
Advances for other purposes on the first FRS submitted to RUS.
 
The Awardee shall, request advances as needed to meet its obligations promptly.
Generally, RUS does not approve an advance requested more than 30 days before
the obligation is payable.
 
Funds must be disbursed for the item for which they were advanced except in the
following circumstance. If the Awardee needs to pay an invoice which has been
approved on an FRS for which funds have not been advanced, and disbursement of
advanced funds for another item has been delayed, the latter funds may be
disbursed to pay the due and owing invoice up to the amount approved for such
item on the FRS. The Awardee shall make entries on the next FRS showing the
changes under "Total Advances to Date" and shall explain the changes in writing
before RUS will process the next FRS.
 
The certification on each of the three copies of the FRS sent to RUS shall be
signed by a corporate officer or manager authorized to sign such statements. RUS
Form 675, Certificate of Authority, shall be submitted to RUS indicating the
names of all persons authorized to sign a FRS. RUS will not process a FRS signed
by an individual whose name is not included on the most recent Form 675.
 
Funds other than award funds that are deposited in the pledged deposit account
are reported as a . credit under total disbursements. Disbursements of these
funds are subject to the same RUS approvals as RUS funds.
The documentation required for audit of FRS transactions, include but are not
limited to deposit slips for the pledged deposit account, all cancelled pledged
deposit account checks and the supporting third party invoices, timesheets,
payroll records, accounts payable records, general ledger, etc., and/or
reimbursement schedules. These shall be kept in the Awardee's files for periodic
audits by RUS.
 
The FRS shall be the primary method used by the Awardee to record and control
transactions in the deposit account. Approved contracts and other items are
shown on the FRS under "Approved Purposes." Funds are approved for advance as
follows:
 
(1)  
Contracts/Work Orders

 
(a)  
Equipment Contracts: Ninety percent of the approved contract amount,including
amendments, with the final 10 percent available when RUS approves the contract
closeout certification.

 
 

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(b)  
Construction contracts: Ninety-five percent of the approved contract amount,
including amendments, with the fmal 5 percent available when RUS approves the
contract closeout certification.

 
(c)  
Work orders: The amount shown on the RUS form 771a that RUS determines to be
eligible for reimbursement.

 
(2)  
Pre-Application Expenses and Engineering

 
(a)  
Pre-Application expenses: Based on the final itemized invoice from the person(s)
or firm(s) that provide services to complete the Application, engineering, and
accounting, as approved by RUS.

 
(b)  
Post-loan engineering contracts: Ninety-five percent of the amount of the RUS
approved engineering contract, with the final 5 percent available when RUS
approves the fmal statement of engineering/architectural fees.

 
(c)  
In-house engineering: One hundred percent of the amount approved by RUS.

 
(3)  
Operating Equipment

 
Office equipment, vehicles, and work equipment will be reimbursed based on
copies of invoices.
 
E. Temporary Excess Construction Funds
 
When unanticipated events delay the Awardee's disbursement of advanced funds,
the funds may be used for other approved purposes as described above or must
remain in the pledged deposit account. If the pledged deposit account is an
interest bearing account, all interest earned must remain in the pledged deposit
account and cannot be disbursed without RUS approval.
 
F. Method of Advancing Funds
 
The first or subsequent advances may be conditioned on the satisfaction of
certain requirements stated in the Awardee's agreement with RUS.
 
All advances shall be made electronically using the Automatic Clearing House
(ACH). Normally, for advance of funds ACH only makes one payment per FRS.
 
The following information shall be included with each advance:
 
(1)  
Name and address of Awardee's bank. If the Awardee's bank is not a member of the
Federal Reserve System, the name and address of its correspondent bank that is a
member of the Federal Reserve System;

 
(2)  
ACH routing information;

 
(3)  
Awardee's bank account title and number; and

 
(4)  
Any other necessary identifying information.

 
 

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ATTACHMENT 2
 
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 non-discrimination 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 worker's
representative of the contractor's commitments under this section, and shall
post copies of the notice in conspicuous place available to employees and
applicants for employment.

 
(d)  
The contractor shall comply with all provisions of Executive Order 11246 of
September 24, 1965and 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 compliance with such rules,
regulation, and orders.

 
(f)  
In the event of the contractor's non-compliance 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 part by the
Government, and the contractor may be declared ineligible for further Government
contracts or federally assisted construction contracts in accordance with the
procedure authorized in Executive Order 11246 of September 14, 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
non-compliance; 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.

 

 
 

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PROMISSORY NOTE
 
                            ALASKA 1102-A40
                            Anchorage, Alaska
 
THIS PROMISSORY NOTE (hereinafter the “Note,”) dated as of June 1, 2010, is made
by UNITED UTILITIES, INC. (hereinafter the “Borrower,”) a corporation duly
organized and existing under the laws of the State of Alaska, to the UNITED
STATES OF AMERICA, (hereinafter the “Government,”) acting through the
Administrator of the Rural Utilities Service (“RUS.”)  For value received, the
Borrower promises to pay to the order of the Government, at the United States
Treasury, Washington, D.C., Forty Four Million One Hundred Fifty Eight Thousand
Five Hundred Twenty Two Dollars ($44,158,522), with interest payable, from the
date of each advance, on the amount advanced by the Government (hereinafter the
“Advance,”) pursuant to a certain Loan/Grant and Security Agreement, dated the
same date as this Note (hereinafter the “Loan/Grant Agreement,”) made by and
between the Borrower and the Government, and remaining unpaid from time to time,
in the time and manner herein provided:
 
1.  
Interest Rate.  Interest on each Advance shall be at rate(s) per annum,
published by the Secretary of the Treasury, which shall be equal to the cost of
borrowing of the Department of Treasury for obligations, as determined by the
Government, of comparable maturity (hereinafter the “Cost-of-Money Interest
Rate.”)

 
2.  
Maturity Date.  On a date Twenty Four (24) years after the date hereof, the
principal hereof advanced pursuant to the Loan/Grant Agreement and remaining
unpaid, if any, and interest thereon, shall be due and payable (hereinafter the
“Maturity Date.”)

 
3.  
Fund Advance Period.  Funds will be advanced pursuant to the Loan/Grant
Agreement.  The fund advance period for this Note begins on the date hereof and
terminates three (3) years from the date of this Note (hereinafter the
“Termination Date.”)  No funds will be advanced subsequent to the Termination
Date.

 
4.  
Payments on Advances.

 
(a)  
Made Within One (1) Year.  Interest on Advances made during the first year from
the date of the first Advance hereunder, and remaining unpaid, shall be payable
on the last day of each month (hereinafter the “Monthly Payment Date,”)
beginning on the last day of the month following the month of each Advance for
the period ending one (1) year from the date of the first Advance
hereunder.  Thereafter, to and including the Maturity Date, the Borrower shall
make a payment every Monthly Payment Date on each Advance made during such
period which shall be: (i) substantially equal to all subsequent monthly
payments and (ii) in an amount that will pay all principal and interest due on
each Advance no later than the Maturity Date.

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(b)  
Made After One (1) Year.  Interest and principal payments on Advances made more
than one (1) year after the date of the first Advance hereunder shall be repaid
in installments beginning with the Monthly Payment Date of the month following
each Advance and ending on the Maturity Date.  The first such payment on an
Advance shall be increased by the amount of interest accruing between the date
of the Advance and the first day of the next month.  Thereafter, to and
including the Maturity Date, the Borrower shall make a payment every Monthly
Payment Date on each Advance (i) substantially equal to every other monthly
payment on such Advance, and (ii) in an amount that will pay all principal and
interest of each Advance no later than the Maturity Date.  This payment shall be
in addition to the payment on the Advances made within one (1) year from the
date of the first Advance hereunder and remaining unpaid.

 
5.  
Application of Payments.  Each payment made on this Note shall be applied as
follows: First, to expenses, costs and penalties; Second, to late charges;
Third, to the payment of interest on principal; and Fourth, to principal.

 
6.  
Prepayment.  All, or a portion of the outstanding balance, of any Advance may be
prepaid on any payment date, as herein provided.  However, so long as any of the
principal advanced pursuant to the Loan/Grant Agreement shall remain unpaid, the
Borrower shall be obligated to make the monthly payment on account of principal
and interest, in the amount provided herein, unless the Borrower and the
Government shall otherwise agree, in writing.

 
7.  
Late Payments.  A late charge shall be charged on any payment not made within
five (5) days of the date the payment becomes due.  The late charge rate shall
be computed on the payment from the due date at a rate equal to the rate of the
cost of funds to the United States Treasury as prescribed and published by the
Secretary of the Treasury.  In addition, the Borrower shall pay administrative
costs and penalty charges assessed in accordance with applicable Government
regulations.  Acceptance by the Government of a late payment shall not be deemed
to be a waiver of any right or remedy of the Government.

 
8.  
Security.  This Note is secured by a security interest in collateral described
in the Loan/Grant Agreement as such agreement may be amended, supplemented,
consolidated or restated from time to time.  Rights and obligations with respect
to the collateral are stated herein.

 
9.  
Noteholder.  This Note evidences indebtedness created by a loan made pursuant to
the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5, 123 Stat. 115
(2009), the Notice of Funds Availability published at 74 Fed. Reg. 33104 and
Title VI of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.)  The
Government shall be and shall have all rights as holder of this Note.

 
10.  
Default.  In an event of default, as provided in the Loan/Grant Agreement, all
principal advanced pursuant to the Loan/Grant Agreement and remaining unpaid on
this Note, and all interest thereon may be declared or may become due and
payable in the manner and with the effect provided in the Loan/Grant Agreement.

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11.  
Costs.  The Borrower shall pay any and all costs and expenses incurred in
connection with the exercise of rights or the enforcement of remedies, as set
forth in the Loan/Grant Agreement.

 
12.  
Waivers.  The Borrower waives demand, presentment for payment, notice of
non-payment, notice of dishonor, protest, and notice of non-payment of this
Note.

 
13.  
Obligations.  The obligations hereunder of the Borrower on this Note are
absolute and unconditional, irrespective of any defense or any right to set off,
recoupment, or counterclaim it might otherwise have against the Government.

 
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
corporate or legal name and its corporate seal, if any, to be hereunto affixed
and attested by its officers thereunto duly authorized, all as of the day and
year first above written.
 
UNITED UTILITIES, INC.
 
 
by _/s/ Steve Hamlen_______________
Name:  Steve Hamlen
 
(SEAL)                                                                            Title:  President
& CEO
 
Attested to by: _/s/ Bonnie J. Paskvan______
 
 

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