192

§ 1717.1205 7 CFR Ch. XVII (1–1–00 Edition)

the borrower’s loan documents or RUS

regulations; and

(ii) Requirements deemed necessary

by RUS to perfect and protect its lien

on cash deposits, securities, equipment,

vehicles, and other items of real or

non-real property; and

(4) In the case of a power supply borrower, the borrower may be required to

obtain credit support from its member

systems, as well as pledges and action

plans by the members to change their

operations, management, and organizational structure (e.g., shared services,

mergers, or consolidations) in order to

reduce operating costs, improve efficiency, and/or expand markets and revenues.

(k) Conveyance of assets. As a condition of a settlement, a borrower may

be required to convey some or all its

assets to the government.

(l) Additional conditions. The borrower

will be required to warrant and agree

that no bonuses or similar extraordinary compensation has been or will

be provided, for reasons related to the

settlement of government debt, to any

officer or employee of the borrower or

to other persons or entities identified

by RUS. The Administrator may impose such other terms and conditions

of debt settlement as the Administrator determines to be in the government’s interests.

(m) Certification of accuracy. Before

the Administrator will approve a debt

settlement, the manager or other appropriate official of the borrower must

certify that all information provided to

the government by the borrower or by

any agent of the borrower, in connection with the debt settlement, is true,

correct, and complete in all material

respects.

§ 1717.1205 Waiver of existing conditions on borrowers.

Pursuant to section 331(b) of the Con

Act, the Administrator, at his or her

sole discretion, may waive or otherwise

reduce conditions and requirements

imposed on a borrower by its loan documents if the Administrator determines that such action will contribute

to enhancement of the government’s

recovery of debt. Such waivers or reductions in conditions and requirements under this section shall not include the exercise of any of the debt

settlement measures set forth in

§1717.1204(c), which are subject to all of

the requirements of said §1717.1204.

§ 1717.1206 Loans subsequent to settlement.

In considering any future loan requests from a borrower whose debt has

been settled in whole or in part (including the surviving entity of merged or

consolidated borrowers, where at least

one of said borrowers had its debts settled), it will be presumed that credit

support for the full amount of the requested loan will be required. Such

support may be in a number of forms,

provided that they are acceptable to

the Administrator on a case by case

basis. They may include, but need not

be limited to, equity infusions and

guarantees of debt repayment, either

from the applicant’s members (in the

case of a power supply borrower), or

from a third party.

§ 1717.1207 RUS obligations under

loan guarantees.

Nothing in this subpart affects the

obligations of RUS under loan guarantee commitments it has made to the

Federal Financing Bank or other lenders.

§ 1717.1208 Government’s rights under

loan documents.

Nothing in this subpart limits, modifies, or otherwise affects the rights of

the government under loan documents

executed with borrowers, or under law

or equity.

PART 1718—LOAN SECURITY DOCUMENTS FOR ELECTRIC BORROWERS

Subpart A—General

Sec.

1718.1—1718.49 [Reserved]

Subpart B—Mortgage for Distribution

Borrowers

1718.50 Definitions.

1718.51 Policy.

1718.52 Existing mortgages.

1718.53 Rights of other mortgagees.

1718.54 Availability of model mortgage.

193

Rural Utilities Service, USDA Pt. 1718, Subpt. B, App. A

APPENDIX A TO SUBPART B TO PART 1718—

MODEL FORM OF MORTGAGE FOR ELECTRIC

DISTRIBUTION BORROWERS

Subpart C—Loan Contracts With

Distribution Borrowers

1718.100 General.

1718.101 Applicability.

1718.102 Definitions.

1718.103 Loan contract provisions.

1718.104 Availability of model loan contract.

APPENDIX A TO SUBPART C TO PART 1718—

MODEL FORM OF LOAN CONTRACT FOR

ELECTRIC DISTRIBUTION BORROWERS

AUTHORITY: 7 U.S.C. 901–950b; Pub. L. 103–

354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

Subpart A—General

§§ 1718.1—1718.49 [Reserved]

Subpart B—Mortgage for

Distribution Borrowers

SOURCE: 60 FR 36888, July 18, 1995, unless

otherwise noted.

§ 1718.50 Definitions.

Unless otherwise indicated, terms

used in this subpart are defined as set

forth in 7 CFR 1710.2.

§ 1718.51 Policy.

(a) Adequate loan security must be

provided for loans made or guaranteed

by RUS. The loans are required to be

secured by a first mortgage lien on

most of the borrower’s assets substantially in the form set forth in appendix

A of this subpart. At the discretion of

RUS, this model form of mortgage may

be adapted to satisfy different legal requirements among the states and individual differences in lending circumstances, provided that such adaptations are consistent with the policies

set forth in this subpart.

(b) Some borrowers, such as certain

public power districts, may not be able

to provide security in the form of a

first mortgage lien on their assets. In

these cases RUS will consider accepting other forms of security, such as

resolutions and pledges of revenues.

(c) RUS may require supplemental

and amending mortgages to protect its

security, or in connection with additional loans.

(d) RUS may also require such other

security instruments (such as loan contracts, security agreements, financing

statements, guarantees, and pledges) as

it deems appropriate.

(e) All distribution borrowers that receive a loan or loan guarantee from

RUS on or after August 17, 1995 will be

required to enter into a mortgage with

RUS that meets the requirements of

this subpart. The concurrence of any

other lenders secured under the borrower’s existing mortgage may be required before the borrower can enter

into a new mortgage.

§ 1718.52 Existing mortgages.

Nothing contained in this subpart

amends, invalidates, terminates or rescinds any existing mortgage entered

into between the borrower and RUS

and any other mortgagees.

§ 1718.53 Rights of other mortgagees.

Nothing contained in this subpart is

intended to alter or affect any other

mortgagee’s rights under an existing

mortgage.

§ 1718.54 Availability of model mortgage.

Single copies of the model mortgage

(RUS Informational Publication 1718 B)

are available from the Administrative

Services Division, Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250–1500.

This document may be reproduced.

APPENDIX A TO SUBPART B TO PART

1718—MODEL FORM OF MORTGAGE

FOR ELECTRIC DISTRIBUTION BORROWERS

RESTATED MORTGAGE AND SECURITY

AGREEMENT Made By And Between

llllllllllllllllllllllll

Mortgagor

and UNITED STATES OF AMERICA and

llllllllllllllllllllllll

MORTGAGEE

Dated as of lllllllllllllllll

194

Pt. 1718, Subpt. B, App. A 7 CFR Ch. XVII (1–1–00 Edition)

THIS INSTRUMENT GRANTS A SECURITY

INTEREST BY A TRANSMITTING UTILITY

THIS INSTRUMENT CONTAINS FUTURE

ADVANCE PROVISIONS

THIS INSTRUMENT CONTAINS AFTERACQUIRED PROPERTY PROVISIONS

TABLE OF CONTENTS

GRANTING CLAUSES

FIRST

SECOND

THIRD

FOURTH

EXCEPTED PROPERTY

HABENDUM

ARTICLE I—DEFINITIONS & OTHER

PROVISIONS OF GENERAL APPLICATION

SECTION 1.01 Definitions

SECTION 1.02 General Rules of Construction

SECTION 1.03 Special Rules of Construction

if RUS is a Mortgagee

SECTION 1.04 Governing Law

SECTION 1.05 Notices

ARTICLE II

ADDITIONAL NOTES

SECTION 2.01 Additional Notes

SECTION 2.02 Refunding or Refinancing

Notes

SECTION 2.03 Other Additional Notes

SECTION 2.04 Additional Lenders Entitled

to the Benefits of This Mortgage

SECTION 2.05 Form of Supplemental Mortgage

ARTICLE III—PARTICULAR COVENANTS

OF THE MORTGAGOR

SECTION 3.01 Payment of Debt Service on

Notes

SECTION 3.02 Warranty of Title

SECTION 3.03 After-Acquired Property;

Further Assurances: Recording

SECTION 3.04 Environmental Requirements

and Indemnity

SECTION 3.05 Payment of Taxes

SECTION 3.06 Authority to Execute and Deliver Notes, Loan Agreements and Mortgage; All Action Taken; Enforceable Obligations

SECTION 3.07 Restrictions on Further Encumbrances on Property

SECTION 3.08 Restrictions on Additional

Permitted Debt

SECTION 3.09 Preservation of Corporate

Existence and Franchises

SECTION 3.10 Limitations on Consolidations and Mergers

SECTION 3.11 Limitations on Transfers of

Property

SECTION 3.12 Maintenance of Mortgaged

Property

SECTION 3.13 Insurance; Restoration of

Damaged Mortgaged Property

SECTION 3.14 Mortgagee Right to Expend

Money to Protect Mortgaged Property

SECTION 3.15 Time Extensions for Payment of Notes

SECTION 3.16 Application of Proceeds from

Condemnation

SECTION 3.17 Compliance with Loan Agreements; Notice of Amendments to and Defaults under Loan Agreements

SECTION 3.18 Rights of Way, etc., Necessary in Business

SECTION 3.19 Limitations on Providing

Free Electric Services

SECTION 3.20 Keeping Books; Inspection by

Mortgagee

ARTICLE IV—EVENTS OF DEFAULT AND

REMEDIES

SECTION 4.01 Events of Default

SECTION 4.02 Acceleration of Maturity; Rescission and Annulment

SECTION 4.03 Remedies of Mortgagees

SECTION 4.04 Application of Proceeds from

Remedial Actions

SECTION 4.05 Remedies Cumulative; No

Election

SECTION 4.06 Waiver of Appraisement

Rights, Marshaling of Assets Not Required

SECTION 4.07 Notice of Default

ARTICLE V—POSSESSION UNTIL

DEFAULT—DEFEASANCE CLAUSE

SECTION 5.01 Possession Until Default

SECTION 5.02 Defeasance

SECTION 5.03 Special Defeasance

ARTICLE VI—MISCELLANEOUS

SECTION 6.01 Property Deemed Real Property

SECTION 6.02 Mortgage to Bind and Benefit

Successors and Assigns

SECTION 6.03 Headings

SECTION 6.04 Severability Clause

SECTION 6.05 Mortgage Deemed Security

Agreement

SECTION 6.06 Indemnification by Mortgagor of Mortgagees

Schedule A

Schedule B

Schedule C

Exhibit A—Manager’s Certificate

Exhibit B—Form of Supplemental Mortgage

Supplemental Mortgage Schedule A—Maximum Debt Limit and Other Information

Supplemental Mortgage Schedule B—Property Schedule

Supplemental Mortgage Schedule C—Excepted Property

RESTATED MORTGAGE AND SECURITY

AGREEMENT, dated as of lllll 19ll,

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Rural Utilities Service, USDA Pt. 1718, Subpt. B, App. A

(hereinafter sometimes called this ‘‘Mortgage’’) is made by and between

llllllllllllllllllllllll

(hereinafter called the ‘‘Mortgagor’’), a corporation existing under the laws of the State

of lllll, and the UNITED STATES OF

AMERICA acting by and through the Administrator of the Rural Utilities Service (hereinafter called the ‘‘Government’’), lllll

{ Supplemental Lender}, (hereinafter called

‘‘lllll’’) a lllll existing under the

laws of lllll, and is intended to confer

rights and benefits on both the Government

and lllll as well as any and all other

lenders pursuant to Article II of this Mortgage that enter into a supplemental mortgage in accordance with Section [2.04] of Article II hereof (the Government and any such

other lenders being herein sometimes collectively referred to as the ‘‘Mortgagees’’).

RECITALS

WHEREAS, the Mortgagor, the Government and lllll are parties to that certain lllll Mortgage and Security Agreement dated as of lllll, 19ll, as supplemented, amended or restated (the ‘‘Original

Mortgage’’ identified in Schedule ‘‘A’’ of this

Mortgage) originally entered into between

the Mortgagor, the Government acting by

and through the Administrator of the Rural

Electrification Administration, the predecessor of RUS, and lllll;

WHEREAS, the Mortgagor deems it necessary to borrow money for its corporate

purposes and to issue its promissory notes

and other debt obligations therefor from

time to time in one or more series, and to

mortgage and pledge its property hereinafter

described or mentioned to secure the payment of the same;

WHEREAS, the Mortgagor desires to enter

into this Mortgage pursuant to which all secured debt of the Mortgagor hereunder shall

be secured on parity;

WHEREAS, this Mortgage restates and

consolidates the Original Mortgage while

preserving the priority of the Lien under the

Original Mortgage securing the payment of

Mortgagor’s outstanding obligations secured

under the Original Mortgage, which indebtedness is described more particularly by listing the Original Notes in Schedule ‘‘A’’ hereto; and

WHEREAS, all acts necessary to make this

Mortgage a valid and binding legal instrument for the security of such notes and obligations, subject to the terms of this Mortgage, have been in all respects duly authorized;

NOW, THEREFORE, THIS MORTGAGE

WITNESSETH: That to secure the payment

of the principal of (and premium, if any) and

interest on the Original Notes and all Notes

issued hereunder according to their tenor

and effect, and the performance of all provisions therein and herein contained, and in

consideration of the covenants herein contained and the purchase or guarantee of

Notes by the guarantors or holders thereof,

the Mortgagor has mortgaged, pledged and

granted a continuing security interest in,

and by these presents does hereby grant, bargain, sell, alienate, remise, release, convey,

assign, transfer, hypothecate, pledge, set

over and confirm, pledge, and grant a continuing security interest and lien in for the

purposes hereinafter expressed [other language may be required under various state

laws], unto the Mortgagees all property,

rights, privileges and franchises of the Mortgagor of every kind and description, real,

personal or mixed, tangible and intangible,

of the kind or nature specifically mentioned

herein OR ANY OTHER KIND OR NATURE,

except any Excepted Property, now owned or

hereafter acquired by the Mortgagor (by purchase, consolidation, merger, donation, construction, erection or in any other way)

wherever located, including (without limitation) all and singular the following:

GRANTING CLAUSE FIRST

A. all of those fee and leasehold interests

in real property set forth in Schedule ‘‘B’’

hereto, subject in each case to those matters

set forth in such Schedule;

B. all of the Mortgagor’s interest in fixtures, easements, permits, licenses and

rights-of-way comprising real property, and

all other interests in real property, comprising any portion of the Utility System (as

herein defined) located in the Counties listed

in Schedule ‘‘B’’ hereto;

C. all right, title and interest of the Mortgagor in and to those contracts of the Mortgagor (i) relating to the ownership, operation

or maintenance of any generation, transmission or distribution facility owned,

whether solely or jointly, by the Mortgagor,

(ii) for the purchase of electric power and energy by the Mortgagor and having an original term in excess of 3 years, (iii) for the sale

of electric power and energy by the Mortgagor and having an original term in excess

of 3 years, and (iv) for the transmission of

electric power and energy by or on behalf of

the Mortgagor and having an original term

in excess of 3 years, including in respect of

any of the foregoing, any amendments, supplements and replacements thereto;

D. all the property, rights, privileges, allowances and franchises particularly described in the annexed Schedule ‘‘B’’ are

hereby made a part of, and deemed to be described in, this Granting Clause as fully as if

set forth in this Granting Clause at length;

and

ALSO ALL OTHER PROPERTY, real estate, lands, easements, servitudes, licenses,

permits, allowances, consents, franchises,

privileges, rights of way and other rights in

or relating to real estate or the occupancy of

the same; all power sites, storage rights,

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Pt. 1718, Subpt. B, App. A 7 CFR Ch. XVII (1–1–00 Edition)

water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways,

dams, dam sites, aqueducts, and all other

rights or means for appropriating, conveying, storing and supplying water; all

rights of way and roads; all plants for the

generation of electric and other forms of energy (whether now known or hereafter developed) by steam, water, sunlight, chemical

processes and/or (without limitation) all

other sources of power (whether now known

or hereafter developed); all power houses, gas

plants, street lighting systems, standards

and other equipment incidental thereto; all

telephone, radio, television and other communications, image and data transmission

systems, air conditioning systems and equipment incidental thereto, water wheels, waterworks, water systems, steam and hot

water plants, substations, lines, service and

supply systems, bridges, culverts, tracks, ice

or refrigeration plants and equipment, offices, buildings and other structures and the

equipment thereto all machinery, engines,

boilers, dynamos, turbines, electric, gas and

other machines, prime movers, regulators,

meters, transformers, generators (including,

but not limited to, engine-driven generators

and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam, gas or other

pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and

transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage

battery equipment, and all other fixtures

and personalty; all municipal and other franchises, consents, certificates or permits; all

emissions allowances; all lines for the transmission and distribution of electric current

and other forms of energy, gas, steam, water

or communications, images and data for any

purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus

for use in connection therewith, and (except

as hereinbefore or hereinafter expressly excepted) all the right, title and interest of the

Mortgagor in and to all other property of

any kind or nature appertaining to and/or

used and/or occupied and/or employed in connection with any property hereinbefore described, but in all circumstances excluding

Excepted Property;

GRANTING CLAUSE SECOND

All other property, real, personal or mixed,

of whatever kind and description and

wheresoever situated, including without limitation goods, accounts, money held in a

trust account pursuant hereto or to a Loan

Agreement, and general intangibles now

owned or which may be hereafter acquired by

the Mortgagor, but excluding Excepted Property, now owned or which may be hereafter

acquired by the Mortgagor, it being the intention hereof that all property, rights,

privileges, allowances and franchisees now

owned by the Mortgagor or acquired by the

Mortgagor after the date hereof (other than

Excepted Property) shall be as fully embraced within and subjected to the lien hereof as if such property were specifically described herein.

GRANTING CLAUSE THIRD

Also any Excepted Property that may,

from time to time hereafter, by delivery or

by writing of any kind, be subjected to the

lien hereof by the Mortgagor or by anyone in

its behalf; and any Mortgagee is hereby authorized to receive the same at any time as

additional security hereunder for the benefit

of all the Mortgagees. Such subjection to the

lien hereof of any Excepted Property as additional security may be made subject to any

reservations, limitations or conditions which

shall be set forth in a written instrument executed by the Mortgagor or the person so

acting in its behalf or by such Mortgagee respecting the use and disposition of such

property or the proceeds thereof.

GRANTING CLAUSE FOURTH

Together with (subject to the rights of the

Mortgagor set forth on Section [5.01]) all and

singular the tenements, hereditaments and

appurtenances belonging or in anywise appertaining to the aforesaid property or any

part thereof, with the reversion and reversions, remainder and remainders and all the

tolls, earnings, rents, issues, profits, revenues and other income, products and proceeds of the property subjected or required

to be subjected to the lien of this Mortgage,

and all other property of any nature appertaining to any of the plants, systems, business or operations of the Mortgagor, whether

or not affixed to the realty, used in the operation of any of the premises or plants or the

System, or otherwise, which are now owned

or acquired by the Mortgagor, and all the estate, right, title and interest of every nature

whatsoever, at law as well as in equity, of

the Mortgagor in and to the same and every

part thereof (other than Excepted Property

with respect to any of the foregoing).

EXCEPTED PROPERTY

There is, however, expressly excepted and

excluded from the lien and operation of this

Mortgage the following described property of

the Mortgagor, now owned or hereafter acquired (herein sometimes referred to as ‘‘Excepted Property’’):

A. all shares of stock, securities or other

interests of the Mortgagor in the National

Rural Utilities Cooperative Finance Corporation, the National Bank for Cooperatives and

the St. Paul Bank for Cooperatives other

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Rural Utilities Service, USDA Pt. 1718, Subpt. B, App. A

than any stock, securities or other interests

that are specifically described in Subclause

D of Granting Clause First as being subjected to the lien hereof;

B. all rolling stock (except mobile substations), automobiles, buses, trucks, truck

cranes, tractors, trailers and similar vehicles

and movable equipment, and all tools, accessories and supplies used in connection with

any of the foregoing;

C. all vessels, boats, ships, barges and

other marine equipment, all airplanes, airplane engines and other flight equipment,

and all tools, accessories and supplies used in

connection with any of the foregoing;

D. all office furniture, equipment and supplies that is not data processing, accounting

or other computer equipment or software;

E. all leasehold interests for office purposes;

F. all leasehold interests of the Mortgagor

under leases for an original term (including

any period for which the Mortgagor shall

have a right of renewal) of less than five (5)

years;

G. all timber and crops (both growing and

harvested) and all coal, ore, gas, oil and

other minerals (both in place or severed);

H. the last day of the term of each leasehold estate (oral or written) and any agreement therefor, now or hereafter enjoyed by

the Mortgagor and whether falling within a

general or specific description of property

herein: PROVIDED, HOWEVER, that the

Mortgagor covenants and agrees that it will

hold each such last day in trust for the use

and benefit of all of the Mortgagees and

Noteholders and that it will dispose of each

such last day from time to time in accordance with such written order as the Mortgagee in its discretion may give;

I. all permits, licenses, franchises, contracts, agreements, contract rights and

other rights not specifically subjected or required to be subjected to the lien hereof by

the express provisions of this Mortgage,

whether now owned or hereafter acquired by

the Mortgagor, which by their terms or by

reason of applicable law would become void

or voidable if mortgaged or pledged hereunder by the Mortgagor, or which cannot be

granted, conveyed, mortgaged, transferred or

assigned by this Mortgage without the consent of other parties whose consent has been

withheld, or without subjecting any Mortgagee to a liability not otherwise contemplated by the provisions of this Mortgage, or which otherwise may not be, hereby

lawfully and effectively granted, conveyed,

mortgaged, transferred and assigned by the

Mortgagor; and

J. the property identified in Schedule ‘‘C’’

hereto.

PROVIDED, HOWEVER, that (i) if, upon

the occurrence of an Event of Default, any

Mortgagee, or any receiver appointed pursuant to statutory provision or order of court,

shall have entered into possession of all or

substantially all of the Mortgaged Property,

all the Excepted Property described or referred to in the foregoing Subdivisions A

through H, inclusive, then owned or thereafter acquired by the Mortgagor shall immediately, and, in the case of any Excepted

Property described or referred to in Subdivisions I through J, inclusive, upon demand of

any Mortgagee or such receiver, become subject to the lien hereof to the extent permitted by law, and any Mortgagee or such

receiver may, to the extent permitted by

law, at the same time likewise take possession thereof, and (ii) whenever all Events of

Default shall have been cured and the possession of all or substantially all of the Mortgaged Property shall have been restored to

the Mortgagor, such Excepted Property shall

again be excepted and excluded from the lien

hereof to the extent and otherwise as hereinabove set forth.

However, pursuant to Granting Clause

Third, the Mortgagor may subject to the lien

of this Mortgage any Excepted Property,

whereupon the same shall cease to be Excepted Property.

HABENDUM

TO HAVE AND TO HOLD all said property,

rights, privileges and franchises of every

kind and description, real, personal or

mixed, hereby and hereafter (by supplemental mortgage or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, encumbered, hypothecated, pledged, setover,

confirmed, or subjected to a continuing security interest and lien as aforesaid, together

with all the appurtenances thereto appertaining (said properties, rights, privileges

and franchises, including any cash and securities hereafter deposited with any Mortgagee ((other than any such cash, if any,

which is specifically stated herein not to be

deemed part of the Mortgaged Property)),

being herein collectively called the ‘‘Mortgaged Property’’) unto the Mortgagees and

the respective assigns of the Mortgagees forever, to secure equally and ratably the payment of the principal of (and premium, if

any) and interest on the Notes, according to

their terms, without preference, priority or

distinction as to interest or principal (except

as otherwise specifically provided herein) or

as to lien or otherwise of any Note over any

other Note by reason of the priority in time

of the execution, delivery or maturity thereof or of the assignment or negotiation thereof, or otherwise, and to secure the due performance of all of the covenants, agreements

and provisions herein and in the Loan Agreements contained, and for the uses and purposes and upon the terms, conditions, provisos and agreements hereinafter expressed

and declared.

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Pt. 1718, Subpt. B, App. A 7 CFR Ch. XVII (1–1–00 Edition)

SUBJECT, HOWEVER, to Permitted Encumbrances (as defined in Section 1.01).

ARTICLE I

DEFINITIONS & OTHER PROVISIONS OF

GENERAL APPLICATION

Section 1.01. Definitions. In addition to the

terms defined elsewhere in this Mortgage,

the terms defined in this Article I shall have

the meanings specified herein and under the

UCC, unless the context clearly requires otherwise. The terms defined herein include the

plural as well as the singular and the singular as well as the plural.

Accounting Requirements shall mean the requirements of any system of accounts prescribed by RUS so long as the Government is

the holder, insurer or guarantor of any

Notes, or, in the absence thereof, the requirements of generally accepted accounting

principles applicable to businesses similar to

that of the Mortgagor.

Additional Notes shall mean any Notes

issued by the Mortgagor to the Government

or any other lender pursuant to Article II of

this Mortgage including any refunding, renewal, or substitute Notes which may from

time to time be executed and delivered by

the Mortgagor pursuant to the terms of Article II.

Board shall mean either the Board of Directors or the Board of Trustees, as the case

may be, of the Mortgagor.

Business Day shall mean any day that the

Government is open for business.

Debt Service Coverage Ratio (‘‘DSC’’) shall

mean the ratio determined as follows: for

each calendar year add (i) Patronage Capital

or Margins of the Mortgagor, (ii) Interest Expense on Total Long Term Debt of the Mortgagor (as computed in accordance with the

principles set forth in the definition of TIER)

and (iii) Depreciation and Amortization Expense of the Mortgagor, and divide the total

so obtained by an amount equal to the sum

of all payments of principal and interest required to be made on account of Total LongTerm Debt during such calendar year increasing said sum by any addition to interest

expense on account of Restricted Rentals as

computed with respect to the Times Interest

Earned Ratio herein.

Depreciation and Amortization Expense shall

mean an amount constituting the depreciation and amortization of the Mortgagor as

computed pursuant to Accounting Requirements.

Electric System shall mean, and shall be

broadly construed to encompass and include,

all of the Mortgagor’s interests in all electric production, transmission, distribution,

conservation, load management, general

plant and other related facilities, equipment

or property and in any mine, well, pipeline,

plant, structure or other facility for the development, production, manufacture, storage, fabrication or processing of fossil, nuclear or other fuel of any kind or in any facility or rights with respect to the supply of

water, in each case for use, in whole or in

major part, in any of the Mortgagor’s generating plants, now existing or hereafter acquired by lease, contract, purchase or otherwise or constructed by the Mortgagor, including any interest or participation of the

Mortgagor in any such facilities or any

rights to the output or capacity thereof, together with all additions, betterments, extensions and improvements to such Electric

System or any part thereof hereafter made

and together with all lands, easements and

rights-of-way of the Mortgagor and all other

works, property or structures of the Mortgagor and contract rights and other tangible

and intangible assets of the Mortgagor used

or useful in connection with or related to

such Electric System, including without limitation a contract right or other contractual

arrangement referred to in Granting Clause

First, Subclause [(C)] but excluding any excepted property.

Environmental Law and Environmental Laws

shall mean all federal, state, and local laws,

regulations, and requirements related to protection of human health or the environment,

including but not limited to the Comprehensive Environmental Response, Compensation

and Liability Act of 1980 (42 U.S.C. 9601 et

seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Clean

Water Act (33 U.S.C. 1251 et seq.) and the

Clean Air Act (42 U.S.C. 7401 et seq.), and any

amendments and implementing regulations

of such acts.

Equity shall mean the total margins and

equities and margins computed pursuant to

Accounting Requirements, but excluding any

Regulatory Created Assets.

Event of Default shall have the meaning

specified in Section [4.01] hereof.

Excepted Property shall have the meaning

stated in the Granting Clauses.

Government shall mean the United States

of America acting by and through the Administrator of RUS and shall include its successors and assigns.

Government Notes shall mean the Original

Notes, and any Additional Notes, issued by

the Mortgagor to the Government, or guaranteed or insured as to payment by the Government.

Independent shall mean when used with respect to any specified person or entity means

such a person or entity who (1) is in fact

independent, (2) does not have any direct financial interest or any material indirect financial interest in the Mortgagor or in any

affiliate of the Mortgagor and (3) is not connected with the Mortgagor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar

functions.

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Interest Expense shall mean an amount constituting the interest expense of the Mortgagor as computed pursuant to Accounting

Requirements.

Lien shall mean any statutory or common

law consensual or non-consensual mortgage,

pledge, security interest, encumbrance, lien,

right of set off, claim or charge of any kind,

including, without limitation, any conditional sale or other title retention transaction, any lease transaction in the nature

thereof and any secured transaction under

the UCC.

Loan Agreement shall mean any agreement

executed by and between the Mortgagor and

the Government or any other lender in connection with the execution and delivery of

any Notes secured hereby.

Long-Term Debt shall mean any amount included in Total Long-Term Debt pursuant to

Accounting Requirements.

Long-Term Lease shall mean a lease having

an unexpired term (taking into account

terms of renewal at the option of the lessor,

whether or not such lease has previously

been renewed) of more than 12 months.

Margins shall mean the sum of amounts recorded as operating margins and non-operating margins as computed in accordance

with Accounting Requirements.

Maximum Debt Limit, if any, shall mean the

amount more particularly described in

Schedule ‘‘A’’ hereof.

Mortgage shall mean this Restated Mortgage and Security Agreement, including any

amendments or supplements thereto from

time to time.

Mortgaged Property shall have the meaning

specified as stated in the Habendum to the

Granting Clauses.

MORTGAGEE or MORTGAGEES shall mean

the Government, lllll {the supplemental lender}, lllll their successors

and assigns as well as any and all other lenders pursuant to Article II of this Mortgage

that enter into a supplemental mortgage in

accordance with Section [2.04] of Article II

hereof, their successors and assigns.

Net Utility Plant shall mean the amount

constituting the total utility plant of the

Mortgagor less depreciation computed in accordance with Accounting Requirements.

Note or Notes shall mean one or more of the

Government Notes, and any other Notes

which may, from time to time, be secured

under this Mortgage.

Noteholder or Noteholders shall mean one or

more of the holders of Notes secured by this

Mortgage; PROVIDED, however, that in the

case of any Notes that have been guaranteed

or insured as to payment by RUS, as to such

Notes Noteholder or Noteholders shall mean

RUS, exclusively, regardless of whether such

notes are in the possession of RUS.

Original Mortgage means the instrument(s)

identified as such in Schedule ‘‘A’’ hereof.

Original Notes shall mean the Notes listed

on Schedule ‘‘A’’ hereto as such, such Notes

being instruments evidencing outstanding

indebtedness of the Mortgagor (i) to the Government (including indebtedness which has

been issued by the Mortgagor to a third

party and guaranteed or insured as to payment by the Government) and (ii) to each

other Mortgagee on the date of this Mortgage.

Outstanding Notes shall mean as of the date

of determination, (i) all Notes theretofore

issued, executed and delivered to any Mortgagee and (ii) any Notes guaranteed or insured as to payment by the Government, except (a) Notes referred to in clause (i) or (ii)

for which the principal and interest have

been fully paid and which have been canceled

by the Noteholder, and (b) Notes the payment for which has been provided for pursuant to Section [5.03].

Permitted Debt shall have the meaning specified in Section [3.08].

Permitted Encumbrances shall mean:

(1) as to the property specifically described

in Granting Clause First, the restrictions,

exceptions, reservations, conditions, limitations, interests and other matters which are

set forth or referred to in such descriptions

and each of which fits one or more of the

clauses of this definition, PROVIDED, such

matters do not in the aggregate materially

detract from the value of the Mortgaged

Property taken as a whole and do not materially impair the use of such property for the

purposes for which it is held by the Mortgagor;

(2) liens for taxes, assessments and other

governmental charges which are not delinquent;

(3) liens for taxes, assessments and other

governmental charges already delinquent

which are currently being contested in good

faith by appropriate proceedings; PROVIDED

the Mortgagor shall have set aside on its

books adequate reserves with respect thereto;

(4) mechanics’, workmen’s, repairmen’s,

materialmen’s, warehousemen’s and carriers’

liens and other similar liens arising in the

ordinary course of business for charges

which are not delinquent, or which are being

contested in good faith and have not proceeded to judgment; PROVIDED the Mortgagor shall have set aside on its books adequate reserves with respect thereto;

(5) liens in respect of judgments or awards

with respect to which the Mortgagor shall in

good faith currently be prosecuting an appeal or proceedings for review and with respect to which the Mortgagor shall have secured a stay of execution pending such appeal or proceedings for review; PROVIDED

the Mortgagor shall have set aside on its

books adequate reserves with respect thereto;

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(6) easements and similar rights granted by

the Mortgagor over or in respect of any

Mortgaged Property, PROVIDED that in the

opinion of the Board or a duly authorized officer of the Mortgagor such grant will not

impair the usefulness of such property in the

conduct of the Mortgagor’s business and will

not be prejudicial to the interests of the

Mortgagees, and similar rights granted by

any predecessor in title of the Mortgagor;

(7) easements, leases, reservations or other

rights of others in any property of the Mortgagor for streets, roads, bridges, pipes, pipe

lines, railroads, electric transmission and

distribution lines, telegraph and telephone

lines, the removal of oil, gas, coal or other

minerals and other similar purposes, flood

rights, river control and development rights,

sewage and drainage rights, restrictions

against pollution and zoning laws and minor

defects and irregularities in the record evidence of title, PROVIDED that such easements, leases, reservations, rights, restrictions, laws, defects and irregularities do not

materially affect the marketability of title

to such property and do not in the aggregate

materially impair the use of the Mortgaged

Property taken as a whole for the purposes

for which it is held by the Mortgagor;

(8) liens upon lands over which easements

or rights of way are acquired by the Mortgagor for any of the purposes specified in

Clause [(7)] of this definition, securing indebtedness neither created, assumed nor

guaranteed by the Mortgagor nor on account

of which it customarily pays interest, which

liens do not materially impair the use of

such easements or rights of way for the purposes for which they are held by the Mortgagor;

(9) leases existing at the date of this instrument affecting property owned by the

Mortgagor at said date which have been previously disclosed to the Mortgagees in writing and leases for a term of not more than

two years (including any extensions or renewals) affecting property acquired by the

Mortgagor after said date;

(10) terminable or short term leases or permits for occupancy, which leases or permits

expressly grant to the Mortgagor the right

to terminate them at any time on not more

than six months’ notice and which occupancy does not interfere with the operation

of the business of the Mortgagor;

(11) any lien or privilege vested in any lessor, licensor or permittor for rent to become

due or for other obligations or acts to be performed, the payment of which rent or performance of which other obligations or acts

is required under leases, subleases, licenses

or permits, so long as the payment of such

rent or the performance of such other obligations or acts is not delinquent;

(12) liens or privileges of any employees of

the Mortgagor for salary or wages earned but

not yet payable;

(13) the burdens of any law or governmental regulation or permit requiring the

Mortgagor to maintain certain facilities or

perform certain acts as a condition of its occupancy of or interference with any public

lands or any river or stream or navigable waters;

(14) any irregularities in or deficiencies of

title to any rights-of-way for pipe lines, telephone lines, telegraph lines, power lines or

appurtenances thereto, or other improvements thereon, and to any real estate used or

to be used primarily for right-of-way purposes, PROVIDED that in the opinion of

counsel for the Mortgagor, the Mortgagor

shall have obtained from the apparent owner

of the lands or estates therein covered by

any such right-of-way a sufficient right, by

the terms of the instrument granting such

right-of-way, to the use thereof for the construction, operation or maintenance of the

lines, appurtenances or improvements for

which the same are used or are to be used, or

PROVIDED that in the opinion of counsel for

the Mortgagor, the Mortgagor has power

under eminent domain, or similar statutes,

to remove such irregularities or deficiencies;

(15) rights reserved to, or vested in, any

municipality or governmental or other public authority to control or regulate any property of the Mortgagor, or to use such property in any manner, which rights do not materially impair the use of such property, for

the purposes for which it is held by the Mortgagor;

(16) any obligations or duties, affecting the

property of the Mortgagor, to any municipality or governmental or other public authority with respect to any franchise, grant,

license or permit;

(17) any right which any municipal or governmental authority may have by virtue of

any franchise, license, contract or statute to

purchase, or designate a purchaser of or

order the sale of, any property of the Mortgagor upon payment of cash or reasonable

compensation therefor or to terminate any

franchise, license or other rights or to regulate the property and business of the Mortgagor; PROVIDED, HOWEVER, that nothing

in this clause 17 is intended to waive any

claim or rights that the Government may

otherwise have under Federal laws;

(18) as to properties of other operating

electric companies acquired after the date of

this Mortgage by the Mortgagor as permitted by Section [3.10] hereof, reservations

and other matters as to which such properties may be subject as more fully set forth

in such Section;

(19) any lien required by law or governmental regulations as a condition to the

transaction of any business or the exercise of

any privilege or license, or to enable the

Mortgagor to maintain self-insurance or to

participate in any fund established to cover

any insurance risks or in connection with

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workmen’s compensation, unemployment insurance, old age pensions or other social security, or to share in the privileges or benefits required for companies participating in

such arrangements; PROVIDED, HOWEVER,

that nothing in this clause 19 is intended to

waive any claim or rights that the Government may otherwise have under Federal

laws;

(20) liens arising out of any defeased mortgage or indenture of the Mortgagor;

(21) the undivided interest of other owners,

and liens on such undivided interests, in

property owned jointly with the Mortgagor

as well as the rights of such owners to such

property pursuant to the ownership contracts;

(22) any lien or privilege vested in any lessor, licensor or permittor for rent to become

due or for other obligations or acts to be performed, the payment of which rent or the

performance of which other obligations or

acts is required under leases, subleases, licenses or permits, so long as the payment of

such rent or the performance of such other

obligations or acts is not delinquent;

(23) purchase money mortgages permitted

by Section [3.08]; and

(24) the Original Mortgage.

Property Additions shall mean Utility System property as to which the Mortgagor

shall provide Title Evidence and which shall

be (or, if retired, shall have been) subject to

the lien of this Mortgage, which shall be

properly chargeable to the Mortgagor’s utility plant accounts under Accounting Requirements (including property constructed

or acquired to replace retired property credited to such accounts) and which shall be:

(1) acquired (including acquisition by

merger, consolidation, conveyance or transfer) or constructed by the Mortgagor after

the date hereof, including property in the

process of construction, insofar as not reflected on the books of the Mortgagor with

respect to periods on or prior to the date

hereof, and

(2) used or useful in the utility business of

the Mortgagor conducted with the properties

described in the Granting Clauses of this

Mortgage, even though separate from and

not physically connected with such properties.

‘‘Property Additions’’ shall also include:

(3) easements and rights-of-way that are

useful for the conduct of the utility business

of the Mortgagor, and

(4) property located or constructed on, over

or under public highways, rivers or other

public property if the Mortgagor has the lawful right under permits, licenses or franchises granted by a governmental body having jurisdiction in the premises or by the law

of the State in which such property is located to maintain and operate such property

for an unlimited, indeterminate or indefinite

period or for the period, if any, specified in

such permit, license or franchise or law and

to remove such property at the expiration of

the period covered by such permit, license or

franchise or law, or if the terms of such permit, license, franchise or law require any

public authority having the right to take

over such property to pay fair consideration

therefor.

‘‘Property Additions’’ shall NOT include:

(a) good will, going concern value, contracts, agreements, franchises, licenses or

permits, whether acquired as such, separate

and distinct from the property operated in

connection therewith, or acquired as an incident thereto, or

(b) any shares of stock or indebtedness or

certificates or evidences of interest therein

or other securities, or

(c) any plant or system or other property

in which the Mortgagor shall acquire only a

leasehold interest, or any betterments, extensions, improvements or additions (other

than movable physical personal property

which the Mortgagor has the right to remove), of, upon or to any plant or system or

other property in which the Mortgagor shall

own only a leasehold interest unless (i) the

term of the leasehold interest in the property to which such betterment, extension,

improvement or addition relates shall extend

for at least 75% of the useful life of such betterment, extension, improvement or addition

and (ii) the lessor shall have agreed to give

the Mortgagee reasonable notice and opportunity to cure any default by the Mortgagor

under such lease and not to disturb any

Mortgagee’s possession of such leasehold estate in the event any Mortgagee succeeds to

the Mortgagor’s interest in such lease upon

any Mortgagee’s exercise of any remedies

under this Mortgage so long as there is no

default in the performance of the tenant’s

covenants contained therein, or

(d) any property of the Mortgagor subject

to the Permitted Encumbrance described in

clause [(23)] of the definition thereof.

Prudent Utility Practice shall mean any of

the practices, methods and acts which, in the

exercise of reasonable judgment, in light of

the facts, including, but not limited to, the

practices, methods and acts engaged in or

approved by a significant portion of the electric utility industry prior thereto, known at

the time the decision was made, would have

been expected to accomplish the desired result consistent with cost-effectiveness, reliability, safety and expedition. It is recognized that Prudent Utility Practice is not intended to be limited to optimum practice,

method or act to the exclusion of all others,

but rather is a spectrum of possible practices, methods or acts which could have been

expected to accomplish the desired result at

the lowest reasonable cost consistent with

cost-effectiveness, reliability, safety and expedition.

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REA shall mean the Rural Electrification

Administration of the United States Department of Agriculture, the predecessor of RUS.

Regulatory Created Assets shall mean the

sum of any amounts properly recordable as

unrecovered plant and regulatory study

costs or as other regulatory assets, pursuant

to Accounting Requirements.

Restricted Rentals shall mean all rentals required to be paid under finance leases and

charged to income, exclusive of any amounts

paid under any such lease (whether or not

designated therein as rental or additional

rental) for maintenance or repairs, insurance, taxes, assessments, water rates or

similar charges. For the purpose of this definition the term ‘‘finance lease’’ shall mean

any lease having a rental term (including the

term for which such lease may be renewed or

extended at the option of the lessee) in excess of 3 years and covering property having

an initial cost in excess of $250,000 other than

aircraft, ships, barges, automobiles, trucks,

trailers, rolling stock and vehicles; office,

garage and warehouse space; office equipment and computers.

RUS shall mean the Rural Utilities Service, an agency of the United States Department of Agriculture, or if at any time after

the execution of this Mortgage RUS is not

existing and performing the duties of administering a program of rural electrification as

currently assigned to it, then the entity performing such duties at such time.

Security Interest shall mean any assignment, transfer, mortgage, hypothecation or

pledge.

Subordinated Indebtedness shall mean secured indebtedness of the Mortgagor, payment of which shall be subordinated to the

prior payment of the Notes in accordance

with the provisions of Section [3.08] hereof

by subordination agreement in form and substance satisfactory to each Mortgagee which

approval will not be unreasonably withheld.

Supplemental Mortgage shall mean an instrument of the type described in Section

[2.04].

Times Interest Earned Ratio (‘‘TIER’’) shall

mean the ratio determined as follows: for

each calendar year: add (i) patronage capital

or margins of the Mortgagor and (ii) Interest

Expense on Total Long-Term Debt of the

Mortgagor and divide the total so obtained

by Interest Expense on Total Long-Term

Debt of the Mortgagor, provided, however,

that in computing Interest Expense on Total

Long-Term Debt, there shall be added, to the

extent not otherwise included, an amount

equal to 33–1/3% of the excess of Restricted

Rentals paid by the Mortgagor over 2% of

the Mortgagor’s Equity.

Title Evidence shall mean with respect to

any real property:

(1) an opinion of counsel to the effect that

the Mortgagor has title, whether fairly deducible of record or based upon prescriptive

rights (or, as to personal property, based on

such evidence as counsel shall determine to

be sufficient), as in the opinion of counsel is

satisfactory for the use thereof in connection

with the operations of the Mortgagor, and

counsel in giving such opinion may disregard

any irregularity or deficiency in the record

evidence of title which, in the opinion of

such counsel, can be cured by proceedings

within the power of the Mortgagor or does

not substantially impair the usefulness of

such property for the purpose of the Mortgagor and may base such opinion upon counsel’s own investigation or upon affidavits,

certificates, abstracts of title, statements or

investigations made by persons in whom

such counsel has confidence or upon examination of a certificate or guaranty of title

or policy of title insurance in which counsel

has confidence; or

(2) a mortgagee’s policy of title insurance

in the amount of the cost to the Mortgagor

of the land included in Property Additions,

as such cost is determined by the Mortgagor

in accordance with the Accounting Requirements, issued in favor of the Mortgagees by

an entity authorized to insure title in the

states where the subject property is located,

showing the Mortgagor as the owner of the

subject property and insuring the lien of this

Mortgage; and with respect to any personal

property a certificate of the general manage

or other duly authorized officer that the

Mortgagor lawfully owns and is possessed of

such property.

Total Assets shall mean an amount constituting total assets of the Mortgagor as computed pursuant to Accounting Requirements,

but excluding any Regulatory Created Assets.

Total Long-Term Debt shall mean the total

outstanding long-term debt of the Mortgagor

as computed pursuant to Accounting Requirements.

Total Utility Plant shall mean the total of

all property properly recorded in the utility

plant accounts of the Mortgagor, pursuant to

Accounting Requirements.

Uniform Commercial Code or UCC shall mean

the UCC of the state referred to in Section

[1.04], and if Mortgaged Property is located

in a state other than that state, then as to

such Mortgaged Property UCC refers to the

UCC in effect in the state where such property is located.

Utility System shall mean the Electric System and all of the Mortgagor’s interest in

community infrastructure located substantially within its electric service territory,

namely water and waste systems, solid waste

disposal facilities, telecommunications and

other electronic communications systems,

and natural gas distribution systems.

SECTION 1.02. General Rules of Construction:

a. Accounting terms not referred to above

are used in this Mortgage in their ordinary

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sense and any computations relating to such

terms shall be computed in accordance with

the Accounting Requirements.

b. Any reference to ‘‘directors’’ or ‘‘board

of directors’’ shall be deemed to mean

‘‘trustees’’ or ‘‘board of trustees,’’ as the

case may be.

SECTION 1.03. Special Rules of Construction

if RUS is a Mortgagee: During any period that

RUS is a Mortgagee, the following additional

provisions shall apply:

a. In the case of any Notes that have been

guaranteed or insured as to payment by

RUS, as to such Notes RUS shall be considered to be the Noteholder, exclusively, regardless of whether such Notes are in the

possession of RUS.

b. In the case of any prior approval rights

conferred upon RUS by Federal statutes, including (without limitation) Section 7 of the

Rural Electrification Act of 1936, as amended, with respect to the sale or disposition of

property, rights, or franchises of the Mortgagor, all such statutory rights are reserved

except to the extent that they are expressly

modified or waived in this Mortgage.

SECTION 1.04. Governing Law: This Mortgage shall be construed in and governed by

Federal law to the extent applicable, and

otherwise by the laws of the State of

llll.

SECTION 1.05 Notices: All demands, notices, reports, approvals, designations, or directions required or permitted to be given

hereunder shall be in writing and shall be

deemed to be properly given if sent by registered or certified mail, postage prepaid, or

delivered by hand, or sent by facsimile transmission, receipt confirmed, addressed to the

proper party or parties at the following address:

As to the Mortgagor:

llllllllllllllllllllllll

llllllllllllllllllllllll

llllllllllllllllllllllll

As to the Mortgagee:

Rural Utilities Service,

United States Department of Agriculture,

Washington, DC 20250–1500

llllllllllllllllllllllll

llllllllllllllllllllllll

llllllllllllllllllllllll

and as to any other person, firm, corporation

or governmental body or agency having an

interest herein by reason of being a Mortgagee, at the last address designated by such

person, firm, corporation, governmental

body or agency to the Mortgagor and the

other Mortgagees. Any such party may from

time to time designate to each other a new

address to which demands, notices, reports,

approvals, designations or directions may be

addressed, and from and after any such designation the address designated shall be

deemed to be the address of such party in

lieu of the address given above.

ARTICLE II

ADDITIONAL NOTES

SECTION 2.01. Additional Notes: (a) Without

the prior consent of any Mortgagee or any

Noteholder, the Mortgagor may issue Additional Notes to the Government or to another lender or lenders for the purpose of acquiring, procuring or constructing new or replacement Eligible Property Additions which

Notes will thereupon be secured equally and

ratably with the Notes if each of the following requirements are satisfied:

(1) As evidenced by a certificate of an Independent certified public accountant sent to

each Mortgagee on or before the first advance of proceeds from such Additional

Notes:

(i) The Mortgagor shall have achieved for

each of the two calendar years immediately

preceding the issuance of such Additional

Notes, a TIER of not less than 1.5 and a DSC

of not less than 1.25;

(ii) After taking into account the effect of

such Additional Notes on the Total Long

Term Debt of the Mortgagor, the ratio of the

Mortgagor’s Net Utility Plant to its Total

Long Term Debt shall be greater than or

equal to 1.0 on a pro forma basis;

(iii) After taking into account the effect of

such Additional Notes on the Total Assets of

such Mortgagor, the Mortgagor shall have

Equity greater than or equal to 27 percent of

Total Assets on a pro forma basis; and

(iv) The sum of the aggregate principal

amount of such Additional Notes (if any)

that are not related to the Electric System

if added to the aggregate outstanding principal amount of all the existing Notes (if

any) that are not related to the Electric System will not exceed 30% of the Mortgagor’s

Equity on a pro forma basis.

(2) No Event of Default has occurred and is

continuing hereunder, or any event which

with the giving of notice or lapse of time or

both would become an Event of Default has

occurred and is continuing.

(3) The Eligible Property Additions being

constructed, acquired, procured or replaced

are part of the Mortgagor’s Utility System.

(4) The Borrower’s general manager or

other duly authorized officer shall send to

each of the Mortgagees a certificate in substantially the form attached hereto as [Exhibit A] on or before the date of the first advance of proceeds from such Additional

Notes.

(b) For purposes of this section:

(1) ‘‘Eligible Property Additions’’ shall

mean Property Additions acquired or whose

construction was completed not more than 5

years prior to the issuance of the Additional

Notes and Property Additions acquired or

whose construction is started and/or completed not more than 4 years after issuance

of the Additional Notes, but shall exclude

any Property Additions financed by any

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other debt secured under the Mortgage at

the time additional Notes are issued;

(2) Notes are considered to be ‘‘issued’’ on,

and the date of ‘‘issuance’’ shall be, the date

on which they are executed by the Mortgagor; and

(3) For purposes of calculating the pro

forma ratios in subparagraphs (a)(1)(ii) and

(iii), the values for Total Long Term Debt

and Total Assets before debt issuance and

the values for Equity and Net Utility Plant

shall be the most recently available end-ofmonth figures preceding the issuance of the

Additional Notes, but in no case for a month

ending more than 180 days preceding such

issuance.

SECTION 2.02. Refunding or Refinancing

Notes: The Mortgagor shall also have the

right without the consent of any Mortgagee

or any Noteholder to issue Additional Notes

for the purpose of refunding or refinancing

any Notes so long as the total amount of

outstanding indebtedness evidenced by such

Additional Note or Notes is not greater than

105% of the then outstanding principal balance of the Note or Notes being refunded or

refinanced. PROVIDED, HOWEVER, that the

Mortgagor may not exercise its rights under

this Section if an Event of Default has occurred and is continuing, or any event which

with the giving of notice or lapse of time or

both would become an Event of Default has

occurred and is continuing. On or before the

first advance of proceeds from Notes issued

under this section, the Mortgagor shall notify each Mortgagee of the refunding or refinancing. Additional Notes issued pursuant to

this Section [2.02] will thereupon be secured

equally and ratably with the Notes.

SECTION 2.03. Other Additional Notes. With

the prior written consent of each Mortgagee,

the Mortgagor may issue Additional Notes to

the Government or any lender or lenders,

which Notes will thereupon be secured equally and ratably with Notes without regard to

whether any of the requirements of Sections

[2.01] or [2.02] are satisfied.

SECTION 2.04. Additional Lenders Entitled to

the Benefits of This Mortgage: Without the

prior consent of any Mortgagee or any

Noteholder, each new lender designated as a

payee in any Additional Notes issued by the

Mortgagor pursuant to Section [2.01] or [2.02]

of this Mortgage shall become a Mortgagee

hereunder upon the execution and delivery

by the Mortgagor and such lender of a supplemental mortgage hereto designating such

lender as a Mortgagee hereunder. Such new

lender shall be entitled to the benefits of this

Mortgage without further act or deed. Each

Mortgagee and each person or entity that becomes a lender pursuant to Section [2.01] or

[2.02] of this Mortgage shall, upon the request of the Mortgagor to do so, execute and

deliver a supplement to this Mortgage in

substantially the form set forth in Section

[2.05] to evidence the addition of such new

lender as an additional Mortgagee entitled

to the benefits of this Mortgage. The failure

of any existing Mortgagee to enter into such

supplemental mortgage shall not deprive the

new lender of its rights under this Mortgage;

provided that such additional indebtedness

otherwise conforms in all respects with the

requirements for issuing Additional Notes

under this Mortgage.

SECTION 2.05. Form of Supplemental Mortgage: (a) The form of supplemental mortgage

referred to in Section [2.04] is attached to

this Mortgage as Exhibit B and hereby incorporated by reference as if set forth in full at

this point.

(b) In the event that the Mortgagor subsequently issues Additional Notes pursuant to

Sections [2.01] or [2.02] to any existing Mortgagee and that Mortgagee desires further assurance that such Additional Notes will be

secured by the lien of the Mortgage, an instrument substantially in the form of the

supplemental mortgage attached as Exhibit

B may be used.

(c) In the event that the Mortgagor issues

Additional Notes pursuant to Section [2.03]

to either an existing Mortgagee or a new

lender, in either case with the prior written

consent of each Mortgagee, then an instrument substantially in the form of the supplemental mortgage attached as Exhibit B may

also be used.

ARTICLE III—PARTICULAR COVENANTS

OF THE MORTGAGOR

SECTION 3.01. Payment of Debt Service on

Notes: The Mortgagor will duly and punctually pay the principal, premium, if any,

and interest on the Notes in accordance with

the terms of the Notes, the Loan Contracts,

this Mortgage and any Supplemental Mortgage authorizing such Notes.

SECTION 3.02. Warranty of Title: (a) At the

time of the execution and delivery of this instrument, the Mortgagor has good and marketable title in fee simple to the real property specifically described in Granting

Clause First as owned in fee and good and

marketable title to the interests in real

property specifically described in Granting

Clause [First], subject to no mortgage, lien,

charge or encumbrance except as stated

therein, and has full power and lawful authority to grant, bargain, sell, alien, remise,

release, convey, assign, transfer, encumber,

mortgage, pledge, set over and confirm said

real property and interests in real property

in the manner and form aforesaid.

(b) At the time of the execution and delivery of this instrument, the Mortgagor lawfully owns and is possessed of the personal

property specifically described in Granting

Clauses [First and Second], subject to no

mortgage, lien, charge or encumbrance except as stated therein, and has full power

and lawful authority to mortgage, assign,

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transfer, deliver, pledge and grant a continuing security interest in said property

and, including any proceeds thereof, in the

manner and form aforesaid.

(c) The Mortgagor hereby does and will forever warrant and defend the title to the

property specifically described in Granting

Clause First against the claims and demands

of all persons whomsoever, except Permitted

Encumbrances.

SECTION 3.03. After-Acquired Property; Further Assurances; Recording: (a) All property of

every kind, other than Excepted Property,

acquired by the Mortgagor after the date

hereof, shall, immediately upon the acquisition thereof by the Mortgagor, and without

any further mortgage, conveyance or assignment, become subject to the lien of this

Mortgage; SUBJECT, HOWEVER, to Permitted Encumbrances and the exceptions, if

any, to which all of the Mortgagees consent.

Nevertheless, the Mortgagor will do, execute,

acknowledge and deliver all and every such

further acts, conveyances, mortgages, financing statements and assurances as any

Mortgagee shall require for accomplishing

the purposes of this Mortgage.

(b) The Mortgagor will cause this Mortgage

and all Supplemental Mortgages and other

instruments of further assurance, including

all financing statements covering security

interests in personal property, to be promptly recorded, registered and filed, and will

execute and file such financing statements

and cause to be issued and filed such continuation statements, all in such manner

and in such places as may be required by law

fully to preserve and protect the rights of all

of the Mortgagees and Noteholders hereunder to all property comprising the Mortgaged Property. The Mortgagor will furnish

to each Mortgagee:

(1) promptly after the execution and delivery of this instrument and of each Supplemental Mortgage or other instrument of further assurance, an Opinion of Counsel stating that, in the opinion of such Counsel, this

instrument and all such Supplemental Mortgages and other instruments of further assurance have been properly recorded, registered and filed to the extent necessary to

make effective the lien intended to be created by this Mortgage, and reciting the details of such action or referring to prior

Opinions of Counsel in which such details are

given, and stating that all financing statements and continuation statements have

been executed and filed that are necessary

fully to preserve and protect the rights of all

of the Mortgagees and Noteholders hereunder, or stating that, in the opinion of such

Counsel, no such action is necessary to make

the lien effective; and

(2) within 30 days after lllll in each

year beginning with the year ll, an Opinion of Counsel, dated as of such date, either

stating that, in the opinion of such Counsel,

such action has been taken with respect to

the recording, registering, filing, re-recording, re-registering and re-filing of this instrument and of all Supplemental Mortgages, financing statements, continuation

statements or other instruments of further

assurances as is necessary to maintain the

lien of this Mortgage (including the lien on

any property acquired by the Mortgagor

after the execution and delivery of this instrument and owned by the Mortgagor at the

end of preceding calendar year) and reciting

the details of such action or referring to

prior Opinions of Counsel in which such details are given, and stating that all financing

statements and continuation statements

have been executed and filed that are necessary to fully preserve and protect the

rights of all of the Mortgagees and

Noteholders hereunder, or stating that, in

the opinion of such Counsel, no such action

is necessary to maintain such lien.

SECTION 3.04. Environmental Requirements

and Indemnity: (a) The Mortgagor shall, with

respect to all facilities which may be part of

the Mortgaged Property, comply with all Environmental Laws.

(b) The Mortgagor shall defend, indemnify,

and hold harmless each Mortgagee, its successors and assigns, from and against any

and all liabilities, losses, damages, costs, expenses (including but not limited to reasonable attorneys’ fees and expenses), causes of

actions, administrative proceedings, suits,

claims, demands, or judgments of any nature

arising out of or in connection with any matter related to the Mortgage Property and

any Environmental Law, including but not

limited to:

(1) the past, present, or future presence of

any hazardous substance, contaminant, pollutant, or hazardous waste on or related to

the Mortgaged Property;

(2) any failure at any time by the undersigned to comply with the terms of any order

related to the Mortgaged Property and

issued by any federal, state, or municipal department or agency (other than RUS) exercising its authority to enforce any Environmental Law; and

(3) any lien or claim imposed under any

Environmental Law related to clause (1).

(c) Within 10 (ten) business days after receiving knowledge of any liability, losses,

damages, costs, expenses (including but not

limited to reasonable attorneys’ fees and expenses), cause of action, administrative proceeding, suit, claim, demand, judgment, lien,

reportable event including but not limited to

the release of a hazardous substance, or potential or actual violation or non-compliance arising out of or in connection with the

Mortgaged Property and any Environmental

Law, the Mortgagor shall provide each Mortgagee with written notice of such matter.

With respect to any matter upon which it

has provided such notice, the Mortgagor

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shall immediately take any and all appropriate actions to remedy, cure, defend, or

otherwise affirmatively respond to the matter.

SECTION 3.05. Payment of Taxes: The Mortgagor will pay or cause to be paid as they become due and payable all taxes, assessments

and other governmental charges lawfully

levied or assessed or imposed upon the Mortgaged Property or any part thereof or upon

any income therefrom, and also (to the extent that such payment will not be contrary

to any applicable laws) all taxes, assessments and other governmental charges lawfully levied, assessed or imposed upon the

lien or interest of the Noteholders or of the

Mortgagees in the Mortgaged Property, so

that (to the extent aforesaid) the lien of this

Mortgage shall at all times be wholly preserved at the cost of the Mortgagor and

without expense to the Mortgagees or the

Noteholders; PROVIDED, HOWEVER, that

the Mortgagor shall not be required to pay

and discharge or cause to be paid and discharged any such tax, assessment or governmental charge to the extent that the

amount, applicability or validity thereof

shall currently be contested in good faith by

appropriate proceedings and the Mortgagor

shall have established and shall maintain

adequate reserves on its books for the payment of the same.

SECTION 3.06. Authority to Execute and Deliver Notes, Loan Agreements and Mortgage; All

Action Taken; Enforceable Obligations: The

Mortgagor is authorized under its articles of

incorporation and bylaws [or code of regulations] and all applicable laws and by corporate action to execute and deliver the

Notes, any Additional Notes, the Loan

Agreements and this Mortgage. The Notes,

the Loan Agreements and this Mortgage are,

and any Additional Notes and Loan Agreements when executed and delivered will be,

the valid and enforceable obligations of the

Mortgagor in accordance with their respective terms.

SECTION 3.07. Restrictions on Further Encumbrances on Property: Except to secure Additional Notes, the Mortgagor will not, without the prior written consent of each Mortgagee, create or incur or suffer or permit to

be created or incurred or to exist any Lien,

charge, assignment, pledge, mortgage on any

of the Mortgaged Property inferior to, prior

to, or on a parity with the Lien of this Mortgage except for the Permitted Encumbrances. Subject to the provisions of Section

[3.08], or unless approved by each of the

Mortgagees, the Mortgagor will purchase all

materials, equipment and replacements to be

incorporated in or used in connection with

the Mortgaged Property outright and not

subject to any conditional sales agreement,

chattel mortgage, bailment, lease or other

agreement reserving to the seller any right,

title or Lien.

SECTION 3.08. Restrictions On Additional

Permitted Debt: The Mortgagor shall not

incur, assume, guarantee or otherwise become liable in respect of any debt for borrowed money and Restricted Rentals (including Subordinated Debt) other than the following: (‘‘Permitted Debt’’)

(1) Additional Notes issued in compliance

with Article II hereof;

(2) Purchase money indebtedness in nonUtility System property, in an amount not

exceeding 10% of Net Utility Plant;

(3) Restricted Rentals in an amount not to

exceed 5% of Equity during any 12 consecutive calendar month period;

(4) Unsecured lease obligations incurred in

the ordinary course of business except Restricted Rentals;

(5) Debt represented by dividends declared

but not paid; and

(6) Subordinated Indebtedness approved by

each Mortgagee.

PROVIDED, However, that the Mortgagor

may incur Permitted Debt without the consent of the Mortgagee only so long as there

exists no Event of Default hereunder and

there has been no continuing occurrence

which with the passage of time and giving of

notice could become an Event of Default

hereunder.

PROVIDED, FURTHER, by executing this

Mortgage any consent of RUS that the Mortgagor would otherwise be required to obtain

under this Section is hereby deemed to be

given or waived by RUS by operation of law

to the extent, but only to the extent, that to

impose such a requirement of RUS consent

would clearly violate existing federal laws or

government regulations.

SECTION 3.09. Preservation of Corporate Existence and Franchises: The Mortgagor will, so

long as any Outstanding Notes exist, take or

cause to be taken all such action as from

time to time may be necessary to preserve

its corporate existence and to preserve and

renew all franchises, rights of way, easements, permits, and licenses now or hereafter to be granted or upon it conferred the

loss of which would have a material adverse

affect on the Mortgagor’s financial condition

or business. The Mortgagor will comply with

all laws, ordinances, regulations, orders, decrees and other legal requirements applicable to it or its property the violation of

which could have a material adverse affect

on the Mortgagor’s financial condition or

business.

SECTION 3.10. Limitations on Consolidations

and Mergers: The Mortgagor shall not, without the prior written approval of each Mortgagee, consolidate or merge with any other

corporation or convey or transfer the Mortgaged Property substantially as an entirety

unless: (1) such consolidation, merger, conveyance or transfer shall be on such terms as

shall fully preserve the lien and security

hereof and the rights and powers of the

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Mortgagees hereunder; (2) the entity formed

by such consolidation or with which the

Mortgagor is merged or the corporation

which acquires by conveyance or transfer the

Mortgaged Property substantially as an entirety shall execute and deliver to the Mortgagees a mortgage supplemental hereto in

recordable form and containing an assumption by such successor entity of the due and

punctual payment of the principal of and interest on all of the Outstanding Notes and

the performance and observance of every

covenant and condition of this Mortgage; (3)

immediately after giving effect to such

transaction, no default hereunder shall have

occurred and be continuing; (4) the Mortgagor shall have delivered to the Mortgagees

a certificate of its general manager or other

officer, in form and substance satisfactory to

each of the Mortgagees, which shall state

that such consolidation, merger, conveyance

or transfer and such supplemental mortgage

comply with this subsection and that all

conditions precedent herein provided for relating to such transaction have been complied with; (5) the Mortgagor shall have delivered to the Mortgagees an opinion of

counsel in form and substance satisfactory

to each of the Mortgagees; and (6) the entity

formed by such consolidation or with which

the Mortgagor is merged or the corporation

which acquires by conveyance or transfer the

Mortgaged Property substantially as an entirety shall be an entity—(A) having Equity

equal to at least 27% of its Total Assets on

a pro forma basis after giving effect to such

transaction, (B) having a pro forma TIER of

not less than 1.50 and a pro forma DSC of not

less than 1.25 for each of the two preceding

calendar years, and (C) having Net Utility

Plant equal to or greater than 1.0 times its

Total Long-Term Debt on a pro forma basis.

Upon any consolidation or merger or any

conveyance or transfer of the Mortgaged

Property substantially as an entirety in accordance with this subsection, the successor

entity formed by such consolidation or with

which the Mortgagor is merged or to which

such conveyance or transfer is made shall

succeed to, and be substituted for, and may

exercise every right and power of, the Mortgagor under this Mortgage with the same effect as if such successor entity had been

named as the Mortgagor herein.

SECTION 3.11. Limitations on Transfers of

Property: The Mortgagor may not, except as

provided in [Section 3.10] above, without the

prior written approval of each Mortgagee,

sell, lease or transfer any Mortgaged Property to any other person or entity (including

any subsidiary or affiliate of the Mortgagor),

unless (1) there exists no Event of Default or

occurrence which with the passing of time

and the giving of notice would be an Event of

Default, (2) fair market value is obtained for

such property, (3) the aggregate value of assets so sold, leased or transferred in any 12-

month period is less than 10% of Net Utility

Plant, and (4) the proceeds of such sale, lease

or transfer, less ordinary and reasonable expenses incident to such transaction, are immediately (i) applied as a prepayment of all

Notes equally and ratably, (ii) in the case of

dispositions of equipment, materials or

scrap, applied to the purchase of other property useful in the Mortgagor’s utility business, not necessarily of the same kind as the

property disposed of, which shall forthwith

become subject to the Lien of the Mortgage,

or (iii) applied to the acquisition or construction of utility plant.

SECTION 3.12. Maintenance of Mortgaged

Property: (a) So long as the Mortgagor holds

title to the Mortgaged Property, the Mortgagor will at all times maintain and preserve

the Mortgaged Property which is used or

useful in the Mortgagor’s business and each

and every part and parcel thereof in good repair, working order and condition, ordinary

wear and tear and acts of God excepted, and

in compliance with Prudent Utility Practice

and in compliance with all applicable laws,

regulations and orders, and will from time to

time make all needed and proper repairs, renewals and replacements, and useful and

proper alterations, additions, betterments

and improvements, and will, subject to contingencies beyond its reasonable control, at

all times use all reasonable diligence to furnish the consumers served by it through the

Mortgaged Property, or any part thereof,

with an adequate supply of electric power

and energy. If any substantial part of the

Mortgaged Property is leased by the Mortgagor to any other party, the lease agreement between the Mortgagor and the lessee

shall obligate the lessee to comply with the

provisions of subsections (a) and (b) of this

Section in respect of the leased facilities and

to permit the Mortgagor to operate the

leased facilities in the event of any failure

by the lessee to so comply.

(b) If in the sole judgement of any Mortgagee, the Mortgaged Property is not being

maintained and repaired in accordance with

paragraph (a) of this section, such Mortgagee

may send to the Mortgagor a written report

of needed improvements and the Mortgagor

will upon receipt of such written report

promptly undertake to accomplish such improvements.

(c) The Mortgagor further agrees that upon

reasonable written request of any Mortgagee, which request together with the requests of any other Mortgagees shall be

made no more frequently than once every

three years, the Mortgagor will supply

promptly to each Mortgagee a certification

(hereinafter called the ‘‘Engineer’s Certification’’), in form satisfactory to the requestor, prepared by a professional engineer,

who shall be satisfactory to the Mortgagees,

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as to the condition of the Mortgaged Property. If in the sole judgment of any Mortgagee the Engineer’s Certification discloses

the need for improvements to the condition

of the Mortgaged Property or any other operations of the Mortgagor, such Mortgagee

may send to the Mortgagor a written report

of such improvements and the Mortgagor

will upon receipt of such written report

promptly undertake to accomplish such of

these improvements as are required by such

Mortgagee.

SECTION 3.13. Insurance; Restoration of

Damaged Mortgaged Property: (a) The Mortgagor will take out, as the respective risks

are incurred, and maintain the classes and

amounts of insurance in conformance with

generally accepted utility industry standards for such classes and amounts of coverages of utilities of the size and character of

the Mortgagor and consistent with Prudent

Utility Practice.

(b) The foregoing insurance coverage shall

be obtained by means of bond and policy

forms approved by regulatory authorities

having jurisdiction, and, with respect to insurance upon any part of the Mortgaged

Property, shall provide that the insurance

shall be payable to the Mortgagees as their

interests may appear by means of the standard mortgagee clause without contribution.

Each policy or other contract for such insurance shall contain an agreement by the insurer that, notwithstanding any right of cancellation reserved to such insurer, such policy or contract shall continue in force for at

least 30 days after written notice to each

Mortgagee of cancellation.

(c) In the event of damage to or the destruction or loss of any portion of the Mortgaged Property which is used or useful in the

Mortgagor’s business and which shall be covered by insurance, unless each Mortgagee

shall otherwise agree, the Mortgagor shall

replace or restore such damaged, destroyed

or lost portion so that such Mortgaged Property shall be in substantially the same condition as it was in prior to such damage, destruction or loss, and shall apply the proceeds of the insurance for that purpose. The

Mortgagor shall replace the lost portion of

such Mortgaged Property or shall commence

such restoration promptly after such damage, destruction or loss shall have occurred

and shall complete such replacement or restoration as expeditiously as practicable, and

shall pay or cause to be paid out of the proceeds of such insurance all costs and expenses in connection therewith.

(d) Sums recovered under any policy or fidelity bond by the Mortgagor for a loss of

funds advanced under the Notes or recovered

by any Mortgagee or any Noteholder for any

loss under such policy or bond shall, unless

applied as provided in the preceding paragraph, be used to finance construction of

utility plant secured or to be secured by this

Mortgage, or unless otherwise directed by

the Mortgagees, be applied to the prepayment of the Notes pro rata according to the

unpaid principal amounts thereof (such prepayments to be applied to such Notes and installments thereof as may be designated by

the respective Mortgagee at the time of any

such prepayment), or be used to construct or

acquire utility plant which will become part

of the Mortgaged Property. At the request of

any Mortgagee, the Mortgagor shall exercise

such rights and remedies which they may

have under such policy or fidelity bond and

which may be designated by such Mortgagee,

and the Mortgagor hereby irrevocably appoints each Mortgagee as its agent to exercise such rights and remedies under such policy or bond as such Mortgagee may choose,

and the Mortgagor shall pay all costs and

reasonable expenses incurred by the Mortgagee in connection with such exercise.

SECTION 3.14. Mortgagee Right to Expend

Money to Protect Mortgaged Property: The

Mortgagor agrees that any Mortgagee from

time to time hereunder may, in its sole discretion, after having given 5 Business days

prior written notice to Mortgagor, but shall

not be obligated to, advance funds on behalf

of Mortgagor, in order to insure the Mortgagor’s compliance with any covenant, warranty, representation or agreement of the

Mortgagor made in or pursuant to this Mortgage or any of the Loan Agreements, to preserve or protect any right or interest of the

Mortgagees in the Mortgaged Property or

under or pursuant to this Mortgage or any of

the Loan Agreements, including without

limitation, the payment of any insurance

premiums or taxes and the satisfaction or

discharge of any judgment or any Lien upon

the Mortgaged Property or other property or

assets of Mortgagor; provided, however, that

the making of any such advance by or

through any Mortgagee shall not constitute

a waiver by any Mortgagee of any Event of

Default with respect to which such advance

is made nor relieve the Mortgagor of any

such Event of Default. The Mortgagor shall

pay to a Mortgagee upon demand all such advances made by such Mortgagee with interest thereon at a rate equal to that on the

Note having the highest interest rate but in

no event shall such rate be in excess of the

maximum rate permitted by applicable law.

All such advances shall be included in the

obligations and secured by the security interest granted hereunder.

SECTION 3.15. Time Extensions for Payment

of Notes: Any Mortgagee may, at any time or

times in succession without notice to or the

consent of the Mortgagor, or any other Mortgagee, and upon such terms as such Mortgagee may prescribe, grant to any person,

firm or corporation who shall have become

obligated to pay all or any part of the principal of (and premium, if any) or interest on

any Note held by or indebtedness owed to

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such Mortgagee or who may be affected by

the lien hereby created, an extension of the

time for the payment of such principal, (and

premium, if any) or interest, and after any

such extension the Mortgagor will remain

liable for the payment of such Note or indebtedness to the same extent as though it

had at the time of such extension consented

thereto in writing.

SECTION 3.16. Application of Proceeds from

Condemnation: (a) In the event that the Mortgaged Property or any part thereof, shall be

taken under the power of eminent domain,

all proceeds and avails therefrom may be

used to finance construction of utility plant

secured or to be secured by this Mortgage.

Any proceeds not so used shall forthwith be

applied by the Mortgagor: first, to the ratable payment of any indebtedness secured by

this Mortgage other than principal of or interest on the Notes; second, to the ratable

payment of interest which shall have accrued on the Notes and be unpaid; third, to

the ratable payment of or on account of the

unpaid principal of the Notes, to such installments thereof as may be designated by

the respective Mortgagee at the time of any

such payment; and fourth, the balance shall

be paid to whomsoever shall be entitled

thereto.

(b) If any part of the Mortgaged Property

shall be taken by eminent domain, each

Mortgagee shall release the property so

taken from the Mortgaged Property and

shall be fully protected in so doing upon

being furnished with:

(1) A certificate of a duly authorized officer of the Mortgagor requesting such release,

describing the property to be released and

stating that such property has been taken by

eminent domain and that all conditions

precedent herein provided or relating to such

release have been complied with; and

(2) an opinion of counsel to the effect that

such property has been lawfully taken by exercise of the right of eminent domain, that

the award for such property so taken has become final and that all conditions precedent

herein provided for relating to such release

have been complied with.

SECTION 3.17. Compliance with Loan Agreements; Notice of Amendments to and Defaults

under Loan Agreements: The Mortgagor will

observe and perform all of the material covenants, agreements, terms and conditions

contained in any Loan Agreement entered

into in connection with the issuance of any

of the Notes, as from time to time amended.

The Mortgagor will send promptly to each

Mortgagee notice of any default by the Mortgagor under any Loan Agreement and notice

of any amendment to any Loan Agreement.

Upon request of any Mortgagee, the Mortgagor will furnish to such Mortgagee single

copies of such Loan Agreements and amendments thereto as such Mortgagee may request.

SECTION 3.18. Rights of Way, etc., Necessary

in Business: The Mortgagor will use its best

efforts to obtain all such rights of way, easements from landowners and releases from

lienors as shall be necessary or advisable in

the conduct of its business, and, if requested

by any Mortgagee, deliver to such Mortgagee

evidence satisfactory to such Mortgagee of

the obtaining of such rights of way, easements or releases.

SECTION 3.19. Limitations on Providing Free

Electric Services. The Mortgagor will not furnish or supply or cause to be furnished or

supplied any electric power, energy or capacity free of charge to any person, firm or corporation, public or private, and the Mortgagor will enforce the payment of any and

all amounts owning to the Mortgagor by reason of the ownership and operation of the

Utility System by discontinuing such use,

output, capacity, or service, or by filing suit

therefor within 90 days after any such accounts are due, or by both such discontinuance and by filing suit.

SECTION 3.20. Keeping Books; Inspection by

Mortgagee: The Mortgagor will keep proper

books, records and accounts, in which full

and correct entries shall be made of all dealings or transactions of or in relation to the

Notes and the Utility Systems, properties,

business and affairs of the Mortgagor in accordance with the Accounting Requirements.

The Mortgagor will at any and all times,

upon the written request of any Mortgagee

and at the expense of the Mortgagor, permit

such Mortgagee by its representatives to inspect the Utility Systems and properties and

properties, books of account, records, reports

and other papers of the Mortgagor and to

take copies and extracts therefrom, and will

afford and procure a reasonable opportunity

to make any such inspection, and the Mortgagor will furnish to each Mortgagee any

and all such information as such Mortgagee

may request, with respect to the performance by the Mortgagor of its covenants

under this Mortgage, the Notes and the Loan

Agreements.

ARTICLE IV

EVENTS OF DEFAULT AND REMEDIES

SECTION 4.01. Events of Default: Each of

the following shall be an ‘‘Event of Default’’

under this Mortgage:

(a) default shall be made in the payment of

any installment of or on account of interest

on or principal of (or premium, if any associated with) any Note or Notes for more than

five (5) Business Days after the same shall be

required to be made;

(b) default shall be made in the due observance or performance of any other of the covenants, conditions or agreements on the part

of the Mortgagor, in any of the Notes, Loan

Agreements or in this Mortgage, and such

default shall continue for a period of thirty

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(30) days after written notice specifying such

default and requiring the same to be remedied and stating that such notice is a ‘‘Notice of Default’’ hereunder shall have been

given to the Mortgagor by any Mortgagee;

PROVIDED, HOWEVER that in the case of a

default on the terms of a Note or Loan

Agreement of a particular Mortgagee, the

‘‘Notice of Default’’ required under this paragraph may only be given by that Mortgagee;

(c) the Mortgagor shall file a petition in

bankruptcy or be adjudicated a bankrupt or

insolvent, or shall make an assignment for

the benefit of its creditors, or shall consent

to the appointment of a receiver of itself or

of its property, or shall institute proceedings

for its reorganization or proceedings instituted by others for its reorganization shall

not be dismissed within sixty (60) days after

the institution thereof;

(d) a receiver or liquidator of the Mortgagor or of any substantial portion of its

property shall be appointed and the order appointing such receiver or liquidator shall not

be vacated within sixty (60) days after the

entry thereof;

(e) the Mortgagor shall forfeit or otherwise

be deprived of its corporate charter or franchises, permits, easements, or licenses required to carry on any material portion of

its business;

(f) a final judgment for an amount of more

than $lllll shall be entered against the

Mortgagor and shall remain unsatisfied or

without a stay in respect thereof for a period

of sixty (60) days; or,

(g) any material representation or warranty made by the Mortgagor herein, in the

Loan Agreements or in any certificate or financial statement delivered hereunder or

thereunder shall prove to be false or misleading in any material respect at the time

made.

SECTION 4.02. Acceleration of Maturity; Rescission and Annulment:

(a) If an Event of Default described in Section [4.01(a)] has occurred and is continuing,

any Mortgagee upon which such default has

occurred may declare the principal of all its

Notes secured hereunder to be due and payable immediately by a notice in writing to

the Mortgagor and to the other Mortgagees

(failure to provide said notice to any other

Mortgagee shall not affect the validity of

any acceleration of the Note or Notes by

such Mortgagee), and upon such declaration,

all unpaid principal (and premium, if any)

and accrued interest so declared shall become due and payable immediately, anything contained herein or in any Note or

Notes to the contrary notwithstanding.

(b) If any other Event of Default shall have

occurred and be continuing, any Mortgagee

may declare the principal of all its Notes secured hereunder to be due and payable immediately by a notice in writing to the Mortgagor and to the other Mortgagees (failure to

provide said notice to any other Mortgagee

shall not affect the validity of any acceleration of the Note or Notes by such Mortgagee), and upon such declaration, all unpaid

principal (and premium, if any) and accrued

interest so declared shall become due and

payable immediately, anything contained

herein or in any Note or Notes to the contrary notwithstanding.

(c) Upon receipt of actual knowledge of or

any notice of acceleration by any Mortgagee,

any other Mortgagee may declare the principal of all of its Notes to be due and payable

immediately by a notice in writing to the

Mortgagor and upon such declaration, all unpaid principal (and premium, if any) and accrued interest so declared shall become due

and payable immediately, anything contained herein or in any Note or Notes or

Loan Agreements to the contrary notwithstanding.

(d) If after the unpaid principal of (and premium, if any) and accrued interest on any of

the Notes shall have been so declared to be

due and payable, all payments in respect of

principal and interest which shall have become due and payable by the terms of such

Note or Notes (other than amounts due as a

result of the acceleration of the Notes) shall

be paid to the respective Mortgagees, and (i)

all other defaults under the Loan Agreements, the Notes and this Mortgage shall

have been made good or cured to the satisfaction of the Mortgagees representing at

least 80% of the aggregate unpaid principal

balance of all of the Notes then Outstanding,

(ii) proceedings to foreclose the lien of this

Mortgage have not been commenced, and

(iii) all reasonable expenses paid or incurred

by the Mortgagees in connection with the acceleration shall have been paid to the respective Mortgagees, then in every such case

such Mortgagees representing at least 80% of

the aggregate unpaid principal balance of all

of the Notes then Outstanding may by written notice to the Mortgagor, for purposes of

this Mortgage, annul such declaration and

waive such default and the consequences

thereof, but no such waiver shall extend to

or affect any subsequent default or impair

any right consequent thereon.

SECTION 4.03. Remedies of Mortgagees: If

one or more of the Events of Default shall

occur and be continuing, any Mortgagee personally or by attorney, in its or their discretion, may, in so far as not prohibited by law:

(a) take immediate possession of the Mortgaged Property, collect and receive all credits, outstanding accounts and bills receivable

of the Mortgagor and all rents, income, revenues, proceeds and profits pertaining to or

arising from the Mortgaged Property, or any

part thereof, whether then past due or accruing thereafter, and issue binding receipts

therefor; and manage, control and operate

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the Mortgaged Property as fully as the Mortgagor might do if in possession thereof, including, without limitation, the making of

all repairs or replacements deemed necessary

or advisable by such Mortgagee in possession;

(b) proceed to protect and enforce the

rights of all of the Mortgagees by suits or actions in equity or at law in any court or

courts of competent jurisdiction, whether for

specific performance of any covenant or any

agreement contained herein or in aid of the

execution of any power herein granted or for

the foreclosure hereof or hereunder or for the

sale of the Mortgaged Property, or any part

thereof, or to collect the debts hereby secured or for the enforcement of such other or

additional appropriate legal or equitable

remedies as may be deemed necessary or advisable to protect and enforce the rights and

remedies herein granted or conferred, and in

the event of the institution of any such action or suit the Mortgagee instituting such

action or suit shall have the right to have

appointed a receiver of the Mortgaged Property and of all proceeds, rents, income, revenues and profits pertaining thereto or arising therefrom, whether then past due or accruing after the appointment of such receiver, derived, received or had from the

time of the commencement of such suit or

action, and such receiver shall have all the

usual powers and duties of receivers in like

and similar cases, to the fullest extent permitted by law, and if application shall be

made for the appointment of a receiver the

Mortgagor hereby expressly consents that

the court to which such application shall be

made may make said appointment; and

(c) sell or cause to be sold all and singular

the Mortgaged Property or any part thereof,

and all right, title, interest, claim and demand of the Mortgagor therein or thereto, at

public auction at such place in any county

(or its equivalent locality) in which the property to be sold, or any part thereof, is located, at such time and upon such terms as

may be specified in a notice of sale, which

shall state the time when and the place

where the sale is to be held, shall contain a

brief general description of the property to

be sold, and shall be given by mailing a copy

thereof to the Mortgagor at least fifteen (15)

days prior to the date fixed for such sale and

by publishing the same once in each week for

two successive calendar weeks prior to the

date of such sale in a newspaper of general

circulation published in said locality or, if

no such newspaper is published in such locality, in a newspaper of general circulation in

such locality, the first such publication to be

not less than fifteen (15) days nor more than

thirty (30) days prior to the date fixed for

such sale. Any sale to be made under this

subparagraph (c) of this Section [4.03] may be

adjourned from time to time by announcement at the time and place appointed for

such sale or for such adjourned sale or sales,

and without further notice or publication

the sale may be had at the time and place to

which the same shall be adjourned; provided,

however, that in the event another or different notice of sale or another or different

manner of conducting the same shall be required by law the notice of sale shall be

given or the sale be conducted, as the case

may be, in accordance with the applicable

provisions of law. The expense incurred by

any Mortgagee (including, but not limited

to, receiver’s fees, counsel fees, cost of advertisement and agents’ compensation) in

the exercise of any of the remedies provided

in this Mortgage shall be secured by this

Mortgage.

(d) In the event that a Mortgagee proceeds

to enforce remedies under this Section, any

other Mortgagee may join in such proceedings. In the event that the Mortgagees

are not in agreement with the method or

manner of enforcement chosen by any other

Mortgagee, the Mortgagees representing a

majority of the aggregate unpaid principal

balance on the then Outstanding Notes may

direct the method and manner in which remedial action will proceed.

SECTION 4.04. Application of Proceeds from

Remedial Actions: Any proceeds or funds arising from the exercise of any rights or the enforcement of any remedies herein provided

after the payment or provision for the payment of any and all costs and expenses in

connection with the exercise of such rights

or the enforcement of such remedies shall be

applied first, to the ratable payment of indebtedness hereby secured other than the

principal of or interest on the Notes; second,

to the ratable payment of interest which

shall have accrued on the Notes and which

shall be unpaid; third, to the ratable payment of or on account of the unpaid principal of the Notes; and the balance, if any,

shall be paid to whomsoever shall be entitled

thereto.

SECTION 4.05. Remedies Cumulative; No

Election: Every right or remedy herein conferred upon or reserved to the Mortgagees or

to the Noteholders shall be cumulative and

shall be in addition to every other right and

remedy given hereunder or now or hereafter

existing at law, or in equity, or by statute.

The pursuit of any right or remedy shall not

be construed as an election.

SECTION 4.06. Waiver of Appraisement

Rights; Marshaling of Assets Not Required: The

Mortgagor, for itself and all who may claim

through or under it, covenants that it will

not at any time insist upon or plead, or in

any manner whatever claim, or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption laws

now or hereafter in force in any locality

where any of the Mortgaged Property may be

situated, in order to prevent, delay or hinder

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the enforcement or foreclosure of this Mortgage, or the absolute sale of the Mortgaged

Property, or any part thereof, or the final

and absolute putting into possession thereof,

immediately after such sale, of the purchaser

or purchasers thereat, and the Mortgagor,

for itself and all who may claim through or

under it, hereby waives the benefit of all

such laws unless such waiver shall be forbidden by law. Under no circumstances shall

there be any marshalling of assets upon any

foreclosure or to other enforcement of this

Mortgage.

SECTION 4.07. Notice of Default: The Mortgagor covenants that it will give immediate

written notice to each Mortgagee of the occurrence of any Event of Default or in the

event that any right or remedy described in

Sections [4.02] and [4.03] hereof is exercised

or enforced or any action is taken to exercise

or enforce any such right or remedy.

ARTICLE V—POSSESSION UNTIL

DEFAULT-DEFEASANCE CLAUSE

SECTION 5.01. Possession Until Default:

Until some one or more of the Events of Default shall have happened, the Mortgagor

shall be suffered and permitted to retain actual possession of the Mortgaged Property,

and to manage, operate and use the same and

any part thereof, with the rights and franchises appertaining thereto, and to collect,

receive, take, use and enjoy the rents, revenues, issues, earnings, income, proceeds,

products and profits thereof or therefrom,

subject to the provisions of this Mortgage.

SECTION 5.02. Defeasance: If the Mortgagor

shall pay or cause to be paid the whole

amount of the principal of (and premium, if

any) and interest on the Notes at the times

and in the manner therein provided, and

shall also pay or cause to be paid all other

sums payable by the Mortgagor hereunder or

under any Loan Agreement and shall keep

and perform, all covenants herein required to

be kept and performed by it, then and in that

case, all property, rights and interest hereby

conveyed or assigned or pledged shall revert

to the Mortgagor and the estate, right, title

and interest of the Mortgagee so paid shall

thereupon cease, determine and become void

and such Mortgagee, in such case, on written

demand of the Mortgagor but at the Mortgagor’s cost and expense, shall enter satisfaction of the Mortgage upon the record. In any

event, each Mortgagee, upon payment in full

to such Mortgagee by the Mortgagor of all

principal of (and premium, if any) and interest on any Note held by such Mortgagee and

the payment and discharge by the Mortgagor

of all charges due to such Mortgagee hereunder or under any Loan Agreement, shall

execute and deliver to the Mortgagor such

instrument of satisfaction, discharge or release as shall be required by law in the circumstances.

SECTION 5.03. Special Defeasance: Other

than any Notes excluded by the foregoing

Sections 5.01 and 5.02 and Notes which have

become due and payable, the Mortgagor may

cause the Lien of this Mortgage to be

defeased with respect to any Note for which

it has deposited or caused to be deposited in

trust solely for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Note for principal (and premium, if any) and interest to the date of maturity thereof; PROVIDED, HOWEVER, that

depository serving as trustee for such trust

must first be accepted as such by the Mortgagee whose Notes are being defeased under

this section. In such event, such a Note will

no longer be considered to be an Outstanding

Note for purposes of this Mortgage and the

Mortgagee shall execute and deliver to the

Mortgagor such instrument of satisfaction,

discharge or release as shall be required by

law in the circumstances.

ARTICLE VI

MISCELLANEOUS

SECTION 6.01. Property Deemed Real Property: It is hereby declared to be the intention

of the Mortgagor that any electric generating plant or plants and facilities and all

electric transmission and distribution lines,

or other Electric System or Utility System

facilities, embraced in the Mortgaged Property, including (without limitation) all

rights of way and easements granted or

given to the Mortgagor or obtained by it to

use real property in connection with the construction, operation or maintenance of such

plant, lines, facilities or systems, and all

other property physically attached to any of

the foregoing, shall be deemed to be real

property.

SECTION 6.02. Mortgage to Bind and Benefit

Successors and Assigns: All of the covenants,

stipulations, promises, undertakings and

agreements herein contained by or on behalf

of the Mortgagor shall bind its successors

and assigns, whether so specified or not, and

all titles, rights and remedies hereby granted

to or conferred upon the Mortgagees shall

pass to and inure to the benefit of the successors and assigns of the Mortgagees and

shall be deemed to be granted or conferred

for the ratable benefit and security of all

who shall from time to time be a Mortgagee.

The Mortgagor hereby agrees to execute

such consents, acknowledgements and other

instruments as may be reasonably requested

by any Mortgagee in connection with the assignment, transfer, mortgage, hypothecation

or pledge of the rights or interests of such

Mortgagee hereunder or under the Notes or

in and to any of the Mortgaged Property.

SECTION 6.03. Headings: The descriptive

headings of the various articles and sections

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Rural Utilities Service, USDA Pt. 1718, Subpt. B, App. A

of this Mortgage and also the table of contents were formulated and inserted for convenience only and shall not be deemed to affect the meaning or construction of any of

the provisions hereof.

SECTION 6.04. Severability Clause: In case

any provision of this Mortgage or in the

Notes or in the Loan Agreements shall be invalid or unenforceable, the validity, legality

and enforceability of the remaining provisions thereof shall not in any way be affected

or impaired, nor shall any invalidity or unenforceability as to any Mortgagee hereunder affect or impair the rights hereunder

of any other Mortgagee.

SECTION 6.05. Mortgage Deemed Security

Agreement: To the extent that any of the

property described or referred to in this

Mortgage is governed by the provisions of

the UCC this Mortgage is hereby deemed a

‘‘security agreement’’ under the UCC, and, if

so elected by any Mortgagee, a ‘‘financing

statement’’ under the UCC for said security

agreement. The mailing addresses of the

Mortgagor as debtor, and the Mortgagees as

secured parties are as set forth in Section

[1.05] hereof. If any Mortgagee so directs the

Mortgagor to do so, the Mortgagor shall file

as a financing statement under the UCC for

said security agreement and for the benefit

of all of the Mortgagees, an instrument other

than this Mortgage. In such case, the instrument to be filed shall be in a form customarily accepted by the filing office as a financing statement. PROCEEDS OF COLLATERAL ARE COVERED HEREBY.

SECTION 6.06. Indemnification by Mortgagor

of Mortgagees: The Mortgagor agrees to indemnify and save harmless each Mortgagee

against any liability or damages which any

of them may incur or sustain in the exercise

and performance of their rightful powers and

duties hereunder. For such reimbursement

and indemnity, each Mortgagee shall be secured under this Mortgage in the same manner as the Notes and all such reimbursements for expense or damage shall be paid to

the Mortgagee incurring or suffering the

same with interest at the rate specified in

Section [3.14] hereof. The Mortgagor’s obligation to indemnify the Mortgagees under

this section and under Section [3.04] shall

survive the satisfaction of the Notes, the reconveyance or foreclosure of this Mortgage,

the acceptance of a deed in lieu of foreclosure, or any transfer or abandonment of

the Mortgaged Property.

IN WITNESS WHEREOF, lllll as

Mortgagor, has caused this Restated Mortgage and Security Agreement to be signed in

its name and its corporate seal to be hereunto affixed and attested by its officers

thereunto duly authorized, and UNITED

STATES OF AMERICA, as Mortgagee, and

as Mortgagee, has caused this Restated

Mortgage and Security Agreement to be

signed in its name by duly authorized persons, all as of the day and year first above

written.

llllllllllllllllllllllll

(SEAL)

By: lllllllllllllllllllll

President

Attest: lllllllllllllllllll

Title: llllllllllllllllllll

Executed by the Mortgagor in the presence

of:

llllllllllllllllllllllll

llllllllllllllllllllllll

Witnesses

UNITED STATES OF AMERICA

By: Director, of the lllll Rural Utilities

Service

Executed by the United States of America,

Mortgagee, in the presence of:

llllllllllllllllllllllll

llllllllllllllllllllllll

Witnesses

By:

(SEAL)

Attest: lllllllllllllllllll

Title: llllllllllllllllllll

Executed by the above-named Mortgagee

in the presence of:

llllllllllllllllllllllll

llllllllllllllllllllllll

Witnesses

SCHEDULE A

1. The Maximum Debt Limit is lllll.

2. The Original Mortgage as described in

the [first] WHEREAS clause above is

lllll.

3. The outstanding secured indebtedness

described in the [fourth] WHEREAS clause

above as evidenced by the Original Notes is

as follows:

[Note this requires computation of principal balances, not merely a toting up of the

original face amounts of the notes. Alternative approaches may be used by the parties where legally effective and mutually

agreeable.]

SCHEDULE B—PROPERTY SCHEDULE

The fee and leasehold interests in real

property referred to in Section Subclause (a)

of Granting Clause One are lllll.

The counties referred to in Subclause (B)

of Granting Clause One are lllll.

SCHEDULE C—EXCEPTED PROPERTY

STATE OF lllll

COUNTY OF lllll

On this lll day of lllll, 19 ll, before me appeared lllll and lllll

personally known, by me and having been

duly sworn by me, did say that they are the

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Pt. 1718, Subpt. B, App. A 7 CFR Ch. XVII (1–1–00 Edition)

President and Secretary, respectively, of

llllllll, a lllll corporation, and

that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed

and sealed in behalf of said corporation by

authority of its Board, and said lllll

and lllll acknowledged that the execution of said instrument was a free act and

deed of said corporation.

IN WITNESS whereof, I have hereunto set

my hand and official seal the day and year

last above written.

llllllllllllllllllllllll

Notary Public

(Notarial Seal)

My commission expires:

DISTRICT OF COLUMBIA ) SS

The foregoing instrument was acknowledged before me thislllll day of

19lll, by lllll Director, lllll Regional Division of the Rural Utilities Service, acknowledging an agency of the United

States of America, on behalf of the Rural

Utilities Service, United States of America.

llllllllllllllllllllllll

Notary Public

(Notarial Seal)

My Commission expires:

COMMONWEALTH OF VIRGINIA ) SS

BEFORE ME, a Notary Public, in and for

the Commonwealth of Virginia, appeared in

person lllll, signing for the Governor of

the National Rural Utilities cooperative Finance Corporation, to me personally known,

and known to be the identical person who

subscribed the name of said corporation to

the foregoing instrument, being by me duly

sworn, and who stated that she/he is duly authorized to execute the foregoing instrument

on behalf of said corporation, and further

stated and acknowledged that she/he executed the foregoing instrument as a free and

voluntary act and deed of said corporation

for the consideration therein mentioned and

set forth.

IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this lll

day of lllll, 19lll.

llllllllllllllllllllllll

Notary Public

(Notarial Seal)

My commission expires:

EXHIBIT A—MANAGER’S CERTIFICATE

MANAGER’S CERTIFICATE REQUIRED UNDER

MORTGAGE SECTION 2.01 FOR ADDITIONAL

NOTES

On behalf on lllll[Name of Borrower]

(the ‘‘Borrower’’), I lllll hereby certify

as follows:

1. I am the Manager of the Borrower and

have been duly authorized to deliver this certificate in connection with the Additional

Note or Notes to be issued on or about

lllll [Date Note or Notes are to be

Signed] pursuant to Section [2.01] of the

Mortgage dated lllll.

2. No Event of Default has occurred and is

continuing under the Mortgage, or any event

which with the giving of notice or lapse of

time or both would become an Event of Default has occurred and is continuing.

3. The Additional Notes described in paragraph 1 are for the purpose of funding Property Additions being constructed, acquired,

procured or replaced that are or will become

part of the Borrower’s Utility System.

4. The Property Additions referred to in

paragraph 3 are Eligible Property Additions,

i.e. Property Additions acquired or whose

construction was completed not more than 5

years prior to the issuance of additional

Notes and Property Additions acquired or

whose construction is started and/or completed not more than 4 years after issuance

of the additional Notes, but shall exclude

any Property Additions financed by any

other debt secured under the Mortgage at

the time additional Notes are issued.

5. I have reviewed the certificate of the

Independent certified public accountant also

being delivered to each of the Mortgagees

pursuant to Section [2.01] in connection with

the aforesaid Additional Note or Notes and

concur with the conclusions expressed therein.

6. Capitalized terms that are used in this

certificate but are not defined herein have

the meanings defined in the Mortgage.

[Signed] lllllllllllllllllll

[Dated] lllllllllllllllllll

[Name] lllllllllllllllllll

[Title] llllllllllllllllllll

[Name and Address of Borrower] llllll

llllllllllllllllllllllll

llllllllllllllllllllllll

Exhibit B—Form of Supplemental Mortgage

llllllllllllllllllllllll

Supplemental Mortgage and Security

Agreement, dated as of lllll, lll,

llll, (hereinafter sometimes called this

‘‘Supplemental Mortgage’’) is made by and

between lllll (hereinafter called the

‘‘Mortgagor’’), a corporation existing under

the laws of the State of lllll, and the

UNITED STATES OF AMERICA acting by

and through the Administrator of the Rural

Utilities Service (hereinafter called the

‘‘Government’’), lllll (Supplemental

Lender) (hereinafter called lllll), a

lllll existing under the laws of

lllll, and intended to confer rights and

benefits on both the Government and

lllll and lllll in accordance with

this Supplemental Mortgage and the Original Mortgage (hereinafter defined) (the Government and the Supplemental Lenders

being herein sometimes collectively referred

to as the ‘‘Mortgagees’’).

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Rural Utilities Service, USDA Pt. 1718, Subpt. B, App. A

RECITALS

Whereas, the Mortgagor, the Government

and lllll are parties to that certain Restated Mortgage and Security Agreement, as

supplemented, amended or restated (the

‘‘Original Mortgage’’ identified in Schedule

‘‘A’’ of this Mortgage) originally entered

into between the Mortgagor, the Government acting by and through the Administrator of the Rural Utilities Service (hereinafter called ‘‘RUS’’), and lllll; and

Whereas, the Mortgagor deems it necessary

to borrow money for its corporate purposes

and to issue its promissory notes and other

debt obligations therefor, and to mortgage

and pledge its property hereinafter described

or mentioned to secure the payment of the

same, and to enter into this Supplemental

Mortgage pursuant to which all secured debt

of the Mortgagor hereunder shall be secured

on parity, and to add lllll as a secured

party hereunder and under the Original

Mortgage (the Supplemental Mortgage and

the Original Mortgage, as it may have been

previously amended or supplemented, hereinafter may be called collectively the ‘‘RUS

Mortgage’’); and

Whereas, the RUS Mortgage, as supplemented hereby, preserves the priority of the

Original Mortgage for the pro rata benefit of

all the Mortgagees and secures the payment

of all of the Mortgagor’s outstanding indebtedness as listed in the Instruments Recital of

Schedule ‘‘A’’; and

Whereas, all acts necessary to make this

Supplemental Mortgage a valid and binding

legal instrument for the security of such

notes and obligations, subject to the terms

of the RUS Mortgage, have been in all respects duly authorized:

Now, Therefore, This Supplemental Mortgage Witnesseth: That to secure the payment

of the principal of (and premium, if any) and

interest on all Notes issued hereunder according to their tenor and effect, and the

performance of all provisions therein and

herein contained, and in consideration of the

covenants herein contained and the purchase

or guarantee of Notes by the guarantors or

holders thereof, the Mortgagor has mortgaged, pledged and granted a continuing security interest in, and by these presents does

hereby grant, bargain, sell, alienate, remise,

release, convey, assign, transfer, hypothecate, pledge, set over and confirm, pledge

and grant a continuing security interest in

for the purposes hereinafter expressed [other

language may be required under various

state laws], unto the Mortgagees all property, rights, privileges and franchises of the

Mortgagor of every kind and description,

real, personal or mixed, tangible and intangible, of the kind or nature specifically mentioned herein or any other kind or nature,

except any Excepted Property set forth on

Schedule ‘‘C’’ hereof owned or hereafter acquired by the Mortgagor (by purchase, consolidation, merger, donation, construction,

erection or in any other way) wherever located, including (without limitation) all and

singular the following:

A. All of those fee and leasehold interests

in real property set forth in Schedule ‘‘B’’

hereto, subject in each case to those matters

set forth in such Schedule; and

B. All of those fee and leasehold interests

in real property set forth in Schedule ‘‘B’’ of

the Original Mortgage or in any restatement, amendment or supplement thereto,

subject in each case to those matters set

forth in such Schedule; and

C. All of the kinds, types or items of property, now owned or hereafter acquired, described as Mortgaged Property in the Original Mortgage or in any restatement, amendment to supplement thereto as Mortgaged

Property.

It is Further Agreed and Covenanted That

the Original Mortgage, as previously restated, amended or supplemented, and this

Supplement shall constitute one agreement

and the parties hereto shall be bound by all

of the terms thereof and, without limiting

the foregoing.

1. All capitalized terms not defined herein

shall have the meaning given in Article I of

the Original Mortgage.

2. This Supplemental Mortgage is one of

the Supplemental Mortgages contemplated

by Article II of the Original Mortgage.

In Witness Whereof, lllll as Mortgagor.

[ACKNOWLEDGEMENTS]

SUPPLEMENTAL MORTGAGE SCHEDULE A—

MAXIMUM DEBT LIMIT AND OTHER INFORMATION

1. The Maximum Debt Limit is lllll.

2. The Original Mortgage as described in

the first WHEREAS clause above is

lllll.

3. The outstanding secured indebtedness

described in the third WHEREAS clause

above is lllll.

SUPPLEMENTAL MORTGAGE SCHEDULE B—

PROPERTY SCHEDULE

The fee and leasehold interests in real

property referred to in clause A of the granting clause are lllll.

SUPPLEMENTAL MORTGAGE SCHEDULE C—

EXCEPTED PROPERTY

[60 FR 36888, July 18, 1995, as amended at 60

FR 67410, Dec. 29, 1995]

216

§ 1718.100 7 CFR Ch. XVII (1–1–00 Edition)

Subpart C—Loan Contracts With

Distribution Borrowers

SOURCE: 60 FR 67410, Dec. 29, 1995, unless

otherwise noted.

§ 1718.100 General.

(a) Purpose. The purpose of this subpart is to set forth the policies, requirements, and procedures governing

loan contracts entered into between

the Rural Utilities Service (RUS) and

distribution borrowers or, in some

cases, other electric borrowers.

(b) Flexibility for individual circumstances. The intent of this subpart

is to provide the flexibility to address

the different needs and different credit

risks of individual borrowers, and other

special circumstances of individual

lending situations. The model loan contract contained in Appendix A of this

subpart provides an example of what a

loan contract with an ‘‘average’’ or

‘‘typical’’ distribution borrower may

look like under ‘‘average’’ or ‘‘typical’’

circumstances. Depending on the credit

risks and other circumstances of individual loans, RUS may execute loan

contracts with provisions that are substantially different than those set

forth in the model. RUS may develop

alternative model loan contract provisions. If it does, such provisions will be

made available to the public.

(c) Resolution of any differences in contractual provisions. If any provision of

the loan contract appears to be in conflict with provisions of the mortgage,

the loan contract shall have precedence with respect to the contractual

relationship between the borrower and

RUS with respect to such provision. If

either document is silent on a matter

addressed in the other document, the

other document shall have precedence

with respect to the contractual relationship between the borrower and

RUS with respect to such matter.

(d) Certain loan contract provisions

subject to subsequent rulemaking. If a

loan contract provision imposes an obligation or limitation on the borrower

whose interpretation or specification is

subject to RUS regulations or the discretion of the Administrator or RUS,

such interpretation or specification

shall be subject to subsequent rulemaking. Such interpretation or specification of the borrower’s obligations

or limitations may not exceed the authority granted to the Administrator

or RUS in the loan contract provision.

§ 1718.101 Applicability.

(a) Distribution borrowers. The provisions of this subpart apply to all distribution borrowers that obtain a loan

or loan guarantee from RUS approved

on or after January 29, 1996. Distribution borrowers that obtain a lien accommodation or any other form of financial assistance from RUS after January 29, 1996, may be required to execute a new loan contract and new

mortgage. Moreover, any distribution

borrower may submit a request to RUS

that a new loan contract and new

mortgage be executed. Within the constraints of time and staff resources,

RUS will attempt to honor such requests. Borrowers must first obtain the

concurrence of any other mortgagees

on their existing mortgage before a

new mortgage can be executed.

(b) Other borrowers. Borrowers other

than distribution borrowers may also

submit requests for execution of a new

loan contract pursuant to this subpart

and a new mortgage pursuant to subpart B of this part. RUS may approve

such requests if it determines that

such approval is in the government’s financial interest. If other mortgagees

are on the borrower’s existing mortgage, their concurrence would be required before a new mortgage could be

executed.

§ 1718.102 Definitions.

For the purposes of this subpart:

Borrower means any organization

that has an outstanding loan made or

guaranteed by the Rural Utilities Service (RUS) or its predecessor, the Rural

Electrification Administration, for

rural electrification, or that is seeking

such financing.

Distribution borrower means a borrower that sells or intends to sell electric power and energy at retail in rural

areas, the latter being defined in 7 CFR

1710.2.

Loan documents means the mortgage

(or other security instrument acceptable to RUS), the loan contract, and

the promissory note entered into between the borrower and RUS.

217

Rural Utilities Service, USDA § 1718.103

§ 1718.103 Loan contract provisions.

Loan contracts executed pursuant to

this subpart shall contain such provisions as RUS determines are appropriate to further the purposes of the

RE Act and to ensure that the security

for the loan will be reasonably adequate and that the loan will be repaid

according to the terms of the promissory note. Such loan contracts will

contain provisions addressing, but not

necessarily limited to, the following

matters:

(a) Description of the purpose of the

loan;

(b) Specification of the interest to be

charged on the loan, including the

method for determining the interest

rate if it is not fixed for the entire

term of the loan;

(c) Specification of the method for

repaying the loan principal, including

the final maturity of the loan;

(d) The conditions under which the

loan may be prepaid before its maturity date, including but not limited to

requirements regarding the prepayment of loans made concurrently by

RUS and another secured lender;

(e) The method for making scheduled

payments on the loan;

(f) Accounting principles and system

of accounts, and RUS authority to approve the accountant used by the borrower;

(g) The method and time period for

advancing loan funds and the conditions precedent to the advance of

funds;

(h) Representations and warranties

by the borrower as a condition of obtaining the loan, including but not limited to: the legal authority of the borrower to enter into the loan contract

and operate its system; that the loan

documents will be a legal, valid and

binding obligation of the borrower enforceable according to their terms;

compliance of the borrower in all material respects with all federal, state,

and local laws, regulations, codes, and

orders; existence of any pending or

threatened legal actions that could

have a material adverse effect on the

borrower’s ability to perform its obligations under the loan documents; the

accuracy and completeness of all information provided by the borrower in the

loan application and with respect to

the loan contract, and the existence of

any material adverse change since the

information was provided; and the existence of any material defaults under

other agreements of the borrower;

(i) Representations, warranties, and

covenants with respect to environmental matters;

(j) Reports and notices required to be

submitted to RUS, including but not

limited to: annual financial statements; notice of defaults; notice of litigation; notice of orders or other directives received by the borrower from

regulatory authorities; notice of any

matter that has resulted in or may result in a material adverse change in

the condition or operations of the borrower; and such other information regarding the condition or operations of

the borrower as RUS may reasonably

require;

(k) Annual written certification that

the borrower is in compliance with its

loan contract, note, mortgage, and any

other agreement with RUS, or if there

has been a default in the fulfillment of

any obligation under said agreements,

specifying each such default and the

nature and status thereof;

(l) Requirement that the borrower

design and implement rates for utility

services to meet certain minimum coverage of interest expense and/or debt

service obligations;

(m) Requirement that the borrower

maintain and preserve its mortgaged

property in compliance with prudent

utility practice and all applicable laws,

which may include certain specific actions and certifications set forth in the

borrower’s loan contract or mortgage;

(n) Requirement that the borrower

plan, design and construct its electric

system according to standards and

other requirements established by

RUS, and if directed by the Administrator, that the borrower follow RUS

planning, design and construction

standards and requirements for other

utility systems constructed by the borrower;

(o) Limitations on extensions and additions to the borrower’s electric system without approval by RUS;

(p) Limitations on contracts and contract amendments that the borrower

may enter into without approval by

RUS;

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§ 1718.104 7 CFR Ch. XVII (1–1–00 Edition)

(q) Limitations of the transfer of

mortgaged property by the borrower;

(r) Limitations on dividends, patronage refunds, and cash distributions

paid by the borrower;

(s) Limitations on investments,

loans, and guarantees made by the borrower;

(t) Authority of RUS to approve a

new general manager and to require

that an existing general manager be replaced if the borrower is in default

under its mortgage, loan contract, or

any other agreements with RUS;

(u) Description of events of default

under the loan contract and the remedies available to RUS;

(v) Applicability of state and federal

laws;

(w) Severability of the individual

provisions of the loan documents;

(x) Matters relating to the assignment of the loan contract;

(y) Requirements relating to federal

laws and regulations, including but not

limited to the following matters: area

coverage for electric service; civil

rights and equal employment opportunity; access to buildings and other

matters relating to the handicapped;

design and construction standards relating to earthquakes; the National

Environmental Policy Act of 1969 and

other environmental laws and regulations; flood hazard insurance; debarment and suspension from federal assistance programs; and delinquency on

federal debt; and

(z) Special requirements applicable

to individual loans, and such other provisions as RUS may require to ensure

loan repayment and reasonably adequate loan security.

§ 1718.104 Availability of model loan

contract.

Single copies of the model loan contract (RUS Informational Publication

1718 C) are available from the Rural

Utilities Service, United States Department of Agriculture, Washington,

DC 20250–1533. This document may be

reproduced.

APPENDIX A TO SUBPART C TO PART

1718—MODEL FORM OF LOAN CONTRACT FOR ELECTRIC DISTRIBUTION

BORROWERS

LOAN CONTRACT

TABLE OF CONTENTS

RECITALS

ARTICLE I—DEFINITIONS

ARTICLE II—REPRESENTATIONS AND

WARRANTIES

Section 2.1. Representations and Warranties.

ARTICLE III—LOAN

Section 3.1. Advances.

Section 3.2. Interest Rate and Payment.

Section 3.3. Prepayment.

ARTICLE IV—CONDITIONS OF LENDING

Section 4.1. General Conditions.

Section 4.2. Special Conditions.

ARTICLE V—AFFIRMATIVE COVENANTS

Section 5.1. Generally.

Section 5.2. Annual Certificates.

Section 5.3. Simultaneous Prepayment of

Contemporaneous Loans.

Section 5.4. Rates to Provide Revenue Sufficient to Meet Coverage Ratios Requirements.

Section 5.5. Depreciation Rates.

Section 5.6. Property Maintenance.

Section 5.7. Financial Books.

Section 5.8. Rights of Inspection.

Section 5.9. Area Coverage.

Section 5.10. Real Property Acquisition.

Section 5.11. ‘‘Buy American’’ Requirements.

Section 5.12. Power Requirements Studies.

Section 5.13. Long Range Engineering

Plans and Construction Work Plans.

Section 5.14. Design Standards, Construction Standards, and List of Materials.

Section 5.15. Plans and Specifications.

Section 5.16. Standard Forms of Construction Contracts, and Engineering and Architectural Services Contracts.

Section 5.17. Contract Bidding Requirements.

Section 5.18. Nondiscrimination.

Section 5.19. Financial Reports.

Section 5.20. Miscellaneous Reports and

Notices.

Section 5.21 Special Construction Account.

Section 5.22. Additional Affirmative Covenants.

ARTICLE VI—NEGATIVE COVENANTS

Section 6.1. General.

Section 6.2. Limitations on System Extensions and Additions.

Section 6.3. Limitations on Changing Principal Place of Business.

Section 6.4. Limitations on Employment

and Retention of Manager.

Section 6.5. Limitations on Certain Types

of Contracts.

Section 6.6. Limitations on Mergers and

Sale, Lease or Transfer of Capital Assets.

Section 6.7. Limitations on Using non

FDIC-insured Depositories.

Section 6.8. Limitation on Distributions.

Section 6.9. Limitations on Loans, Investments and Other Obligations.

Section 6.10. Depreciation Rates.

Section 6.11. Historic Preservation.

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Rural Utilities Service, USDA Pt. 1718, Subpt. C, App. A

Section 6.12. Rate Reductions.

Section 6.13. Limitations on Additional Indebtedness.

Section 6.14. Limitations on Issuing Additional Indebtedness Secured Under the

Mortgage.

Section 6.15. Impairment of Contracts

Pledged to RUS.

Section 6.16. Additional Negative Covenants.

ARTICLE VII—DEFAULT

Section 7.1. Events of Default.

ARTICLE VIII—REMEDIES

Section 8.1. Generally.

Section 8.2. Suspension of Advances.

ARTICLE IX—MISCELLANEOUS

Section 9.1. Notices.

Section 9.2. Expenses.

Section 9.3. Late Payments.

Section 9.4. Filing Fees.

Section 9.5. No Waiver.

Section 9.6. Governing Law.

Section 9.7. Holiday Payments.

Section 9.8. Rescission.

Section 9.9. Successors and Assigns.

Section 9.10. Complete Agreement; Amendments.

Section 9.11. Headings.

Section 9.12. Severability.

Section 9.13. Right of Setoff.

Section 9.14. Schedules and Exhibits.

Section 9.15. Prior Loan Documents.

Section 9.16. Authority of Representatives

of RUS.

Section 9.17. Term.

SCHEDULE 1

SCHEDULE 2—Existing Liens

SCHEDULE 3—Additional Contracts

EXHIBIT A—Form of Promissory Note

EXHIBIT B—Equal Opportunity Contract

Provisions

EXHIBIT C–1—Manager’s Certificate Required Under Loan Contract

Section 6.14 for Additional Notes

Exhibit C–2—Manager’s Certificate Required

Under Loan Contract

Section 6.14 for Refinancing Notes

LOAN CONTRACT

AGREEMENT, dated llllllllll,

199ll, between llllllllll (‘‘Borrower’’), a corporation organized and existing under the laws of the State of

llllllllll (the ‘‘State’’) and the

UNITED STATES OF AMERICA acting by

and through the Administrator of the Rural

Utilities Service (‘‘RUS’’).

RECITALS

The Borrower has applied to RUS for a

loan for the purpose(s) set forth in Schedule

1 hereto.

RUS is willing to make such a loan to the

Borrower pursuant to the Rural Electrification Act of 1936, as amended, on the terms

and conditions stated herein.

THEREFORE, for and in consideration of

the premises and the mutual covenants hereinafter contained, the parties hereto agree

and bind themselves as follows:

ARTICLE I—DEFINITIONS

Capitalized terms that are not defined

herein shall have the meanings as set forth

in the Mortgage. The terms defined herein

include the plural as well as the singular and

the singular as well as the plural.

‘‘Act’’ shall mean the Rural Electrification

Act of 1936, as amended.

‘‘Advance’’ or ‘‘Advances’’ shall mean advances by RUS to Borrower pursuant to the

terms and conditions of this Agreement.

‘‘Agreement’’ shall mean this Loan Contract together with all schedules and exhibits and also any subsequent supplements or

amendments.

‘‘Business Day’’ shall mean any day that

RUS is open for business.

‘‘Contemporaneous Loan’’ shall mean any

loan which the Borrower has used to satisfy

RUS Regulations or loan conditions requiring that supplemental financing be obtained

in order to obtain a loan from RUS. Any loan

used to refinance or refund a Contemporaneous Loan is also considered to be a Contemporaneous Loan.

‘‘Coverage Ratios’’ shall mean, collectively, the following financial ratios: (i)

TIER of 1.5; (ii) Operating TIER of 1.1; (iii)

DSC of 1.25; and Operating DSC of 1.1.

‘‘Debt Service Coverage Ratio’’ (‘‘DSC’’)

shall have the meaning provided in the Mortgage.

‘‘Distributions’’ shall mean for the Borrower to, in any calendar year, declare or

pay any dividends, or pay or determine to

pay any patronage refunds, or retire any patronage capital or make any other Cash Distributions, to its members, stockholders or

consumers; provided, however, that for the

purposes of this Agreement a ‘‘Cash Distribution’’ shall be deemed to include any

general cancellation or abatement of charges

for electric energy or services furnished by

the Borrower, but not the repayment of a

membership fee upon termination of a membership or the rebate of an abatement of

wholesale power costs previously incurred

pursuant to an order of a state regulatory

authority or a wholesale power cost adjustment clause or similar power pricing agreement between the Borrower and a power supplier.

‘‘Electric System’’ shall have the meaning

as defined in the Mortgage.

‘‘Equity’’ shall mean the Borrower’s total

margins and equities computed pursuant to

RUS Accounting Requirements but excluding any Regulatory Created Assets.

‘‘Event of Default’’ shall have the meaning

as defined in Section [7.1].

‘‘Independent’’ when used with respect to

any specified person or entity means such a

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person or entity who (1) is in fact independent, (2) does not have any direct financial interest or any material indirect financial interest in the Borrower or in any affiliate of the Borrower and (3) is not connected

with the Borrower as an officer, employee,

promoter, underwriter, trustee, partner, director or person performing similar functions.

‘‘Interest Expense’’ shall mean the interest

expense of the Borrower computed pursuant

to RUS Accounting Requirements.

‘‘Loan’’ shall mean the loan described in

Article III which is being made pursuant to

the RUS Commitment in furtherance of the

objectives of the Act.

‘‘Loan Documents’’ shall mean, collectively, this Agreement, the Mortgage and

the Note.

‘‘Long-Term Debt’’ shall mean the total of

all amounts included in the long-term debt

of the Borrower pursuant to RUS Accounting

Requirements.

‘‘Maturity Date’’ shall have the meaning

as defined in the Note.

‘‘Monthly Payment Date’’ shall have the

meaning as defined in the Note.

‘‘Mortgage’’ shall have the meaning as described in Schedule 1 hereto.

‘‘Mortgaged Property’’ shall have the

meaning as defined in the Mortgage.

‘‘Net Utility Plant’’ shall mean the

amount constituting the Total Utility Plant

of the Borrower, less depreciation, computed

in accordance with RUS Accounting Requirements.

‘‘Note’’ shall mean a promissory note executed by the Borrower in the form of exhibit

A hereto, and any note executed and delivered to RUS to refund, or in substitution for

such a note.

‘‘Operating DSC’’ or ‘‘ODSC’’ shall mean

Operating Debt Service Coverage calculated

as:

ODSC

ABC

D = + +

Where:

All amounts are for the same calendar year

and are computed pursuant to RUS Accounting Requirements and RUS form 7;

A=Depreciation and Amortization Expense of

the Electric System;

B=Interest Expense on Total Long-Term

Debt of the Electric System, except that

such Interest Expense shall be increased by

1⁄3 of the amount, if any, by which the Restricted Rentals of the Electric System exceed 2 percent of the Mortgagor’s Equity;

C=Patronage capital & operating margins of

the Electric System, (which equals operating revenue and patronage capital of

Electric System operations, less total cost

of electric service, including Interest Expense on Total Long-Term Debt of the

Electric System) plus cash received from

the retirement of patronage capital by suppliers of electric power and by lenders for

credit extended for the Electric System;

and

D=Debt service billed which equals the sum

of all payments of principal and interest

required to be made on account of Total

Long-Term Debt of the Electric System

during the calendar year, plus 1⁄3 of the

amount, if any, by which Restricted Rentals of the Electric System exceed 2 percent

of the Mortgagor’s Equity.

‘‘Operating TIER’’ or ‘‘OTIER’’ shall mean

Operating Times Interest Earned Ratio calculated as:

OTIER

A B

A = +

Where:

All amounts are for the same calendar year

and are computed pursuant to RUS Accounting Requirements and RUS form 7;

A=Interest Expense on Total Long-Term

Debt of the Electric System, except that

such Interest Expense shall be increased by

1/3 of the amount, if any, by which Restricted Rentals of the Electric System exceed 2 percent of the Mortgagor’s Equity;

and

B=Patronage capital & operating margins of

the Electric System, (which equals operating revenue and patronage capital of

Electric System operations, less total cost

of electric service, including Interest Expense on Total Long-Term Debt of the

Electric System) plus cash received from

the retirement of patronage capital by suppliers of electric power and by lenders for

credit extended for the Electric System.

‘‘Payment Notice’’ shall mean a notice furnished by RUS to Borrower that indicates

the precise amount of each payment of principal and interest and the total amount of

each payment.

‘‘Permitted Debt’’ shall have the meaning

as defined in section [6.13].

‘‘Prior Loan Contracts’’ shall have the

meaning as defined in section 9.15.

‘‘Regulatory Created Assets’’ shall mean

the sum of any amounts properly recordable

as unrecovered plant and regulatory study

costs or as other regulatory assets, computed pursuant to RUS Accounting Requirements.

‘‘RUS Accounting Requirements’’ shall

mean any system of accounts prescribed by

RUS Regulations as such RUS Accounting

Requirements exist at the date of applicability thereof.

‘‘RUS Commitment’’ shall have the meaning as defined in schedule 1 hereto.

‘‘RUS Regulations’’ shall mean regulations

of general applicability published by RUS

from time to time as they exist at the date

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of applicability thereof, and shall also include any regulations of other Federal entities which RUS is required by law to implement.

‘‘Special Construction Account’’ shall have

the meaning as defined in section 5.21.

‘‘Subsidiary’’ shall mean a corporation

that is a subsidiary of the Borrower and subject to the Borrower’s control, as defined by

RUS Accounting Requirements.

‘‘Termination Date’’ shall have the meaning as defined in the Note.

‘‘Times Interest Earned Ratio’’ (‘‘TIER’’)

shall have the meaning provided in the Mortgage.

‘‘Total Assets’’ shall mean an amount constituting the total assets of the Borrower as

computed pursuant to RUS Accounting Requirements, but excluding any Regulatory

Created Assets.

‘‘Total Utility Plant’’ shall mean the

amount constituting the total utility plant

of the Borrower computed in accordance

with RUS Accounting Requirements.

‘‘Utility System’’ shall have the meaning

as defined in the Mortgage.

ARTICLE II—REPRESENTATIONS AND

WARRANTIES

Section 2.1. Representations and Warranties.

To induce RUS to make the Loan, and recognizing that RUS is relying hereon, the

Borrower represents and warrants as follows:

(a) Organization; Power, Etc. The Borrower:

(i) is duly organized, validly existing, and in

good standing under the laws of its state of

incorporation; (ii) is duly qualified to do

business and is in good standing in each jurisdiction in which the transaction of its

business makes such qualification necessary;

(iii) has all requisite corporate and legal

power to own and operate its assets and to

carry on its business and to enter into and

perform the Loan Documents; (iv) has duly

and lawfully obtained and maintained all licenses, certificates, permits, authorizations,

approvals, and the like which are material to

the conduct of its business or which may be

otherwise required by law; and (v) is eligible

to borrow from RUS.

(b) Authority. The execution, delivery and

performance by the Borrower of this Agreement and the other Loan Documents and the

performance of the transactions contemplated thereby have been duly authorized

by all necessary corporate action and shall

not violate any provision of law or of the Articles of Incorporation or By-Laws of the

Borrower or result in a breach of, or constitute a default under, any agreement, indenture or other instrument to which the

Borrower is a party or by which it may be

bound.

(c) Consents. No consent, permission, authorization, order, or license of any governmental authority is necessary in connection

with the execution, delivery, performance, or

enforcement of the Loan Documents, except

(i) such as have been obtained and are in full

force and effect and (ii) such as have been

disclosed on Schedule 1 hereto.

(d) Binding Agreement. Each of the Loan

Documents is, or when executed and delivered shall be, the legal, valid, and binding

obligation of the Borrower, enforceable in

accordance with its terms, subject only to

limitations on enforceability imposed by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting

creditors’ rights generally.

(e) Compliance With Laws. The Borrower is

in compliance in all material respects with

all federal, state, and local laws, rules, regulations, ordinances, codes, and orders (collectively, ‘‘Laws’’), the failure to comply with

which could have a material adverse effect

on the condition, financial or otherwise, operations, properties, or business of the Borrower, or on the ability of the Borrower to

perform its obligations under the Loan Documents, except as the Borrower has disclosed

on Schedule 1 attached hereto.

(f) Litigation. There are no pending legal,

arbitration, or governmental actions or proceedings to which the Borrower is a party or

to which any of its property is subject which,

if adversely determined, could have a material adverse effect on the condition, financial

or otherwise, operations, properties, profits

or business of the Borrower, or on the ability

of the Borrower to perform its obligations

under the Loan Documents, and to the best

of the Borrower’s knowledge, no such actions

or proceedings are threatened or contemplated, except as the Borrower has disclosed to RUS in writing.

(g) Title to Property. As to property which is

presently included in the description of

Mortgaged Property, the Borrower holds

good and marketable title to all of its real

property and owns all of its personal property free and clear of any Lien except the

Liens specifically identified on Schedule 2

attached hereto (the ‘‘Existing Liens’’), and

Permitted Encumbrances or Liens permitted

under the Mortgage.

(h) Financial Statements; No Material Adverse Change; Etc. All financial statements

submitted to RUS in connection with the application for the Loan or in connection with

this Agreement fairly and fully present the

financial condition of the Borrower and the

results of the Borrower’s operations for the

periods covered thereby and are prepared in

accordance with RUS Accounting Requirements consistently applied. Since the dates

thereof, there has been no material adverse

change in the financial condition or operations of the Borrower. All budgets, projections, feasibility studies, and other documentation submitted by the Borrower to

RUS are based upon assumptions that are

reasonable and realistic, and as of the date

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hereof, no fact has come to light, and no

event or transaction has occurred, which

would cause any assumption made therein

not to be reasonable or realistic.

(i) Principal Place of Business; Records. The

principal place of business and chief executive office of the Borrower is at the address

of the Borrower shown on Schedule 1 attached hereto.

(j) Location of Properties. All property

owned by the Borrower is located in the

counties identified in Schedule 1 hereto.

(k) Subsidiaries. The Borrower has no subsidiary, except as the Borrower has disclosed

to RUS in writing.

(l) Defaults Under Other Agreements. The

Borrower is not in default under any agreement or instrument to which it is a party or

under which any of its properties are subject

that is material to its financial condition,

operations, properties, profits, or business.

(m) Survival. All representations and warranties made by the Borrower herein or

made in any certificate delivered pursuant

hereto shall survive the making of the Advances and the execution and delivery to

RUS of the Note.

ARTICLE III—LOAN

Section 3.1. Advances

RUS agrees to make, and the Borrower

agrees to request, on the terms and conditions of this Agreement, Advances from time

to time in an aggregate principal amount

not to exceed the RUS Commitment. On the

Termination Date, RUS may stop advancing

funds and limit the RUS Commitment to the

amount advanced prior to such date. The obligation of the Borrower to repay the Advances shall be evidenced by the Note in the

principal amount of the unpaid principal

amount of the Advances from time to time

outstanding. The Borrower shall give RUS

written notice of the date on which each Advance is to be made.

Section 3.2. Interest Rate and Payment

The Note shall be payable and bear interest as follows:

(a) Payments and Amortization. Principal

shall be amortized in accordance with the

method stated in Schedule 1 hereto and more

fully described in the form of Note attached

hereto as Exhibit A.

(b) Application of Payments. All payments

which the Borrower sends to RUS on any

outstanding obligation owed to RUS shall be

applied in the manner provided in the Borrower’s loan documents to which such payments relate and in a manner consistent

with RUS policies, practices, and procedures

for obligations that have been similarly classified by RUS.

(c) Electronic Funds Transfer. Except as otherwise prescribed by RUS, the Borrower shall

make all payments on the Note utilizing

electronic funds transfer procedures as specified by RUS.

(d) Fixed or Variable Rate. The Note shall

bear interest at either a fixed or variable

rate in accordance with the method stated in

Schedule 1 hereto and as more particularly

described in the form of Note attached hereto as Exhibit A.

Section 3.3. Prepayment

The Borrower has no right to prepay the

Note in whole or in part except such rights,

if any, as are expressly provided for in the

Note. However, prepayment of the Note (and

any penalties) shall be mandatory under Section [5.3] hereof if the Borrower has used a

Contemporaneous Loan in order to qualify

for the RUS Commitment, and later prepays

the Contemporaneous Loan.

ARTICLE IV—CONDITIONS OF LENDING

Section 4.1. General Conditions

The obligation of RUS to make any Advance hereunder is subject to satisfaction of

each of the following conditions precedent

on or before the date of such Advance:

(a) Legal Matters. All legal matters incident to the consummation of the transactions hereby contemplated shall be satisfactory to counsel for RUS.

(b) Loan Documents. That RUS receive duly

executed originals of this Agreement and the

other Loan Documents.

(c) Authorization. That RUS receive evidence satisfactory to it that all corporate

documents and proceedings of the Borrower

necessary for duly authorizing the execution,

delivery and performance of the Loan Documents have been obtained and are in full

force and effect.

(d) Approvals. That RUS receive evidence

satisfactory to it that all consents and approvals (including without limitation the

consents referred to in Section [2.1(c)] of this

Agreement) which are necessary for, or required as a condition of, the validity and enforceability of each of the Loan Documents

have been obtained and are in full force and

effect.

(e) Event of Default. That no Event of Default specified in Article VII and no event

which, with the lapse of time or the notice

and lapse of time specified in Article VII

would become such an Event of Default,

shall have occurred and be continuing, or

shall have occurred after giving effect to the

Advance on the books of the Borrower.

(f) Continuing Representations and Warranties. That the representations and warranties

of the Borrower contained in this Agreement

be true and correct on and as of the date of

such Advance as though made on and as of

such date.

(g) Opinion of Counsel. That RUS receive an

opinion of counsel for the Borrower (who

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shall be acceptable to RUS) in form and content acceptable to RUS.

(h) Mortgage Filing. The Mortgage shall

have been duly recorded as a mortgage on

real property, including after-acquired real

property, and duly filed, recorded or indexed

as a security interest in personal property,

including after acquired personal property,

wherever RUS shall have requested, all in accordance with applicable law, and the Borrower shall have caused satisfactory evidence thereof to be furnished to RUS.

(i) Wholesale Power Contract. That the Borrower shall not be in default under the terms

of, or contesting the validity of, any contract for sales for resale that has been

pledged by any entity to RUS as security for

the repayment of any loan made or guaranteed by RUS under the Act.

(j) Material Adverse Change. That there has

occurred no material adverse change in the

business or condition, financial or otherwise,

of the Borrower and nothing has occurred

which in the opinion of RUS materially and

adversely affects the Borrower’s ability to

meet its obligations hereunder.

(k) Requisitions. That the Borrower shall

requisition all Advances by submitting its

requisition to RUS in form and substance

satisfactory to RUS. Requisitions shall be

made only for the purpose(s) set forth herein.

The Borrower agrees to apply the proceeds of

the Advances in accordance with its loan application with such modifications as may be

mutually agreed.

(l) Flood Insurance. That for any Advance

used in whole or in part to finance the construction or acquisition of any building in

any area identified by the Secretary of Housing and Urban Development pursuant to the

Flood Disaster Protection Act of 1973 (the

‘‘Flood Insurance Act’’) or any rules, regulations or orders issued to implement the

Flood Insurance Act (‘‘Rules’’) as any area

having special flood hazards, or to finance

any facilities or materials to be located in

any such building, or in any building owned

or occupied by the Borrower and located in

such a flood hazard area, the Borrower has

submitted evidence, in form and substance

satisfactory to RUS, or RUS has otherwise

determined, that (i) the community in which

such area is located is then participating in

the national flood insurance program, as required by the Flood Insurance Act and any

Rules, and (ii) the Borrower has obtained

flood insurance coverage with respect to

such building and contents as may then be

required pursuant to the Flood Insurance

Act and any Rules.

(m) Compliance With Loan Contract and

Mortgage. That the Borrower is in material

compliance with all provisions of this Agreement and the Mortgage.

Section 4.2. Special Conditions

The obligation of RUS to make any Advance hereunder is also subject to satisfaction, on or before the date of such Advance,

of each of the special conditions, if any, listed in Schedule 1 hereto.

ARTICLE V—AFFIRMATIVE COVENANTS

Section 5.1. Generally

Unless otherwise agreed to in writing by

RUS, while this Agreement is in effect,

whether or not any Advance is outstanding,

the Borrower agrees to duly observe each of

the affirmative covenants contained in this

Article:

Section 5.2. Annual Certificates

(a) Performance Under Loan Documents. The

Borrower shall duly observe and perform all

of its obligations under each of the Loan

Documents.

(b) Annual Certification. Within ninety (90)

days after the close of each calendar year,

commencing with the year following the

year in which the initial Advance hereunder

shall have been made, the Borrower shall deliver to RUS a written statement signed by

its General Manager, stating that during

such year the Borrower has fulfilled all of its

obligations under the Loan Documents

throughout such year in all material respects or, if there has been a default in the

fulfillment of any such obligations, specifying each such default known to said person

and the nature and status thereof.

Section 5.3. Simultaneous Prepayment of

Contemporaneous Loans

If the Borrower shall at any time prepay in

whole or in part the Contemporaneous Loan

described on Schedule 1, the Borrower shall

prepay the RUS Note correspondingly in

order to maintain the ratio that the Contemporaneous Loan bears to the RUS Commitment. If the RUS Note calls for a prepayment penalty or premium, such amount shall

be paid but shall not be used in computing

the amount needed to be paid to RUS under

this section to maintain such ratio. In the

case of Contemporaneous Loans and RUS

Notes existing prior to the date of this

Agreement under previous agreements, prepayments shall be treated as if governed by

this section. Provided, however, in all cases

prepayments associated with refinancing or

refunding a Contemporaneous Loan pursuant

to Article II of the Mortgage are not considered to be prepayments for purposes of this

Agreement if they satisfy each of the following requirements:

(a) Principal. The principal amount of such

refinancing or refunding loan is not less than

the amount of loan principal being refinanced; and

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(b) Weighted Average Life. The weighted average life of the refinancing or refunding

loan is materially equal to the weighted average remaining life of the loan being refinanced.

Section 5.4 Rates to Provide Revenue Sufficient

to Meet Coverage Ratios Requirements

(a) Prospective Requirement. The Borrower

shall design and implement rates for utility

service furnished by it to provide sufficient

revenue (along with other revenue available

to the Borrower in the case of TIER and

DSC) (i) to pay all fixed and variable expenses when and as due, (ii) to provide and

maintain reasonable working capital, and

(iii) to maintain, on an annual basis, the

Coverage Ratios. In designing and implementing rates under this paragraph, such

rates should be capable of producing at least

enough revenue to meet the requirements of

this paragraph under the assumption that

average weather conditions in the Borrower’s service territory shall prevail in the

future, including average Utility System

damage and outages due to weather and the

related costs.

(b) Retrospective Requirement. The average

Coverage Ratios achieved by the Borrower in

the 2 best years out of the 3 most recent calendar years must be not less than any of the

following:

TIER=1.5

DSC=1.25

OTIER=1.1

ODSC=1.1

(c) Prospective Notice of Change in Rates.

The Borrower shall give thirty (30) days

prior written notice of any proposed change

in its general rate structure to RUS if RUS

has requested in writing that it be notified

in advance of such changes.

(d) Routine Reporting of Coverage Ratios.

Promptly following the end of each calendar

year, the Borrower shall report, in writing,

to RUS the TIER, Operating TIER, DSC and

Operating DSC levels which were achieved

during that calendar year.

(e) Reporting Non-achievement of Retrospective Requirement. If the Borrower fails to

achieve the average levels required by paragraph (b) of this section, it must promptly

notify RUS in writing to that effect.

(f) Corrective Plans. Within 30 days of sending a notice to RUS under paragraph (e) of

this section, or of being notified by RUS,

whichever is earlier, the Borrower in consultation with RUS, shall provide a written

plan satisfactory to RUS setting forth the

actions that shall be taken to achieve the required Coverage Ratios on a timely basis.

(g) Noncompliance. Failure to design and

implement rates pursuant to paragraph (a) of

this section and failure to develop and implement the plan called for in paragraph (f) of

this section shall constitute an Event of Default under this Agreement in the event that

REA so notifies the Borrower to that effect

under section [7.1(d)] of this Agreement.

Section 5.5. Depreciation Rates

The Borrower shall adopt as its depreciation rates only those which have been previously approved for the Borrower by RUS.

Section 5.6. Property Maintenance

The Borrower shall maintain and preserve

its Utility System in compliance in all material respects with the provisions of the Mortgage, RUS Regulations and all applicable

laws.

Section 5.7. Financial Books

The Borrower shall at all times keep, and

safely preserve, proper books, records and accounts in which full and true entries shall be

made of all of the dealings, business and affairs of the Borrower and its Subsidiaries, in

accordance with any applicable RUS Accounting Requirements.

Section 5.8. Rights of Inspection

The Borrower shall afford RUS, through its

representatives, reasonable opportunity, at

all times during business hours and upon

prior notice, to have access to and the right

to inspect the Utility System, any other

property encumbered by the Mortgage, and

any or all books, records, accounts, invoices,

contracts, leases, payrolls, canceled checks,

statements and other documents and papers

of every kind belonging to or in the possession of the Borrower or in anyway pertaining

to its property or business, including its

Subsidiaries, if any, and to make copies or

extracts therefrom.

Section 5.9. Area Coverage

(a) The Borrower shall make diligent effort

to extend electric service to all unserved persons within the service area of the Borrower

who (i) desire such service and (ii) meet all

reasonable requirements established by the

Borrower as a condition of such service.

(b) If economically feasible and reasonable

considering the cost of providing such service and/or the effects on consumers’ rates,

such service shall be provided, to the maximum extent practicable, at the rates and

minimum charges established in the Borrower’s rate schedules, without the payment

of such persons, other than seasonal or temporary consumers, of a contribution in aid of

construction. A seasonal consumer is one

that demands electric service only during

certain seasons of the year. A temporary

consumer is a seasonal or year-round consumer that demands electric service over a

period of less than five years.

(c) The Borrower may assess contributions

in aid of construction provided such assessments are consistent with this section.

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Section 5.10. Real Property Acquisition

In acquiring real property, the Borrower

shall comply in all material respects with

the provisions of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (the ‘‘Uniform Act’’), as

amended by the Uniform Relocation Act

Amendments of 1987, and 49 CFR part 24, referenced by 7 CFR part 21, to the extent the

Uniform Act is applicable to such acquisition.

Section 5.11. ‘‘Buy American’’ Requirements

The Borrower shall use or cause to be used

in connection with the expenditures of funds

advanced on account of the Loan only such

unmanufactured articles, materials, and supplies as have been mined or produced in the

United States or any eligible country, and

only such manufactured articles, materials,

and supplies as have been manufactured in

the United States or any eligible country

substantially all from articles, materials,

and supplies mined, produced or manufactured, as the case may be, in the United

States or any eligible country, except to the

extent RUS shall determine that such use

shall be impracticable or that the cost thereof shall be unreasonable. For purposes of this

section, an ‘‘eligible country’’ is any country

that applies with respect to the United

States an agreement ensuring reciprocal access for United States products and services

and United States suppliers to the markets

of that country, as determined by the United

States Trade Representative.

Section 5.12. Power Requirements Studies

The Borrower shall prepare and use power

requirements studies of its electric loads and

future energy and capacity requirements in

conformance with RUS Regulations.

Section 5.13. Long Range Engineering Plans

and Construction Work Plans

The Borrower shall develop, maintain and

use up-to-date long-range engineering plans

and construction work plans in conformance

with RUS Regulations.

Section 5.14. Design Standards, Construction

Standards, and List of Materials

The Borrower shall use design standards,

construction standards, and lists of acceptable materials in conformance with RUS

Regulations.

Section 5.15. Plans and Specifications

The Borrower shall submit plans and specifications for construction to RUS for review

and approval, in conformance with RUS Regulations, if the construction will be financed

in whole or in part by a loan made or guaranteed by RUS.

Section 5.16. Standard Forms of Construction

Contracts, and Engineering and Architectural

Services Contracts

The Borrower shall use the standard forms

of contracts promulgated by RUS for construction, procurement, engineering services

and architectural services in conformance

with RUS Regulations, if the construction,

procurement, or services are being financed

in whole or in part by a loan being made or

guaranteed by RUS.

Section 5.17. Contract Bidding Requirements

The Borrower shall follow RUS contract

bidding procedures in conformance with RUS

Regulations when contracting for construction or procurement financed in whole or in

part by a loan made or guaranteed by RUS.

Section 5.18. Nondiscrimination

(a) Equal Opportunity Provisions in Construction Contracts. The Borrower shall incorporate or cause to be incorporated into any

construction contract, as defined in Executive Order 11246 of September 24, 1965 and implementing regulations, which is paid for in

whole or in part with funds obtained from

RUS or borrowed on the credit of the United

States pursuant to a grant, contract, loan,

insurance or guarantee, or undertaken pursuant to any RUS program involving such

grant, contract, loan, insurance or guarantee, the equal opportunity provisions set

forth in Exhibit B hereto entitled Equal Opportunity Contract Provisions.

(b) Equal Opportunity Contract Provisions

Also Bind the Borrower. The Borrower further

agrees that it shall be bound by such equal

opportunity clause in any federally assisted

construction work which it performs itself

other than through the permanent work

force directly employed by an agency of government.

(c) Sanctions and Penalties. The Borrower

agrees that it shall cooperate actively with

RUS and the Secretary of Labor in obtaining

the compliance of contractors and subcontractors with the equal opportunity

clause and the rules, regulations and relevant orders of the Secretary of Labor, that

it shall furnish RUS and the Secretary of

Labor such information as they may require

for the supervision of such compliance, and

that it shall otherwise assist the administering agency in the discharge of RUS’s

primary responsibility for securing compliance. The Borrower further agrees that it

shall refrain from entering into any contract

or contract modification subject to Executive Order 11246 with a contractor debarred

from, or who has not demonstrated eligibility for, Government contracts and federally assisted construction contracts pursuant to Part II, Subpart D of Executive Order

11246 and shall carry out such sanctions and

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penalties for violation of the equal opportunity clause as may be imposed upon contractors and subcontractors by RUS or the

Secretary of Labor pursuant to Part II, Subpart D of Executive Order 11246. In addition,

the Borrower agrees that if it fails or refuses

to comply with these undertakings RUS may

cancel, terminate or suspend in whole or in

part this contract, may refrain from extending any further assistance under any of its

programs subject to Executive Order 11246

until satisfactory assurance of future compliance has been received from such Borrower, or may refer the case to the Department of Justice for appropriate legal proceedings.

Section 5.19. Financial Reports

The Borrower shall cause to be prepared

and furnished to RUS a full and complete annual report of its financial condition and of

its operations in form and substance satisfactory to RUS, audited and certified by

Independent certified public accountants

satisfactory to RUS and accompanied by a

report of such audit in form and substance

satisfactory to RUS. The Borrower shall also

furnish to RUS from time to time such other

reports concerning the financial condition or

operations of the Borrower, including its

Subsidiaries, as RUS may reasonably request

or RUS Regulations require.

Section 5.20. Miscellaneous Reports and Notices

The Borrower shall furnish to RUS:

(a) Notice of Default. Promptly after becoming aware thereof, notice of: (i) the occurrence of any default; and (ii) the receipt of

any notice given pursuant to the Mortgage

with respect to the occurrence of any event

which with the giving of notice or the passage of time, or both, could become an

‘‘Event of Default’’ under the Mortgage.

(b) Notice of Non-Environmental Litigation.

Promptly after the commencement thereof,

notice of the commencement of all actions,

suits or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting the Borrower which, if

adversely determined, could have a material

adverse effect on the condition, financial or

otherwise, operations, properties or business

of the Borrower, or on the ability of the Borrower to perform its obligations under the

Loan Documents.

(c) Notice of Environmental Litigation. Without limiting the provisions of Section

[5.20(b)] above, promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or other communications alleging a condition that may

require the Borrower to undertake or to contribute to a cleanup or other response under

laws relating to environmental protection,

or which seek penalties, damages, injunctive

relief, or criminal sanctions related to alleged violations of such laws, or which claim

personal injury or property damage to any

person as a result of environmental factors

or conditions for which the Borrower is not

fully covered by insurance, or which, if adversely determined, could have a material

adverse effect on the condition, financial or

otherwise, operations, properties or business

of the Borrower, or on the ability of the Borrower to perform its obligations under the

Loan Documents.

(d) Notice of Change of Place of Business.

Promptly in writing, notice of any change in

location of its principal place of business or

the office where its records concerning accounts and contract rights are kept.

(e) Regulatory and Other Notices. Promptly

after receipt thereof, copies of any notices or

other communications received from any

governmental authority with respect to any

matter or proceeding which could have a material adverse effect on the condition, financial or otherwise, operations, properties, or

business of the Borrower, or on the ability of

the Borrower to perform its obligations

under the Loan Documents.

(f) Material Adverse Change. Promptly, notice of any matter which has resulted or may

result in a material adverse change in the

condition, financial or otherwise, operations,

properties, or business of the Borrower, or

the ability of the Borrower to perform its obligations under the Loan Documents.

(g) Other Information. Such other information regarding the condition, financial or

otherwise, or operations of the Borrower as

RUS may, from time to time, reasonably request.

Section 5.21. Special Construction Account

The Borrower shall hold all moneys advanced to it by RUS hereunder in trust for

RUS and shall deposit such moneys promptly

after the receipt thereof in a bank or banks

which meet the requirements of Section [6.7]

of this Agreement. Any account (hereinafter

called ‘‘Special Construction Account’’) in

which any such moneys shall be deposited

shall be insured by the Federal Deposit Insurance Corporation or other federal agency

acceptable to RUS and shall be designated by

the corporate name of the Borrower followed

by the words ‘‘Trustee, Special Construction

Account.’’ Moneys in any Special Construction Account shall be used solely for the construction and operation of the Utility System and may be withdrawn only upon

checks, drafts, or orders signed on behalf of

the Borrower and countersigned by an executive officer thereof.

Section 5.22. Additional Affirmative Covenants

The Borrower also agrees to comply with

any additional affirmative covenant(s) identified in Schedule 1 hereto.

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ARTICLE VI—NEGATIVE COVENANTS

Section 6.1. General

Unless otherwise agreed to in writing by

RUS, while this Agreement is in effect,

whether or not any Advance is outstanding

hereunder, the Borrower shall duly observe

each of the negative covenants set forth in

this Article.

Section 6.2. Limitations on System Extensions

and Additions

(a) The Borrower shall not extend or add to

its Electric System either by construction or

acquisition without the prior written approval of RUS if the construction or acquisition is financed or will be financed, in whole

or in part, by a RUS loan or loan guarantee.

(b) The Borrower shall not extend or add to

its Electric System with funds from other

sources without prior written approval of

RUS in the case of:

(1) Generating facilities if the combined

capacity of the facilities to be built, procured, or leased, including any future facilities included in the planned project, will exceed the lesser of 5 Megawatts or 30 percent

of the Borrower’s Equity;

(2) Existing electric facilities or systems in

service whose purchase price, or capitalized

value in the case of a lease, exceeds ten percent of the Borrower’s Net Utility Plant; and

(3) Any project to serve a customer whose

annual Kwh purchases or maximum annual

Kw demand is projected to exceed 25 percent

of the Borrower’s total Kwh sales or maximum Kw demand in the year immediately

preceding the acquisition or start of construction of facilities.

Section 6.3. Limitations on Changing Principal

Place of Business

The Borrower shall not change its principal place of business or keep property in a

county not shown on a schedule to the Mortgage if the change would cause the lien in

favor of RUS to become unperfected or fail

to become perfected, as the case may be, unless, prior thereto, the Borrower shall have

taken all steps required by law in order to

assure that the lien in favor of RUS remains

or becomes perfected, as the case may be,

and, in either event, such lien has the priority accorded by the Mortgage.

Section 6.4. Limitations on Employment and

Retention of Manager

At any time any Event of Default, or any

occurrence which with the passage of time or

giving of notice would be an Event of Default, occurs and is continuing the Borrower

shall not employ any general manager of the

Utility System or the Electric System or

any person exercising comparable authority

to such a manager unless such employment

shall first have been approved by RUS. If any

Event of Default, or any occurrence which

with the passage of time or giving of notice

would be an Event of Default, occurs and is

continuing and RUS requests the Borrower

to terminate the employment of any such

manager or person exercising comparable authority, or RUS requests the Borrower to

terminate any contract for operating the

Utility System or the Electric System, the

Borrower shall do so within thirty (30) days

after the date of such notice. All contracts in

respect of the employment of any such manager or person exercising comparable authority, or for the operation of the Utility System or the Electric System, shall contain

provisions to permit compliance with the

foregoing covenants.

Section 6.5. Limitations on Certain Types of

Contracts

Without the prior approval of RUS in writing, the Borrower shall not enter into any of

the following contracts:

(a) Construction Contracts. Any contract for

construction or procurement or for architectural and engineering services in connection

with its Electric System if the project is financed or will be financed, in whole or in

part, by a RUS loan or loan guarantee;

(b) Large retail power contracts. Any contract to sell electric power and energy for periods exceeding two (2) years if the kWh sales

or kW demand for any year covered by such

contract shall exceed 25 percent of the Borrower’s total kWh sales or maximum kW demand for the year immediately preceding

the execution of such contract;

(c) Wholesale power contracts. Any contract

to sell electric power or energy for resale and

any contract to purchase electric power or

energy that, in either case, has a term exceeding two (2) years;

(d) Power supply arrangements. Any interconnection agreement, interchange agreement, wheeling agreement, pooling agreement or similar power supply arrangement

that has a term exceeding two (2) years;

(e) System management and maintenance contracts. Any contract for the management and

operation of all or substantially all of its

Electric System; or

(f) Other contracts. Any contracts of the

type described on Schedule 3.

Section 6.6. Limitations on Mergers and Sale,

Lease or Transfer of Capital Assets

(a) The Borrower shall not consolidate

with, or merge, or sell all or substantially all

of its business or assets, to another entity or

person except to the extent it is permitted to

do so under the Mortgage. The exception

contained in this paragraph (a) is subject to

the additional limitation set forth in paragraph (b) of this section.

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(b) The Borrower shall not, without the

written approval of the Administrator, voluntarily or involuntarily sell, convey or dispose of any portion of its business or assets

(including, without limitation, any portion

of its franchise or service territory) to another entity or person if such sale, conveyance or disposition could reasonably be expected to reduce the Borrower’s existing or

future requirements for energy or capacity

being furnished to the Borrower under any

wholesale power contract which has been

pledged as security to RUS.

Section 6.7. Limitations on Using non-FDIC

Insured Depositories

Without the prior written approval of RUS,

the Borrower shall not place the proceeds of

the Loan or any loan which has been made or

guaranteed by RUS in the custody of any

bank or other depository that is not insured

by the Federal Deposit Insurance Corporation or other federal agency acceptable to

RUS.

Section 6.8. Limitation on Distributions

Without the prior written approval of RUS,

the Borrower shall not in any calendar year

make any Distributions (exclusive of any

Distributions to the estates of deceased natural patrons) to its members, stockholders

or consumers except as follows:

(a) Equity above 30%. If, after giving effect

to any such Distribution, the Equity of the

Borrower shall be greater than or equal to

30% of its Total Assets; or

(b) Equity above 20%. If, after giving effect

to any such Distribution, the aggregate of

all Distributions made during the calendar

year when added to such Distribution shall

be less than or equal to 25% of the prior

year’s margins.

Provided however, that in no event shall

the Borrower make any Distributions if

there is unpaid when due any installment of

principal of (premium, if any) or interest on

its Notes, if the Borrower is otherwise in default hereunder or if, after giving effect to

any such Distribution, the Borrower’s current and accrued assets would be less than

its current and accrued liabilities.

Section 6.9. Limitations on Loans, Investments

and Other Obligations

The Borrower shall not make any loan or

advance to, or make any investment in, or

purchase or make any commitment to purchase any stock, bonds, notes or other securities of, or guaranty, assume or otherwise

become obligated or liable with respect to

the obligations of, any other person, firm or

corporation, except as permitted by the Act

and RUS Regulations.

Section 6.10. Depreciation Rates

The Borrower shall not file with or submit

for approval of regulatory bodies any proposed depreciation rates which are inconsistent with RUS Regulations.

Section 6.11. Historic Preservation

The Borrower shall not, without approval

in writing by RUS, use any Advance to construct any facilities which shall involve any

district, site, building, structure or object

which is included in, or eligible for inclusion

in, the National Register of Historic Places

maintained by the Secretary of the Interior

pursuant to the Historic Sites Act of 1935 and

the National Historic Preservation Act of

1966.

Section 6.12. Rate Reductions

Without the prior written approval of RUS,

the Borrower shall not decrease its rates if it

has failed to achieve all of the Coverage Ratios for the calendar year prior to such reduction.

Section 6.13. Limitations on Additional

Indebtedness

Except as expressly permitted by Article II

of the Mortgage and subject to the further

limitations expressed in the next section, the

Borrower shall not incur, assume, guarantee

or otherwise become liable in respect of any

debt for borrowed money and Restricted

Rentals (including Subordinated Indebtedness) other than the following: (‘‘Permitted

Debt’’)

(a) Additional Notes issued in compliance

with Article II of the Mortgage;

(b) Purchase money indebtedness in nonUtility System property, in an amount not

exceeding 10% of Net Utility Plant;

(c) Restricted Rentals in an amount not to

exceed 5% of Equity during any 12 consecutive calendar month period;

(d) Unsecured lease obligations incurred in

the ordinary course of business except Restricted Rentals;

(e) Unsecured indebtedness for borrowed

money, except when the aggregate amount of

such indebtedness exceeds 15% of Net Utility

Plant and after giving effect to such unsecured indebtedness the Borrower’s Equity is

less than 30% of its Total Assets;

(f) Debt represented by dividends declared

but not paid; and

(g) Subordinated Indebtedness approved by

RUS.

PROVIDED, However, that the Borrower

may incur Permitted Debt without the consent of RUS only so long as there exists no

Event of Default hereunder and there has

been no continuing occurrence which with

the passage of time and giving of notice

could become an Event of Default hereunder.

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PROVIDED, FURTHER, by executing this

Agreement any consent of RUS that the Borrower would otherwise be required to obtain

under this Section is hereby deemed to be

given or waived by RUS by operation of law

to the extent, but only to the extent, that to

impose such a requirement of RUS consent

would clearly violate federal laws or RUS

Regulations.

Section 6.14. Limitations on Issuing Additional

Indebtedness Secured Under the Mortgage

(a) The Borrower shall not issue any Additional Notes under the Mortgage to finance

Eligible Property Additions without the

prior written consent of RUS unless the following additional requirements are met in

addition to the requirements set forth in the

Mortgage for issuing Additional Notes:

(1) The weighted average life of the loan

evidenced by such Notes does not exceed the

weighted average of the expected remaining

useful lives of the assets being financed;

(2) The principal of the loan evidenced by

such Notes is amortized at a rate that shall

yield a weighted average life that is not

greater than the weighted average life that

would result from level payments of principal and interest; and

(3) The principal of the loan being evidenced by such Notes has a maturity of not

less than 5 years.

(b) The Borrower shall not issue any Additional Notes under the Mortgage to refund or

refinance Notes without the prior written

consent of RUS unless, in addition to the requirements set forth in the Mortgage for

issuing Refunding or Refinancing Notes, the

weighted average life of any such Refunding

or Refinancing Notes is not greater than the

weighted average remaining life of the Notes

being refinanced.

(c) Any request for consent from RUS

under this section, shall be accompanied by

a certificate of the Borrower’s manager substantially in the form attached to this

Agreement as Exhibit C–1 in the case of

Notes being issued under Section [2.01] of the

Mortgage and C–2 in the case of Notes being

issued under Section [2.02] of the Mortgage.

Section 6.15. Impairment of Contracts Pledged to

RUS

The Borrower shall not materially breach

any obligation to be paid or performed by

the Borrower on any contract, or take any

action which is likely to materially impair

the value of any contract, which has been

pledged as security to RUS by the Borrower

or any other entity.

Section 6.16. Additional Negative Covenants

The Borrower also agrees to comply with

any additional negative covenant(s) identified in Schedule 1 hereto.

ARTICLE VII—DEFAULT

Section 7.1. Events of Default

The following shall be Events of Default

under this Agreement:

(a) Representations and Warranties. Any representation or warranty made by the Borrower in Article II hereof or any certificate

furnished to RUS hereunder or under the

Mortgage shall prove to have been incorrect

in any material respect at the time made

and shall at the time in question be untrue

or incorrect in any material respect and remain uncured;

(b) Payment. Default shall be made in the

payment of or on account of interest on or

principal of the Note when and as the same

shall be due and payable, whether by acceleration or otherwise, which shall remain

unsatisfied for five (5) Business Days;

(c) Borrowing Under the Mortgage in Violation of the Loan Contract. Default by the Borrower in the observance or performance of

any covenant or agreement contained in Section 6.14 of this Agreement.

(d) Other Covenants. Default by the Borrower in the observance or performance of

any other covenant or agreement contained

in any of the Loan Documents, which shall

remain unremedied for 30 calendar days after

written notice thereof shall have been given

to the Borrower by RUS;

(e) Corporate Existence. The Borrower shall

forfeit or otherwise be deprived of its corporate charter, franchises, permits, easements, consents or licenses required to carry

on any material portion of its business;

(f) Other Obligations. Default by the Borrower in the payment of any obligation,

whether direct or contingent, for borrowed

money or in the performance or observance

of the terms of any instrument pursuant to

which such obligation was created or securing such obligation;

(g) Bankruptcy. A court having jurisdiction

in the premises shall enter a decree or order

for relief in respect of the Borrower in an involuntary case under any applicable bankruptcy, insolvency or other similar law now

or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain

unstayed and in effect for a period of ninety

(90) consecutive days or the Borrower shall

commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or under

any such law, or consent to the appointment

or taking possession by a receiver, liquidator, assignee, custodian or trustee, of a

substantial part of its property, or make any

general assignment for the benefit of creditors; and

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(h) Dissolution or Liquidation. Other than as

provided in the immediately preceding subsection, the dissolution or liquidation of the

Borrower, or failure by the Borrower

promptly to forestall or remove any execution, garnishment or attachment of such

consequence as shall impair its ability to

continue its business or fulfill its obligations

and such execution, garnishment or attachment shall not be vacated within 30 days.

The term ‘‘dissolution or liquidation of the

Borrower’’, as used in this subsection, shall

not be construed to include the cessation of

the corporate existence of the Borrower resulting either from a merger or consolidation of the Borrower into or with another

corporation following a transfer of all or substantially all its assets as an entirety, under

the conditions permitting such actions.

ARTICLE VIII—REMEDIES

Section 8.1. Generally

Upon the occurrence of an Event of Default, then RUS may pursue all rights and

remedies available to RUS that are contemplated by this Agreement or the Mortgage in the manner, upon the conditions, and

with the effect provided in this Agreement or

the Mortgage, including, but not limited to,

a suit for specific performance, injunctive relief or damages. Nothing herein shall limit

the right of RUS to pursue all rights and

remedies available to a creditor following

the occurrence of an Event of Default listed

in Article VII hereof. Each right, power and

remedy of RUS shall be cumulative and concurrent, and recourse to one or more rights

or remedies shall not constitute a waiver of

any other right, power or remedy.

Section 8.2. Suspension of Advances

In addition to the rights, powers and remedies referred to in the immediately preceding section, RUS may, in its absolute discretion, suspend making Advances hereunder

if (i) any Event of Default, or any occurrence

which with the passage of time or giving of

notice would be an Event of Default, occurs

and is continuing; (ii) there has occurred a

change in the business or condition, financial or otherwise, of the Borrower which in

the opinion of RUS materially and adversely

affects the Borrower’s ability to meet its obligations under the Loan Documents, or (iii)

RUS is authorized to do so under RUS Regulations.

ARTICLE IX—MISCELLANEOUS

Section 9.1. Notices

All notices, requests and other communications provided for herein including,

without limitation, any modifications of, or

waivers, requests or consents under, this

Agreement shall be given or made in writing

(including, without limitation, by telecopy)

and delivered to the intended recipient at

the ‘‘Address for Notices’’ specified below;

or, as to any party, at such other address as

shall be designated by such party in a notice

to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly

given when transmitted by telecopier or personally delivered or, in the case of a mailed

notice, upon receipt, in each case given or

addressed as provided for herein. The Address for Notices of the respective parties are

as follows:

Rural Utilities Service, United States Department of Agriculture, Washington, DC

20250–1500

Fax: (202) xxx-xxxx

Attention: [Administrator]

The Borrower:

The address set forth in Schedule 1 hereto

Section 9.2. Expenses

To the extent allowed by law, the Borrower

shall pay all costs and expenses of RUS, including reasonable fees of counsel, incurred

in connection with the enforcement of the

Loan Documents or with the preparation for

such enforcement if RUS has reasonable

grounds to believe that such enforcement

may be necessary.

Section 9.3. Late Payments

If payment of any amount due hereunder is

not received at the United States Treasury

in Washington, DC, or such other location as

RUS may designate to the Borrower within

five (5) Business Days after the due date

thereof or such other time period as RUS

may prescribe from time to time in its policies of general application in connection

with any late payment charge (such unpaid

amount being herein called the ‘‘delinquent

amount’’, and the period beginning after

such due date until payment of the delinquent amount being herein called the ‘‘latepayment period’’), the Borrower shall pay to

RUS, in addition to all other amounts due

under the terms of the Note, the Mortgage

and this Agreement, any late-payment

charge as may be fixed by RUS Regulations

from time to time on the delinquent amount

for the late-payment period.

Section 9.4. Filing Fees

To the extent permitted by law, the Borrower agrees to pay all expenses of RUS (including the fees and expenses of its counsel)

in connection with the filing or recordation

of all financing statements and instruments

as may be required by RUS in connection

with this Agreement, including, without limitation, all documentary stamps, recordation

and transfer taxes and other costs and taxes

incident to recordation of any document or

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Rural Utilities Service, USDA Pt. 1718, Subpt. C, App. A

instrument in connection herewith. Borrower agrees to save harmless and indemnify

RUS from and against any liability resulting

from the failure to pay any required documentary stamps, recordation and transfer

taxes, recording costs, or any other expenses

incurred by RUS in connection with this

Agreement. The provisions of this subsection

shall survive the execution and delivery of

this Agreement and the payment of all other

amounts due hereunder or due on the Note.

Section 9.5. No Waiver

No failure on the part of RUS to exercise,

and no delay in exercising, any right hereunder shall operate as a waiver thereof nor

shall any single or partial exercise by RUS of

any right hereunder preclude any other or

further exercise thereof or the exercise of

any other right.

Section 9.6. Governing Law

EXCEPT TO THE EXTENT GOVERNED

BY APPLICABLE FEDERAL LAW, THE

LOAN DOCUMENTS SHALL BE DEEMED

TO BE GOVERNED BY, AND CONSTRUED

IN ACCORDANCE WITH, THE LAWS OF

THE STATE [IN WHICH THE BORROWER IS

INCORPORATED].

Section 9.7. Holiday Payments

If any payment to be made by the Borrower hereunder shall become due on a day

which is not a Business Day, such payment

shall be made on the next succeeding Business Day and such extension of time shall be

included in computing any interest in respect of such payment.

Section 9.8. Rescission

The Borrower may elect not to borrow the

RUS Commitment in which event RUS shall

release the Borrower from its obligations

hereunder, provided the Borrower complies

with such terms and conditions as RUS may

impose for such release and provided also

that if the Borrower has any remaining obligations to RUS for loans made or guaranteed

by RUS under any Prior Loan Contracts,

RUS may, under Section [9.15] of this Loan

Contract, withhold such release until all

such obligations have been satisfied and discharged.

Section 9.9. Successors and Assigns

This Agreement shall be binding upon and

inure to the benefit of the Borrower and RUS

and their respective successors and assigns,

except that the Borrower may not assign or

transfer its rights or obligations hereunder

without the prior written consent of RUS.

Section 9.10. Complete Agreement; Amendments

Subject to RUS Regulations, this Agreement and the other Loan Documents are intended by the parties to be a complete and

final expression of their agreement. However, RUS reserves the right to waive its

rights to compliance with any provision of

this Agreement and the other Loan Documents. No amendment, modification, or

waiver of any provision hereof or thereof,

and no consent to any departure of the Borrower herefrom or therefrom, shall be effective unless approved in writing by RUS in

the form of either a RUS Regulation or other

writing signed by or on behalf of RUS, and

then such waiver or consent shall be effective only in the specific instance and for the

specific purpose for which given.

Section 9.11. Headings

The headings and sub-headings contained

in the titling of this Agreement are intended

to be used for convenience only and do not

constitute part of this Agreement.

Section 9.12. Severability

If any term, provision or condition, or any

part thereof, of this Agreement or the Mortgage shall for any reason be found or held invalid or unenforceable by any governmental

agency or court of competent jurisdiction,

such invalidity or unenforceability shall not

affect the remainder of such term, provision

or condition nor any other term, provision or

condition, and this Agreement, the Note, and

the Mortgage shall survive and be construed

as if such invalid or unenforceable term, provision or condition had not been contained

therein.

Section 9.13. Right of Setoff

Upon the occurrence and during the continuance of any Event of Default, RUS is

hereby authorized at any time and from time

to time, without prior notice to the Borrower, to exercise rights of setoff or

recoupment and apply any and all amounts

held or hereafter held, by RUS or owed to

the Borrower or for the credit or account of

the Borrower against any and all of the obligations of the Borrower now or hereafter existing hereunder or under the Note. RUS

agrees to notify the Borrower promptly after

any such setoff or recoupment and the application thereof, provided that the failure to

give such notice shall not affect the validity

of such setoff, recoupment or application.

The rights of RUS under this section are in

addition to any other rights and remedies

(including other rights of setoff or

recoupment) which RUS may have. Borrower

waives all rights of setoff, deduction,

recoupment or counterclaim.

Section 9.14. Schedules and Exhibits

Each Schedule and Exhibit attached hereto

and referred to herein is each an integral

part of this Agreement.

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Section 9.15. Prior Loan Contracts

It is understood and agreed that with respect to all loan agreements previously entered into by and between RUS and the Borrower (hereinafter being referred to as

‘‘Prior Loan Contracts’’) the Borrower shall

be required, after the date hereof, to meet affirmative and negative covenants as set

forth in this Agreement rather than those

set forth in the Prior Loan Contracts. In addition, any remaining obligation of RUS to

make additional advances on promissory

notes of the Borrower that have been previously delivered to RUS under Prior Loan

Contracts shall, after the date hereof, be subject to the conditions set forth in this Agreement. In the event of any conflict between

any provision set forth in a Prior Loan Contract and any provision in this Agreement,

the requirements as set forth in this Agreement shall apply. Nothing in this section

shall, however, eliminate or modify any special condition, special affirmative covenant

or special negative covenant, if any, unless

specifically agreed to in writing by RUS.

Section 9.16. Authority of Representatives of

RUS

In the case of any consent, approval or

waiver from RUS that is required under this

Agreement or any other Loan Document,

such consent, approval or waiver must be in

writing and signed by an authorized RUS

representative to be effective. As used in this

section, ‘‘authorized RUS representative’’

means the Administrator of RUS, and also

means a person to whom the Administrator

has officially delegated specific or general

authority to take the action in question.

Section 9.17. Term

This Agreement shall remain in effect

until one of the following two events has occurred:

(a) The Borrower and RUS replace this

Agreement with another written agreement;

or

(b) All of the Borrower’s obligations under

the prior loan contracts and this Agreement

have been discharged and paid.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above

written.

llllllllllllllllllllllll

(Name of Borrower)

(SEAL)

By llllllllllllllllllllll

President

Attest: lllllllllllllllllll

Secretary

RURAL UTILITIES SERVICE

By llllllllllllllllllllll

Administrator

SCHEDULE 1

[citations subject to change]

1. The purpose of this loan is

llllllllll and such other purposes

that RUS may agree to in writing in order to

carry out the purposes of the Rural Electrification Act.

2. The Mortgage shall mean the Restated

Mortgage and Security Agreement, dated as

of llllllllll, between the Borrower

and RUS, as it may have been or shall be

supplemented, amended, consolidated, or restated from time to time.

3. The governmental authority referred to

in Section [2.1(c)] is llllllllll.

4. The exception being taken to the representations in Section [2.1(e)] concerning

material compliance with laws is as follows:

llllllllll.

5. The litigation referred to in Section

[2.1(f)] is described as follows:

llllllllll.

6. The date of the Borrower’s financial information referred to in Section [2.1(h)] is

llllllllll.

7. The principal place of business of the

Borrower referred to in Section [2.1(i)] is

llllllllll.

8. All of the property of the Borrower is located in the counties of llllllllll.

9. The subsidiary (or subsidiaries) referred

to in Section [2.1(k)] is (are):

llllllllll.

10. The Contemporaneous Loan referred to

in Section [5.3] is described as follows:

llllllllll.

Lender: lllllllllllllllllll

Amount: lllllllllllllllllll

Year of Final Maturity: lllllllllll

11. The RUS Commitment referred to in

the definitions means a loan in the principal

amount of $llllllll which is being

made by RUS to the Borrower at the lll

Hardship Rate lll Municipal Rate

(CHECK ONE) pursuant to the Rural Electrification Act and RUS Regulations.

12. Amortization of Advance shall be based

upon the method indicated below:

lll level principal

lll level debt service

lll other

13. The SPECIAL condition(s) referred to

in Section [4.2] is (are): llllllllll.

14. The additional AFFIRMATIVE covenant(s) referred to in Section [5.22] is (are)

as follows: llllllll. 15. The additional

NEGATIVE covenant(s) referred to in Section [6.16] is (are) as follows:

llllllllll.

16. The address of the Borrower referred to

in Section [9.1]. is llllllllll.

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Rural Utilities Service, USDA Pt. 1718, Subpt. C, App. A

SCHEDULE 2—EXISTING LIENS

The Existing Liens referred to in Section

[2.1(g)] are as follows:

[INSERT DESCRIPTION OF EXISTING

LIENS, IF ANY, HERE]

SCHEDULE 3—ADDITIONAL CONTRACTS

The additional contracts referred to in

Section [6.5(f)] are described as follows:

[INSERT LIST OF ANY ADDITIONAL CONTRACTS HERE]

EXHIBIT A—FORM OF PROMISSORY NOTE

[INSERT EITHER MUNICIPAL or HARDSHIP RATE PROMISSORY NOTE FORM

HERE]

EXHIBIT B—EQUAL OPPORTUNITY CONTRACT

PROVISIONS

During the performance of this contract,

the contractor agrees as follows:

(a) The contractor shall not discriminate

against any employee or applicant for employment because of race, color, religion, sex

or national origin. The contractor shall take

affirmative action to ensure that applicants

are employed, and that employees are treated during employment without regard to

their race, color, religion, sex or national origin. Such action shall include, but not be

limited to the following: employment, upgrading, demotion or transfer, recruitment

or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The contractor agrees to

post in conspicuous places, available to employees and applicants for employment, notices to be provided setting forth the provisions of this nondiscrimination clause.

(b) The contractor shall, in all solicitations or advertisements for employees placed

by or on behalf of the contractor, state that

all qualified applicants shall receive consideration for employment without regard to

race, color, religion, sex or national origin.

(c) The contractor shall send to each labor

union or representative of workers with

which he has a collective bargaining agreement or other contract or understanding, a

notice to be provided advising the said labor

union or workers’ representative of the contractor’s commitments under this section,

and shall post copies of the notice in conspicuous places available to employees and

applicants for employment.

(d) The contractor shall comply with all

provisions of Executive Order 11246 of September 24, 1965, and of the rules, regulations

and relevant orders of the Secretary of

Labor.

(e) The contractor shall furnish all information and reports required by Executive

Order 11246 of September 24, 1965, and by the

rules, regulations and orders of the Secretary of Labor, or pursuant thereto, and

shall permit access to his books, records and

accounts by the administering agency and

the Secretary of Labor for purposes of investigation to ascertain compliances with such

rules, regulations and orders.

(f) In the event of the contractor’s noncompliance with the non-discrimination

clauses of this contract or with any of the

said rules, regulations or orders, this contract may be cancelled, terminated or suspended in whole or in part and the contractor may be declared ineligible for further

Government contracts or federally assisted

construction contracts in accordance with

procedures authorized in Executive Order

11246 of September 24, 1965, and such other

sanctions may be imposed and remedies invoked as provided in said Executive Order or

by rule, regulation or order of the Secretary

of Labor, or as otherwise provided by law.

(g) The contractor shall include the provisions of paragraphs (a) through (g) in every

subcontract or purchase order unless exempted by rules, regulations or orders of the

Secretary of Labor issued pursuant to section 204 of Executive Order 11246, dated September 24, 1965, so that such provisions shall

be binding upon each subcontractor or vendor. The contractor shall take such action

with respect to any subcontract or purchase

order as the administering agency may direct as a means of enforcing such provisions,

including sanctions for noncompliance: Provided, however, that in the event a contractor becomes involved in, or is threatened

with, litigation with a subcontractor or vendor as a result of such direction by the agency, the contractor may request the United

States to enter into such litigation to protect the interests of the United States.

EXHIBIT C–1—MANAGER’S CERTIFICATE REQUIRED UNDER LOAN CONTRACT SECTION 6.14

FOR ADDITIONAL NOTES

On behalf on llllllllll [Name of

Borrower] llllllllll I hereby certify that the Additional Note or Notes to be

issued under Section [2.01] of the Mortgage

on or about llllllllll [Date Note or

Notes are to be Signed] llllllllll

meet all of the requirements of Section [6.14]

of the Loan Contract, namely:

(a) The weighted average life of the loan

evidenced by such Notes (llll years) does

not exceed the weighted average of the expected remaining useful lives of the assets

being financed (llll years) as evidenced

by the attached calculation of said weighted

average lives.

(b) The principal of the loan evidenced by

such Notes shall either be [check one and

provide evidence in the second case]:

lll (1) repaid based on level payments of

principal and interest throughout the life of

the loan, or

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Pt. 1721 7 CFR Ch. XVII (1–1–00 Edition)

lll (2) amortized at a rate that shall

yield a weighted average life that is not

greater than the weighted average life that

would result from level payments of principal and interest throughout the life of the

loan as evidenced by the attached analysis of

said weighted average lives.

(c) The principal of the loan evidenced by

such Notes has a maturity of not less than 5

years.

[Signed] lllllllllllllllllll

[Dated] lllllllllllllllllll

[Name] lllllllllllllllllll

[Title] llllllllllllllllllll

[Name and Address of Borrower] llllll

llllllllllllllllllllllll

llllllllllllllllllllllll

EXHIBIT C–2—MANAGER’S CERTIFICATE REQUIRED UNDER LOAN CONTRACT SECTION 6.14

FOR REFINANCING NOTES

On behalf on llllllllll [Name of

Borrower] llllllllll I hereby certify that the Additional Note or Notes to be

issued under Section [2.02] of the Mortgage

on or about llllllllll [Date Note or

Notes are to be Signed] llllllllll

meet the requirement of Section [6.14] of the

Loan Contract that the weighted average life

of such Notes is not greater than the weighted average remaining life of the Notes being

refinanced, as evidenced by the attached calculation of said weighted average lives.

[Signed] lllllllllllllllllll

[Dated] lllllllllllllllllll

[Name] lllllllllllllllllll

[Title] llllllllllllllllllll

[Name and Address of Borrower] llllll

llllllllllllllllllllllll

llllllllllllllllllllllll

PART 1721—POST-LOAN POLICIES

AND PROCEDURES FOR INSURED

ELECTRIC LOANS

AUTHORITY: 7 U.S.C. 901 et seq.; 1921 et seq.;

and 6941 et seq.

EDITORIAL NOTE: Nomenclature changes to

part 1721 appear at 55 FR 39397, Sept. 27, 1990.

Subpart A—Advance of Funds

§ 1721.1 Advances.

(a) Purpose and amount. With the exception of minor projects, insured loan

funds will be advanced only for projects

which are included in an RUS approved

borrower’s construction work plan

(CWP) or approved amendment and in

an approved loan, as amended. Loan

fund advances can be requested in an

amount representing actual costs incurred.

(b) Minor project. Minor project

means a project costing $100,000 or less.

Such a project qualifies for advance of

loan funds even though it may not

have been included in an RUS-approved

borrower’s CWP, amendment to such

CWP, or approved loan. Total advances

requested shall not exceed the total

loan amount. All projects for which

loan fund advances are requested must

be constructed to achieve purposes permitted by terms of the loan contract

between the borrower and RUS.

(c) Certification. Pursuant to the applicable provisions of the RUS loan

contract, borrowers shall certify with

each request for funds to be approved

for advance that such funds are for

projects in compliance with this section and shall also provide for those

that cost in excess of $100,000, a contract or work order number as applicable and a CWP cross-reference project

coded identification number. For a

minor project not included in an RUS

approved borrower’s CWP, the Borrower shall describe the project and do

one of the following to satisfy RUS’ environmental requirements (see 7 CFR

part 1794).

(1) If applicable, state that the

project is a categorical exclusion of a

type described in §1794.21(b), which normally does not require preparation of

an Environmental Report (ER); or

(2) If applicable, state that the

project is a categorical exclusion of a

type that normally requires an ER and

then:

(i) Submit the ER with the request

for funds to be approved for advance, or

(ii) If applicable, certify that it has

analyzed the minor project with respect to a comprehensive service area

environmental map and data base collected and used in preparing the ER for

its RUS-approved borrower’s CWP, and

that on the basis of that information,

the minor project will not be located in

an environmentally sensitive area or

location.