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[Code of Federal Regulations]
[Title 7, Volume 11, Parts 1600 to 1899]
[Revised as of January 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1718]

[Page 192-234]
 
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.

[[Page 193]]


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

Secs. 1718.1--1718.49  [Reserved]

             Subpart B--Mortgage for Distribution Borrowers

    Source: 60 FR 36888, July 18, 1995, unless otherwise noted.

Sec. 1718.50  Definitions.

    Unless otherwise indicated, terms used in this subpart are defined 
as set forth in 7 CFR 1710.2.

Sec. 1718.51  Policy.

    (a) Adequate loan security must be provided for loans made or 
guaranteed by RUS. The loans are required to be secured by a first 
mortgage lien on most of the borrower's assets substantially in the form 
set forth in appendix A of this subpart. At the discretion of RUS, this 
model form of mortgage may be adapted to satisfy different legal 
requirements among the states and individual differences in lending 
circumstances, provided that such adaptations are consistent with the 
policies set forth in this subpart.
    (b) Some borrowers, such as certain public power districts, may not 
be able to provide security in the form of a first mortgage lien on 
their assets. In these cases RUS will consider accepting other forms of 
security, such as resolutions and pledges of revenues.
    (c) RUS may require supplemental and amending mortgages to protect 
its security, or in connection with additional loans.
    (d) RUS may also require such other security instruments (such as 
loan contracts, security agreements, financing statements, guarantees, 
and pledges) as it deems appropriate.
    (e) All distribution borrowers that receive a loan or loan guarantee 
from RUS on or after August 17, 1995 will be required to enter into a 
mortgage with RUS that meets the requirements of this subpart. The 
concurrence of any other lenders secured under the borrower's existing 
mortgage may be required before the borrower can enter into a new 
mortgage.

Sec. 1718.52  Existing mortgages.

    Nothing contained in this subpart amends, invalidates, terminates or 
rescinds any existing mortgage entered into between the borrower and RUS 
and any other mortgagees.

Sec. 1718.53  Rights of other mortgagees.

    Nothing contained in this subpart is intended to alter or affect any 
other mortgagee's rights under an existing mortgage.

Sec. 1718.54  Availability of model mortgage.

    Single copies of the model mortgage (RUS Informational Publication 
1718 B) are available from the Administrative Services Division, Rural 
Utilities Service, United States Department of Agriculture, Washington, 
DC 20250-1500. This document may be reproduced.

    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

_______________________________________________________________________
Mortgagor

                    and UNITED STATES OF AMERICA and

_______________________________________________________________________
MORTGAGEE

Dated as of_____________________________________________________________

[[Page 194]]

  THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY

           THIS INSTRUMENT CONTAINS FUTURE ADVANCE PROVISIONS

       THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS

                            TABLE OF CONTENTS

                            GRANTING CLAUSES

FIRST
SECOND
THIRD
FOURTH
EXCEPTED PROPERTY

                                HABENDUM

    ARTICLE I--DEFINITIONS & OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.01  Definitions
SECTION 1.02  General Rules of Construction
SECTION 1.03  Special Rules of Construction if RUS is a Mortgagee
SECTION 1.04  Governing Law
SECTION 1.05  Notices

                               ARTICLE II

                            ADDITIONAL NOTES

SECTION 2.01  Additional Notes
SECTION 2.02  Refunding or Refinancing Notes
SECTION 2.03  Other Additional Notes
SECTION 2.04  Additional Lenders Entitled to the Benefits of This 
          Mortgage
SECTION 2.05  Form of Supplemental Mortgage

           ARTICLE III--PARTICULAR COVENANTS OF THE MORTGAGOR

SECTION 3.01  Payment of Debt Service on Notes
SECTION 3.02  Warranty of Title
SECTION 3.03  After-Acquired Property; Further Assurances: Recording
SECTION 3.04  Environmental Requirements and Indemnity
SECTION 3.05  Payment of Taxes
SECTION 3.06  Authority to Execute and Deliver Notes, Loan Agreements 
          and Mortgage; All Action Taken; Enforceable Obligations
SECTION 3.07  Restrictions on Further Encumbrances on Property
SECTION 3.08  Restrictions on Additional Permitted Debt
SECTION 3.09  Preservation of Corporate Existence and Franchises
SECTION 3.10  Limitations on Consolidations and Mergers
SECTION 3.11  Limitations on Transfers of Property
SECTION 3.12  Maintenance of Mortgaged Property
SECTION 3.13  Insurance; Restoration of Damaged Mortgaged Property
SECTION 3.14  Mortgagee Right to Expend Money to Protect Mortgaged 
          Property
SECTION 3.15  Time Extensions for Payment of Notes
SECTION 3.16  Application of Proceeds from Condemnation
SECTION 3.17  Compliance with Loan Agreements; Notice of Amendments to 
          and Defaults under Loan Agreements
SECTION 3.18  Rights of Way, etc., Necessary in Business
SECTION 3.19  Limitations on Providing Free Electric Services
SECTION 3.20  Keeping Books; Inspection by Mortgagee

               ARTICLE IV--EVENTS OF DEFAULT AND REMEDIES

SECTION 4.01  Events of Default
SECTION 4.02  Acceleration of Maturity; Rescission and Annulment
SECTION 4.03  Remedies of Mortgagees
SECTION 4.04  Application of Proceeds from Remedial Actions
SECTION 4.05  Remedies Cumulative; No Election
SECTION 4.06  Waiver of Appraisement Rights, Marshaling of Assets Not 
          Required
SECTION 4.07  Notice of Default

         ARTICLE V--POSSESSION UNTIL DEFAULT--DEFEASANCE CLAUSE

SECTION 5.01  Possession Until Default
SECTION 5.02  Defeasance
SECTION 5.03  Special Defeasance

                        ARTICLE VI--MISCELLANEOUS

SECTION 6.01  Property Deemed Real Property
SECTION 6.02  Mortgage to Bind and Benefit Successors and Assigns
SECTION 6.03  Headings
SECTION 6.04  Severability Clause
SECTION 6.05  Mortgage Deemed Security Agreement
SECTION 6.06    Indemnification by Mortgagor of Mortgagees
Schedule A
Schedule B
Schedule C
Exhibit A--Manager's Certificate
Exhibit B--Form of Supplemental Mortgage
Supplemental Mortgage Schedule A--Maximum Debt Limit and Other 
          Information
Supplemental Mortgage Schedule B--Property Schedule
Supplemental Mortgage Schedule C--Excepted Property

    RESTATED MORTGAGE AND SECURITY AGREEMENT, dated as of __________ 
19____,

[[Page 195]]

(hereinafter sometimes called this ``Mortgage'') is made by and between
_______________________________________________________________________
(hereinafter called the ``Mortgagor''), a corporation existing under the 
laws of the State of __________, and the UNITED STATES OF AMERICA acting 
by and through the Administrator of the Rural Utilities Service 
(hereinafter called the ``Government''), __________ { Supplemental 
Lender}, (hereinafter called ``__________'') a __________ existing under 
the laws of __________, and is intended to confer rights and benefits on 
both the Government and __________ as well as any and all other lenders 
pursuant to Article II of this Mortgage that enter into a supplemental 
mortgage in accordance with Section [2.04] of Article II hereof (the 
Government and any such other lenders being herein sometimes 
collectively referred to as the ``Mortgagees'').

                                RECITALS

    WHEREAS, the Mortgagor, the Government and __________ are parties to 
that certain __________ Mortgage and Security Agreement dated as of 
__________, 19____, as supplemented, amended or restated (the ``Original 
Mortgage'' identified in Schedule ``A'' of this Mortgage) originally 
entered into between the Mortgagor, the Government acting by and through 
the Administrator of the Rural Electrification Administration, the 
predecessor of RUS, and __________;
    WHEREAS, the Mortgagor deems it necessary to borrow money for its 
corporate purposes and to issue its promissory notes and other debt 
obligations therefor from time to time in one or more series, and to 
mortgage and pledge its property hereinafter described or mentioned to 
secure the payment of the same;
    WHEREAS, the Mortgagor desires to enter into this Mortgage pursuant 
to which all secured debt of the Mortgagor hereunder shall be secured on 
parity;
    WHEREAS, this Mortgage restates and consolidates the Original 
Mortgage while preserving the priority of the Lien under the Original 
Mortgage securing the payment of Mortgagor's outstanding obligations 
secured under the Original Mortgage, which indebtedness is described 
more particularly by listing the Original Notes in Schedule ``A'' 
hereto; and
    WHEREAS, all acts necessary to make this Mortgage a valid and 
binding legal instrument for the security of such notes and obligations, 
subject to the terms of this Mortgage, have been in all respects duly 
authorized;
    NOW, THEREFORE, THIS MORTGAGE WITNESSETH: That to secure the payment 
of the principal of (and premium, if any) and interest on the Original 
Notes and all Notes issued hereunder according to their tenor and 
effect, and the performance of all provisions therein and herein 
contained, and in consideration of the covenants herein contained and 
the purchase or guarantee of Notes by the guarantors or holders thereof, 
the Mortgagor has mortgaged, pledged and granted a continuing security 
interest in, and by these presents does hereby grant, bargain, sell, 
alienate, remise, release, convey, assign, transfer, hypothecate, 
pledge, set over and confirm, pledge, and grant a continuing security 
interest and lien in for the purposes hereinafter expressed [other 
language may be required under various state laws], unto the Mortgagees 
all property, rights, privileges and franchises of the Mortgagor of 
every kind and description, real, personal or mixed, tangible and 
intangible, of the kind or nature specifically mentioned herein OR ANY 
OTHER KIND OR NATURE, except any Excepted Property, now owned or 
hereafter acquired by the Mortgagor (by purchase, consolidation, merger, 
donation, construction, erection or in any other way) wherever located, 
including (without limitation) all and singular the following:

                          GRANTING CLAUSE FIRST

    A. all of those fee and leasehold interests in real property set 
forth in Schedule ``B'' hereto, subject in each case to those matters 
set forth in such Schedule;
    B. all of the Mortgagor's interest in fixtures, easements, permits, 
licenses and rights-of-way comprising real property, and all other 
interests in real property, comprising any portion of the Utility System 
(as herein defined) located in the Counties listed in Schedule ``B'' 
hereto;
    C. all right, title and interest of the Mortgagor in and to those 
contracts of the Mortgagor (i) relating to the ownership, operation or 
maintenance of any generation, transmission or distribution facility 
owned, whether solely or jointly, by the Mortgagor, (ii) for the 
purchase of electric power and energy by the Mortgagor and having an 
original term in excess of 3 years, (iii) for the sale of electric power 
and energy by the Mortgagor and having an original term in excess of 3 
years, and (iv) for the transmission of electric power and energy by or 
on behalf of 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,

[[Page 196]]

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

[[Page 197]]

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.

[[Page 198]]

    SUBJECT, HOWEVER, to Permitted Encumbrances (as defined in Section 
1.01).

                                ARTICLE I

          DEFINITIONS & OTHER PROVISIONS OF GENERAL APPLICATION

    Section 1.01. Definitions. In addition to the terms defined 
elsewhere in this Mortgage, the terms defined in this Article I shall 
have the meanings specified herein and under the UCC, unless the context 
clearly requires otherwise. The terms defined herein include the plural 
as well as the singular and the singular as well as the plural.
    Accounting Requirements shall mean the requirements of any system of 
accounts prescribed by RUS so long as the Government is the holder, 
insurer or guarantor of any Notes, or, in the absence thereof, the 
requirements of generally accepted accounting principles applicable to 
businesses similar to that of the Mortgagor.
    Additional Notes shall mean any Notes issued by the Mortgagor to the 
Government or any other lender pursuant to Article II of this Mortgage 
including any refunding, renewal, or substitute Notes which may from 
time to time be executed and delivered by the Mortgagor pursuant to the 
terms of Article II.
    Board shall mean either the Board of Directors or the Board of 
Trustees, as the case may be, of the Mortgagor.
    Business Day shall mean any day that the Government is open for 
business.
    Debt Service Coverage Ratio (``DSC'') shall mean the ratio 
determined as follows: for each calendar year add (i) Patronage Capital 
or Margins of the Mortgagor, (ii) Interest Expense on Total Long Term 
Debt of the Mortgagor (as computed in accordance with the principles set 
forth in the definition of TIER) and (iii) Depreciation and Amortization 
Expense of the Mortgagor, and divide the total so obtained by an amount 
equal to the sum of all payments of principal and interest required to 
be made on account of Total Long-Term Debt during such calendar year 
increasing said sum by any addition to interest expense on account of 
Restricted Rentals as computed with respect to the Times Interest Earned 
Ratio herein.
    Depreciation and Amortization Expense shall mean an amount 
constituting the depreciation and amortization of the Mortgagor as 
computed pursuant to Accounting Requirements.
    Electric System shall mean, and shall be broadly construed to 
encompass and include, all of the Mortgagor's interests in all electric 
production, transmission, distribution, conservation, load management, 
general plant and other related facilities, equipment or property and in 
any mine, well, pipeline, plant, structure or other facility for the 
development, production, manufacture, storage, fabrication or processing 
of fossil, nuclear or other fuel of any kind or in any facility or 
rights with respect to the supply of water, in each case for use, in 
whole or in major part, in any of the Mortgagor's generating plants, now 
existing or hereafter acquired by lease, contract, purchase or otherwise 
or constructed by the Mortgagor, including any interest or participation 
of the Mortgagor in any such facilities or any rights to the output or 
capacity thereof, together with all additions, betterments, extensions 
and improvements to such Electric System or any part thereof hereafter 
made and together with all lands, easements and rights-of-way of the 
Mortgagor and all other works, property or structures of the Mortgagor 
and contract rights and other tangible and intangible assets of the 
Mortgagor used or useful in connection with or related to such Electric 
System, including without limitation a contract right or other 
contractual arrangement referred to in Granting Clause First, Subclause 
[(C)] but excluding any excepted property.
    Environmental Law and Environmental Laws shall mean all federal, 
state, and local laws, regulations, and requirements related to 
protection of human health or the environment, including but not limited 
to the Comprehensive Environmental Response, Compensation and Liability 
Act of 1980 (42 U.S.C. 9601 et seq.), the Resource Conservation and 
Recovery Act (42 U.S.C. 6901 et seq.), the Clean Water Act (33 U.S.C. 
1251 et seq.) and the Clean Air Act (42 U.S.C. 7401 et seq.), and any 
amendments and implementing regulations of such acts.
    Equity shall mean the total margins and equities and margins 
computed pursuant to Accounting Requirements, but excluding any 
Regulatory Created Assets.
    Event of Default shall have the meaning specified in Section [4.01] 
hereof.
    Excepted Property shall have the meaning stated in the Granting 
Clauses.
    Government shall mean the United States of America acting by and 
through the Administrator of RUS and shall include its successors and 
assigns.
    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.

[[Page 199]]

    Interest Expense shall mean an amount constituting the interest 
expense of the Mortgagor as computed pursuant to Accounting 
Requirements.
    Lien shall mean any statutory or common law consensual or non-
consensual mortgage, pledge, security interest, encumbrance, lien, right 
of set off, claim or charge of any kind, including, without limitation, 
any conditional sale or other title retention transaction, any lease 
transaction in the nature thereof and any secured transaction under the 
UCC.
    Loan Agreement shall mean any agreement executed by and between the 
Mortgagor and the Government or any other lender in connection with the 
execution and delivery of any Notes secured hereby.
    Long-Term Debt shall mean any amount included in Total Long-Term 
Debt pursuant to Accounting Requirements.
    Long-Term Lease shall mean a lease having an unexpired term (taking 
into account terms of renewal at the option of the lessor, whether or 
not such lease has previously been renewed) of more than 12 months.
    Margins shall mean the sum of amounts recorded as operating margins 
and non-operating margins as computed in accordance with Accounting 
Requirements.
    Maximum Debt Limit, if any, shall mean the amount more particularly 
described in Schedule ``A'' hereof.
    Mortgage shall mean this Restated Mortgage and Security Agreement, 
including any amendments or supplements thereto from time to time.
    Mortgaged Property shall have the meaning specified as stated in the 
Habendum to the Granting Clauses.
    MORTGAGEE or MORTGAGEES shall mean the Government, __________ {the 
supplemental lender}, __________ 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;

[[Page 200]]

    (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

[[Page 201]]

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.

[[Page 202]]

    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

[[Page 203]]

sense and any computations relating to such terms shall be computed in 
accordance with the Accounting Requirements.
    b. Any reference to ``directors'' or ``board of directors'' shall be 
deemed to mean ``trustees'' or ``board of trustees,'' as the case may 
be.
    SECTION 1.03. Special Rules of Construction if RUS is a Mortgagee: 
During any period that RUS is a Mortgagee, the following additional 
provisions shall apply:
    a. In the case of any Notes that have been guaranteed or insured as 
to payment by RUS, as to such Notes RUS shall be considered to be the 
Noteholder, exclusively, regardless of whether such Notes are in the 
possession of RUS.
    b. In the case of any prior approval rights conferred upon RUS by 
Federal statutes, including (without limitation) Section 7 of the Rural 
Electrification Act of 1936, as amended, with respect to the sale or 
disposition of property, rights, or franchises of the Mortgagor, all 
such statutory rights are reserved except to the extent that they are 
expressly modified or waived in this Mortgage.
    SECTION 1.04. Governing Law: This Mortgage shall be construed in and 
governed by Federal law to the extent applicable, and otherwise by the 
laws of the State of ________.
    SECTION 1.05 Notices: All demands, notices, reports, approvals, 
designations, or directions required or permitted to be given hereunder 
shall be in writing and shall be deemed to be properly given if sent by 
registered or certified mail, postage prepaid, or delivered by hand, or 
sent by facsimile transmission, receipt confirmed, addressed to the 
proper party or parties at the following address:
    As to the Mortgagor:

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
    As to the Mortgagee:

    Rural Utilities Service,
    United States Department of Agriculture,
    Washington, DC 20250-1500

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

and as to any other person, firm, corporation or governmental body or 
agency having an interest herein by reason of being a Mortgagee, at the 
last address designated by such person, firm, corporation, governmental 
body or agency to the Mortgagor and the other Mortgagees. Any such party 
may from time to time designate to each other a new address to which 
demands, notices, reports, approvals, designations or directions may be 
addressed, and from and after any such designation the address 
designated shall be deemed to be the address of such party in lieu of 
the address given above.

                               ARTICLE II

                            ADDITIONAL NOTES

    SECTION 2.01. Additional Notes: (a) Without the prior consent of any 
Mortgagee or any Noteholder, the Mortgagor may issue Additional Notes to 
the Government or to another lender or lenders for the purpose of 
acquiring, procuring or constructing new or replacement Eligible 
Property Additions which Notes will thereupon be secured equally and 
ratably with the Notes if each of the following requirements are 
satisfied:
    (1) As evidenced by a certificate of an Independent certified public 
accountant sent to each Mortgagee on or before the first advance of 
proceeds from such Additional Notes:
    (i) The Mortgagor shall have achieved for each of the two calendar 
years immediately preceding the issuance of such Additional Notes, a 
TIER of not less than 1.5 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

[[Page 204]]

other debt secured under the Mortgage at the time additional Notes are 
issued;
    (2) Notes are considered to be ``issued'' on, and the date of 
``issuance'' shall be, the date on which they are executed by the 
Mortgagor; and
    (3) For purposes of calculating the pro forma ratios in 
subparagraphs (a)(1)(ii) and (iii), the values for Total Long Term Debt 
and Total Assets before debt issuance and the values for Equity and Net 
Utility Plant shall be the most recently available end-of-month figures 
preceding the issuance of the Additional Notes, but in no case for a 
month ending more than 180 days preceding such issuance.
    SECTION 2.02. Refunding or Refinancing Notes: The Mortgagor shall 
also have the right without the consent of any Mortgagee or any 
Noteholder to issue Additional Notes for the purpose of refunding or 
refinancing any Notes so long as the total amount of outstanding 
indebtedness evidenced by such Additional Note or Notes is not greater 
than 105% of the then outstanding principal balance of the Note or Notes 
being refunded or refinanced. PROVIDED, HOWEVER, that the Mortgagor may 
not exercise its rights under this Section if an Event of Default has 
occurred and is continuing, or any event which with the giving of notice 
or lapse of time or both would become an Event of Default has occurred 
and is continuing. On or before the first advance of proceeds from Notes 
issued under this section, the Mortgagor shall notify each Mortgagee of 
the refunding or refinancing. Additional Notes issued pursuant to this 
Section [2.02] will thereupon be secured equally and ratably with the 
Notes.
    SECTION 2.03. Other Additional Notes. With the prior written consent 
of each Mortgagee, the Mortgagor may issue Additional Notes to the 
Government or any lender or lenders, which Notes will thereupon be 
secured equally and ratably with Notes without regard to whether any of 
the requirements of Sections [2.01] or [2.02] are satisfied.
    SECTION 2.04. Additional Lenders Entitled to the Benefits of This 
Mortgage: Without the prior consent of any Mortgagee or any Noteholder, 
each new lender designated as a payee in any Additional Notes issued by 
the Mortgagor pursuant to Section [2.01] or [2.02] of this Mortgage 
shall become a Mortgagee hereunder upon the execution and delivery by 
the Mortgagor and such lender of a supplemental mortgage hereto 
designating such lender as a Mortgagee hereunder. Such new lender shall 
be entitled to the benefits of this Mortgage without further act or 
deed. Each Mortgagee and each person or entity that becomes a lender 
pursuant to Section [2.01] or [2.02] of this Mortgage shall, upon the 
request of the Mortgagor to do so, execute and deliver a supplement to 
this Mortgage in substantially the form set forth in Section [2.05] to 
evidence the addition of such new lender as an additional Mortgagee 
entitled to the benefits of this Mortgage. The failure of any existing 
Mortgagee to enter into such supplemental mortgage shall not deprive the 
new lender of its rights under this Mortgage; provided that such 
additional indebtedness otherwise conforms in all respects with the 
requirements for issuing Additional Notes under this Mortgage.
    SECTION 2.05. Form of Supplemental Mortgage: (a) The form of 
supplemental mortgage referred to in Section [2.04] is attached to this 
Mortgage as Exhibit B and hereby incorporated by reference as if set 
forth in full at this point.
    (b) In the event that the Mortgagor subsequently issues Additional 
Notes pursuant to Sections [2.01] or [2.02] to any existing Mortgagee 
and that Mortgagee desires further assurance that such Additional Notes 
will be secured by the lien of the Mortgage, an instrument substantially 
in the form of the supplemental mortgage attached as Exhibit B may be 
used.
    (c) In the event that the Mortgagor issues Additional Notes pursuant 
to Section [2.03] to either an existing Mortgagee or a new lender, in 
either case with the prior written consent of each Mortgagee, then an 
instrument substantially in the form of the supplemental mortgage 
attached as Exhibit B may also be used.

           ARTICLE III--PARTICULAR COVENANTS OF THE MORTGAGOR

    SECTION 3.01. Payment of Debt Service on Notes: The Mortgagor will 
duly and punctually pay the principal, premium, if any, and interest on 
the Notes in accordance with the terms of the Notes, the Loan Contracts, 
this Mortgage and any Supplemental Mortgage authorizing such Notes.
    SECTION 3.02. Warranty of Title: (a) At the time of the execution 
and delivery of this instrument, the Mortgagor has good and marketable 
title in fee simple to the real property specifically described in 
Granting Clause First as owned in fee and good and marketable title to 
the interests in real property specifically described in Granting 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,

[[Page 205]]

transfer, deliver, pledge and grant a continuing security interest in 
said property and, including any proceeds thereof, in the manner and 
form aforesaid.
    (c) The Mortgagor hereby does and will forever warrant and defend 
the title to the property specifically described in Granting Clause 
First against the claims and demands of all persons whomsoever, except 
Permitted Encumbrances.
    SECTION 3.03. After-Acquired Property; Further Assurances; 
Recording: (a) All property of every kind, other than Excepted Property, 
acquired by the Mortgagor after the date hereof, shall, immediately upon 
the acquisition thereof by the Mortgagor, and without any further 
mortgage, conveyance or assignment, become subject to the lien of this 
Mortgage; SUBJECT, HOWEVER, to Permitted Encumbrances and the 
exceptions, if any, to which all of the Mortgagees consent. 
Nevertheless, the Mortgagor will do, execute, acknowledge and deliver 
all and every such further acts, conveyances, mortgages, financing 
statements and assurances as any Mortgagee shall require for 
accomplishing the purposes of this Mortgage.
    (b) The Mortgagor will cause this Mortgage and all Supplemental 
Mortgages and other instruments of further assurance, including all 
financing statements covering security interests in personal property, 
to be promptly recorded, registered and filed, and will execute and file 
such financing statements and cause to be issued and filed such 
continuation statements, all in such manner and in such places as may be 
required by law fully to preserve and protect the rights of all of the 
Mortgagees and Noteholders hereunder to all property comprising the 
Mortgaged Property. The Mortgagor will furnish to each Mortgagee:
    (1) promptly after the execution and delivery of this instrument and 
of each Supplemental Mortgage or other instrument of further assurance, 
an Opinion of Counsel stating that, in the opinion of such Counsel, this 
instrument and all such Supplemental Mortgages and other instruments of 
further assurance have been properly recorded, registered and filed to 
the extent necessary to make effective the lien intended to be created 
by this Mortgage, and reciting the details of such action or referring 
to prior Opinions of Counsel in which such details are given, and 
stating that all financing statements and continuation statements have 
been executed and filed that are necessary fully to preserve and protect 
the rights of all of the Mortgagees and Noteholders hereunder, or 
stating that, in the opinion of such Counsel, no such action is 
necessary to make the lien effective; and
    (2) within 30 days after __________ in each year beginning with the 
year ____, an Opinion of Counsel, dated as of such date, either stating 
that, in the opinion of such Counsel, such action has been taken with 
respect to the recording, registering, filing, re-recording, re-
registering and re-filing of this instrument and of all Supplemental 
Mortgages, financing statements, continuation statements or other 
instruments of further assurances as is necessary to maintain the lien 
of this Mortgage (including the lien on any property acquired by the 
Mortgagor after the execution and delivery of this instrument and owned 
by the Mortgagor at the end of preceding calendar year) and reciting the 
details of such action or referring to prior Opinions of Counsel in 
which such details are given, and stating that all financing statements 
and continuation statements have been executed and filed that are 
necessary to fully preserve and protect the rights of all of the 
Mortgagees and Noteholders hereunder, or stating that, in the opinion of 
such Counsel, no such action is necessary to maintain such lien.
    SECTION 3.04. Environmental Requirements and Indemnity: (a) The 
Mortgagor shall, with respect to all facilities which may be part of the 
Mortgaged Property, comply with all Environmental Laws.
    (b) The Mortgagor shall defend, indemnify, and hold harmless each 
Mortgagee, its successors and assigns, from and against any and all 
liabilities, losses, damages, costs, expenses (including but not limited 
to reasonable attorneys' fees and expenses), causes of actions, 
administrative proceedings, suits, claims, demands, or judgments of any 
nature arising out of or in connection with any matter related to the 
Mortgage Property and any Environmental Law, including but not limited 
to:
    (1) the past, present, or future presence of any hazardous 
substance, contaminant, pollutant, or hazardous waste on or related to 
the Mortgaged Property;
    (2) any failure at any time by the undersigned to comply with the 
terms of any order related to the Mortgaged Property and issued by any 
federal, state, or municipal department or agency (other than RUS) 
exercising its authority to enforce any Environmental Law; and
    (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

[[Page 206]]

shall immediately take any and all appropriate actions to remedy, cure, 
defend, or otherwise affirmatively respond to the matter.
    SECTION 3.05. Payment of Taxes: The Mortgagor will pay or cause to 
be paid as they become due and payable all taxes, assessments and other 
governmental charges lawfully levied or assessed or imposed upon the 
Mortgaged Property or any part thereof or upon any income therefrom, and 
also (to the extent that such payment will not be contrary to any 
applicable laws) all taxes, assessments and other governmental charges 
lawfully levied, assessed or imposed upon the lien or interest of the 
Noteholders or of the Mortgagees in the Mortgaged Property, so that (to 
the extent aforesaid) the lien of this Mortgage shall at all times be 
wholly preserved at the cost of the Mortgagor and without expense to the 
Mortgagees or the Noteholders; PROVIDED, HOWEVER, that the Mortgagor 
shall not be required to pay and discharge or cause to be paid and 
discharged any such tax, assessment or governmental charge to the extent 
that the amount, applicability or validity thereof shall currently be 
contested in good faith by appropriate proceedings and the Mortgagor 
shall have established and shall maintain adequate reserves on its books 
for the payment of the same.
    SECTION 3.06. Authority to Execute and Deliver Notes, Loan 
Agreements and Mortgage; All Action Taken; Enforceable Obligations: The 
Mortgagor is authorized under its articles of incorporation and bylaws 
[or code of regulations] and all applicable laws and by corporate action 
to execute and deliver the Notes, any Additional Notes, the Loan 
Agreements and this Mortgage. The Notes, the Loan Agreements and this 
Mortgage are, and any Additional Notes and Loan Agreements when executed 
and delivered will be, the valid and enforceable obligations of the 
Mortgagor in accordance with their respective terms.
    SECTION 3.07. Restrictions on Further Encumbrances on Property: 
Except to secure Additional Notes, the Mortgagor will not, without the 
prior written consent of each Mortgagee, create or incur or suffer or 
permit to be created or incurred or to exist any Lien, charge, 
assignment, pledge, mortgage on any of the Mortgaged Property inferior 
to, prior to, or on a parity with the Lien of this Mortgage except for 
the Permitted Encumbrances. Subject to the provisions of Section [3.08], 
or unless approved by each of the Mortgagees, the Mortgagor will 
purchase all materials, equipment and replacements to be incorporated in 
or used in connection with the Mortgaged Property outright and not 
subject to any conditional sales agreement, chattel mortgage, bailment, 
lease or other agreement reserving to the seller any right, title or 
Lien.
    SECTION 3.08. Restrictions On Additional Permitted Debt: The 
Mortgagor shall not incur, assume, guarantee or otherwise become liable 
in respect of any debt for borrowed money and Restricted Rentals 
(including Subordinated Debt) other than the following: (``Permitted 
Debt'')
    (1) Additional Notes issued in compliance with Article II hereof;
    (2) Purchase money indebtedness in non-Utility System property, in 
an amount not exceeding 10% of Net Utility Plant;
    (3) Restricted Rentals in an amount not to exceed 5% of Equity 
during any 12 consecutive calendar month period;
    (4) Unsecured lease obligations incurred in the ordinary course of 
business except Restricted Rentals;
    (5) Debt represented by dividends declared but not paid; and
    (6) Subordinated Indebtedness approved by each Mortgagee.
    PROVIDED, However, that the Mortgagor may incur Permitted Debt 
without the consent of the Mortgagee only so long as there exists no 
Event of Default hereunder and there has been no continuing occurrence 
which with the passage of time and giving of notice could become an 
Event of Default hereunder.
    PROVIDED, FURTHER, by executing this Mortgage any consent of RUS 
that the Mortgagor would otherwise be required to obtain under this 
Section is hereby deemed to be given or waived by RUS by operation of 
law to the extent, but only to the extent, that to impose such a 
requirement of RUS consent would clearly violate existing federal laws 
or government regulations.
    SECTION 3.09. Preservation of Corporate Existence and Franchises: 
The Mortgagor will, so long as any Outstanding Notes exist, take or 
cause to be taken all such action as from time to time may be necessary 
to preserve its corporate existence and to preserve and renew all 
franchises, rights of way, easements, permits, and licenses now or 
hereafter to be granted or upon it conferred the loss of which would 
have a material adverse affect on the Mortgagor's financial condition 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

[[Page 207]]

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,

[[Page 208]]

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

[[Page 209]]

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

[[Page 210]]

(30) days after written notice specifying such default and requiring the 
same to be remedied and stating that such notice is a ``Notice of 
Default'' hereunder shall have been given to the Mortgagor by any 
Mortgagee; PROVIDED, HOWEVER that in the case of a default on the terms 
of a Note or Loan Agreement of a particular Mortgagee, the ``Notice of 
Default'' required under this paragraph may only be given by that 
Mortgagee;
    (c) the Mortgagor shall file a petition in bankruptcy or be 
adjudicated a bankrupt or insolvent, or shall make an assignment for the 
benefit of its creditors, or shall consent to the appointment of a 
receiver of itself or of its property, or shall institute proceedings 
for its reorganization or proceedings instituted by others for its 
reorganization shall not be dismissed within sixty (60) days after the 
institution thereof;
    (d) a receiver or liquidator of the Mortgagor or of any substantial 
portion of its property shall be appointed and the order appointing such 
receiver or liquidator shall not be vacated within sixty (60) days after 
the entry thereof;
    (e) the Mortgagor shall forfeit or otherwise be deprived of its 
corporate charter or franchises, permits, easements, or licenses 
required to carry on any material portion of its business;
    (f) a final judgment for an amount of more than $__________ shall be 
entered against the Mortgagor and shall remain unsatisfied or without a 
stay in respect thereof for a period of sixty (60) days; or,
    (g) any material representation or warranty made by the Mortgagor 
herein, in the Loan Agreements or in any certificate or financial 
statement delivered hereunder or thereunder shall prove to be false or 
misleading in any material respect at the time made.
    SECTION 4.02. Acceleration of Maturity; Rescission and Annulment:
    (a) If an Event of Default described in Section [4.01(a)] has 
occurred and is continuing, any Mortgagee upon which such default has 
occurred may declare the principal of all its Notes secured hereunder to 
be due and payable immediately by a notice in writing to the Mortgagor 
and to the other Mortgagees (failure to provide said notice to any other 
Mortgagee shall not affect the validity of any acceleration of the Note 
or Notes by such Mortgagee), and upon such declaration, all unpaid 
principal (and premium, if any) and accrued interest so declared shall 
become due and payable immediately, anything contained herein or in any 
Note or Notes to the contrary notwithstanding.
    (b) If any other Event of Default shall have occurred and be 
continuing, any Mortgagee may declare the principal of all its Notes 
secured hereunder to be due and payable immediately by a notice in 
writing to the Mortgagor and to the other Mortgagees (failure to provide 
said notice to any other Mortgagee shall not affect the validity of any 
acceleration of the Note or Notes by such Mortgagee), and upon such 
declaration, all unpaid principal (and premium, if any) and accrued 
interest so declared shall become due and payable immediately, anything 
contained herein or in any Note or Notes to the contrary 
notwithstanding.
    (c) Upon receipt of actual knowledge of or any notice of 
acceleration by any Mortgagee, any other Mortgagee may declare the 
principal of all of its Notes to be due and payable immediately by a 
notice in writing to the Mortgagor and upon such declaration, all unpaid 
principal (and premium, if any) and accrued interest so declared shall 
become due and payable immediately, anything contained herein or in any 
Note or Notes or Loan Agreements to the contrary notwithstanding.
    (d) If after the unpaid principal of (and premium, if any) and 
accrued interest on any of the Notes shall have been so declared to be 
due and payable, all payments in respect of principal and interest which 
shall have become due and payable by the terms of such Note or Notes 
(other than amounts due as a result of the acceleration of the Notes) 
shall be paid to the respective Mortgagees, and (i) all other defaults 
under the Loan Agreements, the Notes and this Mortgage shall have been 
made good or cured to the satisfaction of the Mortgagees representing at 
least 80% of the aggregate unpaid principal balance of all of the Notes 
then Outstanding, (ii) proceedings to foreclose the lien of this 
Mortgage have not been commenced, and (iii) all reasonable expenses paid 
or incurred by the Mortgagees in connection with the acceleration shall 
have been paid to the respective Mortgagees, then in every such case 
such Mortgagees representing at least 80% of the aggregate unpaid 
principal balance of all of the Notes then Outstanding may by written 
notice to the Mortgagor, for purposes of this Mortgage, annul such 
declaration and waive such default and the consequences thereof, but no 
such waiver shall extend to 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

[[Page 211]]

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

[[Page 212]]

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

[[Page 213]]

of this Mortgage and also the table of contents were formulated and 
inserted for convenience only and shall not be deemed to affect the 
meaning or construction of any of the provisions hereof.
    SECTION 6.04. Severability Clause: In case any provision of this 
Mortgage or in the Notes or in the Loan Agreements shall be invalid or 
unenforceable, the validity, legality and enforceability of the 
remaining provisions thereof shall not in any way be affected or 
impaired, nor shall any invalidity or unenforceability as to any 
Mortgagee hereunder affect or impair the rights hereunder of any other 
Mortgagee.
    SECTION 6.05. Mortgage Deemed Security Agreement: To the extent that 
any of the property described or referred to in this Mortgage is 
governed by the provisions of the UCC this Mortgage is hereby deemed a 
``security agreement'' under the UCC, and, if so elected by any 
Mortgagee, a ``financing statement'' under the UCC for said security 
agreement. The mailing addresses of the Mortgagor as debtor, and the 
Mortgagees as secured parties are as set forth in Section [1.05] hereof. 
If any Mortgagee so directs the Mortgagor to do so, the Mortgagor shall 
file as a financing statement under the UCC for said security agreement 
and for the benefit of all of the Mortgagees, an instrument other than 
this Mortgage. In such case, the instrument to be filed shall be in a 
form customarily accepted by the filing office as a financing statement. 
PROCEEDS OF COLLATERAL ARE COVERED HEREBY.
    SECTION 6.06. Indemnification by Mortgagor of Mortgagees: The 
Mortgagor agrees to indemnify and save harmless each Mortgagee against 
any liability or damages which any of them may incur or sustain in the 
exercise and performance of their rightful powers and duties hereunder. 
For such reimbursement and indemnity, each Mortgagee shall be secured 
under this Mortgage in the same manner as the Notes and all such 
reimbursements for expense or damage shall be paid to the Mortgagee 
incurring or suffering the same with interest at the rate specified in 
Section [3.14] hereof. The Mortgagor's obligation to indemnify the 
Mortgagees under this section and under Section [3.04] shall survive the 
satisfaction of the Notes, the reconveyance or foreclosure of this 
Mortgage, the acceptance of a deed in lieu of foreclosure, or any 
transfer or abandonment of the Mortgaged Property.
    IN WITNESS WHEREOF, __________ as Mortgagor, has caused this 
Restated Mortgage and Security Agreement to be signed in its name and 
its corporate seal to be hereunto affixed and attested by its officers 
thereunto duly authorized, and UNITED STATES OF AMERICA, as Mortgagee, 
and as Mortgagee, has caused this Restated Mortgage and Security 
Agreement to be signed in its name by duly authorized persons, all as of 
the day and year first above written.
_______________________________________________________________________

(SEAL)

By:_____________________________________________________________________
President

Attest:_________________________________________________________________
Title:__________________________________________________________________

    Executed by the Mortgagor in the presence of:

_______________________________________________________________________
_______________________________________________________________________

Witnesses

                        UNITED STATES OF AMERICA

By: Director, of the __________ Rural Utilities Service

    Executed by the United States of America, Mortgagee, in the presence 
of:

_______________________________________________________________________
_______________________________________________________________________

Witnesses

By:

(SEAL)

Attest:_________________________________________________________________
Title:__________________________________________________________________
    Executed by the above-named Mortgagee in the presence of:

_______________________________________________________________________
_______________________________________________________________________

Witnesses

                               Schedule A

    1. The Maximum Debt Limit is __________.
    2. The Original Mortgage as described in the [first] WHEREAS clause 
above is __________.
    3. The outstanding secured indebtedness described in the [fourth] 
WHEREAS clause above as evidenced by the Original Notes is as follows:

    [Note this requires computation of principal balances, not merely a 
toting up of the original face amounts of the notes. Alternative 
approaches may be used by the parties where legally effective and 
mutually agreeable.]

                      Schedule B--Property Schedule

    The fee and leasehold interests in real property referred to in 
Section Subclause (a) of Granting Clause One are __________.
    The counties referred to in Subclause (B) of Granting Clause One are 
__________.

                      Schedule C--Excepted Property

STATE OF __________
COUNTY OF __________

    On this ______ day of __________, 19 ____, before me appeared 
__________ and __________ personally known, by me and having been duly 
sworn by me, did say that they are the

[[Page 214]]

President and Secretary, respectively, of ________________, a __________ 
corporation, and that the seal affixed to the foregoing instrument is 
the corporate seal of said corporation, and that said instrument was 
signed and sealed in behalf of said corporation by authority of its 
Board, and said __________ and __________ acknowledged that the 
execution of said instrument was a free act and deed of said 
corporation.
    IN WITNESS whereof, I have hereunto set my hand and official seal 
the day and year last above written.
_______________________________________________________________________
Notary Public

(Notarial Seal)

    My commission expires:

DISTRICT OF COLUMBIA    )    SS
    The foregoing instrument was acknowledged before me this__________ 
day of 19______, by __________ Director, __________ Regional Division of 
the Rural Utilities Service, acknowledging an agency of the United 
States of America, on behalf of the Rural Utilities Service, United 
States of America.
_______________________________________________________________________

Notary Public

(Notarial Seal)

    My Commission expires:

COMMONWEALTH OF VIRGINIA    )    SS
    BEFORE ME, a Notary Public, in and for the Commonwealth of Virginia, 
appeared in person __________, signing for the Governor of the National 
Rural Utilities cooperative Finance Corporation, to me personally known, 
and known to be the identical person who subscribed the name of said 
corporation to the foregoing instrument, being by me duly sworn, and who 
stated that she/he is duly authorized to execute the foregoing 
instrument on behalf of said corporation, and further stated and 
acknowledged that she/he executed the foregoing instrument as a free and 
voluntary act and deed of said corporation for the consideration therein 
mentioned and set forth.
    IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal 
this ______ day of __________, 19______.
_______________________________________________________________________

Notary Public

(Notarial Seal)
    My commission expires:

                    Exhibit A--Manager's Certificate

     Manager's Certificate Required Under Mortgage Section 2.01 for 
                            Additional Notes

    On behalf on __________[Name of Borrower] (the ``Borrower''), I 
__________ hereby certify as follows:
    1. I am the Manager of the Borrower and have been duly authorized to 
deliver this certificate in connection with the Additional Note or Notes 
to be issued on or about __________ [Date Note or Notes are to be 
Signed] pursuant to Section [2.01] of the Mortgage dated __________.
    2. No Event of Default has occurred and is continuing under the 
Mortgage, or any event which with the giving of notice or lapse of time 
or both would become an Event of Default has occurred and is continuing.
    3. The Additional Notes described in paragraph 1 are for the purpose 
of funding Property Additions being constructed, acquired, procured or 
replaced that are or will become part of the Borrower's Utility System.
    4. The Property Additions referred to in paragraph 3 are Eligible 
Property Additions, i.e. Property Additions acquired or whose 
construction was completed not more than 5 years prior to the issuance 
of additional Notes and Property Additions acquired or whose 
construction is started and/or completed not more than 4 years after 
issuance of the additional Notes, but shall exclude any Property 
Additions financed by any other debt secured under the Mortgage at the 
time additional Notes are issued.
    5. I have reviewed the certificate of the Independent certified 
public accountant also being delivered to each of the Mortgagees 
pursuant to Section [2.01] in connection with the aforesaid Additional 
Note or Notes and concur with the conclusions expressed therein.
    6. Capitalized terms that are used in this certificate but are not 
defined herein have the meanings defined in the Mortgage.
[Signed]________________________________________________________________
[Dated]_________________________________________________________________
[Name]__________________________________________________________________
[Title]_________________________________________________________________
[Name and Address of Borrower]__________________________________________
_______________________________________________________________________
_______________________________________________________________________

                Exhibit B--Form of Supplemental Mortgage

_______________________________________________________________________
    Supplemental Mortgage and Security Agreement, dated as of 
__________, ______, ________, (hereinafter sometimes called this 
``Supplemental Mortgage'') is made by and between __________ 
(hereinafter called the ``Mortgagor''), a corporation existing under the 
laws of the State of __________, and the UNITED STATES OF AMERICA acting 
by and through the Administrator of the Rural Utilities Service 
(hereinafter called the ``Government''), __________ (Supplemental 
Lender) (hereinafter called __________), a __________ existing under the 
laws of __________, and intended to confer rights and benefits on both 
the Government and __________ and __________ in accordance with this 
Supplemental Mortgage and the Original Mortgage (hereinafter defined) 
(the Government and the Supplemental Lenders being herein sometimes 
collectively referred to as the ``Mortgagees'').

[[Page 215]]

                                Recitals

    Whereas, the Mortgagor, the Government and __________ are parties to 
that certain Restated Mortgage and Security Agreement, as supplemented, 
amended or restated (the ``Original Mortgage'' identified in Schedule 
``A'' of this Mortgage) originally entered into between the Mortgagor, 
the Government acting by and through the Administrator of the Rural 
Utilities Service (hereinafter called ``RUS''), and __________; and
    Whereas, the Mortgagor deems it necessary to borrow money for its 
corporate purposes and to issue its promissory notes and other debt 
obligations therefor, and to mortgage and pledge its property 
hereinafter described or mentioned to secure the payment of the same, 
and to enter into this Supplemental Mortgage pursuant to which all 
secured debt of the Mortgagor hereunder shall be secured on parity, and 
to add __________ as a secured party hereunder and under the Original 
Mortgage (the Supplemental Mortgage and the Original Mortgage, as it may 
have been previously amended or supplemented, hereinafter may be called 
collectively the ``RUS Mortgage''); and
    Whereas, the RUS Mortgage, as supplemented hereby, preserves the 
priority of the Original Mortgage for the pro rata benefit of all the 
Mortgagees and secures the payment of all of the Mortgagor's outstanding 
indebtedness as listed in the Instruments Recital of Schedule ``A''; and
    Whereas, all acts necessary to make this Supplemental Mortgage a 
valid and binding legal instrument for the security of such notes and 
obligations, subject to the terms of the RUS Mortgage, have been in all 
respects duly authorized:
    Now, Therefore, This Supplemental Mortgage Witnesseth: That to 
secure the payment of the principal of (and premium, if any) and 
interest on all Notes issued hereunder according to their tenor and 
effect, and the performance of all provisions therein and herein 
contained, and in consideration of the covenants herein contained and 
the purchase or guarantee of Notes by the guarantors or holders thereof, 
the Mortgagor has mortgaged, pledged and granted a continuing security 
interest in, and by these presents does hereby grant, bargain, sell, 
alienate, remise, release, convey, assign, transfer, hypothecate, 
pledge, set over and confirm, pledge and grant a continuing security 
interest in for the purposes hereinafter expressed [other language may 
be required under various state laws], unto the Mortgagees all property, 
rights, privileges and franchises of the Mortgagor of every kind and 
description, real, personal or mixed, tangible and intangible, of the 
kind or nature specifically mentioned herein or any other kind or 
nature, except any Excepted Property set forth on Schedule ``C'' hereof 
owned or hereafter acquired by the Mortgagor (by purchase, 
consolidation, merger, donation, construction, erection or in any other 
way) wherever located, including (without limitation) all and singular 
the following:
    A. All of those fee and leasehold interests in real property set 
forth in Schedule ``B'' hereto, subject in each case to those matters 
set forth in such Schedule; and
    B. All of those fee and leasehold interests in real property set 
forth in Schedule ``B'' of the Original Mortgage or in any restatement, 
amendment or supplement thereto, subject in each case to those matters 
set forth in such Schedule; and
    C. All of the kinds, types or items of property, now owned or 
hereafter acquired, described as Mortgaged Property in the Original 
Mortgage or in any restatement, amendment to supplement thereto as 
Mortgaged Property.
    It is Further Agreed and Covenanted That the Original Mortgage, as 
previously restated, amended or supplemented, and this Supplement shall 
constitute one agreement and the parties hereto shall be bound by all of 
the terms thereof and, without limiting the foregoing.
    1. All capitalized terms not defined herein shall have the meaning 
given in Article I of the Original Mortgage.
    2. This Supplemental Mortgage is one of the Supplemental Mortgages 
contemplated by Article II of the Original Mortgage.
    In Witness Whereof, __________ as Mortgagor.

[ACKNOWLEDGEMENTS]

     Supplemental Mortgage Schedule A--Maximum Debt Limit and Other 
                               Information

    1. The Maximum Debt Limit is __________.
    2. The Original Mortgage as described in the first WHEREAS clause 
above is __________.
    3. The outstanding secured indebtedness described in the third 
WHEREAS clause above is __________.

           Supplemental Mortgage Schedule B--Property Schedule

    The fee and leasehold interests in real property referred to in 
clause A of the granting clause are __________.

           Supplemental Mortgage Schedule C--Excepted Property

[60 FR 36888, July 18, 1995, as amended at 60 FR 67410, Dec. 29, 1995]

[[Page 216]]

          Subpart C--Loan Contracts With Distribution Borrowers

    Source: 60 FR 67410, Dec. 29, 1995, unless otherwise noted.

Sec. 1718.100  General.

    (a) Purpose. The purpose of this subpart is to set forth the 
policies, requirements, and procedures governing loan contracts entered 
into between the Rural Utilities Service (RUS) and distribution 
borrowers or, in some cases, other electric borrowers.
    (b) Flexibility for individual circumstances. The intent of this 
subpart is to provide the flexibility to address the different needs and 
different credit risks of individual borrowers, and other special 
circumstances of individual lending situations. The model loan contract 
contained in Appendix A of this subpart provides an example of what a 
loan contract with an ``average'' or ``typical'' distribution borrower 
may look like under ``average'' or ``typical'' circumstances. Depending 
on the credit risks and other circumstances of individual loans, RUS may 
execute loan contracts with provisions that are substantially different 
than those set forth in the model. RUS may develop alternative model 
loan contract provisions. If it does, such provisions will be made 
available to the public.
    (c) Resolution of any differences in contractual provisions. If any 
provision of the loan contract appears to be in conflict with provisions 
of the mortgage, the loan contract shall have precedence with respect to 
the contractual relationship between the borrower and RUS with respect 
to such provision. If either document is silent on a matter addressed in 
the other document, the other document shall have precedence with 
respect to the contractual relationship between the borrower and RUS 
with respect to such matter.
    (d) Certain loan contract provisions subject to subsequent 
rulemaking. If a loan contract provision imposes an obligation or 
limitation on the borrower whose interpretation or specification is 
subject to RUS regulations or the discretion of the Administrator or 
RUS, such interpretation or specification shall be subject to subsequent 
rulemaking. Such interpretation or specification of the borrower's 
obligations or limitations may not exceed the authority granted to the 
Administrator or RUS in the loan contract provision.

Sec. 1718.101  Applicability.

    (a) Distribution borrowers. The provisions of this subpart apply to 
all distribution borrowers that obtain a loan or loan guarantee from RUS 
approved on or after January 29, 1996. Distribution borrowers that 
obtain a lien accommodation or any other form of financial assistance 
from RUS after January 29, 1996, may be required to execute a new loan 
contract and new mortgage. Moreover, any distribution borrower may 
submit a request to RUS that a new loan contract and new mortgage be 
executed. Within the constraints of time and staff resources, RUS will 
attempt to honor such requests. Borrowers must first obtain the 
concurrence of any other mortgagees on their existing mortgage before a 
new mortgage can be executed.
    (b) Other borrowers. Borrowers other than distribution borrowers may 
also submit requests for execution of a new loan contract pursuant to 
this subpart and a new mortgage pursuant to subpart B of this part. RUS 
may approve such requests if it determines that such approval is in the 
government's financial interest. If other mortgagees are on the 
borrower's existing mortgage, their concurrence would be required before 
a new mortgage could be executed.

Sec. 1718.102  Definitions.

    For the purposes of this subpart:
    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.

[[Page 217]]

Sec. 1718.103  Loan contract provisions.

    Loan contracts executed pursuant to this subpart shall contain such 
provisions as RUS determines are appropriate to further the purposes of 
the RE Act and to ensure that the security for the loan will be 
reasonably adequate and that the loan will be repaid according to the 
terms of the promissory note. Such loan contracts will contain 
provisions addressing, but not necessarily limited to, the following 
matters:
    (a) Description of the purpose of the loan;
    (b) Specification of the interest to be charged on the loan, 
including the method for determining the interest rate if it is not 
fixed for the entire term of the loan;
    (c) Specification of the method for repaying the loan principal, 
including the final maturity of the loan;
    (d) The conditions under which the loan may be prepaid before its 
maturity date, including but not limited to requirements regarding the 
prepayment of loans made concurrently by RUS and another secured lender;
    (e) The method for making scheduled payments on the loan;
    (f) Accounting principles and system of accounts, and RUS authority 
to approve the accountant used by the borrower;
    (g) The method and time period for advancing loan funds and the 
conditions precedent to the advance of funds;
    (h) Representations and warranties by the borrower as a condition of 
obtaining the loan, including but not limited to: the legal authority of 
the borrower to enter into the loan contract and operate its system; 
that the loan documents will be a legal, valid and binding obligation of 
the borrower enforceable according to their terms; compliance of the 
borrower in all material respects with all federal, state, and local 
laws, regulations, codes, and orders; existence of any pending or 
threatened legal actions that could have a material adverse effect on 
the borrower's ability to perform its obligations under the loan 
documents; the accuracy and completeness of all information provided by 
the borrower in the loan application and with respect to the loan 
contract, and the existence of any material adverse change since the 
information was provided; and the existence of any material defaults 
under other agreements of the borrower;
    (i) Representations, warranties, and covenants with respect to 
environmental matters;
    (j) Reports and notices required to be submitted to RUS, including 
but not limited to: annual financial statements; notice of defaults; 
notice of litigation; notice of orders or other directives received by 
the borrower from regulatory authorities; notice of any matter that has 
resulted in or may result in a material adverse change in the condition 
or operations of the borrower; and such other information regarding the 
condition or operations of the borrower as RUS may reasonably require;
    (k) Annual written certification that the borrower is in compliance 
with its loan contract, note, mortgage, and any other agreement with 
RUS, or if there has been a default in the fulfillment of any obligation 
under said agreements, specifying each such default and the nature and 
status thereof;
    (l) Requirement that the borrower design and implement rates for 
utility services to meet certain minimum coverage of interest expense 
and/or debt service obligations;
    (m) Requirement that the borrower maintain and preserve its 
mortgaged property in compliance with prudent utility practice and all 
applicable laws, 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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    (q) Limitations of the transfer of mortgaged property by the 
borrower;
    (r) Limitations on dividends, patronage refunds, and cash 
distributions paid by the borrower;
    (s) Limitations on investments, loans, and guarantees made by the 
borrower;
    (t) Authority of RUS to approve a new general manager and to require 
that an existing general manager be replaced if the borrower is in 
default under its mortgage, loan contract, or any other agreements with 
RUS;
    (u) Description of events of default under the loan contract and the 
remedies available to RUS;
    (v) Applicability of state and federal laws;
    (w) Severability of the individual provisions of the loan documents;
    (x) Matters relating to the assignment of the loan contract;
    (y) Requirements relating to federal laws and regulations, including 
but not limited to the following matters: area coverage for electric 
service; civil rights and equal employment opportunity; access to 
buildings and other matters relating to the handicapped; design and 
construction standards relating to earthquakes; the National 
Environmental Policy Act of 1969 and other environmental laws and 
regulations; flood hazard insurance; debarment and suspension from 
federal assistance programs; and delinquency on federal debt; and
    (z) Special requirements applicable to individual loans, and such 
other provisions as RUS may require to ensure loan repayment and 
reasonably adequate loan security.

Sec. 1718.104  Availability of model loan contract.

    Single copies of the model loan contract (RUS Informational 
Publication 1718 C) are available from the Rural Utilities Service, 
United States Department of Agriculture, Washington, DC 20250-1533. This 
document may be reproduced.

 Appendix A to Subpart C 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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    Section 6.12. Rate Reductions.
    Section 6.13. Limitations on Additional Indebtedness.
    Section 6.14. Limitations on Issuing Additional Indebtedness Secured 
Under the Mortgage.
    Section 6.15. Impairment of Contracts Pledged to RUS.
    Section 6.16. Additional Negative Covenants.
ARTICLE VII--DEFAULT
    Section 7.1. Events of Default.
ARTICLE VIII--REMEDIES
    Section 8.1. Generally.
    Section 8.2. Suspension of Advances.
ARTICLE IX--MISCELLANEOUS
    Section 9.1. Notices.
    Section 9.2. Expenses.
    Section 9.3. Late Payments.
    Section 9.4. Filing Fees.
    Section 9.5. No Waiver.
    Section 9.6. Governing Law.
    Section 9.7. Holiday Payments.
    Section 9.8. Rescission.
    Section 9.9. Successors and Assigns.
    Section 9.10. Complete Agreement; Amendments.
    Section 9.11. Headings.
    Section 9.12. Severability.
    Section 9.13. Right of Setoff.
    Section 9.14. Schedules and Exhibits.
    Section 9.15. Prior Loan Documents.
    Section 9.16. Authority of Representatives of RUS.
    Section 9.17. Term.
SCHEDULE 1
SCHEDULE 2--Existing Liens
SCHEDULE 3--Additional Contracts
EXHIBIT A--Form of Promissory Note
EXHIBIT B--Equal Opportunity Contract Provisions
EXHIBIT C-1--Manager's Certificate Required Under Loan Contract
    Section 6.14 for Additional Notes
Exhibit C-2--Manager's Certificate Required Under Loan Contract
    Section 6.14 for Refinancing Notes

                              Loan Contract

    AGREEMENT, dated ____________________, 199____, between 
____________________ (``Borrower''), a corporation organized and 
existing under the laws of the State of ____________________ (the 
``State'') and the UNITED STATES OF AMERICA acting by and through the 
Administrator of the Rural Utilities Service (``RUS'').

                                Recitals

    The Borrower has applied to RUS for a loan for the purpose(s) set 
forth in Schedule 1 hereto.
    RUS is willing to make such a loan to the Borrower pursuant to the 
Rural Electrification Act of 1936, as amended, on the terms and 
conditions stated herein.
    THEREFORE, for and in consideration of the premises and the mutual 
covenants hereinafter contained, the parties hereto agree and bind 
themselves as follows:

                         Article I--Definitions

    Capitalized terms that are not defined herein shall have the 
meanings as set forth in the Mortgage. The terms defined herein include 
the plural as well as the singular and the singular as well as the 
plural.
    ``Act'' shall mean the Rural Electrification Act of 1936, as 
amended.
    ``Advance'' or ``Advances'' shall mean advances by RUS to Borrower 
pursuant to the terms and conditions of this Agreement.
    ``Agreement'' shall mean this Loan Contract together with all 
schedules and exhibits and also any subsequent supplements or 
amendments.
    ``Business Day'' shall mean any day that RUS is open for business.
    ``Contemporaneous Loan'' shall mean any loan which the Borrower has 
used to satisfy RUS Regulations or loan conditions requiring that 
supplemental financing be obtained in order to obtain a loan from RUS. 
Any loan used to refinance or refund a Contemporaneous Loan is also 
considered to be a Contemporaneous Loan.
    ``Coverage Ratios'' shall mean, collectively, the following 
financial ratios: (i) TIER of 1.5; (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:
[GRAPHIC] [TIFF OMITTED] TR29DE95.004

Where:

All amounts are for the same calendar year and are computed pursuant to 
RUS Accounting Requirements and RUS form 7;
A=Depreciation and Amortization Expense of the Electric System;
B=Interest Expense on Total Long-Term Debt of the Electric System, 
except that such Interest Expense shall be increased by \1/3\ of the 
amount, if any, by which the Restricted Rentals of the Electric System 
exceed 2 percent of the Mortgagor's Equity;
C=Patronage capital & operating margins of the Electric System, (which 
equals operating revenue and patronage capital of Electric System 
operations, less total cost of electric service, including Interest 
Expense on Total Long-Term Debt of the Electric System) plus cash 
received from the retirement of patronage capital by suppliers of 
electric power and by lenders for credit extended for the Electric 
System; and
D=Debt service billed which equals the sum of all payments of principal 
and interest required to be made on account of Total Long-Term Debt of 
the Electric System during the calendar year, plus \1/3\ of the amount, 
if any, by which Restricted Rentals of the Electric System exceed 2 
percent of the Mortgagor's Equity.

    ``Operating TIER'' or ``OTIER'' shall mean Operating Times Interest 
Earned Ratio calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.005

Where:
All amounts are for the same calendar year and are computed pursuant to 
RUS Accounting Requirements and RUS form 7;
A=Interest Expense on Total Long-Term Debt of the Electric System, 
except that such Interest Expense shall be increased by 1/3 of the 
amount, if any, by which Restricted Rentals of the Electric System 
exceed 2 percent of the Mortgagor's Equity; and
B=Patronage capital & operating margins of the Electric System, (which 
equals operating revenue and patronage capital of Electric System 
operations, less total cost of electric service, including Interest 
Expense on Total Long-Term Debt of the Electric System) plus cash 
received from the retirement of patronage capital by suppliers of 
electric power and by lenders for credit extended for the Electric 
System.

    ``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

[[Page 221]]

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

[[Page 222]]

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

[[Page 223]]

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

[[Page 224]]

    (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.

[[Page 225]]

                 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

[[Page 226]]

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.

[[Page 227]]

                     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.

[[Page 228]]

    (b) The Borrower shall not, without the written approval of the 
Administrator, voluntarily or involuntarily sell, convey or dispose of 
any portion of its business or assets (including, without limitation, 
any portion of its franchise or service territory) to another entity or 
person if such sale, conveyance or disposition could reasonably be 
expected to reduce the Borrower's existing or future requirements for 
energy or capacity being furnished to the Borrower under any wholesale 
power contract which has been pledged as security to RUS.

     Section 6.7. Limitations on Using non-FDIC Insured Depositories

    Without the prior written approval of RUS, the Borrower shall not 
place the proceeds of the Loan or any loan which has been made or 
guaranteed by RUS in the custody of any bank or other depository that is 
not insured by the Federal Deposit Insurance Corporation or other 
federal agency acceptable to RUS.

                Section 6.8. Limitation on Distributions

    Without the prior written approval of RUS, the Borrower shall not in 
any calendar year make any Distributions (exclusive of any Distributions 
to the estates of deceased natural patrons) to its members, stockholders 
or consumers except as follows:
    (a) Equity above 30%. If, after giving effect to any such 
Distribution, the Equity of the Borrower shall be greater than or equal 
to 30% of its Total Assets; or
    (b) Equity above 20%. If, after giving effect to any such 
Distribution, the aggregate of all Distributions made during the 
calendar year when added to such Distribution shall be less than or 
equal to 25% of the prior year's margins.
    Provided however, that in no event shall the Borrower make any 
Distributions if there is unpaid when due any installment of principal 
of (premium, if any) or interest on its Notes, if the Borrower is 
otherwise in default hereunder or if, after giving effect to any such 
Distribution, the Borrower's current and accrued assets would be less 
than its current and accrued liabilities.

  Section 6.9. Limitations on Loans, Investments and Other Obligations

    The Borrower shall not make any loan or advance to, or make any 
investment in, or purchase or make any commitment to purchase any stock, 
bonds, notes or other securities of, or guaranty, assume or otherwise 
become obligated or liable with respect to the obligations of, any other 
person, firm or corporation, except as permitted by the Act and RUS 
Regulations.

                    Section 6.10. Depreciation Rates

    The Borrower shall not file with or submit for approval of 
regulatory bodies any proposed depreciation rates which are inconsistent 
with RUS Regulations.

                   Section 6.11. Historic Preservation

    The Borrower shall not, without approval in writing by RUS, use any 
Advance to construct any facilities which shall involve any district, 
site, building, structure or object which is included in, or eligible 
for inclusion in, the National Register of Historic Places maintained by 
the Secretary of the Interior pursuant to the Historic Sites Act of 1935 
and the National Historic Preservation Act of 1966.

                      Section 6.12. Rate Reductions

    Without the prior written approval of RUS, the Borrower shall not 
decrease its rates if it has failed to achieve all of the Coverage 
Ratios for the calendar year prior to such reduction.

          Section 6.13. Limitations on Additional Indebtedness

    Except as expressly permitted by Article II of the Mortgage and 
subject to the further limitations expressed in the next section, the 
Borrower shall not incur, assume, guarantee or otherwise become liable 
in respect of any debt for borrowed money and Restricted Rentals 
(including Subordinated Indebtedness) other than the following: 
(``Permitted Debt'')
    (a) Additional Notes issued in compliance with Article II of the 
Mortgage;
    (b) Purchase money indebtedness in non-Utility System property, in 
an amount not exceeding 10% of Net Utility Plant;
    (c) Restricted Rentals in an amount not to exceed 5% of Equity 
during any 12 consecutive calendar month period;
    (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.

[[Page 229]]

    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

[[Page 230]]

    (h) Dissolution or Liquidation. Other than as provided in the 
immediately preceding subsection, the dissolution or liquidation of the 
Borrower, or failure by the Borrower promptly to forestall or remove any 
execution, garnishment or attachment of such consequence as shall impair 
its ability to continue its business or fulfill its obligations and such 
execution, garnishment or attachment shall not be vacated within 30 
days. The term ``dissolution or liquidation of the Borrower'', as used 
in this subsection, shall not be construed to include the cessation of 
the corporate existence of the Borrower resulting either from a merger 
or consolidation of the Borrower into or with another corporation 
following a transfer of all or substantially all its assets as an 
entirety, under the conditions permitting such actions.

                         Article VIII--Remedies

                         Section 8.1. Generally

    Upon the occurrence of an Event of Default, then RUS may pursue all 
rights and remedies available to RUS that are contemplated by this 
Agreement or the Mortgage in the manner, upon the conditions, and with 
the effect provided in this Agreement or the Mortgage, including, but 
not limited to, a suit for specific performance, injunctive relief or 
damages. Nothing herein shall limit the right of RUS to pursue all 
rights and remedies available to a creditor following the occurrence of 
an Event of Default listed in Article VII hereof. Each right, power and 
remedy of RUS shall be cumulative and concurrent, and recourse to one or 
more rights or remedies shall not constitute a waiver of any other 
right, power or remedy.

                   Section 8.2. Suspension of Advances

    In addition to the rights, powers and remedies referred to in the 
immediately preceding section, RUS may, in its absolute discretion, 
suspend making Advances hereunder if (i) any Event of Default, or any 
occurrence which with the passage of time or giving of notice would be 
an Event of Default, occurs and is continuing; (ii) there has occurred a 
change in the business or condition, financial or otherwise, of the 
Borrower which in the opinion of RUS materially and adversely affects 
the Borrower's ability to meet its obligations under the Loan Documents, 
or (iii) RUS is authorized to do so under RUS Regulations.

                        Article IX--Miscellaneous

                          Section 9.1. Notices

    All notices, requests and other communications provided for herein 
including, without limitation, any modifications of, or waivers, 
requests or consents under, this Agreement shall be given or made in 
writing (including, without limitation, by telecopy) and delivered to 
the intended recipient at the ``Address for Notices'' specified below; 
or, as to any party, at such other address as shall be designated by 
such party in a notice to each other party. Except as otherwise provided 
in this Agreement, all such communications shall be deemed to have been 
duly given when transmitted by telecopier or personally delivered or, in 
the case of a mailed notice, upon receipt, in each case given or 
addressed as provided for herein. The Address for Notices of the 
respective parties are as follows:

Rural Utilities Service, United States Department of Agriculture, 
Washington, DC 20250-1500
Fax: (202) xxx-xxxx

Attention: [Administrator]
The Borrower:
The address set forth in Schedule 1 hereto

                          Section 9.2. Expenses

    To the extent allowed by law, the Borrower shall pay all costs and 
expenses of RUS, including reasonable fees of counsel, incurred in 
connection with the enforcement of the Loan Documents or with the 
preparation for such enforcement if RUS has reasonable grounds to 
believe that such enforcement may be necessary.

                       Section 9.3. Late Payments

    If payment of any amount due hereunder is not received at the United 
States Treasury in Washington, DC, or such other location as RUS may 
designate to the Borrower within five (5) Business Days after the due 
date thereof or such other time period as RUS may prescribe from time to 
time in its policies of general application in connection with any late 
payment charge (such unpaid amount being herein called the ``delinquent 
amount'', and the period beginning after such due date until payment of 
the delinquent amount being herein called the ``late-payment period''), 
the Borrower shall pay to 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

[[Page 231]]

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.

[[Page 232]]

                   Section 9.15. Prior Loan Contracts

    It is understood and agreed that with respect to all loan agreements 
previously entered into by and between RUS and the Borrower (hereinafter 
being referred to as ``Prior Loan Contracts'') the Borrower shall be 
required, after the date hereof, to meet affirmative and negative 
covenants as set forth in this Agreement rather than those set forth in 
the Prior Loan Contracts. In addition, any remaining obligation of RUS 
to make additional advances on promissory notes of the Borrower that 
have been previously delivered to RUS under Prior Loan Contracts shall, 
after the date hereof, be subject to the conditions set forth in this 
Agreement. In the event of any conflict between any provision set forth 
in a Prior Loan Contract and any provision in this Agreement, the 
requirements as set forth in this Agreement shall apply. Nothing in this 
section shall, however, eliminate or modify any special condition, 
special affirmative covenant or special negative covenant, if any, 
unless specifically agreed to in writing by RUS.

            Section 9.16. Authority of Representatives of RUS

    In the case of any consent, approval or waiver from RUS that is 
required under this Agreement or any other Loan Document, such consent, 
approval or waiver must be in writing and signed by an authorized RUS 
representative to be effective. As used in this section, ``authorized 
RUS representative'' means the Administrator of RUS, and also means a 
person to whom the Administrator has officially delegated specific or 
general authority to take the action in question.

                           Section 9.17. Term

    This Agreement shall remain in effect until one of the following two 
events has occurred:
    (a) The Borrower and RUS replace this Agreement with another written 
agreement; or
    (b) All of the Borrower's obligations under the prior loan contracts 
and this Agreement have been discharged and paid.
    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to 
be duly executed as of the day and year first above written.

_______________________________________________________________________
(Name of Borrower)

(SEAL)

By______________________________________________________________________
President

Attest:_________________________________________________________________

Secretary

                         RURAL UTILITIES SERVICE

By______________________________________________________________________
Administrator

                               Schedule 1

[citations subject to change]

    1. The purpose of this loan is ____________________ and such other 
purposes that RUS may agree to in writing in order to carry out the 
purposes of the Rural Electrification Act.
    2. The Mortgage shall mean the Restated Mortgage and Security 
Agreement, dated as of ____________________, between the Borrower and 
RUS, as it may have been or shall be supplemented, amended, 
consolidated, or restated from time to time.
    3. The governmental authority referred to in Section [2.1(c)] is 
____________________.
    4. The exception being taken to the representations in Section 
[2.1(e)] concerning material compliance with laws is as follows: 
____________________.
    5. The litigation referred to in Section [2.1(f)] is described as 
follows: ____________________.
    6. The date of the Borrower's financial information referred to in 
Section [2.1(h)] is ____________________.
    7. The principal place of business of the Borrower referred to in 
Section [2.1(i)] is ____________________.
    8. All of the property of the Borrower is located in the counties of 
____________________.
    9. The subsidiary (or subsidiaries) referred to in Section [2.1(k)] 
is (are): ____________________.
    10. The Contemporaneous Loan referred to in Section [5.3] is 
described as follows: ____________________.

Lender:_________________________________________________________________

Amount:_________________________________________________________________

Year of Final Maturity:_________________________________________________

    11. The RUS Commitment referred to in the definitions means a loan 
in the principal amount of $________________ which is being made by RUS 
to the Borrower at the ______ Hardship Rate ______ Municipal Rate (CHECK 
ONE) pursuant to the Rural Electrification Act and RUS Regulations.
    12. Amortization of Advance shall be based upon the method indicated 
below:

______ level principal

______ level debt service

______ other

    13. The SPECIAL condition(s) referred to in Section [4.2] is (are): 
____________________.
    14. The additional AFFIRMATIVE covenant(s) referred to in Section 
[5.22] is (are) as follows: ________________. 15. The additional 
NEGATIVE covenant(s) referred to in Section [6.16] is (are) as follows: 
____________________.
    16. The address of the Borrower referred to in Section [9.1]. is 
____________________.

[[Page 233]]

                       Schedule 2--Existing Liens

    The Existing Liens referred to in Section [2.1(g)] are as follows:

[INSERT DESCRIPTION OF EXISTING LIENS, IF ANY, HERE]

                    Schedule 3--Additional Contracts

    The additional contracts referred to in Section [6.5(f)] are 
described as follows:

[INSERT LIST OF ANY ADDITIONAL CONTRACTS HERE]

                   Exhibit A--Form of Promissory Note

[INSERT EITHER MUNICIPAL or HARDSHIP RATE PROMISSORY NOTE FORM HERE]

            Exhibit B--Equal Opportunity Contract Provisions

    During the performance of this contract, the contractor agrees as 
follows:
    (a) The contractor shall not discriminate against any employee or 
applicant for employment because of race, color, religion, sex or 
national origin. The contractor shall take affirmative action to ensure 
that applicants are employed, and that employees are treated during 
employment without regard to their race, color, religion, sex or 
national origin. Such action shall include, but not be limited to the 
following: employment, upgrading, demotion or transfer, recruitment or 
recruitment advertising; layoff or termination; rates of pay or other 
forms of compensation; and selection for training, including 
apprenticeship. The contractor agrees to post in conspicuous places, 
available to employees and applicants for employment, notices to be 
provided setting forth the provisions of this nondiscrimination clause.
    (b) The contractor shall, in all solicitations or advertisements for 
employees placed by or on behalf of the contractor, state that all 
qualified applicants shall receive consideration for employment without 
regard to race, color, religion, sex or national origin.
    (c) The contractor shall send to each labor union or representative 
of workers with which he has a collective bargaining agreement or other 
contract or understanding, a notice to be provided advising the said 
labor union or workers' representative of the contractor's commitments 
under this section, and shall post copies of the notice in conspicuous 
places available to employees and applicants for employment.
    (d) The contractor shall comply with all provisions of Executive 
Order 11246 of September 24, 1965, and of the rules, regulations and 
relevant orders of the Secretary of Labor.
    (e) The contractor shall furnish all information and reports 
required by Executive Order 11246 of September 24, 1965, and by the 
rules, regulations and orders of the Secretary of Labor, or pursuant 
thereto, and shall permit access to his books, records and accounts by 
the administering agency and the Secretary of Labor for purposes of 
investigation to ascertain compliances with such rules, regulations and 
orders.
    (f) In the event of the contractor's noncompliance with the non-
discrimination clauses of this contract or with any of the said rules, 
regulations or orders, this contract may be cancelled, terminated or 
suspended in whole or in part and the contractor may be declared 
ineligible for further Government contracts or federally assisted 
construction contracts in accordance with procedures authorized in 
Executive Order 11246 of September 24, 1965, and such other sanctions 
may be imposed and remedies invoked as provided in said Executive Order 
or by rule, regulation or order of the Secretary of Labor, or as 
otherwise provided by law.
    (g) The contractor shall include the provisions of paragraphs (a) 
through (g) in every subcontract or purchase order unless exempted by 
rules, regulations or orders of the Secretary of Labor issued pursuant 
to section 204 of Executive Order 11246, dated September 24, 1965, so 
that such provisions shall be binding upon each subcontractor or vendor. 
The contractor shall take such action with respect to any subcontract or 
purchase order as the administering agency may direct as a means of 
enforcing such provisions, including sanctions for noncompliance: 
Provided, however, that in the event a contractor becomes involved in, 
or is threatened with, litigation with a subcontractor or vendor as a 
result of such direction by the agency, the contractor may request the 
United States to enter into such litigation to protect the interests of 
the United States.

Exhibit C-1--Manager's Certificate Required Under Loan Contract Section 
                        6.14 for Additional Notes

    On behalf on ____________________ [Name of Borrower] 
____________________ I hereby certify that the Additional Note or Notes 
to be issued under Section [2.01] of the Mortgage on or about 
____________________ [Date Note or Notes are to be Signed] 
____________________ meet all of the requirements of Section [6.14] of 
the Loan Contract, namely:
    (a) The weighted average life of the loan evidenced by such Notes 
(________ years) does not exceed the weighted average of the expected 
remaining useful lives of the assets being financed (________ years) as 
evidenced by the attached calculation of said weighted average lives.
    (b) The principal of the loan evidenced by such Notes shall either 
be [check one and provide evidence in the second case]:
    ______ (1) repaid based on level payments of principal and interest 
throughout the life of the loan, or

[[Page 234]]

    ______ (2) amortized at a rate that shall yield a weighted average 
life that is not greater than the weighted average life that would 
result from level payments of principal and interest throughout the life 
of the loan as evidenced by the attached analysis of said weighted 
average lives.
    (c) The principal of the loan evidenced by such Notes has a maturity 
of not less than 5 years.

[Signed]________________________________________________________________

[Dated]_________________________________________________________________

[Name]__________________________________________________________________

[Title]_________________________________________________________________

[Name and Address of Borrower]__________________________________________

_______________________________________________________________________

_______________________________________________________________________

Exhibit C-2--Manager's Certificate Required Under Loan Contract Section 
                       6.14 for Refinancing Notes

    On behalf on ____________________ [Name of Borrower] 
____________________ I hereby certify that the Additional Note or Notes 
to be issued under Section [2.02] of the Mortgage on or about 
____________________ [Date Note or Notes are to be Signed] 
____________________ meet the requirement of Section [6.14] of the Loan 
Contract that the weighted average life of such Notes is not greater 
than the weighted average remaining life of the Notes being refinanced, 
as evidenced by the attached calculation of said weighted average lives.
[Signed]________________________________________________________________

[Dated]_________________________________________________________________

[Name]__________________________________________________________________

[Title]_________________________________________________________________

[Name and Address of Borrower]__________________________________________

_______________________________________________________________________

_______________________________________________________________________
```