FIRST AMENDMENT TO LOAN AGREEMENT

          FIRST  AMENDMENT  TO LOAN  AGREEMENT,  (the  "Amendment")  is made and
effective as of October 28,, 1997, by and between CAP ROCK ELECTRIC COOPERATIVE,
INC.  ("Borrower"),  a corporation  organized and existing under the laws of the
State of Texas,  and NATIONAL RURAL UTILITIES  COOPERATIVE  FINANCE  CORPORATION
("CFC"), a corporation  organized and existing under the laws of the District of
Columbia

                                    RECITALS

          WHEREAS,  the  Borrower  and CFC are  parties  to  that  certain  loan
agreement  dated as of  October  24,  1995,  with  respect  to CFC  Loan No.  TX
107-A-9043 (the "Original Loan Agreement");

     WHEREAS,  the  Borrower  and CFC have  agreed to modify the  Original  Loan
Agreement as set forth herein;

          NOW,  THEREFORE,  for and in  consideration  of the foregoing,  and in
further consideration of the premises and the mutual covenants herein contained,
the parties hereto agree and bind themselves as follows:

Section  1.  Recitals.   The  foregoing  recitals  are  incorporated  herein  by
reference.

Section 2. Definitions. Capitalized terms that are not defined herein shall have
the meanings  assigned to them as set forth in the Original Loan  Agreement.  If
not otherwise defined therein or herein, such capitalized terms shall be defined
in accordance with generally accepted accounting principles.

     Section 3.  Amendment.  Schedule 1 of the Original Loan Agreement is hereby
amended as follows:

(1)  by adding to the end of Item No. 1 the following sentence:

          Borrower may use up to  $10,500,000.00  of this loan for  construction
          and general  corporate  purposes  consistent with Borrowers  corporate
          authority and applicable law

 (2) by deleting Item No. 7 in its entirety and replacing it with the following:

          The Borrower selects the following Notes:
<TABLE>
<S>                     <C>                      <C>                       <C>

          -------------------------------------------------------------------------------------
                  LOAN NUMBER                  AMOUNT                   MATURITY DATE
          -------------------------------------------------------------------------------------
          -------------------------------------------------------------------------------------
                     A-9048                $10,500,000.00             October 24, 2030
          -------------------------------------------------------------------------------------
          -------------------------------------------------------------------------------------
                     A-9047                $ 4,500,000.00             October 24, 2005
          -------------------------------------------------------------------------------------
</TABLE>





 (3) by deleting Item No. 9 in its entirety and replacing it with the following:

          (a)  Advances on Loan No.  A-9048  shall be  amortized on a level debt
         service basis over a period of thirty-five (35) years,  commencing from
         the original note date of October 24, 1995.
          (b) Borrower shall repay Advances on Loan No. A-9047 as follows:

                   (i)From  the date hereof  through the Payment  Date ending on
          August 31,  1998,  Borrower  shall pay interest  only.  From and after
          August 31, 1998 and through the Maturity Date,  Borrower shall make an
          annual  principal  payment in the amount of One Hundred Fifty Thousand
          Dollars  ($150,000.00),  plus any interest  then due and payable.  Any
          remaining outstanding principal balance shall be paid at maturity. -

                   (ii) Notwithstanding anything to the contrary in the Original
          Loan  Agreement,  Borrower  may prepay  any or all of Loan No.  A-9047
          without prepayment premium, penalty or fees.

     Section 4.  Representations  and  Warranties.  The Borrower  represents and
warrants that:

          4.1 Good Standing. The Borrower is a corporation duly incorporated and
validly  existing  and in good  standing  under  the  laws of the  state  of its
incorporation,  is duly  qualified in those states in which it is required to be
qualified  to conduct its  business  and has  corporate  power to enter into and
perform this Amendment. The Borrower is a member in good standing of CFC.

          4.2 Authority. The execution, delivery and performance by the Borrower
of this Amendment and the  performance  hereof have been duly  authorized by a)l
necessary  corporate  action and will 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.

          4.3 Material Adverse Change. There has been no material adverse change
in the financial  condition or operations of the Borrower  since the date of the
Original  Loan  Agreement,  except  as set  forth in the most  recent  financial
statements submitted to CFC or as otherwise disclosed in writing to CFC prior to
the date hereof.

          4.4  REQUIRED  APPROVALS.  NO  LICENSE,  CONSENT  OR  APPROVAL  OF ANY
GOVERNMENTAL  AGENCY OR  AUTHORITY  IS REQUIRED TO ENABLE THE  BORROWER TO ENTER
INTO THIS AMENDMENT,  OR TO PERFORM ANY OF THE OBLIGATIONS  PROVIDED FOR HEREIN,
EXCEPT AS HAVE BEEN  OBTAINED BY THE BORROWER AND  DELIVERED TO CFC PRIOR TO THE
DATE HEREOF.

     4.5  Prior   Representations   and  Warranties.   All  representations  and
warranties  made by the Borrower in the  Original  Loan  Agreement  are true and
correct as of the date hereof



     Section 5. Additional  Conditions of Lending. In addition to the conditions
set forth in the Original  Loan  Agreement,  the  obligation  of CFC to make any
Advance is subject to the following:

     5.1 Payoff of Loan No. 9043.  Borrower  shall pay off Loan No.  A-9043 with
the full proceeds of Loan No. A-9047 and any additional  proceeds  required from
Loan No. A-9048.

          5.2 Opinion of Counsel. If requested by CFC, Borrower shall provide an
opinion of counsel  covering  such  matters as CFC may  reasonably  require with
respect to this Amendment.

Section 6.         Miscellaneous.

          6.1 Modifications.  No modification or waiver of any provision of this
Amendment,  and no consent to any departure by Borrower therefrom,  shall in any
event be  effective  unless the same  shall be in writing by the party  granting
such modification, waiver or consent.

          6.2  Merger  and  Integration.   This  Amendment,  the  Original  Loan
Agreement  and the and  matters  incorporated  by  reference  contain the entire
agreement  of the  parties  hereto with  respect to the matters  covered and the
transactions contemplated hereby.

          6.3 Incorporation;  Inconsistency with Original Loan Agreement. Except
as otherwise amended or modified herein, the terms, conditions and provisions of
the Original Loan Agreement are incorporated herein by reference as if set forth
in full herein and remain in full force and effect. In the event of any conflict
or  inconsistency  between the terms of this  Amendment  and the  Original  Loan
Agreement,  the terms of this Amendment shall control. Nothing in this Amendment
shall, however,  eliminate or modify any special condition,  special affirmative
covenant or special negative  covenant,  if any,  specified in the Original Loan
Agreement or herein.

          IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.

                       CAP ROCK ELECTRIC COOPERATIVE, INC.
                                     (SEAL)
                            By: /s/ Russell E. Jones
                          Title: Chairman of the Board



Attest:  /s/ Alfred Schwartz
             Secretary

                            NATIONAL RURAL UTILITIES
                         COOPERATIVE FINANCE CORPORATION
                                     (SEAL)
                               By: /s/ Cindy Tracy
                          Assistant Secretary-Treasurer

Attest:   /s/ Not Legible
Assistant Secretary-Treasurer