Exhibit 10.100


 


LOAN AGREEMENT


 


LOAN
AGREEMENT, (this “Agreement”)
dated as of February 7, 2003 between CAP ROCK ENERGY CORPORATION (“Borrower”),
a corporation organized and existing under the laws of the State of Texas and
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (“CFC”), a cooperative
association incorporated under the laws of the District of Columbia.


 


RECITALS


 


WHEREAS, the Borrower has applied to CFC for a loan
and agrees to use the proceeds thereof for the purposes set forth in Schedule 1
hereto and consistent with the Borrower’s Articles of Incorporation, Bylaws and
applicable federal, state and local laws and regulations; and


 


WHEREAS, CFC has approved a loan to the Borrower in
the aggregate principal amount of the CFC Commitment, subject to the terms and
conditions stated herein; and


 


WHEREAS, the Borrower has agreed to execute one
secured promissory note to evidence Borrower’s indebtedness to CFC under this
Agreement;


 


NOW, 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


 


Section 1. Capitalized terms that are not defined
herein shall have the meanings as set forth in the Mortgage.


 


“Accounting
Requirements” shall
mean any system of accounts prescribed by a federal regulatory authority having
jurisdiction over the Borrower or, in the absence thereof, the requirements of
generally accepted accounting principles applicable to businesses similar to
that of the Borrower.


 


“Advance”
or “Advances” shall
mean one or more advances of funds by CFC to Borrower under a Note and pursuant
to the terms and conditions of this Agreement.


 


“Amortization
Basis Date” shall
mean, with respect to an Advance that Borrower elects to amortize, the date
Borrower selects to begin amortizing such Advance as stated on Schedule 1
hereto, or, if not stated on Schedule 1, then such date as stated on the
written funds requisition submitted by Borrower to CFC pursuant to the terms
hereof.


 


“Business
Day” shall mean any
day that both CFC and the depository it utilizes for funds transfers hereunder
are open for business.


 


“CFC
Commitment” shall
have the meaning as defined in Schedule 1.


 





















 


“CFC Fixed Rate”
shall mean the fixed rate as is then available for loans similarly classified
pursuant to CFC’s policies and procedures then in effect plus fifty (50) basis
points.


 


“CFC Fixed Rate Term” shall mean the specific period of time that a CFC Fixed Rate is in
effect.


 


“CFC Variable Rate” shall mean the greater of a) the interest rate established for its
line of credit programs and b) the rate established by CFC for variable interest
rate long-term loans similarly classified pursuant to the long-term loan
programs established by CFC from time to time.


 


“Conversion Request” shall mean a request from any duly authorized official of the
Borrower, in form and substance satisfactory to CFC, that
requests an interest rate conversion.


 


“Debt Service Coverage Ratio (“DSC”)” shall mean the ratio determined as follows:
for any calendar year add (i) Operating Margins, (ii)
Non-Operating Margins—Interest, (iii) Interest Expense, (iv) Depreciation and
Amortization Expense for such year, and (v) cash received in respect of
generation and transmission and other capital credits, and divide the sum so
obtained by the sum of all payments of Principal and Interest Expense during
such calendar year; provided, however, that in the event that any
Long-Term Debt has been refinanced during such year the payments of Principal
and Interest required to be made during such year on account of such Long-Term
Debt shall be based (in lieu of actual payments required to be made on such
refinanced Long-Term Debt) upon the larger of (i) an annualization of the payments required to be made with
respect to the refinancing debt during the portion of such year such
refinancing debt is outstanding or (ii) the payment of Principal and Interest
Expense required to be made during the following year on account of such
refinancing debt.


 


“Depreciation and Amortization Expense” shall mean an amount constituting the
depreciation and amortization of the Borrower computed pursuant to Accounting
Requirements.


 


“Distributions”
shall have the meaning defined in Section 5.G.


 


“Equity”
shall mean the aggregate of Borrower’s equities and margins computed pursuant
to Accounting Requirements.


 


“Interest Expense” shall mean an amount constituting the interest expense with respect to
Total Long-Term Debt of the Borrower computed pursuant to Accounting
Requirements. In computing Interest Expense, 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 Borrower over 2% of the Borrower’s Equity.


 


“Long-Term Debt” shall
mean any amount included in Total Long-Term Debt pursuant to Accounting Requirements.


 


“Maturity Date”, with respect to each Note, shall mean the date set forth therein, provided, however, that if such date is
not a Payment Date, then the Maturity Date shall be the Payment Date
immediately preceding such date.


 


“Mortgage” shall have the meaning as described in Schedule 1.


 


“Mortgaged Property” shall have the meaning as defined in the
Mortgage.


 





















 


“Non-Operating Margins—Interest” shall mean the amount of non-operating
margins—interest of Borrower computed pursuant to Accounting Requirements.


 


“Note” or “Notes” shall mean one secured promissory note executed by
Borrower pursuant to this Agreement.


 


“Operating Margins” shall mean the amount of patronage capital and operating margins of
the Borrower computed pursuant to Accounting Requirements.


 


“Payment Date”
shall mean the last day of each of the months referred to in Schedule 1.


 


“Payment Notice”
shall mean a notice furnished by CFC to Borrower that indicates the precise
amount of each payment of principal and interest and the total amount of each
payment.


 


“Principal”
shall mean the amount of principal billed on account of Total Long-Term Debt of
the Borrower as computed for purposes of the 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 three (3) years and covering
property having an initial cost in excess of $250,000 other than automobiles,
trucks, trailers, other vehicles (including without limitation aircraft and
ships), office, garage and warehouse space and office equipment (including
without limitation computers).


 


“Termination Date” shall mean a date four (4) years after the date hereof.


 


“Total Assets”
shall mean an amount constituting the total assets of the Borrower computed
pursuant to Accounting Requirements.


 


“Total Long-Term Debt” shall mean an amount constituting the
long-term debt of the Borrower computed pursuant to Accounting Requirements.


 


“Total Utility Plant” shall mean the amount constituting the total
utility plant of the Borrower computed pursuant to Accounting Requirements.


 


ARTICLE II


 


REPRESENTATIONS AND WARRANTIES


 


Section 2.              The
Borrower represents and warrants that:


 


A.            Good
Standing.  The Borrower is a corporation duly
incorporated, validity 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 Agreement, to borrow hereunder and to
give security as provided for herein. The Borrower is a member
in good standing of CFC.


 


B.            Authority.  The
execution, delivery and performance by the Borrower of this Agreement, each
Note and the Mortgage, and the performance of the transactions contemplated
thereby, have been duly authorized by all necessary corporate action and will
not violate any provision of law or of the Articles of Incorporation or Bylaws
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.            Litigation.  There
are no suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or its properties which, if
adversely determined, would have a material adverse effect upon the financial
condition or the business of the Borrower. The Borrower is not, to its
knowledge, in default with respect to any judgment, order, rule or regulation
of any court, governmental agency or other instrumentality which would have a
material adverse effect on the Borrower.


 


D.            Financial
Statements.  The balance sheet of the Borrower as at the
date identified in Schedule 1, and the statement of operations of the Borrower
for the period ending on said date, heretofore furnished to CFC, are complete
and correct. Said balance sheet fairly presents the financial condition of the
Borrower as at said date and said statement of operations fairly reflects its
operations for the period ending on said date. The Borrower has no contingent
obligation or unusual forward or long-term commitments except as specifically
stated in said balance sheet or herein. There has been no material adverse
change in the financial condition or operations of the Borrower from that set
forth in said financial statements except changes disclosed in writing to CFC
prior to the date hereof.


 


E.             Location
of Properties.  All property owned by the Borrower is located
in the counties identified in Schedule 1.


 


F.             No Other
Liens.  As to property which is presently included in
the description of Mortgaged Property (as that term is defined in the
Mortgage), the Borrower has not, without the prior written approval of CFC,
signed any security agreement or filed or permitted to be filed any financing statement
with respect to assets owned by it, other than security agreements and
financing statements running in favor of CFC or except as disclosed in writing
to CFC prior to the date hereof.


 


G.            Required Approvals.  The
Borrower has obtained all licenses, consents and approvals of all governmental
agencies or authorities that are required to enable the Borrower to enter into
this Agreement, any Note, or the Mortgage, or to perform any of its obligations
provided for in such documents, including without limitation (and if
applicable), any state public utilities commission, any state public service
commission, and the Federal Energy Regulatory Commission.


 


H.            Borrower’s
Legal Status.  Schedule 1 hereto accurately sets forth: (a)
The Borrower’s exact legal name, (b) the Borrower’s organizational type and jurisdiction
of organization, (c) the Borrower’s organizational identification number or
accurate statement that the Borrower has none and (d) the Borrower’s place of
business or, if more than one, its chief executive office as well as the
Borrower’s mailing address if different.


 





















 


I.              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 CFC of each Note.


 


ARTICLE III


 


LOAN


 


Section 3.1.  Advances.  CFC
agrees to make, and the Borrower agrees to request, on the terms and conditions
of this Agreement, Advances from time to time at the main office of CFC, or at
such other place as may be mutually agreed upon, in an aggregate principal
amount not to exceed the CFC Commitment.


 


On
the Termination Date, CFC may stop advancing funds and limit the CFC Commitment
to the amount advanced prior to such date. The obligation of the Borrower to
repay the Advances shall be evidenced by one or more Notes. The Borrower shall
give CFC written notice of the date on which each Advance is to be made.


 


Section
3.2.  Interest
Rate and Payment.  Notes shall
be payable and bear interest as follows:


 


A.            Payments; Maturity; Amortization.


 


(a)     Each Note shall have a
Maturity Date that is not more than five (5) years from the date hereof, provided, however, that if such date is
not a Payment Date, then the Maturity Date shall be the Payment Date
immediately preceding such date.


 


(b)     Prior to or at the time of
each Advance on a Note, Borrower shall elect an amortization method and
Amortization Basis Date for principal, or shall elect not to amortize principal
for such Advance.


 


(i) Amortizing Advances: Each
Advance that the Borrower elects to amortize shall amortize over a period not
to exceed thirty (30) years from the date of such Advance, provided, however, that such period shall
not extend beyond the Maturity Date. The Borrower, upon receipt of an Invoice
relating to an Advance, shall promptly pay interest only on each Payment Date
until the first Payment Date of the first full quarter following the
Amortization Basis Date. Thereafter, quarterly or monthly installments, as
determined by CFC, of interest and/or principal in the amounts shown in the
Payment Notice, shall be paid on each Payment Date. If not sooner paid, any
amount due on account of the unpaid principal, interest accrued thereon and
fees, if any, shall be due and payable on the Maturity Date. The amortization
method for each Advance shall be as stated on Schedule 1 or, if not so stated,
then as stated on the written requisition for such Advance submitted by
Borrower to CFC pursuant to the terms hereof.


 


(ii)
Non-Amortizing Advances: Each
Advance that the Borrower elects not to amortize shall be repaid within five
(5) years from the date of such Advance, or the Maturity Date, whichever is
earlier. On each Payment Date, Borrower shall promptly pay interest only until
the final Payment Date corresponding to the term of such Advance, or the
Maturity Date (whichever is applicable), upon which date all unpaid principal,
interest accrued thereon and fees, if any, shall be due and payable. If the


 





















 


term of a non-amortizing Advance ends on a date
that is not a Payment Date, then the repayment of such Advance shall be due and
payable on the Payment Date immediately preceding such date.


 


(c)     CFC will furnish to the
Borrower a Payment Notice at least ten (10) days before each Payment Date,
provided, however, that CFC’s failure to send a Payment Notice shall not
constitute a waiver by CFC or be deemed to relieve Borrower of its obligation
to make payments as and when due as provided for herein.


 


(d)     No provision of this
Agreement or of any Note shall require the payment, or permit the collection,
of interest in excess of the highest rate permitted by applicable law.


 


B.            Application of
Payments.  Each payment shall be applied first to any
charges other than interest or principal then due on the related Note, second
to interest accrued on the principal amount to the due date of such payment on
such Note (or, at the election of the holder of the Note, to the date of such
payment if the same is not paid on its due date), and the balance to the
reduction of principal against the Note according to an amortization schedule
provided to Borrower by CFC.


 


C.            Election of Interest
Rate and Interest Rate Computation.  Prior to each Advance on a
Note, the Borrower must select in writing either a CFC Fixed Rate or the CFC
Variable Rate, as follows:


 


(a)     CFC Fixed Rate. If
the Borrower elects a CFC Fixed Rate for an Advance, then such rate shall be in
effect for the CFC Fixed Rate Term selected by Borrower.   CFC shall provide the Borrower with at least
sixty (60) days prior written notice of the date on which the CFC Fixed Rate is
due to reprice.  
Pursuant to CFC’s policies of general application for repricing, the Borrower may choose any of the Interest rate
options then available for similarly classified borrowers repricing
from a CFC Fixed Rate. If Borrower does not select an interest rate in writing
when a CFC Fixed Rate is subject to repricing, then
outstanding Advances shall reprice for the same CFC
Fixed Rate Term as in effect immediately prior to the repricing,
and shall bear Interest at the then prevailing CFC Fixed Rate in effect for
such term. CFC agrees that its long-term loan policies will include a fixed interest
rate option until the Maturity Date. For any Advance, the Borrower may not
select a CFC Fixed Rate with a CFC Fixed Rate Term that extends beyond the
Maturity Date. Interest on amortizing Advances bearing interest at a CFC Fixed
Rate shall be computed for the actual number of days elapsed on the basis of a
year of 365 days, until the first day of the complete calendar quarter following
the Amortization Basis Date. Thereafter, Interest shall be computed on the
basis of a 30-day month and 360-day year. Interest on non-amortizing Advances
bearing interest at a CFC Fixed Rate shall be computed for the actual number of
days elapsed on the basis of a year of 365 days.


 


(b)     CFC
Variable Rate.   If the Borrower elects the CFC Variable Rate
for an Advance, then such CFC Variable Rate shall apply until the Maturity
Date, unless the Borrower elects to convert to a CFC Fixed Rate pursuant to the
terms hereof. Interest on Advances bearing interest at the CFC Variable Rate
shall be computed for the actual number of days elapsed on the basis of a year
of 365 days.


 


Section 3.3.  Conversion of Interest
Rates.


 


A.            CFC Variable Rate to
a CFC Fixed Rate.  The Borrower may at any time convert from the
CFC Variable Rate to a CFC Fixed Rate by submitting to CFC a Conversion Request
requesting


 





















 


that a CFC Fixed Rate apply to any outstanding
Advance. The rate shall be equal to the rate of interest offered by CFC in
effect on the date of the Conversion Request. The effective date of the new
interest rate shall be a date determined by CFC pursuant to its policies of
general application following receipt of the Conversion Request.


 


B.            CFC Fixed Rate to
CFC Variable Rate.  The Borrower may at any time convert a CFC Fixed
Rate to the CFC Variable Rate by: (i) submitting a
Conversion Request requesting that the CFC Variable Rate apply to any
outstanding Advance; and (ii) paying to CFC promptly upon receipt of an invoice
any applicable conversion fee calculated pursuant to CFC’s long-term loan
policies as established from time to time for similarly classified long-term
loans.  The effective date of the CFC Variable
Rate shall be a date determined by CFC pursuant to its policies of general
application following receipt of the Conversion Request.


 


C.            A CFC Fixed Rate to Another CFC Fixed Rate.  The
Borrower may at its option at any time convert from a CFC Fixed Rate to another
CFC Fixed Rate if the Borrower: (i) submits a Conversion
Request requesting that a CFC Fixed Rate apply to any outstanding loan balance
on an Advance and (ii) pays to CFC promptly upon receipt of an invoice any
applicable conversion fee calculated pursuant to CFC’s long-term loan policies
as established from time to time for similarly classified long-term loans. The
effective date of the new interest rate shall be a date determined by CFC
pursuant to its policies of general application following receipt of the
Conversion Request.


 


Section 3.4.  Prepayment. The Borrower may at any time, on not less
than thirty (30) days prior written notice to CFC, prepay any Advance, in whole
or in part, together with the interest accrued to the date of prepayment and
any prepayment premium prescribed by CFC pursuant to its policies of general
application in effect from time to time.


 


ARTICLE IV


 


CONDITIONS OF LENDING


 


Section 4.  The obligation of CFC to make any Advance hereunder is subject to
satisfaction of the following conditions:


 


A.            Legal
Matters.   All legal matters incident to the
consummation of the transactions hereby contemplated shall be satisfactory to
counsel for CFC and, as to all matters of local law, to such local counsel as
counsel for CFC may retain.


 


B.            Documents.   CFC shall have been furnished with executed copies, satisfactory to CFC,
of this Agreement, each Note and the Mortgage and certified copies,
satisfactory to CFC, of all such corporate documents and proceedings of the
Borrower authorizing the transactions hereby contemplated as CFC shall require.
CFC shall have received an opinion of counsel for the Borrower addressing such
legal matters as CFC shall reasonably require.


 


C.            Government
Approvals. The
Borrower shall have furnished to CFC true and correct copies of all
certificates, authorizations and consents necessary for the execution, delivery
or performance by the Borrower of this Agreement, each Note and the Mortgage.


 





















 


D.            Representations and
Warranties.  The representations and warranties contained
in Article II shall (except as affected by the transactions contemplated by
this Agreement) be true on the date of the making of each Advance hereunder
with the same effect as though such representations and warranties had been
made on such date; no Event of Default
specified in Article VI and no event which, with the lapse of time or the
notice and lapse of time specified in Article
VI would become such an Event of Default, shall have occurred and be continuing
or will have occurred after giving effect to the Advance on the books of the
Borrower, there shall have occurred no material adverse change in the business
or condition, financial or otherwise, of the Borrower; and nothing shall have
occurred which in the opinion of CFC materially and adversely affects the
Borrower’s ability to meet its obligations hereunder.


 


E.             Mortgage Filing.  The
Mortgage (and any amendments, supplements or restatements as CFC may require
from time to time) shall have been duly recorded as a mortgage on real property
and duly filed, recorded or indexed as a security interest in personal property
wherever CFC shall have requested, all in accordance with applicable law, and
the Borrower shall have paid all applicable taxes, recording and filing fees
and caused satisfactory evidence thereof to be furnished to CFC.


 


F.             Requisitions. 
Borrower shall have requested the Advance in writing by submitting its requisition
to CFC in form and substance satisfactory to CFC.


 


G.            Other Information. 
Borrower shall have furnished such other Information, which shall be in
form and substance satisfactory to CFC, as CFC may reasonably require,
including but not limited to (a) information regarding the specific purpose for
an Advance and the use thereof, (b) feasibility studies, cash flow projections,
financial analyses and pro forma financial statements sufficient to demonstrate
to CFC’s reasonable satisfaction that after giving effect to the Advance
requested, Borrower shall continue to achieve the DSC ratio set forth in
Section 5.B. herein, to meet all of its debt service obligations, and otherwise
to perform and to comply with all other covenants and conditions set forth in
this Agreement, and (c) any other information as CFC may reasonably
request.   CFC’s obligation to make any
Advance hereunder is conditioned upon prior receipt and approval of Borrower’s written
requisition and other information and documentation, if any, as CFC may have
requested pursuant to this paragraph.


 


H.            Special Conditions. 
Borrower shall have complied with any special conditions listed in Schedule
1.


 


ARTICLE V


 


COVENANTS


 


Section 5. After the date hereof and until payment in full of all Notes and
performance of all obligations of the Borrower hereunder:


 


A.            Membership.
Borrower agrees that
it will remain a member in good standing of CFC.


 


B.            Financial Ratios;
Design of Rates.  The Borrower, subject to events in the
judgment or CFC to be beyond the
control of the Borrower, shall so operate and manage its business as to achieve
a DSC of not less than 1.35 on a consolidated basis, said DSC ratio being determined
by averaging the two highest annual ratios during the most recent three
calendar years. The Borrower


 





















 


shall design its rates so that such ratio will be achieved. The
Borrower shall not decrease its rates for electric service if it has failed to
achieve a DSC of 1.35 on a consolidated basis for the calendar year prior to
such reduction subject only to an order from a regulatory body properly
exercising jurisdiction over the Borrower.


 


C.            Annual Certificates. 
Within one hundred twenty (120) days after the close of each calendar
year, commencing with the year in which the Initial Advance hereunder shall
have been made, Borrower will deliver to CFC a written statement, in form and
substance satisfactory to CFC, signed by Borrower’s General Manager, stating
that during such year, and that to the best of said person’s knowledge, the
Borrower has fulfilled all of its obligations under this Agreement, each Note,
and the Mortgage throughout such year 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. Borrower shall deliver to CFC within
one hundred twenty (120) days of CFC’s written request, which shall be no more frequently
than once every year, a certification, in form and substance satisfactory to
CFC, regarding the condition of the Mortgaged Property both in a form and prepared by a professional
engineer satisfactory to CFC. Borrower shall also deliver to CFC such other
information as CFC may reasonably request from time to time.


 


D.            Notice. 
Borrower agrees that it will not, directly or indirectly, without giving
written notice to CFC thirty (30) days prior to the effective date of any
change:


 


(a)                                  Change of Location of Place of Business or
Chief Executive Office.  Change the location of Borrower’s place of
business or, if more than one, its chief executive office.


 


(b)                                 Change of Name. Change the name of Borrower.


 


(c)                                  Change of Mailing Address. Change the mailing address of Borrower.


 


(d)                                 Change of Organizational Identification
Number.   Change its organizational identification
number if it has one.


 


E.             Financial Books; Financial Reports; Right of Inspection. Borrower will at all times keep, and safely
preserve, proper books, records and accounts in which full and true entries
will be made of all of the dealings, business and affairs of the Borrower, in
accordance with generally accepted accounting principles. The Borrower will
prepare and furnish CFC from time to time, not later than thirty (30) days from
the last day of each month, financial and statistical reports on its condition
and operations for the previous month.  
All of such reports shall be in such form and include such information
as may be specified by CFC, including without limitation an income statement,
balance sheet and rolling 12 month cash flow statement. Within one hundred
twenty (120) days of the end of each calendar year during the term hereof,
Borrower shall furnish to CFC a full and complete report of its financial
condition and statement of its operations as of the end of such calendar year,
in form and substance satisfactory to CFC. In addition, within one hundred
twenty (120) days of the end of each Borrower’s fiscal years during the term
hereof, Borrower shall furnish to CFC a full and complete report of its
financial condition and statement of its operations on a consolidated and consolidating
basis as of the end of such fiscal year, audited and certified by independent
certified public accountants nationally recognized or otherwise satisfactory to
CFC and accompanied by a report of such audit in form and substance
satisfactory to CFC. CFC, through its representatives, shall at all


 





















 


times during reasonable
business hours and upon prior notice have access to, and the right to inspect
and make copies of, any or all books, records and accounts, and any or all
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.


 


F. Limitations on Mergers and Sale, Lease or Transfer of Capital
Assets; Application of Proceeds. The Borrower may consolidate with, merge, or sell all or substantially
all of its business or assets, to another entity or person provided such action
is either approved, as is evidenced by the prior written consent of CFC, or the
purchaser, successor or resulting corporation is or becomes a member in good
standing of CFC and assumes the due and punctual payment of the Notes and the
due and punctual performance of the covenants contained in the Mortgage and
this Agreement. Notwithstanding anything in this Agreement to the contrary, in
the event that Borrower does not obtain the written consent of CFC prior to
consolidating with, merging or selling all or substantially all of its business
assets to another entity or person, then CFC may stop advancing funds and limit
the CFC Commitment to the amount advanced as of the effective date of such
consolidation, merger or sale. If no Event of Default (and no event which with
notice or lapse of time and notice would become an Event of Default) shall have
occurred and be continuing, Borrower may, without the prior written consent of
CFC, sell, lease or transfer any capital asset in exchange for fair market
value consideration paid to the Borrower if the value of such capital asset is
less than five percent (5%) of Total Utility Plant and the aggregate value of
capital assets sold, leased or transferred in any 12-month period is less than
ten percent (10%) of Total Utility Plan. Subject to the terms of the Mortgage,
if the Borrower does sell, lease or transfer any capital assets, then the
proceeds thereof (less ordinary and reasonable expenses incident to such
transaction) shall immediately (i) be applied as a
prepayment of the Notes, to such installments as may be designated by CFC at
the time of any such prepayment; (ii) in the case of dispositions of equipment,
material or scrap, applied to the purchase of other property useful in the
Borrower’s business, although 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 other property or in
reimbursement of the costs of such property.


 


G.            Limitation
on Dividends, Patronage Refunds and Other Distributions.


 


(a)     The Borrower may make
Distributions in any calendar year if, after giving effect to the Distribution,
the total Equity of the Borrower will be at least twenty percent (20%) of its
Total Assets.


 


(b)     If, after giving effect to
the Distribution, the total Equity of the Borrower will be less than twenty
percent (20%) of its Total Assets, then the Borrower may nevertheless make
Distributions of up to thirty percent (30%) of its total margins for the
preceding calendar year.


 


(c)     Notwithstanding anything
to the contrary in subparagraphs (a) and (b) above, the Borrower shall not make
any Distribution without the prior written consent of CFC if (i) a payment default or other Event of Default under this
Agreement has occurred and is continuing, or (ii) after giving effect to the Distribution,
the Borrower’s total current and accrued assets would be less than its total
current and accrued liabilities, or (iii) such Distribution would be in excess
of the Distributions permitted by subparagraphs (a) or (b), above.


 


(d)     For purposes of this
paragraph H., the term “Distribution” means any dividend, patronage refund,
patronage capital retirement or cash distribution to its members, stockholders
or consumers (including but not limited to any general cancellation or
abatement of charges for electric energy or


 





















 


services furnished by the Borrower). The term “Distribution”
shall not include (i) a distribution by the Borrower to the estate of a
deceased patron, (ii) repayment by the Borrower of a membership fee upon
termination of a membership, or (iii) any rebate to a patron resulting from a
cost abatement received by the Borrower, such as a reduction of wholesale power
cost previously incurred.


 


H.            Limitations
on Loans, Investments and Other Obligations.


 


(a)     The Borrower shall not,
without first obtaining the written approval of CFC: (i)
purchase or make any commitment to purchase any stock, bonds, notes,
debentures, or other securities or obligations of or beneficial interests in,
(ii) make any other investment in, (iii) make any loan to, or (iv) guarantee,
assume, or otherwise become liable for any obligation of any corporation,
association, partnership, joint venture, trust, government or any agency or
department thereof, or any other entity of any kind if the aggregate amount of
all such purchases, investments, loans and guarantees exceeds the greater of
fifteen percent (15%) of Total Utility Plant or fifty percent (50%) of Equity.


 


(b)     The following shall not be
included in the limitation of purchases, investments, loans and guarantees in
(a) above: (i) bonds, notes, debentures, stock, or
other securities or obligations issued by or guaranteed by the United States
government or any agency or instrumentality thereof: (ii) bonds, notes, debentures, stock,
commercial paper, subordinated capital certificates, or any other security or obligation
of institutions whose senior unsecured debt obligations are rated by at least
two nationally recognized rating organizations in either of their two highest
categories; (iii) investments incidental to loans made by CFC; and (iv) any
deposit that is fully insured by the Federal Government.


 


(c)     In no event may the
Borrower take any action pursuant to subsection (a) when there is: (i) unpaid any due installment of principal and/or interest
on a Note; or (ii) Borrower has failed to meet the financial ratio tests in
Section 5.B. herein.


 


I.              Funds
Requisition; Use of Proceeds. Borrower agrees (a) that CFC may rely conclusively upon the interest
rate option, interest rate term and other written instructions submitted to CFC
in Borrower’s written request for an Advance hereunder, (b) that such
instructions shall constitute a covenant under this Agreement to repay the
Advance in accordance with such instructions, the applicable Note, the Mortgage
and this Agreement, (c) to request Advances only for the purposes set forth
herein, and (d) to use the proceeds thereof only in accordance with the terms
hereof.


 


J.             Organizational
Change. Borrower
agrees that it will not, directly or indirectly, without the prior written
consent of CFC change its type of organization, jurisdiction of organization or
other legal structure.


 


K.            Special
Covenants. Borrower agrees
to comply with any special covenant(s) identified in Schedule 1.


 





















 


ARTICLE VI


 


EVENTS OF DEFAULT


 


Section 6. The following shall be Events of Default under this Agreement:


 


A.            Representations
and Warranties.  Any representation or warranty made by the Borrower
herein, in the Mortgage or in any certificate or financial statement furnished
to CFC hereunder which shall prove to be false or misleading in any material
respect;


 


B.            Payment.  Borrower
shall fail to pay any amount due under the terms of a Note or this Agreement
within five (5) Business Days of when the same is be due and payable, whether
by acceleration or otherwise;


 


C.            Other
Covenants.  Default by the Borrower in the observance or
performance of any other covenant or agreement contained in this Loan
Agreement, in a Note or the Mortgage, which shall continue for thirty (30)
calendar days after written notice thereof shall have been given to the
Borrower by CFC;


 


D.            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;


 


E.             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;


 


F.             Bankruptcy.  The
Borrower shall file a petition in bankruptcy or be adjudicated 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;


 


G.            Dissolution
or Liquidation.  Other than as provided in subsection F.
above, 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 will impair its ability to continue its business
or fulfill its obligations and such execution, garnishment or attachment shall
not be vacated within sixty (60) 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 set forth in Section 5.F.


 


H.            Final
Judgment.  A final judgment in excess of $100,000.00
shall be entered against the Borrower and shall remain unsatisfied or without a
stay for a period of sixty (60) days.


 





















 


ARTICLE VII


 


REMEDIES


 


Section 7.  If any of the Events of Default
listed in Section 6 hereof shall occur after the date of this Agreement and
shall not have been remedied, then CFC may pursue all rights and remedies
available to CFC that are contemplated by this Agreement, the Mortgage or any
of the Notes in the manner, upon the conditions, and with the effect provided
in this Agreement, the Mortgage or any of the Notes, including, but not limited
to, a suit for specific performance, injunctive relief, damages or to declare
all unpaid principal outstanding on the Note, all accrued and unpaid interest
thereon, and all other Obligations to be immediately due and payable and the
same shall thereupon become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived. Nothing herein shall limit the right of CFC to pursue all rights and
legal and equitable remedies available to a creditor following the occurrence
of an Event of Default listed in Section 6 hereof. Each right, power and remedy
of CFC 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.


 


ARTICLE VIII


 


MISCELLANEOUS


 


Section 8.1.  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 or telecopied
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 personally
delivered or, in the case of a telecopied or 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:


 


National
Rural Utilities Cooperative Finance Corporation

2201 Cooperative Way

Herndon, Virginia 20171-3025

Attention: Senior Vice President – Member Services


 


Fax:
(703) 709-6776


 


Borrower:
The address set forth in Schedule 1


 


Section 8.2.  Expenses.  The
Borrower will pay all costs and expenses of CFC, including reasonable fees of
counsel, incurred in connection with the enforcement of this Agreement, the
Note(s), the Mortgage and the other instruments provided for herein or with the
preparation for such enforcement if CFC has reasonable grounds to believe that
such enforcement may be necessary.


 


Section 8.3.  Late Payments.  If
payment of any amount due hereunder is not received at CFC’s office in Herndon,
Virginia, or such other location as CFC may designate to the Borrower within


 





















 


five (5) Business Days after
the due date thereof or such other time period as CFC 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 will pay to
CFC, in addition to all other amounts due under the terms of a Note, the
Mortgage and this Agreement, any late-payment charge as may be fixed by CFC
from time to time on the delinquent amount for the late-payment period.


 


Section 8.4.  Filing Fees.  To the extent permitted by law, the Borrower agrees to pay all expenses
of CFC (including the fees and expenses of its counsel) in connection with the
filing or recordation of the Mortgage, all financing statements and instruments
as may be required by CFC in connection with this Agreement, including, without
limitation, any supplements, amendments or restatements thereto, all
documentary stamps, recordation and transfer taxes and other costs and taxes
incident to recordation of any document or instrument in connection herewith.
Borrower agrees to save harmless and indemnify CFC 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 CFC 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 a Note.


 


Section 8.5.  No Waiver.  No failure on the part of CFC to exercise,
and no delay in exercising, any right hereunder shall operate
as a waiver thereof nor shall any single or partial exercise by CFC of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.


 


SECTION 8.6. GOVERNING
LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.


 


(a)           THE
PERFORMANCE AND CONSTRUCTION OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.


 


(b)           BORROWER
HEREBY SUBMIT(S) TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES COURTS
LOCATED IN VIRGINIA AND OF ANY STATE COURT SO LOCATED FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE ESTABLISHING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.


 


(c)           EACH
OF THE BORROWER AND CFC HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.


 


Section 8.7.   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 8.8. Modifications.  No
modification or waiver of any provision of this Agreement or a Note, 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.


 


Section 8.9. Merger and Integration.  This
Agreement (including the Recitals and all exhibits and schedules hereto), the
instructions contained in the written funds requisition statement with respect
to each Advance, and matters incorporated by reference herein together contain
the entire agreement of the parties hereto with respect to the matters covered
and the transactions contemplated hereby.


 


Section 8.10. Headings.  The headings and sub-headings
contained in the tilting of this Agreement are intended to be used for
convenience only and do not constitute part of this Agreement.


 


Section 8.11. Severability.  If
any term, provision or condition, or any part thereof, of this Agreement, any
Note 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, any 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 8.12. Right of Setoff.  Upon
the occurrence and during the continuance of any Event of Default, CFC 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 CFC 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
any Note. CFC 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 CFC under this
section are in addition to any other rights and remedies (including other
rights of setoff or recoupment) which CFC may have.
Borrower waives all rights of setoff, deduction, recoupment
or counterclaim.


 


Section 8.13. Rescission
Fee. The Borrower may
elect not to borrow all or any portion of the CFC Commitment in which event CFC
shall release the Borrower from its obligations hereunder, provided the
Borrower complies with such terms and conditions as CFC may impose for such
release including, without limitation, payment of any rescission fee that CFC
may from time to time prescribe, pursuant to its policies of general
application.


 


Section 8.14. Prior Loan Documents.  It is
understood and agreed that with respect to all long-term-loan agreements
previously entered into by and between CFC and Borrower, and all promissory
notes thereto secured under the Mortgage (both hereinafter being referred to as
“Prior Loan Documents”) the Borrower shall be required, after the date hereof,
to meet reporting and financial covenants as set forth in this Agreement rather
than those set forth in the Prior Loan Documents. In the event of any conflict
between any reporting and financial covenant set forth in a Prior Loan Document
and any reporting and financial covenant 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 CFC. Furthermore, the interest
rate and amortization options available to Borrower as set forth in this
Agreement shall supersede the interest rate and amortization options as set
forth in any Prior Loan Documents. For purposes of the foregoing, this
Agreement shall be deemed to be an amendment to all Prior Loan Documents.


 


Section 8.15. Consent,
Waivers, etc.  It is understood and agreed that all waivers,
consents and authorizations previously agreed to by CFC and made to Cap Rock,
including, but not limited to, those attached as Exhibit A hereto, shall
continue in full force and effect and shall be applicable to Borrower as they
were to Cap Rock in accordance with the terms and limitations set forth in each
such waiver, consent and authorization.


 


Section 8.16. Schedule 1.   Schedule 1 attached hereto is
an integral part of this Agreement.


 


Section 8.17. Exhibit A.  Exhibit A attached hereto is an integral part
of this Agreement.


 


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


 


	
   

  	
  CAP ROCK ENERGY
  CORPORATION

  
	
  (SEAL)

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Russell E Jones

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   CO-CHAIRMAN

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  /s/ Ronald W. Lyon

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NATIONAL
  RURAL UTILITIES

  
	
   

  	
  COOPERATIVE
  FINANCE CORPORATION

  
	
   

  	
   

  
	
  (SEAL)

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig Colantoni

  	
   

  
	
   

  	
   

  	
  Assistant Secretary-Treasurer

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  /s/ Kerry Rollins

  	
   

  	
   

  
	
   

  	
  Assistant
  Secretary-Treasurer

  	
   

  	
   

  
								



 





















 


SCHEDULE 1


 


1.                                       The purpose of this loan is to term out the
outstanding balance on Borrower’s currently existing line of credit with CFC
bearing CFC Loan Number TX107-R-5104.


 


2.                                       The aggregate CFC Commitment is
$28,000,000.00. Within this aggregate amount, Borrower may, at its discretion,
execute one or more Notes, each Note representing a separate loan with CFC and
containing a face amount and Maturity Date in accordance with the terms,
conditions and provisions of this Agreement.


 


3.                                       The Mortgage shall mean the Consolidated and
Restated Mortgage and Security Agreement, dated as of even date herewith,
between the Borrower and CFC, as it may have been or shall be supplemented,
amended, consolidated, or restated from time to time.


 


4.                                       The Payment Date months are February, May,
August and November.


 


5.                                       The date of the Borrower’s balance sheet
referred to in Section 2.D. is 12/31/01.


 


6.                                       The Borrower’s exact legal name is: Cap Rock
Energy Corporation.


 


7.                                       The Borrower’s organizational type is:
Domestic Business Corporation.


 


8.                                       The Borrower is organized under the laws of
the state of: Texas.


 


9.                                       The Borrower’s organizational identification
number is: 151540000.


 


10.                                 The principal place of business or, if more
than one, the chief executive office of the Borrower referred to in Section
2.H. is 500 West Wall, Suite 400, Midland, Texas
79701.


 


11.                                 The property of the Borrower referred to in
Section 3.J. is located in the counties of Andrews, Borden, Brown, Coleman,
Collin, Concho, Dawson, Ector, Fannin, Fisher,
Glasscock, Howard, Hunt, Irion, Martin, Mason, McCulloch, Menard, Midland,
Mills, Mitchell, Nolan, Reagan, San Saba, Scurry, Sterling, Tom Green and Upton
in the State of Texas.


 


12.                                 The address for notices to the Borrower
referred to in Section 8.1 is 500 West Wall, Suite 400, Midland, Texas 79701,
Attention: President/CEO, Fax: 915-684-0333.


 


13.                                 The special condition(s) referred to in
Section 4.H. is:


 


(i)            Prior to, and as a condition of, the Initial Advance hereunder, Borrower shall
pay to CFC an origination fee equal to seventy-five (75) basis points of the
amount of the CFC Commitment.


 


14.                                 The special affirmative covenant(s) referred
to in Section 5.K. is (are) as follows:


 


(i)            Borrower hereby explicitly and irrevocably
instructs CFC, upon CFC’s execution of this Agreement, to make the Initial
Advance under this Agreement and the Note designated by CFC Loan Number TX107-A-9052 to repay any outstanding principal, interest
and


 





















 


other
amounts outstanding under Borrower’s Perpetual Line of Credit with CFC bearing
CFC Loan Number TX107-R-5104 and upon such payment to
CFC, Borrower agrees that such line of credit No. TX107-R-5104
with CFC, and any agreement(s) relating thereto shall be terminated.


 


(ii)           Borrower shall not incur any additional
indebtedness, other than that incurred through vendors and trade creditors, in
the ordinary course of business without the prior written consent of CFC.


 


(iii)          Within sixty (60) days of the end of each of
Borrower’s fiscal quarters during the term of this Agreement, Borrower shall
submit a copy of its 10-Q filing to CFC.


 


(iv)          Within one hundred and twenty (120) days of the end of each of Borrower’s
fiscal years during the term of this Agreement, Borrower shall submit a copy of
its 10-K filing to CFC.


 


(v)           Notwithstanding anything to the contrary in
Section 5.B. hereof, the Borrower, subject to events in the judgment of CFC to
be beyond the control of the Borrower, shall so operate and manage its business
as to achieve an annual DSC of not less than 1.35 on a consolidated basis as of
the end of its 2004 fiscal year and shall maintain such ratio in each fiscal
year thereafter.


 


15.                                 The Borrower selects the following number of
Loans, the amount of each Loan, and the amortization method and/or Amortization
Basis Date for each Loan:


 


	
  LOAN NUMBER

  	
   

  	
  AMOUNT

  	
   

  	
  AMORTIZATION METHOD/BASIS DATE

  
	
  TX107-A-9062

  	
   

  	
  $

  	
  28,000,000.00

  	
   

  	
  One
  year principal deferral, then level debt service

  
						



 





















 


EXHIBIT A





 


NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


 


 


July 13, 1995


 


Mr. John Parker

NewCorp Resources, Inc.

The Vanghu Building

897 Brazos Street

Suite 700


Austin, Texas  78701


 


Dear Mr. Parker:


 


This letter will confirm that the National Rural Utilities Cooperative
Finance Corporation (“CFC”) will require a debt
service coverage (“DSC”) ratio of 1.20 for the proposed financing relating to NewCorp Resources, Inc. 
This ratio requirement was determined on the basis of the type of CFC
member that is being utilized in connection with the financing.


 


Please feel free to call me if you have any questions.


 


Sincerely,


 


 


	
  /s/ Katherine Buhl

  	
   

  



Katherine Buhl


Senior Loan Analyst


 


 


KMB


 


 


	
  Woodland
  Park,

  	
   

  
	
  2201
  Cooperative Way

  	
   

  
	
  Herndon,
  Virginia

  	
   

  
	
  20171-3025

  	
   

  
	
  Fax:
  703-709-6700

  	
   

  



 





















 


December
13, 1995


 


 


Mr.
David W. Pruitt


President
and Chief Executive Officer


Cap
Rock Electric Cooperative, Inc.


500
West Wall


Suite
400


Midland, Texas 79701-1601


 


Dear
Mr. Pruitt:


 


RE: Transmission Facility Lease Agreement


 


CFC
has reviewed the documents between Cap Rock Electric Cooperative, Inc.,
Southwestern Public Service Company (SPS), OTP, Inc., Metropolitan Life Insurance Company and Texas
Commerce Bank, NA dated September 9, 1993, and the subsequent amendments to the
agreement in connection with the transmission facilities lease.


 


CFC
hereby approves Cap Rock Electric Cooperative’s execution of the September 9,
1993 Transaction Agreement and the related documents in connection with the
lease of the transmission facilities. Accordingly, for purposes of compliance
with Section 5(j) of the Loan Agreement dated October 24, 1995 which prohibits
Cap Rock from incurring guarantee obligations in excess of 10% of total utility
plant or 50% of total Equities and Margins, CFC will exclude the amount of Cap
Rock’s obligations with respect to the lease transaction.


 


Please
feel free to call me at 1-800-424-2954 if you have any questions about this
approval.


 


 


	
  Sincerely,

  
	
   

  
	
  /s/ Katherine Buhl

  	
   

  
	
  Katherine Buhl

  
	
  Senior Loan Analyst

  



 





















 





NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


Powerful
Financial Solutions


 


2201 Cooperative Way - Herndon, Virginia 20171-3025


http://www.nrucfc.org


703-709-6700


 


July 17, 1998


 


 


Mr. David Pruitt, President

Cap Rock Electric Cooperative, Inc.

500 W. Wall, Suite 400

Midland, TX 79701


 


 


Dear Mr. Pruitt:


 


We have finished our review of the preliminary draft
of a Prospectus and Ballot/Proxy Statement (“Proxy Statement”) related to a
Special Meeting of Can Rock Electric Cooperative, Inc. (“Cap Rock”) to be held
on October 20, 1998. It appears that the new corporate structure proposed by
the Acquisition Plan creates viable options for Cap Rock to better serve its
customers in the future.


 


As you know, in accordance with a Second Restated
Mortgage an Security Agreement (“Loan Agreement”), dated October 24, 1995,
between Cap Rock and the National Rural Utilities Cooperative Finance
Corporation (“CFC”), Cap Rock has pledged substantially all of its utility
plant assets (“Mortgaged Assets”) to secure various CFC notes payable with
present unpaid principal balances aggregating approximately $9.1 million.  According to the Proxy Statement, if the
proposed acquisition plan is approved, ownership of the Mortgaged Assets will
be transferred from Cap Rock to CREC, a wholly-owned
subsidiary in a corporate restructuring transaction.


 


Based on our review of the proposed Proxy Statement,
CFC has no objection to the transfer of the Mortgaged Assets to CREC, and CFC will not deem Cap Rock in default of the Loan
Agreement as a result of the transfer, provided that:


 


•                  the transfer is made to a wholly-owned subsidiary, as
described in the Proxy Statement (or, if not a wholly-owned subsidiary, in an
entity otherwise acceptable to CFC); and


 


•                  Cap
Rock and CREC execute appropriate security
instruments so that CFC continues to have a first priority, perfected security
interest in the Mortgaged Assets.


 


We look forward to working with Cap Rock as it moves forward to meet the
challenges of a deregulated, competitive electric utility industry.


 


	
  Very truly yours,

  
	
   

  
	
  /s/ Lynn Midgette

  	
   

  
	
  Lynn Midgette

  
	
  Vice President, Business Development

  



 





















 





NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


Powerful
Financial Solutions


 


2201 Cooperative Way - Herndon, Virginia 20171-3025


http://www.nrucfc.org


703-709-6700


 


 


	
  CAP ROCK ELECTRIC

  
	
  COOPERATIVE, INC.

  
	
   

  
	
  JULY 23 1999

  
	
   

  
	
  RECEIVED

  



 


July 20, 1999


 


 


Mr. David Pruitt

President/CEO

Cap Rock Electric Cooperative

500 West Wall, Suite 400

Midland, TX 79701-1601


 


Dear Mr. Pruitt:


 


Re: Limitations on Loans, Investments and Other
Obligations


 


As outlined in Article V Section 5 L (a) of Cap Rock’s
loan agreement with CFC:


 


The Borrower shall not,
without first obtaining the written approval of CFC: (I) purchase or make any
commitment to purchase any stock, bonds, notes, debentures, or other securities
or obligations of or beneficial interests in, (ii) make any other investment
in, (iii) make any loan to, or (iv) guarantee, assume or otherwise become
liable for any obligation of any corporation, association, partnership, joint
venture, trust, government or any agency or department thereof, or any other
entity of any kind if the aggregate amount of all such purchases, investments,
loans and guarantees exceeds the greater of fifteen percent (15%) of Total
Utility Plant or fifty percent (50%) of Equities and Margins.


 


Cap Rock’s loans, investments and guarantees as of the date of this
letter exceed the maximum amount without obtaining approval from CFC.


 


CFC is aware of the transactions to date which comprise the total
amount of loans, investments and guarantees at Cap Rock.  CFC hereby provides written approval for
exceeding the limitation outlined above, based on the transactions which has
occurred as of the date of this letter. 
Please note that any future transactions which effect
the loans, investments and guarantees of Cap Rock must be approved in writing
by CFC.


 


Please do not hesitate to contact me if you have additional questions.


 


 


	
  Sincerely,

  
	
   

  
	
  /s/ Cindy Tracy

  	
   

  
	
  Cindy Tracy

  
	
  Associate Vice President

  



 





















 





NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


A
Touchstone® Energy Cooperative


 


2201 Cooperative Way - Herndon, Virginia 20171-3025


http://www.nrucfc.org


703-709-6700


 


February 22, 2002


 


Mr. David Pruitt

President

Cap Rock Electric Cooperative, Inc.

500 West Wall Street

Suite 400

Midland, TX 79701


 


Re:                               Article
V, Section H. Loan Agreement Waiver


 


Dear Mr. Pruitt:


 


As outlined in Article V, Section H of the Loan Agreement (“Loan
Agreement”) by and between Cap Rock Electric Cooperative, Inc. (“Cap Rock”) and
National Rural Utilities Cooperative Finance Corporation (“CFC”).


 


Subparagraph (a) provides:


 


“The
Borrower may make Distributions in any calendar year if, after giving effect to
the Distribution, the total Equity of the Borrower will be at least twenty percent
(20%) of its Total Assets.”


 


Subparagraph (b) provides:


 


“If, after giving effect to
the Distribution, the total Equity of the Borrower will be less than twenty
percent (20%) of its Total Assets, then the Borrower may nevertheless make
Distributions of up to thirty percent (30%) of its total margins for the
preceding calendar year.”


 


Subparagraph (c) provides:


 


“Notwithstanding anything to
the contrary in subparagraphs (a) and (b) above, the Borrower shall not make
any Distribution without the prior written consent of CFC if (i) a payment default or other Event of Default under this
Agreement has occurred and is continuing, or (ii) after giving effect to the Distribution,
the Borrower’s total current and accrued assets would be less than its total
current and accrued liabilities, or (iii) such Distribution would be in excess
of the Distributions permitted by subparagraphs (a) or (b), above.”


 





















 





NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


A
Touchstone® Energy Cooperative


 


2201 Cooperative Way - Herndon, Virginia 20171-3025


http://www.nrucfc.org


703-709-6700


 


March 15, 2002


 


VIA FACSIMILE


 


Mr. David Pruitt

President

Cap Rock Electric Cooperative, Inc.

500 West Wall Street

Suite 400

Midland, TX 79701


 


Re:          Line of Credit
Agreement (Facility TX107-R-5104)


 


Dear Mr. Pruitt:


 


This letter is to confirm our conversations last month.  The automatic renewal provisions of Section 1
of the Line of Credit Agreement dated June 24, 1997 shall remain in full force
and effect.  Therefore, provided that all
other terms and conditions of the Line of Credit Agreement have been satisfied,
and all other terms and conditions of any and all other Loan Agreements by and
between National Rural Utilities Finance Corporation and Cap Rock Electric
Cooperative, Inc. have been satisfied, the Line of Credit will be automatically
renewed as of June 24, 2002.


 


Very truly yours,


 


	
  /s/ Elaine MacDonald

  	
   

  
	
  for

  
	
  Lynn Midgette

  
	
  Director, Portfolio Management

  



 





















 





 


April 30, 2002


 


 


Lynn Midgette

Director, Portfolio Management


National Rural Utilities Cooperative Finance
Corporation


Woodland Park, 2201 Cooperative Way


Herndon, Virginia 20171-3025


 


Re:          Transmission
Facility Lease Agreement


 


Dear Ms. Midgette:


 


Previously, in December, 1995, CFC consented to and approved Cap Rock’s
execution of documents necessary to finance the construction of transmission
facilities through a sale/leaseback agreement that was subsequently assigned to
NewCorp Resources Electric Cooperative, Inc. (“NewCorp”). NewCorp is now in the
process of refinancing such transmission facilities and paying off the original
lease. While the transmission facilities do not secure any debt owed by Cap
Rock to CFO, NewCorp wanted to make you aware of this
transaction.


 


NewCorp hopes to borrow
approximately $50 million for the transmission facilities.  Loan payments will be same or less than lease
payments now being paid; therefore the new arrangement, which will be a
component of Cap Rock operating costs, will not impact Cap Rock financial
status.  I would appreciate if you would
indicate your agreement to consent to this new transaction by signing in the
space provided below.


 


Should you have any questions or require further information regarding
this matter, please do not hesitate to contact me.


 


	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Lee D. Atkins

  	
   

  
	
   

  	
   

  	
  Lee D. Atkins

  
	
   

  	
   

  	
  Senior Vice
  President/CFO

  
	
   

  	
   

  	
   

  
	
  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  National Rural Utilities Cooperative

  	
   

  	
   

  
	
  Finance Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lynn Midgette

  	
  5/9/02

  	
   

  	
   

  
	
   

  	
  Lynn Midgette

  	
  Date:

  	
   

  	
   

  



 





















 


CONSOLIDATED
AND RESTATED MORTGAGE


 


AND


 


SECURITY
AGREEMENT


 


Made By and Between


 


CAP ROCK ENERGY
CORPORATION

500 West Wall, Suite 400, Midland, Texas 79701


Organizational ID Number:
151540000

Organizational Type: Domestic Business Corporation


 


Mortgagor


 


and


 


NATIONAL RURAL UTILITIES


COOPERATIVE FINANCE
CORPORATION


2201 Cooperative Way, Herndon,
Virginia 20171-3025


 


Mortgagee


 


Dated as of


 


February 7, 2003


 


***


 


THIS INSTRUMENT GRANTS A
SECURITY INTEREST


IN A TRANSMITTING UTILITY.


 


***


 


THIS INSTRUMENT CONTAINS
AFTER-ACQUIRED PROPERTY PROVISIONS.


 


***


 


THIS INSTRUMENT WAS
DRAFTED BY JAMES J JABLONSKI

OF NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION


 


MORTGAGEE’S TELEPHONE
NUMBER IS 1-800-424-2954


 





















 


TABLE OF
CONTENTS


 


	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  1.01

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.02

  	
  Construction of
  Mortgage

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.01

  	
  Granting
  Clause

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  PARTICULAR COVENANTS OF THE
  MORTGAGOR

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.01

  	
  Authority
  to Execute and Deliver Notes and Mortgage; All Action Taken; Enforceable
  Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.02

  	
  Authority to Mortgage
  Property; No Liens; Exception for Permitted Encumbrances; Mortgagor to Defend
  Title and Remove Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.03

  	
  Additional Permitted
  Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.04

  	
  Payment of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.05

  	
  Preservation
  of Corporate Existence and Franchises

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.06

  	
  Maintenance
  of Mortgaged Property

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.07

  	
  Insurance;
  Restoration of Damaged Mortgaged Property

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.08

  	
  Mortgagee
  Right to Expend Money to Protect Mortgaged Property

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.09

  	
  Further
  Assurances to Confirm Security of Mortgage

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.10

  	
  Application
  of Proceeds from Condemnation

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.11

  	
  Compliance
  with Loan Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.12

  	
  Rights
  of Way, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.13

  	
  Mortgagor’s
  Legal Status

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.14

  	
  Authorization
  to File Financing Statements

  	
   

  



 





















 


	
  Section
  3.15

  	
  Other
  Actions Concerning Mortgaged Property

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  REMEDIES OF THE MORTGAGEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.01

  	
  Events
  of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.02

  	
  Acceleration
  of Maturity; Rescission and Amendment

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.03

  	
  Remedies of Mortgagee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.04

  	
  Application of
  Proceeds from Remedial Actions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.05

  	
  Remedies Cumulative;
  No Election

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.06

  	
  Waiver
  of Appraisement Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.07

  	
  Notice
  of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  POSSESSION UNTIL DEFAULT
  DEFEASANCE CLAUSE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.01

  	
  Possession
  Until Default

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.02

  	
  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

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.05

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.06

  	
  Mortgage
  Deemed Security Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.07

  	
  Indemnification
  by Mortgagor of Mortgagee

  	
   

  



 


ii





















 


	
  Section 6.08

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.09

  	
  Costs and Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX A

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX
  B

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDIX C

  	
   

  	
   

  



 


iii





















 


CONSOLIDATED AND RESTATED MORTGAGE
AND SECURITY AGREEMENT, dated as of February 7, 2003, (“Mortgage”)
is made by and between cap ROCK
ENERGY CORPORATION (hereinafter called the “Mortgagor”), a corporation existing
under the laws of the State of Texas, and NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION (hereinafter called “CFC” or the “Mortgagee”), a
cooperative association incorporated under the laws of the District of
Columbia.


 


RECITALS


 


WHEREAS,
Cap Rock Electric Cooperative, Inc. (“Cap Rock”), for value received, has
heretofore borrowed funds from CFC pursuant to certain loan agreements identified
in the Appendix “A” (said loan agreements being hereinafter collectively called
the “Outstanding Loan Agreement”) and has accordingly heretofore duly
authorized and executed, and has delivered to CFC, or has assumed the payment
of, a certain mortgage note, or certain mortgage notes, all payable to the
order of CFC, in installments, of which the certain mortgage note or notes
(hereinafter collectively called the “Outstanding Notes”) identified in the
Appendix “A” are now outstanding and held by CFC; and


 


WHEREAS,
the Outstanding Notes are secured by the security instruments as supplemented,
amended or restated (each “Original Mortgage” identified in Appendix “A”
hereto, hereinafter called the Instruments Recital”) originally entered into
between Cap Rock and CFC; and


 


WHEREAS,
pursuant to the Agreement to Combine McCulloch and Cap Rock Electric
Cooperatives by and between Cap Rock and McCulloch Electric Cooperative, Inc.,
dated as of June 30, 1999, Cap Rock purchased all of the assets and assumed all
of the liabilities of McCulloch Electric Cooperative, Inc. on or about
September 4, 1999 (the “McCulloch Acquisition”); and


 


WHEREAS,
pursuant to the terms of the Original Mortgage, upon the completion of the
McCulloch Acquisition, Mortgagee acquired a security interest in all of the
McCulloch assets purchased by Cap Rock; and


 


WHEREAS,
Cap Rock assigned all of its property and assets, rights privileges and
franchises, except for one thousand (1000) shares of stock in Mortgagor, to Mortgagor
in exchange for Mortgagor’s agreement to accept an assignment of all debts,
obligations and liabilities of every kind of Cap Rock pursuant to an Assignment
by end between Mortgagor and Cap Rock effective September 4, 2001 (“Assignment”); and


 


WHEREAS,
pursuant to the Assignment, by accepting the Assignment, Mortgagor assumed all
of the debts, obligations and liabilities of Cap Rock; and


 


WHEREAS,
pursuant to the Assignment, Cap Rock transferred all of its property and
assets, rights and privileges via a certain Bill of Sale dated February 5,
2002, certain Warranty Deeds all dated February 5, 2002 and certain Assignments
of Easements and Rights of Way all dated February 5, 2002; and


 













 


WHEREAS,
pursuant to the Assignment, Mortgagor assumed the obligations
of Cap Rock under the Outstanding Loan Agreements, Outstanding Notes and each
Original Mortgage; and


 


WHEREAS,
this Mortgage, while preserving the priority of CFC’s lien
under the Original Mortgage, restates and consolidates the Original Mortgage and
secures the payment of Outstanding Notes and Current Notes (as identified more
particularly in the Instruments Recital); and


 


WHEREAS,
the Mortgagor has decided to borrow funds from the Mortgagee
pursuant to the Current Loan Agreement;


 


WHEREAS,
pursuant to the Current Loan Agreement, Mortgagor has duty
authorized, executed and delivered to the Mortgagee one or more Current Notes
to be secured by the mortgage of the property hereinafter described;


 


WHEREAS,
the Mortgagor and the Mortgagee are authorized to enter into
this Mortgage.


 


NOW,
THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein, do agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


Section
1.01.   Definitions. Capitalized
terms used in this Mortgage shall have the meanings specified below. Any
capitalized terms used in this Mortgage and not defined below or elsewhere
herein shall have the meanings assigned to them under the Uniform Commercial
Code of the jurisdiction governing construction of this Mortgage, 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 any system of accounts prescribed by
a federal regulatory authority having jurisdiction over the Mortgagor or, in
the absence thereof, the requirements of generally accepted accounting
principles applicable to businesses similar to that of the Mortgagor.


 


Business
Day shall mean any day that both CFC and the depository
institution CFC utilizes for funds transfers are both open for business.


 


CFC
is defined in the recitals to this Mortgage and shall include
its successors and assigns.


 


Current
Loan Agreement means that certain loan agreement by and
between CFC and the Mortgagor identified as such in the Instruments Recital,
together with all amendments, supplements thereto and restatements thereof.


 


Current
Notes shall mean all Notes identified as such in the
Instruments Recital and issued under the Current Loan Agreement.


 





















 


Equities
and Margins shall mean Mortgagor’s equities and margins
computed pursuant to the Accounting Requirements.


 


Equity
shall mean the aggregate of Mortgagor’s Equities and Margins as computed
pursuant to the Accounting Requirements.


 


Event of
Default shall have the meaning specified in Section 4.01
hereof.


 


Excepted
Property shall mean the property, if any, identified on
Appendix C hereto.


 


Fiscal
Year shall mean the fiscal year of the Mortgagor. 


 


Instruments
Recital shall mean Appendix A hereto.


 


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 Uniform Commercial Code.


 


Loan
Agreement shall mean, collectively;


 


a)             the
Outstanding Loan Agreement


 


b)            the
Current Loan Agreement; and


 


c)                                      any
other loan agreement executed by and between Cap Rock, as assumed by Mortgagor,
and CFC in connection with the execution and delivery of any Notes secured
hereby.


 


Maximum
Debt Limit shall mean the amount more particularly described
in Appendix A hereto.


 


Mortgaged
Property shall have the meaning specified in Section 2.01
hereof. 


 


Mortgagee
shall mean CFC, its successor and assigns.


 


Note or
Notes shall mean the Current Notes and any Outstanding Notes
secured under this Mortgage.


 


Original
Mortgage shall mean the meaning as further described on
Appendix A, attached hereto.


 


Outstanding
Loan Agreements shall mean those loan agreements between Cap
Rock, as assumed by Mortgagor, and CFC identified as such in the Instruments
Recital.


 


Outstanding
Notes shall mean all Notes identified as such in the
Instruments Recital.


 





















 


Permitted Encumbrances shall mean:


 


(1)           any Liens for taxes,
assessments or governmental charges for the currant year and taxes, assessments
or governmental charges due but not yet delinquent;


 


(ii)           Liens for workmen’s compensation
awards and similar obligations not then delinquent;


 


(iii)          mechanics’, laborers’,
materialmen’s and similar Liens not then delinquent, and any such Liens,
whether or not delinquent, whose validity is at the time being contested in
good faith;


 


(iv)          Liens and charges incidental
to construction or current operation which have not been filed or asserted or
the payment of which has been adequately secured or which, in the opinion of
counsel to the Mortgagor are insignificant in amount;


 


(v)           Liens securing
obligations not assumed by the Mortgagor and on account of which it does not
pay and does not expect to pay interest, existing upon real estate (or rights
in or relating to real estate) over or in respect of which the Mortgagor has a
right-of-way or other easement for substation, transmission, distribution or
other right-of-way purposes;


 


(vi)          any right which the
United States of America or any state or municipality or governmental body or
agency 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 reasonable compensation therefor, or upon
reasonable compensation or conditions to terminate any franchise, license or
other rights before the expiration date hereof or to regulate the property and
business of the Mortgagor;


 


(vii)         attachment of judgment
Liens covered by Insurance (to the extent of the Insurance coverage), or upon
appeal and covered by bond;


 


(viii)        deposits or pledges to
secure payment of workmen’s compensation, unemployment insurance, old age
pensions or other social security;


 


(ix)           deposits or pledges to
secure performance of bids, tenders, contracts (other than contracts for the
payment of borrowed money), leases, public or statutory obligations;


 


(x)            surety or appeal
bonds, and other deposits or pledges for purposes of like general nature in the
ordinary course of business;


 


(xi)           easements or
reservations in respect to any property for the purpose of transmission and
distribution lines and rights-of-way and similar purposes, zoning ordinances,
regulations, reservations, restrictions, covenants, party wall agreements,
conditions of record and other encumbrances (other than to secure the payment
of money), none of which in the opinion of counsel to the Mortgagor is such as
to interfere with the proper operation of the property affected thereby;


 





















 


(xii)          the
burdens of any law or governmental organization 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 land or any river, stream
or other waters or relating to environmental matters;


 


(xiii)         any
Lien or encumbrance for the discharge of which moneys have been deposited in
trust with a proper depository to apply such moneys to the discharge of such
Lien or encumbrances;


 


(xiv)        any
Lien reserved as security for rent or compliance with other provisions of the
lease in case of any leasehold estate made, or existing on property acquired in
the ordinary course of business or in connection with Restricted Rentals
permitted by Section 3.03; and


 


(xv)         Liens for
purchase money indebtedness permitted by Section 3.03; and


 


(xvi)        Liens
in favor of CFC.


 


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 automobiles, trucks, trailers, other vehicles (including without
limitation aircraft and ships), office, garage and warehouse space and office
equipment (including without limitation computers).


 


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


 


Subordinated
Indebtedness shall mean indebtedness of the Mortgagor,
payment of which shall be subordinated to the prior payment of the Notes by
subordination agreement in form and substance satisfactory to the Mortgagee,
which approval will not be unreasonably withheld.


 


Total
Utility Plant shall mean the amount constituting the total
utility plant of the Mortgagor computed in accordance with the Accounting
Requirements.


 


Uniform
Commercial Code shall mean the Uniform Commercial Code of the
jurisdiction governing construction of this Mortgage.


 


Section 1.02.  Construction of Mortgage. Accounting terns used in this
Mortgage and not referred to above shall have the meanings assigned to them
under generally accepted accounting principles. The singular shall include the
plural, and vice versa, as the context requires.


 





















 


ARTICLE II


 


SECURITY


 


Section
2.01. Granting Clause. In order to secure the payment of the
principal of (and premium, if any) and interest on the Notes, according to
their terms, and further to secure the due performance of the covenants,
agreements and provisions contained in this Mortgage and the Loan Agreement,
and to declare the terms and conditions upon which the Notes are to be secured,
the Mortgagor, in consideration of the premises, does hereby grant, bargain,
sell, alienate, convey, assign, transfer, mortgage, hypothecate, pledge, set
over and confirm unto the Mortgagee, all property, rights, privileges and
franchises of the Mortgagor of every kind and description, real, personal or
mixed, tangible or intangible, whether now owned or hereafter acquired by the
Mortgagor, wherever located, and grants a security interest therein for the
purposes herein expressed, except any Excepted Property, and including all and
singular the following described property (all of which is hereinafter called
the “Mortgaged Property”):


 


I


 


All right, title
and interest of the Mortgagor in and to the electric generating plants and
facilities and electric transmission and distribution lines and facilities now
owned by the Mortgagor and located in the counties listed in Appendix B hereto,
or hereafter constructed or acquired by the Mortgagor, wherever located, and in
and to all extensions and improvements thereof and additions thereto, including
any and all other property of every nature and description, used or acquired
for use by the Mortgagor in connection therewith, and including, without
limitation, the property described in the property schedule listed on or
attached to Appendix B hereto;


 


II


 


All right, title
and interest of the Mortgagor in, to and under any and all grants, privileges,
rights of way and easements now owned, held, leased, enjoyed or exercised, or
which may hereafter be owned, held, leased, acquired, enjoyed or exercised, by
the Mortgagor for the purposes of, or in connection with, the construction or
operation by or on behalf of the Mortgagor of electric transmission or
distribution lines or systems, whether underground or overhead or otherwise, or
of any electric generating plant, wherever located;


 


III


 


All right, title
and interest of the Mortgagor in, to and under any and all licenses,
ordinances, privileges and permits heretofore granted, issued or executed, or
which may hereafter be granted, issued or executed, to it or to its assignors
by the United States of America, or by any state, or by any county, township,
municipality, village or other political subdivision thereof, or by any agency,
board, commission or department of any of the foregoing, authorizing the
construction, acquisition or operation of electric transmission or distribution
lines or systems, or any electric generating plant or plants, insofar as the
same may by law be assigned, granted, bargained, sold, conveyed, transferred,
mortgaged or pledged;


 





















 


IV


 


All right, title
and interest of the Mortgagor in, to and under any and all accounts, contract
rights and general intangibles (as such terms are defined in the applicable Uniform
Commercial Code) heretofore or hereafter acquired by the Mortgagor, including
all contracts heretofore or hereafter executed by and between the Mortgagor and
any person, firm, corporation or governmental body or agency providing for the
purchase, sale, exchange or transmission of electric power or energy by the
Mortgagor;


 


V


 


Also, all right,
title and interest of the Mortgagor in and to all other property, real or
personal, tangible or intangible, of every kind, nature and description, and
wheresoever situated, now owned or hereafter acquired by the Mortgagor, it
being the intention hereof that all such property now owned but not
specifically described herein or acquired or held by the Mortgagor after the
date hereof shall be as fully embraced within and subjected to the lien hereof
as if the same were now owned by the Mortgagor and were specifically described
herein to the extent only, however, that the subjection of such property to the
lien hereof shall not be contrary to law;


 


Together with all
rents, income, revenues, profits, cash, proceeds and benefits at any time
derived, received or had from any and all of the above-described property or
business operations of the Mortgagor, to the fullest extent permitted by law.


 


Provided,
however, that no automobiles, trucks, trailers, tractors or other
vehicles (including, without limitation, aircraft or ships, if any) owned or
used by the Mortgagor shall be included in the Mortgaged Property.


 


TO HAVE
AND TO HOLD all and singular the Mortgaged Property unto the
Mortgagee forever, to secure equally and ratably the payment of the principal
of (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 the covenants, agreements and
provisions herein and in the Loan Agreement contained, and for the uses and
purposes and upon the terms, conditions, provisos and agreements hereinafter
expressed and declared.


 


ARTICLE III


 


PARTICULAR
COVENANTS OF THE MORTGAGOR


 


The Mortgagor
covenants with the Mortgagee as follows:


 


Section
3.01. Authority to Execute and Deliver Notes and Mortgage; All Action Taken;
Enforceable Obligations. The Mortgagor is authorized under
its articles of incorporation and bylaws and all applicable laws and by
corporate action to execute and deliver the Notes and this Mortgage; and the
Notes and this Mortgage are, the valid and enforceable obligations of the
Mortgagor in accordance with their respective terms.


 





















 


Section
3.02. Authority to Mortgage Property; No Liens; Exception for Permitted
Encumbrances; Mortgagor to Defend Title and Remove Liens. The Mortgagor warrants that it has
good, right and lawful authority to mortgage the Mortgaged Property for the
purposes herein expressed, and that the Mortgaged Property is free and clear of
any Lien affecting the title thereto, except the lien of this Mortgage and
Permitted Encumbrances. Except as to Permitted Encumbrances, the Mortgagor
will, so long as any of the Notes shall be outstanding, maintain and preserve
the lien of this Mortgage superior to all other Liens affecting the Mortgaged
Property and will forever warrant and defend the title to the Mortgaged
Property against any and all claims and demands. Subject to the provisions of
Section 3.03, or unless approved by the Mortgagee, 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. Except as to
Permitted Encumbrances, the Mortgagor will promptly pay or discharge any and
all obligations for or on account of which any such Lien or charge might exist
or could be created and any and all lawful taxes, rates, levies, assessments,
Liens, claims or other charges imposed upon or accruing upon any of the
Mortgagor’s property (whether taxed to the Mortgagor or to the Mortgagee), or
the franchises, earnings or business of the Mortgagor, as and when the same
shall become due and payable; provided,  however, that this
provision shall not be deemed to require the payment or discharge of any tax,
rate, levy, assessment or other governmental charge while the Mortgagor is
contesting the validity thereof by appropriate proceedings in good faith and so
long as it shall have set aside on its books adequate reserves with respect
thereto.


 


Section 3.03. Additional
Permitted Debt. Except as permitted by the Loan Agreement,
the Mortgagor shall not incur, assume, guarantee or otherwise become liable in
respect of any debt (including Subordinated Indebtedness) other than the
following:


 


(1)                                  Purchase
money indebtedness in non-electric utility property, in an amount not exceeding
ten percent (10%) of Total Utility Plant or fifty percent (50%) of Equity,
whichever is greater;


 


(2)                                  Restricted
Rentals in an amount not to exceed five percent (5%) of Equity during any 12
consecutive calendar month period;


 


(3)                                  Unsecured
current debt and lease obligations incurred in the ordinary course of business
including accounts payable for goods and services; and


 


(4)                                  Unsecured
indebtedness.


 


Section 3.04. Payment of Notes.
The Mortgagor will duly and punctually pay the principal of (premium, if any)
and interest on the Notes at the dates and places and in the manner provided
therein, and all other sums becoming due hereunder.


 


Section
3.05. Preservation of Corporate Existence and Franchises. The Mortgagor will, so long as any of
the Notes are outstanding, 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, and will
comply with all valid laws, ordinances, regulations and requirements applicable
to it or its property.


 


Section
3.06. Maintenance of Mortgaged Property. So long as the
Mortgagor holds title to the Mortgaged Property, the Mortgagor will at all
times maintain and preserve the Mortgaged Property in good repair, working
order and condition, ordinary wear and tear and acts of God excepted, and in
compliance with all applicable laws, regulations and orders, and will from time
to time make all necessary 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 keep
its plant and properties in continuous operating condition and 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
energy and other services furnished by the Mortgagor. 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 this Section in respect of the leased
facilities and permit the Mortgagor to operate the leased facilities in the
event of any failure by the lessee to so comply.


 


Section
3.07.  Insurance; Restoration of Damaged
Mortgaged Property. 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.


 


The foregoing insurance
coverage shall be obtained by means of bond and policy forms approved by
regulatory authorities, and, with respect to insurance upon any part of the
Mortgaged Property, shall provide (unless waived by the Mortgagee) that the
insurance shall be payable to the Mortgagee as its interest 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 thirty (30) days after written
notice to the Mortgagee of cancellation.


 


In the event of
damage to or the destruction or loss of any portion of the Mortgaged Property,
unless the Mortgagee shall otherwise agree, the Mortgagor shall promptly
replace or restore such damaged, destroyed or lost portion so that the
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.


 


Sums recovered
under any policy or fidelity bond by the Mortgagor for a loss of funds advanced
under the Notes or recovered by the Mortgagee for any loss under such policy or
bond shall, unless otherwise directed by the Mortgagee, 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 Mortgagee at the time of any
such prepayment), or be used to construct or acquire facilities which will
become part of the Mortgaged Property. At the request of the Mortgagee, the
Mortgagor shall exercise such rights and remedies which it may have under such
policy or fidelity bond and which may be designated by the Mortgagee, and the
Mortgagor hereby irrevocably appoints the Mortgagee as its agent to


 





















 


exercise such rights and remedies under such policy or bond as the
Mortgagee may choose, and the Mortgagor shall pay all costs and expenses
incurred by the Mortgagee in connection with such exercise.


 


Section
3.08. Mortgagee Right to Expend Money to Protect Mortgaged Property.
The Mortgagor agrees that the Mortgagee from time to time hereunder may in its
sole discretion, but shall not be obligated to, after having given five (5)
Business Days prior written notice to Mortgagor, advance funds on behalf of
Mortgagor, in order to insure Mortgagor’s compliance with any covenant,
warranty, representation or agreement of Mortgagor made in or pursuant to this
Mortgage or any Loan Agreement, to preserve or protect any right or interest of
the Mortgagee in the Mortgaged Property or under or pursuant to this Mortgage
or any Loan Agreement, 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 the Mortgagee shall not constitute a waiver by the Mortgagee of any Event of
Default with respect to which such advance is made nor relieve the Mortgagor of
any such Event of Default. Notwithstanding the foregoing, if, in the sole
discretion of Mortgagee, a situation arises which requires immediate action by
Mortgagee to preserve and protect any of the Mortgaged Property given to secure
the obligations secured by this Mortgage, Mortgagee shall be free to take such
action as it reasonably deems appropriate to preserve and protect such
Mortgaged Property without delivery of prior written notice to Mortgagor, or if
such notice has been delivered, without waiting for the expiration of the
aforementioned grace period. The Mortgagor shall pay to the Mortgagee upon
demand all such advances made by the Mortgagee with interest thereon at a rate
equal to the Mortgagee’s rate at such time for short-term loans 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 this
Mortgage.


 


Section
3.09. Further Assurances to Confirm Security of Mortgage.
Upon the written request of the Mortgagee, the Mortgagor shall promptly make,
execute, acknowledge and deliver or cause to be made, executed, acknowledged
and delivered all such further and supplemental indentures of mortgage, deeds
of trust, mortgages, financing statements and amendments thereto (including
continuation statements), security agreements, pledge agreements, stock powers
or other such instruments of transfer or assignment duly executed in blank,
stock certificates or other securities representing any of the Mortgaged
Property, instruments (including any promissory notes held or acquired by the
Mortgagor, duly endorsed and assigned to the Mortgagee) and conveyances as may
reasonably be requested by the Mortgagee, and take or cause to be taken all
such further action as may reasonably be requested by the Mortgagee to insure
the attachment, perfection and first priority of, and the ability of the
Mortgagee to enforce, the Mortgagee’s lien on and security interest in any or
all of the Mortgaged Property. The Mortgagor will cause this Mortgage and any
and all supplemental indentures of mortgage, mortgages and deeds of trust and
every security agreement, financing statement, amendment thereto (including
continuation statements) and every additional instrument which shall be
executed pursuant to the foregoing provisions forthwith upon execution to be
recorded and filed and re-recorded and re-filed as conveyances and mortgages
and deeds of trust of and security interests in real and personal property in
such manner and in such places as may be required by law or reasonably
requested by the Mortgagee in order to insure the attachment, perfection and
first priority of, and the ability of the Mortgagee to


 





















 


enforce, the Mortgagee’s lien on and security interest in any or all of
the Mortgaged Property.


 


Section
3.10. Application of Proceeds from Condemnation. 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 facilities 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 Mortgagee at the time of any such payment;
and fourth, the balance shall be paid to Mortgagor or whoever shall be entitled
thereto.


 


Section
3.11. Compliance with Loan Agreement. The Mortgagor will
observe and perform all of the 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.


 


Section
3.12. Rights of Way, etc. The Mortgagor will use its best
efforts to obtain all such rights of way, easements from landowners and
releases from lien holders as shall be necessary or advisable in the conduct of
its business, and, if requested by the Mortgagee, deliver to the Mortgagee evidence
satisfactory to it that it has obtained such rights of way, easements or
releases.


 


Section
3.13. Mortgagor’s Legal Status. (a) The Mortgagor represents,
warrants, covenants and agrees that: (i) the Mortgagor’s exact legal name is
that indicated on the signature page hereof, (ii) the Mortgagor is an
organization of the type and organized in the jurisdiction set forth on the
first page hereof, (iii) the cover page hereof accurately sets forth the
Mortgagor’s organizational identification number or accurately states that the
Mortgagor has none and (iv) Section 6.04 hereof accurately sets forth the
Mortgagor’s place of business or, if more than one, its chief executive office
as well as the Mortgagor’s mailing address if different.


 


(b) (i) The
Mortgagor will not change its name, its place of business or, if more than one,
chief executive office, or its mailing address or organizational identification
number if it has one, without providing prior written notice to the Mortgagee
at least thirty (30) days prior to the effective date of any change, (ii) if
the Mortgagor does not have an organizational identification number and later
obtains one, the Mortgagor will promptly notify the Mortgagee of such
organizational identification number and (iii) the Mortgagor will not change
its type of organization, jurisdiction of organization or other legal structure
without the prior written consent of the Mortgagee.


 


Section
3.14. Authorization to File Financing Statements. The
Mortgagor hereby irrevocably authorizes the Mortgagee at any time and from time
to time to file in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Mortgaged
Property (i) as all assets of the Mortgagor or words of similar effect,
regardless of whether any particular asset comprised in the Mortgaged Property
falls within the scope of Article 9 of the applicable Uniform Commercial Code,
or (ii) as being of an equal or lesser scope or with greater


 





















 


detail, and (b) contain any other information required by part 5 of
Article 9 of the applicable Uniform Commercial Code for the sufficiency or filing
office acceptance of any financing statement or amendment, including (i)
whether the Mortgagor is an organization, the type of organization and any
organizational identification number issued to the Mortgagor and (ii) in the
case of a financing statement filed as a fixture filing, a sufficient
description of real property to which the Mortgaged Property relates. The
Mortgagor agrees to furnish any such information to the Mortgagee promptly upon
request. The Mortgagor also ratifies its authorization for the Mortgagee to
have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.


 


Section
3.15. Other Actions Concerning Mortgaged Property. The Mortgagor will take any other
action reasonably requested by the Mortgagee to insure the attachment,
perfection and first priority of, and the ability of the Mortgagee to enforce,
the Mortgagee’s lien on and security interest in any and all of the Mortgaged
Property including, without limitation (a) complying with any provision of any
statute, regulation or treaty of the United States as to any Mortgaged Property
if compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Mortgagee to enforce, the Mortgagee’s security
interest in such Mortgaged Property, (b) obtaining governmental and other third
party consents and approvals, including without limitation any consent of any
licensor, lessor or other person obligated on Mortgaged Property, (c) obtaining
waivers from mortgagees and landlords in form and substance satisfactory to the
Mortgagee and (d) taking all actions required by any earlier versions of the
Uniform Commercial Code or by other law, as applicable in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.


 


ARTICLE IV


 


REMEDIES
OF THE MORTGAGEE


 


Section
4.01. Events of Default: Each of the following shall be an “Event
of Default”:


 


(a)           Payments.
Failure of Mortgagor to make any 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, whether by acceleration or otherwise;


 


(b)           Other
Covenants. Failure of Mortgagor to observe or perform any covenant,
condition or agreement on the part of the Mortgagor, in any of the Notes, the
Loan Agreement or in this Mortgage, and such default shall continue for a
period of thirty (30) days after written notice specifying such default shall
have been given to the Mortgagor by the Mortgagee;


 


(c)           Bankruptcy.
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)           Dissolution
or Liquidation. Other than as provided in subsection (c) above, the
dissolution or liquidation of the Mortgagor, or failure by the Mortgagor
promptly to forestall or remove any execution, garnishment or attachment of
such consequence as will impair its ability to continue its business or fulfill
its obligations and such execution, garnishment or attachment shall not be
vacated within sixty (60) days;


 


(e)           Corporate
Existence. 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)            Final
Judgment. A final judgment in excess of $100,000 shall be entered against
the Mortgagor and shall remain unsatisfied or without a stay in respect thereof
for a period of sixty (60) days;


 


(g)           Representations
and Warranties. Any representation or warranty made by the Mortgagor
herein, in the Loan Agreement or in any certificate or financial statement
delivered hereunder or thereunder shall prove to be false or misleading in any
material respect; or


 


(h)           Other
Obligations. Default by the Mortgagor 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.


 


Section
4.02. Acceleration of Maturity; Rescission and Annuiment.


 


(a)           Defaults.
 If an Event of Default described in
Section 4.01 shall have occurred and be continuing, the Mortgagee may declare
the principal of, and any other amounts due on account of, the Notes secured
hereunder to be due and payable immediately by a notice in writing to the
Mortgagor and upon such declaration, all unpaid principal (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)           Rescission
and Annulment.  If at any time after
the unpaid principal of (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 Mortgagee, and all other
defaults hereunder and under the Notes shall have been made good and secured to
the satisfaction of the Mortgagee, then and in every such case, the Mortgagee
may, by written notice to the Mortgagor, 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
Mortgagee. If one or more of the Events of Default shall
occur and be continuing, the Mortgagee personally or by attorney, in its discretion,
may, to the fullest extent permitted by law:


 





















 


(a)           Possession;
Collection.  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 and profits pertaining to or arising from the Mortgaged Property, or
any part thereof, whether then past due or accruing thereafter, and issue
binding receipts therefor; and manage, control and operate the Mortgaged
Property as fully as the Mortgagor might do if in possession thereof,
including, without limitation, the making of all repairs or replacements deemed
necessary or advisable;


 


(b)           Enforcement;
Receiver. Proceed to protect and enforce the rights of the Mortgagee 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 debt 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 shall have the right to have appointed a
receiver of the Mortgaged Property and of all 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)           Auction.  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 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 notice shall comply with all applicable law. Subject to all
applicable provisions of law, 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, and without further notice or
publication the sale may be had at the time and place to which the same shall
be adjourned.


 


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 the Mortgagor
or whosoever shall be lawfully entitled thereto.


 





















 


Section 4.05. Remedies
Cumulative; No Election. Every right or remedy herein
conferred upon or reserved to the Mortgagee 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. 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, 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.


 


Section
4.07. Notice of Default. The Mortgagor covenants that it will
give immediate written notice to the Mortgagee of the occurrence of an Event of
Default.


 


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, 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 (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 and under
the 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 shall thereupon cease,
determine and become void and the 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, the Mortgagee, upon payment in
full by the Mortgagor of all principal of (premium, if any) and interest on the
Notes and the payment and discharge by the Mortgagor of all charges due to
hereunder or under the 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.


 


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 or non-electric


 





















 


systems and 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
Mortgagee shall pass to and inure to the benefit of the successors and assigns
of the Mortgagee. The Mortgagor hereby agrees to execute such consents,
acknowledgments and other instruments as may be reasonably requested by the
Mortgagee in connection with the assignment, transfer, mortgage, hypothecation
or pledge of the rights or interests of the 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 of this Mortgage 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. Notices. All notices, requests and other communications
provided for herein including, without limitation, any modifications of, or
waivers, requests or consents under, this Mortgage shall be given or made in
writing (including, without limitation, by telecopy) and delivered or
telecopied to the intended recipient at the “Address for Notices” specified,
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 Mortgage,
all such communications shall be deemed to have been duly given when personally
delivered or, in the case of a telecopied or 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:


 


As to the
Mortgagor:


 


CAP ROCK ENERGY CORPORATION


500 West Wall,
Suite 400


Midland, Texas
79701


Attention:
President/CEO


Fax: (915) 684-0333


 


As to the
Mortgagee:


 


NATIONAL RURAL
UTILITIES


COOPERATIVE
FINANCE CORPORATION


2201 Cooperative
Way


Herndon, Virginia
20171-3025


Attention: Senior
Vice President - Member Services


Fax: (703)
709-6776


 





















 


Section
6.05. Severability. The invalidity of any one or more
phrases, clauses, sentences, paragraphs or provisions of this Mortgage shall
not affect the remaining portions hereof.


 


Section
6.06 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 Uniform Commercial Code, this Mortgage is hereby deemed a
“security agreement” a “financing statement” and a “fixture filing” under the
Uniform Commercial Code. The Mortgagor herein is the “debtor” and the Mortgagee
herein is the “secured party.” The mailing addresses of the Mortgagor as debtor
and of the Mortgagee as secured party are as set forth in Section 6.04 hereof.
The Mortgagor is an organization of the type and organized in the jurisdiction
set forth on the first page hereof. The cover page hereof accurately sets forth
the Mortgagor’s organizational identification number or accurately states that the
Mortgagor has none.


 


Section
6.07. Indemnification by Mortgagor of Mortgagee. The
Mortgagor agrees to indemnify and save harmless the Mortgagee against any
liability or damages which the Mortgagee may incur or sustain in the exercise
and performance of its rightful powers and duties hereunder. The obligation of
Mortgagor to reimburse and indemnify the Mortgagee hereunder shall be secured
by this Mortgage in the same manner as the Notes and all such reimbursements
for expense or damage shall be paid to the Mortgagee with interest at the rate
specified in Section 4.08 hereof.


 


Section
6.08. Counterparts. This Mortgage may be simultaneously
executed in any number of counterparts, and all said counterparts executed and
delivered, each as an original, shall constitute but one and the same instrument.


 


Section
6.09. Costs and Expenses: Mortgagor agrees to pay and be
liable for any and all expenses, including, but not limited to reasonable
attorney’s fees, court costs, receiver’s fees, costs of advertisement and agent’s
compensation, incurred by Mortgagee in exercising or enforcing any of its
rights hereunder. Such sums shall be secured hereby and shall be payable
forthwith, with interest thereon at the rate specified in Section 3.08 hereof.


 





















 


IN
WITNESS WHEREOF, CAP ROCK ENERGY CORPORATION, the Mortgagor,
has caused this Mortgage to be signed in its name and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized, and
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, as Mortgagee, has
caused this Mortgage to be signed in its name and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized, all as
of the day and year first above written.


 


	
   

  	
   

  	
  CAP ROCK ENERGY CORPORATION

  
	
   

  	
   

  	
   

  
	
  (SEAL)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Russell E. Jones

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Co-Chairman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/ Ronald W. Lyon

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Executed by the Mortgagor

  in the presence of:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Jackie Myden

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Robin Willeford

  	
   

  	
   

  	
   

  
	
  Witnesses



  	
   

  	
  

  NATIONAL RURAL UTILITIES

  COOPERATIVE FINANCE CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
  (SEAL)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Craig Colantoni

  	
   

  
	
   

  	
   

  	
   

  	
  Assistant Secretary-Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/ Kerry Rollins

  	
   

  	
   

  	
   

  
	
  Assistant
  Secretary - Treasurer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Executed by the Mortgagee

  in the presence of:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robert D. Stephens

  	
   

  	
   

  	
   

  
	
  Deepmala Rastogi

  	
   

  	
   

  	
   

  
	
  Witnesses

  	
   

  	
   

  	
   

  
								



 





















 


Appendix
A - Instruments Recital


 


The Maximum Debt Limit referred to in Section 1.01 is $200,000,000,00.


 


The instruments referred to in the preceding recitals are as follows:


 


1.             “Original Mortgage”:


 


	
  Mortgage Type:

  	
   

  	
  Mortgage Date:

  
	
   

  	
   

  	
   

  
	
  Supplemental Mortgage and Security Agreement

  	
   

  	
  05/15/73

  
	
   

  	
   

  	
   

  
	
  Supplement to Supplemental Mortgage and Security
  Agreement

  	
   

  	
  03/18/82

  
	
   

  	
   

  	
   

  
	
  Restated Mortgage and Security Agreement

  	
   

  	
  09/21/88

  
	
   

  	
   

  	
   

  
	
  Supplement to Restated Mortgage and Security
  Agreement

  	
   

  	
  05/17/90

  
	
   

  	
   

  	
   

  
	
  Restated Mortgage and Security Agreement

  	
   

  	
  03/30/93

  
	
   

  	
   

  	
   

  
	
  Second Restated Mortgage and Security Agreement

  	
   

  	
  10/24/95

  



 


2.             “Current Loan
Agreement” la that loan agreement dated as of even date herewith.


 


3.             ‘Current Notes’:


 


	
  Loan

  Designation

  	
   

  	
  Loan

  Amount

  	
   

  	
  Note

  Date

  	
   

  	
  Maturity

  Date

  
	
  TX 107-A-9052

  	
   

  	
  $

  	
  28,000,000.00

  	
   

  	
  As of even date herewith

  	
   

  	
  Five (5) years from the date hereof

  
								



 


3.             “Outstanding Loan
Agreement” are those loan agreements dated as of:


 


	
  Loan Designation(s)

  	
   

  	
  Date of Loan Agreement

  
	
  TX 107-A-9002

  	
   

  	
  07/08/74 (as amended 09/21/88 and as of even date
  herewith)

  
	
  TX 107-A-9004

  	
   

  	
  07/01/75 (as amended 11/13/83, 09/21/88 and as of
  even date herewith)

  
	
  TX 107-A-9008

  	
   

  	
  04/24/78 (as amended 09/21/88 and as of even date
  herewith)

  
	
  TX 107-A-9012

  	
   

  	
  10/23/81 (as amended 11/13/86, 09/21/88 and as of
  even date herewith)

  



 





















 


	
  TX 107-A-9013

  	
   

  	
  8/23/85 (as amended 9/21/88 and as of even date
  herewith)

  
	
  TX 107-A-9014-9017

  	
   

  	
  9/25/87 (as amended 9/21/88, 04/19/89 and as of even
  date herewith)

  
	
  TX 107-A-9018-9022

  	
   

  	
  03/22/90 (as amended as of even date herewith)

  
	
  TX 107-A-9024

  	
   

  	
  03/10/92 (as amended as of even date herewith)

  
	
  TX 107-A-9025

  	
   

  	
  03/10/92 (as amended as of even date herewith)

  
	
  TX 107-A-9026

  	
   

  	
  03/10/92 (as amended as of even date herewith)

  
	
  TX 107-A-9027

  	
   

  	
  03/10/92 (as amended as of even date herewith)

  
	
  TX 107-A-9028-9033

  	
   

  	
  03/30/93 (as amended as of even date herewith}

  
	
  TX 107-A-9034-9037

  	
   

  	
  03/30/93 (as amended as of even date herewith)

  
	
  TX 107-A-9043 (9047 - 9048)

  	
   

  	
  10/24/95 (as amended 10/28/97 and as of even date
  herewith)

  
	
  TX 107-A-9038 & 9044-9046

  	
   

  	
  06/24/97 (as amended as of even date herewith)

  
	
  TX 107-A-9039-9041

  	
   

  	
  12/13/94 (as amended as of even date herewith)

  
	
  TX 107-A-9050-9051

  	
   

  	
  06/23/00 (as amended as of even date herewith)

  
	
  TX 107-R-5104

  	
   

  	
  06/27/97 (as amended 06/26/00 and as of even date
  herewith)

  



 


5.             Outstanding Notes:


 


	
  Loan

  Designation

  	
   

  	
  Note

  Amount

  	
   

  	
  Note

  Date

  	
   

  	
  Maturity

  Date

  
	
  TX 107-A-9002

  	
   

  	
  $

  	
  158,000.00

  	
   

  	
  10/24/74 (substituted 09/21/88)

  	
   

  	
  10/21/09

  
	
  TX 107-A-9004

  	
   

  	
  $

  	
  565,000.00

  	
   

  	
  08/14/75 (substituted 08/20/87 and 09/21/08)

  	
   

  	
  08/14/10

  
	
  TX 107-A-9008

  	
   

  	
  $

  	
  2,330,000.00

  	
   

  	
  07/27/78 (substituted 09/21/88)

  	
   

  	
  07/27/13

  
	
  TX 107-A-9012

  	
   

  	
  $

  	
  3,692,000.00

  	
   

  	
  03/18/82 (substituted 08/20/87 and 09/21/88)

  	
   

  	
  03/18/17

  
	
  TX 107-A-9013

  	
   

  	
  $

  	
  4,186,316.00

  	
   

  	
  09/24/85 (substituted 09/21/88)

  	
   

  	
  09/24/20

  
	
  TX 107-A-9014

  	
   

  	
  $

  	
  5,161,290.00

  	
   

  	
  09/25/87 (substituted 09/21/88 and 04/19/89)

  	
   

  	
  09/25/22

  
	
  TX 107-A-9015

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  	
  09/25/87 (substituted 09/21/88 and 04/19/89)

  	
   

  	
  09/25/22

  
	
  TX 107-A-9016

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  	
  09/25/87 (substituted 09/21/88 and 04/19/89)

  	
   

  	
  09/25/22

  
	
  TX 107-A-9017

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  	
  09/25/87 (substituted 09/21/68 and 04/19/89)

  	
   

  	
  09/25/22

  
	
  TX 107-A-9018

  	
   

  	
  $

  	
  4,301,075.00

  	
   

  	
  03/22/90

  	
   

  	
  03/22/25

  
	
  TX 107-A-9019

  	
   

  	
  $

  	
  2,365,691.00

  	
   

  	
  03/22/90

  	
   

  	
  03/22/25

  



 





















 


	
  TX 107-A-9020

  	
   

  	
  $

  	
  4,301,075.00

  	
   

  	
  03/22/90

  	
   

  	
  03/22/25

  
	
  TX 107-A-9021

  	
   

  	
  $

  	
  3,763,441.00

  	
   

  	
  03/22/90

  	
   

  	
  03/22/25

  
	
  TX 107-A-9022

  	
   

  	
  $

  	
  3,225,806.00

  	
   

  	
  03/22/90

  	
   

  	
  03/22/25

  
	
  TX 107-A-9024

  	
   

  	
  $

  	
  846,411.00

  	
   

  	
  03/10/92

  	
   

  	
  03/10/27

  
	
  TX 107-A-9025

  	
   

  	
  $

  	
  846,411.00

  	
   

  	
  03/10/92

  	
   

  	
  03/10/27

  
	
  TX 107-A-9026

  	
   

  	
  $

  	
  846,411.00

  	
   

  	
  03/10/92

  	
   

  	
  03/10/27

  
	
  TX 107-A-9027

  	
   

  	
  $

  	
  846,411.00

  	
   

  	
  03/10/92

  	
   

  	
  03/10/27

  
	
  TX 107-A-9028

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  02/17/72 (substituted 03/30/93)

  	
   

  	
  02/17/07

  
	
  TX 1Q7-A-9030

  	
   

  	
  $

  	
  146,000.00

  	
   

  	
  10/16/79 (substituted 03/30/93)

  	
   

  	
  10/16/14

  
	
  TX 107-A-9031

  	
   

  	
  $

  	
  641,000.00

  	
   

  	
  06/04/81 (substituted 03/30/93)

  	
   

  	
  06/14/16

  
	
  TX 107-A-9034

  	
   

  	
  $

  	
  4,268,617.00

  	
   

  	
  03/30/93

  	
   

  	
  03/30/28

  
	
  TX 107-A-9035

  	
   

  	
  $

  	
  4,268,617.00

  	
   

  	
  03/30/93

  	
   

  	
  03/30/28

  
	
  TX 107-A-9036

  	
   

  	
  $

  	
  4,268,617.00

  	
   

  	
  03/30/93

  	
   

  	
  03/30/28

  
	
  TX 107-A-9037

  	
   

  	
  $

  	
  4,268,617.00

  	
   

  	
  03/30/93

  	
   

  	
  03/30/28

  
	
  TX 107-A-9038

  	
   

  	
  $

  	
  743,617.00

  	
   

  	
  04/23/86 (substituted 06/24/97)

  	
   

  	
  04/23/21

  
	
  TX 107-A-9039

  	
   

  	
  $

  	
  5,072,000.00

  	
   

  	
  12/13/94

  	
   

  	
  12/13/29

  
	
  TX 107-A-9040

  	
   

  	
  $

  	
  5,072,000.00

  	
   

  	
  12/13/94

  	
   

  	
  12/13/29

  
	
  TX 107-A-9041

  	
   

  	
  $

  	
  5,072,000.00

  	
   

  	
  12/13/94

  	
   

  	
  12/13/29

  
	
  TX 107-A-9044

  	
   

  	
  $

  	
  6,095,000.00

  	
   

  	
  06/24/97

  	
   

  	
  06/24/32

  
	
  TX 107-A-9045

  	
   

  	
  $

  	
  6,095,000.00

  	
   

  	
  06/24/67

  	
   

  	
  06/24/32

  
	
  TX 107-A-9046

  	
   

  	
  $

  	
  6,095,000.00

  	
   

  	
  06/24/97

  	
   

  	
  06/24/32

  
	
  TX 107-A-9047

  	
   

  	
  $

  	
  4,500,000.00

  	
   

  	
  10/24/95 (substituted 10/24/95)

  	
   

  	
  10/24/05

  
	
  TX 107-A-9048

  	
   

  	
  $

  	
  10,500,000.00

  	
   

  	
  10/24/95 (substituted 10/24/95)

  	
   

  	
  10/24/05

  
	
  TX 107-A-9050

  	
   

  	
  $

  	
  15,000,000.00

  	
   

  	
  06/23/00

  	
   

  	
  06/23/35

  
	
  TX 107-A-9051

  	
   

  	
  $

  	
  6,000,000.00

  	
   

  	
  06/23/00

  	
   

  	
  06/23/35

  



 





















 


Appendix B


 


(a)                                  The
Counties referred to in Section 2.01 are Counties of Andrews, Borden, Brown, Coleman,
Collin, Concho, Dawson, Ector, Fannin, Fisher, Glassoock, Howard, Hunt, Irion,
Martin, Mason, McCulloch, Menard, Midland, Mills, Mitchell, Nolan, Reagan, San
Saba, Scurry, Sterling, Tom Green and Upton in the State of Texas.


 


(b)                                 The
property referred to in the Granting Clause includes the following:


 


SEE ATTACHED


 





















 


The Existing
Electric Facilities are located in the following counties: Andrews, Dawson,
Borden, Ector, Midland, Martin, Howard, Upton, Glasscock, Reagan, Sterling, Tom
Green and Irion, all in Texas.


 


1.                                       Two
tracts of land described in a deed, dated April 12,1972, by Cap Rock Refrigeration
Cooperative, Inc., as grantor, to Cap Rock Electric Cooperative, Inc., as
grantee, and recorded in the office of the County Clerk of Martin County,
Texas, In Volume 143 on page 446.


 


2.                                       One
tract of land described in a deed dated April 22, 1960, by Cap Rock
Refrigeration Cooperative, Inc., as grantor, to Cap Rock Electric Cooperative,
Inc., as grantee, and recorded in the office of the County Clerk of Martin
County, Texas in Volume 82 on page 73.


 


3.                                       One
tract of land described in a deed, dated June 5, 1956, by City of Stanton,
Texas, as grantor, to Cap Rock Electric Cooperative, Inc., as grantee, and
recorded in the office of the County Clerk of Martin County, Texas in volume 74
on page 169.


 


4.                                       Two
tracts of land described in a deed dated January 27, 1944, by W. A. Koderli, as
grantor, to Cap Rock Electric Cooperative, Inc., as grantee, and recorded in
the office of the County Clerk of Martin County, Texas in Volume 50 on pages 94
and 95.


 


5.                                       One
tract of land described in a deed dated October 3, 1953, by Inez W. Luce and Ova
B. Webb, as grantors, to Cap Rock Electric Cooperative, Inc., as grantee, and recorded
in the office of the County Clerk of Martin County, Texas, in Volume 75 on page
399.


 


6.                                       One
tract of land described in a deed dated August 1, 1974, by City of Stanton,
Texas, as grantor, to Cap Rock Electric Cooperative, Inc., as grantee, and
recorded in the office of the County Clerk of Martin County, Texas in Volume
156 on page 453.


 


7.                                       One
tract of land described in a deed dated January 13, 1975, by R. C. Stewart, and
wife, Hazel Stewart, as grantors, to Cap Rock Electric Cooperative, Inc., as
grantee, and recorded in the office of the County Clerk of Martin County, Texas
in Volume 159 on page 494.


 


8.                                       One
tract of land described in a deed dated March 24, 1975, by Ervin A. Baumann, and
wife, Norma L. Baumann, as grantors, to Cap Rock Electric Cooperative, Inc., as
grantee, and recorded in the office of the County Clerk of Midland County,
Texas in Volume 591 on page 689.


 


9.                                       One
tract of land described in a deed dated May 7, 1975, by Lawrence E. Schwertner,
and wife, Arla Mae Schwertner, as grantors, to Cap Rock Electric Cooperative,
Inc., as grantee, and recorded in the office of the County Clerk of Reagan
County, Texas in Volume 59 on page 143.


 


10.                                 One
tract of land described in a deed dated April 17, 1978, by Fred J. Hoelscher
and wife, Ella Joy Hoelscher, as grantors to Cap Rock Electric Cooperative,
Inc., as grantee, and recorded in the office of the County Clerk of Glasscock
County, Texas, in Volume 166, page 582.


 


1





















 


11.                                 One
tract of land described in a deed dated May 8, 1978, by Cecil Wilkerson, et. al.,
as grantors to Cap Rock Electric Cooperative, Inc., as grantee, and recorded in
the office of the County Clerk of Glasscock County, Texas in Volume 167, pager
628.


 


12.                                 One
tract of land described in a deed dated May 9, 1978, by Ray B. Barrett, Jr. And
wife, Patricia T. Barrett, as grantee, and recorded in the office of the County
Clerk of Upton County, Texas in Volume 452, Page 30.


 


13.                                 One
tract of land described in a deed dated June 20, 1978, by E. E. Crittenden and wife,
Lottie L. Crittenden, as grantors, to Cap Rock Electric Cooperative, Inc., as grantee,
and recorded in the office of the County Clerk of Borden County, Texas, Volume
156, page 469.


 


14.                                 One
tract of land described in a deed dated December 19, 1980, by James d. Jones
and wife, Sharon Jones, as grantors, to Cap Rock Electric Cooperative, Inc., as
grantee, and recorded in the office of the County Clerk of Martin County,
Texas, Volume 202, page 694.


 


15.                                 One
tract of land described in a deed dated February 15, 1980, by Ruth Edward
Riser, as grantor, to Cap Rock Electric Cooperative, Inc., as grantee, and
recorded in the office of County Clerk of Martin County, Texas in Volume 192,
page 764.


 


16.                                 One tract of land described in a deed dated
June 4, 1981, by R.c. Stewart, as grantor, to Cap Rock Electric Cooperative, Inc., as grantee, and recorded in the
office of the County Clerk of Martin County, Texas in Volume 208, page 727.


 


17.                                 One tract of land described in a deed dated
January 8, 1982, by W. D. Stroud and wife, Geraldine Stroud, as grantors, to
Cap Rock Electric Cooperative, Inc., as grantee, and recorded in the office of
the County Clerk of Martin County, Texas, in Volume 215, page 659.


 


18.                                 One tract of land described in a deed dated
March 7, 1984, by Tri-City Beverages, as grantor, to Cap Rock Electric
Cooperative, Inc., as grantee, and recorded in the office of the County Clerk
of Martin County, Texas in Volume 238, page 396.


 


Together with all plants, works, structures, erections, reservoirs, dams,
buildings, fixtures and improvements now or hereafter located on any of the
properties conveyed by any and all aforesaid deeds mentioned above and all
tenements, hereditaments and appurtenances now or hereafter thereunto belonging
or in anywise appertaining.


 


The description of each of the properties conveyed by and through the
provisions of the aforesaid deeds is by reference made a part hereof as though
fully set forth at length therein.


 


Together with:


 


All properties
formerly owned by Lone Wolf Electric Cooperative, Inc., and transferred and
assigned to Cap Rock Electric Cooperative, Inc., pursuant to the terms of the
merger completed January 10, 1991, located in the following counties of Texas:


 


Howard, Borden,
Scurry, Fisher, Nolan and Mitchell;


 


2





















 


Tract I:
Being the West one hundred seventy-three feet (W 173’) of Lots Seven (7), Eight
(8), Nine (9), Ten (10), Eleven (11), and Twelve (12), in Block Thirty-four
(34), of the Dunn, Snyder and Moar Addition of the town of Colorado City,
Mitchell County, Texas, SAVE AND EXCEPT that part of Lots 11 and 12 deeded to
the State of Texas for highway purposes and recorded in Volume 2, Page
231, Deed Records of Mitchell County, Texas, said Lots 7, 8, 9, 10 and the
remainder of Lots 11 and 12, containing 2,096 acres of land and being more
particularly described as follows:


 


BEGINNING at an iron pin set for the Southwest corner of Lot 7 at the
intersection of Terrell Street and College Avenue;


 


THENCE along the East boundary line of said Terrell Street and the West
boundary line of Lots 7 through 12, N. 12 deg. 11’ W. 558.65 feet to a point
from whence an iron pin bears N. 12 deg. 11’E. 1.25 feet;


 


THENCE along the South ROW of State Highway 208 with a curve to the
right with a radius of 587.28 feet a chord of S. 79 deg. 30’ E. 187.5 feet to a
point from whence an iron pin bears S. 12 deg. 11’ E. 1.25 feet;


 


THENCE S. 12 deg 11’ E. 486.34 feet to an iron pin set on the North
boundary line of College Avenue;


 


THENCE S. 77 deg. 49’ W. along the North line of said College Avenue
173.0 feet to the PLACE OF BEGINNING and containing 2.096 acres of land, more
or less.


 


Tract II.
That certain 5.7 acres of land, more or less, out of Section No. 46, in Block
No. 26, T. & P. Ry. Co.
Survey, Cert. 2/1375, in Mitchell County, Texas, conveyed by that certain Deed
dated July 14, 1947, from E. H. Smith, et ux to Western Cottonoil Co., recorded
in Vol. 123, Page 353, Deed Records, Mitchell County, Texas, to which Deed, and
its record, reference is hereby made for all purposes, and said 5.7 acres of
land is more fully described as follows:


 


BEGINNING at the Northwest corner of said Section No. 46;


 


THENCE South 13 deg. East along the Southwesterly line of said Section
No. 46 and along the Northeasterly right-of-way line of the Colorado City
Robert Lee Highway 208, a distance of 812 feet, to the PLACE OF BEGINNING of
the tract conveyed hereby:


 


THENCE North 77 deg. East a distance of 520 feet to a stake for corner;


 


THENCE South 13 deg. East a distance of 486 feet to a stake for corner;


 


THENCE South 77 deg. West a distance of 500 feet to the Northeasterly
line of the right-of-way said Colorado City-Robert Lee Highway No. 208, for corner;


 


3





















 


THENCE in a Northwesterly direction along the Northeasterly line of the
right-of-way of said Colorado City-Robert Lee Highway No. 208, a distance of
487 feet to the PLACE OF BEGINNING.


 


Tract
III: Being that part of Block No. Thirty-four (34), of
the Dunn, Snyder and Moar addition to the Town of Colorado City, Mitchell
County, Texas, described as follows:


 


BEGINNING at the intersection of the West line of State Highway 208,
being the Colorado City-Robert Lee Highway and the South line of said Block No.
34, being also the North line of College Avenue, for the Southeast corner of
the tract thereby conveyed;


 


THENCE West along the South line of said block No. 34 and the North
line of College Avenue, a distance of 270 feet to a point in said South line of
Block No. 34, for the Southwest corner of this tract;


 


THENCE North on a line parallel with the West boundary line of said
Block No. 34, to a point in the South line of said Highway No. 208, for the
Northwest corner of this tract;


 


THENCE following the said line of said Highway No. 208 in a curved
southerly direction to the PLACE OF BEGINNING, the tract hereby conveyed being
all of that part of said Block No. 34, lying South and West of said Highway No.
208 and lying East of the tract of land heretofore conveyed to H. H. Houghston
by Deed recorded in Vol 115, Page 54, of the Deed Records of Mitchell County,
Texas; being the same property conveyed by Warranty Deed dated January 10,
1991, executed by Lone Wolf Electric Cooperative, Inc. as Grantor to Cap Rock Electric Cooperative, Inc.
as grantee said deed being recorded in Vol. 494 at page 41 of the Official
Public Records of Mitchell County, Texas; and specifically including all
easements, rights of way, and other real property interests, whether of record
or not, located in the counties of Howard, Borden, Scurry, Fisher, Nolan, and
Mitchell, Stale of Texas;


 


Together with all
plants, works, structures, erections, reservoirs, dams, buildings, fixtures and
improvements now or hereafter located on any of the properties conveyed by any
and all aforesaid deeds mentioned above or properties described above and all
tenements, hereditaments and appurtenances now or hereafter thereunto belonging
or in anywise appertaining.


 


Together with:


 


All properties
formerly owned by Hunt-Collin Electric Cooperative, Inc., and transferred and
assigned to Cap Rock Electric Cooperative, Inc., pursuant to the terms of the
merger completed December 8, 1992, located in the following counties of Texas:


 


Collin, Fannin and
Hunt;


 


4





















 


Tract 1:
Being a lot, tract or parcel of land situated in the Enos Murphy Survey,
Abstract No. 647, Hunt County, Texas, and being TRACT TWO described in the
Appointment of Substitute Trustee recorded in the Real Property Records of Hunt
County in Volume 230 at page 86 and being more particularly described as
follows:


 


BEGINNING at a 1⁄2 inch iron rod set at the Southwest corner of said
TRACT TWO, said corner being in the center of County Road No. 2740, said point
also being the Southwest corner of an 80 acre tract of land deeded to Asberry
by Greenwade and recorded in Volume 487, Page 23, Hunt County Deed Records.


 


THENCE North 00°59’39” East 2076.66 feel to a 1⁄2 inch iron rod set in
the Southwest right-of-way line of U.S. Hwy. 380, for a corner;


 


THENCE South 52°33’55” East with said right-of-way line 416.69 feet to
a 1⁄2 inch iron rod set for a corner;


 


THENCE South 48°55’00” East with said right-of-way line 2699.52 feet to
an iron rod set at the Northeast corner of said TRACT TWO for a corner;


 


THENCE South 02°23’45” West with said right-of-way line 30.35 feet to a
1⁄2 inch iron rod set at the
Southeast corner of said TRACT TWO, for a corner, said corner being in the
center of County Road No, 2740;


 


THENCE North 88°03’34” West with said center of County Road 2397.60
feet to the PLACE OF BEGINNING and containing 61.626 acres of land.


 


Tract 2:
BEGINNING at a steel rod found at the SW corner of said 20.025 acre tract, said
corner being in the Northeasterly ROW line of U.S. Hwy 69;


 


THENCE N 28°18’ W 1012.98 ft. along said Northeasterly ROW line and a
fence to a steel rod set for a corner;


 


THENCE N 89°08’55” E 1181.05 ft. to a steel rod set at a fence corner
at the NE corner of said 20.025 acre tract, for a corner;


 


THENCE S 0°10’27” E 403.59 ft. along a fence to a steel rod set in an E
line of said tract;


 


THENCE S 15°48’08” E 276.74 ft. along a fence to a steel rod set in an
E line of said 20.025 acre tract;


 


5





















 


THENCE S 30°14’ 19” E 215.41 ft. along said fence to a steel rod found
at a fence corner at the SE corner of said 20.025 acre tract, for a corner;


 


THENCE S 86°36’09” W 887.81 ft. along a fence in the S line of said
tract to return to the PLACE OF BEGINNING and containing 19.996 acres of land.


 


Together with all
plants, works, structures, erections, reservoirs, dams, buildings, fixtures and
improvements now or hereafter located on any of the properties conveyed by any
and all aforesaid deeds mentioned above or properties described above and all
tenements, hereditaments and appurtenances now or hereafter thereunto belonging
or in anywise appertaining.


 


Together with:


 


All properties
formerly owned by McCulloch Electric Cooperative, Inc., and transferred and
assigned to Cap Rock Electric Cooperative, Inc., pursuant to the terms of the
merger completed June 30, 1999, located in the following counties of Texas;


 


Brown, Coleman,
Concho, McCulloch, Mason, Menard, Mills, San Saba, and Tom Green;


 


1.               A certain tract of
land situated in the town of Richland Springs, San Saba County, described in a
certain deed, dated April 10, 1963 by Charles E. Taylor and Fanora May Taylor,
as grantors and recorded on April 13, 1963 in the Office of the Clerk of County
Court of San Saba County in the State of Texas in Volume 136, page 140.


 


2.               A certain tract of
land 60’ X 60’ described in a certain deed, dated January 2, 1947 by B. F. Wilkerson
and Mary Lillian Wilkerson, grantors and recorded on January 2, 1947 in the
Office of Clerk of County Court of Concho County in the State of Texas in
Volume 65, page 321.


 


3.               A certain tract of
land being 2.00 acres described in a certain deed dated December 17, 1980 by
Aubrey W. Harrell and Florence R. Harrell, as grantors and recorded on December
30, 1980 in the Office of the Clerk of McCulloch County in the State of Texas
in Deed Records, Volume 209, page 951.


 


4.               A
certain tract of land being 1.00 acres described in a certain deed dated
January 13, 1981 by Gertrude Dutton Harrison, grantor and recorded on January
14,1981 in the Office of the Clerk of McCulloch County, in the State of Texas
in Deed Records, Volume 210, Page 43.


 


5.               A certain tract of
land being 1.52 acres described in a certain deed, dated May 26, 1981 by James
R. Cromer and Alta J. Cromer, grantors and recorded on June 10,


 


6





















 


1981 in the Office
of the Clerk of San Saba County in the State of Texas in Deed Records, Volume
173, page 412.


 


6.               A certain tract of
land being 4.72 acres described in a certain deed dated July 31, 1984, by Rod
Harrell and Bille Ann Harrell,
grantor and recorded on August 2, 1984 in the office of the Clerk of McCulloch
County in the State of Texas to Deed Records, Volume 224, page 49.


 


7.               A certain tract of
land being 1.001 acres of land, more or less, in J. R. Welsh Survey #2,
Abstract #1334, described in that certain deed dated April 20, 1986, by Clinton
W. Sedberry and wife, Ollie Sedberry, grantors, and recorded in the Office of
the Clerk of San Saba County in the State of Texas in Deed Records, Volume 190,
Page 438.


 


8.               A certain tract of
land being 1.715 acres of land, more or less, in Indianola R.R. Co. Survey No.
13, Abstract No. 518 described in a certain deed, dated July 23, 1992 by Arnold
R. Tyler and Judy Tyler, grantors and recorded on July 23, 1992 in the Office of
the Clerk of Concho County in the State of Texas in Deed Records, Volume 152, pages
34 and 35.


 


Together with all
plants, works, structures, erections, reservoirs, dams, buildings, fixtures and
improvements now or hereafter located on any of the properties conveyed by any
and all aforesaid deeds mentioned above or properties described above and all
tenements, hereditaments and appurtenances now or hereafter thereunto belonging
or in anywise appertaining.


 


7





















 


Appendix
C -Excepted Property


 


NONE


 





















 




	
  STATE OF TEXAS

  	
  )

  
	
   

  	
  ) SS

  
	
  COUNTY OF Midland

  	
  )

  






 


On this 7th
day of February 2003, before me appeared Russell E. Jones and Ronald W. Lyon
personally known by me and, having been duly sworn by me, did say that they are
the Co-Chairman and Secretary, respectively, CAP ROCK ENERGY CORPORATION, a
Texas corporation, and that the seal affixed to the foregoing instrument in the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors,
and the said Russell E. Jones and Ronald W. Lyon 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.


 


	
   

  	
   

  	
  /s/ Leslie A. Melson

  
	
  (Notarial Seal)



  	
   

  	
  Notary Public

  
	
   

  	
  

  	
  LESLIE A. MELSON

  Notary Public

  STATE OF TEXAS

  My Comm. Exp. 06/22/2006

  	
   

  
	
  My commission expires:

  
	
   

  
	
   

  
	
   

  
					



 




	
  COMMONWEALTH OF VIRGINIA

  	
  )

  
	
   

  	
  ) SS

  
	
  COUNTY OF FAIRFAX

  	
  )

  






 


BEFORE ME, a
Notary Public, in and for the Commonwealth of Virginia, appeared in person
CRAIG COLANTONI, Assistant Secretary-Treasurer of National Rural Utilities
Cooperative Finance Corporation, a cooperative association incorporated under
the laws of the District of Columbia, 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 23rd day
of January 2003.


 


	
   

  	
  /s/ Evette Johnson

  	
  Evette Johnson

  
	
  (Notarial Seal)

  	
  Notary Public

  
	
   

  	
  Commissioned as:

  
	
  My commission expires:

  	
  Evette Farmer

  
	
   

  	
   

  
	
  My Commission Expires 9/30/04

  	
   

  
	
   

  	
   

  
	
   

  	
  EVETTE FARMER

  



 


8