Document:

ex_98828.htm

Exhibit 10.1

 

 

 

AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered into as of October 30, 2017 among Kona Grill, Inc., a Delaware corporation (the “Borrower”), the Lenders (as defined below) party hereto and KeyBank National Association, as the administrative agent (the “Administrative Agent”).

 

RECITALS:

 

A.     The Borrower, the Administrative Agent and the lenders from time to time party thereto (the “Lenders”) are parties to the Second Amended and Restated Credit Agreement, dated as of October 12, 2016 (as previously amended and as the same may from time to time be further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

 

B.     The Borrower, the Administrative Agent and the Lenders party hereto desire to amend the Credit Agreement to modify certain provisions thereof as set forth herein.

 

AGREEMENT:

 

In consideration of the premises and mutual covenants herein and for other valuable consideration, the Borrower, the Administrative Agent and the Lenders agree as follows:

 

Section 1.       Definitions. Unless otherwise defined herein, each capitalized term used in this Amendment and not defined herein shall be defined in accordance with the Credit Agreement.

 

Section 2.       Amendments.

 

(i)     Section 4.02 of the Credit Agreement is hereby amended by inserting the following new clause (c) at the end thereof:

 

(c)    Other Matters. The Borrower and each Subsidiary Guarantor shall have provided a description of the uses of such Credit Event, the proposed repayment terms of the proceeds of such Credit Event and shall have satisfied such other conditions as may be reasonably required by the Administrative Agent, in each case, reasonably acceptable to the Lenders.

 

(ii)     Section 6.01 of the Credit Agreement is hereby amended by inserting the following new clause (r) at the end thereof:

 

(r)    Monthly Reporting. As soon as available and in any event within 20 days after the end of each calendar month, (i) the unaudited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of the end of such monthly period and the related unaudited consolidated and consolidating statements of income and unaudited consolidated statements of cash flows for such monthly period and/or for the fiscal year to date, and setting forth, in the case of such unaudited consolidated and consolidating statements of income and unaudited consolidated statements of cash flows, comparative figures for (x) the related periods in the prior fiscal year and (y) the projections most recently delivered to the Administrative Agent and the Lenders, and which shall be certified on behalf of the Borrower by the Chief Financial Officer of the Borrower, subject to changes resulting from normal year-end audit adjustments, in a form consistent with the certification delivered by the Borrower under Section 6.01(b) above, and (ii) the covenant compliance projections, including the principal assumptions upon which such projections are based.

 

 

 

 

(iii)     Section 7.06(c) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

 

(c)     [Reserved]; 

 

(iv)     Article VII of the Credit Agreement is hereby amended by inserting the following new Section 7.16 at the end thereof:

 

Section 7.16     Limitation on Capital Expenditures. No Credit Party will, nor will any Credit Party permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Capital Expenditures other than such Capital Expenditures set forth in a Capital Expenditure proposal submitted from time to time by the Borrower and approved by the Lenders in their sole discretion.      

 

Section 3.      Effectiveness.

 

3.1     Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

 

(i)      Amendment Executed. This Amendment shall have been executed by the Borrower, each Subsidiary Guarantor, the Administrative Agent and the Required Lenders, and counterparts hereof as so executed shall have been delivered to the Administrative Agent.

 

(ii)      Officer’s Certificate. The Administrative Agent shall have received an Officer's Certificate from the Borrower certifying that, after giving effect to this Amendment, (a) all representations and warranties of the Credit Parties contained herein or in the other Loan Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the Amendment Effective Date and the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties shall have been true and correct in all material respects as of the date when made, and (b) no Default or Event of Default has occurred and is continuing.

 

(iii)     Fees and Expenses. The Administrative Agent shall have received (a) all expenses (including reasonable fees and disbursements of counsel to the Administrative Agent) in connection with the preparation, negotiation and effectiveness of this Amendment, and (b) any other amounts due and payable by the Borrower under the Credit Agreement on or prior to the date hereof.

 

(iv)     Other Matters. The Borrower and each Subsidiary Guarantor shall have provided such other items and shall have satisfied such other conditions as may be reasonably required by the Administrative Agent.

 

3.2     Amendment Effective Date. This Amendment shall be effective as of the date hereof (the “Amendment Effective Date”) upon the satisfaction of the conditions precedent set forth above. Unless otherwise specifically set forth herein, each of the amendments and other modifications set forth in this Amendment shall be effective on and after the Amendment Effective Date.

 

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Section 4.      Miscellaneous.

 

4.1     Representations and Warranties. The Borrower and each Subsidiary Guarantor, by signing below, hereby represents and warrants to the Administrative Agent and the Lenders, on its own behalf and not on behalf of the other Credit Parties, that:

 

(i)     the Borrower and each Subsidiary Guarantor has the legal power and authority to execute and deliver this Amendment;

 

(ii)     the officers executing this Amendment on behalf of the Borrower and each Subsidiary Guarantor have been duly authorized to execute and deliver the same and bind the Borrower or such Subsidiary Guarantor with respect to the provisions hereof;

 

(iii)     the execution and delivery hereof by the Borrower or each Subsidiary Guarantor and the performance and observance by the Borrower and each Subsidiary Guarantor of the provisions hereof do not violate or conflict with the Organizational Documents of the Borrower or any Subsidiary Guarantor or any law applicable to the Borrower or any Subsidiary Guarantor or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against the Borrower or such Subsidiary Guarantor;

 

(iv)     no Default or Event of Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof;

 

(v)     neither the Borrower nor any Subsidiary Guarantor has any claim or offset against, or defense or counterclaim to, any obligations or liabilities of the Borrower or such Subsidiary Guarantor under the Credit Agreement or any other Loan Document;

 

(vi)     this Amendment constitutes a valid and binding obligation of the Borrower and each Subsidiary Guarantor in every respect, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies; and

 

(vii)     each of the representations and warranties set forth in Article V of the Credit Agreement is true and correct in all material respects as of the date hereof, except to the extent that any thereof expressly relate to an earlier date.

 

4.2     Credit Agreement Unaffected. Each reference to the Credit Agreement or in any other Loan Document shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Credit Agreement shall remain in full force and effect and be unaffected hereby. This Amendment is a Loan Document. 

 

4.3      Subsidiary Guarantor Acknowledgment. Each Subsidiary Guarantor, by signing this Amendment:

 

(i)     consents and agrees to and acknowledges the terms of this Amendment;

 

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(ii)     acknowledges and agrees that all of the Loan Documents to which such Subsidiary Guarantor is a party or otherwise bound shall continue in full force and effect and that all of such Subsidiary Guarantor’s obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment;

 

(iii)     represents and warrants to the Administrative Agent and the Lenders that all representations and warranties made by such Subsidiary Guarantor and contained in this Amendment or any other Loan Document to which it is a party are true and correct in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of the Amendment Effective Date, except to the extent that any thereof expressly relate to an earlier date; and

 

(iv)     acknowledges and agrees that (A) notwithstanding the conditions to effectiveness set forth in this Amendment, such Subsidiary Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to which such Subsidiary Guarantor is a party to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (B) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Subsidiary Guarantor to any future amendments or modifications to the Credit Agreement.

 

4.4     Waiver. The Borrower and each Subsidiary Guarantor, by signing below, hereby waives and releases the Administrative Agent, each of the Lenders and their respective Related Parties from any and all claims, offsets, defenses and counterclaims of which the Borrower and any Subsidiary Guarantor is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.

 

4.5     Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, amend, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Credit Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective solely with respect to the matters expressly referred to herein.

 

4.6     Entire Agreement. This Agreement, together with the Credit Agreement and the other Loan Documents, integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.

 

4.7     Counterparts This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

 

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4.8     Governing Law. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK GOVERNS THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

4.9     JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS RELATING TO ANY OF THE FOREGOING), OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

[Signature pages follow.]

 

 

 

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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.

 

	 	
			KONA GRILL, INC., as the Borrower 

			 

			By:_______/s/ Berke Bakay_____________________

			Name: Berke Bakay

			Title: Chief Executive Officer and President

			

 

 

 

 

 

	 	
			keybank national association, as the 

			Administrative Agent and as a Lender

			 

			By:    /s/ Quinn Kelly                                                     

			Name: Quinn Kelly

			Title: Vice President

			
	 	 

 

 

 

 

	 	
			ZB, N.A. DBA ZIONS FIRST NATIONAL BANK, as

			a Lender

			 

			By: /s/ Matt A. Johnson                                                    

			Name: Matt A. Johnson

			Title: Vice President

			

 

 

 

 

	
			Each of the undersigned acknowledge the terms of and consent to the foregoing:

				 

 

KONA RESTAURANT HOLDINGS, INC.,

KONA SUSHI, INC.,

KONA MACADAMIA, INC.,

KONA BALTIMORE, INC.,

KONA GRILL INTERNATIONAL HOLDINGS, INC.,

KONA GRILL INTERNATIONAL, INC.,

KONA GRILL PUERTO RICO, INC.,

   each as a Subsidiary Guarantor

 

 

By:___/s/ Berke Bakay___________________

Name: Berke Bakay

Title: President

 

 

KONA TEXAS RESTAURANTS, INC.,

   as a Subsidiary Guarantor

 

 

By:___/s/ Christi Hing____________________

Name: Christi Hing

Title: SecretaryExhibit 4.1

 

MEMBER CAPITAL SECURITIES, SERIES 2017,
MAY NOT BE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (“NATIONAL
RURAL”) AND ONLY NATIONAL RURAL’S VOTING MEMBERS MAY PURCHASE AND HOLD THE MEMBER CAPITAL SECURITIES, SERIES 2017.
ANY PURPORTED TRANSFER OF MEMBER CAPITAL SECURITIES, SERIES 2017, WITHOUT NATIONAL RURAL’S PRIOR WRITTEN CONSENT WILL BE
VOID AB INITIO. 

 

Certificate No.:

 

PRINCIPAL AMOUNT:

 

INTEREST RATE:

 

MATURITY DATE:

 

ISSUE DATE:

 

INTEREST PAYMENT DATES:

 

REGULAR RECORD DATES:

 

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION

 

MEMBER CAPITAL SECURITIES

 

SERIES 2017

 

National Rural Utilities
Cooperative Finance Corporation, a cooperative association duly organized and existing under the laws of the District of Columbia
(herein referred to as the “Company,” which term includes any successor Person under the Indenture), for value received,
hereby promises to pay to              , or registered assigns, the
principal sum of                  on the Maturity
Date set forth above and to pay interest thereon as set forth below, until the principal hereof is paid or made available for payment.

 

Interest on the member
capital securities, series 2017 (the “Securities”), will be payable in arrears on the Interest Payment Dates set forth
above of each year, and at maturity, commencing on                 
    , 20XX, at the rate of   % per annum.

 

The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will be payable to, as provided in such Indenture, the Person
in whose name this Security is registered at the close of business on the Regular Record Dates set forth above of each year. Interest
will be paid on such principal sum from the Maturity Date or from the most recent Interest Payment Date until the principal amount
thereof becomes due and payable.

 

Reference is hereby made
to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have
the same effect as if forth at this place.

 

Unless the certificate
of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

     

     

    

 

IN WITNESS WHEREOF, the Company has caused
this instrument to be duly executed.

 

	 	NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
	 	 
	 	 
	 	By:	

	 	Name: 	J. Andrew Don
	 	Title:	
        Senior Vice President &

        Chief Financial Officer

 

	ATTEST:	 
	 	 
	 	 
	Assistant Secretary-Treasurer	 

 

     

     

    

 

CERTIFICATE OF AUTHENTICATION

 

Dated:                  

   

This is one of the Securities
of the series designated herein referred to in the within-mentioned Indenture.

 

	 	U.S. BANK NATIONAL ASSOCIATION
	 	 
	 	 	 
	 	By:	

	 	 	Authorized Signatory

 

     

     

    

 

REVERSE OF SECURITY 

 

This Security is one
of a duly authorized issue of subordinated debt securities of the Company (the “Series 2017 member capital securities,”
and, herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of
October 15, 1996, as amended (herein called the “Indenture,” which term shall have the meaning assigned to it
in such instrument), between the Company and U.S. Bank National Association, as successor trustee (herein called the “Trustee,”
which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of
the series designated on the face hereof.

 

The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months.

 

In the event that any
date on which interest is payable on the Securities is not a Business Day, then payment of the interest payable on such date will
be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the following month, such payment will be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date. A “Business Day” is any week day other than a
day on which banking institutions in the Borough of Manhattan, City and State of New York are authorized by law to close.

 

Any such interest not
so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner, as more fully provided in the Indenture referred to on the reverse hereof.

 

Each Security will be
issued in certificated form. Payment of the principal of and any interest on this Security payable at maturity or upon redemption
will be made in immediately available funds at the office of the paying agent in the Borough of Manhattan, City and State of New
York. Payments in immediately available funds will be made only if the certificated Security is presented to the paying agent in
time for the paying agent to make payments in immediately available funds in accordance with normal procedures. Interest on the
Security will be paid by wire transfer in immediately available funds, but only if appropriate instructions have been received
in writing by the paying agent on or prior to the applicable regular record date for the payment of interest. If no instructions
have been received in writing by the paying agent, the funds will be paid by check mailed to the address of the person entitled
to such interest.

 

The Securities of this
series are subject to redemption upon not less than 30 nor more than 60 days’ notice by mail, at any time on or after the
date that is ten years from the Issue Date set forth on the front of this Security, as a whole or in part, at the election of the
Company, at a Redemption Price equal to 100% of the principal amount to be redeemed, together in the case of any such redemption
with accrued interest to, but not including, the Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holder of such Security, or one or more Predecessor Securities, of record at the
close of business on the related Regular Record Date referred to on the face hereof, all as provided in the Indenture.

 

In the event of redemption
of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

 

The indebtedness evidenced
by this Security is unsecured and subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness,
which shall include all subordinated indebtedness of the Company that may be held by or transferred to non-members of the Company,
and this Security is issued subject to the provisions of the Indenture with respect thereto. The Securities of this series will
rank (i) pari passu with the Company’s member subordinated certificates and the Company’s other subordinated indebtedness
that may only be held by or transferred to the Company’s members, including previously issued and outstanding member capital

 

     

     

    

 

securities and (ii) senior to the Company’s unretired patronage capital. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints
the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby waives all
notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of such Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions.

 

The Indenture contains
provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth
in the Indenture.

 

If an Event of Default
with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the Indenture.

 

In addition to the events
of default set forth in the Indenture, the following will constitute an Event of Default under the Indenture with respect to the
Securities: the Company shall pay any dividend or interest on, or principal of, or redeem, purchase, acquire, retire or make a
liquidation payment with respect to, any Members’ Subordinated Certificates, Members’ Equity or patronage capital,
if such payment is made during an Extension Period, and either (i) such Extension Period has not expired or been terminated
or (ii) the Company has not made all payments due on the Securities as a result of such expiration or termination.

 

No payment will be made
in respect of the Securities if, at the time of such payment or immediately after giving effect thereto, (i) there exists
a default by the Company in the payment of principal or mandatory prepayments or premium, if any, of sinking funds or interest
on any senior or subordinated indebtedness (as defined in the instrument under which the same is outstanding) of the Company, or
(ii) there shall have occurred an event of default (other than a default in the payment of principal, premium, if any, mandatory
prepayments, sinking funds or interest) with respect to any senior or subordinated indebtedness (as defined in the instrument under
which the same is outstanding) permitting the holders thereof (or of the indebtedness secured thereby) to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall not have ceased to exist.

 

The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company
and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of not less than
a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities
of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon
such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

 

As provided in and subject
to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall
have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series,
the Holders of not less than 33 1/3% in aggregate principal amount of the Securities of this series at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in aggregate
principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or
interest hereon on or after the respective due dates expressed herein.

 

     

     

    

 

No reference herein to
the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.

 

The Company may at its
option at any time and from time to time during the term of the Securities of this series defer the interest payment period for
a period not exceeding 10 consecutive semi-annual interest payments (or an equivalent period of quarterly or other interest payment
periods) (a “Deferral Period”), and at the end of such Deferral Period, the Company shall pay all interest then accrued
and unpaid (together with interest thereon at the same rate as specified for the Securities of this series to the extent permitted
by applicable law) through the last day of such Deferral Period, provided that if any principal amount of this Security is paid
on such day, then not including interest for such day with respect to such principal amount; provided, that during such Deferral
Period the Company may not declare or pay any dividend or interest on, or principal of, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its Members’ Subordinated Certificates, Members’ Equity or patronage capital.
Prior to the termination of any such Deferral Period, the Company may further defer the payment of interest, provided that such
Deferral Period, together with all such previous and further deferrals thereof, may not exceed 10 consecutive semi-annual interest
payment periods (or an equivalent period of quarterly or other interest payment periods) or extend beyond the Stated Maturity of
the Securities of this series. Upon the termination of any such Deferral Period and the payment of all amounts then due, the Company
may elect a new Deferral Period, subject to the above conditions. No interest during a Deferral Period, except at the end thereof,
shall be due and payable. The Company shall give the Holder of this Security notice of its intent to defer payment of interest
in writing at least ten Business Days before the earlier of (i) the next interest payment due date and (ii) the date
CFC is required to give notice to holders of the Securities of the record or payment date for such interest payment.

 

The Securities of this
series are issuable only in registered form without coupons and in minimum denominations of $25,000 and integral multiples of $5,000
in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series
are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor and of authorized denominations,
as requested by the Holder surrendering the same.

 

No service charge shall
be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

 

The Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner
hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall
be affected by notice to the contrary.

 

The Securities may not
be transferred without the Company’s prior written consent and only the Company’s voting members may purchase and hold
the securities. Any purported transfer of the Securities without the Company’s prior written consent will be void ab initio.

 

All terms used in this
Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

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