Document:

I

                                                             LOAN AGREEMENT

          AGREEMENT,   dated  March  30,  1993  ,  between  CAP  ROCK   ELECTRIC
COOPERATIVE,  INC., ("Borrower"), a corporation organized and existing under the
laws  of  the  State  of  Texas  (the  "State")  and  NATIONAL  RURAL  UTILITIES
COOPERATIVE  FINANCE CORPORATION  ("CFC"), a corporation  organized and existing
under the laws of the District of Columbia.

                                    RECITALS

          WHEREAS, the Borrower has applied to CFC for four loans to finance, in
part,  the Project and to purchase  LCTCs and CFC is willing to make such a loan
to the Borrower on the terms and conditions stated herein; and

          WHEREAS,  the  Borrower  four (4)  Secured  Promissory  to evidence an
indebtedness Commitment;  and has agreed to enter into four loans and to execute
Notes (each  representing  a separate loan with CFC) in the aggregate  principle
amount of the CFC

     WHEREAS,  the Borrower is the surviving entity in a merger with Hunt-Collin
Electric Cooperative, Inc; and

          WHEREAS,  the Borrower will use the proceeds  hereunder to finance its
1993-1994 workplan and prepay Hunt-Collin Electric Cooperative Inc.'s REA debt;

          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

          "Adjustment  Date" shall mean the date determined by CFC approximately
seven years after the first Advance.

     "Advance" or "Advances" shall mean advances by CFC to Borrower  pursuant to
the. terms and conditions of this Agreement.

          "Amortization Basis Date" shall mean the earlier of (a) two years from
the date  hereof  or (b) the date on which  the CFC  Commitment  has been  fully
advanced.

          "Business Day" shall mean any day that CFC is open for business.

          "CFC  Commitment"  shall have the  meaning  as  defined in  Schedule 1
hereto.

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    "CFC                                   Fixed  Rate"  shall  mean such  other
                                           fixed rate as is then  available  for
                                           loans similarly  classified  pursuant
                                           to  CFC's   policies  and  procedures
                                           -then in effect.

          "CFC  Fixed Rate Term"  shall  mean the  specific  period of time that
either a CFC Fixed Rate or the CFC Standard Seven Year Fixed Rate is in effect,

          "CFC Standard Seven Year Fixed Rate" shall mean the CFC long-term rate
at the time of each  Advance  for loans  similarly  classified  pursuant  to the
long-term loan programs established by CFC from time to time.

          "CFC  Variable  Rate"  shall  mean the  rates  established  by CFC for
variable  interest rate long-term loan programs  established by CFC from time to
time.

         "Conversion Request" shall mean a request of the Borrower's President,
General  Manager or Board of Directors,  in form and substance  satisfactory  to
CFC, that requests an interest rate conversion.

          "DSC" or "Debt Service Coverage Ratio" shall mean the ratio determined
as follows:  for each calendar year add (I) Patronage  Capital or Margins of the
Borrower,  (ii) Interest  Expense (as computed in accordance with the principles
set forth in the  definition  of Times  Interest  Earned  Ratio  herein)  of the
Borrower and (iii)  Depreciation and Amortization  Expense of the Borrower,  and
divide the total so  obtained by an amount  equal to the sum of all  payments of
principal and interest  required to be made on account of Total  Long-Term  Debt
during  such  calendar  year;  provided,  however,  that in the  event  that any
Long-Term  Debt (being any amount  included in Total  Long-Term Debt computed as
provided above) 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  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  required to be made during the  following  year on account of such
refinancing debt, (Capitalized terms used herein are defined in the Mortgage.)

          "Equity" shall mean the aggregate of Mortgagor's  Equities and Margins
as computed pursuant to Generally Accepted Accounting Principles

     "LCTC" or  "LCTCs"  shall  mean the Loan  Capital  Term  Certificate(s)  as
described in Section S.D. hereto.

          "Maturity Date" shall have the meaning as defined in each Note.

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

          "Mortgaged  Property"  shall  have  the  meaning  as  defined  in  the
Mortgage.

<PAGE>

          "Note" or "Notes" shall mean promissory notes executed by the Borrower
in the form of Exhibits A hereto and each in the principal  amounts as set forth
in Schedule 1 hereto.

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

          "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.

          "Project"  shall  mean the  facility  being  financed  by this loan as
described in Schedule 1 hereto.

          "REA" shall mean the Rural Electrification Administration of the
           United States of America, Department of Agriculture.
         "Termination Date" shall mean a date four years after the date hereof.

          "TIER" or "Time Interest Earned Ratio" shall mean the ratio determined
as follows:  for each calendar year: add (i) Patronage Capital or Margins of the
Borrower (ii) Interest Expense on Total Long-Term Debt of the Borrower and (iii)
taxes paid,  if any,  based upon income  during the year and divide the total so
obtained  by  Interest  Expense  of the  Borrower,  provided,  however,  that 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 Equities and Margins.
(Capitalized terms used herein are defined in the Mortgage.)

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

          Section 2.1.              The Borrower represents and warrants that:

          A. Good Standing.  The Borrower is a corporation duly incorporated and
validly existing and in good corporate  standing under the laws of the State, is
duly  qualified  in those  states in which it is  required  to be  qualified  to
conduct its business and has corporate power to make and perform this Agreement,
to borrow hereunder and to give security as provided for herein.

     B.  Authority.  The execution,  delivery and performance by the Borrower of
this Agreement,  each Note (as hereinafter defined) and the Mortgage (as defined
in  Schedule 1 hereto)  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 By-Laws of
the  Borrower  or result in a breach  of, or  constitute  a default  under,  any
agreement,  indenture or other instrument to which the Borrower is a party or by
which it may be bound.

<PAGE>

          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 hereto,  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.

     B. Location of Office.  The principal place of business of the Borrower and
the office where its records concerning accounts and contract rights are kept is
identified in Schedule 1 hereto.

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

          C. 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, except as disclosed in writing to CFC prior to the date
hereof.

     H. Required Approvals. No license,  consent or approval of any governmental
agency or  authority  is  required  to enable  the  Borrower  to enter into this
Agreement or to perform any of its  obligations  provided  for herein  except as
disclosed in Schedule 1 hereto.

     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 the 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

<PAGE>

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.  The obligation of the Borrower to repay
the  Advances  shall be  evidenced  by the Note in the  principal  amount of the
unpaid  principal  amount of the  Advances  from time to time  outstanding.  The
Borrower  shall give CFC written  notice of the date on which each Advance is to
be made.  Advances made by CFC pursuant to this  Agreement  shall be endorsed by
CFC on the reverse side of the  appropriate  Note on or before any assignment or
transfer thereof by CFC.

          Section  3.2.  Application  of Advances.  The Borrower  shall give CFC
prior written notice of the date on which an Advance is to be made.  Prior to an
Advance,  Borrower  shall notify CFC in writing how the Advance is to be applied
with respect to each Note. In the event  Borrower fails to provide CFC with said
notice, the Advance shall be applied sequentially to each Note in the order they
are listed in Schedule 1 attached hereto.

     Section 3.3. Interest Rate and Payment. Each Note shall be payable and bear
interest as follows:

     A.  Payments and  Amortization.  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
principal and interest in the amounts shown in the Payment Notice, shall be paid
on each Payment Date;  except that if not sooner paid, any amount due on account
of the  unpaid  principal,  interest  accrued  thereon  or fees shall be due and
payable on the  Maturity  Date.  On or after the  Amortization  Basis Date,  and
thereafter  at least  quarterly,  CFC will  furnish  to the  Borrower  a Payment
Notice, Such Payment Notice shall be sent to the Borrower at least ten (10) days
before the next ensuing Payment Date.

Principal  will be amortized in accordance  with the method stated in Schedule 1
hereto. The amortization of the principal  outstanding will be calculated by CFC
using one of the following  types of interest  rates which  corresponds--to  the
interest rate selected by Borrower:

     (i) the CFC  Standard  Seven  Year Fixed Rate in effect on the date of such
Advance;

          (ii)    a CFC Fixed Rate in effect on the date of such Advance; or

          (iii)  the CFC  Variable  Rate in effect on the first day of the first
quarter in which principal is due.

<PAGE>

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

          3. Application of Payments. Each payment shall be applied first to any
charges  then due on the  appropriate  Note,  second to interest  accrued on the
principal amount to the due date of such payment on the appropriate Note (or, at
the election of the holder of such 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 appropriate Note according to an amortization  schedule  provided to
Borrower from CFC.

          C.  Election  of Interest  Rate.  For each loan and prior to the first
Advance or as appropriate  after the first Advance,  the Borrower must select in
writing one of the following  interest  rates:  (i) the CFC Standard  Seven Year
Fixed Rate;  (ii) a CFC Fixed Rate; or (iii) the CFC Variable Rate. In the event
the Borrower  does not select an interest  rate in writing when the CFC Standard
Seven Year Fixed Rate or a CFC Fixed Rate is subject to repricing, then Advances
shall bear interest  according to CFC's then  available  interest rate repricing
policies.

Interest 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, if the loan bears interest at
either the CFC  Standard  Seven Year Fixed  Interest  Rate or a CFC Fixed  Rate,
interest  shall be computed on the basis of a 30-day month and 360-day  year. If
the loan bears interest at the CFC Variable Rate, interest shall be computed for
the actual number of days elapsed on the basis of a year of 365 days.

          (i) Fixed Rate.  If the Borrower  elects a fixed rate,  the rate shall
equal either (x) the CFC Standard Seven Year Fixed Rate or (y) a CFC Fixed Rate.
In the event the Borrower  selects either the CFC Standard Seven Year Fixed Rate
or a CFC Fixed  Rate,  such rate  shall be in effect  for a CFC Fixed Rate Term.
During the CFC Fixed Rate Term,  all  Advances  shall bear  interest at the rate
then in effect associated with such CFC Fixed Rate Term.

                           (a) Repricing of CFC Standard  Seven Year Fixed Rate.
          The  CFC  Standard   Seven  Year  Fixed  Rate  shall  apply  until  an
          Adjustment-  Date.  CFC shall  provide  Borrower with at least 60 days
          prior written notice of an Adjustment  Date. After an Adjustment Date,
          the CFC  Standard  Seven Year Fixed  Rate  shall be  computed  in like
          manner and fixed by CFC from time to time. CFC will not change the CFC
          Standard  Seven Year  Fixed Rate  without  giving the  Borrower  prior
          written notice.

                           (b) Repricing of a CFC Fixed Rate.  CFC shall provide
           the Borrower with at least 60 days prior  written  notice of the date
           on which a CFC Fixed Rate is no longer in effect.  Pursuant  to CFC's
           policies of general application for such repricing,  the Borrower may
           choose any of the interest rate options then  available for similarly
           classified borrowers repricing from a CFC Fixed Rate.

<PAGE>

                           (ii) CFC Variable Rate. If the Borrower  elects a CFC
           Variable Rate,  such CFC Variable Rate shall apply until the Maturity
           Date of the appropriate Note unless the Borrower elects to convert to
           the CFC Standard  Seven Year Fixed Rate or a CFC Fixed Rate  pursuant
           to the terms  hereof,  In the event  Borrower  selects a CFC Variable
           Rate,  such rate shall be applicable to the entire amount advanced or
           to be advanced on that loan.

          Section 3.4,         Conversion of Interest Rates.

A.   CFC  Variable  Rate to CFC  Standard  Seven  Year Fixed Rate or a CFC Fixed
     Rate.  For each loan,  the Borrower may at any time request to convert from
     the CFC Variable  Rate to the CFC  Standard  Seven Year Fixed Rate or a CFC
     Fixed Rate by  submitting to CFC a Conversion  Request.  Each rate shall be
     equal to the rate of  interest  offered by CFC in effect on the date of the
     Conversion Request and communicated to its borrowers. The effective date of
     the new interest rate (whether it be the CFC Standard Seven Year Fixed Rate
     or a CFC Fixed  Rate)  shall be a date  determined  by CFC  pursuant to its
     policies  of  general  application  following  receipt  of  the  Conversion
     Request.  Prior to the time when either the CFC  Standard  Seven Year Fixed
     Rate or the CFC Fixed Rate is no longer applicable, the Borrower may select
     the CFC  Variable  Rate,  the CFC  Standard  Seven Year Fixed Rate or a CFC
     Fixed Rate.  CFC agrees that its  long-term  loan  policies  will include a
     fixed interest rate option until the Maturity Date, provided, however, that
     the  Borrower  may not  select a CFC Fixed  Rate with a CFC Fixed Rate Term
     that extends beyond the Maturity Date.

          B.  CFC  Standard  Seven  Year  Fixed  Rate or CFC  Fixed  Rate to CFC
Variable Rate. For each loan, the Borrower may at its option at any time convert
from the CFC Standard  Seven Year Fixed Rate or, at the discretion of CFC, a CFC
Fixed Rate to the CFC Variable  Rate, if the Borrower:  (i) submits a Conversion
Request  requesting  that the CFC Variable  Rate apply to any  outstanding  loan
balance on the appropriate  Secured Promissory Note and future Advances pursuant
thereto;  and (ii) pays to CFC promptly  upon receipt of an invoice a 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 the  beginning  of the  next  full  billing  cycle
following receipt of the Conversion Request.

          C.  CFC  Standard  Seven  Year  Fixed  Rate  to  CFC  Fixed  Rate  and
Vice-Versa.  For each loan,  the  Borrower may at its option at any time convert
any amount  outstanding  on the Note from the CFC Standard Seven Year Fixed Rate
to a CFC Fixed Rate or, at the  discretion  of CFC, from a CFC Fixed Rate to the
CFC  Standard  Seven Year Fixed Rate if the  Borrower  (i) submits a  Conversion
Request  requesting  that a CFC Fixed Rate or the CFC Standard  Seven Year Fixed
Rate  apply to any  outstanding  loan  balance  on the Note and (ii) pays to CFC
promptly  upon receipt of an invoice a  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 (whether
it be the CFC  Standard  Seven Year Fixed Rate or a CFC Fixed  Rate)  shall be a
date determined by CFC pursuant to its policies of general application following
receipt  of the  Conversion  Request.  Prior to the  time  when  either  the CFC
Standard Seven Year Fixed Rate or the CFC Fixed Rate is no

<PAGE>

longer  applicable,  the  Borrower  may select the CFC  Variable  Rate,  the CFC
Standard  Seven  Year  Fixed  Rate or a CFC  Fixed  Rate.  CFC  agrees  that its
long-term  loan  policies  will include a fixed  interest  rate option until the
Maturity Date, provided,  however,  that the Borrower may not select a CFC Fixed
Rate with a CFC Fixed Rate Term that extends beyond the Maturity Date.

          Section  3.5.  Prepayment.  Subject to the terms of the  Mortgage  and
provided  the interest  rate on the loan is at the CFC Variable  Rate or a fixed
rate in effect for seven years or less,  the  Borrower  may at any time,  on not
less than 30 days' written notice to CFC, prepay each Note, in whole or in part,
together with the interest  accrued to the date of prepayment and any prepayment
premium that CFC may from time to time  prescribe.  CFC will permit a prepayment
if required under the Mortgage.

                                   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 or its
counsel  shall  require.  CFC shall have  received an opinion of counsel for the
Borrower: (i) substantially in the form of Exhibit B hereto; and (ii) addressing
such other legal matters as CFC or its counsel shall reasonably require.

     C. Government Approvals.  The Borrower shall have furnished to CFC true and
correct  copies of all  certificates,  authorizations  and  consents,  including
without  limitation the consents  referred to in Section 2,H. hereof,  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,

<PAGE>

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.

     K.  Mortgage  Filing.  The  Mortgage  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 caused  satisfactory
evidence thereof to be furnished to CFC.

     F. Special  Conditions.  The Borrower  shall have complied with any special
conditions listed in Schedule 1 hereto.

     G.  Requisitions.  The Borrower will requisition all Advances by submitting
its requisition to CFC in form and substance  satisfactory to CFC.  Requisitions
shall be made only for the  purpose  of paying  the  costs  associated  with the
Project. The Borrower agrees to apply the proceeds of the Advances in accordance
with its loan application with such modifications as may be mutually agreed.

          H.  Selection of Maturity Date.  Prior to the first Advance,  Borrower
shall select a Maturity Date for each Note, said date not to exceed  thirty-five
(35) years from the date hereof. The date for each Note selected by the Borrower
shall be selected in writing  and must be in form and  content  satisfactory  to
CFC. In the event Borrower fails to select a Maturity Date for any Note prior to
the first  Advance,  the Maturity Date for such Note shall be  thirty-five  (35)
years from the date hereof.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

          Section  5. After the date  hereof  and until  payment in full of each
Note and performance of all obligations of the Borrower hereunder,  the Borrower
agrees that it will:

     A. Membership. Remain a member in good standing of CFC,

          B. Financial Ratios. The Borrower, subject to events in the j~rdgxnent
of CFC to be beyond the control of the Borrower, shall so operate and manage its
business  as to achieve a TIER of not less than 1.5,  and a DSC of not less than
1.25,  each of said ratios 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 TIER and DSC ratios will be achieved.  The Borrower shall
not  decrease its rates if it is failing on an actual  historical  basis to meet
the  ratios  set  forth in this  section  for the  calendar  year  prior to such
reduction.

     C.  Annual  Certificate.  Within 60 days  after the close of each  calendar
year,  commencing  with the year following the year in which the initial Advance
hereunder shall have been made, deliver to CFC a written

<PAGE>

statement  signed  by its  General  Manager,  stating  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.

          D. Loan  Certificate  Purchase.  The Borrower will purchase a LCTC for
each Note from CFC in an amount equal to the amount(s)  identified in Schedule 1
hereto at a  purchase  price of 100% of the  principal  amount  thereof.  Unless
otherwise  requested  in writing by the  Borrower  prior to the initial  Advance
(which  request  must  comply  with CFC's then  current  policy  relating to the
purchase of LCTC's),  the  Borrower  agrees that the initial  Advance  hereunder
shall at least  equal  the  amount of such LCTC and the  Borrower  will  apply a
portion of the  proceeds of such  Advance to the  purchase of such LCTC.  If the
Borrower  elects to pay for such LCTC other than from loan funds,  the amount of
the CFC Commitment will be correspondingly  reduced by said amount when the LCTC
is fully paid. If the Borrower  obtains  Advances  hereunder  other than for the
purpose of purchasing  an LCTC and fails to pay for the LCTC,  then CFC may make
loan  Advances for the account of the Borrower to purchase the LCTC.  CFC agrees
to deliver the LCTC within ninety days  following the date on which the LCTC has
been paid for in full.

          E.  Limitations  on: System  Extensions and Additions;  Operations and
Maintenance Contracts; Power Purchase Contracts;  Power Sales Contracts.  Unless
the  Borrower  shall at the time have an  Equity  of at least 40% or shall  have
achieved  a TIER of at least 1.5 for each of the last two  calendar  years,  the
Borrower will not, without the prior written consent of CFC (a) construct, make,
lease,  purchase or otherwise  acquire any extensions or additions to its system
which provide direct service to any ultimate  consumer  having an anticipated or
contract demand in excess of twenty-five (25) percent of the Borrower's  maximum
system electrical demand recorded during the past twelve months;  (b) enter into
any  contract or  contracts  for the sale to the  ultimate  consumer of electric
power and energy in excess of twenty-five (25) percent of the Borrower's maximum
system demand; (c) subject to the terms of the Mortgage, enter into any contract
or contracts for the use by others of all or a substantial part of its property;
and (d) enter into any contract or contracts for the purchase of electric  power
or energy which would alter the source of more than 25% of the Borrower's source
of  wholesale  power  or  for  any  transmission,   interconnection  or  pooling
arrangements. ---

          F.  Financial  Books;  Financial  Reports;  Right of  Inspection.  The
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 Cenerally  Acceptable
Accounting  Principles.  The Borrower  will prepare and furnish CFC from time to
time  hereunder  not later than the last day of each month,  or at less frequent
intervals  when  specified  by CFC,  financial  and  statistical  reports on its
condition and operations for the previous  month,  Such reports shall be in such
form and include such information as may be specified by CFC,  including without
limitation an analysis of Borrower's  revenues,  expenses and consumer accounts.
The Borrower will cause to be prepared and furnished to

<PAGE>

CFC from time to time  hereunder,  at least once  during  each  12-month  period
during the term hereof,  a full and complete  report of its financial  condition
and of its  operations  as of the end of the calendar year in form and substance
satisfactory  to CFC,  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.
Such report shall be furnished  within 120 days of the end of the such  calendar
year. 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 anywise pertaining to its property or business.

     G.  Special  Affirmative  Covenants.   Comply  with  any  and  all  special
affirmative covenants as listed in Schedule 1 hereto.

                                   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 in Article II hereof or any certificate  furnished to CFC hereunder
shall prove to have been incorrect in any material  respect at the time made and
shall at the time in question be untrue or incorrect in any material respect and
remain uncured;

     B.  Payment.  Default  shall be made in the  payment  of or on  account  of
interest  on or  principal  of any of the Note when and as the same shall be due
and  payable,   whether  by  acceleration  or  otherwise,   which  shall  remain
unsatisfied for S Business Days;

          C . Other  Covenants.  Default by the  Borrower in the  observance  or
performance of any other covenant or agreement contained in this Loan Agreement,
in, any of the Notes or the  Mortgage,  which  shall  remain  unremedied  for 30
calendar days after written notice thereof shall have been given'io 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;

<PAGE>

     F.  Bankruptcy.  A court having  jurisdiction in the premises shall enter a
decree or order for relief in respect of the  Borrower in an  -involuntary  case
under  any  applicable  bankruptcy,  insolvency  or  other  similar  law  now or
hereafter in effect, or appointing a receiver, liquidator,  assignee, custodian,
trustee,  sequestrator  or  similar  official,  or  ordering  the  winding up or
liquidation of its affairs,  and such decree or order shall remain  unstayed and
in effect for a period of 90  consecutive  days or the Borrower shall commence a
voluntary case under any applicable bankruptcy,  insolvency or other similar law
now or hereafter in effect, or under any such law, or consent to the appointment
or taking possession by a receiver, liquidator,  assignee, custodian or trustee,
of a substantial  part of its property,  or make any general  assignment for the
benefit of creditors; or

          C. Dissolution or Liquidation. Other than as provided in subsection R.
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  30 days.  The term  "dissolution  or
liquidation of the Borrower", as used in this subsection, shall not be construed
to include the  cessation of the corporate  existence of the Borrower  resulting
either  from a merger or  consolidation  of the  Borrower  into or with  another
corporation  following a transfer of all or  substantially  all its assets as an
entirety, under the conditions permitting such actions.

                                   ARTICLE 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 the Mortgage in the manner,  upon the  conditions,  and with the
effect  provided  in the  Mortgage,  including,  but not  limited to, a suit for
specific performance,  injunctive relief or damages.  Nothing herein shall limit
the right of CFC to pursue  all  rights  and  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 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

<PAGE>

such party in a notice to each other party. Except as otherwise provided in this
Agreement,  all such communications shall be deemed to have been duly-given when
transmitted  by telecopier  or personally  delivered or, in the case of a mailed
notice,  upon  receipt,  in each case given or addressed as provided for herein.
The Address for Notices of the respective parties are as follows:

                                            National Rural Utilities
                                            Cooperative Finance Corporation
                                            Woodland Park
                                            2201 Cooperative Way
                                            Herndon, Virginia 22071
                                            Attention:        Loan Officer

The Borrower: The address set forth in Schedule 1 hereto

          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, each Note, 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  principal  and/or
interest  due under the terms of each Note is not  received  at CFC's  office in
Herndon,  Virginia,  or such other location as CFC may designate to the Borrower
within five  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 of principal  and/or
interest 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 each 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 alt  expenses  of CFC  (including  the fees and  expenses  of its
counsel)  in  connection  with  the  filing  or  recordation  of  all  financing
statements  and  instruments  as may be required by CFC in connection  with this
Agreement,  including,  without limitation,  all documentary stamps, recordation
and  transfer  taxes and other costs and taxes  incident to  recordation  of any
document or 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.

<PAGE>

          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 . THIS  AGREEMENT  AND THE NOTE SHALL BE
DEEMED TO BE GOVERNED BY, AND  CONSTRUED  IN  ACCORDANCE  WITH,  THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.

          Section  8.7.  Holiday  Payments.  If any  payment  to be  made by the
Borrower hereunder shall become due on a Saturday, Sunday or business holiday of
CFC,  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.  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.

          Section 8.9. Modifications. No modification or waiver of any provision
of this  Agreement  or each 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  8.10.  Merger and  Integration.  This  Agreement  and the attached
exhibits and matters  incorporated by reference  contain the entire agreement of
the parties  hereto with  respect to the  matters  covered and the  transactions
contemplated  hereby.  Section  8.11.  Headings.  The headings and  sub-headings
contained  in the  titling  of  this  Agreement  are  intended  to be  used  for
convenience only and do not constitute part of this Agreement.

          Section 8.12.  Severability.  If any term, provision or condition,  or
any part thereof,  of this  Agreement,  each 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,  each 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  8.13.  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

<PAGE>

against any and all of the obligations of the Borrower now or hereafter existing
hereunder or under the 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.

     Section 8.14. Schedule 1. Schedule 1 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 ELECTRIC COOPERATIVE, INC.
(SEAL)
                                            By:
                                            -------------------------
                                                                Chairman
Attest:
--------------------------------------------
                     Secretary

            NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
                                     (SEAL)
                                       By:
                  --------------------------------------------
                                    Governor
 Attest:
--------------------------------------------
              Assistant Secretary

<PAGE>

                                   SCHEDULE 1

     1. The Project consists of financing  approximately 86% of Borrower's 1993-
1994 construction  workplan and prepaying,  at a discount,  Hunt-Collin Electric
Cooperative, Inc.'s REA debt.

 2.       The Mortgage shall mean the 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.

     3. The date of the Borrower's  balance sheet referred to in Section 2.D. is
March 31, 1992.

 4.       The principal place of business of the Borrower referred to in Section
          2.E. is West Loop 214, Stanton, TX 79782-0700.

5.        All of the  property  of the  Borrower  is located in the  counties of
          Andrews,  Borden,  Dawson,  Ector,  Glasscock,  Howard, Irion, Martin,
          Midland, Mitchell, Nolan, Reagan, Sterling, Tom Green and Upton in the
          State of Texas.

 6.       The governmental authority referred to in Section 2.H. is N/A

     7. The CFC Commitment is  $17,074,468.00  as evidenced by four Notes in the
principal amounts set forth herein below:

          The Borrower  selects four Notes (each  representing  a separate  loan
          with CFC with the Loan  Designation  noted below).  The amount of each
          Note is set forth below. In addition,  the amount of the LCTC referred
          to in Section S.D. hereof shall be  approximately  6% of each Note and
          as set-forth below,  provided,  however, that the exact purchase price
          for a LCTC will be recalculated by CFC after the first Advance on each
          Note.
<TABLE>
<S>                     <C>                                <C>                             <C>

         ------------------------------------------------------------------------------------------------------------------
                              Loan                        Note-  Amount              LCTC    --Amount
                         Designation         -
         ------------------------------------------------------------------------------------------------------------------
         ------------------------------------------------------------------------------------------------------------------
                        A-9034                             $4,268,617.00                          $256,117.00
         ------------------------------------------------------------------------------------------------------------------
         ------------------------------------------------------------------------------------------------------------------
                        A-9035                             $4,268,617.00                          $256,117.00
         ------------------------------------------------------------------------------------------------------------------
         ------------------------------------------------------------------------------------------------------------------
                        A-9036                             $4,268,617.00                          $256,117.00
         ------------------------------------------------------------------------------------------------------------------
         ------------------------------------------------------------------------------------------------------------------
                        A-9037                             $4,268,617.00                          $256,117.00
         ------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

     8. The months  relating to the Payment Date are February,  May,  August and
November.

 9.       Amortization of Advances shall be based upon the Borrower's  selection
          in writting,  prior to the first Advance or as  appropriate  after the
          first Advance, of either of the methods indicated below:

                                 level principal

                               level debt service

 10.      The special condition(s) referred to in Section 4.R. is (are):

          A.      In the  event  the  Borrower  requests  a loan term for any of
                  these  loans  (9034,   9035,   9036  or  9037)  of  less  than
                  thirty--five  years,  then prior to the first Advance for such
                  loan,  Borrower  shall  provide CFC with a financial  forecast
                  which  indicates  its  ability to repay  such loan  within the
                  requested loan term.

          B.      Advances dedicated to the prepayment of Hunt-Collins  Electric
                  Cooperative,  Inc.'s REA debt shall be made by CFC directly to
                  REA.  Borrower shall provide CFC with a written statement from
                  REA stating that Hunt-Collin Electric Cooperative,  Inc.'s REA
                  debt has been paid in full and that REA's lien on  Hunt-Collin
                  Electric Cooperative, Inc.'s facilities has been released.

          C.       Advances may be withheld anytime CFC determines,  in its sole
                   judgement,  that appropriate action has not been taken by the
                   Borrower to implement  retail  rates  adequate to achieve the
                   financial  ratios  required in the CFC loan agreement  and/or
                   mortgage.

     11. The special affirmative covenant(s) referred to in Section 5.G is (are)
as follows: N/A

12.       The address of the Borrower referred to in Section 8.1. is

                   West Loop 214
                   P.O. Box 700
                   Stanton, TX 79782-0700

<PAGE>

                                                                 Exhibit A-1
                             SECURED PROMISSORY NOTE
     $4,268,617.00                                                   , 19

CAP ROCK ELECTRIC  COOPERATIVE,  INC. , a Texas  corporation  ("Borrower"),  for
value  received  promises  to pay,  without  setoff,  deduction,  recoupment  or
counterclaim,  to the order of  NATIONAL  RURAL  UTILITIES  COOPERATIVE  FINANCE
CORPORATION  ("Payee")  at the  Payee's  main  office  or such  other  place  as
designated by the Payee,  in lawful money of the United  States,  the sum of the
aggregate  unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan  Agreement"),  on the dates
provided in the Loan  Agreement  (except  that if not sooner  paid,  any balance
shall be due and  payable on a date not to exceed  thirty-five  years  after the
date hereof or such date  selected by Borrower  pursuant to Section 4.1-1 of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the  respective  dates of each Advance (as defined in
the Loan  Agreement)  hereunder,  at the rate or rates and  payable at the times
provided in said Loan Agreement.

          All Advances made by the Payee pursuant to said Loan  Agreement  shall
be endorsed by the Payee on the reverse side hereof on or before any  assignment
or transfer hereof by the Payee.

          This Note is secured under a Restated Mortgage and Security  Agreement
dated as of even date  herewith,  between the Borrower and the Payee,  as it may
have been or shall be supplemented,  amended, consolidated or restated from time
to time  ("Mortgage").  This  Note is the  Note  referred  to in,  and has  been
executed and delivered pursuant to, the Loan Agreement.

          Upon the  occurrence of an event of default  under the  Mortgage,  the
principal  hereof and interest  accrued  thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.

          The  Borrower  waives  demand,  presentment  for  payment,  notice  of
          dishonor,  protest,  notice of protest,  and notice of  non-payment of
          this Note.  WITNESS  WHEREOF the  Borrower  has caused this Note to be
          signed in its
corporate name and its corporate seal to be hereunto  affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.

                                      CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
                                                 By: _______________________
                                                               (President)
Attest:_____________________
                    (Secretary)

                                                                 Exhibit A-2
                             SECURED PROMISSORY NOTE
     $4,268,617.00                                                 , 19

CAP ROCK ELECTRIC  COOPERATIVE,  INC. , a Texas  corporation  ("Borrower"),  for
value  received  promises  to pay,  without  setoff,  deduction,  recoupment  or
counterclaim,  to the order of  NATIONAL  RURAL  UTILITIES  COOPERATIVE  FINANCE
CORPORATION  ("Payee")  at the  Payee's  main  office  or such  other  place  as
designated by the Payee,  in lawful money of the United  States,  the sum of the
aggregate  unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan  Agreement"),  on the dates
provided in the Loan  Agreement  (except  that if not sooner  paid,  any balance
shall be due and  payable on a date not to exceed  thirty-five  years  after the
date hereof or such date  selected  by  Borrower  pursuant to Section 4.H of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the  respective  dates of each Advance (as defined in
the Loan  Agreement)  hereunder,  at the rate or rates and  payable at the times
provided in said Loan Agreement.

          All Advances made by the Payee pursuant to said Loan  Agreement  shall
be endorsed by the Payee on the reverse side hereof on or before any  assignment
or transfer hereof by the Payee.

          This Note is secured under a Restated Mortgage and Security  Agreement
dated as of even date  herewith,  between the Borrower and the Payee,  as it may
have been or shall be supplemented,  amended, consolidated or restated from time
to time  ("Mortgage").  This  Note is the  Note  referred  to in,  and has  been
executed and delivered pursuant to, the Loan Agreement.

          Upon the  occurrence of an event of default  under the  Mortgage,  the
principal  hereof and interest  accrued  thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.

         The  Borrower  waives  demand,   presentment  for  payment,  notice  of
          dishonor,  protest,  notice of protest,  and notice of  non-payment of
          this Note.  --IN WITNESS  WHEREOF the Borrower has caused this Note to
          be signed in its
corporate name and its corporate seal to be hereunto  affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.

                                        CAP ROCK ELECTRIC COOPERATIVE, INC.

(SEAL)
                                                 By: _____________________
                                                                (President)
Attest: ___________________
                                   (Secretary)

                                                                    Exhibit A-3
                             SECURED PROMISSORY NOTE
     $4,268,617.00                                                     , 19

CAP ROCK ELECTRIC COOPERATIVE, INC., a Texas corporation ("Borrower"), for value
received promises to pay, without setoff, deduction, recoupment or counterclaim,
to the  order  of  NATIONAL  RURAL  UTILITIES  COOPERATIVE  FINANCE  CORPORATION
("Payee")  at the Payee's main office or such other place as  designated  by the
Payee,  in lawful money of the United  States,  the sum of the aggregate  unpaid
principal  amount  of all  Advances  made  by the  Payee  pursuant  to the  Loan
Agreement, dated as of even date herewith, between the Borrower and the Payee as
may be amended from time to time (the "Loan  Agreement"),  on the dates provided
in the Loan Agreement  (except that if not sooner paid, any balance shall be due
and payable on a date not to exceed  thirty-five  years after the date hereof or
such date  selected by Borrower  pursuant to Section 4.H of the Loan  Agreement,
the earlier of such date being the Maturity Date), with interest thereon in like
money  from  the  respective  dates  of each  Advance  (as  defined  in the Loan
Agreement) hereunder,  at the rate or rates and payable at the times provided in
said Loan Agreement.

          All Advances made by the Payee pursuant to said Loan  Agreement  shall
be endorsed by the Payee on the reverse side hereof on or before any  assignment
or transfer hereof by the Payee.

          This Note is secured under a Restated Mortgage and Security  Agreement
dated as of even date  herewith,  between the Borrower and the Payee,  as it may
have been or shall be supplemented,  amended, consolidated or restated from time
to time  ("Mortgage").  This  Note is the  Note  referred  to in,  and has  been
executed and delivered pursuant to, the Loan Agreement.

          Upon the  occurrence of an event of default  under the  Mortgage,  the
principal  hereof and interest  accrued  thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.

         The  Borrower  waives  demand,   presentment  for  payment,  notice  of
         dishonor, protest, notice of protest, and notice of non-payment of this
         Note.
          WITNESS WHEREOF the Borrower has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto  affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.

                                             CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
                                                 By: ____________________
                                                              (President)
Attest:___________________
   (Secretary)

<PAGE>

                                                             Exhibit A-4
                             SECURED PROMISSORY NOTE
     $4,268,617.00                                                  , 19

CAP ROCK ELECTRIC  COOPERATIVE,  INC. , a Texas  corporation  ("Borrower"),  for
value  received  promises  to pay,  without  setoff,  deduction,  recoupment  or
counterclaim,  to the order of  NATIONAL  RURAL  UTILITIES  COOPERATIVE  FINANCE
CORPORATION  ("Payee")  at the  Payee's  main  office  or such  other  place  as
designated by the Payee,  in lawful money of the United  States,  the sum of the
aggregate  unpaid principal amount of all Advances made by the Payee pursuant to
the Loan Agreement, dated as of even date herewith, between the Borrower and the
Payee as may be amended from time to time (the "Loan  Agreement"),  on the dates
provided in the Loan  Agreement  (except  that if not sooner  paid,  any balance
shall be due and  payable on a date not to exceed  thirty-five  years  after the
date hereof or such date  selected  by  Borrower  pursuant to Section 4.H of the
Loan Agreement, the earlier of such date being the Maturity Date), with interest
thereon in like money from the  respective  dates of each Advance (as defined in
the Loan  Agreement)  hereunder,  at the rate or rates and  payable at the times
provided in said Loan Agreement.

          All Advances made by the Payee pursuant to said Loan  Agreement  shall
be endorsed by the Payee on the reverse side hereof on or before any  assignment
or transfer hereof by the Payee.

          This Note is secured under a Restated Mortgage and Security  Agreement
dated as of even date  herewith,  between the Borrower and the Payee,  as it may
have been or shall be supplemented,  amended, consolidated or restated from time
to time  ("Mortgage").  This  Note is the  Note  referred  to in,  and has  been
executed and delivered pursuant to, the Loan Agreement.

          Upon the  occurrence of an event of default  under the  Mortgage,  the
principal  hereof and interest  accrued  thereon may be declared to be forthwith
due and payable in the manner, upon the conditions, and with the effect provided
in the Mortgage.

          The  Borrower  waives  demand,  presentment  for  payment,  notice  of
          dishonor,  protest,  notice of protest,  and notice of  non-payment of
          this Note.  --IN WITNESS  WHEREOF the Borrower has caused this Note to
          be signed in its
corporate name and its corporate seal to be hereunto  affixed and to be attested
by its duly authorized officers, all as of the day and year first above written.

                                       CAP ROCK ELECTRIC COOPERATIVE, INC.
(SEAL)
                                                 By: ___________ _____________
                                                               (President)
Attest: __________________
                   (Secretary)

                                                                  Exhibit B
Date: ____________________

Governor
National Rural Utilities
    Cooperative Finance Corporation
Woodland Park
2201 Cooperative Way
Herndon, Virginia 22071

Re:    _____________________________
Dear Sir:

I am counsel for  ________________________________ , organized under the laws of
the  State  of  _________  ("Borrower"),  and  render  this  opinion  to  you in
connection  with the four long-term  secured loans which in the aggregate  equal
the principal  amount of $__________  provided for in the loan  agreement  ("CFC
Loan Agreement"),  dated as of __________________ , 19 , made by and between the
Borrower and National Rural Utilities Cooperative Finance Corporation ("CFC").

I have examined such corporate records and proceedings of the Borrower, and such
other  documents  as I  have  deemed  necessary  as a  basis  for  the  opinions
hereinafter expressed.

I have also examined the following documents as executed and delivered:  (1) the
CFC Loan Agreement, (2) the four (4) Secured Promissory Notes ("CFC Note"), each
dated  -- ,  19  ,  which  in  the  Aggregate  equal  the  principal  amount  of
$___________  ,  payable  to the  order  of CFC,  and  (3) the  ________________
Mortgage and Security  Agreement  ("Mortgage"),  dated as of made by and between
the Borrower and CFC as it may have been supplemented,  amended, consolidated or
restated from time to time,

I have also  examined,  or caused to be examined by  competent  and  trustworthy
persons,  the records and files of all offices in which there might be recorded,
filed or indexed  evidence of the Borrower's  title, and any liens of any nature
whatsoever affecting the title, to any real or personal property of the Borrower
other than  easements  or rights of way  relating to the  electric  lines of the
Borrower.

I  have  supervised,  examined,  or  caused  to be  examined  by  competent  and
trustworthy persons, the recordation of the Mortgage as a mortgage of

<PAGE>

Based upon the foregoing, I am of the opinion that:

          (i) the Borrower is a duly organized and validly existing  corporation
in good standing under the laws of the jurisdiction of its organization, and the
Borrower has full  corporate  power (a) to execute and deliver the CFC Note, the
CFC Loan Agreement and the Mortgage; (b) to perform all acts required to be done
by it under the CFC Note,  the CFC Loan  Agreement and the Mortgage;  and (c) to
own,  operate and maintain its  properties and operate its business as conducted
at the date of this Opinion;

           (ii)  to the  extent  reasonably  required  for the  maintenance  and
operation  of its  properties  and business  taken as a whole,  the Borrower has
complied with all requirements of the laws of all states in which it operates or
does  business and holds all  certificates,  licenses,  consents or approvals of
governmental authorities required to be obtained on or prior to the date of this
Opinion to enable it to engage in the business then transacted by it;

          (iii) the CFC Notes,  the  Mortgage and CFC Loan  Agreement  have been
duly  authorized,  executed and delivered by the Borrower to CFC and  constitute
the valid and  binding  obligations  of the  Borrower,  enforceable  against the
Borrower,  in accordance with their  respective  terms provided,  however,  that
enforceability may be limited by bankruptcy, insolvency or other laws of general
application  relating to or affecting the  enforcement of creditors'  rights and
that the enforcement thereof may be limited by laws with respect to or affecting
the remedies  provided for in said  agreement or instrument;  provided  further,
however,  that such  laws do not in my  opinion  make  inadequate  the  remedies
afforded  thereby  for the  realization  of the  benefits  provided  for in such
agreement or instrument;

          (iv) the  execution and  performance  by the Borrower of the CFC Note,
the CFC Loan  Agreement  and the  Mortgage,  and the  transactions  contemplated
thereby will not violate any provision of law, the articles of incorporation, or
bylaws* of the  Borrower,  or result in the 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, known to counsel;

         (v) the Mortgage has been duly  recorded and filed,  in such manner and
to such extent as specified  in paragraph  "7" under  Covenants  and  Warranties
contained in Attachment B to this Opinion,  to constitute the Mortgage a-validly
recorded  and filed  mortgage  lien upon the real and  personal  property of the
Borrower  therein   described,   subject  and  subordinate  only  to  liens  and
encumbrances,  if any,  permitted by paragraph "2" of Covenants  and  Warranties
contained in Attachment B to this Opinion;

     *NOTE: As used herein, "articles of incorporation" includes "certificate of
incorporation",  "articles of association" or "charter";  and "bylaws"  includes
"code of regulations".

<PAGE>

          (vi) all  authorizations,  if any, from regulatory  bodies required in
connection  with  the  execution  and  delivery  of the CFC  Note,  the CFC Loan
-Agreement,  and the Mortgage  have been obtained and a copy thereof is attached
hereto; and

          (vii)  I know  of no  litigation  pending  or  threatened  against  or
affecting  the  Borrower or its  property  which,  in my  opinion,  would have a
material adverse effect upon the business,  operations or financial condition of
the Borrower.

I also  wish to  advise  you that  nothing  has  occurred  since the date of the
opinion of counsel of ______________________ , 19 , heretofore delivered to you,
which in any manner  changes  the effect or  application  of such  opinion  with
reference to the matters  therein set forth,  and I confirm that said opinion is
true and correct as of the date hereof.

This  Opinion  (or a true  copy  thereof)  may be relied  upon by  Manufacturers
Hanover Trust Company,  as Trustee under the CFC Indenture  dated as of December
1, 1972, as amended and supplemented, as if this Opinion were addressed to it. I
have read the conditions  contained in paragraph (5) of Section  3.01(b) of said
Indenture and the definitions in Article I of said Indenture  relating thereto*;
in my opinion I have made such  examination or  investigation as is necessary to
enable me to express an  informed  opinion as to whether or not said  conditions
will be complied  with upon delivery of this Opinion (or a true copy thereof) to
said Trustee; and in my opinion, such conditions will be complied with upon such
delivery.

Sincerely,

     *NOTE:  The  conditions  and  definitions  referred to are attached to this
Opinion as Attachment A and Attachment B,

<PAGE>

                                  ATTACHMENT A

 I.       Conditions  contained  in  Section  3.01(b),   paragraph  (5)  of  the
          Indenture,  dated as of December 1, 1972,  made by and between CFC and
          Manufacturers  Hanover  Trust  Company,   Trustee,   relating  to  the
          requirements  that Opinions of Counsel for a member state in substance
          that as of the date of such Opinion:

                  (i) such Member is duly  organized,  validly  existing  and in
          good standing under the laws of its  jurisdiction of organization  and
          has full  corporate  power to execute and deliver such Mortgage  Note,
          the Loan  Agreement  pursuant  to which it was issued (if any) and the
          Mortgage securing the same, to perform all acts required to be done by
          it under such Mortgage Note,  Loan Agreement (if any) and Mortgage and
          to own,  operate and maintain its  properties and operate its business
          as conducted at the date of such opinion;

                  (ii) to the extent reasonably required for the maintenance and
          operation of its properties and business taken as a whole, such Member
          has complied with all  requirements of the laws of all States in which
          it operates or does  business  and holds all  certificates,  licenses,
          consents  or  approvals  of  governmental  authorities  required to be
          obtained  on or prior  to the date of such  Opinion  to  enable  it to
          engage in the business then transacted by it;

                  (iii) such Mortgage Note, Loan Agreement (if any) and Mortgage
          have been duly  authorized,  executed and delivered by said Member and
          constitute   the  valid  and  binding   obligations  of  such  Member,
          enforceable  against such Member in accordance  with their  respective
          terms;

                   (iv) the  execution  and  performance  by such Member of such
         Mortgage  Note,   Loan  Agreement  (if  any)  and  Mortgage,   and  the
         transactions  contemplated  thereby, will not violate any provisions of
         law, the Articles of Incorporation or by-laws of such Member, or result
         in the  breach  of, or  constitute  a  default  under,  any  agreement,
         indenture or other  instrument  to which such Member is a party,  or by
         which it may be bound, known to such Counsel;

                   (v) such  Mortgage has been duly  recorded and filed (in such
          manner and to such extent,  as shown by such Opinion,  as specified in
          paragraph  7 under  Covenants  and  Warranties  in  Schedule I to this
          Indenture)* to constitute  such Mortgage a validly  recorded and filed
          lien  upon the real  and  personal  property  of such  Member  therein
          described, shown by such Opinion to be subject and subordinate only to
          liens and  encumbrances,  if any,  permitted by paragraph 2 under said
          Covenants and Warranties;*

     *NOTE  Provisions of paragraphs 2 and 7 under  Covenants and  Warranties in
Schedule 1 of the Indenture are attached as Attachment B,

<PAGE>

ATTACHMENT A
Page 2

                  (vi) no authorization  from any regulatory body is required in
          connection with the execution and delivery of such Mortgage Note, Loan
          Agreement  (if any) or  Mortgage  or that each such  authorization  so
          required has been obtained; and

                  (vii)  such  Counsel  knows  of  no   litigation   pending  or
          threatened  against or affecting such Member or its property which, in
          the  opinion of such  Counsel  (or in the  opinion  of such  Member as
          evidenced by a certificate of the manager or other responsible officer
          of such Member annexed to said Opinion), would have a material adverse
          effect upon the business,  operations  or financial  condition of such
          Member.

     II. Definitions,  contained in Article I of the Indenture,  relating to the
foregoing conditions:

                  Company - means National Rural Utilities  Cooperative  Finance
          Corporation  until a  successor  corporation  shall have  become  such
          pursuant  to  the  applicable   provisions  of  this  Indenture,   and
          thereafter "Company" shall mean such successor corporation.

                  Distribution  System  Member - means a  Member  50% or more of
          whose gross  operating  revenues are derived from sales of electricity
          to ultimate consumers,  determined as of the end of the last Completed
          Calendar Year.

                  Indenture - means this instrument as originally executed or as
          it may from time to time be  supplemented  or  amended  by one or more
          indentures supplemental hereto entered into pursuant to the applicable
          provisions hereof.

                  Loan  Agreement - means a loan  agreement  (if any)  between a
          Member  and the  Company  (or  between  a  Member  and a  wholly-owned
          subsidiary  of the Company  whose  interest  has been  assigned to the
          Company) providing for the issuance of Mortgage Notes.

                  Member - means  any  Person  which is a member  or  patron  of
          the-Company,  or any Person  which at any time has been or is eligible
          to borrow  from REA under the Rural  Electrification  Act of 1936,  as
          from time to time in effect.

                   Mortgage  - means a  mortgage  or deed of trust or  pledge of
          revenues  securing one or more Mortgage  Notes (i) which complies with
          the  requirements  set forth in  Schedule 1 hereto  annexed and made a
          part  hereof,  or,  in  the  case  of a  change  in  the  status  of a
          Distribution  System Member to a Power System  Member,  or vice versa,
          which  complies with the  requirements  set forth in Schedule 1 either
          with  respect to mortgages or deeds of trust or pledges of revenues of
          Power System Members or with respect to mortgages or deeds of trust or
          pledges of revenues of Distribution System Members, as said Schedule

<PAGE>

ATTACHMENT A
Page 3

          1 shall have been  amended  from time to time in  accordance  with the
          provisions  hereof;  (ii)  which  was  made  to the  Company  (or to a
          wholly-owned  subsidiary  of  the  Company  whose  interest  has  been
          assigned to the  Company)  or to a Trustee or  Trustees  under a trust
          indenture;  (iii) as to which the interest of the Company (if any) has
          been  assigned  to the  Trustee;  and (iv) an executed or true copy of
          which has been delivered to the Trustee.

                  Mortgage  Note - means a note or bond of a Member  payable  to
          the  Company  (or a  wholly-owned  subsidiary  of  the  Company  whose
          interest  has been  assigned  to the  Company)  and  pledged  with the
          Trustee.

                  Opinion of Counsel - means a written  opinion of counsel,  who
          may (except as  otherwise  expressly  provided in this  Indenture)  be
          counsel for the Company or for a Member.

                   Person  - means  any  individual,  corporation,  partnership,
          joint venture, association, joint-stock company, trust, unincorporated
          organization  or  government  or any agency or  political  subdivision
          thereof.

     Power System Member - means a Member, other than a Distribution

<PAGE>

                                  ATTACHMENT B

     Schedule I. to  Indenture  dated as of  December  1, 1972.  between CFC and
Manufacturers                Hanover                Trust                Company
---------------------------------------------------------------------- --------

Covenants and Warranties:

          2. The  mortgagor has the right and authority to mortgage the property
described in the granting clauses.  The mortgaged  property is free and clear of
any equal or prior mortgage, lien, charge or encumbrance,  with usual exceptions
in utility  mortgages,  which exceptions may include (without  limitation) liens
for taxes,  assessments or governmental  charges for the current year and taxes,
assessments or governmental charges not due and delinquent;  liens for workmen's
compensation  awards and similar  obligations not then delinquent;  mechanics' ,
laborers',  materialmen's and similar liens not then delinquent; and any of such
liens, whether or not delinquent,  whose validity is at the time being contested
in good faith; 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,  are  insignificant  in
amount,  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;  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   therefore,   or  upon  reasonable
compensation  or conditions to terminate any franchise,  license or other rights
before the  expiration  date thereof or to regulate the property and business of
the mortgagor; attachment or judgment liens covered by insurance, or upon appeal
and  covered  by bond;  deposits  or  pledges  to secure  payment  of  workmen's
compensation, unemployment insurance, old age pensions or other social security;
deposits or pledges to secure  performance of bids,  tenders,  contracts  (other
than contracts for the payment of borrowed money),  leases,  public or statutory
obligations;  surety or appeal bonds; and other deposits or pledges for purposes
of like  general  nature  in the  ordinary  course  of  business;  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 is such as to  interfere  with
the proper operation of the property affected thereby; 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; 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   encumbrance;   any  exceptions,
reservations  and other matters  referred to in the description of the mortgaged
property and with respect to any property which

<PAGE>

ATTACHMENT B
Page2
the  mortgagor  may  hereafter  acquire,  any  terms,  conditions,   agreements,
covenants,  exceptions  and  reservations  expressed or provided in the deeds or
other  instruments  under which the mortgagor shall hereafter  acquire the same,
none of which in the  opinion of counsel  materially  adversely  affects or will
affect the  property to which the same relates or the  operation  thereof by the
mortgagor;  any lien  reserved as  security  for rent or  compliance  with other
provisions  of the lease in case of any  leasehold  estate;  and purchase  money
mortgages and liens, charges and encumbrances upon property existing at the time
of  acquisition  thereof by the  mortgagor.  The  mortgagor  will  maintain  and
preserve the priority of lien of the Mortgage,  subject to  exceptions  usual in
utility mortgages including (without limitation) those mentioned above.

          7. The mortgagor will upon written  demand of the  mortgagees  execute
such  instruments of further  assurance as may be reasonably  requested and will
cause the Mortgage, each supplemental  indenture,  financing statement and other
instrument of further  assurance to be duly  recorded,  filed,  re-recorded  and
refiled as may be required by law to perfect and maintain  the superior  lien of
the Mortgage,  except as otherwise  consented to by the mortgagees  (but no such
consent shall permit the lien of the Mortgage to remain  unprotected  in respect
of any property  other than  property  deemed by the  mortgagees  to be of minor
importance  to the  operation  of the  properties  of the  mortgagor  taken as a
whole).

<PAGE>February 11, 2000

            Cap Rock Energy Corporation
            500 West Wall
            Suite 400
            Midland, Texas 79701

            Attn:   David W. Pruitt
                    President and Chief Executive Officer

            Gentlemen:

            National  Cooperative  Services  Corporation  ("NCSC") is pleased to
            offer Cap Rock Energy  Corporation  (the "Borrower") this commitment
            to  provide  certain  credit   facilities  in  connection  with  the
            Borrower's  proposed  purchase of certain  electric  assets owned by
            Citizens   Utilities  Company  (the  "Seller")  located  in  Arizona
            (collectively,  the  "Assets"),  subject to the terms and conditions
            set forth below:

            1.  AMOUNT AND PURPOSE:

                    The credit facilities (hereinafter  collectively referred to
                     as the "Credit Facilities") shall consist of the following:

A.   Long  Term  Secured  Loan  No.  A-900l  in the  principal  amount  of up to
     $191,000,000 which shall be used for the acquisition of the Assets.

B.   Long  Term  Secured  Loan  No.  A-9002  in the  principal  amount  of up to
     $37,649,000  which shall be used for capital additions for the Assets for a
     period of not more than three years.

C.   Letter of Credit No,  L-9003 in the face amount of up to  $9,550,000  to be
     delivered  by the  Borrower  as the  deposit  under the  purchase  and sale
     agreement for the Assets.

D.   Secured Line of Credit No.  R-9900 in the principal  amount of  $25,000,000
     which shall be used for general corporate purposes after acquisition of the
     Assets. -

<PAGE>

                2.  LOAN SECURITY:

                    First  Mortgage  lien  on  all  assets  and  revenue  of the
                    Borrower  securing Loan No. A-9001,  A-9002 and R-9900.  The
                    Borrower's  repayment  obligation  of any  amounts  drawn on
                    Letter of Credit No. L-9003 shall be unsecured.

                3.  GUARANTY:

                    The   Credit    Facilities    shall   be   irrevocably   and
                    unconditionally guaranteed by Cap Rock Electric Cooperative,
                    Inc.

                4.  INTEREST RATE OPTIONS:

                    Match funded  rates shall be available  for Loans A-9001 and
                    A-9002 at the Borrower's option, subject to NCSC policies of
                    general  application  in effect at the time of  funding  the
                    Credit Facilities.  Any amounts drawn under Letter of Credit
                    No.  L-9003  and the Line of  Credit  No.  R-9900  will bear
                    interest at the NCSC variable  associate rate. The amount of
                    interest  rate  risk  assumed  by  the  Borrower   shall  be
                    satisfactory to NCSC.

                5.  FEES:

                    NCSC  will  charge  no  commitment  or  up-front  fees  as a
                    condition to the closing of the Credit Facilities. NCSC will
                    not charge for NCSC staff time or expenses  incurred  during
                    the credit process.

                    NCSC's  standard  recission  fees will apply to Loans A-9001
                    and A-9002 in the event those  loans close but the  Borrower
                    does not advance the full principal amounts thereof.

                    The annual fee for Letter of Credit No.  L-9003  shall be 25
                    basis  points,  regardless  of whether the letters of credit
                    remains  outstanding for the full term, and shall be payable
                    at the time of issuance.

                    Borrower  will  reimburse  NCSC for the expenses of external
                    consultants and legal counsel,  if any,  incurred during the
                    credit process.

                    6.   LOAN TERMS, PAYMENTS AND AMORTIZATION:

                    Loan Nos.  A-9001 and  A-9002  will  amortize  over 30 years
                    using a level  debt  service  repayment  schedule  or  other
                    amortization  agreed upon by the Borrower and NCSC,  subject
                    to  Section  7 below.  Debt  service  payments  will be made
                    quarterly on Loan Nos. A-900 I and A-9002.

                    Letter  of Credit  No.  L-9003  shall be issued to  Citizens
                    Utilities Company concurrently with the Borrower's execution
                    of the  purchase  and sale  agreement  of the  Assets  for a
                    period  extending from the date of issuance to and including
                    April 30, 2001. Any amounts drawn under Letter of Credit No.
                    L-9003  shall be  repaid in full by the  Borrower  12 months
                    from

                                                                     2

<PAGE>

                                                                     I

the  date of any such draw. Interest only shall be payable monthly on the amount
     of any such draws.  Secured Line of Credit No. R-9900 shall be repayable in
     full  in  12  months.  Interest  shall  be  payable  quarterly  on  amounts
     outstanding under the line of credit.

               7.    PRINCIPAL DEFERRAL:

                    At the Borrower's option,  repayment of the principal amount
                    of Loan No.  A-9001 may be deferred  for a period of up to 4
                    years and the  Borrower  shall be required  to pay  interest
                    only during that period.  Thereafter,  Loan No. A-9001 shall
                    amortize  over a 26 year period in the manner  described  in
                    Section 6 above.

                8. PREPAYMENTS AND CONVERSIONS:

                    The loan documents will contain standard provisions relating
                    to  prepayment  of the  Credit  Facilities  or  any  portion
                    thereof and conversion of interest  rates,  including  "make
                    whole" provisions on fixed-rate loans.

                9. COVENANTS:

                    The loan documents shall contain, among other covenants, the
following covenants:

                    After  the  closing  of Loan Nos.  A-9001  and  A-9002,  the
                    Borrower  shall  achieve a modified  debt  service  coverage
                    ratio  ("MDSC") of at least 1.35,  based upon  averaging the
                    two  highest  annual  ratios  during the most  recent  three
                    calendar years.  The Borrower shall design its rates so that
                    such ratios shall be achieved

                    The  Borrower  shall  not  in any  calendar  year  make  any
                    distributions   of  patronage   refunds,   dividends,   cash
                    distributions  or any other  return of equity to its members
                    or   shareholders   if,   after   giving   effect   to  such
                    distribution, the Borrower's equity will be less than 20% of
                    its total assets.

                    The Borrower shall not incur any indebtedness of any kind or
                    nature,  including  subordinated  indebtedness,  without the
                    prior  written  consent  of NCSC,  except  for  trade  debts
                    payable in the ordinary course.

                    Payment of principal on any subordinated  indebtedness  will
                    be contingent  upon NCSC's  approval if, after giving effect
                    to such payment, the Borrower's equity will be less than 20%
                    of its total assets.

                    The purchase and sale agreement executed by the Borrower and
                    the  Seller,   together  with  all  schedules   thereto  and
                    contracts  and  agreements   described  therein,   shall  be
                    satisfactory to NCSC in its sole discretion, it being agreed
                    that the  purchase and sale  agreement  dated as of February
                    11,  2000  is  satisfactory  to NCSC  in all  respects  (the
                    "Approved  Purchase and Sale Agreement").  Prior to funding,
                    all of the conditions precedent to Borrower's obligations to

                                                                      3

<PAGE>

                    close in the  purchase  and sale  agreement  shall have been
                    completed  in a manner  satisfactory  to NCSC.  The Borrower
                    shall  not  amend or  modify  or waive  any of the terms and
                    conditions  of the purchase and sale  agreement  without the
                    prior written consent of NCSC.

                    The Borrower shall perform all of its obligations  under the
                    documentation  executed by the Borrower in  connection  with
                    the purchase of the Assets,  including,  but not limited, to
                    any  indemnification  obligations  inuring to the benefit of
                    the Seller.

                    The Borrower  shall  prepare and furnish to NCSC: a full and
                    complete report of its financial  condition and statement of
                    its  operations  within 45 days of the close of each  fiscal
                    quarter of the Borrower,  annual  audited  statements of the
                    Borrower  within  120  days  after  the end of,  each of the
                    Borrower's  fiscal  years,  and  such  other  financial  and
                    operational  information  as NCSC may  request  from time to
                    time.  Borrower  shall be subject to an annual,  on-site due
                    diligence meeting with NCSC staff, which will be arranged at
                    the convenience of the Borrower within 180 days of the close
                    of Borrower's fiscal year.

                    The Guaranty  from Cap Rock  Electric  Cooperative  shall be
                    accompanied  by evidence  that the  execution  and  delivery
                    thereof has been duly  authorized and is a valid and binding
                    obligation of Cap Rock Electric Cooperative,  including such
                    opinions of counsel,  regulatory  approvals  and third party
                    consents as NCSC shall require.

                10.CONDITIONS OF CLOSING:

                    NCSC's obligation to close the Credit Facilities (other than
                    the  issuance  of  Letter  of Credit  No.  L-9003)  shall be
                    subject to the following conditions precedent:

--   NCSC shall have  received  all  permits,  consents,  waivers and  approvals
     required by any federal,  state or local governmental boards,  commissions,
     authorities or other  regulatory  bodies in connection with the acquisition
     of the  Assets by the  Borrower  and  approval  of such  Credit  Facilities
     contemplated  by this  commitment  letter,  including,  but not limited to,
     those  required by any state public service  commissions,  other than those
     the failure of which to obtain would not have a material  adverse effect on
     the  operation,  financial  position or results of operation of the Assets,
     and none of such  approvals  shall  materially  and  adversely  impact  the
     Borrower's  ability  to  repay  such  Credit  Facilities  and  perform  the
     covenants  set forth in `the loan  documents,  as determined by NCSC in its
     sole  discretion.  None of such approvals shall contain a term or condition
     that would require a net reduction in the existing  tariffed rates relating
     to  the  Assets.  The  requests  for  State  regulatory  approvals  of  the
     transaction  shall  expressly  make clear that  Borrower  is  required as a
     condition and covenant of its indebtedness to meet and maintain  Borrower's
     MDSC  requirements  (regardless of whether  Borrower is a cooperative or an
     investor-owned  utility),  and the State regulatory  order(s) approving the
     transaction  shall indicate,  as determined by a prudent lender acting in a
     commercially  reasonable  manner, the regulatory body's recognition of this
     requirement.

--                          The Borrower  shall  execute and deliver  promissory
                            notes,   loan   agreements,   security   agreements,
                            assignments,  mortgages, pledge agreements, and such
                            other  documents  as required  by NCSC,  in form and
                            substance reasonably satisfactory to NCSC and its

                                                                    4

<PAGE>

              counsel, it being agreed that the form of loan agreement and other
              loan  documents that are attached to this  commitment  letter (the
              "Approved Loan  Documents") are satisfactory in form and substance
              to NCSC and its counsel.

--   The  Borrower  shall cause its legal  counsel to deliver  such  opinions of
     counsel  covering such matters as NCSC may require in  connection  with the
     acquisition  of  the  Assets  and  the  financing   contemplated   by  this
     commitment.

This  commitment is subject to further  negotiation  and completion of agreeable
financing  terms  and  documentation  which  will  include  terms,   provisions,
representations,   warranties,   covenants,   conditions  precedent,   defaults,
indemnities,  remedies, and waiver of jury trial provisions,  that are customary
in acquisition financing transactions,  although not expressly described in this
letter,  it being agreed that the Approved Loan Documents include all conditions
precedent to NCSC's obligation to close such Credit Facilities.

This commitment is delivered to you with the express  understanding that NCSC or
its affiliates may provide financing and other financial or consulting  services
to other  entities  and their  affiliates,  and that  these  companies  may have
conflicting or competing interests with you regarding the proposed  acquisition.
However, in providing such financing and other financial or consulting services,
neither  NCSC nor any of its  affiliates  will  share  with any other  entity or
person any  confidential  information  you disclose to us in connection with the
transaction described in this letter.  Similarly, you acknowledge and agree that
neither NCSC nor any of its  affiliates  has any  obligation  to disclose to you
confidential  information  that NCSC  receives  from any other  entity or person
regarding the subject acquisition or financing.

This commitment is delivered to you with the further understanding that you will
not disclose its contents or the  financing  terms of the  transaction  with any
party  other  than   governmental  or  regulatory   bodies  which  require  such
disclosure,  or to  those  who are in a  confidential  relationship  with you in
connection with this transaction, such as your legal counsel, consultants, Board
of Directors, and the Seller, or as otherwise required by law.

All of the provisions of this  conditional  commitment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and  assigns,  except that the  Borrower  may not assign or transfer  any of its
rights or  obligations  under  this  conditional  commitment  and any  purported
assignment or transfer by the Borrower  shall be void. No rights are intended to
be created under this commitment for the benefit of any third party.

The Borrower shall indemnify and hold harmless NCSC and its officers, directors,
employees,  agents  and  affiliates  from and  against  any and all  liabilities
arising out of the transaction contemplated by this commitment letter.

If the  terms of this  commitment  are  acceptable  to you,  please  sign  where
indicated  below and return the executed  copy to NCSC.  This  commitment  shall
become  effective  only upon your  signature  below and  receipt  by NCSC of the
signed commitment,

NCSC's  obligations  under this  commitment  shall terminate upon the earlier to
occur of (i) the rejection by the Seller of the  Borrower's  bid to purchase the
Assets,  (ii) the date the Borrower  consummates the closing of the acquisition,
and (iii) April 30, 2001.

                                        5

<PAGE>

Concurrently  with the  issuance  by NCSC of this  conditional  commitment  (the
"Arizona Commitment") to finance the acquisition by the Borrower of the Seller's
assets  located in the State of Arizona (the  "Arizona  Assets"),  NCSC has also
issued the following conditional commitments:  (i) a conditional commitment (the
"Hawaii  Commitment") to finance the acquisition by the Borrower of the Seller's
assets  located in Kaua'i,  Hawaii (the "Hawaii  Assets") and (ii) a conditional
commitment  (the "Joint  commitment") to finance the acquisition by the Borrower
of the  Arizona  Assets and the Hawaii  Assets.  By  acceptance  of the  Arizona
Commitment,  the borrower acknowledges and agrees that all of NCSC's obligations
under  the  Hawaii   commitment  and  the  Joint  Commitment  are  automatically
terminated and the Hawaii  commitment and Joint Commitment are null and void and
of no further force or effect.

This letter  supercedes  that certain  commitment  letter dated January 10, 2000
from NCSC to the Borrower which is of o further force of effect.

We at NCSC look forward to working with you toward a  successful  completion  of
this transaction.

Very truly yours,

NATIONAL COOPERATIVE SERVICES CORPORATION

By: ____________________________
        Its: _______________________

ACKNOWLEDGED AND AGREED TO:

Borrower:

CAP ROCK ENERGY CORPORATION

By: ___________________________

           Its: _____________________

Date: _________________________

                                        6

<PAGE>

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