20050719Compliance filing 1.pdf

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RUS Project Designation:
Idaho 515 -G 11 Rural
LOAN AGREEMENT
dated as of March 9 2005
between
RURAL TELEPHONE CaMP ANY
and
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THE UNITED STATES OF AMERIC:;A.
UNITED STATES DEPARTIvIENT OF AGRICULTURE
RURAL UTILITIES SERVICE
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LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement ) dated as of March 9, 2005, is betweenRURAL TELEPHONE COMPANY (hereinafter the "Borrower ) a corporation organized and existingunder the laws of Idaho and the UNITED STATES OF - AMERICA (hereinafter
the "Government") acting through the Administrator of the Rural Utilities Service ("RUS.
The Borrower has applied to RUS, requesting fmancial assistance (hereinafter theApplication) to provide telecommunications and/or broadband services in rural areas.
RUS is willing to extend fmanciaI assistance, in the form of loans or loan guarantees to theBorrower, pursuant to the Rural Elec1rification Act of 1936 (7 D.C. 901 et seq.)(the Act, H) and allapplicable federal regulations, on the tenDS and conditions stated herein.
THEREFORE, in consideration of the promises and mutual covenants herein contained, theparties agree and bind themselves as follows:
ARTICLE I - DEFINITIONS
The tenns defined herein include both the plural and the singular. Unless otherwisespecifically provided, all. accoup.ting terms not otheIwise defined herein shall have the meanings assigned
to them, and all determinations and computations herein provided for shall be made in accordance withAccounting Requirements.
Accounting Requirements" shall mean the system of accounting prescribed by RUS in RUSRegulations.
Advance" or "Advances" shall mean an advance or advances made or approved by RUS
under its respective Note(s).
Affiliate" or "Affiliated CompanyU of any specified pe,rson or entity means any other person
or entity directly or indirectly controlling of, controlled by, under direct or indirect common control wi~or related to, such specified person or entity. For the purpose of this definition, "control" of any specifiedperson or entity 'means the power to direct the management and policies of such specified person or entity,
directly or indirectly, whether through the ownership of stock, by contract, or otherwise.
Application" shall have the meaning as derIDed above in the second paragraph hereof.
Broadband Loan" shall mean the broadband loan described in Section 3.
Section 3.
Broadband Loan Expiration Date" shall have the meaning as defined in Paragraph (a)(ii) of
Business Day" shall mean any day that RUS and the Department of Treasury are both open
for business.
Construction Fund Account" shall have the meaning as derIDed in Paragraph (d) of Section
Distributionsu shall have the meaning as dermed in Section 6.
Event of Default" shall have the meaning as dermed in Article VllI.
Interest ExpenseH shall have the meaning as defined in Attachment 3.
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Laws" shall have the meaning as defined in paragraph (e) of Article II.
Loan(s)" shall mean, collectively, the loans described in Section 3.
Note(s).
Loan Documents" shall mean, collectively, this Agreement, Security Documents, and the
Material Adverse Effect" shall mean a material adverse effect on, or change in, the
condition, financial or otherwise, operations, properties, business or prospects of the Borrower or on the
ability of the Borrower to perfonn its obligations under the Loan Documents as deternrined by RUS.
Net Income" or "Net Margins') shall have the meaning as derIDed in Attachment 3.
Net Worth" shall have the meaning as defined in Attachment 3.
Note(s)" shall have the meaning as deemed in Paragraph (a) of Section 3.
Pennitted Encumbrances" shall have the meaning as deemed in the Security Documents.
Pledged Deposit Account" shall have the meaning as defmed in Section 5.4.
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Prior Telephone Loan Contracts" shall mean all telephone' loan ,agreements previouslyentered into by RUS and the Borrower.
Project" shall have the meaning as def~ed in Paragraph (a) of Section 3.4.
RUS Regulations" shall mean the roles, regulations and bulletins of general applicabilitypublished by RUS from time to time, as such rules, regulations, and bulletins exist at the date ofapplicability thereof, and shall also include any rule and regulations of other Federal entities which RUS is
required by law to implement. Any reference to specific RUS Regulations shall mean the version of andcite to such regulation effective at the date of applicability thereof.
Security Documents" shall mean, collectively, any mortgage, security agreement, financingstatement, deposit account control agreement or other document providing collateral for the Loan(s).
Subsidiaries" shall mean the subsidiaries listed in Schedule 1.
Telecommunications Loan" shall mean the telecommunications loan described in Section
Telecommunications Loan Expiration Date" shall have the meaning as defined in Paragraph
(b )(ii) of Section 3.
Telecommunications Loan Guarantee" shaH mean the teleconnnwrications loan guaranteedescribed in Section 3.
TIER" shall mean the Borrower s total Net Income or Net Margins plus Interest Expense, payable for such year divided by Interest Expense payable for such year, as determined in Schedule 1hereto.
TIER Conunencement Date" shall have the meaning as defined in Section 5.12.
Total Assets" shall have the meaning as deified in Attaclunent 3.
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
Recognizing that RUS is relying hereon, the Borrower represents and warrants) as of the date
of this Agreement, the following:
(a)Organization; Power, Etc The Borrower: (i) is the type of organization specified in
the first paragraph hereof. duly organized, validly existing, and in good standing
under the laws of the State identified in the fIrst paragraph hereof; (n) is duly
qualified to do business and is in good standing in each jurisdiction in which the
transaction of its business make such qualification necessary; (Ui) has legal power to
own and operate its assets and to cany on its business and to enter into and perform
its obligations under the Loan Documents; (iv) has duly and lawfully obtained and
maintained all material licenses, certificat~s, pernrits, authorizations, and approvals
necessary to conduct its business or required by applicable Laws; and (v) is eligible
to obtain the financial assistance from RUS contemplated by this Agreement.
(b)A uthority. The execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents and the performance of the transactions
contemplated hereby and thereby have been duly authorized by all necessary actions
and do not violate any provision of law or any charter. articles of incorporation
organization documents or bylaws of the Borrower or result in a breach of, or
constitute a default under; any agreement, secUrity agreement, 'hote of other
instrument to which the Borrower is a party or by which it may be bound. The
Borrower has not received any notice from any other party to any of the foregoing
that a default has occurred or that any event or condition exists that with the giving
of notice or lapse of time or both would constitute such a default.
(c)Consents. No consent, approval, authorization, order, ruing, qualificatio~ license, or
permit of any governmental authority is necessary in connection with the execution
delivery~ perfonnance, or enforcement of the Loan Documents, except such as have
been obtained and are in full force and effect.
(d)Binding Agreement. Each of the Loan Documents is, or when executed and
delivered will be, the legal, valid, and binding obligation of the Bon-ower
enforceable in accordance with its terms, subject only to limitations on enforceability
imposed in equity or by applicable bankruptcy, insolvency. reorganization
moratorium or similar laws affecting creditors' rights generally.
(e)Compliance with Laws. The Borrower is in compliance in all material respects with
all federal, state and local laws, rules, regulations, ordinances, codes and orders
(collectively, "Laws.
(f)Litigation. There are no pending or threatened legal, arbitration or governmental
actions or proceedings to which the Borrower is a party or to which any of its
property is subject which, if adversely determined. could have a Material AdverseEffect.
(g)
Information Submitted with Application. All information, reports, and other
documents and data submitted t~ RUS in connection with the Application were. at
the time the same were furnished. complete, and correct in 'all material respects. Ally
financial statements or data submitted to RUS in colU1ection with the Application
present fairly, in all material respects) the financial position of the Borrower and the
results of its operations in conformity with Accounting Requirements. Since the date
thereof, there has been no material adverse change in the fmancial condition or
operations of the Borrower.
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(h)
(i)
Section 3.1 Loans
Location of Properties. All real property and interests therein of the Bon-ower are
located in the states, counties
, '
or parishes identified in the Security Documents.
Principal Place of Business. The principal place of business and chief executive
office of the Borrower is at the address of the Borrower specified in Schedule 1
hereto.
Organization Number. The Borrower s organization number is correctly identified
in Schedule 1 hereto.
(k)Subsidiaries and Parent. Any subsidiaries or parent of the Borrower are disclosed
on the attached Schedule 1.
(I)Defaults Under Other Agreements. No default by the Borrower has occurred under
any agreement or instrument to which the BolTower is a party, or to which any of its
property is subject, that could have a Material Adverse Effect.
(m)Title to Property. Except as disclosed in writing in the opinion of counsel, the
Borrower holds good and marketable title to all of the collateral securing the
Loan(s), free and clear of any liens, security interests, or other encumbrances except
for Permitted Encumbrances.
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ARTICLE HI-THE LOANS
(a)Broadband Loan. RUg agrees to make and the Borrower agrees to accept, on the
terms and conditions stated in this Agreement, a Broadband Loan, in the amount
specified in Schedule 1 hereto.
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(i)Interest Rate. The portion of the Broadband Loan specified in Schedule
hereto will bear interest at the comparable Treasury rate for comparable
maturities, as determined by RUS, and the portion of the Loan specified in
Schedule 1 hereto will bear interest at the rate of four percent (4%) per
annum.
(ii)Broadband Loan Expiration Date. The obligation of RUS to advance the
Broadband Loan or any portion thereof shall expire on a date ("Broadband
Loan Expiration Date ) five years from the date of the Note(s). No portion
of the Broadband Loan will be advanced by RUS to the Bon-ower after the
Broadband Loan Expiration Date. RUS, in its sole discretion, may approve
an extension of the Broadband Loan Expiration Date, provided that the
Borrower notifies RUS, in writing at least ten days prior to the Broadband
Loan Expiration Date, of the reasons and need for an extension, together
with a suggested revised Broadband Loan Expiration Date.
(b)Telecommunications Loan. RUS agrees to make and the Borrower agrees to accept
on the terms and conditions stated in this Agreement, a Telecommunications Loan
in the amount specified in Schedule 1 hereto.
(i)Interest Rate. The portion of the Telecommunications Loan specified in
Schedule 1 hereto will bear interest at the Cost-or-Money Interest Rate
detennined by the Govenunent pursuant to 7 D.C. 935(d)(2)(A) of the
Act and its implementing regulations, as amenq.ed tram time to time (7
R. 1735.31(c)) and the portion of the Teleconnnunications Loan
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(c)
(ii)
specified in Schedule 1 hereto will bear interest at the rate of five percent
(5%) per annum.
Telecommunications Loan Expiration Date. The obligation of RUS to
advance the Telecommunications Loan or any portion thereof shall expire
on a date ("Telecommunications Loan Expiration Date ) five (5) years from
the date of the Note(s). No portion of the Telecommunications Loan will be
advanced by RUS to the Borrower after the Telecommunications Loan
Expiration Date. RUS) in its sole discretion, may approve an extension of
the Telecommunications Loan Expiration Date, provided that the Borrower
notifies RUS, in writing at least ten (10) days prior to the
Telecommunications Loan Expiration Date~ of the reasons and need for an
extension, together with a suggested revised Teleconununications Loan
Expiration Date.
Telecommunications Loan Guarantee. RUS agrees to guarantee the loan identified
in Schedule 1 hereto and the Borrower agrees to accept such guarantee, on the tenns
and conditions stated in this Agreement.
(i)Interest Rate. Each Advance of funds subject to the Telecommunications
Loan Guarantee shall bear interest at the rate established by FFB at the time
such Advance is made on the basis of the determination made by the
Secretary of the Treasury pursuant to 12 V.C. 2285(b) of the Federal
Financing Bank Act of 1973, as amended.
(ii)Telecommunications Loan Guarantee Expiration Date. The obligation ofRUS to approve requests for Advances made under the
Teleconnnwrications Loan Guarantee or any portion thereof shall expire on
the Last Advance Date as specified in the applicable guaranteed Note.
Section 3.2 Loan Documents
Section 3.Payment
(a)
(b)
The debt created by the Loan(s) will be evidenced by a note(s) ("Note(s)") executed
by the Borrower and payable, as applicable, to the United States of America or, in
the case of a loan guarantee, to the guaranteed lender. The Borrower shall repay the
Loan(s) in accordance with the Note(s) which shall be payable and bear interest in
accordance with its (their) tenDS.
The Borrower shall execute the Security Documents covering all of the Borrower
property, in fonn and substance satisfactory to RUS and such other security
instruments as required by RUS.
Except as otherwise prescribed by RUS) if any, the Borrower shall make all payments on theNote(s) utilizing elec1ronic funds transfer procedures as specified by RUS.
Section 3.4 Pro) ect
(a)
(b)
Loan Purpose. The Loan has been made solely to finance the project specifically
described in the Application to furnish or improve telecommunications and/or
broadband services in rural areas (the ccProject."
Changes to Project. The Borrower shall obtain the prior written approval of RUS
regarding any material change to the scope, loan design, construction, delivery of
services, or objectives of the Project.
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ARTICLE IV CONDITIONS OF LENDING
Section 4.General Conditions
In connection with the execution and delivery of this Agreement, each of the followingconditions shall be satisfied (all documents, certificates, and other evidence of such conditions are to be
satisfactory to RUS in its discretion):
(a)Legal Matters. AU legal matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to counsel for RUS;
(b)Loan Documents.
Documents;
RUS shall receive duly executed originals of the Loan
(c)Filed and Recorded Security Documents. RUS shall have received the following
documents securing the Loan(s): (i) executed, file~ and indexed financing
statements covering all of the personal property and fixtures of the Borrower and (ii)
executed, flied, and recorded counterparts of a mortgage covering all of the
Borrower s real property;
(d)Articles of Incorporation, Charter, Bylaws, and Organizational Documents. With
respect to corporate and cooperative Borrowers, RUS shall have received copies of
the Borrower s articles of incorporation, charter, and bylaws. With respect to limited
liability companies or similar organizations, RUS shall have received copies of the
Borrower organizational documents containing provisions reflecting the
obligations of the ,Borrower in paragraphs (c) and (d) of Section 6.
(e)AuthorizatiIJ1)S. RUS shall have received satisfactory evidence that all Loan
Documents and proceedings of the Bonower necessary for duly authorizing theexecution, delivery, and perfonnance of the Loan Documents have been obtained
and are in full force and effect;
(f)Approvals. RUS shall have received satisfactory evidence that the Borrower has
duly registered as required by law with all state, federal, and other public authorities
and regulatory bodies and has obtained all authorizations, certificates, permits
licenses, franchises and approvals necessary for, or required as a condition of, the
validity and enforceability of each of the Loan Documents and for the construction
and operation of the Project;
(g)
Title Evidence. RUS shall have received satisfactory evidence that the Borrower has
good and marketable title to its property, including the Project, and holds suchfranchises, pennits, leases, easements, rights, privileges, licenses, or right-of-way
instruments, reasonably adequate in fonn and substance, as may be requITed by law
for the continued maintenance and operation of its existing facilities and the Proj ect,
(h)Tariff Evidence. RUS shall receive evidence from each Bonower with rates
imposed by tariff, that it has duly adopted a tariff, which (1) will provide for such
grades of telephone service as RUS may approve, (2) does not include mileage or
.zone charges on any telephone service provided by the Project, and (3) ,is designedwith a view to (i) paying and discharging all taxes, maintenance expenses ' andoperating expenses of the Borrower s system, (n) making all payments in respect of
principal and interest on the Note(s) when and as the same shall become due, (in)
providing and maintaining reasonable working capital of the BoITower, and (iv)
producing and maintaining the TIER, specified in Schedule 1 hereto;
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(i)Broadband Rate Evidence. For Broadband loans, RUS shall receive evidence that
the Borrower has du1y adopted rates which are designed with a view to (i) paying
and discharging all taxes, maintenance expenses, and operating expens~s of the
Borrower s system, (ii) making all payments in respect of principal arid interest on
the Note(s) when and as the same shall become due, (iii) providing and maintairllng
reasonable working capital of the Borrower, and (iv) producing and maintaining the
TIER, specified in Schedule 1 hereto.
Opinion of Counsel. RUS shall receive an opinion of counsel for the Borrower
(who shall be acceptable to RUS) in fonn and content acceptable to RUS;
Section 4.Conditions to Advances
The obligations ofRUS to make any Advances under its Loan(s) or approve any requests for
Advances under its Loan Guarantee( s) are subject to the satisfaction of each of the following conditions
precedent on or before the date of such Advance (all ,documents, certificates and other evidence of such
conditions precedent are to be satisfactory to RUS in its discretion):
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(a)Continuing Representations and Warranties. That the representations and warranties
of the Borrower contained in this Agreement be true and correct on and as of the date
of such Advance as though made on and as of such date;
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(b)Material Adverse Effect. That no event has occurred which has had or could have a
Material Adverse Effect;
(c)Event off)efault. That no Event of Default and no event which with the passage of
time or giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing, or shall have occurred after giving effect to such
Advance on the books of the Borrower;
Cd)Requisitions and Supporting Documentation
(1)Broadband Loans. That RUS shall have received a requisition for
Broadband, loan funds, not more frequently than once a month, and
supporting documentation from the Borrower in accordance with Rural
Utilities Service RUS Bulletin 1738-Rural Broadband Access Loan and
Loan Guarantee Advance and Construction Procedures Guide as amended
and supplemented from time to time (hereinafter "RUS Bulletin 1738-
attached hereto as Attachment 1 or available at http://www.usda.gov/
rusitelecom/broadbandJrus-bulletin-173 8-web2-03 .doc;
(2)Telecommunications Loan and Loan Guarantee. That RUS shall have
received a requisition for Telecommunications Loan funds and Loan
Guarantee funds not more frequently than once a month, and supporting
documentation from the BoITower in accordance with RUS Regulations;
(e)Flood Insurance. That for any Advance used in whole or in part to finance the
construction or acquisition of any building in any area identified by the Secretary of
Housing and Urban Development pursuant to the Flood Disaster Protection Act
1973 (the "Flood Insurance Act") or any rules, regulations or orders issued to
implement the Flood Insurance Act as any area having special flood hazards, or to
fmance any facilities or materials to be located in any such building, or in any
building owned or occupied by the BoITower and located in such a flood hazard area
the Borrower shall have submitted evidence, in form and substance satisfactory to
RUS or RUS has otherwise determined, that (i) the community in which such area is
located is then participating in the national flood insurance program, as required by
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the Flood Insurance Act and any related regulations, and (n) the Borrower has
obtained flood insurance coverage with respect to such building and contents as may
then be required p~suant to the Flood Insurance Act and any related regulations;
(f)Current Financial Information and Certification of Authority. That RUS has
received from the Borrower (i) its current, updated balance sheet, statement of cash
flow, and income statement and (ii) a dilly authorized and executed certification
Fonn675
, "
Certification of Authority," designating an officer, employee, or agent of
the Borrower as the person or persons authorized to execllte and submit, on behalf of
the Borrower, REA Form 481
, "
Financial Requirement Statement;
(g)
Fidelity Bond or Theft Insurance Coverage. That RUS has received from the
BoITower, except BoITowers which are units of government, evidence, that the
Borrower has obtained fidelity bond or theft insurance coverage in accordance with
RUS Regulations;
(h)Pledged Deposit Account. That, in coDDection with Broadband Loans (or with
respect to Telecommunications Loans and Loan Guarantees when required on
Schedule 1, or otherwise directed in writing by RUg), the Borrower has opened a
Pledged Deposit Account under terms satisfactory to RUS;
(i)Compliance with Deposit Requirements for Broadband Loans. That) in connection
with Broadband Loans, RUS has received from the Borrower, evidence that the
Borrower has maintained on deposit in account, fimds in the amount specified in
Schedule 1 to cover operating expenses, in accordance with 7 C.R. Section
1738.20(b), and has prpvided RUS with an advance schedule for- such funds;
(j)
Compliance with Loan Documents. That the Borrower is in material compliance
with. the Loari Documents;
(k)RUS Loan Guarantee Requirements. In connection with the Telecommunications
Loan Guarantee:
(1)That RUS and the FFB have entered into a contract and that the FFB has
agreed to make the loan to the Borrower, which will be guaranteed by RUS;
(2)That RUS has received evidence that any conditions in the contract referred
to above in subparagraph (1) have been satisfied; and
(3)That RUS has received a promissory note payable to FFB in the amount to
be guaranteed by RUg and a reimbursement note payable to the order of the
Government, both duly authorized, executed and delivered by the BoITower
within the time period prescribed by RUS;
(1)Additional Documents. The Borrower agrees to provide RUg with such additional
documents as RUS may request; and
(m)Additional Conditions. The Borrower has met all additional conditions specified in
Schedule I hereto.
Section 4.3 First Advance to Pay Off Interim Construction Financing~ Restrictions on SubseQuen~
Advances
Loan funds to payoff RUS approved interim construction fmancfug, if any, will be included
in the fIrst loan advance. Thereafter no further advances will be made unless and until the Borrower has
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furnished evidence, in fonn and content satisfactory to RU8, that such interiri1 construction financing has
been paid in full and any associated liens have been duly discharged from record.
SectionS.Generall'X
ARTICLE V - AFFIRMATIVE COVENANTS
Unless otherwise agreed to in writing by RUB, ~hile thi~ Agreement is in effect, the Borrower
shall duly observe each of the affmnative covenants contained in this Article V.
Section 5.2 Use of Advances
The BolTower shall apply the proceeds of Advances in accordance with its Application with
such modifications as may be mutually agreed to in writing by RUS and the Borrower.
Section 5.' Unused and Disallowed Advances
(a)The Borrower shall return forthwith to RUS any and all advanced portions of the
Loan(s) or Loan Guarantee(s) not disbursed by the Bonower for the Project or not
needed to complete the Project with any interest earned thereon when deposited in
the.,Pledged Deposit Account or other account approved by RUS.
(b)The Borrower shall reimburse RUS for any advanced funds whose original
expenditure has been disallowed by a RUS loan audit. Disallowances shall be
satisfied, as directed by RUS, by either administrative offset against. requests for
Advances or repaying the disallowed amount directly to the United States Treasury.
Such disallowed amounts shall accme interest payable to RUS from the date RUS
delivers to the Borrower a written demand for payment. Interest shall accrue at the
lesser of the following: the interest rate of the disallowed Advance or the then
. cwrent United States Treasury rate as prescribed by the Secretary of the Treasury in
the Federal Register and the Treasury Fiscal Requirements Manual Bulletin.
Closeout of the Loan will not affect such right to disallow expenditures and recover
in full, any amount on the basis of a subsequent audit, or other review or the
Borrower s obligation to return any disallowed expenditures.
Section 5.Deposit of Advances into Pled1!ed Deposit Account and Construction Fund Account
(a)Broadband Loans. The Borrower of Broadband Loans shall open and maintain a
deposit account pledged to RUg ("Pledged Deposit Account ) in a bank or
depository whose deposits are insured by the Federal Deposit Insurance Corporation
or other federal agency acceptable to RUS and shall be designated by the RUS name
of the Borrower followed by the words "Pledged Deposit Account" The Borrower
shall promptly deposit proceeds from all Advances of the Broadband Loan, including
previously advanced funds whose original expenditure has been disallowed by a
RUS loan audit, and other funds described on Schedule 1 hereto (hereinafter
Additional Funds ) into the Pledged Deposit Account. Moneys in the Pledged
Deposit Account shall be used solely for the purposes for which the Advance was
made, for the purposes as set forth in Schedule 1 hereto (hereinafter "Additional
PliIposes ) or for such other purposes as may be approved by RUS. Deposits and
disbursements from the Pledged Deposit Account shall be made and recorded in
accordance with Attachment 1 hereto~ RUS Bulletin 1738-, as amended and
supplemented from time to time.
(b)Telecommunications Loans and Loan Guarantees and Bank Loans. The BolTower of
Telecommunications Loans and/or Loan Guarantees, when required on Schedule 1 or
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otherwise directed in writing by RUS, shall open and maintain a deposit account
pledged to RUS for Telecommunications Loans and Loan Guarantees. Such account
shall be in a bank or depository whose deposits are insured by the Federal Deposit
Insurance Corporation or other federal agency acceptable to RUS, and shall be
designated by the corporate name of the Borrower followed by the words "Pledged
Deposit Account." ,The Borrower shall promptly deposit proceeds from Loan
Advances, including previously advanced funds whose original expenditure has been
disallowed by a RUS loan fund audit, and any Additional Funds into the Pledged
Deposit Account. Moneys in the Pledged D~posit Account shall be used solely for
the purposes approved by RUS or other Additional Purposes and shall be withdrawn
from time to time only as permitted by RUS.
(c)First Lien on Pledged Deposit Account. The BoITower shall establish and maintain
the Pledged Deposit Account as a deposit account and perfect a fITst and prior lien in
such account for RUS, (pursuant to a deposit account agreement or similar
agreement or mechanism for perfecting as provided by applicable law) in form
acceptable to RUS.
(d)Construction Fund Account. The Borrower shall promptly deposit Loan Advances
not required to be deposited in a Pledged Deposit Account, including previously
advanced Loan funds whose original expenditure has been disallowed by a RUS loan
fund audit, in a bank or depository whose deposits are insured by the Federal Deposit
Insurance Corporation or other federal agency acceptable to RUS. Such account
(hereinafter called the Construction Fund Account) shall be designated by the
corporate name of the Borrower followed by the words "Construction Fund
Account." Moneys in the Constmction Fund Account shall be used solely for the
purposes approved by RUS and shall be withdrawn from time to time only as
permitted by RUS.
Section 5.Use of Ooeratine: Funds Required in Connection with Broadband Loans
The Borrower shall expend the operating funds required by 7 C.R. Section 1738.20(b), as
approved by RUB.
Section 5.Financial Books
The Borrower shall maintain, at its premises, such books, documents, papers, or other records
and supporting documents, including, but not limited to, invoices, receipts, and bills of sale, adequate to
identify the purposes for which and the ~nner in which Loan and other funds were expended on the
Proj ect. The Borrower shall at all times keep and safely preserve proper books, records, and accounts in
which full and true entries shall be made of all dealings, business, and affairs of the Borrower and its
Subsidiaries (as listed in Schedule 1 hereto ) in accordance with any applicable Accounting Requirements.
The BolTower shall maintain copies of all documents submitted to RUS in connection with the Loan until
the Loan has been paid in full and all audits have been completed.
Section 5.Ri2hts of Inspection
The Borrower'shall afford RUS, the Office of Inspector General of USDA and the General
Accounting Office, through their representatives, reasonable opportunity, at all times during business hours
and upon prior notice, to access and inspect the Project, any other property encumbered by the Security
Documents, and any and all books, records, accounts; including electronic books, records, accounts, and
electronic mail messages, regardless of the physical fonn or characteristics, invoices, contracts, leases
payrolls, canceled checks, statements, other documents, and papers of every kind belonging to or in any
way pertaining to its property or business, including its Subsidiaries, if any, and to make copies or extracts
therefrom.
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Section 5.Annual and Special Financial Reports
(a)One hundred twenty (120) days from the end of the Borrower s fiscal year in whicb.
the first Advance is made and, thereafter, one hundred twenty (120) days from the
close of each fiscal year of the Borrower, the Borrower shall cause to be prepared
and furnished to RUS a full and complete annual report of its financial condition and
of its operations in fOnD and substance satisfactory to RU8, and as provided in
c.F.R. 1773, which is audited and certified by an independent certified public
accoun~ant satisfactory to RU8, and accompanied by a report of such audit in form
and substance satisfactory to RUS.
(b)The Borrower shall also furnish to RUS fifteen (15) Business Days after March 31st
of each year, and on such additional date ( s) as specified in Schedule 1 (hereinafter
Additional Reporting Dates ) or'as otherwise requested in writing by RUS, balance
sheets, income statements, statements of cash flow, or such other reports concerning
the fmancial condition or operations of the BolTower, including its Subsidiaries, as
RUS may request or RUS Regulations require.
Section 5.Annual Compliance Certificate
Commencing forty-five (45) days from the date hereof, and thereafter within forty-five (45)
days after the clos6,.of each calendar year, or sooner if required in writing by RUS; the Borrower shall
deliver to RUS, a written statement signed by its general manager managing member, or equivalent
corporate official satisfactory to RUS, stating that, during such year the Borrower has fulfilled its
obligations under the Loan Documents in all material respects or, if there has been a material default in the
fulfillment of such obligations;'\specifying each such default known to such official .arid the nature and
status thereof.
,';J'
~.. " "
Section 5.10 Miscellaneous Reports and Notices
The 'Borrower shall furnish to RUS:
(a)Notice of Default. Promptly after becoming aware thereof, notice of the occurrence
of any defaUlt under the Loan Documents or the receipt of any notice with respect to
the occurrence of any event which with the giving of notice or the passage of time, or .
both, could become an Event of Default hereunder or under the other Loan
Documents.
(b)Notice of Litigation. Promptly after the commencement thereof,. notice of the
commencement of" all actions, suits or proceedings before any court, arbitrator, or
governmental department, commission, board, bureau, agency, or instrumentality
affecting the Borrower or any Affiliate which, if adversely detennined, could have a
Material Adverse Effect on the Borrower.
(c)Regulatory and Other Notices. Promptly after receipt thereof, copies of any notices
or other communications received from any governmental authority with respect to
any matter or proceeding which could have a Material Adverse Effect on the
Borrower.
(d)Material Adverse Effect. Promptly after becoming aware thereof, notice of any
matter which has resulted or may result in a Material Adverse Effect on the
Borrower.
(e)Corporate Document Changes. Thirty (30) days prior to their effectiveness, any
amendments supplements or modifications to the Borrowee Articles of
Page 12
Incorporation) Charter) Bylaws, Operating Agreement, Members Agreements or
other Organizational Documents.
(f)Other Information. Such other information regarding the condition, fmancial or
otherwise, or operations of the Borrower as RUS may, from time to time, reasonably
request.
(a)
Section 5.11 Tariff and Rate Desilm
Tariff Requirements for Telecommunications Loan and Telecommunications Loan
Guarantee BoITowers are as follows:
(b)
(1)Regulatory Approval Necessary. If regulatory approval is required to
effectuate its telephone service tariff, the Borrower shall seek and use its
diligep,t best efforts to obtain all regulatory body approvals necessary to
place in effect and thereafter to maintain in effect a tariff for telephone
service which (A) provides for such grades of service as RUS shall approve
(B) does not include mileage or zone charges for any telephone service
provided by the Project, and (C) is designed with a view to (1) paying and
discharging all taxes, maintenance expenses, and operating expenses oithe
BolTower s system, (2) making all payments in respect of principal of and
interest on the Note(s) when and as the same shall become due, (3)
providing and maintaining reasonable working capital for the Borrower, and
(4) producing and maintaining the TIER specified on Schedule 1 hereto.
The Borrower shall place such tariff into effect as soon as permitted by
applicable laws and regulations and shall USe its diligent best efforts to
obtain all necessary regulatory body approvals of such revisions of its tariff
as may be necessary nom time to time to satisfy the requirements of this
provision.
(2)!1egulatory Approval Not Required. If regulatory approval is not required
to effectuate its telephone service tariff, the Bon-ower shall design, charge
and maintain in effect a tariff for telephone service which (A) provides for
such grades of service as RUS shall approve, (B) does not include mileage
or zone charges for any telephone service provided by the Project, and (1)
pays and discharges all taxes, maintenance expenses, and operating
expenses of the Bon-ower s system, (2) makes all payments in respect of
principal of and interest on the Note(s) when and as the same shall becomedue, (3) provides and maintains reasonable worklng capital for the
Borrower, and (4) produces and maintains the TIER specified on Schedule
1 hereto.
Rate Requirement for Broadband Service. The Borrower shall design, charge, and
maintain in effect rates for Broadband service which (i) pay and discharge all taxes
maintenance expenses and operating expenses of its system, (n) make all payments
in respect of principal of and interest on the Note(s) when and as the same shall
, become due, (iii) provide and maintain reasonable working capital for the BolTower
and (iv) produce and maintain the TIER specified on Schedule 1 hereto.
Section 5.12 TIER Requirement
From the date of this Agreement until the date specified in Schedule 1 , the Borrower will
maintain a TIER of at least 1.0. Thereafter, starting on the date specified in Schedule 1 (hereinafter called
the HTIER Commencement Date ) the Borrower shall maintain the TIER level(s) as specified in Schedule1.
Page 13
- "
Section 5.13 Corrective Action
Within thirty (30) days of (i) sending the fmancial reports required by Section 5.8 hereof that
shows the TIER specified by Section 5.12 was not achieved for the reported fiscal year or (ii) being notified
by RUS that the TIER specified in Section 5.12 was not achieved for the reported fiscal year, whichever is
earlier, the' Borrower, ill consultation uWith RUS, shall provide a -written plan satiSfactory to RUS settiiig
forth the actions that shall be taken to achieve the specified TIER on a timely basis and shall promptly
implement said plan.
Section 5.14 Oblie:ations with Respect to the Construction~ Operation and Maintenance of the
Project Funded bX the Broadband Loan
(a)
(b)
,,'1-
Project Management an~ Operation. The Borrower shall be responsible for
. managing the day to day operations of the Project and will operate the Project in an
efficient and economic manner as well as maintaining the Project in good repair.
Design Standards, Construction Standards, and Lists of Materials. The Borrower
shall use design standards, constmction standards, and lists of acceptable materials in
accordarl:ce with Attachment 1 hereto RUS Bulletin 1738-, as amended and
supplemented from time to time.
(c)Plans and Specifications. The Borrower shall submit plans and specifications for
construction to RUS for review and approval in accordance with AttacIuhent 1
hereto, RUS Bulletin 1738-, as amended and supplemented from time t9 time.
(d)Standard Forms of Purchase Contracts, Installation Contracts, Construction
Contracts, and Engirzeering and Architectural Service Contracts. The Borrower
shall use the standard forms of contracts promulgated by RUS for construction,
procurement, engineering services, and architectural services in accordance with
Attachment 1 hereto, RUS Bulletin 1738-, as amended and supplemented from
time to time, and shall submit to R US such contracts for review and approval in
accordance with such Attachment 1.
(e)Contract Bidding Requirements. The Borrower shall follow RUS bidding procedures
when contracting for construction or procurement in accordance with Attachment
hereto, RUS Bulletin 1738-, as amended and supplemented from time to time.
(f)Construction in Accordance with Loan Design. The Borrower shall cause the
Project to be constructed and completed in accordance with the loan design
submitted with the Application.
(g)
General Insurance Requirements. The Borrower shall take out and maintain
insurance on the Project and any other property acquired with the Loan in
accordance with 7 CFR Section 1788 as well as maintaining the fi4elity bond or theft
insurancC? coverage required in Section 4.2 paragraph (g) hereof.
Section 5.15 Obli2'ations with Respect to the Construction, Operation and Maintenance of the
Project Funded by the Telecommunications Loan and Telecommunications Loan
Guarantee
(a)Project Management and Operation. The Borrower shall be responsible for
managing the day to day operations of the Project and will operate the Project in an
efficient and economic manner as well as maintaining the Project in good repair.
Page 14
(b)
(e)
Design Standards, Construction Standards and List of Material. The Borrower shall
use design standards) construction standards, and lists of acceptable materials iri
accordance with RUS Regulations.
(c)Plans and Specifications. The Borrower shall submit plans and specifications for
constmction to RUS for review and approval in accordance with RUS Regulations.
(d)Standard Forms of Purchase Contracts, Installation Contracts, Construction
Contracts, and Engineering and Architectural Service Contracts. The Borrower
shall use the standard forms of contracts promulgated by RUS for construction
procurement, engineering services, and architectural services in accordance with
RUS Regulations and shall submit to RUS such contracts for review and approval in
accordance with RUS Regulations.
Contracts for Toll Traffic, Operator Assistance Services, and Extended Area Service.
The Borrower shall submit contracts for toll traffic, operator assistance services and
contracts for extended area service to RUS for review and approval in accordance
with RUS Regulations.
(f)Contract Bir;iding R,equil"ernents. The Borrower shall follow. RUS bidding procedures
when contracting for construction or procurement in accordance with RUS
Regulations.
(g)
Construction in Accordance with Loan Design. The Borrower shall cause the Project
to be constructed and cofupleted in accordance with the loan design submitted with
the Application.
(h)General Insurance' Requirements. The Borrower shall take out and maintain
insurance on the Project and any other property acquired with the Loan as well as
maintaining fidelity bond or theft insurance coverage in accordance with RUS
Regulations.
Section 5.16 Oblit:ations Applicable to Telecommunications Loan and Telecommunications Loan
Guarantee Borrowers with Resnect to Area Coveraee of Telephone Service
The Borrower shall furnish adequate telephone service to the widest" practicable nwnber
rural users in the Borrower s telephone service area, as such area is shown on the map which is a part of the
Borrower s application for the Telecommunications Loan or Telecommunications Loan Guarantee and
which map, as revised by agreement between the Borrower and RUS, is incorporated herein by reference
thereto. In the performance of this obligation, the Borrower shall:
(a)furnish service to all applicants for telephone service included in the Project funded
by the Telecommunications Loan, or Telecommunications Loan Guarantee, without
payment by such applicants of any extra charge as a contribution to the cost of
construction of facilities to provide such service; and
(b)take all action that may be required to enable it to extend service, without payment to
the Borrower of any extra charge as a contribution to construction of facilities to
provide such service, to every unserved rural applicant for service in its telephone
service area if the cost of constructing the required line extension for such applicant
will not exceed seven times the estimated aDnuallocal service revenues from such
applicant. Such service shall be furnished with the use of such funds as may ftom
time to time be available to the Borrower, either from surplus earnings, increased
equity capital, additional loans made by lenders other than the Government, or
otherwise as the Borrower may elect, pursuant to terms and conditions set forth in
Page 15
the Borrower s tariff, as duly filed with or approved by regulatory bodies having
jurisdiction in the premises, or in the absence of any such regulatory body, as
adopted by the Borrower; provided that the Borrower shall not file with or submit for
approval of appropriate regulatory bodies or adopt any proposed tariff, or continue in
effect any existing tariff not required to be continued by any regulatory body, unless
under such tariff the Borrower will be obligated to serve unserved rural applicants as
provided herein.
Section 5.17 Presetvation of-Existence and:Rights
The Borrower shall, until the Loan is repaid in full, take or cause to be taken all such actions
as ftam time to time may be necessary to preserve its existence and to preserve and renew all franchises
contracts, rights of way, easements, permits, and licenses now or hereafter to be granted or conferred upon
, with respect to the Project, the loss of which would have a Material Adverse Effect on the Borrower.
Section 5.18 Compliance with Laws
The Borrower shall operate and maintain the Project and its properties in compliance in all
material respects, with all applicable Laws.
Section 5.19 NondiscriInination
, ,.
(a)Equal Opportunity Provisions in Construction Contracts. The Borrower shall
incorporate or cause to be incorporated into any construction contract, as defined in
Executive Order 11246 of September 24, 1965 and implementing regulations, which
is paid for in whole or in part with funds obtained from RUS, or borrowed on the
, credit of the United States pursuant to a grant, contract, loan, insurance or guarantee
or undertaken pursuant to any RUS program involving such grant, contract, loan
insurance or guarantee, the equal opportmrity provisions set forth in Attachment 2
hereto, entitled Equal.opportunity Con1ract Provisions.
(b)Equal Opportunity Contract Provisions Also Bind the Borrower. The Borrower
further agrees that it shall be bound by such equal opportunity clause in any federally
assisted construction work which it performs itself other than through the permanent
work force directly employed by an agency of government.
(c)Sanctions and Penalties. The Borrower agrees that it shall cooperate .actively with
RUS and the Secretary of Labor in obtaining the compliance of contrac~ors and
subcontractors with the equal opportunity clause and the rules, regulations and
relevant orders of the Secretary of Labor, that it shall furnish RUS and the Secretary
of Labor such informati~n as they may require for the supervision of such
compliance, and that it shall otherwise assist the administering agency in the
discharge of RUg' primary responsibility for securing compliance. The Borrower
further agrees that it shall refrain from entering into any contract or contract
modification subject to Executive Order 11246 with a contractor debmed from,
who has not demonstrated eligibility for, Government contracts and federally
assisted construction contracts pursuant to Part II, Subpart D of Executive Order
11246 and shall carry out such sanctions and penalties for violation of the equal
opportunity clause as may be imposed upon contractors and subcontractors by RUS
or the Secretary of Labor pursuant to Part ', Subpart D of Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with these
undertakings RUS may cancel, terminate or suspend in whole or iIi part this
Agreement, may refrain from extending any further assistance under any of its
programs subject to Executive Order 11246 until satisfactory assurance of future
compliance has been received fi:om the Borrower, or may refer the case to the
Department of Justice for appropriate legal proceedings.
Page 16
Section 5.20 Buy American
The Borrower shall use or cause to be used in connection with the expenditures of funds if
such funds were obtained in whole or in part by a loan being made or guaranteed by RUS only such
unmanufactured articles, materials, and supplies as have been mined or produced in the United States or
any eligible country, and only such ,manufactured articles, material, and supplies as have been
manufactured in the United States or any eligible country substantially all from articles, material, and
supplies mined, produced' or manufactured~as' the case may be, in the United States or any eligible country,
except to the extent RUS shall determine that such use shall be impracticable or that the cost thereof shall
be umeasonable. For purposes of this section, an "eligible cmmtry" is any country that has with respect to
the United States an agreement ensuring reciprocal access for United States products and services and
United States suppliers to the markets of that Country, as determined by the United States Trade
Representative.
Section 5.21 Additional Affirmative Covenants
The Borrower shall comply with the additional affirmative covenants set forth in Schedule
hereto.
ARTICLE VI - NEGATIVE COVENANTS
Section 6.1 General
Unless otherwise agreed to in writing by RUS,while this Agreement is in effect, the Borrower
shall duly observe each of the negative covenants set forth in this Article VI.
Section 6.Mere:er~ Consolidation anq Transfer ofPropertI
The Borrower shall not, without the prior written consent of RUS, take or suffer to be taken
any steps to reorganize, consolidate with, or merge into any other corporation, or to sell, lease or transfer
(~r make any agreement therefor) all or any part of its property, including, without limitation, the Project.
Section 6.Covenan~tv Companies and Similar Borrowers
Borrowers which are limited liability companies or similar orgamzations agree that:
(a)The dea~ retirement, resignation, expulsion, termination, bankruptcy, or dissolution
of any member or the occurrence of any other event that terminates the continued
membership of any member shall not cause the Borrower to be dissolved or its
affairs to be wound up;
(b)Prior to the date on which any and all obligations owed to RUS or the guaranteed
lender with respect to Telecommunications Loan Guarantees, including the note
evidencing the Loan, are discharged in full, the Borrower shall not be dissolved ortenninated'
(c)The organizational documents of the Borrower shall contain provisions reflecting the
obligations of the :Borrower in paragraphs (a) and (b) innnediately above and such
provisions shall not be amended without the prior written consent of RUS; and
(d)No direct or indirect addition, issuance, or transfer of any membership units (or any
other ownership interest) in the Borrower may be made by the Borrower or its
members without the prior written consent ofRUS.
Pagel7
Section 6.4 Additional Indebtedness
The Borrower shall not, without the prior written consent of RUS, incur additional
indebtedness in the event:
(a)The Borrower is not maintaining a TIER of 1.0 or if the additional indebtedness will
cause the Borrower s TIER to fall below 1.0; or
(b)An Event of Default as defined in 'Section 8.1 (b) hereof has occurred and is
continuing.
Section 6.Negative Pled~e
The Borrower shall not create, incur, or suffer any ~en, mortgage, pledge, assignment, or
other encumbrance on, or security interest in its property, other than Permitted Encumbrances.
Section 6.6 Contracts
The Borrower shall not, without the prior written consent of RUS, enter into any contract or
contracts for the operation or maintenance of all or any part of its property, including, without limitation
the Project, and shall not enter into any conlract for the use by others of all or any part of its property,
including, without limitation, the Project.
Section 6.7 Salaries
, Salaries, wages and other compensation paid by the Borrower for services, and directors
members , managers' or trustees' fees , shall be reasonable and in confonnity with the usual practice', of
entities of the size and nature of the Borrower.
Section 6.8 Extension of Credit
Except as specifically authorized in writing in advance by RUS, the Bonower will make no
advance payments or loans, or in any manner otherwise extend its credit, either directly or indirectly, with
, or without interest, to any of its directors, trustees, officers, employees, stockholders, members, managers
Affiliates or Affiliated Companies; provided, however, the Borrower may make an investment for any
purpose described in section 607(c)(2) of the Rural Development Act of 1972 (including any investment in
or extensi(~m of credit, guarantee or advance made to an Affiliated Company that is used by such Affiliate
for such 'purpose) to the extent that, immediately after such investment, (1) the aggregate of such
investments does not exceed one-third of the Net Worth and (2) the Bonower s Net Worth is at least
twenty percent (20%) of its Total Assets.
Section 6.9 Distributions or Withdrawals
(a)Corporations and Cooperatives. Corporate or cooperative Borrowers shall not
without the prior written approval of RUS, make any dividend, stock, capital, or
other distribution in the nature of an investment, guarantee, extension of credit
advance, or loan, nor make a capital credit distribution (all such distributions being
hereinafter collectively called "Distributions;provided, however;J. Distributions
may be made in each calendar year as follows:
(1)Aggregate, annual Distributions not to exceed twenty-five percent (25%) of
prior calendar year s Net Income or Margins may be made if, after such
aggregate annual Distributions, the Borrower s net worth is at least one
p~rcent (1 %) of its Total Assets;
Page 18
(2)
(3)
. ,..,.. ,....,.. ,"'..
(4)
(b)
Aggregate aruma! Distributions not to exceed fifty percent (50%) of the
prior calendar year s Net Income or Margins may be made if, after such
aggregate annual Distributions, the Borrower s Net Worth is at least twenty
percent (20%) of its Total Assets;
Aggregate annual Distributions not to exceed seventy-five percent (75%) of
the prior calendar year s Net Income or Margins may be made if, after such
aggregate annual Distributions, the Borrower s Net Worth is at least thirty
percent(30%) of its Total Assets; or ,...
.. .
There is no limit on aggregate, annual Distributions if, after making such
aggregate, annual Distributions, the Borrower s Net Worth is at least forty
percent (40%) of its Total Assets.
..... ...., ,
Limited Liability Companies. Borrowers which are limited liability companies shall
not, without the prior written approval ofRUS, make any membership withdrawals
unit redemptions, or other type of profit allocation to its members and shall not,
without the prior written approval of RUS, make capital distributions in the nature of
an investment, guarantee, extension of credit, advance, or loan (all such actionsbeing hereinafter collectively called "Distributions;provided, however
;!.
Distributions may be made in each calendar year as follows:
- .
(c)
(1)Aggregate, annual Dis1ributions not to exceed twenty-five percent (25%) ofthe prior calendar year s Net Income or Margins may be made if, after
such aggregate annual Distributions, the Bonower s Net Worth is at least
one percent (1 %) of its Total Assets;
(2)Aggregate annual Distributions not to exceed fifty percent (50%) of the
prior calendar year~ s Net Income or margins may be made if, after such
aggregate annual Distributions, ~e Bon-ower s Net Worth is at least twenty
percent (20%) of its Total Assets;
(3)Aggregate annual Distributions not to exceed seventy-five percent (75%) of
the prior calendar year s Net Income or Margins may be made if, after such
aggregate annual Distributions, the Borrower s Net Worth " is at least thirty
percent (30%) of its Tot~ Assets; or
(4)There is no limit on aggregate, annual Distributions if, after maIdng such
aggregate, annual Distributions, the Borrower s net worth is at least forty
percent forty percent (40%) of its Total Assets.
In addition to the Distributions authorized under the immediately) precedmg
subsections, the Borrower may make any Distribution or investment as provided in 7
CFR 1744 SubpartD.
Section 6.10 Chan1!inl!: Principal Place of Business~ Place of Conducpnl!: Business, or Type of
Ort!:aniz~tion
The Borrower shall not change its principal place of business, place of conducting business
or type of organization without the prior consent ofRUS.
Section 6.11 Chant!:in2 Name or Place of Incorporation or Or2anization
The Borrower shall not change its legal name or place of incorporation or organization
without giving RUS sixty (60) days prior written notice.
Page 19
Section 6.12 Chane:ine Rates or Tariffs
RUS.
The Borrower shall not file for or change its rates or tariffs without prior written approval by
Section 6.13 Historic Preservation
The Borrower shall not, without the prior written consent of RUS, use any Advance( s) to
construct any facility which shall involve any district, site; building, structure or object which..is included
, or eligible for inclusion in, the National Register of Historic Places maintained by the Secretary of the
Interior pursuant to the Historic Sites Act of 1935 and the National Historic Preservation Act of 1966.
Section 6.14 Limitations on Usint! non-FDIC Insured Depositories
Without the prior written approval of RUS, the Borrower shall not place the proceeds of theLoans or any loan which has been made or guaranteed by RUS, in the custody of any bank or other
depository that is not insured by the Federal "Deposit Insurance Corporation or other federal agencyacceptable to RUS.
Section 6.15 Affiliated Transactions
The Borrower shall not enter into any transaction, contract, or dealing with an Affiliate of the
Bon-ower or with the Borrower s or Affiliate s directors, trustees, officers, managers, members (if the
Borrower is a limited liability company), or other corporate officials, without the prior written consent ofRUS.
,.
Section 6.16 Obli~ations with Respect to Nonduplicatjon of Faciljties for TeJecommunicagons Loan and
Telecommunications Loan Guarantee Loan Borrowers
If the Borrower has outstanding Telecommunications Loan(s) or Teleconununications Loan
Guarantee(s) and provides telephone service in any state in which there is no state regulatory body with
authority to regulate telephone service and to require certificates of convenience and necessity to the
Borrower, the BolTower shall not use any portion of such Loan(s) for the construction of telephone
facilities to furnish or improve service to persons located in such state receiving telephone service from any
other telephone company at the time the BoIrower proposes to furnish or improve service to such persons
except that the Borrower may provide or improve service to persons receiving service through facilities
acquired or to be acquired by the Borrower, and except to the extent RUS, on the basis of evidencesubmitted to it by the Bonower, shall have determined that service by the Borrower to such persons willnot result in duplication of lines, facilities or systems providing reasonably adequate service.
Section 6.17 Additional Ne1!ative Covenants
hereto.
The Borrower shall comply with the additional negative covenants set forth in Schedule 1
ARTICLE vn - LENDER'S RIGHTS
Section 7.Termination of Loan Offer
RUS, in its sole discretion, may terminate the offer to make the Loan( s) if Loan Documents
dilly executed on behalf of the Borrower, are not received and all other conditions in Section 4.1 hereof are
not satisfied within one hundred twenty (120) days from the date hereof.
Page 20
Section 7.Audits and Comnliance Reviews
After giving prior notification to the Borrower, RUS has the right to conduct compliance
reviews and audits of the Borrower to assure compliance with the Loan Documents and RUS Regulations.
Section 7.Disallowed Expenditures
Upon a determination by RUS that the Bonower did not utilize the Loan in the manner and
"",..,.." ",..
exclusively for the Project as approved by RUS, RUS"may, in-its sole discretion:
(a)
(b)
(c)
Disallow all or a part of the expenditures and disbursements of the Loan and require
the Borrower to deposit such funds in the Construction Fund Account or in the
Pledged Deposit Account, to be applied toward other approved Project purposes or to
reimburse the Government, as provided in Section 5.3 hereof;
Suspend making Advances; and/or
Take any other action RUS determines to be necessary including, without limitation
exercising any right or remedy available under the Loan Documents or at law.
Section 7.4 Suspension of Advances
, "
RUS may, in its absolute discretion, suspend making or approving Advances hereunder, if
RUS detennines that an event has occurred that is likely to have a Material Adverse Effect on the
Borrower.
.. "'
Section 7.Payment Extensions
RUS may, at any time or times in succession without notice to, or the consent of, the
Borrower and upon such terms as RUS may prescribe, grant to any perso~ finn or entity who shall have
become obligated to pay all or any part of the principal of or interest on any Note held by, or indebtedness
owed to, RUS or who may be affected by the lien created by the Loan Documents, an extension of the time
for the payment of such principal or interest. After any such extension the Borrower will remain liable for
the payment of such Note or indebtedness to the same extent as though it had at the time of such extension
consented thereto in writing.
ARTICLE VIII-EVENTS OF DEFAULT
Section 8.1. Events of Default
The following shall be Events of Default under this Agreement:
(a)Representations and Warranties.Any representation or warranty made by the
Bon-ower in the Loan Documents or in the Application, any certificate furnished to
RUS thereunder, shall prove to have been incorrect in any material respect at the
time made;
(b)Non-Pavment.The nonpayment of any required and due installment of interest on, or
principal of, any Note, whether by acceleration or otherwise, which continues for
five (5) Business Days, as such term is herein defined;
(c)Corrective Actions. Default by the Borrower in the observance or performance of
Section 5.13;
Page 21
Cd)
(e)
","""", '.0
,- ,.... ""
(f)
Section 9.Generally
Limited Liability Companies Default by the Bon-ower or its members in the
observance or performance of Section 6.
Other Covenants. Default by the Borrower in the observance or performance of any
other covenant or agreement contained in any of the Loan Documents, which shall
remain unremedied for thirty (30) calendar days, after -written notice thereof had
been given to the Borrower by RUS;
, "0"' :Adverse Effects . The Borrower shall forfeit or otherwise be deprived of its charter
articles of organization, franchises, permits, easements, consents, or licenses required
to carry on any material portion of its business, or the Borrower files for, or an event
occurs, which can reasonably be expected to result in its dissolution or termination;
(g)
Other ' Obligations.Default by the Borrower in the payment of any obligation
whether direct or contingent, for borrowed money in 'excess of ten thousand dollars
($10,000.00) or in the performance or observance of the tenDS of any instrument
pursuant to which such obligation was created or securing such obligation which
default shall have resulted in such obligation becoming or being declared due and
payable .prior to the date on which it would otherwise be due and payable;
(h)
~.
A court having jurisdiction-in the premises shall enter a decree or order
for relief with respect to the Borrower in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law now or hereafter in effect: (1)
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official, or (2) ordering the winding up or liquidation of its affairs; or the Bon-ower
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 thebenefit of creditors;
(i)Dissolution or LiQuidation. Other than as provided in the immediately preceding
subsection, the dissolution or liquidation of the Borrower, or the filing of such by the
Borrower;
(j)
Impaired Business.The failure by the Borrower to promptly forestall or remove any
execution, garnishment or attachment of such consequence as shall impair its ability
to continue its business or fulfill its obligations and such execution, garnishment or
attachment shall not be vacated within thirty (30) days; or
Payment of Final Judgment.A final judgment in an amount of ten thousand dollars
($10 000.00) or more shall be entered against the Bon-ower and shall remain
, unsatisfied or without a stay in respect thereof for a period of thirty (30) days.
ARTICLE IX - REMEDIES
Upon the occurrence of an Event of Default, RUS may pursue all rights and remedies that are
contemplated by the Loan Documents in the manner, upon the conditions, and with the effect provided in
the Loan Documents, including, but not limited to, a suit for specific performance, injunctive relief, or
damages. Nothing herein shall limit the rights of RUS to pursue, jointly or severally, all rights and
remedies available to 'a creditor following the occurrence of an Event of Default listed in Article VITI
hereof. Each right, power, and remedy of RUS shall be cumulative and concurrent, and recourse to one or
more rights or remedies shall not constitute a waiver of any other right, power or remedy.
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Section 9.Remedies
In addition to the remedies referred to in Section 9.1 hereof, upon the occurrence of an Event
of Default RUS may:
(a)Refuse to make any Advance or further Advance on account of the Loan(s), but any
Advance thereafter made by RUS shall not constitute a waiver of such default; or
""'"' -. - ....,""', "." . --..'
(b)Declare all unpaid principal of and all interest accrued on the Note( 5) to be....
immediately due and payable and upon such declaration all such principal and
interesfshall become immediately due and payable.
ARTICLE X - MISCELLANEOUS
Section 10.1 Notices
All notices, requests, and other communications provided for herein including, without
limitation, any modifications, 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 forNotice(~~~cified below; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this Agreement, all such
conununications shall. be deemed to have been dilly 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 Addresses for Notices of ~e respective parties are as follows:
RUS
, Rural Utilities Service
United States Department of Agriculture
1400 Independence Avenue, S.
Washington, D.20250-1500
Attention: Administrator
Fax: [phone]
BOIrower
See Schedule 1
With a COpy to
See Schedule 1
With a copy to
See Schedule 1
Section 10.Exuenses
To the extent allowed by law, the Borrower shall pay all costs and expenses of RUS
including reasonable fees of counsel, incurred in connection with the enforcement of the Loan Documents
or with the preparation for such enforcement if RUS has reasonable grounds to believe that such
enforcement may be necessary.
Section 10.3 Late Payments
If payment of any amount due hereunder is not received at the United States Treasury in '
Washington, DC or such other location as RUg may designate to the Borrower within five (5) Business
Days after the due date thereof, or such other time period as RUS may prescribe from time to time in its
policies of general application in connection with any late payment charge (such unpaid amount being
herein called the "delinquent amount", and the period beginning after such due date until payment of the
delinquent amount being herein called the Ulate-payment period ) the Borrower shall pay to, RUS in
addition to all other amounts due under the terms of the Notes, the Security Documents and this
Agreement, any late payment charge as may be fixed by RUS Regulations from time to time on the
delinquent amount for the late-payment period.
Page 23
Section 10.4 Filius: Fees
.., ..... '.. ..
To the extent permitted by law, the Borrower agrees to pay all expenses of RUS (including
the fees and expenses of its counsel) in connection with the filing or recordation of all financing statements
and instruments as may be required by RUS in connection with this Agreement, j,ncluding, without
limitation, all documentary stamps, recordation, transfer taxes, and other costs and taxes incident to
recordation of any docuYnent or instrument in connection herewith. Borrower agrees to save hannlessand
indemnify RUS from and against any liability resulting from the failure to pay any required docmnentary
,.stamps" recordation and transfer taxes, recording cost~; or any other expenses incurred by RUS..
connection with this Agreement. The provisions of this section shall survive the execution and delivery of
this Agreement and the payment of all other amounts due hereunder or due on the Notes.
Section 10.5 No Waiver
No failure on the part of RUS to exercise, nor any delay in exercising, any ~ght hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by RUS of any right hereunder
preclude any other or further exercise thereof or the exercise of any other right
Section 10.Governing Law
This Agreement shall be governed by andc()nstrue4 in accordance with applicable federal law
and, in the absence of controlling federal law, by the laws of the State identified in the first paragraph
herein, except those that would render such choice oflaw ineffective.
Section 10.Holiday Pavments
If any payment to be made by the Borrower hereunder shall become due on a day which is not
Business Day, such payment shall be made on the next succeeding Business Day and,such extension of
time shan be included in computing any interest in respect of such payment.
Section 10.8 Rescission
The Borrower may elect not to borrow the Loan, in which event RUS shall release the
Borrower from its obligations hereunder, provided the Borrower complies with such terms and conditions
as RUS may impose for such release.
Section 10.Successors and Assie:ns
(a)This Agreement shall be binding upon and inure to the benefit of the Borrower
RUS, and their respective successors and assigns, except that the Borrower may not
assign or transfer its rights or obligations hereunder without the prior written
consent ofRUS.
(b)Pursuant to federal claims collection laws, RUS' claims hereunder may be
transferred to other agencies of the United States of America; in the event of such a
transfer, all rights and remedies hereby granted or conferred on RUS shall pass to
and inure to the benefit of any such successor agency.
Section 10.10 Complete Ae:reement; Waivers and Amendments
Subject to RUS Regulations, this Agreement and the other Loan Documents are intended by
the parties to be a complete and fInal expression of their agreement. However, RUS reserve the right to
waive its rights to compliance with any provision of this Agreement and the other Loan Documents. No
amendment, modification, or waiver of any provision hereof or thereof, and no consent to any departure of
the Borrower herefrom or therefrom, shall be effective unless approved in writing by RUS in the fonn of
Page 24
either a RUS Regulation or other writing signed by or on behalf of RU8, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.
Section 10.11 Prior Telephone Loan Contracts
With respect to all Prior Telephone Loan Contracts, the Borrower shall, commencing on the
delivery date hereof, prospectively meet the affmriative and negative covenants as set forth in this
Agreement rather than those set forth in the Prior Telephone Loan Contracts. In addition, any remaining
obligation of-RUS to make or approve additional advances on promissory notes of the Borrower thathave
been previously delivered to RUS under Prior Telephone Loan Contracts shall, after the date hereof, be
subject to the conditions set forth in this Agreement. In the event of any conflict between any provision set
forth in a Prior Telephone Loan Contract and any provision in this Agreement, the requirements as set forth
in this Agreement shall apply. Nothing in this section shall, however, eliminate or modify (i) any special
condition, special affumative covenant or special negative covenant, if any, set forth in any Prior
Telephone Loan Contract or (ii) alter the repayment terms of any promissory notes which the Borrower has
delivered under any Prior Telephone Loan Contract, except) in either case, as RUS may have specifically
agreed to in writing.
Section 10.12 Headine:s
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 10.13
If any tefII\ provision, condition, or any part thereof, of this Agreement, Note(s) or the
Security Documents shall for any reason be found or held invalid or unenforceable by any governmental
agency or court of competent jurisdiction) such invalidity or unenforc~ability shall not affect the remainder
of such tenn, provision, or condition nor any other tenn, provision, or condition, and this Agreement, the
Note( s), and the Security Documents shall survive and be cons1rued as if such invalid or unenforceable
term, provision or condition had not been contained therein.
Section 10.14 Rie:ht of Setoff
Upon the occurrence and during the continuance of any Event of Default, RUS is hereby
authorized at any time, without prior notice to the Bonower, to exercise rights of setoff-or recoupment and
apply any and all amounts held or hereafter held, by RUS, owed to the 'Borrower, or for the credit or
account of the Borrower against any and all of the obligations of the B9IrOWer now or hereafter existing
hereunder or under the Note(s). RUS agrees to notify the Borrower promptly after any such setoff or
recoupment and the application thereof, provided that the failure to give such notice shall not affect the
validity of such setof'f: recoupment or application. The rights of RUS under this section are in addition to
any other rights and remedies (including other rights of setoff or recoupment) which RUS may have.
Borrower waives all rights of setoff, deduction, recoupment, or counterclaim.
Section 10.15 Schedules and Attachments
Each Schedule and Attachment attached hereto and referred to herein is each an integral part
of this Agreement.
Section 10.16 ~horitv of Represent!tives ofl!!lli
In the case of any consent, approval, or waiver from RUS that is required under this
Agreement or any other Loan Docwnent, such consent, approval) or waiver must be in writing and signed
by an authorized RUS representative to be effective. As used in this section
, "
authorized RUS
representative" means the Administrator of RUS or any person to whom the Administrator has officially
delegated specific or general authority to take the action in question.
Page 25
Section 10.17 Anlendment of Laws and RUS Ree:ulations
Nothing contained herein shall restrict in any way RUS' right to amend , rescind, or
supplement any of the RUS Regulations or to seek such changes to existing Laws.
Section 10.18 Term
This Agreement shall remain in effect until one of the following two events has occurred:
(a)
(b)
The Borrower and RUS replace this Agreement with another Mitten agreement; or
All of the Borrower s obligations under this Agreement have been discharged and'
paid.
IN WITNESS WHEREOF, the parties hereto ~ve caused this Agreement to be duly
executed as of the day and year fIrst above written.
e:;:j,.t)mG".:f .l??19 A: T /:;--:-.i- .i-
itle: ?~135 i D~NIea
Attested to by: / ~~~~.&2:
Secretary
L TELEPHONE CO~ ANY
J;.
TIIE UNITED-STATES OF AMERICA
by /1 'l~?-V":"l-v~.-
;'/.;' ,(--;~ /
1 .
~cting Assistant Administrator
Telecommunications Program
Page 26
SCHEDULE 1
Article II Representations and Warranties
Paragraph (i) Borrower s address:892 West Madison Avenue
Glenns Ferry, Idaho 83623
Paragraph (j) Borrower s Organization Number:C61691
Paragraph (k) Borrower s Subsidiaries:Pend Oreille Telephone Company,
Nehalem Telecommunications, Inc.
Paragraph (k) Borrower s Parent: Martell Enterprises, Inc.
Article III The Loans
Broadband Loan
Section 3.1(a) Broadband Loan amount: $0
Section 3. 1 (a) (i) Broadband Loan portion at the cost-of-money interest rate: $0
Section 3. 1 (a)(i) Broadband Loan portion at the four percent (4%) rate of interest: $0
,-' .
Telecommunications Loan
Section 3.(b) Telecommunications Loan amount: $17,425,000
Section 3. (b)(i) Telecommunications Loan amount at the cost-of-money interest rate: $0
Section 3.1(b)(i) TelecOlmnwrications Loan amount five percent (5%) rate of interest: $17,425,000
Telecommunications Loan Guarantee
Section 3.1(c) Telecommunications Loan Guarantee amount: $0
Bank Loan
Section 3.1(d) Bank Loan amount: $0
Article IV Conditions of Lending
Section 4.2(i) funds required on deposit by Broadband borrower in accordance with
7 C.R. 1738.20(b): N/A
The additional conditions to advance referred to in Section 4.2(m) are as follows:
No advances for new toll facilities will be advanced until connecting company concurrences have
been received from:
(a)Syringa Networks, Inc., for the new fiber toll connections with Tipanuk and BoiseRiver
(b)Filer Mutual Telephone Company for the location of a fiber terminal in their
Rogerson office for the Three Creek toll route; and
(c)Citizens Communications for a new fiber connection with their Elko exchange to the
new Tuscarora and North Fork toll route.
Page 27
No advances for outside plant construction will be advanced until the final route maps and approvals
have been granted by the U. S. Army Corps of Engineers, Boise, Regulatory Office, the State
Historical Societies of Idaho and Nevada, the Boise National Forest, the Humboldt-Toiyabe National
Forest ,and the Salmon-Challis National Forest, the Bureau of Land Management and the U. S. Fish
and Wildlife Services of Idaho and Nevada; as outlined in RUS' letter dated September 15,2004.
Article V Affmnative Covenants
ection 5 A\a) Additiomil Funds: None
Section 5.4(a) Additional Purposes: None
Section 5.4(b) Pledged Deposit Account IS NOT required.
Section 5.8(b) Additional Reporting Date(s): None
Section 5.12 TIER: 1.50
Section 5.12 TIER ConnnencementDate: December 31,2008
The additional affinnative covenants referred to in Section 5.21 are as follows: None
Article VI Negative Covenants1. The a.dditional negative covenants referred to in Section 6.17 are as follows: None
Article X Miscellaneous
Section 10.1 Borrower s addre~ for purposes of notification:
Mr. James R. Martell
President
892 West Madison Avenue
Glenns Ferry, Idaho 83623
. Telephone: [phone]
Fax: [phone]
Section 10.1 Address for Borrower s notification copy:
. Givens Pursley LLP
Attorney
601 W. Bannock Street
Boise, Idaho 83701
Telephone: [phone]
Fax: [phone]
Section 10.1 Address for RUS' notification copy:
Rural Utilities Service
United States Department of Agriculture
1400 Independence Avenue, S.
Washington, D.C. 20250-1500
Attention: Administrator
Fax: [phone]
Page 28